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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1627</font><br>
10.06.2011<br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">I-T
- Interest up to Rs 3500 in Post Office Savings Exempted </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per sub-clause (i) of clause (15) of Section 10 of the Income Tax Act, income by way of interest (among certain other incomes) will not form part of taxable income, if notified by the Government and subject to conditions in the notification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government had notified vide number G.S.R. 607(E), dated the 9th June, 1989, certain securities, bonds etc, for this purpose. As per Sl. No. 9 of the table to this notification, interest from Post Office Savings Bank Account was not to be computed as income. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, this is amended to restrict the exemption to interest up to Rs. 3500/- for individual account and Rs. 7000 in the case of joint account. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2011/it11not032.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Notification No. 32/2011., Dated: June 03, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">I-T
- Exemption - Income from Funds for Employee Welfare - Annual Medical Check-up
Included</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 10(23AAA) of the Income-Tax Act, the income received by any person on behalf of a Fund established for the welfare of employees or their dependents, is exempted for the purposes notified by the Board. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT vide [S.O.672(E) (F. No. 142/16/95-TPL)], DATED 27-7-1995 had notified the following purposes. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(1) cash benefits to a member of the fund,-- </em></font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) on superannuation, or </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) in the event of his illness or illness of his spouse or dependent children, or </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) to meet the cost of education of his dependent children ; or </font></em></p>
</blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) cash benefits to the dependants of a member of the fund in the event of the death of such member. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, a new clause (d) is added to para 1 above to include, “ to meet the cost of annual medical tests or medical check-ups of the member, his spouse and dependent children ” </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2011/it11not033.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Notification No. 33/2011, Dated: June 3, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP - Quantity Restriction on Export of Cotton </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended the “Nature of Restriction” in para 2 of Notification No. 32(RE-2010)/2009-14 dated 14.03.2011 read with Notification No. 12(RE-2010)/2009-14 dated 16.12.2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cap on export of cotton during the current Cotton Season is increased to 65 lakh bales from 55 lakh bales as was notified earlier. Other conditions remain unchanged. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2010/dgft10not057.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 57 (RE-2010)/2009-14, Dated: June 9, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Search - Bihar HRC slams Department and proposes compensation to be recovered from salary of the officials </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a recent order, Justice SN Sinha, Chairperson of the Bihar Human Rights Commission, came down heavily against the Income Tax Department for human rights violations during a search operation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commission was of the view that the members of the raiding party may take their own time to conclude the search & seizure operations but such operations must be carried out keeping in view the basic human rights of the Individual. They have no right to cause physical and mental torture to him. If the officer-in-charge of the Interrogation/recording of statements wanted to continue with the process, he should have stopped the same at the proper time and resumed it next morning. But continuing the process without any break or interval at odd hours up to 3:30 AM, forcing the applicant and/ or his family members to remain awake when it is time to sleep was torturous act which and cannot be countenanced in a civilised society. It was violative of their rights relating to dignity of the individual and therefore violative of human rights. Even die-hard criminal offenders have certain human rights, which cannot be taken away. The applicant's position was not worse than that. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the opinion of the Commission, the Income Tax Department should ensure that the search & seizure operations at large in future are carried out without violating one's basic human rights. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commission was prima facie satisfied that there has been violation of the applicant's human rights by the <em><strong>concerned </strong></em>officials of the Income Tax Department while continuing the search and seizure operations for which he is entitled to be monetarily compensated. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Having held, thus, the Commission gave an opportunity to the Department to submit its response as to why monetary compensation be not awarded to the applicant - recoverable from the salary of the <em><strong>concerned</strong></em> officials in accordance with law. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Copy of the Order was sent to the Chief Commissioner and DG, Investigation for their response, if any within four weeks. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you remember, Justice Sinha was the President of CESTAT. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/Bihar_Humam_Rights_Commission_Case.htm">Click here</a> for the full text of the Order. </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">WCO Chief at IATA AGM </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WCO </strong>Secretary General, Kunio Mikuriya attended IATA's 67 th Annual General Meeting and World Air Transport Summit held in Singapore last week. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Secretary General participated in an executive panel session on "Aviation in a Dangerous World" together with three airline CEOs and the heads of INTERPOL and the US Transport Security Administration. He explained the work of the WCO on air cargo security and its partnership approach with relevant international organizations, in addition to stressing the importance of sharing timely and quality information, which will enable Customs authorities to analyze risk for security purposes. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transfer Pricing - Australian Full Federal Court Landmark Judgement</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a decision that can have global impact, the Full Bench of the Australian Federal Court recently held that that there is not simply one arm's length consideration and that goods will change hands at prices which are different from the market value for legitimate reasons, such as a need to secure long term or large volume arrangements or for example, with securities, to acquire control. In the present case, the taxpayer proved that the prices paid by it were less than the prices paid by independent comparable purchasers and as such those prices were at arm's length. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sales can be comparable despite not being identical. The CUP methodology can be applied to a broader range of transactions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court referred to the OECD Transfer Pricing Guidelines saying that to be comparable means that none of the differences between the situations being contemplated could materially affect the situation or that reasonably accurate adjustments could be made to eliminate such differences. The Court rejected the notion that an arm's length price required all factors other than ownership to be identical. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court recognized the fact that losses, including long-term losses, may be evidenced by commercial reasons and not purely as a result of inflated prices. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was a case taken to the Federal Court by the Commissioner against SNF (Australia) Pty Ltd. SNF carried on the business of manufacturing and selling industrial chemicals known as polyacrylamides, which are principally used in the cleansing of water in an industrial setting. As part of its business, SNF purchased chemicals from related foreign companies and sold these to third party customers. Notices of assessment were issued to the taxpayer, increasing the taxable income of the taxpayer on the basis that it had paid more than an arm's length price in respect of acquisitions of the products from non-resident related party suppliers. </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"><a></a><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">Service Tax</font></strong> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Repair of coffee vending machine is an input service: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> coffee machine has been maintained by the appellant for vending of coffee to its employees. It is the nature of a catering service provided to the employees, which is very essential, especially for the employees working round the clock as in the case of IT companies. Therefore, repair of the coffee vending machine is an input service in or in relation to the output service provided by the appellant and, therefore, they are rightly entitled to the service tax paid on the repair of the coffee vending machine as it is an eligible input service. </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">Whether Sec 94 is attracted and penalty is justified when assessee sets off loss on sale of mutual fund units against profit on short-term investments but does not claim loss as deduction - YES, rules ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Tribunal is - Whether section 94 is attracted and penalty is justified when assessee sets off the loss on sale of its mutual fund units against profit on short-term investments but does not claim the loss as a deduction. YES is the Tribunal's answer. </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">In case of provisional assessment no interest is payable on finalization of assessment if differential duty has been paid before finalization of assessment: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> decision in the appellants own case in earlier period, this Tribunal has held that in the case of provisional assessment, no interest is payable on finalization of the assessment if the differential duty has been paid before the finalization of assessment. Further, the same view has been confirmed by the High Court of Bombay in the case of Ispat Inds. Ltd. </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"><strong> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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