ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE Dt 22-2-2010 Volume 1 : Part 8

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 22-2-2010

Volume 1 : Part 8

 

 

REPORTS

>> Where dispute relating to method of billing for supplies, liability arises only on settlement : ITO v. Sicgil India Pvt. Ltd. (Chennai) p. 749

>> Deduction u/s. 80-IB to be worked out after setting off of loss of earlier year : ITO v. Sicgil India Pvt. Ltd. (Chennai) p. 749

>> Where order under appeal not erroneous or based on insufficient material and not needing fresh evidence, restoration of matter not justified : ITO v. Sicgil India Pvt. Ltd. (Chennai) p. 749

 

>> Assessment cannot be set aside solely on ground that direction for special audit invalid : Jai Bhawani Concast P. Ltd. v. Dy. CIT (Delhi) p. 762

 

>> Addition in respect of items not mentioned in inventory of closing stock justified : Jai Bhawani Concast P. Ltd. v. Dy. CIT (Delhi) p. 762

 

>> Charging of interest in respect of advance tax is consequential in nature : Jai Bhawani Concast P. Ltd. v. Dy. CIT (Delhi) p. 762

 

>> Income from sale of shares held as investment treated as long-term capital gain and not business income : Suresh Kumar Seksaria v. Asst. CIT (Mumbai) p.783

 

>> Building owned by assessee and building taken on lease treated as building owned by assessee under Expln. 1 to s. 32(1), fall under same block of assets : AO computing depreciation on WDV of block of assets u/s. 43(6)(c) justified : Anand and Anand v. Asst. CIT (Delhi) p. 788

 

>> Short fall between individual WDV and amount realised on transfer to be reduced from aggregate WDV of block of assets : Anand and Anand v. Asst. CIT (Delhi) p. 788

 

>> Assessee not entitled to exclusion of capital gains in computation of book profit under Explanation to s. 115JB : S. 54EC not applicable : Growth Avenue Securities P. Ltd v. Dy. CIT (Delhi) p. 807

NEWS-BRIEFS

 

>> Rajasthan High Court ruling on clamp down of rent arrears irks Supreme Court

A Rajasthan High Court ruling, giving retrospective effect of the special provision for assessing arrears of rent provided under section 25B of the Income-tax Act, has irked the Supreme Court.

 

A Bench comprising Justices of Supreme Court took strong exception to the High Court ruling on the issue. The High Court had said that the provisions of section 25B of the Income-tax Act is clarificatory in nature and should be given retrospective effect.

 

The advocate on behalf the Trust, said "The High Court failed to appreciate that the question or issue regarding section 25B of the Income-tax Act did not at all arise out of the orders of the Appellate Tribunal and therefore, the High Court did not have the jurisdiction under section 250A of the Income-tax Act to go into or decide that question", in its Special Leave Petition. Section 25B was inserted by the Finance Act, 2000 which lays down that where the owner of the property received any amount, by way of arrears of rent from such property, the amount so received, after deducting a sum equal to one-fourth of such amount for repairs of, and collection of rent from, the property, shall be deemed to be the income chargeable under the head "income from house property" as the income of the previous year in which such rent is received. This will be the position even if the assessee is not the owner of that property in the year of receipt of enhanced rent. It was made effective from April 1, 2001. However, the question was left open whether it can be applied retrospectively.

 

DMRAWA Trust said, "the High Court completely failed to appreciate that section 25B was inserted into IT Act by the Finance Act, 2000 with effect from April 1, 2001 and therefore, section 25B could not in law be given retrospective effect in respect of any earlier assessment years".

 

Secondly, "the High Court completely failed to appreciate that legal position prevailing prior to April 1, 2001 as laid down by several High Court judgments was entirely different from that contained in section 25B and that the said previously obtaining legal position was consequently and materially changed by the amendment made by insertion of section 25B in IT Act and therefore, section 25B could not possibly be considered to be a clarificatory provision", said the Trust.

 

On appeal, the ITAT had said that the amount of retrospective rent increase could not be included in the annual value of the property. It had also held Department's reassessment notices as illegal. It was challenged by the Department in the High Court. [Source : www.economictimes.com dated February 8, 2010]

 

 

>> BDT to fight back advance tax payments of top companies

Big corporations will now find it difficult to defer their advance tax payments. In a bid to meet its revenue collection targets, the Central Board of Direct Taxes (CBDT) has decided to monitor advance tax payments by top companies and persuade them not to defer such payment as self-assessment tax for the next financial year.

 

CBDT convened a meeting of Chief Commissioners of income-tax to discuss strategies for achieving the revenue collection target budgeted at Rs. 3.7 lakh crore for the current financial year (2009-10) and internally reset at Rs. 4 lakh crore. The strategies discussed during the meeting also included monitoring tax payments of loss-making companies, liable to minimum alternate tax (MAT) at an enhanced rate of 15 per cent., and persuading them to make such payment as advance tax during the current financial year. They also decided to monitor tax deducted at source (TDS) deposits by private deductors as well as State Governments and local bodies. The Government said it would also focus on the collection of tax arrears, as well as tax demand raised in scrutiny assessments during 2009-10.

 

The Revenue Department will have to collect over Rs. 1.2 lakh crore as direct taxes in the next three months to meet its target of Rs. 3.7 lakh crore.

 

Last year, the Government had missed its target of Rs. 3.45 lakh crore due to the economic slowdown, but this year it is relying on direct tax collections to make up for any shortfall in indirect tax receipts. [Source : www.businessstandard.com dated February 5, 2010]

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In penalty proceedings, assessee can always show that finding recorded in quantum proceedings is neither reliable nor sufficient to impose penalty

In penalty proceedings, assessee can always show that finding recorded in quantum proceedings is neither reliable nor sufficient to impose penalty

ITAT, AHMEDABAD `D' BENCH (THIRD MEMBER)

Dhirajlal Maganlal Shah

v.

ITO

ITA No. 2522/Ahd/2006

September 25, 2009

RELEVANT EXTRACTS:

** ** ** ** ** ** ** ** ** ** ** **

On careful consideration of relevant facts, I am of the view that important fact stated by the assessee in his reply to penalty notice has not been considered in accordance with law. The revenue authority and the Tribunal in the quantum proceedings proceeded mainly on a presumption that the payment was made through account payee cheque, decided the issue against the assessee and the expenditure claimed was disallowed and added to the income of the assessee. In the penalty proceedings, which admittedly are different and separate from the assessment proceedings, the assessee was entitled to render fresh explanation and accordingly detailed reply dated 8-11-2004 was filed before the AO. In the said reply it was emphasized that payments were made to transporter through "crossed cheques". It was further explained that the transporter had produced evidences of having carried on transport business. He had categorically accepted the payments in question. It was accordingly claimed that the explanation of the assessee could not be treated as non-genuine or false and there was no case for imposition of penalty for concealment. The aforesaid claim of the assessee was rejected merely by referring to the order passed b} the learned CIT (A) and by observing that question of unsigned bills issued by the "SJT" remained unanswered. The aforesaid incorrect finding has also been adopted by the learned AM to confirm the levy of penalty. In addition to the above, the learned AM has further wrongly stated that the assessee has not given any afresh explanation except what has been stated in quantum/ assessment proceedings. This is against record as discussed above. The learned AM, I say with lot of respect, was also not correct in observing that the finding of the ITAT in quantum appeal has become final, nor even disputed before him. The finding of ITAT was vehemently challenged. The learned AM has further observed that certificate from bank relating to issue of cheques was rightly rejected. The explanation of the assessee was held to be not bona fide and that the matter was fully covered by Explanation 1 to section 271(l)(c) of the Act. The premise on above conclusion was arrived at is not correct.

12. Having considered the facts carefully, I am unable to ascribe to the view taken by the learned AM. The question involved in penalty proceedings was whether the claim of the assessee relating to the deduction of Rs.4,68,301/-towards transport charges in the account of "SJT" was false and therefore the assessee was covered by provision of Section 271(l)(c) of the Act. It is settled law that the findings recorded in the assessment proceedings is not conclusive, although it is entitled to great weight. The penalty proceedings being separate and independent proceedings, the assessee can always show that the finding recorded in the quantum proceedings is neither reliable nor sufficient to impose penalty. This is what the assessee has done in this case. Unfortunately, the stand of the assessee has not been appreciated. When the assessee took up the stand that the payment was made through' payee cross-cheques and other evidences relating to the activities carried on by the transport was filed, the AO in remand report filed with the Id. CIT(A) has stated as under:

".. .But as Shree J alar am Transport is not holding any bank accounts, it cannot be ascertained whether the cheques encashed by Shri Mahendra T. Rana Prop. Of Shree J alar am Transport or by another persons. "

Now when the cross cheques were issued in the name "SJT", whether these were encashed by "SJT" or endorsed to somebody-else was not concern of the assessee. The ITAT in quantum appeal did not consider the above facts recorded in the remand report. From the findings of the AO noted above, it could not be inferred that the claim made by the assessee is false. It is further to be appreciated that the payee duly acknowledged the payment and filed an affidavit in support of the work carried out and payments -receipt* He also appeared before the AO and led evidences in support of services rendered. There is no finding that "SJT" could not or did not carry on transport work for and on behalf of the assessee. In the above circumstances, there is absolutely no justification for rejecting the explanation of the assessee. There is no justification to term the explanation of the assessee as false. In my considered opinion, no case for levy of penalty has been made by the revenue as relevant facts stated above were neither considered nor challenged during the course of the proceedings. These were partly accepted and remaining are established on 'the record. For the aforesaid reasons, 1 agree with the view taken by the learned JM in canceling the penalty imposed in his proposed order. The question is answered accordingly.

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S. 14A, Rule 8D & Daga Capital: Bombay High Court to hear arguments

S. 14A, Rule 8D & Daga Capital: Bombay High Court to hear arguments

As earlier intimated to you, Writ Petition bearing No. 50 of 2010 (Indian Exporters Grievances Forum & Other vs. CIT) challenging the constitutional validity of Rule 8D has been admitted on 12.1.2010 by Hon'ble Shri Justice Dr. D.Y. Chandrachud and Hon'ble Shri Justice J.P. Devadhar of the Bombay High Court.

The said matter including appeals relating to section 14A which were fixed for final hearing on 15.2.2010 have been adjourned to 23.3.2010.

All those having matters relating to interpretation of section 14A which are pending before the High Court are requested to give the Appeal Nos. to the Associate for grouping matters.

For a round up of the law on s. 14A see Temporary reprieve from Daga Capital. See also: New Rule 8D – A lesson in tight rope walking?

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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS, ISSUE Dt 15-2-2010 Volume 1 : Part 7

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS, ISSUE DATED 15-2-2010

Volume 1 : Part 7

REPORTS

F Order for special audit without hearing assessee : Assessment cannot be annulled but matter to be remanded and assessee to be permited with an opportunity of being heard : Asst. CIT v. Sushila Milk Specialities P. Ltd. (Delhi) [SB] p.639

F Liaison office securing orders in India for assessee is a business connection : DDIT (Intl. Taxation) v. Jebon Corporation India (Bangalore) p.655

F Where liaison office is permanent establishment of South Korean company, income taxable under art. 7 of DTAA (South Korea) : DDIT (Intl. Taxation) v. Jebon Corporation India (Bangalore) p.655

F Payments made to non-resident for hire of transponders is royalty : Asianet Communicatons Ltd. v. Dy. CIT (Chennai) p. 683

F Where contractor working for statutory authority in development of infrastructure facilities not entitled to deduction u/s 80-IA : B.T. Patil and Sons Belgaum Construction P. Ltd. v. Asst. CIT (Mumbai) [LB] p.703

NEWS-BRIEFS

F Hospital reimbursements by TPAs' may be taxed
The forthcoming Budget may have provisions binding on the third party administrators (TPAs), the entities that network between insurers and hospitals to facilitate cashless treatment for policyholders, to deduct tax at source (TDS) before making payments to hospitals.

The rationale for the Finance Ministry to make it mandatory for TPAs to pay TDS before reimbursing that to hospitals is on account of a slew of cases filed by TPAs against the Income-tax (I.T.) Department. Here, the Department took a stand that TDS was payable by TPAs.

The money reimbursed annually to hospitals - for cashless services to policyholders - is estimated to be around Rs. 4,000 crore. Of this, 60 per cent. is facilitated by TPAs, who make the payment out-of-float funds that are parked with them by non-life insurance companies. In return for their services, TPAs receive a commission from insurance companies of about 5 per cent. on the health insurance premium.

The I.T. Department wants TPAs to deduct 10 per cent. tax at source before making payments to hospitals. A Karnataka High Court verdict last year, in the case of Medi Assist, had favoured the I.T. Department's stand, following which a group of TPAs moved the High Courts in Mumbai and Delhi, which at present are hearing these cases. The Karnataka High Court had observed that since it involved TPA, the authority that makes payments to hospitals, it was, therefore, obligated to deduct TDS. The court had also observed that the critical factor in deciding this issue was the fact that the agreement relating to paying the hospitals was between TPA and them. The I.T. Department in Mumbai had raised a tax demand of Rs. 117 crore last year on a host of TPAs that operated out of the city. The Department raised the demand after conducting a survey on TPAs in the city. Here, it was revealed that none of them had deducted TDS, while making payment to hospitals.

This demand was raised under section 194(J) of the Income-tax Act. The rate of tax stipulated under this section is 10 per cent., if the payment is a fee for professional services or a fee for technical services or royalty. [Source : www.economictimes.com dated February 2, 2010]

F High Court to decide on taxing expenditure on dividends

The Bombay High Court has recently admitted a writ petition that challenges an Income-tax Rule allowing the taxation of expenditure incurred on earning tax-free income like dividends and long-term capital gains. The writ petition was filed by a Mumbai-based exporter, along with Indian Exporters' Grievance Forum, a body under the Federation of Indian Export Organisations (FIEO). The final hearing of the matter is slated for February 15.

The specific rule challenged in the court, according to the petitioners, stipulates a stringent structure for taxing expenditure related to earning income that is exempt from taxation. Rule 8D authorises an Assessing Officer to use a formula for computing expenditure incurred on earning the tax-free income if he is not satisfied with the declaration of the taxpayer. Section 14A provides for taxing the expenditure related to earning the income that is exempt from taxation.

The petitioner stated that at times the rule leads to situations in which a disproportionately huge expenditure incurred on earning a small income was brought into the tax net. In the process, the benefit derived by the taxpayer by earning income which is exempt from taxation is substantially reduced and even leads to double taxation.

Elaborating its stand, the petitioner said when it had earned tax exempt dividend from surplus - not borrowed funds - and which did not form part of the total income, the Assessing Officer could not consider the value of those investments on which no tax-exempt dividend was earned. For instance, the Assessing Officer could not consider as expenditure the interest that the company paid on loans taken for purposes other than earning tax-free dividend.

The petitioners forum representative stated in the writ petition that rule 8D is against the basic principle of taxation which allows levy of tax calculated as gross income minus expenditure. This specific rule is tantamount to double taxation, the petitioner contended. [Source : www.economictimes.com dated February 3, 2010]

GOODS AND SERVICE TAX REPORTS (GSTR) HIGHLIGHTS ISSUE Dt 15.2.2010 Volume 1 Part 7

GOODS AND SERVICE TAX REPORTS (GSTR) HIGHLIGHTS ISSUE DATED 15.2.2010

Volume 1 Part 7

 

 

SUPREME COURT JUDGMENT

 

F Extended period of limitation for recovery of duty : Where assessee voluntarily disclosing facts on particular date, period of limitation cannot be extended thereafter : Kushal Fertilisers (P) Ltd. v. Commissioner of Customs and Central Excise, Meerut. . . 301

F Whether failure to disclose facts and period of limitation extended is a question of fact : Kushal Fertilisers (P) Ltd. v. Commissioner of Customs and Central Excise, Meerut . . . 301

F Secured debts or debts which by provision of statutes get first charge over property and would prevail over Crown debts which are unsecured : Union of India v. SICOM Ltd. . . . 346

HIGH COURT JUDGMENT

 

F In order to adjudicate claim of third party on goods confiscated due to failure on part of original importer to clear goods, original importer is necessary party : Commissioner of Customs (Exports), Chennai v. Ishwar Impex (Mad) . . . 293

F Presumption against retrospective operation is not applicable to declaratory statutes : Premium Suitings Pvt. Limited v. Commissioner of Central Excise, Division Kanpur (All) . . 310

CESTAT ORDER

 

F Prolongation of hearing from one day to another due to paucity of time or for non-conclusion of arguments not adjournment : Prakash Industries Ltd. v. Commissioner of Central Excise, Raipur. . . 328

F Where no reliable evidence showing clearance of excisable goods without payment of duty, order imposing penalty and interest set aside : Sarita Software and Industries Ltd. v. Commissioner of Central Excise, Visakhapatnam . . . 341

STATUTES AND NOTIFICATIONS

 

Rules :

Cigarettes and Other Tobacco Products (Packaging and Labelling) Amendment Rules, 2009 . . . 97

Notifications :

Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 :
Notification under section 1(3) : Commencement of sections . . . 98

Notification under section 25(1) : Authorised officers to act under sections 12 and 13 . . . 99

Notification under section 25(1) : Amendments . . . 100

Notification under section 25(1) : Amendments in rates . . . 111

Notification under section 9A(1) and (5) : Imposition of definitive anti-dumping duty on imports . . . 105, 112

JOURNAL

 

Goods and services tax : Optimal rate is vital (Dr. Geeta Das) . . 68

Goods and services tax : Threshold limit (Dr. Geeta Das) . . 65

Power of Commissioner (Appeals) for remand of case in Customs and Central Excise Appeals (K. Sankararaman) . . 72

NEWS BRIEFS

 

F Proposal to hike export duty on ore
The Steel Ministry has proposed an across the board increase in export duty on iron ore to discourage export and lower the import duty on ore to zero to ensure that there is adequate raw material available for the domestic industry.

The proposal will benefit domestic steel manufacturers as it will increase the availability of cheaper ore for value addition within the country, helping them to boost their bottomlines.

In its pre-budget memorandum to the Finance Ministry, the steel ministry has suggested that the export duty be hiked to 20 per cent. on all grades of iron ore from the current levels of 10 per cent. on iron ore lumps and pellets and 5 per cent. on iron fines.

The duty on pellets, lumps and fines was raised only recently on December 2009 following consistent rise in ore exports. Prior to December, the duty on iron ore fine was nil and on pellets and lumps was 5 per cent.

Iron ore imports, on the other hand, attracts a duty of 2 per cent. The Steel Ministry has recommended that this should be brought to zero to facilitate coastal steel plants who use high grade iron ore for blending.

The Steel Ministry justifying the increase in export duty has said, "Iron ore exports have been increasing on account of current global demand, particularly from China. During April-October, 2009, the exports of iron ore is higher by 20.8 per cent. in comparison to last year. Indications are that this may further increase".

The ministry had at times even argued for a ban on iron ore exports to conserve raw material for the industry, a demand that has found favour with the big steel players. The steel ministry also wants the customs duty on stainless steel and alloy steel melting scrap to be brought down from 5 per cent. to zero, to further boost the availability of raw material for the industry.

It is, however, keen to insulate the domestic industry from imports and suggested that the 5 per cent. import duty on flat and long steel products and sponge iron, pig iron, could be retained at the current levels. [Source : The Economic Times, February 6, 2010]

F Agriculture and Food Minister urges States to waive VAT, local taxes on food items
In his effort to bring down the soaring food prices, Agriculture and Food Minister urged States to waive the value-added tax and other local levies on foodgrain and sugar.

"I would urge the states to relook the issue of taxes levied by them on foodgrain and sugar," he said while addressing the chief ministers' conference on price rise convened by the Prime Minister.

The rate of VAT and other local taxes on foodgrain is over 10 per cent in states like Punjab and Haryana, while it ranges between 3 and 8 per cent in Uttar Pradesh, Rajasthan, Madhya Pradesh, Bihar and Gujarat, he said.

On sugar prices, the Minister said, Delhi, Karnataka, Gujarat, Bengal and Bihar have already abolished VAT on imported sugar and similar steps required in other states. The VAT on sugar was 12.5 per cent. in Delhi and Karnataka, while it was 4 per cent. in Bengal and Bihar.

Commending Chhattisgarh for abolishing entry tax on sugar, he asked Punjab, Madhya Pradesh and a few other states to remove such cess.

He also asked Uttar Pradesh to lift the restrictions on processing imported raw sugar in the state. [Source : The Economic Times, February 6, 2010]

F SC to examine Punjab's plea on VAT provisions
The Supreme Court has decided to examine the plea of Punjab Government pertaining to the provision of its VAT law which according to the Government provides no exemption to the assessees from the mandatory deposit of 25 per cent. of the tax, penalty and interest for entertaining their appeal by the appellate authority.

"It appears that the High Court did not considered the provision of section 62(5) of Punjab Value Added Tax Act, 2005", said a Bench comprising of Justice SH Kapadia and Justice Swatanter Kumar while issuing notice to Femina Jewellery Pvt Ltd. The High Court allowing the writ petition filed by Femina had directed that the appeal of the petitioner shall be entertained by the Appellate Authority without pre-deposit of 25 per cent. of the amount assessed by the authority. [Source : The Economic Times, February 8, 2010]

F Excise hike in Budget to set off stimulus exit
Excise duties are likely to be raised in the forthcoming Budget by between 2 and 4 percentage points.

Top sources in the Government have indicated that it is necessary to start increasing the rates now to get closer to the Goods and Services Tax rate when it is introduced, perhaps in a year.

The likely Central GST rate is around 14 per cent. But the current excise rates are down to between 4 per cent. and 10 per cent. The average rate is 8 per cent. "It would be too high a gap to bridge at one-go when GST comes," says a noted Government economist.
Top industry sources said : "We have more-or-less given up. But we are still trying to persuade the Government not to raise excise duties now. The producers will pass on the increase and that will only add to inflation."

However, inflation in manufactured products has been low, around 2 per cent on an average in the last six months (excluding sugar and other agri-products) compared to inflation in food products which has been ranging between 17 and 20 per cent. This gives the Government some elbow room to raise excise duty rates.

The Government slashed excise duty rates steeply during December 2008-March 2009 as part of its stimulus package to keep growth up after the global financial system collapsed in September 2008.

Excise rates since December 2008 had been progressively cut from 16, 12 and 8 per cent. to 10, 8 and 4 per cent. depending on the product in question. Service tax was also reduced from 12 to 10 per cent.

The Government is considering a phased increase in indirect tax rates, and not a one-shot withdrawal.

"The withdrawal is likely to be gradual," said Dr. C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council. "I expect the Government to take some steps on fiscal consolidation in the Budget."

India had provided three rounds of stimulus packages in the aftermath of the global financial meltdown in September 2008.

The package included both monetary loosening and indirect tax cuts besides fiscal incentives for exporting community.

Recently, the Planning Commission Deputy Chairman said that with the growth impulses now back, the time has come to start exiting.

There are expectations that the Centre will in the Budget undertake some unwinding of the fiscal stimulus.

The RBI had in the second quarter policy review initiated the process of monetary exit and further moved in that direction by announcing a 75 basis point hike in cash reserve ratio in end January 2010 as part of the third quarter review of monetary policy. [Source : The Hindu Business Line, February 11, 2010]

 

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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE Dt 8-2-2010 Volume 1 : Part 6

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 8-2-2010

Volume 1 : Part 6

REPORTS

F On failure of assessee to prove genuineness of transaction, amount received by way of share capital, added as cash credit : Dhingra Global Credence P.Ltd. v. ITO (Delhi) p.529

F Transfer of assets on conversion of proprietary concern into firm, revalued amount deemed to be full value of consideration, no deemd gift : Dharamshibhai B.Shah v. ITO/GTO (Ahd.) p.536

F Where no finding that consideration on sale of stock-in-trade above stated consideration, addition based on fair market value not justified : Asst.CIT v. Excellent Land Developers P. Ltd. (Delhi) p. 563

F Where surrender of income found during survey not connected with levy of penalty u/s 271E for violation of s.269T : Ajay Goel v.Addl. CIT (Delhi) p.569

F Receipt of sum by assessee in lieu of forgoing its right to use premises is not revenue receipt : Assessee holding premises on lease from Municipal Corporation, right as lessee is capital asset : Asst. CIT v. United Motors (I) Ltd. (Mumbai) 578

F Receipt of one-time fee for forgoing right to use property assessable as capital gains : Asst. CIT v. United Motors (I) Ltd. (Mumbai) 578

F Where financial capacity of donors and genuineness of gifts not established, addition justified : ITO v.Smt.Usha Aggarwal (Delhi) 593

F Assessee under duty to pay TDS on behalf of other persons to credit of Govt.: Assessee treated as assessee in default on failure to pay TDS : T.H.E. Makers P. Ltd. v. ITO (TDS) (Delhi) 611

F Where contracts are not interconnected, various sites cannot be considered together in computing minimum period for permanent establishment under art.5(2)(i) of DTAA (Germany) : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614

F Where income subject to TDS, interest u/s 234B cannot be charged : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614

F Where reimbursement of expenses incurred on travel not involving element of income, not taxable under art.12 of DTAA (Germany) : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614

NEWS-BRIEFS

F Supreme Court defines "manufacturing" for Finance Ministry

The Supreme Court has asked the revenue department to take into account the process applicable to the product and not dictionary meaning of "manufacture" to decide the issue of benefits under the provisions of Income-tax Act, Excise Act and Customs Act. The apex court expressed its displeasure over Revenue's failure in such cases, saying the Department was not following its recommendations over the years.

"Repeatedly this court (Supreme Court) has recommended to the Department, be it under Excise Act, Customs Act or the Income-tax Act, to examine the process applicable to the product in question and not to go only by dictionary meanings (of manufacture). This recommendation is not being followed over the years", said a bench comprising Justice SH Kapadia and Justice HL Dattu.

The court dismissed a bunch of appeals filed by the Income-tax Department. In such appeals, the issue was whether twisting and texturising of partially oriented yarn amounts to "manufacture" for the purpose of extending benefits to the assessees in accordance with section 80-IA of the Income-tax Act, 1961.

Ruling in favour of the assessees, the court, however, clarified, "at the outset, we wish to clarify that our judgment should not be understood to mean that per se twisting and texturising would constitute 'manufacture' in every case. In each case, one has to examine the process undertaken by the assessee" .

The structure, the character, the use and the name of the product are distinguishing markings to be taken into account while deciding the question whether the process is a manufacture or not, said court in its order.

The apex court perused its earlier order on the issue. In that order, the court had said, "the term 'manufacture' implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word 'manufacture' ".

The Revenue, however, has amended the Income-tax Act in 2009 to define the word "manufacture". According to it, "manufacture" shall mean a change bringing into existence a new and distinct object or article or thing with a different chemical composition or integral structure.

Then the Department had filed appeals in the apex court in 2010. Dismissing the appeals, the court said, partially oriented yarn is not fit for being used in the manufacture of a fabric. [Source : www.economictimes.com dated January 25, 2010]

F Date for filing ITR-V form extended

The Central Board of Direct Taxes has decided to extend the time limit for filing ITR-V form relating to income-tax returns filed electronically (without digital signature) on or after April 1, 2009, up to March 31, 2010 or within a period of 120 days from the date of uploading of the electronic return data, whichever is later. The ITR-V form should continue to be sent by ordinary post to Post Bag No. 1, Electronic City Post Office, Bengaluru-560100 (Karnataka). However, in cases where e-mail acknowledgement for ITR-V form is not received by the taxpayer from the CPC Bengaluru, the taxpayer may send another duly signed ITR-V form by speed post to Centralized Processing Centre, Electronic City Post Office, Bengaluru, Karnataka-560100.

This has been done in relaxation of the stipulation in Circular No. 3/2009 dated May 21, 2009 which allows taxpayers who file their income-tax returns in electronic form without digital signature to submit their ITR-V form duly verified and signed, within a period of 30 days thereafter to Post Bag No. 1, Electronic City Post Office, Bengaluru, Karnataka-560100, by ordinary post.

The relaxation has been made following requests from taxpayers that, as a one-time measure, the time limit for filing of ITR-V form may be extended to March 31, 2010 and that alternative modes of submission of ITR-V form may also be provided in cases where an ITR-V form has not been received at CPC, Bengaluru by ordinary post. [Source : www.pib.nic.in dated January 27, 2010]