1.   [Contribution by  CA. Rajat Mohan, and contributor is available on Mobile No.  9910044223 / email-id: rajat.mohan@icai.org ]

Service Tax Place of Supply Rules– Presentation of notification no. 18/2011 on Place of Supply rules.

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2.   GVK INDS. LTD. & ANR.  VERSUS THE INCOME TAX OFFICER, CIVIL APPEAL NO. 7796 OF 1997, DATE OF ORDER : March 1, 2011 SUPREME COURT OF INDIA

The assessee filed a Writ Petition in the AP High Court to challenge the constitutional validity of s. 9(1)(vii)(b). The High Court (228 ITR 564) upheld the vires of s. 9(1)(viii)(b) by relying on Electronics Corporation of India Ltd vs. CIT 183 ITR 44 (SC). On appeal to the Supreme Court, the matter was referred to a Constitutional Bench to determine the extent to which laws enacted by Parliament can have extra-territorial effect under Article 245. HELD by the Constitution Bench:

(i) Parliament is constitutionally restricted from enacting legislation with respect to extra-territorial aspects or causes that do not have, nor expected to have any, direct or indirect, tangible or intangible impact(s) on or effect(s) in or consequences for: (a) the territory of India, or any part of India; or (b) the interests of, welfare of, well-being of, or security of inhabitants of India, and Indians. In all other respects, Parliament may enact legislation with extra-territorial effect. This power is not subject to tests of “sufficiency” or “significance” or in any other manner requiring a pre-determined degree of strength. All that is required is that the connection to India be real or expected to be real, and not illusory or fanciful.

(ii) However, Parliament does not have the power to legislate “for” any territory, other than the territory of India or any part of it. Parliament can only make laws for India and any law which has no impact on or nexus with India would be ultra-vires.

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3.   THE COMMISSIONER OF INCOME TAX, VS PACKWORTH UDYOG LTD, ITA.NO. 930 OF 2009, DATE OF ORDER : 30/11/2010, HIGH COURT OF KERALA AT ERNAKULAM

Though the assessee was not entitled to any deduction u/s 80HHC under the normal provisions of the Act owing to losses, it claimed that in computing the book profits u/s 115JA/115JB, deduction u/s 80HHC ought to be computed having regard to the profits as per the P&L A/c as held in GTN Textiles 248 ITR 372 (Ker). On appeal, the matter was referred to the Full Bench. HELD by the Full Bench:

(i) The assessees’ contention that export profit has to be computed with reference to the P&L A/c prepared under the Companies Act is not acceptable because there is no such provision in s.80HHC to determine export profit with reference to P&L A/c. Clause (iv) of s. 115JB (2) provides that the “amount of profit eligible for deduction u/s 80HHC as computed u/s 80HHC (3)” has to be deducted in computing the book profits. Accordingly, only the deduction u/s 80HHC as computed under the normal provisions is allowable;

(ii) However, in accordance with Ajanta Pharma 327 ITR 305 (SC), the restriction in s. 80AB or s. 80B(5) should not be applied and deduction u/s 80HHC should be allowed for s. 115JA/JB even if the carry forward of business loss or depreciation reduces the gross total income to Nil.

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