Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Manufacture - activity of cutting specified varieties of electric cables into desired lengths, testing and packaging thereof does not amount to manufacture - AAR

It is well settled through a series of judgements of the Hon'ble Supreme Court and High Courts in the context of the aforesaid clause (f) that manufacture can said to have taken place only if the processing to which an item is subjected to results in the emergence of a different commodity having its distinct character, use and name and it should be commercially known as such.

Income Tax

Indo-USA DTAA - Article 12 - Non-resident assessees render strategic management services to Indian branch - decline to furnish details of services and transactions relating to relevant AY - If assessees fail to cooperate, onus to prove non-taxability of income shifts to assessees, and AO can draw adverse inference: ITAT

PROTECTING business details, clients' details and the nature of transactions entered into from public eyes is one of the basic traits of any business-doing entity. But, can this trait or behaviour be given a leeway to such an extent that an assessee need not disclose them even to the income tax authorities? The issue becomes more sensitive when the details of services rendered and transactions entered into are in exclusive possession of the assessee. Under such circumstances, does the onus to prove the taxability of income continue to be on the Revenue? Or, the burden of proof shifts to the assessee who fails to cooperate with the AO and insists on relying on some information filed before the Revenue in some distant assessment year? Should the AO rely on some email correspondence details disclosed in the past, the same having no nexus with the relevant assessment year, and concur with what was decided in the past? Can the A.O legally draw an adverse inference for lack of details furnished by the assessee? It may sound enigmatic to TIOL Netizens or call it 'Vodafone Syndrome' as Vodafone B V had also declined to provide text of original agreement to the Bombay HC in its Rs 10000 Cr case which was later dismissed. Anyway, here are the details of this case involving a global service provider specialising in strategic management consultancy services which highlight the dilemmas many of the assessing officers face while making assessment orders involving the high and mighty, particularly MNCs having global interrelated business from whom it is extremely difficult to get any worthwhile information leading, at times, to framing of assessment orders which are often dubbed as high handed. It is only because of the feisty defence put up by the departmental representative that the fact that the assessee declined to give any shred of evidence for the relevant financial year came to light.

Customs

COFEPOSA – Detention - In matters of personal liberty, standard of proof needs to be high to justify an order of preventive detention.- Supreme Court

Preventive detention is not punitive but a precautionary measure. The object is not to punish a person, but to intercept or prevent him from doing any illegal activity. Its purpose is to prevent a person from indulging in activities, such as smuggling and such other anti social activities as provided under the preventive detention law. The mere fact that on one occasion person smuggled goods into the country may constitute a legitimate basis for detaining a person under COFEPOSA. For this purpose, the antecedents of the person, facts and circumstances of the case need to be taken into consideration.

See our columns Tomorrow for the judgements