TIOL-DDT 2261
30.12.2013
Monday

"ALL of us, i.e. judicial officers, departmental representatives and assessee's representatives, are like a large joint family, in pursuit of a common goal of the cause of justice, and all of us have an equal stake in well-being of this institution, and, therefore, whatever be the provocation, all of us should desist from invoking these extreme measures and in washing dirty linen in full public gaze." - Pramod Kumar, Member (A) of ITAT in 2013-TIOL-570-ITAT-LKW.

Generally, our Courts and Tribunals are exemplary models of good behaviour, though sometimes to the extent of ridiculous courtesy. "We are much obliged" when the Bench most unreasonably asks us to make a huge pre-deposit of not only duty outrageously demanded by the Commissioner, but also interest on the duty (not) payable and penalty, so illegally imposed. All the judges are honourable and "my lords"; all the lawyers are learned - so are all the Commissioners who pass those patently illegal orders. All our arguments are "humble submissions" and what we ask the bench is not a demand of what is ours by right, but a "humble prayer". And we are all in black robes, perhaps symbolising the inherent tragedy couched in all these artificial courtesies.

Even in such a sea of tranquillity (which as you know does not exist on Earth), sometimes fissures are bound to develop.

In recent times, this has been quite visible in the Income Tax Appellate Tribunal. Some Bar Associations have boycotted some Members and sent complaints against Members to the President. The ITAT has no regular President for the last more than three years and many in Income Tax Circles feel that all the troubles are because there is no President, but in some other Tribunals, they feel that all the troubles are because of the president and they recall the happier times when there was no President.

In the particular case, which we bring you today, the ITAT made a reference to the President of the Institute of Chartered Accountants with a request to take necessary action as per law against a CA for his professional misconduct and also to take corrective measures and necessary steps to educate its members to behave with the judicial authorities befitting to their status and should not be engaged in scandalizing the judicial authority/courts. The Tribunal also imposed a cost of Rs.5000 on the CA. Earlier the ITAT had filed a contempt petition against the CA in the Allahabad High Court.

Some Bar Members had earlier complained against the ITAT Member.

Against the ITAT Order, the CA filed a writ in the Allahabad High Court and the High Court observed that it appears that originally, the dispute was between Accountant and Judicial Members of the Tribunal.

The High Court held, "During the course of arguments, the petitioner has tendered his unconditional apology orally as well as in writing. When the petitioner has tendered his unconditional apology, no further adjudication is required."

So, the High Court expunged the reference made by the Tribunal to the Institute of Chartered Accountant of India, and cancelled the cost of Rs.5,000/-, imposed by the Tribunal too. Adverse remark against the petitioner, if any, is also expunged.

The High Court added, "We hope that in future such type of incident will not be repeated. It is in the interest of justice to maintain the dignity and decorum of the judicial system and the Tribunal is an essential part of it."

Proxy war between Members of the Tribunal: While the High Court made a mention of the dispute between two Members of the Tribunal, the ITAT Member Pramod Kumar in the case cited in the top para also made some caustic remarks about this situation. "In any case, the way these resolutions and communications have been issued- attacking one of the Members and defending the other Member by one interest group, and with a role reversal by the other interest group, this looks like a proxy war being fought by the Members through these people- something which could never have been intended by my distinguished colleagues. Unsolicited overenthusiasm by their respective support groups makes it an ugly sight and may be seen as a sad commentary on the functioning of division benches."

Advocacy - Decay: Mr.Pramod Kumar also observed, "The profession of law and accountancy, which had earned so much of well deserved respect and dignity for their outstanding contribution to the larger interests and good causes, cannot always be said to be absolutely beyond general decay in society. There are bar associations which have fought legal battles to protect independence of our institution and, in the process, have helped us earn, as indeed everyone associated with this Tribunal, the respect and credibility. Many of the learned representatives appearing before us, which included, for long decades, legendry and great lawyers like late Shri N A Palkhivala, have helped us do our job in a more meaningful and satisfying manner, and have helped this institution emerge as an institution of distinction and eminence."

Restraint is not timidity: The Member tersely concluded, occasions do arise when politeness is taken as weakness and restraint is taken as timidity, making it impossible for a righteous person or institution to survive with dignity, self-respect and with a healthy distance from the troubles and trouble creators.

Click here for the High Court order.

Service Tax - FTP - Amendments to FMS Exemption

NOTIFICATION No.6/2013-ST dated 18.04.2013 exempted services against Focus Market Scheme scrips subject to certain exclusions. Government has amended the notification to add some more items to the lists. Similar amendments have been made to the Central Excise & Customs notifications 30/2012-CE & 93/2009-Cus respectively.

Notification No. 17/2013-Service Tax, Dated: December 26, 2013

Notification No. 31/2013-CE, Dated: December 26, 2013.

Notification No. 52/2013-Cus, Dated: December 26, 2013.

Customs - Exemption - Mega Power Project

AS per Notification No. 12/2012-Cus dated 17.03.2012, goods required for setting up of any mega power projects specified in List 32A are exempted. List 32A has a list of 112 power projects. Now, Kameng Hydro Electric Power Project, Arunachal Pradesh-600 MW [North Eastern Electric Power Corporation Ltd. (NEEPCO)] is added to the list as 113th item.

Notification No. 53/2013-Cus., Dated: December 26, 2013

Central Excise - Exemption - Mega Power Project

SIMILARLY as per Notification No. 12/2012-CE dated 17.03.2012, goods for mega power project specified in List 11 are exempted. List 11 has a list of 105 power projects. Now, Kameng Hydro Electric Power Project, Arunachal Pradesh-600 MW [North Eastern Electric Power Corporation Ltd. (NEEPCO)] is added to the list as 106th item.

Notification No. 32/2013-CX., Dated: December 26, 2013

Company Law - Holding and Subsidiary relationship - Ministry Clarifies

AS per Section 2(87) of the Companies Act 2013,

"Subsidiary company" or "subsidiary", in relation to any other company (that is to say the holding company), means a company in which the holding company-

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total share capitaleither at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation. - For the purposes of this clause,-

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company's Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c) the expression "company" includes any body corporate;

(d) "layer" in relation to a holding company means its subsidiary or subsidiaries;

Section 4(3) of the Companies Act 1956 stipulated that, in determining whether one company is a subsidiary of another - any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable by it.

After the new Act has been notified, the ministry received representations requesting for clarification whether shares held or power exercisable by a company in a 'fiduciary capacity' will be excluded while determining if a particular company is a subsidiary of another company under the new Act.

The Ministry of Corporate Affairs clarifies that the shares held by a company or power exercisable by it in another company in a 'fiduciary capacity' shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2(87) of the Companies Act, 2013.

Why couldn't they make it clear in the Act as was done in the previous Act, instead of clarifying now?

Ministry of Corporate Affairs General Circular No. 20/2013., Dated: December 27, 2013

Legal Smuggling of Gold?

'LEGAL' and 'Smuggling' are contradictory words but it seems the smugglers have found out a way to legally smuggle gold into the country.

An eligible passenger landing in India is entitled to import 1 kg of gold on payment of duty. The smugglers have found out that even after paying duty and fees for carriers, there is still a huge margin.

The method is simple - ask every passenger to carry a kg of gold - pay him a lakh of rupees for this service, ask him to pay duty at the Indian airport and collect it from him outside the airport - perfectly legal.

It seems in a recent flight to Calicut almost every passenger was found to be carrying one kg of gold each. And every passenger would be happy to carry that one kg of gold when he gets paid a lakh of rupees and the activity is risk free.

If the Customs is vigilant, the next few months are going to be rewarding.

VCES - Last Two Days

NOW, it is almost certain that the VCES is not going to be extended - this is your last chance - don't wait till tomorrow - File that declaration and pay up TODAY.

Jurisprudentiol - Tuesday's cases

Central Excise

Demand of duty on clandestine removals - Tribunal by majority upholds demand.

AROUND 17 years ago, preventive officers of the department visited a unit and conducted physical stock verification. The officers found shortage of raw materials. Statements were recorded and inquiries were conducted at the buyer's end. Consequently, duty was demanded on clandestine removals by applying input/output ratio. On appeal, the Commissioner (Appeals) confirmed a demand of Rs 38,143/- (out of total demand of Rs 6,65,309/-) and reduced penalty to Rs 10,000/- and Rs 5,000/- on the Director of the company. Aggrieved by the order of Commissioner (Appeals), revenue is before the Tribunal.

Income Tax

Whether when initial expenses incurred on development of software is capitalised, any expenditure on further improvement of same is to be necessarily treated as capital in nature - NO: HC

THE issues before the Bench are - Whether when the initial expenses incurred on development of software is capitalised, any expenditure on further improvement of the same is to be necessarily treated as capital in nature and Whether expenditure on scientific research, even if it is capital in nature, but incurred in relation to the business of the assessee u/s 35(1)(iv) of the Act, is a deductible expenditure. And the verdict goes in favour of the assessee.

Customs

Used and Reconditioned Fuji Frontier 370 Printer Processor with Standard Accessories is used for developing photo films as well as digital printing as per catalogue on record and, therefore, order confiscating goods in question as being Hazardous Waste is not sustainable -goods classifiable under heading 9010 of Customs Tariff and not under chapter 84-order set aside and appeal allowed: CESTAT

THE appellant imported 'Used and Reconditioned Fuji Frontier 370 Printer Processor with Standard Accessories' and claimed classification under Ch. 84 of the Customs Tariff. The adjudicating authority confiscated the goods in question on the ground that goods are Hazardous Waste and also imposed penalty under Section 112 of the Customs Act. As their appeal was dismissed by the Commissioner (Appeals), the appellant is before the CESTAT.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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