TIOL-DDT 1274 · the untouched capture
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<p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1274 </font></strong><font size="2"><strong><br>
08.01.2010 <br>
Friday </strong></font></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Surplus from land contributed as capital contribution liable to pay tax - Real Estate Giant DLF in Mega SB decision of the ITAT</strong></font></p>
<p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TODAY </strong>we are bringing you a mega decision of the ITAT Special Bench running into 230 pages. It is really fascinating and astonishing to see such long judgements. By the time I finish a four page article, I lose track of what I have written in the first page! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This marathon judgement was delivered on 4 th January 2010 and a copy was available only at 7 pm yesterday. One of my colleagues who managed to get the copy was insistent that we should carry this order today. Poor editors have no choice when their staff dictate the terms. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So
we bring you the order today – yet another first from <strong>TIOL</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DLF, the real estate giant had entered into a partnership with four of its subsidiaries and contributed five plots of land measuring 16.98 acres as its contribution. The market value was determined at Rs. 11.50 crore. In the assessee's books of account, the said land contributed towards capital in the partnership firm was shown at a cost of Rs. 4,40,62,419/-. The said newly constituted partnership firm credited the capital account of the assessee company by Rs. 11.50 crores being the value of the land contributed by the assessee as capital. The assessee also recorded the value of said land contributed as capital in the firm at Rs. 11.50 crores in its books, and the surplus amounting to Rs. 6.01 crore was credited to the profit and loss account, but, was claimed as not exigible to tax in the return of income filed by the assessee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The taxability of this 6.01 Crores was the issue before the Special Bench. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Special Bench held, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the surplus arising to the assessee from the transaction of contribution of land held by it to a firm as capital contribution shall be assessable to tax as profit or gains under the head “capital gain” under section 45 of the Income Tax Act, and for that purpose, the amount of 11.50 crore recorded in the books of accounts of the partnership firm as the value of the land shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land as so provided under sub-section (3) of the section 45 of the Act, effective from the A.Y. 1988-89. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
bring you this large judgement today – please see <strong>Breaking
News</strong>. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Coercive Collection of Customs Duty – Customs Commissioner hauled up for Contempt</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today's <strong>DDT </strong> is all about cases. We came across an important decision of the Bombay High Court delivered on 19.12.2009. Normally we would have carried this judgement after a month or so, but the issue being so important, we have to break it through the <strong>DDT </strong> route. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is all about overzealous Customs officers who coerce the assessees into paying duties and taxes which they are not required to pay. The efficiency of a preventive officer or an Audit Officer is judged based on his ‘spot collections' – how much he can extract from that harried assessee, by means fair or foul. The tragedy is the best of the assessees break down under pressure and hand over those cheques to these officers who behave like thugs and highway robbers to collect Revenue for the Nation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this particular case, the officers extracted a cheque for Rs. 2.85 Crores from the assessee, even though his appeal was pending before the CESTAT and his crime was that his applications were pending with the DGFT. For the delay on the part of one wing of the government, the officers wanted to punish the assessee. And they did!. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the matter was before the High Court, the Court gave time to the Revenue Counsel to seek instructions from the Commissioner, but the Commissioner stuck to his stand and the High Court ordered that the amount collected illegally by coercion should be returned with a 6% interest. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Commissioner has been issued a contempt notice! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Should officers go to such extremes to bring a bad name to the government? They should be projecting an image that government is all about protecting the interests of the citizens, but unfortunately we have a few officers who by their behaviour convey a feeling that government is all about harassment and unfair treatment! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <strong>Breaking News </strong> for this judgement also. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Filing of false Income tax returns – CBI files charge sheet in Satyam case </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBI filed a charge sheet yesterday before the ACMM Court (XIV), Nampally, Hyderabad against the then Chairman, the then Managing Director, the then C.F.O. and the then Vice President (Finance), all of M/s Satyam Computer Services Ltd. and the then two Auditors of a Bangalore based private company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This charge sheet, CBI has brought out evidence against the accused on the allegations of filing false Income Tax Returns with fraudulent & dishonest intentions of cheating the Shareholders and thereby causing wrongful loss to M/s Satyam Computer Services Ltd. (SCSL). The accused have inflated the revenue of the company by infusing false & fictitious sales invoices and shown the amount received & deposited as fixed deposits in various scheduled banks. Due to this inflated revenue and the inflated income in the form of interest on the non-existent fixed deposits, an additional tax liability to the tune of Rs. 526.37 Crore was created on the company. Then by taking recourse to the provisions of Section 90 and 91 of the Income Tax Act., the accused in furtherance of the conspiracy have shown higher tax remittances in Foreign Countries to get relief from the tax chargeable in India. Thus they achieved by showing Income on the non-existent revenue as part of the income of the overseas branches of M/s SCSL while filing Income Tax Returns in India. Correspondingly while filing the Income Tax Returns in foreign countries, the non-existent income towards interest on non-existent Fixed Deposits was not included in the income declared to the tax authorities in those countries and no additional tax was paid. In doing so the higher tax remittances to the tune of Rs. 329.58 crore were shown as if paid in overseas tax remittances while filing returns in India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Using this <em>modus operandi </em>, the accused persons could not completely setoff the additional tax liability created on the company and therefore, in furtherance of the conspiracy, the accused persons who were entrusted with the property of M/s SCSL have dishonestly made tax payments by way of self assessment tax and in some cases not making lawful claim for refund of TDS. The accused persons squandered the money in violation of the trust bestowed on them by the share holders of the company in order to conceal their fraudulent & dishonest deeds of inflating income on account of fictitious sales and interest on non-existent fixed deposits by violating the existing law & corporate ethics have made the company M/s SCSL to suffer an estimated loss of Rs. 126.57 crore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How is it that Satyam Ramalinga Raju is in jail for almost a year, while all other confirmed criminals are out and some of them in government? </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font></strong> <font color="#FF6633" size="5"><strong>tiol </strong></font></font><font color="#006600">– <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> Monday's cases </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"></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>ROM
application need not be disposed of within six months of the date of the
order passed by CESTAT u/s 35C(1) – only
requirement is it (ROM) is to be filed within six months: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue involved in the appeal is whether the refund claim in question is liable to be allowed without the bar of unjust enrichment and not whether the admissibility of any MODVAT credit. The final order was erroneously rendered on the latter issue which had already been settled by the Tribunal. In the circumstances, the final order has to be recalled and the appeal to be disposed of afresh. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Indo-USA
DTAA - non-resident broadcasters - Mutual Agreement Procedure - dispute
over tax on deemed profit from advertising and subscription - gross Vs
net revenue - First, order passed under MAP is an appealable order u/s
246A(1)(a) - second, if an order under MAP is passed, in case of doubts,
clarification should be sought from contracting state authority: ITAT</font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DISPUTES </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">under
taxation laws are common worldwide. And they are no less in number even under
DTAAs. But DTAAs also provide an exit route for avoiding normal judicial
route of dispute resolution, and it is globally known as Mutual Agreement
Procedure (MAP). Such procedure is notified as a part of one of the Articles
of the DTAA. Now the question in this case before the Tribunal is whether
an order passed by the AO under the MAP is appealable when the pre-conditions
for resorting to MAP are that all appeals pending should be withdrawn by
the assessees. And the Tribunal has held that even under MAP the order passed
by the AO is an order under Sec 143(3) of the I-T Act, and the same is very
much appealable.</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>Re-export
of containers - constrained to direct reasonable pre-deposit towards penalty
as Importer had acted with impunity regardless of the mandatory provisions
of the notification: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The maximum penalty imposable under section 117 of the Customs Act (one of the provisions invoked in the show cause notice) was Rs.1 lakh as on the date on which the impugned order was passed. The amount of penalty imposed on the appellant under section 112 of the Customs Act by the Commissioner is Rs. 5 lakhs. In the peculiar circumstances of this case, we direct the appellant to pre-deposit an amount of Rs. 1 lakh under section 129E of the Act, within a period of four weeks and report compliance. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more DDT </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend. </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>
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