HIGH COURT ORDERS

F Amount received after resignation from former employer for not accepting employment in rival concern not assessable as salary : B. K. Kotru v. CIT (Bom) p. 1

F Tax not deductible by assessee on amount paid as hire charges for taking temporary possession of ships : CIT v. Poompuhar Shipping Corporation Ltd. (Mad) p. 3

F Discount given on sale of stamps by treasury to stamp vendors is outside the scope of TDS provisions : Kerala State Stamp Vendors Association v. Office of the Accountant-General (Ker) p. 7

F Amount paid for acquisition of technical know-how for a period of seven years is revenue expenditure : CIT v. Prem Heavy Engineering Works Ltd. (All) p. 11

F Additional purchase price paid by co-operative society towards purchase of milk pursuant to board’s resolution on the last day of accounting year does not amount to application of profits : CIT v. Mehsana District Co-operative Milk Producers Union Ltd. (Guj) p. 24

F Meaning of “distribution of profits” : CIT v. Mehsana District Co-operative Milk Producers Union Ltd. (Guj) p. 24

F Constitution of NTT and transferring pending matters from Bombay High Court restrained : P. C. Joshi v. UOI (Bom) p. 39

F S. 5 of Limitation Act, 1963, not applicable to income-tax proceedings u/s. 146 : CIT v. Bajrang Dal Mills (All) p. 44

F Delay in issuing certificate of deduction : No penalty leviable : CIT v. Gabrial India Ltd. (MP) p. 58

F Assessee letting out part of business : Income from letting out assessable as business income : CIT v. Pateshwari Electrical and Associated Industries P. Ltd. (All) p. 61

F Reference at the instance of assessee : Court refused to answer in the absence of assessee : CIT v. Pateshwari Electrical and Associated Industries P. Ltd. (All) p. 61

F Trial court acquitting partners on ground that no notice was given them : Petition against order of acquittal not permissible : ITO v. Shiv Sewak Cotton Co. (P & H) p. 73

F Discrepancies in accounts found in survey : Surrender of amount : Rejection of accounts justified : Surinder Kumar Charanjit Kumar v. CIT (P & H) p. 78

F Search disclosing unaccounted cash and jewellery of assessee : Search valid : Harvest Gold Foods (India) P. Ltd. v. UOI (Raj) p. 83

F Loose slip found in search showing calculation of household expenses but not bearing any date and also not stating as to which period it relates : AO to use loose slip to estimate household expenses for that assessment year to which it relates : CIT v. C. L. Khatri (MP) p. 97

F Sale of flat : No evidence of undervaluation : Pre-emptive purchase not valid : Parasrampuria Estate Developers P. Ltd. v. Members of Appropriate Authority (Bom) p. 110

APPELLATE TRIBUNAL ORDERS

F Temporary and casual workers apart from permanent workmen should be considered for the purpose of determining the ten workers for purposes of s. 80-IA : ACIT v. Ms. Richa Chadha (Mumbai) p. 1

F Meaning of “worker” : ACIT v. Ms. Richa Chadha (Mumbai) p. 1

F DDIT got signed blank papers from assessee by exercising coercion : Reassessment on basis of DDIT report not valid : Dr. Devendra Gupta v. ITO (Jodhpur) p. 18

F Lottery includes “winning first prize from lucky draw” : Bhavin J. Vakil v. DCIT (Mumbai) p. 32

F Notice u/s. 143(2) issued before completion of assessment but not served on assessee in prescribed time not a bar for initiating reassessment proceedings : Bhavin J. Vakil v. DCIT (Mumbai) p. 32

F Assessee’s father purchasing donation card and gifting to assessee : Assessee won first prize in lucky draw : Nature of receipt continues as a lottery : Bhavin J. Vakil v. DCIT (Mumbai) p. 32

F No power of AO to make reference to DVO to estimate cost of construction : DCIT v. Rohtas Projects Ltd. (Lucknow) p. 42

STATUTES

F SEZ Act, 2005, notifications p. 1, 2

F Corrigendum in jurisdiction of I. T. authorities p. 2

F Corrigendum in bulk filing of returns by salaried employees p. 3

F Senior Citizens Savings Scheme (Amendment) Rules, 2006 p. 3

F S. 10(23C)(vi) notifications p. 4

JOURNAL

A critical analysis of FBT p. 1

NEWS-BRIEFS

F Large taxpayer units from July

The Finance Minister has said that the large taxpayer units (LTUs) will be operational from July and the remaining four by year-end. He said at a seminar “Formation of Large Taxpayer Units in India” that these units would act as a single-window facilitation centre for all large entities paying excise duty, corporate/income-tax and service tax in Bangalore, Chennai, Delhi, Kolkata and Mumbai.

He said there are 843 taxpayers who pay over Rs. 5 crore in taxes every year. Of these, 90 are from Bangalore alone. He, however, said that it would not be mandatory on the part of the taxpayers to use the services of the LTUs.

He added that during the last three years, the Government had seen a 20 per cent. annual growth on tax collections. The Finance Minister said relationship tax executives would be appointed to help the taxpayers. He said LTUs have achieved “fair degree of success” in meeting its objectives in other South Asian countries.

On the issue of a common Asian currency, he said India was part of the talks on the currency. On the sidelines of the seminar, the Finance Minister said India was not left out of the talks on this issue.

ASEAN countries along with China, Korea and Japan are understood to be in talks on the floating of an Asian Currency Unit along with a single market to facilitate trade in the region. He said the Reserve Bank of India Governor will soon hold talks with banks on the issue of 1 per cent. reduction in cash reserve ratio. [Source : Business Line, March 28, 2006]

F CBDT specifies reporting format for banks

The Finance Ministry has made it easier for banks to comply with the Budget 2005-06 provision that required them to report to the revenue department all deposits on which interest has been paid without deduction of tax at source.

The burden of compliance has been reduced, with the Central Board of Direct Taxes (CBDT) now mandating banks to provide a “consolidated return for all branches” (bank level return) to the revenue department rather than transaction-wise details of time deposits on which interest has been paid without tax deducted at source (TDS).

As per the new arrangement, the details of the transactions would be held at the branch level and only the overall picture on time deposits would be passed on to the revenue department (through the consolidated return). The Finance Ministry has spelt out the format of the quarterly return (Form 26QAA) that banks would have to furnish to the tax department.

It has also spelt out the format in which every branch, of a banking company that is required to submit the quarterly return, should maintain particulars of time deposits on which interest has been paid without TDS. The CBDT has also stipulated that the quarterly returns are to be furnished to the Director General of Income Tax (Investigation).

The returns are to be filed on or before July 31, October 31, January 31 and June 30 following the respective quarters of the financial year. Banks have been expressing their inability to comply with the Budget requirement in this regard in full due to the mammoth back-office efforts required to collate such data. The CBDT has had to give repeated extension to the deadline for filing the quarterly returns.

At present, the Income-tax Act specifies that a bank would not be required to deduct tax at source on interest on deposits where the amount paid in a financial year does not exceed Rs. 5,000. For such transactions, the Finance Act, 2005, mandated banks to file quarterly returns for the period ending June 30, September 30, December 31 and March 31, in each financial year.

Top bankers had pointed out to the tax authorities that the problem of reporting such detailed transactions was compounded in cases where the branches are not hooked on to the core banking solution. [Source : Business Line, March 27, 2006]

F Export units to receive duty refunds within 15 days

The revenue department is expected to unveil a new refund scheme for export-oriented units (EOU) and star export houses. This will allow 80 per cent. of the duty refund to be available within 15 days from the date of filing a request. Currently, refunds of duties are refunded within three months from the date of filing. Further, it is expected that for exporters with a turnover of more than Rs. 5 crore, the Department is making efforts to transfer the duty directly to banks. [Source : Times of India, March 27, 2006]

F RBI eases overseas investment norms

Indian corporates will now find it much more easier to provide guarantee for their overseas investment or to disinvest from their foreign venture. The RBI issued a notification dated March 27, 2006 liberalising the procedure for overseas investment.

As per the new norms, corporates can offer any form of guarantee for their overseas investment under the automatic route, provided all financial commitments are within 200 per cent. of their net worth and the guarantee amount is specified upfront.

Accordingly, companies can offer corporate, personal, primary or collateral guarantees. Guarantees by wholly-owned subsidiaries (WOS), sister concerns, joint ventures (JVs) or associates of a company will also be permitted. At present, only the promoter company is permitted to offer guarantees on behalf of its WOS or JVS under the automatic route. Personal, collateral and third party guarantees require prior approval of the RBI on a case-by-case basis.

Guarantees issued by banks in India in favour of subsidiaries or JVS abroad will be outside this ceiling and subject to prudential norms issued by the RBI.

The RBI has also permitted Indian companies to disinvest without its approval where the JV or WOS are listed on the overseas stock exchange, the Indian promoter company is listed in India and has a net worth of not less than Rs. 100 crore, the Indian promoter is an unlisted company and the investment in overseas venture does not exceed $10 million.

In order to allow recognised exporters with a proven track record and a consistently high export performance to enjoy the benefits of globalisation and liberalisation, the RBI has allowed proprietary and unregistered partnership firms to set up a JV or WOS outside India. Until now, only registered firms were allowed to invest in or set up JVs abroad. [Source : Business Line, March 28, 2006]

F New norms on mutual fund issue expenses

The concerns of long-term investors of mutual funds about bearing the initial issue expenses may finally be put to rest. The Securities and Exchange Board of India (SEBI) would be soon issuing new guidelines for fund houses, suggesting that the issue expenses be made part of entry load for all open-ended funds. If the fund house does not wish to do so, the expense would have to be absorbed by the asset management company.

As per the existing guidelines, fund houses can charge up to 6 per cent. of its collections during new fund offers as issue expenses. This indicates that if a fund collects Rs. 5,000 crore, up to Rs. 300 crore can be charged as issue expenses. This sum can now be amortised over a period of five years. Investors to the fund, especially long-term investors, end up paying for the marketing extravaganza of the fund house to publicise its New Fund Offer (NFO). With funds mopping up larger sums during the NFO, on the back of mega advertising campaigns and high brokerages to distributors, amortisation of issue expense was seen as an issue of concern by the Association of Mutual Funds in India (AMFI). Subsequently, AMFI had sent its recommendations to SEBI.

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