India-ASEAN FTA: India negotiates for 489 items on Negative List; Commerce Minister says India is not only country to go for such a list;

Environmental Pollution Index: Govt asks CPCB to prepare Action Plan for hugely polluted areas;

CBEC exempts construction activity for execution of works contract for building canals from service tax ;

Revenue mop-up for Apr-Sept: Direct taxes down to 2% growth; Service tax grows by 4% and Central Excise becomes sluggish in Sept - down by 16.5% as compared to same period last year;

Maran reconstitutes Textiles Committee;

TIOL COMMENTARY

ddt 26 oct.pdf

Income deemed to accrue or arise in India – CBDT withdraws forty year old Circular

tiol top.pdf

Judicial reforms can scale up GDP growth rate by 2% annually: FM;

RBI CIRCULAR

rbi09cir012.pdf

Exim Bank's Line of Credit of USD 20 million to the State of Eritrea;

2009-TIOL-573-HC-HP-IT.pdf

CIT Vs H P State Forest Corporation (Dated: October 7, 2009)

Income tax - Sec 37(1) - Assessee is a State Government undertaking - its main business is to sell timber and resin - trees are given to it by the State Forest Department which collects royalty on them - assessee is also liable to pay interest on delayed payment of royalty - State Govt levies sales tax on royalty - Since it is a liability on the State, the assessee deducts sales tax and deposits the same on behalf of the State - assessee pays interest on delayed payment of sales tax and claims deduction - AO disallows - CIT(A) agrees with the AO bu the Tribunal allows the assessee's appeal - held, since the interest paid is deducted from the royalty payment made to the State and a simple interest is paid on delayed payment, it is not penal in nature, and an allowable expenditure for the assessee - Revenue's appeal dismissed:HIMACHAL PRADESH HIGH COURT;

2009-TIOL-657-ITAT-MAD.pdf + tvs story.pdf

M/s TVS Motor Company Ltd Vs ITO, Chennai (Dated: September 18, 2009)

India-UK DTAA - Article 13(4)(c) - Assessee-company is a motorcycle manufacturer - enters into agreement with non-resident company for specialised testing of its own engines and that of its competitor - non-resident to provide documented test report - also provide training to its engineers in UK as it has no PE in India - whether payments made for such services are liable to TDS - are such services covered by the defintion of technical services under Article 13(4)(c)

Assesse is a leading motorcycle manufacturer in India - enters into an agreement with UK-based company M/s LTC Ltd which has extensive experience of product development, including the use of experimental and analytical techniques to improve the dynamic behaviour of vehicle system - Indian tax resident appoints LTC for carrying out an appraisal of the motorcycles manufactured by it, reviewing certain aspects of ride, handling, vibration etc. - certain lumpsum payments are to be made to the non-resident for availing such services - assessee company files income tax returns in representative capacity and the fees for technical services rendered to the assessee-company claimed as exempt - AO rejects the claim in his order passed u/s 147 and the CIT(A) upholds the same.

Before the Tribunal the assessee argues that LTC did not provide any technical knohow or design to the assessee company; the present case is governed by the definition of 'fees for technical services' as appearing in paragraph 4 of Article 13 of the DTAA between India and UK, and not by section 9 of the Act; motorcycles sent by the assessee were merely subjected to certain tests by the LTC, UK, that no technical knowledge, experience, skill, know how or processes were 'made available' by LTC to the assessee and there was no 'development and transfer of a technical plan or technical design'. Assessee places strees on the expression 'make available' in clause ( c) of paragraph 4 of the Article 13 the DTAA with UK, and pleads its income are business profits, taxable as per Article 7 of the DTAA and since it has no PE in India, it can be taxed only in the UK

Revenue contends that the payments are covered by paragraph 4(c) of Article 13 of the DTAA between India and UK, and that LTC 'made available' to the TVS Motors, technical knowledge, experience, skill, knowhow and processes, as was clear from the 'Objectives' and 'Project Scope & Technical Content' of the recitation of the agreement.

Having heard the arguments the Tribunal makes certain observations based on the text of the agreement entered into between the two parties;

++ the M/s LTC is to provide training for TVS Suzuki's engineering staff in the test techniques and procedures used to create and validate the ADAMS model;

++ The ADAMS model will be fully documented and made available to TVS Suzuki to enable future design solutions to be investigated.

++ Throughout the Project LTC will encourage the active participation of engineers from TVS Suzuki and some relevant information with them.

++ Where appropriate LTC will arrange specific training for engineers nominated by TVS Suzuki in the test techniques and procedures used.

++ LTC will arrange specific training for engineers nominated by TVS Motor in the test technique and procedures.

Having gone through the content of the agreement, the Tribunal holds that the payments made to M/s LTC Ltd are 'fees for technical services' within the meaning of paragraph 4 of Article 13 of the DTAA between India and UK and in its considered opinion, M/s LTC Ltd, UK, did 'make available' technical knowledge, experience, skill, know how, processes to TVS Motor, within the meaning of paragraph 4(c) of Article 13 of the DTAA, in relation to the Project no. TS 0102. Therefore, the assessment orders of the AO are valid and legally sustainable.

As regards the Project No. TS 0105 ('Rombo' motorcycle), the Tribunal holds that since the objective of the project is merely to provide an independent evaluation of the 'Rombo' motorcyle prior to its launch, and there is no provision for 'making available' any technical skill as per the provisions of Article 13(4)(c) of the DTAA, the payments made for this project is not liable to TDS u/s 195.:CHENNAI ITAT;

2009-TIOL-656-ITAT-BANG.pdf

JCIT, Bangalore Vs M/s Karnataka Soaps & Detergents Ltd (Dated: June 30, 2009)

Income tax - Sec 43B - AO disallows sales tax, surcharge and entry tax not paid - unless these liabilities are discharged by the assessee, it is hit by the provisions of Sec 43B - held, since these liabilities were discharged under the sales tax deferred scheme, and the same is allowable as per the CBDT's circular, Revenue's appeal has no merit:BANGALORE ITAT;

2009-TIOL-655-ITAT-HYD.pdf

ACIT, Hyderabad Vs M/s Idea Cellular Ltd (Dated: February 26, 2009)

Income tax - Sec 194H - Assessee is a cellular service provider - offers both pre-paid and post-paid facilities to subscribers - enters into agreement with distributors for marketing and promotion of its services - offers discounts on bulk purchases of SIM cards - Survey u/s 133A - Revenue treats the margins offered on the MRP as 'commission or brokerage' liable to TDS u/s 194H - CIT(A) disagrees - held, since the assessee and the distributors enjoy principal to principal relationship, the margins offered to distributors cannot be brought under the ambit of Commission taxable u/s 194H - discounts allowed on transactions resulting in outright purchases cannot be treated as brokerage or commission. Since the transactions between the assessee and the distributors are not on principal and agent basis, it cannot be said that the assessee was defaulter attracting the provisions of sec.201 (1) and sec.201(1A) of the Act. No fault in the CIT(A) order - Revenue's appeal dismissed:HYDERABAD ITAT;

SERVICE TAX SECTION

NOTIFICATION

stnot09_041.pdf

CBEC exempts construction activity for execution of works contract for building canals from service tax;

CASE LAWS

2009-TIOL-1714-CESTAT-BANG.pdf

M/s Karwar Dock & Port Labour Vs CCE, Mangalore (Dated: May 1, 2009)

Service tax – Handling export/import cargo by cooperative society formed for benefit of its members, not supply of manpower – Prima facie case in favour of appellants – Pre-deposit waived and stay granted :BANGALORE CESTAT;

2009-TIOL-1713-CESTAT-MAD.pdf

M/s Sri Krishna Smelters Ltd Vs CCE, Salem (Dated: July 17, 2009)

Service Tax – Appeal – Delay – the appeal was filed within the stipulated period – appeal filed again after affixing the court fee stamps as directed by the Commissioner (A) – Appeal not hit by time bar.:CHENNAI CESTAT;

2009-TIOL-1712-CESTAT-BANG.pdf

M/s Telco Construction Equipment Company Ltd Vs CST, Bangalore (Dated: May 12, 2009)

Service tax – Liability to pay service tax on commission received under BAS – No finding in impugned order on submissions of assessees on limitation – Assessees submission with regard to receipt of payments in foreign exchange not produced before original authority – Matter remanded for de novo consideration:BANGALORE CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-574-HC-HP-CX.pdf + 11ac story.pdf

CCE, Chandigarh Vs M/s HIM Chemicals & Fertilizers Ltd (Dated: September 16, 2009)

Central Excise – Penalty - applicability of Section 11AC is not excluded merely on deposit of the amount after having been caught but before the issuance of show cause notice .- Once a case is covered by the situation mentioned in the Section, mere deposit prior to issuance of show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Section.:HIMACHAL PRADESH HIGH COURT;

2009-TIOL-572-HC-P&H-CX.pdf

CCE Vs M/s Forex Fastners Pvt Ltd (Dated: September 8, 2009)

Central Excise – Reduction of mandatory two months penal period under Rule 8 of Central Excise Rules, 2002 by CESTAT – Instant appeal does not involve any substantial amount warranting consideration of question of law raised – Question of law left open for consideration in appropriate case:PUNJAB AND HARYANA HIGH COURT;

2009-TIOL-1711-CESTAT-MAD.pdf

M/s Strategic Engineering P Ltd Vs CCE, Madurai-II (Dated: July 6, 2009)

Central Excise – CENVAT Credit – wrongly taken credit reversed without utilising – no case for levy of interest and penalty.:CHENNAI CESTAT;

2009-TIOL-1710-CESTAT-DEL.pdf

Whale Graphics India Ltd Vs CCE, Meerut-I (Dated: August 6, 2009)

Central Excise – Merely because an industrial unit is set up in an industrial area it cannot be presumed that the unit is not in a rural area for denying SSI exemption benefit – An area as certified in land revenue records by a proper authority as a rural area is relevant for allowing SSI exemption – Matter remanded to original authority to properly ascertain assessees claim – Impugned order set aside:CHENNAI CESTAT;

CUSTOMS SECTION

2009-TIOL-1717-CESTAT-MUM.pdf + air trade story.pdf

Air Trade International Vs CC, Mumbai (Dated: August 5, 2009)

Customs – Cross examination of foreign Nationals - Natural justice cannot be denied to the parties on the ground of procedural difficulties inasmuch as the procedure is only a handmaid of justice – case remanded for allowing cross examination and providing records: the learned Commissioner ought to have supplied the documents to the parties for the ends of justice, regardless of the fact that some of these documents might have already been given to them. The parties also wanted to cross-examine the foreigners, whose statements were also relied upon in the show cause notices, but this opportunity was also denied. The learned counsel submits today that the appellants would meet the expenses of these witnesses if allowed to be cross-examined. The learned SDR points out procedural difficulties in summoning these witnesses, but procedural difficulties can be overcome to the extent possible. Natural justice cannot be denied to the parties on the ground of procedural difficulties inasmuch as the procedure is only a handmaid of justice.:MUMBAI CESTAT;

2009-TIOL-1716-CESTAT-MUM.pdf

M/s Surya Pharmaceutical Ltd Vs CC & CCE (Dated:September 7, 2009)

Notification no.51/2000-Cus did not prohibit exemption to the goods of Indian origin and benefit of notification available - Policy circular is not applicable to the import made prior to issue of circular and further the same cannot take away the effect given under notification as the same being non-existent in law in view of Supreme Court decision in CCE Bolpur Vs Ratan Melting and Wire Industries – [ 2008-TIOL-194-SC-CX-CB ] - Waiver of pre-deposit granted and Stay ordered pending disposal of appeal.:MUMBAI CESTAT;

2009-TIOL-1715-CESTAT-KOL.pdf

Sri Arun Kumar Vs CC & CCE, Patna (Dated: August 4, 2009)

Customs – Allegation of gold smuggling – No findings given by Appellate Commissioner on issues raised by appellant regarding ownership of goods and other legal issues – Matter remanded for de novo consideration of all issues and issue a speaking order – Impugned order set aside :KOLKATA CESTAT;