TIOL-DDT 1313 · 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 1313 </font><br>
08.03.2010 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">India's
Debt Position - 300 Crores due from Pakistan for more than 60 years </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is one item consistent and uniform in all Union Budgets from 1950. If you look at the Annexure-3 to the Receipts Budget of India, 2010-11, you will find certain interesting figures. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India ' s debt by the end of March 2011 is expected to be nearly 40 Lakh Crores. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Statement of the Liabilities of the central Government, the Total Liabilities are Rs. 39,44,598 Crores. From this an amount of Rs. 300 crores is deducted and the net liability is shown as Rs. 39,44,298 Crores. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is this amount of Rs. 300 Crores? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is supposed to be “Amount due from Pakistan on account of share of Pre-partition debt (Approx)”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This same amount had been shown consistently in all our budgets since 1950. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1950-51, when our total liability was Rs. 2865 Crores, this 300 Crores was deducted to arrive at Rs. 2565 Crores. That is the dues from Pakistan constituted slightly more than 10 percent of our debts. Ten percent of the present liabilities would amount to about 4 Lakh Crores, about 40% of today's budget. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even at 6% interest per annum, this would amount to approximately Rs. 10,000 Crores now. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact is that we are not able to collect this amount from Pakistan for the last 60 years. Why to keep showing it in the budget year after year. Is it to show our inability to collect from Pakistan or do we send a copy of our Budget to Pakistan to remind them gently that they owe us Rs. 300 Crores? Why can't we simply write off this 300 Crores and be done away with it instead of having this blot in all our annual budget year after year? As a goodwill gesture, can't we tell Pakistan that their dues are written off? May be there are diplomatic problems! </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Why are Dues from Pakistan shown in Statement of Liabilities of Central Government? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> position of the undivided Government as on the date of partition was that its outstanding liabilities exceeded its assets so that ultimately it was the debt that was being divided between the two Governments. On a rough estimate the outstanding debt of the Central Government as on the 14th August, 1947, included in this is not merely the outstanding public debt but all its obligations to outside parties such as deposits in Postal Savings Banks, outstanding balances of Post Office Cash and National Savings Certificates, Provident Fund Deposits of Government servants, the amount likely to be paid to the British Government for surplus stores and other property acquired by the Defence Services and the capitalised value of the liability for pensions in payment on the date of partition and pensions earned by serving officers upto that date, was likely to be of the order of Rs. 3,300 crores. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his Budget Speech of 1948, Finance minister Shanmukham Chetty said, “On a very rough estimate this debt is likely to be of <strong>the order of Rs. 300 crores</strong> and the rate of interest may be near about 3 per cent. Pakistan's total debt is to be repaid in Indian rupees in fifty annual equated instalments for principal and interest. As a measure of assistance to the new Dominion in its earlier years it has been agreed that the first repayment should commence only in 1952. In addition to the Rs. 75 Crores given to her out of the cash balance of the undivided Government it has also been agreed that India would make available to Pakistan a further sum of Rs. 6 crores for meeting the expenditure on the setting up of Ordnance factories and similar special institutions required by her. This amount will also be added to Pakistan's debt. With this settlement, the terms of which, as the Deputy Prime Minister has already told the House, are generous and conceived in a real spirit of assistance to Pakistan, the purely financial problems arising out of the partition may be said to have been satisfactorily solved.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That was in 1948, but when it came to payment, nothing came from Pakistan. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the 1952-53, budget, credit had been taken for a recovery of Rs.9 crores from <strong>Pakistan</strong> as the first instalment of its debt repayment to India, but not a paisa came. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his 1954 Budget Speech, Finance Minister Deshmukh said, “the budget for the current year placed the revenue at Rs.439.26 crores and the expenditure at Rs.438.81 crores leaving a nominal surplus of Rs.45 lakhs. In balancing this budget, I had taken credit for a recovery of Rs.18 crores from Pakistan on account of two instalments due from that country in repayment of the partition debt. I have been having discussions on this subject with the Finance Minister of Pakistan and we both hope that it will be possible to commence the repayment of the debt in the coming year. This single factor has made for a deterioration of Rs.18 crores in the revenue budget for the current year, and converted the surplus of Rs.45 lakhs into a deficit of Rs.16. 96 crores.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a></a><a></a>In the next year's budget speech, he said, “I am not taking any credit for repayment of partition debt by Pakistan in <strong>view of what has happened in the last two years</strong>.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the debt continues and do we hope to collect it some day? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Alternative Inputs for Silk Allowed by Amending SION </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has made an amendment to the statement of Standard Input Output Norms (SION), as contained in the HBP, Vol. II, 2009-2014 as follows:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In the General Note No. 4 for Textiles (Product Code: J) the following is incorporated for allowing flexibility for import of any alternative import items of Silk from the permissible inputs of SION:-</font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S.No </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Export Product </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Alternative inputs allowed </font></strong></p></td>
</tr>
<tr>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Made out of Mulberry Raw Silk </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dupion Silk/Tussar Silk/Spun Silk/Noil Silk </font></p></td>
</tr>
<tr>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Made out of Dupion Silk </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tussar Silk/Spun Silk/Noil Silk </font></p></td>
</tr>
<tr>
<td valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3 </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Made out of Tussar Silk/ Spun Silk </font></p></td>
<td valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Spun Silk/Noil Silk </font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In case the export product is made out of more than one variety of Silk then, the alternate inputs will be allowed (as in table above) in proportion to the ratio of constituents of Silk or in proportion to the ratio of Spun Silk blended with other fibres like Cotton/Viscose etc. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn047.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 47/2009-2014, Dated: March 4, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Restrictions on Indo-China Border Trade </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has made the following amendment to <em>Public Notice No. 20(RE-2006)/2004-2009 dated 13th June, 2006</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The existing part of paragraph 1 of the said Public Notice viz., </font></p>
<blockquote>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“In terms of the provisions contained in the Foreign Trade Policy, import/export of the following locally produced commodities by the people living along both sides of Indo – China Border as per the prevailing customary practice will be allowed freely” </font></strong></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">is amended to read as </font></p>
<blockquote>
<p align="justify"><strong><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">”In terms of the provision contained in the Foreign Trade Policy, Import/Export of the following commodities by residents of border districts who are issued trade passes, as per the prevailing customary practice will be allowed freely”. </font></em></strong></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the list of items stipulated for import/export and paragraphs 2 & 3 of the<em> Public Notice No. 20(RE-2006)/2004-2009 dated 13th June, 2006</em> remain unaltered. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, hereafter only those residents of border districts who are issued trade passes will be allowed to trade in the specified commodities freely. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2009/dgft09pn048.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 48/2009-2014, Dated: March 5, 2010 </font></strong></a></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"> – Tuesday's cases</font></strong></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"><strong><font color="#663399">Service Tax</font></strong> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Even after receipt of show-cause notice, appellant continued default and it was only after more than one year since receipt of the SCN that they started paying service tax - Bona fides not proved - Pre-deposit of penalty ordered: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DURING</strong> the period of dispute, the appellant had provided outdoor catering service to the clients, viz., The National Institute of Bank Management (NIBM) but did not pay service tax in respect of the catering charges received from the client. They were not even registered with the department as ‘Outdoor Caterers' and obtained the registration only in March 2007 only at the instance of the department. </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 - Exports – Assessee runs two units and incurs foreign travelling expenses – AO finds expenses were for promotion of Andhra unit but debited to Mumbai unit – Apportions expenses on the basis of turnover – No infirmity in AO's action: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN </strong>there are different units of a business entitled to different exemptions or deductions, there is a temptation to arrange the affairs in such a way that the income of the unit entitled to greater deduction is increased while that of the other unit is reduced. This is a very common practice involving various incentive sections which still litter the Income-tax Act. Nevertheless, the assessing authorities can not rely on mere surmises and conjectures to deny the exemption claimed. The present case is a good example of the same. </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">Typographical error in mentioning quantity of goods in IGM vis-à-vis that cited in Bill of Lading - Invoking provisions of Ss. 111(f) and (g) of the Customs Act, 1962 for confiscation of goods appears improper – Matter remanded : CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant, a steamer agent, filed an Import General Manifest (IGM) mentioning the quantity of the goods as 1920 kg instead of 19200 kg reflected in the corresponding Bill of Lading. They pleaded that it was a typographical mistake and filed an application for amendment of the IGM. Seeing that the Customs authorities were inclined to invoke penal provisions, the steamer agent sought waiver of show-cause notice and requested for a lenient view. </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><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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