Enactment of Budget 2009: Finance Bill yet to reach President's Secretariat;

Two more succumb to Swine Flu; Death toll goes up to six in India;

FM to inaugurate CBDT CCITs / DGITs annual meet tomorrow;

Securities Transaction Tax mop-up recovers; grows by 3.55% in four months;

FTP restrictions on State Trading Enterprises shall not apply to SEZ manufacturing Units SEZ Rules, 2006 amended to incorporate these provisions and much more;

Service tax on manufacture - The issue of constitutional validity;

Excise - It is not open to a Tribunal under guise of moulding relief to pass order in respect of a demand which was never made: Bombay HC

GST is inevitable - Consensus is way forward on a range of issues: CBEC Chairman;

I-T AO disallows interest on excess levy of sugar price and on sugarcane rate difference which was later on allowed CIT (A) Held, it has already been decided in assessee's favour in own case and there is no flaw in CIT(A) order - Revenue's appeal rejected;

Swine Flu: More than 30% Indians likely to be infected in 2 years: Health Minister;

TIOL COMMENTARY

ddt 10 aug.pdf

Brain Storming Seminar in Hyderabad and Vizag;

top guest.pdf

GST is inevitable - Consensus is way forward on a range of issues: CBEC Chairman;

guest column.pdf

Service tax on manufacture - The issue of constitutional validity;

MIXED BUZZ

mbuzz0741.pdf

Securities Transaction Tax mop-up recovers; grows by 3.55% in four months;

mbuzz0740.pdf

Swine Flu - what is it? Is it contagious?;

mbuzz0739.pdf

Two more succumb to Swine Flu; Death toll goes up to six in India;

2009-TIOL-506-ITAT-MUM.pdf + shah story.pdf

Shri Chandrakant H Shah, Mulund Vs ITO, Mumbai (Dated: January 12, 2009)

Income tax – Section 56(2)(v) – Assessee had taken loans from a builder and its three sister concerns and utilised it for purchase of flat from the same builder. The said loans were reflected by the assessee in his balance sheet as loan – AO treated these loan amounts of Rs. 54,70,000/- as gifts received and were given a colour of loan and considered it the income of the assessee u/s 56(2)(v) of the Act after giving a rebate of Rs. 25,000/-, as per the findings that the repayment capacity of the assessee was very poor, loan was given without security, without any interest and without any repayment schedule and it was given as a mark of gratitude to the assessee having regard to the association of the assessee with the lender group. Hence, the entire transaction was of the nature of gift and not a loan. Further an addition was made for Rs. 6,56,400/- treating it as perquisite for interest free loan given to the assessee @ 12% of the loan amount.

CIT (A) disallowed the claim of the assessee in appeal stating that in absence of any interest and repayment terms and not having the capacity to repay the loan, loan transactions are abnormal in nature and without consideration. The fact that the assessee repaid loan to the extent of Rs. 15,00,000/- was also not brought to the notice of the AO which resulted into avoidance of further enquiry. Further regarding the claim of the assessee that out of the total loan amount Rs. 27,70,000/- was received prior to insertion of section 56(2)(v) i.e. prior to 1st Sep 2004 and therefore should not be considered as income u/s 56(2)(v), it was held that no such question was raised before the AO. Therefore, in view of above, the appeal of the assessee was rejected.

Regarding addition for perquisite for interest free loan, the addition was deleted as the entire loan was treated as income and there was no question of further addition for interest on such income.

On further appeal, held–

++  that at no stage of assessment proceedings, assessee was made aware of the intention of the AO to make the addition and in absence of the same, the assessee could not raise the fact that the out of the total loan amount Rs. 27,70,000/- was received prior to 1st September 2004 i.e. prior to the insertion of section 56(2)(v). Therefore, CIT (A) was not justified in not deleting the addition to this extent.

++ that the amount was shown by the assessee in its balance sheet as loan and this was also confirmed by the lenders by filing the loan confirmation statements. Therefore, it is purely loan and not a gift covered u/s 56(2)(v).

++ that before passing the assessment order, the assessee repaid loan taken from one of the concerns and it refutes the assumption of the AO that there was no obligation of the assessee to repay the loan amount.


++ that the said section was brought on statue to avoid the money laundering after the abolition of Gift Tax Act, 1958 in 1997 and the exemptions given in the section 56(2)(c) of the Act also leads to a conclusion that only bogus gifts are brought to tax under this provision and not the loan transactions.


++ that the charging of notional interest added as perquisite in the hands of the assessee is not correct as there was no employer and employee relationship and the contention of deemed dividend raised by the revenue is also not applicable as the assessee was not holding the required shareholding in the lender companies as is stipulated in section 2(22)(e) of the Act.: MUMBAI ITAT;

2009-TIOL-505-ITAT-MUM.pdf

DCIT, Mumbai Vs M/s Bajaj Hindusthan Ltd (Dated: April 20, 2009)

Income tax – AO disallows interest on excess levy of sugar price and on sugarcane rate difference which was later on allowed by the CIT (A) – Held that it has already been decided in assessee's favour in the assessee's own case and there is no flaw in the CIT(A) order allowing the assessee's claim - Revenue's appeal rejected.

Community Development expenses – AO disallows the expenses incurred by the assessee as non-business expenditure – CIT(A) restricts deduction to the extent of 50% - Held that the assessee is entitled to deduction of 100% following the decision of Kolkata Bench ITAT in the case of JCIT Vs. ITC Ltd. ( 2008-TIOL-128-ITAT-KOL-SB ) .

Section 40(a)(iia) – Payment of wealth tax – Held that disallowance of claim of wealth tax payment is covered against the assessee in assessee's own case and therefore, cross objection raised by the assessee is dismissed.: MUMBAI ITAT;

2009-TIOL-504-ITAT-MUM.pdf

JCIT, Mumbai Vs Bombay Dyeing MFG Co Ltd (Dated: April 16, 2009)

Income Tax Act - Section 36(1)(iii) - By issuing Secured Premium Notes (SPNs) assessee raised funds and claimed deduction under section 36(1)(iii) - AO disallowed deduction alleging that it was capital in nature – Held, following ITAT order in assessee's own case for earlier assessment year that deduction claimed u/s 36(1)(iii) is allowable

Income Tax Act - Section 14A r.w sections 147 – Order u/s 143(3) was passed by AO on 23-1-2001 – Thereafter notice u/s 148 was issued on 21-4-2004 for reopening concluded assessment to disallow expenses claimed by assessee on account of exempted income – Held, that the proviso to section 14A inserted by Finance Act, 2002 with effect from 11-5-2001 does not confer any jurisdiction on AO to make reassessment under section 147 for any assessment year beginning on or before 1-4-2001 i.e AY 1998-99 in present case.: MUMBAI ITAT;

2009-TIOL-503-ITAT-DEL.pdf

Mitsubishi Corpn Vs ADIT, New Delhi (Dated: June 23, 2009)

Income tax - India-Japan DTAA - Interest u/s 234B - Assessee is a Japan-based non-resident company - carries out its activities through its LO - claims no income is taxable in India - Survey u/s 133A - based on documents found, Revenue attributes part of assessee's income to Indian operations and holds the same as taxable as per Articles of DTAA and also provisions of the Income Tax Act - tax determined accepted by the assessee but interest u/s 234B questioned - CIT(A) agrees with the AO - held, since there is no evidence that even after taking into reckoning the TDS, the assessee had liability to pay advance tax, the interest u/s 234B is not sustainable - Assessee's appeal allowed.: DELHI ITAT;

SEZ Notification.pdf

SEZ Notification - Dated: July 28, 2009;

SERVICE TAX SECTION

2009-TIOL-1231-CESTAT-AHM.pdf

M/s Mandev Tubes Vs CCE, Vapi (Dated: May 20, 2009)

ST - GTA Service - Assessee is a manufacturer of copper tubes - avails GTA services - Revenue raises demand - Original Adjudicathing Authority finds the tax was paid by the transporters - held, since it is established that the tax was paid by the transporters, the Revenue need not mechanically raise demand, insiting on payment to be made by the assessee - Assessee's appeal allowed.: AHMEDABAD CESTAT;

2009-TIOL-1230-CESTAT-DEL.pdf

CCE, Kanpur Vs M/s Kanpur Development Authority (Dated: April 15, 2009)

ST - Sec 80 - Assessee is a State Govt organisation - penalty imposed under Sections 76 & 77 - Commissioner (A) does not find any corroborative evidence indicating intention to evade tax and sets aside penalty - held, since the assessee has explained reasonable cause for failure to pay tax and the same was paid once pointed out, the condition precedent for invoking Sec 80 is fulfilled - Revenue's appeal dismissed.: DELHI CESTAT;

2009-TIOL-1229-CESTAT-DEL.pdf

IFB Industries Ltd Vs CCE, Chandigarh (Dated: June 9, 2009)

ST - Cenvat credit - assessee is engaged in sale of home appliances - also provides after-sale maintenance and repair service during warrantly period - there is scope of use of inputs for providing such services - assessee pleads even if some inputs are used for providing tax-free warranty services, the cenvat credit is available to it - held, since there is no speaking order in the case, it is not clear what is the value of taxable services and also non-taxable services - waiver from pre-deposit granted.: DELHI CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-396-HC-MUM-CX.pdf + bhor story.pdf

M/s Bhor Industries Ltd Vs UoI (Dated: July 23, 2009)

Central Excise - It is not open to a Tribunal under the guise of moulding relief to pass order in respect of a demand which was never made: BOMBAY HIGH COURT;

2009-TIOL-1226-CESTAT-MUM.pdf

Saurabh Suryakant Mehta Vs CCE, Raigad (Dated: June 17, 2009)

Appeal dismissed by Commissioner(A) for non compliance with pre-deposit order – Any order passed on an application for stay/waiver of pre-deposit has to be a speaking order and reasons for directing such pre-deposit should be stated – Order set aside and consequently final order dismissing the appeal is also set aside – matter remanded – Apex Court decision in Ravi Gupta vs. CST, Delhi [ 2009-TIOL-47-SC-CT ] relied upon.: MUMBAI CESTAT;

2009-TIOL-1225-CESTAT-BANG.pdf

M/s Petron Engineering & Construction Limited Vs CCE & CC, Visakhapatnam (Dated: March 12, 2009)

Central Excise – Supply, fabrication and erection of primary reformer package at site – Parts fabricated piece by piece at site and fitted to reformer package does not amount to manufacture – Demand of duty not sustainable, penalties set aside – Impugned order set aside.: BANGALORE CESTAT;

2009-TIOL-1224-CESTAT-BANG.pdf

Andhra Pradesh Paper Mills Ltd, AP Vs CCE, Visakhapatnam (Dated: February 18, 2009)

Central Excise – Valuation of goods cleared from factory as stock transfer and subsequent clearance in ream form from depot – Appellant has not made out a strong case for complete waiver of pre-deposit – Pre-deposit of Rs. 5 lakhs ordered and stay granted.: BANGALORE CESTAT;

CUSTOMS SECTION

CIRCULAR

draft_circular.pdf

CBEC seeks suggestions on CHALR;

CASELAW

2009-TIOL-1228-CESTAT-MUM.pdf + patel story.pdf

Patel Engineering Ltd Vs CC (Import), Mumbai (Dated: June 3, 2009)

Section 129E of Customs Act, 1962 - Pre-deposit of duty and penalty - merely because the goods are already seized, that would not ipso facto lead to the conclusion that the balance of convenience would lie in favour of the appellant even in relation to penalty amount – CESTAT

Tribunal observations -

Section 129E of the Customs Act, undoubtedly, provides that wherein any appeal filed under Chapter XIV of the Customs Act, the decision or order appealed relates to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer duty and interest demanded or the penalty levied. Obviously, therefore, when the goods in question are seized by the customs department, the question of the appellant depositing the duty amount and interest accrued thereon does not arise for the purpose of filing the appeal.

As regards the penalty amounts, such an exemption has not been granted under Section 129E of the Act. The criteria to he adopted for deciding the issue relating to the pre-deposit of the penalty amount is totally different from the one in relation to the demand of duty and interest pertaining to such goods. Being so, merely because the goods are already seized, that would not ipso facto lead to the conclusion that the balance of convenience would lie in favour of the appellant even in relation to the penalty amount is concerned.

The Statute makes a clear differentiation between the penalty amount and the amount relating to duty and interest payable thereon on the goods seized. The very fact that the goods are under seizure with the department cannot be construed to be a ground for the appellant to claim exemption from deposit of the penalty unless a clear case in that regard is made out by the appellant.

When the statute specifically requires the party to deposit such penalty amount even in cases where the goods in question are seized by the department while excluding the requirement of pre-deposit of the duty and interest amount, the mere submission that it would cause great hardship to the party would not be a justification to grant waiver of pre-deposit in relation to the penalty amount.

Perusal of the application for stay nowhere discloses any fact which could reveal any financial hardship which could be caused to the applicants if the penalty amount is ordered to be deposited under Section 129E of the said Act. Whether it would cause financial hardship or not is not a mere question of law. It is essentially a question of fact which should be established from the facts pleaded established on the basis of materials on record placed along with the application for stay. In the absence of any material on record in the case in hand, in our opinion, no case has been made out for the grant of waiver of penalty.

Applications for waiver of penalty filed by the appellant importer and the Managing Director rejected and they are directed to deposit the penalty amounts within a period of four weeks. However, as regards the applications for waiver of penalties filed by the Director, the Addl. General Manager and Dy. Director, prima facie, there is no material on record to warrant pre-deposit of the penalty amount imposed against them in the absence of specific consideration of their involvement and/or liability while passing the impugned order by the authority.

Apex Court decision Union of India vs. Rajasthan Spinning & Weaving Mills ( 2009-TIOL-63-SC-CX ) relied upon.

Tribunal decision in Mahavir Roads & infrastructure Pvt. Ltd. 2009-TIOL-558-CESTAT-MUM referred.

Apex Court decision in Bhavya Apparels Pvt. Ltd. ( 2007-TIOL-162-SC-CUS ) distinguished.: MUMBAI CESTAT;

2009-TIOL-1227-CESTAT-KOL.pdf

Jugal Kishore Sadani Vs CC (PREV), WB (Dated: March 20, 2009)

Customs – Allegation of smuggling of watches and watch components – No clear evidence to suggest smuggling of watches and watch components – Sale of goods and identity of buyers/sellers not established – Confiscation of goods and currency in the absence of proper evidence not sustainable – Impugned order set aside.: KOLKATA CESTAT;