Provision for warranty couldn't be allowed on mere matching principle unless calculated scientifical

IT : Provision for warranty made on basis of principle of matching can be allowed but amount claimed should have some rational and scientific basis and it cannot be on mere ipsi dixit

In absence of an agreement transfer of land by assessee to his AOP wouldn’t be deemed as transfer

IT : Where assessee contended that he formed an AOP and transferred a land to it, in view of fact that there was no agreement between assessee and AOP nor contention by AOP that in part performance thereof it was in possession of land, transaction would not amount to transfer

Tribunal sets aside mindless appeal authorization signed only by single Commissioner

ST : Power to review an order passed by Commissioner (Appeals) and to authorise filing of appeal to Tribunal is vested in Committee of Commissioners; any single Commissioner cannot exercise this power

Buying and selling shares within 1 minute and almost on same price can’t be said to be manipulative

SEBI : Buy and sell orders between a stock broker and one group (with whom no connection is attributed) within a time gap of one minute with negligible or no price difference cannot ipso facto lead to conclusion that trades in question were executed with a view to manipulate scrip

Govt Allows Import Of Drugs In Small Quanity For Personal Use

16-Oct-2013

Government has allowed the import of drugs in small quanitities for personal use and patients requiring them will have to obtain a permit from the Drugs Controller General of India (DCGI).



As per the Drugs and Cosmetics Rules, 1945, the applicant is required to make an application in Form 12A along with the prescription of the Registered Medical Practitioner (RMP) and his registration number, indicating the quantity of drug required for the treatment of the patient.



The rules also permit import of small quantities of drugs for exclusive personal use of the passenger as part of his bona-fide baggage.



"The quantities of any single drug so imported shall not exceed 100 average doses and shall be declared to the custom authorities, if so directed," an order of the Central Drugs Standard Control Organization (CDSCO), the country's apex drug regulator, said.



The government has designated certain port offices of CDSCO from where permissions for import of small quantities of drugs for personal use could be obtained, which include those at airports of IGI Airport, New Delhi, Air Cargo Complex, Chennai, International Air Cargo Complex, Mumbai, New Integrated Cargo Terminal Building, Kolkata, RGI Airport, Hyderabad, Airfreight Terminal, Bengaluru, Air Cargo Complex, Ahmedabad and Port Offices at Custom House, Chennai, New Custom House, Mumbai, Nava Sheva Port, Navi Mumbai, Custom House, Kolkata.

Source:- articles.economictimes.indiatimes.com

Bajaj Auto Profit Rises 13% On Strong Export Revenue

16-Oct-2013

Bajaj Auto Ltd ’s second-quarter profit rose by a higher-than-expected 13% as India’s second largest motorcycle maker benefited from a weak rupee that boosted export earnings to a record, countering a sales decline in its home market.



Net profit rose to Rs.837.16 crore in the three months ended 30 September from Rs.740.67 crore in the year-earlier period, the company said on Wednesday. That compared with expectations of a profit of Rs.809.6 crore, based on a Bloomberg survey of analysts. Net sales rose 5.06% to Rs.5,061 crore from Rs.4,817.07 crore.



Exports received a boost from the rupee’s 5.15% depreciation against the dollar in the quarter, and rose 26% year-on-year to an all-time high of Rs.2,125 crore.



The export performance helped the company offset the decline in sales by volume in the domestic market, where demand for cars and bikes has slumped on account of slowing economic growth, higher fuel prices and high interest rates on auto loans.



The company’s total sales—motorcycles and commercial vehicles combined—dropped 8% to 961,330 units in the three months to September from the year-ago period.



The owner of the Pulsar and Discover motorcycle brands also reported a record operating margin in the September quarter—23.1% against 18.7% in the year-ago quarter.



Strategic initiatives to enter overseas markets, including Africa, are delivering results, the company said in a statement. A focus on high-margin models also paid off.



One out of three motorcycle models manufactured by the company turns in an ebitda (earnings before interest, tax, depreciation and amortization) margin in excess of 20%. As a result, Bajaj has been able to achieve a break-even with low sales volumes.



Bajaj’s motorcycle sales dropped 11% to 1,078,127 units in the six months to September from 1,220,365 units in the same period a year ago. Its marketshare also fell to 21.5% from 24% a year earlier as competition intensified.



Motorcycle sales in the domestic market remained almost flat with 5.01 million units sold in the first half compared with 4.97 million units a year ago, according to Society of Indian Automobile Manufacturers (Siam).



In a bid to recoup the ground it has lost to rivals Hero MotoCorp Ltd and Honda Motorcycle and Scooter India Pvt. Ltd, Bajaj plans to launch two more new models in the mass commuter category, a segment that accounts for the bulk of motorcycle sales, by the end of the current fiscal, Mint reported on 16 October. Bajaj launched the Discover 100M in Pune on 15 October.

“Bajaj is likely to sustain the good performance in the months ahead with improving volumes in both the domestic and exports markets,” Mitul Shah, an analyst at Karvy Stock Broking Pvt. Ltd, said.



Others too are bullish on Bajaj’s prospects. In a 9 October earnings preview report, Goldman Sachs Equity Research estimated Bajaj to turn in an ebitda margin of 15% by the end of 2013-14.

The margin is likely to expand 100 basis points (one basis point is one-hundredth of a percentage point) year-on-year on account of strong export demand. “Despite weaker end-consumer demand, company has been able to consistently deliver top quartile cash returns across the cycle indicating strong management execution and product strategy,” the report said.



As on 30th September, Bajaj had surplus cash and cash equivalents of Rs.6,516 crore.



On Tuesday, Bajaj Auto’s shares fell 0.66% to Rs.2,124.15 on the BSE as the benchmark Sensex fell 0.29% to end at 20,547.62. The stock market was closed for a holiday on Wednesday.

Source:- livemint.com

Steel Consumption Grows 0.8% In Apr-Sept Period

16-Oct-2013

India's steel consumption in the first six months of the current fiscal remained flat, showing just 0.8% year-on-year growth due to poor offtake by construction and automobile sectors.



The consumption of finished steel, a key indicator to the health of an economy, was at 36.58 million tonnes (MT) during the April-September period of the current fiscal, data compiled by Joint Plant Committee (JPC), a unit of the Steel Ministry, has revealed.



India, world's fourth largest steel maker, had consumed 36.28 MT steel during the April-September period of the last fiscal.



Coupled with beleaguered auto sector, the bad run of the construction sector, which consumes maximum steel, is taking a toll on the steel consumption, a sectoral analyst said, adding good times are ahead with the elapse of the monsoon season.



Meanwhile, imports of steel during the April-September period has also come down by 25.2% to 2.9 MT against 3.9 MT a year earlier.



Exports were also down by 0.4% to 2.3 MT.



Total production, however, was up by 6.2% to 40.3 MT during the April-September period compared to 38 MT during the same period last fiscal, JPC data revealed.



SAIL's production was up by 5.8% at 5.28 MT. RINL produced 11.8% to 1.38 MT. Tata Steel's production was up by 27.4% to 3.65 MT.



World Steel Association (WSA) has recently slashed its projection for India's steel demand growth to 3.4% for the current year from the earlier forecast of 5.9%.



"In India, steel demand is expected to grow by 3.4% to 74 million tonnes (MT) in 2013 following 2.6% growth in 2012 as high inflation and structural problems are constraining steel using sectors' activities," the industry association had said in its short-range outlook released earlier this month.



WSA had in April projected India's steel demand growth at 5.9% for 2013, pinning hopes on monetary easing and investment activities.

Source:- business-standard.com

India Pushes Iran To Accept Rupee For All Crude Oil

The department of commerce under the ministry of commerce and industry has asked Iran to accept payment for crude oil imports by India entirely in rupees or face the risk of losing its biggest client. India currently pays 55 per cent of its crude oil purchases from Iran in rupees and the rest in euros.



“We are pursuing them (Iran) to accept 100 per cent (payment) in rupees; they are pondering over it. They will have no other option. We have also told them that either they go for the option or we might have to look for other options,” a senior commerce department official told Business Standard, indicating India might look at increasing its crude oil purchases from other markets such as Venezuela.



India exports rice, cereals, pharmaceutical products, machine tools, automobile parts and steel to Iran, all of which are permitted under the US-imposed sanctions. Hence, the department has urged Iran to buy these items with rupee it is obtaining from selling oil.



According to the official, the government was expecting some warming up of relations between Washington and Teheran during the visit to Iranian President Hassan Rouhani to the US last month to attend the UN General Assembly meet where he was expected to meet US President Barack Obama. However, nothing fruitful emerged except for highly-publicised phone call between both the leaders, while sanctions remained intact.



Since July 2011, India had been making payments in euro through Ankara-based Halkbank until February this year. While euro payments through Turkey are stuck, rupee payments continue to be made on the accounts of Iranian National Oil Company through Kolkata-based UCO Bank.



India has been pressing for all payments to be made through rupee and the previous regime in Iran had reportedly agreed to take entire payment in rupee. However, the new government under Hassan Rouhani is yet to accept this proposal.



“I do not know whether the Iranian government ever said that they were willing to take 100 per cent. My understanding is that there is a percentage agreed to between Iran and India in terms of how we will pay for crude and that is 45 per cent and 55 per cent,” Syed Akbaruddin, spokesperson, external affairs ministry said.



Following the US sanctions, India cut its imports from Iran to 13.3 million tonnes in 2012-13 from 17.4 mt in 2011-12.

Source:- business-standard.com

Japan May Import Rice Bran Oil From India, To Improve Fiscal Numbers

There is some good news for the UPA government, which is trying hard to tackle the rising import bill. Japan has shown interest in buying rice bran oil from India - a country that depends on import of edible oil for meeting nearly 60 per cent of its domestic consumption. Export of rice bran oil will help India earn foreign exchange, thus reducing the rising import bill on account of edible oil.



India is likely to import edible oils worth Rs 56,000 crore in the current oil year (November 2012- October 2013). In volume terms, the country is expected to import 10.5 million tonne edible oil this oil year.



Talking to ET, BV Mehta, executive director of the Solvent Extractors' Association of India (SEA), said: "Indian rice bran oil, known as 'heart oil' in Japan, may soon land on the coast of Japan if every thing goes well. Manufacturers of Japanese rice bran oil (they also call it rice oil) have shown keen interest in the import from India. Some of the Japanese producers are also looking for joint ventures with Indian companies for value-added products." In fact, a seven-member Japanese team from Wakayama Prefectural government has recently met the members of SEA to discuss the possibility of importing rice bran oil from India.



India is the second-largest producer of the oil after China and the country has the potential to produce over 14 lakh tonne rice bran oil. Currently, it produces about 9 lakh tonne, of which only 3 lakh tonne is used as edible oil. The rest is used by vanaspati industry or blended with other oils.



Rice bran oil is gaining popularity across the world as it is rich in mono-unsaturated fatty acids and has a higher cholesterol reducing power. It has the highest amount of oryzanol, which has cholesterol lowering properties, unique micro nutrients and natural antioxidants compared to other cooking oils. It reduces cholesterol absorption, blood platelet aggregation and increases cholesterol excretion, thus reducing total cholesterol effectively.



However, a major hurdle for the bulk exports is the existing policy. The government does not allow bulk exports of edible oils. It only allows exports of small packs of 5 kg with a maximum limit of 20,000 tonne. "We will take up the matter with the government so that rice bran oil can be exported to Japan and other countries," Mehta said.



In India, rice bran oil, which is available at Rs 110-115 per litre, is giving a tough competition to olive oil. "After Adani Wilmar launched rice bran oil under its Fortune brand, it has witnessed tremendous growth in the domestic market. In the current fiscal year, rice bran oil is expected to grow 25 per cent. Olive oil industry is facing a big challenge from rice bran oil," said AR Sharma, chairman of AP Solvex, the largest rice bran oil producer in the country.

Source:- economictimes.indiatimes.com

Govt To Hold Meetings With Coal India Every Quarter For Coal Import

16-Oct-2013

The government will hold meetings with CIL every quarter for examining the import of fossil fuel by the PSU firm.



The world's largest coal miner has to import coal to meet the fuel supply agreement commitment with the power producers.



"The Coal Ministry will be monitoring imports of coal by Coal India (CIL) by holding quarterly meetings," an official said.



CIL is likely to import 15 million tonnes (MT of coal for power utilities as part of meeting the commitment with regard to fuel supply agreement.



"We have received interest for 15 million tonnes from IPPs (independent power producers) and state owned entities," CIL Director (Marketing) B K Saxena had earlier said.



He had said some 55-60 companies that include mostly private power producers, Damodar Valley Corporation and state generation companies have shown interest to import coal on behalf of them.



However, NTPC has not sought any import assistance from CIL and instead drawn its own import plan, he had said.



"We propose to supply the imported coal to them from 2014-15 financial year," Saxena had said.



Coal India will float tender to select an agency (like MMTC, STC) which will import the coal on its behalf and the same will be completed within this fiscal, he had said.



According to the new FSA (Fuel Supply Agreement) Coal India will supply 65 per cent of the contracted amount from domestic sources and another 15 per cent will be done through imports with pass-on pricing model.



Pass-on in other words, CIL will charge buyers imported coal at landed cost plus a service charge and there will be no subsidy in pricing.



Coal Minister Sriprakash Jaiswal had earlier said that around 85 per cent fuel supply pacts have been signed and the remaining would also be done once the technical glitches are addressed.

Source:- economictimes.indiatimes.com

Product characteristics couldn't be ignored under TNM Method merely on change in marketing condition

IT/ILT : Quality of product is to be considered for comparability of transaction as it has influence on pricing of product

Fine can't be more than twice the amount in bounced cheque: Supreme Court

NEW DELHI: Courts cannot impose a fine of more than twice the amount in bounced cheques, the Supreme Court has held, stressing that the limit is inviolable and should be respected.

"First and foremost is the fact that the power to levy fine is circumscribed under the statute to twice the cheque amount.

"Even in a case where the court may be taking a lenient view in favour of the accused by not sending him to prison, it cannot impose a fine more than twice the cheque amount. That statutory limit is inviolable and must be respected," a bench of justices T S Thakur and Vikramajit Sen said.

It set aside the Calcutta High Court order which had directed a person to pay Rs 1,49,500 as against the cheque amount of Rs 69,500.

In this case a trial court had sentenced a person to six months imprisonment and directed him to pay compensation amounting to Rs 80,000 in a cheque bounce case.

The accused, Somnath Sarkar, then approached the High Court which directed him to pay an additional Rs 69,500 to the complainant and his jail term was waived.

Sarkar then moved a mercy plea before the Supreme Court saying that he was not capable of paying the amount.

The court after hearing his plea set aside the High Court order and reduced the amount of Rs 69,500 to Rs 20,000.

"The High Court has, in the case at hand, obviously overlooked the statutory limitation on its power to levy a fine," the bench said.

Value of freebies provided by buyer not includible in construction value for abatement purposes

ST : Value of goods and materials supplied free of cost by a service recipient to provider of taxable construction service is not a consideration paid by or flowing from service recipient, accruing to benefit of service provider and not includible in value of services determined under section 67

Matter remanded as additional evidences weren’t referred to TPO and on allegation of invalid compara

IT/ILT: Where TPO determined ALP by adopting TNM method as against CUP method adopted by assessee and had not discussed applicability of same, in view of fact that Commissioner (Appeals) had deleted addition on account of TP adjustment on accepting additional evidence furnished by assessee without referring same to TPO, matter was restored to Assessing Officer to determine ALP including applicability of method to be adopted

No sec. 78 penalty for suppressing value of taxable services in cases involving interpretation of la

ST : If issue involved is a question of interpretation of law, penalties under sections 76, 77 and 78 cannot be levied and are liable to waived under section 80

I-T Department conducts searches at brokerage firm's offices

conducted searches at the premises of a leading city-based brokerage firm with a high exposure to crisis-hit NSEL, for suspected tax evasion.

Searches were conducted in over 15 offices of the firm for tax evasion, an Income-Tax Department official said.

The Department had earlier carried out a survey on the brokerage firm and the searches were conducted after it got some clear leads, Income-Tax Department sources said.

National Spot Exchange Ltd (NSEL) is grappling with a payment crisis for settling dues worth Rs 5,500-crore and had to on July 31 suspend trading activities following a Government directive.

IRDA ask insurers not to deal with brokers on basis of ‘Letter of Processing’ unless they hold valid

INSURANCE : Section 42D of The Insurance Act, 1938 - Issue of Licence to Intermediary or Insurance Intermediary - Instruction to Insurers not to Treat Letter of Processing Issued to Insurance Brokers as A Valid Licence for Acceptance of New Business Etc. From Them

Dy. Commissioner of Income-tax,Circle - 16(2,)Hyderabad. Vs. M/s Margadarshi Marketing (P) Ltd., Respondent Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH "B", HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No. 364/Hyd/2013 Assessment Year : 2009-10 Dy. Commissioner of Income-tax, ... Appellant Circle - 16(2,)Hyderabad. Vs. M/s Margadarshi Marketing (P) Ltd., ... Respondent Hyderabad (PAN ­ AAACA2210N) Appellant by : Shri D. Sudhakar Rao Respondent by : Shri K. Gopal Chowdhary Date of Hearing : 08/10/2013 Date of Pronouncement : 08/10/2013 ORDER PER SAKTIJIT DEY, J.M.: This appeal preferred by the Revenue is directed against the order of CIT(A)-V, Hyderabad, for the assessment year 2009- 10. 2. In the grounds raised the Department has challenged the order of the CIT(A) deleting the addition made by the Assessing Officer by treating the amount received as deemed dividend u/s 2(22)(e) of the Act. 2 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. 3. Briefly the facts are, the assessee is a Private Ltd. company mainly engaged in the business of marketing and sale promotion besides various other activities. For the assessment year under dispute the assessee filed its return of income on 30/09/2009 admitting a loss of Rs. 1,48,13,495/-. The return was processed u/s 143(1) of the Act. During the course of assessment proceeding the Assessing Officer noticed that the assessee was providing services to M/s Ushodaya Enterprises Ltd. For rendering services the assessee was receiving advances from Ushodaya Enterprises and the advances are subsequently adjusted against the bills raised for the services rendered. The Assessing Officer further noticed that Ch. Ramoji Rao (HUF) is holding 90% share or voting right in both the companies. Ushodaya Enterprises Ltd is also having accumulated profits. The Assessing Officer therefore was of the view that the excess advances received against the services to be rendered comes under the purview of deemed dividend u/s 2(22)(e) of the Act. Though it was submitted by the assessee that the advances are not in the nature of loans but were trade credits against which bills were raised and services were rendered, the Assessing Officer however rejecting such contention held that advances received fell within the purview of deemed dividend u/s 2(22)(e) of the Act and accordingly treated the amount of Rs. 3,32,25,964/- as income of the assessee for the assessment year under dispute. 4. The assessee challenged the assessment order so passed by preferring an appeal before the CIT(A). The CIT(A) following his finding in assessee's appeal for the 3 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. assessment year 2006-07 held that addition made by the Assessing Officer in terms of deemed dividend could not be made in the hands of the assessee as the assessee is not a shareholder of M/s Ushodaya Enterprises Ltd. He further held that the advances made by Ushodaya Enterprises Ltd are in the form of a running account of commercial trade, hence do not come within the purview of deemed dividend as per section 2(22)(e) of the Act. The CIT(A) accordingly deleted the addition made by the Assessing Officer. 5. Being aggrieved of the aforesaid assessment order of the CIT(A), the Revenue is in appeal before us. 6. Before us, the learned counsel for the assessee has canvassed that the issue in dispute is squarely covered in favour of the assessee by the decision of the coordinate bench of ITAT, Hyderabad in assessee's own case for AY 2005-06, 2006-07, 2007-08 and 2008-09 in ITA Nos. 689, 690 & 1234/Hyd/2010 and 1849/Hyd/2011 wherein the coordinate bench upheld the orders of the CIT(A) dismissing the appeals filed by the Revenue. 7. The learned DR, on the other hand, has not controverted the submissions of the learned counsel nor brought any contrary decision in this regard. 8. After considering the rival submissions and perusing the record, we find that similar issue came up for consideration before the coordinate bench in assessee's own case for AYs 2005-06 to 2008-09 (supra), wherein the Bench held as follows: 4 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. "7. Having heard the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record, we do not find any infirmity in the order of the CIT(A). The fact that the assessee is not a shareholder of M/s Ushodaya Enterprises Ltd. has not been controverted by the department. Therefore, as per the provision contained u/s 2(22)(e) of the Act the advances cannot be considered as deemed dividend in the hands of the assessee. The Hon'ble Delhi High Court in case of CIT Vs. Ankitech P. Ltd. 340 ITR 14, while considering identical issue approved the decision of the ITAT, Mumbai Special Bench in case of Bhaumic Colours (P) Ltd., 313 ITR (AT) 146 and held as under: "22. Insofar as the provisions of Section 2(22)(e) are concerned, we have already extracted this provision and taken note of the conditions/requisites which are to be established for making provision applicable. In Commissioner of Income Tax Vs. C.P. Sarathy Mudaliar[1972] 83 ITR 170, the Supreme Court had traced out the assessee of this provision in the following manner: Any payment by a company, not being a company in which the public are substantially interest, of any sum (whether as representing a part of the assets of the company or otherwise) made after 31.05.19987 by way of advance or loan. First limb a) to a shareholder, being a person who is the beneficial of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten percent of the voting power, Second limb b) or to my concern in which, such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) 5 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. Third limb c) or any payment by any such company on behalf, or for the individual benefit, or any such shareholder, to the extent to which the company in either case possesses accumulated profits. 23. It is rightly pointed out by the Bombay High Court in Universal Medicare (P) Ltd.(supra)that Section 2(22)(e) of the Act is not artistically worded. Be as it may, we may reiterate that as per this provision, the following conditions are to be satisfied: (1) The payer company must be a closely held company. (2) It applies to any sum paid by way of loan or advance during the year to the following persons: (a) A shareholder holding at least 10 of voting power in the payer company. (b) A company in which such shareholder has at least 20% of the voting power. (c) A concern (other than company) in which such shareholder has at least 20% interest. (3) The payer company has accumulated profits on the date of any such payment and the payment is out of accumulated profits. (4) The payment of loan or advance is not in course of ordinary business activities. 24. The intention behind enacting provisions of Section 2(22)(e) is that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the 6 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions, such payment by the company is treated as dividend. The intention behind the provisions of Section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. 25. Further, it is an admitted case that under normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under Section 2(22)(e) of the Act. We have to keep in mind that this legal provision relates to `dividend'. Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to `shareholder'. When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under Section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of 7 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. the arguments of the learned counsels for the Revenue would stand answered, once we look into the matter from this perspective. 26. In a case like this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income "is not taxed at the hands of the recipient". Such an argument based on the scheme of the Act as projected by the learned counsels for the Revenue on the basis of Sections 4, 5, 8, 14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance. 27. Precisely, for this very reason, the Courts have held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act. 28. Insofar as reliance upon Circular No. 495 dated 22.09.1997 issued by Central Board of Direct Taxes is concerned, we are inclined to agree with the observations of the Mumbai Bench decision in Bhaumik Colour (P) Ltd. (supra)that such observations are not binding on the Courts. Once it is found that such loan or advance cannot be treated as deemed dividend at the hands of such a concern which is not a shareholder, and that according to us is the correct legal position, such a circular would be of no avail. 29. No doubt, the legal fiction/deemed provision created by the Legislature has to be taken to 'magigical conclusion` as held in Andaleeb Sehgal (supra). The Revenue wants the deeming provision to be extended which is illogical and attempt is to create a real legal fiction, which is not created by the Legislature. We say at the cost of repetition that the definition of shareholder is not enlarged by any fiction. 30. Before we part with, some comments are to be necessarily made by us. As pointed out above, it is 8 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. not in dispute that the conditions stipulated in Section 2(22)(e) of the Act treating the loan and advance as deemed dividend are established in these cases. Therefore, it would always be open to the Revenue to take corrective measure by treating this dividend income at the hands of the shareholders and tax them accordingly. As otherwise, it would amount to escapement of income at the hands of those shareholders." 8. The same view has also been expressed by the Hon'ble Delhi High Court again in case of CIT Vs. Navyug Promoters P. Ltd. (203 Taxman 618) and Hon'ble Bombay High Court in case of CIT Vs. Universal Medicare (P) Ltd., (324 ITR 263). 9. The ITAT, Hyderabad Bench in case of MARC Manufacturers Pvt. Ltd. Vs. ACIT in ITA No. 555/Hyd/2008 dt. 31/08/2009 while considering identical issue of advancement of loan to one company, which is not a shareholder of the lender company following the decision of ITAT Mumbai Special Bench in case of Bhaumik Colour P. Ltd. (supra) and other decisions held as under: "5. It can be seen from the circular that the provisions of amended section 2(22)(e) are to be applied only to the payments made to the shareholders and not to any other person or concern other than the shareholders. The Allahabad High Court in the case of CIT vs. H.K. Mittal reported in 219 ITR 420 held that the chief ingredient of dividend as defined in sub clause (e) of clause (22) of section 2 of the I T Act is that the recipient should a shareholder on the day the loan was advanced. If that fact is not established, there cannot be a deemed dividend. Therefore, the provisions of sec. 2(22)(e) cannot be applied to MARC as it is not a shareholder in MTAR Technologies Pvt. Ltd. (Hereinafter called as MTAR). In this regard, the assessee relies on the declslon of the ITAT Mumbai Bench "G" in the case of Seamist Properties Pvt. Ltd. vs. ITO reported in (2005) 1 SOT page 142. The assessee further submits that the provisions of sec. 2(22)( e) mention as under: "Any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) (made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a 9 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the- extent to which the company in either case possesses accumulated profits" 6. The intention of the legislature is clarified in circular issued by the CBIT as at the time of amendment of clause (e) of sub section (22) of sec. 2 is further fortified by the fact that for deduction of tax at source. Sec. 194 provide that such deduction of tax has to be made in the case of the payments of the nature mentioned in clauses (a), (b), (c), (d) and (e) of sub section (22) of Section 2 only in a case where such payments were made to a shareholder. Section 199 also indicates that adjustment of TOS would be provided in the assessment of shareholder only. The very fact that the provision for deduction of tax at source and adjustment of tax is only in respect of the payments to the' shareholder would clearly indicate that even after the amendment, the effect of clause (e) of sub section (22) of Sec. 2 would apply only when the payment is made to shareholder. Wherever, the tax is to be deducted at source from a dividend or deemed dividend and the consequential effect of giving effect to such deduction of tax at source, etc., reference was made only to the payments to the shareholder. This would indicate clearly that clause (e) would apply only in case of payments to the shareholder and not to others." Therefore, considered in the light of the ratios laid down as aforesaid the advances cannot be treated as deemed dividend coming within the ambit of section 2(22)(e) of the Act. 10. Even otherwise also the amounts received by the assessee from M/s Ushodaya Enterprises P. Ltd. cannot be treated as deemed dividend under section 2(22)(e) of the Act. On a perusal of the order passed by the CIT(A) for the assessment year 2006- 07, which is also in appeal before us, it is very much evident that the CIT(A) has elaborately and exhaustively dealt with the issue by examining all the relevant facts and materials and thereafter has come to the conclusion that the amounts received by the assessee from M/s Ushodaya Enterprises is in regular course of trade, hence, outside the purview of section 2(22)(e) of the Act. On the contrary, the Assessing Officer neither in course of the assessment proceeding nor in his remand report has brought any materials to establish the fact that the amount received was not in regular course of trade but in the nature of loan and advance as envisaged 10 ITA No. 364/H/11 M/s Margdarshi Marketing (P) Ltd. u/s 2(22)(e) of the Act. In aforesaid view of the matter, we find no reason to interfere with the order passed by the CIT(A) in all the assessment years under consideration and uphold the same. The grounds raised by the department being devoid of merit are therefore dismissed in all the appeals under consideration. 11. In the result, all the appeals filed by the Department are dismissed." 9. Since the issue under consideration is materially identical to that of the case decided by the coordinate bench in assessee's own case for AY 2005-06 to 2008-09, respectfully following the same, we uphold the order of the CIT(A) in deleting the addition made by the AO towards deemed dividend u/s 2(22)(e) of the IT Act and dismiss the grounds raised by the revenue in this regard. 10. In the result, appeal of the revenue is dismissed. Pronounced in the open court on 08-10-2013. Sd/- Sd/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 11 th October, 2013. kv Copy to:- 1) DCIT, Circle ­ 16(2), Hyderabad. 2) Margardarshi Marketing Pvt. Ltd., 6-3-570, Eenadu Complex, Somajiguda, Hyderabad ­ 500 082. 3) CIT(A)-V, Hyderabad. 4) CIT-IV Hyderabad 5) The Departmental Representative, I.T.A.T., Hyderabad.

M/s Glitz Financial Services ITO, (P) Ltd., Flat No.26, DDA Flats. Ward-12 (2), New Delhi. VS. Shivalik Road, Panchsheel Park, New Delhi.

Smt. Sudesh Rani, Smt. Sudesh Rani, Proprietor, Proprietor, M/s Amba Marble Industries, M/s Amba Marble Industries, D----16, Industrial Estate, 6, Industrial Estate, 6, Industrial Estate, Vs.. Income Tax Officer, Income Tax Officer, Income Tax Officer, Ward----2,,,, Roorkee. Roorkee.

Ms. Maulli Ganguly B-503/4, 5th Floor Mumbai VS. Income Tax Officer - 11(1)(2) Mumbai

D C I T - 1(1) M/s. Bharat Containers P. Ltd. Room No. 597, Aayakar Bhavan 1st Floor, Cecil Court M.K. Road, Mumbai 400020 Vs. Mahakavi Bhushan Marg Mumbai 400039

ITAT clears Karan Johar-Shah Rukh Khan companies' deal

Many actors, including leading stars such as Shah Rukh Khan, Amitabh Bachchan and Aamir Khan, have set up their own production houses, entirely for commercial efficiency. But this has brought to the fore many challenges on the tax front.

Payments made to actors' production houses are often contested by the tax authorities. There have been instances where tax authorities have denied a deduction of such payments from the business profits in the hands of the payer - the producer or co-producer.

This means, such expenditure is added back to the income of the producer or that of his business entity, which inflates the net profits and consequently results in a higher tax burden.

A recent ruling by the Income-Tax Appellate Tribunal (ITAT) brings respite from this tax challenge. The Mumbai bench of the ITAT has allowed a deduction of Rs 1.52 crore for Karan Johar's Dharma Productions. This business entity had made these payments to Red Chillies Entertainments Pvt Limited (RECL), founded by actor Shah Rukh Khan.

These payments were towards joint production of the film Kaal - a Bollywood horror film released in April 2005. Under the agreement between the entities owned by Johar and Khan, the profits were to be shared equally and their contractual obligations and responsibilities were clearly defined.

For instance, in addition to creative, technical and marketing input, RCEPL was also to provide use of cinematographic equipment. Further, Kaal was also released under a joint banner.

One of the main objections raised by the tax authorities was that the services were rendered by Khan in his personal capacity. Thus, as no service was rendered by RCEL, the payments made to it by Dharma Productions were not an 'admissible business deduction' for the latter.

The ITAT did not agree with this view. It held that these services rendered by RECL were creative in nature and required personal expertise and talent. It also observed that Khan had also performed the title song in the film for which no separate payment was made to him.

"The only inference that can be drawn from the given facts and circumstances is that the services rendered by Khan are on behalf of RCEL and under the contractual obligation," the ITAT concluded.

Rakesh Jariwala, EY partner specializing in the entertainment sector, states, "With participation agreements gaining popularity in Bollywood, the ITAT has given a significant ruling as it recognizes that a creative services company (RCEL in this case) is entitled to arrange and provide services for a project as per the terms of the contractual agreement."

Gowree Gokhale, partner at law firm Nishith Desai Associates, explains, "If actors charged sky-high fees, it was not commercially feasible as not all films do well. On the other hand, if an actor charged moderate fees and the film was a huge success, he lost out. In this backdrop, business-savvy actors began to set up their own production companies and entered into co-production deals where they owned part of the intellectual property in the film and could also claim their share of back-end profits.

There are variations to such business models - such as revenue share, profit share and service fee models - and the tax implications accordingly differ. Proper structuring of the business model and agreement helps deal with tax challenges."

Interest could not be slapped on assessee if delay in completion of assessment wasn’t attributable t

IT : Where Assessing Officer did not complete assessment within period of one year, any interest liability for period beyond that one year could not be foisted on assessee unless delay in not completing assessment within period of one year was clearly attributable to assessee

No concealment penalty if assessee discloses income and files return consequent to survey under sec.

IT : Where assessee consequent to survey conducted under section 133A had declared income from business at Rs. 81 lakhs and further in return of income filed also declared said income, which was accepted and brought to tax, Assessing Officer was wrong in imposing penalty under section 271(1)(c)

Festival shopping: Are Purchases made on EMI - good or bad?

When its festival time and you notice almost every other shop offering discounts and offers, you are tempted to go on a shopping spree and buy even things you may not need. But what happens to your liquidity at such times and how do you settle your credit card bills after the shopping? Merchant outlets and credit card companies recognize that this could be a concern to many shoppers and offer a scheme of payment by Equated Monthly Instalment (EMI) in order to tap such customers as well and increase their sales. This is very popular in India for electronic appliances, mobiles, laptops and other gadgets. An EMI scheme means you can purchase the product and begin using it immediately, but pay the price over an extended period of time in instalments. On the face of it, this scheme looks very attractive and easy on your purse. But there is no such thing as a free lunch. Let's look at the extra costs you are likely to pay when you opt for an EMI scheme and what you should evaluate before you opt for such a scheme.

Costs to be borne while opting for an EMI Scheme:

Higher amount paid: Raj opted to purchase his mobile phone worth Rs. 40,000 through an EMI scheme offered by the retailer, which was in tie-up with his credit card company. The EMI was for 6 months, which should have technically worked out to a down payment of Rs. 4000 and 6 EMIs of Rs. 6000 each. But Raj discovered that he had to pay a down payment of Rs. 4000 and 6 EMIs of Rs. 6833 each. That is, he would have ended up paying Rs. 5000 more on the product if he had opted for the EMI scheme. This is because most EMI schemes come with a hidden cost, which is the interest you will have to pay.

Additional costs: Apart from the interest cost, most credit card companies charge a processing fee when you opt for an EMI scheme. This is a percentage on the transaction amount and varies from bank to bank.

Default in paying EMIs: The EMI amount will get reflected on your monthly credit card bills along with your other dues. So when you fail to make the payment of your credit card dues in a month, you will be charged the normal interest of anywhere between 24%-36% for non-payment along with the late payment fee and taxes. The EMI amount, in addition to being subject to these charges will also carry the basic interest cost thus causing a double whammy.

Absence of discounts: Often banks tie up with merchant outlets and offer the EMI option on various products. However, most products carrying the EMI option do not have the benefits of a discount or any offers attached to them. For example, an LCD costing Rs. 30,000 under the EMI option may be available at Rs.27,000 without the EMI option.

Pre-closure penalties: If you purchase a product on an EMI scheme offered by your credit card company, it is most likely that there will be a pre-closure penalty. This means that if you have the cash to pay off the entire amount before the completion of the total number of EMIs, you will have to pay a pre-closure charge, which is usually in the range of 2.5%-3% of the outstanding principal amount.

Things to evaluate before opting for an EMI Scheme:

As you can see, even though an EMI option may be light on your pocket, there are several costs attached to it. You must therefore evaluate the offer on the table before you opt for it. As a first step, remember to read the fine print thoroughly, as card companies can change terms at their discretion. You must also check if the total payment you are making, including all the EMIs and the down payment is equal to the MRP of the product or if it is more than the quoted price. If it is more, then it means you are being charged interest and/or processing fees for the option.

Defendant was trespasser as it forcefully evicted an employee from a house owned by employer-co.

CL: Defendant forcefully evicting his brother's wife, a worker of company, from company's quarter was a trespasser in quarter belonging to company

Period of holding by donor to be considered to work out indexed cost of acquisition of gifted assets

IT: Where assessee's brother acquired a property prior to 1-4-1981 and he had gifted said property to assessee on 23-5-1995 and subsequently assessee had sold property on 7-2-2006, while computing capital gain indexed cost of acquisition was to be worked out with reference to 1-4-1981 and not with reference to date on which assessee acquired property by gift, i.e., 23-5-1995

Buffer stock subsidy isn't liable to service tax

ST : Buffer-stock subsidy received by sugar factories is for storage of sugar by sugar factory for themselves, which amounts to self-service; since subsidy is not a consideration for services rendered, service tax would not be leviable thereon

Invalid service of notice if AO knowingly posts notice at old address where assessee isn't residing

IT: Where Assessing Officer came to know that assessee is not residing at his last known address, he should follow procedure of substituted service of notice under CPC; service by affixation at said last known address would be invalid

Payment of one time lease premium to acquire a leasehold land isn't subject to tax deduction under s

IT: Where payment of lease premium was not be made on periodical basis but it was one time payment to acquire land with right to construct a commercial complex thereon, section 194-I had no application on deposit of such lease premium