TIOL-DDT 1258 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1258 </font><br>
15.12.2009 <br>
Tuesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Now It is Final - No Service Tax on foreign service prior to 18.4.2006: Supreme Court dismisses Revenue SLP </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IS</strong> it 1.1.2005 or 18.4.2006? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the <em>Hindustan Zinc </em>case - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2008/2008-TIOL-1149-CESTAT-DEL-LB.htm" target="_blank"><font size="1">2008-TIOL-1149-CESTAT-DEL-LB</font></a></strong>, a Larger Bench of the Tribunal headed by the President held that, <em>“the taxable service provided by a non-resident or from outside India, who does not have any office in India, having been specified as 'taxable service' with effect from 1.1.2005, under notification No.36 /2004, recipient of such service could not be held liable for paying service tax prior to 1.1.2005 notwithstanding the amendment in rule 2(1)(d) of the Service Tax Rules under notification no. 12/2004.” </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department had challenged this in the Supreme Court and the Supreme Court had dismissed the Government's appeal - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=42&filename=legal/sc/2009/2009-TIOL-87-SC-ST.htm" target="_blank"><font size="1">2009-TIOL-87-SC-ST</font></a>. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This, many in the Government, take as a reason to state that the Supreme Court had confirmed that Service Tax on import of services is payable from 1.1.2005 and not 18.4.2006 as held by the Bombay High Court in <em>Indian National Shipowners Association </em> – <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2008/2008-TIOL-633-HC-MUM-ST.htm" target="_blank"><font size="1">2008-TIOL-633-HC-MUM-ST</font></a> </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court had not held that the tax is payable from 1.1.2005, but only dismissed the Revenue appeal against the CESTAT order holding that it was not payable before 1.1.2005. And there is a lot of difference in the two concepts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway not satisfied with the dismissal of its appeal by the Supreme Court, the Government filed a review petition in the Supreme Court in the <em>Hindustan Zinc </em> case. The Supreme Court found no merit in the prayer for Review and dismissed the Review Petition. - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=42&filename=legal/sc/2009/2009-TIOL-117-SC-ST.htm" target="_blank"><font size="1">2009-TIOL-117-SC-ST</font></a> </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You will remember that in <em>Indian National Shipowners Association </em> – <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2008/2008-TIOL-633-HC-MUM-ST.htm" target="_blank"><font size="1">2008-TIOL-633-HC-MUM-ST</font></a> </strong>the Bombay High Court held that the tax is payable only from 18.04.2006 and this decision had been widely followed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the litigation loving government does not keep quiet. It has filed a Special Leave Petition in the Supreme Court against the Bombay High Court judgement. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday the Supreme Court dismissed the SLP and in tune with <strong>TIOL</strong> tradition – we are the first to bring you this news. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=42&filename=legal/sc/2009/2009-TIOL-129-SC-ST.htm" target="_blank"><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong>2009-TIOL- 129-SC-ST </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax on Construction of Residential Complex - Board Circular clarified </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is always a well-known solution to every human problem--neat, plausible, and wrong! The problem with clarifications given by the government is that the clarifications themselves need further clarifications. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC had vide <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/sercir108.htm" target="_blank">Circular No. 108/02/2009–ST, Dated : January 29,2009</a></em></strong> had clarified on the service tax on builders, which had generated heated debates in <strong>TIOL</strong> columns. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently the Assistant Commissioner (Tech) in the Service Tax Commissionerate explained and clarified the Board Circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to the Assistant Commissioner, </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">the sum and substance of the clarification issued in the circular is that no service tax is payable in cases of:- </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Sale of building/flat either by outright sale or by agreement for sale followed by sale of building (in this case stamp duty will be paid for full value of flat and not for the land portion alone) </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Construction of a residential complex i.e. more than 12 flats is provided to a customer for personal use. </font></p>
</blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">If the transaction involves a composite agreement for sale of undivided share of land and construction of flats/apartments there on, there is no outright sale of flat and service tax has to be paid by the Builder/Promoter/Developer under Construction of Residential Complex Service. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The circular is not applicable to works contract service because a works contract always has two parties-one service provider and another service recipient. Thus there cannot be self service in a works contract. Board's clarification mentions that Service Tax is not liable where activity is self-service. Hence Service Tax is leviable to works contracts. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does the Board agree? </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2009/construction_residential.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Bangalore Service Tax Commissionerate letter in C.No.IV/16/89/2006 ST.Tech. Dated 1.12.2009 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Science Fiction can't be stranger than Customs </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sci-fi Author Peter Watts of Canada realised by first-hand experience that the American Customs can be stranger than the sci-fi stories written by him. Last week as he was on his way back to Toronto after helping a friend move to the U.S. Before he crossed the border into Sarnia, American customs officers pulled him over. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When they began rifling through his car, he got out to ask what was going on. They ordered him back into the car; he asked again. He says, he was assaulted, punched in the face, pepper-sprayed and thrown in jail for the night, only to find himself facing charges of assaulting a customs officer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The writer who is a PhD in zoology says, “All I basically did was use words to ask what was going on." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Friends are raising funds to help Watts cover his legal costs, which are overwhelming for someone who makes a living as an author. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If convicted of the felony charge, Watts could be imprisoned for two years and face a fine of up to USD 2,000. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Don't you think Indian Customs officers are angels? </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"> – Wednesday's cases</font></strong></font></strong></font></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Central Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Denial of CENVAT Credit on Garden Maintenance Services - Statutory requirement laid down by Maharashtra Pollution Control Board to maintain 33% greenery on factory premises is of no relevance in deciding admissibility - ROM application dismissed - CESTAT. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the grievances raised in this application is that the appellant's contention that the subject service is covered by the inclusive part of the definition of ‘input service' given under Rule 2(l) of the CENVAT Credit Rules, 2004 has not been considered. On going through the final-order, I find that the subject service was held not to be an ‘input service' as it did not satisfy the requirements of the substantive part of the definition. Impliedly, it was held that any service which is claimed to be falling within the ambit of the inclusive part of the definition should necessarily satisfy the legal requirements embodied in the main pat of the definition. </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>Assessee is entitled to claim of depreciation on Gas Sweetening Plant which was kept ready for use during entire previous year, though not actually used due to lack of raw material – ITAT by Majority </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even after the introduction of block of assets concept, there is no change in the legal position to the effect that the assessee would be entitled to depreciation even though the assets in question were not actually put to use in the relevant previous year, but were kept ready for being put to use for the purpose of the business. The judgment of the Madras High Court on this question is in <em>CIT vs. Vayithri Plantations Ltd. - <font size="1"><strong>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2003/2003-TIOL-263-HC-MAD-IT.htm">2003-TIOL-263-HC-MAD-IT</a>)</strong></font></em>. An assessee can claim development rebate in the year in which the asset was installed or in the immediately succeeding previous year in which year the asset was "first put to use". </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FEMA/FERA </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 would be applicable and to what extent will apply to exports made in 1998 is doubtful – pre-deposit reduced – HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The counsel for the petitioner submits that the impugned order does not notice that the adjudicating order itself records that the transactions/sales pertain to the year 1998 and, therefore, the Enforcement Directorate would not have imposed penalty under Foreign Exchange Management Act, 1999. </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">vijaywrite@taxindiaonline.com </a></font></p>
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