TIOL-DDT 1303 · 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 1303</font><br>
19.02.2010<br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">SC
& HCs have not only power and jurisdiction but also an
obligation to protect fundamental rights - CBI probe ordered by
a HC without consent of State, valid in Law: SC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> the media had widely reported the Supreme Court decision delivered on 17.02.2010 held that CBI probe can be ordered without the State's consent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this landmark judgement delivered by a Constitution Bench headed by the Chief Justice, the bench while upholding the wide writ powers of the Supreme Court and High Courts advised caution. Some extracts from the Judgement: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) The fundamental rights, enshrined in Part III of the Constitution, are inherent and cannot be extinguished by any Constitutional or Statutory provision. Any law that abrogates or abridges such rights would be violative of the basic structure doctrine. The actual effect and impact of the law on the rights guaranteed under Part III has to be taken into account in determining whether or not it destroys the basic structure. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Article 21 of the Constitution in its broad perspective seeks to protect the persons of their lives and personal liberties except according to the procedure established by law. The said Article in its broad application not only takes within its fold enforcement of the rights of an accused but also the rights of the victim. The State has a duty to enforce the human rights of a citizen providing for fair and impartial investigation against any person accused of commission of a cognizable offence, which may include its own officers. In certain situations even a witness to the crime may seek for and shall be granted protection by the State. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) In view of the constitutional scheme and the jurisdiction conferred on this Court under Article 32 and on the High Courts under Article 226 of the Constitution the power of judicial review being an integral part of the basic structure of the Constitution, no Act of Parliament can exclude or curtail the powers of the Constitutional Courts with regard to the enforcement of fundamental rights. As a matter of fact, such a power is essential to give practicable content to the objectives of the Constitution embodied in Part III and other parts of the Constitution. Moreover, in a federal constitution, the distribution of legislative powers between the Parliament and the State Legislature involves limitation on legislative powers and, therefore, this requires an authority other than the Parliament to ascertain whether such limitations are transgressed. Judicial review acts as the final arbiter not only to give effect to the distribution of legislative powers between the Parliament and the State Legislatures, it is also necessary to show any transgression by each entity. Therefore, to borrow the words of Lord Steyn, judicial review is justified by combination of “the principles of separation of powers, rule of law, the principle of constitutionality and the reach of judicial review”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) If the federal structure is violated by any legislative action, the Constitution takes care to protect the federal structure by ensuring that Courts act as guardians and interpreters of the Constitution and provide remedy under Articles 32 and 226, whenever there is an attempted violation. In the circumstances, any direction by the Supreme Court or the High Court in exercise of power under Article 32 or 226 to uphold the Constitution and maintain the rule of law cannot be termed as violating the federal structure. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) Restriction on the Parliament by the Constitution and restriction on the Executive by the Parliament under an enactment, do not amount to restriction on the power of the Judiciary under Articles 32 and 226 of the Constitution. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) If in terms of Entry 2 of List II of The Seventh Schedule on the one hand and Entry 2A and Entry 80 of List I on the other, an investigation by another agency is permissible subject to grant of consent by the State concerned, there is no reason as to why, in an exceptional situation, court would be precluded from exercising the same power which the Union could exercise in terms of the provisions of the Statute. In our opinion, exercise of such power by the constitutional courts would not violate the doctrine of separation of powers. In fact, if in such a situation the court fails to grant relief, it would be failing in its constitutional duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) When the Special Police Act itself provides that subject to the consent by the State, the CBI can take up investigation in relation to the crime which was otherwise within the jurisdiction of the State Police, the court can also exercise its constitutional power of judicial review and direct the CBI to take up the investigation within the jurisdiction of the State. The power of the High Court under Article 226 of the Constitution cannot be taken away, curtailed or diluted by Section 6 of the Special Police Act. Irrespective of there being any statutory provision acting as a restriction on the powers of the Courts, the restriction imposed by Section 6 of the Special Police Act on the powers of the Union, cannot be read as restriction on the powers of the Constitutional Courts. Therefore, exercise of power of judicial review by the High Court, in our opinion, would not amount to infringement of either the doctrine of separation of power or the federal structure. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Decision:</strong> A direction by the High Court, in exercise of its jurisdiction under Article 226 of the Constitution, to the CBI to investigate a cognizable offence alleged to have been committed within the territory of a State without the consent of that State will neither impinge upon the federal structure of the Constitution nor violate the doctrine of separation of power and shall be valid in law. Being the protectors of civil liberties of the citizens, this Court and the High Courts have not only the power and jurisdiction but also an obligation to protect the fundamental rights, guaranteed by Part III in general and under Article 21 of the Constitution in particular, zealously and vigilantly. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A word of caution:</strong> Despite wide powers conferred by Articles 32 and 226 of the Constitution, while passing any order, the Courts must bear in mind certain self-imposed limitations on the exercise of these Constitutional powers. The very plenitude of the power under the said Articles requires great caution in its exercise. In so far as the question of issuing a direction to the CBI to conduct investigation in a case is concerned, although no inflexible guidelines can be laid down to decide whether or not such power should be exercised but time and again it has been reiterated that such an order is not to be passed as a matter of routine or merely because a party has levelled some allegations against the local police. This extra-ordinary power must be exercised sparingly, cautiously and in exceptional situations where it becomes necessary to provide credibility and instil confidence in investigations or where the incident may have national and international ramifications or where such an order may be necessary for doing complete justice and enforcing the fundamental rights. Otherwise the CBI would be flooded with a large number of cases and with limited resources, may find it difficult to properly investigate even serious cases and in the process lose its credibility and purpose with unsatisfactory investigations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(Also See - </strong></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2010/2010-TIOL-14-SC-MISC.htm">2010-TIOL-14-SC-MISC</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>) </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Joe
Stack ko Gussa kyon aaya</em> - If you are angry with Income Tax - just go to
nearest airbase, steal a plane and crash it into IRS Building </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is exactly what Joe Stack did yesterday. He burned his house, stole a plane and crashed it into the IRS building in Texas. The frustrated 53 year old software engineer was facing an income tax audit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems he posted his manifesto online before his death. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Excerpts. </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">If you're reading this, you're no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn't enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principles represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principle is promptly labelled a “crackpot”, traitor and worse. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">While very few working people would say they haven't had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it's time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">And justice? You've got to be kidding! </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">How can any rational individual explain that white elephant conundrum in the middle of our tax system and, indeed, our entire legal system? Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly <em>“holds accountable”</em> its victims, claiming that they're responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that's not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">How did I get here? </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">My introduction to the real American nightmare starts back in the early ‘80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code' readings and discussions. In particular, zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy. We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren't steeling from our congregation or lying to the government about our massive profits in the name of God). We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">That little lesson in patriotism cost me $40,000+, 10 years of my life, and set my retirement plans back to 0. It made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie. It also made me realize, not only how naive I had been, but also the incredible stupidity of the American public; that they buy, hook, line, and sinker, the crap about their “freedom”… and that they continue to do so with eyes closed in the face of overwhelming evidence and all that keeps happening in front of them. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Before even having to make a shaky recovery from the sting of the first lesson on what justice really means in this country (around 1984 after making my way through engineering school and still another five years of “paying my dues”), I felt I finally had to take a chance of launching my dream of becoming an independent engineer. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">During 1987, I spent close to $5000 of my ‘pocket change', and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”. Oh, and don't forget, for all of the time I was spending on this, I was losing income that I couldn't bill clients. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren't going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">I remember reading about the stock market crash before the <em>“great”</em> depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn't it ironic how far we've come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn't have any say in it, elections are a joke) to cover their asses and it's “business-as-usual”. Now when the wealthy f... up, the poor get to die for the mistakes… isn't that a clever, tidy solution. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">I know I'm hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn't limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at <em>“big brother”</em> while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won't continue; I have just had enough. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let's try something different; take my pound of flesh and sleep well. </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The communist creed: From each according to his ability, to each according to his need. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The capitalist creed: From each according to his gullibility, to each according to his greed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is strange that the taxmen could drive an engineer to burn his house, steal a plane and crash it into the tax office! But what is stranger is that a man could just walk into an airbase and steal a plane and crash it into the nearest IRS building. And what is the kind of security we are having if stealing a plane for crashing is all that simple. I really don't understand why the CISF officials check me with a metal detector at airports, when I am told that modern bombs are made of plastic. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">World Customs Chief concerned about security </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> that plane crashed into the IRS building in Texas, Kunio Mikuriya, WCO Secretary General was addressing the Seventh Worldwide Security Conference and he said,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nowadays, the WCO encourages Customs around the world to act as a global network to establish and maintain a secure supply chain based on a consistent risk-management approach. A recent survey we conducted shows that Customs administrations are making steady progress towards implementation of the WCO SAFE standards in order to secure and facilitate trade. Built on this international cooperation, the US Department of Homeland Security has raised its voice in support of the WCO risk-management-based approach, as opposed to 100% scanning of US-bound cargo mandated by the US Congress and scheduled for implementation in 2012.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In spite of these endeavours, however, the risk still persists, as evidenced by the recent failed bombing attempt by a transatlantic air passenger on Christmas Day. We need better coordination with other government agencies in sharing intelligence on the movement of people and goods in order to enhance border management. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, we also need to be prepared when unforeseen incidents occur. The WCO has developed guidance for trade recovery contingencies to address this risk, built on the APEC model. Another risk about which we are increasingly concerned is that of cyber-threats which could be exploited by criminal and terrorist organizations to undermine IT security in the supply chain. </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="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Monday's cases</font></strong></font></strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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 color="#663399">CESTAT </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal before CESTAT – Condonation of delay - technicalities shall not stand in way of a party getting the relief before appropriate forum. What is important is that substantial justice should be rendered - Delay condoned : High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is well settled principle of law that when the technicalities and substantial justice are pitted against each other and the Courts would always lean in favour of substantial justice rather than technicalities for non-suiting the petitioner on the ground that the appeal has not been filed within the time stipulated in spite of the fact that the authorities are conferred with the power to condone the delay. Likewise, the limitation prescribed is not for destruction of statutory right and is only to give finality without protracting the matter endlessly. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The set off of loss as mentioned in section 72 says that carry forward of loss is to be set off against profits and gains of any business or profession carried on by assessee and assessable for subsequent asst. year: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THUS</strong>, 90% of the deduction as computed u/s 10B is admissible as per second proviso for the asst. year 2003-04 and 10% of such deduction becomes assessable for the asst. year 2003-04. Once such income becomes assessable for the asst. year 2003-04, then loss of earlier year can be set off in view of section 72(1)(i). Hence, the loss of asst. year 2001-02 is required to be set off as claimed by the assessee. Thus, it is held that the CIT(A) was not justified in disallowing the carry forward loss of asst, year 2001-02. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Luxury Tax on Snuff challenged by assessee and deduction not claimed from Assessable value u/s 4 of CEA, 1944 - Once challenge failed and luxury tax was paid, same is entitled for deduction from AV - Refund of Central Excise duty proper : CESTAT </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> respondents are the manufacturer of <em>“Snuff”</em> falling under Ch. 24 of Central Excise Tariff Act, 1985. With effect from 01.05.2001, the Maharashtra Government imposed luxury tax @8% on snuff. The respondents contested the levy of luxury tax and did not collect the said tax and also did not pay the same to the State Government and they also did not claim any abatement on this count for arriving at the assessable value for payment of Central Excise duty. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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 align="justify"><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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