Penalty under Income Tax Act: CBDT needs to make it fair and transparent!

CBEC reshuffles charge, including Zonal responsibilities, of Members (See 'Indirect Tax Basket')

Four more tax havens commit to OECD tax standards;

Govt notifies rules for Limited Liability Partnership (See 'Common Basket');

India to launch spy satellite on April 20 to keep an eye to curb infiltration and on terrorists;

Under UN Scheme, Facebook users can lend refugees a hand: UN;

Noted fiscal strategist Raja J Chelliah is no more; dies at 83 after brief illness;

India for three-fold hike in IMF equity;

TIOL COMMENTARY

ddt 8 Apr.pdf + file_6_9A.pdf

Demand against Oil PSUs under Sec.11D of Central Excise Act for differential duty – CBEC Directions;

spl down.pdf

Penalty under Income Tax Act: CBDT needs to make it fair and transparent!

llp_rules.pdf

Limited Liability Partnership Rules, 2009;

MIXED BUZZZ

mbuzz0369.pdf

USA, Switzerland talks to begin this month to review DTAA;

mbuzz0368.pdf

Four more tax havens commit to OECD tax standards;

mbuzz0367.pdf

Under UN Scheme, Facebook users can lend refugees a hand: UN;

2009-TIOL-169-HC-DEL-IT.pdf

Yum Restaurants (Marketing) Private Limited Vs CIT (Dated: April 1, 2009 )

Income tax - assessee is the creation of a tripartite agreement between three companies and their franchisees, engaged into resturant business - purpose of setting up the assessee-company was to undertake advertising, marketing and promotion (APM) activities - all companies except the assessee's parent company and franchisees were to contribute certain percentage of their monthly revenue for promotional activities - assessee makes provision for advertising - AO disallows it on the ground that the provision of fund was made for a sales incentive scheme made known to franchisees only in April, and no deduction can be allowed for an uncrystallised liability - CIT(A) and Tribunal sustain the disallowance - held, since the provision was made for future liability, the same cannot be allowed as deduction - Assessee's appeal disallowed

Sec 37 - Parent company of the assessee contributes to the corpus of the assessee-company without any obligation - AO disallows - CIT(A) and Tribunal agree with the AO - held, any expenditure to be allowed u/s 37 the twin conditions to be fulfilled are that the expenditure should not be of a capital nature, and that, it should have been expended wholly for the purposes of business. The expression 'for the purposes of business' in Section 37 of the Act has been held to mean an expenditure which is voluntary in nature and commercially expedient. In the present case the Tribunal has returned a finding of fact that the assessee-company has not been able to prove that the contributions to the subsidiary were made in the course of business or on account of commercial expediency. Thus the surplus sum cannot be allowed as deduction - Assessee's appeal dismissed :DELHI HIGH COURT;

2009-TIOL-168-HC-DEL-IT.pdf

Yum Restaurants (Marketing) Private Limited Vs CIT (Dated: April 1, 2009 )

Income tax - principle of mutuality - assessee is the creation of a tripartite agreement between three companies and their franchisees, engaged into resturant business - purpose of setting up the assessee-company was to undertake advertising, marketing and promotion (APM) activities - all companies except the assessee's parent company and franchisees were to contribute certain percentage of their monthly revenue for promotional activities - assessee returns surplus of income over expenditure - AO dismisses the principle of mutuality pleaded by the assessee and brings the sum to tax - CIT(A) finds that there was commercial purpose behind setting up the assessee company which did not work in a mutual benefit framework - Tribunal dismisses assessee's appeal - held, given the fact that the assessee also received contributions from Pepsi Food Ltd and the parent company of the assessee contributed to it without any obligation to do so, the principle of mutuality cannot be said to be applicable in this case where the assessee's activities are tinged with commercial purpose - Tribunal's order does not call for interference - Assessee's appeal dismissed:DELHI HIGH COURT;

2009-TIOL-167-HC-DEL-IT.pdf

CIT, New Delhi Vs M/s K J Business Centre (Dated: April 2, 2009 )

Income tax - Commission - Assessee receives commission for letting out property - shares the same with other business entities involved in the deal - AO takes the view that the assessee alone was entitled to the entire receipt and created benami entities and distributed the commission income to reduce its tax liability - makes additions - CIT(A) and Tribunal disagree with the AO and delete additions - held, since the Tribunal is the highest fact-finding body and no perversity is found in the order, Tribunal's decision is upheld

Assessee spreads the commission income over the lease period - Revenue disallows - Tribunal allows the assessee's appeal - held, since the Revenue has allowed the same in case of other business entities, the rule of consistency demands that it is uniformly applied and the Tribunal's decision does not call for intereference. However, there are judicial decisions which make such payment receipts taxable in the accounting year rather than allowing spread over of the same. Besides what indicates the falsity of the assessee's claim that the commission was partly refundable if the lease tenure is cut short or terminated and such a condition was not in the form of written document but an oral understanding - Revenue's appeal dismissed:DELHI HIGH COURT;

2009-TIOL-214-ITAT-PUNE.pdf + skoda story.pdf

Skoda Auto India Pvt Ltd Vs ACIT, Aurangabad (Dated : March 12, 2009)

Income tax - ALP as per TNMM (Transactional Net Margin Method) - a higher import content of raw material by itself does not warrant an adjustment in operating margins – but what is to be really seen is whether this high import content was necessitated by the extraordinary circumstances beyond assessee's control. The adjustments then are required to be made for functional differences. The other way of looking at the present situation is to accept that business models of the assessee company and the comparable companies are the same and it is on account of initial stages of business that the unusually high costs are incurred. The adjustments are thus required either way. It is, therefore, permissible in principle to make adjustments in the costs and profits in fit cases.

Onus is not on the assessee: Assessee cannot be expected to get the details and particulars which are not in public domain: onus is not on the assessee to get all such details of the comparable concerns so as to make this comparison possible. The assessee cannot be expected to get the details and particulars which are not in public domain. In such a situation, i.e. when information available in public domain is not sufficient to make these comparisons possible, it is inevitable that some approximations are to be made and reasonable assumptions are to be made.

Comparable Uncontrolled Price : What is referred to as CUP (Comparable Uncontrolled Price) is price of a comparable but controlled transaction, since to be termed as an uncontrolled transaction, the transaction has to be between two entities which cannot influence or control each other's decision. The transactions between AEs obviously do not satisfy such a criterion. There is thus no Internal CUP, as claimed by the assessee before the authorities below and as stated in the information filed along with the income tax return. The assessee also accepts that there are no external comparables available.:PUNE ITAT;

2009-TIOL-213-ITAT-BANG.pdf

JCIT, Bangalore  Vs M/s Maini Precision Products Ltd (Dated : September 26, 2008)

Income tax – Assessee entitled to deduct expenses which have a direct nexus with the receipts of machining charges – AO to deduct 90% of the net machining charges from the profits of the business by applying Explanation (baa) to s. 80HHC:BANGALORE ITAT;

CBEC OFFICE ORDER

cbecorder063_2009.pdf

Charge reshuffle among CBEC Member;

SERVICE TAX SECTION

2009-TIOL-566-CESTAT-DEL.pdf + st story.pdf

Nyco S A Vs CST, Delhi (Dated: February 23, 2009)

Service Tax - sharing of knowledge shall not be called as consulting engineering service: sharing of knowledge shall not be called as consulting engineering service when expertise acquired by a concern is also used for its own benefit along with others.:DELHI CESTAT;

2009-TIOL-565-CESTAT-DEL.pdf

M/s Caiit Jee (Cat Jee) Vs CCE, Allahabad (Dated: March 3, 2009)

ST - Commercial coaching and training service - Demand raised related to period from 1.4.03 to 31.3.04 - Since the show cause notice has been issued beyond a period of one year, demand is time-barred - Assessee's appeal allowed:DELHI CESTAT;

2009-TIOL-564-CESTAT-AHM.pdf

M/s Akar Info-Media Pvt Ltd Vs CST, Ahmedabad (Dated: March 16, 2009)

Service tax - refund - unjust enrichment - the certificate of Chartered Accountant is not based on fats and from the documents, the only conclusion that emerges is that in respect of domestic clients, appellants had collected the service tax - rejection of refund upheld.

CENVAT Credit - denial of credit on the ground that the same was taken belatedly - time taken by the appellants to take the credit does not appear unreasonable - credit admissible.:AHMEDABAD CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-563-CESTAT-MUM.pdf + penalty story.pdf

Batra International Vs CCE, Thane-II (Dated: February 19, 2009)

Penalty under rule 26 of the CER, 2002 cannot be imposed against persons who have not dealt with goods – Majority decision of Tribunal.:MUMBAI CESTAT;

2009-TIOL-562-CESTAT-MAD.pdf

CCS Infotech Ltd Vs CCE, Pondicherry (Dated: February 19, 2009)

Central Excise – CENVAT Credit – reversal of credit when the finished goods become exempt – no requirement of reversal of credit in view of the Larger Bench decision in case of M/s H.M.T. :CHENNAI CESTAT;

2009-TIOL-561-CESTAT-MUM.pdf

M/s Cadbury India Ltd Vs CCE, Mumbai II (Dated: March 4, 2009)

Revenue alleges that the goods are Waffles/wafers coated with chocolate classifiable under heading 1905.31 but assessee submits that the goods are biscuits classifiable under CSH 1905.11 – Distinction between biscuits and waffles/wafers is as thin as wafer itself – appellants have not established a fool proof case – Pre-deposit ordered.

Appellant submits that the commodity is manufactured by coating chocolate over dull white coloured pieces of identical shape procured from suppliers who classified the material under CSH 1905.11 as biscuits and mere coating with chocolate goods do not cease the products to be known as biscuits – Appellants have not established a fool proof case against duty and penalty – financial hardship not pleaded – Pre-deposit ordered of 50% of duty.:MUMBAI CESTAT;

CUSTOMS SECTION

2009-TIOL-560-CESTAT-DEL.pdf

CCE, Indore Vs M/s Midland Plastics Ltd (Dated: November 18, 2008)

Customs - refund of duty debited in DEPB - the Commissioner (Appeals) correctly came to the conclusion that the refund claim is not hit by the bar of unjust enrichment -  however, he erred in allowing cash refund - if the DEPB had expired long back and re-credit is not of any use, the matter has to be sorted out with DGFT authorities as per law.: DELHI CESTAT;