TIOL-DDT 1349 · 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 1349 </font><br> 30.04.2010 <br> Friday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Bill 2010 - Passed by Lok Sabha - FM announces more concessions </font></strong></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">INCOME Tax </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Section 35AD of the Income Tax Act is further amended to provide for investment linked deductions to specified business which is in the nature of building and operating a new hospital with at least one hundred beds for patients. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Similar benefit is extended to specified business which is in the nature of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and which is notified by the Board in this behalf in accordance with guidelines as may be prescribed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Further, any transfer of a capital asset or intangible asset by a private company or unlisted public company to a limited liability partnership including transfer of shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership would be out of the purview of capital gains tax. </font></p> </blockquote> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ An explanation was inserted in the definitions of commercial or industrial construction service and construction of complex service to provide that unless the entire payment for the property is paid by the prospective buyer after completion of construction, activity of construction would be deemed to be a taxable service provided by the builder/developer/promoter and service tax is payable accordingly in such instances. So irrespective of whether there is a transfer of property or not, even transactions under an agreement to sell a flat to prospective buyer against payment of instalments would also be liable to service tax. Now for these types of transactions, an abatement of 75% is proposed to be provided. This abatement is in addition to the existing abatement of 67% already available to transactions other than those mentioned above. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Low cost housing schemes for the urban poor provided under the JNNURM and Rajiv Awas Yojana are exempted from levy of service tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption available to vocational training institutes under commercial training or coaching service is also extended to ‘modular employment skill development courses provided by training institutes registered under ‘skill development initiative of the Ministry of Labour. </font></p> </blockquote> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ An export duty of Rs. 2500 per tonne was imposed on export of raw cotton w.e.f April 9, 2010. The second schedule to the Customs Tariff Act, 1975 is amended to enhance the statutory export tariff to Rs. 10,000 per tonne. However the effective rate of duty would remain at Rs. 2500/- per tonne. The statutory tariff rate is enhanced only to meet future exigencies. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When we flashed that export duty was enhanced from Rs. 2500/- to Rs. 10000/- per tonne we were inundated with calls from Maharashtra and Gujarat asking us to clarify about the proposed enhancement and its effective date. As of now we can only say that the enhancement is in the tariff rate and the effective rate would be kept at the current level of Rs. 2500/- per tonne as mentioned by the Finance Minister on the floor of the Lok Sabha. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Tunnel boring machines meant for hydro-electric projects including parts and components thereof exempted from customs duty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Export duty on iron ore lumps is also enhanced to 15%. </font></p> </blockquote> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Excise </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption from excise duty extended to scented supari as well. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ SSI exemption was extended to specified packing materials bearing a brand name. Now this is extended to all types of packing materials. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Since RSP based assessment is extended to parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716, which also includes earth moving machinery, like loaders and excavators, parts, components and assemblies of these machineries are also brought into the purview of RSP based assessment. </font></p> </blockquote> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Where, under what carpet, will I keep it - FM's Reply To Budget Discussions </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his reply to the budget discussions, the Finance Minister said, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Budget is an annual exercise, a constitutional requirement under Article 102. But it is not a ritualistic exercise because it is formulated in the context of the economic philosophy of ruling Party and also in the context - since the beginning of our planned economic development - of the Five-year Plan though, nowadays, the five-year period of the Government and the five-year tenure of the Five-Year Plan do not synchronise because of the periodical elections to Lok Sabha. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the Budget is presented, it is presented by the Finance Minister. But during these eight weeks the entire House is involved in one way or other in analysing the Budget proposals, dissecting it and reviewing it from various angles. First in the General Discussion, the Members participate; but much more important is that after the Vote on Account, for almost four weeks, sometimes more than that, both the Houses divide themselves into Parliamentary Standing Committees and examine the Demands of all the Ministries and Departments. Therefore, they have the involvement during these eight weeks with the budgetary exercise. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, to save the economy, I had to provide two stimulus packages in the Interim Budget of last year and thereafter in the General Budget to continue and when I had to withdraw partly the fiscal stimulus because always one scenario haunted me which many of the old Members, particularly the former Leader of the Opposition, Shri Advaniji and others will remember, that this country had to face the ignominy of pledging its gold to a foreign bank just to borrow a few hundred million dollars of foreign exchange to buy certain essentials. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Economic issues are to be addressed with proper economic perspective so that we can find out a solution to the problem. Therefore, if we increase the limit of the agricultural credit, it is to address that. What is the demand of all the kisans? Major political parties say that you bring down the interest rate to the level of four per cent. Are we not trying to achieve that? If we bring it down from seven per cent to six per cent, and six per cent to five per cent, is it not for the aam admi? Is it for the amir? Therefore, you have every right to criticize. You do criticize. As Opposition, you do dissect, oppose and expose, but do not forget the truth and do not distort the facts. Therefore, this is the aspect that we shall have to keep in mind. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Much has been talked about the petroleum prices. I am not going to make any comparison as to how many times and in what percentages the prices of petrol and diesel were increased. When we bought at the international price, when the Indian basket crude was varying from USD 12 to USD 36, how many times did we increase the price? By what percentage did we increase the price? When I am buying today crude at an average of USD 73 per barrel, what is the level of the price increase that we have done? I could have taken the very easy course that instead of doing it through the duty route, I could have done it through the administered price mechanism, but I did not do so because to me it would have been not correct. It is because what I am collecting today is not merely for me; it is also for the State Governments. Thirty-two per cent of these Rs. 26,000 crore will be distributed, as per the recommendations of the Thirteenth Finance Commission, to all the States. Thereafter, when I had the meeting with the State Chief Ministers, none of them raised any objection because they understand. What is the level of VAT and what is the level of Sales Tax in the States? It varies from 28 per cent to 38 per cent. They understand and they know where the shoe pinches. Therefore, these aspects are to be kept in view.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the full text of FM's speech<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10779" target="_blank">Click here.</a></strong> </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Impact of Audit </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DO</strong> you remember the havoc created by audit para by C & AG on 75% abatement on GTA service? The Audit wrote that the 75% abatement is not admissible to the consignors / consignees who pay service tax as recipients of service. (Para 18.1 of report No 7 of 2007 (Indirect Taxes). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to C & AG, there was revenue loss to the tune of Rs.223.56 crore during the period from January 2005 to April 2006. After this objection, a number of show cause notices were issued denying 75% abatement. Finally the Board had to intervene and issue 37 B Order dated March 12, 2007 to allow the exemption to the consignors / consignees also after taking the opinion of the law ministry, notwithstanding the C & AG objection. That was how Para 18.1 met its gory end without yielding a single rupee out of 223 crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Surprisingly, this Para 18.1 has again become a subject matter of discussion in Audit Report for 2010 [Report No. 13 of 2009-10 - Union Government (Indirect Taxes - Service Tax)]. Under the head “Impact of audit reports”, it claims that because of para 18.1, the Government has issued to the <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_001.htm" target="_blank">notification No. 1/2009-ST dated 5 January 2009</a></strong></em> with retrospective effect from 1 January 2005. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is this <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_001.htm" target="_blank">Notification 1/2009</a></strong></em>? It exempts services like clearing and forwarding agent services, manpower recruitment services, cargo handling services warehousing services, business auxiliary services, packaging services, etc., <strong>provided to the goods transport agency</strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you see any connection between denying 75% abatement to the consignors / consignees and exemption <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2009/stnot09_001.htm" target="_blank"><strong>Notification 1/2009 ST</strong></a></em>? We, the lesser mortals can never see any. All that we know about the impact of para 18.1 was issue of 37B order dated 12.3.2007. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this is not the first time C & AG trumpeted their impact story on Para 18.1 of AR No. 7 of 2007. Even in Report No. CA 20 of 2009-10 – Union Government (Indirect Taxes), C & AG boasted that because of their audit para Government provided unconditional exemption through <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2008/stnot08_013.htm" target="_blank">Notification No. 13/2008-ST dated March 1, 2008</a></strong></em> from levy of service tax upto 75% of gross amount charged as freight by GTA. Of course they conveniently ignored to acknowledge Board's Section 37B Order issued in March 2007 which sounded death knell to their audit para. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not to forget the huge impact this Para also had on the environment when tonnes of paper was laid waste by issuing show cause notices and then scrapping those notices by issuing orders-in-original. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Exchange Rates for Import Export Notified</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Government has notified the exchange rates meant for export and import of goods with effective from May 1, 2010. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_032.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 32/ 2010 –Customs (N.T.), Dated: April 28, 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"> – Monday's cases</font></strong></font></strong></font></p> <p align="justify"><strong><font color="#663399" 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">Central Excise/Service Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bereavement in Consultant's family a sufficient cause for condoning delay in filing appeal - COD application allowed and matter remanded to Commissioner(A) with a direction to hear appeal on merits: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALTHOUGH</strong> these appeals were filed within the condonable period of delay of 30 days prescribed under the proviso to sec. 35 of the Central Excise Act, 1944, the Commissioner(Appeals) refused to condone the delay by observing that the reason for delay stated by the appellants was not supported by any evidence. Inasmuch as the reason stated was that the father of the appellants' consultant was seriously ill during the material period and passed away.</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 – penalty - even when AO has not recorded his satisfaction in explicit terms, assessment orders should indicate that AO had arrived at such a satisfaction. Tribunal is not correct in holding that since expenditure was arrived at on estimation, penalty cannot be imposed. Claiming excessive deductions also amount to concealment of income: High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondent/assessee is a company engaged in the business of providing consultancy services. Consultancy services were provided to some foreign clients from whom the appellant earned foreign exchange. To the extent, any expense is incurred in foreign currency, the same is reduced from the foreign consultancy income and deduction under Section 80-O of the Act claimed @ 50% of the net foreign consultancy income. No expenses incurred in India are allocated/apportioned to earning of foreign consultancy income. </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 – Demand without Show Cause Notice - no law permits Revenue to twist arms of importer - ‘be you ever so high, laws are above you'. Every holder of a statutory office is a trustee to whom statutory powers are entrusted. His highest duty is to follow mandate of statute.- cost awarded: High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> High Court reminded the officers of the department that every holder of a statutory office is a trustee to whom statutory powers are entrusted. His highest duty is to follow mandate of the statute. Therefore, every holder of a statutory office must discharge his duty without bias and ill will. In modern society, no authority can arrogate to itself the power to act in a manner which is arbitrary. Every State action or action of the statutory authority, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 and basic to the rule of law the system which governs us. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong> </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend. </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> </body> </html>