India, Russia to export BrahMos missile system to friendly countries;

NPPA extends deadline for submitting info for revision of CC, PC, PL and PM (See 'Mixed Buzz')

Mumbai tense over Raj Thackerey's imminent arrest;

AP Govt reduces sales tax on ATF;

PM, his Russian counterpart attend launch of 'Year of Russia' in India; 2009 to be celebrated as 'Year of India' in Russia;

2008-TIOL-17-SC-IT.pdf + sc it story.pdf

Income Tax - Assessee is a pharma company - files 'nil return - revises return to declare loss - deduction of interest paid on capital borrowed claimed - AO disallows as the fund borrowed was used for acquiring new machineries which were not put to use in the relevant accounting year - Tribunal sets aside disallowance which was confirmed by the High Court - The expression "for the purpose of business" occurring in Section 36(1)(iii) indicates that once the test of "for the purpose of business" is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under Section 36(1)(iii) - This provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset - What sub- section (iii) emphasizes is the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital unlike Section 37 which expressly excludes an expense of a capital nature - assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed.

Section 43 groups together all provisions in the nature of definitions or interpretations relevant to the computation of income under the head "Profits and Gains of Business". Section 43(1) defines "actual cost". The definition of "actual cost" has been amplified by excluding such portion of the cost as is met directly or indirectly by any other person or authority. Explanation 8 has been inserted in Section 43(1) by Finance Act, 1986 (23 of 1986), with retrospective effect from 1.4.74. It is important to note that the word "actual cost" would mean the whole cost and not the estimate of cost. "Actual cost" means nothing more than the cost accurately ascertained. The determination of actual cost in Section 43(1) has relevancy in relation to Section 32(depreciation allowance), Section 32A(investment allowance), Section 33(development rebate allowance), and Section 41(balancing charge);

"Actual cost" of an asset has no relevancy in relation to Section 36(1)(iii). Section 43 defines certain terms relevant to income from profits and gains of business and, therefore, the said section commences with the words "In Sections 28 to 41 and unless the context otherwise requires" "actual cost" shall mean the actual cost of the assets to the assessee, reducing by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. In other words, Explanation 8 applies only to those Sections like Sections 32, 32A, 33 and 41 which deal with concepts like Depreciation. The concept of Depreciation is not there in Section 36(1)(iii). That is why the legislature has used the words "unless the context otherwise requires". Hence, Explanation 8 has no relevancy to Section 36(1)(iii);

Section 36(1)(iii) of the 1961 Act has to be read on its own terms. It is a Code by itself. Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because of that the section requires is that the assessee must borrow the capital for the purpose of his business. : SUPREME COURT;

2008-TIOL-90-HC-MUM-IT.pdf + hc settlement story.pdf

Settlement Commission- Constitution of the Special Bench and the binding character of its findings: The power to constitute a Special Bench is conferred on the Chairman of the Commission under Section 245BA ( 5A ). It is, therefore, not a case of non-existence of power. The question is whether the petitioners can contend that because of the constitution of a Special Bench any prejudice has been occasioned to them. The only contention as urged is that the reasons for constitution of the Bench and the material relied upon for that purpose has not been disclosed. On a consideration of Section 245BA ( 5A ) of the Income Tax Act it is clear that power is conferred on the Chairman for disposal of a particular case to constitute a Special Bench.The gravamen of the argument on behalf of the petitioners was that the Commission has referred to complexities without even the respondents raising such a contention. In our opinion that discretion to constitute a Bench if there be a case which requires to be decided by Special Bench is that of the Chairman of the Commission. The petitioners themselves in their applications have set out various facts. This was the material which was available to the Chairman. In item No.10 of Form 34B the Petitioners themselves set out the nature and circumstances of the case and the complexities of investigations which are involved. If the Chairman, therefore, has borrowed phraseology used by the Petitioners themselves it is not open to the Petitioners now to contend that such material was not available to the Chairman. In our opinion apart from the fact that there is no requirement to disclose reasons considering the power of constituting the Special Bench and the contents of the settlement application of the petitioners it cannot be said that the action of the Chairman was without jurisdiction or exercise of power was illegal.

What is invalid? It was argued that the Section 245D ( 2C ) as now introduced by Finance Act 2007 w.e.f . 1st June, 2007 has conferred power on the Commission to treat the application as "invalid". The expression "invalid" has not been defined under the Act and would therefore, require consideration. It was submitted that the Commission at the prima facie stage could not have held the application as invalid considering that the Petitioenrs have complied with the other requirements. It is not as if the moment an application is made and there is compliance of the requirements of Section 245-D that the Commission is bound to entertain the application and allow it. The Commission has then to consider whether the application is invalid under Section 245- D( 2C ). The Commission must be satisfied from the report of the Commissioner and on hearing the applicant that the application not invalid. The Settlement Commission can treat the application as invalid meaning thereby non - est if the Applicant has not made a true and full disclosure and further must disclose how the income has been derived. The expression "invalid" will have to be given a meaning of ' non est ', in other words as if not made on and from the inception. If on the material it arrives at a conclusion even prima facie that there was no true and full disclosure it has then the right to declare the application as invalid. Read in this context there is power conferred on the Commission based on the material before it, to form an opinion if the party has concealed facts and/or not made true disclosure during a search operation.

If the case of husband could not he accepted ,it will be difficult to accept the case of the wife. In respect of the petitioner in Writ Petition No.2422 of 2007 it is sought to be contended that no incriminating documents were found from that petitioner and in these circumstances the Commission ought not to have rejected the application made by this Petitioner. In the instant case this petitioner is the wife of the petitioner in Writ Petition No.2421 of 2007. They share a house from which the documents were seized. These documents pertain to prima facie evasion of foreign exchange. Therefore, it cannot be said that merely because no documents were found in possession of this petitioner the documents found could not have been considered. The petitioner was disclosing income based on purported earning of horse racing. If the case of husband could not he accepted, in our opinion, it will be difficult to accept the case of this petitioner.: BOMBAY HIGH COURT;

2008-TIOL-89-HC-DEL-IT.pdf

Income Tax - Assessee, engaged in the business of providing satellite signals, satellite channels etc., claims depreciation on decoders loaned to cable operators and deduction of TDS - Revenue contends that decoders once loaned out to cable operators are not used for the purpose of assessee's business and thus can't be allowed depreciation and TDS is deducted on amount which is the income of the principal of assessee, thus assessee is not entitled to TDS - Assessee being engaged in the business of distribution of satellite channels and signals relating to satellite channels, giving of decoders on loan to cable operators forms a part of the business of the assessee thus entitled to depreciation and since TDS claimed corresponds to some of the amount offered as income by assessee, it is entitled to take credit of tax deducted at source - Revenue's appeal dismissed.: DELHI HIGH COURT;

2008-TIOL-88-HC-RAJ-IT.pdf

Income Tax - Assessee is searched - block assessment follows - Assessee claims reduction of income of a previous year falling within the block period in which the total income did not cross the maximum limit of income chargeable to tax - A.O. rejects on the ground that in case of block assessment, no such deduction is allowed for income of a year - As per Sec.158BB(1)(c) in case of computation of income for block period, if in any previous year the total income as computed according to the books of accounts and other documents maintained in normal course before or on the date of search does not exceed the taxable limit, then such amount is to be reduced from the total aggregate income computed for block period under Sec.158BB(1) even if assessee does not file a return u/s 139(1) - Reference answered against the revenue and resultantly appeal dismissed. : RAJASTHAN HIGH COURT;

cbecorder026_2008.pdf

CBEC gives P &A Charge to Mr Gupta and Mr J K Batra gets Computerisation + EP + Safeguards;

CENTRAL EXCISE SECTION

2008-TIOL-18-SC-CX.pdf + sc story.pdf

Central Excise – Classification: As per Rule 1 on Interpretive Rules, classification of excisable goods is to be determined according to the terms of the Heading and in terms of Section/Chapter notes. Note 2(f) to Section XVII (which governs Chapter 87) excludes the goods viz. electrical machinery and equipment (Chapter 85). The goods in question i.e. contractors, switches, control box etc. are the goods used for switching, protecting electrical circuits or for making connections to or in electric circuit. These parts/components are specifically covered under CSH 8536.90.

As per the Explanatory Notes to HSN the parts falling under Chapter Heading 8710 would be covered under the said chapter, provided they fulfill both the conditions i.e. they must be identifiable as being suitable for use solely or principally for such vehicles and that they must not be excluded by the provisions of Notes to Section XVII. The identifiable parts under the said heading bodies of armoured vehicles and parts thereof, cover special road wheels for armoured cars, propulsion wheels for tanks, tracts etc. As per this requirement, the goods should not only be identifiable to be armoured vehicles, but it should so not have been excluded by Notes to Section XVII. The Chapter note 2(f) excludes electrical machinery and equipment falling under Chapter 85. Explanatory Notes to HSN relating to the parts and accessories excluded by Note 2 specify items with reference to specific Chapter Heading as per (7) (a), (k) which excludes photographs and other current collectors for electric traction vehicles, fuses, switches and other electric apparatus of Heading No.85.35 or 85.36. The items, therefore, manufactured by the appellants are identifiable or are in the nature of goods falling under Chapter Heading 85.36. Since these fall under the category of excluded goods under Chapter Notes, even though they are used specifically solely or principally with the armoured vehicles of Chapter Heading 8710, they are classifiable under Chapter Heading 8536.90 only as held by the adjudicating authority.: SUPREME COURT;

2008-TIOL-91-HC-MUM-CX.pdf + mum hc story.pdf

Once an issue is decided by the Supreme Court the department is bound to suo moto apply the ratio in every case that comes before it - Costs to be levied in case of failure to comply with the orde within six weeks: BOMBAY HIGH COURT;

2008-TIOL-230-CESTAT-DEL.pdf

Central Excise – refund of pre-deposit made under Section 35 F - The refund of pre-deposit has to be made within a period of three months from the date of the order passed by the Tribunal in the absence of any stay order of a superior Court - since the appeal was allowed on 9.11.01 by setting aside the order of the Commissioner, there has been a delay beyond three months in making the refund of the pre-deposit which was directed by the Tribunal –the appellant is eligible for interest after the expiry of three months from 9.11.01 till the grant of refund.: MUMBAI CESTAT;

2008-TIOL-229-CESTAT-KOL.pdf

Central Excise – Cenvat Credit – removal of air conditioner on which credit was availed – since applicable duty has been paid on the air conditioner as a part of the finished goods viz. stamping, charging and pushing machinery, the demand of duty on the air conditioner treating removal of the same as clearance of inputs as such is not justified – demand set aside.: KOLKATA CESTAT;

SERVICE TAX SECTION

hc_reference.pdf

References received from Commissioners on Judgments passed by the High Courts - Reg

analysis_report.pdf

Analysis of monthly report of cases heard and orders received from CESTAT;

2008-TIOL-234-CESTAT-MUM.pdf + inox st story.pdf

Service Tax paid on outward transportation - Liquid Oxygen, Nitrogen, Argon gas and Medicinal gas delivered to customers in transport vehicles maintained at sub-zero temperatures – Cenvat Credit – As matter referred to Larger Bench, pre-deposit totally waived on Modification application: MUMBAI CESTAT;

2008-TIOL-233-CESTAT-DEL.pdf

ST - Coaching Centre - Short payment of tax - Demand - Assessee pays with interest - Penalty imposed - Allegation of suppression of facts after the assessee paid the tax is not sustainable - however, since the assessee was liable to pay the differential tax, penalty u/s 76 is justified but not unde Sec 78: DELHI CESTAT;

CUSTOMS SECTION

2008-TIOL-232-CESTAT-MAD.pdf

Customs – valuation – technical assistance fee and trade mark fee paid to the foreign supplier are not includible in the transaction value of the imported goods.:CHENNAI CESTAT;

2008-TIOL-231-CESTAT-MAD.pdf

Customs – principles of natural justice – the appellants requested permission for obtaining legible copies of relied upon documents – order passed without granting the permission – matter remanded for fresh decision after providing the opportunity of obtaining the relied upon documents:CHENNAI CESTAT;

ddt 13 feb.pdf

CBEC Member not happy with 10% success in CESTAT;

References received from Commissioners on Judgements passed by the High Courts – no reference to Board please;

brunup.pdf

spl down.pdf

Doping ethanol also a green technology;

mbuzz338.pdf

NPPA extends deadline for submitting info for revision of CC, PC, PL and PM;

mbuzz337.pdf

RIL makes first gas discovery in deepwater block in Krishna Basin;

mbuzz336.pdf

Wockhardt enters US market with Zithromax;