FM approves CBEC Chief Commissioners' posting order; Formal order expected any time;

CBEC issues clarification regarding peripheral activities for Area Based Exemption notification;

PC for National Counter Terrorism Centre by 2010-end;

Govt extends anti-dumping duty on Sodium Nitrite on modified rates;

Jharkhand heading for hung status; Congress may join hands with JMM to form Govt;

Prof C N R Rao is first Indian scientist to win Hoffmann International Medal for contributions to Chemistry;

17 Bills passed by both Houses of Parliament during Winter Session;

China goes to DSB against US duty on tyres;

Energy Conservation Award goes to Chhatisgarh: Energy Secretary Aman Kumar Singh (IRS) receives award from Power Minister;

Finance Secretary launches e-platform to facilitate discounting of MSME bills on supplies to large purchasers;

TIOL RUN UP TO GST

gst story.pdf

Inter-state transactions: Far from Solutions!

TIOL COMMENTARY

ddt 23 dec.pdf

No Education Cess on amount paid under Rule 6 of CCR, 2004;

spl down.pdf

Export of exempted goods under bond whether possible?

MIXED BUZZ

mbuzz1148.pdf

PC for National Counter Terrorism Centre by 2010-end;

mbuzz1147.pdf

17 Bills passed by both Houses of Parliament during Winter Session;

mbuzz1146.pdf

China goes to DSB against US duty on tyres;

2009-TIOL-32-ARA-IT.pdf

M/s Wavefield Inseis ASA (Dated: December 21, 2009)

Income tax - Sec 44BB, 195 - Applicant is a tax resident of Norway - engaged in seismic survey and provides offshore seismic data acquisition to global oil companies - such services are to maximise production from their existing reservoirs - enters into contract with ONGC for 3D seismic data acquisition and onboard processing offshore India - hires 'chase vessel' from a Danish company incorporated in Faroe Islands, on time charter basis - files application u/s 195 for withholding tax order @ 4.223% on the basis that services rendered by the Faroe Islands company fall within the scope of Sec 44BB - AO settles for 10.56% rate - Applicant seeks advance ruling

Authority holds that,

++ the second limb of section 44BB is clearly attracted in the instant case.

++ There is no doubt that Danish Company is engaged in the business of letting out the ships/vessels on hire. There is also no doubt that the vessel has been taken on hire by the applicant for the purpose of enabling the applicant to carry on the seismic survey and data acquisition operations which are essential for prospecting of mineral oil.

++ The requirement of sub-section (1) of section 44BB is that the vessel/ship must be used in the prospecting for or extraction of mineral oils. The function and utility of chase vessel in the operations relating to seismic survey and data acquisition which are integral to prospecting has been explained earlier. A chase vessel, provided by the Danish company is thus inextricably linked to the prospecting operations. Once the deployment of the vessel in the prospecting operations is considered to be integral part of such operations, the second part of section 44BB(1) is triggered.

++ It is immaterial whether the vessel is deployed in the prospecting activities pursuant to a direct contract with the oil producing company or pursuant to a contract with the seismic survey services provider. The person at whose instance the chase vessel participates in the seismic survey is not relevant to decide whether the requirements of the section are satisfied.

++ As per Section 44BB read with Part II of the First Schedule to the Income Tax Act, the effective rate at which the tax has to be withheld from the payments made by the applicant to the Danish Company would be 4.223%.

++ As the amounts falling under Section 44BB of I.T.Act have been excluded from the purview of the royalty definition, this question has to be answered in the negative. Once Section 44BB is attracted, it is common ground that the computation has to be made in accordance with that provision and no other special provision, viz., Section 44DA or Section 115-A would come into play in view of the fact that the payment is being made by a non-resident to another non-resident. :ADVANCE RULING;

2009-TIOL-717-HC-MUM-IT.pdf + hc story.pdf

DCIT Vs Shri Gopal Ramnarayan Kasat (Dated: November 5, 2009)

Income tax - Sec 2(13), 147, 234B - Assessees are real brothers - assessees with an advocate friend buy agricultural land - land is acquired by the State Govt immediately after the purchase - compensation, enhanced compensation and interest on compensation paid - whether the profits are to be treated as 'adventure in nature of trade' or capital assets - whether interest on compensation is to be taxed only on reaching its finality as case is pending before the court - whether interest u/s 234B is chargeable

The assessees received compensation/enhanced compensation towards the acquisition of the said lands during the assessment years 2000-2001, 2001-2002 and 2002-2003. The assessees had filed their returns for the said assessment years. Noticing that the assessees, apart from their regular business / professional activities, had jointly purchased agricultural lands, the assessment was re-opened under Section 147 after issuing a notice under Section 148 to the assessees.

After collecting detailed inputs from the district officers the AO held the said transaction as "adventure in the nature of trade", as defined under the provisions of Section 2(13) of the said Act, and treated the same as business income, taxable as per provisions of Sec 28. Assessees protest but the CIT(A) held that the compensation received for acquisition of lands, was liable to tax. However, the Commissioner of Income Tax (Appeals), directed deletion of the enhanced compensation and the interest component, in view of pendency of the issue regarding enhanced compensation before the High Court.

The Tribunal held that the enhanced compensation was liable to be taxed. In so far as the finding of the Commissioner of Income Tax (Appeals), regarding interest on enhanced compensation being not liable to be taxed, the Tribunal held that the interest was to be assessed on accrual basis from year to year. The Tribunal upheld the view of the Commissioner of Income Tax (Appeals), to the extent, that the interest was liable to be taxed only on reaching its finality. The Tribunal also upheld that the interest has to be assessed under the head "income from other sources".

The issue goes to the HC which held that,

++ there is no infirmity in the concurrent finding of the authorities, that the transactions, in question, were "adventure in the nature of trade" and as such, chargeable to income tax under the head "profits and gains of business or profession".

++ Since in view of amendment to Section 148 by the Finance Act, 2006, the notices issued to the assessees under Sub-Section 2 of Section 143 of the Income Tax Act, 1961, after the expiry of 12 months, specified in the proviso to Sub-Section 2 of Section 143, where returns have been furnished during the period commencing from 1st day of October 1991 and ending on 30th September 2005, have been saved, no error could be found in the opening of the re-assessment proceedings under Section 147 of the Income Tax Act.

++ The interest, as provided under Section 234B of the Income Tax Act, is liable to be charged.

++ The interest which forms component of the compensation, as held by the Apex Court, in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (2009-TIOL-84-SC-IT), has to be taxed in the year of receipt.

++ The interest, which has been held to be a component of the compensation, is chargeable to income tax under the head "profit and gains of business or profession" and not under the head 'income from other sources': BOMBAY HIGH COURT; .

2009-TIOL-796-ITAT-MUM.pdf

ACIT, Mumbai Vs M/s Akasha Syncotex Ltd (Dated: December 10, 2009)

Income tax - Sec 37 - Assessee claims deduction for expenditures incurred under the head ‘other manufacturing, selling and administrative expenses' - AO disallows on the ground that no business was carried out in the relevant previous year and the restructuring plan has been pending with the BIFR for approval - CIT(A) agrees with the AO - held, since the BIFR has not stopped the restructuring plan undertaken by the assessee and some recovery efforts were made, and for the same, the assessee maintained office and other infrastructure and expenses incurred for the same are revenue expenditure - Assessee's appeal allowed:MUMBAI ITAT;

2009-TIOL-795-ITAT-DEL.pdf

ACIT, New Delhi Vs M/s Excellent Land Developers (P) Ltd (Dated: December 11, 2009)

Income Tax Act – Section 28 read with Section 145 – Assessee was engaged in the business of real estate, and was the owner of one property as its stock in trade which was sold for a sum of Rs 100 lakhs. The said property was purchased for Rs 80 lakhs. Annual Rent received by assessee on said property was Rs. 24 lakhs. The AO made reference to DVO for determining fair market value under section 142A of the Act, where the DVO valued the property by rent capitalization method as per Rule 3 of Schedule 3 of the Wealth Tax Act, 1957 and determined the sale consideration at Rs. 300 lacs on the basis of Rent capitalization method – AO made addition accordingly.

On revenue appeal ITAT held -

++ Except for the suspicion or an opinion that the property is under valued, no material is available to the AO to presume that any “on money” was received by the assessee or that anything over and above the stated consideration accrued to the assessee.

++ Section 50C was introduced by Finance Act, 2002 with effect from 01/04/2003. However, the said provision is only with reference to computation of capital gain and being a deeming provision will strictly apply for the purpose of computing capital gain alone.

++ Decision of Hanemp Properties is a decision with reference to the determination of ‘purchase price' and not sale price, it has no application nor can it lead to the invocation of section 142A.

++ The AO is not justified in making any addition by estimating the fair market value where there is no finding that the consideration received by the assessee on sale of stock in trade is over and above the stated consideration.:DELHI ITAT;

2009-TIOL-794-ITAT-BANG.pdf

Ace Manufacturing Systems Ltd Vs ACIT, Bangalore (Dated: July 31, 2009)

Income Tax - Assessee Company claims deduction under sec 80IB - AO disallows on finding that the AY for which deduction claimed was the eleventh year and holding that there is no difference between trial production and commercial production for the purposes of sec. 80IB(14)(c)(i) - CIT(A) upholds AO's order - Held, the records show that the assessee company produced 3 numbers of MCV 400, which shows that machines produced in the year 1994-95 also continued to be produced in the year 1995-96 and, therefore, commercial production was commenced in the year 1994-95 relevant to the assessment year 1995-96 - initial assessment year in the case of the assessee for the purpose of commencement of production of machines is Assessment Year 1995-96 and therefore the claim for deduction under section 80IB stopped after 10 years - Assessee's appeal partly allowed.: BANGALORE ITAT;

SERVICE TAX SECTION

2009-TIOL-2106-CESTAT-MAD.pdf

CCE, Chennai Vs Panasonic Home Appliances (I) Co Ltd (Dated: September 16, 2009)

Service Tax – Input credit – Canteen services – Service tax credit on ‘Canteen Services' is admissible. (Para 3):CHENNAI CESTAT;

2009-TIOL-2105-CESTAT-BANG.pdf

CCE, Mangalore Vs M/s Padma Cable TV (Dated: July 31, 2009)

Service Tax – Cable Operator Service – Service tax paid along with interest before issue of show cause notice – Absence of any finding by lower authority for suppression of fact, willful mis-statement, fraud with an intention to evade service tax – Failure to pay service tax dues on time occasioned by ignorance of statutory requirements on the part of assessee, eligible for relief under Section 80 – Impugned order setting aside penalty upheld – Interest payment mandatory for delayed payment of service tax – Order portion setting aside interest liability set aside: BANGALORE CESTAT;

2009-TIOL-2104-CESTAT-DEL.pdf

CCE, Bhopal Vs M/s AVS Associates (Dated: August 18, 2009)

Service tax - Rent-a-Cab Service - Assessee is a partnership firm - one of its partners is also the Director of the company which received the rent-a-cab service - demand raised and penalty imposed - assessee argues it was under the belief that when rent-a-cab service is provided under lease agreement, it was not liable to service tax and that is why no service tax was collected from the service receiver - tax with interest deposited before issue of SCN - Commissioner(A) confirms penalty imposed under Sec 76, 77 and 78 - held, going by facts of the case, the Commissioner(A) has rightly upheld the penalty under Sec 77, and since the tax with interest has been deposited within 30 days, only 25% of penalty is leviable under Sec 78 - Assessee's appeal dismissed :DELHI CESTAT;

CENTRAL EXCISE SECTION

CIRCULAR

excircular908.pdf

CBEC issues clarification regarding peripheral activities for Area Based Exemption notification;

CASE LAWS

2009-TIOL-716-HC-P&H-CX.pdf + penalty story.pdf

CCE, Ludhiana Vs M/s B T Steels Limited (Dated: December 15, 2009)

Central Excise – Compounded levy Scheme – Penalty under Rule 96ZO mandatory; no discretion: the provisions for imposing penalty under Rule 96ZO (3 )( ii) of the Rules are held to be mandatory and there is no discretion vested in any authority to reduce the aforesaid amount of penalty on the ground that there was no intention of evading payment of duty or commission of fraud, misrepresentation etc.

No retrospective application of Trade Notice: The trade notice no. 31/99 dated 10.08.1999 issued by the Commissioner of Central Excise, Chandigarh cannot be applied to the period of 24.01.1988 to 09.02.1998 as such trade notice cannot have any retrospective effect. It is well settled that any instructions or bye-law cannot be issued with retrospective effect nor it can be interpreted so as to give retrospective operation.: PUNJAB AND HARYANA HIGH COURT;

2009-TIOL-2103-CESTAT-MAD.pdf

CCE, Pondicherry Vs M/s MRF Ltd (Dated: September 8, 2009)

Central Excise – Valuation – Intermediate products – CAS4 – Deductions – For valuation of the intermediate goods CAS4 standard can be applied even for the period prior to 13.02.03. The actual turnover discount given as certified by the Chartered Accountant is admissible. When a manufacturer has more than one factory and the goods are sold at the same price, the deduction towards taxes paid such as additional sales tax and surcharge on sales tax can be computed and allowed on the basis of such uniform price. ( Para 3, 6 & 7) :CHENNAI CESTAT;

2009-TIOL-2102-CESTAT-BANG.pdf

CCE, Mysore Vs M/s San Engg & Locomotives Co Ltd (Dated: May 5, 2009)

Central Excise – No infirmity in reversal of CENVAT credit on goods used in manufacture of exempted goods cleared to R & D Establishment under Ministry of Defence – Rule 6(3)(b) of CENVAT Credit Rules not applicable – Impugned order upheld:BANGALORE CESTAT;

2009-TIOL-2101-CESTAT-BANG.pdf

M/s Ultra Tech Cement Ltd Vs CCE, Tirupati (Dated: August 5, 2009)

Central Excise – CENVAT Credit availed on MS sheets, plates angles etc as ‘capital goods' and reversed under protest during pendency of adjudication of show cause notices denying credit – Proceedings culminated in an O-I-O allowing credit which was not appealed by Revenue – Assessee eligible for taking re-credit – Impugned order not sustainable, liable to be set aside:BANGALORE CESTAT;

CUSTOMS SECTION

NOTIFICATION

ctariff09_143.pdf

Govt extends anti-dumping duty on Sodium Nitrite on modified rates;

CASE LAWS

2009-TIOL-715-HC-AP-CUS.pdf + sravani story.pdf

M/s Sravani Impex Pvt Ltd Vs Additional Director General Directorate Of Revenue Intelligence, Chennai (Dated: September 24, 2009)

DEPB obtained by fraud – Customs has jurisdiction to issue SCN - Taking the show cause notices at face value, and accepting the allegations made therein as true, the petitioner would not have been entitled to claim the benefit of DEPB credit i.e., import duty exemption but for the false declaration in the shipping bill.  The DEPB scrips, fraudulently obtained by the petitioner, has resulted in the revenue being deprived of the Customs (Import) duty legitimately due to them.  In Jain Shudh Vanaspati Ltd , the Supreme Court held that, as the clearance order, was obtained by fraudulent means, it would not bar issuance of a show cause notice for confiscation of the goods, that fraud, if established, unravelled all, that an order, when obtained by fraudulent means, did not have to be set aside before the ill-effects of the fraud could be set right by initiation of the process of confiscation of the fraudulently cleared goods.   As the DEPB scrips have, admittedly, been sold to third parties, the only course open to the Customs Officers is to demand repayment of DEPB credit (i.e., Customs (Import) duty) from the petitioner.  Exercise of power to make such a demand is referable to Section 28(1) of the Customs Act.  The impugned show cause notices, which propose a demand for repayment of DEPB credit under Section 28(1) as it was availed by resort to fraudulent over-valuation of export consignments, cannot be said to have been issued without jurisdiction.

Fraud unravels all: Questions regarding lack of jurisdiction of Customs officers to demand repayment of customs duty benefits, extended earlier to the petitioner by way of DEPB scrips, must be examined in the context of the allegations in the impugned show cause notice that the DEPB scrips were obtained by fraudulent misrepresentation.  

Leave to Appeal rejected: After pronouncement of judgment, the Counsel for the petitioner, sought leave to prefer an appeal to the Supreme Court. As no substantial question of law, either on the interpretation of the Constitution or of general importance, which needs to be decided by the Supreme Court arises for consideration in these writ petitions, the High Court saw no reason to grant leave as sought for.  Oral application for leave is rejected.: ANDHRA PRADESH HIGH COURT;