TMI Tax Updates - e-Newsletter
May 8, 2012

Case Laws in this Newsletter:

Income Tax Corporate Laws Central Excise

Articles

1. SERVICE TAX TERMINOLOGY – PART-V

   By: Dr. Sanjiv Agarwal

2. Applicability of New Reverse Charge Mechanism under Service Tax Law

   By: CSSwati Rawat

News

1. Opening Remarks made by the Finance Minister Shri Pranab Mukherjee at the beginning of the Discussion on Finance Bill 2012.

2. Conducting of AGM by Companies.

3. Furnishing of Misleading Information by MNAFs.

4. Export of Commodities.

5. Exports from SEZs.

6. Production of Tobacco.

7. Export of Spices.

8. Leather Exports.

9. Exports of Flowers.

10. Tea Industry.

11. Visa Rejection by USA.

12. IT-SEZ at Rajarhat.

13. Export of Fruits and Vegetables.

14. Trade with Portugal.

15. Pakistan Exhibition in Delhi.

16. Wages for Plantation Workers.

17. Exports of Gems and Jewellery.

18. Import Duties on Cars.

19. Special Fund for Tea Industry.

20. Brass Imports.

21. Food Products Imported from Japan.

22. Ban on Indian Drug Manufacturers.

23. FDI in Pharma.

24. Oveview of Delhi-Mumbai Industrial Corridor.

Notifications

Customs

1. 23/2012 - dated 4-5-2012 - ADD

Seeks to levy anti-dumping duty on imports of Viscose Filament Yarn, originating in, or exported from, China PR for a further period of five years.

Circulars / Instructions / Orders

FEMA

1. 117 - dated 7-5-2012

Transfer of Funds from Non-Resident Ordinary (NRO) account to Non- Resident External (NRE) Account.

2. 118 - dated 7-5-2012

Release of Foreign Exchange for Miscellaneous Remittances.

3. 119 - dated 7-5-2012

External Commercial Borrowings (ECB) Policy - Utilization of ECB proceeds for Rupee expenditure.

Highlights / Catch Notes

Income Tax

• Service Tax Exclusion from Gross Receipts u/s 43B: Only Deductible When Actually Paid by Taxpayer.

  Case-Laws - AT : Applicability of section 43B on payment of service tax - Non-inclusion of service tax in gross receipts – AT
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• High Court rules interest on awards as "income from other sources" or "business income," affecting tax liabilities and reporting.

  Case-Laws - HC : Interest received on the award is an "income from other sources", or an "income from business" - HC
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• High Court Upholds Tribunal's Denial of Tax Exemption for Breach of Section 13(1)(d) Conditions u/s 11.

  Case-Laws - HC : Whether the Income-tax Appellate Tribunal was justified in denying exemption under section 11 of the Income-tax Act for violation of section 13(1)(d) - HC
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• Court Disallows Expenditure Claims, Rules Business Had Not Commenced in Relevant Year per Assessing Officer's Determination.

  Case-Laws - AT : Determination of date of commencement of business - The main issue is with reference to allowance of expenditure claimed by the assessee, disallowed by the Assessing Officer on the reason that the assessee has not commenced the business in the year under consideration - AT
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• Real Estate Agent Faces Legal Scrutiny Over Discrepancy in TDS Certificate and Profit & Loss Account Commission Reports.

  Case-Laws - AT : Real estate agent / booking agent - Difference between commission as per TDS certificate and commission as shown in the profit and loss account. - AT
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Customs

• Assessee Can Choose More Beneficial Exemption When Multiple Notifications Apply to Goods, Maximizing Tax Relief.

  Case-Laws - AT : Where there are two exemption notifications that cover the goods in question, the assessee is entitled to the benefit of that exemption notification which gives him greater relief - AT
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• Court to Decide Timing of Import Exemption Certificates: Must They Be Filed with Bill of Entry?

  Case-Laws - AT : Import - exemption - Whether it was necessary for the Appellant to produce the certificates at the time of filing of the Bill of Entry or whether it was sufficient if the - AT
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• India Extends Anti-Dumping Duty on Chinese Viscose Filament Yarn for Five More Years to Protect Local Industry.

  Notifications : Seeks to levy anti-dumping duty on imports of Viscose Filament Yarn, originating in, or exported from, China PR for a further period of five years. - Ntf. No. 23 /2012-Customs (ADD) Dated: May 4, 2012
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FEMA

• Guidelines for Transferring Funds Between NRO and NRE Accounts Under FEMA Circular No. 117 Explained.

  Circulars : Transfer of Funds from Non-Resident Ordinary (NRO) account to Non- Resident External (NRE) Account. - Cir. No. 117 Dated: May 7, 2012
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• New Guidelines for Foreign Exchange Remittances under FEMA Regulations Issued on May 7, 2012.

  Circulars : Release of Foreign Exchange for Miscellaneous Remittances. - Cir. No. 118 Dated: May 7, 2012
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• Circular No. 119 Updates ECB Policy: Guidelines for Using Foreign Borrowed Funds in India Under FEMA Framework.

  Circulars : External Commercial Borrowings (ECB) Policy - Utilization of ECB proceeds for Rupee expenditure. - Cir. No. 119 Dated: May 7, 2012
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Corporate Law

• Supreme Court Rules on Liability of Authorized Signatories u/s 138 of Negotiable Instruments Act for Dishonored Cheques.

  Case-Laws - SC : Liability of authorized signatory of a company to be prosecuted under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused - SC
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Indian Laws

• Finance Bill 2012: Tax Amendments Proposed to Boost Revenue, Enhance Growth, and Ensure Economic Stability.

  News : Amendments proposed in Finance Bill, 2012 - Opening Remarks made by the Finance Minister Shri Pranab Mukherjee at the beginning of the Discussion on Finance Bill 2012.
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• High Court Reviews Constitutionality of Mandatory Death Penalty for Drug Offenses u/s 31-A of NDPS Act.

  Case-Laws - HC : Validity of Section 31-A of the NDPS Act - mandatory death penalty for drug offences - violative of Articles 14 and 21 of the Constitution of India or not - HC
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Central Excise

• Duty Based on Highest MRP for Packages with Multiple Regional Prices in Central Excise Cases.

  Case-Laws - AT : MRP - Demand of duty - All the MRPs are indicated on the same package although for different regions.- duty - duty to be paid on highest of MRP - Tri.
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Case Laws:

• Income Tax

• 2012 (5) TMI 90
  Applicability of section 43B on payment of service tax - Non-inclusion of service tax in gross receipts – Held that:- As per the Service Tax Law, Service Tax is payable only when the payment/fees for underlying service provided are realized - as the appellant firm has not received the sum till the end of the financial year i.e. 2006-07 question of paying the same did not arise at all - Since the liability to pay service tax does not exist in the present case, the service tax cannot be said to be "payable" and therefore provisions of Sec.43-B of the Act could not also be invoked – in favour of assessee. Dis -allowing the insurance premium to the extent half out of an entire premium amount paid on the life of the partners – Held that:- The maturity proceeds of the Key Man Insurance Policy is taxable and premium paid on such policies is deductible - the CBDT Circular No. 762 dated February 18, 1998 has confirmed it - It is not necessary that a key man insurance policy should be only in the name of the employees and not partners - Sec. 10(1OD) recognize the existence of other types of relationship apart from employer-employee relationship for claiming deduction on account of premium paid on Keyman Insurance Policy as business expenditure - in favour of assessee.

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• 2012 (5) TMI 89
  Gains from sale and purchase of securities should be treated as business income or capital gains - the assessee is an salaried employee had also made purchases and sold securities maintaining two separate portfolios i.e. investment portfolio and trading portfolio – Held that:- Quantum or total number shares/transactions subject matter of short term capital gains is substantial but the transactions in question are only seven in number and the period of holding cannot be treated as insignificant and small - period of holding may indicate intention to make investment - substantial dividend income of more than Rs.19 lakhs and Rs.27 lakhs in the assessment year 2005-06 and 2006-07 can happen even in case of investment portfolio because when investment is liquidated to earn gains and change their portfolio - no mention whether the assessee had indulged in frequent transactions in the previous period or subsequently - Merely because the assessee had sold the said shares in the relevant year and made substantial gains and could not show basically the objective for acquiring the shares was not as an investor but as a trade - in favour of the assessee.

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• 2012 (5) TMI 88
  ITAT held that Order u/s 201(1) & 201(IA) passed by the A.O. beyond four years was time barred – Held that:- Not to disturb the time limit of four years prescribed by the Tribunal and in view of terms of the decision in STATE OF PUNJAB Versus BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. [2007 -TMI - 48068 - SUPREME COURT OF INDIA] action must be initiated by the competent authority under the Income-tax Act, where no limitation is prescribed as in section 201 of the Act within that period of four years - action of the Revenue cannot be said to be within the period of limitation prescribed under the Act – against revenue.

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• 2012 (5) TMI 87
  Claim to deduction under Section 80P(2)(a)(i) on interest earned on deposits made out of the non-SLR funds , especially since the income so earned cannot be said to be earned from the normal banking business/activities – Held that:- Decided by the Division Bench of this Court in Commissioner of Income Tax vs. M/s H.P. State Cooperative Bank Ltd (2009 - TMI - 201840 - HIMACHAL PRADESH HIGH COURT) held that interest on the deposits made by the Bank is directly attributable to the business of the banking - Deduction allowed – against revenue.

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• 2012 (5) TMI 86
  Expenses booked on accrual basis and receipts on actual receipt basis and not account for work-in - progress in the closing stock – Held that:- Assessee has followed mercantile system of accountancy in regard to the expenditure incurred during the year and results were declared on actual receipt - this method is constantly followed by the assesse since last so many years - addition of the amount received in the next year in the month of April should not have been added in the previous year merely on the basis of bills issued and expenditure shown in the assessment year - in favour of the assessee. ITAT deleted the addition made by the AO on account of investment made by the three partners with the assess firm – Held that:- The three partners are income tax assessees and copies of their returns of income were furnished during the assessment proceedings - contribution made by the partners shown in their respective returns could not be said to be from unknown sources of income - in favour of the assessee. Disallowance on account of the purchases of the material and hire charges of the dumper/tractor – Held that:- assessee never produced before the Assessing Authority proof of genuine transactions despite of giving repeated opportunities – finding of no illegality or perversity in the observations made by Authorities as finding of facts recorded are based on logic and does not require interference – against assessee.

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• 2012 (5) TMI 85
  Reassessment - A.O. opined that the interest received on the award is an "income from other sources", and not an "income from business" as claimed by the assessee in the original return - Held that: the amounts under a contract were not paid at the proper time and, as such, the interest was awarded to the assessee for such delay. The interest was only an accretion to the assessee's receipts from the contracts and was attributable to an incidental to the business carried on by it - the interest payable to the assessee is at par with the business receipts, as it was not acquired separately as already held by Hon'ble Apex Court in the case of Govinda Chaudhary & Sons (1992 -TMI - 5424 - SUPREME Court) - Decided in favor of the assessee

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• 2012 (5) TMI 84
  Whether the Income-tax Appellate Tribunal was justified in denying exemption under section 11 of the Income-tax Act for violation of section 13(1)(d) - The finding of the Assessing Officer is that the funds of the Trust have been utilised substantially for personal benefits of the Chairman and family members - Held that: the finding of the Tribunal because as a matter of fact the Tribunal found that there is a violation of section 13(1)(d) inasmuch as Rs. 50,000/- belonging to the trust remained invested during the previous year in a private finance company. Even though counsel for the appellant raised a contention that investment itself is not made in the previous year relevant for the assessment year i.e. 1998-99, we do not think disqualification applies only for deposit made in the previous year, but applies to deposits retained in the previous year - Appeal is dismissed

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• Corporate Laws

• 2012 (5) TMI 83
  Liability of authorized signatory of a company to be prosecuted under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused – Held that:- Section 141 of the Act operates in cases where an offence under Section 138 is committed by a company - If a person who commits offence under Section 138 of the Act, the company as well as every person in charge of and responsible to the company for the conduct of business of the company at the time of commission of offence is deemed to be guilty of the offence - the words "as well as the company" appearing in the Section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof - there can be no vicarious liability unless there is a prosecution against the company – in favour of assessee.

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• Central Excise

• 2012 (5) TMI 82
  CESTAT set aside the demand confirmed by Order in Original - duty was not paid on the inputs, the assessee could not have taken credit of the duty on those inputs – Held that:- Decision on the question as to whether the finished products were cleared without payment of duty or not was wholly irrelevant for deciding the question as to whether the inputs received by the assessee were duty paid or not - the decision of the Tribunal in setting aside the demand raised on wrongful credit taken on the inputs is erroneous - impugned order is set aside and the matter is remanded back to the Tribunal to decide the appeal on merits.

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