TMI Tax Updates - e-Newsletter
March 28, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Central Excise

Articles

1. Budget 2012- INCOME FROM CAPITAL GAINS

   By: CSSwati Rawat

2. Budget 2012 -INCOME FROM BUSINESS OR PROFESSION

   By: CSSwati Rawat

3. Valuation in works contract and other issues requiring more clarity after provision of Reverse charge in Service Tax in Budget 2012

   By: RadheyShyam Mangal

4. WHEN INTEREST IS NOT PAYABLE FOR SHORTFALL OF PAYMENT ON FINALIZATION OF ASSESSMENT

   By: DR.MARIAPPAN GOVINDARAJAN

5. BUDGET 2012: NOT MUCH FOR CAPITAL MARKET .

   By: Dr. Sanjiv Agarwal

6. Un-necessary litigation with gross negligence by revenue- a serious concern. Avoid un-necessary litigation to stop brain drain.

   By: DEVKUMAR KOTHARI

7. Lump sum scheme for payment of service tax in works contract introduced

   By: AMIT BAJAJ ADVOCATE

8. Quick review on Budgetary Changes in Service tax .

   By: CSSwati Rawat

News

1. International Price of Crude Oil - Indian Basket inches Closer to 124 BBL on 26.3.2012.

2. 32.39% Growth in Marine Product Exports in Terms of US Dollar

3. Rs. 135.86 Crore Spent on Modernization of Food Processing Industries in 2011-12

4. Management of Funds Under NPS

5. Excise duty from Tobacco Products

6. Tax Concession on Education Loan

7. Measures for Checking Out-Flow of Black Money

8. Interest Subsidy on Education Loan

9. Prosecution for Concealing Income

10. Lending to Small and Marginal Farmers

11. New Base Rate System

12. Introduction on Interst Free Banking

13. Size of the Indian Economy

14. Disinvestment of NALCO

15. Repayment of 6.85% Government Stock, 2012 to be made on 5th April, 2012

16. National Small Savings Fund (NSSF) Schemes - Revision of interest rates for small savings schemes

17. India asks for long term agreement on rough diamonds from Russia Anand Sharma pushes for JV between India and Russian Pharma Companies.

18. Before the Summit- BRICS Trade Minister to meet on 28th March Anand Sharma Expresses Optimism on Growth in BRICS Countries.

19. 928 Hospitals join the Preferred Provider Network (PPN) to provide cashless facility.

20. Public sector general insurance companies not to charge service tax on cashless hospitalization claims.

21. Training institutes to register themselves either as a company under the companies act, 1956 or as a society/trust.

22. Revision of Interest Rates for Small Savings Schemes with Effect from 1st April 2012.

23. No proposal to shift the insurance sector to a paperless model.

24. SPMCIL Inks MoU with the Government setting Sales Target of Rs.3050 Crores for the Financial Year 2012-13.

25. SPMCIL becomes a debt-free company.

26. Registration of Companies.

27. Regulation of Foreign Chartered Accountant Firms.

28. Implementation of XBRL.

29. Minister Anand Sharma and Secretary Bryson of US Commend India - U.S. Commercial Dialogue.

30. DE-Notified SEZs.

31. Exports of Basmati Rice.

32. Directorate General of Trade Remedies.

33. Export of Vegetables and Fruits.

34. Breach of WTO Obligations.

35. Export of Mineral.

36. AEZs in Rajasthan.

37. FTA with Asean Countries.

38. Marine Exports.

39. Export of Fishes.

40. Setting up Power Plant in SEZs.

41. CCI Advocating for Competition Coherent Government Policies.

Notifications

Customs

1. Corrigendum - dated 23-3-2012 - Cus

4th Corrigendum of notification number 21/2002-customs.

2. 25/2012 - dated 23-3-2012 - Cus (NT)

Amends Notification No. 64/1994 - Ports for Coastal Trade.

Income Tax

3. 13/2012 - dated 22-3-2012 - IT

U/S. 80-IA IT Act, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INDUSTRIAL INFRASTRUCTURE UNDERTAKINGS,

Circulars / Instructions / Orders

Income Tax

1. 01/FT&TR/2012 - dated 31-1-2012

Section 144C of the Income-tax Act, 1961 - Dispute Resolution Panel (DRP) - Reference to - Constitution of DRP at specified places.

DGFT

2. 105 / 2009-14(RE 2010) - dated 27-3-2012

Procedure for refund / revalidation of DEPBs/Reward Scrips for re-credit of 4% CVD (SAD).

Customs

3. 09/2012 - dated 23-3-2012

Applicability of exemption under Sr. No. 4 of the Notification 4 / 2006 - CE dated 1/3/2006 on import of Ore Concentrates - regarding.

4. F. No.450/24/2012-Cus.IV - dated 14-3-2012

‘Handling of Cargo in Customs Areas Regulations, 2009’ - regarding.

Central Excise

5. 961/04/2012-CX - dated 26-3-2012

Revised Treaty of Trade between India and Nepal.

Highlights / Catch Notes

Customs

• Amendment to Notification No. 64/1994: Updates on Ports for Coastal Trade to Streamline Customs Regulations.

  Notifications : Amends Notification No. 64/1994 - Ports for Coastal Trade. - Ntf. No. 25/2012 - Customs (N. T.) Dated: March 23, 2012
  Visit to Get Source

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• Exemption for Ore Concentrates under Serial No. 4 of Notification 4/2006-CE: Key Updates from Circular No. 09/2012.

  Circulars : Applicability of exemption under Sr. No. 4 of the Notification 4 / 2006 - CE dated 1/3/2006 on import of Ore Concentrates - regarding. - Cir. No. 09 / 2012 – Customs Dated: March 23, 2012
  Visit to Get Source

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Central Excise

• India-Nepal Trade Treaty Revised: Enhancements in Bilateral Trade, Customs Procedures, and Economic Cooperation Outlined in Circular No. 961/04/2012-CX.

  Circulars : Revised Treaty of Trade between India and Nepal. - Cir. No. 961/04/2012-CX Dated: March 26, 2012
  Visit to Get Source

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Case Laws:

• Income Tax

• 2012 (3) TMI 325
  Claim of bad debt - Business or Capital loss - In the assessment order dated 29th August, 2006, the Assessing Officer disallowed bad debt of Rs.44,28,000/- on the ground that provisions of Section 36(1)(vii) read with Section 36(2) of the Act were not satisfied as the amount had not been taken into account in computing income of the earlier years - It is not in dispute that the assessee is also in the business of constructing and developing buildings - The amount of Rs.44,28,000/- receivable from M/s. Gulmohar Estate Ltd. paid towards purchase of flats were shown under the head “loans and advances” in the balance sheet as on 31.03.1991 - It is also an admitted position that the possession of the fats agreed to be purchased by the assessee was not given to the assessee and, thus, the transfer of flats within the meaning of Income Tax Act was not completed - the transaction to purchase property from M/s. Gulmohar Estate Ltd. was related or incidental to the assessee’s business. After taking into account the intention of the assessee, it is well settled that it is the intention of the assessee which would matter in deciding as to whether the property purchased were intended for carrying on business or to hold it as an investment coupled with the line of the business carried on by the assessee - Decided in favor of the assessee

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• 2012 (3) TMI 324
  Deemed dividend - The reduction was made by the CIT(Appeals) on the ground that certain amounts had been repaid and that cannot be treated and regarded as deemed dividend - The tribunal also examined the merits of the case and held that the transactions between the assessee and the East India Impex (Delhi) Private Limited were business transactions and cannot be treated as loans or advance - The fact that the shareholders of the assessee company were also shareholders of the company which had given “loan/advances” is not suffice and does not meet the requirement of Section 2(22)(e) - Decided in favor of the assessee

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• 2012 (3) TMI 323
  Condonation of delay - Revision u/s 263 - dividend stripping - Commissioner of Income Tax noticed that the two transactions were accepted by the Assessing Officer without verification about the genuineness, nature and purpose of the transaction and without obtaining necessary details - Held that: it has been held that order of the Assessing Officer cannot be treated as erroneous and therefore revisable under Section 263 of the Act, as Section 94(7) relating to dividend stripping became a part of the statute and is applicable from Assessment Year 2002-03 onwards and is not applicable to earlier assessment years - The purchase and sale of units by the Assessee was undoubtedly bona fide and this was accepted by the Assessing Officer - Decided in favor of the assessee Regarding failure of the Assessing Officer to invoke Section 40A (2)(b) in respect of Rs.2,37,500/- paid to Rajesh Mehta, CA, who is also a director of the respondent-assessee - Tribunal has observed and held that the Commissioner of Income Tax had recorded an entirely incorrect finding - It is not pointed out and shown to us how and why the finding recorded by the Tribunal is factually incorrect or perverse - Decided in favor of the assessee

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• 2012 (3) TMI 322
  Rectification - Rule 19 of the AAR(Procedure) Rules, 1996 - Certain typographical mistakes have been pointed out in the Ruling pronounced on 28th February, 2012 - Revised corrected order is being issued separately

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• 2012 (3) TMI 321
  Capital or revenue expenditure - enduring nature - The contention of the Revenue is that the construction of flyovers, pedestrian facilities etc. was capital expenditure as the facilities being constructed had an enduring benefit and had resulted in creation of permanent facilities - held that the expenditure incurred on construction of flyovers etc was revenue expense and not capital expense - Decided in favor of the assessee. Regarding diversion - The concept of diversion of income by way of overriding title for the purpose of income tax was expounded and explained by the Supreme Court in CIT vs. Sitaldas Tirathdas, (1960 -TMI - 49527 - SUPREME Court) - The nature of obligation by reason of which income becomes payable to a person other than the one entitled to it, is the relevant and the determinative factor - A part of the said amount i.e. 5 paise per bottle was retained by the assessee to meet their administrative and other corporate expenses and the other part of that was to be used for construction of flyovers and pedestrian facilities by the assessee. The said 95 paise was not transferred or paid by the assessee to the Delhi Administration - held that the amount standing in TIUF was not diverted at source by way of overriding title and, therefore, was to be included in the taxable income of the assessee - Decided against the assessee. Taxability of part of sale proceeds kept in separate account - held that:- Mere fact that the amount was retained in the bank account of the assessee under the head ‘OGES’, does not show or prove that it was the income of the assessee. Mere realization of an amount in course of trading was not determinative whether the amount received was income. The court/authorities must determine the nature and character of the receipts before the amount can be taxed as income. This part of the sale consideration i.e. OGES was kept in a deposit unrelated to the business of the respondent assessee. The assessee did not exercise dominion over the said fund/deposit and deal with the said fund/deposit. Keeping in view the aforesaid elucidation of law and applying the same to the factual matrix, noting the nature and character of the OGES, it has to be held that the same was not taxable income of the assessee. The same has to be excluded from the profit. The aforesaid receipts were not income earned and do not have character of income earned by the assessee over which it had dominion or right.

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• 2012 (3) TMI 320
  Penalty u/s 272A - The assessee, who is deriving income from its business of cold storage, was required to deduct tax at source from interest payable/paid to certain creditors and in case the creditors were not liable to pay any income tax, the assessee was required to obtain declarations in Form No.15H which were to be filed with the Commissioner of Income Tax (CIT) under section 197A of the Act - Mr. M. R. Bhatt learned senior advocate submitted that the proviso to section 272A of the Act has been inserted by the Finance Act, 1991 with effect from 1.10.1991 - It was submitted that the proviso to section 272A of the Act being substantive in nature and having been made expressly applicable with effect from 01.04.1999 is neither expressly nor by implication retrospective in effect - Failure to file the declaration in Form No.15H prior to 1.6.1992 not being a default under section 272A(2)(f) of the Act - Decided in favor of the assessee. Maximum limit of penalty - retrospective effect - Held that: it is evident that there is no loss of revenue in case of failure to file declarations under section 197A of the Act as the provision relates to cases where no tax is deductible - Once it is held that the proviso is remedial in nature, in the light of the law laid down by the Supreme Court in the decisions cited hereinabove, the proviso is required to be treated as retrospective in operation. The Tribunal was, therefore, right in law and on facts in directing that the penalty should be calculated in accordance with the proviso to section 272A (wherein it is stipulated that the penalty should not exceed the tax deductible) by giving retrospective effect to the proviso. - Decided in favor of the assessee

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• 2012 (3) TMI 319
  Deemed income u/s 41(1) - refund of excise duty - The ground given by the tribunal for deleting the said addition is that the Excise Department had appealed against the judgment passed by the learned single Judge of this Court pursuant to which refund of Rs.42,05,173/- was granted - Held that: the furnishing of bank guarantee itself when payment has been received, will not make any difference as the language of Section 41(1) is clear that the amount should have been received either in cash or in any other manner - Decided against the assessee

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• Customs

• 2012 (3) TMI 311
  Waiver of pre-deposit - the learned counsel appearing on behalf of the respondents had submitted that the petitioner has been directed to pay the penalty, as he had abetted in the irregularities committed by the original assessee - Held that: the original assessee, namely, Visaka Industries Limited, had already paid nearly four and half crores, as pre-deposit for the hearing of the appeal filed by the said assessee - Decided in favor of the assessee

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• 2012 (3) TMI 310
  Clearance of import goods - 104 units of old and used Digital Multifunction Printing and Copying Machines and 10 units of old and used photocopying machines - circular no.42/2001 issued by CBEC, New Delhi, providing for speedy clearance of goods imported - Held that :- while the authorities insisted for proper documentation to clear the consignment, a statement was made by the petitioner before the authorities concerned stating that he was unaware of the import consignment and documents and it is a settled legal position that once a statement is made under Section 108 the petitioner's claim for assessment or provisional assessment cannot be considered - thus the petitioner as a matter of right, cannot claim release of the goods as long as the statement made by him is still in force - mere production of Bill of Entry, Invoice of the goods, packing list and Bill of Lading, will not give any right over the property - the burden is on the petitioner to prove his ownership - Writ Petition stands disposed of

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• Corporate Laws

• 2012 (3) TMI 309
  winding up petition - For a winding up petition to be allowed, the petitioner is required to show that the alleged admission is clear and unambiguous. In the present case, the respondent-company has not denied the letter dated 26th March, 1998 but at the same time has set up the defence that subsequent to the abovesaid letter, two debit notes dated 30th June, 1998 had been issued by the sister concern of the respondent-company. the jurisdiction of Company Court is summary in nature and the issues of inter-se transactions between the parties and the veracity of the debit notes cannot be examined in the present case as it involves disputed questions of fact and would require evidence to be led. Certainly, the defence set out by the respondent in its reply to the statutory notice cannot be said to be a moonshine or sham. - Consequently, the present petition dismissed

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• Central Excise

• 2012 (3) TMI 308
  Classification of the fermented milk product and non-fermented milk based beverage under the Central Excise Tariff Act,1985 - Claming exemption under Notification No. 01/2011-CE dated 01/03/2011 - applicant is engaged in trading of dairy products set up a manufacturing unit in which they propose to manufacture a fermented milk product and non-fermented milk based beverage - The applicant has expressed the view that the product “Yum Creamy” will be classifiable under heading 04039090 of CETA and the product “Yum Chusky” would get classified under heading 22029030 of the CETA and will also be eligible for the exemption under notification No. 1/2011 – CE dated 01/03/2011 as it satisfies the description “flavoured milk of animal origin” mentioned in the said notification - Held that:- The products “Yum Creamy” and “Yum Chusky” shall be classifiable under headings 04039090 and 22029030 respectively of the Central Excise Tariff Act, 1985; - The product “Yum Chusky” will be eligible for exemption under the Notification No. 01/2011 – CE dated 01/03/2011, subject to the applicant fulfilling the conditions prescribed in the said Notification.

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• 2012 (3) TMI 307
  Condonation of delay - Time limitation - The submission of the Petitioner is that notwithstanding the fact that the Legislature under the proviso to Subsection (1) of Section 35 has laid down an outer limit of a further period of thirty days, beyond the original period of sixty days, for condonation of delay, this does not oust the power of the Court under Section 5 of the Limitation Act, 1963 - Counsel appearing on behalf of the Petitioner submits that unlike Section 35H which provided an absolute period of limitation of 180 days, Section 35 to which the present Petition relates, does provide a power to condone a delay beyond sixty days though upto an extent of thirty days - Once the legislature has laid down a period within which an appeal has to be filed and has prescribed the extent to which a delay beyond that period can be condoned, recourse to the provisions of Section 5 of the Limitation Act, 1963 would stand “ expressly excluded” within the meaning of Section 29(2) of the Limitation Act, 1963 - Decided against the assessee

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