TIOL-DDT 1793 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1793 </font><br> 10.02.2012 <br> Friday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DEPB is 'cash assistance' receivable by a person against exports and is chargeable to income tax under head 'Profits and Gains of Business or Profession' - SC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a landmark judgement, disposing of nearly 200 appeals in one go, the Supreme Court set aside the judgement of the Bombay High Court in <em>Commissioner of the Income Tax vs. Kalpataru Colours and Chemicals </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2010/2010-TIOL-482-HC-MUM-IT.htm" target="_blank"><font size="1">2010-TIOL-482-HC-MUM-IT</font></a></strong>, which was on appeal from the judgement of the <em>ITAT Special Bench in Topman Exports v ITO -</em> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=39&filename=legal/itat/2009/2009-TIOL-531-ITAT-MUM-SB.htm" target="_blank"><font size="1">2009-TIOL-531-ITAT-MUM-SB</font></a></strong>. The High Court held that the Tribunal was not justified in holding that the entire amount received on the sale of the DEPB does not represent profits chargeable under Section 28(iiid) of the Act and the Tribunal was not correct in holding that the face value of the DEPB shall be deducted from the sale proceeds of the DEPB. The High Court did not agree with the Tribunal that the face value of DEPB is chargeable to tax as income of the assessee under Section 28(iiib) of the Act and instead held that the entirety of sale consideration for transfer of DEPB would fall within the purview of Section 28(iiid) of the Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court held: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter for DEPB. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ DEPB is "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under clause (iiib) of Section 28 and is chargeable to income tax under the head "Profits and Gains of Business or Profession" even before it is transferred by the assessee. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Under clause (iiid) of Section 28, any profit on transfer of DEPB is chargeable to income tax under the head "Profits and Gains of Business or Profession" as an item separate from cash assistance under clause (iiib). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The word "profit" means the gross proceeds of a business transaction less the costs of the transaction. 'Profits', therefore, imply a comparison of the value of an asset when the asset is acquired with the value of the asset when the asset is transferred and the difference between the two values is the amount of profit or gain made by a person. As DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ While the face value of the DEPB will fall under clause (iiib) of Section 28 of the Act, the difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 of the Act and the High Court was not right in taking the view in the impugned judgment that the entire sale proceeds of the DEPB realized on transfer of the DEPB and not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this judgement today. Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14256" target="_blank">Breaking News </a></strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on Coumarin </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROVISIONAL</strong> Anti Dumping Duty was imposed on Coumarin originating in, or exported from, People's Republic of China, vide Notification No. 38/2010 – Cus dated 23.03.2010. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Definitive anti dumping duty on the product was imposed by Notification No. 82/2010 – Cus dated 20.08.2010. Now, pursuant to an order of the CESTAT, the Designated Authority has again recommended imposition of the anti dumping duty on the product. The Government has now re-imposed the duty with effect from the date of provisional imposition that is 23.03.2010. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=337&filename=notification/custom/2012/ctariffadd12_012.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 12/2012-Cus (ADD), Dated: February 08, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import policy of arms and ammunition for Specified Sportspersons / Sport Bodies </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IMPORT</strong> Licensing Note (1) in Chapter 93 of ITC (HS) Classifications of Export and Import Items is amended by the DGFT. As per the latest amendment, the procedure for issue of import license/authorization for import of arms & ammunition by specified sports persons/sports bodies has been dispensed with. NRAI, SAI and SSCB can freely import arms and ammunition for their own use or their affiliates. Renowned Shooter can freely import arms and ammunition for their own use. Import Policy Regime for ‘Air Gun Pellets' continues to be ‘free'. This notification does not exempt the specified sports persons/sports bodies from the Arms Act, 1959 or Rules thereunder; but merely makes amendments in the Import Policy regime for the specified categories of importers.</font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2010/dgft10not095.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 95 (RE-2010)/2009-2014, Dated: February 09, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Fixation of a new SION (C–2048) and addition / deletion / amendment in SIONs of Engineering Product Group </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has made certain additions/deletions in the Standard Input output Norms as contained in the Handbook of Procedure V.2 (2009-14). </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ SION for a new export product ‘Ball Pen Tips of Nickel Silver Wire of 1.60mm diameter' is notified. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ SION C-864, C-1802, C-1888 and C-1937 are made harmonious by using uniform description of Tungsten Carbide Balls only and wastage is reduced from 2% to 1%. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Input item number 3 ‘Cutting Tools, Drill Oil & Chemical' is allowed in all these SIONs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ SION C-1768 is deleted. </font></p> </blockquote> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn097.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT PUBLIC NOTICE No. 97 (RE-2010)/2009-14, Dated: February 09, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Establishment of Project Offices in India by Foreign Entities </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000,<em> no person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, shall establish in India, a branch office or a liaison office or a project office or any other place of business by whatever name called, without the prior permission of the Reserve Bank.</em> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI clarifies that that the general permission accorded in terms of the Circular No. 37/2003 dated 15.11.2003 is subject to the regulation above. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2011/rbi11cir076.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A.P. (DIR Series) Circular No. 76, Dated: February 09, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refusal to follow order of the ITAT - Assessee is free to take proper steps for initiating contempt proceedings </font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">IN a recent case, the ITAT observed, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since the Income tax Appellate Tribunal is exercising judicial functions, it is now settled that it has all powers of Court, i.e. it can issue summons and exercise all the powers vested in the Income tax authorities under section 131 of the Income tax Act. Hence, any proceeding before the Income tax Appellate Tribunal shall be deemed to be judicial proceedings. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears to be the impression/misunderstanding of some of the tax officials that the orders of ITAT interpreting the law cannot be binding as it is a fact-finding authority. However, one can understand that that the decision of the higher authority in the judicial hierarchy is binding on all the lower authorities below the line. Hence, the learned CIT(A) and the assessing officer would be bound by the decision rendered by the jurisdictional Income tax Appellate Tribunal. <strong>Refusal to follow the order of the ITAT would render that authority guilty of committing contempt of Tribunal for which the concerned authority is liable to be proceeded against. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whenever a decision of the Income tax Appellate Tribunal is found to be unacceptable to the authorities below, the right course to follow is to carry the matter in appeal to the High Court and in case of urgent necessity, to seek suspension of the operation of the order of the Tribunal appealed against. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, it is possible that the law of judicial discipline may be lost sight of by some tax officials. Hence, it would be beneficial to all if the same were brought to the notice of all tax officials in periodic intervals so that this kind of unpleasant happenings can be avoided. Accordingly, we direct the learned CIT (Departmental Representative) to bring this order to the notice of the Chief Commissioner and Central Board of Direct Taxes so that they, being the authorities having superintendence over the tax authorities, may take appropriate steps to enlighten all the officials in order to ensure enforcement of judicial discipline in them, which would avoid considerable harassment, if any, to the assessee public. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is free to take proper steps for initiating contempt proceeding against the concerned Learned CIT(A). </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=39&filename=legal/itat/2011/2011-TIOL-821-ITAT-VIZAG.htm" target="_blank">Click Here</a> for the Order. </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">BUDGET 2012 - Your suggestions, Please </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FINANCE</strong> Minister Pranab Mukherji is likely to present the 2012 BUDGET on 16 March 2012. We will start our “BUDGET RUN UP” soon – Please send in your suggestions to <a href="mailto:editor@taxindiaonline.com"><strong>editor@taxindiaonline.com</strong></a>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will tell the FM what you want in <strong>his </strong>budget.</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><strong><font color="#663399" 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">Central Excise</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Rule 7 of Valuation Rules, value of goods under assessment shall be transaction value of goods sold from depot at time nearest to time of removal: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant is engaged in the manufacture of pesticides. They filed a price list in respect of transfer of the pesticides 'D-ALLETHRIN' to their depot situated at Himachal Pradesh for sale and declared the assessable value of Rs.4,000/- per kg. On going through the invoices issued by the assessee from their depot at Parwanoo , H.P, it was observed that all the sales of such goods from the Parwanoo depot were made at the transaction value of Rs.5,500/- per kg. during the impugned period irrespective of the quantity of the goods sold to a buyer at a time. </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 while arriving at profit of business, ninety per cent of gross interest and gross rent are to be excluded before allowing deduction u/s 80HHC - NO, it should be net interest and net rent: SC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> the assessment year 2003-04, the assessee filed a return of income claiming a deduction of Rs.34,44,24,827/- under Section 80HHC of the Act. The Assessing Officer passed the assessment order deducting ninety per cent of the gross interest and gross rent received from the profits of business while computing the deduction under Section 80HHC and accordingly restricted the deduction under Section 80HHC to Rs.2,36,25,053/-. The Commissioner of Income-Tax (Appeals), confirmed the order of the Assessing Officer excluding ninety per cent of the gross interest and gross rent received by the assessee while computing the profits of the business for the purposes of Section 80HHC. The Tribunal held, that netting of the interest could be allowed if the assessee is able to prove the nexus between the interest expenditure and interest income and remanded the matter to the file of the Assessing Officer. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Arranging of celebrities for promotion and publicity is not an advertisement agency service prior to 01.07.2003 - Pre-deposit waived:CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DURING</strong> the period April, 2002 to June 2003, the applicant was engaged in the activity of arranging celebrities namely Sourav Ganguly, Virendra Sehwag, Yuvraj Singh, Harbhajan Singh and Mohd. Zaheer Khan for promotion and publicity of the two-wheelers manufactured by Hero Honda Ltd. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department was of the view that this activity is covered under advertisement agency service. </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><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend. </font></p> <font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to <a href="mailto:vijaywrite@taxindiaonline.com"><strong></strong></a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font> </body> </html>