TMI Tax Updates - e-Newsletter
January 25, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax

Articles

1. PROVISIONS FOR INDEPENDENT DIRECTORS IN COMPANIES BILL, 2011

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Indian Customs Tableau Depicting Indian Customs as Guardians of Our Economic Frontiers to be Presented in the Republic Day Parade, 2012.

2. New Initiatives under MCA 21 System

3. Auction for Sale of Government Stocks.

4. Cost of Credit Needs to be brought down: Anand Sharma Addresses the Plenary Session of SAARC Business Summit.

Notifications

Customs

1. 07/2012 - dated 24-1-2012 - Cus (NT)

Grant of Presidential Awards of Appreciation Certificate on the occasion of Republic Day-2012

Income Tax

2. 139/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure "Creating and Upgradation of infrastructure facilities for advanced treatment for Cancer and Cardiac patients with an element of accessibility and affordability of the underprivileged, Charutar Arogya Mandal, Gujarat

3. 138/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes - Society for Education of the Crippled (Child & Adult), Bombay

4. 137/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Sevalaya Primary School Building Project" by Sevalaya, Sevalaya Campus, Kasuva Village, Pakkam

5. 136/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Sevalaya old age home project" by Sevalaya, Sevalaya Campus, Kasuva Village, Pakkam Sevalaya, Thiruninravur

6. 135/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Tribal Development" by Seva Mandal Meghraj, AT & PO Kasana, Tal Meghraj, District Sabarkantha, Gujarat,, Gujarat

7. 134/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Running of Polio Hospital, Rehabilitation and Research Centre at Hiran Magri, Sector-4, Udaipur, Rajasthan" by Narayan Seva Sanstha, Rajasthan

8. 133/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on "Expansion Project - purchase of equipments for increasing number of free eye surgeries and running of Hospital at Village - Ognaj, Ahmedabad, Gujarat" by Lions Club of Karnavati Foundation, Ahmedabad

9. 132/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Brahmrishi Doodhadhari Burfani International Medical and Research Centre" by Shree Raghvendra Sewashram Samiti, Doodhadhari Ashram, Haridwar

10. 131/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Free Eye surgeries and running of hospital" by Medical Research Foundation, Chennai

11. 130/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on "Natural Resource Management-Model Watershed Management & Afforestation programme and allied agricultural support for rural development" by Krishi Gram Vikas Kendra, Rukka- Neori Vikas,

12. 129/2011 - dated 27-12-2011 - IT

Under Section 35AC, of the Income-tax Act, 1961 - Eligible projects or schemes, expenditure on - Amar Jyoti Charitable Trust, New Delhi.

13. 128/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Land development, construction, equipments, furnishing and running of Sri Sathya Sai Heart Hospital at Rajkot, Gujarat", by Prashanti Medical Services and Research Foundation, Rajkot

14. 127/2011 - dated 27-12-2011 - IT

Under Section 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Welfare programmes in the field of Health, education, environment etc." by SNS Foundation, 1, Sri Aurobindo Marg, New Delhi

15. 126/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Running of free medical services by Dardi Sahayak Trust at whole of Gujarat" by Smt. Ushaben Rasiklal Shaw Digvijay Lion Dardi Sahayak Trust. Ahmedabad

16. 125/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on "Construction of a school building and running of SOS Children's Village at Tambaram East, Chennai, Tamilnadu" by SOS Children Villages of India-Chatnath Homew, Chennai,

17. 124/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on "Comprehensive rehabilitation, medical & human resource development services for the blind and disabled" by Blind People's Association, Jagdish Chowk, Surdas Marg, Vastrapur, Ahmedabad

18. 123/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Supporting the Leprosy Mission Hospitals" by The Leprosy Mission Trust India New Delhi

19. 122/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - "Rural Drinking Water hand pump project" - Hindvi Swarajya Pratistan, Kile Rajgad, At/p. - Chirmodi, Tal Velhe, District Pune, State Maharashtra,

20. 121/2011 - dated 27-12-2011 - IT

U/s. 35AC, IT Act, 1961 - Eligible projects or schemes, expenditure on - Deepak Charitable Trust, Baroda

21. 120/2011 - dated 27-12-2011 - IT

U/s 35AC, - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes - Sankara Eye Hospital, Chennai

Circulars / Instructions / Orders

Service Tax

1. 8/ 2011 - dated 3-11-2011

Renting of immovable property service - Civil Appeal on "Renting/leasing of immovable property"

Income Tax

2. 4836 /15.02.001/2011-12 - dated 20-1-2012

Clarification on regulation of interest rates for Small Savings Schemes.

FEMA

3. 08 - dated 20-1-2012

Master Circular on Compounding of Contraventions under FEMA, 1999.

4. 09 - dated 20-1-2012

Master Circular on External Commercial Borrowings and Trade Credits.

Highlights / Catch Notes

Customs

• Presidential Awards of Appreciation Certificates Announced on Republic Day 2012 in Notification No. 07/2012(N.T.

  Notifications : Grant of Presidential Awards of Appreciation Certificate on the occasion of Republic Day-2012 - Ntf. No. 07/2012(N.T) Dated: January 24, 2012
  Visit to Get Source

  ---

FEMA

• Master Circular on External Commercial Borrowings: Streamlined Guidelines for Cross-Border Financial Transactions under FEMA.

  Circulars : Master Circular on External Commercial Borrowings and Trade Credits. - Cir. No. 09 Dated: January 20, 2012
  Visit to Get Source

  ---

• FEMA, 1999 Master Circular Simplifies Compounding of Foreign Exchange Violations, Promotes Compliance and Business Ease.

  Circulars : Master Circular on Compounding of Contraventions under FEMA, 1999. - Cir. No. 08 Dated: January 20, 2012
  Visit to Get Source

  ---

Service Tax

• Understanding Rule 4: Steps and Documents Needed for Centralized Service Tax Registration per Circular No. 3/2011-12-ST.

  Circulars : Read with rule 4 of the Service Tax Rules, 1994 - Registration - Procedure and documents required in respect of Centralised registrations - Cir. No. 3/2011-12-ST, Dated: October 21, 2005
  Visit to Get Source

  ---

• Court Reviews Service Tax Duties on Property Rentals; Circular No. 8/2011 Shapes Legal Interpretation and Updates.

  Circulars : Renting of immovable property service - Civil Appeal on “Renting/leasing of immovable property“ - Cir. No. 8/ 2011 Dated: November 3, 2011
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (1) TMI 77
  Society registered u/s 12A & 80G - pledged FDRs with a bank to enable some other societies to obtain loan from a bank – few members of the management committee of the respondent society and other two societies are common – Revenue contending violation of Section 13(1)(c)(ii) read with Section 13(3) and Explanation 3 (ii) – non-utilization of grant received fully – Held that:- A.O. has not been able to record any finding that the persons in control of the management of the three societies had, at any point of time, not less than 20% shares in the profits of such concern. This being the position, invocation of Section 13(1) (c) (ii) has to fail and is accordingly rejected. Grants were received for specific purposes/projects from the government, non-government, foreign institutions etc. In case of specific tied up grants, money is received for specific purposes and is to be utilized for the same. Unutilized amount has to be refunded back to the funding agencies. On the basis of the evidences placed on record, it is seen that the appellant is not free to use the funds voluntarily as per its will and, thus, these are not voluntary contribution as per Section 12 of the Act - Decided against the Revenue

  ---

• 2012 (1) TMI 76
  Revisionary powers of Commissioner u/s 263 - DTAAs with Canada and Thailand - Tribunal set aside the revisional orders of the Commissioner remanding matter to the A.O. to rework the credit in respect of Canadian and Thailand Tax claimed under Double Taxation Avoidance Agreement - Held that:- It is the duty of the assessing authority to support every conclusion and finding by it with reasons and if the assessing authority had failed in that, more so in extending a tax relief to the assessee, the order definitely constitutes an order not merely erroneous but also prejudicial to the interest of the revenue and therefore while the commissioner was justified in exercising the jurisdiction u/s 263, the tribunal was definitely not justified in interfering with this order of the commissioner in its appellate jurisdiction - Decided against the assessee. Reduction in tax relief on recomputation by A.O. - subject matter of appeal before Tribunal – Held that:- Tribunal had not examined the appeals of the assessee on its merits, but had simply allowed the appeals based on the premise that the revisional orders of the commissioner had been set aside by it and the revisional orders having now been restored by us in terms of the judgment in the above two appeals, the matter again has to necessarily go back to the tribunal - Decided in favor of Revenue.

  ---

• 2012 (1) TMI 73
  Relief u/s 89(1) - ex-gratia payment received under VRS scheme – Revenue allowed exemption u/s 10(10C) but denied relief u/s 89(1) – Held that:- Similiar controversy is settled by the two Division Bench decisions of this Court in case of CIT vs Harendra Natah Tripathi and CIT vs Subhash Chand Goyal [2010 (7) TMI 754 - ALLAHABAD HIGH COURT] and their being no decision to the contrary. Relief u/s 89(1) is also admissible in such a case. Present appeal does not raise any question of law which requires to be decided by this Court – Decided in favor of assessee.

  ---

• 2012 (1) TMI 72
  Validity of reopening of assessments - unexplained credits – amount received from company(entry provider) – assessee contending the amount to be share application money and discrediting the reasons recorded for reopening the assessment - information received by the A.O. from DIT (Inv.), who was in charge of the investigation into groups that operate as entry providers or entry operators - Held that:-Material present before the A.O. at the time of recording reasons for reopening the assessment did show a link between entry provider, with the petitioner herein together with date on which the entry was taken, the cheque or DD number, the name of the bank and branch and the account number. With such precise material before the A.O., the existence of which is beyond challenge, it can hardly be said that the A.O. could not have had even a prima facie belief that income chargeable to tax had escaped assessment in the hands of the assessee. - Decided against the assessee.

  ---

• 2012 (1) TMI 65
  Unexplained cash credit – deposit received – Revenue contending it to be adjustment entry & lender party to be non existing firm – Held that:- Tribunal has observed that lender company was having sufficient cash in hand, deposited the same in bank account and issued cheque in favor of assessee. lender company is an income tax assessee. Books of accounts together with Financial statements were produced. All these were taken sufficient by the Tribunal to prove the identity and source of the creditor. No infirmity is found in the order – Decided against the Revenue.

  ---

• 2011 (12) TMI 179
  Demand for A.Y. 2003-04 was raised on the petitioner by A.O. in reassessment proceedings – A.O. declined to follow the ITAT order in the petitioner’s own case for A.Y. 2004-05 with respect to the computation of benefit u/s 10A - adjustment of demand against refund due of A.Y. 2010-11without issuing notice u/s 245 – appeal questioning validity of initiating re-assessment proceedings decided in favor of assessee – Held that:- Such a recovery of demand relating to an issue covered by the judgment in favour of the petitioner is directly contrary to CBDT Circular No.1914 of 1993 which provides that a stay of demand could be granted in such situations. Thus, demand made by the A.O. on re-assessment itself becomes invalid and, therefore, no question of adjustment thereof arises. A.O. is directed to release the aforesaid amount. - Decided in favor of assessee.

  ---

• 2011 (12) TMI 178
  Transfer Pricing - additions on account of GP rate and transfer pricing adjustment - benefit of 5% adjustment not given - adjustments made in relation to the entire sales – A.Y. 2007-08 - Held that:-The adjustments on account of transfer pricing are to be restricted only to the international transactions with the AE, and not to the entire turnover of the assessee as held in case of Dy. CIT v. Starlite [2010 (4) TMI 704 - ITAT, MUMBAI]. Similarly, in the pre 01.10.2009 position, the benefit of 5% is to be allowed to the assessee, even in cases where difference in value of international transactions and its ALP is more than 5% as held in case of Emersons Process Management India (P.) Ltd. v. Add CIT ([2011 (8) TMI 427 - ITAT MUMBAI]). The computation made by the AO is, therefore, required to be reworked. As regards the GP rate, addition was made due to fall in G.P. Rate the reason for which was explianed by assessee. The AO has not pointed out any defects in the books of accounts. In relation to international transactions with the AE, there is provision for separate TP adjustments, and merely because there is TP adjustment, entire books cannot be rejected in the absence of any defects. Further, while computing the GP rate for the year, for the purpose of comparison with the earlier year, the AO had not made any allowance for TP adjustments, which would also have impact on the GP rate and, therefore, making the additions on both the counts would result in double addition. Therefore, the order is set aside and restored back to A.O. for passing a fresh order .- Decided in favor for assessee for statistical purpose.

  ---

• Customs

• 2012 (1) TMI 70
  Unlawful import of the gold - offences punishable u/s 135(1)(a) and 132 of the Customs Act – matter relates to year 1989 - petitioner has already undergone sentence for more than one month – Held that:- The instant case is of economic offence in the prospective. Therefore, while maintaining the conviction, the order dated 21.3.2003 is modified to the extent already undergone, accordingly he is released on the sentence already undergone. The criminal Revision Petition 1037/2003 is partially allowed, as prayed.

  ---

• Service Tax

• 2012 (1) TMI 71
  Plea for waiver of Pre-deposit – registered charitable society – Held that:- Having considered the matter in the light of the material on record, we are of the opinion that the ends of justice would be subserved if the appellant is directed to deposit 1/3rd of the demand raised against them towards the service tax. If the said deposit is made on or before 15th March, 2012, their appeal shall be heard by the Tribunal on merits.

  ---

• 2012 (1) TMI 68
  Simplified procedure for sanction of refund/rebate of unutilised credit/rebate claims in cases of export - denial of benefit of sanction of 80% of the rebate amount within 15 days as per Board's Circular No. 828/5/2006-CX dated 20.4.2006 on the ground that an offence has been booked against the company - show cause notice dated 21.10.2011 issued for payment of the Service Tax on 'Intellectual Property Services' received from foreign companies – Held that:- At this stage, we are not required to go into merits of the validity of the show cause notice, as proceedings of adjudication are still pending. Company has not been denied the rebate, it has only been disentitled to the benefit of the Board's Circular dated 20.4.2006. Rebate claims of the company will be processed or sanctioned as per provision of Section 11-B of the Central Excise Act, 1944. - Decided against the assessee.

  ---