REVENUE'S winning spree continues in the Supreme Court. In two Judgements delivered yesterday, Revenue won both emphatically and in an Income Tax case, Revenue won with costs, even though it had lost the case both in the Tribunal and the High Court. Not really Good Times for the assessees.

Payment of Advance Tax by itself not Proof of Disclosure of Income

SUPPOSE you pay advance tax, but do not file the return within time. In the meantime, the friendly income tax officers come for a search and find that you have income, which was not disclosed. You plead that you had all good intentions of disclosing the income in the return; that you are going to file the return and that is why you paid advance tax. AO would believe none of this and charges you with non-disclosure of income. Tribunal thought that payment of advance tax was good intention. So did the High Court, which observed, "the income disclosed by the assessee on payment of advance tax would be an income disclosed to the Revenue and cannot be treated as an income undisclosed for the relevant assessment year".

Revenue took the matter to the Supreme Court. The Apex Court observed,

a. The only way of disclosing income, on the part of an assessee, is through filing of a return, as stipulated in the Act, and therefore an "undisclosed income" signifies income not stated in the return filed.

b. Payment of Advance Tax and filing of return are functions of completely different notions of income i.e. estimated income and total income respectively. The payment of Advance Tax is based on an estimation of the total income that is chargeable to tax and not on the total income itself.

c. Advance Tax is based on estimated income, and hence, it cannot result in the disclosure of the total income assessable and chargeable to tax.

d. Since the Advance Tax payable by an assessee is an estimate of his "current income" for the relevant financial year, it is not the actual total income, to be disclosed in the return of income. To repeat, the vital distinction being that the "current income" is an estimation or approximation, which may not be accurate or final; whereas the "total income" is the exact income disclosed in a valid return, assessable by the Revenue. The fact that the "current income" is an estimation implies that it is not final and is subject to further adjustments in the form of additions or reductions, as the case may be, and would have to be succeeded by the disclosure of final and total income in a valid return.

e. If we were to hold that the payment of Advance Tax reflects the intention of the assessee to disclose its income, it could result in a situation where the mandatory obligation of filing a return for disclosure of income under the provisions of the Act, would not be necessary.

And the Supreme Court found that the concurrent findings of the Tribunal and High Court were not correct and allowed the Revenue appeal with costs of Rs. 50,000/- in each appeal - there were six appeals covered by this common judgement.

We bring you this landmark judgement today. Please see Breaking News.

CE - SSI Exemption - Goods not physically bearing brand name sold from branded outlets - SSI Exemption not Eligible

THE assessee was engaged in the manufacture and sale of cookies from branded retail outlets of "Cookie Man". The assessee had acquired this brand name from M/s Cookie Man Pvt. Ltd, Australia (which in turn acquired it from M/s Auto- bake Pvt. Ltd., Australia). The brand name used the words "Cookie Man" accompanied with a logo depicting the smiling face of a moustachioed chef. The assessee was selling some of these cookies in plastic pouches/containers on which the brand name described above was printed. No brand name was affixed or inscribed on the cookies. Excise duty was duly paid, on the cookies sold in the said pouches/containers. However, on the cookies sold loosely from the counter of the same retail outlet, with plain plates and tissue paper, duty was not paid.

The short question of law for consideration by the Supreme Court was, whether the manufacture and sale of specified goods that do not physically bear a brand name, from branded sale outlets, would disentitle an assessee from the benefit of S.S.I. Notification No. 1/93-C.E., dated 28th February, 1993, as amended from time to time.

The Supreme Court observed,

Once it is established that a specified good is a branded good, whether it is sold without any trade name on it, or by another manufacturer, it does not cease to be a branded good of the first manufacturer. Therefore, soft drinks of a certain company do not cease to be manufactured branded goods of that company simply because they are served in plain glasses, without any indication of the company, in a private restaurant. The good will continue to be a branded good of the company that manufactured it. The same principle would apply in the case of potato chips, chocolates, biscuits, wafers, powders and other such goods often sold from various locations.

In the instant case, the cookies were sold from a dedicated outlet of "Cookie Man" where no other products but those of the assessee were sold. The invoices carry the name of the company and the cookies were sold from a counter of the store. The store's decision to sell some cookies without containers that are stamped with its brand or trade name does not change the brand of the cookies. The cookies sold even without inscription of the brand name, indicate a clear connection with the brand name, in the course of assessee's business of manufacture and sale of cookies under the brand name "Cookie Man". They continue to be branded cookies of "Cookie Man" and hence cannot claim exemption under the SSI Notification.

We bring you today this order - also delivered yesterday. Please see Breaking News.

GAAR to be effective from 2016-17 - No Retro Effect

THE principle of GAAR was incorporated in the Direct Taxes Code, which was introduced as a Bill in Parliament on August 30, 2010.

Pending consideration of the Bill, the Income-tax Act, 1961 was amended by Finance Bill, 2012 to add Chapter X-A titled "General Anti- Avoidance Rule?. It became part of the law when the Finance Bill was passed by Parliament. Draft GAAR guidelines were also published. Under the current provisions, Chapter X-A would come into force with effect from April 1, 2014.

A number of representations were received against the provisions contained in Chapter X-A. Hence, on July 13, 2012, the Prime Minister approved the constitution of an Expert Committee on GAAR to undertake stakeholder consultations and finalize the guidelines for GAAR. Accordingly, an Expert Committee consisting of Dr. Parthasarathi Shome and three others was constituted on July 17, 2012 with broad terms of reference including consultation with stakeholders and finalizing the GAAR guidelines and a roadmap for implementation.

Government has released the final report of the Committee yesterday. Government has decided that the provisions of Chapter X-A will come into force with effect from April 1, 2016 (as against the current provision of April 1, 2014).

The Shome Committee had recommended, GAAR should be deferred for 3 years. But the year, 2016-17, should be announced now, so that it could apply from A.Y. 2017-18. Pre-announcement is a common practice internationally, in today's global environment of freely flowing capital.

No retrospective application of GAAR: The Committee observed, "Certain apprehensions were raised about retrospective application of GAAR. It was feared that GAAR provisions may be applied retrospectively if they are considered to be procedural provisions and not substantive in nature. Considering those apprehensions, the Committee is of the view that it may be clarified as under-

"GAAR shall apply only to the income received, accruing or arising, or deemed to accrue or arise, to the taxpayers on or after date of affectivity of GAAR provisions. In other words, GAAR will apply to income of the previous year relevant to assessment year from which GAAR provisions become effective and subsequent years".

Click here for the Final Report.

More Customs Officers to get Presidential awards this year? 50 year old Notification Amended

AS per Notification No. 12/139/59-Ad.III B dated 05.11.62 (Does anyone have a copy of this?), it appears that for the Presidential Awards to the staff of Customs, Excise, Service Tax, Narcotics, the number of awardees in a year shall not exceed 35. Last year they gave the awards to the maximum possible 35 officers. Obviously, this year there is more pressure and they want to give the award to more officers. So, now they have made the maximum number as 40. It is almost sure that more than 35 officers will get the awards this year.

CBEC Notification No. 2/2013- Customs (N.T.), Dated: January 14, 2013

Jurisprudentiol – Wednesday's cases

Central Excise

Pre-deposit amount reduced in view of ongoing Telangana Agitation - CESTAT.

THOUGH the Tribunal did not find a clear case for the appellant, the Bench was inclined to consider the submission that the appellant is running through a financial crisis on account of the ongoing Telangana agitation.

Income Tax

Whether when assessee is leasing and finance company, it gets deprived of depreciation benefits on assets leased out to third parties - NO: SC

THE issues before the Bench are - Whether when the assessee is a leasing and finance company, it gets deprived of depreciation benefits on assets leased out to third parties - Whether for the purpose of claiming depreciation on trucks leased out, it is not necessary for the assessee to use the assets for its own use; Whether when the wording in the Sec 32 emphasises on the ownership of the asset, to decide the question of ownership a reference to Sec 2(30) of the Motor Vehicle Act can be resorted to for verification of registration of vehicle in the name of lessor; Whether Sec 2(30) of the MV Act is a deeming fiction and it cannot be relied upon to decide the question of ownership of the vehicle and Whether when the assets were used for the purpose of business, the assessee is entitled to higher rate of depreciation. And the verdict goes in favour of assessee.

Whether when assessee-club places surplus funds in form of FDs with its member-banks to earn interest income, since such funds are loaned out to third parties for earning higher interest income, it violates privity of mutuality - YES: SC

THE issues before the Bench are - Whether when the assessee-club places its surplus funds in the form of FDs with its member-banks to earn interest income, since such funds are loaned out to third parties for earning higher interest income, it violates the privity of mutuality; Whether in such a case there is a lack of identity between the contributors and the participators and Whether when the banks loan out the funds placed by the assessee to third parties it can be said that the funds were not utilised for the benefit of its members and thus went beyond the principle of mutuality. And the verdict goes in favour of the Revenue.

Service Tax

Proprietorship concern is known by proprietor of firm and no entity can be identified without proprietor: CESTAT

THE appellant started security agency in the year May 1997 under the name and style as Jai Jawan Securities under the proprietorship of Shri S.N. Mahajan. In May 2002, Shri Mahajan changed the name of the security agency to Veer Jawan Securities Services and applied for registration to the department on 28.11.2003. It is submitted that the demand has been raised against the assessee namely Veer Jawan Securities which came into existence in May 2002 and hence the demand for the period prior to May 2002 is not sustainable

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day

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