Cabinet gives nod for disinvestment of shares in Andrew Yule + DDA to develop Commonwealth Games Village; Rs 828 Cr fund given + extends CGHS facility to all PIB Accredited Journalists;

Amendment in Customs Act in Budget 2009: CBEC makes major changes in guidelines for compounding of offences; Exclusion list lengthened;

CBDT issues transfer order of Nine CITs;

CBDT notifies India-Luxembourg DTAA; Tax Treaty comes into force from July 9, 2009;

Complicated Selection procedure for Members of CBDT - BOARD out of CAT;

Indo-China bilateral trade all set to cross USD 60bn by next year: FIEO;

Supply of Duty free gold by Nominated Agencies ;

TIOL COMMENTARY

ddt 15 oct.pdf

Complicated Selection procedure for Members of CBDT – BOARD out of CAT

cobweb.pdf

CBDT Chairman's appointment in question; CAT passes strictures against Revenue Secretary; Should FM really intervene in this case?

narindar_singh_cat.pdf

Service matter - Applicant is IRS officer of 1972 batch - questions the application of criteria for selection of CBDT Members by the Special Committee of Secretaries (SCOS) - alleges that the criteria based on the guidelines decided by the Prime Minister in 2006 were not uniformly applied - Respondent explains that the selection committee follows the weighted average methodology to eliminate chances of disadvantage or advantage to certain applicants - weighted average is calculated by taking into account the gradings in ACRs over a period of 10 years (A = Months x points given for grades in ACRs / No of months) - Assessee alleges that the weighted average formula not applied to his case as for certain years he had ACRs for less than one year but the ACR points were divided by full 12 months and this reduced its weighted average points as compared to others - held that

++ there are merits in the argument of the applicant as weighted average method was not uniformly applied in his case.

++ a fresh selection be made by the SCOS for the 2008-09 by meticulously working out the period for which each person considered had worked in every year during the ten years for which ACRs were considered.

++ If as a result, the Applicant is successful, he would be selected for the post of Member, CBDT and also consequently considered for the post of Chairman, CBDT. The direction would be complied with within three months of receipt of a certified copy of this order.

++ In the interest of administration the Tribunal directs that the current Members of CBDT and Chairman CBDT would not be affected in anyway for the three months, when the reconsideration is completed by the SCOS. It would be the responsibility of the Respondent to ensure that the above re-consideration is completed within prescribed period in view of the imminent retirement of the Applicant on superannuation.;

office_memorandum.pdf

Implementation of Nw Pension Scheme - Release of 2nd installment of arrears of 6th CPC recommendations to the pot 1/1/2004 entrants.

MIXED BUZZ

mbuzz0935.pdf

Cabinet gives nod for disinvestment of shares in Andrew Yule;

mbuzz0934.pdf

DDA to develop Commonwealth Games Village; Rs 828 Cr fund given;

mbuzz0933.pdf

CGHS facility extended to all PIB Accredited Journalists but families;

mbuzz0932.pdf

Indo-China bilateral trade all set to cross USD 60bn by next year: FIEO;

cbdtorder145_2009.pdf

CBDT issues transfer order of 9 CITs;

NOTIFICATION

it09not078.pdf

CBDT notifies India-Luxembourg DTAA; Tax Treaty comes into force from July 9, 2009;

CASE LAWS

2009-TIOL-553-HC-ALL-IT.pdf

CIT Vs M/s U P State Bridge Corporation Ltd (Dated: October 7, 2009)

Income tax - Sec 271(1)(c) - Assessee is in the business of civil construction work in India and abroad - AO makes disallowance and initiates penalty proceedings - CIT(A) deletes the same - Tribunal upholds the CIT(A) order - held, merely because some additions were made, it cannot be said that some information was concealed. AO needs to record valid reasons for initiating penalty - Tribunal order upheld - Revenue's appeal dismissed:ALLAHABAD HIGH COURT;

2009-TIOL-552-HC-DEL-IT.pdf

CIT Vs M/s Sunbeam Auto Ltd (Dated: September 11, 2009)

Income Tax Act – Section 263 – Erroneous and Prejudicial to the Interest of Revenue - According to CIT no detailed investigation had been carried out by the AO while making the assessment – Held that the AO while passing the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. One has to see from the record as to whether there was application of mind before allowing the claim made by the assessee – Held further that there is a distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under Section 263 of the Act, merely because he has different opinion in the matter. It is only, in cases of “lack of inquiry” that such a course of action would be open – Also held that the CIT conceded the position that the AO had made the inquiries, elicited replies and thereafter passed the assessment order, however the grievance of CIT was that the AO should have made further inquiries rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry.' – Held further that even the CIT in his order u/s 263 did not give a clear finding as to whether the expenditure can be treated as capital expenditure or it is revenue in nature. In certain cases, it may not be possible to come to such a definite finding and therefore, it is not necessary that in all cases the CIT is bound to express final view, as held in the case of Geevee Enterprise ( 2003-TIOL-329-HC-DEL-IT ) but, the least that was expected from CIT was to record a finding that order sought to be revised was erroneous and prejudicial to the interest of the revenue.

Income Tax Act – Section 37(1) – Capital or Revenue Expenditure – Held dyes and tools are part of the machines. By replacing these dyes the purpose is to maintain the existing assets, viz., machine and not to bring a new asset. It is not case of “repairs of machinery” which was the situation is Sarvana Spinning's case ( 2007-TIOL-147-SC-IT ).: DELHI HIGH COURT;

2009-TIOL-630-ITAT-COCHIN.pdf + vodafone story.pdf

Vodafone Essar Cellular Ltd Vs ACIT, Kochi (Dated: April 30, 2009)

Income tax - Sec 194H - Assessee is a cellular service provider - markets its services through distributors - pays commission to distributors for marketing post-paid SIM Cards and also deducts TDS on the payment made - however, enters into separate agreement with distributors for marketing pre-paid SIM Cards - offers SIM Cards on discounted price and gives freedom for pricing them but not beyond MRP - does not deduct TDS on the ground that it sells SIM Cards in bulk, and in case distributors fail to sell them it is their loss - even in the case of damage, the assessee does not provide replacements - claims it enjoys principal to principal relationship with distributors who are offered margins on sale of pre-paid SIM cards and no sum is credited to their accounts as commission - AO passes orders under section 201(1) and 201(1A) on the ground that it is principal to agent relationship as even after the sale of SIM cards, the assessee-company regulates the marketing behaviour of its distributors who exclusively promote the assessee's products or services - CIT(A) agrees with the AO - held,

++ the pricing freedom is not so crucial in examining the exact nature of the business relation between the assessee-company and its distributors. The pricing factor is also a matter of mutual consent between the parties;

++ the Kerala HC in the case of the assessee's predecessor company held that the transaction between the service provider and the distributors is only that of a service and not sale and purchase of any goods or merchandise;

++ Since the SIM Card is only a device to have access to the mobile phone network, there is no question of passing of any ownership or title of the goods from the assessee-company to the distributor or from the distributor to the ultimate consumer.

++ The essence of service rendered by the distributors is not the sale of any product or goods. The distributors are providing facilities and services to the general public for the availability of devices like SIM Cards to have access to the mobile phone network of the assessee-company;

++ The essence of service rendered to the pre-paid and post-paid consumers are one and the same. There is no difference. The only difference is technical. The essence of post-paid and pre-paid services rendered by the assessee-company is the same and the relationship between the assessee and the customers is also the same. Therefore, if post-paid scheme is subject to section 194H, it is quite unlikely that pre-paid system would be outside the purview of section 194H.:COCHIN ITAT;

2009-TIOL-629-ITAT-DEL.pdf

DCIT, New Delhi Vs M/s Sumi Motherson Innovative Engg Ltd (Dated: June 15, 2009)

Income Tax - Sec 2(24)(x) and sec 36(1)(va) - AO disallows and makes addition on account of employees' and employer's contribution towards PF within the grace period of 5 days allowed under the relevant statue - CIT(A) deletes addition –Held, in view of the decision of Karnataka  High Court in the case of CIT Vs. Sabari Enterprises , Revenue ground dismissed.:DELHI ITAT;

2009-TIOL-628-ITAT-DEL.pdf

Hindustan Times Ltd Vs ACIT, New Delhi (Dated: September 4, 2009)

Income Tax - section 36(1)(iii) - On the issue of CIT(A) confirming disallowance incurred on account of guarantee commission for procuring foreign loan for purchasing new machinery holding the same to be of the nature of capital expenditure - Held, guarantee commission has been paid by the assessee on the loan taken for purchase of new machinery. In the earlier years, the Tribunal has held such expenditure, of revenue nature. Assessee's ground allowed.

On the issue of CIT(A) confirming disallowance for conducting a market research on insurance project of the appellant holding the same to be of the nature of capital expenditure - Held, the term business as defined u/s 2(13) should not be construed in a restricted manner - in the present economic environment companies prefer to have a scale of operations and various business activities under the same company so as to generate efficiency, cost control as well as to gain recognition in the business world. Hence, a certain portion of gross receipts / profit is generally earmarked for exploring possibilities of various business along with the running of various business activities at the same time. when specific activity like market research can be done by a specialized agency then there is no reason as to such expenditure should not be allowed as revenue expenditure, specially, when outsourcing is in vogue in the business world today. Assessee's ground allowed.:DELHI ITAT;

SERVICE TAX SECTION

2009-TIOL-1640-CESTAT-AHM.pdf

CST, Ahmedabad Vs M/s Bacha Finlease (Dated: August 11, 2009)

ST - exemption under Notification 6/2005-ST - Assessee's activities are covered under the BAS - Commissioner(A) finds that the value of taxable service is less than the exemption threshold of Rs four lakh - held, merely because the assessee fails to raise this point before the adjudicating authority there is no bar for the assessee to raise a legal issue at the first appellate stage - Revenue has no case - Revenue's appeal dismissed:AHMEDABAD CESTAT;

2009-TIOL-1639-CESTAT-MAD.pdf

Kongu Engineering College Vs CCE, Salem (Dated: June 5, 2009)

Service Tax – penalty – plea that the appellant is an educational institution and there was a reasonable cause for failure to pay service tax is not acceptable as the demand was confirmed under extended period and Section 80 does not come to their rescue.:CHENNAI CESTAT;

2009-TIOL-1638-CESTAT-MAD.pdf

M/s Vijay Television Pvt Ltd Vs CST, Chennai (Dated: May 11, 2009)

Service Tax – Stay / Dispensation of pre-deposit – Broadcasting service – the appellant paid the service tax on the licence fee collected from the distributor in India – revenue demanded service tax again on the licence fee paid by the appellants to the overseas broadcasting agency located in Hong Kong under reverse charge basis in terms of Section 66A of the Finance Act, 1994 – prima facie case for waiver of pre-deposit as the appellant would be entitled to CENVAT credit of the Service Tax demanded.:CHENNAI CESTAT;

2009-TIOL-1637-CESTAT-BANG.pdf

M/s Ritesh Enterprises Vs CCE, Mangalore (Dated: May 1, 2009)

Service tax – Handling and transportation of fertilizers by labour contracted by factory does not amount to supply of labour to attract service tax under Manpower Recruitment & Supply Agency services – License given by Labour department not for supply of labour, license required for engaging labour for handling, unloading and loading of materials – Pre-deposit waived and stay granted:BANGALORE CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-1644-CESTAT-MUM.pdf + globe story.pdf

CCE, Aurangabad Vs M/s Globe Trotters Pvt Ltd (Dated: September 10, 2009)

When the issue is pending before the High Court and the Larger Bench of the CESTAT, penalty cannot be demanded from assessee moreso since no mens rea established – CESTAT rejects Revenue appeal.:MUMBAI CESTAT;

2009-TIOL-1643-CESTAT-DEL.pdf

M/s Hindustan Coca Cola Beverages Pvt Ltd Vs CCE, Meerut-II (Dated: May 5, 2009)

Central Excise – Delay in reversal of duty credit on fuels used in exempted products due to change in law but before issue of SCN – No penalty leviable in view of Appellants own case in 2005-TIOL-443-CESTAT-MUM:DELHI CESTAT;

2009-TIOL-1642-CESTAT-AHM.pdf

M/s Gail (India) Ltd Vs CCE, Vadodara (Dated: July 2, 2009)

Central Excise – Classification of Pentane Mixture – Test conducted by chemical examiner to see its suitability for spark ignition engine in admixture with motor spirit not appropriate to determine classification – Matter remanded to original authority to take fresh samples for conducting tests as per judicial precedents in Oil India Ltd case 2002-TIOL-123-CESTAT-DEL and consider matter afresh :AHMEDABAD CESTAT;

2009-TIOL-1641-CESTAT-BANG.pdf

CC & CCE , Visakhapatnam Vs M/s Andhra Pradesh Paper Mills Limited (Dated: May 15, 2009)

Central Excise – Penal interest collected from buyers for delayed payments not includible in assessable value – Appeal to be filed against Tribunal's earlier order before Supreme Court not a valid ground to file an appeal before Tribunal – No reason to interfere with Appellate Commissioner's order :BANGALORE CESTAT;

CUSTOMS SECTION

NOTIFICATION

ctariff09_118.pdf

CBEC amends 21/2002 to insert 22AC for Nil duty;

CIRCULAR

cuscir09_029.pdf

Guidelines for compounding of offences under Customs Act, 1962

CASE LAWS

2009-TIOL-551-HC-MUM-CUS.pdf + leela story.pdf

CC Vs M/s Leela Scottish Lace P Ltd (Dated: September 24, 2009)

Customs – redemption - Section 125 of the Act permits the authority to redeem the goods on payment of fine either to the owner or the persons in possession: once the goods were freely importable, it is immaterial as to who first sought to import the goods as long as the goods were cleared according to law. Whatever may be the transaction between M/s Leela Scottish Lace P. Ltd. and the three persons who had subsequently cleared the goods, the previous antecedents to evade customs duty, if any, would be irrelevant as long as the goods were finally cleared by the said three persons by payment of duty. Section 125 of the Act permits the authority to redeem the goods on payment of fine either to the owner or the persons in possession.:BOMBAY HIGH COURT;

2009-TIOL-1636-CESTAT-MAD.pdf

CC, Chennai Vs M/s Thamilzh Ponni Exports Enterprises (Dated: June 18, 2009)

Customs – valuation – spare parts of electric scooters – the goods are in loose packing and since the goods as presented at the time of import were packed in loose condition, they are not pre-packed commodities and assessment based on MRP does not arise. :CHENNAI CESTAT;