Bangalore Branch of SIRC of the Institute of …bangaloreicai.org/downloads/nl/201111_newsletter.pdf7 November 2011 Bangalore Branch of SIRC of the Institute of Chartered Accountants

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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CALENDAR OF EVENTS - November & December 2011Date/Day Topic /Speaker Venue/Time CPE Credit

02.11.11 Corporate Governance in unlisted companies Branch PremisesWednesday Mr. J Sundareshan 06.00pm to 08.00pm03.11.11 CPE Teleconference on “Auditing in ERP Environment” Branch PremisesThursday CA.Yukti Arora 11.00am to 01.00pm09.11.11 Drafting & pleading before appellate authorities Branch PremisesWednesday CA. Prashanth G S 06.00pm to 08.00pm12.11.11 Seminar on TDS Branch PremisesSaturday Co-ordinator: CA. D R Venkatesh 09.30am to 05.30pm

Details at page no: 16 Fee: Rs.750/-16.11.11 Interactive Session with ROC, Karnataka Branch PremisesWednesday & Officials of ROC 06.00pm to 08.00pm

- Discussion on CLSS 2011 & other ROC related issues19.11.11 Workshop on MS - Excel 2007 & 2010 ITT South Centre, B'lore BranchSaturday Speaker: CA. Aditya Singhal Sanjay Towers, #216,

Restricted to 45 participants Subbarama Chetty Road,Details at page no: 16 Fee: Rs.250/- Bangalore - 04Ph: 080 -26621434

10.00am to 01.00pm20.11.11 Golden Jubilee Sports Meet KGS Club,Cubbon Road,Sunday Details at page no: 4 Bangalore

09.00am to 06.00pm —21.11.11 Comprehensive workshop on Real Estate and Branch Premises

26.11.11 Co-ordinator: CA.Ashok Raghavan on Saturday 10.00am to 01.30pmSaturday Details at page no: 18 Fees: Rs.1,500/-23.11.11 XBRL - CA perspective Branch PremisesWednesday CA. Anirudh Saraf 06.00pm to 08.00pm24.11.11 CPE Teleconference on “Transfer Pricing Provisions” Branch PremisesThursday CA.Dhinal A. Shah, Central Council Member 11.00am to 01.00pm

Wednesday CA. Sankara Srinivasan 06.00pm to 08.00pm07.12.11 Refund - Under Service Tax Law Branch PremisesWednesday CA. G Lakshminarayana 06.00pm to 08.00pm09.12.11 Corporate Conclave Hotel Lalit Ashok,Friday & Details at page no: 17 Fees:Rs.3,000/- Bangalore10.12.11Saturday23.12.11 Sub Regional CPE Conference Venue will be communicatedFriday & on the occasion of Diamond Jubilee year of SIRC of ICAI Visit www.bangaloreicai.org24.12.11 & Golden Jubilee year of Bangalore Branch of SIRC of ICAISaturday Details at page no: 19 Fees:Rs.1,800/-

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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 that 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 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. Venkatesh Babu T.R.

Sub Editor : CA. Ravindranath S.N.

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30.11.11 Preperation of Bank Loan Documents Branch Premises

Monday to Property Development 04.00pm to 08.15pm

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TAX UPDATES SEPTEMBER 2011CA. Chythanya K.K., B.com, FCA, LL.B., Advocate

VAT, CST, ENTRY TAX,PROFESSIONAL TAXPARTS DIGESTED:a) 41 VST – Part 2 & 4b) 42 VST – Part 4c) 43 VST – Part 1 & 5d) 44 VST – 1 & 2e) 7 GST – Part 1f) 16 KCTJ – Part 6

Reference / Description[2011] 41 VST 129 (AP – HC) : A.P.Aksh Broad Band Ltd. v. CTO andothers - In the instant case the AndhraPradesh High Court was dealing withthe taxable event with regard to workscontract under section 4(7)(a) & (b)of the Andhra Pradesh VAT Act. Thedealer was engaged in the businessof undertaking laying of fibre cablesrequired for the telecom industry. TheAndhra Pradesh Telecom Departmententrusted to the dealer the job oflaying of cables in Andhra Pradeshfor a consideration of Rs. 370 Crores.The dealer entrusted the work on sub-contract to the third party. The workwas either partially or fully completedduring 2005-06 and 2006-07. TheTelecom Department suspendedexecution of the work, and kept it onhold. The dealer did not submitrunning account bills and, therefore,treated the value of the fibre cableslaid as part of the work-in-progressand capitalised it in the balance sheet.The revenue department proposed tolevy tax under section 4(7)(a) of theAndhra Pradesh VAT Act at 4 or 12.5per cent on the material used inexecuting the work of laying cables.The dealer contended that there wasno transfer of any material inexecution of works contract, in favourof the contractee, that the dealer did

not raise any bills against the contractand that therefore, in the absence ofthe incorporation and consequentappropriation of goods by theTelecom Department, the levy of taxunder section 4(7) does notexist.Considering the above facts, theAndhra Pradesh High Court held thatwhen goods are supplied or used inexecution of a works contract by adealer, there shall be deemed to be atransfer of property in such goodswhich would be regarded asincorporation of such goods. Furtherwith regard to the appropriation ofgoods, the Court held that the taxableevent exists at the time ofincorporation of goods in contract bycontractor and not at the time ofappropriation of goods by principalemployer. The Court further held thatmerely because the works areabandoned, or merely because a partof the material was used only by theemployer, the works contractor cannotescape VAT liability.[2011] 43 VST 303 (SC) : EurekaForbes Ltd. v. State of Bihar andothers - In the instant case theSupreme Court while dealing with theapplicability of the rate of tax inrespect of vaccum cleaner held thatthe vaccum cleaner is a machinerywhich is run by electricity andtherefore falls under the ambit of theexpression ‘electrical goods’ underentry no. 81 of the Notificaiton No.Bikrikar/San/1026/77-14545 dated26.12.1977 read with section 12 of theBihar Finance Act and hence taxed at12%.Further the Supreme Court whileinterpreting with the expression‘electrical goods’ held that if weconsider vaccum cleaner is not liableto tax at 12% as it is not specifically

included within the entry 81, then allother electrical goods which are notspecifically mentioned in the saidentry do not fall under the expression‘electrical goods’ which makes theentire entry 81 of no use. Further theCourt observed that the expression‘electrical goods’ appears to be aninclusive description as it emphasiseson the word “including electrical fansand lighting bulbs, etc.” and again itexcludes from its purview electricmotor, dry cell batteries, etc.[2011] 43 VST 323 (AP.-HC) : G.S.Lamba & Sons v. State of AndhraPradesh - In the instant case the dealerentered into an agreement with M/s.Grasim Industries Ltd. (Grasim), whomanufactures ready mix concrete, forproviding transportation service forshipping ready mix concrete by hiringspecially designed transit mixers withcertain specifications for a period of42 months. The specifications ofGrasim in the said agreement was thatthe dealer has to provide a dedicatedfleet of five transit mixers painted ina particular style and colour as wellas brand name of Grasim to transportready mix concrete every day as perthe instructions of Grasim, failure ofwhich the dealer will be entitled topenalty. Apart from the saidspecifications the other specificationsof Grasim was that the staff of thedealers were required to obey theinstructions issued by Grasim, theyshould use safety equipments likehelmets and the transit mixers has tomove or carry ready mix concrete tothe work sites only according to thedelivery schedule given by Grasim.The Andhra Pradesh High Court heldthat the above facts lead to theconclusion that the dealer hadtransferred the right to use goods toGrasim exclusively for a period of 42months. The Court further held thatthe above arrangement is not for a

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mere transportation but for a transferof right to use goods.[2011] 43 VST 398 (Bom. - HC) -[2011] 7 GST 104 (Bom. – HC) :Addl. CST v. Sehgal Authorities Pvt.Ltd. - In the instant case the BombayHigh Court dealing with theexpression ‘sale price’ held that thehandling charges for registration ofmotor vehicles could not fall withinthe extended meaning of theexpression ‘sale price’ since they didnot constitute a sum charged foranything done by the seller in respectof the goods at the time of or beforethe delivery thereof. Further the Courtheld that the seller acted only as anagent on behalf of the buyer of motorvehicle for the purpose of registrationand goods which formed the subject-matter of the contract between theseller and its buyer were in a specificand deliverable state. Therefore, theCourt held that the obligation towardsregistration of motor vehicle was onthe buyer and not the seller.[2011] 7 GST 6 (Mad. – HC): Stateof Tamilnadu v. Tvl. JayalakshmiEnterprises - In the instant case theMadras High Court dealing withtransfer of right to use goods inrespect of hoardings held that in orderto bring the transaction underprovisions of section 3A of TamilNadu General Sales Tax Act, 1959relating to transfer or right to usegoods, transferee must have controlover economic benefit of property, inwhich event, possession also has tobe with transferee. The High Courtnoted that the assessee along with thehoardings also allowed its parties tooccupy the spaces for putting upadvertisement on the hoardings whichestablished that the assessee wouldcontinue to have the possession andcontrol over the hoardings and therewas nothing on record to show thatthe hoardings were detachable and

remained as goods to be used as andwhen they were required for theassessee to render its services as anadvertisement agency. Therefore, theCourt held that the hoardings werepart of immovable property and therewas no transfer of possession of goodsto parties and hence levy of tax undersection 3A does not attract.INCOME TAXPARTS DIGESTED:a) 336 ITR – Part 5b) 337 ITR – Part 1 to 3c) 201 Taxman – Part 1 & 5d) 202 Taxman – Part 1e) 11 ITR (Trib) – Part 2 to 5f) 131 ITR (Trib) – Part 4 to 9g) 132 ITD – Part 1 to 4h) 43-A BCAJ – Part 6i) 139 TTJ – Part 2 & 3j) 5 International Taxation – Part 3

Reference / Description[2011] 337 ITR 21 (Delhi – HC): CITv. Jagatjit Industries Ltd. - In theinstant case the assessee issued equityshares overseas by way of globaldepository receipts and collected USdollars as share capital. The assesseekept the entire share capital in fixeddeposits in the U.K. and repatriatedfunds as when required forimplementing various projectsapproved by the Ministry of Financeand Ministry of Industry. Out of theentire share capital 79% was for thepurpose of acquisition of fixed assetsand 21% for general corporate use.The assessee accounted in its balance-sheet the gains arised from exchangefluctuation of foreign currency ascapital receipt. The Assessing Officertreated the entire gain on exchangerate fluctuation as revenue receipt onthe basis that the 21% of the sharecapital was to be utilized for generalcorporate uses.The Delhi High Courtheld that the relevant considerationwould be to see the source of funds

held and not the ultimate utilizationof the funds. The Court further heldthat even if money was raised byissuance of equity sharesdomestically, the money thuscollected as share capital would betreated as a capital receipt. The Courtopined that for setting up or forexpansion of business, part of the sharecapital raised can be utilized foracquiring assets and the other expensecan be met treating them as workingcapital. Therefore, the Court held thatmerely because part of the share capitalwas used as working capital the samecannot be treated as revenue receiptand treated the same as capital receipt.[2011] 337 ITR 26 (Delhi – HC):Export Promotion Council forHandicrafts and another v. DGITand another - In the instant case theassessee had complied with thedirection given in the order passed bythe High Court on its earlier writpetition of withdrawing the amountsinvested and in placing the amount ina scheduled bank in accordance withsection 11(5) of the IT Act andclaimed exemption for AY’s 2008-09,2009-10 & 2010-11, under section10(23C)(iv) of the IT Act. In theearlier order the Revenue authoritiesmade clear to the court that if theassessee follows the instructions ofthis court and the revenue authoritieswill consider the same and grantexemption. But despite having sodone by the assessee, the Revenueauthorities limited the grant ofexemption to the AY’s 2009-10 &2010-11 and denied the exemption forthe AY 2008-2009. The Delhi HighCourt held that it was not open to theDGIT to deny the exemption for theAY 2008-2009 despite the assesseehaving complied with the directionsgiven by the court in the earlier orderand therefore the Court directed therevenue authorities to grant

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exemption for the AY 2008-2009.[2011] 337 ITR 74 (AP – HC): VivekJain v. ACIT - In the instant case theassessee had let out the property onlyfor a period of 15 days. The assesseein the computation of total income hasshown the annual value of the saidproperty as nil. The Andhra PradeshHigh Court held that the annual valueof the property would become nilwhen the property will be vacant forthe reasons provided under section23(2) of the IT Act. The Court opinedthat if the property has been let outfor a part of the previous year, it canbe vacant only for the part of theprevious year for which the propertywas let out and not beyond and forthat part of the previous year duringwhich the property was not let out,but was vacant, clause (c) of section23(1) of the IT Act would not applyand it is only clause (a) which wouldbe applicable. Therefore the Courtconcluded that the benefit undersection 23(1)(c) of the IT Act cannotbe extended to a case where theproperty was not let out at all.[2011] 337 ITR 131 (AAR): CairnU.K. Holdings Ltd., In re - In theinstant case the applicant had reliedon the rulings in the case of TimkenFrance SAS, In re [2007] 294 ITR 513(AAR). The Authority for AdvanceRulings held that the advance rulingunder the IT Act is confined to thefacts and the law projected in theapplication leading to the ruling andbinds only on that party and theRevenue. It further opined that in acase where, with respect, certainaspects germane to the issue are notexamined and the authority has takena view, then the Advance forAuthority Rulings are not hamperedfrom taking a fresh look on that issuewhen raised before them.[2011] 337 ITR 192 (AAR): VerizonData Services India Pvt. Ltd., In re -

In the instant case the applicant soughtan advance ruling on the questionswhether the applicant has to deducttax at source in respect of paymentmade to the affiliate of its parentcompany (non-resident company) forthe purpose of engaging threeemployees deputed to performmanagerial functions; whether theamounts paid to the non-residentcompany represented ‘income’ in thehands of non-resident company andwhether the salary and benefits paidto expatriate employees by the non-resident company would be regardedas ‘fees for technical services’. Theauthority rulings held that threeemployees performed managerialservices as the employees of non-resident company and not asemployees of applicant; hence theyreceived the salary from non-residentcompany. The salaries were paid outof the income of non-residentcompany. Therefore the authorityrulings held that the amounts paid tothe non-resident company representedincome in the hands of non-residentcompany. With the regard to thenature of service the authority rulingsheld that functions performed by theseconded employees were purelymanagerial in nature and not technicalbut to say that the consultancyservices being managerial services,the requirement under Article 12(4)of the DTAA that these must be madeavailable, ought to be satisfied, wasnot correct. Further it held that fromthe memorandum of understanding ofthe DTAA it was clear that in case ofservices which are not in the natureof technical services, the ‘makeavailable’ clause would not apply andas the services provided by non-resident company were in the natureof managerial services, the paymentsmade by applicant were coveredunder ‘fees for included services’

under Article 12(4) of the DTAA andalso under ‘fees for technical services’as defined under Explanation 2 tosection 9(1)(vii) of the Act. Therefore,the authority rulings held that theamounts reimbursed by the applicantrepresented income accruing to non-resident and accordingly waschargeable to tax within theprovisions of section 195 of the ITAct.[2011] 337 ITR 207 (AAR): SiemOffshore Inc., In re - In the instantcase the Authority for AdvanceRulings dealing with section 44BB ofthe IT Act has held that the assesseemay opt to come either under sub-section (1) or (3) of section 44BB ofthe IT Act. If an assessee chooses tocome under sub-section (3), it canclaim exemptions and exclusionssubject to the conditions mentionedin that sub-section. But once it optsto proceed under sub-section (1) thereis not scope for any calculation or re-calculation of the amount shown aspayable. Further it held that the veryobject of introducing this section wasto avoid all complications indetermining the liability of anassessee coming under that provisionand also held that the course of theregular assessment is not warrantedor permissible under the scheme ofsection 44BB of the IT Act.[2011] 337 ITR 286 (Guj.-HC):Bhagwati Appliance v. ITO - In theinstant case the Gujarat High Courtdealing with distinguishing the terms‘hire’ and ‘lease’ held that when onlya licence is given to the hirer to usethe vehicle for a temporary period thevehicle so hired, it is a case of ‘hire’and when the hirer as an option to buythe equipment, it is a case of ‘lease’.The Court further held that assesseewas only engaged in the business ofleasing motor vehicles to clients andnot engaged in the business of hire.

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The Court observed that the basicrequirement for being entitled todepreciation at the hire rate of 50percent under entry III(2)(ii) ofAppendix I to the Rules was notsatisfied where the said entry providesfor higher rate of depreciation onmotor trucks uses in a business orrunning them on ‘hire’. Therefore theCourt held that the assessee wasentitled to depreciation at the rate of33.333 per cent only and not at therate of 50 per cent.[2011] 201 Taxman 192 (Kar. –HC)12 taxmann.com 442 (Kar. -HC): GE India Technology Centre(P.) Ltd. v. DRP - In the instant casethe AO served the proposed draftorder upon the assessee as to why theexcess claim under section 10A of theAct should not be disallowed and ALPas determined by the TPO should notbe accepted. In response to the same,the assessee filed an appeal and thematter was referred to the DRP undersection 144C of the IT Act. The DRPafter examining the records anddocuments issued two directionsfirstly; assessee was not entitled toany exemption under section 10A ofthe Act within the meaning of thecomputer software and secondly,directed the AO to examine thealternate claim of the assessee that itwas engaged in providing engineeringdesign services.The Karnataka HighCourt held that direction of the DRPthat the AO should decide thealternative claim of the assesseehaving regard to the material onrecord was wholly withoutjurisdiction in view of the provisionsof section 144C(6)(a) of the IT Actwherein the power of the DRP is notextended to any proposed variation orissue any direction under sub-section(5) for further enquiry and passing ofthe assessment order.The KarnatakaHigh Court further held that as

regards other direction issued by theDRP that the assessee was not entitledto deduction under section 10A of theIT Act was also without jurisdictionand suffered from inherent lack ofjurisdiction because in the proposeddraft order there was no proposal tohold that assessee was not entitled toany benefit under section 10A.[2011] 201 Taxman 273 (Kar. -HC)13 taxmann.com 43 (Kar. - HC):CIT v. Canfin Homes Ltd. - In theinstant case the Karnataka High Courtdealing with respect to the method ofaccounting, the income of non-performing asset held that incomefrom non-performing asset may benot recognized merely on the basis ofaccrual. The Court further held thatan asset becomes non-performingwhen it ceases to yield income,therefore the court held that the sameshould be recognized only when it isactually received i.e. it should beaccounted on cash basis and not onmercantile basis despite assesseemaintaining mercantile system ofaccounting.[2011] 201 Taxman 292 (MP – HC)- 13 taxmann.com 27 (MP – HC):CIT v. Khemchand Motilal Jain,Tobacco Products (P) Ltd. - In theinstant case the assessee had paidransom money for release of itsdirector who was kidnapped by thedacoits when the director had gone onbusiness tour for purchase of tenduleaves and claimed the same asbusiness expenditure under section37(1) of the IT Act. The AO deniedthe claim on the ground that the samewas not incidental to the business ofassessee.The Madhya Pradesh HighCourt held that there is no provisionin the IPC Code that for saving a lifeof a person if a ransom is paid, it willamounts to an offence and in theabsence of such provision,Explanation to sub-section (1) of

section 37 will not be attracted. TheCourt observed that the entire tour ofthe director was for purchase of tenduleave of quality for his business andduring his business tour, the directorwas kidnapped. Therefore, the Courtheld that the amount paid for therelease of the assessee’s director wasincidental to the business of assesseeand allowed the same as businessexpenditure.[2011] 11 ITR (Trib) 451 (Delhi):DCIT v. Vijay Gopal Jindal - In theinstant case the Delhi Tribunal dealingwith respect to employee stock optionunder section 17(2)(iiia) of the IT Actheld that mere issue of equity warrantcertificate does not attract the benefitunder section 17(2)(iiia) as they didnot had any value, that they wereneither tradable nor marketable andthat they were only in the nature ofright to acquire the share and not theshare itself, therefore the benefit aroseonly on exercise of the option ofconversion of warrant into sharesupon full payment of the conversionprice.[2011] 131 ITD 271 (Hyd.)12taxmann.com 13 (Hyd. – Trib):DCIT v. Divi’s Laboratories Ltd. - Inthe instant case the assessee had paidcommission to the foreign agents forthe services rendered outside India.The AO held that Circular 7/2009dated 22.10.2009 issued by CBDTwithdraws its earlier Circular nos. 23,dated 23.07.2009, 163, dated29.05.1975 and 786 dated 07.02.2000wherein the earlier circulars haveclearly demonstrated the illustrationto explain that the said commissioncan be paid without deduction of taxand therefore, disallowed theexpenditure under section 40(a)(ia) ofthe IT Act.The Hyderabad Tribunalheld that though the Circular No. 7/2009 does not provide for non-deduction of tax at source for the

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commission paid to the foreign agentsthe main thrust in such a situation wasto examine whether the commissionwas made to overseas agents, who arenon-resident entities and who renderservices only at such particular placeto be liable to tax.Further the Tribunalheld that the section 195 of the IT Actvery clearly speaks that unless theincome is liable to be taxed in India,there is no obligation to deduct tax,therefore, in order to determinewhether the income could be deemedto be accrued or arisen in India,section 9 of the IT Act is the basis.The Tribunal opined that the saidsection does not provide scope fortaxing such payment because thebasic criteria provided in that sectionis about genesis or accruing or arisingin India, by virtue of connection withthe property in India, control andmanagement vested in India andnoted that the same was not satisfiedin the present case. Therefore, theTribunal held that under thesecircumstances withdrawal of earliercirculars issued by the CBDT had noassistance to the department, in anyway, in disallowing such expenditure.[2011] 131 ITD 151 (Chennai)(TM)12 taxmann.com 240 (Chennai– ITAT): Sanghvi & DoshiEnterprise v. ITO - In the instant casethe Chennai Tribunal noted from therecords of the assessee that in respectof some of flats, the built up area didnot exceed 1,500 square feet and inrespect of some flats, the built up areaexceeded 1,500 square feet. Thereforefollowing the decision Calcutta HighCourt in CIT v. Bengal AmbujaHousing Development Ltd. [ITAppeal No. 458 of 2006, dated05.01.2007, the Tribunal allowed thededuction under section 80-IB(10) inrespect of flats having built up areanot exceeding 1,500 square feet anddenied the benefit of deduction under

section 80-IB(10) in respect of flatshaving their built up area exceeding1,500 square feet.[2011] 131 ITD 414 (Delhi)10taxmann.com 242 (Delhi – ITAT):Career Launcher (India) Ltd. v.ACIT - In the instant case the assesseewas carrying on business of runningcoaching classes for admission ofstudents to professional courses.Assessee entered into agreementswith various persons desirous ofrunning similar coaching classes. Inthe said agreement the assesseeallowed its franchisees to usetradename, trademark and coursematerial belonging to assessee forwhich assessee received 25 percent ofthe net value earned from operationsby franchisees. Assessee paid certainsum to franchisees and same wasshown as ‘administrative and otherexpenses’. The AO officer held thatthe contract with franchisees was inthe nature of contract for work andheld that the assessee was liable todeduct tax at source under section194C of the IT Act on the saidpayment.The Delhi Tribunal observedthat the terms of agreement betweenparties showed that franchisees werenot doing any work for assessee ratherit was a case of running a study centreand to apportion profits thereofbetween assessee and franchisees andtherefore held that since it was not acase of payment made by assessee to

franchisees for work done, section194C of the IT Act was not applicable.[2011] 131 ITD 436 (Mum.)12taxmann.com 354 (Mum. – ITAT):DCIT v. Mrs. Lakshmi M. Aiyar - Inthe instant case the Mumbai Tribunalhas held that if a widow receivespayment from a firm in which thehusband of a widow was a partner thesame has to be treated as capitalreceipt on basis that the said paymentwas towards recognition of valuedservices rendered by the partnerduring his lifetime which was sort ofrelief to distressed family and as perterms of partnership deed, it could notbe said to have a revenue character.[2011] 131 ITD 442 (Agra)10taxmann.com 156 (Agra – ITAT):Gagan Education Society v. ACIT -In the instant case the assesseedonated certain sum to anothercharitable society out of current year’sincome and claimed deduction. AOdisallowed the said claim. The AgraTribunal held that the restrictionimposed by section 11(3)(d) appliesto income accumulated under section11(2) and not to the current year’sincome or accumulation under section11(1). Therefore the Tribunal held thatthe deduction should be allowed toassessee in respect of donationprovided that society was dulyregistered under section 12AA as acharitable institution.

OBITUARYWe deeply regret to inform the sad demise of our members

May their soul rest in peace.

CA. P. K. Subramaniam( M.No. : 002276)

on 23.09.2011

CA. Subhas chandra adiveppa baligar( M.No. : 086307)

on 02.10.2011

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RECENT JUDICIALPRONOUNCEMENTS ININDIRECT TAXESN.R. Badrinath, Grad C.W.A., F.C.A.Madhur Harlalka, B. Com., F.C.A

Service Tax:

• The Hon’ble Supreme Court hasdirected in case of Service Tax onRenting of Immovable Propertyunder (zzzz)of clause (105) ofSection 65 read with Section 66of the Finance Act, 1994 (asamended), for the parties on staywith regard to the arrears ofservice tax due from the appellantsprior to 30th September, 2011 asfollows:

(i) All the appellants shall depositwith the concerned department50% of the arrears towards thesaid tax within six months in threeequated installments;

(ii) The balance 50% each of theappellant in these appeals shallfurnish a surety to the satisfactionof the jurisdictionalCommissioner;

(iii)They shall file affidavits in thisCourt, within four weeksundertaking to pay the balancearrears of service tax as may bedirected by this Court at the timeof final disposal of the appeals

(iv)the successful party in theseappeals shall be entitled to intereston the amount stayed by this Courtat such rate as may be directed atthe time of final disposal of theappeals. [Retailers Association OfIndia Vs. Union Of India & ORS,2011-TIOL-104-SC-ST]

• The Hon’ble Supreme Court haswith respect to levy of service taxon ‘renting of immovable

property’ ruled that permission isgranted to the appellant to placeon record the details of the arrearstowards the service tax upto 30thSeptember, 2011, within twoweeks. In this regard, it has alsoheld that no coercive steps shallbe taken against the appellant forrecovery of arrears of service taxdue on or before 30th September,2011.

Further, it has held that there is nostay of imposition of service taxunder sub-clause (zzzz) of clause(105) of Section 65 read withSection 66 of the Finance Act,1994 (as amended), insofar as thefuture liability towards service taxwith effect from 1st October, 2011is concerned. [Home SolutionsRetails (India) Ltd vs. Union ofIndia and Others 2011-TIOL-103-SC-ST].

• The appellant had entered into anagreement for rendering advises,provide assistance and undertakecompliance services of varioustaxation matters includingIncome-tax, Customs, CentralExcise, Sales Tax, Various locallaws including Municipal taxes,Octroi, Shops and Establishment,Electricity, Labour Laws like EPF,ESIS, Minimum Wages Act andvarious other Industrial Lawsrelated to labour. The departmentalleged that the amount receivedfor the above should be treated asservice rendered by aManagement Consultant

attracting service tax. TheTribunal held that filing ofrequisite documents with theRegistrar of Companies, and otherstatutory authorities, carrying outlocal statutory requirements andother registrations under variouslaws and statutes such asregistration under Service Tax,Custom, Central Excise Act, etc.,do not involve any change orimprovement in the managementof an organization and does notrequire any specializedknowledge of a ManagementConsultant but these services areonly in the nature of compliancewith the statutory requirements.Therefore, the same are not liableto service tax under the categoryof ‘management consulting’.[CCE, Chennai Vs M/s FuturaPolyesters Limited, 2011-TIOL-1404-CESTAT-MAD]

• The appellant has paid centralexcise duty of more than Rs.50lakhs during the FY 2007-08. Asper rule 8(1) of Central ExciseRules, 2002, such appellants wererequired to deposit excise dutyelectronically through internetBanking. They did not remit theduty by such means but insteadpaid duty in cash under TR-6challan. This is contravention ofRule 8(1) of CER, 2002. A SCNwas issued and was adjudicatedimposing a penalty of Rs.15,000/- on the appellant under Rule 27of the CCR, 2002. The Tribunalheld that the issue does notinvolve any revenue loss but onlya violation of a procedural rule.Therefore, it is proper to condonethe matter on the ground that it isonly violation of a procedurebecause if such argument isaccepted all procedural rule will

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become meaningless andGovernment will not be able toframe any procedure, which maybe necessary in public interest. Itis also relevant that for penaltyunder Rule 27, there is no need toprove mens rea. However,considering the facts andcircumstances of the case, thepenalty reduced to Rs.3,000/-.[M/s Ansons Electro LectroMechanical Works Vs CCE,Mumbai-I, 2011-TIOL-1301-CESTAT-MUM].

• The service tax was voluntarilypaid on the activities undertakenfor the period July, 2005 toDecember, 2006 under thecategory of “construction ofcomplex services” without anyprotest. Subsequently, whenworks contract service wasbrought under the tax net effectivefrom 01/06/2007, the assesseesubmitted that the servicesprovided by them come under thecategory of “works contract” andnot under the category of“construction of commercialcomplexes”; therefore, theysought refund of the service taxpaid by them for the previousperiods. The case was placedbefore Single Member ofTribunal. Tribunal held that fromthe facts of the case, it is clear thatthe issue involved is the rate ofservice tax liable to be paid by therespondent/assessee. As per theSection 35D (3) of the CentralExcise Act, 1944 made applicableto service tax, when the rate of taxor the value of service rendered isone of the issues involved, thenthe matter has to be heard by aDivision Bench. Accordingly, theregistry is directed to place this

matter before the Division Benchfor consideration and disposal.[Nakshatra vs. CCE, Pune 2011-TIOL-1274-CESTAT-MUM]

• The appellant is Security GuardsBoard for Greater Mumbai and isa statutory authority constitutedunder Section 6 of theMaharashtra Private SecurityGuards (Regulation ofEmployment and Welfare) Act,1981. The Act has been enactedby the State legislature forregulating the employment ofprivate security guards employedin factories and establishments inthe State of Maharashtra and formaking better provisions for theirterms and conditions ofemployment and welfare, throughthe establishment of a Board.Department has levied service taxon the services provided by theAppellant as ‘security agencyservices’. On appeal, the Tribunalordered 50% of service tax to bedeposited. Aggrieved with orderof the Tribunal, the appellant haschallenged before Hon’bleMumbai High Court. Hon’bleMumbai High Court held that theCEBC has clarified that it is of theview that activities performed bysovereign / public authoritiesunder the provisions of law are inthe nature of statutory obligationswhich are to be fulfilled inaccordance with law. The feecollected by them is forperforming such activities and isdeposited in the GovernmentTreasury. Such activity is purelyin public interest and it isundertaken as a mandatory andstatutory function, and is not in thenature of a service provided to anyparticular individual for

consideration. In view of thesecircumstances, the Tribunal wasnot justified in imposing arequirement of deposit. But apartfrom that, the question as towhether the Appellant carries onthe business of rendering servicesrelating to the security of anyproperty including the business ofproviding security personnel is aserious triable question.Consequently an order for pre-deposit was not warranted in thecircumstances of the case. [TheSecurity Guards Board Vs. CCE,Thane-II and Union Of India,2011-TIOL-653-HC-MUM-ST].

Central Excise:• The appellant is engaged in the

manufacture of Iron and Steelingots falling under sub headingNo. 7206.90 of the Central ExciseTariff Act, 1985. The appellantwas sending M.S. ingots, forwhich no small scale exemptionwas available, for conversion intore-rolled products on job workbasis. During the period 1997-1998, the entire products or re-rolled products received backfrom the job worker have beencleared as such at NIL rate of dutyunder small scale exemptionNotification No.16/97dated.1.4.97. As per NotificationNo.214/86 dated.25.3.86, thegoods manufactured by a jobworker on job work basis are tobe used in or in relation to themanufacture of final products onwhich duty of Excise is payableeither in whole or part. Theappellant cleared the re-rolledproducts as such without paymentof duty claiming exemption underNotification No.16/97 dated1.4.97. The jurisdictional

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Superintendent of Central Excisehas issued a Show Cause Noticefor why the excise duty on Ironand Steel Products should not bedemanded.

The Tribunal held that theappellant had cleared the re-rolledproducts received back by themafter job work in terms ofNotification No.214/86dated.25.03.86 at NIL rate of dutyfrom the factory. The small scaleexemption was availed underNotification No.16/97 is notcorrect. The goods manufacturedby a job worker are to be used inor in relation to the manufactureof the final products on whichduty of Excise is leviable underthe Notification No.214/86. Theappellant had not cleared thegoods at NIL rate of duty. Further,goods at NIL rate of duty cannotbe sent for job work in terms ofNotification No.214/86 andtherefore the procedure followedby the appellant was not correct.The process undertaken by the jobworker amounted to manufactureand resulted in final productsnamely, rerolled products, theduty liability would fall on themanufacturer who is a job workerin this case and not on theappellant. The duty demand is onthe re-rolled products and not onthe steel ingots. Therefore, theshow cause notice must have beenissued to the job worker on thesteel ingots for re-rolled products.Thus, the demand is notsustainable. [M/s. Libra Steel Pvt.Ltd Vs. CCE, Calicut, 2011-TIOL-1401-CESTAT-BANG]

• In the present case question beforethe Tribunal is whether filling ofammonia gas from bulk tankers

into smaller cylinders wouldamount to manufacture under theCentral Excise in terms of ChapterNote 10 to Chapter 28. TheTribunal held that there is nolabelling or re-labeling involvednor any activity to render theproduct marketable is undertakenas required Chapter Note 10 toChapter 28. Thus, filling ofammonia gas from bulk tankersinto smaller cylinders would notamount to manufacture andtherefore, no duty liability underthe Central Excise Act is attracted.[CCE, Thane Vs. AmmoniaSupply Co, 2011-TIOL-1400-CESTAT-MUM]

• In the present case issue beforeAdvance Ruling Authority iswhether the Battery Cells insertedin a battery bank is excisable. Theapplicant proposes to importbattery cells of two volts each,store the battery cells in a customsbonded store room and effectsupplies of battery bankscomprising 24 battery cellsinserted in battery cabinets alongwith base stand and connectorsetc. Advance Ruling Authorityobserved that the Battery cells oftwo volts each approximating insize to a car battery are imported,checked for their charge, chargedwherever necessary, inserted intosix shelves of 4 metallic cabinetsand 24 battery cells are cleared asa battery bank along withconnectors, clamps, stand, screws,bus bar etc. There is notransformation that brings abouta fundamental change in thecharacter and use of the goods.The name remains the same (i.e.accumulator, although anassembly of batteries is called a

battery bank), the character andusage remain the same (i.e.provide direct current to anappliance though of differingmagnitude etc.). Applying thetests specified by the Apex Court,it cannot be said that a new articlehas emerged having a differentname, character or usage. Thus,the activities undertaken do notamount to manufacture for thepurpose of levy of excise duty.[M/s Delta Power Solutions IndiaPvt Ltd, 2011-TIOL-08-ARA-CX]

CENVAT Credit:• In the present case, the question

before the Tribunal is whether MSangles, plates and rounds used bythe respondent for fabricatingstructural support to plant andmachinery in their factory duringthe period from October 2006 toApril 2007 could be held to be‘capital goods’ as defined underRule 2(a) of the CENVAT CreditRules (CCR), 2004 for purposesof CENVAT credit and whetherthe structural support for themachinery could be treated as‘capital goods’. The Tribunal heldthat MS angles, plates and roundsare an integral part of themachinery and hence to becovered by clause (i) ibid. If thatbe so, as held by the SupremeCourt, the plates, angles, etc., usedfor fabricating structural supportare liable to fall within thepurview of clause (iii) of Rule 2(a)(A). In the result, it has to be heldthat the MS angles, plates androunds used by the respondent forfabricating structural support formachinery would qualify to be‘capital goods’ for CENVATcredit.

Further, The Tribunal held that the

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view of the Tribunal’s Larger Bench in the case ofVandana Global Ltd (2010-TIOL-624-CESTAT-DEL-LB) which was much before the Supreme Court’sdecision in the case of Rajasthan Spinning & WeavingMills Ltd., 2010-TIOL-51-SC-CX. The LargerBench’s decision was to the effect that the supportingstructure for a machinery could not be considered tobe part or accessories of the machinery and, therefore,the steel items used for constructing such supportingstructure would not be ‘capital goods’ for the purposeof CENVAT credit. This view of the Larger Bench isno longer valid as it runs contrary to the subsequentruling of the apex Court. [CC&CE, VisakhapatnamVs M/s APP Mills Ltd, 2011-TIOL-1378-CESTAT-BANG]

• In the present case, the question before the Tribunal iswhether CENVAT credit of service tax paid on outwardtransportation upto the port of export is eligible. TheTribunal held that the place of removal is the load portand the department is not contesting the export wascarried out on FOB basis. The issue of place of removalconsidered the Board’s Master Circular No.97/8 whichheld that in export cases the place of removal getsextended to the load port. Accordingly, the credit ofservice tax paid on outward transportation of exportgoods up to port of export which is the actual place ofremoval in the case of export is admissible. Theappellant is eligible for the credit on the input serviceon outward transportation up to the place of removal.The Tribunal has relied on the judgment of the Hon’bleHigh Court of Karnataka in the case of CCE & ST,Bangalore Vs. ABB Ltd, Vadodara (2011-TIOL-395-HC-KAR-ST), CCE Rajkot Vs. Adani PharmachemPvt Ltd (2008 (232) ELT 804 (Tri.-Ahmd)) and CCERajkot Vs. Rolex Rings Pvt. Ltd (2008 (230) ELT 569(Tri.-Ahmd). [CCE, Surat Vs. Kanoria Chemicals AndIndustries Ltd, 2011-TIOL-1344-CESTAT-AHM].

• In the present case, the question before the Tribunal iswhether the availment of CENVAT credit of servicetax on outward freight charges is eligible. Tribunal heldthat the very same issue came up before the Hon’bleHigh Court of Karnataka in the case of CCE & ST.,LTU, Bangalore Vs. ABB Ltd. reported in 2011 (23)STR 97 (Kar.). Hon’ble High Court has taken the viewthat till 01.04.08, the credit would be admissible up tothe place of removal and a view has also been takenthat the amendment of through Notification No 10/

2008-CE is not clarificatory in nature. Since the issueis squarely covered by the decision of the Hon’ble HighCourt in the case of ABB Ltd. which is the latestdecision on the subject. Therefore, the credit wouldbe admissible up to the place of remove till April 1,2008 and the amendment is not clarificatory. [CCE,Vapi Vs M/s Fabkem India, 2011-TIOL-1397-CESTAT-AHM]

• In the present case, the question before the Tribunal iswhether man power supply service availed for gardenmaintenance would be eligible as input service. TheTribunal held that the Tamil Nadu State PollutionControl Board as per Section 41A of the Factories Act,1948 has granted permission to the appellant formanufacture of goods subject to condition of gardeningin the plant premises. Therefore, the gardenmaintenance service has a nexus with the activity ofthe business of manufacture. Hence, credit of servicetax paid on man power supply service availed forgarden maintenance work is allowed. [JBM AutoSystem Pvt. Ltd Vs CCE, Chennai, 2011-TIOL-1393-CESTAT-MAD]

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IMPORTANT DATES TO REMEMBER DURING THE MONTH OF NOVEMBER 20115th Nov. 2011 Payment of Excise Duty for October 2011

Payment of Service Tax for October 2011 by Corporates

6th Nov. 2011 E-Payment of Excise duty for October 2011

E-Payment of Service tax for October 2011 for Corporates

7th Nov. 2011 Deposit of TDS/TCS Collected during October 2011

STPI Monthly Returns

10th Nov. 2011 Monthly Returns for Production and Removal of Goods and CENVAT Credit for October 2011

Monthly Return of excisable Goods Manufactured & Receipt of Inputs & Capital Goods by Units inEOU,STP,HTP for October 2011

Monthly Returns of Information relating to Principal Inputs for October 2011 by Manufacturer of SpecifiedGoods who Paid Duty of Rs.1 Crore or More during Financial Year 2010-11 By PLA/CENVAT/Both

15th Nov. 2011 Payment of EPF Contribution for October 2011

Return of Employees Qualifying to EPF during October 2011

Monthly Return (VAT 120) and Payment of VAT/COT for the month of October 2011.

20th Nov. 2011 Consolidated Statements of Dues and Remittances Under EPF and EDLI for the October 2011

Monthly Return and Payment of Profession Tax Collected During October 2011

Monthly Return (VAT 100) and Payment of CST and VAT Collected During October 2011

21st Nov. 2011 Deposit of ESI Contributions and Collections for October 2011

25th Nov. 2011 Monthly Returns of Employees Joined & Left the organization during October 2011 under ESI

Monthly Returns of Employees Joined and left the organization during October 2011 under EPF

16November2011

Seminar on TDS 6 HrsCPE

Timing Topic

09.30am to 10.00am Registration

10.00am to 11.00am Inaugural & Interactive Sessions with Income Tax Officials

11.00am to 01.00pm Technical Session – IIssues related to resident payments CA. G S Prashanth(Salaries, Interest, Commission, Contracts, Chartered Accountant, Bangalore

Rent & Fees for Professional/ Technical Services)

01.00pm to 02.00pm Lunch Break

02.00pm to 03.30pm Technical Session – IIIssues related to Non-Resident payments CA. Narendra Kumar Jain

Chartered Accountant, Bangalore

03.30pm to 03.45pm Tea Break

03.45pm to 05.15pm Technical Session – IIIE-Filing of Quarterly returns, CA. TarunCertificates and related issues Chartered Accountant, Bangalore

05.15pm to 06.15pm Technical Session – IVPractical Issues and latest circulars on TDS CA. D R Venkatesh

Chartered Accountant, Bangalore

Open House

Date : 12th November 2011, Saturday Venue : Branch Premises Time : 09.30am to 05.30pm

Seminar Co-ordinator: CA. D R Venkatesh

Registration Fees: Rs.750/- per participant.

DD/Pay order/Cheque should be drawn in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore.

Please mention your name, membership number and contact details at the back of the cheque/demand draft.

For further details please contact:Ms. Geethanjali D, Tel: 080-30563500 / 3513, Email: [email protected]

3 HrsCPEWorkshop on MS Excel 2007 & 2010

Saturday, 19th November 2011

* Advanced command and the features in MS Excel 2007 & 2010

* MS Excel as a tool for MIS reporting

Date : 19th November 2011 Speaker : CA. Aditya SinghalTime : 10.00am to 01.00pm Venue : ITT South Centre, B'lore BranchDelegate Fees : Rs. 250/- Sanjay Towers, #216, Subbarama Chetty Road,

Cheque / Cash in favour of Bangalore - 04, Ph: 080 -26621434“Bangalore Branch of SIRC of ICAI”. * Open to CA students also.

Restricted to 45 delegates on First Come First Serve basis.

For further details please contact: Ms. Geethanjali, Tel: 080-30563500 / 3513, Email: [email protected]

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