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By Vijay Kumar

Income Tax - AAR

Payment received by US Co for repair of hardware is not liable to tax in India but payment for software maintenance support is to be taxed in India - AAR

For a better understanding of this case, please go back a little through the pages of history and have a look at 2005-TIOL-05-ARA-IT. In that case, Authority for Advance Rulings has ruled that payment received by Non-Resident US Company in regard to repair of hardware does not fall within the meaning of income from the furnishing of services as defined in article 12. The payment, would, therefore, be business profits within the meaning of para 7 of article 7 of DTAA. Since US Company has no permanent establishment in India the payment will not be taxable in India in view of the provisions of article 7. However, the payment made for repair of software will be outside the purview of para 7 of article 7. Having regard to provisions of para 2 of article 12 the same shall be taxable in India.

And so the applicant is not legally required to deduct tax on the payments made to Raytheon Company, USA. And the rate at which the tax has to be withheld in relation to the payments made to Raytheon Company on the Software Maintenance Contract should be 10% (ten per cent), apart from the applicable surcharge.

The same decision is now reiterated in Round 2.

Customs:

Exemption to copper waste and scrap used within factory of production applicable for imported scrap : Supreme Court

NOTIFICATION No. 8/96- Central Excise dated 23rd July 1996, exempts, Copper waste and scrap used within the factory of production for the manufacture of unrefined or unwrought copper, copper sheets or circles and handicrafts. The issue involved in these appeals is as to whether the scrap imported by the appellants is chargeable to 'NIL' rate of additional customs duty under Section 3 of the Customs Tariff Act, 1975. Is the Notification applicable to imported goods?

The test laid down by the Tribunal that the benefit of the notification/tariff heading would be admissible to only that copper waste and scrap which is generated in the factory of production and not the imported waste and scrap, is not supported either by the text of the exemption notification, heading 74.04 or any other authority.

Mens rea?

Selling of part of goods procured for manufacture against conditions imposed – mens rea evident – penalty imposable : Supreme Court

APPELLANT manufactures Steel Ingots. It purchased iron scrap from the Railways in public auction. Iron scrap is melted and converted into the finished products. Appellant had been accorded recognition under Section 4-B (2) of the U.P. Trade Tax Act in terms whereof it became entitled to purchase raw-materials for manufacturing purpose at a concessional rate of tax. In the year 1985-86, it purchased 2532.989 M.T. of iron scrap. Allegedly, the lots contained various categories of iron scraps as it was purchased on "as is where is basis".

Moreover, the assessing authority as also the appellate authority had held that the appellant sold the goods knowingly and, it must, therefore, be inferred that the finding in regard to mens rea had also been arrived at.