TIOL-DDT 1598 · 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 1598 </font><br>
29.04.2011 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Regulating refund of excess TDS deducted - CBDT clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> procedure for regulating refund of amount paid by the deductor in excess of the tax deducted at source (TDS) and/or deductible is governed by Board circular No. 285, dated 21-10-1980.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Subsequent to issue of circular No. 285, new sections have been inserted under Chapter XVII-B of the Income-tax Act, 1961. Board received references regarding inclusion of these sections also for the purpose of issue of refund of excess amount of the TDS deducted/deductible. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In consideration of the above and in supersession of the Circular No. 285, dated 21-10-1980, CBDT prescribes the following procedure for regulating refund of amount paid in excess of tax deducted and/or deductible in respect of TDS on residents covered under sections 192 to 194LA of the Income-tax Act, 1961. This circular will not be applicable to TDS on non-residents falling under sections 192, 194E and 195 which are covered by Circular No. 7/2007. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The excess payment to be refunded would be the difference between: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the actual payment made by the deductor to the credit of the Central Government; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the tax deductible at source. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In case such excess payment is discovered by the deductor during the financial year concerned, the present system permits credit of the excess payment in the quarterly statement of TDS of the next quarter during the financial year. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In case, the detection of such excess amount is made beyond the financial year concerned, such claim can be made to the Assessing Officer (TDS) concerned. However no claim of refund can be made after two years from the end of financial year in which tax was deductible at source. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, to avoid double claim of TDS by the deductor as well as by the deductee, the following safeguards must be exercised by the Assessing Officer concerned: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applicant deductor shall establish before the Assessing Officer that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ it is a case of genuine error and that the error had occurred inadvertently; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ that the TDS certificate for the refund amount requested has not been issued to the deductee(s); and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ that the credit for the excess amount has not been claimed by the deductee(s) in the return of income or the deductee(s) undertakes not to claim such credit. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prior administrative approval of the Additional Commissioner or the Commissioner (TDS) concerned shall be obtained, depending upon the quantum of refund claimed in excess of Rupees One Lakh and Rupees Ten Lakh respectively. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After meeting any existing tax liability of the deductor, the balance amount may be refunded to the deductor. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of provisions of section 200A of the Income-tax Act prescribing processing of statement of TDS and issue of refund with effect from 1-4-2010, this circular will be applicable for claim of refunds for the period upto 31-3-2010. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2011/it11cir02.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Circular No. 2/2011, Dated April 27, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Confusion regarding availment of credit on certain items as inputs or capital goods</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> netizen sent us the following query regarding this confusion: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Input definition excludes </font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"(A) ........................... </font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(B) ........................... </font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(C) capital goods except when used as parts or components in the manufacture of final product ................" </font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It means parts or components used in the manufacture of final product are inputs.</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What was the need for the inclusion of (C) in the exclusion?</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Take the example of an electric motor; depending upon the usage it can be input or capital goods.</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the motor is used as a part or component in the manufacture of capital goods which are the final products of a manufacturing unit, electric motor is considered as input; if it is used in a factory as part of plant it is treated as capital goods.</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The distinction we know. Hence even without (C) the purpose is served. Then what could be the purpose of inclusion of (C)?</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is it in lieu of explanation 2 in the definition of input up to the period 31.03.2011?</font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Kindly have your views in DDT. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of exception clause (C) in the definition of inputs at Rule 2(k) of CENVAT Credit Rules, 2004 ('CCR, 2004'), "capital goods" are excluded from the definition of "inputs" except when used as parts or components in the manufacture of a final product. The illustration provided above i.e. receipt of 'electric motor' in the factory of manufacture aptly brings out the distinction of the item being used as an input or capital goods depending on its end use. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this connection, it may be noted that in terms of Rule 4(2)(a) of CCR, 2004 only 50% of the duty paid on "capital goods" can be availed as CENVAT Credit in the year of its receipt and the balance 50% can be availed in the financial year subsequent to the year of receipt. There is no such restriction on availment of CENVAT Credit of duty paid on "inputs". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of the above restriction on availment of <em>CENVAT Credit</em> of duty paid on capital goods, an exception at clause (C) in Rule 2(k) becomes a necessity to bring out the distinction on certain items which are capable of being used as both "capital goods" and/or "inputs"/"raw materials" in the factory of manufacture, especially in the light of “broad-basing” the definition of input in this year's budget. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At this juncture it is pertinent to refer to latest Board's Instruction No. 267/11/2010-CX, dated 8-7-2010 on the subject which was issued in the backdrop of CESTAT Larger Bench Judgment in <a><em>Vandana Global Ltd. </em></a><em>vs. CCE, Raipur</em> - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-624-CESTAT-DEL-LB.htm" target="_blank"><font size="1">2010-TIOL-624-CESTAT-DEL-LB</font></a></strong>. In para 2 of this Instruction, Board also referred to the judgment of Tribunal in <em>Vikram Cement vs. CCE, Indore</em> - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2009/2009-TIOL-1959-CESTAT-DEL.htm" target="_blank"><font size="1">2009-TIOL-1959-CESTAT-DEL</font></a></strong> and <em>Vikram Cement vs. CCE, Indore</em> -<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2005/2005-TIOL-112-SC-CX.htm" target="_blank"> <strong>2005-TIOL-112-SC-CX</strong></a></font> and clarified at para 3 of the instruction as follows: </font></p>
<p align="justify"><em><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">It thus follows from the above judgments that credit on capital goods is available only on items, which are excisable goods covered under the definition of ‘capital goods' under CENVAT Credit Rules, 2004 and used in the factory of the manufacturer. As regards ‘inputs', they have to be covered under the definition of ‘input' under the CENVAT Credit Rules, 2004 and used in or integrally connected with the process of actual manufacture of the final product for admissibility of cenvat credit. The <a>credit on inputs used in the manufacture of capital goods , which are further used in the factory of the manufacturer is also available, except for items like cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. </a>Further, <a>credit shall also not be admissible on inputs used for repair and maintenance of capital goods . </a></font></strong></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further in <em>CCE vs. Gujarat Ambuja Cement Ltd </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2008/2008-TIOL-683-HC-HP-CX.htm" target="_blank"><font size="1">2008-TIOL-683-HC-HP-CX</font></a></strong> the High Court held that Plates/Rounds, TOR Steel, Channels, Angles, Sheets, Industrial Cables, Fuses, Plugs, Sockets, Electric Machinery used in Hydraulic system Motor Pumps/Electrical Motors <strong><em>by their use are to be covered in the definition of capital goods</em></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Since credit on certain items solely depends on the usage of those items in the factory of manufacture, Board may consider issuing a comprehensive clarification for the benefit of trade/industry and field formations. </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">UP Trade Tax</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Stainless steel wire is not covered within entry (ix) of clause (iv) of Section 14 of Central Sales Tax Act: It is a settled principle of law that the words used in section, rule or notification should not be rendered redundant and should be given effect to: SC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is also one of the cardinal principles of interpretation of any statue that some meaning must be given to the words used in the section. Besides, in a taxing Act one has to look merely at what is clearly said and there is no room for any intendment. In a taxing statute nothing is to be read in, nothing is to be implied, one can only look fairly at the language used. </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 deduction available u/s 32AB is admissible only on business income and not income from other sources - YES, rules HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether assessee is entitled to deduction u/s 32AB on the amount of dividend income which is not the business income and the same is not applied for any business purposes and whether deduction available u/s 32AB is allowable only on the profit from “business or profession” and not from the income from other sources. And the verdict goes in favour of the Revenue. </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">When undervaluation is alleged by the department, it is their responsibility to prove the case - CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee was clearing semi-finished goods to their Akurdi plant on which further manufacturing operations such as surface treatment, etc. were to be completed. As such, the clearances of these goods were considered as captive consumption and the assessable value was determined on the basis of cost construction method as provided under Rule 6(b)(i) of the Valuation Rules, 1975 (the period involved is 01.04.95 to 30.04.97). The department alleged that the assessee had cleared identical/comparable goods to various distributors and dealers which were higher than the price declared in respect of the supplies made for captive consumption. Accordingly, by adopting this price, a differential duty demand notice of Rs.25,88,795.53 was issued. </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"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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