Jurisprudentiol-Tomorrow's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.FEMA

FEMA - Procurement of foreign exchange for import of machinery under EPCG scheme - If goods are imported and warehoused for years without producing exchange control copy to authorized bank violation would come within the meaning of economic offence and not a technical lapse even if there is change in management - High Court

THE appellant company's management changed hands wherein the assets and liabilities were taken over for a consideration of Rupees Six crores . The appellant company acquired foreign exchange of USD 35766 and French Francs 374000 for import of refrigeration machinery in their Hotel Industry under EPCG scheme. The Goods were imported in two consignments in the months of March and May 2000 and warehoused due to severe financial crisis and never cleared from the warehouse. The said import had been done against the EPCG License and incurred an obligation to earn foreign exchange up to four times the CIF value of the license.

Income Tax

Sec 40(a)(i) - payments to non-residents - TDS not confined to only interest, royalty and fees for technical services but also 'any other sum' provided income is chargeable in hands of non-residents; No TDS if non-residents have no business connection with India: ITAT

SECTION 40(a)(i) is a harsh Section in the Income Tax Act. If a tax resident of India is making a payment to any non-resident, one is as per the provisions of this Section, liable to deduct tax at source. If one fails to do so, the entire business expenditure is guillotined. But, is TDS to be deducted only on three payments like interest, royalty and fees for technical services? NO, says the Tribunal in its latest decision. It is because this Section does not stop at mentioning only three items and goes on to include 'any other sum chargeable under the Act'. In other words, any payment made to non-residents comes within the sweep of the provisions of this Section provided it is chargeable to tax under this Act in the hands of the non-resident.

Customs

CESTAT rejects ROM application filed in pursuant to Supreme Court direction - Tribunal has inherent power of recalling its own order - Supreme Court

IT is true that the period of limitation specified in terms of Sub-Section (2) of Section 129(B) of the Customs Act is required to be observed but the Tribunal failed to notice that it has inherent power of recalling its own order if sufficient cause is shown therefore. The principles of natural justice, which in a case of this nature, in our opinion, envisage that a mistake committed by the Tribunal in not noticing the facts involved in the appeal which would attract the ancillary and/or incidental power of the Tribunal necessary to discharge its functions effectively for the purpose of doing justice between the parties, were required to be complied with.

See our columns tomorrow for the judgements