TIOL-DDT 1378 · 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 align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1378 </font><br> 11.06.2010 <br> Friday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Renting of Immovable Property - AP High Court Stays</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> had brought you this story yesterday. The High Court observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The generic contentions urged on behalf of the petitioner, are eminently arguable though we are not prima facie satisfied to an extent warranting interdiction of the operation of the provisions of Section 65(105)(zzzz) in so far as their prospective application is concerned. The challenge as to the retrospectivity of the provisions, in our considered view and prima facie is on more substantial grounds. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the prima facie analysis above, the respondents are directed, pending further orders, not to initiate any coercive steps for recovery of the service tax on the renting of immovable property by the petitioners, on the basis of the provisions of Section 65(105)( zzzz) as amended by the Finance Act, 2010, for the period 01/06/2007 to 01/04/2010. Petitioner shall, however be, liable to pay the applicable service tax as per the provisions of Section 65(105), for the period subsequent to 01/04/2010 but subject to the result of the writ petition. </font></p> </blockquote> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what is the sanctity of 01/04/2010? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court seems to have basically stayed the retrospectivity of the tax and that could be the reason for the comment that the petitioner is liable to pay the tax after 01/04/2010. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But when the tax itself is not valid, will its retrospective implementation be valid? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government seems to be determined to levy this tax and if the government is determined, it will have its way – courts and laws notwithstanding. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ultimately they have to pay the tax – with interest! </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-402-HC-AP-ST.htm" target="_blank">Click here</a></strong> for the High Court Order.</font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax – What happened to Finance Act 2010? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> amendments made to the Finance Act, 1994 by Finance Act 2010, in respect of Service Tax, are effective from a date to be notified by the government. The Finance Act 2010 came into effect on 08/05/2010 – more than a month ago. But the provisions of Service Tax are not yet notified. Why? And once they are notified, the stakeholders have to be given a little time to understand and follow the Law. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong>Service Tax – Works Contract – Benefit of composition scheme not available for ongoing projects on which ST was paid prior to 01.06.2007 under respective services</strong></strong>– AP High Court </font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2008/sercir98.htm" target="_blank">Circular No. 98/1/2008-ST dated 04.01.2008</a></strong>, Board clarified, </font></p> <blockquote> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">a service provider who paid service tax prior to 01.06.07 for the taxable service, namely, erection, commissioning or installation service, commercial or industrial construction service or construction of complex service, as the case may be, is not entitled to change the classification of the single composite service for the purpose of payment of service tax on or after 01.06.07 and hence, is not entitled to avail the Composition </font></strong></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was challenged in the AP High Court. The High Court in a recent judgement upheld the Circular observing, </font></p> <blockquote> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“the impugned circular merely reiterates the eligibility criterion specified in Rule 3(3), as the condition precedent for entitlement to exercise an option for coming within the composition scheme, while impliedly recognizing that certain taxable services earlier falling within Clauses (zzd ), (zzq ) and (zzzh) of Sec. 65 (105) may now fall within the recently introduced Clause (zzzza) of Sec. 65(105) (amendment w.e.f . 1.6.2007), in the light of the criteria for classification of taxable services spelt out in Section 65A of the Act.” </font></strong></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court further held, </font></p> <blockquote> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">On a true and fair construction of Rule 3(3) of the 2007 Rules, it is clear that where in respect of a works contract service tax has been paid, no option to pay service tax under the composition scheme could be exercised. There is no ambiguity in this provision. The entitlement to avail the benefits of the composition scheme is only after an option is exercised under Rule 3(3) of the 2007 Rules and this provision specifically enjoins a disqualification for exercise of such option where service tax had been paid in respect of a works contract. To put it succinctly, where service tax has been paid in respect of a works contract, the eligibility to exercise an option to avail the benefits of the composition scheme under the 2007 Rules is excluded. </font></strong></p> </blockquote> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this case today. Please see<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10976" target="_blank">Breaking News</a></strong>. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is more to tax administration than mere revenue collection - MOS </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MOS</strong> in the Finance Ministry Mr. Palanimanickam delivered an impressive valedictory address yesterday at the 26th Annual Conference of Chief Commissioners and Directors General of Income Tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Snippets: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ There is a need to attain higher levels of professionalism and motivation amongst the officers of CBDT and to improve service delivery standards to the tax payers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is important to satisfy the professional aspirations of officers in a timely manner through efficient cadre management, cadre planning, and imparting the right skills. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Department has to create quality infrastructure for its officers and staff as well as for the use of assessees . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The corrupt should be punished, but the department's reaction should be prompt. You have to realize that keeping officers in the <font color="#FF6633"><strong>Agreed list</strong></font> also deprives the department of officers to man sensitive charges. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ <strong>While tax collection is the core responsibility of the Department, it is important to remember that there is more to modern tax administration than mere revenue collection</strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Department's efficiency has to be bench marked by the satisfaction level of the users. A major source of dissatisfaction of income tax assesses is with respect to refund of taxes. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ I have received feedback that the taxpayers are facing difficulties in getting credit of the TDS paid by them. There is a need to review and revamp the existing TDS administration in order to iron out these irritants. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is important that taxpayers receive uniform treatment of their cases in any part of the country. In order to ensure uniformity of approach and transparency in its functioning, the department should put in place a mechanism to disseminate information on all such important orders, judgments to all field formations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exceeding our collection targets will be a form of thanksgiving to the FM for the benevolence and encouragement shown towards this Department. </font></p> </blockquote> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">What is Agreed List? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is a list of potentially corrupt and clever officers, maintained by CBI and Government Departments. CBI in consultation with the Department concerned makes a list of officers who they think are corrupt, but are too clever to be caught. So they are not given sensitive postings. In many of the cases, there is no real logic or basis for keeping an officer in the ‘agreed list' - it is just the opinion of CBI and the Departmental Head. And it is quite possible that the Head of the Department, who agreed to keep one of his officers in the LIST, is himself corrupt. Nothing happens to the officers in the ‘agreed list' as they are posted to places where there is no opportunity for corruption and after three years, they are certified to be honest and repatriated to the corruptible and coveted posts. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The tragedy is most often, the affected officers don't even know that they are in the agreed list and some blissfully ignorant officers don't even know that there is an agreed list ! </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"> – Monday's cases</font></strong></font></strong></font></p> <p><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">Customs </font></strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods to be classified under CTA 90.01 should primarily be optically worked CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROTECTIVE</strong> spectacles and goggles generally consist of plain or curved discs of ordinary glass (whether or not optically worked or tinted) , of plastic, of glass, etc. and these include sunglass. These Notes further indicate that sunglasses could be used by mountaineers, airmen, motorists, motorcyclists, welders, foundry workers, etc. Nowhere is it stipulated that these items would not be classified under SH 9004.10 unless these are fitted with arms or other accessories for the purpose of being mounted. </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">Sec 50C - Surrender of tenancy right which is capital in nature, cannot be equated with transfer of land and building and no market value can be applied for valuation of such rights: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> key question before the Tribunal is whether the surrender of tenancy right, though capital in nature, can be equated with the transfer of land and building within the meaning of section 50C , and hence market value may be applied for the valuation of these rights. And the straight answer is NO. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Activity of cutting of sugarcanes and its loading and transportation up to sugar factory is not services ‘Clearing and Forwarding Agents - CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> activity of cutting of sugarcanes and its loading and transportation up to the sugar factory is not the services ‘Clearing and Forwarding Agents'. We, further find that the second show cause notice was issued to the appellants cover the services rendered by the appellants under the ‘Goods Transport Operator' services. </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>