TIOL-DDT 1244 · 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> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1244 </font><br> 25.11.2009 <br> Wednesday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax - Third Party Administrators - liable to pay TDS – but go easy - CBDT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong> 8th October we reported the Karnataka High Court judgement in the case of <em>THE MEDI ASSIST INDIA TPA P LTD – </em></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2009/2009-TIOL-534-HC-KAR-IT.htm" target="_blank">2009-TIOL-534-HC-KAR-IT</a></strong></em></font> </p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Third Party Administrator (TPA) providing health insurance claim services, makes payments to hospitals – liable to deduct TDS: A perusal of the agreement itself discloses that the TPA is responsible for making the payment to the hospital for rendering the medical service to the policy holders. The TPAs enter into an agreement with the hospitals for the aforesaid purpose. It is not necessary as to when the services are required to be provided by the TPA. Services can also be said to have been provided if they are provided through someone else on the request of the TPA. Indeed the TPA is given unbridled power in this regard. This would be in the nature of TPA taking over a part of the work of the insurance company. The TPA who is the authority or the person to pay the amount to the hospital is required to deduct tax at source under section 194J </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Income tax Department got hyper-active and started issuing notices. In Mumbai alone six TPAs were asked to pay nearly Rs. 120 Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Several representations have been received by the CBDT from various stakeholders regarding applicability of provisions under Section 194J of Income Tax Act '61 on payments made by Third Party Administrators (TPAs) to hospitals on behalf of insurance companies for settling medical/insurance claims etc with the hospitals. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has examined the issue and confirmed that the TPAs are liable to deduct tax – without referring to the Karnataka HC judgement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However the CBDT has decided that:- </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. No proceedings u/s 201 may be initiated after the expiry of <strong><font color="#FF6633">six years</font> </strong>from the end of financial year in which such payment have been made without deducting tax at source etc by the TPAs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The tax demand arising out of Section 201 (1) in situations arising above, may not be enforced if the deductor (TPA) satisfies the officer in charge of TDS that the relevant taxes have been paid by the deductee assessee (hospitals etc.). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. A certificate from the auditor of the deductee assessee stating that the tax and interest due from deductee assessee has been paid for the assessment year concerned would be sufficient compliance for the above purpose. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. However, this will not alter the liability to charge interest under Section 201 (1A) of the Income Tax Act till payment of taxes by the deductee assessee or liability for penalty under Section 271C of the Income Tax Act as the case may be. </font></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2009/it09cir08.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT Circular No. 8 /2009 Dated: November 24, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EPCG authorization to Branch Offices </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Regional Authorities at Pune & Coimbatore have sought clarification whether EPCG authorizations can be issued to the exporters at their Branch office. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT has clarified that an application for grant of an EPCG authorization may be made by Regional Office or Head Office or a Branch Office or Manufacturing Unit of eligible exporter, to RA concerned. Para 4.2 & 4.3 of HBP Vol.-1 apply mutatis mutandis to EPCG scheme also. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2009/dgft09cir017.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Circular No. 17 (RE -2008/2004-09), Dated: November 18, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SEZs – How to calculate NFE? </strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">References have been received in the Commerce Department on the currency in which NFE is to be calculated. The Department has examined the issue and clarifies that NFE is to be calculated in rupee terms only. In case a unit is NFE negative and claims that it is due to foreign exchange fluctuation, the Approval Committee may consider such cases provided that the unit gets the computations certified by the Authorised Bank, on a case to case, basis. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=260&filename=sez/sez_instructions/2006/sez09ins041.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Department of Commerce Instruction No. 41 Dated: November 13, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Opening and operation of Accounts and settlement of payments for electronic payment transactions – RBI Instructions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The use of Electronic/Online Payment modes for payments to merchants for goods and services like bill payments, online shopping etc. has been gaining popularity in the country. With a view to safeguard the interests of the customers and to ensure that the payments made by them using Electronic/Online Payment modes are duly accounted for by the intermediaries receiving such payments and remitted to the accounts of the merchants who have supplied the goods and services without undue delay, RBI has framed directions for the safe and orderly conduct of these transactions. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI/2009-10/231 - DPSS.CO.PD.No.1102 /02.14.08/ 2009-10 dated: November 24, 2009 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Company Law Board Member caught taking Bribe </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBI, yesterday arrested a member of the Company Law Board while accepting a bribe of Rs. 7 Lakhs from a Company Secretary. The CS has also been arrested. A search in the Member's residence yielded another Rs. 48 Lakhs. Many facets of corruption! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tainted Milk Powder Scandal - China executes two </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">BBC has reported that more than 300,000 infants were made ill from milk powder contaminated with melamine, an industrial chemical used to make plastics and fertiliser. China has executed two people for their role in a scandal involving tainted milk powder that resulted in six children dying. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nineteen other people were sentenced to prison terms. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Geng Jinping, who managed a milk production centre, was convicted of supplying milk containing melamine to the now-bankrupt Sanlu Group and other dairies. The two men were sentenced in January in Shijiazhuang, capital of Hebei, where Sanlu was based. Their appeals were rejected by the Hebei Provincial Higher People's Court in March. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is reported that the executions were carried out on Tuesday, but it is not known where. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Melamine is used in the making of plastics and fertilisers. When added to food products it indicates a higher apparent protein content but can cause kidney stones and kidney failure. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe this kind of quick and ruthless justice is the reason for China's economic success. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Doctorate for WCO Chief </strong></font></p> <p align="justify"><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" 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face="Verdana, Arial, Helvetica, sans-serif">World Customs Organisation Secretary General, in addition to performing his arduous duties as the WCO Chief had been engaged in an academic pursuit – Research at Kent University. The Kent University conferred the degree of Doctor of Philosophy (Ph D) on Secretary General of the WCO, Kunio Mikuriya, at its Congregation Ceremony held at the Cathedral of Canterbury in the United Kingdom on 20 November 2009. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Before taking up his position as Secretary General of the World Customs Organization (WCO) on 1 January 2009, Kunio Mikuriya spent seven years as the Organization's Deputy Secretary General. Prior to joining the WCO, he worked for Japan's Ministry of Finance for 25 years. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"> – Thursday's cases</font></strong></font></strong></font></p> <p><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" 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color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Since goods are not sought to be held liable to confiscation, penalty under Rule 26 deserves to be dropped – Penalty is also not imposable under non-existent Rule 26(2) as period involved is prior to 01.03.2007: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THERE are two appeals before the CESTAT concerning the same Order-in-Appeal. One by the assessee seeking setting aside of the penalty of Rs. 65,000/- imposed under Rule 26 of the CER, 2002 and the other, by Revenue aggrieved by the Commissioner(Appeal)'s largesse in reducing the mandatory penalty of Rs.1,31,340/- to Rs.65,000/-. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Salary of Rs 14 Lakhs in 1997 to employee of charitable Trust held to be excessive: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ONE of the grounds in this appeal is in respect of the finding of the CIT(Appeals) that salary paid to Mrs. Sudha Tewari was excessive. It is mentioned that there was no material on record to come to such a finding and, therefore, the finding was a matter of inference only. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Collecting Service Tax from customers but not depositing with Revenue is a grave error on part of appellant which cannot be ignored – CESTAT upholds mandatory penalty </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applicant is registered under the category of Banking and Financial Services. It is alleged by the Department that although the appellant has collected the Service Tax amounts from his customers, yet he has failed to pay service tax on due dates and file ST-3 returns. In view of these contraventions, penalty under sections 76 and 77 and late fee under section 70 of the Finance Act, 1994 were proposed and the same were confirmed by the lower authorities inasmuch as a total penalty of Rs.29,938/- was imposed. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong> </font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p> <p><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">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>