 TIOL-DDT 2328
04.04.2014
Friday
IN an order delivered on 31 March 2014, the Supreme Court held, "The High Court's power to frame substantial question(s) of law at the time of hearing of the appeal other than the questions on which appeal has been admitted remains under Section 260A(4). This power is subject, however, to two conditions, (one) the Court must be satisfied that appeal involves such questions, and (two) the Court has to record reasons therefor. "The Supreme Court also observed, "We are afraid that the Revenue is under some misconception. The proviso following the main provision of Section 260A(4) of the Act states that nothing stated in sub-section (4), i.e., 'The appeal shall be heard only on the question so formulated' shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question."
The High Court's power to frame a question is not fettered and in this the Direct and Indirect Taxes laws are almost identical.
It will be interesting to note that the Supreme Court delivered an identical judgement a year ago word to word ‘copy and paste?' in 2013-TIOL-20-SC-IT-LB and we had covered it in DDT 2068 19.03.2013.
Please see 2014-TIOL-34-SC-IT
Central Sales Tax - Jharkhand - 3 per cent CST on all types of glass and glass sheets not applicable to glass and glassware made of Opal glass: SC
THE respondent is a Public Limited Company engaged in the manufacture of glass and glassware made of Opal glass. The State Government had issued a notification in 2001 allowing a three per cent Central Sales Tax (instead of the normal 4 per cent) in respect of Sale of all types of glass and glass sheets in the course of interstate sale.
The question before the Supreme Court in a recent judgement is whether the products of the respondent are covered by the expression "types of glass and glass-sheets" as contained in the notification.
Supreme Court observed,
It is settled rule of construction of a notification that at the outset a strict approach ought to be adopted in administering whether a dealer/ manufacturer is covered by it at all and if the dealer/manufacturer falls within the notification, then the provisions of the notification be liberally construed. Literally speaking, an exemption is freedom from any liability, payment of tax or duty. It may assume different applications in a growing economy such as provisioning for tax holiday to new units, concessional rate of tax to goods or persons for a limited period under specific conditions.
It is a settled law that in taxing statutes the terms and expressions must be seen in their common and popular parlance and not be attributed their scientific or technical meanings. In common parlance, the two words "type" and "form" are not of the same import.
Admittedly, glassware is a form of glass and it is contended by the assessee that forms of glass are also covered by the said notification. The term glassware would generally encompass ornaments, objects and articles made from glass. Glassware would include crockery such as drinking vessels (drinkware) and tableware and general glass items such as vases, pots, etc. Therefore, it cannot be accepted that the expression "types of glass" could have been intended to refer to or include "forms of glass".
The Supreme Court held: the respondent-dealer, a manufacturer of articles of glass, is not entitled to derive the benefit of the notification issued by the State Government, dated 25.06.2001.
Please see 2014-TIOL-33-SC-CT
It is axiomatic that decisions of this Tribunal are binding on Revenue
IN a recent case before the CESTAT, the Departmental Representative argued that the Tribunal in Paul Merchants Ltd. vs. CCE, Chandigarh reported in 2012-TIOL-1877-CESTAT-DEL and M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi - 2014-TIOL-465-CESTAT-DEL had not correctly comprehended the scope and trajectory of provisions of the Export of Service Rules, 2005!
The Tribunal was not amused. In his aristocratic language, the President observed,
1. The invitation by Revenue to ignore the law declared by the Larger Bench in Paul Merchants Ltd. vs. CCE, Chandigarh (supra) and reiterated in GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi (supra) is unacceptable.
2. It is axiomatic that decisions of this Tribunal are binding on Revenue.
3. Jurisprudential stability and coherence in law is the foundation for a stable investment climate which is critical to economic stability of the Republic.
4. Once the Tribunal pronounces a verdict after consideration of the relevant legal environment, the executive branch and an adjudicator at a lower level in the hierarchy is bound by such verdict, subject only to remedies within the judicial branch or appropriate and constitutionally permitted legislative curatives.
Isn't it also axiomatic that the decisions of a Division Bench of the Tribunal are binding on another Bench? Quite often, especially in recent times, we find Tribunal Benches showing scant respect for decisions of other Benches and passing orders against decided judgements.
We will bring you this order of the Tribunal on Monday.
Income Tax - CBDT clarifies on exempted income of Firm Section 10(2A)
AS per Section 10(2A) of the Income Tax Act, in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm, is not included in the total income.
Explanation.- For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits.
Now, a doubt was raised before the Board as to what will be the amount exempt in the hands of the partners of a partnership firm in cases where the firm has claimed exemption/deduction under Chapter III or VI A of the Act.
A firm is assessed as such and is liable to pay tax on its total income. A partner is not liable to tax once again on his share in the said total income.
CBDT clarifies that 'total income' of the firm for sub section (2A) of Section 10 of the Act, as interpreted contextually, includes income which is exempt or deductible under various provisions of the Act. It is, therefore, further clarified that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners accounts in the firm would be exempt from tax in the hands of such partners, even if the income chargeable to tax becomes NIL in the hands of the firm on account of any exemption or deduction as per the provisions of the Act.
This is one Circular which would certainly be welcomed by the Trade.
CBDT Circular No. 8/2014, Dated: March 30, 2014
Customs - New Exchange Rates from Today
CBEC has notified new exchange rates for Imported Goods and for Export Goods with effect from 4th April 2014. The US Dollar is 60.45 rupees for imports and 59.45 rupees for exports.
The Exchange rates were last notified on 20 March, 2014.
Notification No. 26/2014-Cus (N.T.), Dated: April 03, 2014
American Embassy School in Delhi in IT Evasion
THE New York Times recently reported that the American Embassy School in New Delhi have quietly admitted that for years the school undertook a variety of tax-avoidance schemes, including one in which they instructed some female teachers whose husbands also worked at the school to list their occupations on visa applications as "housewife." Indian officials are refusing to renew teacher visas until the case is resolved, leading nearly 20 teachers to leave in recent weeks. Without a quick resolution, nearly a quarter of the school's teaching staff could be forced to leave before classes end in June. If the controversy remains unsettled into the fall, the school - widely considered one of the best international schools in the world and a key recruiting tool here - could close.
Income Tax Raids Red-Light Areas
A newspaper reported today that Income Tax sleuths raided Kolkata's red-light areas and seized over a Crore of rupees in cash.
How can the poor prostitutes pay income tax when their profession is not recognised as legal? Of course even illegal income is taxable. But what has the Welfare State done for these unfortunate prostitutes; has the State ever wondered what happens to them when they are too old to carry out their profession all the States men who enjoyed their services will not bother to lend a helping hand. The State should try to do something for their welfare before raiding them for evading income tax.
Our Leaders recognised internationally for bribes - MP indicted by US Court
A Rajya Sabha Member was charged yesterday by a US Federal Court with participating in an alleged international racketeering conspiracy involving bribes of state and central government officials in India to allow the mining of titanium minerals.
He, along with five others are charged with conspiring to pay at least $18.5 million in bribes to secure licenses to mine minerals in the eastern coastal Indian state of Andhra Pradesh. The mining project was expected to generate more than USD 500 million annually from the sale of titanium products, including sales to unnamed "Company A," headquartered in Chicago.
As per a release of the US Department of Justice, one of the defendants is K.V.P. Ramachandra Rao, aka "KVP" and "Dr. KVP," 65, a Member of Parliament in India who was an official of the state government of Andhra Pradesh and a close advisor to the now-deceased chief minister of the State of Andhra Pradesh, Y.S. Rajasekhara Reddy.
As alleged in the indictment, the defendants used U.S. financial institutions to engage in the international transmission of millions of dollars for the purpose of bribing Indian public officials to obtain approval of the necessary licenses for the project. They allegedly financed the project and transferred and concealed bribe payments, and used threats and intimidation to advance the interests of the enterprise's illegal activities. The indictment further alleges that Sunderalingam met with Rao to determine the total amount of bribes and advised others on the results of the meeting, and he identified various foreign bank accounts held in the names of nominees outside India that could be used to funnel bribes to Rao. Rao allegedly solicited bribes for himself and others in return for approving licenses for the project, and he warned other defendants concerning the threat of a possible law enforcement investigation of the project.
The release clarifies that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proof beyond a reasonable doubt .
The Department of Justice proclaims, "Fighting global corruption is part of the fabric of the Department of Justice; Criminal conspiracies that extend beyond our borders are not beyond our reach."
We had a visionary leader who had declared long ago that corruption is a global phenomenon .
State Emblem - Don't Forget Satyameva Jayate
 THE State Emblem of India is the official seal of the Government of India. The State Emblem is an adaptation from the Sarnath Lion Capital of Asoka. The Emblem consists of the profile of the Lion Capital showing three Lions mounted on the abacus, with a Dharma Chakra in the centre, a bull on the right, a galloping horse on the left and outlines of Dharma Chakras on the extreme right and left with the motto "Satyameva Jayate" - written in Devanagari script below the profile of the Lion Capital.
It has been brought to the notice of the Home Ministry that various Government agencies/authorities are using the State Emblem of India on their Stationery, publications, seals, vehicles, buildings, websites etc., often omit the motto "Satyameva Jayate" and are only depicting the profile of the Lion Capital.
The Ministry has advised that the State Emblem of India is incomplete without the motto "Satyameva Jayate" inscribed (in Devanagari script) below the profile of the Lion Capital.
Incomplete display of the State Emblem of India is a violation of the State Emblem of India (Prohibition of Improper Use) Act, 2005 and the State Emblem of India (Regulation of Use) Rules, 2007.
The Ministry has reiterated that the Government agencies who are authorized to use the State emblem of India for various official purposes must depict the complete picture of the 'State Emblem together with the motto "Satyameva Jayate" in Devanagri script - inscribed below the profile of Lion Capital.
Home Ministry's Letter No. 13/3/2014-Public, dated 26.02.2014 communicated by CBDT in Letter No. A-27013/ 1/2014-Ad.VI(A), Dated: April 02, 2014
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Jurisprudentiol – Monday's cases
 Service Tax
Evaluation of market trends and identification of prospective customers in India for overseas entity, export of service -. It is axiomatic that decisions of this Tribunal are binding on Revenue: CESTAT
THE appellant Alpine Modular Interiors (P) Ltd (AMIL) provided certain services to UB Office Systems Ltd UBOS under an agreement dated 02/01/02. The scope of the services provided by AMIL are evaluation of market trends and identification of prospective customers in India for the overseas entity, for its modular furniture business; and providing a list of prospective customers on a regular basis to enable UBOS to strategise its decisions, for sale of its products to customers.; Larger Bench of this Tribunal in Paul Merchants Ltd. vs. CCE, Chandigarh reported in 2012-TIOL-1877-CESTAT-DEL considered substantially analogous facts and the relevant statutory provisions and concluded that the transactions fall within the ambit of Export of Service Rules, 2005 and are not therefore liable to levy of service tax. This view is reiterated in the recent decision of this Tribunal dated 28/02/14 in an appeal preferred by M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi, reported in 2014-TIOL-465-CESTAT-DEL.
Income Tax
Whether retention money would be income accrued to assessee when it is received from contractee in order to have more liquidity but against bank performance guarantee on condition that guarantee will be released only after satisfactory completion of work - NO: HC
THE assessee is a civil contractor. It was awarded a construction contract by SSNNL. Out of running bills raised by assessee for construction work, SSNNL would retain a portion for satisfactory completion of the work upon being certified by the Engineer-In-charge. Such terms were later on modified to permit greater liquidity to the contractors and an option was given to receive such completion warranty amounts also in cash, subject to providing bank guarantee of a matching sum.
In the return of income filed, assessee claimed debit of retention money in computation of income.
The issue before the Bench is - Whether the retention money would be the income accrued to the assessee when it is received from the contractee in order to have more liquidity but against a bank performance guarantee on a condition that the guarantee will be released only after satisfactory completion of the work upon being certified by the Engineer-In-charge and in case of any non satisfactory completion of work, it would be recovered from bank guarantee. And the answer favours the assessee.
Customs
Factory employee acts on behalf of employer and appellant has to take responsibility for any irregularity done by employee - law does not stipulate that only differential quantity which has been misdeclared is to be confiscated - once there is misdeclaration entire quantity is liable to be confiscated -: CESTAT
THE appellant had filed two shipping bills for export of dyed printed fabric made from 100% polyester filament yarn under DEPB scheme. On examination, it was found that there was shortage of 5 mtrs. in each pack of 25 mtrs. in both the shipping bills. Thus there was shortage of 12335 mtrs. valued at FOB Rs.6,48,255/- in respect of the first shipping bill and 12689 mtrs. valued at FOB Rs.6,46,870/- in respect of the second shipping bill.
It appeared that due to the misdeclaration in the quantity of the goods, the appellant would have got the benefit of Rs.1,07,831/- under DEPB scheme. The appellant's explanation to the shortage is that some worker in the factory by mistake has cut the saree pieces in the width of 4 mtrs. instead of 5 mtrs and that is how this misdeclaration has happened.
See our Columns Mondayfor the judgements
Until Monday with more DDT
Have a nice weekend.
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