The Most Comprehensive Portal on Indian Laws

1^st June, 2001

Dear User, 

We are once again with you with our monthly Newsletter.  As usual, in this newsletter, we have incorporated latest judgements, circulars etc. received by us in the previous month.

At this site we have added another feature i.e."INVEST ONLINE"  from where you can download various application forms for mutual funds and Government of India Bonds (RBI). Click here for "INVEST ONLINE"

The Government of India, Ministry of Finance vide its notification no.57 dtd. 29.5.2001 has transferred ten Chief CITs and vide another notification no.58 dtd. 29.5.2001 the Commissioners / Directors of Income Tax are  promoted as Chief Commissioners of Inccome Tax / Directors General of Income Tax. These notifications are also incorporated in this News Letter.

We have covered many subjects in this newsletter. You may select only those subjects in which you are interested by clicking the relevant following subjects : - 

Finance Act, 2001 - Amendments effective from 1.6.2001
Income Tax Law
Foreign Exchange (Reserve Bank of India)
Service Tax
Arbitration and Conciliation
Chartered Accountants Act
Trade Marks Act
Other Laws (Sales Tax, Negotiable Instrument etc.)
Calendar for the Month (important dates to remember)
Finance Ministry - CBDT - Orders for Transfer of Chief CITs & Promotions

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Thanking you,

Finance Act, 2001 - Amendments effective from 1.6.2001

The following amendments are coming in to force from 1-6-2001

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Income Tax

Bonds u/s. 54 EC

The Rural Electrification Corporation has launched Capital Gain Exemption Bond u/s. 54EC of the Income Tax Act, 1969. The Bonds are of five year tenure with a put - and - call option after three years. The Bonds carry a coupon rate of 8.5% if paid on half yearly or annual basis or 10% in case of cumulative interest rate option.

Capital Gains on Forex Assets

The Assessee, a non-resident Indian, inherited from her deceased husband certain shares purchased by him by utilizing convertible foreign exchange. She sold some of those equity shares and claimed taxability of capital gains as per proviso to section 48(1)(a) read with rule 115A of the Income Tax Rules, 1962. The Assessing Officer did not allow benefit of proviso to assessee on the ground that assessee, though a non-resident, acquired estate by way of bequest or rather acquired shares on account of law of inheritance and as such she was not investor in foreign currency. The Commissioner (Appeals) however, held that so long as shares were acquired out of foreign currency, benefit of proviso to section 48(1)(a) was available even to person acquiring shares by inheritance. The Income Tax Appellate Tribunal upheld the decision of the CIT (A). It was further held that conspicuous absence of words "by the assessee" in proviso to section 48(1)(a) would show that there was no requirement for an assessee to purchase shares herself by utilizing foreign currency so as to be eligible to take benefit under proviso to said section :

[ ACIT v/s Mrs. Zita Welinkar - 30 SCL 528 ITAT Mumbai Bench ‘B’ ]

Assessment as AOP

The applicant-company, incorporated in Netherlands and engaged in the business of dredging and marine contractors, has participated in the contract of Chennai Port Trust, in joint venture with an Indian company. Both parties have decided as to the work each party shall carry out and each of them has agreed to bear its own loss or retain its own profit separately. On facts, it was held that the applicant and Indian company cannot be treated as an AOP for the purpose of levy of Income Tax. It was also held that on facts, the applicant should be taxed in accordance with the principle embedded in section 44BBB and 10 % of amount receivable by it under contract, whether in India or elsewhere, should be taken as its profits and gains of business under section 28 without any deduction or allowance or exemptions :

[ Van Oord ACZ.BV – 115 Taxman 317 (Authority for Advance Rulings, New Delhi) ]

Collection of Tax at Source

Section 206C of the Income-tax Act, 1061 – Collection of tax at source – It was held that "buyer" for purposes of section 206C means buyer of goods and not merely a person who acquires a licence to carry on the business :

[ Union of India v/s Om Prakash S.S. & Co – 115 Taxman 325 ( SC ) ]

Cost of Acquisition on Amalgamation

The assessees were shareholders of the amalgamating company. Under scheme of arrangement, the assessees had received 14 shares of the amalgamated company for one share in the amalgamating company. The assessee sold certain shares of the amalgamated company. It was held that there was transfer of shares of amalgamating company within meaning of section 2(47) read with section 47(vii). It was also held that therefore cost of acquisition of shares to assessee of amalgamated company would have to be determined in accordance with provision of section 49(2). It was also held that the expression "extinguishment of any rights therein" in section 2(47)(ii) is not limited to such "extinguishment on account of transfer". It was held that the expression "extinguishment of any rights therein" extends to mean "extinguishment of rights independent of or otherwise than on account of transfer" :

[ CIT v/s Grace Collis – 115 Taxman 326 ( SC ) ]

Special provisions for computing profits and gains in connection with business of exploration of mineral oils

"Command" an Australian company, has entered into a contract with three companies and the Government of India for development of Ravva Offshore Oil and Gas Field which includes, inter alia, extraction and production of mineral oil. Command has entered into an agreement with the applicant, another Australian company, carrying on business in operation of helicopter services on a world-wide basis. Under this agreement, the applicant is required to place its helicopter services in India at the disposal of ‘Command’ for its oil operations. It was held that income of the applicant from services carried on in India is taxable as per provisions of section 44BB, and section 44BBA will be inapplicable. It was also held that the concept of profits determined under section 44BB or 44BBA, though arrived at on statutory basis, cannot be considered to exclude expenses such as salaries as non-deductible merely because the statute fixes a percentage in this regard. It was further held that remuneration paid to employees of applicant cannot be said to satisfy sub-clause © of clause 2 of article 15 of the DTAA concluded between India and Australia, as not being an expense deductible in deterring taxable profits of permanent establishment of applicant in India :

[Lloyd Helicopters International Pty. Ltd. v/s CIT – 115 Taxman 334 (Authority for Advance Rulings, New Delhi)]

Special provisions for computing profits and gains of the business of operation of aircraft in case of non-residents

It was held that the operation of helicopters moving men and goods within India cannot be excluded from purview of section 44BBA. It was also held that section 44BBA should not be confined to cases of international traffic :

[Lloyd Helicopters International Pty. Ltd. v/s CIT – 115 Taxman 334 (Authority for Advance Rulings, New Delhi)]

Deduction of Tax at Source on Payments to Contractors

It was held that Explanation III, inserted in section 194C with effect from 1-7-1995, is not clarificatory or retrospective in operation. It was further held that section 194C before insertion of Explanation III was inapplicable to transport contracts, i.e. contracts for carriage of goods. It was accordingly held that CBDT Circular dated 8-3-1994, which provides that section 194C shall apply to all types of contracts for carrying out any work including transport contracts and which is made applicable from 1-4-1994 to the extent it relates to transport contracts was to be quashed :

[ Birla Cement Works v/s CBDT 115 Taxman 359 ( SC ) ]

HUF vis-à-vis female heirs

It was held that Hindu personal law requires presence of a male for purpose of constitution of an HUF. It was further held that female heirs of a Hindu governed by Dayabhaga School of Hindu Law, dying intestate, cannot form joint Hindu family by means of agreement by throwing therein interest of any one of them in inherited property. It was therefore held that share of properties inherited by such female heir from her husband, dying intestate, would be assessable in her hands in status of individual :

[ CIT v/s Smt Sandhya Rani Dutta – 115 Taxman 369 (SC) ]

Business Income of Commission Agent

The assessee, a commission agent, collected sales tax from purchasers and paid to the sales tax department. It also collected refund of sales tax from the department when sales tax was not found payable. It was held that the assessee being only a commission agent of principal when it collected sales tax, neither amount collected by it nor refund received by it could be treated at its income :

[ CIT v/s D. Shankaraiah 115 Taxman 374 (SC) ]

Export Profits

The assessee-firm claimed deduction under section 80HHC in respect of counter-sales effected in convertible foreign exchange to foreigners, which did not involve clearance at customs. It was held that such sales were to be treated as exports out of India and, hence, eligible for benefit of section 80HHC :

[ CIT v/s Silver & Arts Palace 115 Taxman 403 (Raj) ]

Amalgamation vis-à-vis Chapter XX-C

By order of the company court, the sixth respondent, a company owning a vacant plot of land at land’s end Bandra, amalgamated with the ninth respondent, another company, and proceeded to construct a 7 star hotel. In instant public interest litigation, the petitioners, who were taxpayers and rate-payers and claimed to be deeply interested in environmental protection, challenged the amalgamation as fraud played on the company court by misrepresenting share-exchange ratio. It was held that on facts, no fraud was involved as all contemporaneous documents indicated that certain omission in amalgamation scheme was purely inadvertent and correct position was clearly placed on record before the company court and intimated to the Department of Company Affairs. It was further held that amalgamation, which had become final and binding could not be permitted to be challenged by petitioners, who had no locus standi, in a collateral proceeding in writ petition. It was also held that it was not open to the instant court, while exercising writ jurisdiction in a public interest litigation, to sit in judgement over correctness of an order made under section 391 by the company court which had become final, conclusive and binding. It was also held that a ‘No objection Certificate’ by appropriate authority under chapter XX-C of the Income Tax Act, being not a prescribed condition precedent under section 391 of the Companies Act, is a factor wholly irrelevant immaterial and non-germane for consideration at time of sanctioning of amalgamation scheme. It was also held that Chapter XX-C of the Income Tax Act, 1961 is inapplicable to situation of transfers of immovable property consequent upon an amalgamation scheme being sanctioned :

[ Sadanand S. Varde v/s State of Maharashtra 115 Taxman 407 (Bom) ]

Registration of Firm

The High Court, on reference, held that the Tribunal was justified in cancelling order passed under section 186(1) and that registration was to be allowed to firm constituted in violation of Arms Act and rules made thereunder. It was held that, following decision of the Supreme Court in Moti Lal Chunilal (Tak)’s case, order of High Court under appeal had to be set aside :

[ CIT v/s Friends & Co. 115 Taxman 491 ( SC ) ]

Taxation of crew of Indian ship

The assessee, a marine engineer, worked on an Indian ship owned by SCI. The ship did not touch the Indian coast except for eight days, during the relevant year. At the assessee’s instance, under section 264, the Commissioner set aside assessment completed by the Assessing Officer and held that assessee was a non-resident and directed the Assessing Officer to decide tax liability in the light of contract of employment as per sections 5(2)(b) and 9(1)(ii). The Assessing Officer held that since the assessee was an employee of SCI and earned salary as per contract with SCI, income accrued to him in India. The Tribunal held that income having been earned in foreign waters, had accrued to assessee outside India and was, thus not taxable in India. It was held that under section 5(2), in case of a non-resident only income which accrues to him in India or which is received by him in India is taxable and, therefore, income accruing to non-resident outside India would be outside charge of India income tax. It was also held that, on facts, the commissioner having found that the assessee was a non-resident during the relevant period, the question stood concluded :

CIT v/s Avtar Singh Wadhwan – 115 Taxman 537 ( Bom )

Double Taxation Relief

The assessee claimed that the amount of technical service charges and management service charges received from Sri Lanka under an agreement with NTC, owned by the Sri Lankan Government, and repatriated to India were exempt from Indian Income Tax because of the provisions of DTAA between the two Governments. The assessing Officer negatived the assessee’s claim on grounds that income having not suffered tax in Sri Lanka, there was no question of double taxation. The Sri Lankan Government had accepted that the assessee had a permanent establishment in Sri Lanka. It was held that decision would be binding on the Indian Government. It was also held that the fact that income arising from such permanent establishment in Sri Lanka was exempt in Sri Lanka was immaterial and therefore the assessee’s claim for double taxation relief was rightly accepted by Tribunal and no question of law arose from its order :

[ CIT v/s Lakshmi Textive Exporters Limited 115 Taxman 573 ( Mad ) ]

Plant

The assessee company constructed a factory building for manufacture of pharmaceuticals and basic drugs and claimed that its parental portion, i.e. ‘pharma building’’ was to be treated as "plant" for the purpose of higher rate of depreciation. It was found from the report of the Valuation Officer that "pharma building" was completely being used to manufacture of medicines, having a separate section for each process besides being centrally air-conditioned. It was held that the aforesaid building could be said to constitute an apparatus and a tool for assessee by means of which business activities were being carried out, and hence, it had to be considered as a "plant" :

[ DCIT v/s Astra IDL Limited 115 Taxman 622 (Kar) ]

Permission u/s 80 RRA

The Petitioner, on retirement from SAIL as Executive Director, was appointed as advisor to a firm in U.K. on a monthly remuneration. The Appropriate Authority was of view that the Petitioner was not qualified for grant of approval under section 80RRA on grounds that benefit of approval could be given to those governed by employer-employee relationship and that the Petitioner was not an employee of the U.K. firm. It was held that the Petitioner as an advisor would still be deemed to have been employed as an employee so as to attract the applicability of section 80RRA and therefore was entitled for grant of permission under section 80RRA :

[ D.K. Agarwal v/s Government of India – 115 Taxman 640 ( Del ) ]

Penalty for concealment of income

On the basis of facts that the managing director of the assessee-company executed sale deed and received additional consideration on behalf of the assessee on which assessee had specific knowledge. Addition to income was made and, accordingly, penalty was levied for concealment of income. The Tribunal upheld the order of penalty. On application under section 256(2), the High Court held that no question of law arose for which reference could be called for. It was held that order of the High Court was justified :

[ Century Flour Mills Limited v/s CIT 115 Taxman 675 ( SC ) ]

Profits and Gains from Poultry

The High Court rejected question whether sale of eggs and birds constitutes income of an industrial undertaking for purpose of allowing deductions under sections 80HH and 80-I. It was held that in view of the decision in CIT v/s Venkateswara Hatcheries (P) Limited (1999) 237 ITR 174 / 103 Taxman 503 (SC), a question of law arose and, therefore, Tribunal should refer the question to the High Court and the High Court should answer the question accordingly. It was also held that the question whether poultry sheds constitute "plant" and are entitled to higher rate of depreciation is question of law and, therefore, it entitles a reference to the High Court :

[ CIT v/ s Ratnam Poultry (P) Limited 115 Taxman 678 (SC).
Venkateswara Hatcheries Private Limited v/s CIT 115 Taxman 680 ( SC )
CIT v/s Srinivasa Hatcheries (P) Limited 115 Taxman 682 ( SC ) ]

Probation of Offenders Act

The Respondents were convicted under section 276C and 277 but released under the Probation of Offenders Act irrespective of the fact that provisions of section 292A bar application of provisions of the Probation of Offenders Act. Appeal against release order was dismissed by the High Court. It was held that the order of the High Court should be set aside and matter should be remanded to the High Court for fresh disposal :

[ Union of India v/s Smt Mamta Sethi 115 Taxman 683 (SC) ]

Investment Allowance

It was held that question as to whether investment allowance is allowable on machinery employed in process of extraction of granite from quarry, cutting same into various sizes and polishing them, is a question of law :

[ CIT v/s Mysore Minerals Limited 115 Taxman 685 (SC) ]

Balancing Charge

The assessee’s undertaking was acquired by Government Board and matter regarding price of assets was referred to arbitration. The award was challenged mainly on amount awarded on planning and designing and jurisdiction of arbitrator to award interest. However, the award was made a rule of court during the relevant assessment year 1970-71. An appeal was filed against the said award before the Supreme Court. It was held that the award made, for purposes of taxability under section 41(2) accrued to assessee on date of passing of decree of Court, not withstanding filing of appeal against Court’s decree. It was also held that in view of facts stated under the heading "Balancing Charge", and the fact that the Assessing Officer was never informed by the assessee of passing of decree by Court on arbitrator’s award and amount of decree, it was not possible for the Assessing Officer to determine taxability and quantum of tax under section 41(2) and, thus, it was a case which fell within the purview of section 147(a) :

Central India Electric Supply Co. v/s CIT 115 Taxman 687 ( SC )

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Arbitration & Conciliation

Arbitration and Conciliation Act

The defendant-applicants, who were promoter-directors of a company, stood guarantee for loan advanced by plaintiff to the company. They sought the Court’s declaration that suit filed by plaintiff against them for recovery of the said loan was not maintainable in view of matter being before the sole Arbitrator. It was held that the law is well-settled that simultaneous continuance of two independent legal proceedings on the same subject-matter must be assiduously avoided. It was further held that after arbitral proceedings had been initiated against the principal debtor only, filing of civil suit for recovery of the same amounts from the principal debtor and guarantors was impermissible, particularly when the principal debtor had been registered as sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985. It was also held that having regard to fact that there admittedly existed an arbitration clause between the plaintiff and the defendant-company and defendant directors of that company and in no other capacity, the two contracts were intrinsically intertwined with each other and, therefore, it had to be held that arbitration clause existed between all parties and defendant applicants had rightly invoked section 8. Accordingly, it was held that the defendant’s application had to be allowed and parties referred to pending arbitration before sole arbitrator :

[M.M.T.C. Limited v/s Shyam Singh Chaudhary 30 SCL 555 (Del) ]

Power of Court to set aside Arbitration Award

The appellant-trust had entered into an agreement with the respondent-company on 31-3-1981 for sale of scrap. Certain disputes arose between the parties whereupon appellant repudiated the contract on 28-9-1982 and forfeited the deposit made by the respondent. Pursuant to the arbitration clause contained in the said agreement, disputes were referred to an arbitrator on 10-1-1985 who after conducting the proceedings, passed the award on 1-6-1985 to the effect that the respondent was entitled to receive a sum of Ras.8,51,315/- together with interest at the rate of 18 per cent per annum from 28-9-1982 from the appellant. The award passed by the arbitrator did not contain any reasons and was a non-speaking one. The court of sub-judge, after considering the objections filed by the appellant under sections 30 and 33 set aside the award. Appeal by the respondent was allowed by the High Court. The High Court held that the award of interest from 28-9-1982 to 10-1-1985 was justified but denied interest thereafter on the ground that there was no claim for interest pendante lite. It was held that the law is settled by the Supreme Court that arbitrator’s award is final both on facts as well as in law and there is no appeal from his verdict which can be set aside only in situations specified in sections 30 and 33. It was also held that the arbitrator’s award cannot be set aside assuming that another view is possible. It was held that having regard to the arbitration clause in the agreement entered into between the appellant-trust and the respondent-company, claims made by the respondent-company were clearly covered and they fell within its scope and notwithstanding the fact that award did not contain any reason and was non-speaking one, it would be wrong to say that it was arbitrary or unsustainable. It was also held that there was no valid reason to deny future interest from date of decree to the company and, hence, respondent-company would be entitled to interest at the rate of 18 per cent per annum from 28-9-1982 to 10-1-1985 and future interest at the rate of 12 per cent per annum from date of decree till payment :

[ Paradip Port Trust v/s Unique Builders 30 SCL 592 ( SC ) ]

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Service Tax

Service tax is made payable with effect from 1st July, 2001, for the following services also:

1. Scientific or technical consultancy
2. Photography studio or agency
3. Commercial concerns holding conventions
4. Telex, fax leased circuit by the Telegraph Authority
5. Online information and database access or retrieval.
6. Video production agency
7. Sound recording agency
8. Broadcasting agency.
9. Insurance auxiliary services e.g. actuary, etc.
10. Banking or financial services by bank, FI or NBFC.
11. Port services
12. Automobile services or repairs, by an authorized services station

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Chartered Accountants Act

Payment of stipend by Chartered Accountants

An amendment was inserted in Regulation 48 providing for payment of a monthly stipend to Articled Clerks by every principal engaging them, at rates depending on location of their normal place of work. It was held that provision was intended to enable articled clerks to meet a portion of their pocket expenses and to remunerate them for services rendered as such articled clerks and object also was to enable bright students to take up training in accountancy. It was also held that stipend was related to expenses incurred by Articled clerks as also services rendered by them. It was also held that obligation on chartered accountant to pay stipend by statue has to be performed, and hence, it would be incorrect to term it as discriminatory and violative of Article 14 of the Constitution. It was also held fixation of stipend based on population is not discriminatory and violative of Article 14 on ground that it would affect financial capacity of chartered accountants :

[ R. Sunder v/s Institute of Chartered Accountants of India – 115 Taxman 493 ( Mad ) ]

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Foreign Exchange (Reserve Bank of India)

Foreign Investment in India

The limit of Foreign Direct Investment (FDI) in the banking sector has been raised from 20% to 40% and in case of NRI investment from 40% to 49%. FDI will include investment by FIIs.

The FDI limits have also been raised in the pharmaceutical, telecom, civil aviation and real estate sectors.

• In the pharmaceutical sector, foreign companies will be able to invest upto 100% instead of the existing 74%.

• In the telecom sector, foreign companies will be able to invest upto 74% instead of the existing 49%.

• In the civil aviation sector, foreign companies will be able to invest upto 100% instead of the existing 74%.

Export of Goods and Services

In partial modification of its Notification No. FEMA 23/2000-RB dated 3^rd May 2000, the Reserve Bank of India has made the following amendments in the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 with immediate effect :-

1. In regulation 4,

1. in clause (i) after the words "Export Processing Zones", the words "Electronics Hardware Technology Parks, Electronics Software Technology Parks" shall be inserted;
   

2. after clause (i) the following clause shall be inserted, namely;

"(ia) goods listed at items (1),(2) and (3) of clause (i) to be re- exported by units in Special Economic Zones, under intimation to the Development Commissioner of Special Economic Zones / concerned Assistant Commissioner or Deputy Commissioner of Customs;"

3. after clause (j). the following clauses shall be inserted, namely;

"(k) goods sent outside India for testing subject to re-import into India;

1. defective goods sent outside India for repair and re-import provided the goods are accompanied by a certificate from an authorized dealer in India that the export is for repair and re-import and that the export does not involve any transaction in foreign exchange;
2. exports permitted by the Reserve Bank, on application made to it, subject to the terms and conditions, if any, as stipulated in the permission."

2. in regulation 6, in sub-regulation (3) for clause (i), the following clause shall be substituted, namely;

"(i) The declaration in Form SOFTEX in respect of export of computer software and audio / video / television software shall be submitted in triplicate to the designated official of Ministry of Information Technology, Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) or Export Processing Zones (EPZs) or Special Economic Zones (SEZs) in India"

3. in regulation 9 of the said regulations,

1. the existing regulation shall be numbered as "(1)";
2. after sub-regulation (1) as so numbered, the following sub-regulation shall be inserted, namely;

"(2) (a) where the export of goods or software has been made by a unit situated in a Special Economic Zone, then notwithstanding any thing contained in sub-regulation (1), the amount representing the full export value of goods or software shall be realized and repatriated to India within twelve months from the date of export;

Provided that the Reserve Bank may for a sufficient and reasonable cause shown, extent the said period of twelve months,

(b) The Reserve Bank may for reasonable and sufficient cause direct that the unit shall cease to be governed by sub-regulation (2):

Provided that no such direction shall be given unless the unit has been given a reasonable opportunity to make a representation in the matter.

(c) On such direction, the unit shall be governed by the provisions of sub-regulation (1) until directed otherwise by the Reserve Bank."

2. in the schedule to the said regulations, a new form SOFTEX has been substituted for the existing SOFTEX.

Constitution of Benches of Appellate Tribunal for Foreign Exchange

The Chairperson has constituted the following Benches of the Appellate Tribunal namely;

1. Two single Member Benches, one consisting of the Chairperson and the other consisting of a Member, and
2. One Division Bench consisting of the Chairperson and the Member.

The division Bench referred to in clause (b) above, shall hear such cases in which the amount of penalty exceeds rupees five lakhs and all other cases shall be heard by a single Member Bench. The distribution of work amongst Benches shall be done by the Chairperson, from time to time.

Write Off of Unrealized Export Bills

With a view to simplify the procedure for write off of unrealized export bills, the RBI has decided that status holders, ( viz. Export Houses, Trading Houses, Star Trading Houses, Super Star Trading Houses ) and manufacturer exporters exporting more than 50 per cent of their production, and recognized as such by the DGFT may be permitted to "write off" outstanding export bills upto an annual limit of 5 per cent of their average annual realizations ( not turnover ) during the preceding 3 calendar years. The limit of 5% will be cumulatively available in a year and will be subject to the following conditions:

1. The exporter should submit to the concerned authorized dealer a Chartered Accountant’s certificate indicating:

1. the export realization in the preceding three calendar years and also the amount of "write off" already availed of during the year, if any.
2. the relevant GR / SDF Nos. to be written off, bill number, invoice value, commodity exported, country of export.
3. the export benefits, if any, availed of by the exporter have been surrendered.

It is clarified that the following do not qualify for the "Write off" facility:

1. Exports made to countries with externalization problem i.e. where the overseas buyer has deposited the value of export in local currency but the amount has not been allowed to be repatriated by the central banking authorities of the country.
2. GR / SDF forms which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil / criminal suits.

After the "write off" has been permitted, the authorized dealer may submit the duplicate GR / SDF forms in question to the Reserve Bank along with R-Return, duly certified as under:

"Write off of ………..

(Amount in words and figures) permitted in terms of AP(DIR Series) circular No.30 dated April 4, 2001.

Date Stamp & Signature of Authorized Dealer"

The authorized dealers may note to take into account the amount written off under this facility while arriving at the eligible amount under paragraph C.18 of AP (DIR Series) Circular No.12 of September 9, 2000.

Authorized dealers may forward a statement in Form EBW, in the prescribed format to the Regional Office of Reserve Bank under whose jurisdiction they are functioning, indicating details of write off allowed under this circular.

The directions in this circular has been issued under section 10(4) and section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) . Any contravention or non-observance of these directions is subject to the penalties prescribed under the Act..

( vide A.P ( Dir Series ) Circular No. 30 dated 4.4.2001 issued by the Exchange Control Department, RBI )

Evidence under proceedings u/s section 9

As a result of search of residential premises of S, certain documents, including four loose sheets mentioning appellant’s name, were seized. Based on S’s statement disclosing payments made to the appellant in violation of the provisions of law, the department searched the latter’s premises and seized documents. Relying on S’s statement, four loose sheets, appellant’s statement of 30-10-1995 but not of 1-11-1995, the appellant was found guilty of having received and made payments in India under instructions of a person resident outside India in contravention of section 9(1)(b) and 9(1)(d) and penalty was imposed on the appellant. It was held that in absence of joint proceedings against ‘S’ and appellant, presumption available under section 72 in respect of documents seized from ‘S’ against appellant was not available to the department. It was further held that since for certain reasons, it was not feasible for the department to make ‘S’ available for cross-examination and prove documents seized from him, the Adjudicating Officer had to exclude evidence of those documents and S’s statement from consideration as evidence to support charge against appellant. It was also held that Adjudicating Officer should consider as to whether charge could be substantiated on remaining evidence like appellant’s statements and documents seized from his premises. The appellant had to prove that contents of his two statements, particularly those that were inculpatory, had not been voluntarily given and that they were not true so that the Adjudicating Officer could exclude his statement from evidence while considering charge against him. In view of the above circumstances, impugned order was set aside and case remanded for fresh adjudication :

[ Imran Ahmed v/s Directorate of Enforcement – 30 SCL 581 (Foreign Exchange Regulation Appellate Board) ]

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Trade Marks

Trade Mark Violation

The Appellant filed suit for injunction against respondent alleging that a medicine being sold under brand name "Falcitab" by respondent was a brand name similar to drug being sold by appellant under its brand name "Falcigo". The Respondent-company stated in defence that word ‘Falci’ was taken from the name of the disease falcipharum malaria and further that the two products in question being schedule ‘L’ drugs which could be sold only to hospitals and clinics, and as such there could not even be remote chance of confusion and deception. The interim injunction application was dismissed on grounds that there was no chance of deception or confusion, especially as drug was not meant to be sold to any individual. It was held that although both drugs were sold under prescription, this fact alone was insufficient to prevent confusion which was otherwise likely to occur. It was further held that in an action for passing off on basis of unregistered trademarks, for deciding question of deceptive similarity, factors, viz, nature of marks, degree of resemblance between marks, nature of goods in respect of which they are use, similarly in nature, character and performance of goods of rival traders, class of purchasers, etc. should be kept in mind :

[ Cadila Health Care Limited v/s Cadila Pharmaceuticals Limited – 30 SCL 534 ( SC ) ]

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Other Laws

Sales Tax

The Andhra Pradesh High Court held that software which was specialized and exclusively custom made to cater to needs of individual clients would not come under the definition of ‘goods’, while software which was standardized and marketed for use of certain classes of clients would constitute ‘goods’. It was held that in view of importance of matter having global implications and need for an authoritative pronouncement on all aspects of matter, it would be appropriate to refer case to a larger Bench :

[ Tata Consultancy Services v/s State of Andhra Pradesh 115 Taxman 478 (SC) ]

Sales Tax - Penal Interest u/s. 23(3)

Penal Interest u/s. 23(3) Kerala General Sales Tax is not payable by the assessee who has not filed the return of taxable turn over, but paid the tax when served with demand notice of sales tax pursuant to assessment

[ Maruti Wine Industries Pvt. Ltd. v. STO Mattancherry (2001) 3 SCC 735 ]

Negotiable Instrument Act, 1881, s.138

Proviso (a) - where post dated cheques is given, it was held that six months' period is to be calculated for purposes of proviso (a) from the date mentioned in the face of the cheque and not from any earlier date when drawer actually gave the cheque to the drawee.

[ Ashok Yashwant Badare v. Surendra Madavrao Nigho Jokar (2001) 3 SCC 726 ]

Town Planning

Permission granted regarding construction on Nazul Land would not be affected by a later government order making valuation in procedures involved.

[ Dist Magistrate v. Harminder Pal Singh (2001) 3 SCC 711 ]

Pre-Detention order under COFEPOSA

A detention order was passed against the respondent for illegally possessing Indian and foreign currency and yellow metal was quashed by the High Court on grounds of delay in passing impugned order and delay in execution thereof. It was held that in view of the Supreme court having categorically held that interference of court is not called for in matters of pre-detention cases except in exceptional circumstances, order made by High Court was bad in law and therefore had to be set aside :

[ Union of India v/s Muneesh Suneja 30 SCL 565 ( SC ) ]

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Calendar for June, 2001

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Finance Ministry - GOI - Transfer

F.No.A-32011/9/2000-Ad. VI
Government of India
Ministry of Finance

New Delhi, Dated: May 29, 2001

Order No. 57 of 2001

The following transfers and positions in the grade of Chief Commissioners of Income Tax are hereby ordered with immediate effect:

 F.NO.A-32011/9/200-Ad-VI
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE

New Delhi, the 29th May, 2001

ORDER NO.58 OF 2001  

The following Commissioners / Directors of Income Tax are hereby promoted to officiate as Chief Commissioners of Inccome Tax / Direcctors Generl of Income Tax in the pay scale of Rs.22400-525-24500 w.e.f the date(s) they take over charge and until further order.