TIOL-DDT 751 · the untouched capture
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<p ><font size="2"><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 751</font><font face="Verdana, Arial, Helvetica, sans-serif"><br>
29.11.2007<br>
Thursday</font></b> </font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Consultation only thru proper channel - LAWMIN </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Attorney General for India, Solicitor General of India and the Additional Solicitors General of India are Governed by the Law Officers (Conditions of Service) Rules, 1987 and as per these Rules the Law Officer shall not advise any Ministry of department of Government of India or any statutory organization of any Public Sector Undertaking unless the proposals or a reference in this regard is received through the Department of Legal Affairs.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Departmental of Legal affairs has observed that government departments have become independent and are overlooking this Legal Affairs Department and directly consulting the Law Officers thereby creating embarrassing situations for the Law Officers as well as the Department of Legal Affairs.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What could be the embarrassing situations for the Law Officers and the Department if a Commissioner of Income Tax seeks legal opinion from an ASG situated in his place? (Of course Commissioners are too big to go and meet a mere Additional solicitor General of <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region>) </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So now, the Departmental of Legal Affairs wants the Ministries/Departments of the Government of India to approach this Department for advice and not to approach the Law Officers directly.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Department of Legal Affairs has its Branch Secretariats at Mumbai, Kolkata, Chennai and <st1:place w:st="on"><st1:City
w:st="on">Bangalore, to cater to the advice/litigation matters of the Ministries/Departments of the Government of India situated in those regions respectively and therefore they want the government offices in these regions to approach the Branch secretariat and not the Law officers directly. So if the Commissioner in <st1:City w:st="on">Hyderabad needs legal advice, he should not talk to the ASG who is just a kilometre away, but talk to the Branch secretariat in B<st1:City w:st="on">angalore who will then ask him to speak to the ASG in <st1:City w:st="on"><st1:place w:st="on">Hyderabad. Now you understand how the Government works - or rather doesn't work!</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally the Government officers do not maintain any good rapport with their Departmental counsels either at the Tribunals or the Courts. The other day a Commissioner sent an Assistant Commissioner to brief the ASG. The whole office was aghast! Why an Assistant Commissioner, when an Inspector used to do this job all these years? Even the ASG was surprised that an AC chose to visit his office! And rumour is that the ASG will become a High Court judge any day! </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please have a look at <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=4744" target="_blank">TIOL-DDT 521 -28.12.2006</a> </u>wherein we had discussed a Board Circular about the <b><font color="#663399">high Handedness and non-cooperative attitude of the Branch Secretariat, Kolkata.</font></b></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=31&filename=notification/excise/2006/lletter.htm" target="_blank">The Board in F.No. 275/19/2006-CX.SA Dated : <st1:date ls="trans" Month="12" Day="15" Year="2006"
w:st="on">December 15, 2006 stated</a></font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Instance have been brought to the notice of Board by Commissioners of Central Excise, Kolkata-II and siliguri that due to high Handedness and non-cooperative attitude of Branch Secretariat, Kolkata, they are finding it difficult to file appeals before the High Court against the orders of CESTAT which in their opinion are fit cases to agitate under Section 35G of the Central Excise Act. Similar instances were later brought to the notice by the Commissionerate of Customs, Mumbai and Commissionerate of Central Excise, Thane-II with regard to similar non-responsive attitude of Branch Secretariat, Mumbai.</font></p>
</blockquote>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Looking to the seriousness of the matter, issue was taken up with Secretary (Law), Ministry of Law & Justice and it was categorically stated that it is the statutory right of the Department to file appeals before the High Court against the orders of the CESTAT involving questions of law in terms of Section 35G of the Central Excise Act, 1944/Section 130 of the Customs Act, 1962 and that the Branch Secretariat, Ministry of Law & Justice have no right to exercise their <b><font color="#663399">dictum</font></b> over the statutory right of the administrative Department.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By the time they decide whose dictum will prevail, the time to appeal will be over!</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cbdtconsultation.htm" target="_blank">Department Of Legal Affairs F.34(13)2007-Judl. Dated: <ST2:DATE u1:st="on" Year="2007" Day="05" Month="11" ls="trans">October 17,, 2007</ST2:DATE></a><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/cbdtconsultation.htm"><ST2:DATE u1:st="on" Year="2007" Day="05" Month="11" ls="trans"></ST2:DATE></a><ST2:DATE u1:st="on" Year="2007" Day="05" Month="11" ls="trans"></ST2:DATE></u></font></p>
<p align="center" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Exchange
rates announced for imported goods and export goods 2-in-1 Notification</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the exchange rates for imports and exports are announced in one notification instead of two earlier. The US Dollar is Rs. 39.85 for imports and Rs. 39.35 for exports. Hundred Japanese Yen equal Rs. 36.25 for exports and Rs. 36.85 for exports.</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=24&filename=notification/custom/2007/cnt07_115.htm" target="_blank">Notification Nos. 115/2007 Cus., (<st2:GivenName w:st="on">N.T.</st2:GivenName>), Dated <st1:date ls="trans" Month="11" Day="27" Year="2007" w:st="on">November 27, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Pecuniary - Counterfeit? </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today's<u> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6436" target="_blank">cobweb</a></u> carries interesting snippets gathered by our editor on the history of currency and counterfeiting. He finds out that counterfeit is as old as money itself. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">My
Engineer daughter once asked me, if I knew the meaning of 'pecuniary'.
I told her it relates to money. She was very impressed and conceded that
even I knew a little English. (It is really possible to convince your
children that you also went to school - provided you know a couple of
words like pecuniary!)</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Then she asked me if I knew where the word came from. I was stuck. No use pretending before your children! </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was explained to me that the word is actually derived from the Sanskrit word <b><font color="#663399">pasu</font> </b>and the Latin word<b> <font color="#663399">Pecu</font> </b>meaning <b><font color="#663399">cattle.</font> </b>The possession of cattle in those days denoted wealth and a man was considered rich or poor according to the large or small number of cattle that he owned. In the <i>Ramayana</i> king <i>Janaka's</i> wealth was described by reference to the large number of herds that he owned. It appears that the cow was gradually raised to the status of divinity. <i>Kautilya's
Arthasastra</i> has a special chapter (Ch.XXIX) dealing with the "superintendent of cows" and the duties of the owner of cows.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Were there counterfeit cows? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently Shobha De wrote in <b>THE
WEEK</b> that women are sold in <st1:place w:st="on">Punjab for about Rs. 3000/- whereas bulls command a price of Rs. 30,000/-!</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does it sound peculiar?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And does <strong><font color="#663399">peculiar</font></strong> mean a liar who is also an animal?</font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Jurispruden<font color="#663399" size="5">tiol</font></b> <b> - tomorrow's cases</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><strong><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></strong></b></font></b></font></b></font></p>
<p align="justify" ><font color="#FF3366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Contempt</b></font></p>
<p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Jt DGFT narrowly comes out of contempt petition - strictures passed - Bureaucracy is also accountable - Authorities expected to show minimum courtesy to senior citizen and respect to orders of court : Bombay High Court</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is now settled legal position that the bureaucracy is also accountable for the acts done in accordance with the rules when judicial review is called to be exercised by the Courts. The hierarchical responsibility for the decision is their in-built discipline. But the Head of the Department/designated officer is ultimately responsible and accountable to the Court for the result of the action done or decision taken. Despite this, if there is any special circumstance absolving him of the accountability or if someone else is responsible for the action, he needs to bring them to the notice of the Court so that appropriate procedure is adopted and action taken. The controlling officer holds each of them responsible at the pain of disciplinary action. The object thereby is to ensure compliance of the rule of law.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is known fact that in transaction of the Government business, none would own personal responsibility and decisions are leisurely taken at various levels. It is not uncommon that delay would be deliberately caused to confer advantage to the opposite litigant' more so when stakes involved are high or persons are well connected/influential or due to obvious consideration.</font></p>
<p align="justify" ><font color="#FF3366" 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>Rolls Royce has PE in India - liable to tax in India; As manufacture did not take place in India, only 35% of profits to be taxed in India; At time of issue of notice u/s 148, AO not required to reach final conclusion regarding exact quantum of income : ITAT</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">Assessee has income chargeable to tax in <st1:country-region
w:st="on">India</st1:country-region> and has business connection in <st1:country-region
w:st="on">India</st1:country-region>:</font></b> RRIL is not only 100% subsidiary of the appellant but also maintains a permanent office in <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region> to undertake all such activities. Thus, it can be concluded that the appellant has a business connection in <st1:country-region w:st="on">India</st1:country-region> within the meaning of Section 9(1)(i) of the Act and under the Income-tax act, its income is chargeable to tax in <st1:country-region
w:st="on"><st1:place w:st="on">India</st1:country-region> arising out of such business connections.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">The appellant has a PE in <st1:country-region
w:st="on"><st1:place w:st="on">India</st1:country-region>;</font></b> the mere fact that an enterprise has a certain amount of space at its disposal which is used for business activities is sufficient to constitute a place of business. No formal legal right to use that place is therefore, required. Thus, for instance, a permanent establishment could exist where an enterprise illegally occupied a certain location where it carried on its business. Article 5(1) does not refer that the premises should belong to the assessee but if it is able to use the same, it is an identified and distinct location and on which he exercise the control, it will be considered as a PE within the meaning of Article 5(1) of the treaty. Accordingly, it can be said that the appellant has a PE in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region> within the meaning of Article 5(1) of the treaty.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">What is the taxable income in India</font></b> of the goods manufactured abroad and sold in <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region>? The marketing is in <st1:country-region
w:st="on"><st1:place w:st="on">India</st1:country-region>. Therefore, the profit accruing directly or indirectly in respect of the marketing activities in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region> shall be taxable in India Under the Income-tax Act read with Rule 10 of income-tax Rules. <st1:metricconverter ProductID="1962. in" w:st="on">1962. in a case in which the AO is of the opinion that actual amount of the income accruing or arising directly or indirectly through or from any business connection in India cannot be definitely ascertained, for the purpose of assessment the same may be calculated at such percentage of the turnover so accruing or arising as may be considered reasonable, or in such other manner as the AO may deem suitable. We, therefore, direct the AO to adopt 35% of the profit as against 75% of the global profits in respect of sales effected in <st1:country-region w:st="on">India</st1:country-region> as chargeable to tax in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:country-region>.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#FF9966">Interest u/s 234A and 234B is chargeable:</font></b> Charging of interest u/s 234A and 234B are consequential in nature. The same are compensatory as well as are mandatory in nature. The same may be charged as per law.</font></p>
<p align="justify" ><font color="#FF3366" 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="#FF9966">Air Cargo Agents - whether under BAS - Tribunal refuses to grant out of turn hearing to Revenue</font></b></font></p>
<p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>SOME</b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b> </b>time back, nearly two years ago to be precise, the omnipresent authority in Service Tax matters called DGST passed an order V/DGST/21-30/Legal/04/2004 dated 13.12.2005 holding that services rendered under IATA Cargo Agency Agreement by the members of Association, viz. the Air Cargo Agents Association of India, are covered within the scope of Business Auxiliary Services, and the Air Cargo Agents are liable to pay service tax since 01.07.2003 under Section 68 of the Finance Act, 1994. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This order came to be passed because the trade association of A ir Cargo Agents had moved the Bombay High Court against the proposal of the department for levy of service tax on the service rendered by them <i>qua </i>air cargo agents to airlines & the High Court had disposed of their petition with a direction to the Director General of Service Tax to take a decision on the issue after hearing the writ petitioners. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, this decision of the DGST was challenged by the Association before the Tribunal & when their application for an early hearing in the matter came up, the Tribunal vide its order dated 02.03.2006 dismissed the same <b>[</b><a
href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2006/2006-TIOL-442-CESTAT-MUM.htm">2006-TIOL-442-CESTAT-MUM</a><b>] </b>by observing that - <b><i><font color="#FF9966">"neither has any demand of tax been quantified nor is there any other ground for jumping the queue". </font></i></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, against the very same order of the DGST, an application for early hearing was also made by the Revenue viz. Commissioner of Service Tax & this too has been dismissed by the Tribunal on 15.10.2007 in terse terms - </font></p>
<p align="justify" ><font color="#FF9966" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>"The application filed by the revenue is dismissed as no ground for out of turn hearing has been made out." </i></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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