(Set up by an Act of Parliament)

The Institute of Chartered Accountants of India

BangaloreN e w s l e t t e rBranch of SIRC

Volume 01 | Issue 03 | October, 2012 | Pages : 16 ` 5/- per copyFor Private Circulation only

CPE

- O

ct. 2

012

27

English Monthly

GzÉÆåÃUÀ²Ã®gÁzÀ ¹AºÀ¥ÀÅgÀĵÀjUÉ ®Që äAiÀÄÄ vÁ£ÉøÀ«Äà ¸ÀÄvÁÛ¼É. J®èªÀ£ÀÆß zÉêÀgÉà ¤ÃqÀ¨ÉÃPÉAzÀÄ C®àgÀĪÀiÁvÀæ ºÉüÀÄvÁÛgÉ. zÉʪÀªÀ£ÀÄß CªÀ®A©¸ÀzÉà ¤£Àß ¥ÀÇtð(DvÀä)±ÀPÁÛ å£ÀĸÁgÀ ¥ÀæAiÀÄvÀߪÀ£ÀÄß ªÀiÁqÀÄ. AiÀÄvÀß ªÀiÁrAiÀÄÆ¥sÀ® ¹UÀ¢zÀÝ°è vÀ¥Éà°èAiÀÄzÀÄ?

EkrÉÉãÌaÉlÉÇ mÉÑÂwÉÍxÉÇWûqÉÑmÉæÌiÉ sɤqÉÏ:SæuÉålÉ SårÉÎeÉÌiÉ MüÉmÉÑÂwÉÉ uÉSÎliÉ |SæuÉÇ ÌlÉWûirÉ MÑü mÉÉæiÉÑwÉqÉÉiqÉzÉYirÉÉrÉ Éå M×üiÉå rÉÌS lÉ ÍxÉSè±ÌiÉ MüÉãS§É SÉãwÉ:||

Fortune bestows only to the lion hearted industrious

people; the cowards depend upon the Luck factor.

Discard the destiny aspect and put all your efforts-

sincerely and wholeheartedly. In spite of all your

efforts if you do not succeed then is it your fault?

SOURCE : Hitopadesha

2

Managing Committee's Communique . . .Managing Committee's Communique . . .Dear Professional Colleagues,

Greetings.

– Mahatma Gandhi.

Every year we remember the father of our nation

Mohandas Karamchand Gandhi on his birth anniversary

2 October. Our father of the nation is internationally

renowned for advocating nonviolence and peace.

Mahatma Gandhi's quote

is true for all the times.

September was hectic for all of us, as we were either busy

on completing tax audits or helping the assessees to file

their tax returns. Most of the members in Industry were

busy in closing half yearly/quarterly accounts. Hopefully,

the pressure of work is efficiently handled by our

members. After successfully completing the

professionally committed month of September, all the

members have earned a well deserved rest and relaxation.

Dussehra and Bakrid should bring plenty of joy and

pleasant time with family.

As you are aware not many activities were planned in

September. We did do some programs, which were well

appreciated and received by members.

Seminar on “service tax under the negative

taxation scheme”

CPE Tele conference

Study circle meetings

Impact Seminars

Following programmes are scheduled for October 2012

(details available in the program calendar):

Computer Basics: This programme is designed

for beginners and senior CAs.

CPE Tele conference

Study circle meetings

Impact Seminars

Bangalore branch is planning to have a meeting and

interactive session with Chief Commissioners and

“We must be the change we wish to see”

“seven deadly sins - Wealth

without work, Pleasure without conscience, Science

without humanity, Knowledge without character,

Politics without principle, Commerce without morality,

Worship without sacrifice”

nd

•

•

•

•

•

•

•

•

September 2012Activities

Interactive session with Chief Commissioners and

Commissioners of Income Tax:

Commissioners of Income Tax during October 2012. The

details of the programme will be intimated to the member

in due course.

After successfully completing the first batch of RCA

during the month of June this year, Bangalore Branch is

commencing the second batch. We request the members to

refer the eligible candidates to enroll for this batch and

encourage the initiative of Bangalore Branch. The

glimpse of RCAis as follows:

RCA is an initiative of the ICAI towards Corporate Social

Responsibility. Bangalore Branch of SIRC of ICAI has

designed this course in a most befitting manner to

empower the participants in the area of Accounts,

Taxation, Corporate and Allied Laws. This course will

equip the participants with the skills necessary for

improved performance as well as to motivate them to

reach new heights in the field of Finance &Accounting.

RCA is a Fast Forward Crash Course for those who are

interested in learning the practical exposure to accounting

and financial practices and to learn the most important and

fundamentals of tax laws in the process of pursuing their

accounting career more effectively and competently. RCA

enables accountants to prepare, present and analyse the

financial statements and co-ordinate for smooth

conclusion of audit process.

Board of Studies (BOS) of The Institute of Chartered

Accountants of India intends to start reading room

facilities across Bangalore in association with schools,

colleges. BOS will assist by way of grants for Furniture,

Air-conditioning required for reading room facility. We

request the members who are associated with such

institutions to contact Bangalore branch.

All the programs at Bangalore Branch are live telecasted,

archived and available at all times. All the recorded

programs of Bangalore branch are hosted in the Bangalore

branch website. Please visit www.bangaloreicai.org/

resources/icai-tube.

We thank all the speakers, resource persons, professional

colleagues and branch staff for the success of Bangalore

branch activities. We once again wish all of you and your

family happy Dussehra and Bakrid.

Refresher Course forAccountants (RCA)

Reading Rooms

Web-casting & ICAI Tube

Managing Committee

3 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

DISCLAIMER: The Bangalore Branch of ICAI is not in anyway responsible for the result of any action taken on the basis of the advertisement publishedin the newsletter. The members, however, bear in mind the provision of the code of ethics while responding to the advertisements. The views and opinionsexpressed 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/-

Editors & Sub Editors : Managing Committee

Cover Page SubhashitaTranslation by : CA. Allama Prabhu M.S.

CALENDAR OF EVENTS - October & November 2012Date/Day Topic /Speaker Venue/Time CPE Credit

2 hrs

Live TV & ICAI TubeAll the programmes of Bangalore branch are live telecasted. To watch the programme, please visit :

www.bangaloreicai.org / resources/livetv.‘ICAI TUBE’ Bangalore branch’s initiative of archiving and streaming of programs in the form of videos

was well appreciated by the members. All the recorded programs of Bangalore branch are hosted in theBangalore branch website, to watch these videos please visit www.bangaloreicai.org/resources/icai-tube

for the benefit of the members. We welcome your suggestion & feedback to serve you better.

4 hrs

2 hrs

2 hrs

3 hrs

2 hrs

2 hrs

3 hrs

3 hrs

2 hrs

2 hrs

2 hrs

3 hrs

05.10.12 CPE Teleconference Programme on Branch PremisesFriday “Standards of Auditing 700, 705 & 706” 11.00am to 01.00pm

CA. B. Ganesh10.10.12 Transfer Pricing - Practical Issues Branch PremisesWednesday CA. D. S. Vivek 06.00pm to 08.00pm12.10.12 Issues in filing of Annual Returns & other documents with MCA, Branch PremisesFriday followed by interactive sessions with officicals of ROC, Karnataka 05.30pm to 08.30pm

CA. Ravi Prasad16.10.12 Interactive session with Chief Commissioners & Branch PremisesTuesday Commissioners of Income Tax Department 05.30pm to 08.30pm17.10.12 CPE Teleconference Programme Branch PremisesWednesday 11.00am to 01.00pm17.10.12 Import / Export of Services Branch PremisesWednesday Mr. K. S. Naveen Kumar 06.00pm to 08.00pm18.10.12 Basics of Computer for Beginners and Senior CAs ITT South Centre, ICAIThursday & Mr. S. M. Hussain, ITT Faculty Netkallappa Circle19.10.12 Basavanagudi, B'lore-4Friday Fees: Rs.200/- Ph: 080 -266214340

6.00pm to 08.00pm20.10.12 Corporate Restructuring - Mergers & Acquisitions Branch PremisesSaturday CA. Amith Raj A N & CA. Krishna Prasad 10.00am to 01.00pm24.10.12 XBRL filing for MCA and related issues Branch PremisesWednesday CA. S. Hariharan 05.30pm to 08.30pm26.10.12 Research & Development incentive under section 35 (2AB) Branch PremisesFriday of the Income Tax Act 1961

CA. Vijay Kotha 06.00pm to 08.00pm31.10.12 CPE Teleconference Programme Branch PremisesWednesday 11.00am to 01.00pm31.10.12 Valuation of Intangible Assets Branch PremisesWednesday CA. D. Naresh Phanfat 06.00pm to 08.00pm07.11.12 CENVAT credit under Input Services Branch PremisesWednesday CA. Nayaz Pasha 06.00pm to 08.00pm

4October2012

TAX UPDATES AUGUST 2012CA. Chythanya K.K., B.Com, FCA, LL.B., Advocate

VAT, CST, ENTRY TAX,PROFESSIONAL TAX

PARTS DIGESTED:a) 52 VST – Part 4 & 5b) 53 VST – Part 1 to 3c) 17 KCTJ – Part 5d) 73 KLJ – Part 8

Reference / Description[2012] 53 VST 66 (Karn. – HC);Kwality Biscuits (P) Ltd. v. State ofKarnataka - In the instant case thedealer is engaged in the business ofmanufacture and sale of biscuits andconfectionery, wheat products, jamsjellies and creams. Its promotersentered into an agreement withBritannia under which the promotersof the dealer agreed to exit thebusiness of biscuits by effecting a saleof the entire business as a whole andas a going concern includingtrademarks and brand names.The question that arose forconsideration before the HonourableKarnataka High Court was whetherthe sale of intellectual property ownedby the dealer attracted payment ofsales tax under the Karnataka SalesTax Act, 1957 (KST Act).The Honourable Karnataka HighCourt observed that in order to attractliability to pay tax under Section 5 ofthe KST Act, a dealer must becarrying on the business of buying,selling, supplying and distributinggoods and a sale or purchase musttake place during the course ofbusiness of buying or selling. In theinstant case the Court observed thatthe dealer was the owner of the

intellectual property rights,trademarks, designs and copy rights.In order to sell its goods, it used thisintellectual property. Thesetrademarks or designs could not besold in the course of business.In view of the above, the Court heldthat the dealer was not engaged in thebusiness of selling and buyingintellectual property rights or that thesale of intellectual property wasincidental or connected withmanufacture and sale of biscuits andconfectionery, wheat products, jamsjellies and creams. Hence, the Courtheld that the dealer was not liable topay sales tax under the KST Act onthe sale of intellectual property.In this welcome decision, thehonourable Karnataka High Courtbrought out the fine distinctionbetween goods, which are sold in theordinary course of business and thegoods though connected with thebusiness are not ordinarily sold in thecourse of business. It also answersnegatively the Department’s attemptto tax, any sale by the dealer.[2012] 53 VST 226 (Karn. – HC); AliSinghania Bulk Carriers v. State ofKarnataka - In the instant case, thedealer owned a fleet of vehicles andwas engaged in transporting concretemixture to G, Bengaluru. Theagreement entered into between thedealer and G provided that the dealerwould maintain and provide adedicated fleet to transport theproduce of G from its plant to thevarious customers in the City ofBengaluru. The Assessing Authorityimposed tax under Section 5C of the

KST Act and penalty on the groundthat the transaction amounted totransfer of the right to use the vehiclesplaced at the disposal of the G.The Honourable Karnataka HighCourt observed that the dealer haddedicated to G, certain number ofvehicles for the use of transporting theproduce of G from its plant to thevarious customers in the City ofBengaluru and G was in possessionof the vehicles and the vehicles wereavailable to G 24 hours on all theseven days of week, except for twodays for maintenance.The Court further observed that thethough the driver was the employeeof the dealer and he was also placedwith the vehicle for use of the vehicleby G, the driver had to obey theinstructions of G and was authorisedto obtain receipt for having completedthe transportation as per theagreement.In view of the above facts, the Courtheld that the agreement entered intobetween the dealer and G amountedto transfer of right to use the goodsand was liable to tax under Section5C of the KST Act.[2012] 53 VST 235 (Mad. – HC); SriVelur Devasthanam VaitheeswaranKoil Dharmapuram Adhinam v.State of Tamil Nadu - In the instantcase the Honourable Madras HighCourt held that the gold bullionoffered by devotes to devasthanamwhich the devasthanam sold throughpublic auction is a religious activityand not a business or trading activityliable to tax.Therefore, unless the main object ofthe dealer is to carry on business, hecannot be charged to tax merelybecause there is an incidental activityof trade/business. This decision

5 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

follows the decision of the honourableSupreme Court in the case of SaiPublication reported in 126 STC 288SC.2012-13 (17) KCTJ (Karn. – HC);Packwell Industries v. State ofKarnataka - In the instant case theHonourable Karnataka High Courtdenied the input tax credit claimed bythe Petitioner on the basis that taxinvoices issued by the dealers werebogus and fake and that the dealerswere de-registered on the date ofpurchase made by the Petitioner andfurther they have not filed anydeclarations nor remitted the taxcollected from the Petitioner.It is important to distinguish theaforesaid decision from a case wherethe selling dealer although registeredmay not have remitted the taxescollected to the governmentexchequer. The aforesaid decisionapplies in a peculiar setting wheregoods are bought from bogus dealers.2012 (73) Kar. L.J. 429 (Karn. –HC)(DB); State of Karnataka v. K.Bond Polymers Pvt. Ltd. - In theinstant case the Assessee had paid 4%tax demanded by the supplier in themonth of June, July and December of2005 and February 2006. The supplierraised debit note on 31.07.2006 forthe reason that the actual tax payablewas 12.5%. Thereafter the Assesseepromptly paid the difference in taxand the supplier also remitted thesame to the Department in July 2006.Later on the Assessee put forth theaforesaid claim six months, thereafteri.e. in December 2006.The Karnataka High Court held thatonce the tax is paid under the Act, theassessee is entitled to the benefit ofinput tax. If the Assessee has paid themoney, either he may retain thedifference of the amount collected and

appropriate it or he can put the claimfor refund. The delay in putting forththe claim for refund neither does notin any way effect his right to claimthe said amount, which is legitimatelydue to him under Act nor it amountsto contravention and results inliability to pay tax, interest andpenalty.The aforesaid decision is one of thefinest decisions that appreciates thatthere is no time limit for claiming theinput tax credit. In fact, the dealermay be doing a favour to theDepartment in putting up the belatedclaim.2012 (73) Kar. L.J. 487 (Karn. –HC); Larsen & Toubro Ltd. v. Stateof Karnataka - In the instant case thequestion that came up forconsideration before the HonourableKarnataka High Court is whether thetax under Section 5-B of the KST Actis leviable on Appellant’s grossprofits, who is a civil contractor inrespect of works done through sub-contractors (who are local registereddealers)?The Honourable Karnataka HighCourt observed that in Section 5-B ofthe KST Act, the charge is only onthe value of the goods that passesfrom the contractor to the principalin the course of execution of anyworks contract. Insofar the deemingprovision is concerned, it is at best forthe purpose of ascertaining the placeand time of the event, i.e. taxing eventin the sale of goods and not exactly adeeming provision for creating a non-sale event as sale. Further, the Courtobserved that the definition of ‘tax onthe sale or purchase of goods’ asindicated in Clause (29-A) of Article366 of the Constitution of Indiaenables only splitting of differentvalues of the components involved in

a works contract and levying tax onlyon the goods components, as there islimitation on the State Legislature forimposing tax on the sale of goods.Hence, the charge is on the goods thatare involved in the execution ofcontract work.In view of the above, the Court heldthat there cannot be any dichotomyof the contract and sub-contract; thatthe sub-contractor is only an agent andwhatever value of the contract is gotalong through sub-contractors, suchcontract is also virtually forming partof the turnover of the Assessee andthe Assessee is liable and accountablefor payment of tax in respect of thegoods utilised for execution of thecontract.With due respect, it is submitted thatthe aforesaid decision has notfollowed the spirit as well as thebinding precedent of the decision ofthe honourable Supreme Court in thecase of State of Andhra Pradesh andothers v. Larsen & Tourbo Ltd. andothers [2008] 17 VST 1 (SC). Theaforesaid decision also does notfollow the earlier decision of thehonourable Karnataka High Court inthe case of State of Karnataka v.Dynasty Developers Pvt. Ltd. 2012(73) Kar.L.J. 111 (HC)(DB) which infact followed the aforesaid SupremeCourt decision.INCOME TAXPARTS DIGESTED:a) 346 ITR – Part 1, 3 & 4b) 208 Taxman – Part 5 to 7c) 209 Taxman – Part 1d) 17 ITR (Trib) – Part 5 & 6e) 18 ITR (Trib) – Part 1 & 2f) 137 ITD – Part 5 to 9g) 145 TTJ – Part 1 to 3h) 146 TTJ – Part 5 to 6

6October2012

i) 147 TTJ – Part 3 & 4

j) 148 TTJ – Part 3

k) 39 CAPJ – Part 3 & 4

l) 44-A BCAJ – Part 5

m) 61 TCA – Part 2

n) 7 International Taxation – Part 2

Reference / Description

[2012] 346 ITR 30 (All. - HC);Mohd. Ayub v. ITO - In the instantthe Assessing Officer had issuedcombined notice for all four years forreopening the assessment. TheHonourable Allahabad High Courtheld that notice under Section 148 ofthe Act has to be issued for each yearseparately; therefore the reassessmentis not valid.

[2012] 346 ITR 329 (Del. - HC); CITv. Asahi India Safety Glass Ltd. - Inthe instant case the Honourable DelhiHigh Court held that the softwareexpenditure incurred by the Assesseewas a business expenditure on thebasis that expenditure incurred by theAssessee did not create a new assetor a new source of income but wastowards upgrading the system.

[2012] 346 ITR 349 (Bom. - HC);CIT v. Kotak Securities Ltd. - In theinstant case the Tribunal on the issueof the claim of the Assessee forsoftware expenses remitted the matterback to the Assessing Officer todecide the issue afresh in the light ofthe Special Bench decision in the caseof Amway India Enterprises v. DCIT[2008] 301 ITR (AT) 1 (Delhi)/[2009]111 ITD 112 (Delhi) [SB] after givingreasonable opportunity to theAssessee. The Department questionedthe action of the Tribunal before theHonourable Bombay High Court.The Honourable Bombay High Courtheld that there is no question of law,much less a substantial question of

law that arose in the instant case.Further, the Court was informed thatthe appeal which arose from aforesaidSpecial Bench decision, the DelhiHigh Court in CIT v. Amway IndiaEnterprises [201] 346 ITR 341 (Delhi)has held that the entire expenditurewas liable to be allowed as revenueexpenditure.The aforesaid decisions impliedlyoverrule the special bench decisionin the case of Amway India (whichgave some guidelines fordetermination of capital or revenuenature of expenditure on software) byholding that expenditure onapplication software is revenue innature.[2012] 208 Taxman 464 (Karn. -HC); 23 taxmann.com 3 (Karn. -HC); Prakash Leasing Ltd. v. DCIT- In the instant case the HonourableKarnataka High Court held that leaserental may consist of financing chargeas well as capital recovery; amountreceived towards capital recoveryconstitutes capital expenditure,whereas, financing charges representsrevenue receipt, which is real income.It is only financing charges whichrepresent real income that has to beoffered for tax.The Court further held that in absenceof any provision in Act for calculatinglease equalisation charges,Accounting Standards prescribed byICAI can be adopted for that purposeand assessee would be entitled toclaim said amount as deduction fromtotal lease rentals.[2012] 209 Taxman 6 (Karn. - HC);22 taxmann.com 250 (Karn. - HC);CIT v. Shravanee Constructions - Inthe instant case the Assessee wasengaged in the business ofdevelopment and construction ofresidential flats. It purchased

agricultural land and paid entireconsideration. Sale deed was notregistered. A MOU was entered withland owner and the Assessee took thepossession of land. Later on, a jointdevelopment agreement was enteredinto by the Assessee as ‘consentingwitness’ with landowner and apromoter to develop a residentialapartment on above land. As aconsequence of agreement, Assesseegot converted into non-agriculturalland and got work commencementletter from Municipal Corporation. Italso undertook different developmentactivities. Out of total 211 flats thatwere to be constructed as per projects,40 flats in different blocks wereallotted to Assessee. Assessee claimeddeduction under Section 80-IB(1) ofthe Act on profits derived from saleof some flats. The Assessing Officerdenied the deduction on the groundthat the Assessee did not undertakeany development or building activityand it cannot individually claim thebenefit of tax under Section 80-IB(10)of the Act.

The Honourable Karnataka HighCourt observed from the jointdevelopment agreement that theundertaking of developing andbuilding housing project was jointlyundertaken by the Assessee andbuilder. The Court keeping in mindthe object with which this provisionis introduced held that when allpersons who have made investmentsin this housing project which is forthe benefit of middle and lower classpeople and when they have compliedwith all the conditions prescribedunder the aforesaid provision, both ofthem are entitled to 100% benefit oftax deduction.

[2012] 209 Taxman 42 (Ker. - HC);22 taxmann.com 332 (Ker. - HC);

7 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

CIT v. Hindustan Latex Ltd - In theinstant case the Assessee claimedpayments made towards premium toLIC for policy under group leaveencashment scheme as businessexpenditure under Section 37(1) ofthe Act and the same was allowed bythe Assessing Officer. TheCommissioner, invoking Section 263of the Act held that the said claim wasallowable under Section 43B(f) of theAct only and same could be availedof only with respect to paymentsmade on that account in previous year.The Kerala High Court held that sinceAssessee had insured itself againstliabilities which might arise onaccount of claim made by employeestowards leave encashment and saidliability was borne by insurer, therecould be no situation whereinAssessee could make a valid claim fordeduction under Section 43B(f) of theAct as actual liability was not incurredin any of years.The Court further held that evenotherwise the Honourable CalcuttaHigh Court in case of Exide IndustriesLtd. v. UOI [2007] 292 ITR 470/164Taxman 9 has held that Clause (f) ofSection 43B to be unconstitutionaland revenue having accepted decisionof the said Court cannot press intoservice Section 43B(f) of the Act.Therefore, the Court held thatpayment of premium towards leaveencashment policy was businessexpenditure wholly and exclusivelyincurred for business purpose andallowable as a deduction underSection 37(1) of the Act.However, the honourable KeralaHigh Court failed to notice that thedecision of honourable Calcutta HighCourt was challenged in the SupremeCourt and the Supreme Court hasgranted a stay against the same.

[2012] 18 ITR (Trib) 62 (Mumbai);B4U International Holdings Ltd. v.DCIT (International Taxation) - Inthe instant case the HonourableMumbai Tribunal held that theamendment to the Finance Act, 2012in respect of Explanation 5 to Section9(1)(vi) of the Act has no effect forthe reasons that there is nothing in theDTAA entered into between India andthe USA which provides for suchchange.In this welcome decision, thehonourable tribunal held that not astand in the amendment made tosection 9, as long as the DTAA isunamended and is in force, theamendments made to section 9 willhave no force.[2012] 18 ITR (Trib) 180 (Cuttack):ITO v. Sahadev Pradhan - In theinstant case the Assessee derivedincome from publication and tradingin books. For the assessment year2008-2009, the Assessing Officerpassed an order of assessment underSection 144 of the Act, makingaddition towards excess net profitfrom a proprietorship concernestimating the net profit at 5% on saleand further disallowing Rs.21,05,583/- under Section 40(a)(ia)relating to transportation charges,printing charges, lamination charges,binding charges, design and scanningexpenses.The Honourable Cuttack Tribunalheld that when the Assessing Officerhas estimated the income and hasrejected the books of account takingrecourse to Section 145(3) of the Act,deduction under Section 40(a)(ia) wasnot tenable in law.[2012] 18 ITR (Trib) 244 (Kolkata);NSHM Academy v. CIT - In theinstant case the Assessee filed anapplication for approval under

Section 80G. Clause 9 of the trust deedpermitted the trustees to invest andkeep the trust fund in any businessundertaking and Clause 17 of the trustdeed empowered the trustees tomodify the trust deed or provision,rules or regulations in an absolutemanner. The Commissionerconcluded that both clauses gave thetrustees a free hand whereby incomeor assets of the trust at any time couldbe transferred or applied for any non-charitable purpose and accordinglyrejected the application.

The Honourable Kolkata Tribunalobserved that Clause 3 of the trustdeed restricted the application of thefund for trust purposes and objectsand subject to such conditions orlimitations, if any, as may, from timeto time, be laid down in the Income-tax Act. This Clause preceded Clause9 and would get precedence overClause 9 of the trust. Clause 13 madeit clear that no part of the trustproperty or its income could beapplied for any purpose other than thepurposes of the trust and all thepowers and provisions were subjectto the restrictions and limitationsunder the Income-tax Act. From theabove the Tribunal held that Clause 9could not be considered acted uponin violation of Clauses 3 and 13.Therefore, the Tribunal held thatClause 9 could not be considered inisolation and in order to find out thetrue import of the trust all the clauseshad to be read together. Thus, theTribunal held that the Assessee wasentitled to registration under Section80G of the Act.

[2012] 18 ITR (Trib) 253(Ahmedabad); ITO v. Yasin MoosaGodil - In the instant case theAhmedabad Tribunal held if theamount paid for booking the flat in

8October2012

advance has been subsequentlyreceived back by the builder therebyrelinquishing his booking right on theflat then the booking advance cannotbe regarded as a capital asset andSection 50C of the Act does not apply.[2012] 137 ITD 301 (Ahmd.)23taxmann.com 55 (Ahmd.); ACIT v.Torrent Pharmaceuticals Ltd. - In theinstant case of Assessee, theCommissioner (Appeals) confirmeddisallowance being 150% weighteddeduction under Section 35(2AB) inrespect of capital expenditure onmotor cars and capitalized interestthereof.The Honourable Ahmedabad Tribunalheld that the capital expenditureincurred by the Assessee on purchaseof motor cars could not be consideredas expenditure incurred by theAssessee on in-house research &development since use of motor carsby employees had no bearing on in-house research & development.In the instant case, the Tribunalfollowing the co-ordinate Benchdecision in the Assessee’s own casein IT Appeal No. 4343/Ahd/2007 andthe Bombay High Court decision inthe case of CIT v. Raychem RPG Ltd.[IT Appeal No. 4176/2009, dated04.07.2011] held that expenditureincurred on ERP was of revenue innature.[2012] 137 ITD 370 (Ahmd.); 23taxmann.com 225 (Ahmd.); DCIT v.Kuldeep D. Kaura - In the instant caseemployer of the Assessee obtained aresidential flat on leave and licencebasis and provided same to theAssessee for his residentialaccommodation. Employer recoveredfrom Asseessee’s salary lease rent ofRs. 1.70 lakhs on monthly basis andpaid same to the landlord. Assessee

was getting HRA of Rs. 3 lakhs/month including special HRA of Rs.1.70 lakhs/month. Assessee claimedexemption under Section 10(13A) foramount of reimbursement of rentalexpenses paid to employer of Rs. 1.70lakhs/month.The Assessing Officer held that sincethe Assessee was not paying rent tothe landlord directly, he was notentitled to the benefit of Section10(13A) of the Act. The AssessingOfficer also held that since theAssessee was allowed to occupy freeaccommodation provided by theemployer for which the employer waspaying rent as per the leased licenceagreement, the Assessee was noteligible for exemption under Section10(13A) of the Act.The Honourable Ahmedabad Tribunalheld that the perquisite value ofhousing accommodation provided byemployer to the Assessee as per Rule3 of IT Rules was worked out as niland once housing perquisite value wasworked out as nil, there was no rentalpayment made by the Assessee forpurpose of working out exemptionunder Section 10(13A) and therefore,the Tribunal held that the Assesseewas not entitled to the said benefit.With due respect, it is submitted thatmerely because the perquisite valuebecame nil, the assessee cannot bedenied the benefit of HRA exemptionin respect of rental expenditureincurred by him by whatever namecalled. The aforesaid decision has notfollow the earlier decision of BombayTribunal in the case of Mrs ManghalGaonkar Vs ITO, Mumbai[2012] 137 ITD 376 (Mum.); 24taxmann.com 91 (Mum.); ACIT v.Jaimal K. Shah - In the instant casethe Assessee owned a land since 1962.

It entered into a developmentagreement on 21.02.2001 with abuilder for a consideration of Rs. 61lakh and 55 per cent share in built-uparea. Assessee was given possessionof flats on 24.02.2005. Assessee soldtwo flats on 10.04.2006 and12.05.2006 and computed long termcapital gain by taking holding periodfrom date of agreement 21.02.2001.The Assessing Officer computed gainas short term capital gain on reasonthat Assessee had taken possession offlats on 24.02.2005.The Honourable Mumbai Tribunalheld that though ‘right of claim inflats’ as per agreement of 2001 wasan ‘asset’, Assessee had not sold ‘rightof claim in flats’ but had sold ‘flats’of which he was owner. ‘Right ofclaim in flats’ no longer subsistedonce Assessee acquired flats and tookpossession of same on 24.02.2005.Therefore, the Tribunal held that thecapital gain had to be computed onsale of flats and not on transfer of rightof claim in flats; and consideringdates of possession of flats and salethereof, gain on sale of flats was shortterm capital gain.Further, the Tribunal also held thatsince Assessee along with flats hadalso sold right of land as owner, whichwas an independent asset held since1962, capital gain in respect oftransfer of right of Assessee in landhad to be computed separately as longterm capital gains. It would bereasonable to adopt a profit marginof 25 per cent on cost of constructionof flats to arrive at sale considerationpertaining to flats and balance saleconsideration of flats would beappropriated towards sale price fortransfer of right in land.

9 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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

Service Tax:1. The statutory compliance

services are not ‘ManagementConsultant Services”:The issuebefore the Tribunal was whetherthe statutory compliance servicessuch as filing of application forimport export code, Income-taxreturns, ROC returns andsales taxreturns and other complianceswith the regulation of ReserveBank of India, Foreign InvestmentPromotion Board etc. falls underthe category ‘ManagementConsultancy Service’ underSection 65(105)(r) read withSection 65(65)of the Finance Act,1994. The Tribunal held that thecompliance with statutory Acts ispart of the responsibilities ofmanagement which perse will notfall under the words ‘inconnection with the managementof any organization’ used inSection 65(105)(r) and Section65(65) of the Finance Act, 1994.Tribunal placed reliance on thedecision of Apex Court in the caseof Collector of Central Excise Vs.Parle Exports Private Limited,([1990] 183 ITR 264)wherein heldthat a taxing entry should beunderstood in the same way as inthe ordinary parlance. Further, theTribunal also relied upon theBoard Circulars No. V/DGST/21/-26MC/9/99 dated 28.01.1999

and F.No. 341/21/99-TRU dated20.08.1999 and No. 1/1/01-STdated 27.01.2001[Ernst & YoungPrivate Limited, V. CST, NewDelhi [2012] 36 STT 358/23taxmann.com 331 (New Delhi –CESTAT)]

2. Activity of installation of metersis not liable to service tax: Theissue before the Tribunal waswhether the activity of installationof electricity meters is subject tothe service tax under the categoryof “erection, commissioning andinstallation”. The Tribunal heldthat since the assessee is sellingelectricity to the consumer and itis essential to install the electricitymeter for recording the bill andalso to review the capacity towithstand the load provided to theconsumer. Thus, any activity orservice like erection,commissioning and installation ofmeters can easily be termed as theservice relating to the transmissionand distribution of electricityprovided. Tribunal placed relianceon its own decision in case of M.P.Power Transmission CompanyLimited vs. CCE, Bhopal inrelation to interpretation of similarexemption Notification No. 11/2010-ST dated 27.02.2010 whichis parimateria to the NotificationN o . 4 5 / 2 0 1 0 - S T d a t e d20.07.2010. Hence, the demand

based on the impugned order is setaside. [M/s Paschimanchal VidyutVitran Nigam Ltd Vs CCE,Meerut, 2012-TIOL-1175-CESTAT-DEL]

3. Individual co-owners ofimmovable property are primafacie eligible for Small ScaleServices providers (SSSP)exemption: In the present case,the appellants are co-owners of abuilding, which was let out. Thetenant was issuing differentcheques to the co-owners, whowere claiming the benefit of SSSPexemptions under NotificationNo. 6/2005-ST dated 01.03.2005(as amended from time totime).Issue before the Tribunalwas whether the co-owners areprima facie individually eligiblefor exemption under SSSPNotification for waiver of pre-deposit. The Tribunal held thatprima faice co-owners will havetobe considered as separate providerof such service and in the presentcase, individual co-owner’saggregate value of taxableservices does not exceedexemption threshold limit.Accordingly, pre-deposit ofservice tax stayed till disposal ofappeals. [Smt K D Chaudhary &Others Vs CST, Ahmedabad,2012-TIOL-1272-CESTAT-AHM]

4. Service tax not remitted by theservice provider and henceCENVAT credit disallowed:Service providers who suppliedservices to the appellants had notpaid service tax to the department,though on the invoices issued,service tax was charged. It wasobserved that the appellants wereaware of the disappearance of the

10October2012

service provider, but they did notmake any effort to find out evenat that stage as to whether theservice providers were inexistence and whether they hadpaid service tax collected fromthem to the government. TheAppellants did not even bother toverify whether the office premisesin the invoice was in existence ornot. Thus, the CENVAT credit isallowed.Self – assessment: Further,insofar as it relates to reversal ofCENVAT Credit where theassessee was manufacturing both,exempted and dutiable goods, itis held that the principle of selfassessment and submission ofonly the results of self assessmentin the form of return would showthat it is the responsibility of theassessee to assess the goodscorrectly and pay the taxescorrectly. In this case it cannot besaid that assessee was not awarethat for trading activity credit wasnot admissible. Once the assesseeis considered to be aware ofstatutory provisions relating toavailment of credit and hisactivities, the normal conclusion ofa ordinary prudent person is thatthe assessee had deliberatelyavoided reversing the creditattributable to trading activity andthereby suppressing/ mis -declaring the fact of availment ofcredit to the department. Hence, thedemand of credit availed withinterest and penaltyupheld.LACTO COSMETICS(VAPI) PVT LTDSHRI JAVEDSHAIKH vs. COMMISSIONEROF CENTRAL EXCISE, DAMAN- 2012-TIOL-1281-CESTAT-AHM.

5. Evidence not furnished beforethe original authority but filedbefore the appellate authoritiesought to be considered and adetailed review should beundertaken to quantity the taxbefore issue of show causenotice: Commissioner (Appeals)had rejected the appeal on theground that all submissions madeby the appellant cannot beadmitted because no evidence wasproduced before the originalauthority. The Original Authorityhad issued a show cause noticebased on Profit & Loss Accounteven without giving anopportunity to explain thesituation by the appellant. It washeld that the matter should havebeen investigated and recordscalled for because the law requiresthat correct amount of service taxliabilityis required to be workedout before issue of the ShowCause Notice. The appellant beinga proprietary firm and not wellversed with service tax provisions,there is a possibility that he couldhave entertained a bonafide beliefabout the liability of service taxand in view of the fact that noevidence was produced beforeoriginal adjudicating authority andCommissioner (Appeals) did notallow them to produce anyevidence, the Tribunal ruled thatit is a fit case for exercising thediscretion to give an opportunityto the appellant to produceevidence afresh and therefore thematter was remanded to originaladjudicating authority.NiravTravels Vs CCE - 2012-TIOL-1251-CESTAT-AHM

Central Excise:6. The negligence of the employee

is not a valid reason forcondonation of delay: Anapplication for condonation ofdelay of 486 days in filing appealbefore the Tribunal was filedstating that the employee dealingin excise matter was retired andthe employee had not informedthe assessee about the proceedingsand order received. The assesseeclaimed that impugned order cameto the notice of the assessee onlywhen Revenuedirected them todeposit an amount of penalty. TheTribunal held that the assessee isnot disputing the receipt of orderin time and blamed its employeefor being unable to file an appealwithin the period of limitation.The negligence of the employeeof assessee cannot be consideredas sufficient cause for not filingthe appeal within the period oflimitation.[M/s RemediaLaboratories Private Limited V.CCE, Thane-I, 2012-TIOL-1193-CESTAT-MUM]

7. The interest on loan is notincludible in the assessablevalue: The issue before theTribunal was whether the cost ofinterest is includible in theassessable value. The assesseecleared the goods to anotherunitof his own and paid the duty onaccount of captive consumption asper Rule 8 of the Central ExciseValuation Rules, 1975. TheTribunal held that the cost ofproduction is to be calculated inaccordance with CAS-4 asclarified by the Board videcircular no. 692/08/2003-CX,dated 13/02/2003 andthe cost of

11 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

interest is not includible in theassessable value in terms of CAS-4. On applicability of the circularprior to 13.02.2003, the Tribunalrelied on the decision of ApexCourt in the case of CCE, Punevs. Cadbury India Ltd (2006 (200)E.L.T. 353 (S.C.)), which pertainsto the period prior to13.02.2003,held that the cost mustbe determined, strictly accordingto the principles of costing and forthis purpose CAS-4 must beadopted even for prior to13.02.2003. [M/s Swaraj FoundryDivision Vs CCE, 2012-TIOL-1240-CESTAT-DEL]

CENVAT Credit8. Refund of accumulated Cenvat

credit related to deemedexports: In the present case,theassessee manufacturedandclearedexcisable goodswithout payment of central exciseduty as deemed exports to SEZs,100% EOUs and to Delhi MetroRail Corporation (DMRC) underthe exemption notification No. 06/2006–CE dated 01.03.2006 andalso on payment of duty to unitslocated in Domestic Tariff Area.The assessee claimed refund ofexcise duty paid on inputs, capitalgoods and service tax paid oninput services under Rule 5 ofCENVAT Credit Rules, 2004(CCR, 2004) on supply of goodsto SEZs, EOUs and DMRC.However, the refund was partlyallowed, viz., was allowed to theextent of sales made to SEZs anddisallowed in respect of salesmade to 100% EOUs and DMRCon the ground that thesesuppliesare not covered by Rule5 of the CCR, 2004 and the same

was confirmed lower appellateauthority.On appeal,the Tribunalheld that refund of accumulatedCENVAT credit is subject the useof CENVAT credit availed oninputs or input services formanufacture of the goods whichare cleared for export under bond/letter of undertaking or are usedin the manufacture of intermediateproduct cleared for export. Whilethe supplies to SEZ are to betreated as export for the purposeof this Rule in terms of theprovisions of Section 2 (m) ofSEZ Act, 2005, the supplies toDMRC by availing NotificationNo. 6/2006-CE which thoughdeemed exports in terms of theprovisions of EXIM policy,cannot be treated as export for thepurpose of Rule 5 of CenvatCredit Rules, 2004. Therefore, theprovisions of this Rule are notapplicable in respect ofaccumulated CENVAT credit onaccount of supplies to DMRC byavailing full duty exemption underNotification No. 6/2006-CE. Asregards supplies to 100% EOUs,as rightly observed by theCommissioner (Appeals) there isno evidence that the goods havebeen used by those EOUs inmanufacture of finished productwhich were exported out of Indiaunder bond.[M/s TricoliteElectrical Industries Ltd Vs CCE,Delhi-III, Gurgaon, 2012-TIOL-1266-CESTAT-DEL]

9. CENVAT credit can be deniedif the output does nottantamount to manufacturethough excise duty is paid on theclearance of such processedgoods: Assessee had availed

CENVAT credit on inputs and waspaying duty on final products.However, the department allegedthat since activity undertaken bythe assessee does not qualify asmanufacture and hence, thequestion of payment of centralexcise duty by him does not arise.Accordingly, demand was raisedfor recovery of CENVAT Creditand also for penalty. In this regard,on the stay application made bythe assessee, a prima facie viewwas taken that as the assessee hadpaid more duty than creditavailed,the assessee has made astrong case for waiver of pre-deposit. Accordingly, the pre-deposit was waived. TristarEnterprises Vs CCE, Thane-I -2012-TIOL-1174-CESTAT-MUM

10. CENVAT Credit on inputservices allowed against rentingof immovable propertyservice:On the question relatingto the allowability of CENVATCredit on the services likeconstruction, tours andtravelagents service, consultingarchitects service, consultingengineers service, manpowerplacement agency service, airticket booking agency service,security agency service, technicaltesting andanalysis agency andbank charges etc, the Tribunal hasheld that it would not have beenpossible for the owner to constructand bring into existence the mallonly after which it was possiblefor the owner to rent immovableproperty. Therefore, the aboveservices qualify as ‘input services’and hence service tax paid on thesame is eligible as CENVATcredit. Navaratna S G Highway

12October2012

Prop Pvt Ltd Vs CST - 2012-TIOL-1245-CESTAT-AHM.

KST/VAT:11. The sale of intellectual property

along with the business is notliable to tax: The assessee isengaged in the activity ofmanufacture and sale of biscuits,confectioneries etc and isregistered under Karnataka SalesTax Act, 1957.The assesseetransferred its businesscomprising of manufacture,distribution and sale along withthe entire market network andrelated trademarks, brands,copyrights and designs with allassets and liabilities as a goingconcern. The commercial taxdepartment levied the sales tax onthe turnover relating to sale ofintellectual property rights such astrademarks, copyrights anddesigns. The First AppellateAuthority and also the KarnatakaAppellate Tribunal confirmed thesame. Being aggrieved with theorders, an appeal was preferredbefore the Honourable High Courtof Karnataka. Honorable HighCourt held that the assessee is theowner of intellectual propertyrights which was being used inselling the goods manufactured byhim and is not in the business ofselling and buying theseintellectual property rights asgoods. Further, such sale ofintellectual property rights is notincidental or connected with themanufacture and sale of goods.Therefore, the transfer of suchintellectual property rights cannotbe held as sale in the course ofbusiness to attract tax under the

Karnataka Sales Tax Act, 1957.Honourable High Court placedreliance of Apex Court decision inthe case of State of Gujarat Vs.Raipur Manufacturing Co.Limited ([1967] 19 STC 1 (SC)),District Controller of Stores,Northern Railway, Jodhpur Vs.ACT ([1976] 37 STC 423 (SC))and Indian Express PrivateLimited V. State of Tamil Nadureported in [1987] 67 STC 474(SC) held that the assessee is notliable to pay sales tax on sale ofsuch intellectual property underthe sales Acts. [Kwality BiscuitsP. Ltd., V. State of Karnataka[2012] 53 VST 66 (Karn)]

12. Sale of used equipmentsis not liable to tax underKVAT Act: The assessee isa dealer registered underKVAT Act, 2003 under thecomposition scheme and isrunning a canteen in thecinema theatre and haseffected sale of certainequipments other than foodand beverages such as usedmetal detectors, watercoolers and lockers. Theoriginal authority haslevied sales tax on sale ofused equipments underKVAT Act, 2003 and alsol e v i e d c o n s e q u e n t i a linterest and penalty. Theorder of the originalauthority was upheld by thelower appellate authorities.However, the HonourableHigh Court held that theassessee has not sold theused equipments in thecourse of its regular

business but was one time sale ofdiscarded used goods. Theassessee was not engaged in thebusiness of purchase and sale ofthese items and was not a dealertherein. Therefore it was held thatthe sale of those goods were notliable to tax under the KVAT Act,2003. The High Court placedreliance has placed on its owndecision in case of KwalityBiscuits Private Limited V. Stateof Karnataka [2012] 53 VST 66(Karn.). [Cineplex PrivateLimited Vs. State of Karnataka[2012] 53 VST 84 (Karn.)]

Advt.

13 October2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

Advertisement

14October2012

IMPORTANT DATES TO REMEMBER DURING THE MONTH OF OCTOBER 20125th October 2012 Payment of Excise Duty for September 2012

Payment of Service Tax for September 2012 by CorporatesPayment of Service Tax forJul-Sep 2012 for Non-Corporates

6th October 2012 E-Payment of Excise duty for September2012

E-Payment of Excise duty for September 2012 for CorporatesPayment of Excise duty forJul-Sep 2012 for Non-Corporates

7th October 2012 Deposit of TDS/TCS Collected during September 2012

STPI Monthly Returns

10th October 2012 Monthly Returns for Production and Removal of Goods and CENVAT Credit for September2012

Monthly Return of excisable Goods Manufactured & Receipt of Inputs & Capital Goodsby Units in EOU,STP,HTP for September 2012

Monthly Returns of Information relating to Principal Inputs for September 2012 byManufacturer of Specified Goods who Paid Duty of Rs.1 Crore or More during FinancialYear 2011-12 By PLA/CENVAT/Both

15th October 2012 Payment of EPF Contribution for September 2012

Return of Employees Qualifying to EPF during September 2012

Monthly Return (VAT 120) and Payment of VAT/COT for the month of September 2012

Quarterly Return and Payment of CST and VAT Collected During July 2012 to September2012

Quarterly e-TDS for the period July to September 2012 (Form 24Q, 26Q, 27Q and 27EQ)

20th October 2012 Monthly Return and Payment of Profession Tax Collected During September 2012

Monthly Return (VAT 100) and Payment of CST and VAT Collected During September2012

21st October 2012 Deposit of ESI Contributions and Collections for September 2012

25th October 2012 Consolidated Statements of Dues and Remittances Under EPF and EDLI for the September2012

Monthly Returns of Employees Joined & Left the organisation during September 2012under ESIFiling of Half Yearly Return (ST-3) for the period ended September 2012(Electronic Mode is Mandatory)Filing of Half Yearly Return (ST-3) for the period endedSeptember 2012 by Input Service Distributors (Electronic Mode is Mandatory)

30th October 2012 Quarterly TDS and TCS certificates (Form 16A/ Form 27D) as per section 203

31st October 2012 Filing of Belated Annual Accounts & Annual Return to Register of Companies forCorporates under CLSS Scheme.

Advertisement

16

BANGALORE BRANCH OF SIRC NEWS LETTER - English Monthly

Bangalore Branch of SIRC News LetterBangalore Branch of SIRC of ICAI

SUB EDITOR: CA. Ravindranath S.N.

English Monthly Printed & Published & Edited by , on behalf of., No.16/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka

Printed at:Published at: ,

Sub Editor CA. Ravindranath S.N., Vice Chairman

44/1, K.R. Road, Basavanagudi, Bangalore-560 004, Ph : 080-26617243, e-mail : jwalmuki@gmail.comNo.16/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka

Tel : 080 - 3056 3500, Fax : 080 - 3056 3542, www.bangaloreicai.org e-mail : bangalore@icai.orgJwalamukhi Mudranalaya Pvt. Ltd.,

Inauguration

Seminar on Service Tax under Negative Taxation Scheme

Inauguration

16th Batch of FNFE Inauguration

Inauguration

106th Batch of GMCS Inauguration

Inauguration

108th Batch of GMCS Inauguration

CA. Chandrahasa K CA. B. P. SachinKumar

CA. Kusuma Yathish CA. Vikas Oswal Mr. J. Sundaresan Regional Level Quiz Winners -Tarun & Srivatsa &

Selected to National Level

Medini S Bhat -Regional level

Elocution WinnerSelected to National level

Speakers at Study Circle Meetings Bangalore Branch of SICASA

CA. K. S. Ravishankar CA. V. Raghuraman

Mr. G. Shivadass

CA. T. R. Rajesh Kumar

CA. C. R. Raghavendra Mr. Anirudha R J Nayak Cross section of the delegates

CA. Naveen Rajpurohit

CA. N. Anand

Chief Guest Shri. M. Pitchiah Participants of 16th Batch of FNFE

Chief Guest Sri. Ramiah Daniels Participants of 106th Batch of GMCS

Chief Guest CA. K. K. Chythanya Participants of 108th Batch of GMCS

Registered with RNI, Delhi vide Reg. No. KARENG/2012/45348 Date of Posting 4th & 5th of Every month Place of posting at G.P.O., Bangalore