TIOL-DDT 637 · the untouched capture
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<p align="justify"><font color="#663399" size="2"><b><font size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 637</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b></b></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
18.06.2007<br>
Monday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DRI
case -Reliance pays up about Rs 20 Cr</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sources in DRI have confirmed that Reliance, <st1:place w:st="on"><st1:City w:st="on">Jamnagar</st1:City></st1:place>, had paid up nearly Rs. 20 Crores in connection with the recent DRI investigations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ahmedabad DRI is still working on the case and it is likely to take a few months before DRI sleuths browse through the voluminous records and produce a show cause notice.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DRI sources say that Reliance is cooperating and has agreed to pay whatever amount payable. We are told that there is absolutely no interference or influence from DRI and Revenue Bosses from <st1:place
w:st="on"><st1:City w:st="on">New Delhi</st1:City></st1:place>. No special treatment for Reliance; it is just another case!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But a DRI boss appeared unhappy that the payment made by Reliance was only a “deposit” and not a confessional payment of duty due!</font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Tsunami Exemption - Extended</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 32/2005-Central Excise, dated the 17<sup>th</sup> August 2005, Cement and steel used for construction of houses in the Tsunami effected districted of Tamil Nadu, Andhra Pradesh, Kerala, <st1:City w:st="on">Pondicherry</st1:City> and Andaman and <st1:place w:st="on">Nicobar Islands</st1:place> are exempted from excise duty if the houses are constructed between 1<sup>st</sup> April 2005 and 31<sup>st</sup> July 2007. Now the houses can be constructed till 31<sup>st</sup> March, 2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2007/etariff07_27.htm" target="_blank">Notification No. 27/2007-C.E., Dated June 14, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tariff Value of Brass Scarp – Increased</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has increased the Tariff Value of imported Brass Scrap from Rs. 4524 to 4538. There is no change in the Tariff Value of other products.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_062.htm" target="_blank">Notification Nos.<u>62/2007-CUS. (N.T.) , Dated June 15, 2007</u></a></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CAG raps customs for bad monitoring – Officers prone to postponing adjudication</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAG in his report no. 7 of 2007 to the Parliament has noticed that officers are not exactly eager to pass adjudication orders. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Inadequate internal control mechanism</i></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board through their instructions issued on 23 April 2003 stressed the need for close monitoring of appeal cases and judicial pronouncements of the Supreme Court/High Court/CEGAT daily on internet and desired that Chief Commissioners should examine the cases critically and develop adequate mechanism to implement the directions of the Court. <font color="#663399">(<b>This is the circular in which the Board had asked the field to get information from</b></font><b> <a href="http://www.taxindiaonline.com/">www.taxindiaonline.com</a> ) </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In two cases of M/s. HPCL {(CC (I), NCH Mumbai)} on appeal of the importer, orders in original were set aside by CC (Appeal) in September 2002 and March 2003. It was observed that though substantial revenue of Rs.14.36 crore was involved, yet both the orders were submitted (June 2005) for acceptance after a delay of 27/33 months.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Review of register maintained in legal/review cell of Chennai (Air) and Mumbai commissionerates revealed that the nature of order whether adverse or in favour of department, money value, details of stay, interim stay, vacation of stay were not recorded, in many cases.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit scrutiny revealed that eight cases in Chennai (Air) and CC (Import) JNCH, Mumbai involving revenue of Rs.18.75 crore were shown as closed but these cases have not reached finality. Five cases in CC (I) JNCH, Mumbai were shown as closed due to non availability of files and these cases were not reflected in MTR as pending adjudication till December 2005.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In MTR of CC (ICD), New Delhi for June 2005, two cases involving revenue of Rs.11 lakh were shown as pending in High Court whereas in annexure of same MTR, cases where stay had been granted by High Court were shown as nine involving revenue of Rs.4.06 crore. As such, correct position of pendency was not clear.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In three other cases of Chennai (Sea) and (Air) though these cases involving revenue of Rs.3.84 crore are pending in High Court, they were neither shown pending in call book nor in MTR as arrears of adjudication and another 21 call book cases in Chennai (Sea) and Trichy commissionerates involving revenue of Rs.29.42 crore were not shown pending in MTR.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is indicative of inadequate monitoring and non identification of cases for priority action.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Conclusion – Audit’s review revealed</b></font></p>
<ol start=1 type=1>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">non adjudication of cases even up to 46 years, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">abnormal delay in adjudication including denovo adjudication, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">issue of corrigendum to orders in original in violation of Board’s instructions, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">avoidable litigation, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">pendency of cases in call book, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">non/delayed filing of appeal leading to dismissal, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">non vacation of stay orders, </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">non monitoring of court cases effectively and consequent risk to revenue realisation. </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjudication officers were prone to postponing finalisation of adjudication by taking recourse to ‘where it is possible to do so’ proviso. </font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Various measures initiated by the Government to speed up finalisation of adjudication and appeal cases did not meet the objectives largely due to lack of consistent monitoring and inadequate internal controls.</font></li>
</ol>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Shares – Capital asset or Trading asset? CBDT clarifies</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When you buy and sell shares, is it at investment or are you in the business of buying and selling shares? This has been the bone of contention in several cases. The Authority for Advance Rulings, referring to the Supreme Court decisions had propounded the following principles:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)Where a company purchases and sells shares, it must be shown that they were held as stock-in-trade and that existence of the power to purchase and sell shares in the memorandum of association is not decisive of the nature of transaction;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)the substantial nature of transactions, the manner of maintaining books of accounts, the magnitude of purchases and sales and the ratio between purchases and sales and the holding would furnish a good guide to determine the nature of transactions;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii)ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade/ adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend etc. then the profits accruing by change in such investment (by sale of shares) will yield capital gain and not revenue receipt.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now CBDT emphasizes that it is possible for a tax payer to have two portfolios </font></p>
<ol start=1 type=1>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An investment portfolio of securities to be treated as capital assets, and</font></li>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The trading portfolio of stock in trade securities to be treated as trading assets.</font></li>
</ol>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT asserts that when an assessee has two portfolios he may have income under both the heads “capital gains” and “business income”. CBDT advises the assessing officers that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.The above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (capital gains) or as stock in trade (business profit).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.No single principle would be decisive and the total effect of all the principles should be considered to determine whether in a given case the shares are held as investment or stock in trade.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Clear?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also see our breaking news story <b><u><font color="#663399">Distinction between share held as stock-in-trade and investment</font></u></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2007/it07cir04.htm" target="_blank">Income Tax Circular No. 4/2007, Dated June 15, 2007</a></u><u></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Custom House Agent’s license – Application form to be modified – Draft Circular – but what’s the change?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC proposes to modify the Application From for Custom House Agent’s licence, apparently based on the recommendations of a parliamentary committee, and wants views, comments and suggestions on the proposed changes. But pray, what are the changes? The revised form does not seek any additional information or delete any information sought in the earlier form. Instead of eleven fields in the existing form there are ten fields in the proposed form. This is because item numbers (1) & (2) have been merged into item number (1). Why these changes at all? Waste paper and time?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But what did the Parliamentary Committee suggest?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here are the excerpts from the <font color="#663399">COMMITTEE ON SUBORDINATE LEGISLATION - HUNDRED AND SIXTY-SEVENTH REPORT</font></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Point referred</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Regulation 5 deals with the application for licences, the format of which has been appended to the regulations as form ‘A’.Further, regulation 5 lays down certain information, which is required to be furnished by the applicant.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>What is the justification for prescribing the information desired in the main regulations when a format of application has been appended to the regulations; It is seen that the conditions mentioned in regulation 5 have been briefly summarized in the form of the application also and to this extent, there is duplication.Whether Government have any objection in putting these conditions in the form itself so as to (a) avoid duplication and (b) facilitate the applicant in finding the conditions at one place which will also reduce the chances of anybody missing to take note of them?Lastly the application form appended to the regulation as form ‘A’ is not in the format of an application form.It only lists desired information.It is not possible to put it in the format of an application?</i></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Ministry's reply</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The application contains a number of columns whereas Regulation 5 merely indicates the names of persons, which should appear in the application form. If the Committee recommends the format of Form-A could be amended to make it in a letter form.However, the practice is that form-A is forwarded with a covering letter from the applicant.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Committee's Observations (25/10/2004)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Committee noted with satisfaction that the representatives were agreeable to revise the format of form ‘A’ into a letter form in order to avoid duplication.The Committee hoped that this would not only avoid duplication but also facilitate applicants in laying their hand at all the conditions at one place.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Committee's Observations (9/11/2005)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b></b>The Committee noted that Regulation 5 has been amended based upon its suggestion but it felt that FORM A was still not in the appropriate form.The Committee desired the Ministry to look into this aspect</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Ministry looked into this and merged Item 1 and 2 in the form and the Parliamentary Committee will be informed that their suggestion has been implemented. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now you know where the taxes you pay go to?</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>Send in your suggestions before 30<sup>th</sup> June.</u></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/draft_circha.htm">Draft Circular F.No.512/9/2004-Cus-VI</a></u></b></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Enforcement Directorate – Reinforcement urgently required </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The very word <b>ED</b> once spelt terror – it’s an agency of repute like CBI and DRI, but unfortunately ED is now at the receiving end – an end which the agency is not really used to.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Chetan Gupta, an alleged hawala operator, has charged that in two high profile scams, he and his associates, including former chief minister Amarinder Singh's son, bribed a top official of the ED of the rank of special director.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his confessions, Gupat said, ''I used to get 30/40 paise per dollar in this hawala and when the Enforcement Directorate initiated an enquiry into the same, then Tikku paid an amount of Rs 50 lakh through RS Gill, advocate, to special director and got the matter settled.''</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Gupta
further claimed, ''the enquiry into the Volcker fraud had been conducted
by ED against Natwar Singh and his son Jagat Singh. At that time, my Mercedes
car which was with Jagat Singh had been impounded by ED. 'I had also taken
$20,000 from the said fraud from Jagat Singh and therefore my name had also
cropped up and I paid an amount of Rs 1.5 crore as illegal gratification
to the same high official of ED and escaped from the said incident.''<br>
<br>
<b>ED</b> of course dismissed the claim as false entirely. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is of course not very uncommon for investigating agencies to be accused of corruption, illegal actions and third degree torture. But this seems to be the first time that a premier investigating agency is accused of such high value corruption.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner – tomorrow’s cases</b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Commission paid to wife and brother-in-law - If such commission can be paid to outsiders, no adverse inference can be drawn merely because the same is paid to close relatives - Deduction allowed : ITAT</font></b><font color="#663399"></font></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Diesel smuggling case - COFEPOSA detention quashed - grounds of detention given in English to illiterate detenu - Advisory Board did not follow principles of natural justice : Delhi High Court</b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>A body corporate and a proprietary concern cannot be treated as related : CESTAT</b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns tomorrow for the judgements</u></b></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more DDT</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</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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