Mr Prakash Chandra joins as new CBDT Member;

Service Tax - Accounting Codes for new services - issued long ago, but kept a close secret;

Avoiding harassment in course of search of air passengers by Air Intelligence Units/Investigation Units of Income Tax Department - CBDT guidelines;

Establishment of Branch Office (BO)/Liaison Office (LO) in India by Foreign Entities - Eligibility Criteria and Procedural Guidelines;

Establishment of Branch (BO) / Liaison Offices (LO) in India by Foreign Entities — Delegation of Powers;

CBDT Member S S Khan retiring today; CBDT promotes three CITs as CCIT;

Centre holds meet on Telangana; Congress Ministers agree to withdraw resignation;

Railways to focus on e-procurement system ;

Hyderabad CBI wraps up probe in 66 cases, including Satyam Computers;

TIOL COMMENTARY

ddt 31 dec.pdf

Service Tax - Accounting Codes for new services – issued long ago, but kept a close secret;

cobweb.pdf

'Intaxicating' 2009 - Rooting history for shaping up less taxing future!

RBI CIRCULAR

rbi09cir024.pdf

Establishment of Branch (BO) / Liaison Offices (LO) in India by Foreign Entities — Delegation of Powers;

rbi09cir023.pdf

Establishment of Branch Office (BO)/Liaison Office (LO) in India by Foreign Entities - Eligibility Criteria and Procedural Guidelines;

MIXED BUZZ

mbuzz1171.pdf

Railways to focus on e-procurement system;

mbuzz1170.pdf

Hyderabad CBI wraps up probe in 66 cases, including Satyam Computers;

PROMOTION

CBDT Order 191 2009.pdf

CBDT Member S S Khan retiring today; CBDT promotes three CITs as CCIT;

INSTRUCTION

letter.pdf

Avoiding harassment in the course of enquiry/search of the air passengers by the Air Intelligence Units/Investigation Units of the Income Tax Department - Reg.;

letter.pdf

Avoiding harassment in the course of enquiry/search of the air passengers by the Air Intelligence Units/Investigation Units of the Income Tax Department - Reg.;

CASE LAWS

2009-TIOL-135-SC-IT.pdf + rajendran chingaravelu story.pdf

Mr Rajendran Chingaravelu Vs Addl Commissioner, Income Tax Dept. & Ors (Dated: November 24, 2009)

Carrying cash of Rs. 65 Lakhs is not an offence, but investigation agencies like Income tax cannot be faulted for their bona fide actions in trying to find out the source and use; In such a situation, the rights of the passenger will have to yield to public interest: When the bonafides of a passenger carrying an unusually large sum, and his claims regarding the source and legitimacy, have to be verified, some delay and inconvenience is inevitable. The inspecting and investigating officers have to make sure that the money was not intended for any illegal purpose. Any bonafide measures taken in public interest, and to provide public safety or to prevent circulation of black money, cannot be objected as interference with the personal liberty or freedom of a citizen.

The actions of the officers of the investigation wing in detaining the appellant for questioning and verification, and seizing the cash carried by him, were bonafide and in the course of discharge of their official duties and did not furnish a cause of action for claiming any compensation.

The nation is facing terrorist threats. Transportation of large sums of money is associated with distribution of funds for terrorist activities, illegal pay offs etc. There is also rampant circulation of unaccounted black money destroying the economy of the country. In this background if the officers wanted to fully satisfy themselves that the funds were not intended for any illegal purposes, such action cannot be termed as highhanded or unreasonable.

It is not only the security/intelligence personnel who require to be sensitised, but also the air travelling public some of whom throw tantrums and create scenes at Airports, even for minimum delays and checking procedures.

Income Tax Department apologises for causing inconvenience: The department's additional affidavit dated 23.11.2009 expressed regret for the inconvenience caused to the appellant and also assuages the apprehension felt by appellant that he would be harassed for having taken the department to court. The remedial action by the department and the expression of regret serves and achieves the purpose of appellant filing the writ petition.

Premature leakage to the media on pending investigation, not correct: the appellant's grievance in regard to media being informed about the incident even before completion of investigation, is justified. There is a growing tendency among investigating officers (either police or other departments) to inform the media, even before the completion of investigation, that they have caught a criminal or an offender. Such crude attempts to claim credit for imaginary investigational breakthroughs should be curbed. Even where a suspect surrenders or a person required for questioning voluntarily appears, it is not uncommon for the Investigating Officers to represent to the media that the person was arrested with much effort after considerable investigation or a chase. Similarly, when someone voluntarily declares the money he is carrying, media is informed that huge cash which was not declared was discovered by their vigilant investigations and thorough checking. Premature disclosures or `leakage' to the media in a pending investigation will not only jeopardise and impede further investigation, but many a time, allow the real culprit to escape from law.: SUPREME COURT;

2009-TIOL-730-HC-DEL-IT.pdf

Mawana Sugars Ltd Vs DCIT (Dated: November 19, 2009)

Income Tax – Section 90 - Dividend received by a company resident in India, from a company resident in UK - tax withheld in UK – assessee claims credit for tax withheld in UK against Indian Income - ITAT ( 2009-TIOL-268-ITAT-Del ) denies the claim for credit assuming that assessee is claiming a refund in India for UK tax - Assessee files an appeal before High Court – Held that after quoting provisions of Article 24 of Indo-UK DTAA and after observing that assessee's case is covered within Article 24 of DTAA, ITAT has not given any reasons for denying claim made by assessee – For this reason alone matter remitted back to ITAT. : DELHI HIGH COURT;

2009-TIOL-729-HC-ALL-IT.pdf

E E Minor Irrigation Banda Vs CIT, Kanpur (Dated: December 17, 2009)

Income tax - Sec 272A(2)(c), 194C - Assessee is a state government arm - deducts tax at source under Sec 194C and deposits the same in Govt account - fails to file Annual TDS Returns for several AYs - AO imposes penalty - CIT(A) and Tribunal confirm the same as assessee fails to provide valid reasons for non-filing of returns - held, since there is no loss of revenue to the Govt, merely for non-filing of returns will not attract rigour of penalty - Tribunal fails to examine whether there was valid reason for the same as return-filing is a ministerial job and assessee cannot be penalised for the same - Assessee's appeal allowed: ALLAHABAD HIGH COURT;

2009-TIOL-808-ITAT-MAD.pdf

M/s Rajkumar Exports Pvt Ltd Vs ACIT, Chennai (Dated: April 9, 2009)

Income Tax - Section 40A(3), 80IA - assessee engaged in the business of manufacturing cashew nuts from raw cashews which is exported and is also sold in the domestic market - AO makes disallowance u/s 40A(3) - CIT(A) allows part relief - Ground 1 is in respect of CIT(A) who has erred in holding that the sum disallowed by the AO u/s 40A(3) in respect of cash payments is only a deemed income and hence not entitled to deduction u/s 80IA. – Held, the section 80IA is part of Chapter Vl-A of the Act and the deduction is available from the 'profits and gains of business derived by an undertaking specified therein. The disallowances made by the AO under different sections from 30 to 43D of the Act do not change the nature of the 'income' that is arrived at - assessee's appeal allowed.:CHENNAI ITAT;

2009-TIOL-807-ITAT-BANG.pdf

M/s St John's Medical College Hospital Vs ACIT, Bangalore (Dated: August 21, 2009)

Income Tax - Section 194J, 201, 201(1A) - assessee Society owns Medical College and Medical College Hospital - appoints doctors and staff to undertake teaching of students in the college. On verification, AO notices that TDS deduction at 5% u/s 194J on certain payments to the doctors. These payments  pertain to the evening consultations undertaken by the doctors - AO comes to the conclusion that the payments received by the doctors for evening consultations within the definition of 'salary' and 'tax deducted at source' is deductible u/s 192B and not u/s 194J and, thus, the assessee is deemed to be 'assessee in default' for the short-deduction of tax u/s 201 and, accordingly, interest u/s 201(1A) is leviable for the AYs under dispute - No relief from CIT(A) - Held, payments made to the doctors for their evening consultations fall within the definition of "SALARY" and the tax for the same should have been deducted u/s 192 and NOT u/s 194J of the Act as resorted to by the assessee. The assessee was deemed to be "assessee in default" for short-deduction of tax u/s 201 - AO was justified in levying of interest u/s 201(1) and 201(1A) for the reasons (a) the assessee had failed to bring any documentary evidence to establish that the evening consultation was not the venture of the assessee (hospital), (b) the doctors who were allowed to practise in the evening consultations, primarily the employees of the assessee (hospital) (c) if the services are terminated/dismissed by the said College" indicates that the agreement for evening practice was entered into by virtue of being an employee of the assessee and was co-terminus with the existence of employer-employee relationship; (d) the services rendered by the doctors was categorized as "contract of service" and NOT 'contract for service', (e) There is lots of similarity between morning and evening consultation (f) the control exercised by assessee is same in the morning as well as in the evening, and the nature of relationship continues to be that of employer-employee. Assessee's appeal dismissed.:BANGALORE ITAT;

SERVICE TAX SECTION

service_tax_code.pdf

Service Tax - Accounting Codes;

CASE LAWS

2009-TIOL-2144-CESTAT-MUM.pdf + sidal story.pdf

M/s Sidel India Pvt Ltd Vs CCE, Pune-I (Dated: December 9, 2009)

From face of the bills, it cannot be determined as to what purposes the mobile phones are being used - No statement of any employee is on record with regard to the use of the phones - Appellant company has given these mobile phones to their employees for the use of business purpose only, which was never controverted by the lower authorities through any evidence – Cenvat Credit of ST allowed by CESTAT:MUMBAI CESTAT;

2009-TIOL-2143-CESTAT-DEL.pdf

M/s Shri Rakesh Shukla Vs CCE, Bhopal (Dated: November 9, 2009)

Appellant providing rent-a-cab service to M/s Power Grid Corporation and filing returns periodically - for period 2004-05, they showed that they had recovered Rs.1,76,487/- as Service charges - however, TDS certificate issued by Power Grid Corporation indicated an amount of Rs.2,19,228/- paid as service charges - Department alleging that the entire amount shown in TDS certificate is different and service tax on the same has not been paid to Department - Demand issued and confirmed with penalty and interest - Appellant admitting that due to oversight service tax not paid on balance sum of Rs.42,741/- - subsequently service tax paid along with interest - TDS certificate issued by service recipient cannot be treated as a separate income different from service charges mentioned in the service tax return by the appellant so as to demand Service Tax - Authorities below have not indicated that the appellant has rendered services to any other party other than Power Grid Corporation - Order confirming service tax demand, penalty, interest set aside and matter remanded for fresh consideration.:DELHI CESTAT;

2009-TIOL-2142-CESTAT-AHM.pdf

CCE, Ahmedabad Vs M/s Sagar Enterprises (Dated: October 30, 2009)

Appellant started functioning as a labour contractor from April, 2005- department pointing out that service tax is required to be paid w.e.f 16.06.2005 - appellant got registered and paid the service tax amount with interest on 22.10.2007 - subsequently in April 2008, SCN issued and confirmed along with imposition of penalty and interest - Commissioner(A) reducing penalty to 25% under section 78 of Finance Act, 1994 - Appellant seeking setting aside of penalties pleading ignorance of law - Revenue is in appeal against reduction of penalty - no evidence to show intention to evade tax- provisions of Section 73 (3) apply to the present case and the penalties imposed under various Sections of Finance Act, 1994 are not imposable - Order as far as it relates to imposition of penalties set aside - Revenue appeal rejected.:AHMEDABAD CESTAT;

CENTRAL EXCISE SECTION

NOTIFICATION

exnt09_27.pdf

CCE (A) Manglore vested with powers to adjudicate certain cases;

CASE LAWS

2009-TIOL-2148-CESTAT-MUM.pdf + colgate story.pdf

Colgat Palmolive (I) Ltd Vs CCE, Mumbai (Dated: November 26, 2009)

Valuation – Section 4A of the CEA, 1944 - Toothpaste cleared in combination pack with a Toothbrush inserted in the carton at the premises of the marketing agent – Toothpaste manufactured by the assessee to be valued only on its MRP and not of the combination pack – CESTAT sets aside demand and penalty.

CESTAT's observations –

+ that toothpaste is admittedly an item notified under section 4A of Central Excise Act, 1944, whereas toothbrush was not so notified though, in respect of both these items, there was a requirement under the Standards of Weights and Measures Act, 1976 and the Rules made thereunder to declared on the package the retails sales price of the goods;

+ that toothbrush was chargeable to ‘nil' rate of duty during the material period;

+ that, in the form in which the goods were removed from the assessees factory, they did not include any toothbrush;

+ that only one MRP for toothpaste was printed on the pack at the time of its clearance from the factory; and

+ that the combi-pack came into existence only at the premises of the assessee's marketing agent.

“We find that the learned SDR has argued beyond the scope of the case made out by the department in the show-cause notice . The show-cause notice simply demanded differential duty from the assessee on the ground that the product toothpaste is covered under section 4A of the Act and duty thereon is required to be discharged as per the MRP at which the goods were sold to the ultimate consumer. The show-cause notice clearly stated that the brush was inserted in the pack at the premises of the assessee's marketing agent subsequent to clearance of the toothpaste from the assessee's factory. It is settled law that excisable goods have to be assessed to duty in the form in which they are cleared from the factory of production, whether under section 4 of under section 4A. Had the combi-pack containing the paste and brush been cleared from the assessee's factory with a combined MRP printed thereon alongside individual MRP's, the position would have been different. In the instant case, the toothpaste alone was cleared in packed condition, with a single MRP thereof printed on the pack, from the assessee's factory. For one period, this MRP was Rs.42/- and, for the other period, it was Rs.28.50. We find that the assessee paid duty on this basis in terms of Section 4A of the Act. They are not liable to pay any additional amount of duty on the goods in question .”

Demands and penalty set aside and appeals allowed.:MUMBAI CESTAT;

2009-TIOL-2147-CESTAT-MAD.pdf

CCE, Tirunelveli Vs M/s DCW Ltd (Dated: September 23, 2009)

Central Excise – MODVAT – Debit of CVD in DEPB licence – Eligibility of credit – The payment of additional duty of Customs by way of debit in DEPB licence is not sufficient to be eligible to the benefit of MODVAT credit. (Para 2)

Appeals – A s many appeals as there are orders are required to be filed, and the fact that there is only one assessee, single appeal is sufficient. (Para 3) :CHENNAI CESTAT;

2009-TIOL-2146-CESTAT-MUM.pdf

Hercules Hoists Ltd Vs CCE, Mumbai-III (Dated: October 19, 2009)

Availment of credit on goods received under Rule 16(2) but later on cleared as scrap on payment of duty on lower transaction value - argument that original supply of goods was only trading activity hence no duty demand survives cannot be accepted being too belated - Rule 16(2) prescribes for payment of duty equal to amount of credit – duty demand sustainable. Appellant suppressed the facts in ER1 returns hence extended period rightly invoked - penalty sustainable.:MUMBAI CESTAT;

2009-TIOL-2145-CESTAT-DEL.pdf

M/s Nu Tech Packagings Vs CCE, Noida (Dated: August 27, 2009)

Central Excise - Job-work - Manufacture - It is not clear whether the appellants were manufacturing books as a whole or they were only undertaking processes of laminating covers for the books and binding the books. The admissibility or otherwise of the benefit of exemption under the Notifications No.49/87, 101/94, has not been specifically dealt with by the Commissioner. Whether art and development charges have to be amortized or not has not been considered. Matter remanded. (Para 4):DELHI CESTAT;

CUSTOMS SECTION

2009-TIOL-2141-CESTAT-MUM.pdf

CC, Mumbai Vs Gibson Guitar Corpn India (Dated: October 14, 2009)

Import without IEC - Main issue of confiscation under Section 111(d) does not survive for reason of voluntary payment of fine and penalty - Increase of fine & penalty on ground of respondent being habitual offender without giving sufficient past offences not correct - Appeal and stay application disposed off in above terms. .:MUMBAI CESTAT;