DDT is FIVE-YEAR-OLD today; Manufacture of Alcoholic Beverages on Job Work Basis - Service Tax - Board Clarifies (See 'DDT' Column)

Credit of duty under Rule 16 of Central Excise Rules, 2002 on goods brought into the factory-reg;

Govt clarifies no mandatory cut in Plan Expenditure as part of austerity measure;

UN to release 'Hard Rain' film with Bob Dylan tune on eve of climate talks;

FM approves 17 FDI proposals worth Rs 4551 Crore, including Rs 3051 Cr proposal of Sistema Shyam Teleservices;

More skeletons out of the CLB Lockers - CBI recovers nearly a Crore (See 'DDT' Column)

OECD Secretary General coming to India to release Review of Investment Policies Report;

Stock markets and zero interest rates resulting in 'cheapening' of money ;

TIOL COMMENTARY

ddt_5yrs.pdf

DDT is 5 years Old;

guest column.pdf

Indo-Asean and Korean FTAs and their impact on Indian industry;

MIXED BUZZ

17 FDI Proposals Approved.pdf

FM approves 17 FDI proposals worth Rs 4551 Crore, including Rs 3051 Cr proposal of Sistema Shyam Teleservices;

mbuzz1078.pdf

UN to release 'Hard Rain' film with Bob Dylan tune on eve of climate talks

mbuzz1077.pdf

OECD Secretary General coming to India to release Review of Investment Policies;

mbuzz1076.pdf

Stock markets and zero interest rates resulting in 'cheapening' of money;

2009-TIOL-746-ITAT-BANG.pdf + software story.pdf

Robert Bosch Engineering And Business Solutions Ltd Vs ACIT, Bangalore (Dated: September 11, 2009)

Income tax - 90% of service income is to be excluded from the profit of the business for computing deduction u/s 80HHE - what is to be excluded is 90% of the service income and not the 90% of gross receipts. During the course of proceedings it was clarified by the AR that the gross receipts represent the service income as there are no direct expenses incurred against service income. Hence, following the order of this Bench in the case of Maini Precisions Products Ltd. and considering that Explanation (baa) to section 80HHC is similar to Explanation (d) to section 80HHE , it is held that the CIT(A) was justified in holding that 90% of service income is to be excluded from the profit of the business for computing deduction u/s 80HHE.

90% of other income to be excluded for the purpose of determining the profit of the business; The Apex Court in the case of K Ravindranathan Nair observed that profit incentives and items like rent, commission, brokerage charges etc. though they formed part of the gross total income, had to be excluded as they were independent incomes which had no element of export turnover. Therefore, the lower authorities were justified in excluding 90% of other income for the purpose of determining the profit of the business to ascertain deduction allowable u/s 80HHE.

Computer software – capital or revenue expenditure? Functional test to be applied; When the assessee acquires a computer software or for that matter the licence to use such software, he acquires a tangible asset and becomes the owner thereof Once the tests of ownership and enduring benefit are satisfied, the question whether expenditure incurred on computer software is capital or revenue has to be seen from the point of view of its utility to a businessman and how important an economic or functional role it plays in his business. Once the tests of ownership and enduring benefit are satisfied, the question whether expenditure incurred on computer software is capital or revenue has to be seen from the point of view of its utility to a businessman and how important an economic or functional role it plays in his business.

Interest – Sec 234D has no retrospective application: The assessment year under consideration is asst.year 2003-04. The Special Bench in the case of ITO vs Ekta Promotors P. Ltd. - ( 2008-TIOL-337-ITAT-DEL-SB ) held that provisions of section 234D is substantive and cannot be applied retrospectively. It was held that provision of section 234D will be applicable for the asst. year 2004-05. Following the decision of the Special Bench, it is held that the learned AO was not justified in charging interest u/s 234D .:BANGALORE ITAT;

2009-TIOL-745-ITAT-BANG.pdf

M/s Mcdowell & Co Ltd Vs ACIT, Bangalore (Dated: August 21, 2009)

Income Tax - Section 36(1)(vii) r.w.s. 36(2) and 37(1) - assessee writes off bad debts and advances - AO declines to allow deduction on the ground that no effort shown to have been made for recovery - assessee's claim of expenditure towards research and development also not  allowed on the premise that the assessee has not furnished any other details. The assessee's claim of exchange fluctuation loss also not allowed. A total income determined and tax demanded which includes levy of interest u/s 234B and 234C – Held, actual bad debts written off in accordance with the provisions of section 36(1)(vii) r.w.s. 36(2) are allowable following the decision of ITAT, Special Bench in the case of DCIT Vs. Oman International Bank ( 2006-TIOL-118-ITAT-MUM-SB ) .

On the issue of foreign exchange loss on conversion - Held, assessee himself rendered income on gain from exchange fluctuation on identical nature of revenue from loans remaining unpaid. The same is to be allowed.

On the issue of disallowance of R & D expenses - Held, the assessee not claiming any weighted reduction thereupon, was to claim the same in its normal course of business which is allowed. Levy of interest under section 234B & 234C is mandatory as has been held by the Tribunal and is consequential to merit additions considered. Assessee's appeal allowed.:BANGALORE ITAT;

2009-TIOL-744-ITAT-BANG.pdf

ACIT, Bangalore Vs M/s E 4 E Application Services Pvt Ltd (Dated: July 31, 2009)

Income tax - Sec 10A(2)(iii) - AO disallows Sec 10A benefits on the ground that the assessee was an existing DTA unit but the benefits are available only to a newly-established unit - CIT(A) allows the appeal - held, issue is no longer res integra as it has already been settled that if the status of a DTA unit is changed to a STPI unit, the assessee is eligible for the benefits - Revenue's appeal dismissed:BANGALORE ITAT;

2009-TIOL-743-ITAT-DEL.pdf

Basu Distributors Pvt Ltd Vs ACIT, New Delhi (Dated: August 1, 2009)

Income Tax - Section 40A(3), rule 6DD- In the first round of appeals before the ITAT the Tribunal set aside the original assessment orders and restored the matter to the AO for re-consideration specially relating to additions made u/s 40A(3) relating to sister concern. After consideration, the AO gives major relief relating to sister concern while additions in respect of other parties re-made. AO comes to the conclusion that cash payments made to other parties are without any business expediency and there is no sufficient cause for such cash payments besides none of the payments are covered by exceptions under rule 6DD. This results in additions - CIT(A) confirms additions – Held, assessee never genuinely intended to make the payments initially by crossed cheques/drafts in compliance with the provisions of sub-section (3) of section 40A read with rule 6DD and simply adopted this route to get protection under clause ( j ) of rule 6DD. The explanation of the assessee cannot be accepted being not bona fide and genuine and is accordingly rejected. CIT(A) order upheld and Assessee's appeals dismissed.:DELHI ITAT;

2009-TIOL-742-ITAT-DEL.pdf

M/s Turkmenistan Airlines Vs ADIT, New Delhi (Dated: October 16, 2009)

Income tax - Sec 44BBA - Assessee is a non-resident airlines - collects foreign travel tax (FTT) on behalf of the tax authorities - AO for taxing the same as taxable income - Assessee argues FTT is not an income, that FTT belongs to revenue and diversion by overiding title should apply - CIT(A) goes with the AO - On appeal to the Tribunal, held, the issue is squarely covered against the assessee by the Uttranchal HC decision in the case of Reading and Bates Exploration Co.

Interest u/s 234D - held, it is settled issue that the Sec 234D which was brought on the statute from 1.6.2003, will have application only with effect from the AY 2004-05 - A.O directed to delete the interest levied.

Interest u/s 234B - Following S.C decision in Anjum M H Ghaswala, levy of interest is mandatory, granting off opportunity is not necessary. A.O directed to levy interest up to the date of original assessment following the decision of the coordinate Bench in Freigtship Consultants P.Ltd :DELHI ITAT;

SERVICE TAX SECTION

2009-TIOL-1964-CESTAT-MAD.pdf + st story.pdf

India Cements Ltd Vs CCE, Trichy (Dated : November 3, 2009)

Service Tax – Eligibility of credit of service tax paid on outward freight – CESTAT adjourns case till stay application of Revenue against Larger Bench decision in M/s ABB Ltd & Ors 2009-TIOL-830-CESTAT-BANG-LB is disposed of by Karnataka High Court:BANGALORE CESTAT;

2009-TIOL-1963-CESTAT-BANG.pdf

M/s Vijay Traders Vs CCE, Belgaum (Dated : May 13, 2009)

Service Tax – Commission received as consignment not liable for service tax under C & F Agency service when no clearing activity is undertaken by agent from principal's premises – Agent liable to pay tax when he undertakes both clearing and forwarding services – Impugned order disallowing refund claim not sustainable, liable to be set aside:BANGALORE CESTAT;

2009-TIOL-1962-CESTAT-BANG.pdf

M/s Vista Infotech Vs CST, Bangalore (Dated : August 6, 2009)

Service Tax – When service tax in default paid with interest provisions of Section 73(3) applies – Board's Circular 137 dated 03.10.2007 clarifies that no SCN to be issued to defaulter if tax liabilities are paid with interest – Impugned order imposing penalties set aside: BANGALORE CESTAT;

CENTRAL EXCISE SECTION

Instruction.pdf

Credit of duty under Rule 16 of Central Excise Rules, 2002 on goods brought into the factory-reg.

CASE LAWS

2009-TIOL-1968-CESTAT-BANG.pdf + essar story.pdf

M/s Essar Steel Ltd Vs CCE, CC & ST, Visakhapatnam (Dated : June 30, 2009)

Central Excise – Clearance of iron ore pellets to sister concern by paying duty on value arrived in terms of Rule 8 of Valuation Rules, 2000 – No infirmity in differential duty paid in November 2006 after considering price escalation for the period April to August 2006 by utilizing CENVAT Credit available in November 2006 since differential duty liability crystallized only in November 2006 – Impugned order not sustainable, liable to be set aside:BANGALORE CESTAT;

2009-TIOL-1967-CESTAT-BANG.pdf

M/s Newtech Stewing Telecom Ltd Sh C Satyanarayan Vs CCE, Hyderabad (Dated : May 29, 2009)

Central Excise – Manufacture and usage of heat shrinkable sleeves captively in manufacture of exempted products viz., cable jointing kits – When cost accounting data was submitted in December 2002 no reason to issue show cause notice invoking extended period in August 2005 – Demand notice time barred – Impugned order not sustainable:BANGALORE CESTAT;

2009-TIOL-1966-CESTAT-BANG.pdf

CCE, Hyderabad Vs M/s Aurobindo Pharma Ltd (Dated : March 18, 2009)

Central Excise – Availment of credit of duty paid on facility charges of special storage tanks – Includibility of facility charges in assessable value at supplier's end not the question under consideration – It is settled law that once supplier discharges duty it is available as credit – No merits in revenue appeal: BANGALORE CESTAT;

2009-TIOL-1965-CESTAT-MUM.pdf

Ghanshyam Dyeing & Printing Pvt Ltd Vs CCE & CC, Belapur (Dated : July 24, 2009)

Remission of C.Ex duty granted in respect of finished goods destroyed in the fire subject to reversal of cenvat credit in respect of inputs contained in the finished goods – no need to reverse any Cenvat credit in view of LB decision in Grasim Industries [ 2007-TIOL-135-CESTAT-DEL-LB ].

Notification 33/2007-CE(N.T) dated 07.09.2007 warranting reversal of Cenvat credit in respect of duty remitted goods is prospective in nature – nothing contained in the notification can affect any relief claimed by the assessee on the basis of the LB decision (supra).

SCN also does not categorically allege clandestine removal of goods but admitting the destruction of goods in fire by relying on surveyor report hence grant of remission of duty by the Commissioner is in order - Calculation of amount of remission of duty was based on report from the Assistant Commissioner and in absence of any alternative the same is to be accepted.: MUMBAI CESTAT;

CUSTOMS SECTION

NOTIFICATION

cnt09_176.pdf

Tariff Value of Brass Scrap increased;

CASE LAWS

2009-TIOL-1961-CESTAT-KOL.pdf

Shri Rajeshwar Sharma Vs CC, Patna (Dated : July 9, 2009)

Customs – Clandestine exportation of red sanders – Penalties imposed on owner of transport company justified as red sanders is prohibited goods – Penalty on employee reduced: KOLKATA CESTAT;

2009-TIOL-1960-CESTAT-BANG.pdf

M/s Aditya Birla Nuvo Ltd Vs CC, Bangalore (Dated : May 27, 2009)

Customs – Allegation of wrong utilization of benefit of Customs Notification 30/97-Cus and misuse of duty free goods imported under DEEC licenses – When proper officer of Customs satisfied with broad nexus of imported goods with export products mentioned in license, stand of appellant that imported fabrics were used in manufacture of both shirts and trousers cannot be disbelieved – Appellant having discharged export obligation cannot be faulted for replenishing inputs and disposing of trousers manufactured out of such exempted goods – Once export obligation is discharged, replenished inputs can be used in manufacture of other products and not necessarily incorporated in export goods under license, no restriction exists for disposal of such manufactured goods – Not open for Customs authorities to question manner of disposal of manufactured goods to deny exemption of replenished inputs contained therein

Customs – Jurisdiction – Merely because licenses are not transferable, it does not means that Customs authorities are permitted to go beyond licenses to deny exemption benefits – Specifications of goods imported squarely covered by advance license issued by licensing authority and appellant established nexus as envisaged under advance licensing scheme – Commissioner having failed to consider undisputed fact of issue of EODC by DGFT for impugned licenses after cancellation of bonds by Customs, no scope for levy of penalty – Customs authorities prohibited from contending contrary to stipulations in licenses and any misrepresentations noticed should be taken up with licensing authority – If no such reference is made to licensing authority, proceedings against appellant premature – Board to issue suitable clarificatory instructions to distinguish the thin line of jurisdiction of licensing authority and customs authority in matters concerning clearances under duty exemption/remission/credit schemes

Res judicata – Once proceedings were initiated earlier for violation of exemption notification and duty/penalties demanded and fulfilled, principle of res judicata applies – Impugned order not sustainable, liable to be set aside: BANGALORE CESTAT;