From our Legal Corner - tomorrow's cases

By Vijay Kumar

CESTAT

Adverse remarks against CESTAT Member - They proceeded to hang him by the closest lamp post simply for the reason that his neck nicely fitted the noose - remarks expunged : CAT

THERE is delay in passing an order by CESTAT which was commented by a High Court. The delay was mostly because of one member, but the President of the CESTAT made an adverse remark in the 'annual confidential report' of the other member. The Secretary to the government sitting in appellate authority over the President of the CESTAT, a retired High Court Chief justice, refuses to expunge the remarks. The aggrieved Member of the Tribunal is before another Tribunal, the Central Administrative Tribunal. But hasn't the Madras High Court held that the President of the CESTAT is not competent to write the ACR of the Member?

Income Tax

Tax evasion is not necessary pre-condition for AO to refer the case to Transfer Pricing Officer : ITAT Special Bench

WITH the Indian economy finding itself at the centre of rapid integration of virtually all sectors with the globalisation process, the participation of MNEs has logically grown manifolds. So has the importance of transfer pricing in Income Tax Act. Though the developed countries are well versed with the phrase but India is still struggling to effectively deal with the issue. Transfer pricing, to put simply, is a mechanism to make adjustments in controlled price of international transaction in the light of Arms length price (ALP). Controlled price is the price charged or paid by associate enterprises for goods and services in international transactions between them whereas ALP is the price of comparable uncontrolled transaction i.e. international transaction between unrelated enterprises. The issue is sensitive because of the capability of MNCs to manipulate the transactions between their subsidiaries in order to reduce or avoid tax. They have the ability to divert tax by manipulating prices thus burning a hole in the national exchequer. It is here the concept of Transfer Pricing (TP) assumes importance in order to come to the right price in international transactions of asociated enterprises to ensure that income taxable in India is not diverted. The intricacies of TP mechanism was discussed threadbare by a Special Bench of Tribunal constituted to look into the matter in the case of M/s Aztec Software & Technology Services Ltd. v. ACIT.

Customs

CBEC cannot interfere with adjudication - used rails - CBEC Circular No 8/2006-Cus quashed : Madras HC

THE CBEC had issued a Circular No. 1 of 2005-Customs dated 11.01.2005 clarifying that used steel rails for re-rolling were classifiable under heading 72.04 and these were freely importable.

The Board issued another Circular No. 8 of 2006-Customs dated 17.1.2006 clarifying that the appropriate classification of "used steel rails" shall be under CTH 7302, and not under CTH 72.04 as ferrous waste and scrap.

It is this second circular which is under challenge before the High Court.

See our columns Tomorrow for the judgements