TIOL-DDT 1596 · 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 1596</font><br>
27.04.2011<br>
Wednesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Scope of Post Budget Changes in Service Tax Law - TRU Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> new services specified in clauses (zzzzv) and (zzzzw) of section 65 (105) of the Finance Act, 1994 and amendments to the existing clauses of the same section are being operationalized w.e.f. May 1, 2011. The scope of these services was explained earlier in TRU's D.O. letter dated February 28, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thereafter, in accordance with the budget announcements certain changes were necessitated and the related clarifications are given as follows: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services provided by a Restaurant </strong>– <font color="#663399"><strong>Tips to waiters outside purview of Gross Value </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An exemption of 70% of the gross value i.e. the total price charged by the restaurant has been given by amending Notification No. 1/2006-ST dated 01.03.2006 vide Notification No. 34/2011-ST dated April 25, 2011. This exemption is available provided no CENVAT credit is availed either of inputs or input services. It is clarified that the exemption is available on the gross price charged by the restaurant for the taxable service, including any portion shown separately e.g. service charge. However the amount paid by the customer ex-gratia e.g. as tip to any member of the staff doesn't constitute consideration paid to the restaurant and shall remain outside this levy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Short Term Accommodation - <font color="#663399">Declared Tariff to include charges for breakfast/meals and not extra beds. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In accordance with the budget announcement, this levy will be applicable on short-term accommodation with a declared tariff of Rs 1000 per day or above. A suitable exemption has been given below this amount vide Notification No. 31/2011-ST dated April 25, 2011. Declared tariff has been defined within the notification as charges for all amenities provided in the unit of accommodation. Thus it will include cost of all electronic gadgets installed in the room and any other facility normally provided by a hotel as part of the stay. Cost of extra bed will not form a part of the declared tariff. No further exclusions are provided from the declared tariff e.g. on account of breakfast or any other meal whose cost is included in the declared tariff including any discount given to the customer. However an exemption @ 50% has been given by amending the notification No.1/2006-ST dated 01.03.2006 vide notification No. 34/2011-ST dated April 25, 2011 provided no CENVAT credit is availed either of inputs or input services. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Life Insurance Services </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new definition will include all services provided by a life insurance company. The optional scheme available in Rule 6(7A) of the Service Tax Rules, 1994 has been amended vide Notification No. 35/2011-ST dated April 25, 2011. The assessee will have the option to pay tax on that portion of the premium which is not invested, when such break-up is given to the policy holder. Where the break-up is not so provided, tax amount shall be 1.5% of the gross premium. However, where the entire premium is only for the risk portion the same shall constitute the taxable value of the service. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Health Services </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new levy on medical services in terms of sub-clause (zzzzo) of section 65(105) has been exempted vide notification No. 30/2011-ST dated April 25, 2011. It may be noted that the earlier levy on certain services provided by hospitals imposed last year was substituted by a new entry. Thus the levy imposed last year will not be applicable anymore. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commercial Coaching and Training </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The revised definition is intended to bring into the tax net all unrecognized education within its ambit irrespective of the fact whether the institute imparting the education is conducting any one or more course recognized by law. Accordingly, an exemption has been given to pre-school education and all education that leads to the award of a qualification recognized by law vide Notification No. 33/2011-ST dated April 25, 2011. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Legal Services </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With the amendments coming into force, exemption provided to CAs, CWAs and CSs vide Notification No. 25/2006-ST dated 13.07.2006 for similar services is being withdrawn by Notification No. 32/2011-ST dated April 25, 2011. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Other Services </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Changes have also been made in other services namely club or association, business support services and service centre for motor vehicles and have already been explained in TRU D.O. letter dated Feb. 28, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Both the new services i.e. Services provided by Restaurants and short-term Accommodation have also been notified for the purpose of Export of Services Rules, 2005 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 and placed in Category 1 i.e. based on the location of the property. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TRU urges that all the above changes to be carefully studied and any issues in their implementation to be informed as and when they arise. Potential new assessees as well existing assessees who are required to pay tax on certain hitherto non-taxable services may be informed suitably of the changes and assisted in any desired manner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">As regards amendments made to Export of Services Rules, 2005 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 for inclusion of the two new services in Category I thereof, it may be noted that there is a lot of difference in services provided in relation to immovable property located outside India and services provided in immovable properties located outside India . </font></strong></font></p>
<p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While it is justified to place taxable services like general insurance, architect, interior decorator, real estate agent, auctioneer etc in Category I as they are services provided in relation to immovable property located outside India in case of export of such services and vice versa in case of import of such services in relation to immovable property located in India , what is the justification in placing ‘accommodation service provided by hotels/inns located outside India' and ‘services provided by restaurants outside India' in Category I of both these Rules? </font></strong></font></p>
<p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If these properties are located outside India then the said services can be availed only when a person from India (or outside India) physically visits these properties to avail the said services and vice versa when a person from outside India visits these properties located in India to avail the said services in India. In the first instance, the service is provided and availed outside India and hence the long arm of service tax law cannot reach offshore to tax them or consider these services as exports merely because a person from India visits these properties located outside India to avail the said services. On the other hand, if a person from outside India visits these properties to avail the said services in India then can such services be regarded as import of said services. Does it not sound preposterous? </font></strong></font></p>
<p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board is requested to make laws and issue clarifications after making a thorough study of various plausible scenarios and not make preposterous laws which will lead to absurd situations.</font></strong></font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2011/TRU_Letter_april_25.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">D. O. F. No. 334/3/2011-TRU., Dated: April 25, 2011</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjudicating Authority for DRI case notified </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has assigned Show Cause Notice F. No. DRI/AZU/INQ-12/2009 dated 31.12.2009 issued by the Additional Director General, Directorate of Revenue Intelligence, Ahmedabad in the case of M/s Inter-Continental ( India ) & others to Commissioner of Customs (Import), Sahar Air Cargo Complex, Mumbai for adjudication. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Renting - Next hearing on 9th May </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN</strong> the Court assembled yesterday, Ms. Sonia Sharma, representing UOI, rose to inform the Court that Mr. A.S. Chandiok, ASG, was indisposed. The matter thereupon was adjourned to 9th May. It was however, made clear by the CJ that no more adjournments would be granted. In case, anyone else is unable to cause appearance, the case must still be argued by nominee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court was categorical that matter must be concluded on that day, as almost all the points have by and large been covered, but all those still willing to argue the rejoinder must come with written arguments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court also stated that it would like to pronounce the judgement before the summer vacations, and therefore need for early conclusion of proceedings. </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"> – 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">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income tax - Whether when expenses are incurred for carrying out existing business more efficiently, and no new source of income is created, even then expenditure can be considered as capital in nature - NO, rules ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> two issues before the Bench are - Whether where the expenses are incurred for carrying on the existing business more efficiently, and which did not result in acquisition of any new assets or in any new source of income, the expenditure can still be considered as capital expenditure and whether where the foreign party has no permanent establishment in India, payments made for mere printing of research reports abroad can be treated as fees for technical services. And the verdict goes in favour of the assessee. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Sales Tax</font></strong></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court cannot direct the subordinate legislation to substitute wordings in a particular manner, by assuming to itself role of a supervisory authority, which is not a power vested in the High Court: SC </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> State of Uttar Pradesh is in appeal against the High Court order in favour of the respondent assessee relating to exemption from sales tax to Tractors. The Government of Uttar Pradesh, for the purpose of levy of sales tax issued a notification on 12th September, 1986 in which it was stated that under Section 4 of the Uttar Pradesh Sales Tax Act, 1948, Tractors with Power Take-off Horse Power not exceeding 25 would stand exempted from payment of tax under the Sales Tax Act, subject, however, to the condition that the said tractors are exempted from payment of Central Excise Duty. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">ROM application - CESTAT order directing Commissioner to return pre-deposit amount along with interest @12% from October, 2005 to date of actual refund modified – Interest to be NOW paid at @6%: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AN</strong> appeal filed by the assessee was allowed by the CESTAT by way of remand vide order dated 19.07.2005. In the said order, the Commissioner was directed to undertake de novo adjudication of the dispute inasmuch as re-quantify the duty demand. </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><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>
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