Income Tax Department - Winds of Change - Vision 2020 (See 'DDT' Column)

Income Tax Ombudsman post in Kochi falling vacant;

Guidelines on trading of Currency Futures in Recognized Stock Exchanges;

Acquisition bug bites MTNL; State telecom giant eyes African company;

India signs MoU with Finland in the field of ICT;

Indian exports to Latin America jumps by 178% in last four fiscals;

India, China to step up bilateral ties: Commerce Minister;

Ministerial Group debates on providing Financial Services on Mobile phones;

Time for comments on tariff issues for DTH services extended;

FM invites House Panel members to send inputs on Budget ;

TIOL COMMENTARY

ddt 19 jan.pdf

Does construction of railway track amount to manufacture?

guest column.pdf

Rectification of mistakes – whether permissible in case of subsequent contrary decision?

CASE LAWS + ANALYSIS

2010-TIOL-55-HC-MUM-STATE-CX.pdf + karan story.pdf

Karan Dileep Nevatia Vs UoI (Dated: January 5, 2010)

State Excise - International Policy without Indian Legislation - Courts cannot interfere; The stipulations of the said treaties duly ratified by the Central Government do not by virtue of the treaties alone have the force of law. They are not by their own force binding upon Indian nationals. When the treaty or agreement restricts or affects the rights of citizens or others or modifies the law of India, it is necessary for Parliament to make a law in respect thereof under Article 253 of the Constitution and not otherwise. In any case, it is open to Parliament to refuse to perform such treaties. Admittedly, in this case, Parliament has not made any law under Article 253 of the Constitution. Therefore, the stipulations in the instant treaties do not have a binding effect. The argument that legislation is not a pre-requisite for the court to take cognizance and apply international policy must, therefore, be rejected.

State has a very wide discretion in selecting the persons or objects it will tax; imported wines can be taxed higher . In a long line of judgments, the Supreme Court has held that the State has a very wide discretion in selecting the persons or objects it will tax , and that exercise is not open to attack unless within the class chosen by the State, there is discrimination. Undisputedly, the State has wide discretion to impose higher taxes or levies. Several fiscal considerations are involved in the Government's decision to impose higher tax on certain items. The courts are therefore, not expected to interfere with the discretion of the State unless a very strong case of hostile discrimination is made out and unless the taxing statute operates unequally within the range of its selection. No such case is made out by the petitioner.: BOMBAY HIGH COURT;

DEPUTATION POST

vacancy_ombudsman.pdf

Income Tax Ombudsman post in Kochi falling vacant;

RBI CIRCULAR

rbi09cir027.pdf

Guidelines on trading of Currency Futures in Recognized Stock Exchanges;

MIXED BUZZ

mbuzz1236.pdf

India signs MoU with Finland in the field of ICT;

mbuzz1235.pdf

Indian exports to Latin America jumps by 178% in last four fiscals;

mbuzz1234.pdf

India, China to step up bilateral ties: Commerce Minister;

mbuzz1233.pdf

Time for comments on tariff issues for DTH services extended;

mbuzz1232.pdf

Ministerial Group debates on providing Financial Services on Mobile phones;

2010-TIOL-31-ITAT-CHD-SB.pdf + quark story.pdf

M/s Quark Systems Pvt Ltd Vs ITO, Chandigarh (Dated: October 22, 2009)

Income tax - Transfer Pricing - Sec 92 - Assessee is a fully owned subsidiary of a Switzerland-based company - it is a captive unit working exclusively for the parent compamny - enters into contract with the parent company to provide technical and advisory services - parent company makes specialised software for the Media companies which is used for page layout of newspapers and periodicals - assessee caters to technical requirements of the parent company's clients in India - for the services rendered, it earns costs plus 13.5% mark up - transactions with AE - computation of Arm's Length Price (ALP) - whether selection of comparables with negative net worth, low turnover, start-up status and also extraordinatory profit is fair for determining mean profits required for ALP - whether FAR analysis parameter can be loosely applied to select comparables

Assessment proceedings - reference made to TPO for determining ALP - TPO notices assessee has employed TNM Method - also notices one of the comparabales chosen by the assessee has suffered huge net loss - SCN issued for exclusion of the continuously loss-making comparable which is also a start-up company - CIT(A) goes with the AO - issue goes to the Tribunal where the assessee pleads for admission of an additional ground to reject one of the comparables suggested by it on the ground that the same has shown extraordinary profits which is another extreme if loss-making is one extreme:CHANDIGARH ITAT 'SPECIAL BENCH';

2010-TIOL-30-ITAT-MUM.pdf

M/s Sheth Developers Pvt Ltd Vs DCIT, Mumbai (Dated: October 12, 2009)

Income Tax - Section 158BC, 80IB(10) - Assessee group is one of leading builders and developers carrying out its business activity - During the course of search operations, a large number of papers found with notings indicating transactions involving the sale of flats and shops at different sites and complexes developed by the assessee - AO after considering the seized material and assessee's submission computed the undisclosed income of the assessee vide order passed u/s 158BC for the block period - CIT(A) holds that deduction u/s.80IB is admissible on the on money receipts received from the sale of flats and shops, partly confirms the addition of unaccounted expenses and partly allows the Assesee's Appeal - Held, the assessee has not given any working on the basis of the said seized material to show the exact amount of undisclosed income according to the assessee. The onus has not been discharged by the assessee. In the absence of any ground the AO was justified in invoking the provisions of section 145. AO was not justified in assessing the whole receipts of on-money on the sale of flats and shop  as undisclosed income instead of applying the project-wise net profit ratio on the said receipts of on-money. keeping in view that there is no dispute that various building projects carried on by the assessee are eligible for deduction u/s. 80IB(10), and in the absence of any material to show that the said projects are not eligible for deduction u/s 80IB(10). CIT(A) fully justified in directing the AO to restrict the undisclosed income as disclosed by the assessee after allowing deduction u/s. 80IB(10). The grounds taken by the assessee partly allowed and Revenue's ground rejected.:MUMBAI ITAT;

2010-TIOL-53-HC-P&H-IT.pdf

Dinesh Sharma Vs CCIT (Dated: January 12, 2010)

Income tax - Sed 158BFA(1)(a), 245D(4) - Search - Assessee files return after expiry of statutory period - block assessment order passed - assessee moves Settlement Commission - Commission holds assessee is liable to pay interest - assessee files application for waiver of interest before CCIT - application rejected on the ground that the Commission's order cannot be amended as per provisions of Sec 245(1) - held, there is no infirmity in the CCIT's view as the Commission is not subordinate to the Board and once it orders levy of interest, it cannot be waived off by amending its order - assessee can approach only the Commission for such waiver if any legal remedy is available as per the law - Assessee's appeal dismissed: PUNJAB AND HARYANA HIGH COURT;

2010-TIOL-52-HC-HP-IT.pdf

M/s D J Stone Crusher Vs CIT (Dated: December 16, 2009)

Income tax - Sec 80IA, 80IB - Assessee runs stone crushers - claims its activity of crushing boulders and stones into grit is a process of 'manufacture' - deducton of profit claimed u/s 80IA - AO disallows - held, issue is no longer res integra as crushing of boulders ans stones into requisite size of gitti or bajri either mechanically or electrically does amount to manufacture as the resultant article has its own commercial identity, character and use - Assessee's appeal allowed: HIMACHAL PRADESH HIGH COURT;

2010-TIOL-51-HC-MUM-IT.pdf

M/s Shivashahi Punarvan Prakalp Ltd Vs UoI (Dated: January 5, 2010)

Income tax - Dispute between Income Tax and a State PSU – approval of the Committee on Disputes not required: BOMBAY HIGH COURT;

SERVICE TAX SECTION

CIRCULAR

sercir120.pdf

Problems faced by exporters in availing refund of excess credit;

CASE LAWS

2010-TIOL-113-CESTAT-BANG.pdf

M/s Venpakal Advertisers Vs CCE, Cochin (Dated : May 22, 2009)

Service Tax – Advertising Agency service – Agreement with KSRTC for right to sell space for display boards, signages etc – Contentions raised by appellants not examined in detail by adjudicating authority – Matter remanded for de novo adjudication with a direction to pass a speaking order: BANGALORE CESTAT;

2010-TIOL-112-CESTAT-DEL.pdf

M/s Insulators And Electricals Company Vs CCE, Bhopal (Dated : October 14, 2009)

Cenvat credit on the service tax paid on GTA service – No allegation in the show-cause notice that the goods were not supplied at the customer's place – Credit available in view of Larger Bench decision in ABB Ltd. Vs. Commissioner of C. Ex. & ST Bangalore ( 2009-TIOL-830-CESTAT-BANG-LB ) & P&H High Court decision in Ambuja Cements Ltd. Vs. Union of India - Appeal allowed with consequential relief.:DELHI CESTAT;

2010-TIOL-111-CESTAT-DEL.pdf

M/s Diamond Cable Network Vs CCE, Jaipur (Dated : September 30, 2009)

ST - Penalty - Assessee is a small time cable operator - demand confirmed and penalty under Sections 76, 77 and 78 imposed - Assessee deposits the tax with interest and seeks invocation of Sec 80 - held, since the assessee was a registered entity and was paying tax, there is no justification for not paying tax - however, since there is no suppression, separate penalty under Sec 78 is not required - penalty under Sec 76 reduced - Assessee's appeal allowed:DELHI CESTAT;

CENTRAL EXCISE SECTION

2010-TIOL-05-SC-CX.pdf + sc story.pdf

CCE Vs M/s International Auto Limited (Dated : January 8, 2010)

Central Excise – Supplementary Invoice – Interest – when differential duty is payable, interest is liable – SKF decision followed - 2009-TIOL-82-SC-CX- Supreme Court : What does differential price signify? It signifies that value, which is the function of the price, on the date of removal/clearance of the goods, was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced duty. This enhanced duty is on the corrected value of the goods on the date of removal. When the differential duty is paid after the date of clearance, it indicates short- payment/short-levy on the date of removal, hence, interest which is for loss of revenue, becomes leviable under Section 11AB of the Act.:SUPREME COURT;

2010-TIOL-116-CESTAT-MAD.pdf

M/s Thiru Arooran Sugars Ltd Vs CCE, Pondicherry (Dated : October 20, 2009)

Central Excise – CENVAT Credit – credit on parts / components of Boilers and Turbines transferred to another unit of the same manufacturer – not a case covered under Rule 8 of the CENVAT Credit rules to deny the credit on the ground that the inputs were not transferred - Since the inputs had been utilized earlier and there is nothing remaining to be transferred of the said inputs, Rule 8 cannot have any application to the present case.:CHENNAI CESTAT;

2010-TIOL-115-CESTAT-KOL.pdf

M/s Tata Motors Ltd Vs CCE & ST, Jamshedpur (Dated : September 15, 2009)

Central Excise - CENVAT - Inputs - Generation of electricity - Proportionate credit - Revenue is asking for reversal of the credit in respect of the inputs which are used in the generation of electricity which is not used in or in relation to the final product. HELD - The manufacturer is not entitled for the credit in respect of the inputs used in relation to generation of electricity which is sold outside the factory of production. (Para 6): KOLKATA CESTAT;

2010-TIOL-114-CESTAT-BANG.pdf

CCE, Visakhapatnam Vs M/s Sri Sarvarya Sugars Ltd (Dated : July 31, 2009)

Central Excise – ‘Press Mud' emerging as by product during manufacture of sugar, molasses and denatured spirit not excisable goods – Payment of 10% in terms of Rule 6 of CENVAT Credit Rules not required on clearance of ‘Press Mud' – No merits in Revenue appeal: BANGALORE CESTAT;

CUSTOMS SECTION

2010-TIOL-54-HC-MAD-CUS.pdf + delta story.pdf

M/s Delta Power Solutions Pvt Ltd Vs CC, Chennai (Dated: December 2, 2009)

Customs – valuation -related person – Extra Duty Deposit of 1% - assessment to be treated as provisional – Final assessment to be passed: The grievance of the petitioner arises only on account of the fact that in the background of the order made long after the import, the respondents should have either made a final assessment without the demand for 1% EDD or alternatively with 1% EDD , it could only be a provisional assessment. Hence, with the collection of 1% EDD , the contention of the respondents that it is the final assessment clearly goes against the order dated 6.6.2008. In the circumstances, the collection of 1% EDD is totally unjustified. Hence, the petitioner has to be granted the refund of the said amount in terms of the order dated 6.6.2008 Circular 268/07 dated 10.12.2007 within the time frame as referred to in the provisions of the Act or otherwise pass the assessment and grant the refund to the petitioner.: MADRAS HIGH COURT;