Some recent past case. (Favor Revenue)

2011-TIOL-89-SC-IT + it sc story : - ITO Vs M/s Mangat Ram Norata Ram Narwana (Dated: May 5, 2011 ) Income tax - Sections 142(1), 143(3), 148, 271(1)(a) & (c), 276C, 277, 278 - Whether, for the purpose of prosecution, it is statutorily required of the partner of the assessee-firm to sign the revised return showing higher income and leading to imposition of penalty - Whether when the partner fails to raise the issue of not signing the revised return and the assessee-firm pays up the penalty imposed, such acts impliedly amounts to admission for the purpose of prosecution.- Revenue's appeal allowed: SUPREME COURT

2011-TIOL-529-HC-AHM-IT : - Dy.CIT Vs Pradip N Desai (Dated: July 6, 2011) Income Tax - Section 32 - Whethe the depreciation at the rate of 50% can be claimed in respect of vehicles given on lease. - Revenue's appeal allowed : GUJARAT HIGH COURT

2011-TIOL-533-HC-AHM-IT : - CIT, Ahmedabad Vs Gurukrupa Developers (Dated: July 27, 2011) Income Tax - Section 113 - Whether the proviso to Section 113 which is in respect to the surcharge on the undisclosed income is clarificatory in nature. - Revenue's appeal allowed: GUJARAT HIGH COURT

2011-TIOL-543-HC-AHM-IT : - CIT Vs Saurashtra Kutch Stock Exchange Ltd (Dated: August 8, 2011) Income tax – Section 12A, 13(3) – Whether once the CIT grants approval for registration of the trust u/s 12A, the AO is not required to re-examine the entire question of the object and purpose of the trust even though the approval was given with the said condition as the CIT cannot keep the very foundational issue open to be judged by the AO – Whether when there is no conclusion that any part of the funds were diverted or applied as not permitted under sub-section (3) of Section 13, the exemption cannot be denied only on the basis of some irregularities observed by SEBI in managing the funds of the trust. - Revenue's appeal dismissed : GUJARAT HIGH COURT

2011-TIOL-519-HC-DEL-IT : - CIT, Delhi Vs Industrial Finance Corporation Of India Ltd (Dated: July 11, 2011) Income tax – Sections 36(1)(viia)(c), 36(1)(vii), 41(4A) – Whether the deduction claimed for the special reserve can be disallowed for an amount which is transferred from special reserve account to other account as per the amendment in section 36(1)(viii) which required to also maintain the amount in the reserve account though it is not retrospective – Whether the assessee is entitled to claim deduction for the amount of interest offered on NPA account which is not realized. - Revenue's appeal allowed: DELHI HIGH COURT

2011-TIOL-519-HC-DEL-IT : - CIT, Delhi Vs Industrial Finance Corporation Of India Ltd (Dated: July 11, 2011) Income tax – Sections 36(1)(viia)(c), 36(1)(vii), 41(4A) – Whether the deduction claimed for the special reserve can be disallowed for an amount which is transferred from special reserve account to other account as per the amendment in section 36(1)(viii) which required to also maintain the amount in the reserve account though it is not retrospective – Whether the assessee is entitled to claim deduction for the amount of interest offered on NPA account which is not realized. - Revenue's appeal allowed: DELHI HIGH COURT

2011-TIOL-559-HC-KAR-IT : - CIT, Bangalore Vs Dr T K Dayalu (Dated: June 20, 2011) Income Tax - Section 2(47)(v), 45, 143(2) – Whether, in respect of development agreement, the relevant date for attracting capital gain is the date on which possession is handed over to the developer or the date of completion of the project. - Revenue's appeal allowed : KARNATAKA HIGH COURT

2011-TIOL-564-HC-KAR-IT : - CIT, Bangalore Vs M/s Ganjam Nagappa And Sons (HUF) (Dated: May 26, 2011) Income Tax - Sections 147, 148 - Whether the Tribunal can interfere with the concurrent findings on the question of fact when no cogent reasons are given for interfering. - Revenue's appeal allowed : KARNATAKA HIGH COURT

2011-TIOL-536-HC-MAD-IT : - CIT, Madurai Vs K A S Mathivanan (Dated: August 1, 2011) Income Tax - Whether allowance can be made merely because future payments were made out of the funds said to be kept in the suspense account - Revenue's appeal allowed : MADRAS HIGH COURT

2011-TIOL-496-HC-P&H-IT : - CIT, Chandigarh Vs Sanjay Chhabra (Dated: March 31, 2011) Income tax – Sections 69, 133A – Unexplained Investment – Whether when the assessee fails to rebut the unexplained investment in the purchase of fuits, and the CIT(A) and Tribunal fail to record the fact that such entries were made in the books, the addition made by the AO is sustainable. - Revenue's appeal allowed : PUNJAB AND HARYANA HIGH COURT;

2011-TIOL-567-HC-P&H-IT : - CIT Vs Mukta Metal Works (Dated: February 28, 2011) Income Tax – Section 158BC, 158BD - Whether the office note appended to section 158BC constitutes a valid satisfaction note within the parameter of section 158BD of the Act – Whether any inference could be drawn from the entries in the seized diary during search, so as to make additions on account of undisclosed income - Whether the Tribunal is duty bound to consider the additional evidence in the form of report of forensic science laboratory in the interest of justice if the same is authentic and necessary for the decision of the issue raised before it.- Revenue's appeal allowed : PUNJAB AND HARYANA HIGH COURT

(ITR) HIGHLIGHTS ISSUE DATED 12-9-2011 Volume 337 Part 1

INCOME TAX REPORTS (ITR) HIGHLIGHTS
ISSUE DATED 12-9-2011
Volume 337 Part 1

HIGH COURT JUDGMENTS

>> Wilful failure to file return on time not a continuing offence : J. Jayalalitha v. Asst. CWT (Mad) p. 1
 
>> Gains due to fluctuation in foreign exchange constituted capital receipt : CIT v. Jagatjit Industries Ltd. (Delhi) p. 21
 
>> Order of court to withdraw utilisation/investment and utilise/invest those funds in terms of s. 11(5) for entitlement to benefit : Assessee complying with direction : Entitled to exemption : Export Promotion Council for Handicrafts v. Director-General of I. T. (Exemptions) (Delhi) p. 26
 
>> Sale of original shares and bonus shares : Cost of acquisition to be spread over original and bonus shares : M. B. and Co. Ltd. v. Asst. CIT (Mad) p. 29
 
>> Whether assessee a real owner of that concern : To be determined and addition made only in regular assessment and not in block assessment : CIT v. Mukesh Luthra (Delhi) p. 41
 
>> Commissioner directing AO to decide year of commencement of business : Tribunal on merits holding in favour of assessee not proper : CIT v. Eastern Medikit Ltd. (Delhi) p. 56
 
>> Objection to jurisdiction cannot be raised after assessment is completed : CIT v. British India Corporation Ltd. (All) p. 64
>> Deduction for vacancy not allowable where property not let out at all : Vivek Jain v. Asst. CIT (AP) p. 74
 
>> Inclusion of winnings from television game show within definition with effect from AY 2002-03 : Winnings in earlier period not taxable : Miss Lopamudra Misra v. Asst. CIT (Orissa) p. 86
 
>> AO not entitled to tax as income from other sources while giving effect to order of Tribunal : Miss Lopamudra Misra v. Asst. CIT (Orissa) p. 92
 
>> Section 92 does not apply to royalty which is not part of regular business between resident and non-resident : CIT v. Nestle India Ltd. (Delhi) p. 103

AUTHORITY FOR ADVANCE RULINGS

>> Transaction of sale and transfer of title outside India : Receipts therefor not taxable in India : LS Cable Ltd., In re p. 35

>> Services involving field data collection, desk study and mathematical model study and technology transfer involving transfer of software : Fees for technical services taxable under DTAA : Lanka Hydraulic Institute Ltd., In re p. 47

>> Time charter vessels hired by non-resident to company carrying out offshore drilling and support services for ONGC : Income to be computed under s. 44BB : Bourbon Offshore Asia Pte. Ltd., In re p. 122

>> Non-resident responsible for offshore supplies : Sums payable to non-resident not taxable in India : Deepak Cables (India) Ltd., In re p. 127

>> Transfer of equity shares in Indian company to another non-resident by off-market mode : Lower rate of tax of 10 per cent. not available : Cairn U. K. Holdings Ltd., In re p. 131


STATUTES AND NOTIFICATIONS

>> Bills :

Benami Transactions (Prohibition) Bill, 2011 p. 1

>> Notifications :

Income-tax Act, 1961 : Notification under section 35(1)(iii) : Scientific research associations notified by the Central Government for the purpose of section 35(1)(iii) p. 35


JOURNAL

>> Circular No. 4 of 2011, relating to section 281, which deals with certain transfers to be void (S. K. Tyagi, Advocate) p. 8

>> Whether CBDT can issue Circulars/Instructions in relaxation of the provisions of the income-tax law ? (T. N. Pandey, Retd. Chairman, CBDT) p. 1
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Some recenrt case laws

2011-TIOL-540-HC-MP-IT + it story

CIT, Jabalpur Vs M/s Khemchand Motilal Jain (Dated: August 23, 2011)

Income tax – Section 37(1) – Whether when the Director of the company is on business tour and is kidnapped by dacoits; ransom money paid to get him releases is to be treated as incidential to business as per Sec 37(1) - Whether the payment made towards ransom for saving the life of the Director of the assessee-company is prohibited by law and thus, not allowable expenditure.- Revenue's appeal disallowed: JABALPUR HIGH COURT

2011-TIOL-539-HC-ALL-IT

M/s Shyam Enteprises Vs CIT, Allahabad (Dated: August 4, 2011)

Income Tax - Section 32 - Whether the depreciation on cooling chambers of the cold storage is allowable at the rate of 25%. - Assessee's appeal allowed: ALLAHABAD HIGH COURT

2011-TIOL-538-HC-KAR-IT

Sri P Dayananda Pai Vs ACIT, Bangalore (Dated: July 1, 2011)

Income tax – Sections 147, 148, 153 - Whether when the assessee did not file a return of income and a notice u/s 148 was issued to file the return and a second notice u/s 148 was made after considering the return filed before the issue of first notice u/s 148, the second notice is a valid notice as the first notice is fulfilled by the filing of return before the service of the first notice and the second notice, issued after the AO having reasons to believe that the income or profit or gains chargeable to income-tax had escaped assessment, is not a "second notice" – Whether the assessment made within two assessment years from the end of the assessment year, in which the revised return is filed in response to notice issued u/s 148 second time, is a valid assessment and is not time barred considering the date of notice issued for the first time.- Assessee's appeal dismissed: KARNATAKA HIGH COURT

2011-TIOL-533-ITAT-DEL

ITO, Faridabad Vs Shri Yashpal Gera (Dated: May 20, 2011)

Income Tax - Sections 40A(3), 153A, 153C – Whether estimated addition is permissible under the new provisions of search and seizure - Whether, under the new provisions of search and seizure, AO can spread over his estimate to that time period for which no material has been unearthed during search - Whether provisions of section 40A(3) can be invoked in a case where income has been estimated. - Revenue's appeal dismissed: DELHI ITAT

2011-TIOL-532-ITAT-DEL

DCIT, New Delhi Vs M/s Neptune India Ltd (Dated: June 30, 2011)

Income Tax - Section 41(1) - Whether AO, by invoking the provisions of section 41(1) of the Act, can add any outstanding liability without bringing any material on record to establish that the liability in fact becomes ceased - Revenue's appeal dismissed: DELHI ITAT

SERVICE TAX SECTION

2011-TIOL-1114-CESTAT-DEL

M/s A G Engineers Vs CCE, Ghaziabad (Dated: June 2, 2011)

Service Tax - Valuation - Clearing and Forwarding Service - Reimbursement of Expenses - Penalty - Reimbursed expenditure is to be included in taxable value. However, due to the confusion prevailing at the relevant period, penalty stands waived. - Appeal partly allowed: DELHI CESTAT

2011-TIOL-1113-CESTAT-DEL

M/s A G Engineers Vs CCE, Ghaziabad (Dated: May 31, 2011)

Service Tax - Maintenance or Repair Service - Authorised Agent - Assessee is a dealer of branded goods. But there is no evidence that the appellant acted under any contract or as an authorised service provider. Taxation cannot be under presumption. Demand set aside along with penalties and intertest.- Appeal allowed: DELHI CESTAT

CENTRAL EXCISE SECTION

2011-TIOL-86-SC-CX + sc story

M/s Air Liquide North India Pvt Ltd Vs CCE, Jaipur (Dated: August 30, 2011)

Central Excise- Helium Gas purchased in bulk, processed and sold in cylinders - liable to excise duty: The fact that the gas was not sold as such is further established from the fact that the gas, after the tests and treatment, was sold at a profit of 40% to 60%. If it was really being sold as such, then the customers of the appellants could have purchased the same from the appellant's suppliers. When this question was put to the officer of the appellant, he could not offer any cogent answer but merely stated that it was the customers' preference. Further, he did not give proper answer as to how the profit margin was so high. The appellant had supplied the gas not as such and under the grade and style of the original manufacturer but under its own grade and standard. Further, while selling the gas, different cylinders were given separate certificates with regard to the pressure, moisture, purification and quality of the gas. This explains the high price at which the appellant was selling the gas. Therefore, the Tribunal has rightly observed that if no treatment was given to the gas purchased by the appellant, customers of the appellant would not have been purchasing Helium from the appellant at a price 40% to 60% above the price at which the appellant was purchasing.

Marketable to the consumer: The word "consumer" in this clause refers to the person who purchases the product for his consumption, as distinct from a purchaser who trades in it. The marketability of the product to "the purchaser trading in it" is distinguishable from the marketability of the product to "the purchaser purchasing the same for final consumption" as in the latter case, the person purchases the product for his own consumption and in that case, he expects the product to be suitable for his own purpose and the consumer might purchase a product having marketability, which it did not possess earlier.- Appeal Dismissed: SUPREME COURT

2011-TIOL-1117-CESTAT-MUM + cx story

CCE, Mumbai Vs Hawkins Cookers Ltd (Dated: June 16, 2011)

Assessee claiming deductions based on CA certificate on account of dealer discounts and taxes in respect of parts of pressure cookers which are assessed in terms of s. 4 of the CEA, 1944 – apprehension of department that expenses incurred for sale of pressure cookers (valued u/s 4A) have been included for deduction is not supported by any evidence – Revenue appeal dismissed: MUMBAI CESTAT

2011-TIOL-1116-CESTAT-BANG

Mangalore Refinery & Petrochemicals Ltd Vs CCE, Mangalore (Dated: February 8, 2011)

Central Excise – Eligibility of CENVAT Credit on chequered plates, Tor steel, TMT bars – Lower authorities did not record any detailed findings on submissions made by appellants regarding usage of disputed items in factory premises – Adjudicating authority directed to reconsider issue on merits – Matter remanded without expressing any opinion on merits - Appeal allowed by remand :BANGALORE CESTAT

2011-TIOL-1115-CESTAT-MAD

CCE, Chennai Vs M/s Eveready Industries (I) Ltd (Dated: April 19, 2011)

Central Excise – Valuation of intermediate goods manufactured and stock transferred - Assessee's submission that method prescribed in CAS-4 has been followed is not controverted by Revenue - The correct method is to adopt the cost of material during the year on actual basis and not on any notional basis or on average basis. - Appeal dismissed: CHENNAI CESTAT

CUSTOMS SECTION

NOTIFICATIONS

ctariff11_083

Govt imposes Safeguard Duty on import of PX-13 (6 PPD)

cnt11_063

CBEC revises tariff value of poppy seeds + brass scraps

DGFT PUBLIC NOTICES

dgft10pn075

Amendment in Appendix 2 and Appendix 5 of Handbook of Procedure Vol.I (Appendices and Aayat Niryat Forms), 2009-2014

dgft10pn074

MODIFICATION OF SION C-1579 under Engineering Product Group

DGFT TRADE NOTICE

Trade Notice 19

Penalty for failure to export cotton yarn in terms of Policy Circular No. 27 dated 01.04.2011 and Policy Circular No. 38 dated 10.08.2011.

CASE LAW

2011-TIOL-1118-CESTAT-MUM + cus story

Godrej Hi Care Ltd Vs CC (Dated: June 9, 2011)

It is settled law that substantive statutory provisions should be strictly construed - There is nothing in the definition of "manufacturer" u/r 2(h) of SWAM Rules, 1977 to show that mere affixture of trade mark would suffice the requirement of the inclusive definition - MRP based CVD assessment applicable to importers who affix their own brand name on notified goods and supply to institutional consumers: MUMBAI CESTAT

[2011] 12 taxmann.com 503 (CUTTACK - ITAT)
IT : Interest on fixed deposits for a term exceeding more than one year would be rendered to tax only on its receipt from bank on maturity on basis of certificate of TDS issued by bank
[2011] 12 taxmann.com 502 (MUM. - ITAT)
IT/ILT : Where assessee, an Israel based company, entered into an agreement with an Indian company for supply and licence of software for operation, management and maintenance of its wireless network in India, payment made by Indian Company to Israel Company was for purchase of copyright material which did not amount to royalty within meaning of article 12(3) of India-Israel DTAA and, thus, same was not liable to tax in India


[2011] 12 taxmann.com 492 (GUJ.)
ST : Levy of service tax on renting of immovable property under section 65(105)(zzzz) as amended by Finance Act, 2010 with retrospective effect from 1-6-2007, is constitutionally valid
[2011] 12 taxmann.com 493 (UTTARAKHAND)
IT/ILT : Amendments proposed in section 44BB and 44DA would take effect from 1-4-2011 and would apply in relation to the assessment year 2011-12 and subsequent years

Brought forward unabsorbed losses and deficiencies of earlier years are to

Brought forward unabsorbed losses and deficiencies of earlier years are to be adjusted first against current year's profits and gains of an industrial undertaking before granting of deduction under sections 80-I and 80HH - [2011] 11 taxmann.com 260 (All.)

Easier PAN norms for FIIs, foreign nationals

Breaking News:

NEW DELHI: In a move which could improve the fund flow and provide some stability to the choppy Indian bourses, the finance ministry has relaxed norms for foreign nationals and foreign institutional investors to obtain Permanent Account Numbers (PAN) that could also double up as KYC (know your customer) compliance for any investment they make in Indian stocks.

Till now, FIIs or foreign nationals had to obtain a PAN and separately meet KYC requirements prescribed by the market regulator before investing in stocks. The tax obligation on any transaction is twice the due amount if they fail to mention PAN.

In the revised rules that come into effect from October 1, a foreign national will have to only produce either h/his citizenship number or taxpayer identification number to obtain a PAN. The government is making amendments in Rule 114 and Form 49A of the Income Tax Rules and has proposed to introduce a new Form 49AA. While Form 49A will be used for Indian citizens, the other is for foreign nationals and FIIs.

Earlier rules stipulated that citizenship or taxpayer identification number would not be accepted as proof of identity in case of foreign nationals seeking PAN card. The applicant is required to take prescribed documents to an officer of Indian Embassy or High Commission where he is a resident to get them attested.

The revised guidelines ensure that a foreign national or an FII need not make rounds of Indian Embassies or High Commissions anymore. They can get copies of their documents attested by recognized authorities in their respective countries. Several countries and trade and industry organizations had represented the finance ministry seeking changes in the rules, in particular documents to be accepted as proof of identity and address and their attestation.

The department of economic affairs and the central board of direct taxes (CBDT) also worked on harmonizing the requirements of PAN and meeting KYC obligation. "Since most of the basic information for both are common, it was decided to harmonize them into one so that compliance burden for a foreign investor is substantially reduced," said a senior finance ministry official. The directorate of Income Tax has devised a single integrated form that incorporates the requirements of both PAN and KYC.

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ITR (Trib) HIGHLIGHTS ISSUE DATED 12-09-2011 Volume 11 Part 3

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS

ISSUE DATED 12-09-2011

Volume 11 Part 3

APPELLATE TRIBUNAL ORDERS

>> Appeal to Appellate Tribunal : Assessee filing return for block period without any objection, additional ground rejected : Bhagwandas Punjabi (Decd.) v. Asst. CIT (Ahmedabad) p. 216

>> Search and seizure : Undisclosed income to be determined at amount mentioned in sale deed : Bhagwandas Punjabi (Decd.) v. Asst. CIT (Ahmedabad) p. 216

>> Charitable trust : CIT citing irrelevant reasons for refusing registration, assessee entitled to registration : Vidhya Sikshaa Educational and Charitable Trust v. CIT (Chennai) p. 236

>> Expenditure on keyman insurance for two working directors, maturity amount offered for taxation, deductible : ITO v. Radha Raj Ispat P. Ltd. (Delhi) p. 243

>> Where assessee not charging any interest notional interest cannot be added : ITO v. C.J. Rathod (Indl.) (Ahmedabad) p. 252

>> Where value of property not fully disclosed by assessee, AO justified in making reference u/s. 142A : Shagun Buildwell Ltd. v. Dy. CIT (Delhi) p. 273

>> Rectification of mistakes : Order charging interest u/s. 234D can be rectified u/s. 154 : Ashok Leyland Finance Ltd. v. Asst. CIT (Chennai) p. 287

>> Software services, amount paid for technical advisory services deductible as revenue expenditure : Dy. CIT v. Lifetree Cyberworks P. Ltd. (Delhi) p. 294

>> Computer software : Receipt of sale proceeds in India in convertible foreign exchange within prescribed period, assessee entitled to exemption u/s. 10B : ITO v. Techdrive (India) P. Ltd. (Delhi) p. 298

>> When sale consideration not less than stamp duty, AO not permitted to refer to DVO additions to be deleted : ITO v. Chandrakant R. Patel (Ahmedabad) p. 317
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At a Glance: Important Orders on S. 40(a)(ia) since Jan 2011 – August 2011

At a Glance: Important Orders on S. 40(a)(ia) since Jan 2011 – August 2011 reported by TaxCorp


1. S K SAIFUDDIN vs ITO
Dated : 17 February 2011
S. 40(a)(ia), 194C(2) - Whether when assessee makes payments to leader of workers working on jobwork basis, such payments are subject to tax deduction at source u/s 194C(2).
(2011) 005 TaxCorp (A.T.) 24638 (KOLKATA)



2. HCC L & T PURULIA JOINT VENTURE vs JCIT
Dated : 24 June 2011
S. 40(a)(ia), 194C – Whether the assessee, a sub contractor, is required to deduct tax at source for the payment made by it to its sub contractor though as per Explanation 1 for the purpose of sub-section (2) of Sec 194C the expression 'contractor' shall include a contractor.
Reported in (2011) 005 TaxCorp (A.T.) 25177



3. Addl. CIT vs M/s INDIA INDEX SERVICES AND PRODUCTS LTD
Dated : 16 March 2011
S. 40(a)(ia), 192, 194C, 194J - Whether payments made to the parent company on account of reimbursement of salaries in relation to services rendered by the personnel on deputation to the JV attract the liability of TDS.
(2011) 005 TaxCorp (A.T.) 24761 (MUMBAI)



4. CIT vs D RATHINAM
Date of decision - 01 February 2011
S. 40(a)(ia), 194C, 194I - Whether when Sec 194I came into being only from 2007, putting TDS liability on hiring of machinery, Revenue is right in insisting on tax deduction at source on miller and road roller charges for the prior period.
Reported in (2011) 005 TaxCorp (DT) 48347 (MADRAS)



5. SHRI J PRASHANTH HEGDE vs ADD. CIT
Dated : 21 January 2011
S. 40(a)(ia), 133(6), 194C – Whether when assessee randomly hires vehicles, and payments made are less than Rs 20,000 except one case, provisions of section 194C are applicable where there was no contract by the assessee with the vehicle owners.
(2011) 005 TaxCorp (A.T.) 24578 (BANGALORE)



6. ITO vs THE ANKLESHWAR TALUKA ONGC
Dated : 20 May 2011
S. 40(a)(ia), 43B, 143(3), 194C – Whether when the assessee-society acts as an intermediate between the company and the members of the society, and the fact that there is no relationship between the assessee and its members as contractor and contractee, section 194C.
(2011) 005 TaxCorp (A.T.) 25163 (AHMEDABAD)



7. ITO vs M/s VIJAY BHARAT ROADLINES PVT LTD
Dated : 23 June 2011
S. 40(a)(ia), 194C, Rule 46A – Whether the payments made to lorry/truck owners who merely placed the vehicles at the disposal of the assessee and never involved themselves in the work to be carried out by the assessee, would not attract provisions of section 194C.
Reported in (2011) 005 TaxCorp (A.T.) 25172 (DELHI)



8. M/s INDUSTRIAL PACKAGING PRODUCTS vs ADDL CIT
Dated : 20 April 2011
S. 37(1), 40(a)(ia), 80IB – Whether where due to the amendment brought into Act by the Finance Act, 2008 in section 40(a)(ia) with retrospective effect from 1/4/2005, the assessee would be entitled to claim deduction for the amount on which TDS was deducted late but before the due.
Reported in (2011) 005 TaxCorp (A.T.) 25038 (MUMBAI)



9. ITO vs M/s ELKA COSMETIC PVT LTD
Dated : 13 April 2011
S. 40(a)(ia), 35D – Whether, if assessee engaged in the business of cosmetics, incures certain expenses on 'Testers', generally used by customers before purchase, such product promotional expenses are to be treated as capital in nature merely because it also promotes goodwill.
Reported in (2011) 005 TaxCorp (A.T.) 25052 (DELHI)



10. HCC PATI JOINT VENTURE vs ACIT
Dated : 31 March 2011
S. 40(a)(ia), 194C, 195, CBDT Circular No 285 of 1980 – Whether, if assessee ends up making excess deposit of TDS in the previous year, it is entitled to make suo moto adjustment of the same against liability arising in next financial year - Whether such excess payment of tax.
Reported in (2011) 005 TaxCorp (A.T.) 24884 (MUMBAI)



11. Mr HEMANT MANGALDAS BHANUSHALI vs ITO
Dated : 15 June 2011
S. 40(a)(ia), 263 – Whether when the CIT observes that the AO has not applied his mind while passing the order and did not call for the required details for completing the assessment, initiation of proceedings u/s 263 in such circumstances is valid.
Reported in (2011) 005 TaxCorp (A.T.) 25407 (MUMBAI)



12. PENFORD ISRAEL LTD vs DCIT, MUMBAI
Dated : 30 March 2011
S. 32, 37, 40(a)(ia), 142(1), 143(1) & (2), Rule 27 – Whether, merely because non-resident assessee writes to RBI seeking permission to close down its branch office in India, AO is justified in making the presumption that the assessee had discontinued its trading activity in India.
Reported in (2011) 005 TaxCorp (A.T.) 24875 (MUMBAI)



13. NATIONAL PROJECTS CONSTRUCTION CORPORATION LTD vs DCIT
Dated : 11 March 2011
S. 40(a)(ia), 194(a), 197 - Whether no TDS is liable to be deducted when a payment is made to a corporation owned by the Govt.
Reported in (2011) 005 TaxCorp (A.T.) 24845 (DELHI)



14. M/s INDUSTRIAL THERMOPLASTICS vs ITO
Dated : 18 February 2011
S. 36(1)(iii), 40A(2)(b), 69C, 40(a)(ia) – Whether the disallowance is warranted u/s 40(a)(ia) for non-deduction of tax on interest payment by the assessee to a concern covered u/s 40A(2) though the assessee has explained that there is no taxable income of the corporation.
Reported in (2011) 005 TaxCorp (A.T.) 25150 (MUMBAI)



15. M/s DECCAN ROADWAYS vs ADD. CIT
Dated : 07 January 2011
Section 40(a)(ia), 194C – Whether section 40(a)(ia) applies for non-deduction of tax at source on payments made to various truck operators / drivers when there is no contract with them and they are randomly taken on hire as per the requirement.
Reported in (2011) 005 TaxCorp (A.T.) 24591 (BANGALORE)



16. M/s VODAFONE ESSAR LTD vs ADDL CIT
Dated : 07 April 2011
S. 14A, 40(a)(ia), 80IA, 115JB, 143(3), 144C(13), 194C, 195, 220(6), 226(3) - Whether when Sec 80IA benefits are debatable, the Tribunal is right in granting conditional stay of high-pitch demand raised - Whether, to do justice to the cause of Revenue.
Reported in (2011) 005 TaxCorp (A.T.) 25137 (CHANDIGARH)



17. ACIT vs SMT KEYA SETH
Dated : 11 March 2011
S. 194C, 40(a)(ia) – Whether provisions of section 194C as introduced by Finance Act 2007 are retrospective.
Reported in (2011) 005 TaxCorp (A.T.) 24847 (KOLKATA)



18. M/s MUKESH TRAVELS CO vs ITO
Dated : 25 February 2011
S. 40(a)(ia), 194C – Whether section 194C is applicable to payments made to various vehicle owners from whom the assessee hired the vehicles alongwith the drivers which were further given by the assessee on hire to its clients – Whether the tax is to be deducted u/s 194I.
Reported in (2011) 005 TaxCorp (A.T.) 24927 (AHMEDABAD)



19. ACIT vs M/s PRESCO MEC AUTOCOMP
Dated : 18 February 2011
S. 37, 40(a)(ia), 40A(2)(b), 133(6), 194C – Whether disallowance is warranted for the freight and cartage expenses incurred in cash without rejecting the books of account only on the basis of surmises and presumptions – Whether the assessee is required to deduct TDS u/s 194C.
Reported in (2011) 005 TaxCorp (A.T.) 25068 (DELHI)



20. M/s NAGESH CONSTRUCTION (P) LTD vs ITO
Dated : 29 April 2011
S. 40(a)(ia), 144 – Whether TDS provisions are applicable where the outside job work charges are incurred on account of wages and site expenses.
Reported in (2011) 005 TaxCorp (A.T.) 25054 (DELHI)



21. NAYAK AND CO vs ACIT
Dated : 28 January 2011
S. 40(a)(ia), 194C – Whether TDS liability arises even if there is no contract between the assessee and the transporters which were arranged by consignors - Whether TDS u/s 194I is to be deducted on cold storage rental charges or u/s 194C.
Reported in (2011) 005 TaxCorp (A.T.) 24879 (KOLKATA)



22. CIT vs D RATHINAM
Dated : 01 February 2011
S. 40(a)(ia), 194C, 194I - Whether when Sec 194I came into being only from 2007, putting TDS liability on hiring of machinery, Revenue is right in insisting on tax deduction at source on miller and road roller charges for the prior period.
Reported in (2011) 005 TaxCorp (DT) 48347 (MADRAS)



23. M/s MATRIX GLASS AND STRUCTURES PVT LIMITED vs ITO
Dated : 28 January 2011
Section 40(a)(ia), 40A(3), 43A, 194C - Whether provisions of section 194C apply in cases where payments have been made to the truck owners for carrying goods - Whether provisions of section 40(a)(ia) are applicable only when amounts of expenses stand paid and not payable.
Reported in (2011) 005 TaxCorp (A.T.) 24629 (KOLKATA)


24. DCIT vs M/s INDRAPRASTHA POWER GENERATION CO LTD
Dated : 18 April 2011
S. 40(a)(ia), 139(1), 143(3), 271(1)(c) – Whether tax deducted at source from payments in March, but not deposited within the specified date would attract penalty or fall within the ambit of the retrospective amendment of 40(a)(ia)
Reported in (2011) 005 TaxCorp (A.T.) 25040 (DELHI)


25. Raja & Co. v. Commissioner of Income-tax (Central)
S. 40(a)(ia), r.w.s 263 - Interest, commission, etc., paid without deduction of tax at source - Assessment years 2005-06 and 2006-07. Whether since assessee had not deducted any tax at source while making payments to transport contractors, impugned order of Commissioner issued under section 263 for considering disallowance under section 40(a)(ia)
Reported in (2011) 005 TaxCorp (DT) 48858 (KERALA)

Merely because shares transferred by a NR (transferor-company)other NR

 

IT/ILT : [2011] 13 taxmann.com 26 (DELHI)
IT/ILT : Merely because shares transferred by a non-resident (transferor-company) to another non-resident company relate to an Indian company, that would not make that Indian company as agent under section 163 qua deemed capital gain purportedly earned by transferor-company -resident company relate to an Indian company, that would not make that Indian company as agent under section 163 qua deemed capital gain purportedly earned by transferor-company 

NO PENALTY IN CASE OF CONTENTIOUS ISSUES.

NO PENALTY IN CASE OF CONTENTIOUS ISSUES.


Complexity in legal provisions and tax laws:

Unfortunately laws are generally complex and require lot of studies to understand them .Even after proper understanding there can be mistake in understanding. Legal provisions are manmade and are dependent on who made them, who read them and who is ultimately interpreting them. Legal provisions are not like mathematics or natural science in which one can get a perfect answer. Understanding of law can be influenced even according to the person for whom a law is being read. For example, a petitioner will try to interpret law in his favor and the respondent in the same case will try to read it in his favor. We find difference of opinion between two judges so the matter is referred to larger bench. We find difference of opinion amongst Tribunal and Courts and due to such differences matter s are dragged in litigation. Even at the level of the Supreme Court we find many times different opinions amongst judges. In such cases majority prevails.

In case of tax Laws we find that they are much more complex than general laws. This is for the following reasons:

There are many amendments in tax laws. As a routine we find one occasion of amendment through the Annual Finance Act and then there are many other amendments through other amending enactments. Then we find changes in legal provisions due to changes in Rules, clarifications and decisions of authorities and Courts.

Even after judgment of the Supreme Court, many times doubts are expressed about correctness of judgment by other benches, and it may be reviewed by a larger bench of the Supreme Court. Amendment of law after pronouncement of judgment by the Supreme Court or High Courts to nullify the judgments is also a regular feature and unfortunately Courts are also allowing such amendments even with retrospective effect. Therefore, it can be said that the laws are not only complex but are also uncertain. This is very unfortunate aspect of our legislation system.

Recent case in relation to Central Excise Duty:

In the case of Uniflex Cables Ltd. vs. C.C.E. matter came before the Supreme Court about penalty on a demand which arose on a contentious issue. The Supreme court held that undoubtadely the issue is contentious or of interpretational nature. In such case penalty cannot be levied. The supreme Court found that in this case the Commissioner himself has found and recorded in his order-inoriginal that the issue involved in the case is of interpretational nature. Keeping in mind the same the Commissioner thought it fit not to impose harsh penalty and a penalty of an amount of Rs. 5 lakhs was imposed on the appellant while confirming the demand of the duty.

An appeal under Section 35-L (b) of the Central Excise Act, 1944 (the Act'), was preferred against the Judgment and Order no A/1326/WZB/2005/C-iii dated 7.7.05 in Appeal No. E/1893/01, passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Branch, Mumbai.

Analysis of facts:

The appellant is engaged in the manufacture of insulated wires and cables falling under Central Excise Tariff Sub‑Heading No.8544.00.
The appellant had received orders from various wind mill manufacturers for specially designed electrical cables, which were to be used in the manufacture of wind mills.
Notification no. 205/88 – C.E. dated 25.05.88 as amended by Notification no. 57/95 grants exemption from payment of central excise duty in respect of manufacture of wind mills, parts of wind mills and any specially designed devices which run on wind mills.
The appellant claimed benefit under said Notification and claimed exemption from payment of central excise duty in respect of specially designed cables manufactured and supplied to wind mills manufacturers by considering the cable as , parts of wind mills
The appellant filed a declaration under Rule 173-B of the Central Excise Rules, 1944 claiming nil rate of duty so as to avail benefit under the aforestated notification for the insulated cables manufactured by it and supplied to the manufacturers of wind mills for using the same as part of wind mills for the period commencing from May, 1995 to February, 2006.
The appellant also reversed the modvat credit taken on inputs for Rs. 16,14,088.32 for availing the exemption benefit under notification no. 205/88. The appellant did not pay excise duty in accordance with the declaration filed by it.
For nonpayment of duty as stated above, three show cause notices had been issued to the appellant by the Revenue -Authorities for recovery of total excise duty amounting to Rs. 66,92,604/-. The revenue took view that the electric cables were neither parts nor specially designed devices, which were necessary for manufacturing or running wind mills. Therefore, according to the authorities, benefit under the said notification could not have been availed by the appellant.
Ultimately, the Commissioner, Central Excise, Surat – II by an order dated 20.2.1998, confirmed the demand of excise duty amounting to Rs. 66,92,604 and imposed penalty under Rule 173Q(1) of the Rules. The said order was challenged before the Tribunal and the Tribunal allowed the appeal by remanding the matter to the Commissioner. After hearing the appellant, the Commissioner again took the same view by his order dated 22.3.2001.
Again the appellant preferred an appeal before the Tribunal which was dismissed. The Tribunal relied on its earlier order passed in NICCO CORPORATION LIMITED v. COMMISSIONER OF CENTRAL EXCISE, CALCUTTA, whereby an analogous issue was adjudicated and decided against the concerned assessee. Aggrieved by the said order dated 7.7.2005, the appellant has preferred the appeal before the Supreme Court.
In case of NICCO CORPORATION LIMITED (supra) ultimately the Supreme Court has vide its order dated 22.3.06 dismissed the appeal and held that insulated electrical cables designed for use in wind mills would not be eligible for exemption under notification no 205/8 8 as amended vide Nicco Corporation Ltd. v. Commissioner of Central Excise, Calcutta 2006 -TMI - 722 – (SUPREME COURT OF INDIA)
During the pendency of the proceedings, the Authorities had issued a notice of demand directing the appellant to pay central excise duty and penalty amounting to Rs. 1, 33, 85,208.
The amount of penalty was not paid as stay has been granted against the said demand.
The Supreme Court heard the learned counsel appearing for the concerned parties. It was mainly submitted on behalf of the appellant that the electrical cables supplied to the manufacturers of wind mills were specifically designed for use in wind mills. They were special type of cables, without which the wind mills could not have been operated and, therefore, the revenue authorities ought to have granted exemption as stated in the notification referred to hereinabove. The learned counsel appearing for the appellant gave details as to how the electric cables were specially used for running the wind mills. He further stated that without use of the electric cables supplied by the appellant, functioning of the wind mills would not have been possible. He, therefore, submitted that the appellant ought to have been given the benefit of the notification referred to hereinabove.
Shri H.P. Raval, learned Additional Solicitor General appearing for the respondent-authorities relied upon the judgment delivered in Nicco Corporation Ltd. v. Commissioner of Central Excise, Calcutta (supra) and submitted that the electric cables manufactured and supplied by the appellant were not so indispensable that without which the wind mills could not have been operated. He further submitted that for the reasons recorded in the order passed by the Tribunal, the appellant is not entitled to exemption. He further submitted that the order imposing penalty is also just and proper as the appellant deliberately did not pay excise duty payable by it. Thus, he submitted that the impugned order is just and proper and, therefore, the appeal deserves to be dismissed.
Issues considered by the Supreme Court:

Suprem Court considered that two issues arise for adjudication:

1. Whether the insulated electrical cables manufactured by the appellant would be eligible for exemption under the above mentioned exemption notification.

2. Whether imposition of penalty is justified in view of the facts and circumstances of the case.

The first issue is no more res integra in view of the judgment delivered by this Court in the case of Nicco Corporation Ltd. v. Commissioner of Central Excise, Calcutta (supra). The facts in the said case as well as in the present case are similar and, therefore, we need not consider the said issue again. In the circumstances, the first issue is decided in favour of the Revenue.

As regards the imposition of penalty, The supreme Court opined that the said order cannot be justified in the facts of the case because the Commissioner, himself in his order-in­original has stated that the issue involved in the case is of interpretational nature. Keeping in mind the said factor, the Commissioner thought it fit not to impose harsh penalty and a penalty of an amount of Rs. 5 lakhs was imposed on the appellant while confirming the demand of the duty.

About facts it is also evident from the said order that the Commissioner also found that except for the statement of the Excise Executive Director and Excise Clerk of the assessee company there was no other evidence pointing out any accusing finger at them in dealing with offending goods knowingly.

A clear finding has been recorded by the Commissioner that it was difficult to hold that the appellant knowingly dealt with excisable goods which were cleared without payment of duty. Nor the department itself took it as a formal case of offence.

On consideration of the aforesaid facts and also the fact that the Commissioner himself found that it is only a case of interpretational nature, The Supreme Court held that

"in our considered opinion, no penalty could be and is liable to be imposed on the appellant herein".
"therefore, in the facts and circumstances of the present case we are of the view that penalty should not have been imposed upon the appellant".
Consequently, we quash the order of the Commissioner imposing penalty as also the order of the Tribunal so far as it confirms imposition of penalty upon the appellant.
Learning from the judgment:

Author will try to write another article on the issue of specially designed cables. Prima facie it appears that the case of specially designed cable was not properly prepared. This is because cables as such , even if specially designed or prepared cannot be considered as a component or part of component of any machine. However, a set of cables and fittings to serve circuiting and controlled electrical movement can definitely be considered as components or accessories of any machine. Therefore, apparently the case was considered by manufacturers of cable in a very simple manner to treat cables as component of wind mills.

Whenever, there is a contentious issue, it is always desirable that the basis of treatment given should be disclosed, and for the adopted basis, there should be technical reports about facts and circumstances , technical and legal opinion should also be obtained from experts, if any order passed in any case, even by lower ranking authorities is available, that can also be relied on. These will make that one has taken proper care and found his basis of claim on certain contentions which are possible contentions. This situation will definitely help in waiver of penalty.

When assessee transfers brand, trademark and other interests in a

Whether when assessee transfers brand, trademark and other interests in a health periodical, held as intangible assets, profits arising out of such transactions are to be treated as capital gains or business income - capital gains, says HC

THE issue before the HC is - Whether when assessee transfers brands, trademark and interests in a health periodical, held as intangible assets, the profit arising out of such transaction is to be treated as capital gains or business income. The HC's answer is capital gains.

Facts of the case

Assessee is a private limited company engaged in the business of Healthcare, print media & electronic media communications – it entered into an 'Specified Assets Transfer Agreement' with one `CMPIPL' for the sale of all its rights, titles and interest in specified assets of its Healthcare Journals & Communications business for a consideration of Rs. 3.80 crores – these assets were (a) the periodicals (b) the products (c) the business intellectual property rights along with the goodwill and all rights (d) the customer database (e) the records (f) the editorial materials & (g) the contracts – pursuant to the agreement, two separate deeds namely 'Deed of Assignment of Copyrights' & 'Deed of Assignment of Trademarks' were executed on the same date and the assessee also assigned the copyrights and trademarks pertaining to its Healthcare Journals & Communication business – it also relinquished its right to carry on any business involving, relating to or competing with the transferred specified assets – however, it retained a limited & non exclusive right to use the pharmaceuticals companies solely for the purpose of its clinical trials business and for no other purpose – assessee offered the said amount as long term capital gain – In assessment proceedings, the assessee submitted that all the journals were initiated by the company itself and were not in existence earlier, these journals were registered with the Registrar of Newspapers of India - thus, the assessee was the owner of brand name of these journals which were also registered/indexed with Indian National Scientific Documentation Centre, Govt. of India and was the exclusive holder of copyrights and trademarks of all the journals – these were intangible assets u/s 55(2)(a), the cost of acquisition of which was `Nil' and the consideration received should be considered as long term capital gain.

AO observed as per the terms of the agreement that the assessee had not sold whole of its business but only surrendered it right regarding publications of journals and the `CMPIPL' granted the assessee a royalty free, non-exclusive license to use the data comprised of the advertisers and pharmaceutical companies which the assessee would use in respect of its clinical trials business. The agreement also contained a non compete clause. Thus, the AO considered that the income received would be treated as business income as per the provisions of Section 28 (va).

CIT (A) as well as ITAT allowed the appeal of the assessee and treated it as capital gain. ITAT held that the assessee company had wholly given up its right to carry on Healthcare Journals and Communications business for a specified period and there was no connection between the two businesses i.e. Business of Healthcare Journals & Communications was clearly a distinct and separate business as before sale of intangible like trademarks, brands, copyrights and goodwill. The assessee had lost the source of income and section 28(va) did not apply.

After hearing both the parties, the ITAT held that,

++ it is to be borne in mind that vide agreement entered into by the assessee in favour of M/s CMP Medica Pvt. Ltd, the assessee had sold/transferred the rights of trade mark, brands, copyrights etc. in the journals and publications which the assessee had. All the journals were registered with RNI. These publications were indexed by the INSDC and were also published as property of the assessee. The assessee also had copyrights therein. It cannot be disputed that trademarks/brands, copyright and good will constitute assets of the business and are profit earning apparatus. The 'right to carry on any business' has been recognized by the legislature as capital asset for the purposes of assessing and computing the capital gains as per Section 55 (2) (a). Once it is accepted that the brand names, trademark, copyright and goodwill in the aforesaid journals was sold/transfered by the assessee to the transferee, it would be a case of sale of capital asset and the gain therefrom would be computed as capital gain;

++ the assessee had sold and transferred permanently and forever all its existing assets and contracts of the Healthcare journals and Communication business in terms of the agreement. The consideration was not received only for giving up the right to carry on the Healthcare Journals & Communications business but was mainly for the transfer of all intangible assets being trademarks, brands, copyrights and the associated goodwill of the Healthcare journals & communications business. In respect of journals etc. published, the assessee had Statutory Title Clearance from the office of the Registrar of Newspapers for India, all the publications were registered with RNI, appellant had also filed "from B' declaration before the DCP (Licensing), Delhi, the publications were indexed by INSDOC and all these publications had a copyright declaration which proves the authenticity of the appellant's claim of the assets being in the nature of intangible capital assets of business;

++ the clinical trial business which the assessee continues to carry on was distinct and separate from the business of Healthcare Journals and Communication. As far as Healthcare Journal and Communication business is concerned, it had been given up in entirety in favour of the transferee. Therefore, it could not be said that the assessee had given up only one of the activities in relation to its business. Thus, the proviso to Section 28(va) becomes applicable which stipulates that Section 28 (va) was not applied to any sum received on account of transfer of right to carry on any business which is chargeable under the head "capital gains";

++ further the agreement was captioned as "Specified Asset Transfer Agreement" which defines "Business" to mean the business of publishing, distributing and selling the periodical and products as carried on by the seller. All these publications were termed as "Business Intellectual Property Rights" which were treated as "Specified assets". So much so, the "Customer Data Base" held by the assessee was also shared with the transferee. Thus, there was a clear transfer of the exclusive assets and on transfer it is the transferee who had become the sole and undisputed owner of these assets which were the business assets of the assessee.

SC issues notice to Citibank on petition filed by I-T deptThe Supreme Court has

 

SC issues notice to Citibank on petition filed by I-T dept
The Supreme Court has issued notice to US-based Citibank on a petition filed by the income tax department alleging that the bank was liable to pay more than R59.19 crore as tax during 1991-92 for violating the RBI guidelines on Portfolio Management Scheme (PMS). A bench headed by Chief Justice SH Kapadia has sought reply from the bank on the issue. Under the PMS, the bank received money from customers and invested the same in shares, debentures, public sector bonds, securities, and so on. The investment was made for and on behalf of the customers. The role of the bank was purely custodial and managerial. The bank earned commission, fees and service charges for managing PMS on behalf of its customers. The RBI had issued guidelines for the proper management of the scheme and for acceptance of funds by the bank from time to time. Under the scheme, money has to be placed by the customer for a certain period of time. Challenging the Bombay HC judgment that dismissed its plea for delay, the revenue department said that the high court failed to consider that the income on account of the so-called portfolio account holders (PAH) was nothing but a deposit taken. "As per the RBI guidelines, certain maximum amount of interest was only permitted on the deposits. Any excess payment has not legally been permitted and, therefore, all the income of the company from portfolio management has to be treated as the income of the company against which payment of interest to the various so-called PAH was to be allowed subject to the maximum of the right permitted by RBI," the petition stated. According to the revenue department, the bank had collected substantial amounts from corporate under PMS in violation of the RBI guidelines. In view of such alleged violations , an addition of R54.77 crore was made by the assessing officer in respect of such PMS transcations. However, Income Tax Appellate Tribunal, in appeal by the bank, had allowed the assessee's appeal related to the addition on the PMS account by holding that the question of disallowance would arise only were either such loss or expenditure was claimed in profit and loss account or in computation in income and not otherwise. Besides, the tribunal also allowed the assessee's claim in respect of bad debts on the grounds that such debts were written off in its books of accounts.