Interest Rates for Delayed Payment/Refund of duty (See 'DDT')

Service Tax - Commercial Coaching and training – Board overrules CESTAT decisions + ST – Construction of Residential Complex – No tax when sale is involved – AAR decision in Harekrishna Developers - 2008-TIOL-03-ARA-ST not in rem – applicable only to that case – CBEC clarifies (See 'Indirect Tax Basket')

CBDT to bid goodbye to Chairman at 4 PM in North Block today;

PM all set to be discharged from AIIMS tomorrow;

IMF forecasts 5% growth rate for India in 2009; has bad news for global economy;

Pranab also supports 7% growth theory for current fiscal;

CBI arrests branch manager of Bank of Baroda, Janakpuri, for accepting bribe + searches premises of AIR Station Director in Ahmedabad for criminal conspiracy

Pranab Mukherjee interacts with MoF top honchos; says his priority is to get vote on account smoothly passed in coming session of Parliament;

ddt 30 Jan.pdf

A CERTIFICATE - Central Board of Film Certification issued Notice for Service Tax – Board puts off Fire;

satyam story.pdf

ICAI - Please wake up!

mbuzz0099.pdf

IMF forecasts 5% growth rate for India in 2009 ;

mbuzz0098.pdf

Govt launches Phase III of Project Arrow for integrating post offices;

2009-TIOL-02-ARA-IT.pdf + cholamandalam story.pdf

Cholamandalam MS General Insurance Co Ltd (Dated: January 29, 2009)

Income tax - Indo-Korea DTAA - Applicant is an Indian insurance company - intends to build up business relations with JVs and subsidiaries of Korean companies - ties up with a Korean insurance company - non-resident company deputes an experienced staffer for the assignment - applicant partly reimburses the salary of the deputed technical hand - Revenue for deduction of tax at source u/s 195 on payments made to the non-resident - Revenue also takes the view the payment made for the services provided by the non-resident is nothing but fees for technical services as covered under Explanation 2 to Sec 9(1)(vii) and also under Article 13.4 of the DTAA - held, though the provision of services of technical personnel is covered u/s 9(1)(vii) and also DTAA but no tax is deductible in India as reimburement of part salary cannot be treated as revenue receipt for the non-resident company .:ADVANCE RULING AUTHORITY;

CIT Vs ITI, Limited (Dated: January 21, 2009)

Income tax - Sec 10(5) - LTC / Conveyance Allowance - assessee-company gives LTC benefits to its employees - avails Sec 10(5) benefits - Revenue insists on collecting evidence towards actual utilisation of LTC facility - held, Sec 192 does not cast any obligation on the employer to collect and examine supporting evidence to establish declaration given by individual employees for having availed the facility - Revenue's appeal dismissed:SUPREME COURT;

2009-TIOL-07-SC-IT.pdf +  sc it story.pdf

E K Lingamurthy Vs Settlement Commissioner (IT AND WT) (Dated: January 22, 2009)

Income Tax - set off of the loss suffered in any of the previous year in the block period against the income assessed in other previous years in the block period is not prohibited: only brought forward losses of the past years under Chapter VI and unabsorbed depreciation under Section 32(2) are to be excluded while aggregating the total income or loss of each previous year in the block period but set off of the loss suffered in any of the previous year in the block period against the income assessed in other previous years in the block period is not prohibited. The Settlement Commission had erred in disallowing the application of the assessee for set off of inter se losses and depreciation accruing in any of the previous year in the block period against the income returned/assessed in any other previous year in the block period.

Scope of Section 158 BB: Section 158BB , inter alia, states that undisclosed income of the block period shall be "the aggregate of the total income of the previous years falling within the block period" computed in accordance with the provisions of Chapter IV. "Total income" is defined in Section 2(45) to mean the total amount of income referred to in section 5, computed in the manner laid down in the Act. In other words, Chapter XIV does not rule out Chapter IV of the Act in the matter of computation of undisclosed income under Chapter XIV-B. It may be mentioned that ordinarily, in the case of regular assessment, the unit of assessment is one year consisting of twelve months whereas in the case of block assessment, the unit of assessment consists of ten previous years and the period upto the date of the search. Section 158BB provides for aggregation of income/loss of each previous year comprised in the block period. The block period assessment under Chapter XIV-B is in addition to regular assessment.:SUPREME COURT;

2009-TIOL-54-HC-HP-IT.pdf

CIT Vs M/s H P State Forest Corporation Ltd (Dated: November 11, 2008)

Income tax - assessee fails to file returns for four years - Notice u/s 147 - Returns filed without statutory audit reports u/s 44AB - AO holds them invalid - writ filed - HC gives conditional permission to AO to proceed with assessee - Fresh returns filed with audit reports - assessment order passed with some additions - meanwhile, HC upholds AO's order treating the returns as invalid - Sec 148 notice issued but returns not filed - AO issues Sec 142(1) notice - return filed and order passed - assessee alleges the earlier notice issued by the Revenue was invalid - Tribunal held that since the earlier notice was pending, the second notice u/s 148 was not sustainable - held, the second notice by the Revenue was in continuation of the first notice, and even if they are treated independently they are within the limitation if the time during which the proceedings were stayed by the High Court are excluded - Revenue's appeal allowed :HIMACHAL PRADESH HIGH COURT;

2009-TIOL-68-ITAT-PUNE.pdf + pune story.pdf

Daimler Chrysler India Private Limited Vs DCIT, Pune (Dated : January 21, 2009 )

Income tax - Indo-German tax treaty - Assessee is an Indian subsidiary of a German Company - undergoes a change in shareholding matrix on account of merger of the parent company with another company - All assets and liabilities of the parent company merged into the new Company, including the merger of the assessee company - It included the shares - Since these shares were more than 51% of the total shares and the assessee was not a ‘company in which public are substantially 'interested', the AO takes the view that the provisions of pre-amended Section 79 are attracted and accumulated losses cannot be allowed to be carried forward - CITA(A) agrees with the AO

Before Tribunal the assessee seeks to take benefits of Article 24(4) of the Treaty and argues that the assessee be treated as a company in which public are substantially interested and, accordingly, disentitlement under section 79 does not come into play.

Held, the benefits of DTAA provisions cannot be viewed as options being available to the assessee, which the assessee may or may not invoke and that these provisions restrict the scope of and relax the rigour of domestic law. The domestic law cannot be viewed in isolation with the curbs placed on its applicability. On the question whether double taxation was necessary to invoke the DTAA and whether the non-discrimination provisions of the DTAA could, prior to the insertion of s. 90 (1) (a)(ii), be said not to be protected by treaty override, the Tribunal observed that the role of tax treaties is not only confined to avoiding double taxation but it is a tool for fostering economic relations, trade and investment. Consequently, treaty override, even before the 2004 amendments in Section 90(1), covered all provisions of the DTAA, including the provisions relating to non-discrimination.

Tribunal held that the treaty protection under ownership non-discrimination clause is available to the Indian subsidiaries, as long as the capital of such enterprise is wholly or partly owned or controlled, directly or indirectly, by one or more residents of Germany. Such an enterrpise cannot be subjected to any taxation in India and the assessee is entitled to the benefit of the non-discrimination provision of the DTAA;

The Bench also held that the term “other similar enterprises of India” means a company which is subsidiary of a domestic company and not a company which is a subsidiary of a foreign company. It further notes that though judicial precedents from foreign judicial forums may not have any binding value, but it is certainly desirable that the interpretation assigned to the expressions found in the bilateral tax treaties should be in harmony with the judicial opinion abroad and, where there is a divergence of judicial opinion abroad, it should ideally be in harmony with the judicial opinion in the treaty partner country. The significance of uniformity of interpretation of expressions which are used in global treaty networks can thus hardly be overemphasized.

The Tribunal finally concluded that Sec 79 read with Sec 2(18) is discriminatory to the Indian subsidiary of a German company as compared to the Indian subsidiary of an Indian company because while the latter qualifies as a “company in which the public are substantially interested” by virtue of the holding company being listed on an Indian stock exchange, the former is not even though its holding company is listed on a German stock exchange. There is no justification for this differentiation in treatment, as a foreign company, except for the limited purposes of Indian Depository Receipts (IDRs), cannot be listed on Indian Stock Exchanges. Section 79 thus was read down not to disentitle carry forward of accumulated losses in case of transfer of 51% or more share capital of Indian subsidiaries of German companies, as long as parent German company is listed in domestic stock exchanges recognized under the German domestic laws. :PUNE ITAT;

SERVICE TAX SECTION

CIRCULAR

sercir108.pdf

ST – Construction of Residential Complex – No tax when sale is involved – AAR decision in Harekrishna Developers - 2008-TIOL-03-ARA-ST not in rem – applicable only to that case – CBEC clarifies;

sercir107.pdf

Service Tax - Commercial Coaching and training – Board overrules CESTAT decisions;

st_demand.pdf

Demand of Service Tax on CBFC – reg.;

CASE LAWS

2009-TIOL-180-CESTAT-DEL.pdf

M/s P L Colour Lab Vs CCE & ST (Dated: January 1, 2009)

Service tax - photography service - service tax is leviable only on processing charges excluding the cost of materials - case remanded for re-quantification of demand:DELHI CESTAT;

2009-TIOL-179-CESTAT-AHM.pdf

CCE, Daman Vs M/s Supreme Treaves (P) Ltd (Dated: December 1, 2008)

ST - No tax is leviable on royalty payment made for licence to use technical knowhow - Revenue's appeal dismissed:AHMEDABAD CESTAT;

2009-TIOL-178-CESTAT-MUM.pdf

CCE, Pune-III Vs M/s Beharay & Rathi Constructions (Dated: December 5, 2008)

ST - refund - assessee avails GTA service - takes abatement of only 25% instead of 75% - refund claim filed - Revenue rejects it as it was filed after one year period - Commissioner(A) allows the appeal on the ground that Sec 11B of Central Excise is not applicable and unjust enrichment cannot be alleged in cases of tax collected without authority of law - held, refund claim filed beyond the period of one year is hit by time bar in terms of Sec 11B and Commissioner(A) order is not sustainable - Revenue appeal allowed :MUMBAI CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-55-HC-P&H-CX.pdf + invoice story.pdf

CCE, Faridabad Vs M/s Goodyear India Ltd (Dated: January 7, 2009)

Central Excise – Supplementary Invoice – No interest – Reliance placed on quashed High Court order – Revenue loses in High Court - The judgment of the Tribunal in the case of CCE , Aurangabad v. M/s Rucha Engineering Pvt. Ltd., 2006-TIOL-885-CESTAT-MUM , which has been approved by the Aurangabad Bench of the Bombay High Court and is in favour of the assessee-respondent has been relied upon. Accordingly, it has been held that the demand of interest and penalty were not sustainable for payment of deficient duty on the basis of supplementary invoices.”

But the facts are that the Bombay High Court judgement has been set aside by the Supreme Court and remanded to the Tribunal. This fact was specifically mentioned in the CESTAT LB order in the Lucas case - 2008-TIOL-1843-CESTAT-MAD-LB in which the issue had been referred to a Five Member Bench.

So the situation is the Bombay High Court order relied on by this High Court is no more valid and the issue is with a Five Member Larger Bench. Apparently these facts were not brought to the notice of the High Court and Revenue has lost one more case because it has not kept itself updated with the latest case law.:PUNJAB AND HARYANA HIGH COURT;

2009-TIOL-184-CESTAT-MUM.pdf

M/s Jayketan Marketing & Clothing Vs CCE, Belapur (Dated: September 19, 2008)

Central Excise – Duty paid under protest after clearance of goods cannot be transferred to buyers – Test of unjust enrichment not applicable – Impugned order set aside:MUMBAI CESTAT;

2009-TIOL-183-CESTAT-MUM.pdf

CC, Mumbai Vs M/s Diamond Polymer Pvt Ltd (Dated: August 28, 2008)

Central Excise – All refund claims pending when provisions of unjust enrichment were enacted to be dealt with as per those principles – Impugned order set aside with directions to adjudicating authority to decide afresh on merits:MUMBAI CESTAT;

2009-TIOL-182-CESTAT-MUM.pdf

M/s Seam Engineers Vs CCE & CC, Nasik (Dated: October 17, 2008)

Central Excise – Duty demand on clearance of copper billets after conversion of copper scrap by job work under Notification No. 83/94-CE and 84/94-CE for non-maintenance of records – No attempt made by Revenue to ascertain from supplier about supply and receipt of materials from job worker – Impugned order set aside:MUMBAI CESTAT;

CUSTOMS SECTION

2009-TIOL-09-SC-CUS.pdf + leela story.pdf

M/s Hotel Leela Venture Ltd Vs CC, Mumbai (Dated: January 22, 2009)

Customs – Exemption – burden is on the claimant that he has satisfied the conditions of the exemption notification – Appellant failed to discharge burden - No reason to interfere with the concurrent findings of the authorities below: What is important to note is that in this case appellant is claiming the benefit of an Exemption Notification. The burden was on the appellant to prove that the appellant satisfies the terms and conditions of the Exemption Notification. It is well settled that Exemption Notification have to be read in the strict sense. In this case the appellant had led evidence of an expert, twice. It appears that the Operational Manual was not placed before him. No questions were asked to the expert on the terminology used in the Manual which described the imported items as "Heat Pump Type Air Conditioner". Therefore, on the facts and circumstances of the case, we do not see any reason to interfere with the concurrent findings recorded by the authorities below.:SUPREME COURT;

2009-TIOL-181-CESTAT-DEL.pdf

CC, Amritsar Vs Shri Sukhdev Singh (Dated: October 17, 2008)

Customs - heroin, arms and ammunition including RDX and fake currency recovered from the car and the occupant of the car made a detailed statement under Section 108 of the Customs Act whereby he narrated his role in obtaining the articles recovered from the van from the Pakistan - Commissioner's order dropping the proceedings against the respondent is not sustainable and is set aside.:DELHI CESTAT;