snk newsletter- september 2011

8/4/2019 SNK Newsletter- September 2011

1/131

DIRECT TAXES

SNK

Issue 09 September, 2011

NewsletterWebsite : www.snkca.com Email: [email protected]

DIRECT TAXES ... 1 - 9

OTHER LAWS ... 12

IMPORTANT DUE DATES 13

INDIRECT TAXES . 10 - 11

Society for The Small & Medium Exporters Vs DIT [ITA

No.3182 & 3183/Del/2008, dtd. 29.04.2011]

Benefits of Sec. 12A and 80G cannot be allowed if there

is no charitable activity and assessee undertakes only

commercial activity

ITAT Delhi bench held that in a case where the objects of

the society may be charitable, but, in the absence of carry-

ing on those activities despite the fact that the activities

which were carried on were for the purpose of generating

income, the society is not entitled for registration for benefits

of Sec. 12A and 80G for that year. It has been held that for

assessment years in which the assessee does not carry out

charitable activity, the assessee has been rightly refused to

get benefit of registration as charitable institution. The only

activity which has been carried out is for the purpose of gen-

erating income, which is not a charitable activity in itself.

Honda Siel Power Products Ltd. Vs. Dy. Commissioner

of Income Tax & Anr. [SLP No. 19085/2011, dtd.

29.07.2011]

Despite bar in Proviso to s. 14A, s. 147 reopening for

earlier years valid

For AY 2000-01, the assessee filed a return on 30.11.2000.

As s. 14A was inserted subsequently by FA 2001 (w.r.e.f

1.4.62) and was tabled in Parliament on 28.2.2001, the as-

sessee did not make any disallowance u/s 14A. The AO also

did not make a disallowance in the s. 143 (3) order passed

on 7.3.2003. After the expiry of 4 years, the AO sought to

reopen the assessment to make a disallowance u/s 14A.

The assessee challenged the reopening on the ground that

(i) under the Proviso to s. 14A, a reopening u/s 147 for AY

2001-02 & earlier years was not permissible, (ii) as s. 14A

was not on the statute when the ROI was filed, there was no

failure to disclose & (iii) as the AO had also sought to rectify

u/s 154, he could not reopen u/s 147. The High Court dis-

missed the Writ Petition inter alia on the ground that the

Proviso to s. 14A bars reassessment but not original assess-

ment on the basis of the retrospective amendment. Though

the ROI was filed before s. 14A was enacted, the assess-

ment order was passed subsequently. The AO ought to

have applied s. 14A and his failure has resulted in escape-

ment of income. The object and purpose of the Proviso is toensure that the retrospective amendment is not made as a

tool to reopen past cases which have attained finality. On

appeal by the assessee to the Supreme Court dismissing

the SLP held that the re-opening of assessment is fully justi-

fied on the facts and circumstances of the case.

CIT and Anr Vs. R Hanumaiah Associates [ITA Nos 3225,

3224 of 2005, dtd. 12.07.2011]

No addition can be made on account of the unexplained in-

vestment on the basis of the DVO findings when the as-

sessee satisfactorily explains that the difference was on ac-

count of the construction expenditure incurred, which was

not considered by the DVO.


2/132

SNKDIRECT TAXES

Judicial pronouncements

CIT Vs Mahavir Irrigation Pvt Ltd

[ITA No.1266/2009, dtd. 03.08.2011]

If two views are possible than As-

sessing Officers should take the one

favourable to the Assessee and pen-

alty for concealment cannot be lev-

ied

Where there is no finding that any de-

tails supplied by the assessee in its

Return is incorrect or erroneous or

false, there would be no question of

inviting the penalty under Section 271

(1)(c) of the Act. A mere making of the

claim, which is not sustainable in law,

by itself, will not amount to furnishing

inaccurate particulars regarding the

income of the assessee. Such claim

made in the Return cannot amount to

the inaccurate particulars.

ITO Vs. Omni Globe information

Technologies India (P) Ltd. [ITA

No.3465/D/09, dtd. 29.04.2010]

Expenditure incurred by the as-

sessee-company, incorporated for

carrying out the business of the

BPO, prior to the setting up of busi-

ness, cannot be taken into account

for computing the business income

Business is set up when it reaches a

stage where it is in a position to pro-

cure business and not before. How-

ever, the expenditure becomes deducti-

ble from such stage, irrespective of the

date of actual receipt of the business.

ACIT Vs. Pramod H. Lele [I.T.A

No.4699/ Mum/2004, dtd. 10.08.2011]

ESOP Holding period to be reckoned

from the date of exercise of option

to buy shares and not from the ear-

lier date of grant of options

The Stock Option Plan had granted

only an option to buy a specified num-

ber of shares in a specified timeframe

at a specified price, subject to the fulfill-

ment of other conditions set out in the

plan. There was no compulsion on the

part of the assessee to acquire the

shares. In other words, the Stock Op-tion Plan only allowed the assessee to

get benefit from the increase in the

market price of the shares between the

date of grant and the date of sale of

shares. Therefore, where only stock

options were issued and stood in the

name of employees and no payment

was made until the date of exercise,

mere grant of an option does not result

in a transfer of shares.

GE India Technology Centre Pvt.

Ltd. Vs. DRP and ACIT [Writ Appeal

No. 1010 of 2011, dtd. 05.07.2011]

Scope of DRP is restricted only to

adjustments proposed in the draft

assessment order and not beyond

HC held that the scope of powers of the

Dispute Resolution Panel (the DRP)under Section 144C of the Income-tax

Act, 1961 (the Act) is restricted to deal-

ing with only those issues in respect of

which variations are proposed as per

the draft assessment order and not be-

yond.

Further, the High Court also held that

the DRP does not have the power un-

der Section 144C of the Act to issue a

direction to the Assessing Officer (AO)

to conduct further inquiry for passing

the assessment order. HC held that this

was wholly without jurisdiction in view

of the provisions of section 144C of the

Act, which expressly provides that the

DRP cannot issue any direction for fur-

ther enquiry and passing of the assess-

ment order. Further, it was observed

that if such orders and directions are

permitted to be allowed they would de-

feat the very object with which the alter-

nate dispute resolution is provided.

Capgemini India Pvt. Ltd. VS. The

Addl. Commissioner of Income-tax

[ I T A N o . 7 7 2 9 / M / 2 0 1 0 , d t d .

25.05.2011]

Loss from a 10A unit is to be ad-

justed against taxable profit of other

units after allowing deduction under

section 10A in respect of such eligi-

ble unit

The provisions of section 10A of the

Act were amended with effect from as-

sessment year 2001-02 and as per the

amended provisions, the profit and

gains derived by an eligible undertakingare required to be deducted from the

total income. Thus from assessment

year 2001-02, section 10A is no longer

an exemption provision and it allows

deduction from total income. The de-

duction is to be allowed in respect of

each eligible undertaking separately

which has also been clarified by the

CBDT. Hence the loss from a 10A unit

is to be adjusted against taxable profits

of other units only after deduction un-

der section 10A of the Act in respect of

each eligible unit.

Fab India Overseas Pvt. Ltd. Vs. CIT

[ITA No.55/2011, dtd. 16.05.2011]

An inadequate enquiry on the part of

the AO would not, by itself, give oc-

casion to the Commissioner to pass

orders under s 263 merely because

he has a different opinion on the

matter.

An inadequate enquiry on the part of

the AO would not, by itself, give occa-

sion to the Commissioner to pass or-

ders under s 263 merely because he

has a different opinion on the matter.

Issues, in respect of which the as-

sessee has preferred an appeal before

the CIT(A), could not have been taken

up by the Commissioner while exercis-

ing his powers under s 263(1).


3/133

SNKDIRECT TAXES


Failure to conduct an enquiry on part of

the AO with regard to international

transactions made by the assessee

with its associates gives jurisdiction to

CIT to exercise power under s 263.

Beejay Security & Finance Ltd Vs.

ACIT [ITA Nos 4859 to 4865/

Mum/200, dtd. 24.06.2011]

AO to record satisfaction regarding

existence of undisclosed income

before proceeding u/s. 153C of the

Act

Satisfaction is required to be arrived at

by the AO of the person who was

searched under s 132 of the Act re-

garding any undisclosed income of the

person who was not subjected to a

search to hand over the seized mate-

rial to the AO of the person to whom

the seized documents belongs or is

alleged to belong. The satisfaction

required for proceedings under s 153C

cannot be reduced to a mere formality

of forwarding the documents found in

the course of the search, which did not

belong to the person searched, and

which belonged to the person against

whom proceedings under s 153C were

sought to be initiated.

Hive Communications Pvt. Ltd. Vs

CIT [ITA No. 306/2011, dtd.

08.07.2011]

While invoking the provisions of s

40A(2), the reasonableness of ex-

penditure for the purposes of busi-

ness has to be judged from the

point of view of a businessman and

not that of the revenue and after

considering the nature of the busi-

ness

It is not for the Assessing Officer to

dictate what the business needs of the

company should be and he is only to

judge the legitimacy of the business

needs of the company from the point of

view of a prudent businessman. The

benefit derived or accruing to the com-

pany must also be considered from the

angle of a prudent businessman. The

term benefit to a company in relation

to its business, it must be remembered,

has a very wide connotation and may

not necessarily be capable of being

accurately measured in terms of

pound, shillings and pence in all cases.

Both these aspects have to be consid-

ered judiciously, dispassionately with-

out any bias of any kind from the view-

point of a reasonable and honest per-

son in business.

All Grow Finance and Investment

Pvt Ltd Vs. CIT [ITA No. 682/2011,

dtd. 03.06.2011]

Deduction under s 36(1)(vii) is allow-

able if the amount was advanced in

the ordinary course of business and

the debt was written off as irrevoca-

ble in the books of accounts

If the debt is not advanced in the ordi-

nary course of business, it would not

qualify for deduction as a bad

debt. Delhi High Court is of the view

that the only condition laid down in sec-

ond part of sub-section (2) of Section

36 of the Act is that the amount should

be advanced in the ordinary course of

business which by itself proves its

revenue nature and no further condi-

tions are required to be satisfied which

are only applicable with regard to debt

qualifying as bad debt in the first part of

sub-section (2).

CIT Vs. K. Raheja Corporation Pvt

Ltd [ITA No. 1260 of 2009, dtd.08.08.2011]

No s. 14A disallowance of interest

on borrowed funds if AO does not

show nexus between borrowed

funds & tax-free investment

In AY 2000-01 the assessee had in-

vestments in shares & mutual funds of

Rs. 20 crores on which it earned tax-

free dividend of Rs. 13.35 lakhs. Theassessee also had borrowed funds on

which it claimed deduction of interest of

Rs. 8.70 crores. The AO disallowed

interest of Rs.2.79 crores on the

ground that it was relatable to earning

tax-free dividend. The Tribunal deleted

the disallowance on the ground that the

investments had been made out of the

assessees own funds and not out of

the borrowed funds. The department

filed an appeal before the High Court.

Bombay High Court dismissing the ap-

peal held that Counsel for the Revenue

could not point as to how interest on

borrowed funds to the extent of

Rs.2.79 crores was attributable to

earning dividend income which are ex-

empt u/s 10(33) of the Act. Therefore,

in the absence of any material or basis

to hold that the interest expenditure

directly or indirectly was attributable for

earning the dividend income, the deci-

sion of the Tribunal in deleting the dis-

allowance of interest made u/s 14A

cannot be faulted.

ITO Vs. Mrs. Mohini Arun Jayavant

[ITA no. 4995/Mum./2010, dtd.

26.08.2011]

The indexed cost of acquisition of capi-

tal asset acquired under gift has to be

computed with reference to the year in


4/134

SNKDIRECT TAXES


CIT Vs.Market Committee, Tohona

[I.T.A. No. 186 of 2011, dtd.

12.07.2011]

Depreciation on the capital assets was

allowable even when capital expendi-

ture on the acquisition of the corre-

sponding assets had already been al-

lowed as application of income for the

purpose of allowing the exemption un-

der s 11

Nihilent Technologies Private Lim-

ited VS. DCIT & Anr. [Writ Petition

No.10104 OF 2010, dtd. 18.07.2011]

If there is no failure to disclose fully

and truly all material facts necessary

for the purpose of the assessment,

then the reopening of the assess-

ment beyond four years from the

end of the relevant assessment year

is unsustainable

A division bench of the Bombay high

court has quashed the reopening of the

income tax assessment of Nihilent

Technologies Ltd after four years. The

software company had shares held by

Hatch Investments (Mauritius) Ltd. The

shareholding was reduced from 99.85

per cent to 76.63 per cent. The assess-

ment for 2003-04 was completed in

2006 wherein the carried forward loss

incurred by the firm in the assessment

year 2001-02 was allowed to be set off.

Last year the assessment was sought

to be reopened on the ground that the

shareholding pattern has changed and

losses could not be carried forward.

The high court rejected this argument.

CIT Vs.Phil Corporation Ltd. & Anr.

[Tax Appeal No. 57 of 2002, dtd.

28.06.2011]

Interest paid by the assessee, on ac-

count of an investment in its sister con-

cern from borrowed funds for the acqui-

sition of shares in a subsidiary com-

pany in order to have control over that

company, is eligible for a deduction

under s 36(1)(iii).

CIT vs G4S Securities System (India)

Private Limited [ITA No.1943/2010,

763/2011 & 765/2011 ITA No.

1943/2010, dtd. 11.07.2011]

When the assessee does not get ex-

clusive right over the technical

know-how and the trade mark, the

royalty paid is revenue expenditure

Payment of royalty by the assessee on

a year-to-year basis on the net sales in

lieu of technical know-how assistance

and the trademark would not amount to

capital expenditure and will amount to

revenue expenditure. The ownership

rights of the trademark and know-how

throughout were vested with G4F and

on the expiration or termination of the

agreement, the assessee was to return

all G4F know-how obtained by it under

the agreement. The payment of royalty

was also to be on a year-to-year basis

on the net sales of the assessee and at

no point of time was the assessee enti-

tled to become the exclusive owner of

the technical know-how and the trade-

mark. Hence, the expenditure incurred

by the assessee as royalty is revenue

expenditure and is, therefore, relatable

under s 37(1) of the Act.

M/s. Peico Electronics & Electricals

Limited (now known as Philips India

Limited) Vs. Commissioner of In-

come-tax, West Bengal-IV & Anr.

[I.T.A. No.353 of 2004, dtd.

12.08.2011]

Assessee can claim lower of depre-

ciation or business loss as claimedin the books of account for the pre-

ceding year while computing book

profits u/s 115J

According to Calcutta High Court, the

term loss as occurring in clause (b) of

the proviso to Section 205 (1) of the

Companies Act has to be understood

and read as the amount arrived at after

taking into account the depreciation.

Then alone the formula prescribed in

this clause would make sense and it

would be consistent with the object

sought to be achieved by enacting Sec-

tion 115-J of the Income-tax Act, 1961.

If loss were to be taken as pre-

depreciation loss then the resultant

computation will not be in conformity

with the tenor of the provisions of Sec-

tion 205. The language of clause (b) of

the proviso to Section 205 (1) is clear. It

applies to those cases where the de-

preciation has been provided in accor-

dance with the provisions of sub-

section (1) of Section 205. The depre-

ciation is provided for in the Profit and

Loss Account. The loss is arrived at

after taking into account the deprecia-

tion provided. It is therefore clear that

the word loss as used in proviso,

clause (b) to Section 205 (1) signifies

the amount arrived at after taking into

account the amount of depreciation and

it has to be so read and understood in

the context of Section 115-J of the In-

come-tax Act, 1961. The High Court of

Calcutta do not agree with the view that

in case there is profit in a year but after

adjustment of depreciation it results inloss, no adjustment in the book profit

under Section 115-J can be allowed.


5/135

SNKDIRECT TAXES


Valibhai Khanbhai Mankad Vs. DCIT

[(2011) 56 DTR (Ahd.)(Trib.) 89, dtd.

29.04.2011]

Payment of hire charges to sub con-

tractors after obtaining form 15-I

cannot be disallowed u/s. 40(a)(ia)

on the ground that Form 15-J was

not filed in time as per Rule 29D

Once the assessee has obtained forms

15-I from the sub contractors, and con-

tents thereof are not disputed or whose

genuineness is not doubted, then the

assessee is not liable to deduct tax

from the payments made to sub con-

tractors. Once the assessee is not li-

able to deduct tax u/s. 194C, then addi-

tion u/s. 40(a)(ia) cannot be made.

Non furnishing of form 15-J to the CIT

is an act posterior in time to payments

made to sub contractors. This cannot

by itself undo the eligibility of exemp-

tion created by second proviso. Third

proviso to Sec. 194C(3)(i) which re-quires the assessee to submit Form

15-J is only a procedural formality and

cannot undo what has been done by

second proviso.

CIT Vs. Cargill Global Trading P. Ltd.

[335 ITR 94 (Del.)]

Bill of exchange discounting

charges is not interest and hence

Tax not deductible at source

The Delhi High Court held that as per

definition in Sec. 2(28A) of the Income

Tax Act, 1961, before any amount paid

is constructed as interest, it has to be

established that the same is payable in

respect of any money borrowed or debt

incurred and discount charges paid for

discounting bill of exchange are not in

respect of any debt incurred or money

borrowed. Hence tax is not deductible

at source on discount charges.

CIT Vs Vijaya Bank [TS-481-HC-2011

(KAR), dtd. 22.08.2011]

Interest on refund of excess self as-

sessment tax available from 'date of

payment of tax and not from 'date of

assessment order' u/s 244A

A Division bench of Karnataka HC held

that the assessee Vijaya Bank, was

eligible for interest on refund from ex-

cess self assessment tax (SAT) from

the 'date of payment of tax' as against

'date of assessment order', as held by

the AO. While ruling in favour of the

assessee, HC observed that the wordsin any other case in Sec 244A(1)(b)

would cover refund of SAT.

HC, on perusal of Circular No 549

dated 31st Oct 1989 observed that

the object behind insertion of Sec 244A

as understood by Department is that,

an assessee is entitled to payment of

interest for money remaining with Gov-

ernment which would be ordered to be

refunded. Therefore, if that is the object

behind the insertion of Sec 244A, the

contention of revenue that if the case

does not fall under either of the clauses

in Sec 244A, no interest is payable, is

without any substance. Accordingly

HC allowed the interest from the date

of payment of self assessment tax.

Pradeep Kumar Malhotra Vs. CIT

[TS-432-HC-2011(Cal), dtd.05.08.2011]

'Loan or advance' for business con-

siderations cannot be considered as

deemed dividend. Deemed dividend'

provisions u/s 2(22)(e) applicable for

gratuitous advances and not where

advance is given for business con-

siderations

The assessee, an individual, let out itsproperty to a private company in which

it was a substantial shareholder. He

also allowed company to mortgage

said property to a bank for obtaining a

loan facility. The company authorised

the assessee to obtain interest free

deposit as and when required, in con-

sideration for the mortgage. The as-sessee accordingly obtained certain

deposit in the relevant financial year

from the Company. The AO treated

deposit received as deemed dividend

u/s 2(22)(e). As per Sec 2(22)(e), any

loan or advance by a 'closely held com-

pany' to a shareholder having

'substantial interest' in the company is

deemed to be a dividend income sub-

ject to certain conditions. A divisionbench of Calcutta HC held that provi-

sions of section 2(22)(e) would be ap-

plicable in respect of gratuitous loans

and advances given by the company

which were enjoyed on account of

shareholding. HC held that the section

would not be applicable to cases where

the loan or advance was given as a

consideration for any other advantage

conferred upon the company by suchshareholder. The Court held that in the

case under consideration, the advance

was not a gratuitous advance but was

given to protect 'business interest' of

the company. Hence, the provisions of

Sec 2(22)(e) were not applicable. The

Court relied on Delhi HC decision in

Creating Dying and Printing P Ltd (318

ITR 476) and Bombay HC decision in

Nagindas M Kapadia (177 ITR 393).

Sanjay S. shah Vs. DCIT [I.T.A. No.

432 / Ahd/2011 (Assessment year

2006-07), dtd. 17.06.2011]

When assessee fails to receive TDS

certificates on interest income from

banks in time but decides neither to

declare the income in his return nor

to take credit for the TDS on the ba-

sis of duplicates collected, penalty

u/s 271(1)(c) is warranted in such a

case.


6/136

SNKDIRECT TAXES

Judicial pronouncements (International Taxation)

The fact that the assessee got credit of

TDS u/s 154 proceedings in fact goes

against the assessee. When the as-

sessee received TDS in respect of

some FDRs, and not in respect ofother FDRs as claimed by him, he

should have obtained the duplicate

certificates and should have filed them

with the return of income showing total

interest received by him. Instead, he

chose not to show the interest income

to the extent of Rs.2,11,172/-. When

the A.O. on the basis of AIR informa-

tion taxed this amount, to take the

credit of TDS he obtained the duplicate

certificate. As a matter of fact this exer-

cise should have been done by him

before filing the return of income. This

conduct of the assessee creates doubt

about the bona fides of the assessee

and, therefore, it cannot be said that

default on the part of the assessee in

not showing interest income was attrib-

utable to reasonable cause.

M/s. Sahney Kirkwood Private Lim-

ited Vs. The Additional Commis-

sioner of Income tax, Range 10(2),

Mumbai [ITA No. 1501, 1509, 1515,

1516 & 1517 of 2007, dtd.

29.07.2011]

Tax Planning transaction not

Sham if parties assessed

The assessee let out its premises to

Minicon on a monthly rent of

Rs.47,000 pursuant to a leave and

license agreement. Minicon thereafter

let out the said premises to various

third parties. The AO, CIT (A) & Tribu-

nal took the view that as one director

was common between the assessee

and Minicon, the transaction of leave &

license was a sham and that the

amount received by Minicon from vari-

ous persons was assessable in the

hands of the assessee. On appeal by

the assessee, High Court held allowing

the appeal that as the amounts re-

ceived by Minicon from the third par-

ties have been taxed in the hands of

Minicon and that has attained finality,

taxing the very same amount once

again in the hands of the assesseewould amount to taxing an income

twice which is not permissible in law. In

Akshay Textile Trading 304 ITR 401

(Bom) it was held that in the absence

of any cogent evidence to show that

the transaction was not genuine, the

amounts received by an intermediary

cannot be assessed in the hands of

the assessee. In the present case,

save and except the fact that one of

the directors of the assessee company

was also a director in Minicon, there is

nothing on record to show that the

transaction between the assessee and

Minicon is a sham transaction. Accord-

ingly, the decision of the Tribunal that

the amounts received by Minicon on

account of letting out the premises is

liable to be assessed in the hands of

the assessee on the ground that the

transaction between the assessee and

Minicon is a sham and bogus transac-

tion cannot be accepted.

Judicial Pronouncements - Interna-

tional Taxation

M/s Havells India Ltd. Vs. Addl.CIT

[ITA No.1300/Del./2010, dtd.

27.05.2011] (2011) 59 DTR (Del)(Trib)

118

Fees paid to a foreign company for

rendering testing and certification

services cannot be treated as in-

come deemed to accrue or arise in

India under Section 9(1)(vii) of the

Income-tax Act

ITAT Delhi Bench held that where ser-

vices have been rendered outside In-

dia and have been utilised for the pur-

pose of making or earning any income

from any source outside India, suchpayments would fall outside the pur-

view of Section 9(1)(vii) of the Act and

will not be deemed to accrue or arise

in India.

The Tribunal observed that the testing

and certification was necessary for the

export of the product and was utilised

for such export. The said services

were rendered and utilised outside

India. Therefore, the income fell out-

side the purview of Section 9(1)(vii) of

the Act and did not deem to accrue or

arise in India.

The Tribunal observed that the tax de-

partment had failed to prove its conten-

tion that the testing and certification

were utilised in the taxpayers produc-

tion activity in India. The burden in this

regard was entirely on the tax depart-ment, which the tax department had

failed to discharge.

The tax departments argument on

remitting the matter to the AO was nei-

ther required, nor appropriate to be

adopted. The Tribunal observed that it

was not possible to remit the matter to

the AO since the appellate authority

examines whether the assessment had

been framed in accordance with law

and if the assessment was not framed

in accordance with law it was not the

responsibility of the authority to start

investigation suo moto and in order to

fill up the gap which was missing.

The Tribunal further observed that the

tax department did not bring anything

on record to substantiate its observa-

tion of the testing and certification ser-

vices provided to the taxpayer by CSA

having been utilised for the taxpayers

business activity in India.


7/137

SNKDIRECT TAXES


Accordingly, it was held that fees paid

by the taxpayer did not deemed to ac-

crue or arise in India and withholding

of tax under Section 195 of the Act

was not required and thus disallow-

ance under Section 40(a)(i) of the Act

was also not required. [Post amend-

ment of section 9(1)(vii)]

Nippon Keiji Kyokoi Vs. ITO [ITA

no.6329, 6330, 6331/Mum./2007, dtd.

29.07.2011]

Income of non-resident attributed to

its PE in India taxable as business

profits; balance income not to be

taxed as fee for technical services

Notwithstanding a change in the posi-

tion by the assessee, the Tribunal has

held that the effective connection with

the permanent establishment in India

has to be determined based on a func-

tional test in the case of fees for tech-

nical services . Furthermore, the Tribu-

nal also upheld that if the services are

said to have been effectively con-nected with the permanent establish-

ment, the income would be taxable

only as business profits to the extent of

attribution and the balance income

would not be liable to tax in India as

fees for technical services.

Article-12(5) of the DTAA, excludes the

entire receipt from Article-12(1) and

12(2), if the receipt has an effective

connecting with the P.E. The argument

that Port is to be taxed under Article-7

and balance under Article-12, is devoid

of merit. The DTAA does not contem-

plate the same. Such an interpretation

said to be placed by learned Depart-

mental Representative is incorrect and,

hence, we reject the same. When cer-

tain FTS is effectively connected with

the P.E., then so much of the fees i.e.,

directly or indirectly attributable to the

P.E. is to be taxed under Article-7.

Services rendered through own staff

and those rendered through independ-

ent surveyors cannot be dealt with dif-

ferently and hence the services ren-

dered through independent surveyors

have an effective connection with the

PE.

Destination of the World

(Subcontinent) Pvt. Ltd., Vs. Asstt.

CIT [ITA No. 5534(Del)/2010, dtd.

08.07.2011]

For transfer pricing, internal compa-

rability to be given preference over

external comparables

The ITAT Delhi Tribunal held that inthe first instance, the attempt should

be made to determine arms length

price of controlled transactions by

comparing the same with internal un-

controlled transactions undertaken in

same or similar economic scenario.

ACIT Vs. Anchor Health and Beauty

Care Pvt Ltd [ITA No. 7164/

Mum/2008, dtd. 26.08.2011]

Fee for user of name and

accreditation not taxable as

royalty

The assessee, engaged in manufac-

ture of tooth paste etc paid Rs

11,71,826 as accreditation panel fees

to British Dental Health Foundation UK

without deduction of tax at source. The

AO disallowed the sum u/s 40(a)(i) on

the ground that the sum was taxable

as royalty and tax had not been de-

ducted at source u/s 195(1). The CIT

(A) deleted the disallowance. Before

the Tribunal, the department argued

that since the assessee derived valu-

able advantage from the accreditation

by BDHF and use the same as a mar-

keting tool, the amount constituted

royalty. ITAT Mumbai bench dismiss-

ing the appeal held that

(i) The obligation to deduct tax u/s

195(1) arises only if the payment is

chargeable to tax in the hands of

non-resident recipient. If the recipi-

ent of the income is not charge-

able to tax, the vicarious liability on

the payer is ineffectual. As the AO

had not established how the recipi-

ent was liable to pay tax, he was in

error in disallowing u/s 40(a)(i) (GE

India Technology Center 327 ITR

456 (SC) followed;

(ii) On merits, though the accreditation

fees permitted the assessee the

use of name of British Dental

Health Foundation, it did not con-

stitute royalty under Article 13 of

the India-UK DTAA because it didnot allow the accredited product to

use, or have a right to use, a trade-

mark, nor any information concern-

ing industrial, commercial or scien-

tific experience so as to fall within

the definition of the term. The pur-

pose of the accreditation by a re-

puted body was to give certain

comfort level to the end users of

the product and to constitute theUSP of the product. The term

royalty cannot be construed as

per its normal connotations in busi-

ness parlance but has to be con-

strued as per the definition in Arti-

cle 13. The amount constituted

business profits and as the recipi-

ent did not have a PE in India, it

was not taxable in India.

DCIT Vs. RBS Equities India Ltd [ITA

No. 2570/Mum/2010, dtd. 26.08.2011]

When method changed by TPO, no

penalty is leviable

The assessee adopted the TNMM to

determine the ALP in respect of the

broking transactions entered into with

its affiliates. The AO & TPO held that

the assessee ought to have adopted

the CUP method and made an adjust-

ment of Rs. 1.10 crores. This was ac-

cepted by the assessee.


8/138

SNKDIRECT TAXES


The AO levied penalty under Explana-

tion 1 to s. 271(1)(c) on the ground that

the assessee had filed inaccurate par-

ticulars of income. This was deleted by

the CIT (A). On appeal by the depart-

ment to the Tribunal, ITAT Mumbai

Bench dismissing the appeal held that

explanation 1 to s. 271(1)(c) does not

apply to transfer pricing adjustments.

Penalty for transfer pricing adjustments

is governed by Explanation 7 to s. 271

(1)(c). Under Explanation 7 to s. 271(1)

(c), the onus on the assessee is only to

show that the ALP was computed by

the assessee in accordance with thescheme of s. 92 C in good faith and

with due diligence. The assessee

adopted the TNMM and no fault was

found with the computation of ALP as

per that method. Instead, the method

was rejected on the ground that CUP

method was applicable. It is a conten-

tious issue whether any priority in the

methods of determining ALPs exists.

So, when TNMM is rejected, withoutany specific reasons for inapplicability

of the TNMM and simply on the ground

that a direct method is more appropri-

ate to the fact situation, it is not a fit

case for imposition of penalty. The ex-

pression good faith used alongwith

due diligence, which refers to proper

care, means that not only must the

action of the assessee be in good

faith, i.e. honestly, but also with propercare. An act done with due diligence

would mean an act done with as much

as care as a prudent person would

take in such circumstances. As long as

no dishonesty is found in the conduct

of the assessee and as long as he has

done what a reasonable man would

have done in his circumstances, to

ensure that the ALP was determined in

accordance with the scheme of s. 92C, deeming fiction under Explanation 7

cannot be invoked.

ADIT Vs. TII Team Telecom Interna-

tional Pvt Ltd [ITA No. 3939/

Mum/2010, dtd. 26.08.2011]

Income from license of software not

assessable as royalty.

The assessee, an Israeli company,

entered into an agreement with Reli-

ance Infocom for supply and licence of

software for RILs wireless network in

India. The assessee received Rs. 3

crores which it claimed to be business

profits and not taxable for want of a

permanent establishment (PE) in India.

The AO took the view that the said

sum was assessable as royalty. This

was reversed by the CIT (A) following

Motorola Inc 96 TTJ 1 (Del) (SB). In

appeal before the Tribunal, the depart-

ment argued that in view of Gracemac

Corp 42 SOT 550 (Del), the use of

software was assessable as royalty.

ITAT Mumbai bench dismissing the

appeal held that

(i) Under Article 12 (3) of the India-Israel DTAA, royalty is defined in-

ter alia to mean payments for the

use of a copyright or a

process. There is a distinction

between use of copyright and

use of a copyrighted article. In

order to constitute use of a copy-

right, the transferee must enjoy

four rights viz: (i) the right to make

copies of the software for distribu-tion to the public, (ii) The right to

prepare derivative computer pro-

grammes based upon the copy-

righted programme, (iii) the right to

make a public performance of the

computer programme and (iv) The

right to publicly display the com-

puter programme. If these rights

are not enjoyed, there is no use of

a copyright. The consideration isalso not for use of a process be-

cause what the customer is paying

for is not for the process but for

the results achieved by use of the

software. It will be a hyper techni-

cal approach totally divorced from

ground business realities to hold

that the use of software is use of a

process. (Motorola Inc 96 TTJ 1

(Del) (SB) and Asia Sat 332 ITR

340 (Del) followed. Gracemac

Corp 42 SOT 550 (Del) not fol-

lowed);

(ii) It is well settled that a DTAA pre-

vails over the Act where it is more

favourable to the assessee. The

view taken in Gracemac, relying on

Gramophone Co AIR 1984 SC

667, that the Act overrides thetreaty provisions where there is

irreconcilable conflict is not accept-

able because (a) it is obiter dicta,

(b) contrary to Azadi Bachao An-

dolan 263 ITR 706 (SC) and (c)

Gramophone Co not applicable to

I. T. Act as it dealt with law in

which specific enabling clause for

treaty override did not exist. (Ram

Jethmalani vs UOI also consid-ered).

LS Cable Limited Vs. DIT [ A.A.R.

Nos. 858-861 of 2009, dtd.

26.07.2011]

Off-shore supplies not taxable de-

spite composite contract & PEs

role in clearance

The assessee, a Korean company,

entered into three contracts with Delhi

Transco Ltd for (i) offshore supply con-

tract on CIF basis, (ii) onshore supply

contract and (iii) onshore service con-

tract. The applicant claimed that the

income arising from the offshore sup-

ply contract was not taxable in India.

The revenue claimed that the profits

from the off-shore supply was taxable

in India on the basis that (a) though

the supply contract was awarded of

sepasuccessful completion of the facil-

ity as per specifications, (c) the three

contracts were


9/139

SNKDIRECT TAXES

Judicial pronouncements (International Taxation) / Circulars / Notifications

separate contracts did not dilute the

responsibility of the applicant for suc-

cessful completion of the facility as per

specifications, (c) the three contracts

were composite contracts and onecould not exist without the other, (d)

the offshore supplies were on CIF ba-

sis and the contracts for offshore sup-

ply and onshore contracts were signed

on the same date, (e) the insurance

requirement of the offshore supplies

contract require that the applicant will

take out and maintain insurance of

cargo, installation, worker compensa-

tion, etc, (f) the case is not a case of a

sale simpliciter but is for full package

involving onshore services. It could not

have made a difference had the con-

tract been one instead of three divisi-

ble contracts. AAR rejecting the con-

tentions of the department held that

(i) The clauses in the offshore supply

contract agreement regarding the

transfer of ownership, the payment

mechanism in the form of letter of

credit which ensures the credit of

the amount in foreign currency to

the applicants foreign bank ac-

count on receipt of shipment ad-

vice and insurance clause estab-

lish that the transaction of sale and

the title took place outside Indian

Territory. The ownership and prop-

erty in goods passed outside India.The transit risk borne by the appli-

cant till the goods reach the site in

India is not necessarily inconsis-

tent with the sale of goods taking

place outside India. The parties

may decide between them as to

when the title of the goods should

pass. As the consideration for the

sale portion is separately specified,

it can well be separated from thewhole. (Ishikwajima Harima 288

ITR 410 (SC) & Hyosung Corpora-

tion 314 ITR 343 (AAR) followed;

Ansaldo Energia SPA 310 ITR 237

(Mad) distinguished);

(ii) Nothing in law prevents parties to

enter into a contract which pro-

vides for sale of material for a

specified consideration although

they were meant to be utilized in

the fabrication and installation of a

complete plant;

(iii) Though the assessee had a PE in

India, that came into existence for

the purpose of carrying out the

contract for onshore supplies and

services etc and had no role toplay in offshore supplies. Even if

the PE was involved in carrying on

some incidental activities such as

clearance from the port and trans-

portation, it cannot be said that the

PE is in connection with the off-

shore supplies.

Circulars / Notifications / Press Re-

lease

Press Release No.402/92/2006-MC

(20 of 2011), dtd. 24.08.2011

The Government of India signed an

Agreement for Avoidance of Double

Taxation and the Prevention of Fiscal

Evasion with respect to Taxes on In-

come and on Capital (DTAA) with Gov-

ernment of Georgia on 24.08.2011.

The DTAA provides that business prof-

its will be taxable in the source state if

the activities of an enterprise constitute

a permanent establishment (PE) in the

source state. The Agreement provides

for fixed place PE, building site, con-

struction & installation PE, service PE,insurance PE and agency PE. The

Agreement incorporates para 2 in Arti-

cle concerning Associated Enterprises.

This would enhance recourse to Mu-

tual Agreement Procedure to relieve

double taxation in cases involving

transfer pricing adjustments. Divi-

dends, interest and royalties & fees for

technical services income will be taxed

both in the country of residence and in

the country of source. The low level of

withholding rates of taxation for divi-

dend (10%), interest (10%) and royal-

ties & fess for technical services (10%)

will promote greater investments, flow

of technology and technical services

between the two countries. The Agree-

ment incorporates provisions for effec-

tive exchange of information between

tax authorities of the two countries in

line with best international standards,

including exchange of banking infor-

mation and supplying of information

without recourse to domestic interest.

The Agreement also provides for shar-

ing of information to other agencies

with the consent of supplying state.

The Agreement has an article on as-

sistance in collection of taxes, includ-

ing provision for taking measures of

conservancy. The Agreement incorpo-

rates anti-abuse (limitation of benefits)

provisions to ensure that the benefits

of the Agreement are availed of by the

genuine residents of the two countries.

The Agreement will provide tax stability

to the residents of India and Georgia

and will facilitate mutual economic co-

operation between the two countries. Itwill also stimulate the flow of invest-

ment, technology and services be-

tween India and Georgia.


10/1310

SNKINDIRECT TAXES

Judicial Pronouncements

C.C.E., Mangalore -Vs- M/s. Pals

Microsystems Ltd., [Civil Appeal No.

6058 of 2011 (Arising out of S.L.P.

(C) No.13594 of 2009), dtd.

29.07.2011]

Honest mistake committed in main-

tenance of stock register can not be

treated as fraud or willful mis-

statement or suppression of facts

As there was honest mistake commit-

ted in maintenance of stock register

etc. which was frankly admitted by the

Managing Director of the respondent-

assessee and the department could

not establish that there was any sup-

pression of facts or a fraud on the part

of the respondent-assessee and as,

there is no finding to the effect that

there was a fraud or willful mis-

statement or suppression of facts.

Royal Enfield (Unit of M/s. Eicher

Ltd.) VS. CCE [Civil Appeal NO.

4406 OF 2010, dtd. 10.08.2011]

Cost of packing of motor cycles

cleared to Depot to be included in

assessable value for Excise Duty

Valuation

The packing which is given by the ap-

pellant-company to their motorcycles is

necessary for putting the excisable

article in the condition in which it is

generally sold in the wholesale market

at the factory gate and, therefore, such

cost is liable to be included in the

value of the goods and the cost of

such packing cannot be excluded.

Uniflex Cables Ltd. versus Commis-

sioner, Central Excise, Surat [Civil

Appeal No. 5870 of 2005, dtd.

24.08.2011]

No Penalty in case of interpreta-

tional nature

With regard to the imposition of pen-

alty is concerned, when the Commis-

sioner, himself in his order-in-original

has stated that the issue involved in

the case is of interpretational nature,

Honble Supreme Court held that no

penalty could be and is liable to be

imposed on the appellant herein.

Commissioner of Customs Excise,

New Delhi Vs. M/s. Living Media In-

dia Pvt. Ltd. [Civil Appeal Nos. 8627-

8628 of 2002, 2959 of 2008, 4751 of

2006, 2832 of 2006, 1 of 2009, dtd.

17.08.2011]

Royalty paid on import of Goods /

prerecorded music cassette or a

popular film to be included in the

transaction value for Custom valua-

tion

Supreme Court held that if a prere-

corded music cassette or a popular

film or musical score is imported into

India, duty will necessarily have to be

charged on the value of the final prod-

uct. As per Rule 9, in determining the

transaction value there has to be

added to the price actually paid or pay-able for the imported goods, royalties

and the license fees related to the im-

ported goods that the buyer is required

to pay, directly or indirectly, as a condi-

tion of sale of goods. Therefore, when

prerecorded music cassette is im-

ported as against the blank cassette,

definitely its value goes up in the mar-

ket which is in addition to its value and

therefore duty shall have to becharged on the value of the final prod-

uct. Therefore, there can be no dispute

with regard to the fact that value of the

royalty paid is to be included in the

transaction value.

Essar Telecom Infrastructure (P.)

Ltd. VS. UOI [No. 2459-2482 OF

2011 (T RES), dtd. 07.04.2011]

Renting of Mobile Towers liable toVAT, not service tax

Referring to various judgments of the

Apex Court and other courts, petitioner

contended that petitioner has already

remitted the entire service tax due to

the Centre. Directing the petitioner to

pay tax as per section 2(29)(d) of the

VAT Act is impermissible and also it

would be in the form of double jeop-

ardy. As against the order of the as-

sessing authority, petitioner has come

up before Karnataka High Court to

exercise efficacious remedy under Arti-

cle 226 of the Constitution and praying

not to insist upon for redressal before

the appellate forum as the matter in-

volves a Constitution stipulation and

since it also involves substantial ques-

tion of law of public importance, this

has to be adjudicated by this Court

exercising power under Article 226 of

the Constitution.

Various decisions rendered and re-

ferred to by the petitioners counsel are

in the context what is movable and

immovable. As a matter of fact finding,

the reassessing authority having re-

gard to the nature of the equipmentused and its fixation to the earth i.e.,

civil foundation or on the roof of the

building for proper functioning and the

nature of the activity that is being

transferred to the customers viz., tele-

com companies to use the equipment

i.e., the tower raised and in considera-

tion petitioner receives some amount

which are in the form of rents, has pro-

posed tax under the provision of VATAct, treating it as lease of movable.

Further, having regard to the nature of

the agreement entered into and the

nature of transaction, the effective con-

trol is with the petitioner and, the com-

ponent of delivery is also involved and

the maintenance and over all control is

also with the petitioner, it could be spe-

cifically said that the right to use the

goods has been transferred by the

petitioner to the telecom companies

and that very much falls within Article

366(29A)(d) of the Constitution.


11/1311

SNKINDIRECT TAXES

Judicial Pronouncements / Circulars / Notifications

So far as imposition of penalty is con-

cerned, of course penalty or interest

thereof cannot be imposed as, in the

usual course petitioner having exer-

cised his bona fides, having registered

under the Service Tax, went on paying

service tax.

Idea Mobile Communication Ltd. Vs.

C.C.E.& C.,Cochin [Civil Appeal No.

6319 of 2011 {Arising out of SLP(C)

No. 24690 of 2009}, dtd. 04.08.2011]

Service tax is payable on Sale of

SIM cards, no sales tax. Even if

Sales tax is wrongly paid, Service

Tax is payable

Amount received by the cellular tele-

phone company from its subscribers

towards SIM Card will form part of the

taxable value for levy of service tax, for

the SIM Cards are never sold as goods

independent from services provided.

They are considered part and parcel of

the services provided and the dominantposition of the transaction is to provide

services and not to sell the material i.e.

SIM Cards which on its own but without

the service would hardly have any

value at all. Thus, it is established from

the records and facts of this case that

the value of SIM cards forms part of

the activation charges as no activation

is possible without a valid functioning

of SIM card and the value of the tax-able service is calculated on the gross

total amount received by the operator

from the subscribers.

Cinemax India Limited VS. UOI &

Anr. [Special Civil Application No.

8032 of 2010, 9661 of 2010, 11111

of 2010, 12933 of 2010, 707 of 2011

and 11032 of 2010, dtd. 23.08.2011]

Gujarat HC upholds constitutionalvalidity of service tax on renting of

immovable property

While upholding Sec.65[105][zzzz] of

Finance Act, 1994 as amended by

Sec.75[5][h] and Sec.76 of the Finance

Act, 2010, Gujarat High Court hold that

the provision of Sec.65[105][zzzz] in-

troducing service tax is not attracted if

[i] the vacant land is used solely for

agriculture, aquaculture, farming, for-

estry, animal husbandry, mining pur-

poses; [ii] it is a vacant land, whether

or not having facilities clearly incidental

to the use of such vacant land; [iii] land

is used for educational, sports, circus,

entertainment and parking purposes

and; [iv] building is used solely for resi-

dential purposes and buildings are

used for the purposes of accommoda-

tion, including hotels, hostels, boarding

houses, holiday accommodation, tents,

camping facilities. The said provision

levying service tax will be attracted if

the immovable property is rented for

the use in the course of or for further-

ance of the business of commerce.

Circulars / Notifications

Instruction No. F.No.390/Misc./163/

2010 -JC, dtd. 17.08.2011

Vide the above instruction, CBEC fixed

monetary limit for Custom, Service tax

and Excise Appeal filing with CESTAT,

High Court and Supreme Court, which

is as under-

For ascertaining whether a matter

would be covered within or without the

aforementioned limits, the determina-

tive element would be duty/tax under

dispute.

F.No.390/Misc./163/2010-JC Dated

- New Delhi 17th August 2011

LETTER No. F.NO. 137/25/2011 - ST,

dtd. 03.08.2011

Vide the above letter it has been clari-

fied that delayed payment charges re-

ceived by the stock brokers are not

includible in taxable value as the same

are not the charges for providing tax-

able services. Such charges are on

account of delay in making payments

by the service recipient to the service

provider and are in the nature of a pe-

nal charge for not making the payment

within stipulated time. Such amounts

are not includible in the taxable value

for charging service tax. This principle

will also apply to other service provid-ers.

However, section 67 of the Finance

Act, 1994 provides that service tax is

chargeable on taxable value which

shall be the gross amount charged by

the service provider. Therefore, if in the

account statement/invoice/bill, etc. is-

sued by the service provider, only the

gross amount is shown without indicat-

ing the delayed payment charges

separately, the service tax would be

payable on the entire amount. Delayed

payment charges would not be includ-

ible in gross value charged only if

these charges are shown separately in

the account statement/invoice/bill etc.

Notification No. 43/2011 ST, dtd.

25.08.2011

As per the above notification, from 1st

October 2011, all type of Assessees

are required to file their Service Tax

Return Electronically/Online.

Sr.

No.Appellate

ForumMonetary

limit1. CESTAT Rs .5,00,0002. High Court Rs.10,00,0003. Supreme

CourtRs.25,00,000


12/1312

SNKOTHER LAWS

Judicial Pronouncements /Circulars / Notifications

Judicial Pronouncements

J K College Of Nursing & Paramedi-

cals Vs. UOI & ORS [W.P.(C)

8195/2010 & CM No.21123/2010 (for

stay), dtd. 24.05.2011]

If any establishment or employer

claims to be not covered under Em-

ployees Provident Funds and Mis-

cellaneous Provisions Act, 1952,

burden to prove in such cases is on

the establishment

It was held by Delhi High Court that if

any establishment or employer claims

to be not covered under the said Act,

then it is for the employer to place suf-

ficient cogent and convincing material

before the designated authority in an

enquiry under Section 7A of the Act, so

as to satisfy the Authority with regard

to non-applicability of the Act and fur-

ther held that on failure to place any

such material, the onus cannot be

shifted on the EPF authorities to prove

the applicability of the Act. It was yet

further held that the EPF authorities

under no circumstances can be in pos-

session of necessary records evidenc-

ing the extent of strength of employees

in any particular establishment.

Sarojben Ashwinkumar Shah etc.

Vs. State of Gujarat & ANR.

[CRIMINAL APPEAL NOS. 1554-1557

OF 2011 (Arising out of S.L.P. (Crl.)Nos. 9527-9530 of 2010), dtd.

10.08.2011]

New partners can not be held guilty

for cheque issued by old partners

In the above case, a firm issued

cheques to a person but it was re-

turned by the bank as the account had

been closed. The payee filed a criminal

complaint under Section 138 of theNegotiable Instruments Act against the

firm and two partners. During the trial,

the two partners produced the copy of

the registration of the firm. It indicated

that there were two more partners in

the firm. So the payee wanted to make

them also parties. The newcomers

moved the Gujarat high court for

quashing this move. The high courtrefused to do so. They appealed to the

Supreme Court. Supreme Court set

aside the high court order and asked it

to reconsider the case.

State of Haryana & Ors. Vs. M/s.

Malik Traders [Civil Appeal No. 7033of 2011 {arising out of S.L.P.(C) No.

24107 of 2009}, dtd. 17.08.2011]

Earnest money forfeited as per

terms of tender for not entering into

contract can not be refunded

A person may have a right to withdraw

his offer but if he has made his offer on

a condition that some earnest money

will be forfeited for not entering into

contract or if some act is not per-

formed, then even though he mayhave a right to withdraw his offer, he

has no right to claim that the earnest/

security be returned to him. Forfeiture

of such earnest/security, in no way,

affects any statutory right under the

Indian Contract Act. Such earnest/

security is given and taken to ensure

that a contract comes into existence. It

would be an anomalous situation that

a person who, by his own conduct,precludes the coming into existence of

the contract is then given advantage or

benefit of his own wrong by not allow-

ing forfeiture.

Sri Ramachandrappa Vs. the Man-

ager, Royal Sundaram Alliance In-

surance Company Ltd. [dtd.

09.08.2011]

Compensation to be awarded

should not be measured by the na-

ture, location or degree of the in-

jury, but rather by the extent or de-

gree of the incapacity resulting from

the injury

Compensation to be awarded is not

measured by the nature, location or

degree of the injury, but rather by the

extent or degree of the incapacity re-sulting from the injury. The tribunals

are expected to make an award deter-

mining the amount which should ap-

pear to be just, fair and proper.

Reynolds Pens India Pvt. Ltd. Vs.

Regional Provident Fund Commis-

sioner [W.P.No.15823 of 2010, dtd.

07.06.2011]

Provident Fund (PF) contribution isapplicable on allowances

The Madras High Court in aforesaid

case has held that certain allowances

such as conveyance, educational al-

lowances, food concession, medical

allowance, special holidays, night shift

incentive, city compensatory allow-

ances etc. should be treated as part of

basic wages under the Employees

Provident Fund and Miscellaneous

Provisions Act, 1952 (EPF Act.) and

accordingly, provident fund contribu-

tion should be remitted on such allow-

ances.

BSNL Vs. Union of India & others

[W.P.Nos.21520, 21782 and 21783 of

2010 and M.P.Nos.1,1,1 and 2 of

2010, dtd. 16.06.2011]

PF contributions need to be deducted

for training period of Junior Officers/

Junior Accounts Officers and other

similarly placed employees.


13/13

SNK

Due Dates of key compliances pertaining to the month of September 2011:

5th September Payment of Service Tax & Excise duty for August6

thSeptember Payment of Service tax & Excise duty paid electronically through internet banking

7th September TDS/ TCS Payment of August10th September Excise Return ER1/ER2/ER615

thSeptember PF Contribution of August

21stSeptember ESIC payment of August

30th September Due date for filing Income tax return for corporate assessees and for those assessees whose

accounts are liable for tax audit u/s. 44AB.

The information contained in this newsletter is of a general nature and it is not intended to address specific facts, merits and circumstances of any indi-vidual or entity. We have tried to provide accurate and timely information in a condensed form however, no one should act upon the information pre-sented herein, before seeking detailed professional advice and thorough examination of specific facts and merits of the case while formulating businessdecisions. This newsletter is prepared exclusively for the information of clients, staff, professional colleagues and friends of SNK.

MUMBAI

303, Konark Shram, 3rd Floor, 156 Tardeo Road, Tardeo,Mumbai-400 034.

49/2341, M.H.B. Colony, Ghandhinagar, Bandra(E)Mumbai-400 051

Tel. : 91-22-26428494, 26451439, 26515396Fax : 91-22-26455586

PUNE

E-2-B, 4th Floor, The Fifth Avenue, Dhole Patil Road Pune.

Tel. : 91-20-32549007-8 Fax : 91-20-30529401

SURAT

'SNK House' 31-A, Adarsh Soc, Opp. Seventh Day Adventist HighSchool, Athwalines, Surat-395 001.

Tel. : 91-261-2656273-4 & 6544791-2 & 3299540 & 47Fax : 91-261-2656868

AHMEDABAD

111, Nalanda Enclave, Opp. Chicago Hotel, Pritamnagar, Ellis-bridgeAhmedabad-380 006.

Tel-fax: 91-79-26586348 & 30006348

OUR OFFICES:

snk newsletter- september 2011

Documents