TMI Tax Updates - e-Newsletter
February 11, 2012
Case Laws in this Newsletter:
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses the principles of classification under the Central Excise Tariff Act, 1985, emphasizing that changes in classification should be prospective, not retrospective. It highlights Supreme Court rulings that established classification practices cannot be altered without valid reasons and that the burden of proof lies with the Department. The case of Lamifab & Papers Limited is examined, where a dispute arose over the classification of goods. The Tribunal ruled that the initial classification approved by the Assistant Commissioner could not be changed retrospectively, although provisional assessments for subsequent periods were upheld due to the absence of a limitation period.
News
Summary: The Indian government approved 20 Foreign Direct Investment (FDI) proposals totaling approximately Rs. 1034.371 crore, following recommendations from the Foreign Investment Promotion Board. These approvals span various sectors, including commerce, consumer affairs, economic affairs, health, information technology, and pharmaceuticals. Notable approvals include joint ventures and equity participation in retail, manufacturing, and IT services. Additionally, 15 proposals were deferred, two were rejected, and one was withdrawn. The deferred proposals cover sectors such as pharmaceuticals, defense, logistics, and publishing, while the rejected proposals involved issues with capitalization and share transfer timing.
Summary: During April-November 2011, India's import of sensitive items rose by 42.3% to Rs. 67,264 crores from Rs. 47,260 crores the previous year, constituting 4.7% of total imports. While imports of milk products and food grains declined, there was a significant increase in imports of edible oils, fruits, vegetables, automobiles, and other items. Notably, edible oil imports surged due to a rise in crude palm oil imports. Imports from countries like Indonesia, China, and the USA increased, whereas imports from Brazil and Australia decreased. The overall import of all commodities grew by 32.2% during the same period.
Summary: The Central Statistics Office of India's Ministry of Statistics and Programme Implementation released the Quick Estimates of the Index of Industrial Production (IIP) for December 2011. The General Index rose by 1.8% compared to December 2010, with cumulative growth from April to December 2011-12 at 3.6%. The Mining, Manufacturing, and Electricity sectors showed varied growth rates of -3.7%, 1.8%, and 9.1%, respectively. Fifteen out of twenty-two manufacturing industry groups experienced positive growth, with significant increases in publishing and tobacco products. Consumer goods recorded a 10% growth, while capital goods declined by 16.5%. Some consumer goods and machinery items showed negative growth.
Summary: The Finance Minister of India and the UK's Secretary of State for International Development held a telephonic discussion, expressing satisfaction with the progress of development cooperation activities between the two countries. They addressed recent media reports in the UK regarding their partnership and reaffirmed their commitment to the Bilateral Development Cooperation Programme, set to continue until 2014-15. Both leaders highlighted the historical ties and warm relations between India and the UK, noting the mutual benefits of their cooperation, including the introduction of Private Sector Development initiatives through government-sponsored institutions.
Summary: The Central Government of India released the seventh quarterly report on Public Debt Management for October-December 2011. Initiated in September 2010 by the Department of Economic Affairs, the report is divided into five sections covering the macroeconomic environment, debt management operations in the primary market, cash management operations, outstanding debt characteristics, and secondary market activity in government securities. The report aims to provide insights into the government's financing requirements, auction details, borrowing costs, and maturity profiles, and it will continue to be published quarterly.
Summary: India's exports in January 2012 grew by 10.1% to $25.4 billion, while imports increased by 20.3% to $40.1 billion, resulting in a trade deficit of $14.7 billion. From April 2011 to January 2012, exports rose by 23.5% to $242.8 billion, and imports grew by 29.4% to $391.5 billion, leading to a trade deficit of $148.7 billion. Significant export growth was seen in sectors like engineering, petroleum products, and gems. Import growth was notable in petroleum, gold and silver, and machinery. The Commerce Secretary noted these figures are preliminary estimates.
Summary: The European Union Trade Commissioner met with India's Union Minister of Commerce, Industry, and Textiles to discuss strengthening economic ties between the EU and India. They focused on the upcoming India-EU Summit and the proposed Broad-based Trade and Investment Agreement (BTIA) aimed at expanding and diversifying trade. The EU is India's third-largest trading partner, with significant export growth and investment between 2010 and 2011. The EU is the largest investor in India, with substantial foreign direct investment, while Indian investments in the EU also reached significant levels, highlighting the importance of bilateral trade relations.
Summary: The Union Cabinet has approved the National Data Sharing and Accessibility Policy 2012 (NDSAP-2012) to enhance access to government-owned data. The policy aims to make shareable data available in both human and machine-readable formats across India, supporting national planning and development. It applies to all data created or collected using public funds by government entities, ensuring broader accessibility and use of public information within the framework of existing policies and regulations.
Summary: The Union Cabinet approved guidelines for establishing Joint Venture Companies by Defence Public Sector Undertakings (DPSUs) to enhance national security and self-reliance in defense production. Key provisions include transparent partner selection, defined JV scope, DPSU rights to approve key decisions, and exit strategies. These guidelines aim to improve risk management, efficiency, and delivery times for defense needs. The initiative aligns with the Defence Production Policy of 2011, promoting public-private partnerships and advanced technology acquisition to boost the competitiveness and efficiency of the defense sector. The guidelines are expected to strengthen partnerships between DPSUs and private entities.
Notifications
Customs
1.
F.No. 437/07/2012-Cus. IV - dated
10-2-2012
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Cus (NT)
Appointment of Common Adjudicating Authority
Summary: The Central Board of Excise & Customs, under the Ministry of Finance, has appointed the Commissioner of Customs (Import) at New Custom House, Mumbai, as the Common Adjudicating Authority for a case involving M/s KMS Medisurgi Pvt. Ltd. This appointment follows the powers granted by Notification No. 15/2002-Customs (N.T.) and pertains to a Show Cause Notice issued by the Directorate of Revenue Intelligence, Zonal Unit, Ahmedabad. The decision is documented in Order F.No. 437/07/2012-Cus. IV, dated February 10, 2012. Copies of the order have been distributed to relevant customs and intelligence officials.
DGFT
2.
95 (RE-2010)/2009-2014 - dated
9-2-2012
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FTP
Import policy of arms and ammunition for Specified Sportspersons / Sport Bodies, amendment thereof.
Summary: The Government of India has amended the import policy for arms and ammunition for specified sportspersons and sports bodies under the Foreign Trade Policy. The amendment allows renowned shooters, the National Rifle Association of India (NRAI), the Sports Authority of India (SAI), and the Services Sports Control Board (SSCB) to import arms and ammunition freely for their use or affiliates, subject to proper certification and record maintenance. The import of air gun pellets remains free. This change simplifies the import process but does not exempt compliance with the Arms Act, 1959, or related rules.
SEZ
3.
S.O. 200(E), - dated
31-1-2012
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SEZ
Rescinds the sector specific Special Economic Zone for information technology and information technology enabled services at Village Sholinganallur; Taluka Tambaram, District Kanchipuram in the State of Tamil Nadu;
Summary: The Central Government has rescinded the notification establishing a sector-specific Special Economic Zone (SEZ) for information technology and IT-enabled services at Village Sholinganallur, Taluka Tambaram, District Kanchipuram, Tamil Nadu. Initially proposed by a private company, the SEZ covered an area of 18.60.4 hectares and was notified in May 2007. The company later sought to denotify the SEZ, and the government approved this request on December 27, 2011. Consequently, the SEZ notification is withdrawn, except for actions taken before this rescission.
Circulars / Instructions / Orders
FEMA
1.
76 - dated
9-2-2012
Clarification - Establishment of Project Offices in India by Foreign Entities – General Permission
Summary: The circular addresses the establishment of project offices in India by foreign entities, highlighting the requirement for prior permission from the Reserve Bank of India for citizens of certain countries, including Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, and China. It refers to Regulation 4 of the Foreign Exchange Management Act (FEMA) and reiterates the conditions under which foreign entities can set up project offices in India as per guidelines issued on November 15, 2003. Authorized Dealer Category - I banks are instructed to inform their clients of these regulations, which are issued under the Foreign Exchange Management Act, 1999.
DGFT
2.
98(RE:2010)/2009-2014 - dated
10-2-2012
Amendment in SION, A1790 and A1834.
Summary: The Director General of Foreign Trade has issued amendments to the Handbook of Procedures for the Foreign Trade Policy 2009-2014. Specifically, in SION No. A1790 and A1834 of the Chemical and Allied Product Group 'A', the import item previously listed as 'Antimony Dioxide' and 'Antimony Oxide' has been corrected to 'Antimony Trioxide'. This change only affects the name of the import item and does not alter the description or quantity of inputs, nor the description of the export product.
3.
97 (RE-2010)/2009-14 - dated
9-2-2012
Fixation of a new SION (C–2048) and addition / deletion / amendment in 5 SIONs of Engineering Product Group (Product Code ‘C’) in the Hand book of Procedures V.2 (2009-14)
Summary: The Directorate General of Foreign Trade has issued a public notice revising the Standard Input Output Norms (SION) for the Engineering Product Group. A new SION, C-2048, is introduced for exporting ball pen tips made from nickel silver wire. Additionally, amendments are made to SIONs C-864, C-1802, C-1888, and C-1937, standardizing the description of tungsten carbide balls and reducing wastage from 2% to 1%. Input items such as cutting tools, drill oil, and chemicals are now permissible. SION C-1768 is deleted due to redundancy with C-864.
Highlights / Catch Notes
Income Tax
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Non-Compete Fees Classified as Capital Expenditure, Affecting Tax Deductions for Businesses Seeking to Ward Off Competition.
Case-Laws - HC : Non-compete fees - capital expenditure or revenue expenditure – warding off competition in business will constitute capital expenditure.... - HC
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High Court Affirms Section 40A(3) Applies to Stock-in-Trade Purchases; Payments Must Be Via Account Cheque or Draft.
Case-Laws - HC : When moneys are paid/spent for purchase of stock-in-trade then also the provisions of Section 40A(3) will apply since this amounts to expenditure.... - HC
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Housing Board's Interest on Delayed Flat Allotment Classified as Revenue Receipt, Not Subject to TDS u/s 194A.
Case-Laws - HC : TDS on Interest paid/credited by the Housing Board - delayed allotment of flats – though it was termed as interest on delayed payment, it was actually a revenue receipt and therefore the provisions of Section 194A of the Income tax Act would have no application .... - HC
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Section 80IA(3) Deductions Not Applicable: Business Started Before April 1, 2005, Ineligible for Internet Services Benefits.
Case-Laws - HC : Deduction under 80IA on internet services and internet telephone - provisions of 80IA(3) are not applicable to the present assessee, it having commenced its business much prior to 1.4.2005.... - HC
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Assessee Avoids Disallowance: Payments Made Without TDS Using Form 15-I, Despite Filing Lapse with Assessing Officer.
Case-Laws - AT : TDS - payment to truck owners without tax deduction - Assessee has obtained Form 15-I and filed during the course of assessment proceedings but only failed to file before the concerned Assessing Officer. - No disallowance.... - AT
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Section 50C Not Applicable When Full Property Sale Proceeds Reinvested in Bonds u/s 54EC, Reducing Tax Liability.
Case-Laws - AT : Validity of invoking provisions of Section 50C – investment in bonds in view of provisions of section 54EC - entire amount of sale consideration has been invested in Bonds therefore, provisions of section 50C cannot be invoked.... - AT
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Trust's 80G Registration Can't Be Denied by CIT Due to Inoperative Clause Restrictions u/ss 12A and 10(23C).
Case-Laws - AT : Trust registered u/s 12A, 10(23(C) - application made for registration u/s 80G(5)(vi) – CIT could not deny the registration solely on the basis of one clause, which could not be acted upon in view of the restriction contained in other clauses..... - AT
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Court Denies Relief for Late Rental Income Returns; Single Consolidated TDS Certificate Insufficient Justification u/s 119(2)(b.
Case-Laws - HC : Relief u/s 119(2)(b) – return of rental income & TDS thereon filed late in year 2005 for A.Y.1998-99 to 2001-02 – issuance of one consolidated TDS certificate by bank cannot be projected as a reason since separate share of each co-owners is a matter of agreement between the parties..... - HC
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Housing Developers Eligible for Tax Deduction u/s 80IB(10) Without Land Ownership Transfer.
Case-Laws - HC : Deduction u/s 80IB - undertaking developing and building housing projects – assessees were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees.... - HC
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Charitable Society Deed Focuses on Non-Violence and Spiritual Upliftment, Not Commercial Dispute Settlement.
Case-Laws - HC : Charitable Society - Clauses of the deed clearly state that the object of the Society is to propagate Non-violence and Tenets of Truth and to encourage universal spiritual uplifment. What is stated about the settlement of dispute is only incidental thereto and cannot be stated to be commercial in nature.... - HC
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"Total Income" in Section 80G(5B) differs from "Income" in Section 11 under Income Tax Act. Different meanings, applications.
Case-Laws - HC : The ‘total income’ as mentioned in sub-clause (5B) of Section 80G of the Act does not mean the ‘income’, as it appears in Section 11 of the Act. The expression “total income” and income have been used differently and has distinct application.... - HC
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Court Rules Director's Undisclosed Income Not Attributable to Assessee, Protecting Them from Additional Tax Liabilities.
Case-Laws - HC : Undisclosed Income - it is the director of the company who had utilized his undisclosed income for and on behalf of the assessee. - Addition could not be made in the hands of assessee.... - HC
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High Court Grants Tax Deduction Benefits to Software Firm Relocating from Gujarat to Bangalore u/s 10B.
Case-Laws - HC : Eligibility of deduction u/s 10B of the Act- Assessee having business of software development located at Gujarat shifted its unit to Bangalore- entitled to the benefit under Section 10B of the I.T. Act..... - HC
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ITAT Rules Payment to Sisters Under Will Was Voluntary, Not Mandatory, Affecting Capital Gains Application.
Case-Laws - HC : Capital gains - Application of income - ITAT is justified in holding that the obligation to make the payment to the sisters under the Will was a voluntary act of the appellant in the light of the agreement of Distribution of Assets.... - HC
Customs
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Anti-dumping duty proposed on Coumarin imports from China to protect domestic industries from unfair pricing. Notification 12/2012.
Notifications : Seeks to impose anti-dumping duty on import of Coumarin, originating in, or exported from, the People’s Republic of China - Ntf. No. 12/2012 –Customs (ADD) Dated: February 8, 2012
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Appellants contest anti-dumping duties; appeal not allowed. Must seek review by Designated Authority u/r 23.
Case-Laws - AT : Anti dumping duty - challenging the final findings dated 24.11.2009 issued by the Designated Authority. - it is no more open for the appellants to challenge the final finding by way of appeal and only remedy available at this stage to the appellants is to approach Designated Authority in review proceedings under Rule 23 of Anti-Dumping Rules .... - AT
DGFT
-
DGFT Updates SION for Categories A1790 and A1834 to Reflect Current Trade Requirements per Circular No. 98(RE:2010)/2009-2014.
Circulars : Amendment in SION, A1790 and A1834. - Cir. No. 98(RE:2010)/2009-2014 Dated: February 10, 2012
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New SION C-2048 Established; Five Existing SIONs Modified in Engineering Product Group, Handbook Updated Per Circular No. 97.
Circulars : Fixation of a new SION (C–2048) and addition / deletion / amendment in 5 SIONs of Engineering Product Group (Product Code ‘C’) in the Hand book of Procedures V.2 (2009-14) - Cir. No. 97 (RE-2010)/2009-14 Dated: February 9, 2012
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Amendment to Arms Import Policy: New Regulations for Sportspersons and Sport Bodies Under Notification No. 95 (RE-2010)/2009-2014.
Notifications : Import policy of arms and ammunition for Specified Sportspersons / Sport Bodies, amendment thereof. - Ntf. No. 95 (RE-2010)/2009-2014 Dated: February 9, 2012
SEZ
-
New IT SEZ Established in Sholinganallur, Tamil Nadu u/s 4 of SEZ Act, 2005.
Notifications : U/s. 4 of the SEZ Act, 2005 - Set up a sector specific Special Economic Zone for information technology and information technology enabled services at Village Sholinganallur; Taluka Tambaram, District Kanchipuram in the State of Tamil Nadu; - Ntf. No. S.O. 200(E), Dated: January 31, 2012
FEMA
-
Foreign Entities Allowed to Set Up Project Offices in India Under FEMA Circular No. 76 for Business Activities.
Circulars : Clarification - Establishment of Project Offices in India by Foreign Entities – General Permission - Cir. No. 76 Dated: February 9, 2012
Service Tax
-
Coal Loading and Unloading Using Pay Loaders and Manual Labor Deemed Taxable as Cargo Handling Services.
Case-Laws - AT : Whether loading/Unloading of coal on tippers by pay loaders and manual labor can be taxed under Cargo Handling Services - In the given case there was use of manual labor means thus Services liable to Tax. .... - AT
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Commissioners Must Ensure Thorough Review and Justification Before Appealing Revenue Orders to Avoid Dismissal.
Case-Laws - AT : Authorization by committee of commissioner - appeal before tribunal - The intent and spirit of the law is that the committee has to thread bare examine the issues/points which has caused prejudice to the interest of Revenue and with proper reason shall come to a conclusion that the order appealed is neither legal or proper for which remedy of appeal by Revenue is to be sought. Unless such process known to law is followed, we shall have no hesitation to dismiss the appeal of Revenue.... - AT
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Ship and Crew Management Services Subject to Service Tax from May 1, 2006, Says Court in Recent Ruling.
Case-Laws - AT : Ship Management Service versus Manpower Recruitment Agency - Short listing and selection of officer and crew, Issuing engagement/employment contract to officer and crew, Prepare and affect crew change's rule, Providing shore supervisor. These services specifically fall under 'Ship Management Services' which came into force on 01.05.06.... - AT
Central Excise
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Drawings for Motor Vehicle Parts Not Included in Assessable Value for Central Excise.
Case-Laws - AT : Valuation - Assessee manufacturer of M.V Parts - drawing supplied by the customers for product manufactured by the manufacturer, the cost thereof is not includible in the assessable value. ... - AT
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Liability to Pay Interest on Differential Duty u/s 11AB of Central Excise Act Clarified for Supplementary Invoices.
Case-Laws - AT : Liability to pay interest u/s 11AB of the Central Excise Act on the differential amount of duty paid by assessee under supplementary invoices - interest levied from the date of clearance of the goods to the date of payment of differential duty.... - AT
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Court Deems Encashment of Bank Guarantee During Pending Appeal Unjust, Orders Refund to Petitioner.
Case-Laws - HC : Revenue encashed the bank guarantee while the appeal was pending - Not to order refund of the amount due to encashment of BG even while the appeal of the petitioner is pending, in our considered opinion, amounts to adding insult to injury. .... - HC
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Supreme Court Grants Waiver on Pre-Deposit for Excise Duty on Jute Carpets, Overruling Tribunal's Interpretation of Rule 3.
Case-Laws - HC : Excise duty on Jute Carpets - Waiver of pre deposit - Decision of Apex court in favor of assessee - order of Tribunal is surprising where tribunal wen on to distinguish the judgment both on question of facts as well as interpretation of Rule 3... - HC
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Cenvat Credit Not Demanded on Inputs or Capital Goods if Ownership Changes Without Removing Goods from Facility.
Case-Laws - AT : Cenvat Credit - demand is not payable on inputs or capital goods due to change in ownership when the same are not removed from the factory of production. ..... - AT
VAT
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Sales Tax Stage Unfixed: No Gazette Notice by Chief Commissioner Breaches Section 15, Affects Cotton Yarn Turnover.
Case-Laws - HC : Sales Tax - non fixing of stage of tax - that there is no notification in the official Gazette by the Chief Commissioner and therefore, the vital pre requisite of Section 15 of the Central Sales Tax, namely, that the tax shall not be levied at more than one stage, has not been satisfied in respect of turnover of the cotton yarn.... - HC
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