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TMI - Update - Newsletter - Friday, August 26, 2011

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, 26-08-2011 at 06:28 AM (2724 Views)
TMI - Update - Newsletter - Friday, August 26, 2011
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    1. Income Tax - TMI - 205213 - HC The Commissioner of Income Tax Versus M/s.Simpson & Co., - (MADRAS HIGH COURT )
      -when the requirements under Section 17(1)(a) are not satisfied, we have no hesitation in rejecting the case of the Revenue, thereby, affirming the view of the Tribunal. Even assuming that the case of the Revenue is to be accepted, going by the decision of this Court in the same assessee's case in COMMISSIONER OF WEALTH-TAX Vs. SHARDLOW INDIA LTD., reported in (2006) 285 ITR 426 (Mad) as regards the valuation of the property to be adopted based on the compensation payable under the Tamil Nadu Urban Land (Regulation and Ceiling) Act, the revenue difference would be so minimal, that the case does not call for any interference on the Tribunal's order. Hence, we have no hesitation in accepting the case of the assessee. Accordingly, the tax case appeal stands dismissed. No costs.
    2. Income Tax - TMI - 205212 - Tri Cherokee India (P.) Ltd. Versus Income-tax Officer, 8(1)(2), Mumbai - (ITAT, MUMBAI )
      Arm length price - Transfer pricing adjustment - Profit/losses declared by the assessee under Transactional Net Margin Method ("TNMM") - Proof of - There is no dispute with regard to the method followed by the assessee except for the fact that the assessee has not proved satisfactorily as to why estimated 'standard-cost' has to be taken into consideration particularly when the transaction is with the principal who is holding 99.95 per cent control over the assessee-company - The main factor for disregarding the method followed by the assessee was due to non-furnishing of the so-called agreement with the AE - Since, we are in agreement with the detailed reasons given by the TPO/Assessing Officer as well as the CIT(A), held that the initial burden is upon the assessee to prove the reasonableness of the method followed by the assessee-company and in the absence of proving the same by producing any document/agreement with its principal highlighting the contractual terms of sharing cost, the learned CIT(A) was correct in holding that the special provisions of the Act have to be construed strictly and the method adopted by the tax authorities for making transfer pricing adjustments is reasonable in the circumstances of the case - Decided against the assessee.
    3. Income Tax - TMI - 205211 - HC Commissioner of Income Tax Madurai Versus K.A.S.Mathivanan Madurai. - (Madras High Court )
      Disallowance - contingent liability - Scrutiny - assessee was maintaining suspense account crediting a sum of Rs.23,77,458/- in the trial balance for the year ended on 31.3.1991 - Merely because future payments were made out of the funds said to be kept in the suspense account, the allowance could not be made - No evidence has been placed before the authorities concerned to show that the expenditures had been incurred during the relevant assessment year to be shown in the "suspense account - Decided in favour of the revenue
    4. Income Tax - TMI - 205210 - Tri Deputy Commissioner of Income Tax Versus M/s Edelweiss Capital Ltd., Mumbai - (ITAT MUMBAI )
      Claim of bed debt - Amounts paid for development of websites is allowed as business loss– If the websites had materialized, the expenditure could not have been viewed as capital expenditure because the website is put up for the purposes of day-to-day running of the business and even if one were to view that some enduring benefit is obtained by the assessee, the benefit cannot be said to accrue to the assessee in the capital field - A website is something where full information about the assessee’s business is given and it helps the assessee’s customers in dealing with it - A website constantly needs updating, otherwise it may become obsolete - It helps in the smooth and efficient running of the day-to-day business - The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business. The loss is thus allowable as business loss in terms of section 28 of the Act - The appeal of the department is dismissed.
    5. Income Tax - TMI - 205209 - HC The Commissioner of Income Tax-I, Chandigarh Versus Sh. Sukhjit Singh - (PUNJAB AND HARYANA HIGH COURT )
      Cash credit - Agricultural income - Source - The finding recorded by the Tribunal being based on consideration of non-existent material is vitiated and liable to be set aside - The judgments relied upon by learned counsel for the assessee has no applicability to the facts of the present case - Accordingly, the substantial question of law is answered in favour of the revenue - The appeal is allowed and the impugned order passed by the Tribunal is set-aside - The matter is remitted to the Tribunal to proceed afresh in accordance with law.
    6. Income Tax - TMI - 205208 - HC Commissioner of Income-tax Versus Gitwako Farma (I) P. Ltd. - (DELHI HIGH COURT)
      Condonation of delay - Upon hearing learned counsel for the parties and on a perusal of the application, the delay in refiling the appeal is condoned subject to payment of costs of Rs. 5,000 to the Delhi High Court Legal Services Committee

      Deduction under section 80-IB - Assessing Officer completed the assessment under section 143(3) on December 27, 2006 and disallowed the deduction amount to Rs. 54,83,360 claimed by the assessee under section 80-IB of the Act - It is noticed that the processing undertaken by the assessee-company cannot be held to be amounting to manufacturing or production of an article or thing and, therefore, the basic condition for eligibility of 80-IB deduction is not found to have been fulfilled and, hence, the deduction claimed under section 80-IB is not found to be allowable - Held that the assessee is engaged in processing and not manufacturing and as such is not eligible for deduction under section 80-IB - the assessee or the Excise Department have been taking the activities as manufacturing, that would be sorted out by the assessee with the Excise Department even to the extent of asking for refund of excise duty, if it was so entitled to - Appeal is allowed
    7. Income Tax - TMI - 205207 - HC Commissioner of Income-tax, Faizabad Versus Krishi Utpadan Mandi Samiti - (ALLAHABAD HIGH COURT )
      Disallowance - Administrative expense and vikas cess - In the instant case, it is noticed that the ld. CIT(A) while referring to the cases of Mandi Parishads had not afforded any opportunity to the said assessees and it is also noticed that the ld. CIT(A) made these observations in spite of the fact that no such material relating to Mandi Parishads was available to him - the facts of the case which is pending for adjudication are only to be considered - In the instant case, neither the material facts relating to other issues were available to the ld. CIT(A) nor opportunity of being heard was given to the said assessees whose cases have been referred by the ld. CIT(A) - Cross Objections by the assessees are partly allowed

      whether it is open to an assessee, who was in appeal before a competent Tribunal, to contend that in the appeal preferred by them, in respect of money transferred by them to another assessee, CIT(A) could not have made any observations in respect of that other assessee - The legal position in the proceedings between the parties, who are in appeal before the Tribunal or Court, is that the Court addresses itself to the issues, which are before it and confines its exercise of jurisdiction to those grounds, which can result in deciding the appeal - the provisions of section 153C of the Act would not apply - Even if the order of the quasi-judicial authority in assessing the income in the hands of the Mandi Parishad was at fault or erroneous, the remedy is for the revenue to challenge the same before the appropriate forum - the appeal by the revenue is dismissed
    8. Income Tax - TMI - 205206 - Tri Ajit B. Zota Versus ACIT - (ITAT MUMBAI)
      Penalty - Undisclosed income - Interest u/s. 234A, 234B & 234C - Search and seizure - It was the submission of the learned counsel that penalty cannot be levied as the assessee had filed return of income and the Department had accepted same in the order passed under section 143(3) r.w.s. 153A., hence, when there is no addition to the returned income penalty cannot be levied - whether immunity is available to the assessee when additional income was disclosed in the return u/s 153A was also considered by the Coordinate Bench in the case of ACIT vs. Kirit Dahyabhai Patel reported in 121 ITD 159 (TM) - since the assessee has filed returns after the search and has not disclosed the income in the original return, the Explanation 5 to section 271(1)(c) cannot give immunity to the assessee

      there is no explanation why the income earned by way of speculation profit was not disclosed in the original return - in this case no assessment or reassessment proceedings are pending on the date of search, hence, the original return filed has to be taken into consideration - Explanation 1 to Section 271(1)(c) can not be invoked as there is no bonafide explanation given why this income was not disclosed at the time of filing original return - Decided against the assessee
    9. Income Tax - TMI - 205205 - HC Commissioner of Income-tax Versus Mridula, Prop. Dhruv Fabrics - (Punjab and Haryana High Court )
      Search and seizure - Block assessment - Undisclosed income - Time barred - The plain and reasonable construction that can be placed on the aforesaid provision would be that the recording of satisfaction for taking action against any other person under section 158BD of the Act has to be between initiation of proceedings under section 158BC and before completion of block assessment under section 158BC of the Act in the case of the person searched - It could not be read in the provision that where block assessment under section 158BC of the Act in the case of an assessee against whom action under section 132 or 132A of the Act had been carried out is finalized, the Revenue can take action at any time in the absence of any specific limitation prescribed in the statute - The satisfaction having been recorded and the proceedings initiated after finalization of the block assessment in the case of S. K. Bhatia's group on March 30, 2005, the same were bad in law - Decided in favour of the assessee
    10. Income Tax - TMI - 205204 - Tri Smt. Harsha N. Mehta Versus Deputy Commissioner of Income-tax 19(2) - (ITAT, MUMBAI)
      Short term capital gain or business income - According to the Assessing Officer the nature of activity, the frequency and magnitude suggest that the profit declared by the assessee on account of transactions in purchase and sale of shares is business income - CBDT also wishes to emphasise that it is possible for a taxpayer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets - It is possible for an assessee to be both an investor as well as dealer in shares - the assessee is employed in Twin Earth Securities Pvt. Ltd. which is a stock broking company and member of the Bombay Stock Exchange Ltd - Purchase of shares during the year and selling them frequently in short period, in our opinion, do indicate that the assessee has purchased the shares with a motive to earn profit in a short period - Each case has to be decided on the basis of its own set of facts - The profit on account of purchase and sale of shares by the assessee in the instant case has to be treated as ‘income from business’ as held by the Assessing Officer - In the result, the appeal of the revenue is allowed and the appeal of the assessee is dismissed
    11. Income Tax - TMI - 205203 - Tri ACIT Versus ABC Bearings Ltd. - (ITAT, MUMBAI )
      Disallowance - AO wanted to verify the expenses, assessee was duty bound to produce the books of accounts and other bills and vouchers for his verification - Merely because, records are voluminous, that cannot be a reason for non production of such records before the Assessing Authority - Decided in the favour of the assessee by way of remand

      Regarding bad debts - The bonafides of the assessee are further clear from the fact that in the earlier year only provision was created and no claim for bad debt was made -In any case, there was a fire in the assessee’s office and no further records were available to prove this point

      Capital loss - US-64 units had ceased to exist and in place of them and on the strength of those holdings, the assessee has been allotted new tax free bonds and, therefore, even the extended definition of relinquishment is not applicable - Thus, it is not a case of extinguishment but a simple case of conversion of one asset into another - transaction regarding surrender of US-64 units for converting the same into Unit Trust of India 6.75% tax free bonds in terms of the scheme of the Unit Trust of India which was guaranteed by the Government of India, would not amount to transfer - In the result, revenue’s appeal is partly allowed for statistical purposes
    12. Income Tax - TMI - 205202 - HC COMMISSIONER OF INCOME TAX Versus SHRI MUKESH LUTHRA & OTHERS - (DELHI HIGH COURT )
      Search and seizure - Block assessment - Undisclosed income - whether addition could be made in the regular assessment proceedings as done by the AO or it could be the subject matter of block assessment proceedings alone - it was during block assessment proceedings the AO noticed that M/s Globe Meditech was in fact controlled by the assessee herein, though one Mr. Rajesh Khurana was shown as the proprietor of the said firm - It was thus a case of lifting of the veil by the Assessing Officer and this could be done in the regular assessment proceedings, insofar as the assessee is concerned - The appeal is disposed of by way of remand
    13. Customs - TMI - 205195 - Tri M/s. Serene Fashions & Others Versus Commissioner of Customs (Exports), Nhava Sheva - (CESTAT, MUMBAI)
      Waiver of pre-deposit of redemption fine and penalties - Confiscation - Board vide Circular No.15/97-Cus dated 3.6.97 - It is his submission that there is a definite misdeclaration as regards the description of the goods in one shipping bill which was found to be of 100% viscose materials of non-texturised instead of polyester yarn - assessee is not in a position to correctly satisfy us that there was no misclaration of the quantity - Since there is misdeclaration of the description, quantity and the value in respect of 3 consignments which were meant for export, we hold that the goods are liable for confiscation - Appeal is disposed of
    14. Customs - TMI - 205194 - HC COMMISSIONER OF CUSTOMS Versus SHAH ALLOYS LTD. - (GUJARAT HIGH COURT)
      Demand - wrongful intention, connivance and mis-statement before the Director General of Foreign Trade (DGFT) - Notification No. 55/2003 - Penalty - invocation of extended period of limitation - Chartered Engineer had disclosed Furnace Oil as the product to be imported which was a consumable to be used in the captive power plant - it is apparent that the expression ‘importer’ would operate only in relation to the point at which the goods are imported and till the time they are cleared for home consumption - in connection with alleged suppression, wilful misstatement made at the stage of issuance of licences, prior to importing the goods, the proviso to sub-section (1) of Section 28 could not have been invoked - Decided in favour of the assessee
    15. Service Tax - TMI - 205201 - Tri COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR Versus HELIOS FOOD ADDITIVES PVT LTD - (CESTAT, MUMBAI)
      Demand - renting of immovable property - Assessee had obtained service tax registration in Mumbai from the Assistant/Deputy Commissioner of Service Tax Division-V, Mumbai, vide registration certificate dated 29.01.2009 - In the instant case, the service has been provided at Mumbai and the registered office is also situated in Mumbai. Therefore, the Assistant Commissioner, Ratnagiri has no jurisdiction over the activities undertaken by the respondent in Mumbai - Decided in favour of assessee
    16. Service Tax - TMI - 205200 - Tri Commissioner of Central Excise Vapi Versus M/s. Hindalco Industries Limited - (CESTAT, AHMEDABAD)
      Demand - Business Auxiliary Services and Goods Transport Agency services - Sales promotion connotes with promotion that supplements or coordinate advertising, promotional material, publicity, packing or a message issued to on behalf of the assessee s final products intended to increase the sales - it can be concluded that legislative intent in respect of inputs, for manufacture and input service, in case of manufacture, are to be treated differently and when input services are rendered in relation to the business activity, credit is admissible - The respondents are therefore eligible for the benefit of credit of service tax paid on the services rendered by the agent - Appeal is disposed of
    17. Service Tax - TMI - 205199 - Tri CCE, HYDERABAD Versus M/s LAMTUFF PLASTICS LTD - (CESTAT, BANGALORE)
      Cenvat Credit - Show-cause notice was issued for the recovery of service tax credit availed on the said outward services for export as irregularly availed Cenvat Credit - place of removal can only be a factory or a warehouse or a depot and therefore the appellant's contention that port of shipment would be place of removal is not correct - Tribunal in the case of Modern Petrofils Vs. CCE, Vadodara [2010 -TMI - 77338 - CESTAT, AHMEDABAD] has, in an identical situation, held that the port of shipment can be considered as place of removal and assessees entitled for the credit of service tax paid on freight till port of shipment
    18. Service Tax - TMI - 205198 - Tri CESTAT, AHMEDABAD - (CESTAT, AHMEDABAD)
      Penalty u/s 76 - GTA service -The appellant was required to pay service tax as a recipient of GTA service and since they were not aware of this requirement, the service tax had not been paid - The appellant paid service tax on their own even though after some delay and filed the returns and during the scrutiny of the return only it was found by the department that there was delay in payment of service tax and hence the proceedings have been commenced and penalty has been imposed.

      Held that: the Central Board of Excise & Customs in the Circular No. 137/167/2006-CX-4 dated 3-10-07 has stated that in view of the provisions of Section 73(3), where service tax with interest is paid before issue of show cause notice no show cause notice should be issued - Hence,impugned order of penalty is set aside.
    19. Service Tax - TMI - 205197 - Tri COMMISSIONER OF SERVICE TAX, RAJKOT Versus SHREE GANESH AUTOMOBILES - (CESTAT, AHMEDABAD)
      Stay application - Stay application is a reproduction of appeal consisting of brief facts of the case and grounds of appeal - The only difference between the two is that, in the stay application on top ‘Brief facts of the case’ and “STAY APPLICATION” has been typed - There is no indication as to what is required to be stayed and what exactly the reasons for seeking of stay of the impugned order - Therefore, stay application is devoid of any merit and shows total lack of application of mind on the part of Deputy Commissioner who has signed the stay application - The Revenue does not contain application in Form ST-5 at all and the stay application only in Form ST-7 has been filed and attached - Registry is directed to issue defect memo to the appellant to file ST-5 form also - Hence, stay application has no merits and accordingly, rejected.
    20. Central Excise - TMI - 205193 - Tri CCE Ahmedabad Versus M/s. Balkrishna Textile Mills - (CESTAT, AHMEDABAD)
      Transitional cenvat credit - Rule 9A of the Cenvat Credit Rules, 2002 - show cause notice dated 01.10.03 proposing to deny the cenvat credit of Rs.38,27,932/- and of Rs.15,35,220/- and to confirm interest and to impose penalty - during the relevant period, there were various amendments to the provisions of Rule-9, allowing modvat credit in terms of the provisions of transitional Cenvat Credit Rules, 2002 and extending the facilities to the textile units - Held that: sub rule 5 introduced in Rule 9A(b) refers to a manufacturer, who has already made declarations of the goods lying in stock as on 31.03.03 and has availed credit on or before 30th day of April 2002, whereas sub rule 9A5(a) refers to a manufacturer, who had not made the declaration at all - Decided in favour of the assessee
    21. Central Excise - TMI - 205192 - Tri M/s. Arogya Trading & Finance Limited Versus Commissioner of Central Excise, Surat - (CESTAT, AHMEDABAD)
      Demand - It was submitted by the appellants that the credit was denied to them on the ground that they failed to provide correct invoice and some of the invoices were found to be fake/ issued by non existent suppliers - there was no intention on their part to evade payment of service tax and the manufacturers, dealers from whom the grey fabrics were received, were registered under the provisions of the Act and therefore, there was no suppression of facts - it is found that no proper verification of the invoices or for existence of manufacturers/ dealers were conducted by the Revenue to substantiate the demand - Appeal is disposed of by way of remand
    22. Central Excise - TMI - 205191 - HC COMMISSIONER OF C. EX., GUNTUR Versus KINETA MINERALS AND METALS LTD. - (ANDHRA PRADESH HIGH COURT)
      Imposition of export duty - Effective date - On the date of filing of shipping bill, there was no export duty and there was only export cess which had been paid by the respondents - Admittedly, the loading of goods was also commenced much prior to the imposition of export duty - The export duty was introduced only with effect from 1-3-2007 - Under Section 51 of the Act is a composite order permitting clearance and loading of the goods for export and when such an order is passed, the relevant duty in terms of Section 16 is being date of that order, subsequent change in the rate of duty does not render the earlier order invalid - Since the assessment has been made prior to the imposition of export duty i.e. on 1-3-2007, and the same being collected prior to 1-3-2007, subsequent changes in the rate of duty are inconsequential - Decided in favour of assessee.
    23. Central Excise - TMI - 205190 - HC MONNET INDUSTRIES LTD. (SUGAR DIVISION) Versus UNION OF INDIA - (ALLAHABAD HIGH COURT)
      Refund - Deposit of supervision charges in excess - provision for the payment of supervision charges has been withdrawn - The refund has been denied to the petitioner on the ground that there is no head for refunding the amount - Held that:- the respondents have illegally withheld the amount refundable and therefore the petitioner is entitled for the interest even in the absence of any specific provision - The respondents are directed to refund the amount along with interest at the rate of 10% from the date of order till the date of actual payment.
    24. Central Excise - TMI - 205189 - HC COMMISSIONER OF C. EX. & CUSTOMS, SURAT-I Versus ESSAR STEEL LTD. - (GUJARAT HIGH COURT )
      Clandestine removal - Rule 3(1) and Rule 7 of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944 - Circular No. F.No. 345/2/2000-TRU, dated 28-8-2000, has clarified that in a situation where inputs are received in a factory prior to supersession of the Central Excise Rules, however, credit has not been availed of for any reason, such credit earned, can be availed in terms of the transitional provisions under the subsequent rules - Tribunal further noticed that in Show Cause Notice F.No. VIII/10-83/COMMR/2001, dated 24-7-2001 in the customs proceedings, the Department had agreed to the fact that due records had been maintained by the respondent - There was no evidence that the clearance of goods was with the intention to evade payment of duty - Merely because there was non-compliance with some directions issued by the Settlement Commission, it would not affect the rights of the respondents to avail of the benefit of the CENVAT credit - Appeal is dismissed
    25. Central Excise - TMI - 205188 - HC ABHAY INDUSTRIES Versus UNION OF INDIA - (BOMBAY HIGH COURT)
      Application for rectification - It is no doubt true that on behalf of the respondents, the learned counsel has pointed out to us that initial order was remanded earlier by the Tribunal to the A.O. only for the purpose of de novo consideration in so far as calculations are concerned and therefore, A.O. had rightly restricted himself in terms of the order of remand to only calculations which the Tribunal has accepted - Considering the contentions raised by the appellants as mentioned above, the points raised by them ought to have been decided and considered - Appeals disposed of

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