bangalore branch of icai

1 October2011

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

2October2011

3 October2011


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

04.10.11 CPE Teleconference on “Service Tax – Point of Branch PremisesTuesday Taxation Rules & other significant amendments” 11.00am to 01.00pm

CA. P. Rajendra Kumar, Central Council Member

05.10.11 No Study Circle Meeting on account of Ayudha Pooja - Branch HolidayWednesday

08.10.11 Tax holiday benefit under Section 10A & 10B Branch PremisesSaturday Computation mechanism & recent judicial controversies 10.00am to 01.00pm

CA. Ishita Bhaumik & CA. Prashant Jain Delegate Fee: Rs.250/-

12.10.11 Paradigm shift for Finance Branch PremisesWednesday CA. Manoj Ladi 06.00pm to 08.00pm

13.10.11 Training programme on “An insight on the Branch PremisesThursday & concepts applicable to Autonomous Bodies” 09.00am to 05.00pm14.10.11 Details at page no: 19 Delegate Fee: Rs.1,500/-Friday Restricted to 200 participants

17.10.11 Workshop on “Value Added Tax (VAT)” Branch PremisesMonday to Coordinators: 04.00pm to 08.00pm20.10.11 CA. S. Venkatramani & CA. S. VishnumurthiThursday Details at page no: 18 Delegate Fee: Rs.1,000/-

19.10.11 Taxation of expatriate Branch PremisesWednesday CA. Tapati Ghose 06.00pm to 08.00pm

21.10.11 Workshop on XBRL ITT South Centre, B'lore BranchFriday & Fri(06.00pm to 08.00pm) & Sat(10.00am to 05.00pm) of SIRC of ICAI, Sanjay Towers,22.10.11 Details at page no: 13 Delegate Fee: Rs.2,500/- #216, Subbarama Chetty Road,Saturday Restricted to 45 participants B'lore - 04,Ph: 080 -26621434

26.10.11 No Study Circle Meeting on account of Deepavali - Branch HolidayWednesday

29.10.11 Workshop on Transfer Pricing - Law & Practice: Branch PremisesSaturday Discussion on Key Case Laws 09.30am to 05.30pm

CA. Vishweshwar Mudigonda, Mr. Vinay Nichani,CA. Priya GopalakrishnanDetails at page no: 13 Delegate Fee: Rs.750/-

02.11.11 Corporate Governance in unlisted companies Branch PremisesWednesday Mr. J. Sundareshan 06.00pm to 08.00pm

09.11.11 Drafting & pleading before appellate authorities Branch PremisesWednesday CA. Prashanth G. S. 06.00pm to 08.00pm

2 hrs

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.

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4October2011

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

VAT, CST, ENTRY TAX,PROFESSIONAL TAXPARTS DIGESTED:

a) 16 KCTJ – Part 5

b) 71 KLJ – Part 7 & 8

c) 6 GST – Part 4

Reference / Description

2011 (71) Kar. L.J. 215 (SC):Commissioner of Trade Tax v.Parikh Gramdoyog Sansthan - In theinstant case the Apex Court wasdealing with the classification of avoltage stabilizer either as an ‘electricgood’ or an ‘electronic good’ for thepurpose of taxation under the U.P.Trade Tax Act. The Apex Courtobserved that an automatic voltagestabilizer involves the operation of anumber of electronic components.The Court was of the view that avoltage stabilizer might have manycomponents some of which useelectricity which could not be the solereason for classifying it as electricalgoods. The Court further observedthat an electrical device could be anelectronic device, but not vice-versa.The Tribunal being the last fact-finding authority, in the instant case,after taking into consideration thecomponents of voltage stabilizer, thepurpose for which it was used and theprinciples on which it worked hadcome to the conclusion that thevoltage stabilizer was electronicgoods, for the purpose of taxationunder the U.P. Trade Tax Act.2011 (71) Kar. L.J. 234 (HC) (DB):State of Karnataka v. KitchenAppliances India Ltd. - In the instantcase the Karnataka High Court wasdealing with allowability of deductionon account of discount whilecomputing the turnover of the

assessee. The Court held that thededuction of discount would beallowable while computing thetaxable turnover only if the amountallowed as discount was shown in thetax invoice or bill of sale issued inrespect of sale relating to suchdiscount. The Court noted thatdiscount offered after sale by issuingcredit note, could not be allowed asan item of deduction.Further the Court noted that thevalidity of Rule 3(2)(c) requiringdealer to show the amount allowed asdiscount in the tax invoice or sale billhaving been pronounced by theDivision Bench earlier as notcontravening provisions of Section 30of Act, and therefore within the rulemaking power of Government, theTribunal, was bound by the saidjudgments and the judgment of theTribunal in defiance of ruling given byHigh Court was liable to be set asideand would in fact border on contemptof Court (arising as a situation ofobstructing the course of justice).It is unfortunate that after severalrounds of flip flop between the HighCourt and the tribunal, eventually theassessee ended up losing. It isunfortunate also for the reason thatwhen the law otherwise recognisesoffering discounts through creditnotes, it is too pedantic an approachof the government to insist onimpractical requirement of givingdiscount necessarily in the invoice.This requirement apart from beingimpractical does not seem to serveany useful purpose.2011 (71) Kar. L.J. 241 (HC) (DB):Bharti Airtel Ltd. (Formerly knownas Bharti Telenet Ltd) v. State ofKarnataka & Others - In the instant

case the Karnataka High Court hasheld that Artificially Created LightEnergy (ACLE) used as carrier ofdata/information and transmittedthrough optical fibre cable (OFC)lines by providers of broadbandinternet services is not ‘goods’ asdefined in the sales tax law of States.The Court while holding so took notesas to the process involved in the same.The Court observed that ACLE wasobtained by converting electricalenergy by using Light EmittingDiodes (LED) or Laser Device (LD).The light energy so created wasmixed/modulated with date/information and transmitted throughOFC for delivery of data/informationat desired destination. On delivery ofdata/information light energy gotdissipated completely and the saidlight energy used as a carrier was oneform of electromagnetic wave whichwas not ‘goods’.

It is indeed a welcome decision; whatwith the current trend (moreso postthe enactment of the service tax law)of the Department to go on ahyperbole and call any andeverything as ‘goods’. It is almostalways the direct tangle of the centraland the state executives in claimingthe right of way in a tax war.

It is also time the State sales taxauthorities realise that theiroverzealous attitude of extractingsales tax from non-sales wouldeventually drive the businessman outof the state. The sales tax departmentneed not exist if the business is drivenout of the state.

[2011] 6 GST 543 (Mad.): SriRajeswari Agencies v. Addl. Dy.CTO - In the instant case the HighCourt of Madras has held that the AOcould not refuse to issue C Forms toan assessee on ground that it was inarrears of tax and penalty. It was notedthat though under the Puducherry

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VAT Act there was an explicitprovision that at the time of anyrecovery proceeding initiated underthe Act the AO had the power towithhold the issuance of statutory orother declaration forms, in theabsence of similar provisions underthe CST Act the said refusal wasuncalled for. Further when the AO hadother means of recovery (in terms ofattaching the sale proceeds or the bankaccount) there was no justifiableground to have rejected the requestfor the grant of C Forms.Further in the context of validity ofthe writ filed under Article 226 of theConstitution on a show cause notice,the Court opined that though normallyshow-cause notice could not bechallenged by filing a writ petition,in view of the fact that there was anunjust denial to issue C Form licenceto the petitioner and that too, whenthe Respondent had no jurisdiction todo so, the Court could entertain thewrit petition.The ever so present, self-proclaimeddomineering stance of the Departmentseems to persistently reduce theiractions to nothing short of beingfarcical, miring their thought process;Judicious intervention of the Court tomitigate any further injustice.

[2011] 6 GST 562 (AP) : NutrineConfectionary Co. (P.) Ltd. v. Stateof Andhra Pradesh - In the instantcase the Andhra Pradesh High Courtwas dealing with the taxability underthe sales tax Act in respect of transferof right to use certain goods. Theassessee in the instant case hadentered into an agreement withanother company (assignee) for theuse of its trademark and logo againstthe payment of royalty. The Tribunalhad held that consideration receivedby assessee from assignee for transferof right to use its trademark and logowas amount realized in respect of

transfer of right to use goods and,therefore, it was taxable under thesales tax Act. The assessee contendedbefore the High Court that theagreement in question was not onlyfor transfer of a right to use trademarkand logo but also there was obligationon its part to suggest various businessmodalities and to provide formulasand recipes to assignee and, therefore,there was no transfer of right to usegoods as contemplated under the salestax Act. The High Court held thattransfer of a right to use any goodsfor any purpose whatsoever fellwithin the ambit of the sales tax Actand merely because the agreement inquestion provided for other aspects,in addition to creating a right inassignee to use trademark and logo,the same would not make anydifference to it. Since in the instantcase the agreement in question wascertainly one evidencing transactionof transfer of a right to use trademarkand logo and that the assignee wasfree to make use of trademark andlogo and would have full control oversuch use, the Court held that theTribunal was justified in its view.

However, the point that is notaddressed was one of the importantrequirements of transfer of right to useas stated by Justice Lakshmanan inthe case of BSNL 145 STC 91 thatonce such right is transferred by oneperson to another, the transferorshould not be giving it out to any thirdparty during the period of suchtransfer. If the trademark assignmentagreement reserved the right of thetransferor to assign the trademark toany other person simultaneously andif the assignment is on a non-exclusivebasis, the aforesaid test may fail. Thiswould mean that there is no transferof right to use and hence no tax.

[2011] 6 GST 66612 taxmann.com180 (Kar.): Essar Telecom

Infrastructure (P.) Ltd. v. Union ofIndia - In the instant case the AssesseeCompany had erected and constructedcellular telephony towers either on landor on roof of buildings and leased outthe same on rent to various telecom/cellular operators. Further the assesseehad also entered into agreement withoperators for the purpose of renderingservice in relation to passive telecomnetwork including operating andmaintenance. The High Court ofKarnataka held that the tower inquestion was a movable property.Further the Court noted that havingregard to the nature of the agreemententered into between parties and natureof transaction, since effective controlwas with assessee and the componentof delivery was also involved andmaintenance and over all control werealso with assessee, it could be said thatright to use goods had been transferredby assessee to telecom companies andthat very much would fall within Article366 (29A)(d) of the Constitution.With due respect, it is submitted thatthe High Court failed to appreciatethat the telecom covers beingpermanently fastened to earthwill be in the nature of immovableproperty.

INCOME TAXPARTS DIGESTED:a) 335 ITR – Part 4 & 5b) 336 ITR – Part 1 to 3c) 200 Taxman – Part 1 to 5d) 10 ITR (Trib) – Part 5 to 7e) 11 ITR (Trib) – Part 1f) 5 International Taxation – Part 2

Reference / Description[2011] 335 ITR 508 (P&H) HC:Aravali Engineers P. Ltd. v. CIT &another - In the instant case the HighCourt dealing with the matter ofdeductions while computing incomefrom house property has held thatbrokerage paid to a broker was an

6October2011

independent transaction, as againstthe earning of the rental income. TheCourt opined that whereverdeductions out of income fromproperty are permissible, the samehave been specified in Section 24. Dehors the said provision, deductionfrom income was not permissible. Itmay be noted that it was thecontention of the assessee that rent tothe extent of brokerage paid havingnever been received by the assessee,the assessee was not liable to includethe said rent in its income.[2011] 335 ITR 541 (Delhi) HC: CITv. Karan Bihari Thapar - In theinstant case the High Court wasdealing with the effect of amendmentto Section 6(6) made vide the FinanceAct 2003 w.e.f. 1-4-2004. The Courtheld that the said amendment was notretrospective in nature. Therefore inrespect of the assessment years 1998-99 and 1999-2000 the old Section wasapplicable. It was held that theassessee who was not resident forthree years out of the ten previousyears was assessable as ‘resident butnot ordinarily resident’.The Court noted that even though theDepartment’s Circular No. 7 of 2003(see [2003] 263 ITR (St.) 62) whichstated that the amendment was madein order to remove doubts about theinterpretation of the Section and it wasclarificatory in nature, nevertheless,it had been made applicable only fromApril 1, 2004. The Court noted thatthere was a significant differencebetween the Section as it existed priorto the amendment and thereafter in asmuch as prior to the amendment thereference was with respect to a personwho has ‘not been resident in India’,while what was contemplated postamendment was that of a person whohas ‘been a non-resident’.[2011] 336 ITR 56 (Bom) HC: CITv. Cable Corporation of India Ltd.-

In the instant case the High Court hasheld that for the purpose of calculatingdepreciation allowable to a block offixed assets, only the apparentconsideration for which the flat wassold should be reduced from the blockof fixed assets which was different(far lesser) from the fair market valueof the flat as determined by theDepartmental Valuation Officer.The Court upholding the view of theTribunal observed that Section43(6)(c)(i)(B) has used a differentconnotation in respect of sale of assetsand sale of scrap. As per that Sectionon sale of an asset, the written downvalue of the block of assets is to bereduced by the amount at which theasset is actually sold, whereas, in thecase of sale of scrap, the value of thescrap, being the fair market value ofthe scrap and not the price at whichthe scrap is sold should be reducedfrom the written down value of theblock of assets.[2011] 336 ITR 65 (Ker) HC: CIT v.Sree Seetharama Anjaneya VedaKendra - In the instant case the HighCourt dealing with the exemptionunder Section 11 held that prima facie,the carry forward of income up to 75percent, though permitted underSection 11(2) of the Act, should notbe adopted on a routine basis and if itis done, the very purpose of the trustwould be defeated. The Court was ofthe view that Section 11(2) providingfor carry over up to 75 percent is anexception and if it is followed fromyear to year, then the genuineness ofthe activities of the trust itself shouldbe examined by the Assessing Officer.The decision though to a great extentmight try to construct the provisionin the light of what was intended bythe legislatures; it is a little strangeto interpret (in a manner of imposingextra conditions) something beyondwhat has been explicitly provided

under the provisions of law.

[2011] 336 ITR 321 (Delhi) HC: CITv. Sumi Motherson InnovativeEngineering Ltd. - In the instant casethe High Court was dealing withmethod of computation of book profitfor the purposes of Section 115JB.The High Court held that the Tribunalwas correct in law and on the meritsin holding that the assessee is entitledto deduction of brought forwardlosses even though the losses havebeen liquidated during the course ofthe year and nothing was left to beavailable for set off. The same waswith reference to Explanation 1(iii)appended below the said Section. Inthe instant case the Company hadlosses brought forward and the samewere wiped out during the course ofthe year due to reduction of capital.The AO in the case had given his ownrationale in choosing the last date ofthe financial year, which is the subjectmatter of assessment for the purposeof ascertaining the amount ofunabsorbed losses brought forward.On the other hand, the order of theTribunal provided its ownjustification for adopting the last dayof the preceding year/first day of thecurrent financial year. The Courthaving regard to the said Explanationnoted that the same categorically andunhesitatingly used the term ‘lossbrought forward’. The meaning thatwas to be assigned to this term wouldbe the loss on the last date of theimmediately preceding year, which isto be brought forward to the financialyear in question. The Court furtherobserved that what happens duringthe course of the year was notrelevant, as under the scheme of theaforesaid provision no suchcontingency was taken note of.[2011] 336 ITR 348 (P&H) HC: CITv. K. Streetlite Electric Corporation -In the instant case the High Court was

7 October2011


of the view that interest–free securitydeposit taken by the assessee beinghugely disproportionate to monthlyrent charged, the same was a deviceto circumvent liability to income-tax.Therefore the Court held that notionalinterest on security deposit had to betreated as income from houseproperty under Section 23 of the Act.With due respect, the High Courtmissed the point that the assesseewould have earned interest income onsuch deposit and offered the same totax. Taxing him in respect of notionalinterest on deposit would amount todouble taxation.

[2011] 336 ITR 383 (Delhi) HC: CITv. Jai Drinks P. Ltd. - In the instantcase there was an agreement by theassessee with the distributor fordistribution of products manufacturedby assessee. The distributor purchasedthe products at pre-determined price forsale within specified area. Both theassessee and the distributor werecollecting and paying sales taxseparately. In such a case the High Courtheld that the payment being made bythe assessee to the distributor were inthe nature of incentive and discount andnot commission and therefore there wasnot liability to deduct tax on suchpayments under Section 194H.[2011] 200 Taxman 35(Kar.)(Mag.)11 taxmann.com 368(Kar.): CIT v. Chinnanachi Muthu

Construction & Co. - In the instantcase the High Court has held thatincome derived by the assessee outof fixed deposit kept in banks, toobtain a bank guarantee, in order tofurnish the same to acquire contractwork, constituted business incomeand not income from other sources.Similar view has been taken by theDelhi High Court in a case reportedin 335 ITR 132 (reported in lastmonth’s journal); re-iterating theprinciple that the taxability of interestunder the head ‘income from othersources’ would be only by exceptionand not by rule.

[2011] 200 Taxman 66 (Punj. &Har.)(Mag.) 11 taxmann.com 312(Punj. & Har.): Pawan Arya v. CIT -In the instant case the assesseeclaimed exemption on capital gainson sale of flat on the ground ofacquisition of two houses. The AOset off the capital gain against one ofthe houses but held the claim not tobe admissible against the secondhouse. The High Court held that asregards claim for exemption againstacquisition of two houses underSection 54, the same was notadmissible in plain language of statue.[2011] 200 Taxman 27112taxmann.com 108 (Delhi) HC:Indglonal Investment & FinanceLtd. v. ITO - In the instant case theassessee had filed its return of income

declaring a loss. In the said return ofincome the assessee had not shownany tax collected and deducted atsource nor any claim for refund wasmade. However, in the statement ofincome and audited balance sheetannexed with return of income it wasshown that assessee had receiveddividend from a company on whichTDS had been deducted and the samewas refundable. Subsequently theassessee wrote a letter to the revenueauthorities seeking refund of TDSamount. The Revenue, however,rejected the refund claim on the groundthat the same had not been mentionedin return of income. The High Courtheld that merely because the assesseehad not claimed the refund in the itsreturn of income itself it could not besaid that the assessee was not entitledto refund. Since in accordance withSection 139(9) the assessee hadannexed statement of total income,computation of tax payable on totalincome and attached the original TDScertificate to the return of income, theCourt held that the assessee had madea claim for refund.

The interpretation of the tax lawsseems as per the convenience of,rather to cater to the ‘privy purses’;while the Department citingprocedural lapses sought to ill-legitimately usurp assessee’s moneyin blatant disregard to Article 265.

MOCK TEST FOR IPCC & FINAL STUDENTS APPEARING FOR NOV.2011 EXAMSCA FINAL

Date Time Subject15-10-2011 10 am to 01 pm Financial Reporting

02 pm to 05 pm Strategic FinancialManagement

16-10-2011 10 am to 01 pm Advanced ManagementAccounting (Costing)

02 pm to 05 pm Direct Tax Laws

IPCCDate Time Subject8-10-2011 10 am to 01 pm Cost Accounting &

Financial Management02 pm to 05 pm Taxation

9-10-2011 10 am to 01 pm Accounting (Group – I)02 pm to 05 pm Advanced Accounting

(Group - II)

Fees: Rs. 50/- per paper Limited Seats. Registration closes on 04th October 2011Venue: Bangalore Branch premises For further details please contact: Ms. Rajalakshmi on 080-30563509

ATTENTION : STUDENTS

8October2011

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

Central Excise: The respondent-assessee is

engaged in manufacture of Sugar.In addition to central excise duty,the assessee is required to payadditional excise duty at the rateof Rs. 45.55 paisa per quintal onthat quantity of sugar clearedwhich falls short of export quotafixed for the manufacturer underSection 7 of Sugar Export &Promotion Act, 1958 (SEPA,1958). The provisions of theCentral Excise Act, 1944 and theRules made thereunder relating tolevy and collection includingrefunds and exemptions of theduty of excise are also madeapplicable to levy of additionalduty of excise by virtue of Section7(4) of the SEPA, 1958. Theadjudicating authority leviedinterest under Section 11AB underCEA, 1944 and penalty underRule 25(1) of Central ExciseRules, 2002 for the delay inpayment of duty. On appeal, theCommissioner (Appeals) haspartly allowed by setting aside thepenalty but confirmed the interest.On appeal to the Tribunal, theTribunal set aside the demand ofinterest. The revenue aggrievedwith order of the Tribunal, anappeal was preferred before theHon’ble Gujarat High Court. TheGujarat Hon’ble Court held thatinterest is only payable if there isa substantive provision forpayment of interest though levy

and collection of interest can besaid to be a part of the machineryprovisions and not part of thecharging provisions. In theabsence of any substantiveprovision in the Act for levy ofinterest on late payment of tax, nointerest could be so levied basedon the application of sub-section(4) of section 7 of the SugarExport and Promotion Act, 1958.Accordingly upheld the decisionof the Tribunal and dismissed theappeal of revenue. [CCE&C.,SURAT-I Vs. Ukai PradeshShakari Khand Udyog MandliLtd. 2011 (271) E.L.T. 32 (Guj)]

The assessee purchased the capitalgoods in the year 1998 for use inthe process of manufacture ofexcisable goods and CENVATcredit was availed on such goods.The said capital goods weredestroyed in a fire accident on 20-05-2003. Thereafter, the assesseepurchased new capital goods on27-11-2003. Insurance companyreimbursed the amount includingexcise duty to the assessee on thebasis of claim put forth byassessee. The excise departmentcalled upon the assessee to reversethe CENVAT credit attributable tocapital goods and on the failure ofthe assessee to do so, alsoconfirmed the demand forpayment of the said amount. Theassessee preferred an appeal,which came to be dismissed byCommissioner (Appeals). On

further appeal to the Tribunal, theTribunal set aside the demand ofreversal of the CENVAT credit.Aggrieved with the order of theTribunal, the revenue filed anappeal before Hon’ble KarnatakaHigh Court. Hon’ble High Courtheld that it is clear that there is noprovision in the rules whichprovides for a reversal of the creditexcept where it has beenirregularly taken in which eventit stands cancelled or if utilizedhas to be paid for. When theassessee purchased the capitalgoods, he is entitled to avail theCENVAT credit of excise dutypaid on them. Capital goods weredestroyed in fire after use in themanufacture process. Insurancecompany in terms of the policyhas compensated including for thevalue of excise duty paid on suchmachinery. CENVAT credit Rulesdoes not confer any right on theExcise Department to demandreversal of credit or default to paythe said amount merely becausethe Insurance Company paid thevalue of goods including theexcise duty. In that view of thematter, the substantial questions oflaw framed in this appeal areanswered in favour of the assesseeand against the revenue. [CCE,Bangalore Vs. Tata AdvancedMaterials Ltd, 2011 (271) E.L.T.62 (Kar)]

The assessee is availing CENVATcredit on MS fabricated rackfalling under 7308 90 10 forstoring, keeping material in theirfactory premises. The ExciseDepartment was of the view thatthese goods were neither inputs asthey do not form part of finalproduct and used in or in relationto the manufacture of final product

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nor capital goods as these rackscannot be said to be a componentspares and accessories of thecapital goods and as such not usedin or in relation to the manufactureof final product in terms of Rule3 of CENVAT Credit Rules, 2004.Therefore, central excise duty wasconfirmed by both the lowerauthorities. Aggrieved with theorder, an appeal was preferredbefore the Tribunal. The Tribunalheld that storage system is beingused for storing raw material andis an integral part of the activityof manufacturing. Thus, it isdirectly or indirectly involved inthe process of manufacturing.Therefore, the appellants areentitled for CENVAT credit onthese MS slotted racks. TheTribunal set aside the impugnedorder and allowed the CENVATcredit on the above capital goods.Tribunal placed reliance on thedecision of CCE V. SonaiEngineering Private. Ltd (T-Mum) ((2010 (253) E.L.T. (806)).[Kosi Plast Pvt. Ltd. Vs. CCE,,PUNE, 2011 (271) E.L.T. 93 (TRI-MUMBAI]

The appellant is engaged inmanufacturing of motorcyclesfalling under Chapter 87 under theFirst Schedule to Central ExciseTariff Act, 1985. The issue relatesto non-inclusion of the value ofpacking charges in the assessablevalue for motorcycles. At the timeof removal from the factory, themotorcycles were cleared in fullypacked condition and sent todepots located outside Chennai onstock transfer basis. The CentralExcise department has confirmeddemand order duty on packingcharges and the same alsoconfirmed the Commissioner(Appeals) and Tribunal.

Aggrieved with the above orders,the assessee filed an appeal beforeSupreme Court. Supreme Courtheld that value in relation toexcisable goods includes the costof packing where the excisablegoods are delivered at the time ofremoval in a packed conditionunless the packing is of durablein nature and is returnable. TheSupreme Court placed reliance itsown decision of Government ofIndia v. Madras Rubber FactoryLtd., (S.C.). [Royal Enfield V.CCE, CHENNAI, 2011 (270)E.L.T. 637 (S.C.)]

The appellant was confirmedidentical demand of duty, interestand penalty for the same period atHyderabad and Rampur, wherethe warehouses of the companyare located. The TribunalBangalore vacated the demand,interest and penalty vide its orderdated 9-11-2009 [2010 (252)E.L.T. 273 (Tri - Bangalore)].Whereas New Delhi Tribunal videorder dated 30-11-2010 [2011(270) E.L.T. 395 (Tri – Del] givencontradicting decision to thedecision given by BangaloreTribunal. Aggrieved by theassessee preferred appeal toHon’ble Allahabad High Court byplacing reliance on the Hon’bleSupreme Court decision in case ofGammon India Ltd., v.Commissioner of Customs,Mumbai. The Hon’ble High Courtheld that a bench of a Tribunal hasto adhere to the principles ofjudicial disciplines. In case whereidentical facts and similarevidences are involved, Tribunalhas to adhere to the decisions of acoordinate bench. If thesubsequent bench of the Tribunalis of the opinion that the earlierview taken by the coordinate

bench of the same Tribunal isincorrect, then it has to refer thematter to a larger bench to avoidthe difference of opinion betweentwo coordinate benches on thesame point, for which provisionexists in the Act itself.Accordingly, the order of NewDelhi Tribunal is set aside and thematter is remanded back to theNew Delhi Tribunal to decide inaccordance with law and in caseit does not agree with the decisionof CESTAT Bangalore, it mayrefer the matter to a Larger Bench.[Xerox India Ltd.,Vs. CCE,Meerut-II, 2011 (270) E.L.T. 651(All)]

The assessee engaged in themanufacture of readymadegarments and availed theCENVAT credit on duty paid oninputs. However, subsequently,ready made garments wereexempted during the year 2004with a condition no CENVATcredit benefit. The assesseereversed the CENVAT credit toextent of inputs available in stockand CENVAT credit is notreversed to the extent of inputscontained in the work-in-progressand also finished goods. Duringthe year 2007, CENVAT CreditRules, 2004 were amended toprovide for reversal of CENVATCredit for inputs contained in theWIP. The revenue has confirmeddemand for reversal of CENVATcredit for inputs contained in theWIP, interest and penalty.However, the Tribunal set asidethe demand of reversal ofCENVVAT credit, interest andpenalty. Revenue, aggrieved bydecision of Tribunal preferred toappeal before Hon’ble KarnatakaHigh Court. The Hon’ble Highcourt held that the assessee is

10October2011

entitled to CENVVAT credit inrespect of inputs contained in WIP.The above amendment isprospective in nature andinapplicable prior to the date itcame into force. [CCE Bangalorev. Gokaldas Intimate Wear 2011(270) E.L.T. 351 (Kar)]

The assessee is engaged in themanufacture of printing ink byprocuring inputs / capital goodsfrom domestic suppliers /manufacturers and availed theCENVAT credit on such inputsand capital goods. However, theassessee exported the same onpayment of duty by reversing thecredit of duty on those inputs /capital goods under Rule 3(4) ofthe CENVAT Credit Rules, 2002(CCR). Subsequently, the assesseeclaimed the rebate of duty paid onthe inputs / capital good as perCentral Excise Rules, 2002 (CER)which was rejected by theadjudicating authority and alsofirst appellant authority.Aggrieved with the orders, theassessee filed a revisionapplication before Joint Secretary,Government of India, who heldthat the assessee is liable to betreated as deemed manufacturer.Hence, he is entitled to claimrebate on such inputs / capitalgoods. Aggrieved with the aboveorder, the revenue preferred anappeal before Hon’ble HighCourt. Hon’ble High Court hasheld that Inputs and capital goodson which CENVAT credit isavailed can be removed from thefactory by paying an amount equalto duty of excise at the rateapplicable to such goods at thetime of removal and such dutypaid is to be treated as duty paidon clearance of inputs / capitalgoods in terms of Rule 3(4) andRule 3(5) of CCR, 2002. The

Circular No. 283/1996-CE dated31.12.1996 clarified that anassessee avails CENVAT credit oninputs / capital goods andsubsequently clears for export onpayment of duty, then suchassessee shall be deemed to be amanufacturer of exported inputs /capital goods and is entitled toclaim rebate of that amount. [CCERaigad v. Micro Inks Ltd., 2011(270) E.L.T. 360 (Bom.)]

Service Tax:

In the present case issue before theLarge Bench of the Tribunal is thevalue of service includes cost ofgoods and material used andconsumed in course of renderingsuch service. In this regard,Tribunal has formed the followingtwo questions:

1. Whether for the purpose of Section67 of the Finance Act, 1994 thevalue of service provided inrelation to photography would bethe “gross amount charged”including the cost of material,goods used / consumed minus thecost of unexposed film?

2. Whether the term ‘sale’ appearingin exemption Notification No.12 /03-S.T., dated 20-6-03, is to begiven the same meaning as givenby Section 2(h) of the CentralExcise Act, 1944, read withSection 65(121) of the FinanceAct, 1994 or this term would alsoinclude the deemed “sale” asdefined by Article 366 (29A)(b) ofthe Constitution?

The Larger Bench has analyzedas follows:

In this regard, service tax islevied on the gross value of taxableservice in terms of Section 67 ofFinance Act, 1994 read with theService Tax (Determination of Value)Rules 2006. Depending on the factsand circumstances of each taxable

service provided, certain elements ofcost make value of such services andsuch elements which are integral,relevant, indispensable and inevitableto provide taxable service and bringthat service to the stage ofperformance, contribute to the valueof such service. Service tax beingdestination based consumption tax,till the taxable service reaches itsdestination, all elements of costmaking the service reachable to suchdestination contribute to the valueaddition and form part of valuethereof. Agreement or understandingof the parties to deal with theconsideration for the service renderedand received does not affect incidenceof tax. In whatever manner therecipient and provider of taxableservice mutually arrange their affairsfor their benefit to deal withconsideration that is of nosignificance to law.

Further, the notification No.12/2003-ST dated 26.06.2003 exemptsso much of value of all the taxableservices as is equal to the value ofgoods and material sold by the serviceprovider to the recipient of service.The term “sold” as appearing in theNotification can only be read withreference to definition of ‘sale’ asappearing in the Central Excise Act,made applicable for the purpose oflevy of service tax under the FinanceAct, 1994, It therefore follows that theNotification intends to exempt thevalue of goods and materials sold bythe service provider while providingservice. To claim a part of the valuecharged as exempt in terms of theNotification, an Assessee has todischarge burden of proof adducingevidence showing value of goods andmaterial actually sold and satisfy theconditions of Notification. Theexpression ‘sold’ cannot in ourconsidered view include ‘deemedsale’ of goods and material consumed

11 October2011


by the service provider whilegenerating and providing service.

In view above, the Larger Benchhas answered the two questions asfollows -

(i) For the purpose of Section 67 ofthe FA, 1994, the value of servicein relation to photography wouldbe the gross amount chargedincluding cost of goods andmaterial used and consumed inthe course of rendering suchservice. The cost of unexposedfilm etc. would stand excluded interms of Explanation to section 67if sold to the client.

(ii) The value of other goods andmaterial, if sold separately wouldbe excluded under exemptionNotification No.12/2003 and theterm ‘sold’ appearing there-underhas to be interpreted using thedefinition of ‘sale’ in the CentralExcise Act, 1944 and not as perthe meaning of deemed sale underArticle 366 (29A)(b) of theConstitution.

Further, it is held thatdetermination of value of taxableservice of photography dependson the facts and circumstances ofeach case as the Finance Act, 1994does not intend taxation of goodsand materials sold in the courseof providing all the taxableservices. [M/s Aggarwal ColourAdvance Photo System and othersVs. CCCE, Bhopal, 2011-TIOL-1208-CESTAT-DEL-LB]

VAT AND CST:

The appeal was filed in theSupreme Court against thejudgement passed by the HighCourt of Andhra Pradesh, whereinthe High Court had dismissed therevision petition filed by theappellant, inter alia, holding thatthe disputed transactionsconstitute inter state sales, as

contemplated under Section 3A ofthe Central Sales Tax Act, 1956.The appellant had entered into anagreement with a Companynamed Usha Sales Limited (UIL)for sales, distribution andmarketing of the appellantcompany’s products. Theappellant would dispatch goods toout-of-state depots and claim anexemption on the value of suchgoods from the turnover. Therevenue contended that suchtransfer of goods was not in thenature of branch transfers andsuch goods were further sent toout of state depots/ branches toUIL for sales as per the agreement.The appellant’s claim that suchtransfer of goods were ‘forecasts’was not accepted by the revenueand exemption was denied. Thelower adjudicating authority andthe lower appellate authority alsoheld the same view. The SupremeCourt observed that, it was clearfrom the facts and circumstancesof the case that an order was placedby UIL in composite form forsupply of goods through theirbranch offices and the movementof the goods thereto from theappellant’s factory to appellant’sgodown was to fulfil the demandmade pursuant to the “letters ofallocation’ which the appellantclaims that the same is in the natureof forecast. The movement ofgoods from the appellant’s factoryto its various godowns situated indifferent parts of the country waspursuant to ‘sales agreement’coupled with ‘forecasts’ which arenothing but ‘indents’ or firm orders.Therefore, the transactionsbetween the appellant with itsbranch offices is a clear case ofinter state sales and not branchtransfer, as claimed by theappellant [Hyderabad Engineering

Industries vs. State of AndhraPradesh, 2011 (71) KLJ 189 (SC)]

The appellant is a governmentowned Telecom Company whichuses Artificially Created LightEnergy (ACLE) for transmissionof data, for providing broadbandinternet service to its customers.The appellant was a registeredservice provider and payingservice tax on the internet andtelecommunication servicesprovided by it. The revenue issueda reassessment order demandingvalue added tax on the ground thatthis transaction includes sale ofgoods i.e. ACLE. An interim orderwas passed in writ proceedingdirecting the appellant to deposit550 crores within four weeks as acondition for staying theimpugned order. Aggrieved bysuch order, the appellant filed awrit petition in the Supreme Courtof Karnataka. The Supreme Courtin the appellant’s own case hadrendered a judgement on the sameissue earlier. The High Court heldthat, the question whether it is saleof goods or not is yet to be decidedat the highest level. On the faceof it, the judgement of the ApexCourt applies to the facts andcircumstances of the case. Unlessthe law declared by the ApexCourt is held not to be applicableto this case or varied or modified,any demand of tax by the Statecontrary to the law of the landprima facie cannot be sustained.The assessee’s contention is theyare service providers. They are notin the business of sale of goods.As service providers they havealready paid tax. As the questionof law is yet to be decided, theassessee is entitled to an absolutestay. [BSNL, Bangalore vs. Stateof Karnataka, 2011 (71) KLJ 147(HC) (DB)]

12October2011

AGASTYA INTERNATIONAL FOUNDATIONNEEDS A MANAGER – FINANCE AND ACCOUNTS

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Agastya invites application from interested Chartered Accountants / MBA Finance / CostAccountants With about 5 to 8 years of experience preferably in a Non GovernmentalOrganization (NGO), capable of handling the entire Finance and Accounting function includingbut not limited to preparation of periodical MIS reports, monitoring statutory compliances,liaising with statutory and internal auditors and Government Agencies. The candidate shouldalso possess a sound knowledge of computer based accounting and reporting applications.

Interested Candidates who wish to apply may forward their RESUME stating the following onthe cover / subject line “ Application - Manager - Finance and Accounts “ to the followingaddress / e-mail within 10 days of this advertisement.

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13 October2011


Two Days Workshop on

XBRL - Extensible Business Reporting LanguageOrganised by CPE Committee jointly with CMII of ICAI

Hosted by Bangalore Branch of SIRC of ICAIat ITT South Centre, Bangalore Branch of SIRC of ICAI,

Sanjay Towers, #216, Subbarama Chetty Road, Near Nettakallappa Circle, Basavanagudi, Bangalore – 04

on Friday, 21st October & Saturday, 22nd October 2011Programme Structure - XBRL

DAY 1 – Friday, 21st October 2011 (06.00pm to 08.00pm)Time Session details CPE Hrs06.00 pm Technical Session I : An overview on XBRL

• What is XBRL • Advantages of XBRL 2 Hrs• XML/XBRL Basic Concepts • Global XBRL Initiatives

DAY 2-Saturday, 22nd October 2011 (10.00am to 05.00pm)10.00 am Technical Session II : XBRL Taxonomies

• Structure of taxonomies • Tagging • Dimensions 2 Hrs• Indian GAAP Taxonomy • Attributes/Characteristics of Elements

12.00 noon Technical Session - III : Instance documents• Creation of instance documents • XBRL Instance Validation and Viewing 2 Hrs

02.00 pm Lunch03.00 pm Technical Session -IV : XBRL Tool

• Overview of XBRL Generation Process • Taxonomy Editing and Extensions 2 Hrs

8 HrsCPE

Delegate Fees: Rs.2,500/- for Members &Rs.3,000/- for Non-Members

Training provided by :

IRIS Business Services Ltd., Navi MumbaiFor further details please contact: Ms. Geethanjali D, Tel: 080-30563500 / 3513, Email: [email protected]

Restricted to 45 participants on First Come First Serve Basis

Bangalore Branch of SIRC of ICAIOrganises

Workshop on Transfer PricingThe globalization of the Indian Economy has resulted in considerable increase in foreign institutional investment leading to multiplicityof international transactions. It has been over a decade since the Transfer Pricing provisions have been introduced and the taxauthorities have completed 6 years of assessment and are on the verge of completing 7th year. At this point of time we members whoare practicing in this area should be aware of the various aspects of the laws governing Transfer Pricing, which is one of the majorareas of International Taxation. Hence this workshop.Date: 29th October 2011, 09.30 am to 05.30 pm Venue: Bangalore Branch PremisesTiming Topic Speaker09.00 am Registration09.30 am Inaugural Session10.00 am Technical Session – I : Discussion on provisions on Transfer Pricing and CA. Vishweshwar Mudigonda

dispute resolution panel process11.30 am Tea Break11.45 am Technical Session – II : Case Studies CA. Priya Gopalakrishnan01.15 pm Lunch Break02.00 pm Technical Session – III : Recent Judgments *Confirmation awaited

03.30 pm Tea Break03.45 pm Technical Session – IV : Recent Judgments and way forward Mr. Vinay Nichani

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]

6 HrsCPE

14October2011

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15 October2011


16October2011

CA. K. RaghuChairmanCommittee for Members in IndustryThe Institute ofChartered Accountants of India,'ICAI BHAWAN', Indraprastha Marg,New Delhi - 110 002, IndiaTel - Direct +91 11 30110450 / 548 / 430

CA. T.R. Venkatesh BabuChairmanBangalore Branch of SIRC ofThe Institute ofChartered Accountants of IndiaTel : 080-3056 3500 / 511 / 512

17 October2011


CA. K. RaghuChairmanCommittee for Members in IndustryThe Institute ofChartered Accountants of India,'ICAI BHAWAN', Indraprastha Marg,New Delhi - 110 002, IndiaTel - Direct +91 11 30110450 / 548 / 430

CA. T.R. Venkatesh BabuChairmanBangalore Branch of SIRC ofThe Institute ofChartered Accountants of IndiaTel : 080-3056 3500 / 511 / 512

18October2011

IMPORTANT DATES TO REMEMBER DURING THE MONTH OF OCTOBER 20115th Oct. 2011 Payment of Excise Duty for September 2011

Payment of Service Tax for September 2011 by CorporatesPayment of Service Tax for Jul-Sep 2011 for Non-Corporates

6th Oct. 2011 E-Payment of Excise duty for September 2011E-Payment of Excise duty for September 2011 for CorporatesPayment of Excise duty for Jul-Sep 2011 for Non-Corporates

7th Oct. 2011 Deposit of TDS/TCS Collected during September 2011STPI Monthly Returns

10th Oct. 2011 Monthly Returns for Production and Removal of Goods and CENVAT Credit for September 2011Monthly Return of excisable Goods Manufactured & Receipt of Inputs & Capital Goods by Units in EOU,STP,HTPfor September 2011Monthly Returns of Information relating to Principal Inputs for September 2011 by Manufacturer of Specified Goodswho Paid Duty of Rs.1 Crore or More during Financial Year 2010-11 By PLA/CENVAT/Both

15th Oct. 2011 Payment of EPF Contribution for September 2011Return of Employees Qualifying to EPF during September 2011Monthly Return (VAT 120) and Payment of VAT/COT for the month of September 2011.Quarterly Return and Payment of CST and VAT Collected During July 2011 to September 2011Quarterly e-TDS for the period July to September 2011 (Form 24Q, 26Q, 27Q and 27EQ)

20th Oct. 2011 Monthly Return and Payment of Profession Tax Collected During September 2011Monthly Return (VAT 100) and Payment of CST and VAT Collected During September 2011

21st Oct. 2011 Deposit of ESI Contributions and Collections for September 201125th Oct. 2011 Consolidated Statements of Dues and Remittances Under EPF and EDLI for the September 2011

Monthly Returns of Employees Joined & Left the organisation during September 2011 under ESIFiling of Half Yearly Return (ST-3) for the period ended September 2011 (Electronic Mode is Mandatory)Filing of Half Yearly Return (ST-3) for the period ended September 2011 by Input Service Distributors (ElectronicMode is Mandatory)

30th Oct. 2011 Quarterly TDS and TCS certificates (Form 16A/ Form 27D) as per section 20331st Oct. 2011 Filing of Belated Annual Accounts & Annual Return to Register of Companies for Corporates under CLSS Scheme.

Date / Day Timing - From – To Topic Speakers

17.10.2011 04.00 pm to 05.45 pm Introduction to VAT CA. K. K. Chythanya

Monday 06.15 pm to 08.00 pm Jurisdictional issues / Rights and Mr. M. A. Maniyar*remedies available to the dealer

18.10.2011 04.00 pm to 05.45 pm Dealers’ obligations and consequences CA. H. VishnumoorthiTuesday of failure to comply

06.15 pm to 08.00 pm Practical issues in assessments and CA. Sanjay Dhariwal M.movement of goods and their resolutions

19.10.2011 04.00 pm to 05.45 pm Classification of goods for rate purposes CA. S. Ramasubramaniam

Wednesday 06.15 pm to 08.00 pm Input Tax Rebate CA. L. Sridhar*

20.10.2011 04.00 pm to 05.45 pm Interlinking between the Act and the Rules CA. Naveen Rajpurohit

Thursday 06.15 pm to 08.00 pm Contours of GST CA. Badrinath N. R.

Co-ordinators: CA. S. Venkatramani & CA. S. Vishnumurthi *Confirmation awaited

Registration Fees: Rs.1,000/- 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]

16 HrsCPE

Bangalore Branch of SIRC of ICAIOrganises

WORKSHOP ON K-VAT LAWDate: 17th to 20th October 2011 Venue: Bangalore Branch Premises

19 October2011


20October2011

bangalore branch of icai

Documents

branch holidaywednesday29

branch newslettercolour

bangalore branch of

tax vat branch premisesmonday

pm of sirc

pm sat10

half page

quarter page