TIOL-DDT 1523 · 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 1523</font><br>
06.01.2011<br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Provisional Release of Detained Export Goods - CBEC Instructions – Please Obey Board</font></strong></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHENEVER</strong> these columns highlight the gross disobedience of Board orders by the field officers, many departmental officers get amusingly angry at us and some of them have used choicest expletives to abuse us.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is another case of utter disregard for Board’s instructions by the mighty babus in the field.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2005/cuscir05_033.htm" target="_blank">Circular No. 33/2005 – Cus dated August 02, 2005</a>, </strong>CBEC observed,</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“It has come to the notice of the Board that sometimes goods entered for exportation are detained or seized by the field formations for mis-declaration of quantity, value, etc., Such goods are not allowed to be exported even on a provisional basis pending completion of investigation, adjudication or appeal proceedings. However, these proceedings usually take a considerable time to conclude; in the meanwhile, the goods deteriorate and lose their intrinsic value. Consequently, issues like payment of demurrage charges to the custodians and export benefits to the exporters arise. Detention or seizure of goods also adds to congestion in ports, ICDs, etc. It has been observed that such a course of action benefits neither the department nor the exporter. On the contrary, if the consignments are allowed to be exported on a provisional basis, pending completion of investigation and adjudication proceedings, the country would earn valuable foreign exchange and the exporter would get the appropriate price for goods.”</em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board directed that “except for prohibited/contraband goods, the seized goods should be released provisionally and allowed to be exported on execution of a bond”</font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now after five years Board sardonically notes that <em>“Instances have come to the notice of the Board that export consignments continue to be detained and not allowed clearance on provisional basis on account of pending test reports / investigations for alleged mis-declaration in terms of quantity, value and description of the goods. In one case it was reported that the detained goods were not allowed to be exported provisionally on the ground that Board's Circular provides for provisional release of only the <strong>seized</strong> goods.”</em><strong><font color="#FF6633"> [That means seized goods should be released provisionally but detained goods can be retained forever! See the ridiculous lengths to which Departmental officers can put their interpretative skills to]</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board again advises the field about the ill-effects of not allowing the exports and once again directs that exports should be allowed expeditiously unless the prohibited nature of goods is confirmed. Continued detention of any export goods in excess of 3 days must be brought to the notice of the Commissioner of Customs, who will safeguard the interest of the genuine exporters as well as the revenue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the Board knows that its instructions are not followed, why should the Board helplessly issue another circular? If the previous circular was disobeyed, is there any good reason as to why this Circular should be obeyed? What will the Board do when these instructions are also flouted? Issue another Circular after five years!</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is high time that Board takes a serious decision. Either enforce its instructions scrupulously or stop giving instructions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Detaining export cargo illegally should be treated as a serious crime against the Nation and the offenders should be punished.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_001.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 01/2011-Cus.,Dated: January 4, 2011</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Classification of Polyester Bonded Fabrics and other Bonded Fabrics - CBEC Clarifies</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CLASSIFICATION</strong> of polyester bonded fabrics is one among the many issues which is frequently disputed and litigated by Revenue as well as the industry.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Board has observed that the field formations were following divergent practices in these matters and also that the disputes in this regard are pending at various fora. This matter also came up for discussion in the Chief Commissioners Conference on Tariff and Allied Matters held on 29.10.2010 wherein it was resolved that Board should issue a suitable clarification.</strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After examining the various aspects, Board clarifies that bonded fabrics should be classified depending on types of textile materials and the nature of bondings by referring to the relevant Explanatory notes in Section XI of the Tariff and also the General Rules of Interpretation.</font></strong></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2011/cuscir11_002.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 02/2011-Cus.,Dated: January 4, 2011</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export Licence for Restricted Items - FORM - ANF 2 D - Changed</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> DGFT has replaced the ANF 2D - Application Form for Export Licence for Restricted Items - Earlier, the exporters were required to submit the application for grant of Export Licence for Restricted items along with the self certified copy of Export Order/Purchase Order/Proforma Invoice. But, in order to reduce the transaction cost, this requirement has been dispensed with. Now, the exporters will be required to only indicate the name and address of foreign buyers in the application form.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2010/dgft10pn020.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 20/ (RE-2010) / 2009-14, Dated: January 5, 2011</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday’s Judgement Today in TIOL</font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax – MAT - amount transferred from revaluation reserve and set off against the amount of depreciation debited to P & L Account cannot be excluded</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Larger Bench of the Supreme Court yesterday delivered an important judgement on MAT, in favour of Revenue.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>History of MAT:</strong> The Supreme Court observed,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MAT is applicable only where the normal total income computed is less than 30% of the book profit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MAT was introduced by the Finance Act of 1996 w.e.f. 1.4.1997. This was necessary due to a rise in the number of zero-tax companies paying marginal tax which situation arose in view of preferences granted in the form of exemptions, deductions and high rates of depreciation. The rate of minimum tax was kept at 30% of the book profit as deemed total income. MAT was levied under Section 115JA from assessment year 1997-98. Section 115JA is made inoperative w.e.f. 1.4.2001. In its place, the Finance Act, 2000 inserted Section 115JB. The new provision provides that all companies having book profit under the Companies Act, shall be liable to pay MAT at a specified rate of the book profit. It further provides that every MAT company shall follow same accounting policies and standards as are followed for preparing its statutory account.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the purposes of the provision, "book profit" means the net profit as shown in the P & L Account in the relevant previous year in accordance with the provisions of Part II and Part III of the Schedule VI to the Companies Act, subject to certain adjustments which increases or decreases the book profit. Thus, even under Section 115J, certain adjustments were to be made to the net profits as shown in the P & L Account. One such adjustment stipulates that the net profit shall be decreased by the amount withdrawn from any reserves, if any such amount is credited to the P & L Account. Some companies have taken advantage of Section 115J by decreasing their net profit by the amount withdrawn from the reserve created in the same year itself, though the reserve when created had not gone to increase the book profit. Such adjustments led to lowering of profits and, consequently, the quantum of tax payable got reduced. Thus, by amending Section 115J, it was provided that "book profit" will be allowed to be decreased by the amount withdrawn from any reserves only in two cases:</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) if such reserve has been created in the previous year relevant to the assessment year commencing w.e.f. 1.4.1998 OR</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) if the reserve so created in the previous year has gone to increase the book profit in any year when Section 115J was applicable.</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Act, 2002 now specifically provides vide Section 115JB that the amounts withdrawn from any reserves, if credited to the P & L Account, shall be reduced from the book profit. It also provides that any amount withdrawn from such reserves created on or after 1.4.1997 and which is credited to P & L Account shall not be reduced from the book profit, unless the book profit in the year of creation of such reserves stood increased by the amount transferred to such reserves at that time.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">True to the <strong>TIOL</strong> tradition, We bring you yesterday’s judgement today.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please See <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11898" target="_blank">Breaking News</a></strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FM in CBDT Chairman’s Room - Releases Vision 2020</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> new Chairman of CBDT, Sudhir Chandra had a rare visitor in his office room yesterday – none other than the Finance Minister himself! He released the Vision 2020 Document of the Income Tax Department and also interacted with Chief Commissioners of Income Tax from nearly 50 cities across the country through video conferencing. As usual he exhorted them to maximize tax collections.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No Tax Worse Than Inflation - Chidambaram</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mr. PC</strong> is back with some economic news. Yesterday he was in a conclave with the top economists of the country and a concerned Chidambaram said, “If you have high income, that is eaten by inflation”, though he is not the minister concerned. He added that there was no tax worse than inflation and doubted whether we have all the tools in hands to control food inflation.<br>
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<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"> – Friday's cases</font></strong></font></strong></font></p>
<p align="justify"><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">Customs</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Refund amount adjusted against duty demand is to be considered as pre-deposit and is to be returned with interest till date of payment: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> question is whether the amount of Rs.4,71,447/- which was adjusted against the refunds due to the appellant after the confirmation of the demand can be treated as pre-deposit or it should be treated as duty paid.</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">Whether, for availing Sec 10A benefits, it is necessary for exports to be made on physical information storage device - Whether export of data through internet does not qualify to be export of computer software - assessee eligible for benefits: ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>THE</strong> issues before the Tribunal are - Whether, for availing Sec 10A benefits, it is necessary for exports to be made on a physical information storage device and whether export of data by uploading the same on the internet-based server of the importer does not qualify to be export of computer software or ITES. And the final verdict has gone against the Revenue.</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">Expenses reimbursed cannot be excluded from gross value of taxable service: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> gross value takes into its fold entire cost of service enabling that to be performable. Therefore, by no stretch of imagination neither the arrangements of the parties nor their mutuality or nomenclature or format of their agreement and mode of discharge of consideration shall prevail on the law relating to service tax. Legislature accordingly intend that the gross value of the service shall be the measure of value for taxation whether paid as consideration directly or by reimbursement of expenses relating to providing of taxable service.</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"><strong>vijaywrite@taxindiaonline.com</strong></a> </font></p>
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