TIOL-DDT 1703 · 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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1703 </font><br> 29.09.2011 <br> Thursday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax – Renting of Immovable Property - Litigation Continues - Scene Shifts to SC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> litigation never seems to be ending – after all it's a thousand Crore issue! Netizens will recollect that the Bombay High Court in <em>Retailers Association of India vs Union of India</em> – <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2011/2011-TIOL-523-HC-MUM-ST.htm" target="_blank"><font size="1">2011-TIOL-523-HC-MUM-ST</font></a></strong>, has upheld the levy of Service Tax on renting of immovable property, including the retrospective amendment. The judgement was delivered on 4 th August 2011 and immediately after the judgement was delivered, the Counsel for the petitioners requested that the interim orders may be continued for a reasonable period. The High Court ordered that the interim orders will continue to remain in operation for four weeks. The High Court later extended this stay till 30 th September 2011. So they had to get a stay from the Supreme Court before 30 th September 2011 and it seems they have succeeded. It may be noted that the High Courts of Punjab and Haryana, Karnataka, Orissa apart from Bombay and of course the Larger bench of the Delhi High Court upheld the levy and the retrospective amendment. The case is listed for 14 th October in the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the most unlikely event of the Supreme Court quashing the levy, the Government will through Parliament bring in another retrospective amendment and all the litigants in the Supreme Court will have to pay the tax with interest and a possible penalty. Government has scant respect for the interpretations of the Supreme Court and the Parliament's power to impose tax retrospectively is well recognised. In matters relating to tax, it is not the Supreme Court which is the ultimately authority, but an Under Secretary in the Board – he has the powers to undo the orders of the Supreme Court. <font color="#FF6633"><strong>TIOL has said this many times but it has fallen on deaf ears in the trade circles.</strong></font> </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Extension of Ban on Export of Edible Oils </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EXPORT</strong> of edible oils was initially prohibited for a period of one year with effect from 17.03.2008 vide Notification No. 85 dated 17.03.2008 which was extended from time to time and is presently up to 30.09.2011 as notified through Notification No. 7 dated 30.09.2010. Now the ban on export of edible oil is extended up to 30.09.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In relaxation of prohibition, certain exemptions have been granted through various notifications issued from time to time namely (a) export of Castor Oil (b) export of coconut oil from Cochin Port (c) Deemed export of edible oils(as input raw material) from DTA to 100% EOUs for production of non-edible goods to be exported (d) export of oil produced out of minor forest produce even if edible, ITC(HS) Code 15159010, 15159020, 15159030, 15159040, 15179010 and 15219020 (e) export of 10,000 MTs per annum of organic edible oils. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2010/dgft10not077.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. No 77 (RE – 2010)/2009-2014 Dated: Septemeber 28 2011 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">US Justice Department indicts Indian Doctor in Tax Evasion Case with HSBC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ACCORDING</strong> to the indictment yesterday, Dr. Ahuja, a board-certified neurosurgeon, wire transferred and maintained millions of dollars in bank accounts in India and the Bailiwick of Jersey at The Hongkong and Shanghai Banking Corporation Ltd. (HSBC). In 2009, the HSBC bank account in India had a balance of USD 8,733,785. The indictment alleges that Dr. Ahuja failed to report these bank accounts to the IRS on his 2006-2009 tax returns. The indictment further alleges that Dr. Ahuja failed to report more than USD 1.2 million in interest income that he earned from his HSBC India account and failed to pay the taxes due on that income. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The indictment also alleges that Dr. Ahuja conspired with HSBC bankers who worked at an HSBC India office in New York to conceal from the IRS the existence, ownership and income derived from his undeclared bank accounts at HSBC India and HSBC Jersey. One of these bankers allegedly helped Dr. Ahuja avoid receiving bank statements at his house in Wisconsin, by, among other things, informing an HSBC employee in India that Ahuja “has requested that he does not want any kind of mail at his US or India address. He wants a HOLD on all his accounts . . . he does not wish to receive any mail.” The bankers also allegedly helped Dr. Ahuja access the funds in his undeclared bank accounts when he travelled abroad and transferred money from his undeclared HSBC India account to other undeclared financial accounts in India. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dr. Ahuja faces a maximum penalty of five years in prison for the conspiracy charge and a USD 250,000 fine. Each false tax return charge carries a maximum penalty of three years in prison and a USD 250,000 fine. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A trial date has not yet been set. An indictment is merely an allegation, and Dr. Ahuja is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">WTO Review of India's Trade Policy during period from 2007 to 2011: Highlights </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Indian economy continued to expand at a fast pace during the review period, despite the mild slowdown caused by the global financial crisis in 2008/09. In the wake of the global financial crisis, growth was driven by government spending. In this respect, to face the financial crisis, the Government conducted a very proactive policy, introducing a large stimulus package consisting of increased spending, lower excise and customs duties, and subsidies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India's process of fiscal consolidation, which began in 2004, has not resulted yet in the intended decrease in the fiscal deficit. More recently, the focus of fiscal policy has been shifted back to achieving fiscal consolidation and tax rationalization. <em><strong>As a result, a gradual reform of the tax structure was implemented, to reduce customs and excise duties and rely more on direct taxes, particularly corporate income tax and on service tax revenues. </strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, indirect taxes, including taxes that fall solely or mainly on imports, continue to be an important source of revenue, and changes in their levels are a much used policy tool. <em><strong>For some time, India has intended to introduce a goods and services tax (GST) and consolidate several pieces of legislation regarding taxation. A new tax Code has been drafted to simplify the tax regime and increase reliance on direct rather than indirect taxes. </strong></em></font></p> <p align="justify"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In general, the value of imports is based on the transaction value. A landing charge (for loading, unloading, and handling) of 1% is added to the c.i.f. value, to calculate the transaction value (earlier known as "assessable value"). India uses "tariff values"(reference prices), to calculate customs duty levied on imports of, inter alia , certain palm oils, as well as crude soybean oil, poppy seeds, and brass scrap. These "tariff values" must in principle be revised every two weeks and adjusted to align them with international market prices. In practice, however, some of the "tariff values" applied by India have remained unchanged since 2006. </font></em></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>India's WTO bound tariff levels are much higher than the applied rates, especially for many agricultural products. </em></strong>These gaps allow the Indian Government to modify tariff rates in response to domestic and international market conditions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>India is one of the most active users of anti-dumping measures among WTO Members. It initiated 209 anti-dumping investigations against 34 trading partners during the review period, compared with 176 in the period covered in its last Review, and it imposed 207 anti-dumping measures, compared with 177.</em></strong> The products involved included chemicals and products thereof, plastics and rubber and products thereof, base metals, and textiles and clothing. India did not take any countervailing actions during this period. Since its last Review in 2007, India has also imposed several safeguard measures. As a result of an amendment of the legislation, since 2010 safeguard measures may also take the form of quantitative restrictions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Due to its strategic importance, India considers it necessary to maintain protection and offers this sector greater tariff protection than to others. <em><strong>Average tariff protection for agriculture (33.2%) remains, therefore, substantially higher than for manufactured goods (8.9%). </strong></em>India has also retained the price support system for basic commodities and implements other agricultural support programmes at the central and state level. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In general, India's tariffs are higher for processed goods than for semi-manufactures. In order to encourage investment in the manufacturing sector, India also offers a wide range of tax incentives, concessionary credit, and other types of assistance. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">National PPP Policy 2011 - Draft for Consultation </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Union Finance Minister, in his Budget speech for the year 2011-12 announced that it is the Government's endeavor to come up with a comprehensive policy that can be used by the Centre and the State Governments in further developing Public-Private Partnerships. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Pursuant to this announcement, Department of Economic Affairs, Ministry of Finance has prepared the draft National PPP Policy and placed it in public domain yesterday to solicit views / suggestions from all stakeholders by 15th October, 2011. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government of India has set up Public Private Partnership Appraisal Committee to streamline appraisal and approval of projects. Transparent and competitive bidding processes have been established. To provide a broader cross-sectoral fillip to PPPs, extensive support has been extended through project development funds, viability gap funding, user charge reforms, provision of long tenor financing and refinancing as well as institutional and individual capacity building. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The growing PPP trends, especially in the last decade, justify the need for a broad policy framework that sets out the principles for implementing a larger number of projects across diverse sectors to complement the inclusive growth aspirations of the nation. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Netizens may go to the following link <a href="http://pppinindia.com/draftpolicy.php">http://pppinindia.com/draftpolicy.php </a>and post in their comments on the different aspects of this National Policy which is placed in public domain for consultation. Finance Ministry has to be indeed commended for committing to a National policy on public private partnership and bringing out a draft olicy for public consultation. A silver lining amidst crumbling credibility of Indian polity! </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">European Commission's plan to make financial sector pay its fair share - Will this impact financial markets, which are already in turmoil? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> European Commission has presented a proposal for a financial transaction tax in the 27 Member States of the European Union. The tax would be levied on all transactions on financial instruments between financial institutions when at least one party to the transaction is located in the EU. The exchange of shares and bonds would be taxed at a rate of 0.1% and derivative contracts, at a rate of 0.01%. This could approximately raise €57 billion every year. The Commission has proposed that the tax should come into effect from 1st January 2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commission has decided to propose a new tax on financial transactions for two reasons. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First, to ensure that the financial sector makes a fair contribution at a time of fiscal consolidation in the Member States. The financial sector played a role in the origins of the economic crisis. Governments and European citizens at large have borne the cost of massive taxpayer-funded bailouts to support the financial sector. Furthermore, the sector is currently under-taxed by comparison to other sectors. The proposal would generate significant additional tax revenue from the financial sector to contribute to public finances. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Second, a coordinated framework at EU level would help to strengthen the EU single market. Today, 10 Member States have a form of a financial transaction tax in place. The proposal would introduce new minimum tax rates and harmonise different existing taxes on financial transactions in the EU. This will help to reduce competitive distortions in the single market, discourage risky trading activities and complement regulatory measures aimed at avoiding future crises. The financial transaction tax at EU level would strengthen the EU's position to promote common rules for the introduction of such a tax at global level, notably through the G20. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The decision followed an analysis of different tax instruments to make the financial sector contribute to the recovery of the EU economy.</font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The moot question is: will this work to put the crumbling EU economy back on track? </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Regional Anti Corruption Conference Inaugurated by President </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> 7 th Regional Conference of ADB/OECD Anti-Corruption initiative on Asia and the Pacific was inaugurated by the President in New Delhi yesterday. The Conference is aimed at ‘building multi-disciplinary framework to combat corruption'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Experts from 28 member countries and economies of ADB/OECD Anti-Corruption initiative and delegates/ eminent personalities including CVC, CIC from India are attending the Conference. It also has experts from all the relevant disciplines – representing international organizations, leading enterprises and businesses associations, civil society, and multilateral and donor organizations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Conference will provide a forum on establishing and implementing in Asia-Pacific some of the main features of an effective multidisciplinary anti-corruption framework: 1) international cooperation in multijurisdictional corruption investigations; 2) measures to prevent and detect corruption in public procurement; 3) corporate compliance, internal controls and ethics measures to fight corruption; and 4) strong citizen contributions to these frameworks. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Ironically, India is hosting this regional conference at a time when the Government of the day was grappling with the consequences of one of the biggest scams since independence and trying to save its skin at all costs by defending the indefensible.</font></strong></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 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><font color="#006600"> </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 term aircraft is different from term aeroplane, and thus, different depreciation rates are to be applied - NO, rules 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 the term 'aircraft' is different from the term 'aeroplane', and thus different depreciation rates are to be applied; Whether where the assessee fails to prove that the remuneration paid to director of the company is as per the market rate, the disallowance u/s 40A(2) is rightly made particularly when there is substantial increase in the last as compared to preceding year and Whether the expenses incurred in cash due to the rules laid down by the Airport authority of India and as per urgent business need, no disallowance can be made u/s 40A(3). Assessee's appeal partly allowed. </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">Settlement of case - Immunity granted from imposition of penalty u/s 11AC by Settlement Commission - By approaching Commission allegation of suppression etc. in show-cause notice remained unproved - mere allegation does not prove charge - Supplementary invoices issued in respect of Excise duty of Rs.14.7 Crores are cenvattable: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> facts go thus - Against the input supplier M/s Chennai Petroleum Corporation Limited (CPCL), the jurisdictional authorities at Chennai had booked a case and issued a show cause notice demanding additional excise duty which had been allegedly evaded by suppressing the material facts. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">M/s CPCL found it prudent to approach the Settlement Commission, Customs & Central Excise, Additional Bench, Chennai and for settling their case and seeking available immunities. Their application was allowed by the Commission and resultantly M/s CPCL paid up the total Central Excise duty demanded of Rs.31.5 Crores. The case was finally settled by an order dated 23.11.2007 and the Bench granted them immunity from imposition of penalty and prosecution under the Central Excise Act, 1944. </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">Yoga and Meditation Services - Applicants on their own wrote to department in October, 2002 detailing their spiritual meditation activities and sought clarification - they were informed in April, 2003 that no service tax is payable, however in March, 2009 it was clarified that it is a taxable service – Demand for earlier period - limitation - Prima facie case - Pre-deposit waived and stay granted: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant(s) submitted that “Health and Fitness Services” was defined in the year 2002 and it included meditation also. Furthermore, out of abundant caution the applicants on their own in October, 2002 wrote a letter to Service Tax department detailing their spiritual meditation activities and sought clarification about the levy of service tax on meditation. After consulting the Central Board of Excise & Customs, the Chief Commissioner informed them vide letter dated 25th April, 2003 that service tax registration is not required for meditation and yoga. However, on further communication in March, 2009 the Central Board of Excise & Customs clarified that yoga and meditation falls under taxable service and is chargeable to service-tax. Therefore, the applicants started paying service tax with effect from 18th March, 2009. </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><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>