Income Tax - Penalty u/s 271(1)(c) - Supreme Court Larger Bench overrules decision in Virtual Soft Systems (Look for detailed analysis tomorrow)

CoS recommends panels of 11 for CBDT and 3 for CBEC Member posts (See 'Common Basket' )

President appoints Mr T P Joseph as Addl Judge of Kerala HC;

CBEC making all out efforts to notify new Drawback rates this week;

Port-based SEZ: MoC + MoF sort out differences; FM likely to approve final Draft;

Four States - UP, TN, Chhatisgarh & Haryana - agree to implement Pay Panel recommendations;

Former RBI Governor Dr C Rangarajan takes oath as Rajya Sabha Member;

ddt 19 aug.pdf

Goods required for mega power project – Excise exemption;

stgst.pdf

Service Tax on Real Estate Sector: Will latest SC order under CPA, 1986 affect joint development agreements?

servicenews.pdf

CoS recommends panels of 11 for CBDT and 3 for CBEC Member posts;

mbuzz883.pdf

Guidelines for TRP: TRAI seeks content regulation job for itself ;

NOTIFICATION

it08not086.pdf

CBDT notifies Cost Inflation Index for FY 2008-09;

CASE LAWS

2008-TIOL-375-ITAT-DEL.pdf + thailand story.pdf

M/s Parsons Brinckerhoff India Pvt Ltd Vs ACIT, New Delhi ( Dated : July 4, 2008 )

Income Tax - Assessee gets into an agreement with a Thailand-based engineering service consultancy company for supply of drawings and designs of an engineering project - TDS - Revenue insists such payments made to the non-resident company qualifies as royalty income both under the domestic laws as well as the DTAT - CIT(A) also agrees with the AO - Although the agreement is styled as a service agreement but it is a case of outright sale of property which is not covered under Sec 9(1)(vi) of the Act - Since the non-resident company has no PE in India, it is a business income and cannot be covered by Article 22 (the 'other income) under the Treaty - Assessee's appeal allowed

DTAT - Double Taxation Treaty cannot be construed as a taxing enactment. The basic principle to be adopted for taxing income of non-resident is to first look at the domestic law to discover if the non-resident assessee is taxable thereunder. If it is taxable, only then one needs to look into the treaty, if any, between India and the country in which the non-resident is incorporated to find out if there is any beneficial provision in the treaty to exempt the assessee from taxation or reduce the rigours of the domestic law. If there is such a provision in the treaty, the assessee is entitled to claim that it should be given the benefit of the treaty provisions. On the other hand, the Tribunal further underlines, if the assessee is not taxable under the domestic law itself, there is no need to look into the provisions of the treaty for avoidance of double taxation, even if one exists. One cannot, in such a situation, look into the treaty to find out if there is any provision under which the non-resident can be brought to tax. In other words, the treaty cannot be used as a taxing enactment. The subsidiary principle is that where the non-resident is taxable under the domestic law but there is a provision in the treaty to exempt the transaction or reduce the rigour of taxation to the benefit of the non-resident, the provisions of the treaty override the provisions of the domestic law. These fundamental principles are well-settled by the judgments of the Supreme Court in CIT vs. P.V.AL. Kulandayan Chettiar ( 2004-TIOL-61-SC-IT ) and Union of India vs. Azadi Bachao Andolan & Anr. ( 2003-TIOL-13-SC-IT ).:DELHI ITAT;

2008-TIOL-374-ITAT-DEL.pdf

ITO, New Delhi Vs M/s Techdrive ( India ) Pvt Ltd ( Dated : June 27, 2008 )

Income Tax Act – Section 10B – Revenue alleged that section 10B made elaborate provisions in connection with plant and machinery which indicate the requirement that the assessee should itself own the necessary equipment or plant to manufacture or produce computer software and the software should be produced with the help of such plant or equipment and it would not suffice if the assessee outsourced the development of the computer software to another entity which owns the necessary equipment and plant and the infrastructure – Held, it is not the requirement of section 10B that the assessee company should itself own plant, machinery or equipment and manufacture or produce computer software on the same in order to be eligible for the exemption.

Held further, that the plant and equipment required to produce the computer software is subsidiary to the element of human skill, training and experience that are the main requirements and the requirements of section 10B of the Act have to be understood in this context – section 10B does not provide for a positive requirement that the assessee who claims the exemption should own plant and machinery, it only provides for certain negative requirements - no express provision has been incorporated in section 10B to the effect that the assessee which claims the deduction/exemption should itself own the plant and machinery and should itself manufacture or produce the article or thing or the computer software with the help of the said plant and machinery.:DELHI ITAT;

2008-TIOL-373-ITAT-MAD.pdf

M/s Sella Synergy ( India ) Ltd Vs ACIT, Chennai ( Dated : September 14, 2007 )

Since initial assessment was done under s. 143(1) in view of Apex Court decision in ACIT Vs Rajesh Jhaveri Stock Brokers  ( 2007-TIOL-95-SC-IT ), re-opening upheld. Assessee contended that in the re-assessment order, AO traveled beyond the reasons recorded for issue of re-opening notice. This contention was rejected by Tribunal following decision of Supreme Court in Hind Wire Industries ltd. Vs CIT (212 ITR 639) holding that in re-assessment proceedings, the whole proceedings will start afresh. Relief can be claimed only by filing revised return as held by Supreme Court in Goetz (India) Ltd. Vs CIT ( 2006-TIOL-198-SC-IT ) . Covering letter of Chartered Accountant enclosed with the return mentioned that assessee is a 100 percent export oriented unit. But in the body of return assessee did not claim exemption under s. 10A and instead set off brought forward depreciation and loss of earlier years. By making this claim, assessee exercised the option of not claiming exemption under s. 10A during the year and assessee cannot blow hot and cold.

In the return filed in response to notice under s. 148 assessee claimed exemption under s. 10A. Since re-opening is only to favour revenue, assessee cannot make fresh claims as held by Apex Court in CIT v Sun Engineering Ltd. ( 198 ITR 297):CHENNAI ITAT;

2008-TIOL-372-ITAT-LKW.pdf

M/s Kothari Products Ltd Vs ACIT, Kanpur ( Dated : September 28, 2007 )

Income tax - Profits of eligible units, as per audit accounts, could not be said to be sacrosanct so as to prohibit the Assessing Officer from making adjustment therein - Deduction of expenses incurred by Head office for advertisement and publicity by AO from the profits of unit in a backward area under s. 80-IB is legal - Matter remanded to AO to find out suitable method for allocation of expenses by providing proper opportunity to assessee Deductions of turnover and profits under s. 80HHC - If the product of the unit is separate and distinct and is exclusively traded in India then profits as well as turnover of the Unit would be excluded from computation of deduction u/s 80-HHC - In case there is no distinct features of the product of the Unit from that which is exported then deduction u/s 80-HHC would be computed, by including both profits and turnover irrespective of fact as to whether profit was zero or negative - Relief under section 80-IA should be deducted from the profits and gains of the business before computing relief under section 80-HHC of the Act - Matter remanded to the AO to determine the deductions Income received from bank by way of interest cannot be considered to be derived from business - Ineligible for deduction under S.80HHC

No evidence to show that director and his family travelled to countries is connected to business - Expenditure to be allowable u/s 37 of the Act must have been laid out wholly and exclusively for the purposes of the business : LUCKNOW ITAT;

CENTRAL EXCISE SECTION

2008-TIOL-407-HC-J&K-CX.pdf + Bharat Box story.pdf

CC & CE, Jammu Vs M/s Bharat Box Factory Ltd (Dated: April 3, 2008)

Central Excise – Appeals under 35G of Central Excise Act – Grant of refund / self credit of Education cess levied and collected under section 91 of the Finance Act, 2004 under notification dated November 14, 2001, is definitely related to rate of duty of excise for the purpose of assessment – High Court cannot entertain applications under Section 35G of the Act – Only remedy open to the Commissioner is to move the Supreme Court : JAMMU AND KASHMIR HIGH COURT;

2008-TIOL-1336-CESTAT-MUM.pdf + indorama story.pdf

Indo Rama Synthetics (I) Ltd Vs CCE, Nagpur (Dated: July 21, 2008)

Indorama Synthetics asked to make a pre-deposit of ONLY one crore rupees in Cenvat case by Tribunal.

Capital goods purchased by another entity Indo Rama Petrochemicals Ltd for setting up power plant in applicants premises - electricity used by applicant for manufacture of dutiable goods – No prima facie case – issue arguable – Tribunal orders pre-deposit of Rs. One crore only and report compliance by 29/09/2008:MUMBAI CESTAT;

2008-TIOL-1335-CESTAT-MAD.pdf

CCE, Chennai Vs M/s Best and Crompton Engg Ltd (Dated: April 23, 2008)

Testing done at the instance of the customer – charges not includible in Assessable Value – Apex Court's decision in Bombay Tyres and Special Bench decision in Shree Pipes Ltd followed – Revenue Appeal dismissed :CHENNAI CESTAT;

2008-TIOL-1334-CESTAT-MAD.pdf

CCE, Chennai Vs Thirumalai Chemicals (Dated: February 28, 2008)

HTS, CTD bars, angles, channels, beams, joists, HR plates, MS sheets and SS Sheets coils are used as structurals for plant and machinery – Hence, capital goods within the meaning of erstwhile Rule 57(Q) – Modvat credit allowed by following the ratio of Jawahar Mills case – Cement used for building foundations for plant and machinery is not capital goods – Rajasthan High Court judgment in Hindustan Zinc Ltd followed – Appeals allowed to this extent – Department appeal rejected – Penalty waived:CHENNAI CESTAT;

SERVICE TAX SECTION

2008-TIOL-151-SC-ST.pdf + sc st story.pdf

CCE, Vadodara I Vs M/s Gujarat Carbon & Industries Ltd (Dated: August 18, 2008)

Service Tax - Service Tax on GTA in 1997-98 – No tax in spite of retrospective amendment of the law: The above would show that even the amended Section 73 takes in only the case of assesses who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the appellants only under Section 71A. The class of persons who come under Section 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking section 73 are not maintainable:SUPREME COURT;

2008-TIOL-1331-CESTAT-MUM.pdf

HDFC Standard Life Insurance Co Ltd Vs CST, Mumbai (Dated: June 9, 2008)

ST - Cenvat Credit - Assessee avails credit of tax paid on input service of agency commission under the category 'Insurance Auxiliary Service' and Management Consultancy service - In view of some the decided cases, the pre-deposit is waived off:MUMBAI CESTAT;

2008-TIOL-1330-CESTAT-BANG.pdf

CCE, Cochin Vs M/s Indian Cardamom Marketing Company (P) Ltd (Dated: March 26, 2008)

Mere receiving and storing goods for auctioning them has nothing to do with clearing and/or forwarding operations contemplated under the taxable service of ‘clearing and forwarding agent – Revenue appeal devoid of merits hence dismissed:BANGALORE CESTAT;

2008-TIOL-1329-CESTAT-KOL.pdf

CCE, Shillong Vs M/s Ware Well Apparel (Dated: July 8, 2008)

Service tax – clearing and forwarding agent service - the order of adjudication does not demonstrate what was the nature of the service rendered, terms of agreement between the parties, value of consideration received for service provided and the extent of liability thereby arose. In absence of reasoned and speaking order, matter needs to be remanded to the original authority.:KOLKATA CESTAT;

CUSTOMS SECTION

NOTIFICATION

dgft08cir027.pdf

Last date for filing of applications and applicability of late cut, for Schemes under Chapter 3 of FTP, clarification thereof.;

dgft08pn064.pdf

DGFT amends Para 3.23.10 - duty credit scrip - last date for application is Dec 31, 2008;

dgft08pn063.pdf

DGFT amends the List of agencies authorized to issue Certificate of Origin;

CASE LAWS

2008-TIOL-1333-CESTAT-MAD.pdf

M/s Sabari Exim Pvt Ltd Vs CC, Chennai (Dated: April 30, 2008)

Customs – Stay / dispensation of pre-deposit – mis-declaration of goods imported as “ non-alloy re-rollable scrap -The first test report of National Metallurgical Laboratory is against the appellants as it is strong evidence of misdeclaration of the goods – Pre-deposit of duty amount ordered. :CHENNAI CESTAT;

2008-TIOL-1332-CESTAT-BANG.pdf

M/s Rashtriya Ispat Nigam Limited Vs CC, Visakhapatnam (Dated: June 5, 2008)

Customs - Finalization of Provisional Assessments - Prior to the amendment of Section 18 on 14.7.2006 the Doctrine of Unjust Enrichment would not be applicable to refunds arising on account of finalization of provisional assessments :BANGALORE CESTAT;