Jurisprudentiol - tomorrow's cases

By Vijay Kumar

Contempt

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

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.

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.

Income Tax

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

Assessee has income chargeable to tax in India and has business connection in India:

RRIL is not only 100% subsidiary of the appellant but also maintains a permanent office in India to undertake all such activities. Thus, it can be concluded that the appellant has a business connection in India within the meaning of Section 9(1)(i) of the Act and under the Income-tax act, its income is chargeable to tax in India arising out of such business connections.

The appellant has a PE in India;

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 India within the meaning of Article 5(1) of the treaty.

What is the taxable income in India

of the goods manufactured abroad and sold in India? The marketing is in India. Therefore, the profit accruing directly or indirectly in respect of the marketing activities in India shall be taxable in India Under the Income-tax Act read with Rule 10 of income-tax Rules. 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 India as chargeable to tax in India.

Interest u/s 234A and 234B is chargeable:

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.

Service Tax

Air Cargo Agents - whether under BAS - Tribunal refuses to grant out of turn hearing to Revenue

SOME 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.

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 qua 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.

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 [2006-TIOL-442-CESTAT-MUM] by observing that - "neither has any demand of tax been quantified nor is there any other ground for jumping the queue".

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 -

"The application filed by the revenue is dismissed as no ground for out of turn hearing has been made out."

See our columns tomorrow for the judgements