India's Gross Domestic Savings grows to 34.8 % of GDP & Gross Domestic Capital Formation up to 35.9% ;

India's per capita income (PCY) grows from Rs 26000 in 2005-06 to Rs 29650 in 2006-07; Economy actually grew by 9.6% last fiscal : Govt ;

Breakdown in international undersea cable : Internet services remain disrupted in India since yesterday morning;

2008-TIOL-64-HC-P&H-IT-LB.pdf + story hc lb.pdf

Income Tax - Assessee is yarn manufacturer - decides to set up a new unit - borrows capital for acquisition of plant and machinery - Since the new unit was an extension of the existing business, the assessee claimed the interest paid on borrowed capital and the upfront fee paid the bank as revenue expenditure - AO disallows the same on the ground that it cannot be allowed before the capital asset first put to use and starts generating income as per the Explanation 8 of Sec 43(1) - However, the CIT(A) and the Tribunal allow the assessee's appeal on the ground that since the new unit was mere an extension of the existing business, it was revenue expenditure as per the settled laws - The Division Bench holds that since the proviso to Sec 36(1)(iii) and the Explanation 8 of Sec 43(1) make it clear that interest payment made prior to machinery being put to use is to be added to the 'actual cost' of the capital assets, the same cannot be allowed as revenue expenditure - In view of a different opinion of another Division Bench, the matter goes to Larger Bench - Even without considering the insertion of proviso to Sec 36(1)(iii), the Explanation 8 of Sec 43(1) was very clear that any interest paid on the capital borrowed for the acquisition of an asset cannot be allowed as a revenue expenditure; once it is admitted that a part thereof was used for the purpose of acquisition of an asset, which is not in the form of replacement or modernization, the interest component thereon upto the date it is first put to use has to be dealt with in terms of provisions of Section 43 (1) explanation 8 as otherwise cost of the asset shown in the balance sheet will not depict its true picture and this is in conformity with law and the accounting principles.

Addition of proviso of Section 36(1)(iii) vide Finance Act 2003 - the import of addition of proviso to Section 36(1)(iii) is that the interest paid on the capital borrowed for the purpose of acquisition of an asset till the date such an asset is first put to use shall not be allowed as deduction and this is borne out as a converse proposition vide explanation 8 to Section 43(1) - A combined reading of Section 36(1)(iii) and Section 43(1) shows that the same is in consonance with the law laid down by the SC in Challapalli Sugar Limited's case ( 2002-TIOL-593-SC-IT ), wherein it is provided that any amount of interest paid on the capital borrowed for the purpose of acquisition of the asset upto the date it is first put to use is to be added towards the cost of the asset - Insertion of proviso to Section 36(1)(iii) is merely clarificatory as it has made explicit what was already implicit : P&H HIGH COURT ;

2008-TIOL-63-HC-MUM-IT.pdf

Income Tax - Notice u/s 148 for reassessment - Reason - Search at the assessee's premises reveals unaccounted brass and plastic powder scrap - Assessee explains the method of accounting of scrap after the same is sold and the same was accepted by the Tribunal in an earlier order - Since all the facts were known to the Revenue, no valid ground for reopening assessment : BOMBAY HIGH COURT ;

2008-TIOL-62-HC-MUM-IT.pdf

Income Tax - AY 1995-96 - TDS u/s 192 - Assessee-company treats LTA and children education allowances as exempted on the basis of declarations filed by its employees and does not include the same for computing taxable income - AO disallows as the assessee failed to verify the expenditure incurred on these two counts - CIT(A) agrees with the AO - Tribunal examined the issue whether the assessee acted honestly and fairly or not and allowed the same as the assessee did not blindly accept the declarations and then is expected to deduct tax only on estimated income - Despite the amendment to Sec 201, what the assessee is expected to do u/s 192 (1) is to deduct tax on the estimated income and the same was done - No question of law - Revenue's appeal dismissed : BOMBAY HIGH COURT ;

2008-TIOL-61-HC-LKW-IT.pdf

Income Tax - Loss return - Adjustment made and additional tax demanded - Meanwhile, judicial decision comes that no tax to be demanded if income is assessed in loss - Notice of demand rectified and the levy of additional tax cancelled - Then comes retrospective amendment to Sec 143(1A), nullifying the ratio of earlier court order - Proceeding u/s 154 again initiated and demand for additional tax again created - Limitation of four years u/s 154(7) pleaded - CIT(A) and Tribunal turn down appeal - Amendment in sub-section 7 of Sec 154 - Extended period applicable as the law has been clarified and then the power of rectification cannot be taken away or the authorities are not estopped from rectifying the mistake merely on the ground that the order has been given effect to. : ALLAHABAD HIGH COURT ;

CENTRAL EXCISE SECTION

2008-TIOL-162-CESTAT-MUM.pdf + Food Story.pdf

Appellants are to be blamed for not conducting an inspection of the Goods Inspection Register seized by the department or taking a copy of the same to justify that cenvatted inputs stored outside the factory were brought back and used in manufacture of final products cleared on payment of duty – Demand on “clandestine removal” sustained by Tribunal. : MUMBAI CESTAT;

2008-TIOL-160-CESTAT-MAD.pdf

Central Excise – valuation – agreement with the buyer of the goods to purchase minimum quantity failing which the buyer has to pay “ Minimum Take or Pay” – such payment are in the nature of liquidated damages for breach of contract and are not includible in the assessable value. : CHENNAI CESTAT;

SERVICE TAX SECTION

2008-TIOL-166-CESTAT-DEL.pdf

ST - Cenvat credit availed on telephone installed at residential premises of the assessee - Credit not admissible but penalty reduced : DELHI CESTAT;

2008-TIOL-165-CESTAT-MAD.pdf + Campus Service Story.pdf

Service Tax – paid under real estate when it was actually maintenance and so was not taxable during the period: That amount was service tax paid by the appellants in the category of Real Estate Agents under Section 65 (88) of the Finance Act, 1944 and the same would not cease to be service tax by mere reason of the fact that the gross amount collected by them from the apartment owners for the said period has, later on, come to be recognized as consideration for “maintenance and repairs of immovable property”, for which levy was introduced only with effect from 16.06.2005.

What was paid by the appellants for the period April, 2000-February, 2004 continues to be service tax and, for its refund, the rigour of Section 11B of the Central Excise Act will have full play.

It is not in dispute that the claim for refund of the service tax paid for the above period is beyond the period of limitation prescribed under Section 11B. Rejection of that claim is, therefore, in order. : CHENNAI CESTAT;

2008-TIOL-164-CESTAT-DEL.pdf

ST - Consulting Engineer service - Demand raised - Commissioner(A) confirms demand and penalty - Commissioner enhances penalty imposed by the Assistant Commissioner - Since the AC order got merged with the Commissioner(Appeal) order, there was no order available for the Commissioner to review but he could have opted for an appeal against that order rather than reviewing it . : DELHI CESTAT;

CUSTOMS SECTION

2008-TIOL-163-CESTAT-MAD.pdf

Customs – penalty under Section 114A of the Customs Act - such penalty is leviable only on the person who is liable to pay duty found to have been not levied or short-levied – penalty imposed on the appellants set aside as the commissioner himself held that the appellant he is not the owner of the goods. : CHENNAI CESTAT;

2008-TIOL-161-CESTAT-MAD.pdf

Customs – condonation of delay – service of the orders - the orders were dispatched by registered-post to the parties concerned from the office of the Commissioner in terms of Section 153 of the Customs Act – the appellants' claim that they received the orders belatedly through CHA is not tenable – COD applications dismissed. : CHENNAI CESTAT;

ddt 31 jan.pdf

Can we not simplify the language used in courts ? A writ by any other name...

Excise Duty evasion by Petroleum refineries – DGCEI alerts!

brunup.pdf

Multiplicity of excise duty rates hurting cement industry?

cobweb.pdf

Jinnah House : At least for posterity, India should convert it into a 'House of Honour' for Quaid-e-Azam Jinnah!

2008-TIOL-10-SC-FERA.pdf + sc fera story.pdf

Taking cognizance of offence – meaning of : The expression cognizance has not been defined in the Code. But the word (cognizance) is of indefinite import. It has no esoteric or mystic significance in criminal law.It merely means become aware of and when used with reference to a Court or a Judge, it connotes to take notice of judicially. It indicates the point when a Court or a Magistrate takes judicial notice of an offence with a view to initiating proceedings in respect of such offence said to have been committed by someone. Taking cognizance does not involve any formal action of any kind. It occurs as soon as a Magistrate applies his mind to the suspected commission of an offence. Cognizance is taken prior to commencement of criminal proceedings. Taking of cognizance is thus a sine qua non or condition precedent for holding a valid trial.

Cognizance is taken of an offence and not of an offender. Whether or not a Magistrate has taken cognizance of an offence depends on the facts and circumstances of each case and no rule of universal application can be laid down as to when a Magistrate can be said to have taken cognizance. Chapter XIV (Sections 190-199) of the Code deals with Conditions requisite for initiation of proceedings. Section 190 empowers a Magistrate to take cognizance of an offence in certain circumstances. Based on the above scheme of the Cr.P.C , the Supreme Court held that it is clear that Initiation of Proceedings, dealt with in Chapter XIV, is different from Commencement of Proceedings covered by Chapter XVI. For commencement of proceedings, there must be initiation of proceedings. In other words, initiation of proceedings must precede commencement of proceedings. Without initiation of proceedings under Chapter XIV, there cannot be commencement of proceedings before a Magistrate under Chapter XVI. The High Court, in our considered view, was not right in equating initiation of proceedings under Chapter XIV with commencement of proceedings under Chapter XVI. : FEMA - SUPREME COURT ;

Sebi Circular No.11.pdf

Mutual Fund : SEBI removes initial issue expenses;

mbuzz294.pdf

E-Governance Award : Gold goes to IRCTC for e-ticketing ;

mbuzz293.pdf

National Survey : 42% of rural households use kerosene for lighting; Value of average food consumption in urban India ranges between 451 to 500 ;

mbuzz292.pdf

TRAI sends inputs on DTH Service to I & B Ministry;

mbuzz291.pdf

WB says sliding value of dollar will affect India's IT sector but not overall economy;

mbuzz290.pdf

WB Chief Economist says subprime crisis not to seriously impact South Asia;