TIOL-DDT 1143 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1143</font><br> 30.06.2009<br> Tuesday</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Income Tax - </font></strong><font color="#006600"><strong>Remittances to non-residents – Deductions – CBDT Instructions</strong></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION 195</strong> of the Income-tax Act mandates deduction of income tax from payments made or credit given to non-residents at the rates in force. The Reserve Bank of India has also mandated that except in the case of certain personal remittances which have been specifically exempted, no remittance shall be made to a non-resident unless a <em>no objection certificate </em> has been obtained from the Income Tax Department. This was modified to allow such remittances without insisting on a <em>no objection certificate </em> from the Income Tax Department, if the person making the remittance furnishes an undertaking (addressed to the Assessing Officer) accompanied by a certificate from an Accountant in a specified format. The certificate and undertaking are to be submitted (in duplicate) to the Reserve Bank of India/authorised dealers who in turn are required to forward a copy to the Assessing Officer concerned. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from non-residents.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There has been a substantial increase in foreign remittances, making the manual handling and tracking of certificates difficult. To monitor and track transactions in a timely manner, section 195 was amended vide Finance Act, 2008 to allow CBDT to prescribe rules for electronic filing of the undertaking. The format of the undertaking (Form 15CA) which is to be filed electronically and the format of the certificate of the Accountant (Form 15CB) have been notified vide Rule 37BB of the Income-tax Rules, 1962.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The revised procedure for furnishing information regarding remittances being made to non-residents with effect from <strong>1st July, 2009 </strong> is as follows:-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) The person making the payment (remitter) will obtain a certificate from an accountant (other than employee) in Form 15CB.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The remitter will then access the website to electronically upload the remittance details to the Department in Form 15CA (undertaking). The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate).</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgement number generated by the system) and sign it. <strong>Form 15CA (undertaking) can be signed by the person authorised to sign the return of income of the remitter or a person so authorised by him in writing.</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) The duly signed Form 15CA (undertaking) and Form 15CB (certificate), will be submitted in duplicate to the Reserve Bank of India/authorized dealer. The Reserve Bank of India/authorized dealer will in turn forward a copy the certificate and undertaking to the Assessing Officer concerned.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) A remitter who has obtained a certificate from the Assessing Officer regarding the rate at or amount on which the tax is to be deducted is not required to obtain a certificate from the Accountant in Form 15CB. However, he is required to furnish information in Form 15CA (undertaking) and submit it along with a copy of the certificate from the Assessing Officer as per the procedure mentioned from Sl.No.(i) to (iv) above.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Directorate General of Income-tax (Systems) shall specify the procedures, formats and standards for running of the scheme as well as instructions for filling up Forms 15CA and 15CB.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Reserve Bank of India is being requested to circulate the revised procedure among all authorised dealers.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the scheme is effective from 1.7.2009 that is tomorrow. And they have issued the instructions yesterday and expect the whole world to know about them. Even the Reserve bank is yet to react.</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=36&filename=notification/cbdt/2009/it09cir04.htm" target="_blank">CBDT Circular No. 4/2009 Dated: June 29, 2009</a></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Exchange Rates for July 2009</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has notified the rate of exchange of conversion for Imported Goods and goods for Export for the month of July, 2009. Notification No. 54/2009-Customs (N. T.), dated the 27 th May, 2009, is superseded.</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=24&filename=notification/custom/2009/cnt09_068.htm" target="_blank">Notification NO. 68/2009 – Cus ( N.T. ) Dated: June 26, 2009</a></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">GST – The Agenda is Vast - Dr. Vijay Kelkar, Chairman Thirteenth Finance Commission</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dr. Vijay Kelkar, Chairman Thirteenth Finance Commission, addressing the ASSOCHAM 3rd National Conference on “GST for Accelerated Economic Growth and Competitiveness”, organized in Delhi yesterday, said:-</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Merits of GST:</strong></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) It will bring about a phase change on the tax firmament by redistributing the burden of taxation equitably between manufacturing and services.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) It will lower the tax rate by broadening the tax base and minimizing exemptions.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) It will reduce distortions by completely switching to the destination principle.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) It will foster a common market across the country and reduce compliance costs.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) It can provide a fiscal base for local bodies to enable them to fulfill their obligations.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) It will facilitate investment decisions being made on purely economic concerns, independent of tax considerations.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) It will promote exports.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(viii) GST will also promote employment.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ix) Perhaps, most importantly, it will spur growth.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A “Flawless” GST</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ideally the GST would subsume all the major State Level taxes, use a single rate, allow for only essential exemptions and eliminate all barriers to trade. This flawless GST will feature the following characteristics.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Harmonisation</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not only the law but also the methodology relating to levy, assessment, collection and appropriation of the GST should be similar across States and the centre. Such a unified approach will simplify procedures, eliminate bottlenecks and drastically reduce transaction costs for dealers, enabling them to leverage cost and time gains from the new taxation system.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Common Procedure- levy, assessment, collection, appropriation</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> For industry to reduce its transaction and compliance costs, it is necessary that apart from a common law, the implementation of the law be also similar across States. All stages of the taxation chain from the levy of the tax to its assessment collection and appropriation should be similar. This would involve similar rules across States dealing not only with assessments, audit, refunds but also more basic issues like registration, filing of returns, treatment of transportation of goods etc. A common dispute resolution mechanism as well as a mechanism for giving advance rulings would further facilitate trade and industry. Here too, associations can play a very useful role by providing advice and suggestions on the modalities to be followed.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Expanding the envelope</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> A possible step to expand the GST tax base will be the inclusion of the rail sector. This will be necessary if a level playing field is to be provided to the road and air transportation sectors which will be subject to this tax. This inclusion will also ensure that all interstate transportation of goods can be tracked through the proposed IT network. The railways themselves will benefit from this by availing input tax credit on the significant purchases made by them.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Benefits to State Government</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> A few State governments have recently indicated their opposition to the implementation of GST at the present juncture. While their objections need to be carefully examined, it must also be recognized that while implementation of the GST is aimed at being revenue neutral to the States, it will be budget positive for the government. This is because governments are large purchasers in the market for their own consumption and their cost of procurement will come down significantly with the implementation of GST. Apart from these static benefits, dynamic benefits will be generated in the medium term through more economically efficient production, improved competition and more importantly greater employment.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Role of the Finance Commission</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> It is possible that some States may want assurances that existing revenues will be protected when they implement GST. The Commission is willing to consider providing for compensation in order to advance the implementation of a “flawless” GST.</font></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">–Wednesday's cases</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><font color="#663399">Central Excise</font> </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Base Paint sold to customers after mixing with colourant at dealers' premises is assessable under Section 4A of Central Excise Act: CESTAT</font> </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>issue has a very interesting back-drop. The assessee is a paint manufacturer and has been clearing Base Paint by paying Central Excise duty on the basis of MRP . The base paint is mixed with the colourants at the dealers' premises as per the choice of the customers. As per the revenue, the Base Paint is not covered under the Packaged Commodity Rules, 1977 and has to be assessed under Section 4 of the Central Excise Act, 1944. The stay applications against the demand came up before the West Zonal Bench and the appellants were directed to pre-deposit Rs 2.5 crores as no prima facie case was made out against the demand. <strong><em>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2008/2008-TIOL-269-CESTAT-MUM.htm"><font size="1">2008-TIOL-269-CESTAT-MUM</font></a>). </em></strong> After nearly three months, the issue came up before the South Zonal Bench in respect of the same assessee. This time, complete waiver was granted as prima facie case was made to assess the goods under Section 4A. <strong><em>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2008/2008-TIOL-913-CESTAT-MAD.htm"><font size="1">2008-TIOL-913-CESTAT-MAD</font></a>) </em></strong> While granting stay, the SZB observed that the permission granted by the Central Government to clear base paint in non-standard quantities and the subsequent amendment to the Third Schedule to the PC Rules were not brought to the notice of the Bench.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After obtaining stay at SZB , the appellant filed application for modification of Stay before the WZB for waiving the pre-deposit of Rs 2.5 crores. However the WZB refused to modify the earlier order. <strong><em>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2008/2008-TIOL-1034-CESTAT-MUM.htm"><font size="1">2008-TIOL-1034-CESTAT-MUM</font></a>)</em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the SZB has passed the final order on the issue setting aside the demand of duty under Section 4.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Income Tax</font> </strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Microsoft subsidiary files return - claims business profits but no PE in India - Intimation u/s 143(1) - AO treats it as royalty and raises demand - Revenue cannot change character of income while acting u/s 143(1) - it can be done only during course of regular assessment: ITAT</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION 143(1)</strong> of the Income Tax Act is for sending an intimation to the assessee. But, can Revenue change the character of an income and demand tax? Every income has a character and it falls under a particular head like capital gains, business profit, salary etc. While deciding the mega demand case of Microsoft Regional Sales Corporation (MRSC), a non-resident company, having no PE in India, the Tribunal has held that the AO cannot change the character of the income returned and create a demand while acting under Sec 143(1). In this case the AO had raised demand by treating the returned income as royalty under Article 12(7) of the India-USA DTAA as against the business profit claimed by the assessee by simply issuing an intimation u/s 143(1). The ITAT is of the view that crating any demand in such a manner is beyond the scope of Sec 143(1). Such demands can be raised only during the course of regular assessee u/s 143(3).</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Service Tax</font> </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">CENVAT Credit not available on Security services, Rent-a-cab services, Mobile Telephony services as appellants have not adduced evidence to establish the nexus, if any, between the “services” and the manufacture/clearance of the final products – CESTAT</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sections 11A</strong> and 11AB will be applicable where the CENVAT credit in question has been utilized for payment of duty of excise on final products whereas sections 73 and 75 of the Finance Act are applicable where the credit has been utilized for payment of service tax on output services.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns Tomorrow for the judgements</font></strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</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> </body> </html>