TMI Tax Updates - e-Newsletter
May 1, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws

Articles

1. SERVICE TAX TERMINOLOGY – PART-III

   By: Dr. Sanjiv Agarwal

2. GOODS UNDER SERVICE TAX

   By: Dr. Sanjiv Agarwal

3. Slump Sale: Transfer under a scheme under the Companies Act can also attract Section 50B.

   By: DEVKUMAR KOTHARI

News

1. Joint Press Statement Enhancing Cooperation between the Ministry of Commerce and Industry of India and the Ministry of Economy, Trade and Industry of Japan in the Area of Creative Industries.

2. Joint Press Release by H.E. Anand Sharma, Minister of Commerce, Industry and Textiles, India and H.E. Yukio Edano Minister of Economy, Trade and Industry, Japan at the 2nd India-Japan Ministerial Business-Government Policy Dialogue.

3. Index of Eight Core Industries (Base: 2004-05=100) March 2012 .

4. De-Registration of not-for-Profit Companies.

5. Registration of New Companies.

6. Compliance of Reporting Norms by Companies.

7. Export of Sugar.

8. Reforms in SEZ Policy.

9. Trade between India and France.

10. Incentives for Exporters.

11. FTA with JAPAN.

12. Cotton Export Policy.

13. Setting up of Trade Centres.

14. WTO Modalities on Agriculture and Subsidies.

15. Trade Deficit with China.

16. Export of Agricultural Products.

17. Benefits of SEZs.

18. Mutual Agreement Between India and Swiss Confederation Signed for Liberal Interpretation of Identity Requirements for Providing Information Under DTAA.

19. Finance Minister calls for need to empower people with skills and capabilities for continuous and inclusive growth; Releases Logo for 46th Annual Meeting of Board of Governors of ADB; India to host the next ADB Annual Meeting in Delhi in May, 2013

20. Government Denies Allegations

Notifications

Customs

1. 28/2012 - dated 27-4-2012 - Cus

Seeks to amend Notification 69/2011 – Customs, dated 29-07-2011 thereby exempting specific goods when imported into India from Japan.

Circulars / Instructions / Orders

VAT - Delhi

1. F.12/Operation Cell/2006/869-889 - dated 19-4-2012

ARRANGEMENTS FOR RECEIPT AND MOVEMENT OF QUARTERLY RETURNS FOR QUARTER ENDING 31.03.2012.

Highlights / Catch Notes

Income Tax

• Examining the Impact of Section 32 on Short-Term Capital Gains Calculation and Interpretation of Section 50 in Tax Liabilities.

  Case-Laws - HC : Whether effect of section 32 should be examined while computing short term capital gains and interpreting Section 50 - HC
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• Authority to Transfer Tax Case from Vapi to Surat u/s 127; Natural Justice and Recorded Reasons Debated.

  Case-Laws - HC : Power to transfer case from Vapi to Surat u/s 127 - Principles of natural justice - requirement of recording reasons - matter referred to LB - HC
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• Consideration of Lower Tax Rate for Long-Term Capital Gains on Bonus Shares u/s 115E.

  Case-Laws - AT : Whether lower rate of tax u/s 115E will be applicable to long term capital gains on sale of bonus shares where such bonus shares resulted out of original investments of shares made out of convertible foreign exchange - AT
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Customs

• India-Japan Trade Boost: Amended Customs Notification Lowers Duty on Specific Imports for Economic Cooperation.

  Notifications : Concessional rate of duty on specific goods when imported into India from Japan. - Notification no. 69/2011-Customs as amended vide Ntf. No. 28 / 2012 - Customs Dated: April 27, 2012
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• Dispute Over Customs Drawback Rate for Girls' Trousers: 8.80% vs. 1% of FOB Value.

  Case-Laws - CGOVT : Girls Trousers or Legging - claimed drawback rate - Rate of DBK @ 8.80% of FOB or 1% of FOB value - CGOVT
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Corporate Law

• High Court to Evaluate Alleged Misfeasance by Former Directors in Company Liquidation Case Under Company Law.

  Case-Laws - HC : Application of official liquidator alleging misfeasance on the part, of the erstwhile Directors of the Company-in-liquidation - HC
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Indian Laws

• Exploring Service Tax on Goods: Legal Framework, Business Implications, and Recent Updates in Indian Tax Laws

  Articles : GOODS UNDER SERVICE TAX - Article
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• Business Transfers in Schemes of Arrangement May Be Slump Sales, Subject to Section 50B Tax Rules.

  Articles : Slump Sale: Transfer under a scheme under the Companies Act can also attract Section 50B. - Article
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Central Excise

• Joint Brand Owners Eligible for Individual SSI Exemption Under Central Excise Rules.

  Case-Laws - AT : SSI exemption - Joint ownership of brand name - each owner is eligible for SSI exemption. - AT
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• Court Examines Time Limits on Interest Claims in Central Excise Cases with Price Variation Clauses.

  Case-Laws - AT : Price variation clause - applicability of period of limitation on demand of Interest under central excise - AT
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Case Laws:

• Income Tax

• 2012 (4) TMI 470
  Confirmation of the penalty u/s. 271(1)(c) by CIT (A) as on the date of filing of return no judicial pronouncement was available in his favour of assessee – assessee contested that appellant had disclosed all the details with respect to claim u/s. 10B in the computation of income and notes thereon and the said claim was as per Form 56G issued by the Chartered accountant – Held that:- Availability/non-availability of a particular pronouncement on a particular date cannot be the basis for imposing penalty u/s. 271(1)(c) - deduction has to be allowed in respect of three eligible units and loss of the fourth 10A unit has to be set off against the normal business income - Provision of s. 271(1)(c) are valid when there exists concealment of the particulars of the income of the assessee or the assessee have furnished inaccurate particulars of his income - no information given in the return was found to be incorrect or inaccurate – in favour of assessee.

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• 2012 (4) TMI 469
  Treating the sale proceeds of depreciable assets as short term capital gains – ITAT held the Order to be contrary to Section 50 - Held that:- Given the fact that block of assets is identified by the percentage of depreciation granted, on going through the various heads under the Schedule, we find that the depreciation percentage fixed is more of machinery specific rather than industry specific. Thus, on going through the various clauses in the Schedule, we find, if the asset transferred and the asset purchased fall for consideration under the self-same percentage of depreciation, then the asset qualified for being termed as falling under a block of assets. Thus, if the assets transferred from the 100 per cent export- oriented unit and the assets purchased come for the same percentage of depreciation as prescribed in the table, the assessee would be justified in seeking adjustment in the matter of working out the capital gains. Whether effect of section 32 should be examined while computing short term capital gains and interpreting Section 50 - held that:- ection 32 forms part of Chapter IV-D and relates to computation of income from profession and business. It is not the case of the Revenue that the gain on transfer of the block of assets is taxable as business income. The two sections operate in their own filed and there is no conflict. In these circumstances, we do not think we should refer and rely upon Section 32 and accordingly compute and decide whether short term capital gains is payable under Chapter IV-E - in favour of the assessee

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• 2012 (4) TMI 468
  ITAT deleted addition of Rs.5,60,750/-, Rs.4,50,600/- and Rs.8,12,350/- made by the Assessing Officer on the basis of the valuation report – Held that:- AO cannot make addition solely on the basis of the report of the DVO - no incriminating material was found during the course of search and the transactions were duly reflected in the returns filed by the assessee in the normal course – against revenue. ITAT deleted addition made by the Assessing Officer on account of undisclosed investment – Held that:- Income in question had to be taxed in the hands of Association of Persons and the mere fact that the said income was taxed in the hands of individual members of Association does not bar the Income Tax Officer from taxing the Association of Persons - Order passed by the tribunal is perverse and an order of remit is passed to the tribunal to re-examine the question of taxability on account of the undisclosed investment in the purchase of property No.1028, Sector 15-II, Gurgaon in the hands of the respondent-assessee –in favour or revenue. Undisclosed income in the block assessment proceedings has to be taxed at a flat rate - no matter whether the income has been assessed under the head “income from business”, “income from other sources” or “income from property”.

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• 2012 (4) TMI 467
  Income from a market complex for commercial purpose - Income from house property or business income – Held that:- The Assessing Officer has rather misdirected himself to hold the case laws cited by him leaning in favour of the Department - that the bank took cognizance of the commercial viability of this project to grant loan which partners pooled their resources to repay the loan and let out the property to the commercial organizations for earning income against which incidental expenses incurred for carrying out such activities - as it is rendered its income, residual to receipts from the lessees on account of electricity, water charges etc., which are the business activities from the assessee to charge for their portion and incur the remaining for itself along with the maintenance and providing security was in the nature of carrying out commercial activities and not for the purpose of letting it out as house property- the impugned orders of the authorities below are set aside with a direction to the Assessing Officer to accept the return of the assessee holding the same as income from business and not income from house property – in favour of assessee.

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• 2012 (4) TMI 466
  Disallowance u/s.40(a)(ia) - reopening of the assessment – CIT(A) charging interest u/s.234B and initiating penalty proceedings u/s. 271(1)(c) – Held that:- Decided in Kanubhai Ramjibhai Makwana Versus ITO (2010 - TMI - 202951 - ITAT, AHMEDABAD) that provisions of section 40(a)(ia) as amended by Finance Act, 2010 w.e.f. 1.4.2010 are to be treated as having retrospective application with effect from 1st April, 2005 - Assessing Officer is directed to delete the disallowance of Rs. 3,69,568/- as made u/s. 40(a)(ia) of the Act – in favour of assessee.

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• 2012 (4) TMI 465
  Deduction u/s 80 HHC on export incentives received by the assessee as a supporting manufacturer in the same manner as in the case of direct exporter, treating the supporting manufacturer at par with the direct exporter – revenue appeal - Held that:- Court being the jurisdictional Court has already decided the issue raised in Special Leave Petition against the revenue and the instant appeal will follow the suit – in favour of assessee. Addition of Rs. 8,38,77,635/- made by the AO on account of difference in the value of stock as per stock statement submitted to the Bank and that as per the books of account – Held that:- The mere fact that value furnished to the bank is without any detail or verification by the bank may not constitute the basis to make additions - there are categorical finding that the assessee- respondent had maintained broad details of the stock, its consumption, production and closing balance and the accounts have been maintained on day to day basis which have been accepted by the Excise and VAT authorities – in favour of assessee. Depreciation - depreciation @ 50% on the purchase of machinery under TUF Scheme as against depreciation @ 25% allowed by the A.O.- Held that:- The machinery has been purchased as per TUF Scheme, making the assessee- respondent eligible for deduction at higher rate - the nature of stock purchasing is a finding of fact and revenue- could not advance any argument warranting admission of the appeal – in favour of assessee.

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• 2012 (4) TMI 464
  Reopening - Deduction u/s 80IA - assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution - contractor or supplier of irrigation products versus developer of any new infrastructural facility. - held that:- It is now a settled law that if an explanation is added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Assessing Officer earlier did not arrive at such conclusion and thus, the amended Explanation subsequently added cannot be of any help to him in arriving at the second opinion based on the alleged new law. In the absence of existence of "any tangible material" to come to the conclusion that there was escapement of income from assessment, the Assessing Officer exceeded his authority to reopen the assessment merely on the basis of a "change of opinion" and accordingly, it is a fit case of quashing the notice. - Decided in favor of the assessee

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• 2012 (4) TMI 463
  Power to transfer case from Vapi to Surat - Principles of natural justice - Petitioners filed objections and for effective and coordinated investigation in the search cases of the same group, the order impugned in the applications was passed - held that:- the requirement of recording reasons under section 127(1) is a mandatory direction under the law and noncommunication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee as held by the Supreme Court in Ajantha Industries vs. Central Board of Direct Taxes (1975 (12) TMI 1 - SUPREME Court). Division Bench of this court in the case of Arti Ship Breaking vs. Director of Income Tax (Investigation) and others (2000 (3) TMI 38 - GUJARAT High Court) considered the similar question as to whether non-discloser of reason in the order of transfer vitiates the order and in spite of referring the above decision of the Supreme Court decided to ignore such vital defect. Since we propose to hold that the law laid down in the case of Ajantha Industries (supra), is still the law of the land and has not been overruled by any competent bench of the Supreme Court whereas a co-ordinate Division Bench has taken a contrary view, judicial decorum demands that we should refer the matter to a larger bench for deciding the question - matter referred to LB.

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• 2012 (4) TMI 462
  Deduction u/s 80-IB (10) - the sanction plan was issued on 4.4.2005 making it clear it comes into effect from 4 4.2005 and will be in force till 3.4.2007. Assessee contended as the approval was granted on 28.3.2005. he is entitled to the benefit under Section 80-IB(10) of the Act from the assessment year 2005-06 onwards - Held that: it was communicated to the assessee on 4.4.2005 and in law he should have 2 years time to complete the construction, the said communication and the sanctioned letter made it clear the time for completing the construction starts from 4,4,2005 and it ends on 3.4.2007 - As per the judgment of the Bombay High Court, once approval is granted it dates back to the date of application. Even that exercise is not to be done in this case, as the date of approval is 28.3.2005 the assessee is entitled lo the benefit for the assessment year 2005-06 - Decided in favor of the assessee

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• 2012 (4) TMI 461
  Whether lower rate of tax u/s 115E will be applicable to long term capital gains on sale of bonus shares where such bonus shares resulted out of original investments of shares made out of convertible foreign exchange - Held that: A conjoint reading of Section 115E and 115F clearly show that long term capital gains mentioned in clause (b) of Section 115E and investment made out of sale consideration received on transfer of foreign exchange asset mentioned in Section 115F, both relate to income arising out of transfer of foreign exchange asset - In the case of Sanjay Gala v. ITO [2011 - TMI - 205129 - ITAT, MUMBAI - Income Tax] - it is clear that foreign exchange asset for the purpose of section 115F is the one which assessee has acquired in convertible foreign exchange. In the present case, the assessee subscribed to shares in convertible foreign exchange and acquired the foreign exchange asset - assessees cannot be deprived of the concessional rate available under Section 115E of the Act just because the sale of shares were bonus shares - Appeals are allowed

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• Customs

• 2012 (4) TMI 460
  Writ petition - Assessee had asked the Commissioner of Customs at ICD, Tughlakabad, New Delhi to permit and allow import into India of the Data Graphic Display Tubes, which have been imported from Malaysia. It was claimed that these goods could be imported under the open general license - custom authority is delaying the release of the said consignment by taking the plea that the goods imported were old and used and therefore, they are “Electronic Waste” - The contention of the petitioner is that the consignment are lying since December, 2011 and the delay is causing immense hardship and financial loss to the petitioners on account of demurrage and detention charges - Held that: it is directed that the respondent authority will pass an order-in-original determining whether the goods in question can be imported to India and the duty etc. payable thereon within a period of three weeks i.e. by 21st March, 2012 - petition is disposed of

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• Corporate Laws

• 2012 (4) TMI 459
  Application of official liquidator alleging misfeasance on the part, of the erstwhile Directors of the Company-in-liquidation - held that:- KSFC has sold the plant and machinery and the issue is pending, the first respondent who was the Director in any event cannot be held liable for the said auction and the question as to whether the KSFC could have sold the machinery and as to whether it could have been sold for a better value and as to whether the valuation had been appropriately made by the KSFC are issues which would have to be inter se decided between the Official Liquidator and the KSFC - the very same value of the plant and machinery which had been seized by the KSFC and sold cannot be considered as an amount which was due to be realized from the Directors for the misfeasance of not accounting for the said amount, when the facts are clear in the instant case. - Application is dismissed

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