MoF clarifies Infrastructure for ECB purpose to include (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport (vi) industrial parks and (vii) urban infrastructure (water supply, sanitation and sewage projects);

Deduction of laboratory expenses of foreign Head Office - Is it allowable? (Look for Bombay HC decision tomorrow)

CBEC Commissioners' promotion file goes missing - FIR launched (See 'DDT')

India's Service Tax on air travel breaches international obligations – IATA chief (See 'DDT')

NTPC pays highest ever dividend of Rs 2886 Cr for last fiscal;

RBI appoints Ashok Chawla as co-chairman of Financial Sector Assessment;

Gautam Choudhuri, DG (HRD) to hold addl charge of DGIT (L&R) vice N K Shukla who retires;

Two French + one German scientists get Nobel Prize in Medicine category;

RBI cuts CRR rate by 0.5% to ease liquidity crunch in economy;

India all set to launch Chandrayaan-1 on Oct 22;

Union Bank of India & its employees contribute Rs 1.25 Cr to flood relief fund; Cheque handed over to FM;

ddt 7 oct.pdf

Dual benefit by taking credit on inputs and collecting duty on exempted final products;

cir_rgia.pdf

Hyderabad Customs looking for ACSs / ACOs at Shamshabad Airport ;

office_memorandum.pdf

Grant of advances - Sixth Pay Commission recommendations-Amendment to Rules 31,35, 38,53,58,66 of Compendium of Rules on Advances to Government Servants.

mbuzz1038.pdf

Plan to set up Common Service Centres to provide ITeS is on track, says Govt;

mbuzz1037.pdf

RBI appoints Ashok Chawla as co-chairman of Financial Sector Assessment;

mbuzz1036.pdf

Govt selects four mega tourism circuits for integrated development;

mbuzz1035.pdf

Govt aims at 100% sanitation during 11th Plan Period;

2008-TIOL-471-ITAT-BANG.pdf + philips story.pdf

Philips Software Centre Pvt Ltd Vs ACIT, Bangalore ( Dated : September 26, 2008 )

Income Tax - Transfer Pricing - Sec 92C - Assessee is a captive software developer for its Associated Enterprise (AEs) - before filing return, assessee initiates TP study to determine arm's length price - AO refers the case to TPO who makes TP adjustments after arriving at a mean margin by reducing Sec 10A benefits - CIT(A) marginally reduces the mean margin but largely agrees with the AO's order - Issue goes to the Tribunal which holds,

++ Since the basic intention behind introducing the transfer pricing provisions in the Act is to prevent shifting of profits outside India, and the assessee is claiming benefit under section 10A of the Act, the transfer pricing provisions ought not to be applied to the assessee.

++ Circular No. 14/2001 issued by the CBDT is binding upon the TPO.

++ The TPO or the A.O. needs to satisfy and communicate to the taxpayer the relevant clause under section 92C(3) which has been triggered by the assessee, which has necessitated the application of provisions of the transfer pricing provisions, in the instant case, since this was not demonstrated to the assessee, the transfer pricing order is void.

++ The TPO erred in disregarding the most appropriate method adopted by the assessee in the TP Study, and also in using the Prowess data base. The TPO did not provide any reason for deviating from the TP Study in respect of these matters.

++ The TP Study cannot be ignored by the TPO, in the absence of any deficiency or insufficiency. Further, the order passed by the TPO appears to have been passed with the intention of making a higher transfer pricing adjustment.

++ Adjustment needs to be made to the margins of the comparables to eliminate differences on account of different functions, assets and risks. More specifically, adjustment needs to be made for: a) Differences in risk profile. b) Difference in working capital position, c) Differences in accounting policies. ++ The TPO has grossly erred in 'normalising' the profits of super profit companies. Such companies should have been excluded from the list of comparables. ++ The proviso to section 92C(2) of the Act provides a standard deduction of 5% to the taxpayers. The only condition for availing this benefit is that it is subject to the option of the taxpayer. ++ The decision of the Tribunal in the case of Mentor Graphics ( 2007-TIOL-382-ITAT-DEL ) and E-gain Communication (2008-TIOL-282-ITAT-PUNE ) are squarely applicable to the assesee's case. ++ Based on the issues raised and discussed, it should be concluded that the transactions of the assessee with its associated enterprises satisfy the arm's length test, and that the order of the TPO is bad in law and on facts.

++ Without prejudice to the submission of the assessee that the comparables selected by the TPO should not be considered for the purpose of comparability analysis, the assessee has prepared a working carrying our an accept/reject test on the comparables of the TP Study as well as the companies selected by the TPO as comparables. Even on the basis of this statement, the transactions of the assessee with its associated enterprises satisfy the arm's length test.: BANGALORE ITAT ;

2008-TIOL-470-ITAT-DEL.pdf

ITO, New Delhi Vs M/s Pyoginam ( Dated : July 31, 2008 )

PF and ESI contribution by employees collected by employer – Paid before due date of filing of return – sec. 43B applies – No disallowance could be made

Personal use of telephone cannot be ruled out simply because no such disallowance was made in the preceding year.

Disputed liability – payment made in earlier year shown as advance in Balance sheet since appeal filed challenging the levy - Appeal withdrawn during the year and amount transferred from advance a/c to Expense a/c – Liability crystallized – Amount deductible.

Foreign travel expenses of wife of partner - Evidence showed involvement of wife in business dealings with foreign clients – Deduction allowed

Interest on diverted funds disallowed – Diversion took place in earlier years in which no such disallowance made by AO – Interest free fund available with assessee – Addition deleted : DELHI ITAT ; 

2008-TIOL-469-ITAT-MAD.pdf

ITO, Chennai Vs M/s Penar Speciality Products Pvt Ltd ( Dated : May 30, 2008 )

Assessee using the premises for own business of doing jobwork for others – Rent liability is a criteria for deciding jobwork receipts – Rental income not Income from House Property

Assessee is engaged in contract manufacture of leather chemicals on jobwork basis for BSPPL. AO treated a part of receipts representing rent on building as House Property income and balance as Income from Other Sources as against assessee's claim of treating it as Business income.

On appeal, ITAT held that the agreement referred to by the AO is no longer subsisting. Further, on the basis of the very same agreement, income offered in earlier years ahs been accepted by Revenue as Business income. Again, the reference to cost of land and building in the said agreement was only a basis to arrive at the rate of payment by BSPPL. Assessee was in occupation of the building and using it for its jobwork business. Hence it was correctly offered as Business income.: CHENNAI ITAT ; 

2008-TIOL-468-ITAT-MAD.pdf

M/S Oswal Minerals Ltd Vs DCIT, Chennai ( Dated : May 22, 2008 )

Sec. 35D – Premium collected on share capital is not capital employed in the business.

Premium collected by assessee on its subscribed share capital cannot be considered as capital employed in the business of the company for the purpose of computing deduction under sec. 35D of the I.T. Act. Decision of Delhi High Court in Berger paints India Ltd. Vs CIT ( 2004-TIOL-21-SC-IT ) followed.: CHENNAI ITAT ;

2008-TIOL-467-ITAT-MAD.pdf

ACIT, Chennai Vs M/s Keld Ellentoft India Pvt Ltd ( Dated : May 2, 2008 )

When income is estimated, addition under sec. 40A(3) cannot be made.

Addition of credits no longer required made under sec. 41(1) upheld. Assessee's contention that no evidence for this addition was found during the search and that it offered part of such addition for a subsequent year, held not tenable. Following the decision of Apex court in CIT Vs T.V. Sundaram Iyengar & Sons Ltd. ( 222 ITR 344 ) and Madras High Court in B. Noorsingh Vs Union of India ( 249 ITR 378 ), addition was upheld. : CHENNAI ITAT ;

RLT Case Laws Headnotes

CASE LAWS file no 88-Part -3.pdf

CASE LAWS file no 88-Part - 2.pdf

CASE LAWS file no 88-Part - 1.pdf

CENTRAL EXCISE SECTION

NOTIFICATION

exnt08_44.pdf + exnt08_43.pdf

Central Excise: CBEC allows single registration for CNG manufacturers falling under one Chief Commissioner;

CASE LAWS

2008-TIOL-1631-CESTAT-AHM.pdf + TM story.pdf

CCE, Bhavnagar Vs M/s Ultra Tech Cement Co Ltd (Dated: August 6, 2008)

Whether the Revenue appeal is to be dismissed or decided on merits – whether Doctrine of Merger comes into play – Difference of Opinion – matter referred to Third Member.

Member(Technical)

It will be injustice to apply doctrine of merger and reject the appeal of the Revenue in this case in view of the following:

(a) By denying the consideration of appeal filed by the department, the revenue will be deprived of the statutory right conferred to file appeal.

(b) Department has not filed cross-objections. Even if cross-objections were to be filed, it cannot take the place of appeal and generally, such cross-objections try to cover the points raised by the respondents. Even though the Tribunal is required to treat it as appeal, the facts remain that basically, the contents would be objections to the appeal memorandum filed by the other party and such cross-objections can never take the place of appeal.

(c) When both parties are aggrieved against the order it is quite possible that both would file appeal and both would file cross-objections also.

(d) As already discussed above, the points to be considered in the department's appeal are entirely different vis-à-vis the points brought up by the respondents in their appeal which has been decided.

(e) Doctrine of merger if applied results in a situation where there would be no finding on many items in respect of which show cause notice was issued and question of contradiction in different paragraphs of the order would remain unanswered.

(f) In the interest of justice, equity and good conscience and also in view of the observations of the Hon'ble Supreme Court that doctrine of merger is not to be applied universally, we reject the preliminary objections raised by the learned Advocate for the respondents that doctrine of merger would apply in this case and the Tribunal cannot adjudicate upon the matter.

Member(Judicial)

I find that the issue before the Hon'ble Supreme Court in that case [Mauria Udyog [ 2002-TIOL-611-SC-CX ] was entirely different inasmuch as both the appeals, - one filed by the assessee and the other filed by Revenue, were before the Tribunal. The Hon'ble Supreme Court rejected the Revenue's prayer that by dismissing the Revenue's appeal, the assessee's appeal cannot be restored (as dismissed for non-compliance) and disposed of on merits inasmuch as by applying the theory of merger, their appeal gets merged with the Tribunal's order dismissing Revenue's appeal. It was in these circumstances the Hon'ble Supreme Court held that principle of merger has no applicability and inasmuch as both the appeals were on two different issues, they have to be decided separately. It was not a case where Revenue's appeal was filed after the decision on the assessee's appeal.

The law declared by the Larger Bench in the case of M/s. LML Ltd. (Scooter Division) [ 2002-TIOL-404-CESTAT-DEL-LB ] is required to be followed. Accordingly, appeal filed by the Revenue is required to be dismissed as non-maintainable.:AHMEDABAD CESTAT;

2008-TIOL-1630-CESTAT-DEL.pdf

M/s Oriental Trimex Ltd Vs CCE, Noida (Dated: June 3, 2008)

Central Excise – Stay/Dispensation of pre-deposit - demand of duty on Marble Tiles – the ratio of Supreme Court that the process does not amount to manufacture cannot be distinguished merely because it was rendered in the context of six digit tariff – prima facie case in favour of the assessee for the period prior to 1.3.2005 – For the period after 1.3.2005, pre-deposit ordered in view of introduction of chapter note 6 in Chapter 25. :DELHI CESTAT;

2008-TIOL-1629-CESTAT-KOL.pdf

CCE, Siliguri Vs M/s Hindustan Coco-Cola Beverages Pvt Ltd (Dated: August 4, 2008)

Central Excise – authorization under Section 35 B (2) of the Central Excise Act 1944 – Authorization given only by the Commissioner of Central Excise but not by the Committee of the Commissioners is not valid.

Jurisdiction – Commissioner ( Haldia ) has no locus standi to file Miscellaneous Application in respect of case arising in Siliguri Commissionerate. :KOLKATA CESTAT;

SERVICE TAX SECTION

2008-TIOL-1634-CESTAT-MUM-LB.pdf + stgst.pdf

CCE, Mumbai –V Vs M/s GTC Industries Ltd (Dated:September 25, 2008)

Services provided by the outdoor caterer in the canteen of the manufacturer is an Input Service – CAS-4 aids Larger Bench in settling the issue.

Matter referred to Larger Bench as two contrary orders on the issue –

Cenvat credit not available in respect of Service Tax paid by Outdoor Caterers as Canteen/Catering service is a welfare activity - Mahindra Sona & Others [ 2008-TIOL-199-CESTAT-MUM ]

Canteen facility, although not specifically stated in the list of activities in the definition of the ‘input service' under Rule 2(l) ibid, yet it is an activity relating to the business of the appellants - Victor Gaskets, Bajaj Electricals & Ors [ 2008-TIOL-409-CESTAT-MUM ] read with 2008-TIOL-1179-CESTAT-MUM

Held by Larger Bench:-

It is well settled that every clause of the Statute should be construed with reference to the context in which it is issued.  A bare mechanical interpretation of words and application of legislative intent is devoid of concept and purpose will reduce most of the remedial and beneficial legislations to futility.  To be literal in meaning is to see the skin and miss the soul.

The legislature never wastes its words or says anything in vain and a construction which attributes redundancy to legislation will not be accepted, as has been observed by the Supreme Court in the case of Union of India vs. Hansoli Devi 2002 7 SCC 273 .

A similar observation was made by the Apex Court in the case of Peerless Finance that the word “include” is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include.

The word “include” is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that is was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to “mean and include”, and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions. 

The context in which and the purpose for which the credit rules have been issued are clear from the press note dated August 12, 2004 issued by the Ministry of Finance, prior to introduction of the credit rules wherein the draft rules were circulated for inviting comments from trade and industry.  This note clearly states that “In principle, credit of tax on those taxable services would be allowed that go to form a part of the assessable value on which excise duty is charged”. 

Expenses towards the canteen and provision of subsidized canteen forms part of the cost of production as is evident from the Para 4.1, 5.2 of the CAS-4 which defines the phrase “Cost of production”, and under the head Direct Wages and Salaries, subsidized food has also been considered as part of direct wages and salaries, being fringe benefits. 

The above paragraphs of CAS-4 clearly show that cost of subsidized food is included in the cost of production.

In case of a factory having more than 250 workers, under Sec.46 of the Factories Act, 1948, it is mandatory on the part of the factories to provide a canteen facility within the factory premises and failure to comply with the provisions of Sec.46 attracts prosecution and penalty under Sec.92 of the Factories Act, 1948.

A service tax on outdoor catering services is paid by the manufacturer for running the canteen, irrespective of the fact that a subsidized food is provided or not.  Whether the cost of foods is borne by the worker or by the factory , the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production.

In view of the same, employment of outdoor caterer for providing catering services has to be considered as an input service relating to the business and cenvat credit in respect of the same will be admissible.

Views of the Tribunal expressed in the case of Victor Gaskets India Ltd. and Others [ 2008-TIOL-409-CESTAT-MUM ] concurred with – Larger Bench of Tribunal. : MUMBAI CESTAT (LARGER BENCH);

2008-TIOL-1633-CESTAT-DEL.pdf

M/s Delhi Public School Society Vs CST, New Delhi (Dated: August 5, 2008)

ST - Franchisee service - Assessee, Delhi Public School, had got waiver from pre-deposit on the ground that the word 'Franchise' u/s 65(47) of Finance Act had four conditions for one to qualify this service and it did not fulfill all of them - However, after an amendment in the Section vide Finance Act, 2005, assessee cannot take shelter under the same conditions - Pre-deposit of Rs 40 lakh ordered :DELHI CESTAT;

2008-TIOL-1632-CESTAT-DEL.pdf

M/s Hindalco Industries Vs CCE, Allahabad (Dated: August 8, 2008)

ST - Assessee is an aluminium manufacturer - owns a power plant - captive consumption - a part of power supplied to residential colonies - Cenvat credit on GTA services and BAS - Waiver from pre-deposit granted in view of a stay granted in a similar case earlier :DELHI CESTAT;

CUSTOMS SECTION

2008-TIOL-187-SC-CUS.pdf + sc cus story.pdf

Union of India Vs Padam Narain Aggarwal etc (Dated: October 3, 2008)

Customs – summons – anticipatory bail – imposition of conditions before arrest not legal or valid - power to arrest a person by a Custom Officer is statutory in character and cannot be interfered with – A person summoned is bound to comply

Ambit and scope of power of arrest :- The term "arrest" has neither been defined in the Code of Criminal Procedure, 1973 nor in the Indian Penal Code, 1860 nor in any other enactment dealing with offences. The word "arrest" is derived from the French word " arrater " meaning "to stop or stay". It signifies a restraint of a person. "Arrest" is thus a restraint of a man's person, obliging him to be obedient to law. "Arrest" then may be defined as "the execution of the command of a Court of Law or of a duly authorized officer".

Anticipatory bail :- Section 438 of the Code makes special provision for granting `anticipatory bail' which was introduced in the present Code of 1973. The expression (`anticipatory bail') has not been defined in the Code. But anticipatory bail means a bail in anticipation of arrest. The expression `anticipatory bail' is a misnomer inasmuch as it is not as if bail presently granted in anticipation of arrest. Where a competent court grants `anticipatory bail', it makes an order that in the event of arrest, a person shall be released on bail. There is no question of release on bail unless a person is arrested and, therefore, it is only on arrest that the order granting anticipatory bail becomes operative.

Safeguards against abuse of power :- It is amply clear that power to arrest a person by a Custom Officer is statutory in character and cannot be interfered with. Such power of arrest can be exercised only in those cases where the Custom Officer has `reason to believe' that a person has been guilty of an offence punishable under Sections 132, 133, 135, 135A or 136 of the Act. Thus, the power must be exercised on objective facts of commission of an offence enumerated and the custom officer has reason to believe that a person sought to be arrested has been guilty of commission of such offence. The power to arrest thus is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of the officer.

Statements under Section 108, Customs Act: Evidentiary value:- Section 108 does not contemplate magisterial intervention. The power is exercised by a Gazetted Officer of the Department. It obliges the person summoned to state truth upon any subject respecting which he is examined. He is not absolved from speaking truth on the ground that such statement is admissible in evidence and could be used against him. The provision thus enables the officer to elicit truth from the person examined. The underlying object of Section 108 is to ensure that the officer questioning the person gets all the truth concerning the incident. If a person is called upon to make a statement under Section 108 of the Act and summon is issued for the said purpose, he is bound to comply with such direction.

Imposition of condition before effecting arrest - Conditions not lawful : - Neither of the directions can be said to be legal, valid or in consonance with law. Firstly, the order passed by the High Court is a blanket one and seeks to grant protection to respondents in respect of any non-bailable offence. Secondly, it illegally obstructs, interferes and curtails the authority of Custom Officers from exercising statutory power of arrest of a person said to have committed a non-bailable offence by imposing a condition of giving ten days prior notice, a condition not warranted by law.: SUPREME COURT ;

2008-TIOL-1628-CESTAT-MUM.pdf + eou story.pdf

Krishna Filaments Ltd Vs CCE, Thane-II (Dated: August 14, 2008)

Customs - non-fulfilment of export obligation by EOU - demand of duty on capital goods imported under Notification 53/97 Cus - demand of duty is upheld - no depreciation allowed as the capital goods were not allowed to be cleared by the competent authority which is pre-requisite for allowing the depreciation under Notification 53/97 - confiscation under section 111 (o) upheld as it is case of violation of post import conditions. :MUMBAI CESTAT;