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By Vijay Kumar

Income Tax

It's not a good IDEA - Re assessment cannot be ordered if the assessee had placed all material before the AO and the AO chose to ignore certain issues : Bombay High Court

THIS petition filed by Idea Cellular Ltd., impugns a notice dated 26.3.2007 issued by the Income Tax Department under Section 148 of the Income Tax Act, seeking to re-open the petitioners' assessment for the assessment year 2001-2002. It also impugns a further order dated 13.12.2007 issued by the Department rejecting the objections raised by the petitioner to the re-opening of the assessment.

On 30.10.2001 the petitioner filed a return in respect of the assessment year 2001-2002 which indicated a loss of Rs.133,91,49,737 /-. In the computation annexed to the return, the petitioner had disclosed that a company named Tata Cellular Limited had amalgamated into the petitioner w.e.f . 1st January 2001. In the balance-sheet and in Schedule 2 thereof, the petitioner had disclosed that a sum of Rs.9984.15 lakhs was credited to the "Amalgamation Reserve" account under the head "Reserves & Surplus". In note 4(a) of Schedule 19 to the audited accounts, the petitioner had given full details as to how the said sum of Rs.9984.15 lakhs was arrived at. It explained that the assets and liabilities of Tata Cellular Limited had been accounted for in the accounts as per the "Pooling of Interest method" prescribed in the Accounting Standard on Accounting for Amalgamations (AS-14) as issued by the institute of Chartered Accountants of India . It was explained that the said sum of Rs.9984.15 lakhs was the difference between the net book value of the assets and liabilities so acquired and the share capital to be issued there-against.

The Deputy Commissioner passed an assessment order dated 31.3.2004 in which he computed the petitioner's loss at Rs.75 ,04,02,061 /- after making several additions and disallowances. However, he did not make any addition in respect of the said amalgamation reserve of Rs.9984.15 lakhs. In the order he made a specific note of the fact of the amalgamation of Tata Cellular Limited with the petitioner and disallowed the expenses incurred by the petitioner on the amalgamation.

Customs

Warehoused goods – no re-export of surrendered goods : Supreme Court.

THIS is the case of a persistent assessee – he had been through the legal corridors for the last 12 years and in the Supreme Court twice – all to re export the goods imported by him because he could not pay the duty!

On 6.3.1996 the respondent Shakti LPG Ltd. imported 1714.5 MT of boiler steel plates worth Rs. 4.79 Crores claiming that the said goods would be utilized for the extension of their storage terminal at Kakinada . As the said import could be entitled to a concessional rate of duty on the production of the appropriate certificates which were then not available with the importer, the goods were warehoused in one of the bonded godowns of the Central Warehousing Corporation on 30th May 1996 for an initial period of one year. The respondent thereafter applied for the extension of the warehousing period which was allowed by the Commissioner, Customs on 5th September 1997 upto 31st March 1998. A security deposit of about Rs. 10 ,00,000 /- and an advance customs duty of about Rs. 98, 00,000/- were deposited with the department on 31st March 1998 but the goods were still not cleared. From 1998 till 31st January 2001, several notices were sent to the respondent to clear the goods or to pay the duty and during this period the warehousing period was extended six times with the last extension expiring on 31st January 2001. As the respondent sought no further extension thereafter, the aforesaid period came to an end. Several notices were thereafter issued to the respondent under Section 72(1) of the Customs Act, 1962 raising a demand of duty etc. As no reply was forthcoming, a notice under section 72(2) of the Act was issued to the respondent on 3rd December 2001 for sale of the goods by auction so as to recover of the outstanding dues. Interestingly, however, the respondent vide his letter dated 31st December 2004 also surrendered the goods with the result that it ceased to have any claim over them.

Central Excise

Refund of unutilized Cenvat credit – Deemed Exports are not physical exports - Since appellant has not physically exported goods but merely supplied goods to 100% EOU , provisions of Rule 5 of Cenvat Credit Rules, 2004 are not applicable : Tribunal

THE appellants cleared excisable goods viz. packing materials to 100% EOU under CT-3 certificate without payment of duty. Since the goods were cleared without payment of duty, they could not utilize the Cenvat credit availed on the inputs used in the manufacture of goods cleared without payment of duty under CT-3 certificate. They accordingly filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004 in respect of the unutilized Cenvat credit balance for the quarter 01.01.2006 to 31.03.2006. The claim for refund was rejected on the grounds that the description of the goods supplied by them and the description of the goods on the export documents of 100% EOU did not match and further the export documents did not indicate the size of the packing material used in the manufacture of export goods. Additionally, it was also held that supplying goods to 100% EOU does not amount to export and in view of the same the provisions relating to refund of unutilized Cenvat credit under Rule 5 are not applicable to them.

See our columns Monday for the judgements