TMI Tax Updates - e-Newsletter
January 11, 2012
Case Laws in this Newsletter:
Income Tax
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: In a legal case involving a chemical export company, the High Court addressed a violation of natural justice principles. The company challenged a decision by the Customs Department, which finalized provisional assessments without granting them a hearing. The court found this to be a breach of natural justice, referencing a Supreme Court decision that emphasized the necessity of personal hearings in quasi-judicial proceedings. The High Court invalidated the initial orders and instructed the Customs Department to re-evaluate the assessments, ensuring the company is given a chance to be heard, thus upholding fundamental legal principles.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The New Telecom Policy 2011, introduced by the Central Government, aims to create a comprehensive framework for advancing telecommunications in India. Key objectives include increasing rural tele-density, expanding broadband access, promoting domestic telecom equipment production, and ensuring consumer protection. The policy seeks to eliminate roaming charges, allow unrestricted internet telephony, and enable spectrum sharing and trading. It also proposes infrastructure status for the telecom sector, fostering indigenous R&D and innovation. Despite its ambitious goals, the policy lacks clarity on implementation timelines. It aims to address challenges like the 2G spectrum scam and declining operator revenues, positioning India as a global telecom leader.
News
Summary: Moody's Investor Services upgraded India's sovereign credit ratings on December 20, 2011, enhancing long-term government bonds and foreign currency bank deposits from speculative to investment grade (Baa3). The short-term government bonds and foreign currency bank deposits were also elevated from Not Prime to P-3, marking the first upgrade since 1998. Moody's acknowledged India's fiscal consolidation efforts, including subsidy reforms and tax simplification. This upgrade follows Dominion Bond Rating Service's positive action in June 2011 and Fitch's affirmation of India's strong economic growth prospects. India's debt is assessed by six international credit rating agencies, which regularly engage with India's Ministry of Finance and Reserve Bank.
Summary: The Indian government has announced a policy allowing 100 percent foreign direct investment (FDI) in single brand retail. This decision, made by the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry, aims to attract global retailers to the Indian market. For FDI exceeding 51 percent, there is a requirement to source at least 30 percent of the product value from Indian small industries, artisans, and craftsmen. This policy is expected to boost domestic manufacturing, enhance value addition, and support technical upgrades in local small industries.
Summary: The Government of India has formed a committee to draft the National Competition Policy, aiming to achieve sustainable economic growth and enhance living standards. The proposed policy focuses on creating a regulatory framework to promote market competition, protect consumer interests, and maximize social welfare. Key features include reviewing existing laws for anti-competitive practices, ensuring fair market regulation, and maintaining competitive neutrality. The policy also emphasizes fair pricing, third-party access to essential facilities, and cooperation at various governmental levels. A National Competition Policy Council is proposed for oversight, with stakeholder feedback currently being solicited.
Summary: India has committed to supporting Zimbabwe's economic development, with plans to provide a $100 million line of credit for health infrastructure. Indian PSUs such as IRCON, RITES, and WAPCOS are expected to participate in infrastructure projects. Discussions between Indian and Zimbabwean ministers also covered concerns about Zimbabwe's Indigenization and Economic Empowerment Act, which could impact Indian investment. India proposed simplifying business visa processes to encourage investment and plans to assist in reviving Zimbabwe's textile sector. Additionally, India will establish a Rural Technology Park and a Food Testing Laboratory in Zimbabwe, enhancing bilateral trade and investment relations.
Summary: The Commerce, Industries, and Textiles Minister of India announced a US$ one million project to empower rural African craftswomen through design intervention in basketry. This initiative, part of the India-Africa Forum Summit Action Plan, will be executed by the National Institute of Design over three years in five African countries. The project, starting in Zimbabwe, will involve training 25 craftswomen in India with support from the New Basket Workshop Foundation. Additionally, the initiative aims to enhance women's skills and market their crafts through Indian brands. The Indian Minister also pledged support for reviving Zimbabwe's textile sector and enhancing bilateral trade.
Summary: The Indian government has approved 20 foreign direct investment (FDI) proposals totaling approximately Rs. 1935.24 crore based on recommendations from the Foreign Investment Promotion Board. These approvals span various sectors, including retail, financial services, broadcasting, telecommunications, and renewable energy. Notable approvals include a French company setting up retail operations in India, a UK company in the pipe support business, and a microfinance demerger in Chennai. Additionally, 23 proposals were deferred, 10 rejected, and one withdrawn. The approved investments reflect a diverse range of industries, highlighting India's appeal as a destination for foreign investors.
Summary: The Prime Minister of India extended greetings to the African National Congress (ANC) on its centenary, highlighting the shared legacy of leaders like Mahatma Gandhi and Nelson Mandela. The Prime Minister emphasized the growing economic and political collaboration between India and South Africa, noting their joint participation in international forums such as the UN Security Council and BRICS. Anand Sharma, leading the Indian delegation, conveyed messages from Indian leaders to South Africa's President, acknowledging the historical ties and mutual struggles for freedom. Both nations reaffirmed their commitment to strengthening bilateral relations and party-to-party connections between the ANC and the Indian National Congress.
Summary: The Union Finance Minister addressed the Pravasi Bharatiya Divas 2012, emphasizing the role of non-resident Indians in India's development and global economic integration. He highlighted India's economic growth post-liberalization, despite global challenges, and recognized the diaspora's contributions to India's soft power and investment potential. The Minister urged further engagement from the diaspora, particularly in investment and entrepreneurship, to enhance inclusive growth. He stressed the importance of social inclusion, inspired by Mahatma Gandhi's vision, and highlighted ongoing efforts in education, healthcare, and financial inclusion. The address concluded with a call for overseas Indians to connect with India's growth.
Summary: The Indian delegation, led by the Minister of Commerce, Industry and Textiles, attended the African National Congress (ANC) centenary celebrations in Mangaung, South Africa. The Minister conveyed congratulatory messages from India's Prime Minister and the Indian National Congress President to South African President Jacob Zuma, highlighting the historic ties between the ANC and INC. During a meeting with South Africa's Minister of Trade and Industry, both parties expressed satisfaction with the growth in bilateral trade, surpassing the US$ 10 billion target, and agreed to enhance trade relations and expedite agreements such as the India-SACU Preferential Trade Agreement.
Notifications
Customs
1.
01/2012 - dated
6-1-2012
-
ADD
Seeks to extend levy of anti-dumping duty imposed vide Notification No. 98/2006-Customs, dated the 13th September, 2006, upto and inclusive of 1st September, 2012.
Summary: The Government of India, through the Ministry of Finance, has announced an extension of the anti-dumping duty on caustic soda originating from Saudi Arabia, Iran, Japan, USA, and France. Initially imposed by Notification No. 98/2006-Customs on September 13, 2006, this duty will now remain effective until September 1, 2012, unless revoked earlier. This decision follows a review initiated under the Customs Tariff Act, 1975, and is in accordance with the rules governing the identification, assessment, and collection of anti-dumping duties.
2.
01/2012 - dated
6-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Government of India, through the Ministry of Finance, has appointed the Joint Commissioner or Additional Commissioner of Customs (Imports) at the Air Cargo Complex in Sahar, Mumbai, as the Common Adjudicating Authority. This authority will handle matters related to a Show Cause Notice issued to M/s Prominent Enterprises and M/s Gaylord Enterprises. The notice, dated August 10, 2011, was issued by the Additional Director of the Directorate of Revenue Intelligence, Mumbai Zonal Unit. This appointment is made under the powers conferred by the Customs Act, 1962, to ensure proper adjudication of the specified customs matters.
3.
F.No.437/136/2009-Cus. IV - dated
4-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Central Board of Excise & Customs has appointed the Commissioner of Customs (Import & General) at New Custom House, New Delhi, as the Common Adjudicating Authority for specific Show Cause Notices issued by the Directorate of Revenue Intelligence, Delhi Zonal Unit. These notices, dated 03.03.2011, involve various companies located in Noida, Mumbai, Kolkata, and Bangalore. The appointment is in accordance with Notification No. 15/2002-Customs (N.T.) under the Customs Act, 1962. The involved parties include companies in the technology and electronics sectors, such as those based in Noida, Mumbai, and Bangalore.
4.
F.No.437/72/2010-Cus. IV - dated
3-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Central Board of Excise & Customs has appointed the Commissioner of Customs (Import) at New Custom House, Ballard Estate, Mumbai, as the Common Adjudicating Authority for a Show Cause Notice issued by the Directorate of Revenue Intelligence, Mumbai Zonal Unit. This assignment pertains to a case involving M/s SNS Enterprises and others, initially addressed in a previous order dated 20.12.2010. The notification aligns with Notification No. 15/2002-Customs (N.T.) and is intended to streamline the adjudication process under the Customs Act, 1962.
5.
F.No.437/22/2011-Cus. IV - dated
2-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Central Board of Excise & Customs has appointed the Commissioner of Customs (Export Promotion) at New Custom House, Mumbai, as the Common Adjudicating Authority for a Show Cause Notice issued by the Directorate of Revenue Intelligence, Delhi Zonal Unit. The notice pertains to a case involving a company and others, initially issued on June 1, 2007. This appointment is made under the Customs Act, 1962, following Notification No. 15/2002-Customs (N.T.). Relevant authorities, including the Directorate of Revenue Intelligence and the Commissioner of Customs at Jawaharlal Nehru Port, have been informed.
6.
F.No.437/21/2011-Cus. IV - dated
2-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Government of India, through the Ministry of Finance and the Central Board of Excise & Customs, has appointed the Commissioner of Customs (Export Promotion) at New Custom House, Mumbai, as the Common Adjudicating Authority for a specific case. This involves a Show Cause Notice issued by the Directorate of Revenue Intelligence, Delhi Zonal Unit, concerning M/s Jagraon Exports and others. This appointment is in accordance with Notification No. 15/2002-Customs (N.T.) and falls under the provisions of the Customs Act, 1962. The notification aims to streamline the adjudication process for the mentioned case.
7.
F.No.437/02/2011-Cus. IV - dated
2-1-2012
-
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 (Preventive) in Jamnagar as the Common Adjudicating Authority for a case involving M/s Sanghi Industries Ltd. and others. This appointment is in accordance with Notification No. 15/2002-Customs (N.T.) and pertains to a Show Cause Notice issued by the Directorate of Revenue Intelligence, Ahmedabad. The case involves a notice dated 19.11.2010 and a subsequent corrigendum dated 03.01.2011. The decision aims to streamline the adjudication process under the relevant provisions of the Customs Act, 1962.
Service Tax
8.
F. No. 137/99/2011 - dated
9-1-2012
-
ST
Seeks to extend date of submission of half yearly return for the period April 2011 to September 2011, from 6th January 2012 to 20th January 2012.
Summary: The Central Board of Excise and Customs, under the Ministry of Finance, has extended the deadline for submitting half-yearly service tax returns for the period from April 2011 to September 2011. Initially set for January 6, 2012, the new deadline is January 20, 2012. This extension is granted due to challenges faced by assessees in electronic filing. The directive is issued by the Director of Service Tax and communicated to relevant authorities, including Chief Commissioners of Central Excise and Customs and the Director General of Service Tax.
Highlights / Catch Notes
Income Tax
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Deduction Eligibility: Count Workers Across All Units for Section 80IB Compliance in Total Worker Calculation.
Case-Laws - AT : Eligibility of deduction u/s 80IB – Workers engaged in all the units are required to be considered while computing total number of workers employed by the assessee. .... - AT
-
Peak Theory Invalidated in Block Assessment for Undisclosed Investments; Highlights Need for Valid Tax Assessment Methods.
Case-Laws - AT : Undisclosed investment - Block Assessment - The peak theory worked out by the A O for the purpose of making addition on account of undisclosed investments was not valid .... - AT
-
Foundation's Section 12A Registration Denied for Failing to Justify Member-Benefit Object Clause; Deemed a Paper Company.
Case-Laws - HC : Registration u/s 12A - the assessee has not explained as to why the object clause specifically provides that the benefit of the foundation goes to the members in a narrow sense - applicant remains a paper company - no registration u/s 12A .... - HC
-
Interest-Free Advances Between Sister Concerns Justified by Commercial Expediency, Allowing Interest Deduction.
Case-Laws - AT : Commercial Expidency:- Non-charging of interest on advances by the sister concern, particularly in the situation where both the concerns having benefits of such mutual accommodation, could indeed be justified on the ground of commercial expediency in a particular fact situation. - claim of deduction of interest allowed..... - AT
-
Circular u/s 119 is binding; non-compliance leads to erroneous assessment, harming Revenue's interest. Commissioner's decision upheld.
Case-Laws - HC : When circular is issued under Section 119 of the Act and its validity is upheld it is binding on the Assessing Officer. Not taking recourse thereto and passing the order amounted to making assessment without conducting proper inquiry and investigation as enjoyed by law which was also warranted in the facts of this case and, therefore, the Commissioner was right in holding that such assessment was erroneous and prejudicial to the interest of the Revenue. .... - HC
-
Taxpayer's Contract with C&F Agent Not Covered by Explanation III u/s 194C of Income Tax Act.
Case-Laws - AT : TDS us/ 194C - The contract between the assessee and the C & F agent is a service contract which has not been specifically included in Explanation III below section 194C.... - AT
-
Section 40A(2) Provisions Cannot Override Chapter X: Specific Provisions Take Precedence in Legal Conflicts.
Case-Laws - AT : Provisions of section 40A(2) would not and cannot override the provisions contained in Chapter X of the Act. Even otherwise, if there are different provisions over the same subject then in law the specific provisions would prevail..... - AT
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High Court Confirms Mercantile Accounting System Takes Precedence Over Cash Method Per Companies Act Over Section 145 IT Act.
Case-Laws - HC : Method of Accounting - to comply with requirement of companies act merchantile system was adopted - overriding provisions of section 209 of companies act over section 145 of the income tax act - Held that:- Tribunal was justified in rejecting cash method. .... - HC
-
Assessee not in banking business can't claim deduction u/s 80P(2)(a)(i) for income from investments.
Case-Laws - AT : Deduction u/s 80P - Since assessee is not in the banking business therefore, income on investments cannot be allowed as a deduction under section 80P(2)(a)(i).... - AT
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Property Not Rented Last Year; No Vacancy Allowance Claim u/s 23(1)(c) of Income Tax Act.
Case-Laws - HC : Annual Let Out value of the property - The property has not been let out at all, during the previous year under consideration, there is no question of any vacancy allowance being provided thereto under section 23(1)(c).... - HC
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Sale of ICL Shares Qualifies as Capital Asset, Eligible for Section 10(38) Tax Exemption.
Case-Laws - AT : Exemption u/s 10(38) - sale of the shares of ICL held by the assessee is in the nature of sale of capital asset and not in the nature of stock-in-trade - Exemption allowed..... - AT
Customs
-
Common Adjudicating Authority Appointed Under Notification No. 01/2012-Customs for Streamlined Customs Adjudication Process.
Notifications : Appointment of Common Adjudicating Authority. - Ntf. No. 01/2012-Customs (N.T.) Dated: January 6, 2012
-
Anti-Dumping Duty Extension Confirmed Until September 1, 2012, Per Notification No. 01/2012-Customs (ADD.
Notifications : Seeks to extend levy of anti-dumping duty imposed vide Notification No. 98/2006-Customs, dated the 13th September, 2006, upto and inclusive of 1st September, 2012. - Ntf. No. 01/2012-Customs (ADD) Dated: January 6, 2012
Service Tax
-
Penalty Upheld u/s 78; No Reinstatement u/s 76 Despite Appeal Error in Penalty Reduction Decision.
Case-Laws - AT : Inasmuch as a penalty under Section 78 is being sustained, there is no justification for restoring the penalty under Section 76 as sought for by the department. However, the Commissioner (Appeals) has clearly erred in reducing the penalty imposed by the original authority under Section 78 without any valid reasons..... - AT
-
Refund Claim Period Set by Notification No. 41/2007-ST Is Final; Section 11B Cannot Extend It.
Case-Laws - AT : Refund in terms of notification No. 41/2007-ST - Period of limitation - When a notification itself provides the period for claiming the exemption in terms of the said notification, such period cannot be extended by taking recourse to the provisions of section 11B.... - AT
-
Service Tax Return Deadline for September 2011 Extended to January 20, 2012.
Notifications : Due date for filing of Service Tax Return for the period ending September, 2011 extended till 20-1-2012
-
Settlement of Service Tax with Interest Pre-Show Cause Notice Prevents Further Legal Action per CBE&C Circular No.137/167/2006-CX.4.
Case-Laws - AT : Board circular no. CBE&C circular No.137/167/2006-CX.4, dt.3.10.07, clarifies that if the assessee pays Service Tax with interest before issue of Show Cause Notice, no further proceedings will be initiated..... - AT
Central Excise
-
Cenvat Credit Allowed for Duties Paid on Provisionally Assessed Bills of Entry u/r 9, Confirms Court.
Case-Laws - AT : Entitlement of Cenvat credit of duty paid on provisionally assessed Bill of Entry - Rule 9 of the Cenvat Credit Rules - Credit allowed..... - AT
-
Supplies from Domestic Tariff Area to Special Economic Zone Units Qualify as Exports, Eligible for Export Benefits.
Case-Laws - AT : DTA supplied goods to SEZ - the supplies made by DTA units to SEZ units will amount to export for the purpose of all export benefits. .... - AT
-
Refund Claims u/r 5 of Cenvat Credit Rules Are Not Bound by Section 11B Time Limit.
Case-Laws - AT : Time limit stipulated under Section 11B of the Central Excise Act is not applicable in the case of refund claim under Rule 5 of the Cenvat Credit Rules, 2004.... - AT
-
Sharing Premises or Auditors Doesn't Prove Mutual Interest in Excise Valuation, Court Rules.
Case-Laws - AT : Related person - Valuation under central excise - Sharing of common premises or employing a common statutory auditor, are inadequate to find mutuality of interest between them.... - AT
Case Laws:
-
Income Tax
-
2011 (12) TMI 150
Eligibility of deduction u/s 80IB – rejected on basis that the number of workers working in the manufacturing process was less than 10 – deduction of expenses towards salary & wages – benefit of indexation on UTI-deep discount bonds - Held that:- A.O. has not considered workers engaged in another washing unit of same activity. Workers engaged in all the units are required to be considered while computing total number of workers employed by the assessee. Though the name of workers engaged in bottle washing unit were not entered into muster roll but were in the wages register and attendance register. This issue has been decided by the Tribunal in Cavour of the assessee in his own case thereby, assessee is eligible for deduction u/s 80IB and expenses towards salary & wages are also allowed. - Decided against the Revenue It is also held that UTI-MIP-99 is a bond & hence, the assessee is not eligible for indexation in view of 3rd proviso to Section 48. - Decided in favor of Revenue.
-
2011 (12) TMI 148
Non- production of books of accounts by assessee before Adjudicating Authorities – Tribunal recorded finding that books of account were not considered by CIT(A) – Held that:- Tribunal could not return a finding that books of account were not considered by CIT(A) as nothing was produced before him. Such finding is perverse, and cannot be sustained therfore, the matter is remitted back to the Tribunal to decide the appeal afresh. - Decided in favor of Revenue.
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