TIOL-DDT 731 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 731</font><br>
31.10.2007<br>
Wednesday</b> </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Bulls, Bears and Monkeys</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for Rs. 10/-. The villagers seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at Rs. 10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at Rs. 20/-. This renewed the efforts of the villagers and they started catching monkeys again. <br>
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to Rs. 25/- and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it! </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The man now announced that he would buy monkeys at Rs. 50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers. "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at Rs. 35 and when the man returns from the city, you can sell it to him for Rs. 50."</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The villagers squeezed up with all their savings and bought all the monkeys. <br>
Then they never saw the man nor his assistant, only monkeys everywhere!!! <br>
<br>
Welcome to the "Stock" Market!!!!!</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Trim cutting waste - Import Policy - amended by CBEC Circular?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Board has been receiving representations from the manufacturers of 'Chindi
rugs' who are mainly exporting such goods to other countries. These manufacturers
require trim cuttings waste or fabric waste of continuous length with a maximum
width of two Inches (<st1:metricconverter ProductID="2""
w:st="on">2") for manufacture of their final product. Such trim cutting waste
is classifiable under heading 6310 of the First Schedule to the Customs Tariff.
The manufacturer importers were facing problems with respect to the restriction
placed on import as per ITC (HS), wherein the goods falling under heading
6310 are 'restricted'. However, import of such goods is allowed without any
import licence subject to the condition that the goods are completely mutilated.
They had represented for relaxation of this requirement of mutilation for
such trim cutting waste. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Serious problem indeed and CBEC refers the matter to the DGFT. DGFT has informed the Board that there is no need to amend the ITC (HS) Code 6310. However, in case of import of trim cutting waste or fabric trims of continuous length with maximum width restriction of two inches for manufacture of chindi rugs, CBEC may issue instruction to the field formations for exemption from the requirement of licence for such goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Accordingly, Board informs that import of trim cutting waste or fabric trims of continuous length with maximum width restriction of two inches (<st1:metricconverter
ProductID="2"" w:st="on">2") falling under heading 6310, required for manufacture of chindi rugs shall not be subjected to restrictions imposed by the present policy of ITC (HS) Code 6310 and shall be cleared without an import licence.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the Board say that restrictions imposed by the Policy are not applicable in a particular case?</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=25&filename=notification/custom/2007/cuscir07_40.htm" target="_blank">CIRCULAR NO. 40/2007-Cus., Dated: <st1:date ls="trans" Month="10"
Day="29" Year="2007" w:st="on">October 29, 2007</a></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax Returns - last date extended in Bihar</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Board of Direct taxes had extended the last date of filing of income tax returns due by 31<sup>st</sup> October 2007 to 31<sup>st</sup> December <st1:metricconverter
ProductID="2007 in" w:st="on">2007 in the state of <st1:place
w:st="on">Bihar in view of the disruption caused by floods in the state. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The date for obtaining tax audit report under section 44AB of the Income Tax Act has also been extended to <st1:metricconverter ProductID="31 st" w:st="on">31st December <st1:metricconverter
ProductID="2007 in" w:st="on">2007 in the state of <st1:place
w:st="on">Bihar. </font></p>
<p align=center style='
text-align:center'><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Booking of Forward Contracts - RBI announces liberalisation </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With a view to provide greater flexibility to the Small and Medium Enterprises (SME) sector and resident individuals, it has been decided to further liberalise the scope and range of forward contracts to facilitate such entities to hedge their foreign currency exposures on a dynamic basis. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Small and Medium Enterprises (SMEs)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">it has been decided to allow AD Category - I banks to permit such entities to book / cancel / rebook / roll over forward contracts without production of underlying documents, subject to the following conditions: </font></p>
<div align="justify">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 1.Such contracts may be allowed to be booked after ensuring that the entity qualifies as SME as defined by the Rural Planning and Credit Department, Reserve Bank of <st1:country-region
w:st="on"><st1:place w:st="on">India </st1:country-region>vide circular RPCD.PLNS. BC.No.63/06.02.31/2006-07 dated <st1:date ls="trans"
Month="4" Day="4" Year="2007" w:st="on">April 4, 2007 . </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 2.Such contracts may be booked through AD Category - I banks with whom the SMEs have credit facilities and the total forward contracts booked should be in alignment with the credit facilities availed by them for their foreign exchange requirements or their working capital requirements or capital expenditure. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.AD Category - I bank should carry out due diligence regarding " user appropriateness " and "suitability " of the forward contracts to the SME customers as per <st1:place w:st="on">Para 8.3 of 'Comprehensive Guidelines on Derivatives' issued vide DBOD.No.BP.BC. 86/21.04.157/2006-07 dated <st1:date ls="trans" Month="4" Day="20" Year="2007"
w:st="on">April 20, 2007</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> 4.The SMEs availing this facility should furnish a declaration to the AD Category - I bank regarding the amounts of forward contracts already booked, if any, with other AD Category - I banks under this facility.</font></p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SMEs are also permitted to use foreign currency rupee options for hedging their exposures after production of underlying documents or under past performance route.
</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#663399">Resident Individuals</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to enable resident individuals to manage / hedge their foreign exchange exposures arising out of actual or anticipated remittances, both inward and outward, it has been decided to permit them to book forward contracts, without production of underlying documents, up to a limit of USD 100,000, based on self declaration. The contracts booked under this facility would normally be on a deliverable basis. However, in case of mismatches in cash flows or other exigencies, the contracts booked under this facility may be allowed to be cancelled and re-booked. The notional value of the outstanding contracts should not exceed USD 100,000 at any time. Further, the contracts may be permitted to be booked up to tenors of one year only.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Deduction under section 4 - duty paid and not payable as per tariff - Supreme Court clarifies</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:stockticker w:st="on">TOT was payable at 0.5% in certain areas and 2% in certain other areas. While computing the assessable value for Central Excise, the assessee deducted 2% from the price towards <st1:stockticker
w:st="on">TOT. The Supreme Court was not impressed with the assessee's arguments! And this could not wait till tomorrow. In tune with our policy to bring you the latest Supreme Court decisions with our incisive analyses, we couldn't wait till tomorrow to carry this. So you find it today!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A serving officer of the Department pointed out to us that a pink newspaper had already carried a story on the judgement. Sir, please understand that newspapers don't need a copy of the judgement to report a story and we do.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The Honest officer - our fiction</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today we are carrying a story, yes, a story - fiction. As in Sci-fi, may be this can be called tax-fic. A Customs story by <st1:PersonName w:st="on"><st2:GivenName w:st="on">Radha</st2:GivenName> <st2:Sn w:st="on">Arun</st2:Sn>. Should we add that all the characters and incidents are purely fictional and any resemblance to any person, living or dead or event is purely coincidental? A friend of mine who wrote a novel on police atrocities, wrote in his forward - "all the incidents in this story are true and none of them are imaginary or fiction - only names of persons and places have been changed" - to protect the guilty?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Radha asked me, "would you carry fiction in your site?" "What else am I doing every day?" I asked her.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our <u><strong>Special Column</strong></u> today for the story. It's rather long by our standards. You may download it and read it at leisure. </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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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></b></font></strong></font></b></font></strong></font></b></font></strong></font></b></font></strong></font></b></font></strong></font></b></font></strong></font></b></font></strong></font></b></font></strong></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> <br>
<font color="#FF0000">Income Tax </font></b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Rs two Crore cash seized from IAS officer - 25 Cr income tax demanded - money seized belongs to TN Basketball Assn - many of charges not proved : Madras HC</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is an officer of the Indian Administrative Service. At the time of search and seizure, he was the Chairman Cum Managing Director of Tamil Nadu Minerals Limited ("TAMIN"), a Tamil Nadu Government Undertaking, which is engaged in mining and export of granites. Earlier to his posting in TAMIN, he had been Additional Collector of Salem District, District Collector of Periyar District, Managing Director of SIPCOT and Additional Secretary to Government of Tamil Nadu. The assessee had been a basket-ball player of considerable repute and he represented the Indian Team. Also he is the Chief Patron Chairman of Tamil Nadu Basket Ball Association.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee's mother, late <ST2:PERSONNAME u1:st="on"><ST1:GIVENNAME u1:st="on"><st1:PersonName
w:st="on"><st2:GivenName w:st="on">Dr.Dharmambal</st2:GivenName> <ST1:SN u1:st="on"><st2:Sn w:st="on">Namasivayam</st2:Sn> was the first woman graduate in Medicine and Surgery in Trichy. She served in many capacities at various stations of Tamil Nadu and retired as a Civil Surgeon. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#663399">Assessee is into legal business - indulges in illegal activity - gold confiscated in search - Deduction not allowable on losses as illegal activity is not part of assessee's regular business : ITAT</font></font></strong></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">IT</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> may sound a little bizarre but there is a rationale and structured thinking behind it. A claim of loss suffered by way of penalty or confiscation of goods due to infraction of law is allowed to a person engaged in illegal business but not to a person who is engaged in lawful business. The basic logic underlying this is that a person who is engaged in illegal activity and suffers loss due to infraction of law will be allowed claim of loss because it is incidental to his illegal activity whereas a person engaged in legal activity suffering loss for infraction of law on account of some illegal activity cannot be allowed deduction on such loss as such illegal activity is not his regular and normal business. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>A tale of 'poor' investor, Income Tax and UTI - <st1:Street w:st="on"><st1:address
w:st="on">Apex Court orders UTI to compensate investor and also pay dividend</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS is a triangular dispute which involves the UTI, the investor and the Income Tax Department which has to recover tax arrears from the investor-assessee. Hopefully, this decision of the <st1:Street w:st="on"><st1:address w:st="on">Apex Court which has gone in favour of the assessee would also serve as a guideline for all those financial institutions who use market stratagems to attract the fund to their coffers and then treat the investors as sundry item in their decision-making.</font></p>
<p align=justify ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Since Service Tax on Scientific or Technical Consultancy services was levied only on <st1:date
ls="trans" Month="7" Day="16" Year="2001" w:st="on">July 16, 2001, no tax payable for earlier period under Consulting Engineer's Services : Tribunal</font></b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>IN</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> the present case, an Audit was conducted in August 2001 on the records of a 15 year-old bulk drug manufacturer who also had a research and development department recognized by the Department of Scientific & Industrial Research, Govt. of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Audit officers raised an objection that the company is required to pay Service tax on the Consultancy Services provided by them under the category - Consulting Engineer's Services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Succumbing to the pressure tactics adopted by the officers, the assessee paid Service Tax of Rs.72,784/-, but registered his protest. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns on 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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