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Budget should facilitate fiscal prudence-led growth (See 'TIOL TOP') Mind your witness (See 'DDT') Exports continues to be down; logs 33% lower growth in April ; 12 mn telephone lines added in April, 2009; Withdrawal of train stoppage leads to torching of train; Meira Kumar nominated for post of Lok Sabha Speaker as UPA candidate; Consensus emerges to choose Meira Kumar as first woman Speaker of Lok Sabha; Air Chief Marshal P V Naik takes over as Air Force Chief; Swine flu death toll reaches 100; infections spreading to more countries; CBDT gives addl charge of Chennai DGIT (Inv) to Smt P M Vasan, CCIT-II; |
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| Dear Member, Sending the following files: |
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TIOL COMMENTARY Procurement of used capital goods from DTA by SEZ Units - Income Tax benefits - Shifting of existing businesses from DTA to SEZs; Budget should facilitate fiscal prudence-led growth; DTAAs - The battle over phrase 'make available' MIXED BUZZ Exports continues to be down; logs 33% lower growth in April ; 12 mn telephone lines added in April, 2009; Withdrawal of train stoppage leads to torching of train; Greenhouse gas: Share of transport sectors in DCs rapidly growing; Swine flu death toll reaches 100; infections spreading to more countries; |
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2009-TIOL-12-ARA-IT .pdf + ara story.pdf M/s K T Corporation (Dated: May 29, 2009) Income tax - Indo-Korean DTAA - Applicant sets up a Liaison Office (LO) as per RBI permission in India - undertakes supporting and auxiliary work for the head office - enters into agreement with Indian telecommunication company - also enters into another agreement with a Korea-based telecommunication company for providing certain services to each other - as per agreement the applicant is to bear investment cost for connecting facilities between its network and the other party's foreign POP on locations that are to be mutually determined - seeks advance ruling on whether LO is a PE? Ruling: As per the tax treaty what the LO is allowed to do is to only undertake supporting, aiding or auxiliary activities to the main functionality of its head office. And since the RBI has granted extension to its LO status on the basis of activities undertaken by it and such activiteis are only axuliary in nature it cannot be regarded as a PE. LO can also not be treated as a Permanent Establishment as per the exclusionary provision of Article 5(4) of the DTAA. However, the Authority also holds that if the activities of the liaison office are enlarged beyond the parameters fixed by RBI or if the Department lays its hands on any concrete materials which substantially impact on the veracity of the applicant's version of facts, it is open to the department to take appropriate steps under law.:ADVANCE RULING AUTHORITY; Lalitaben Hariprasad Vs CIT (Dated: March 18, 2009) Income Tax - Ss 48 & 49 - Assessees, in their returns while computing capital gains on sale of share of immovable property claims deduction of sum paid to their sons for an acquisition of their one fourth share in the HUF immovable property being the cost of acquisition of the house property - AO disallows the claim of the assessee and holds that the property being of HUF, the only cost of acquisition which could be allowed is under the provisions of section 49 viz. the cost of acquisition in hands of the original owner from whom the property had been received on partition - CIT(A) allows assessee's appeal but Tribunal reverses it - Held, the cost of acquisition in hands of the previous owner, viz. HUF, as proportionately available in hands of each of the assessees, would be governed by provisions of section 49(1)(i); whereas the amount paid by each of the assessees to the other two members of the HUF would be termed to be the cost of acquisition to the assessees u/s 48, being cost of acquisition of the additional interest or additional share acquired by them at the time of partition - Assessee's Appeal allowed :GUJARAT HIGH COURT; 2009-TIOL-323-ITAT-BANG.pdf + korean story.pdf DCIT, Bangalore Vs M/s Jebon Corporation India Liaison Office (Dated: April 30, 2009) Income Tax – DTAA – Korean Company's Liaison Office in India engaged in trading activities – Covered Under PE – Liable to tax in India there is a business connection in respect of source of income in India of the non-resident assessee and therefore, the income from such activity is to be deemed to accrue or arise in India and will therefore is taxable in India. The business profit of the South Korean Company can be taxed in India in case the South Korean Company is having a permanent establishment. Can the LO be treated as a permanent establishment?. As per Article 5, permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. Looking to flow chart of the LO, it is clear that the business of the South Korean Company is partly carried on by the LO. As per Article 5(2), it is mentioned that the permanent establishment shall include especially an office. The office is not defined either under the Income Tax Act or under the DTAA. LO is an office and cannot be excluded from the word 'office' as contained in Article 5(2). Hence, as per Article 5(2), LO becomes a permanent establishment. In the instant case, the LO is having a freedom to fix the sale price and to conclude the contract provided the sale prices are within the band of profit margin communicated by the HO. Such an activity cannot be termed as a preparatory or auxiliary character. Hence, it cannot be said that the LO is solely for the purpose of supply of information or doing a preparatory or auxiliary character in the trade or business. Thus, the LO can participate in promotion of import to India and in the instant case, the LO is engaged in such activities by procuring purchase orders after negotiation of the deal. Hence, held that the AO was justified in holding that LO is a permanent establishment and therefore, income attributable to LO will be taxable as per Article 7 of the DTAA. In the instant case, the LO was having decision making authority on behalf of the HO, They were also empowered to conclude the contract and to secure purchase orders. Hence considering the activities carried on by the LO as found by the department in course of survey, it is clear that LO is to be treated as permanent establishment and will not be excluded from the definition of permanent establishment as per Article 5(4)(e) of DTAA. :BANGALORE ITAT; Maersk India Pvt Ltd Vs DCIT, Mumbai (Dated: January 23, 2009) Income Tax - Assessee, shipping agent of a non resident company, filed IT return - AO disallowed club expenses and provision for demands raised on account of short deduction tax at source from the salary payments to the employees - CIT(A) partly allowed assessee's appeal w.r.t club expenses - Held, even entrance fee paid to a club is to be allowed as expenditure for the reason that it is incurred for the promotion of business and to facilitate the business interest of the assessee - Held, w.r.t demands raised on account of short deduction of tax at source, expenses in question had not crystallized for the reason that the assessee himself has chosen to create a provision and also has contested in appeal, the very basis of levy - Assessee's appeal partly allowed.:MUMBAI ITAT; ACIT, Mumbai Vs M/s Raymond Ltd (Dated: February 25, 2009) Income Tax - Assessee Company claimed trial run expenditure incurred in connection with cold rolled grain oriented steel project as revenue expenditure - AO held it as capital expenditure and added back the adjustment of prior period expenditure for computing the book profit u/s.115JA — CIT(A) upheld AO's order - Held, in assessee's own case, the tribunal has already allowed the pre-operative expenses as revenue expenditure and trial run expenses are also of the nature of pre-operative expenses - Held, the revenue authorities could not tinker with the profit computed under the Companies Act and only prescribed adjustments as provided in the Explanation to section 115JA(2) could be made and there is no provisions for the making any addition on account of prior period expenses which are ascertained liabilities - Assessee's appeal partly allowed.:MUMBAI ITAT; M/s Rockwell Automation India Pvt Ltd Vs ADDL CIT, New Delhi (Dated: February 27, 2009) Income Tax—Assessee claimed deduction u/s 80HHC and 80HHE on account of training school receipts, licence fees and write back of provisions—AO held that the said deductions are neither part of turnover nor they are derived from the export business of the assessee—CIT(A) upheld AO's order—Held, training receipts, no doubt, are business receipts but independent to the main supply and therefore rightly excluded under the provision of the Explanation (baa) to section 80HHC—Held, w.r.t. amortization of expenditure incurred on account of leasehold improvement, revenue expenditure whose benefit extends over some years which is claimed by the assessee can only be spread over that period—Assessee's appeal dismissed.:DELHI ITAT; |
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SERVICE TAX SECTION M/s Bombay Dyeing & MFG CO Vs CST, Mumbai (Dated: March 5, 2009) Appellant executing an agreement for lease of equipment with JBF Industries Ltd and collecting Rs.3.5 crores in 26 equal installments from lessee towards ‘lease rentals' – Service Tax demand made treating the company as a service provider under category of ‘Banking and Other Financial Services' – the company should be found to have been discharging the function of a financial institution – Tribunal decision in Madras Vanaspati [ 2008-TIOL-659-CESTAT-Mad ] , Pepsico India Holdings ( 2006-TIOl-1900-CESTAT-Mad ) and National Oxygen [ 2007-TIOL-822-CESTAT-Mad ] relied upon - Pre-deposit waived and stay ordered.:MUMBAI CESTAT; ISMT Ltd Vs CCE, Aurangabad (Dated: March 13, 2009) Cenvat Credit taken on Security Services – Prima facie case in favour claimed in view of Stay orders of Tribunal in Kirloskar Oil Engines Ltd. [ 2008-TIOL-1581-CESTAT-Mum ] and Ultra Tech Cement Ltd. [ 2008-TIOL-1590-CESTAT-Mum ] – Precedence - Waiver of pre-deposit and stay granted.:MUMBAI CESTAT;
CCE, Salem Vs M/s Singaravelar Spinning Mills (P) Ltd (Dated: April 28, 2009) Central Excise - Modvat Credit on capital goods - revenue seeks denial of credit on the ground that the capital goods were used for producing Sliver/combed cotton falling under Chapter Heading 52.02 of the schedule to the Central Excise Tariff Act, 1985 which are excluded from the final products - "Sliver" has no independent existence and has a transient character and therefore are incomplete excisable goods and cannot be qualified as final products to deny MODVAT credit invoking Rule 57Q - question of law answered against the revenue.:MADRAS HIGH COURT; CCE, Ludhiana Vs M/s Oswal Woolen Mills (Dated: April 29, 2009) Central Excise - Appeal to High Court - appeal arising out of the valuation of the goods lies with Supreme Court - Section 35(G) of the Central Excise Act, 1944 - appeal before High Court not maintainable.:PUNJAB AND HARYANA HIGH COURT; 2009-TIOL-841-CESTAT-AHM.pdf + pla story.pdf M/s Ajanta Manufacturing Ltd Vs CCE & CUS, Rajkot (Dated: April 24, 2009) Central Excise – Excess duty paid in PLA by CFL manufacturer eligible for refund in terms of Notification 39/2001-CE and cannot be restricted to duty leviable in terms of exemption notification 6/2006-CE – No specific provision in s. 5A to prohibit a manufacturer from paying full rate of duty when there is only partial unconditional exemption for specified products – Though there is no estoppel in statutory matters, when assessee advised to classify CFL under Chapter 8539 39 10 instead of 8539 31 10 for which notification 6/2006-CE not applicable, excess duty paid cannot be denied as refund:AHMEDABAD CESTAT; CCE, Nashik Vs Mahindra Sona Ltd (Dated: March 13, 2009) Canteen services provided by Outdoor Caterers – cost of subsidized food stood included in cost of production of excisable goods, whether or not the cost of food was borne by the workers or the factory – Factory has more than 250 workers and it is mandatory in terms of section 46 of the Factories Act, 1948 to provide canteen to workers – Cenvat Credit available – LB decision in GTC Industries [ 2008-TIOL-1634-CESTAT-Mum-LB ] followed.:MUMBAI CESTAT; Asian Paints Ltd Vs CCE, Mumbai (Dated: April 6, 2009) Intermediate product supplied to sister unit – provisional value determined in terms of rule 6(b)(ii) viz. cost of production – upon finalization, excess duty is required to be adjusted against short payment, if any – no cause for demand for alleged short payment – Tribunal decision in Goetze (India) [ 2008-TIOL-1897-CESTAT-Bang ] relied upon – Appeal allowed.:MUMBAI CESTAT; 2009-TIOL-836-CESTAT-MUM.pdf + IVP story.pdf CCE, Aurangabad Vs IVP Ltd (Dated: March 26, 2009) When demand of duty for the extended period is not sustainable, there is no warrant for application of section 11AB or 11AC of the Central Excise Act, 1944 – Tribunal:MUMBAI CESTAT;
CUSTOMS SECTION NOTIFICATION India extends concessional tariff rate to imports from FOUR South American countries; CBEC revises tariff value of brass scraps and poppy seeds; CASE LAWS 2009-TIOL-288-HC-DEL-NDPS.pdf + ndps story.pdf Rajesh Sharma Vs UoI (Dated: April 28, 2009) NDPS Act – Legality of Detention orders issued on allegation of illegal trading of diazepam, lorazepam, alprazolam, clonazepam and phenobarbitone, listed in Schedule H of Drugs & Cosmetic Rules, 1945 and Schedule to NDPS Act questionable – Mere inclusion of substances in the Schedule to NDPS Act by itself not sufficient to conclude that import and export of such substances is prohibited – Prohibition contained in Rule 53 would apply to Rule 58, however it extends to psychotropic substances mentioned in Schedule-I to NDPS Rules and not for all psychotropic substances mentioned in schedule to NDPS Act – It is clear that export of psychotropic substances in question, not being part of Schedule-I to NDPS Rules, would per se not amount to an activity prohibited under the NDPS Act read with NDPS Rules Preventive detention is not punitive detention – Any preventive detention has to be viewed with great circumspection as the liberty of an individual cannot be taken away even before he is found guilty of having committed an offence by a court of law – Deprivation of liberty by way of preventive detention has only been permitted when the executive has made out a clear and undisputable case for it within the parameters prescribed by the Constitution – Personal liberty being a hallowed right of every person, cannot be taken away when the very act which is sought to be prevented cannot definitely be classified as an illegal or prohibited act falling within the expression 'illicit traffic in psychotropic substances' Held: Impugned detention orders are not maintainable and liable to be set aside:DELHI HIGH COURT; M/s M J Biopharm Pvt Ltd Vs CCE, Belapur (Dated: March 4, 2009) Raw materials imported under exemption in terms of notification 21/2002-Cus for manufacture of Insulin injections – Samples drawn for testing– Demand of Customs duty raised on samples – Testing is a part of Quality control and a necessity before using the rest of the consignment – Stay granted in earlier case - Precedent – Waiver of pre-deposit and stay ordered.:MUMBAI CESTAT; |
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