TMI Tax Updates - e-Newsletter
January 30, 2012
Case Laws in this Newsletter:
Income Tax
Central Excise
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses the legal principle that the grant of back wages upon reinstatement is not automatic and is subject to judicial discretion based on the specific circumstances of each case. Various Supreme Court rulings, such as those in "Ram Ashrey Singh V. Ram Bux Singh" and "General Manager, Haryana Roadways V. Rudhan Singh," emphasize that back wages should not be awarded mechanically. Instead, courts must consider multiple factors, including the employee's employment status during the litigation period. The article highlights a shift from automatic reinstatement with back wages to potentially awarding compensation, reflecting a nuanced approach to employment disputes.
By: Dr. Sanjiv Agarwal
Summary: Section 67(2) of the Service Tax law stipulates that when the gross amount charged by a service provider includes service tax, the value of the taxable service is considered inclusive of service tax. This is supported by several judicial rulings, which have consistently held that if service tax is not separately collected, the gross amount received is treated as inclusive of service tax. The article discusses various cases where courts have reaffirmed this interpretation, emphasizing that the service tax liability should be recalculated accordingly. The discussion also touches upon the applicability of cum-tax valuation in reverse charge scenarios, highlighting uncertainties in such cases.
News
Summary: India has signed a Multilateral Convention on Mutual Administrative Assistance in Tax Matters, joining 31 other countries to enhance international tax cooperation. The Convention, originally for OECD and Council of Europe members, was amended in 2010 to include all countries, aiming to combat tax avoidance and evasion. It facilitates transparency, information exchange, and tax recovery assistance, allowing simultaneous tax examinations and participation across borders. The agreement supports automatic and spontaneous information exchange, document service, and use of tax information for countering money laundering. This initiative is expected to attract more signatories, broadening the network of tax cooperation.
Summary: The reduction of transaction costs has generated $450 million for exporters, as announced by a government official at the World Economic Forum in Davos. The official highlighted India's commitment to equitable and inclusive growth, emphasizing initiatives like the National Skill Development Mission and National Manufacturing Policy. The creation of National Investment and Manufacturing zones aims to establish world-class manufacturing hubs. The official stressed the importance of economic and political stability in South Asia and highlighted India's liberalization efforts, which have enhanced transparency and efficiency. Programs like Bharat Nirman aim to empower the poor and improve infrastructure, leveraging India's young demographic.
Summary: The Wholesale Price Index (WPI) for primary articles and fuel & power in India, for the week ending January 14, 2012, remained stable at 199.1 and 172.7, respectively. The annual inflation rate for primary articles decreased to 1.89% from 2.47% the previous week. Food articles saw a 0.3% increase due to rising prices of certain grains and milk, while non-food articles dropped by 1.5% due to lower prices of flowers and raw cotton. The minerals index rose by 0.7% due to increased prices of zinc concentrate and copper ore. The fuel & power index remained unchanged with an annual inflation rate of 14.45%.
Notifications
Customs
1.
CORRIGENDUM - dated
23-1-2012
-
Cus
Corrigendum of Notification no. 2/2012- Custom.
Summary: In the corrigendum to Notification No. 2/2012-Customs dated January 16, 2012, published by the Ministry of Finance, Department of Revenue, a correction is made in paragraph 2, sub-paragraph (i). The phrase "gold content not below" is amended to "gold content below." This change is officially recorded in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i). The document is issued by the Under Secretary to the Government of India, with reference number F. No. 354/4/2012-TRU.
Circulars / Instructions / Orders
Companies Law
1.
[F.No. 52/26/CAB-2010] - dated
24-1-2012
Section 233B of the Companies Act, 1956 - Audit of Cost accounts in certain cases - order under section 233B(1).
Summary: The Central Government mandates that companies engaged in specified industries with a turnover exceeding 100 crore rupees or those with listed securities must have their cost accounting records audited by a certified cost auditor. This applies to financial years starting on or after April 1, 2012, under the Companies (Cost Accounting Records) Rules, 2011. The specified industries include textiles, edible oils, packaged foods, chemicals, coal, mining, vehicles, plantation products, and engineering machinery. Previous company-specific audit orders are withdrawn, and compliance with industry-specific orders is required. Non-compliance may result in penalties as per the Companies Act, 1956.
Highlights / Catch Notes
Customs
-
Corrigendum Issued for Notification No. 2/2012-Customs: Clarifies Errors and Updates for Accurate Implementation of Customs Regulations.
Notifications : Corrigendum of Notification no. 2/2012- Custom. - Ntf. No. CORRIGENDUM Dated: January 23, 2012
Corporate Law
-
Companies Act Section 233B: Cost Account Audits Required for Specific Firms; 2012 Circular Updates Guidelines for Compliance.
Circulars : Section 233B of the Companies Act, 1956 - Audit of Cost accounts in certain cases - order under section 233B(1). - Cir. No. [F.No. 52/26/CAB-2010] Dated: January 24, 2012
Case Laws:
-
Income Tax
-
2012 (1) TMI 92
Unexplained Investment – Search conducted – assessee declared undisclosed investment of Rs.42,65,924/- - A.O. made addition of Rs 61,64,407/ on ground of undisclosed stock - CIT(A) deleted addition of Rs 23,08,033/- as assessee established that belonged to third parties – balance addition was deleted by Tribunal – Held that:- Assessee in their explanation had pointed out that the valuation reports had taken the value of 24 carat gold at Rs.790 per gram but did not correspondingly reduce the value of 18 carat and 22 carat gold. Further, even the stock, recorded in the books of account, was valued as per the market rates, which is not correct, and under the mercantile system of accounting an assessee is entitled to value the stock in hand (declared stock) at “cost price or market price, whichever is lower”. The assessee had valued the stock at cost price. The cost price as recorded in the books was not rejected or adversely commented upon in the assessment order. Thus an obvious mistake has been corrected by the Tribunal – Decided in favor of assessee.
-
2012 (1) TMI 91
Deduction u/s 43B in respect of interest paid on additional sales-tax - Tribunal rejected the claim on the ground that interest did not fall within the expression “any sum payable” used in Section 43B – Held that:- It is clear in Section 17-A (2) of the Himachal Pradesh General Sales Tax Act, 1968 that once there is a notice of demand for the tax and the same is not paid then interest becomes automatically payable. In this regard, Tribunal, not having considered the said provisions of Himachal Pradesh General Sales Tax Act has committed an error in law – Decided in favor of assessee.
-
2012 (1) TMI 86
Contract Construction activity - Commissioner exercised revisionary powers u/s 263 on the ground that A.O. had not examined whether the assessee was following completion method or percentage completion method and whether the said expenditure could be claimed as an expense in the A.Y. in question - non-inquiry by the Assessing Officer with regard to squared up loans – Tribunal quashed the order of Commissioner on ground that expenditure would be allowed as assessee has commenced business activities – Held that:- There was error on the part of the A.O. in not making verification and inquiries, regarding both the aspects discussed aforesaid, which were required and the assessment order was prejudicial to the interest of the Revenue. The tribunal has completely ignored the said aspect and has proceeded on an entirely different basis which was not edifice and foundation of the order passed by the CIT u/s 263 of the Act. Order of Tribunal quashing CIT order is set aside – Decided in favor of Revenue.
-
Central Excise
-
2012 (1) TMI 89
Plea for waiver of pre-deposit of Rs 70 lakhs - clandestine removal and production has been established against the assessee and clubbing of turnover of assessee firm with turnover of sister concern was made – Held that:- Appellant has made out the prima facie case by insisiting that due to its financial position, constraints & adverse market conditions, it is not in a position to pay the pre-deposit and thus would be deprived of his right to be heard and press their appeal. Further appellant have accepted to furnish surety or create a charge on its immovable property so that recovery can be made in case the demand is accepted. Thus, directions of the tribunal are modified. Appellant is required to pay Rs 40 lacs as per schedule specified and is required to deposit papers/title documents of its property. The appellant will also file an undertaking that they shall not dispose of, sell, or encumber or rent out property – Decided in favor of assessee to the extent indicated above.
-
2012 (1) TMI 88
Whether period of limitation would be applicable on demand for payment of interest – duty imposed vide order dated 12.09.2001 paid by assessee - no direction for payment of interest in order-in-original or in the appellate order - letter dated 10.11.2004 demanding differential duty issued - another letter dated 19.10.2005 demanding interest on differntial duty issued - Held that:- Period of limitation, unless otherwise stipulated by the statute, which applies to a claim for the principal amount should also apply to the claim for interest thereon. Period of limitation prescribed for demand of duty u/s 11A is normally one year and, in exceptional circumstance of a case falling under the proviso to Section 11A(1), the period of limitation is five years. But that would be applicable only in case of misstatement, fraud, concealment etc., which is not the case here. As such, in the present case, the period of limitation for the demand for duty would be one year. Thus, the period of limitation for demand of interest thereon would be one year - Decided in favor of assessee.
9911796707
