TIOL-DDT 735 · 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"><b><font color="#663399">TIOL-DDT 735</font><br> 06.11.2007<br> Tuesday</b> </font></p> <p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:place w:st="on"><st1:country-region w:st="on"><b><font color="#006600">India</font></b></st1:country-region><font color="#006600"><b>'s senior most taxpayer - Roses in December</b></font></font></p> <p align="justify" > <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/fdeng.jpg" alt="Legal Corner Icon" width="107" height="116" hspace="5" border="0" align="left"></b></b></b></font></b></font></strong></font></b></font></strong> Yesterday we had carried a report on Mr. F. D. Engineer, aged about 100 years, resident of Secunderabad, Andhra Pradesh who filed his Income-tax return on 31<sup>st</sup> July 2007 and paid due taxes. However much we tried, we could not get his picture yesterday. Here it is. We wish him many more tax paying but less taxing years ahead. Maybe the government can consider exempting people above 90 from Income Tax. Let these people live in peace in the December of their lives when they should enjoy the fragrance of roses, not bear the brunt of taxation.</font></p> <p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Refunds - Pre-audit vs review - CBEC calls a halt?</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC had issued a circular No. 809/6/2005-CX dated 01.03.2005, wherein the procedure relating to sanction and pre-audit of refund/rebate claims has been prescribed.</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While reporting the Circular, <b><font color="#FF9966">DDT</font></b> had mentioned,</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board's clarifications are bound to bring in some uniformity in procedures all over the country. But this whole concept of pre- audit seems to be against the principles of adjudication. When an Assistant Commissioner passes an order, how can it be previewed by the Commissioner and if the Commissioner raises any objection, is the Assistant Commissioner bound by it?(<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=1288" target="_blank">TIOL-DDT 68 <st1:date ls="trans" Month="4" Day="3" Year="2005" w:st="on">4 3 2005</a>)</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4679" target="_blank"> TIOL-DDT 512 14.12.2006</a><b>, </b>Suresh Kumar Nair wrote,</font></p> <p align=center ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pre - audit blues? </strong></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Most of us would agree that the procedure of pre-audit enables the Department to doubly assure itself that the refund /rebate documents go through further scrutiny thus increasing the chances of detection of any fraud. However Hon'ble Bombay High Court in Bombay Chemicals Ltd vs Union of India has <i>inter alia </i>observed that pre-audit before finalization is an interference by audit cell in the quasi-judicial proceedings and held that this was illegal and unauthorized especially as Audit Cell did not give any hearing to affected parties before finalization of its order thereby depriving them from their rights under the refund order. </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The procedure of pre-audit continues in many Commissionerates blissfully oblivious of the above High Court directive. One Commissionerate falling within the jurisdiction of Bombay High Court has promptly brought the above development to the notice of the Board. Hopefully, we will have some decision on the same before contempt proceedings are launched by some aggrieved party for continuing with the prevalent practice of Pre-audit in terms of Boards Circular No 809/6/2005- CX dated 01.03.2005. There should however be no laxity in reducing the level of scrutiny on the refund / rebate documents and suitable methods should be undertaken to handle the situation without hurting the interest of Revenue. </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has now realised this, and has now given instructions that the pre-audit will be done by the Assistant Commissioner in the Commissionerate and not the Commissioner himself. Accordingly, the present system of pre-audit of claims by Commissioner would henceforth be dispensed with. </font></p> <p ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It took the Board nearly two years to clarify the position. </font></p> <p ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/excircular857.htm" target="_blank">CBEC CIRCULAR NO. 857/15/2007/CX., Dated: <st1:date ls="trans" Month="11" Day="2" Year="2007" w:st="on">November 2, 2007</a></font></p> <p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax -Omission of second proviso to Sec 43B, not Curative and amendment cannot be treated as retrospective</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pardon me for a little self patting. The other day, I met an Income Tax practitioner, who told me, "I don't know about indirect taxes, but as far as Income Tax is concerned, your site is very good" I was rather flattered and embarrassed. </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the CBEC is slow to react to Court orders, here is a <st1:stockticker w:st="on">CIT who immediately took note of a case we reported and circulated the printed copies of the order.</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On October 15<sup>th</sup>, we carried a High Court judgement on the subject of Section 43B and commented,</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">THE</font> </b>general perception is that our Income Tax Act is highly litigation-prone. If one talks of Sec 43B, it is widely regarded as more dispute-prone than the Act itself. Vide Finance Act 1983, it was inserted to curb the mischief of deliberate delays in payment of statutory liabilities. Then came two provisos which were added to the section by Finance Act 1987. The second proviso was quickly substituted by Finance Act, 1989. And, finally, vide Finance Act 2003, the second proviso was deleted. And this is the subject matter of dispute in this case in which the Bombay HC has held that <b><font color="#FF9966">the omission of the second proviso was not curative, and it cannot be said that the amendment is retrospective</font>.</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 16<sup>th</sup> October, the <st1:stockticker w:st="on">CIT(J) of Mumbai circulated the judgement with the observation that, As this decision of Bombay High Court has far reaching ramifications and has been reported in <b>taxindiaonline.com</b> only yesterday, a copy of the printout taken from the aforesaid website, is being circulated to you for necessary action in relevant cases at your end.</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2007/2007-TIOL-580-HC-MUM-IT.htm"><font size="1">2007-TIOL-580-HC-MUM-IT</font></a> and Commissioner's letter <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cbdt_judl.htm" target="_blank">No.<st1:stockticker w:st="on">CIT(J)/High Court Orders/2007-08 Dated : <st1:date ls="trans" Month="10" Day="16" Year="2007" w:st="on">October 16, 2007</a></font></p> <p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The rice notification - DGFT again amends</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see TIOL-DDT 733 02.11.2007 for a chronological tour of the rice prohibition notification. We had mentioned that the Notification No. 38(RE-2007) had been amended five times in 15 days. The end is nowhere in sight. It is amended once more. </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now rice brought into the godowns of <st1:place w:st="on"><st1:City w:st="on">Kakinada city till 10.10.2007 (as certified by the State Government of Andhra Pradesh) shall be allowed to be exported.</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You will understand that this rice had been languishing in the bureaucratic corridors for the last 20 days and even now it may not be nirvana for the rice. Questions can still be posed. What is the city of <st1:place w:st="on"><st1:City w:st="on">Kakinada? And what does certified by the State Government of Andhra Pradesh mean? Who is the State Government? Is it the revenue officer, the Collector or the Governor or by virtue of the powers <b><font color="#FF9966">wasted</font></b> in the government, will an authority be notified to issue such certificates? </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the rice that reached <st1:City w:st="on">Kakinada on 10<sup>th</sup> October can be exported, why not the rice despatched to <st1:place w:st="on"><st1:City w:st="on">Kakinada before 10<sup>th</sup> but reaches after the deadly date?</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More amendments are sure to come and in the meanwhile, rats may have a field day with all the rotting rice. When are we going to realise that notifications play havoc with peoples' lives and they deserve to be better drafted?</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the government pro farmer? A friend of mine who holds a university Ph.D , but who is basically a farmer tells me that the concept that the government is agriculture friendly is a lot of bull. If market conditions provide an opportunity for the farmer to make a good profit, the government steps in and ensures that he doesn't, but if the situation is bad, the farmer has to look for his own rope to hang on to commit suicide and there is no government help!</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Take the present situation. <st2:Sn w:st="on">Rice</st2:Sn> has been collected from the farmers on the assumption that it will be exported. Now the poor farmers have no idea about the manoeuvres of the mandarins of <st1:City w:st="on">Delhi and for them what it means is that they don't get paid for the rice they sold to the exporters, because somebody in <st1:place w:st="on"><st1:City w:st="on">Delhi decided that rice cannot be exported. And the rural Banks don't even have a subsidy scheme to provide for a cheap rope for the farmer to hang from.</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=45&filename=notification/dgft/2007/dgft07not046.htm" target="_blank">DGFT Notification No <u>46 (RE-2007)/2004-2009, Dated: <st1:date ls="trans" Month="11" Day="2" Year="2007" w:st="on">November 2, 2007</u></a></font></p> <p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Disclosure of Annual Confidential Reports under the <st1:stockticker w:st="on">RTI Act?</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DOPT has clarified that there is no obligation to disclose ACRs of any employee to the employee himself or to any other person in as much as disclosure of ACRs is protected by clause (j) of sub-section (1) of section 8 of the <st1:stockticker w:st="on">RTI Act; and an <st1:stockticker w:st="on">ACR is a confidential document, disclosure of which is protected by the Official Secrets Act, 1923. However, the public authority has discretion to disclose the Annual Confidential Reports of an employee to the employee himself or to any other person, if the public authority is satisfied that the public interest in disclosure outweighs the harm to the protected interests. If it is felt that public interest in disclosure of <st1:stockticker w:st="on">ACR of any employee outweighs the protected interests, decision to disclose the ACRs should be taken with the approval of the competent authority. Competent authority in the matter may be decided by the concerned public authority.</font></p> <p ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sernews/order/cir_68.htm" target="_blank">DOPT <st1:place w:st="on">OM No. <st1:date ls="trans" Month="10" Day="20" Year="2006" w:st="on">10/20/2006-IR<u> Dated: <st1:date ls="trans" Month="9" Day="21" Year="2007" w:st="on">September 21, 2007</u></a></font></p> <p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">From our Legal Corner - tomorrow's cases</font></b><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></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax</b></font></p> <p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Scrap sales would be included in total turnover for purpose of calculating deduction u/s 80HHC : ITAT</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once there was an element of profit, then such scrap sales have to be included in the total turnover. The ITAT held that scrap sales would be included in the total turnover for the purpose of calculating deduction under Section 80HHC</font></p> <p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b></font></p> <p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Exemption to hospital equipment - No change in category after exemption is withdrawn and especially because application is made three years after withdrawal : SC</b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The representation filed by the appellant in 2003, seeking change of category from para 2 to para 1 of the Table annexed to the Notification, is clearly an after-thought in order to overcome the failure on the part of the appellant to comply with the conditions laid down in para 2 of the Table annexed to the Notification.</font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central Excise </b></font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">A parcel booking clerk of Indian Railways, in order to have some personal gain, colludes with others to book goods without any duty paying documents and goods are seized by authorities at destination point, can Railways be penalised under Excise Rules - NO : CESTAT LB</font></b></font></p> <p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CAN</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>a Company be penalised under the old Rule <ST1:METRICCONVERTER u3:st="on" ProductID="209 A"><st1:metricconverter ProductID="209 A" w:st="on">209 A of Central Excise Rules? </font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is too much to allege or to presume that the advocates or the legal advisers or auditors of the company to handle much less deal with the excisable goods as contemplated under Section 9(1)(bbb) of the Act or Rule <st1:metricconverter ProductID="209 A" w:st="on">209 A of the Rules while discharging their professional duties.</font></p> <p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">Whether deduction of equalised freight has to be average equalised freight based on last year's actual or deduction should be of actual equalised freight incurred during particular year, when assessments are provisional - matter goes to LB of Tribunal</font></b></font></p> <p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>THE</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> </b>issue involved in this case is regarding the demand of differential duty from the respondent on the ground that they have <i>claimed deductions in respect of freight charges without any documentary evidence</i>. Show cause notices were issued proposing to disallow the deduction claimed in respect of freight charges on the ground that the respondents are unable to produce any documentary evidence that they have actually incurred the same. The adjudicating authority after considering the documents and certificate given by the Chartered Accountant came to the conclusion that the <i>respondents are eligible for deductions of actual average freight charges & not average equalized freight charges</i>. </font></p> <p align="justify"><font color="#FF9966" 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> </body> </html>