TIOL-DDT 1167 · the untouched capture
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<strong><font size="3">TIOL-DDT 1167</font><br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>03.08.2009<br>
Monday </strong></font> </div>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Freedom
Fighters' Pension - Taxable? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
Ninety year old Freedom Fighter asked me whether the pension received by freedom
fighters is exempted from Income Tax and if so by what Section/Rule/Notification.
I was stuck. There seems to be an exemption but where do you find it? A search
in the web resulted in the following in a reputed site of CAs.</font></p>
<blockquote>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6666">Question
: Whether the pension received by
freedom fighters is exempt from tax???<br>
If yes, please mention the relevant Section.....</font></strong></font></p>
<p align="justify"><strong><font color="#FF6666"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Answer
: No.
It is taxable.</font></font></strong></p>
</blockquote>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is shocking to even think that freedom fighters pension will be taxed. Assuming
that a freedom fighter was 20 years old when we got freedom in 1947, the youngest
freedom fighter would today be 82 years old and certainly there are not many
of them alive.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apparently
some freedom fighters and some consultants are not correctly informed. So our
<strong>TIOL Research Team </strong>took up the task of finding the precise
position of law in this regard and the result is today's <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9460">TIOL TOP</a></strong>,
humbly dedicated to all the freedom fighters who struggled to achieve freedom
for this country in this month sixty two years ago.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service
Tax on Commission paid to Managing Directors/Directors (Whole-time/Independent
– Not liable to Service Tax</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
<strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8513" target="_blank">DDT
1041 29.01.2009</a></strong> we raised an issue on applicability of service
tax on commission paid to Independent Directors (Non-Executive Directors) of
companies based on a letter received from a concerned Netizen. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
concerned Netizen wrote,</font></p>
<blockquote>
<p align="justify"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">I
have read today’s DDT and also letter No. Dy.No.324/Comm (Service Tax)/
2008 dated 01.12.2008 issued by the Commissioner (ST) clarifying that service
tax would not be leviable on commission paid to the Directors of the Company.</font></strong></p>
<p align="justify"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
circular deals with commission to directors who are employees. What about commission
being paid to other non-executive directors?</font></strong></p>
<p align="justify"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Please
clarify.</font></strong></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
asked a question <strong>‘Can any enlightened Netizen clarify or shall
we wait for the Board?’</strong> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier
in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8502" target="_blank">DDT
1039</a></strong> we reported that Board issued a letter <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/st_commission.htm">CBEC Dy.No.324/Comm
(Service Tax)/2008 : Dated 1st December, 2008</a></strong> wherein it was clarified
that commission paid to Directors/Managing Directors of companies over and above
their salary and other remunerations is not taxable as their relationship with
the companies is not in the nature of client-service provider but employer-employee
and the action taken by the employee for the employer cannot be in the nature
of service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
also asked a question as to why such clarifications are kept in private domain
and not circulated for the benefit of the public through an official Circular.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
the generous CBEC has issued a Circular for the benefit of all service providers
clarifying the following issues:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
Applicability of service tax under ‘Business Auxiliary service’
on commission paid to Managing Director/Directors (Whole-time or Independent)
by the company, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
Applicability of service tax on <strong>Independent</strong> Directors who are
part of the Board of Directors under ‘Management Consultant service’.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Both
these issues have been examined by the Board and the CBEC has come out with
a clarification as follows:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i)
Some Companies make payments to Managing Director/Directors (Whole-time or <strong>Independent</strong>),
terming the same as ‘Commissions’. The said amount paid by a company
to their Managing Director/Directors (Whole-time or <strong>Independent</strong>)
even if termed as commission, is not the ‘commission’ that is within
the scope of business auxiliary service and hence service tax would not be leviable
on such amount.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)
The Managing Director / Directors (Whole-time or <strong>Independent</strong>)
being part of Board of Directors perform management function and they do not
perform consultancy or advisory function. The definition of management consultant
service makes it clear that what is envisaged from a consultant is advisory
service and not the actual performance of the management function. The payments
made by Companies, to Directors cannot be termed as payments for providing management
consultancy service. Therefore, it is clarified that the amount paid to Directors
(Whole-time or <strong>Independent</strong>) is not chargeable to service tax
under the category ‘Management Consultancy service’. However, in
case such directors provide any advice or consultancy to the company, for which
they are being compensated separately, such service would become chargeable
to service tax.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
view of the above, it is clarified that remunerations paid to Managing Director/Directors
of companies whether whole-time or independent when being compensated for their
performance as Managing Director/Directors would not be liable to service tax.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TIOL
thanks the Board for coming out with a suitable clarification though belatedly.
Better late than NEVER. We also thank the <strong>concerned</strong> Netizen
for raising a relevant question to seek an answer which was not found in the
earlier clarification issued by the Board on 01.12.2008 in their private communication
to the Commissioner.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/sercir115.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CIRCULAR
NO. 115/09/2009–ST Dated : July 31, 2009</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provisional
Anti-Dumping Duty imposed on Polypropylene (i.e. homo-polymers of propylene
and copolymers of propylene and ethylene)</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Based
on the study by the Designated Authority and his preliminary findings vide Notification
No. No.14/5/2009-DGAD, dated the 15th June, 2009, Government of India in exercise
of the powers conferred by sub-section (2) of section 9A of the said Customs
Tariff Act, read with rules 13 and 20 of the Customs Tariff (Identification,
Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination
of Injury) Rules, 1995 has imposed provisional anti-dumping duty on Polypropylene
(i.e. homo-polymers of propylene and copolymers of propylene and ethylene) falling
under Chapter 3902 of the First Schedule to Customs Tariff Act, 1975 originating
from countries like Oman, Saudi Arabia and Singapore and exported by designated
exporters from designated exporting countries mentioned in the said notification.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
anti-dumping duty imposed shall be effective up to and inclusive of January
29, 2010 and shall be payable in Indian currency. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_082.htm" target="_blank">NOTIFICATION
NO. 82/2009-CUS Dated: July 30, 2009</a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provisional
Anti-Dumping Duty imposed on Carbon Black used in Rubber Applications </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Based
on the study by the Designated Authority and his preliminary findings vide Notification
No. 14/21/2008-DGAD, dated the 25th May, 2009, Government of India in exercise
of the powers conferred by sub-section (2) of section 9A of the said Customs
Tariff Act, read with rules 13 and 20 of the Customs Tariff (Identification,
Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination
of Injury) Rules, 1995 has imposed provisional anti-dumping duty on Carbon Black
used in Rubber Applications falling under Chapter 2803 00 10 of the First Schedule
to Customs Tariff Act, 1975 originating from countries like Australia, Peoples
Republic of China, Russia, Thailand and exported by designated exporters from
designated exporting countries mentioned in the said notification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
Notification shall not apply to Carbon Black grades N880, N990 and N991 and
Carbon black grades meant for semi conductive compound applications.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
anti-dumping duty imposed shall be effective up to and inclusive of January
29, 2010 and shall be payable in Indian currency. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_083.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION
NO. 83/2009-CUS Dated: July 30, 2009</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tariff
Value of Brass Scrap (All Grades) increased and Poppy Seeds goes into a downward
spiral</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government
has increased the Tariff Value of Brass Scrap from US Dollars 2918 to 2984 per
MT and decreased the value of Poppy Seeds from 3990 to 3323 dollars. It is astonishing
that the tariff value of poppy seeds has seen such a downturn in exactly a month
from US Dollars 5162 to 3323. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_103.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION
NO. 103/2009-CUSTOMS (N.T.) Dated: July 31, 2009</font></strong></a></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Jurispruden</font><font color="#FF6633" size="3">tiol</font><font color="#006600" size="2">– Tuesday's
cases</font></strong></font></strong></font></p>
<p align="justify"><strong><font color="#660099" 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 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 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 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></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central
Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central
Excise – When Tribunal already directed pre-deposit of duty and penalty
by factory, interest of Revenue would be served if appellants (individuals)
furnish security of Rs. 5 lakhs each, other than cash or bank guarantee – High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE
Commissioner of Central Excise, NOIDA confirmed duty demands amounting to Rs.8,45,11,283/-,
Rs.15,68,167/-, Rs.75,80,380/-, Rs.14,70,682/- and Rs.3,90,734 and imposed equivalent
penalties on the assessee viz., M/s Lamicoat International Private Limited.
Further, penalties of Rs. 8 crores and Rs. 3 crores were levied on two directors
of the company and a penalty of Rs. 2.5 crores was imposed on the manager of
the assessee-company. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income
tax - assessees are US-based FIIs - file returns of income declaring capital
gains and dividend income - later, based on Advance Ruling, file revised return
seeking to treat same as business income, not taxable under provisions of DTAA
- AO invalidates revised return - Penalty u/s 271(1)(c) - Levy of penalty based
on invalid returns not sustainable: ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
assessing officer, in the assessment order, states that the original return
as well as the revised return were processed u/s. 143(1) of the Income-tax Act.
This is a contradictory finding and the assessee claims that it has not been
served with any intimation evidencing processing of the revised return u/s.
143(1) of the Act.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs – DEEC – Nexus with product exported – transferee of licence
is under no obligation to establish nexus with export goods when export obligation
had already been fulfilled by transferor exporter: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
DEEC licences used by the importers to make duty-free clearances of the batteries
had been issued to the exporters who had completed export obligation. The respondents
were transferees of such licences. When imports are made against licences issued
after completion of export obligation, benefit of duty-free import of inputs
was available without the importer having to establish nexus between the imports
and the export product.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See
our columns Tomorrow for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
Tomorrow with more <strong>DDT </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a nice day</font></p>
<p align="justify"><font color="#FF6666" 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" target="_blank">vijaywrite@taxindiaonline.com</a></font></p>
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