TIOL-DDT 1038 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1038</font><br>
23.01.2009<br>
Friday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax – TDS on foreign payment – Quarterly Statements</strong></font></p>
<blockquote>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 37A of the Income Tax Rules, reads as,</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">37A. The person making deduction of tax in accordance with sections 193, 194, 194E, 195, 196A, 196B, 196C and 196D of the Act from any payment made to—(i) a person, not being a company, who is a non-resident or a resident but not ordinarily resident, or(ii) a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India;</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">shall send <strong><font color="#663399">within fourteen days from the end of the quarter</font> </strong> a statement in Form No. 27Q to the Director General of Income-tax (Systems) or the person or agency authorised by the Director General of Income-tax (Systems)] referred to in rule 36A:</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided that where the income by way of interest on securities referred to in section 193 or the payment to non-resident sportsmen or sports associations referred to in section 194E or the interest or any other sum referred to in section 195 or the income of a foreign company referred to in sub-section (2) of section 196A or the income from units referred to in section 196B or the income from foreign currency bonds or shares of an Indian company referred to in section 196C or the income of Foreign Institutional Investors from securities referred to in section 196D is credited by a person to the account of the payee as on the date up to which the accounts of such person are made, the statement in Form No. 27Q shall be sent within fourteen days after the expiry of two months from the month in which income is so credited.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Rule is amended and now the statement is to be sent <font color="#663399">on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Proviso is deleted.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2009/it09not011.htm" target="_blank">CBDT NOTIFICATION No. 11/2009, Dated: January 21, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Himachal Exemption – Peripheral activities – Premature Withdrawal – No superior Public Interest</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a landmark judgment delivered by the Himachal Pradesh High Court, Notification No. 1/2008-CE amending Notification 50/2003-CE was consigned to trashcan – at least partly. The Court held that Government is estopped from withdrawing the exemption benefit for peripheral activities like preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labelling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the States of Uttarakhand or Himachal Pradesh.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Drawing strength from Section 38-A (c) which preserves the rights, privileges etc that accrue from existing notifications, the Court held that the rights secured by investors who came to these states with the promise of exemption benefits for ten years cannot be taken away by the Government midway. Countering the Government's view point that Notification 1/2008-CE serves public interest, the High Court observed that Notification 50/2003-CE was issued to attract investors to the States of Himachal Pradesh and Uttarakhand and when the investors have set shop with huge investments, withdrawing benefit of this exemption for peripheral activities in the name of public interest defeats the very purpose.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First exemption was in Public Interest and so was the withdrawal – Government says second one is in superior Public Interest.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It observed that the public interest which the Government thought would serve at the time of issuing the said notification does not fizzle out midway through the sunset clause and will not serve any greater public interest when investments are made by industrial units to undertake these very peripheral activities hoping to gain some tax sops.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This judgment should serve as an eye opener to the policy makers in the North Block that public interest is not a blank cheque given to them to tinker with. They should realize that when such a notification is issued, it is bound to attract huge investments from industries hoping that they can enjoy the benefits at least for the pre-determined time. It serves nobody's cause to withdraw exemptions midway citing flimsy grounds as it happened in the instant case.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, Section 38A was brought in to give life back to amended/rescinded notifications to protect Government Revenue – Now, there can't be one-sided legislation – what is applicable to the government is also applicable to the trade.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this landmark judgement today.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8484" target="_blank">Breaking News</a>. </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CII's nine-point agenda on reversing the exports downtrend</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Confederation of Indian Industry (CII) yesterday submitted its nine-point agenda on reversing the exports downtrend to Mr. Kamal Nath, Minister of Commerce & Industry, and Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission.</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Setting up of a committee under Chairmanship of the Prime Minister to examine the losses faced by Indian exporters in currency derivatives. "Exporters have lost over 2,000 Crore rupees in these currency derivatives, it is important that we resolve this issue amicably on a no profit - no loss basis.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Second, withdrawal of retrospective amendment of Section 80 HHC. The retrospective amendment of section 80 HHC has made exporters with a turnover of more than Rs 10 Crore, liable to pay income tax retrospectively from April 1998.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Enhancement of Duty Entitlement Pass Book (DEPB) rates by 5% across all sectors.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Additional 2% interest subvention and removal of 7% ceiling on export credit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Subsidisation of Export Credit Guarantee Corporation (ECGC) cover charges.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Exemption of service tax on certain engineering goods.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Zero duty on EPCG.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Elimination of compensation fees under advance authorisation scheme.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Additional benefits under Focus Market Scheme.</font></p>
</blockquote>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<strong>CBDT seeks suggestions on Cadre Review & Restructuring of Income Tax Department</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Board of Direct Taxes has constituted a Cadre Review Committee pursuant to the 6th Central Pay Commission recommendations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board invites suggestions from all concerned stakeholders in the Department, including individual employees, covering but not limited to;</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Role and strategic vision of the Income Tax Department in the changing scenario,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The organizational structure and work processes of the Income Tax Department,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) The organization and functioning of assessment, post assessment and collection setup in the Income Tax Department,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) The organization and functioning of investigation, intelligence and enforcement setup in the Income Tax Department,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) The organization and functioning of Appellate and Advocacy setup in the Income Tax Department,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) The organization and functioning of taxpayer services and responsiveness of tax administration in the Income Tax Department,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) Recruitment, cadre management, deputation, and various manpower reserves etc. for IRS and other cadres,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii) The organization and functioning of support services and infrastructure, resource management, overall coordination and general administration,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ix) New and emerging areas for the Income Tax Department</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suggestions may be forwarded to the Cadre Review Committee preferably through e-mail (and e-mail attachment) by 16th February, 2009 to <a href="mailto:praveenkishore@incometaxindia.gov.in">praveenkishore@incometaxindia.gov.in</a></font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/cadre_restructuring.pdf" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Circular
in F. No. HRD /CM/102/06/2008-09/230 Dated 22- January 2009</strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Need for self-contained speaking and reasoned order - CVC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instances have come to the notice of the Central Vigilance Commission in which the final orders passed in disciplinary cases by the competent disciplinary authorities did not indicate proper application of mind, but a mere endorsement of the Commission's recommendations which leads to an unwarranted presumption that the DA has taken the decision under the influence of the Commission's advice. Further, it is also observed that the DAs in the Departments/Organisations, in practice, do not provide a copy of Commission's advice to the employees concerned. The cases where the final orders do not indicate proper application of mind by the DA and or non supply of Commission's advise, are liable to be quashed by the courts.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Commission reiterates that</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) the CVC's views/advices in disciplinary cases are advisory in nature and it is for the DA concerned to take a reasoned decision by applying its own mind.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The DA while passing the final order, has to state that the Commission has been consulted and after due application of mind, the final orders have been passed.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Further, <strong>in the speaking order of DA, the Commission's advice should not be quoted verbatim.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) CVOs should ensure that the DAs in their respective Departments/Organisations strictly follow the above guidelines/procedures while processing the disciplinary cases.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So this means that the Disciplinary Authority while passing the order has to rewrite the CVC's advice in his own words. If the DA has to pass his own orders, why should the CVC's advice be sought at all and who will differ from the CVC?</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/selfcontained.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CVC
Circular No. 02/01/09 Dated: January 15, 2009</strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Presidential Awards – CBEC's Investiture Ceremony on 27th January 2009</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC Investiture Ceremony for the recipients of Presidential Award for the year 2008 will be held at Vigyan Bhawan , Maulana Azad Road, New Delhi from 11.30 AM onwards on 27.01.2009.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Spouse/other family member of the recipient are welcome to attend the investiture ceremony. The expenditure with regard to travel as well as accommodation in Delhi in respect of the spouse/ other family members will, however, have to be borne by the <strong><em>concerned </em></strong> recipients. As regard the travel and stay of the recipients, the same will have to be organized by the recipients themselves and they may claim expenditure in this regard as per their entitlements from their respective establishments.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The awardees will really be <strong><em>concerned </em></strong> about the travel and accommodation of the spouse.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the Department has chosen to confer the Presidential award on an officer, can't the Department spend a little money for the travel and accommodation for the spouse?</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>International Customs Day 2009</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">January 26th is the International Customs day. World Customs Organisation Secretary General, Kunio Mikuriya has decided to dedicate International Customs Day on 26 January 2009 to the environment with the theme “<strong><em>Customs and the environment: Protecting our natural heritage</em></strong>”. In a message, he says, “Our latest initiative, the WCO Recommendation on combating environmental offences which was approved by the WCO Council during its June 2008 Sessions, encourages all WCO Members to deal decisively with those who commit such offences. It is therefore incumbent upon all WCO Members to promote environmental protection by ensuring that it remains a priority, among others, for Customs administrations across the globe.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard, I hope that you will join me in committing your administration to beefing up environmental protection at borders, by fighting environment crime actively, by diligently applying environment controls, and by widely communicating your efforts. Through our collective action to combat this illegal trade, not only will we be protecting the welfare of society, we will also be preserving our natural heritage.”</font></p>
<p align="justify"><strong><font color="#663399" size="4" face="Verdana, Arial, Helvetica, sans-serif">TIOL greets the Customs on this happy day.</font></strong></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600">– Tuesday's cases</font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Demands under Section 11D – Tribunal thrashes once again revenue's belief that demands under Section 11D have no time limit – holds limitation under Section 11A is applicable</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE </strong> is a popular belief in the field formations that the demands under Section 11D can be made for unlimited period. The reason for such belief is that Section 11 D does not contain any <em>relevant date </em> for issue of show cause notice.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India-UK DTAA - assessee makes payment to non-resident for providing training to technical personnel - such payment is fee for technical services, and can be taxed in source jurisdiction - Since fee has arisen in India it is taxable u/s 13(7) of DTAA : ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH</strong> globalisation coming home to forward-looking Indian corporates, it is nowadays common to see Indian personnel being sent abroad for technical and managerial training. In this case, SAIL sends its engineers and managers to UK-based Corus Consulting for imparting training and exposure to various modules on iron and steel-making. A payment is to be remitted to the non-resident. Is TDS deductible on such payments? And the Tribunal's verdict is that yes, such a payment made for imparting technical training does qualify as fee for technical services as per Explanation 2 to Sec 9(1)(vii) and can also be taxed in the source jurisdiction under Sec 13(2) of the DTAA. Since the fee arises in India in terms of Article 13(7) of the DTAA, it is very much liable to tax.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Activity of powder coating on material supplied by customers and collection of job charges – Abatement of value of goods and materials sold to customer available – Matter remanded to grant benefit of Notification 8/2005-ST: CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is engaged in the activity of powder coating on the materials supplied by their customers and after powder coating the materials are returned back to the customer. The Revenue proceeded to tax them under the category of ‘Business Auxiliary Service' on the ground that the appellant is engaged in the activity of production of goods on behalf of their clients.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Monday is a Holiday – <strong><font color="#006600" size="6">Happy Republic Day</font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tuesday for the judgements</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tuesday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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