Income Tax
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Taxation on accrual of interest income - the mercantile system of accounting - the accrual theory of interest income was to be assessed in the year in which it had accrued and had become due. - HC
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Accrual of interest - period of holding - The right to receive interest on the Government securities vested in the respondent only on the due date mentioned in the securities. - HC
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Non deduction of tax at source - no demand visualized u/s. 201(1) should be enforced after the tax deductor has satisfied the Officer in charge of TDS that taxes due have been paid by the deductee assessee - AT
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Long term financing - benefit of section 36(1)(viii) - inclusion in the profit and gains - a) Interest on Bank deposits, b) Interest on advances / deposits, c) Dividend on investments, d) Misc. receipts - condition in the Section that the income should be “derived from” the business of providing long-term finance was not satisfied - AT
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Revenue expenditure versus capital expenditure - Bank Charges being Upfront fee for term loan / Prepayment penalty charges - no justification on the part of the revenue to capitalize the said expenditure. - AT
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Block assessment - Unexplained investment - estimated profit on difference in work in progress - It is only on the basis of hypothetical assumptions and the additions are purely on guess work and without any material evidences. - AT
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Addition u/s 69 C - low household expenses - there must be evidence on record which may prove that the assessee had incurred expenses much more than what has been shown by the family members - AT
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Building includes roads laid in the proximity of factory for the purpose of providing access to factory and other buildings within compound and they are entitled to depreciation - HC
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The circular issued by CBDT No. 789 dated 13th April draws a distinction between “liability to pay tax” and “actual or de facto payment of tax”. - HC
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Royalty payment as 3% of the net ex-factory sale by the licensee/assessee - the expenditure has to be treated revenue in nature - HC
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Application of income outside India - Charitable activity - there is no bar in applying for charitable purpose outside India, if there is an approval from CBDT which is not there. - disallowed - AT
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Corporate membership fees - revenue in nature or capital? - no reason why the renewal membership fees should not be allowed as revenue expenditure - HC
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Non deduction of tax at source - remittances to a non-resident company - SEL, NRI company nowhere is involved in the above identification of the exporter or in selecting the material and negotiating the price, thus it cannot be said that SEL is rendering any of the consultancy services. - AT
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Treatment of sales tax subsidy - CIT(A) treated it as revenue receipts - , it would be in the nature of capital receipt not liable to tax - AT
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Disallowance u/s section 36(1)(ii) - payment in lieu of dividend - amount of commission and bonus paid to the Managing Director was an allowable business expenditure - AT
Customs
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Claim of revalidation of the scrip under the SFIS - HC
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Condonation of delay - Just because the Tribunal is vested with the discretion to condone the delay, exercise of such discretion is not meant to grant premium to the default of delay when neither cogent nor believable reason exist. - AT
FEMA
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Foreign Exchange Management Act, 1999 (FEMA)-Compounding of Contraventions under FEMA, 1999 - Circular
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Risk Management and Inter Bank Dealings - Circular
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Exchange Earner's Foreign Currency (EEFC) Account, Diamond Dollar Account (DDA) & Resident Foreign Currency (RFC) Account - Review of Guidelines - Circular
Indian Laws
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CBDT's Clarification on extension of due date of filing of returns
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Order under Section 119 of the Income Tax Act, 1961.
Service Tax
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Payment of service tax under wrong accounting code – adjustment of payment in the correct account code are allowed. - AT
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Cenvat Credit on courier service connected with export - Once the sample copy of the evidence submitted on record, does not rule out genuineness of claim of the appellant, the appellant succeeds in the appeal - AT
Central Excise
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Valuation - Job work - fabric + job work charges – alleged that merchant manufacturers suppressed the value of grey fabric, which resulted in short payment of duty by the assessee - AT
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Interest on delayed refund – payable on the expiring of period of three months from the date of receipt of application under Section 11B(1) and not from the date of order of refund or Appellate Order allowing such refund - AT
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Refund claim - Their claim is hit by the bar of unjust enrichment under Section 11B of the Act as the uniformity of the price before and after assessment does not lead to the conclusion that incidence of duty has not been passed on to the buyers - AT
VAT
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ARRANGEMENTS FOR RECEIPT AND MOVEMENT OF QUARTERLY RETURNS FOR QUARTER ENDING 30-06-2012. - Circular
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Amendment in Sixth Schedule - Regarding grant facilities for exemption/refund of VAT - Notification
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Verification of ‘C’ & ‘F’ Forms produced during the appellate proceedings - enquiry had to be done by the VATO which was rightly directed by the Tribunal. - HC
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Income Tax
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2012 (8) TMI 19
Receipt of gift from 76 persons - unexplained gift versus genuine gift - opportunity to prove genuineness - held that:- It is trite law that Evidence Act is not strictly applicable to the income tax proceedings as the proceedings being quasi judicial proceedings as opposed to judicial proceedings the A.O. no doubt is not fettered by technical rules of evidence, however like any other judicial proceedings even in the income tax proceedings the issues are decided on the basis of evidences. - It is a fundamental principle of natural justice that no material should be relied upon against a party without giving him an opportunity of explaining the same. The right to know the materials on which the AO is going to take a decision in the remand proceedings is a part of the right to defend oneself. The AO, therefore, while taking action by virtue of the powers vested in him and before making an adverse order in pursuance of such power is obliged to provide to the affected person a 'reasonable opportunity of being heard. Such requirement underscores a point that the order is not dependent on the sweet will of the concerned authority. It will have to be according to law. It is justiciable. Rules of natural justice are not embodied rules. They are only means to an end and not an end in themselves. Their aim is to secure justice or to prevent miscarriage of justice. It is, therefore, not possible, to make an exhaustive catalogues of such rules. Fairness has to be ensured, whatever be the rule. If fairness is shown by the decision-maker to the man proceeded against, the form and features of the rule is not of much relevance. No arguments based on legal propositions have been advanced by the Sr. D.R. addressing the fact that where there are contradictory statements by 4 out of the 21 witnesses as to which statement should be relied upon and why, similarly how and why the statements of 21 witnesses should be given a blanket application to the remaining 55 witnesses has been left unaddressed in a zeal to canvass the confirmation of the addition sustained. The expression "natural justice" is not capable of static or precise definition. It cannot be imprisoned in the strait-jacket of cast-iron formula. All it means fairness in action. The principles will vary with varying situations of statutory bodies and rules prescribed by the Act under which they function. They yield to and change with the exigencies of different situations and do not apply in the same manner to situations which are not alike. They are neither cast in a rigid mould nor can they be put in a legal strait-jacket formula. They are not immutable, but flexible. Matter remanded back to AO with direction.
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2012 (8) TMI 18
Taxation on accrual of interest income - the mercantile system of accounting - Held that:- The assessee received Rs.11 lakhs in the liquidation proceedings consequent on the winding up of the company on 18.03.2008 with effect from 22.04.2002. Therefore, even in respect of the debt written off in 2007, the assessee had received Rs.11 lakhs, which may not be in full quit of the amount due and payable to the assessee herein - that the assessee was following the mercantile system of accounting, hence, the accrual theory of interest income was to be assessed in the year in which it had accrued and had become due. Thus, even though the assessee had followed the mercantile system of accounting, the materials placed before the AO and before the Tribunal, do not, in any manner, advance the cause of the assessee to substantiate its contention that the accrued interest was only hypothetical income and hence, not available for taxation - against assessee.
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2012 (8) TMI 17
Accrual of interest - period of holding - Held that:- The right to receive interest on the Government securities vested in the respondent only on the due date mentioned in the securities. Consequently, interest accrued on the securities only on the due dates and cannot be said to have accrued to the respondent on any date other than the date stipulated therein - As in respect of the securities held by the respondent on 31st March, 2001, the due date for payment of interest thereon had not arrived on 31st March, 2001 and that the respondent sold some of such securities prior to the next due date for payment of interest. It is only the holder of the security on such date to whom interest can be said to have accrued. In any event interest did not accrue to the respondent on 31st March, 2001, as admittedly interest was not payable on that date as per the terms of the said securities - The appellate authorities, therefore, rightly deleted the addition made by AO as interest income. Receipt of consideration towards the sale of the securities - DTAA between India and Cyprus - the appellant's case is that the respondent's case does not fall within Article 14(4) only because it falls within Article 11(4) - Held that:- The governing provision of Article 11(4) is that interest means income from a debt-claim of every kind and a debt-claim arises on account of a transaction that creates a debtor-creditor relationship and the consideration received by the respondent in respect of the sale of the said securities is a capital gain - rejecting the submission that the gain from the sale of the said securities falls under Article 11(4), it follows that the same falls under Article 14(4).
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2012 (8) TMI 16
Non deduction of tax at source - demand raised and interest thereon - that assessee had applied for advertisement contracts which was called for by tender of AUDA Held that:- CBDT vide Circular No,.275/201/95-IT(B) dated 29-1-1997 states “no demand visualized u/s. 201(1) should be enforced after the tax deductor has satisfied the Officer in charge of TDS that taxes due have been paid by the deductee assessee - the factual position as confirmed by CIT (A) that AUDA is subject to tax and is filing its return of income since the details of taxes and dates of payment of taxes by AUDA have not been examined by the AO while passing the order u/s. 201(1) r.w.s. 201(1A) & 221, in the interest of justice it is fit to refer the matter back to the file of A.O.
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2012 (8) TMI 15
Addition on account of the excess stock found during the course of survey – Held that:- Some stock of sarees goes out of fashion and fetches very less value which may have even less than the cost price thereof and no suitable deduction on this count was allowed by the AO while valuing the stock of the assessee - assessee has produced copies of accounts in respect of several creditors which shows that there is already a trade cycle of 2 to 4 months from the receipt of goods to the payment made by the assessee to the creditors - entire addition of Rs.15,00,210/- on account of excess stock found at the time of survey, could not be sustained in the hands of the assessee - addition on account of excess stock found during the course of survey is restricted to Rs.5 lacs as against the addition of Rs.15,00,210/- made by the AO - appeal of the Revenue is partly allowed.
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2012 (8) TMI 14
Additions on account of estimation of gross profit rate @28% on the unaccounted turnover – Held that:- AO could not adduce any cogent reason for applying the higher GP rate of 28% - assessee has declared GP rate of 13.06% to 21.76% in various assessment years 1998-1999 to 2003-2004 which shows an average rate of GP at 18.36% - No reason to justify the higher GP rate of 28% was given by the AO - AO directed to work out the addition on account of GP on undisclosed turnover - Revenue’s appeals is partly allowed. Additions on account of unaccounted investment being 1/6th of initial unaccounted capital - assessee has contended that this investment is to be made in the first month and there is a turnover of remaining period - assessee has also contended before the AO that its business cycle period of one time turnover is 25 to 35 days – Held that:- It would be reasonable to estimate unaccounted initial investment at 1/12th of unaccounted invested capital as against 1/6th thereof estimated by the AO - Revenue’s appeals are partly allowed.
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2012 (8) TMI 13
Long term financing - benefit of section 36(1)(viii) - inclusion in the profit and gains - a) Interest on Bank deposits, b) Interest on advances / deposits, c) Dividend on investments, d) Misc. receipts - held that:- following the decision in (2011 (11) TMI 380 - DELHI HIGH COURT) wherein at was observed that though the aforesaid items of income can be said to be “attributable” to the business of providing long-term finance, that was not sufficient to attract the provisions of Section 36(1)(viii) and that the condition in the Section that the income should be “derived from” the business of providing long-term finance was not satisfied - Decided against the assessee. Deduction u/s 36(1)(viii) - held that:- When we compare the provisions of sec. 36(1)(viii) and sec. 80IB(1), we find that in both cases, deduction is allowable in respect of profits derived from relevant business. - Regarding service charges on SDF loans, admittedly, there is no finance given by the assessee as the entire financing in SDF Loans is by the Govt. and not by the assessee and the assessee is getting only some service charges for rendering certain services in that connection. Hence, this receipt can be said to be attributable to the business of proving long term finance but cannot be said to be derived from the business of providing long term finance. - Decided against the assessee. Alternative contention of the assessee that entire receipt on account of bank interest cannot be reduced from business profit for the purpose of calculating deduction u/s 36(1)(viii) allowable to assessee. - held that:- AO directed to work out the net profit which is liable to be disallowed as deduction u/s 36(i)(viii) after considering the assessee’s contention. In view of these facts, this issue is restored to the file of the Assessing Officer. Disallowance u/s 14A read with rule 8D - held that:- Sub-ss. (2) and (3) of s. 14A as well as r. 8D are prospective and not applicable retrospectively; however, even prior thereto, s. 14A required the AO to first reject the claim of the assessee with regard to the extent of such expenditure; for cogent reasons and then to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment - matter remanded back to AO.
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2012 (8) TMI 11
Block assessment - Unexplained investment - estimated profit on difference in work in progress - remuneration as undisclosed income - held that:- the assessee has justified the payment of onmoney for purchase of land and he has filed necessary cash flow statement to explain the sources for on-money payment and details of advances received for Usha Enclave to justify the sources of fund. The assessing officer has conducted series of investigation and probed the assessee, which proves that the advances are genuine. - The assessing Officer justified his addition purely on guess work stating that the assessee has no chance of diverting advances for purchase of property and he would have used all the money for construction of building itself. It is not able to prove that the work in progress declared by the assessee with the support of valuation report from registered valuer is not correct. It is only on the basis of hypothetical assumptions and the additions are purely on guess work and without any material evidences. - Decided in favor of assessee. Estimation of profit - held that:- The CIT(A) has rightly estimated the 8% profit on difference in work in progress and given relief for the balance and his order needs no rectification.
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2012 (8) TMI 10
Addition on account of low gross profit - rejection of the book results by invoking section 145(3) - Held that:- The primary reason weighing with the Assessing Officer to hold the book results as unreliable is on account of incurrence of site expenses of Rs 51,13,893/- which was unverifiable as it was entirely based on self-made vouchers. Secondly, the labour payments of Rs 62,62,166/- was also found abnormally increased to 28.97% in comparison to 14.92% and 20.23% incurred in assessment year 2003-04 and 2004-05 respectively -no credible and convincing explanation has been rendered by the assessee. Section 145(3) of the Act has been correctly invoked by the Revenue authorities in this case. Quantum of income determined by the Assessing Officer after rejection of the book results - Held that:- The estimation is quite excessive and unjustified considering past history wherein level of profits declared by the assessee are not so huge, we deem it fit and proper that an addition of Rs 5,00,000/- would suffice to plug the leak of revenue, if any, on this account. Disallowance invoking section 40(a)(ia) - non deduction of tax a source - held that:- Find fit and proper to remit the matter back to the file of AO for a decision afresh as the remand is necessitated in view of the decision of the Special Bench in the case of Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) whereby it has been laid down that the disallowance under section 40(a)(ia) shall be limited to only such expenditure which is found payable as on 31st March of the year and not to expenditure which has otherwise been actually paid during the year itself - appeal of assessee partly allowed.
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2012 (8) TMI 9
Addition u/s 69 C - low household expenses - Held that:- No evidence was brought on record by the Revenue which may prove that the assessee has incurred expenses on the household drawing much more than what has been shown by her family members. The household drawing has merely been estimated by the AO without pointing out any specific expenditure being incurred by the assessee - for applicability of section 69C there must be evidence on record which may prove that the assessee had incurred expenses much more than what has been shown by the family members - against revenue. Addition on account of property income - the assessee owned two properties out of which one was used for residential purpose and the other remained vacant - ALV of the property other than that occupied by the assessee was determined u/s 23(1)(a) r.w.s. 23(4)(B) - Held that:- Assessee was owner of only one property which was vacant during the year under appeal as the same was not let out during the year and other property belongs to her husband as born out by the written submissions filed by the assessee with municipal tax receipts in the name of her husband and the computation of income filed along with return of income by her husband to show that the other property was self acquired property of her husband - the A.O. has not brought any material on record to show that the property owned by assessee was ever let out - against revenue.
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2012 (8) TMI 8
Whether road constructed within factory premises should be treated as part of building for depreciation purposes – Held that:- Roads constructed inside and within boundary wall of premises, be it a building or factory, are meant to augment utilization thereof, such roads are eventually intended to augment utilization of building/factory by providing access thereto - Building includes roads laid in the proximity of factory for the purpose of providing access to factory and other buildings within compound and they are entitled to depreciation
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2012 (7) TMI 806
Initiation of reassessment proceedings u/s 147 r.w.s. 148 - DTAA between India and the UAE - as there was no tax regime in UAE and as the assessee was not liable to taxation in UAE, the question of benefit under the said DTAA was not applicable - Held that:- In terms of Circular No. 732 dated 20th December, 1995, the petitioner was issued an ‘annual no objection certificate’ and in terms thereof, the ships operated and owned by the petitioner were allowed to leave the ports. The certificate as itself was treated as valid and binding and in compliance with the Section 172. As the AO has relied upon judgments of ARR in Cyril Eugene Pereira, In Re (2005 (5) TMI 12 - AUTHORITY FOR ADVANCE RULINGS ) for the proposition that benefit under DTAA is only meant for taxpayers who are liable to pay tax twice in two countries on the same income and not where tax is not payable in one country but failed to notice the decision of the Supreme Court in Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT]disapproving the reasoning/ratio mentioned in Cyril Eugene Pereira The circular issued by CBDT No. 789 dated 13th April draws a distinction between “liability to pay tax” and “actual or de facto payment of tax”. Phrase ‘liable to taxation’ it has been held is not the same as ‘payment of tax’. The test for liability for taxation is not determined on the basis of an exemption granted in respect of any particular source of income but by taking into consideration the totality of provisions of income tax law - Merely because at the given time there is an exemption from income tax in respect of any particular head, it cannot be contended or held that the assessee is not liable to tax - For the purpose of application of article 4 of the DTAC, what is relevant is the legal situation, namely, liability to taxation, and not the fiscal fact of actual payment of tax. If this were not so, the DTAC would not have used the words, “liable to taxation”, but would have used some appropriate words like “pays tax” - the company incorporated in Dubai and carrying on shipping business in India is entitled to benefit under Article 8 of the DTAA and there is no scope of taxing them in any port of India - in favour of assessee.
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2012 (7) TMI 805
Royalty payment as 3% of the net ex-factory sale by the licensee/assessee - Held that:- From the terms of the agreement the ld. CIT (A) came to the conclusion that assessee had right to access the technical knowledge as against absolute transfer of technical knowledge and information and the payment for which has been made on turnover basis, the expenditure has to be treated revenue in nature - no substantial question of law arises for consideration
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2012 (7) TMI 804
Disallowance of Depreciation on renovation - AO stated that capital expenditure incurred in respect of a premises that were taken on lease after the end of the previous year are not eligible for depreciation - Held that:- Mrs. Radhika Sehgal, the land lady and Mr. Mukesh Sehgal director of the company traveled together to India. In fact, as per argument of assessee that they are close relatives. Therefore, it can be said that there was oral understanding between them for lease of the above building. Moreover, the various licenses issued by various authorities like Customs Department STPI had given licenses with the same property as its address. Moreover, business was also started from the same premises before 31st March, 2006. Therefore, we do not see any reason to interfere in the order of Ld CIT(A)in deleting the addition made by the A.O on account of disallowance of depreciation - in favour of assessee Disallowance of expenditure on account traveling - Held that:- Mr. Mukesh Shegal was one of the first director of the company and he had traveled to India for completion of various formalities for getting various approvals - there is every possibility that traveling expenses incurred by assessee on the travel of its director were to enable him to attend Board meetings and to file various documents before various authorities - as genuine business expenditure has been incurred CIT(A) was correct to allow the expenditure - in favour of assessee. Disallowance of exemption u/s 10B - Held that:- As assessee had claimed exemption for the profits only from 1.2.2006 to 31.3.2006 and all the conditions for availment of exemption u/s 10B were complied. Therefore no reason to interfere in the order of Ld CIT(A)for allowing the exemption - in favour of assessee.
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2012 (7) TMI 803
Penalty u/s 271(1)(c) - disallowance of deduction claimed u/s 80HHC - Held that:- As noticed by the Tribunal all the foundational facts which ultimately led to the disallowance were revealed by the assessee in the return no occasion to concealment of income arise here - if the claim of assessee is ultimately found to be legally unacceptable, it does not mean that the assessee has concealed the particulars of its income - in favour of assessee.
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2012 (7) TMI 802
Disallowance u/s 68 - Held that:- As the CIT (A) elaborately took into account considerable material furnished by the assessee including income tax returns, balance sheets, ROC particulars and bank account statements it can be concluded that the share application money or the source of the share application money had been satisfactorily explained - the only sentence in ITAT’s order mentioning that some shareholders were refunded the amounts initially given by them to the assessee should not be a ground to conclude that the findings recorded by the lower authorities are not on the basis of evidence - in favour of assessee. Charging the interest u/s 234B is mandatory and therefore, this plea of appellant is dismissed and interest u/s 234D cannot be levied as interest under section 234D could not be charged in respect of assessment years falling prior to assessment year 2004-05.
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2012 (7) TMI 801
Challenge the reassessment orders - Held that:- AO had recorded detailed reasons in order to arrive at the conclusion that provisions of section 68 are applicable and thus resulted in escapement of income and there is nexus between the specific information and reasons recorded by the AO. Therefore AO is justified in reopening the assessment - no substantial question of law arises for consideration
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2012 (7) TMI 800
MAT - Book profit u/s 115JB - Reopen the assessment u/s 147 - writ petition under Article 226/ 227 of the Constitution of India to quash the notice - provision for gratuity and the provision for diminution in the value of the investment and claim of settlement amount as capital receipt - Held that:- Petitioner in the present case had placed all the primary and relevant facts before the AO in the original assessment proceedings but has not alleged, in the reasons recorded, what further primary, material or relevant fact was omitted or had not been disclosed by the petitioner - the reasons recorded show that the only thing remained to be disclosed by the petitioner was the inference that the three items in question were to be added back to the book profit, a duty which is not placed on the assessee. The reasons also show that it was from the same facts which were disclosed by the petitioner, the first respondent formed the view or drew the inference that the items were to be added to the book profit. Nothing more was required to be done by AO except to read the audited profit & loss account, balance sheet etc. along with the schedules and notes on accounts in order to draw the inference whether the three items in question were to be added back to the book profit or not. The tax audit report and audit report in Form No.29B along with its annexures including the settlement agreement were also before him - The alleged escapement of income cannot be attributed to any failure on the part of the petitioner to furnish full and true particulars - Writ petition allowed - in favour of assessee.
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2012 (7) TMI 799
Application of income outside India - Charitable activity - Disallowance of amounts spent outside India for participating in Hannover Fair in Germany - the mischief u/s 11(1)(a) & 11(1)(b) - Held that:- The words "to the extent to the which such income is applied to such purposes in India" appearing in section 11(1)(a) only require that the charitable purposes should be confined to India on the application of the income of the trust to the execution of such purposes can be outside India, appears to us to be also opposed to the natural and grammatical meaning that can be ascribed to the words - it is mandatory that the amount should be spent and applied in India. As regards plea taken by the assessee, it has participated in Hannover Fair at the instance of the Ministry of Commerce, cannot override the Income-tax Act and there is no bar in applying for charitable purpose outside India, if there is an approval from CBDT which is not there. So, in the absence of such approval, disallowance in this regard could validly be made. Disallowing the deprecation - Held that:- The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue - in favour of the assessee
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2012 (7) TMI 798
Disallowance of corporate membership fees - revenue in nature or capital? - Held that:- The club membership enable the nominated executives to meet people and develop relationship for smooth conduct of day to day business. The Tribunal followed its order for the Assessment year 1998-99 in respondent's own case where both entrance and renewal fees paid for club membership were allowed as revenue expenditure and as the earlier order of the Tribunal has not been challenged by the revenue no reason why the renewal membership fees should not be allowed as revenue expenditure - against revenue. Disallowance of excess provision on account of free service provided - Held that:- Quantification of the provision as done on the basis of the unencashed valid coupons was on a reasonable and consistent basis - the provision is of a estimate and if subsequently the same is found to be in excess then the excess is added back and offered to tax. Further, this has been a practice followed by the respondent assessee and accepted by the department for many years - against revenue. Depreciation in respect of telephone trolleys, furniture and equipment as plant and machinery in factory - Held that:- The issue is settled by the Tribunal in the earlier year in respect of the same assessee and the revenue has not been able to point out any change in the circumstances. Appeal admitted only on deleting disallowance by ITAT being expenses incurred by the assessee on account of taxes and fees not pertaining to year under consideration.
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2012 (7) TMI 797
Addition made on account of work in progress - Held that:- As decided in CIT Versus MAHAVIR ALLUMINIMUM LTD. [2007 (11) TMI 41 - HIGH COURT, DELHI] whenever any adjustment is made in the valuation of inventory, this will affect both, the opening as well as the closing stock - thus it is evident that AO has not taken into account working of the opening stock of work in progress, therefore no merit into this ground of appeal of the Revenue against CIT(A)in deleting the addition - in favour of assessee. Addition on account of bogus purchases - Held that:- The material produced in the form copies of bills which were recorded into the books of assessee but were not recorded into the accounts of M/S Aggrawal Enterpries - that the assessee has submitted the copies of delivering challans and weighing slips it can be concluded that the assessee had shown all the purchase bills while M/S Aggrawal Enterprise has not shown all the purchases bills while M/S Aggrawal Enterprises has not shown cash sales - no proof of bogus purchases - in favour of assessee. Addition on account of rebate and discount - Held that:- Considering the contention of the assessee that such huge discount and rebate would not have been given as the seeing the value of material & CIT(A) has given a finding that M/S Aggrawal Enterprises has not recorded the correct transaction in his books of accounts. The Revenue has not brought any material to rebut the finding of CIT(A) - in favour of assessee. Disallowance on breach of sec.40(a)(ia) - non-deduction of TDS on transportation charges - Held that:- The sum credited or paid or likely to be paid are credited to the account of the contractor or the contractor if such sum exceed 20,000/- tax is deductible in terms of Section 194C(5) - Since the aggregate amount paid exceeds the limit prescribed under Section 194C(5) of the Act, therefore, first argument of the assessee is not acceptable - the opening line of Section 194(C)(1) makes it clear that the assessee was liable to deduct tax since it reads any person responsible for paying any sum to any resident. In this case admittedly the assessee was responsible for paying sum to the transporter - against assessee.
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2012 (7) TMI 796
Reassessment proceedings - disallowance of the deduction u/s 80IA(4) - Held that:- CIT(A) expressly stating that the action of the AO of not allowing the deduction for the A.Y. 2008-2009 was erroneous inter-alia in view of the judgment in Commissioner of Income Tax v. Paul Brothers [1992 (10) TMI 5 - BOMBAY HIGH COURT] that a deduction could not have been denied in subsequent years without first withdrawing it in the initial year - in favour of assessee.
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2012 (7) TMI 795
Non deduction of tax at source - remittances to a non-resident company incorporated in Hongkong - services rendered by M/s SEL, NRI company to the assessee company are technical, managerial or consultancy as per sec. 9(i)(vii) - Held that:- The agreement between the assessee and NRI company stipulates that it shall be responsible for the shipment of raw material to the assessee from its importers within the stipulated time and as per the specific quality and quantity - it is the assessee, in the consultation with its exporters, which identifies the manufacturer and the quality and the price of the material to be imported. Therefore, SEL nowhere is involved in the above identification of the exporter or in selecting the material and negotiating the price, thus it cannot be said that SEL is rendering any of the consultancy services. As the quality of material is already determined by the assessee and the SEL is only to make a physical inspection of the material to see if it resembles the quality specified by the assessee it is thus not much of technical knowledge is required in it.SEL is not required to employ any skilled technical personnel to discharge its obligation under the agreement and, therefore, we hold that the assessee is not discharging any technical services - it is seen that SEL is acting on behalf of the assessee as its agent and there is no independent application of thought process in any of the activities to be carried out by SEL no managerial services being rendered by SEL to the assessee - above payments do not fall within the ambit of fee for technical services and, therefore, the provision of sec. 195(1) is also not attracted - in favour of assessee.
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2012 (7) TMI 794
Dis allowance of interest paid on capital borrowed for the acquisition of capital assets (WIP) - CIT stated that the assessment order u/s 143(3) should be treated as “erroneous and prejudicial to the interest of the revenue"- Held that:- Undisputed fact that the Assessee had made written submissions both before CIT & AO that though the assessee had made acquisition of assets during the year under consideration but had not borrowed funds for its acquisition and hence the provisions of sec 36(1)(iii) are not applicable and accordingly no part of interest was required to be capitalised the Commissioner did not adequately deal with these contentions, and rejected the same by observing that the interest payment should not have been allowed as a deduction. The A.O. has after considering all the facts and after satisfying himself accepted the contentions of assessee and made no disallowance u/s. 36(1)(iii). CIT has not been able to establish and pin point unequivocally the error or the mistake made by the A.O. which makes the order unsustainable in law as the finding of the CIT must be clear, unambiguous and not debatable - A.O. having exercised his mind over the issue, it cannot be termed as erroneous and prejudicial to the interest of the Revenue - in favour of assessee.
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2012 (7) TMI 793
Penalty u/s 271 (1)(c) - Held that:- A.O. after detecting the concealment of income on the basis of cash book and deposit in the Bank account & considering the all transactions for working of peak and finally he made addition of Rs. 4 lakhs as conceal income u/s 68 after detecting unaccounted deposit in the Bank account, which was confirmed by the ITAT ‘B’ Bench - no reason to interfere in the order of CIT(A) for confirming the penalty on quantum addition of Rs. 4 lakhs, however the addition of Rs. 5 lakhs has accepted by the A.O. as explained, therefore, penalty on addition of Rs. 5 lakhs is deleted - partly in favour of assessee.
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2012 (7) TMI 792
Treatment of sales tax subsidy - CIT(A) treated it as revenue receipts - Held that:- As decided in M/s Indo Rama Synthetics (I) Ltd. Versus ACIT (2012 (7) TMI 406 - ITAT, DELHI) the intention of granting sales tax incentive is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in processing/developing the backward area, it would be in the nature of capital receipt not liable to tax - no difference between the sales tax subsidy scheme of 1979 vis-a-vis the sales tax subsidy scheme of 1993 - in favour of assessee. Charging of interest u/s. 234B - Held that:- Interest u/s. 234B is not leviable in the instant case as decided in the case of DCIT vs. Uttam Sugar Mills Ltd. [2010 (12) TMI 625 - ITAT, DELHI ] in view of retrospective amendment made by the Finance Act, 2008 inserting section 115JB(2), Explanation 1(h) which provided that the book profit be increased by the amount of the deferred tax w.e.f. 1.4.2001, interest u/s. 234B and 234C could be levied by the AO on the income computed u/s. 115JB - It is only on account of subsequent retrospective amendment in law that the advance tax paid by the appellant would faIl short as it was not possible for the appellant to foresee the retrospective amendment to take place and pay advance tax on the basis of the amended law - in favour of assessee.
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2012 (7) TMI 791
Levy of penalty u/s 271(1)(c) - addition u/s 92CA(3) in relation to international transactions - Held that:- Addition made by AO had been disputed by the assessee before CIT(A)by filling detailed submission giving full details of cost for providing professional services and I.T. implementation services as well as the related working of the international transactions. The very fact that CIT(A) remanded the issue to the AO - a perusal of the remand report shows that the CIT(A) himself was not clear as to whether the amount was representative of ALP of the services was examined by TPO on merit. Remand report was not received even till the date of order of CIT(A). Withdrawal the ground relating to management fee and I.T. implementation fees for expeditious disposal consequent to Hon'ble High Court direction to the CIT(A) to dispose off the appeals for assessment years 2004-05 and 2005-06 within a period of 4 months can not be considered as acceptance of addition by the assessee - Though the appeal has been decided without remand report the contentions raised in the submissions leading to remand of the issue is required to be examined objectively to make proper assessment of case of penalty - no reasons have been given as to how the assessee had not proved to satisfaction that international transactions had been computed in accordance with the provisions of section 92C - it is a settled legal position that penalty proceedings are different from assessment proceedings - allowed in favour of assessee for statistical purposes.
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2012 (7) TMI 790
Disallowance of claim of bad debts - Loan given to party - As per assessee’s claim that party turned out insolvent, therefore, the assessee had written off the loan – Held that:- Assessee is in the line of money lending business and this amount had been advanced as loan - assessee has written off this amount as per Section 36(1)(vii) in the books of account - disallowance rightly deleted - In favor of assessee
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2012 (7) TMI 789
Addition on account of estimation the cold storage rent – alleged that assessee was suppressing the rental receipt by showing under utilization of the capacity of cold storage – Held that:- There is nothing on record to suggest that the receipts shown by the assessee on account of rent of cold storage are less than what the appellant actually received. The addition made by the AO is based on suppositions and conjectures and not on any credible evidence to support the case of the AO – Addition deleted Whether AO was justified in invoking the provisions of section 145(3) of the I.T. Act – Rejection of books of accounts – on the basis of non-maintenance of records of loading/unloading expense, excessive consumption of power – AO alleged that actual rent received by the assessee was Rs.40 per bag and rebate of Rs.5 per bag shown in the bill was not genuine – Held that:- It has not been established by the AO that it is not Rs.35 per bag but actually Rs.40 per bag has been received by the appellant - same cannot be a reason for rejection of books of account. Under utilization of capacity – Held that:- Unless and until it is proved that there was full capacity utilization, but the same has been suppressed before the department then only there would be a case with the AO for rejection of books of account. Excess consumption of power – Held that:- Fuel and power expenses are directly related to the running of cold storage, some cold storage might run for longer time than the others particularly in view of the fact that rent is relatable to whole year and is not charged on day to day basis - AO was not justified in invoking the provisions of sec. 145(3) of the Act Addition on account of interest income earned on the loans given to farmers – alleged that other cold storage of Agra and nearby locality are also showing income on this account – Held that:- Assessee has given advance to farmers to keep their potato in cold storage of the assessee. The assessee did not charge interest on such advance given to farmers - such interest free advances to the farmers is in accordance with commercial expediency – Addition deleted – In favor of assessee Addition on account of payment made to National bank Handling Corporation – alleged that payment for acquiring the membership was given once for all and is of capital nature – Held that:- It is mentioned in the certificate itself that the membership is valid for one year - such type of payment is revenue in nature and the CIT(A) has rightly deleted the addition – In favor of revenue Addition on account of interest on the loans taken from concerns of Ganga Ram Group – alleged that this group is famous for giving accommodation entries on commission basis and the assessee could not prove the genuineness of these loans – Held that:- When addition itself is deleted accepting the loan taken as genuine, therefore, the related interest disallowed is not justifiable – Decided in favor of assessee
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2012 (7) TMI 788
Disallowance u/s section 36(1)(ii) - bonus and commission payment to the Managing Director as payment in lieu of dividend - payment is for services rendered as per terms of appointment as Executive/Managing Director of the appellant company – assessee contended that the bonus and commission paid to Managing Director was a regular business expenditure of the company and the assessee has been paying it regularly for the last 20 years – Held that:- In the case of AMD Metplast Pvt. Ltd. (2011 (12) TMI 320 (HC) ) it was held that the amount of commission and bonus paid to the Managing Director was an allowable business expenditure - facts for are same - Therefore, appeals filed by the assessee are allowed - decided in favour of the assessee.
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2012 (7) TMI 787
Rejection of accounts of the Assessee u/s.145 of the I.T. Act - flat rate of net profit to the gross receipt of the assessee – Held that:- Merely because there was a fall in net profit rate, there is no reason to reject the books of account of the assessee - difference in TDS figures as per certificates and as per books of account have been reconciled by the assessee and the reconciliation has been accepted as correct by the Assessing Officer - appeal of the assessee are allowed CIT(A) was not justified in directing to take the Net Profit @ 4% on the declared receipts
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Customs
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2012 (8) TMI 7
Claim of revalidation of the scrip under the SFIS - Held that:- The terms of the SFIS and the authorization issued under it states that if the goods had reached in the India by the date of expiry of the authorization i.e.30.04.2011, the petitioner could have qualified for extension to facilitate their clearance - in this case The goods in fact reached on 26.05.2011 - a fact known to the petitioner when it booked them after entering into contract with the foreign supplier, on 18.04.2011 - against assessee.
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2012 (8) TMI 6
Valuation of imported goods - limitation – alleged that appellant has not filed any appeal within the prescribed period of 60 days before the Commissioner (Appeals) - appellant has filed an appeal within the extended period of limitation of 30 days. The contention of the appellant (for condonation of delay) has not considered by the Commissioner (Appeals) holding that the reason stated is not satisfactory - matter remand back to the Commissioner (Appeals) to pass an order on merits after giving reasonable opportunity to the appellants
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2012 (7) TMI 786
Condonation of delay - the signatory was not in charge of day-to-day activities - He was living in Coimbatore which is 450 kms. from the factory. - held that:- No one has preemptory right to get the delay condoned on one plea or the other. We are conscious that there cannot be presumption of deliberate delay on account of culpable negligence or malafide. But when the appellant as a Managing Director did not visualize that he may run in risk when SCN resulted in adjudication of demand and penal consequences, he became a silent spectator. Present application is abuse of process of law for no reasonable cause advanced. Condonation of delay of unexplained nature shall be premium to the lapse. There is no sufficient cause to condone the delay of 603 days made in the present case to seek appeal remedy. Just because the Tribunal is vested with the discretion to condone the delay, exercise of such discretion is not meant to grant premium to the default of delay when neither cogent nor believable reason exist.
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Corporate Laws
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2012 (8) TMI 5
Winding up petition - Held that:- Present claim is clearly time barred as under Article 14 Schedule 1 of the Limitation Act, a period of limitation for three years is prescribed for the price of goods sold and delivered where no fixed period of credit is agreed upon - limitation has to commence from the date of delivery of the goods. Article 1 would be applicable only for the balance due on a mutual, open and current account in which case, the limitation would commence in terms of Article 1 of the Limitation Act. Conspicuously the first petition did not speak of the parties having a running account and this was averred only in the amended petition. The petitioner has failed to show that there was a mutual, open and current account where there were reciprocal demands made by the parties after May, 2003. Petition has been filed in November, 2007. It is time barred.
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2012 (7) TMI 785
Application for Dissolution of the company - Held that:- When the affairs of the company had been completely wound up or the court finds that the Official Liquidator cannot proceed with the winding up of the company for want of funds or for any other reason, the Court can make an order dissolving the Company from the date of that order. This puts an end to the winding up process - the facts and circumstances of this case, the liquidation proceedings deserve to be brought to an end.
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Service Tax
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2012 (8) TMI 22
Refund claims - under Notification No. 41/2007-ST - refund of service tax paid on GTA services in respect of transport of the impugned goods directly from the place of removal to the port from where the same were exported – Held that:- On the date of filing the claims, the requirement of the notification has been satisfied and the service taxes paid in respect of GTA services used for transport of the impugned goods for export from the place of removal to the port have become refundable - appeals are allowed
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2012 (8) TMI 21
Penalties under. Sections 76, 77 and 78 of the Finance Act - Business Auxiliary Services - services provided by the appellant as regards the insurance of vehicle, loan from the Bank etc. and receiving the amount from the Bank and Insurance company to the services rendered – Held that:- activities rendered by the appellant could not have been taxed under the category of 'Business Auxiliary Services'. Provisions of Section 80 of the Finance Act invoked. Penalties imposed on the appellant under Sections 76, 77 and 78 of the Act set aside.
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2012 (8) TMI 20
Payment of service tax under wrong accounting code – Held that:- while making the payment wrong service tax code relating to "erection, installation and commissioning", indicated merits to be considered and having regards to facts of the case and Board's Circular No.58/7/2003-ST, dated 20.05.03 issued from F.No.159/2/2003-CX-4 and therefore adjustment of payment in the correct account code are allowed. - it is for the Revenue to take up the matter with the P.A.O. - Decided in favor of assessee
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2012 (7) TMI 811
Demand of service tax - Extended period of limitation – Held that:- Show-cause notice was issued on 22.9.2006 demanding service tax for the period 16.7.2001 to 31.3.2005 - demand beyond the normal period is not sustainable
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2012 (7) TMI 810
Waiver of predeposit of service tax - commission and discount received – non-payment of service tax on business auxiliary services - applicant's plea was that they were registered as sub-broker of mutual fund distributors and that the said income was on account of distribution of mutual fund on which service tax liability had been discharged by the authorized body – Held that:- They have procured mutual fund subscription - applicants are not mutual fund distributors nor they are agents thereof. The applicants could not produce any evidence in this regard - applicants also could not produce any evidence that they have received commission directly from mutual fund companies being a registered mutual fund distributors - applicants have not produced any documentary evidence in support of their contentions - applicant is directed to make pre-deposit 25 per cent of the service tax
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2012 (7) TMI 809
Penalty – non-payment of service tax – appellant provided the services of helping the financee/bankers in financing the vehicle purchasers and they were getting a commission - they are not challenging the service tax liability having discharged the service tax liability and also interest thereof – Held that:- Provisions of section 80 invoked as there is a substantial justification for non-discharge of service tax liability on a bona fide belief – in favor of assessee
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2012 (7) TMI 808
Whether when courier service is connected with export and relevancy thereof was not doubted, the appellant cannot be denied relief of credit relating to tax paid for appropriate consequence under different law – Held that:- When the authority recorded that certificates from courier agency were presented by the appellant, authority could have made an enquiry with the courier agency for further clarification in the matter if he was not satisfied with those certificates - Once the sample copy of the evidence submitted on record, does not rule out genuineness of claim of the appellant, the appellant succeeds in the appeal, accordingly that is allowed.
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2012 (7) TMI 807
Condonation of delay - order dated 21-01-2009 was received by the applicant on 18-2-2010 by fax – Held that:- Appeal was filed on 24-03-2010 and there is a delay of more than one year filing the appeal - Commissioner (Appeals) has no power to condone the delay beyond the period prescribed under the Act - appeal is dismissed
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Central Excise
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2012 (8) TMI 4
Demand of duty and penalty under Section 11AC of the Act - assessee is coming to the assessable value of the goods after taking fabric + job work charges – alleged that merchant manufacturers suppressed the value of grey fabric, which resulted in short payment of duty by the assessee – Held that:- No evidence on record to show that the assessee connived with the merchant manufacturers in suppression of the price of the grey fabric. The differential duty has been paid by the merchant manufacturers as they admitted in their statements that they have suppressed the value of grey fabric. In absence of any evidence that the assessee has connived with the merchant manufacturers in suppression of the price of the grey fabric allegation of suppression with intent to evade duty is not sustainable – In favor of assessee
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2012 (8) TMI 3
Waiver of pre-deposit – demand is confirmed in view of the unamended provisions of Rule 6 of the CENVAT Credit Rules 2004 – Cenvat credit on duty paid on inputs used in or in relation the manufacturer of goods cleared on payment of duty as well as common input services – Held that:- Retrospective amended provisions of Rule 6 was not taken into consideration by the adjudicating authority while passing the impugned order - matter is remanded to the adjudicating authority
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2012 (8) TMI 2
Condonation of delay in filing the appeals - Board grants permission to prefer an appeal – Held that:- Revenue has not produced any review order as required under Section 35E of the Central Excise Act, 1944 in respect of the present respondents in spite of opportunities granted. As there is no order produced by the Revenue, passed by the Board, therefore, we find no merits in the applications - condonation of delay applications are dismissed.
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2012 (8) TMI 1
Waiver of pre-deposit - CENVAT credit denied on MS Angles, Channels and similar items – period of limitation - show-cause notice was issued on 28.5.2009 for demanding duty for the period 2004-09 - assessee submitted that during the material period, there were decisions of this Tribunal which prompted the appellant to believe that they were entitled to avail CENVAT credit on MS Angles and similar items – Held that:- plea of bona fide belief was specifically raised in the reply to the show-cause notice but, there was no occasion for the Commissioner to consider it inasmuch as he was bent on rejecting the assessee s appeal for want of pre-deposit without looking into the merits of the case - case should be disposed of by the learned Commissioner (Appeals) on merits in accordance with law and principles of natural justice - appellant should make pre-deposit of the offered amount.
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2012 (7) TMI 784
Interest on delayed refund – Held that:- Interest on delayed refund is payable under Section 11BB of Central Excise Act, 1944 on the expiring of period of three months from the date of receipt of application under Section 11B(1) ibid and not from the date of order of refund or Appellate Order allowing such refund - order is set aside and appeal allowed
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2012 (7) TMI 783
Refund claim - bar of unjust enrichment – assessee submitted that if the increase amount of excise duty is not charged as increased sale price, this itself proved that the incidence of excise duty has been borne by the seller – Held that:- Their claim is hit by the bar of unjust enrichment under Section 11B of the Act as the uniformity of the price before and after assessment does not lead to the conclusion that incidence of duty has not been passed on to the buyers – Against assessee
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2012 (7) TMI 782
Cenvat credit - appellants were having a D.T.A. manufacturing unit - availed modvat credit on the capital goods installed in the unit - no such capital goods were found therein - capital goods were indeed found in the newly set up 100% E.O.U – Held that:- From this letter of approval, it is noticed that it permits the conversion of D.T.A. unit into an 100% EOU - It is not clear from the case records, whether there was any correspondence between the appellants and the Ministry of Commerce & Industry - whether the Ministry of Commerce & Industry has permitted the appellants to convert the existing D.T.A. unit into an 100% E.O.U.unit - case is remanded back to the Commissioner for de novo adjudication after verifying the facts with the Ministry of Commerce & Industry about the conversion of D.T.A. unit into an 100% E.O.U - appeals are allowed by way of remand.
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2012 (7) TMI 781
Penalty - Cenvat credit on raw materials and services used for non-excisable goods – Held that:- Goods containing alcohol are not final product since the same are not excisable goods under the Central Excise Act - They submitted that since they were reversing 10% of the price of price of non-excisable goods - amount reversed under Rule 6(3)(b) of the Cenvat Credit Rules was Rs. 90,86,941/- which is much more than the amount paid by them on being pointed out by the Revenue - no finding has been given by the Commissioner on this aspect of their submission - matter remanded back to Commissioner Cenvat credit - services used for traded goods was admissible - trading activity undertaken by the appellants from their Head Office - Commissioner has stated that the method prescribed under Rule 6(3)(d)(iii) of the Cenvat Credit Rules, 2004 for apportioning common services between dutiable service and exempted services can be taken as a guideline on a rational basis - appellants had paid back the ineligible credit as per work-sheet prepared by them and they contended that the work-sheet was not rejected by the Commissioner – Held that:- Work-sheet submitted by the appellants has not been rejected by the Commissioner and it is open to the Commissioner to call upon the appellants to substantiate their computation of the work-sheet in respect of the credit availed and the appellants should be given an opportunity of being heard to explain their case in respect of the calculation as mentioned in the work-sheet - matter remanded back to the original authority - appeal is allowed by way of remand
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CST, VAT & Sales Tax
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2012 (7) TMI 812
Verification of ‘C’ & ‘F’ Forms produced during the appellate proceedings - remitting the matter to the VATO - forms were initially produced before the VATO, but without application for extension which invited rejection - Held that:- No doubt in the year 2005, the Parliament amended Section 8(4), and correspondently a period of three months were prescribed thus assessee had furnished the application along with ‘C’ form as required by law - enquiry had to be done by the VATO which was rightly directed by the Tribunal.
