Income Tax
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Expenditure on foreign travel and medical treatment of the Managing Director and his wife - in the absence of any obligation on the part of the company to meet the medical and traveling expenses, the payment made could not be treated as one of commercial expediency & was purely a personal one - HC
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Deduction u/s 43B - payment of bonus - u/s 43B only actual payment and not any notional or deemed payment that would be relevant for considering the deduction - HC
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Addition to the income under the head “income from house property” - amount paid by the tenants to DSL, another group company, towards maintenance charges is not taxable in the hands of assessee. - HC
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Treatment of unutilized balance available in "consumer deposit account" - AO added the unutilized balance of such account to the total income of the assessee - HC
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BIFR - relief flowing from Section 72A - it cannot be said that the BIFR fell into an error by directing the concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession - HC
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Deduction u/s 36(1)(viii) - banking company - when one of the possible views has been taken by the Assessing Officer, the CIT cannot exercise his jurisdiction u/s 263 on that aspect of the matter. - AT
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Applicability of TDS provisions u/s 194C - the assessee is a CONSORTIUM - assessee are created to procure a contract and never to execute the same by themselves with the intention to earn income - AT
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Guarantee commission paid to the Directors of the Company – whole of the guarantee commission shall be allowed - AT
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Adjustment of Excise Duty on purchase, sales and closing stock u/s 145A are required to be made - AT
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Donation versus expenses - Whenever newspaper coverage or radio or TV coverage took place, the name of assessee would be mentioned as one of the sponsors, thus the expenditure is therefore clearly for the enhancement of the brand value and image of the company. - allowed as expense - AT
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It is not possible to presume that the undivided family property becomes the property of the firm for the reason that some of the legal heirs have used the property to carry on the business of the firm constituted by them. - AT
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Assessee has withdrawn its claim of deduction under Section 80IB, which was accompanied by revised return – assessee again claimed deduction - deduction allowed - AT
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Remission of deferred sales tax liability - deferred sales tax liability will not be chargeable to tax as business income of the assessee - AT
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Tax the salary of the assessee earned outside India - Reliance on the provisions of Article 15 of India Japan DTAA holding that the provisions of DTAA override the provisions of taxing statute - HC
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Treatment to tax paid on the facility of rent free accommodation by the employer - taxable or exempt? - HC
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Addition u/s 68 - unexplained amounts received towards Share Capital money - entry operators - HC
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Fees paid to portfolio manager of Asset Management Company - should be allowable in computing income whether under the head “Business” or under the head “Capital gains"? - AT
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Revised return - original return of income was filed within time - Revised return is a loss return which should have been filed within the time specified u/s 139(3) of the Act - loss return filed beyond the time limit prescribed u/s 139(3) of the Act was null and void - AT
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Undisclosed income - entry in the seized material wherein "P-money" was written - Assessing Officer is of the view that "P-money" stands for pocket money and treated it as undisclosed income of the assessee - According to the assessee "P-money" indicates money for petrol utilised for vehicles used by the assessee - AT
Customs
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Amends Notification No. 63/1994-Customs (N. T.) - Land Customs Stations and Routes for import and export of goods by land or inland water ways. - Notification
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Valuation of import of old/used digital multifunction print and copying machines. - goods were not accompanied by the Chartered Engineer's certificate from the load port - The valuation done by the adjudicating Commissioner is upheld. - AT
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Project import - valuation - Drawings and designs are rightly classifiable under Heading No. 49.06 and the benefit of duty-free import under this Heading has to be extended to the goods in question - AT
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Frivolous review petition - Interest and cost to be recovered from the commissioner of customs in the review petition and all officers responsible.- HC
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Benefit of Duty Free Import Authorization (DFAI) - if the cenvat credit availed on inputs is reversed before it is utilised, the benefits cannot be denied while transferring the DFIA. - HC
FEMA
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Whether the appellant had violated Section 9(1)(b) of FERA - transaction to sell the flats to the two directors were non resident Indians - decided in favor of appellant - HC
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Imposing a penalty - violation of provision of Section 9(1)(f)(i) of FEMA - charges levelled against the appellant to the effect that he had aided and abetted the main accused in violating the provisions of law - HC
Corporate Law
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Product Group Classification . - Notification
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Amendment to the Companies (Fees on Applications) Rules, 1999 . - Notification
Service Tax
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Small service provider -once the appellant avail CENVAT Credit on the capital goods, the benefit of exemption under Notification No. 6/2005-ST, would not be available - AT
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Appellant are clearing the solar system through dealers - appellant are not charging installation charges separately, but for installation activity, they are liable to pay service tax - AT
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Slaughtering of any animals is now exempted from service tax - earlier only the slaughtering of bovine was exempt - see amended notification
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Service provided by a director to Company - reverse charge system is applicable
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Amends Notification No. 25/2012-Service Tax - Mega exemption notification. - Notification
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Security services also brought within reverse charge system - see amended notification
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Service Tax (Third Amendment) Rules, 2012. - Notification
Central Excise
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Claim of refund under Rule 5 - Revenue was of the view that since final product was exempted from excise duty they could not have exported the goods under bond and they could not have taken Cenvat credit on inputs used in the manufacture of such exempted goods. - Refund allowed. - AT
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CENVAT credit on stockbroker's service - there is clear nexus between the stockbroker's service and the manufacture of the goods - service clearly fell within the ambit of 'input service' - AT
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Reversal of Cenvt Credit - Rule 6(3) - generation of waste - fine was resulted while manufacture of Sponge Iron – Proportionality aspect not being dealt by Rule 6(3) of Cenvat Credit Rules, 2004 - AT
VAT
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Regarding Republic of Seychelles in New Delhi. - Notification
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Regarding Republic of Niger in New Delhi. - Notification
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Income Tax
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2012 (8) TMI 241
Expenditure on foreign travel and medical treatment of the Managing Director and his wife - Tribunal treated it deduction u/s 37(1) - Held that:- Managing Director of the assessee company who resigned on 3.11.96 and the above said expenditure was incurred only after this date and that expenditure incurred by M.D. was reimbursed only due to the fact that the said person was main person in the family controlling the business of the assessee company - His wife, who accompanied him was a Director in the company - in the absence of any obligation on the part of the company to meet the medical and traveling expenses, the payment made could not be treated as one of commercial expediency & was purely a personal one - against assessee.
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2012 (8) TMI 240
Denial of claim of deduction u/s 43B - assessee deposited the bonus amounts payable to the workers into a separate bank account - Held that:- The deduction is available only on the sum actually paid by the assessee on or before the due date for furnishing the return of income under Section 139(1) - deemed payment could not be treated as actual payment to qualify for deduction u/s 43B disagreeing with the submission of the assessee that depositing the amount in a bank, even if it be in a separate account, would satisfy the provisions of Section 43 B as actual payment - u/s 43 B only actual payment and not any notional or deemed payment that would be relevant for considering the deduction - against assessee.
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2012 (8) TMI 239
Addition to the income under the head “income from house property” - amount paid by the tenants to DSL was nothing but a part of the rent and the same should be added to the rental income received by the assessee - Held that:- No case has been made out to prove that the entire transaction was the result of a collusive arrangement to divert the income which was in truth and fact earned by the assessee. The assessee being the owner of the property, is assessable under Section 22 only in respect of the annual letting value of the same as the services for maintenance of the common areas and facilities were found to have been actually rendered by DLS and not by the assessee. DLS may be part of the same group, but it is a separate corporate entity carrying on business as service provider for maintenance of properties. The arrangement between the tenants and DLS is a part of the business transaction entered into in the regular course of the business of DLS - assessee firm has not been found to have actually enjoyed the service charges paid to DLS and had no domain over the recovery of the maintenance charges nor had any role to play in the business activities of DLS - in favour of assessee.
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2012 (8) TMI 238
Treatment of unutilized balance available in "consumer deposit account" - AO added the unutilized balance of such account to the total income of the assessee - Held that:- Considering the sale agreement produced by the assessee shows that these amounts are not the part of the total sales consideration and also the balance sheet disclosing how the amounts were treated as liability in the books of accounts - the customer deposit accounts are with respect to various services in the apartments, like power connection, water connection, Cable TV connection etc which are necessarily to be taken out by the individual owners of the apartment after the respective apartments are certified fit for occupation by the local authority - pointing of assessee to the fact that after utilization what remains is refunded completely to the customers the issue requires a second look at the hands of the AO - issue is thus remanded back to the AO for fresh consideration
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2012 (8) TMI 237
Application for rehabilitation scheme to BIFR - Department claimed that relief flowing from Section 72A should not be granted by the BIFR itself without considering by the department - Held that:- A reading of the Section 32 shows that in case of amalgamation of a sick industrial company with another company, the provisions of Section 72A would apply in relation to such amalgamation, with the modification that the power of Central Govt. under that section may be exercised by the Board, without any recommendation by the specified authority referred to in that section - As the amendment in Section 32 had not been made by the Parliament the provision continues to dictate that the power of the Central Government under Section 72A shall be exercised by the Board without the recommendation of the specified authority even though under the amended Section 72A, no role is prescribed to the Central Government with or without the recommendation of the specified authority - thus it cannot be said that the BIFR fell into an error by directing the concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession - in favour of assessee.
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2012 (8) TMI 236
Legality of allowing the claim for deduction by way of filing revised statement of income during the assessment proceedings - revenue contended that since the assessee has not claimed the deduction in its original return, the assessee cannot claim any benefit which the assessee has forgotten to claim while filing the return - Held that:- It is found that TDS on the alleged payment was deposited on 19.05.2007 i.e. in the F.Y. 2007-08 relevant to the AY under consideration. Even by the pre amendment provision of section 40(a)(ia), the said payment was allowable in the year of payment of TDS i.e. the year under consideration. Even if no revised statement of income was filed , the claim was allowable as the deduction has been claimed on the payment of TDS . We do not find any reason to interfere with the findings of the CIT(A) - Appeal of revenue dismissed. Employees’ contribution to PF and ESIC - dis-allowance - belated payment - Held that:- If the employee’s share of contribution is paid before the due date of filing of the return u/s 139(1), then no dis-allowance can be made - Decided in favor of assessee. Following precedent year decision deduction is allowed in respect of interest paid to the parent company and depreciation on expenses under the head R & D treated as capital expenses is allowed - Decided in favor of assessee.
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2012 (8) TMI 235
Deduction u/s 36(1)(viii) - banking company - CIT, invoking his jurisdiction u/s 263, denied deduction on ground that assessee did not satisfy this initial condition of being a financial corporation - validity of revisionary proceedings - Held that:- In case of Union Bank of India vs ACIT (2012 (6) TMI 500 - ITAT MUMBAI ) it has been held that “government company” are financial corporation within the meaning of proviso to section 36(1)(viii) and thus entitled the bank to deduction u/s 36(1)(viii) even in the years up to 2006-2007. Hence, when one of the possible views has been taken by the Assessing Officer, the CIT cannot exercise his jurisdiction u/s 263 on that aspect of the matter. However, revisionary order is upheld in respect of erroneous deduction provided by AO in case for provision for bad and doubtful debts. Matter is restored back to file of AO for the purpose of computation of deduction u/s 36(1)(viii) - Appeal partly allowed. since more than 51% shares of the assessee-bank were held by the Central Government, it was a “government company” as defined u/s 617 of the Companies Act and as such it became financial corporation within the meaning of proviso to section 36(1)(viii). On the contrary, the ratio in the case before the Cochin Bench of the Tribunal is not attracted because there the assessee was a foreign bank, namely, Federal Bank Limited, which obviously is not a Government company as per the Companies Act, 1956.
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2012 (8) TMI 234
Search and seizure - no opportunity of cross examination of the persons provided to assessee, based on whose statements substantial addition had been made on account of disallowance of deduction u/s 80IB(10) and other dis-allowances - Held that:- The request for cross examination had been made only before CIT(A) which had not been acceded to by CIT(A). In our view, order of CIT(A) confirming various additions made by AO without allowing the assessee an opportunity of cross examination of the parties whose statements had been used against the assessee cannot be sustained. Order of CIT(A) set aside and matter restored back with a direction to allow the assessee opportunity of cross examination by remanding the matter back to AO.
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2012 (8) TMI 233
Plea for condonation of delay in filing appeal - assessee contended that delay in filing the appeal is mainly attributed to medical reasons, death of parents, family disputes and ignorance of law - Held that:- Considering the entire gamut of facts, the available material on record and averments of the assessee, which is supported by an affidavit, photographs and medical reports, in the absence of any contrary materials brought to our notice we deem it fit and proper to hold that the assessee had bona fide and sufficient reasons for delay in filing the appeals. In the interest of substantial cause of justice, such delay is condoned - Decided in favor of assessee.
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2012 (8) TMI 232
Deduction u/s 80IB - Housing project - denial of deduction on ground that since assessee has sold plot of land to the customers and no residential unit was sold and only after transferring the plot, the assessee has constructed the building as a contractor, hence deduction is available to builder and not contractor - Held that:- Merely because the assessee had entered into agreement for sale of plot so as to enable the customer to have a loan facility from bank and other financial institutions will not go to prove that the assessee has not undertaken any construction. Not only as per project approval letter but also as per the certificate issued by the Office of Sub Divisional Officer, the assessee has not only conceived the entire housing scheme but also executed the work as per approved plan. Further, assessee had entered into comprehensive sale agreement with the customers for the purpose of sale of complete residential units. As per the agreement, the possession of residential unit remained with the assessee till final instalment is paid. In view of these facts, we do not find any merit on the part of AO’s action for treating the assessee merely as a contractor rather than a Developer. However, since revenue alleged that said project allowed commercial complex, we restore this aspect to the file of the AO to physically verify the project and if he finds that no commercial unit is constructed, he should allow the claim of deduction u/s 80IB(10) - Decided in favor of assessee for statistical purposes.
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2012 (8) TMI 231
Non applicability of TDS provisions u/s 194C & consequently the charging of interest u/s 201 & 201(1A) - the assessee is a CONSORTIUM - Held that:- Considering facts of the present cases where the contract amounts are received by the assessee-JVs, which were transferred to one of the respective constituents, who actually executed the contract and the income of the JV was treated as NIL - CIT(A) opined the assessee as the one regularly making TDS on the said contract amount and in fact, fact of the matter in these cases is that the assessees made TDS under protest subsequent to survey, which is completely ignored - CIT(A) merely dismissed the assessee’s grounds relying on the assessee’s compliance in effecting TDS but did not discuss the fact that made assessee to effect TDS, i.e. events that occurred during the survey operations. CIT(A) should have given attention to the grounds raised before him and gone to the root of the matter as to why the assessee is aggrieved on the issue of the requirement to deduct TDS and the liability on the assessee etc. The contract sums were taxed subsequently in the hands of one of the constituents of the assessee-Consortiums and to avoid double tax, the said amounts were never taxed in the hands of the assessee - consortium. This is a relevant fact that the CIT(A) should have considered, while deciding as to why one must make TDS, when the JV - assessee are created to procure a contract and never to execute the same by themselves with the intention to earn income - the objection raised by the Learned Departmental Representative about the requirement of fresh adjudication on the said issue relating to liability to make TDS under S.201(1) is required to be approved - matter is restored to the file of the first appellate authority for fresh adjudication - in favour of assessee for statistical purposes.
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2012 (8) TMI 230
Addition on account of discount allowed by the State Government on early repayment of deferred sales tax, loan holding the same to be income of the assessee for the year and not a capital receipt as claimed by the assessee - difference between the payment made against the future liability on account of deferred sales-tax is a capital receipt and could not be treated as a remission of cessation of liability assessable under section 41(1)(1) of the Act - addition made by the Assessing Officer in the instant case by invoking the provisions of section 41(1) of the Act is untenable In favor of assessee Addition on account of debit balance written off on reconciliation Held that:- Claim is on account of small balances, which were outstanding from the various customers on account of rejections, counting shortage etc., Since the amounts were not recovered, the same have been written off as irrecoverable - lower authorities were not justified in rejecting the claim of the assessee - ground raised by the Revenue is accordingly dismissed. Guarantee commission paid to the Directors of the Company Held that:- What the company loses by way of guarantee commission, it would gain by saving of interest and avoidance of restrictive covenants. The payment of guarantee commission was, therefore, commercially justified - payment, therefore, could not be called in question as being influenced by any extra-commercial considerations and it must be taken that it passed all the test laid down in section 40(c) - whole of the guarantee commission shall be allowed - guarantee commission was not excessive and was an allowable deduction - ground raised by the Revenue is accordingly dismissed. Applicability of Clause (ii) of sub-rule(2) of Rule 8(D) of the I.T. Act - funds of the assessee are from a common pool and there was no exclusively pertaining to capital expenditure on purchase of equipment - assessee received Dividend income which it claimed as exempt - assessee has an outstanding loan - on which it has paid interest Held that:- Matter remanded to the file of the AO for making reasonable disallowance under section 14A r.w. Rule 8D in the light of the decision of the Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Company ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) - Assessee is Partly-allowed.
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2012 (8) TMI 229
Rejection of books of accounts - assessee has not been submitting the daily report to the Market Committee which were required to be submitted as per agreement with the Market Committee - AO accordingly, rejected the books of account by invoking the provisions of section1 145(3) of the Act As regards the employment of 34 persons - no material in the possession of the AO to support the factum of employment of 34 alleged employees by the assessee - no work done by them. There was no question of any payment of any salary to them for any alleged work in the contract business. No collection of market fee or RDF has been brought on record by the AO – AO not justified in rejecting books of accounts of the assessee As regards the commission income - assessee was not required to maintain books of account in respect of collection of Market fee and RDF and since the payments are collected in the name of Market Committee, they are deposited with the Market Committee only. All the details for the collections which were tallied weekly were available with the AO – Held that:- Collections made from commission agents till the amount of the contract entered is not the income of the assessee and, therefore, the assessee is not required to maintain books of account with regard to income of other persons. Therefore, the books of account to that extent cannot be rejected by the A.O - no estimation of income can be made Assessment under section 144 of the Act – Held that:- AO is not justified in making any addition to the income of the assessee, even if the books of account are rejected u/s 145(3) of the Act, on the basis of the material on record, which was available before the AO as well as before the ld. CIT(A). The Ld. CIT(A) is not justified in sustaining the addition on this account. Penalty under section 271(1)(c) of the Act - on concealing the income and furnishing inaccurate particulars of income – Held that:- When no addition remains in pursuance of order mentioned hereinabove, no penalty u/s 271(1)(c) can be sustained - no infirmity in the order of the ld. CIT(A), who has rightly deleted the addition
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2012 (8) TMI 228
Claim for deduction u/s 80HHC of the Income-tax Act - in relation to the DEPB amount – alleged that assessee not fulfilled the conditions stipulated in the said third proviso to sec. 80HHC(3) of the Act – Held that:- Assessee will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28 - Assessing Officer is directed to compute the deduction under Section 80HHC in the case of the appellants in accordance with the judgment in the case of Topman Exports (2009 (8) TMI 827 - ITAT MUMBAI ) - assessee are allowed for statistical purposes.
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2012 (8) TMI 227
Capital gain or business income - Trading of shares – assessee holding shares as a investment – Held that:- Assessee had submitted the explanation that he is mainly doing the business of poultry farm but also doing business in trading of shares - AO has not appreciated the explanation of the assessee that he has made the investments also as available at PB-40 and such details were available with the AO as well as before the CIT(A) - if any shares after purchase are sold to pay off the loan then the intention of making the investment cannot be held to be as an intention to trade in shares to hold the same as stock-in-trade - AO is not justified in treating short-term capital gain declared by the assessee as business income - appeal of the assessee is allowed
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2012 (8) TMI 226
Addition made u/s.40A(2)(b) - CIT(A) deleted the additions - Held that:- The A.O. made hypotheticated calculation in assessment order without any base and material. The addition was made on presumption. In both years, there is no nexus between the borrowed fund and interest free loan - The assessee did not take substantial interest in the business of the specified person or the specified person has a substantial interest in the business of the assessee - A.O. has not brought on record any evidence regarding the assessee has substantial interest in M/s. Yuletide Industries Private Ltd. and M/s Covenent Investment Co. Ltd. and vice versa. - as interest free loan given to alleged sister concern were part consideration of service rendered by both the companies. Therefore, in both the years, the order of ld. CIT(A) are confirmed and appeal of the revenue are dismissed. Adjustment of Excise Duty on purchase, sales and closing stock u/s 145A - Held that:- Considering amendment w.e.f. 01.04.1999 in Subclause b of Section 145A adjustment to include the amount to any tax, duty, cess or fee actually paid or incurred by the assessee to bring goods to the place of its location and condition as on date of valuation is required to adjust as per law by the A.O - A.O. is directed to make suitable adjustment as per law.
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2012 (8) TMI 225
Dis allowance of Peripheral Development Expenses - CIT(A)allowed partial relief - Held that:- As suggested by the Committee being a Government Body, the ITAT, Cuttack Bench in assessee’s own case for AYs 1999-2000 and 2002-03 has held such expenditures allowable u/s.37 as revenue in nature by placing reliance on various judicial pronouncements on the issue. The learned CIT-DR could not bring any decision contrary to the above. Therefore, the facts and issue being the same in the present Assessment Year the expenditure claimed under the head “Peripheral Development Expenses” is allowable u/s.37 - in favour of assessee. Computation of deduction u/s.80HHC - Non inclusion of sales tax and Excise Duty while arriving at total turnover by assessee - Held that:- Direction to exclude Excise duty and Sales tax from the total turnover for the purpose of deduction of Section 80HHC as decided on in the case of CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT]that excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - against revenue. Deduction of 90% of the entire incomes credited to the P & L account for the purpose of deduction u/s.80HHC - Held that:- As decided in case of ACG Associated Capsules (P) Ltd [2012 (2) TMI 101 - SUPREME COURT OF INDIA]that ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business - Matter remanded back to A.O. to work out the deductions – Decided in favor of assessee Dis allowance of expenses under the head “Miscellaneous Expenses” - includes an amount of interest on land compensation which is capital expenditure - Held that:- As the assessee has paid interest on the delayed payment of compensation for the land acquired by the assessee - as capitalization of the asset has not been disputed therefore interest payment on delayed compensation cannot be allowed as revenue expenditure - CIT(A) confirming the disallowance is therefore upheld and the ground raised by the assessee is dismissed. Disallowance of claim of additional depreciation - Plants and Machinery installed in its new industrial undertaking called “Rolled Product Unit” Held that:- As per Section 32(1)(iia) inserted by the Finance Act, 2002 both acquisition and installed of plant or machineries should take place after 31st March,2002 to enable the assessee to claim additional depreciation of 15% if it achieves substantial expansion by way of increase in the installed capacity by not less than 25% in the previous year - As RPU unit though acquired by the assessee on amalgamation which the amalgamated Company had started commencement of installation of the said unit after 1.4.2002 (during F.Y. 2002-03 and 2003-04) enabling the UNIT to become operative and capable of manufacturing Rolled products for Commercial purpose. - as the assessing authorities have not examined this aspect of the case whether any such plant and machinery acquired and installed after 1.4.2002 in the said plant by the assessee - restore this issue to the file of the Assessing Officer for reconsideration - in favour of assessee. Disallowance of Prior Period adjustments - the expenses relates to payment for hiring of helicopter from Govt. of Orissa for visit of Minister - Held that:- As the helicopter was hired during the month of April, 2002, the hiring charges to be paid by the assessee was only crystallized during the AY under consideration on the basis of bill drawn on the assessee by another Govt. Agency i.e., Coal India Ltd. Therefore, the income having crystallized during the year under consideration to Coal India Ltd., thus concluding that the said expenditure can be allowed in the AY under consideration correspondingly - in favour of assessee. Disallowance of Other Misc. expenses - Held that:- The accounting procedures adopted by the assessee should not leave a room for the assessee to park majority of the expenses to the tune of ₹ 76 lakhs as Misc. Expenses when the AO sought to disallow part of the expenses not pertaining to the business which the learned CIT(A) reduced heavily - to put a bar on such practice, a token disallowance has been made by the CIT(A) - against assessee. Disallowance of the loss claimed on revaluation of non- moving stores & spares - CIT deleted it - Held that:- If an item is lying in the inventory either unsold or unutilised, if there is a change in the intrinsic value, an assessee can revalue such assets, and claim the loss on account of revaluation as a charge against profits as decided in vs. CIT [1953 (10) TMI 2 - SUPREME COURT]- in favour of assessee. Dis allowance of addition of payment under benevolent Scheme - CIT deleted it - Held that:- Deleted by ITAT, Cuttack Bench in assessee’s own case for the AYs 1993-94 to 1998-99 & 2000-01. thus follow the same - decided in favour of assessee. Addition being donation made to Sports Authority of India - Held that:- Following the CIT case decided of Cloth & General Mills Co. Ltd [1978 (4) TMI 75 - DELHI HIGH COURT] CIT(A) has deleted the impugned addition in concluding that the payment to Sports Authority of India is not in the nature of donation but in the nature of advertisement and publicity, which is an allowable expenditure - Whenever newspaper coverage or radio or TV coverage took place, the name of assessee would be mentioned as one of the sponsors, thus the expenditure is therefore clearly for the enhancement of the brand value and image of the company.
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2012 (8) TMI 224
Capital gain – sale of land - whether the long-term capital gains on sale of land was to be assessed in the hands of the partnership firm or in the hands of partner of the assessee firm – Held that:- Late J.M. Sharma had carried on a business. On his death, eight persons consisting of four sons and three daughters and his wife became the legal heirs of his estate. The business was carried on by his four sons by constituting a firm - land property belonging to his estate was not specifically assigned to the partnership firm either by act, deed or conduct - shares of two partners were transferred to the remaining partners by stating specific consideration and finally one of the partners sold his share to the remaining partner and thereby ultimately the property came into the individual hands of Shri Jayant Kumar Jethalal partner of the firm - property belonged to Shri Jayanthkumar Jethalal as his individual property and, therefore, the capital gain is assessable to tax in his individual capacity. The long-term capital gain cannot be assessed in the hands of the firm - long term capital gain is assessable to tax in the hands of the partner - against Revenue
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2012 (8) TMI 223
Penalty u/s 158BFA (2) - addition made is on account of various electronic goods found during search from the residence of the assessee – Held that:- Assessee is not entitled to complete immunity from payment of penalty on the undisclosed income returned by them under clause (a) of section 158BC - when the assessee consistently failed to prove his bona fides at every stage in quantum proceedings and even in penalty proceedings, apparently onus laid down upon the assessee is not discharged and consequently, the levy of penalty under section 158BFA(2) of the Act is justified with reference to the undisclosed income determined by the AO to be in excess of the returned income
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2012 (8) TMI 222
Charitable trust - denial of exemption under section 11 of the Act – Held that:- In the absence of any such cancellation of registration under section 12A - there is no justification in denying the exemption allowable under section 11 to the assessee while completing the assessment - assessee is allowed for statistical purposes.
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2012 (8) TMI 221
Deduction under section 80-IB - assessee has withdrawn its claim of deduction under Section 80IB, which was accompanied by revised return – assessee again claimed deduction - Held that:- Conditions required for claiming deduction under Section 80IB stands fully satisfied and all such evidences and enquiry as done by the AO will not render the claim of the assessee infructuous - Once these conditions are fulfilled, the assessee is entitled for statutory deduction or claim to which he is entitled to. Mere consent or acquiescence by the assessee cannot take away the otherwise a legitimate claim to which he is entitled to - assessee has been held to be carrying on manufacturing activities of pre-fabricated steel buildings in the subsequent years for which the claim under Section 80IB has been allowed by the Assessing Officer himself in the order passed under Section 143(3) read with Section 148 - direct the Assessing Officer to allow the claim for deduction under Section 80IB in the impugned year also as have been allowed in the subsequent years by the Department, as there is no change of facts and circumstances.
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2012 (8) TMI 220
Penalty u/s. 271(1)(c) - addition/disallowance made by the Assessing Officer under the normal computation of the Act when the assessment has been finally made and tax has been paid u/s. 115JB – Held that:- Penalty u/s. 271(1)(c) in the case of the assessee cannot be imposed, because there was no tax sought to be evaded because the additions in respect of which penalty have been imposed, was made while computing the total income under the normal provisions of the Act and finally the income of the assessee was determined on the basis of the book profit u/s. 115JB Penalty u/s. 271(1)(c) - For concealment of income - Assessee claimed short-term capital gain on sale of shares - However, Assessing Officer rejected said claim and treated gain as speculative business income under section 73 – Held that:- Appellant company was having shares in the nature of 'investment' and accordingly they were shown under the head "investment" in the balance sheet and gain on sale of such shares was bonafidely shown under the head "capital gain" - mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - appellant cannot be held to be guilty of either furnishing of inaccurate particulars of income or has concealed particulars of income – penalty cannot be levied – In favor of assessee
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2012 (8) TMI 219
Allocation of common expenditure - shipping business and non-shipping business - assessee preferred to offer income under tonnage tax scheme under section 115VJ of the Act, under which the income is assessed on some fixed basis without referring to the book results - AO identified the common expenses and allocated it in the ratio of gross receipts between the two businesses - Commissioner (Appeals) confirmed order of Assessing Officer – since assessee, apart from offering oral submissions, had failed to substantiate its claim that it had allocated common expenses in a fair and reasonable manner, order of Commissioner (Appeals) confirming Assessing Officer's order was to be upheld Disallowance under section 40(a)(ia) of the Act – Held that:- assessee is entitled to claim deduction of expenses if the TDS deducted there on is remitted before the due date for filing the return of income - assessee paid the entire amount of expenditure subjected to disallowance under section 40(a)(ia) of the Act before the end of the financial year and hence the provisions of sec.40(a)(ia) cannot be invoked on them - claim is not borne out of the orders of tax authorities - matter remanded to the file of the Assessing Officer
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2012 (8) TMI 218
Whether Brand Usage Rights is revenue expenses – Jurisdiction of DRP - disallowance of depreciation on "intangible assets, Transfer of Pricing Adjustment u/s 92CA(4) of the Act, disallowance of depreciation on goodwill u/s 32 (1)(ii), disallowance of share issue expenditure and disallowance of expenditure u/s 43B of the Act. - Held that:- On the similar facts and circumstances of the case Tribunal has set aside the matter to the authorities to pass fresh assessment order in conformity with the provisions of the Act - in view the rule of consistency - matter remanded back to the file of the DRP/AO - assessee's appeal stands partly allowed for statistical purposes.
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2012 (8) TMI 217
Purchase of software product - Indo-Singapore Treaty - assisting in modification and implementation of software purchased treated as a royalty payment –Held that:- Taxability of amount u/s 9(1)(vi) of the Act has not decided - if taxability is not attracted as per section 9 of the Act, then notwithstanding any positive provision in the DTAA including such payment within the ambit of 'Royalty' or 'Fees for technical services', no tax can be charged on the total income of the non-resident - if the charge is not attracted, there can be no question of any deduction of tax at source or treating the assessee as in default - matter is restored to the file of the CIT for examining - appeals are allowed for statistical purposes
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2012 (8) TMI 203
Remission of deferred sales tax liability - whether chargeable to tax as business income or is exempt - Miss. application filled by the Revenue against order - Held that:- On comparison of the question noted by the Revenue and framed and answered by the Special Bench of the Tribunal, it is found that there is a mistake in the wordings of the question mentioned by the Revenue inasmuch as the highlighted portion of the question..."against the future value of ₹ 3,37,13,393/- " mentioned by the Revenue does not exist in the question framed by the Special Bench of the Tribunal. To invoke the provisions of section 41(1) the first requirement is as to whether in the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee whereas in the present case of assessee he has obtained the benefit of deduction of sales tax liability u/s. 43B as per CBDT Circular No. 496 dated 25.9.1987 which clearly stated that “...the statutory liability shall be treated to have been discharged for the purposes of Section 43 B”(emphasis supplied). Thus, the benefit of deduction was allowed for the purpose of section 43 B only and not under any other provisions of the Act. There is no dispute that the Assessing Officer has also applied the aforesaid Board Circular while giving the benefit of deduction u/s. 43 B, thus it is settled law that the circulars are binding on the department - as the first requirement of section 41(1) has not been fulfilled in the facts of the present case deferred sales tax liability will not be chargeable to tax as business income of the assessee - no mistake in the order of the Tribunal under the provisions of section 254(2). As the assessee itself has used the expression ‘remission’ of the loan liability. However, the position in law is well settled that making of an entry or absence of an entry cannot determine rights and liabilities of parties - no material to show that the finding given by the Tribunal are contrary to the settled position of law - in favour of assessee.
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2012 (8) TMI 202
Rent free accommodation provided to the Assessee, an employee of Suzuki Motors Corporation (Japan)- collaboration agreement between M/s. Suzuki Motors, Japan and M/s. Maruti Udhyog Ltd., India - Held that:- In terms of Section 5(1)(c) r.w.s. 6(6) the assessee was a person “not ordinarily resident” in India and that the salary earned in Japan for employment under Suzuki Motors Corporattion cannot be assessed in his hands in the assessment made in India - since the assessee did not fall within the purview of Income Tax Act, 1961 there was therefore no question of bringing any amount paid to him by his foreign employer to taxation. Tax the salary of the assessee earned outside India - Reliance on the provisions of Article 15 of India Japan DTAA holding that the provisions of DTAA override the provisions of taxing statute - Held that:- The provisions of Section 90(2) of the Income Tax Act, 1961 are clear that the provisions of the said Act shall be applicable to the extent they are more beneficial to the assessee to whom the relevant DTAA applies - Since in the present case, the provisions of Section 6(6) r.w.s.(5)(1)(c) and Section 9(1)(i) were beneficial to the assessee the same should have been preferred by the authorities over DTAA and the income earned by the assessee outside India during the year under consideration ought to have been held to be not taxable in India as per the said provisions. It was confirmed by Suzuki Motors Corporation (Japan) that the amount of daily allowance received by it from Maruti Udhyog Ltd., India in terms of license agreement was not paid by it to any individuals including the assessee. It is pertinent to note here that nothing has been brought on record either by the Assessing Officer or by the learned CIT (A) to dispute this position - therefore, the income of the assessee earned in India alone was taxable in his hands in India and the income earned by him outside India was not taxable in India as rightly claimed - in favour of assessee.
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2012 (8) TMI 201
Treatment to tax paid on the facility of rent free accommodation by the employer - taxable or exempt ? - Held that:- The combined reading of Rule 3 of Income Tax Rules, 1962 with Section 17(2)it excludes the tax components borne in respect of the perquisite and rent free accommodation paid by the employer - benefit given by this Court in CIT v. Telsuo Mitera [2012 (6) TMI 88 - DELHI HIGH COURT ] to assessee - decided against revenue.
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2012 (8) TMI 200
Mud Engineering Services - income derived in India for the services rendered to Naptogaz - whether covered under the provisions of section 44BB or is liable to be independently taxed as "fees for technical services" in terms of section 9(1)(vii) - Held that:- Explanation (2) to section 9(1)(vii) depicts that the consideration received for rendering technical services will not be fees for technical services if it is consideration for any 'construction, assembly mining or like project undertaken by the recipient' - As in this case doing the work of Mud Engineering cannot be understood as the undertaking of the mining project and is only performing certain services for Naptogaz. At best,consideration received by the applicant for the services it renders is fees for technical services within the meaning of section 9(1)(vii). Section 44BB(1) clearly states that fees for technical services received for rendering services in connection with prospecting for or extraction or production of mineral oils, cannot be brought under this section if section 44DA or section 115A of the Act applied to it and as the applicant is a non-resident receiving consideration for the technical services rendered by it, from an Indian company so clearly section 44DA or section 115A(b) would be attracted - the income-derived by the applicant in India is liable to be independently taxed as 'fees for technical services' in terms of section 9(1)(vii) - in favour of assessee.
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2012 (8) TMI 199
Treatment of repair work as rendered as technical services in view of the Section 9(1)(vii) - the repair works in question are the works done by the foreign companies abroad - Held that:- This is a case where the assessee obtained works orders from third parties and the items such as turbines are required to be repaired or refurbished and for this, these items are sent abroad to Saudi Arabia and Singapore for repairs and refurbishment by the non resident companies abroad - The payment for the repair work is made by assessee for carrying out the work and not for performing any technical service, since no intellectual aspect is involved in the repairs and refurbishment activity carried out by those foreign companies - as the assessee personnel do not accompany these items therefore, there is no involvement of assessee’s personnel in getting the items repaired or refurbished. On examining every activity undertaken it can be concluded that none of the works involve services of technical nature as activities involve assembly, disassembly, inspection, reporting and evaluation - as decided in Lufthansa Cargo India Private Limited V/s. Dy. CIT [2004 (6) TMI 273 - ITAT DELHI-B ] routine maintenance repairs are not FTS & that the payments made by the assessee to non-residents workshops outside India do not constitute payment of fees for managerial, consultancy or Technical services as defined in Explanation 2 to section 9(1)(vii) - in favour of assessee.
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2012 (8) TMI 198
Addition u/s 68 - unexplained amounts received towards Share Capital money - ITAT deleted the addition - Held that:- Viewing a pattern in the way funds were moved into the accounts of those investors was common to each of them as the amounts were received within a few days or weeks before the shares were allotted and there was no material to show how they knew that shares could be purchased - AO’s efforts to get them involved, through summons were unsuccessful and the applicant made no attempt to assist the AO in these proceedings - the material provided about the share applicants’ financial and fiscal standing was sketchy as they did not respond to summons under Section 131. Thus alleged investors belong to a Group who were not carrying on any real business activity and were engaged in the business of providing accommodation entries working as entry operators - the inferences drawn by the AO were justified and warranted - addition to a commission amount paid to the accommodation entry providers out of the undisclosed income of the company to assessee's income - against assessee.
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2012 (8) TMI 197
Selection of Assessment Year for fixing the income - Held that:- As the assessing officer has accepted the assessee’s offer and added back a sum of Rs.55,19,650/- for the assessment year 2009-2010 no useful purpose would be served in considering the question of law, as the same amount cannot be added back for two separate years.
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2012 (8) TMI 196
Denial of claim of Section 80 IB (3)- Revenue held total investment in the assessee's two units exceeded Rs.1 crore - ITAT decided that investment in Unit-I only is to be taken into consideration - Held that:- ITAT on noticing the text of Section 80IB and analyzing the facts stated that as both the units were separately located, the deduction is to be seen with respect to investment made in each unit separately not-with-standing the fact that proprietor of both the units is the same. As decided in CIT Versus DEWAN KRAFT SYSTEM P. LTD. [2007 (2) TMI 149 - HIGH COURT , DELHI ]where profits of two eligible units were sought to be clubbed and adjusted towards the loss claimed in the unit which had been granted the benefit under Section 80IA - as in the present case the assessee has not admittedly claimed the benefit u/s 80IA for the relevant assessment year in respect of Unit No.2 the question of clubbing the investment for purpose of common undertaking does not arise - Section 80-IA(5) directs the income tax authorities to treat the initial unit as an entirely separate entity to the extent the benefit has to be given - in favour of assessee.
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2012 (8) TMI 195
Treatment to the income earned from sale and purchase of shares - Capital gain or business income ? - Held that:- As the issue stands covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for A.Y. 2004-05 allowing the claim of Short term capital gain and Long term capital gain on sale of shares and redemption of mutual funds - as no decision reversing the decision of the Tribunal was filed & in absence of any contrary material brought to notice against the order of the Tribunal - decided against revenue. Fees paid to portfolio manager of Asset Management Company - should be allowable in computing income whether under the head “Business” or under the head “Capital gains" ? - Held that:- As decided in Homi K. Bhabha Vs. ITO [2011 (9) TMI 104 - ITAT MUMBAI]professional Fee or Management fee to portfolio manager is not deductible against capital gains - Considering the genuineness and essentiality of the payment of fee to the Portfolio manager and undisputedly for the predominantly for the said twin purposes of acquisition and sale of the securities, the claim has to be allowed - the claim of the must not be rejected for want of the express provisions in section 48 - decided in favour of assessee.
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2012 (8) TMI 194
Refusal to grant approval in terms of Section 35(1)(ii) - assessee being Scientific Research Institution - Held that:- As decided in Indian Planetary Society Versus CBDT [2009 (7) TMI 14 - BOMBAY HIGH COURT]CBDT has the power to make a reference to the Central Govt. which alone has the jurisdiction to decide the question in terms of Section 35(3) and the governing Rules - The CBDT could not be unaware of the legal position having regard to the mandate of Section 35 and to decide the matter itself without authority of law - As the direction of the Court had to be construed within the frame work of law and the CBDT could only refer the matter to the Central Govt. but not to decide the matter itself - order for denial of grant is set aside and matter is sent back to CBDT to decide afresh - in favour of assessee by way of remand.
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2012 (8) TMI 193
Disallowance of provision for doubtful debts - Held that:- When the assessee had debited the profit and loss account, the doubtful debts are simultaneously taken to the balance sheet, bringing the reduction on the assets side - Looking the total provision at the end of 31.03.1993 of Rs.79,73,725/- (Rs.43,51,034/- + Rs.36,22,691/-), effectively, the assessee seems to have written off the bad debts only to the extent of Rs.21,80,278/-. Since these are the figures culled out from the papers given by the assessee in respect of the assessment year 1993-94, the question of how much of an amount had actually been written off has to be seen only by the Assessing Authority by looking into the accounts of the assessee - issue is remanded back to the files of the Assessing Officer for passing a fresh order of assessment
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2012 (8) TMI 192
Treatment of Prize Winning Tickets (PWT) in the books of assessee - AO stated that liability was an artificial creation as it was without any monetary transaction - Held that:- The assessee is only a sole selling agent and the ultimate liability is that of the State Government - the actual sale of lottery tickets and lottery prize distribution is done by sub-agents who are responsible for distribution of profits. These sub-agents credit the assessee with amounts of PWT payable & the assessee passes similar entries in respect of such PWT amounts payable to its stockist. Eventually the stockist, makes a similar entry to square up accounts with the Government in the State Lotteries Department and as that transactions take place on a day-to-day basis and it is on the next day that the credit entry in respect of PWT payable is squared up when a debit entry is passed consequently there was no need for any cash payment - no substantial question of law arises for consideration - in favour of assessee.
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2012 (8) TMI 191
Transfer pricing – rejection of comparable uncontrolled price [CUP] method and determination on the basis of adjusted ALP - According to assessee it was corporate policy of AEs all over world that after payment of costs, profits were shared equally between AEs that had participated in transaction – Held that:- in the appellants own case appeal filed by the assessee was allowed and hold that the additions on account adjustment in arm's length price is uncalled for and accordingly the adjustment is rejected – Assessee’s appeal allowed
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2012 (8) TMI 190
Re-assessment - Assessee had claimed deduction under Section 80-IA of the Act not only with respect to electricity produced by it, but also for lignite mined by it – Held that:- AO considered income-tax reimbursement not as income derived from power generation activity. All these would amply show that Assessing Officer had applied his mind at the time of original assessment proceedings. Re-assessment having been started after the lapse of four years period from the end of the relevant assessment year - Re-assessment was initiated only based on change of opinion and there was no other tangible record and information available with the Assessing Officer for initiating such reassessment proceedings - Revenue’s appeal for assessment year 2002-03 is dismissed Disallowance under Section 14A of the Act - exempt income earned was from tax free bonds issued by Electricity Boards and such bonds were issued pursuant to Government order. Interest was automatically credited to the bank account and there was no expenses for such income earned – Held that:- Even prior to that year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method – matter remanded to AO Addition made for reversal of sale - as per the assessee, it had to be either allowed as bad debts since amounts were irrecoverable or as business loss - Held that:- assessee having already accounted and offered to tax the amounts as per the tariff in the power purchase agreement, it could claim as a bad debt the excess billings which it came to know, only on determination of tariff by CERC.
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2012 (8) TMI 189
Disallowance towards interest - term loan availed by the assessee was in fact utilized for the purpose of acquisition of the specific asset - assessee has transferred some funds to the group concerns – Held that:- Assessee has not indicated the purpose for which the loan was advanced or the commercial expediency which necessitated advance of funds by the assessee - when the funds were diverted and the assessee paid interest on the borrowed funds, the proportionate interest relatable to funds transferred to group concern has to be disallowed – against assessee Addition of Rs. 1 lakh towards the amount outstanding in the name of sister concern of the assessee - assessing officer added the outstanding amount in the name of sister concern since three years' period has been expired – Held that:- Provisions of section 41(1) found that the principle that the expiry of period of limitation prescribed under the Limitation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt. Therefore, the provisions of section 41(1) are not applicable - assessing officer is not justified in adding back the amount of Rs. l lakh to the total income of the assessee – In favor of assessee Deduction u/s 80IB for extracting granite from granite hills and crushing granite boulders - DR submitted that extracting granite from granite hills cannot be considered to be a manufacturing activity – Held that:- Tribunal had an occasion to consider the very same issue in the assessee's own case and found that the activity of the assessee amounts to manufacture - Since the activity of the assessee was considered by the co-ordinate bench of this Tribunal and held to be manufacturing activity entitled for deduction u/s 80IB, for the sake of consistency - assessee is entitled for deduction u/s 80IB of the Act
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2012 (8) TMI 188
Disallowance on account of cash payments exceeding prescribed limits - provisions of sec.40A(3) – Held that:- Payments are made to the Government of India (South Western Railway) towards purchase - payment made by the assessee in cash to the south western railway, who insisted for cash payment were covered by the exception laid down in Rule 6DD(b) of the Income-tax Rules 1962, as such, it was outside the purview of the provision contained in sec.40A(3) of the Income-tax Act – addition deleted – In favor of assessee
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2012 (8) TMI 187
TDS – disallowance u/s 40(a) (ia) of the Income Tax Act on the ground that assessee failed to deduct the TDS while making payments to the transporters - AO’s opinion is that assessee has availed services of the truck drivers or transporters for carrying out the work of M/s. Jai Prakash Associates thus there exist sub contractor ship and the assessee should have deducted the tax – Held that:- Assessee has not assigned any sub contractor ship to any of the transporter. He has simply hired the trucks for carrying out his contract - payments have been made by M/s. Jai Prakash directly to those drivers such payment is to be construed as made to the assessee - AO is not justified in making disallowance u/s 40(a)(ia) of the Act on account of non deduction of TDS u/s 194C(2) of the Income Tax Act - disallowance deleted – In favor of assessee
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2012 (8) TMI 186
Proceedings u/s 263 of the Act - disallowance of unpaid leave encashment by invoking the provisions of sec.43B(f) of the Act – Held that:- Operation of the decision of the Hon'ble Kolkata High Court referred to by the assessee in the case of M/s. Exide Industries Ltd. & Anr. In support of its case has been stayed by the Hon'ble Supreme Court - Supreme Court has observed that assessee would during the pendency of this Civil Appeal, pay tax as if section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns - assessing officer is directed to add back to the total income being encashment of earned leave not paid by the due date u/s 43B
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2012 (8) TMI 185
Applicability of provisions of sub-section(4) of section 80P – whether the provision applicable only to co-operative banks and not to credit co-operative societies – Held that:- New proviso to section 80P(4) which is brought into statute is applicable only to co-operative banks and not to credit co-operative societies - intention of the legislature of brining in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-operative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act
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2012 (8) TMI 184
Whether revised return u/s 139(5) of the Act was nonest - in original return of income, filed within time, the assessee has shown positive income while in the revised return the assessee as shown positive income from business but a huge loss under income from other sources which has resulted in negative income – Held that:- Revised return is a loss return which should have been filed within the time specified u/s 139(3) of the Act - loss return filed beyond the time limit prescribed u/s 139(3) of the Act was null and void - claim of the assessee for the loss return is also not acceptable and even if it is found to be genuine, then such loss in this year cannot be allowed to be carried forward to subsequent year for set off as the loss return was not filed within the time specified u/s 139(3) of the Income-tax Act - revised return of income is nonest – against assessee
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2012 (8) TMI 183
Addition u/s 68 of the Act - unexplained cash credits – Held that:- Assessee did not care to submit even confirmations of the sixteen creditors before the AO and there is no material on record, establishing creditworthiness of these creditors or genuineness of transactions nor the ld. CIT(A) recorded any findings on these aspects - CIT(A) suffers from lack of reasoning and is not a speaking order – matter remanded to CIT Disallowance u/s 40A(2)(a) of the Act – according to AO interest paid @ 15% paid excessive and unreasonable – Held that:- There is nothing to suggest that the AO ever brought any material on record on this aspect before concluding that interest @ 15% was excessive or unreasonable nor even cited any comparable instances in respect of the fair market value of the interest on unsecured loans. In view the foregoing, especially when there is no material on record to hold that payment of interest @ 15% pa to unsecured creditors was excessive – disallowance deleted Disallowance of depreciation on computer accessories like printer & scanner – Held that:- Printer and Scanners are integral part of the computer and therefore claimed depreciation @ 60% - depreciation on Printers and Scanners is allowable @ 60% - In favor of assessee
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2012 (8) TMI 182
Allowability of rent paid to the owner of the property by the assessee - Assessing Officer rejected the claim of expenditure only on the basis that the investment for the construction is made by the society – Held that:- In the same building the top floor was rented at Rs. 25 per sq. ft - ground floor which is paying Rs. 35 per sq. ft. since 1995 - charging of rent at Rs. 10 per sq. ft. is very reasonable and there is no basis for the lower authorities to reduce the rent claimed by the assessee. In our opinion, the claim of the assessee is justified and the same has to be allowed - payment of Rs. 10 per sq. ft. is reasonable instead of Rs. 9 per sq. ft. determined by the CIT(A). Whether CIT erred in allowing "P-money" as petrol expenditure without proper evidence - entry in the seized material wherein "P-money" was written - Assessing Officer is of the view that "P-money stands for pocket money and treated it as undisclosed income of the assessee - According to the assessee "P-money" indicates money for petrol utilised for vehicles used by the assessee – Held that:- There was no material on record to show on what basis the Assessing Officer had reached to the conclusion - no conclusive evidence to show that "P-money" reflects pocket money in the absence of corroborative material to hold that the "P-money" suggests the pocket money – In favor of assessee
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2012 (8) TMI 181
Reopening of assessment – Held that:- As conditions of Sec. 147 of the Act are fulfilled, AO is free to initiate proceedings u/s. 147 of Act and failure to take steps for regular assessment u/s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when summary assessment with intimation u/s. 143(1)(a) of the Act had been issued - under substituted section 147 as amended by Finance Act 1999, existence of only the condition that if AO for whatever reason has reason to believe that income has escaped assessment, confers jurisdiction in reopening the assessment - action of AO to initiate reassessment proceeding is in accordance with law. Disallowance of expenses - Held that:- Loss from House property is not the actual loss but it is because of claim of various charges of services claimed as rendered which in fact is not the additional charges having consequential additional rental income, but, as held above is an incidental services related with maintenance of House property for which standard deduction is duly provided under the I.T. Act - AO is right not to setting-off of brought forward non allowable loss
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2012 (8) TMI 180
Penalty u/s. 271(1)(c) of the Income-tax Act - disallowance of interest expenditure - Assessing Officer disallowed the expenditure on the ground that the assessee claimed the set off against the interest income of the minors. Since the assessee could not explain the loans and utilization of the funds, the Assessing Officer disallowed the same – Held that:- If the assessee has explained the fact during the penalty proceedings, which are neither found bogus nor false, then the explanation of the assessee has to be considered on the parameters of bonafide. The assessee has disclosed all these fact before the Assessing Officer that the interest expenditure pertains to the borrowed funds, which was utilised for investment in the shares - mere disallowance of claim of expenditure would not lead to attract penalty provisions u/s 271(1)(c) of the act - appeal filed by the assessee is allowed.
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2012 (8) TMI 179
Addition on the Annual Letting Value on account of notional interest on interest free security received by the assessee – Held that:- There was no rent paid and in lieu of that rent excessive deposit was made, the usufruct of that deposit could be considered as rent for determining the annual letting value - AO had not carried out any exercise for determination of the fair market value of the property but had added the notional rent @ 12% per annum on interest free security deposit - it cannot be treated as part of annual letting value – in favor of assessee
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2012 (8) TMI 178
Disallowance of exemption under section 54B of the Income Tax Act – assessee alleged that he is the owner of agricultural land - assessee sold land in the relevant previous year - From his share of sale consideration, the assessee purchased another piece of agricultural land and claimed exemption under section 54B of the Income Tax Act, 1961 – Held that:- As per revenue records no crop was cultivated/agricultural activity undertaken on the land owned by the assessee - no cultivation of crop/agricultural activity on the land in question owned by the assessee in the past two years preceding the date of sale - assessee during the course of his submission placed on record photocopies of some bills to show that agricultural activity was undertaken by the assessee on the land in question - these bills were never produced either before the Assessing Officer or before the learned Commissioner of Income Tax - appeal of the assessee is dismissed.
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Customs
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2012 (8) TMI 215
Valuation - import of old/used digital multifunction print and copying machines. - goods were not accompanied by the Chartered Engineer's certificate from the load port and hence the value has been re-determined by ascertaining the value from a local Chartered Engineer. The appellants have also, accepted the value determined by the customs authorities as per the assessment of the local Chartered Engineer - The valuation done by the adjudicating Commissioner is upheld. Penalty – confiscation – redemption fine - Import of Secondhand Multifunctional Photocopiers - import licensing restrictions - violation of the import restriction – Held that:- Repeated offences and that the respondents are repeatedly importing second-hand digital photocopiers without licences, undervaluing the same and in one case even the quantity was found to be mis-declared - fines and penalties imposed by the original authorities in these cases of repeated offences are not unreasonable - no justification for reducing the fine imposed
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2012 (8) TMI 214
Project import - Inclusion of value of drawings and designs – Held that:- department wants to include the value of the drawings and designs in the value of the machinery which has been assessed to duty under Project Imports under Heading No. 9801; at the same time, they do not want to give the benefit of Project Imports for drawings and designs on the ground that, if that value is included it would exceed the value recommended for Project Imports by the sponsoring authority - Drawings and designs are rightly classifiable under Heading No. 49.06 and the benefit of duty-free import under this Heading has to be extended to the goods in question - entire demand is unsustainable in law
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2012 (8) TMI 176
Frivolous review petition - Review of the order wherein revenue directed to refund the excess fine and penalty consequent to the appellate order to the petitioner within 10 days from the date of the judgment - held that:- the stand of the petitioner in the review petition is totally hyper-technical and unreasonable. When an appellate authority allows an appeal filed against imposition of tax, duty, fine, penalty etc., it is the bounden duty of the assessing authority, as part of a democratic government, to refund the amounts covered by orders of the appellate authority, when appeals are allowed fully or partially. The same shall be refunded even without a formal request for the same. The reasons put forward by the petitioner in the review petition justifying the insistence on the production of original documents also does not impress me at all. When an import is assessed to duty and penalty and fine are imposed, necessarily, the assessing authority maintains a file in relation to the same, which will contain all the documents in original relating to the levy. When payment is made pursuant to the orders of the assessing authority, details of the same would also be available in that file. When appeal is filed by the importer against the orders of the assessing authority the file will contain orders and details relating to the same also. Therefore, there is no difficulty for the assessing officers to decide the claim for refund based on those documents, when the appeal is allowed in full or in part. The filing of this review petition itself is an abuse of the process of the court. - Review petition dismissed with cost of Rs. 25000/- Interest and cost to be recovered from the petitioner in the review petition and all officers responsible.
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2012 (8) TMI 175
Benefit of Duty Free Import Authorization (DFAI) - Revenue stated that on obtaining DFIA the assessee has availed the credit even if the credit is reversed or paid back along with interest after clearance of the goods - Held that:- As decided in Commissioner of Central Excise, Mumbai- I Versus M/s Bombay Dyeing & Mfg. Co.Ltd [2007 (8) TMI 2 - SUPREME COURT] the Cenvat credit taken if reversed before its utilisation, it amounts to not taking the credit - in the case of DFIA if the credit availed on inputs used in the manufacture of final products is reversed before it is utilised either by reversing the credit or by cash payment with interest, then, it should be treated that the assessee has not availed the credit and accordingly, the benefits under para 4.2.6 of the Foreign Trade Policy 2009-2014 cannot be denied while transferring the DFIA.
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Corporate Laws
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2012 (8) TMI 213
Mr. Kishore Rajaram Chhabria as the Managing Director of SWC had misused his fiduciary relationship by causing the take over of BDA, which was always considered as a subsidiary of SWC - Held that:- There is only one person behind the corporate bodies constituting Mr. Kishore Rajaram Chhabria’s group of companies - The distillery of BDA at Aurangabad was divested from SWC and its network of subsidiaries and group companies. However, in the suit, the then plaintiffs were unable to obtain any interim order with regard to this distillery, even up to the stage of Supreme Court - that if Mr. Kishore Rajaram Chhabria and his group of companies thought that by the schemes of merger and demerger the original cause of action of SWC was being given up, they were sadly mistaken as settlement between two individuals cannot bind any body corporate. On examination of the schemes of merger and demerger it can be concluded they were schemes between body corporates and no clause suggests that the cause of action of the original plaintiffs was extinguished. If the shares of BDA or its distillery were to be transferred to another company or group of companies, that transfer was subject to the original cause of action which the original plaintiffs had against Mr. Kishore Rajaram Chhabria and BDA. That had to be expressly given up at the time of transfer of undertakings and other assets under the schemes - there is devolution of interest of the original plaintiffs upon the applicant, United Spirits Ltd granting them leave to prosecute the suit in place of the original plaintiffs.
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2012 (8) TMI 174
Application by creditor for winding up - outstanding dues and interest thereon - Held that:- As per the terms and conditions of the contract the Project Management Consultants has the authority to issue certificate once the work has been virtually completed and the company is obliged to pay the contractor in accordance with the certificate issued by the said management consultants specifying the sum of money in accordance with the final certificate issued in writing at the expiration of the period referred to as the "defect liability period" It appears from the certificate of Project Management Consultants that a final certificate was issued after the defect liability period of 12 months is over. A certificate was issued on 7th December, 2007 wherein Project Management Consultants asked the company to make payment to the contractor the petitioner herein, a sum of Rs. 52,28,095/- towards the work done by the petitioner. It also appears from the TDS certificate that the company has accepted that the petitioner is entitled to get an amount of Rs. 37,45,821 after deduction of tax amounting to Rs. 4,84,312. This amount of Rs. 37,45,821 was admittedly not paid to the petitioner. Thus it appears that there is no dispute about the debt and the company has failed and neglected to pay the aforesaid debt - the winding up petition is admitted,.
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FEMA
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2012 (8) TMI 216
Imposition of penalty - whether the appellant had violated Section 9(1)(b) of FERA - transaction to sell the flats to the two directors were non resident Indians - Held that:- Apart from the statement of the appellant recorded to the effect that the two directors in whose name the receipt was received were persons resident outside India there is no material on record to suggest that on the date of receiving the amount, the appellant was aware of this fact and even from the statement recorded also cannot be inferred that the appellant on the date of issuing the receipts was aware of this fact. The Appellate Tribunal has drawn adverse inference against the appellant solely on the ground that the appellant has not produced the agreement entered into by the appellant with the two directors as apart from issuing receipts, no agreement was entered into - it was adverse on the part of Tribunal to arrive at a conclusion that an agreement must have been entered into by and between the appellant and the two directors and impose penalty of Rs.34 lacs upon the appellant - the Prothonotary and Senior Master is directed to refund the amount of Rs.7.50 lacs with accrued interest to whom the assessee has deposited with the direction of Court - in favour of assessee.
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2012 (8) TMI 177
Imposing a penalty - violation of provision of Section 9(1)(f)(i) of FEMA - Held that:- As Appellate Tribunal against the three main accused held that they have not violated the provisions of and as the main accused are relieved of the charges on no satisfactory evidence have been produced to prove the alleged violations committed by them, then, the charges levelled against the appellant to the effect that he had aided and abetted the main accused in violating the provisions of law could not be said to have been proved. As the documents relied upon by the revenue do not establish violation of the provisions of law against the main accused the same set of documents cannot be said that the person who is alleged to have aided and abetted the main accused has violated the provisions of law - penalty levy cannot be sustained - in favour of assessee.
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Service Tax
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2012 (8) TMI 245
Demand of Service Tax – denial of benefit of exemption under Notification No. 6/2005-ST - demand on the ground that the appellant has availed CENVAT Credit on input services and capital goods – Held that:- Once the appellant avail CENVAT Credit on the capital goods received in the premises from where he provides taxable service, the benefit of exemption under Notification No. 6/2005-ST, would not be available - appellant is directed to deposit full amount of Service tax
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2012 (8) TMI 244
Catering services - Denial of exemption for small service providers as per Notification No. 6/05-ST - appellant submits that for the purpose of calculation, Revenue is taking into account the entire receipts of the appellants whereas the taxable value should be taken after allowing abatement of 50% in terms of Notification No. 1/-90ST – Held that:- There is provision in the Notification to the effect that value of services exempted by other Notification should not be taken into account for calculating the aggregate value under Notification No. 4/07-ST - argument that they were providing only tea and snacks and such items were not substantial and satisfying mean also to be misplaced because the canteen was operated for providing meals to employees of AIL and tea and snacks were only items served at times intervening between that for substantial meals and that was not the main service provided – pre-deposit waived
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2012 (8) TMI 243
Refund – Exemption of service tax paid by them under Notification No. 09/2009 as amended by Notification No. 15/2009 - Held that:- Adjudicating authority denied the refund claim on the ground they are not entitled to claim refund prior to the period, on which date they got the approval from the concerned authority - remanded the matter to the adjudicating authority to consider the claim filed by the respondent to examine whether the respondent has fulfilled the other conditions of the above said notifications or not
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2012 (8) TMI 242
Installation, Erection and Commissioning Service – Held that:- Appellant are clearing the solar system through dealers also and the dealers further sell it to the customers and charge certain amount for installation - appellant are not charging installation charges separately, but for installation activity, they are liable to pay service tax - activity of installation of solar system falls under the category of Erection, Installation and Commissioning Service - matter remanded back to the original adjudicating authority to consider the records, documents for computation of service components in the activity of the appellant
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2012 (8) TMI 207
GTA services - Demand of service tax – denial of Notification No.32/04-ST - conditions are to the effect that GTA services provider gives a declaration on every consignment note that he has not availed the benefit of Cenvat Credit of duty paid on the capital goods as also the benefit of Notification No.12/03-ST - said declaration do not stands given by the transporters, the benefit stands denied - Held that:- In the absence of any prescribed format to make such declaration, the certificate given by the transporters are sufficient - matter remanded to original adjudicating authority for examining the said certificate
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2012 (8) TMI 206
Whether appellants who are actually selling SIM Cards of BSNL to the customers are liable to the service tax or not – Held that:- all the stay applications filed by the Revenue, are rejected.
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2012 (8) TMI 205
Application for waiver of pre-deposit, interest thereof and equal amount of penalty - Held that:- As appellant addressed to the Superintendent, Central Excise, having jurisdiction over his factory, about the activity conducted by them on the tender accepted by ONGC for laying down of pipelines for transportation of gas and despite this, revision authority has not called for any information nor gave any direction/ suggestion to the appellant to classify such activity of manufacture, thus the matter seems to be hit by limitation - application for waiver of pre-deposit of amounts involved is allowed
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2012 (8) TMI 204
Maintainability of appeal – Held that:- no provision for appeal to Tribunal against an order passed by the Commissioner of Service Tax under Section 84 of the Finance Act, 1994 as a revisionary authority after the amendment brought to Section 86 of the said Act w.e.f. 19/08/2009 under the Finance (No.2) Act, 2009. Appeal is rejected as not maintainable.
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Central Excise
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2012 (8) TMI 212
Claim of refund under Rule 5 of Cenvat Credit Rules, 2004 against exportation of 100% Cotton Terry Towels under bond. - Revenue was of the view that since final product was exempted from excise duty they could not have exported the goods under bond and they could not have taken Cenvat credit on inputs used in the manufacture of such exempted goods. - held that:- this issue has been initially decided by the Bombay High Court in the case of Repro India (2007 (12) TMI 209 - BOMBAY HIGH COURT) and decision has been further affirmed by the Himachal Pradesh High Court in the case of CCE Vs. Drish Shoes Ltd. (2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT) - Refund allowed.
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2012 (8) TMI 211
Common modvatable / cenvatable inputs in the manufacture of dutiable as also exempted final products. - demand provisions of Rule 6(3)(b) of Cenvat Credit Rules - held that:- matter remanded back.
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2012 (8) TMI 210
Excisability of sugar syrup, being manufactured by the appellant at the intermediate stage of manufacture of edible biscuits and used by them captively - appellants contention that sugar syrup manufactured by them is not marketed on account of various factors like short shelf life etc. and hence the same is not excisable Held that:- Matters were remanded for denovo decision with the direction to establish the marketability of the product and to decide the consequent excisability.
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2012 (8) TMI 209
CENVAT credit on stockbroker's service - respondent used the services of a stockbroker for acquiring shares in another company - understanding was that the other company would supply electricity to the respondent subject to the condition that the latter would invest in the former – Held that:- Electricity was used by the respondent in the manufacture of their final products – there is clear nexus between the stockbroker's service and the manufacture of the goods - service clearly fell within the ambit of 'input service' as defined under Rule 2(l) of the CENVAT Credit Rules, 2004 – credit allowed
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2012 (8) TMI 208
Reversal of Cenvt Credit - Rule 6(3) - generation of waste - fine was resulted while manufacture of Sponge Iron – Held that:- There is nothing on record to suggest that outcome of manufacture is controllable to eliminate fine which obviously generate - Revenue not brought out that the appellant knowingly generated fine and also knowingly arranged its situation to attract Rule 6(3) of Cenvat Credit Rules, 2004 - Proportionality aspect not being dealt by Rule 6(3) of Cenvat Credit Rules, 2004 and that Rule being subject to certain conditions the appellant shall succeed in absence of a case made from that angle - appeal is allowed
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2012 (8) TMI 173
Pre-deposit of duties and penalties - whether the appellants are entitled to Cenvat credit of Service Tax paid on rent a cab service, used for carrying employees from their homes to the factory and dropping them back from the factory to their homes – Held that:- Services of transportation of employees to the factory is an admissible cenvatable /modvatable input services – In favor of assessee
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2012 (8) TMI 172
Clandestine removal of the goods - appellant firm who had removed the goods clandestinely, discharged the duty liability, interest and penalty to the extent of 25% of the duty involved – Held that:- Requirement of pre-deposit is waived and the appeal taken up for final disposal. Section 11A (1A) of Central Excise Act, 1944, if such person (the person liable to pay duty) has paid duty in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and the other persons to whom the notices are served under sub-section 1 shall without prejudice the provisions of Sections 9, 9A and 9AA be deemed to be conclusive as to the matters stated therein - Appeal allowed
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2012 (8) TMI 171
Non Compliance - the assesses, who had availed Modvat credit on the basis of modvatble invoices were directed to reverse the entire Modvat credit, the other appellants, who were registered dealers and had issued the invoices, were directed to deposit 50% of the penalty amounts imposed upon them. - appeals are liable to be dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act.
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2012 (8) TMI 170
Waiver of pre-deposit - manufacture of MS ingots – alleged that applicants suppressed production of excisable goods and short paid the duty - demand is confirmed on the basis of electric consumption as well as after taking into consideration the data in respect of cost of production and sale considerations – Held that:- Per MT cost of production of finished goods was worked out on their reported turnover as per the audited financial account for the year 2007-08 the cost of production per MT for the period March 2008 to August 2008 is Rs.33,476/- whereas the transaction value per MT as per ER-1 returns is only Rs.31,690/- which is much less than even the cost of production - demand is not merely on the basis of electric consumption - Commissioner (Appeals) has not decided the appeals on merits - appeals filed by the appellants were dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act as the appellants failed to comply with the conditions of the stay order passed by the Commissioner (Appeals) - matter is remanded to the Commissioner (Appeals) to decide afresh - appeals are disposed of by way of remand.
