blore br dec 10 newsletter · 2018. 10. 31. · 3 december 2010 cpe and other programs - december...

1 December2010

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

December2010

3 December2010

CPE AND OTHER PROGRAMS - December 2010 & January 2011Date/Day Topic /Speaker Venue/Time CPE Credit

DISCLAIMER : The Bangalore Branch of ICAI is not in anyway responsible for the result of any action taken on the basisof the advertisement published in the newsletter. The members, however, bear in mind the provision of the code of ethics whileresponding to the advertisements. The views and opinions expressed or implied in the Branch Newsletter are those of the authors

and do not necessarily reflect those of Bangalore Branch of ICAI.

Note : High Tea at 5.30 pm for programmes at 6.00 pm at branch premises.

Advertisement Tariff for the Branch NewsletterColour full pageOutside back ` 30,000/-Inside front ` 24,000/-Inside back ` 24,000/-

Advt. material should reach us before 22nd of previous month.

Inside Black & WhiteFull page ` 15,000/-Half page ` 8,000/-Quarter page ` 4,000/-

Editor : CA. Shambhu Sharma H.

Sub Editor : CA. Prasad S.R.

01.12.10 An overview of IFRS & Challenges involved in Branch Premises 2 hrsWednesday first time adoptions 06.00pm to 08.00pm

CA. Aditya Singhal

04.12.10 Seminar on “Emerging Economic Challenges The Lalit Ashok, 6 hrsSaturday for Industry” Kumara Krupa High Grounds

Delegate Fee: `̀̀̀̀ 1,800/- Bangalore Details Page No: 13 09.00am to 06.00pm

08.12.10 Companies Bill 2009 & MCA Guidelines 2009 Branch Premises 2 hrsWednesday on Corporate Governance & CSR 06.00pm to 08.00pm

CA. Vijay Raja

11.12.10 “Mergers & Acquisitions - Taj Vivanta 6 hrsSaturday Strategising for Growth & Sustainability” (formerly Taj Residency)

Delegate Fee: `̀̀̀̀ 2000/- M.G. Road, Bangalore Details Page No: 17 09.00am to 06.00pm

15.12.10 Recent developments in Auditing Standards Branch Premises 2 hrsWednesday CA. D M Suresh 06.00pm to 08.00pm

18.12.10 2 Day CPE Conference Jnana Jyothi 12 hrsSaturday & Convention Centre,19.12.10 Central College Campus,Sunday Delegate Fee: `̀̀̀̀ 1800/- Details Page No: 18 Bangalore

22.12.10 Assessment Procedures - Revisited Branch Premises 2 hrsWednesday CA. Naveen Khariwal 06.00pm to 08.00pm

29.12.10 Indirect Taxes - Practitioners’ perspective Branch Premises 2 hrsWednesday CA. Govindaraj 06.00pm to 08.00pm

05.01.11 Gold - The other currency & Branch Premises 2 hrsWednesday its importance in an investment portfolio 06.00pm to 08.00pm

CA. Shubha Ganesh

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December2010

TAX UPDATES OCTOBER 2010CA. Chythanya K.K., B.Com, FCA, LL.B

VAT, CST, ENTRY TAX,PROFESSIONAL TAXPARTS DIGESTED:

a) 2010-11(15) KCTJ Part 7

b) 2010 69 Kar. L. J. Part 10

c) 34 VST – Part 3 to 6

d) 35 VST – Part 1

Reference/Description

2010 (69) Kar. L.J. 369 (SC) : IndureLimited & Another v. CTO & others

In the instant case the Appellant hadentered into a works contract for“supply and erection of ash handlingplant” to be executed on turnkey basisfor contractee, viz., National ThermalPower Corporation. In regard to thesame the Appellant had importedM.S. Pipes under special importlicence on condition that the goodsimported should be used exclusivelyfor plant of the contractee. There wasan explicit stipulation in the contractwhich provided that the ownership ofequipments/goods supplied bycontractor would vest exclusivelywith the contractee (N.T.P.C.) upondispatch in India. Upon receipt of theM.S. pipes from abroad the Appellanttransported the same to thecontractee’s work-site and afterobtaining end-use certificate, claimedthe supply as sale in course of importattracting tax exemption underSection 5(2) of CST Act. TheAppellant’s claim was rejected onground that there was no privity ofcontract between contractee(N.T.P.C.) and foreign seller eitherdirectly or through contractor asagent. However the Apex Court

observed that since the goodsimported into India was for executionof works contract on turnkey basis,and, on dispatch of goods tocontractee’s work-site, goods vestedexclusively in the contractee asstipulated in contract, the saidtransaction amounted to sale in courseof import, not liable to be taxed byvirtue of Article 286(1)(b) of theConstitution of India.

Thus, the apex court recognised thepractice of effecting high sea sale ofimported equipments to be used incarrying out a local works contractand held that the State cannot tax suchsale in the guise of tax on workscontract.

2010 (69) Kar. L.J. 422 (SC) : Stateof Karnataka v. Azad Coach BuildersPvt. Ltd. & Another

In the instant case the Apex Courtdwelt in on the aspect of a deemedsale - sale in course of export. TheApex Court noted that the said lastsale should have taken place afteragreement or order for export, andmust be for purpose of complyingwith agreement or order for export orin relation to such export. The ApexCourt spelt out the three essentials ofsale deemed to be export sale whichare: (i) that there must be sale, (ii) thatgoods must actually be exported; and(iii) that sale must be part and parcelof export. The Apex Court furthernoted that the provision granting taxexemption to such sale deemed to beexport sale does not contemplate thatgoods, involved should be samegoods contracted for export. All that

was required was that the local saleor purchase between parties should beinextricably linked with export ofgoods. In the instant case the dealerbuilt and fitted bus-body on chassissupplied by exporter who hadcontracted with foreign buyer toexport “bus”. It was noted that the saleof bus-body built and fitted toexporter’s chassis by the dealer wasto enable the exporter to comply withthe export order. Hence sale of bus-body by dealer to exporter wasdeemed to be export sale and it washeld that the exemption cannot bedenied to dealer on ground that whatwas exported was bus and not the bus-body sold to exporter.

Further in the said case the ApexCourt analysed the following phrases:

(i) “To comply with agreement ororder” – Expression covers alltransactions that are necessary.

(ii) “In relation to” – are words ofcomprehensiveness, having bothdirect and indirect significance –Cannot be construed in restrictivesense.

The above large bench decision putsat rest the controversy relating toexemption in respect of penultimatesale to an exporter against H Form.

[2010] 34 VST 202 (WBTT) : BhartiAirtel Limited & Another v. Asst.CST & Others

In the instant case the West BengalTribunal dealing with the meaning of‘actionable claims’ in the context ofrecharge coupon vouchers providedby cellular mobile service providerheld that the same were actionableclaim. Therefore it was held that thesupply of recharge coupon vouchersby the assessee to distributors/Agentswas not liable to sales tax.

5 December2010

INCOME TAXPARTS DIGESTED:a) 327 ITR – Part 3 to 5

b) 328 ITR – Part 1

c) 193 Taxman – Part 3 & 4

d) 194 Taxman – Part 1

e) 5 ITR(Trib) – Part 2 to 5 & 7 & 8

f) 125 ITD – Part 8

g) 126 ITD – Part 1 & 4 to 9

h) 42-B BCAJ – Part 1

Reference/Description[2010] 327 ITR 456 (SC) : GE IndiaTechnology Centre P. Ltd. v. CIT &anotherIn the instant case the Apex Courthighlighted the purpose of Section195(2) of the Act wherein anapplication is made to the ITO todetermine the extent to which anypayment would be liable to tax onbeing considered as an income. TheApex Court observed that theapplication of Section 195(2) pre-supposes that the person responsiblefor making the payment to the non-resident is in no doubt that tax ispayable in respect of some part of theamount to be remitted to a non-resident but is not sure as to whatshould be the portion so taxable or isnot sure as to the amount of tax to bededucted. In such a situation, he isrequired to make an application to theIncome-tax Officer (TDS) fordetermining the amount. It is onlywhen these conditions are satisfiedand an application is made to theIncome-tax Officer (TDS) that thequestion of making an order underSection 195(2) would arise.

This was one decision which came onexpected lines and which removed anunnecessary controversy that arosefrom infamous Samsung case. Asalways understood, there is no needto make an application under section195(2) if the payer considers that no

part of what he pays is subject to taxin the hands of recipient in India.

[2010] 327 ITR 510 (Delhi) : CIT v.Zoom Communication P. Ltd.The Delhi High Court dealing withthe aspect of penalty under Section271(1)(c) observed that if it were totake the view that a claim which waswholly untenable in law and hadabsolutely no foundation on which itcould be made, the assessee would notbe liable to imposition of penalty,even if he was not acting bona fidewhile making a claim of the nature,then that would give a licence tounscrupulous assessees to makewholly untenable and unsustainableclaims without there being any basisfor making them, in the hope that theirreturn would not be picked up forscrutiny and they would be assessedon the basis of self-assessment underSection 143(1) of the Act. Further italso was of the view that even if theircase was selected for scrutiny, theycould get away merely by paying thetax, which is any case, was payableby them. The consequence would bethat the persons who make claims ofthis nature, actuated by a mala fideintention to evade tax otherwisepayable by them would get awaywithout paying the tax legally payableby them, if their cases are not pickedup for scrutiny. The Court thereforeheld that if a view as aforesaid wastaken then the very purpose of theSection, which is to have a deterrenteffect, would be lost.

This decision is a warning for thosewho make baseless claims in the guiseof arguable claims and take a chance.If an assessee claims some exemption/deduction which is ex facie (withoutdebate) impermissible, his very claimmay not be bonafide and he thereforeruns the risk of facing penalconsequences.

[2010] 327 ITR 543 (Delhi) : CIT v.Nalwa Sons Investments Ltd.

In the instant case the total incomecomputed under the regularprovisions was less than the bookprofits and hence the Delhi HighCourt held that since the assessmentwas made under Section 115JB of theAct penalty could not be levied.

The Delhi High Court referred to thecase of Gold Coin (2008) 304 ITR308 and stated that in the said casethe Court was of the opinion that “thetax sought to be evaded” would meanthe tax chargeable on the concealedincome as if it were the total income.

Extending the said logic toExplanation 4 of Section 271(1)(c)given by the Supreme Court, theCourt noted that no doubt there wasconcealment but that had itsrepercussions only when theassessment as per the normalprocedure. However the same was notacted upon. On the contrary, it wasthe deemed income assessed underSection 115JB of the Act which hadbecome the basis of assessment as itwas higher of the two. Tax was thuspaid on the income assessed underSection 115JB of the Act. Hence,when the computation was madeunder Section 115JB of the Act, theaforesaid concealment had no role toplay and was totally irrelevant.Therefore, the concealment did notlead to tax evasion at all and so nopenalty was leviable.

This decision although favourablemisses the point that although thebook profit is deemed to be totalincome, the loss and depreciationcomputed under the normalprovisions are carried forward forfuture set off. Therefore, concealmentnoticed in computing normal incomeis therefore not irrelevant.

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December2010

[2010] 327 ITR 582 (Karn):Prabhashankar Plaza v. ITOThe instant case dealt with the conceptof mutual association. In the said case,the assessee firm was engaged inproperty development, commissionagency and allied activities. TheKarnataka High Court held that therewas no mutual association. The Courtnoted that for the purpose of mutualitythe following three conditions shouldexist: (i) that no person can earn fromhimself; (ii) that there is no profitmotivation; and (iii) that there is nosharing of profits.

[2010] 327 ITR 592 (Bom) : CWT v.Sona Properties P. Ltd.In the instant case the Bombay HighCourt, in the context of the Wealth TaxAct, noted that where the ValuationReport was called for after completionof assessment the same was not aground for reassessment. However ifthe said Valuation Report was calledfor during pendency of assessment butwas received after completion ofassessment, then the same would bea valid ground for reassessment.

Valuation report being only anopinion can never per se be the basisfor reassessment. It is necessary thatthe assessing officer applies his mindon the valuation report and then hasto form a belief.

[2010] 327 ITR (St.) 19 : CIT v.Business India Television InternLtd.: SLP (Civil) No. 16239 of 2010In the instant case, the apex courtdismissed the Department’s specialleave petition against judgment dt.August 25, 2009, of the Delhi HighCourt in ITA Nos. 677 of 2007whereby the High Court held that nosubstantial question of law arose fromthe order of Tribunal. The Tribunal hadheld that when the assessee was underthe bona fide belief that the amountpaid to the employees was in the nature

of reimbursement of expenses incurredby them in the course of business, theassessee could not be treated as an“assessee in default”.

[2010] 193 Taxman 97 (SC): CIT v.Bharti Cellular Ltd.In the instant case the Apex Court inthe context of Section 9(1)(vii) andthe meaning of the word ‘technicalservices’ observed that right from1979 various judgments of the HighCourts and Tribunals have taken theview that the words “technicalservices” have got to be read in thenarrower sense by applying the ruleof Noscitur a sociis, particularly,because the words “technicalservices” in Section 9(1)(vii) readwith Explanation 2 comes in betweenthe words “managerial andconsultancy services”.

Further the Apex Court also gave adirection to the Assessing Officer(TDS) to examine a technical expertfrom the side of the Department andto decide the matter within a periodof four months. It stated that suchexpert(s) would be examined(including cross-examined) within aperiod of four weeks from the date ofreceipt of the order of the Court.Liberty was also given to respondentNo. 1 to examine its expert and toadduce any other evidence.

[2010] 193 Taxman 100 (Bom):Vodafone International HoldingsB.V. v. Union of IndiaIn the instant case the Bombay HighCourt held that since the transactionbetween one HTIL and the petitionerwas structured so as to achieve objectof discontinuing operations of HTILin relation to Indian mobiletelecommunication operations bytransferring rights and entitlements ofHTIL to petitioner, the said incomeaccrued and arose and derived as aconsequence of divestment of HTIL’s

interest in India. Further the Courtnoted that since the transactionbetween the parties covered within itssweep diverse rights and entitlementsand essence of the transaction was achange in controlling interest in HEL,an Indian Company which constituteda source of income in India to thepetitioner, by the diverse agreementsthat it entered into, the same had anexus with the Indian jurisdiction.Therefore the Court held that theproceedings initiated by income-taxauthorities could not be held to belacking in jurisdiction.

The High Court while upholding theproposition that the controllinginterest associated with a share is nota distinct asset by itself, failed toappreciate that a share cannot beregarded as a conduit for holdingvarious rights including diversebusiness interests. In the absence ofexpress provision, it is not permissibleto adopt the “look through” concept.Wherever a transaction by way ofacquiring share has to be understooddifferently, explicit provision has beenmade. For example, section 2 (47) (vi)regards as a transfer any transaction(whether by way of becoming amember of, or acquiring shares in, aco-operative society, company orother association of persons or byway of any agreement or anyarrangement or in any other mannerwhatsoever) which has the effect oftransferring, or enabling theenjoyment of, any immovableproperty. Similar provision may beseen in section 269 UA(d)(ii) whichdefines immovable property asmeaning any rights in or with respectto any land or any building or a partof a building (whether or notincluding any machinery, plant,furniture, fittings or other thingstherein) which has been constructed

7 December2010

or which is to be constructed,accruing or arising from anytransaction (whether by way ofbecoming a member of, or acquiringshares in, a co-operative society,company or other association ofpersons or by way of any agreementor any arrangement of whatevernature), not being a transaction byway of sale, exchange or lease of suchland, building or part of a building.

The High Court while holding that thesubject matter of transfer was abasket of rights which are in the natureof capital assets, misled itself inimplying that these capital assets aretransferred by HTIL or HTI (BVI) toVodafone. The entire case of departmentas accepted by the High Court is builton the incorrect assumption that thevaried business interests are held byHTIL or HTI (BVI) as their capitalassets. The fact remains that thesebusiness interests always belonged tothe various Indian companies whocarried on telecom business. Even afterthe impugned transaction of transfer ofone CGP share, these rights very muchremained with the above Indiancompanies. These business interestscontinued to be indirectly owned byHEL, an Indian company as well as byvarious Mauritian companies andequally so, by CGP. In the level ofhierarchy, HTI(BV) stands at fifth leveland HTIL stands at the seventh level. Itis too far-fetched to imagine that HTI(BV) and HTIL who stand at fifth andseventh levels respectively, “own” thevaried business interests in India. It isequally far-fetched to say that thesecompanies are the owners of capitalassets and these companies havetransferred the said capital assets whensuch capital assets very much remainedwith various companies up to the fourthlevel even after the impugnedtransaction.

The High Court has erred in layingundue emphasis on the fact that invarious agreements andarrangements, HTIL is a party. HTILbeing at the helm of the group wouldenter into such agreements andarrangements as part of its parentalobligation. Merely because HTIL is aparty to such agreements andarrangements, it cannot be said thatHTIL as such owned the variouscapital assets which are subject matterof such agreements and arrangements.This is particularly so when thesecapital assets have never gone out upto the fourth level company. Thesecapital assets are very much owned bythe companies at the lower levels andthe degree of ownership is strongestat the lowest level.

The High Court has erred in reading“whether directly or indirectly” asqualifying the word “transfer”appearing in fourth limb of section9(1)(i). The words “directly orindirectly” which appear at thebeginning of section 9(1)(i) follow“accruing or arising” and hencequalify only the latter. The said wordsdon’t appear after the word“transfer”. Wherever it is intendedto make the provision applicable tothe word “transfer” specific provisionhas been made. Reference may bemade to section 17(2)(vi) and section64(1)(iv) where such intention hasbeen expressed.

[2010] 194 Taxman 70(Uttarakhand): CIT v. Enron ExpatServices Inc.In the instant case the UttarakhandHigh Court, in the context of Section192 dealing with deduction of tax atsource in the case of payments madein the nature of salaries, held that theobligation to deduct tax at time ofpayment, which is mandate of sub-section (1) of Section 192 extends up

to end of financial year by virtue ofprovisions contained in sub-section(3) of Section 192. Therefore in theinstant case where the assessee did notdeduct tax under Section 192(1) fromsalaries in each month, rather itdeducted tax at end of financial year,the Court held that the Tribunal wasjustified in deleting interest chargedunder Section 201(1A) by relying onSection 192(3).

[2010] 194 Taxman 192 (Bom.): CITv. Gem Plus Jewellery India Ltd.The instant case dealt with thecomputational aspect under Section10A. The Bombay High Court heldthat, for the purpose of application offormula prescribed by Section 10A(4),the export turnover in the numeratormust have same meaning as exportturnover which is a constituent elementof total turnover in the denominator.Therefore it was observed that sincein computing export turnover theLegislature had made a specificexclusion of freight and insurancecharges, these two items would haveto be excluded from total turnover alsofor purpose of computing exemptionunder Section 10A.

Further the Court held that where theAssessing Officer had enhancedincome by disallowing employer’s aswell as employee’s contributiontowards provident fund/ESIC,exemption under Section 10A had tobe granted on such enhanced income.

In the context of Foreign exchangegain the Court held that exemptionunder Section 10A should be grantedon foreign exchange gain earned onrealization of export receipts in theyear of export and gains on sales ofearlier years should be excluded fromprofits of year under consideration.

[2010] 126 ITD 231 (Chennai): K.S.Kamalakannan v. Asst. CITThe instant case dealt with the

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December2010

computation of income under the headhouse property and the aspect ofdeduction on account of interest paidon loan borrowed. The ChennaiTribunal held that as per theprovisions of Section 24(1)(vi), ifinterest paid on original loan wasallowable as deduction, then interestpaid on second loan for repayment oforiginal loan was also allowable.

The facts of the case was that theAssessee had inherited a houseproperty from his father and the saidproperty had been mortgaged to EBSLon account of loan taken by his fatherfor business purposes. Afterinheritance, the assessee took a loan,which was utilized to repay loan takenfrom EBSL. The Assessee claimeddeduction in respect of interest paid onloan taken by him. However theRevenue authorities rejected theassessee’s claim holding that as perprovisions of Section 24(1)(vi), interestwas to be allowed only in respect ofloan taken for repayment of earlier loanutilised for construction, acquisition,reconstruction, repair, etc., of property.

The Tribunal based on such facts heldthat since in instant case, the originalloan was not taken for purpose asprescribed under Section 24(1)(vi),rather the same was taken for businesspurposes, the Revenue authoritieswere justified in disallowing theassessee’s claim.

[2010] 126 ITD 263 (Chennai): Asst.CIT v. Viswas Promoters (P.) Ltd.In the instant case the Assessee hadcompleted four housing projects. Outof the said four in two projects theassessee had constructed flatsexceeding 1500 sft. in area. TheAssessee claimed deduction underSection 80-IB(10) in respect of flatshaving area less than 1500 sft.However the Assessing Officer deniedthe said deduction on the ground thatthe housing project comprised ofresidential units exceeding 1500 sft.,thus, all conditions stipulated instatute were not satisfied.

The Chennai Tribunal held that sincethe Assessee did not comply with allthe conditions precedent for availingof benefit of Section 80-IB(10) the

Assessing Officer was justified indisallowing assessee’s claim.

In passing such a judgement theTribunal noted the meaning of theterm ‘project’ and stated that the samewas nomen generalissinum. It is aterm of most general meaning. Itconnotes a proposal for undertakingor a scheme for something to be done.The assessee did formulate four suchschemes, namely, Agrini, Vajra,Porkundam Phase-I and Phase-II.These four schemes as such wereapproved by the local authority. Aproject cannot be approved inpiecemeal. Approval is accorded tothe entire project. Blocks ofresidential units are parts of a projectand not project by itself. As such ablock of residential unit cannot beconstructed to be a separate project.

This is one exceptional decisionstanding amidst several others whichhave held that disallowance will berestricted to profits attributable tothose units exceeding the prescribedarea limit.

An appeal to Members to inform their articles

Bangalore Branch is pleased to announce that IPCC & Final coachingclasses for the students appearing for the May 2011 Examination, will becommencing from 13th December 2010 at Bangalore Branch premises.

Fee Structure:

IPCC : Rs.8,000/- For both the groups

Rs.5,000/- For only Group I

Rs.4,000/- For only Group II

FINAL : Rs.8,000/- For all subjects

Rs.6,000/- For Single Group

We request you to pass on this information, for the benefit of students.

For further details please call:080-30563511/512 or visit Branch.

Congratulations

CA.Ballambettu Sudhakar Pai,(Membership No. 018187)

has been conferred‘Karnataka Rajyotsava

Award 2010’by the Government of Karnataka

on 1st November 2010for his outstanding

contribution in industrialfacilitation.

9 December2010

VALUE ADDED TAX The assessee was engaged in the

manufacture and sale of Indianmade foreign liquor (‘IMFL’). Theassessee treated the sale of IMFLmade to Air India to be in thecourse of export and claimed thatCentral Sales Tax was notcollectible on such sale. TheAssessing Officer rejected theclaim of the assessee and held thatCentral Sales Tax is payable onsuch sale. However, the Tribunalheld that the sale is in the course ofexport and not liable to sales tax.On revision petition by theRevenue it was held that, a sale orpurchase of goods shall be deemedto take place in the course of exportonly if the sale or purchase eitheroccasions such export or is effectedby a transfer of documents of titleto the goods after the goods havecrossed the customs frontiers ofIndia. Air India is an IndianCompany and is not engaged inexchange of export business as theAir India has not purchased IMFLfrom the assessee for exporting toforeign country. The Tribunal haderred in considering the nature oftransaction between the assesseeand Air India. Hence the revisionpetition was allowed and the orderpassed by the Tribunal was setaside. [State of Karnataka vs.Bacardi Martini India Limited,Bangalore. 2010 (69) Kar. L.J 362(HC) (DB)]

RECENT JUDICIALPRONOUNCEMENTSIN INDIRECT TAXESCA. N.R. Badrinath, B. Com., Grad C.W.A., F.C.A.,CA. Madhur Harlalka, B. Com., F.C.A.

The appellant-company engaged inthe manufacture of cement wasassessed to entry tax under theKarnataka Tax on Entry of GoodsAct, 1979 (‘the Act’) wherebyentry tax was levied on motorvehicles, parts of motor vehicles,tarpaulins and spares of dieselgenerating sets. The appellantcontended that the GovernmentNotification which provided for thelevy of entry tax on motor vehicles,as amended is ultra vires theconstitution since the rate of taxexceeds the statutory limit of 5%.It was held that, the levy of entrytax on tarpaulins and spares ofdiesel generating sets is justifiedwhereas the levy of entry tax onmotor vehicles is ultra vires theConstitution of India as decided bythe Honourable High Court ofKarnataka in the case of Larsenand Toubro Case EquipmentPrivate Limited. Hence it wasordered that the impugned orderslevying tax on motor vehicles areto be deleted and the AssessingAuthority was directed torecompute the appellant’s entry taxliability in terms of this order andissue revised demand noticeaccordingly. [Associated CementCompanies Limited, Bangalore vs.State of Karnataka. 2010 (69) kar.L.J 309 (Tri.) (DB)]

The appellant is engaged in the saleof cement concrete blocks and hadpaid tax at the rate of 4% on the

turnover. The appellant hadclaimed exemption on the turnoverin respect of the transportationcharges incurred by them andreimbursed by the customers. Therevenue proposed to disallow theclaim of exemption on the groundthat the appellant was not eligiblefor such exemption and accordinglyre-determined the taxable turnover.The appellant contended that in theinvoice raised, the transportationcharges are separately mentionedand the after the said amount wascollected from the customer thesame was paid in full to thetransporters without adding anyamount to the value of the goods.However, it was held that the dealercollects freight charges as part oftotal order value and the title to thegoods sold passes on to the buyeronly on delivery of goods to thebuyer. Hence freight charges formspart of sale consideration and hencehas to be included in taxableturnover, though the same is shownis separately in the tax invoice. Theappeal was dismissed accordingly.[APCO Concrete Block and AlliedProducts, Bangalore vs. The DeputyCommissioner of CommercialTaxes, Audit-1, DVO, Bangalore.2010 (69) kar. LJ 305 (HC) (DB)]

The petitioner is engaged in retailsale of motor vehicles/ chassismanufactured by M/s. GeneralMotors India Private Limited andAshok Leyland Limited and isregistered under the KarnatakaValue Added Tax Act, 2003 (‘theAct’) and the Karnataka ValueAdded Tax Rules, 2005 (‘theRules’). The petitioner had affectedsales by raising a pro forma invoicefor full price inclusive of VAT andupon the receipt of the price lessdiscount, a credit note was raised

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on the customer in respect of thediscount including the tax elementon such discount, resulting inreduction in the price. The revenueissued show cause noticeproposing to reject the claim ofdiscount on the ground that thesame is not in compliance withRule 3(2)(c) of the Rules and thediscount was not brought to thenotice of the buyers. However, itwas held that as per Rule3(2)(c) asamended by Notification No. FD124 CSL 2006 dated 27/05/2006with effect from 01/04/2006, thedealer was required to show theamount allowed as discount in thetax invoice, and the said Rule is notultra vires the Act since it does notprohibits the issue of credit noteswithin six months of sale, if taxcharged in the invoice exceeds thetax payable on account of returnof goods. Having issued the taxinvoice, dealer is not permitted tochange the sale price byintroducing an undiscloseddeduction after conclusion of sale.Hence the writ petition wasdismissed. [TV Sundaram Iyengarand Sons Limited, Bangalore vs.State of Karnataka and Another.2010 (69) Kar. LJ. 315 (HC)]

SERVICE TAX The appellant, engaged in the

manufacture of textile machineriesentered into a contract with theircustomers for supply of textilemachinery, for which the sale pricequoted was inclusive of installationand commissioning charges andexcise duty was paid on the entirecontract value. The Revenue issuedshow cause notice proposing torecover service tax on the erection,commissioning and installationcharges included in the value ofmachinery along with interest and

penalty. The appellant contendedthat the contract was a compositecontract for the supply ofmachinery in fully installedcondition and the processundertaken at the buyer’s premiseswas incidental to themanufacturing process. Sinceexcise duty was paid on the entirecontract value, erection,commissioning and installationshould be considered as a part ofmanufacturing process and noservice tax is payable thereon. TheRevenue argued that the appellantsare liable to service tax on theactivities carried out by them at thebuyer’s premises. However, onappeal it was held that theappellants are not liable to pay anyservice tax and hence the impugnedorder confirming the demand andimposing interest and penalties wasset aside and the appeal wasallowed with consequential relief.[Alidhara Texspin Engineers vs.Commissioner of Central Exciseand Customs, Vapi. 2010 (20) S.T.R315 (Tri – Ahmedabad)]

The appellants were registered andpaying tax on services under thecategory Goods Transport Agency(‘GTA’). The Revenue found thatthe appellant had provided servicesunder the category Clearing andForwarding Agent (‘CFA’) withoutpaying service tax and hence issuedshow cause notice imposingpenalty and interest. TheCommissioner (Appeals) foundthat the appellant had suppressedthe fact of providing taxableservice and held that the demandwas sustainable for extendedperiod. Before the Tribunal, theappellant contended that the delayin payment of service tax was dueto the bone fide belief that the

impugned activity did notconstitute a taxable service underthe category CFA and in such casepenalty cannot be imposed. Theperiod of 1 year for the purpose ofissue of show cause notice has tobe computed from the date onwhich service tax was to be paidas per provisions of the Act.However, it was held that theimpugned order wrongly sustainedthe order of the original authorityon the basis that the demand wassustainable for the extended periodthough the shoe cause notice hadnot raised allegation of suppressionof fact. Accordingly, the impugnedorder was set aside and the appealby the appellant was allowed.[Sudhakar Plastic Limited vs.Commissioner of Customs andCentral Excise, Hyderadab. 2010(20) S.T.R 332 (Tri – Bangalore)]

The appellants were holding theservice tax registration for theservices rendered by them underthe category of Port Services.During the course of audit, it wasnoticed that the appellant hadavailed and utilized the credit ofservice tax paid based on ineligibledocuments. On a conclusion thatthese are not the proper documentsprescribed for availment of creditas per Rule 9 of Cenvat CreditRules, 2004, the appellants wereissued show cause notice forreversal of the said credit availed.The Adjudicating Authorityconcluded that the credit availed isincorrect and confirmed few of thedemands and dropped the others.However, it was held that, since theappellant had not challenged theservice tax liability on servicesprocured from foreign consultant,the re-imbursement of expensesand royalty, the demand was

11 December2010

confirmed along with interest.However, the penalties imposed ona consolidated basis would berestricted as per the provisions ofsections 76 and 77 of the FinanceAct, 1994. Since the royaltypayments for services rendered bythe foreign consultants would beliable for service tax from18.01.2006, penalty could not beimposed for a prior period. Hencethe penalties imposed were setaside. [India Gateway Terminal (P)Limited vs. Commissioner ofCentral Excise, Cochin. 2010 (20)S.T.R 338 (Tri – Bangalore)]

The appellants were renderingCommercial or IndustrialConstruction Service (‘CICS’) andhad constructed an OnshoreTerminal (‘OT’) for M/s. RelianceIndustries Limited for storage,processing and onwardtransportation of natural gas to thecustomers. The Revenuecontended that such activity ofconstruction of OT was excludedfrom CICS. The OT was anindustrial plant with variousprocessing facilities and theappellant had not intimated theimpugned activity undertaken byit to the department beforeinitiating enquiry. TheCommissioner found thatappellants had suppressed thecorrect taxable turnover andinvoked longer period to raise thedemand and impose penalty. Theappellant contended that thedepartment was aware of theimpugned activity and thereforethe demand was time barred.However, it was held thatappellants have not made a primafacie case to qualify for completewaiver of the pre-deposit. Hencethe pre-deposit was partly waived.

[Larsen and Toubro Limited vs.Commissioner of Central Excise,Hyderabad. 2010 (20) S.T.R 113(Tri – Bangalore)]

The Revenue was aggrieved by theextension of credit of service taxon agricultural work, levelling ofchildren park and tree plantationsand construction of toilet in school.However, it was held that theassessee was entitled to the crediton agricultural work for the reasonthat such a service has been heldto be an input service in the caseof Millipore India Limited vs. CCE2009 (13) S.T.R 616 = 2009 (236)E.L.T 145 (Tribunal). Therefore theassessees are entitled to credit ofservice tax paid on agriculturalwork. As far as the other two creditsare concerned, it was held that theassessee is not entitled to credit asthese cannot be considered as inputservices relating to the business ofthe assessee. Hence the appeal waspartly allowed. [Commissioner ofCentral Excise, Salem vs. ITCLimited. 2010 (20) S.T.R 141 (Tri– Chennai)]

The Revenue filed appeal againstthe extending of Cenvat credit ofservice tax paid on services ofmaintenance of water coolersinstalled in the factory of theassessee and house keepingservices. However, it was held thatthe lower appellant authority hasrightly extended the benefit of creditof tax paid on the above mentionedservices for the reason that provisionand maintenance of water coolersis an essential requirement under theprovisions of the Factories Act andhouse keeping services are alsonecessary and vital for keeping thefactory in good condition. Based onthe decision in the case ofBalkrishna Industries Limited vs.

CCE. Aurangabad 2010 (18) S.T.R600 (Tri – Mumbai), the impugnedorder was upheld and the appealfiled by the Revenue was dismissed.[Commissioner of Central Excise,Chennai vs. Rotork Control (India)Private Limited. 2010 (20) S.T.R 29(Tri – Chennai)]

The appellants were engaged inlaying, erection andcommissioning of pipelines forwater supply projects of theGovernment of Andhra Pradeshand are assessed to APVAT underthe category of works contract. Theappellants filed an application forwaiver of pre-deposit of the servicetax due from due from them underthe Goods Transport Agency(‘GTA’) service for the outwardtransportation of materials alongwith interest and penalty. Theappellants contended that theimpugned services form part of theworks contract and based on theratio in the case of DaelimIndustrial Co. Ltd vs. CCE,Vadodara 2006 (3) STR 124(Tri.)=2003 (155) ELT 457 (Tri.),outward transportation cannot beseparated and subjected to servicetax and in any case, the impugnedtax liability has been dischargedutilising Cenvat credit. However,it was held that a Division Benchof the Tribunal has waived pre-deposit and stayed the recovery ofsimilar demand raised on theassessee for an earlier period. Theassessee is free to make pre-depositto hear an appeal utilising Cenvatcredit. Accordingly, the pre-depositwas waived and the recovery of theadjudged dues was stayed. [TaherAli Industries and Projects Limitedvs. Commissioner of Service Tax,Huderabad. 2010 (20) S.T.R 127(Tri – Bangalore)]

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December2010

The petitioner company was beengranted registration in the categoryof Clearing and Forwarding Agent(‘CFA’). The petitioners hadentered into liasoning agreementswith various industrial concernsthat are bulk consumers of coal andare required to make bulk purchaseof coal. The petitioner contendedthat the service provided by themfall under the category of BusinessAuxiliary Service which includessupervising the loading of coal,ensuring that proper indents areplaced, the requisite quality of coalis loaded and the wagons areloaded to their full capacity. Thepetitioners were issued aregistration certificate grantingcentralised registration in thecategory of CFA. On a writ petitionby the aggrieved petitioner, it washeld that the Commissioner ofCentral Excise do not have powerto grant registration on his own,even though no application hasbeen made. There is no provisionin the Finance Act, 1994 whereinan application for registration canbe refused and the registration canonly be granted the category inrespect of which the applicationhas been submitted and recoveryor penal proceedings can beinitiated against a person for non-payment of service tax, if theservice provider is taxable under adifferent category. Hence, the writpetition was allowed and theimpugned orders were set asideand quashed. [KaramchandThappar & Bros. (Coal Sales)Limited vs. Union of India. 2010(20) S.T.R 3 (Cal.)]

The appellants are themanufacturers of fabrics andpurchased yarn frommanufacturers in Nepal, who

issued invoices in two parts-firstfor value of the goods and thesecond for the excise duty,transportation from Nepal borderto factory premises, clearingexpenses, insurance charges,cartage, etc. The Department wasof the view that the appellants whoreimbursed freight charges to thesuppliers being receivers of GTAservices were liable to pay servicetax and accordingly issued showcause notice which, wasconfirmed by the Commissioner(Appeals). However, on appeal itwas held there is no evidenceshowing that the appellants hadinstructed the Nepalese suppliersto engage the transporters on theirbehalf. The Nepalese suppliershad engaged the transporters andbilled the appellants for the valueof goods and transport expensesfrom Nepal border to the factorypremises. There is no evidencethat the Nepalese suppliers hadacted as the agents of theappellants. Hence, the appellantscannot be treated as recipients ofGTA services and accordingly theimpugned orders are notsustainable. [SumangalamSuitings (P) Limited vs.Commissioner of Central Excise,Jaipur-II. 2010 (19) S.T.R 809 (Tri– Delhi)]

The service tax shall be payableat the rate prevailing on the dateof entry in service and not at therate prevailing at the time ofbilling and receipt of payment.Various provisions of sections 64to 96 of Finance Act, 1994providing for service tax andService Tax Rules provide that therelevant date is date of entry andnot date of billing. Hence theappeal was dismissed.

[Commissioner of Central Exciseand Customs vs. RelianceIndustries Limited. 2010 (19)S.T.R 807 (Guj.)]

The assessee was engaged in themanufacture of cement. Onscrutiny of the CENVAT register,it was noticed by the ExciseAuthorities that, the assessee hadavailed credit of service tax paidon outdoor catering services underthe provisions of Cenvat CreditRules, 2004 & utilized the same inpaying excise duty. The AssistantCommissioner was of the opinionthat outdoor catering services wasnot a Input service and therefore,the assessee was not entitled to takecredit of service tax paid onoutdoor catering services andaccordingly issued show causenotices. The assessee contendedthat, under the Factories Act, 1948,it was mandatory to providecanteen facilities to the employeesworking in the plant and theadministrative offices of theassessee. However, it was held thatinput service extends to all servicesused in relation to the business ofmanufacturing the final productand covers not only services, whichare directly or indirectly used in orin relation to the manufacture offinal products but also includesvarious services used in relation tothe business of manufacture offinal products, either prior to themanufacture or after themanufacture of final products.Hence the question of law framedby the revenue was answered in thein favour of the assessee andagainst the revenue.[Commissioner of Central Excise,Nagpur vs. Ultratech CementLimited. 2010-TIOL-745-HC-MUM-ST].

13 December2010

6 HrsCPE

Seminar on “Emerging Economic Challenges for Industry”

On Saturday the 4th December 2010at The Lalit Ashok, Kumara Krupa High Grounds, Bangalore

Organised by: Committee for Members in Industry, SIRC of ICAI

Host Branch: Bangalore Branch of SIRC of ICAI

Timings Topics Speakers

09.15 am to 10.00 am InaugurationChief Guest: Sri. Ravi Ramu, Member ICAI & ICAEW

President & CEO, Hothur Group

10.00 am to 11.15 am Session I:Salient Features of Sri M.R.Gopinath, FCS“The Companies Amendment Bill 2009”

11.15 am to 11.35 am Tea Break

11.35 am to 01.00 pm Session II“Direct Tax Code – CA. K.K.Chythanya, FCAComputation of Business Income”

01.00 pm to 02.00 pm Lunch Break

2.00 pm to 03.30 pm Session III“IFRS & preparing for Convergence” CA. M.P.Vijay Kumar, FCA

03.30 pm to 03.50 pm Tea Break

03.50 pm to 05.15 pm Session IV “GST & its impact on Business Enterprise” CA. S.Venkataramani, FCA

05.15 pm to 06.00 pm Session VOpen House - “Understanding the CA. K Viswanath, FCAneeds of Members in Industry”

Hurry! Restricted to 250 delegatesDelegate Fees: `̀̀̀̀ 1,800/-(Cash / Cheque in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore)

For registration & further details please contact: Bangalore Branch of SIRC of ICAI,“ICAI Bhawan”,16/0,Millers Tank Bed Area, Vasanth Nagar,Bangalore-560052

Tel: 080 – 30563500 / 513 Email: [email protected]

14


December2010

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MERGER (ACQUISITION) MODELING

INVESTMENT BANKING PROCESS AND BESTPRACTICES, INTERVIEW SKILLS AND RESUME REVISION

For More Information:

Please email us at [email protected] or sign upon our website at www.austalgroup.net/education.Please visit our website to view all our offerings.

FINANCE MANAGERFOR IT COMPANY

Looking for “Finance Manager” for the newly startedIndia division of a Hong Kong head quartered ITCompany with yearly turnover of more than $200 Mwith multiple offices across East Asia and South EastAsia .The Indian division shall be head quartered inBangalore with multiple offices across various citiesin India.

Job Description: Reporting to the Business GeneralManager of India division shall be responsible to theend to end finance management of the India division.

Expected Profile: Chartered Accountant with goodfinancial knowledge and ability to take completeresponsibility for successful functioning of accounting& finance requirement of the company.

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15 December2010

“SAMMILANA” - Meeting for Better CauseTWO DAY NATIONAL CONFERENCE FOR STUDENTS AT BANGALORE

Organized By Board of Studies, ICAI

Hosted By Bangalore Branch of SICASA & Bangalore Branch of SIRC of ICAI

Date: 8th & 9th of January 2011 (Saturday & Sunday)

Venue: Sophia Auditorium, Sophia School, Basaveshwara Circle, Bangalore - 560 001 (Near Race Course)

Registration Fee:1. Rs. 400/- Per Resident Student (early Bird offer Rs. 350/- Per Student if registered before 15.12.2010)2. Rs. 500/- Per Outstation Student (including 2 days and 1 night accommodation)

SATURDAY, 8TH JANUARY 2011 (DAY 1)

Time Session / Speaker09:30AM Inauguration

A person with national interestCA. Amarjit ChopraPresident, ICAI

CA. G.RamaswamyVice-president, ICAI

CA. Vinod JainChairman, Board of Studies, ICAI

11:00AM TEA BREAK11:30AM DTC - Issues

Session Chairman:CA. K. K. ChytanyaStudent Speaker:To be announced

12:30PM Auditing in an ERP EnvironmentSession Chairman:CA. Babu JayandranStudent Speaker:To be announced

01:30PM LUNCH BREAK02:30PM Interactive Session with

Chairman Board of Studies, ICAI

CA. Vinod JainChairman, Board of Studies, ICAI

03:30PM Road Map to IFRSSession Chairman:CA. M.P. Vijayakumar, Chennai

Student Speaker:To be announced

04:30PM TEA BREAK05:00PM Personality Development &

Communication SkillsSri.Kathiravan

05:30PM Felicitation to Past SICASA Chairmenof Bangalore Branch

06:00PM Entertainment07:30PM DINNER

SUNDAY, 9TH JANUARY 2011 (DAY 2)

Time Session / Speaker09:00AM Strategies for success in CA exams

Padmashri CA.T N ManoharanPast President, ICAI

Spiritual and Motivational ThoughtsPadmashri Mathoor KrishnamoortiExecutive DirectorBharatiya Vidya Bhavan, Bangalore

10:30AM Limited Liability Partnership (LLP)Session Chairman:CA. D R Venkatesh


11:30AM TEA BREAK

11:45AM Companies Amendment Bill, 2010Session Chairman:Sri. M R Gopinath


01:00PM LUNCH BREAK

02:00PM GST-Way forwardSession Chairman:CA.S Venkataramani


03:00PM Valedictory Function

Note: Blood Donation Camparranged for CA studentson 09.01.2011 between 09.00AM & 01.00PM.

For further details, contact:

Mr.CHANDRASHEKAR, 9880128309

Mr.VINOD GARG, 8123908037

Mrs.ANURADHA RAO, 080-30563511

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December2010

5th Dec. 2010 Payment of Central Excise Duty for the month of November 2010

Payment of Service Tax for the month of November 2010 (in case of persons other than

individual, proprietor & partnership firms)

6th Dec. 2010 Payment of Service Tax for the month of November 2010 (in case of persons other than

individual, proprietor & partnership firms) if paid Online.

7th Dec. 2010 Payment of TDS Deducted & TCS collected, in the month of November 2010

10th Dec. 2010 Filing of monthly returns of Central Excise for the month of November 2010

15th Dec. 2010 Filing of monthly returns of Central Excise for the month of November 2010

Payment of Third Installment of Advance Tax in case of Companies.

Payment of Second Installment of Advance Tax in case of Non-corporate assesses

Payment of Provident Fund for the month of November 2010

Filing of VAT 120 under KVAT Laws for the month of November 2010

20th Dec. 2010 Filing of VAT 100 under KVAT Laws for the month of November 2010

21st Dec 2010 Payment of ESI for the month of November 2010

25th Dec. 2010 Filing of Monthly returns of Provident Fund for the month of November 2010.

31st Dec. 2010 Filing of VAT 240 under KVAT Laws for the year ending 31st March 2010

IMPORTANT DATES TO REMEMBER DURING THE MONTH OF DECEMBER 2010

Duration:

December 2010 to April 2011

(78 Sessions)

Timings: 8.30am to 1.30pm

(only on Saturdays)

Course Fee: `̀̀̀̀ 20,000/-

Course Contents:

• Corporate Finance

• Strategic Cost Management

• Financial Reporting and

Analysis

• Financial Services

• Concepts and Practice of

Automated Information Systems

• Corparate Bussiness Laws

For Whom: The course is open for

Members & Non members who are

currently working in the field of

Finance/Accounts. Applicants for this

course should have at least 2 years

experience in the finance function.

Knowledge of accounting terms,

pr inciples and procedures are

essential as the course will cover

areas that are comparitively

advanced in nature.

We request you to pass on this

information to your Clients:

Finance/ Accounts Executives to

avail the benefits of this course.

For details contact Branch on

Tel. 080 30563500/511/512

e-mail: [email protected]

APPEAL TO THE MEMBERS

Admission open for XVIII Batch of Course onCorporate Accounting, Finance & Business Laws

17 December2010

Seminar on “Mergers & Acquisitions- Strategising for Growth & Sustainability”

On 11th December 2010 between 09.00am & 06.00pmat Taj Vivanta (formerly Taj Residency), M.G. Road, Bangalore

Timings Topic Speakers

09.30am to 10.30am InaugurationChief Guest : Mr. V. Sunder

President & Group CFODynamatic Technologies Ltd., Bangalore

10.30am to 11.45am Strategy & Deal Making Ms. Lakshmi NambiarVice President - Financial AdvisoryAvendus Capital Pvt Ltd, Bangalore

11.45am to 12 Noon Tea

12.00 Noon to 01.15pm Valuation & Deal structuring CA. Yashasvi SharmaAssociate Director, Financial AdvisoryServices, PWC, BangaloreMr. Chandra Sekhar GanduriManager, Financial Advisory Services,PWC, Hyderabad

01.15pm to 02.00pm Lunch

02.00pm to 03.15pm Legal & Taxation Mr. N. K. DilipPartner, Tatva Legal, BangaloreCA. K. T. ChandyPartner, E&Y, Bangalore

03.15pm to 03.30pm Tea

03.30pm to 04.45pm Due Diligence CA. Arun Kumar M KClient Service Director,Grant Thornton, Bangalore

04.45pm to 05.45pm Integration & Monitoring CA. Sushanth Pai,Programme Director – Finance,MindTree Ltd., Bangalore

Registration Fee: Members ` ` ` ` ` 2,000/-Non Members ` ` ` ` ` 3,000/-

(Cash / Cheque in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore)

For registration & further details please contact: Mrs. RoopashreeBangalore Branch of SIRC of ICAI,

“ICAI Bhawan”,16/0,Millers Tank Bed Area, Vasanth Nagar,Bangalore-560052

Tel: 080 – 30563500 / 513 Email: [email protected]

6 HrsCPE

Hurry! Restricted to 250 delegates

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December2010

19 December2010

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December2010

blore br dec 10 newsletter · 2018. 10. 31. · 3 december 2010 cpe and other programs - december...

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