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By Vijay Kumar

Income Tax

Loss on sale of debentures – deduction allowed even if loss was known at the time of applying for debentures – High Court dismissing Revenue appeal as no substantial question of law arose – High Court's decision is binding precedent on subordinate forums including Special Bench of the Tribunal – ITAT SB

The Special Bench decided on a substantial question of Law. A bench of the Tribunal decides an issue in favour of the assessee. The Revenue goes in appeal to the High Court, which dismisses the appeal as there was no substantial question of law. Is this decision of the High Court a binding precedent on the Special bench? ‘Yes', ruled the Bench.

TDS – deduction to be treated as tax payment from the person from whose income tax was deducted; IDBI bonds – TDS to be deducted from holder of bond at maturity – credit should be given to him : Punjab and Haryana High Court

TWO substantial questions of law were brought to the High Court by revenue. Whether on the facts and in the circumstances of the case,

1. ITAT was right in law in upholding the order of the CIT (Appeals), directing the Assessing Officer to allow full credit of T.D.S to the assessee, in contravention of the provisions of section 199 of the Income Tax Act ?

2. the findings recorded by ITAT in allowing full credit of TDS to assessee are perverse and sustainable in view of statutory provisions of Section 199 of Income Tax Act, 1961 ?”

One Vivek Bansal , Liberty House, Karnal had originally purchased deep discount bonds 1997 of Industrial Development Bank of India ( I.D.B.I ) @ of Rs. 5500/- each (the original purchaser). From him the assessee-respondent purchased those bonds @ Rs.9700 /- each on 01.01.2001 for total value of Rs.19 ,40,000 /- (the assessee secondary purchaser). The original purchaser filed his return for the assessment year 2001-02 and reflected the difference in amount of purchase and the sale. Thus, a sum of Rs. 9 ,40,000 /- became long term capital gain in respect of the original assessee. It is undisputed that the bonds were subject to accruing of interest year to year although, no income was received annually by the bond holder. The condition was modified by issuance of a press note later. The assessee-secondary purchaser received a draft of Rs. 19 ,08,200 /-. This amount has been accounted for by the assessee-secondary purchaser.

Customs

Cargo imported from USA refused admission by Customs - re-exported to UAE - rejected by UAE Customs - returns to India - importer refuses to file BoE - Customs refuses to dispose of goods - Containers caught in cross-fire - please return my empty containers, pleads shipping line before Madras HC

The story begins:

2 nd respondent, ITC filed two Bills of Entry in September 2005, for the clearance of 1007 MTS of goods declared as waste paper, contained in 40 containers, supplied by a Company by name M/ s.Evergreen Specialities Inc, USA .

On an examination of the goods found in the containers, the Customs Department came to the conclusion that there was contaminated municipal waste in the containers which could not be allowed clearance.

Service Tax

Employees working on rolls of applicant diverted to undertake manufacturing activities of another company – Prima facie Services provided cannot be held to be taxable as “Manpower Recruitment or Supply agency ” : Tribunal

SERVICE tax has been demanded from the applicants on the ground that they were providing services of ‘manpower recruitment agency' to M/s Bajaj Organic Chemicals Limited for the period March, 2003 to July, 2006.

The applicant is before the Tribunal seeking a stay of the tax demand of Rs.3.44 lakhs and penalty of Rs.25 ,000 /-.

The short facts are that the staff of the applicant was loaned to M/s Bajaj Organics Limited for carrying on its manufacturing/production activities. Until 16/06/2005 the definition of “manpower recruitment agency” was “any commercial concern engaged in providing any services, directly or indirectly, in any manner for recruitment of manpower, to a client.” However, w.e.f 16/06/2005 service tax is leviable on “manpower recruitment or supply agency ” which means “any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client.”

See our columns tomorrow for the judgements