TIOL-DDT 1421 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 1421</font><br>
11.08.2010 <br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax on commission received by Primary Dealers dealing in Government Securities - CBEC Clarification </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has received a representation seeking clarification whether service tax is leviable on the underwriting commission received by the Primary Dealers for the auction of Government Securities. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board observes: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Government securities are sovereign securities having zero default risk. Reserve Bank of India only manages the issue and also auction of Government Securities on behalf of the Government of India. In effect, Primary Dealers registered with the RBI (as opposed to registration with the Securities Exchange Board of India) deal in Government Securities, issued by the RBI on behalf of the Government of India, as a part of the central Government's market borrowing program. The general practice is that the RBI invites bids from the Primary Dealers, who in their bids indicate the amount to be underwritten and the underwriting fee expected by them. RBI examines these bids and decides the amount to be underwritten and underwriting fee to be paid to a Primary Dealer. Underwriting Fee is also known as Underwriting Commission in common parlance. Thus the conclusion drawn is that government securities are not securities of a body corporate.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And clarifies: </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“As the service tax law stands today, service tax liability does not arise on Underwriting Fee or Underwriting Commission received by the Primary Dealers during the course of the dealing in Government Securities.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the Commissioners to issue suitable Trade Notice/Public Notice. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/sercir126.htm" target="_blank">CBEC Circular No. 126/08/2010 - ST Dated: August 10, 2010 </a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Is there a provision to raise supplementary invoices by service providers? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> received a mail from a concerned netizen, the excerpts of which are as follows: </font></p>
<p align="justify"><em><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“Whether any circular/public notices etc have been issued by the department having effect that the service provider can pass the service tax liability through Supplementary invoice. This supplementary invoice will have the cross reference of all the invoices issued earlier without charging service tax.” </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As this issue may be of concern to service providers at large, we decided to put this issue in the public domain and also state our viewpoint on this issue as follows: </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Rule 4A of Service Tax Rules, 1994, every person providing taxable service shall issue an invoice, signed by such person (or a person authorized by him), not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier. Such invoice should contain all the details as specified in the said Rule. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, in cases where any payment towards the value of taxable service is not received and such taxable service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, an invoice shall be issued by the person providing such taxable service, not later than fourteen days from the last day of the said period. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that there is no specific provision in the Finance Act, 1994 or the Rules made there under providing for raising a supplementary invoice. Further, it should also be noted that there is no specific bar in raising such supplementary invoices by service providers. Therefore, what is not specifically barred by law may be regarded as impliedly allowed by it especially when there is a legal precedent allowing manufacturers to issue supplementary invoices which can be utilized by the buyers to avail <em>CENVAT credit</em> of any differential duties indicated in such supplementary invoices (subject to the conditions prescribed in the relevant rule i.e. Rule 9(b) of <em>CENVAT Credit</em> Rules, 2004). </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">In the instant case, as indicated in the mail above, if invoices are raised in time but service tax payable is not paid within the due date, then such service tax liability may be discharged with applicable interest immediately. After discharging the said service tax liability if any, with applicable interest, an invoice may be raised on the client/s giving references to the previous invoices and indicate the service tax payment details so as to enable the client/s to avail <em>CENVAT Credit</em> of the said service tax paid by the service provider. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, raising a supplementary invoice indicating the service tax payment details does not violate any provision of law so long as the service tax payable is discharged with applicable interest and the payment details are intimated to the jurisdictional service tax authorities and also disclosed in the periodical returns. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Since this issue has wider ramifications and may be troubling the service providers across the country, we also request the CBEC to issue a detailed clarification in this regard for benefit of all service providers. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Unauthorized Maintenance of Foreign Bank Account - Double Taxation Avoidance Agreements to be Renegotiated </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IMMEDIATE</strong> appropriate action is taken by the Directorate of Enforcement under the Foreign Exchange Management Act, 1999, whenever any specific case of unauthorized maintenance of foreign bank account or retention of funds in foreign banks by any person resident in India comes to its notice. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has proposed to review the India-Mauritius Double Taxation Avoidance Convention (DTAC) to incorporate appropriate changes in the DTAC for prevention of treaty shopping and to strengthen the mechanism for exchange of information on tax matter between India and Mauritius. For this purpose a Joint Working Group (JWG) comprising members from the Government of India and the Government of Mauritius was constituted in 2006 to inter-alia put in place adequate safeguards to prevent misuse of the India-Mauritius DTAC. Since then, JWG has had six rounds of meetings. Consistent efforts are being made by the Indian Government to find mutually acceptable solutions for addressing India's concerns. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India does not have a DTAA with Cayman Islands. India has taken steps to conclude a Tax Information Exchange Agreement (TIEA) in line with international standards, with Cayman Islands as India does not want to enter into DTAA with Cayman Islands. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This information was given by the Minister of State for Finance, S.S.Palanimanickam in a written reply to an Un-starred Question raised in Rajya Sabha yesterday. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASK - Eleven Aayakar Seva Kendras to be Set-up in 2010-11 </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has decided to set up 11 Aayakar Seva Kendra at following 11 locations during the current financial year 2010-11. </font></p>
<table 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">State </font></strong></p></td>
<td><p align="center"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Location </font></strong></p></td>
</tr>
<tr>
<td><p align="justify"><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">Orissa </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Bhubaneswar </font></p></td>
</tr>
<tr>
<td><p align="justify"><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">Tamilnadu </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coimbatore </font></p></td>
</tr>
<tr>
<td><p align="justify"><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">Gujarat </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Gandhinagar and Surat </font></p></td>
</tr>
<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assam </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Guwahati </font></p></td>
</tr>
<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Madhya Pradesh </font></p></td>
<td><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indore </font></p></td>
</tr>
<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">West Bengal </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Kolkata and Chinsurah </font></p></td>
</tr>
<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Jharkhand </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ranchi </font></p></td>
</tr>
<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rajasthan </font></p></td>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Udaipur </font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This information was given to Parliament by the Minister of State for Finance, Shri S.S.Palanimanickam, yesterday. If you look at the list, you will find that there are only ten locations instead of 11. You will also notice that Sl. No. 7 is missing! This shows the scant respect our babus have for Parliament. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Special Tax Benefits and Facilities in SEZs </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Minister of State for Finance, Shri S.S.Palanimanickam, yesterday informed the Rajya Sabha the Special tax benefits/facilities offered to Special Economic Zones: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for the next 5 years thereafter and 50% of the ploughed back export profit for next 5 years; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption from minimum alternate tax under section 115JB of the Income tax Act; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Facilities offered to Developers: </strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption from customs/excise duties for development of SEZs for authorized operations approved by the Board of Approvals. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Income Tax exemption on income derived from the business of development of SEZs in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Exemption from dividend distribution tax under Section 115 O of the Income Tax Act. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax benefits offered to SEZs/Developers </strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">++ Any taxable service provided wholly within the SEZ is exempted an initio. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">++ Taxable services provided outside the boundaries of SEZ but are for use of SEZ are exempted by way of refund i.e. tax has to be paid by the service provider but SEZ developer/unit can take refund of it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">++ SEZ units providing taxable service to DTA units are subjected to normal service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">++ Like any other service provider taxable services exported out of SEZ are not chargeable to service tax. </font></p>
</blockquote>
<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><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">Service Tax/Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">If sale of goods takes place at a place other than depot or consignment agent's premises i.e. at customer's premises, such ‘premises' to be treated as ‘place of removal' and GTA service availed for transportation of finished goods to such ‘place of removal' to be treated as ‘input service' - Credit of service tax paid eligible as ‘input credit' even for manufacturer working under S.4A – CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee , engaged in manufacture of electronic consumer goods, sold the finished goods both at factory gate as well as depots and cleared the finished goods from factory gate/depots to customer's premises utilizing GTA service for outward transportation of finished goods upto ‘customer's premises'. The assessee paid the service tax thereon to the tune of Rs. 6.21 crores during the period October 2004 to February 2007 and availed the same as <em>CENVAT Credit</em>. Revenue initiated proceedings against the assessee for recovery of <em>CENVAT Credit</em> resulting in demand of ‘irregular service tax credit' with interest and for imposition of penalties. Incidental to this demand was initiation of proceedings for short payment of education cess. Commissioner confirmed the demands with interest and imposed mandatory penalties. </font></p>
<p><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 32 - Upgradation of Internet Server and software does not produce any benefits of enduring nature - allowable as revenue expenditure: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DEPRECIATION</strong> is a never-depreciating bone of contention in the Income Tax Act. Despite umpteen number of judicial pronouncements the word 'plant' has always been seen in a narrow compass and it inevitably leads to disputes. In the instant case, the issue is - Whether air-conditioner, refrigerator and office equipments are in the nature of furniture and fixture or plant and machinery, for the purpose of applying rate of depreciation allowable under the Act. Whether Software Expenditure & up-gradation expenses for server are recurring expenditure having no enduring benefit and therefore, the expenses are to be allowed in full as revenue expenditure. Whether expenditure on Repair and Maintenance of building are in the nature of capital expenditure so as to be disallowed. </font></p>
<p><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">When there is a clear finding by Commissioner in adjudication order that there is no collusion or willful mis-statement or suppression of facts so as to impose penalty u/s 114A of Customs Act, 1962, confirmation of Customs duty demand u/s 28 is illegal: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON </strong>11.11.1995, acting on an information that the Gem and Jewellery units in SEEPZ have been mis-using the facility of imports available under exemption notification 177/94-Cus dated 21.10.1994 as amended by showing excess manufacturing wastage or loss than permissible under the above mentioned Notification causing shortage in physical stock, claiming it to be lying in the form of dust, the officers of the Mumbai Customs Preventive Commissionerate visited the premises of the said unit and verified the records from the period of inception of the unit and took the physical stocks of gold followed by detailed investigations which resulted in the detection of a shortage of 24020.550 gms of gold valued at Rs.1,07,61,206/- (CIF). The unit was found to have not been maintaining the wastage account register prescribed vide Public Notice no. 2/88 dated 28.7.1988. </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"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
</body>
</html>