TIOL-DDT 1294 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1294 </font><br>
08.02.2010 <br>
Monday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sugar - SMP – SAP - Income Tax - Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SUGAR</strong> is not all that sweet now a days – poor Mr. Pawar is facing a lot of problems. While Sugar prices had hit the roof recently, government's promise of bringing down the price still seems to be a distant dream. India being the largest consumer of sugar, any attempt to import sugar will spiral the global price of sugar to unheard of levels. Last month the New York Sugar price is reported to have touched a 29 year high. Where does all this money go? Certainly not to the farmers who have cultivated sugarcane. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unfortunately the production of sugar is linked to availability of sugar cane and that depends on farmers willing to grow sugar cane and they for some foolish reason are willing to do it only if they get a reasonable price for the cane. And as is the case with all agricultural produce, there is governmental interference and unlike in the case of rice and wheat, the interference does not cost the government anything. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a Statutory Minimum Price (SMP) fixed by the Central Government and there is a State Advised Price (SAP). The SAP is usually higher than the SMP and in between these two prices, there is a price decided by the millers – the farmer producer has no choice or voice. And if there is any profit in the scheme that goes to the millers who are powerful politicians. The farmer does not get any share in the huge price rise. What share in profits, they don't even get their agreed dues from the millers - sometimes even for two to three years. Their plight starts with getting a cutting order from the Sugar factory and extends over a couple of years till they get their dues settled. Now with all this confusion the price promise to sugar cane growers would be quite high this year and next and you can safely bet, we are going to be flooded with Sugar in 2013 and then the cycle will start again. One of our commentators had suggested taxing agriculturists – you can start with these poor farmers, who don't get their dues from the powerful sugar kings! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now there is an income tax angle to the story. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that the State Advised Price [S.A.P.] is determined on the basis of the price recommended by the Sugar factories after the finalisation of their annual accounts. Obviously they would recommend a higher price only if they had made good profits. The cane growers are paid the difference between the SMP and the SAP. Now the question for the Income Tax is whether such differential payment made after the closure of year/balance sheet date is an expenditure or simple distribution of profits? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter reached the Supreme Court recently through several Departmental appeals. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court noted that to decide the issue the Assessing Officer has to consider </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. the manner in which the business works </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. resolutions of the State Government </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. the modalities and the manner in which S.A.P. and S.M.P. are decided </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. the timing difference which will arise on account of the difference in the accounting years, etc </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. the question as to whether the obligation is attached to income or to its source. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Supreme Court remanded the cases to the Commissioner (Appeals). Incidentally these issues pertain to the Assessment Year 1992-93. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>{Please see </strong></font><font size="2"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2010/2010-TIOL-09-SC-IT.htm"><font size="1">2010-TIOL-09-SC-IT</font></a> }</font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Partnership In Customs Academic Research and Development - PICARD </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> WCO PICARD programme was launched in 2006 to provide a framework for cooperation between Customs and the academic world. Through PICARD, academic institutions have created the International Network of Customs Universities (INCU) and a rich vein of research in the field of Customs, generated through its flagship publication - the World Customs Journal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Working together, the WCO and INCU have undertaken a range of initiatives in the areas of educational programmes, strategic management development, professional standards, and academic research and development. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In relation to standards, the WCO in partnership with the INCU has developed a set of Professional Standards necessary for operational and strategic Customs managers to meet the requirements of the new strategic environment. In addition, the WCO has established a process of assessing university curricula against the Standards. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 2010 PICARD Conference in Abu Dhabi, UAE from 28 through 30 September 2010 will focus on the following specific issues: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ <strong><font color="#663399">Customs Business partnerships</font> </strong> – examining the objectives and expectations of such partnerships, and ways to improve public and private sector performance through partnerships </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ <strong><font color="#663399">Performance measurement</font> </strong> – with a view to identifying appropriate methods to measure and benchmark Customs performance; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ <strong><font color="#663399">Customs and Revenue Collection</font> </strong>derived from Customs Duties, VAT, and other taxes on traded goods– with a focus on ways of mitigating revenue risks caused by misclassification and misdescription , under-valuation, over-valuation, origin fraud, informal trade, and corruption; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ <strong><font color="#663399">The Impact of Climate Change on International Trade and Customs Management in the post-Copenhagen Era</font> </strong> – the consequences of climate change policies on trade facilitation, revenue collection, and supply chain security with a focus on issues such as Border tax adjustments (BTAs), carbon leakage, VAT fraud on carbon credits, trade barriers to Clean Development Mechanisms (especially clean technologies). </font></p>
</blockquote>
<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="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Tuesday's cases</font></strong></font></strong></font></p>
<p><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"><font color="#663399">Central Excise </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Iron Ore Fines and Coke Breeze obtained on screening of Iron Ore and Coke whether result of manufacturing activity – rule 6(3)(b) of CCR , 2004 whether applicable – Matter remanded for final decision on merits – CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR </strong> the purpose of manufacturing of Pig Iron, the appellants purchase Iron Ore and Metallurgical Coke. Before using these as basic inputs the appellants are screening the raw materials and during the process of screening, iron ore fines and coke breeze are generated. Both these products are cleared without payment of duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is the stand of the Department that the aforesaid activity is ‘manufacture' and since Iron Ore Fines/Coke breeze are exempted goods, rule 6(3)(b) of the CCR , 2004 comes into operation and since no separate accounts were maintained by the appellant they are required to pay an amount of 10% of the value of the ‘exempted products'. </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>Transfer Pricing - assessee is subsidiary of tax resident of USA - royalty payment - TPO reduces quantum of royalty paid on even deals going bad and being written off - TPO cannot go beyond limitation prescribed in terms of methods to be followed for determining ALP u/s 92C : ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DETERMINING</strong> Arm's Length Price (ALP) is the essence of Transfer Pricing regulations. And it is too tricky a business for both the Revenue as well as the assessee. Can the Transfer Pricing Officer ( TPO ) adopt any method other than the ones enumerated in the Act to determine the ALP for an international transaction between two related parties? And its answer is NO. The TPO is bound to follow only the methods prescribed in Sec 92C as provided in Rule 10B of the IT Rules. The TPO cannot go beyond the four walls erected by the Act, says the latest decision of the Tribunal. </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>Vehicles having special cavities for concealing smuggled goods can be confiscated if they are found in Customs area – when no owners are forthcoming for said vehicles, the Revenue could have confiscated and disposed same – it is not Tribunal's concern to advise department – CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“<strong>FROM</strong> the submissions made in the appeal by the department itself, the conclusion that emerges is that there is no owner for this seized vehicle. Therefore, the department could have taken steps to issue notices to the owners and if there was no response, the vehicles could have been disposed of. Any way, it is not our concern to advise the department. We do not find any justification to set aside the Commissioner order as regards the confiscation of vehicles. In the result, we find that the stay applications were to be rejected. In fact, we do not find any reason to keep the appeals pending, in view of the observations made by us. Accordingly, we reject the appeals also.“ </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="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend. </font></p>
<p><font color="#FF6666" 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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