TMI Tax Updates - e-Newsletter
January 2, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. TAXABILITY OF DREDGING SERVICES.

   By: Dr. Sanjiv Agarwal

2. Extensions should be made for reasonable period to avoid repetitive extensions. - Filing of Service tax return

   By: DEVKUMAR KOTHARI

3. SAVINGS DEPOSITS TO FETCH MORE.

   By: Dr. Sanjiv Agarwal

4. ITAT- administration: Unified pay scale of member and vice president (VP) does not mean that they are equal in seniority. The President of the Tribunal has no power to write the Members’ ACR- recently so held by Madras High Court.

   By: DEVKUMAR KOTHARI

5. AN ADMISSION CANNOT BE RETRACTED BY THE LEGAL REPRESENTATIVE OF THE PERSON WHO MADE THE ADMISSION

   By: DR.MARIAPPAN GOVINDARAJAN

6. TAXABILITY OF SURVEY AND MAP-MAKING SERVICES.

   By: Dr. Sanjiv Agarwal

News

1. Calendar for Auction of Government of India Treasury Bills for the Quarter Ending March 2012 .

2. Issuance Calendar for Marketable Dated Securities for Jan-March 2011-12 .

3. India’s External debt Stood at US$ 326.6 billion at End-September 2011; an increase of 6.6 per cent over the Level of US$ 306.4 billion at End-March 2011.

Notifications

Companies Law

1. F.NO. 17/133/2008-CLV - dated 29-12-2011 - Co. Law

The Companies (Accounting Standards) (Second Amendment) Rules,2011.

2. F.No. 17/133/2008-CL.V - dated 29-12-2011 - Co. Law

The Companies (Accounting Standards) Amendment Rules,2011.

Service Tax

3. 52/2011 - dated 30-12-2011 - ST

Exemption by way of refund of service tax paid on the specified services used for export of the goods

4. 51/2011-ST - dated 30-12-2011 - ST

Amends Notification No. 09/2010 - Abatement of 70% in case of transport of goods by rail

5. 50/2011 - dated 30-12-2011 - ST

Amends Notification No. 08/2010 - Exempts services provided in relation to transport of goods by rails for specified goods

6. 49/2011-ST. - dated 30-12-2011 - ST

Amends Notification No. 07/2010 - Exempts Transport of goods in containers by rail

Highlights / Catch Notes

Corporate Law

• 2011 Amendments to Companies Accounting Standards: New Rules for Compliance and Alignment with Current Regulations.

  Notifications : The Companies (Accounting Standards) Amendment Rules,2011. - Ntf. No. F.No. 17/133/2008-CL.V Dated: December 29, 2011
  Visit to Get Source

  ---

• 2011 Amendment Updates Accounting Standards for Companies to Ensure Compliance with Evolving Financial Reporting Requirements.

  Notifications : The Companies (Accounting Standards) (Second Amendment) Rules,2011. - Ntf. No. F.NO. 17/133/2008-CLV Dated: December 29, 2011
  Visit to Get Source

  ---

Service Tax

• Simplified Electronic Refund Scheme for Exporters' Service Tax Introduced to Enhance Business Efficiency.

  Notifications : Simplified scheme for electronic refund of service tax to exporters - Ntf. No. 52/2011 Dated: December 30, 2011
  Visit to Get Source

  ---

• Service Tax Amendment: 70% Abatement for Rail Goods Transport Reduces Taxable Value Under Notification No. 51/2011-ST.

  Notifications : Amends Notification No. 09/2010 - Abatement of 70% in case of transport of goods by rail - Ntf. No. 51/2011-ST Dated: December 30, 2011
  Visit to Get Source

  ---

• Amendment Exempts Rail Transport Services for Certain Goods from Service Tax per Notification No. 50/2011.

  Notifications : Amends Notification No. 08/2010 - Exempts services provided in relation to transport of goods by rails for specified goods - Ntf. No. 50/2011 Dated: December 30, 2011
  Visit to Get Source

  ---

• Service Tax Exemption for Rail Container Transport Amended with Notification No. 49/2011-ST, Effective December 30, 2011.

  Notifications : Amends Notification No. 07/2010 - Exempts Transport of goods in containers by rail - Ntf. No. 49/2011-ST. Dated: December 30, 2011
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2011 (12) TMI 116
  Dis-allowance of expenses incurred claimed by assessee for the purposes of the hotel business – part of property under agreement with hotelier being used as a hotel for consideration – consideration treated as business income - Held that:- Agreement between the parties did not contain a stipulation for the incurring of the expenditure by the assesse, moreover no evidence/material were placed on record in form of any communication or confirmation by Hotelier that assessee had incurred expenditure, which was relevant for maintenance and running of the said hotel. Further no evidence are produced to show that assessee had incurred any expenses to earn and for purpose of business. -Decided against the assessee.

  ---

• 2011 (12) TMI 115
  Deduction u/s 80HHC – setting off of aggregate brought forward losses of amalgamating company from both export and non-export activities in determining “profit of the business” for computing deduction – Held that:- Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act. Not only profits but also losses have to be taken into consideration. Expression “profit” occurring in Section 80HHC means a positive profit. To arrive at a net figure of positive profits, losses from export as well as non-export activities are to be taken into consideration. See IPCA Laboratories Ltd Vs. DCIT (2004 - TMI - 6141 - Supreme court). Decided against the assessee.

  ---

• 2011 (12) TMI 114
  Dis-allowance of provision of liability made for expenditure to be incurred in removal of encroachments in and around the technical area of the Airport - capital expenditure or revenue expenditure - Treatment of the proforma invoices issued on government agencies for space provided in Airport as income – Mercantile system of accounting - Held that:- It is not in dispute that the land belongs to the assessee. In the schemes formulated by the Government for removal of these encroachers and rehabilitate them at other places, if the assessee had paid the amount that amount is not for acquisition of new assets. The payment was made to facilitate its smooth functioning of the business. Therefor, expenditure is revenue in nature. See Bikaner Gypsums Ltd vs CIT (1990 - TMI - 5308 - Supreme Court).-Decided in favor of assessee. In respect of the Government Agencies on the application of “real income” theory and taking a realistic view, it is held that no income has accrued merely because proforma advices were raised, that too, at the instance of the CAG of India since these departments have their offices to facilitate the functioning of the assessee and they do not agree to pay any licence fee of the space occupied by them. The matter is restored back to A.O. determine the taxability of proforma invoices in respect of those parties who have been remitting part payments and have accepted their liability and not in respect of those Government Agencies who have never paid any amount.-Decided partly in favor of assessee.

  ---

• 2011 (12) TMI 105
  Addition on account of dis-allowance of cash discount – method of accounting – Held that:- The Assessing Officer took a very myopic view and had opined that the assessee should have followed the “net accounting system” and not “gross accounting system”. - Assessee has right to adopt an accounting system of his choice. - Interference is permissible if the accounting system adopted is contrary to the prescribed accounting standards etc. under Section 145/145A of the Act. - Decided in favor of assessee. In respect of payment of commission assessee has duly established that sufficient services were rendered for the payment of the commission involved in this regard. He has also deducted TDS and filed TDS returns and furnished PAN number of most of the parties. Therefore, expenses are allowed as deduction. - Decided against the revenue.

  ---

• 2011 (12) TMI 104
  TDS u/s 194J or 195 - global management services and VSAT uplinking - reimbursement of the expenses - held that:- The ITAT found that in respect of assessment years 2001-02 and 2003-04, similar appeal of the revenue had been dismissed holding that no such tax at source was deductible and the provisions of Section 40(a)(i) of the Act were not attracted. - this is the view already taken by this Court in the case of this very assessee affirming the earlier decision of the Tribunal (2008 -TMI - 65399 - ITAT DELHI-F) and we see no reason to deviate from the same.

  ---

• 2011 (12) TMI 103
  Voluntary Retirement Scheme (VRS) u/s 35DDA - assessee company had paid certain additional benefits also alongwith VRS - AO arrived at a conclusion that the scheme floated by the assessee was not in conformity with Rule 2BA of the Income Tax Rules and, therefore, benefit of Section 10(10C) was not available. Since Section 10(10C) was not available, the assessee was liable to deduct the tax at source on the payments made to the employees. - Held that:- The factual position which emerges from the aforesaid discussion is that (a) in the assessment orders passed in the case of employees, the Department accepted that the employees were entitled to the benefit of Section 10(10C) of the Act; (b) as per the judgment of Gujarat High Court in Arunkumar T. Makwana Versus Income-Tax Officer. (2006 -TMI - 9895 - GUJARAT High Court), merely because payment of more than Rs. 5 lakhs is made would not mean that the schemes are not in conformity with Rule 2BA and the provisions of Section 10(10A) of the Act; (c) wherever any payment is made in excess of Rs. 5 lakhs and payments made in regard to early bird incentives, the tax has been deducted by the company on such payments made and that tax is paid to the Government. - Assessee can not be treated as 'assessee-in-default' having regard to the principles laid down by this Court in Nestle India Pvt. Ltd. (2000 -TMI - 15273 - DELHI High Court)

  ---

• 2011 (12) TMI 102
  Dis-allowance of expenditure u/s 14A of the Act - depreciation on computer software, peripherals @ 60% without considering whether assets were used for more than 180 days- Held that:- Rule 8D has been held to be prospective in nature and applicable from assessment year 2008-09 by High Court in Maxopp Investment Ltd. v. CIT, New Delhi . However, in the said decision it has been observed that direct and indirect expenses have to be disallowed u/s 14A, when an assessee earns exempt income. In the present case no dis-allowance was made u/s 14A further, Assessing Officer had not examined whether the computer peripherals were used for more than 180 days or not. Under these observations A.O. is directed to pass fresh order. -Decided in favor of Revenue

  ---

• Customs

• 2011 (12) TMI 109
  Joint venture between Honda Motors Co., Japan and Siel India Limited, India - manufacture and sale of automobiles with technical know-how/information etc. from japan – value to be assigned to imported drawings etc. - Revenue contention- Total lump sum fee of US$ 30.5 million constitutes the true and correct value of the imported drawing etc - expenses on personnel, not part of lump sum fee were separately payable - applicability of Rule 9(2)(e) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - Held that:- The value of the imported goods, i.e. the drawings etc., has to be determined at the time and place of importation. Customs duty has direct nexus with the value of the goods imported. The question of computation of the value of the imported drawings etc. is remanded back to the Settlement Commission for fresh adjudication keeping in view the observations and findings of High court on following grounds: (i) Technical information and know-how need not be through the medium of plans, drawings, manuals etc. It can be by other modes and means or non document form including intangible forms like deploying personnel or overseeing construction of the factory or manufacturing, training to staff etc. It is clarified that bifurcation of value between drawing etc. and 'others', is another aspect and has to be specifically examined and considered and computed after detailing material/evidence. Further, lump sum fee paid is not restricted to technical know-how or information supplied or furnished till December, 1997 as there was a contractual requirement that the know-how or information shall be furnished for a period of 7 years or 10 years. The technical know-how is not restricted to setting of the plant, but also for manufacture of cars including designs, engine, transmission etc. With regard to expenses on personnel – Under TPA and Memorandum of Understanding separate payment was mandated when personnel were deputed or sent to Honda Japan on specific request. This aspect will be re-examined by the Settlement Commission and decide whether expenses paid to personnel are included in lump sum fees paid. It is also held that Rule 9(2)(e) applies when an addition is made to value of imported tangible goods in the form of machinery, plant, etc. by including value of know-how, which has been billed separately, but is intricately or otherwise linked with the imported machinery/plant. This is not so in the present case, hence Rule 9(2)(e) is not applicable.

  ---

• Service Tax

• 2011 (12) TMI 111
  Exemption from Service Tax as a small service provider – Revenue held non-eligibility of exemption - assessee deposited service tax under protest before issuance of show cause notice – Revenue later accepted the contention - Refund claimed by assessee rejected on the ground that assessee may have collected it from customers- Held that:- Just because the appellant issued invoice at gross amount and did not indicate that the Service Tax was exempt, conclusion cannot be reached that they have collected the Service Tax from the customers. Only when Service Tax was payable and was held to be payable, the question of determination of gross amount included Service Tax or not, would arise. As regards Profit & Loss Account, if the appellant followed the cash accounting method, they cannot be found fault with for showing it as expenditure. In any case, it has been paid under protest and the expenditure is booked. This does not mean that what was paid before issue of Show Cause Notice was subsequently collected from the customers. - Decided in favor of assessee.

  ---

• 2011 (12) TMI 110
  Service provided by visa facilitator – Held that:- Service provided by visa facilitator in the form of assistance to individuals who intend to travel abroad, directly, does not fall under any taxable service under Section 65(105) of Finance Act, 1994. Accordingly, Stay Petition for waiver of pre-deposit of amounts involved is also allowed. - Decided in favor of assessee.

  ---

• Central Excise

• 2011 (12) TMI 106
  Refund application under Rule 173L of Central Excise Rules, 1944 read with Section 11B of the Central Excise Act, 1944 in respect of goods cleared on payment of duty and brought back for refining, reconditioning etc. and thereafter once again cleared on payment of duty – Held that:- In absence of detailed documents & worksheets the case is remanded back to the original adjudicating authority for a fresh consideration of the matter taking into account the documentary evidence to be submitted by the appellant. Appeal allowed by way of remand

  ---