TIOL-DDT 737 · the untouched capture
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<p class=MsoNormal><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 737</font><br>
08.11.2007<br>
Thursday</b> </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Revenue loses latest Transfer Pricing case</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was a time when it took a couple of years for an ITAT order to be published. We in TIOL can proudly claim to have changed the scenario. Today, we are carrying a very important ITAT order delivered on 2<sup>nd</sup> of November, less than a week ago.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">THE</font> </b>Transfer Pricing (TP) is a fast evolving law in <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region>. And the Revenue has lost in the latest TP case decided by the ITAT President last Friday. While finding the additions made by the Revenue unsustainable, the Bench also observed that Arm's Length Price (ALP) does not mean maximum price or maximum profit in the range. A willing buyer in an open market shall pay minimum and not maximum price for goods or services. It is certainly not an exact science in which mathematical certainty is possible and some approximations cannot be ruled out.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In brief, the Tribunal held that the determination of the ALP is essentially an examination of a matrix of facts, and it can significantly vary even if all the comparable parametres are kept constant and just one parametre differs. Going by the fact that the Tribunal finally upheld the detailed analysis of the comparables done by the assessee, it can be safely inferred that the AO or the TPO cannot summarily reject such due diligence. Application of mind for every minor and major factor is required to do justice to the determination of ALP.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our <b><u>Breaking News</u></b> </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Ministers asked to file Income Tax returns</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
seems that Cabinet Secretary K M Chandrashekhar has issued a circular
asking all the Union Ministers to file their Income Tax returns. It seems
many of them don't! Remember the late Jagjivan Ram had not filed his Income
Tax returns for eleven years and <st1:PersonName w:st="on">Prime Minister <st2:GivenName
w:st="on">Indira</st2:GivenName> <st2:Sn w:st="on">Gandhi</st2:Sn> explained
it away as forgetfulness!</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today
the PM is a former Finance Minister and the Cabinet Secretary was till
recently the Revenue Secretary and both of them should be genuinely concerned
if Cabinet Ministers don't file Income Tax returns. But it seems Ministers
are not alone in breaking Income Tax laws - there are senior bureaucrats,
who don't file returns.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Risk Management and Inter-Bank Dealings - Commodity Hedging - RBI instructions</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Currently, residents in <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region> are permitted to hedge their commodity price risk after obtaining specific approvals from the Reserve Bank or from select ADs which have been authorised by the Reserve Bank for the purpose. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of the volatility in global oil prices, domestic oil refining and marketing companies have been representing to the Reserve Bank for permission to hedge commodity price risk on inventories as well in international exchanges/markets, to modulate the impact of adverse price fluctuations on their margins. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI has decided to permit domestic oil marketing and refining companies to hedge their commodity price risk to the extent of 50 per cent of their inventory based on the volumes in the quarter preceding the previous quarter. The hedging may be undertaken through AD Category - I banks, which have been authorised by Reserve Bank. </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=49&filename=notification/rbi/2007/rbi07cir017.htm" target="_blank">RBI CIRCULAR NO. 17/RBI., Dated: <st1:date
ls="trans" Month="11" Day="6" Year="2007" w:st="on">November 6, 2007</a></u></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Higher HRA for employees at DLF Qutab Enclave, <st1:PersonName
w:st="on"><st2:GivenName w:st="on">Palam</st2:GivenName> <st2:Sn w:st="on">Vihar</st2:Sn> - Income Tax department refuses to reply to Expenditure department.</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Postal employees working in DLF Qutab Enclave, <st1:PersonName w:st="on"><st2:GivenName
w:st="on">Palam</st2:GivenName> <st2:Sn w:st="on">Vihar</st2:Sn>, Dundahera, Badshahpur and Sector-45 POs. near Gurgaon filed a case in the <st1:stockticker
w:st="on">CAT demanding higher HRA applicable to <st1:City
w:st="on"><st1:place w:st="on">Delhi - as the Income Tax employees were getting it. Though the <st1:stockticker w:st="on">CAT dismissed the petition, it asked the government to get clarification on how the DoT and Income Tax employees were getting higher HRA. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department of Expenditure asked for clarifications from DoT and CBDT. DoT clarified that instructions have been issued to stop the higher HRA and CBDT did not bother to reply and you know the CBDT and Department of Expenditure are in the same Ministry! But this time around CBEC promptly communicated the information to its field.</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=70&filename=pitara/oms/cathra.htm" target="_blank">Department of Expenditure letter No. 2(39)/1997-E-II(B) Dated : <st1:date ls="trans" Month="8" Day="8" Year="2007"
w:st="on">August 8, 2007</a></u> <b>and </b><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/oms/cathra.htm" target="_blank">CBEC F.No. A-26017/176/2007-Ad.II.A Dated : <st1:date
ls="trans" Month="10" Day="4" Year="2007" w:st="on">October 4, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Visit to an excise office</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though never credited as efficient in public service, the relaxing mood of the officialdom is to be seen to be believed. <br>
The office was found in 'true to the spirit of omission' as all the rooms were locked by about <st1:time Hour="14" Minute="00" w:st="on">2 pm. There was no body, not even the watchman, to look after the office building.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The premises were presenting a deserted look and the lawns around the building, that have perhaps never been cared of, looked gloomy. It seemed as if the grass was never mowed. There was dust all around the building and in the long passage to office building. It was abundantly evident that the officials were strongly getting in 'why-to-bother' style.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many people who have to visit the building complained that field officers of this wing were not punctual and the practice was causing inconvenience to people who came for queries or to settle their tax cases. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">People complained that the inspectors and the lower staff often left the office in the name of field survey, never to return to the office for the day.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A complainant said that the staff must stay in the office till office timings or at least display their schedule and field visits so that visitors could come on those timings. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the boss was asked about the complaints, he said that he was on leave and could not comment over the situation but added that the field staff often went to field for survey after 12 noon.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before angry officers of the Department cry for my blood, let me clarify that this is what the POST, a Pakistani newspaper reported about the situation after the declaration of emergency in <st1:country-region w:st="on"><st1:place
w:st="on">Pakistan</st1:country-region>.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Eligible deductions?</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
A tax court in <st1:country-region w:st="on">Canada</st1:country-region> had
to decide whether the expenses of running a "call girl" business in <st1:place w:st="on"><st2:Sn w:st="on"><st1:City w:st="on">Vancouver</st2:Sn> were deductible from gross income under income tax. The woman who ran the business and seven call girls were all convicted and imprisoned and taxed. Then came the question of permitted deductions. </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">$1,000 a year paid to a telephone company employee for revealing whether the business telephone was being tapped; $2,000 paid for liquor given to officials of the civic administration and $100 paid under an "arrangement with certain men possessed of physical strength and some guile, which they exercised when set to extricate a girl from difficulties", were allowed as deduction. Many claims were not allowed only because the business could not prove that they had been spent.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally, lawyers' fees for defending the girls were allowed as deductible expenses!</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Don't
'die' in parliament!</b> </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tamil Nadu politicians are famous for dyeing - their moustaches - at least the male ones that is. It seems immediately after MGR's death, senior politicians were busy dyeing - their moustaches, hoping to be sworn in as CM. But don't talk about our FM's moustache for he doesn't sport one and he can't be branded as a Tamil Nadu politician. The UKTV <st1:stockticker
w:st="on">GOLD conducted a survey on stupid laws and these were the toppers.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. It is illegal to die in the Houses of Parliament (27%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.
It could be regarded as an act of treason to place a postage stamp bearing
the British king or queen's image upside-down (7%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Eating mince pies on Christmas Day is banned (5%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In the <st1:country-region w:st="on"><st1:place w:st="on">UK</st1:country-region>, a pregnant woman can legally relieve herself anywhere she wants (4%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The head of any dead whale found on the British coast automatically becomes the property of the King, and the tail of the Queen (3.5%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. <strong><font color="#FF9966">It
is illegal not to tell the taxman anything you do not want him to
know, but legal not to tell him information you do not mind him knowing</font> </strong>(3%) </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. It is illegal to enter the Houses of Parliament wearing a suit of armour (3%)</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>There is no barber</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Every barber shaves everyone who does not shave himself. No barber shaves someone who shaves himself. Prove that there exists no barber.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The trick is -- if you follow this statement to its conclusion using formal logic, then you really can prove that barbers don't exist. Absurd, you say. The flaw lies not with our powers of deduction, but rather with the premise. This is a trivial example, pertinent only in the minds of theoreticians. But there is a lesson to be learned here... no matter how carefully we may analyze something, we can still go astray if our initial assumptions are not correct.</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anything to do with the way we interpret tax laws?</font></p>
<p align=center > <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/barber.jpg" alt="Legal Corner Icon" width="483" height="347" hspace="5" border="0" align="center"></b></b></b></font></b></font></strong></font></b></font></strong> </font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a cartoon by <st1:PersonName
w:st="on"><st2:GivenName w:st="on">Geoff</st2:GivenName> <st2:Sn w:st="on">Draper</st2:Sn>, <st2:nameSuffix w:st="on">PhD</st2:nameSuffix> student at the <st1:place w:st="on"><st1:PlaceType w:st="on">University of <st1:PlaceName w:st="on">Utah, [<a
href="http://www.cs.utah.edu/~draperg/">http://www.cs.utah.edu/~draperg/</a>] who has drawn hundreds of intellectual cartoons and who has been very kind in allowing us to use his cartoons, some of which we will bring occasionally, though he says, "I am curious: on what section of the taxindiaonline website do you plan to put these cartoons?"</font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This cartoon also appears in the book <a
href="http://www.springer.com/west/home/generic/search/results?SGWID=4-40109-22-107891047-0">Computation Engineering: Applied Automata Theory and Logic</a> by <a
href="http://www.cs.utah.edu/~ganesh/">Dr.Ganesh Gopalakrishnan</a>.</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner - Monday'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"><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="#FF6699" 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>Assessee's claim that gold was willed to her by her father in 1928, but was handed over to her in 1980 (promptly seized by Income Tax in 1983) - not accepted - reference application answered in favour of Revenue : Bombay HC</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 29th August, 1983, the Income Tax Officer passed an order under Section 132(5) of the Act rejecting the explanation of the assessee that the jewellery found during the course of search was from the estate of her father and accordingly made addition of Rs.1,65,000/- as unexplained investments in jewellery.</font></p>
<p align=justify ><font color="#FF6699" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b></font></p>
<p align=center ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service charges for foreign tourism company - Forex carried by passenger - liable for confiscation : Tribunal</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">THE</font> </b>appellants are engaged in the business of handling tour activity and for this purpose they entered into contract with the foreign tourism company and remit the amounts payable through bank accounts after opening foreign currency accounts as permitted by RBI. M/s Lama Desert Tours, <st1:City w:st="on">Dubai was providing services in respect of tourist sent by the appellants to <st1:City
w:st="on"><st1:place w:st="on">Dubai.</font></p>
<p align=justify ><font color="#FF6699" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Central Excise </b></font></p>
<p align=justify ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cost of duty paid bought out items cleared with CPU, not includible in assessable value : CESTAT</b></font></p>
<p align=justify ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF9966">THE</font> </strong>appellant company was clearing Central Processing Units (CPU). They were also supplying certain bought out item as per the customers' requirement. The appellant's contention is that they had not taken modvat credit in respect of bought out items and such bought out items were of reputed company and were already bearing brand name. Therefore, in terms of the customers requirement such bought out items were supplied. The appellants contend that these bought out items did not form part of the CPU supplied by them to their customers. Therefore, the value of bought out items was not required to be added, as claimed by the department. This contention was accepted by the Additional Commissioner in Order-in-Original, however, the Revenue being aggrieved filed an application under Section 35E (2) Central Excise Act before Commissioner (A) who has taken a view that the assessee ought to have added the value of the bought out items in the assessable value and as the same has not been done, therefore, the order of the Additional Commissioner is not correct in law.</font></p>
<p align=center ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tomorrow is the festival of lights</b></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> </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/happydiwali.jpg" alt="Legal Corner Icon" width="450" height="300" hspace="5" border="0" align="center"></b></b></b></font></b></font></strong></font></b></font></strong><b> </b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns Monday for the judgments</u></b></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday 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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