TIOL-DDT 1002 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1002</font><br> 01.12.2008<br> Monday</strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT 1000 - Grand celebration in Chennai</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The TIOL family was in Chennai on Friday for the DDT 1000. On this occasion we released a CD containing all the 1000 DDTs.</font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_04_01.jpg" alt="Legal Corner Icon" width="384" height="255" hspace="5" border="0" align="center"></b></strong></strong></strong></strong></strong></strong></strong></font></strong></font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong></strong></strong></strong></strong></strong></strong></strong></font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong align="center">CBEC Chairman P C Jha presenting a memento to Vijay Kumar - looking on is Justice R Sudhakar. </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chidambaram at home - Too little too late</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Politicians say that the exit of Home Minister Shivraj Patil is too little and too late. Economists say the exit of Finance Minister Chidambaram is too little and too late. Chidambaram is not exactly new to the Home Ministry as he was earlier a Minister for internal security and was virtually the de facto Home Minister. Officers in the Finance Ministry will perhaps be celebrating, for PC was not really a lovable boss, though nobody disputes his calibre.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Efficient </em> Finance Ministers are generally responsible for the fall of governments, because in their anxiety to balance budgets, they often make the people unhappy.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps India's best Finance Minister of all times, Dr. Manmohan Singh is back in his favourite job, but this time only on an additional charge and that too with very little time to really take charge and change things - but maybe the good doctor can perhaps still do something to pull the economy out of the mess and make life a little less miserable for the common man. After all last time around, he did pull India out of deep financial crisis.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dr. Manmohan Singh is not the first Prime Minister to hold the Finance Ministry.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1958, when TT Krishnamachari had to resign on the Mundhra scam - then it was called scandal, Prime Minister Jawaharlal Nehru took over as Finance Minister and even presented the 1958 Budget. This was perhaps the first major fiscal scam in India and there was not even a charge that anyone had made a paisa in the scam. The FM had asked LIC to buy shares of Mundhra's companies - not for any financial gain, but TTK was worried about the impact of his high tax budget on the stock market.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was Sonia Gandhi's father-in-law, Feroze Gandhi who broke the news in Parliament embarrassing his father-in-law. TT Krishnamachari made a comeback in 1964, but had to go in 1965, as he did not have a high opinion of his Prime Minister Lal Bahadur Sastry.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1969, Finance Minister Morarji Desai was against the Bank Nationalisation and lost his job when Prime Minister Indira Gandhi took over the Finance Ministry. She presented the 1970 budget.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1986, the then Finance Minister had grown too big and the Prime Minister Rajiv Gandhi shifted him to Defence and took over the Finance portfolio. Rajiv Gandhi presented the 1987 budget.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now 21 years later, another Prime Minister has taken over the Finance portfolio, but Dr. Singh will not be able to present a budget as of now.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also see our <strong>Guest Column </strong> today.</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax - Assessment of Banks - deductions - CBDT instructions - A contingent liability cannot constitute deductible expenditure for the purposes of Income Tax Act.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG has observed that while computing the income of banks under the head 'Profit and Gains of Business & Profession', deductions of large amounts under different sections are being allowed by the Assessing Officers without proper verification, leading to substantial loss of revenue.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The CBDT has instructed that</strong></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) <strong>Bad debts </strong> which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of such debts to the provision for bad and doubtful debt account.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) While considering the claim for bad debts u/s 36(1)(vii), the assessing officer should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad & doubtful debt account.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) In cases where an assessee bank purchases securities under capital account at a price inclusive of any accrued interest, the entire purchase consideration is in the nature of capital outlay. Therefore, any interest element included in the purchase consideration is not allowable as expenditure against income accruing on those securities.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) Section 14A of the Act read with rule 8D of the I.T. Rules, 1962, provides that for the purpose of computing total income under the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of the total income. Therefore, expenditure in respect of exempted incomes should not be allowed as deduction.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) Section 43B(b) of the Act envisages that deduction towards contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees is allowable in computing total income of the assessee only on <strong>actual payment </strong>basis.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) Section 35DDA of the Act provides that where an assessee incurs any expenditure by way of payment of any sum to an employee at the time of his retirement in accordance with any scheme of voluntary retirement, one fifth of the amount so paid shall be deducted in computing the profit and gains of the business and the balance shall be deducted in equal instalments for each of the four immediately succeeding years. Therefore, only one-fifth of such expenditure should be allowed in each of the five years.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) A contingent liability cannot constitute deductible expenditure for the purposes of Income Tax Act. Thus, putting aside of money which may become expenditure on the happening of an event would normally not constitute an allowable expenditure under the Income Tax Act.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii) Under the RBI guidelines and the Indian Companies Act, 1956, banks have to follow the mercantile system of accounting and prepare accounts on accrual basis. The Assessing Officers should ensure that this system is strictly followed by the Banks (in respect of all sources of income).</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=67&filename=notification/cbdt/2008/instruct0817.htm" target="_blank">CBDT Instruction No. 17/2008, Dated: November 26, 2008</a></strong></font></p> <h2 align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Homage to Hemant Karkare</font></h2> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a letter written by Sunil Uke, Commissioner, Directorate of Data Management, Customs & Central Excise to Mrs Hemant Karkare.</font></p> <p><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify"><strong>Dear Mrs. Hemant Karkare,</strong></font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">I was deeply shocked to learn about the sad but heroic demise of Hemant. May you, your family and the people of Mumbai have the courage to bear the loss of one of the bravest and finest IPS officers of Mumbai Police.</font></p> </blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">Hemant and I worked in tandem during the period 1998-2000, when he was posted as Additional Commissioner, Special Bureau, Cabinet Secretariat, Mumbai. While he held the fort in Mumbai I was his counterpart in New Delhi. Together we were responsible for making a dent in the Mumbai Underworld when lots of undesirable elements were neutralized. We were in constant touch with each other sharing our intelligence on a daily basis.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">Later he left for Austria and I also proceeded on Special Assignment. By the time I returned he had repatriated and joined Mumbai Police. On 15 November 2008 I was in Mumbai and enquired about Hemant, though we could not meet.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">My eyes become moist and a shiver ran down my spine when I got the tragic news from my younger brother, an IAS officer in Mumbai and from my daughter who was studying late in the night. I immediately switched on the TV news and have not switched off.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">I only wish that the Indian Defence forces, the Para Military, the Mumbai Police and the Commandos finish the work begun by Hemant. As a fellow Maharashtrian and an Indian, I am indeed proud to have been ever associated with Hemant. I salute Hemant and offer my heartfelt condolences to you and your family.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>With deepest sympathies,</strong></font></p> <p align="right"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Yours Sincerely,</font></strong></p> <p align="right"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(Sunil Uke)<br> Commissioner<br> Directorate of Data Management<br> Customs & Central Excise</font></strong></p> <p align="right"> </p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600">- Tommorow's cases</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Appeals - If reasons explaining the delay are irrational prayer for condonation of delay in filing appeal becomes fatal - Ministerial interference takes away the power and responsibility of the Board - CESTAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<strong>SUFFICIENT CAUSE</strong>" is an expression which essentially means adequate or enough reason. If reasons of delay explained are irrational, that makes the prayer for condonation of delay fatal since, right of the other side to be free from litigation after expiry of limitation period cannot be negated.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Containers imported could not be re-exported and have now been reduced to scrap after lying with the Customs authorities for more than a decade - Duty to be paid on scrap value and not on depreciated value of containers: Tribunal</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS </strong> is a very long story and a story so old that the goods in question have been reduced to scrap, yet the Customs authorities opine that that cannot be a ground to <strong><em>'contain' </em></strong> the dues.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Non-resident bank - international credit cards issued by foreign branches - even if transactions for such cards take place in India, fee paid for such transactions are not taxable as credit is given by foreign branch and debt also arises outside India: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>THE assessee in this case is a foreign bank. It is incorporated in the UK. It has branches all over the world. It also has a PE in India. Its branches issue international credit cards. Card-holders visit India and their transactions are completed here either by the assessee bank or branches of any other bank in India. Now the question is: Where is the commission income arising out of transactions taking place in India taxable?</em></strong></font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns tomorrow for the judgements</font></strong></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Day.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p> </body> </html>