TIOL-DDT 1728 · 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 align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1728 </font><font size="2"><br> </font></strong><font size="2"><strong>08.11.2011 <br> Tuesday </strong></font></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Lessons For Transition to GST - CAG's Recommendations </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSUMING</strong> that all States agree and an Act is in place, are we ready for GST?. The CAG had recommended that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ A road map for resolution of issues from the legacy system may be drawn up before the switch to GST. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Place automation high on priority. To begin with, e·filing may be made mandatory. The tax returns must be simple to reduce the cost of compliance to the assessee but they must also provide the basic data for scrutiny to establish the trail of transactions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Government of India may steer the development of software , which will standardise the processes across the country. The software must enable non -intrusive and system -based scrutiny of returns; detect non -filers or dormant dealers and selection of sample for tax audit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Due priority must be placed for integrating all units (including check gates) within the States as also Inter-State . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Act should specify timeframe for scrutiny of tax returns (and process ITC claim and refunds ) that will bind the tax administration for efficient service delivery , which in turn will enhance taxpayer confidence in the new system. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Ensure that departmental manuals are prepared for standardising the entire gamut of processes and align the internal controls with the GST. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Training of staff with <strong>due emphasis on advocacy </strong>, is central to the success of GST </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The periodicity for filing the returns may be fixed in accordance with the turnover of the respective dealers. This will reduce the burden on the department and ease monitoring on the dealers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Refine the risk-based selection of dealers for tax audit to generate a sample that is both viable and effective in detection of evasion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Prescribe a comprehensive mechanism for cross verification of the returns of the dealers with other records like returns of other dealers, Income Tax/Customs/Central Excise Departments and TINXSYS website. The States may be incentivised for timely uploading of data in the TINXSYS . TlNXSYS should provide an option for the user states to upload the utilisation of declaration forms as also for the States to upload list of dubious TINs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Minimise discretion in clauses relating to penalty across different types of offence. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Install a mechanism to monitor any deviations in the GST that distort the GST. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does anyone listen to the CAG? </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CAG's Opinion on Issues other than Audit</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CAG has strong opinions on issues that are far away from his designated so-called Constitutional role. Addressing the IPS Probationers last month, the CAG lamented: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Governance is at its lowest ebb; the morale of the civil servants is low; credibility of the government is at its lowest; decision-making has become a casualty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We have Chief Ministers who have had to vacate their positions allegedly for graft, on whom courts and other judicial bodies have made adverse pronouncements. We have Union Cabinet Ministers who are in prison. We have Union Cabinet Ministers who have had to vacate their positions, allegedly on complaints of ill doing. We have Members of Parliament who are being indicted by the judiciary for various acts, including accepting cash for exercising their vote in Parliament and also seeking cash to ask questions in the House. In the civil service, we have many examples. They are too many to merit counting now! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Audit the MPs - Justice Hegde in Central Excise Meeting </strong></font></p> <p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/Santosh.jpg" alt="Legal Corner Icon" width="440" height="234" hspace="5" border="0" align="center"></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADDRESSING</strong> the Vigilance Awareness meeting organised by the Central Excise Commissionerate of Mangalore, Justice Santosh Hegde said that there should be a mechanism to audit the annual performance, conduct and attendance of each and every Parliamentarian in the Parliament sessions. Based on this, the citizens should be given a right to recall the representative who has failed them. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He said that all the three organs provided in the Constitution - the Legislature, the Executive and the Judiciary have failed - no organ is better than the other as corruption has invaded each one of them. Corruption has entered almost every field and corporates and even NGOs should be included in the definition of Public Servants. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He also said, “The salary you are drawing is not insufficient to maintain your family. The feeling of pride of earning legitimately is disappearing.” </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>50 Biggest Tax Influences - Justice Kapadia, ITAT President and Sushil Mody in list </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><strong>INTERNATIONAL</strong> Tax Review </em> has announced its list of 50 biggest influences in International tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Three Indians figure in the list: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>1. Justice Sarosh Homi Kapadia</strong>,Chief Justice of India about whom ITR says, “In the area of international taxation, his judgments, have gone a long way in clarifying the law relating to, transfer pricing ( <em>Morgan Stanley) </em>, deduction of taxes on salaries paid to expatriates ( <em>Eli Lilly) </em>, deduction of taxes on royalty payment on software ( <em>GE India Technology </em>), and definition of permanent establishments for the purposes of double taxation avoidance agreements ( <em>Morgan Stanley) </em>. In a time where the growing liberalisation and globalisation of India's economy has presented new and complex forms of economic activity, his judgments on such areas as the taxation of income under production sharing contracts for oil and natural gas ( <em>Enron Oil & Gas) </em>, and dividend stripping ( <em>Walfort Stocks & Shares </em>) have helped lay down a certain and decisive course for tax law to follow in many years to come. Before completing his tenure as the Chief Justice of India in September 2012, Justice Kapadia is also poised to lay down the law on the taxation of offshore mergers and acquisitions of Indian companies in the legal challenge to the tax demand on Vodafone International's acquisition of Hutchison Essar's telecommunication business in India from the Hong Kong based Hutchison Group which was heard by a three-judge bench headed by him. This is probably the first case of its kind being heard by the highest judicial authority, not only in India but anywhere in the world, and Justice Kapadia's judgment in this landmark case is likely to have a decisive impact on the future development of international tax jurisprudence. At a time when several multi-billion dollar cross-border M&A transactions are coming under the scanner of revenue authorities, Kapadia's judgment is likely to lay down the marker for revenue authorities and tax practitioners everywhere on the taxation of such transactions. Chief Justice Kapadia is highly acclaimed for his deep knowledge of law, impeccable integrity, for being a hard taskmaster and for restoring the institutional integrity as well.” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>2. GE Veerabhadrappa </strong> was appointed as the President of the Indian Income Tax Appellate Tribunal (ITAT) last month. The ITAT has released countless rulings on the treatment of transfer pricing in India, with more than 100 rulings in transfer pricing this year alone. It stands as a major influence in the approach to the practice, with taxpayers all over the world using the numerous decisions as benchmarks for their own documentation and transfer pricing strategy. ITR has used our citation and mentioned, “The Delhi Tribunal in <em>Abhishek Auto Industries Limited vs Deputy Commissioner of Income Tax </em><font size="1"><strong><em>(<a href="http://taxindiainternational.com/case_lawDesc.php?qwer43fcxzt=MjEwNQ==" target="_blank">2010-TII-54-ITAT-DEL-TP</a>)</em></strong><em></em></font>, of November 12 2010, ruled that the tax authorities cannot reject a legally binding inter-company agreement, for payment of royalty or technical fees approved by regulatory agencies, simply because there is no commercial need for the arrangement”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>3. Sushil Modi </strong>, finance and deputy chief minister of the state of Bihar, was elected this year to chair the committee in charge of implementing GST, he became one of the most important tax officials in India. ITR says, <em>GST has been delayed a number of times and the latest predictions suggest it will miss its April 2012 implementation date. The process has been marred by disagreements between the states, with a number of Bharatiya Janata Party (BJP) state governments opposed. It falls to Modi to build a consensus on the issue and as a BJP politician, he may be ideally placed to do just that. </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The list includes Japan's new finance minister, Jun Azumi, John Colvin, Chief Judge of the US Tax Court and the chairperson of the African Tax Administration Forum, Oupa Magashula who said that he would take 75 officials from India to help them create a simple system! </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Good News for Central Government Pensioners </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Pay Commission had hiked the salaries and pension of Government employees with effect from 1.1.2006, but those who retired prior to 1.1.2006 were put to a disadvantage compared to those who retired after. The Central Administrative Tribunal in an order that would benefit thousands of pensioners, directed the Government to re-fix the pension of all pre-2006 retirees w.e.f. 1.1.2006 and pay the arrears thereof within a period of 3 months. If the Government does not go in further appeal, these pensioners are in for a bonanza. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=78&filename=pitara/sercaselaw/caselaw/2011/2011-TIOL-03-CAT.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The CAT Order </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Validity of Cheques/drafts to be only three months</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RESERVE</strong> Bank is satisfied that in public interest and in the interest of banking policy it is necessary to reduce the period within which cheques/drafts/pay orders/banker's cheques are presented for payment from six months to three months from the date of such instrument. Accordingly, Reserve Bank directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker's cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI/2011-12/251, dated: 04 November 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Issue of Demand Drafts for Rs 20,000/- and above - RBI Instructions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INSTRUMENTS</strong> with account payee crossing are required to be credited to the payee's account and not paid in cash over the counter. However, some unscrupulous elements use demand drafts without any crossing for transfer of money as an alternative to settlement through cash. RBI now directs that demand drafts of Rs. 20,000/- and above are issued invariably with account payee crossing </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>RBI/2011-12/250, dated: 04 November 2011 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FEMA - Foreign Direct Investment - Transfer of Shares </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> a measure to further liberalize and rationalize the procedures and policies governing FDI in India, RBI has decided to allow transfer of shares without the prior approval of the Reserve Bank of India, in certain cases subject to conditions. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2011/rbi11cir043.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI/2011-12/247, dated: 04 November 2011 </strong></font></a><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Wednesday's cases</font></strong></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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Kar Vivad Samadhan - Not applicable to cases where Notice issued after 1.3.2009 - No discrimination; no illegal classification - Advantages or disadvantages to individual assesses are accidental and inevitable and are inherent in every taxing Statute: SC</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> has been laid down in a large number of decisions of this Court that a taxation Statute, for the reasons of functional expediency and even otherwise, can pick and choose to tax some. A power to classify being extremely broad and based on diverse considerations of executive pragmatism, the Judicature cannot rush in where even the Legislature warily treads. Advantages or disadvantages to individual assesses are accidental and inevitable and are inherent in every taxing Statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether assessee is liable to deduct tax at source on payments to be made to stock exchange as fees for rendering managerial services - YES, rules Bombay HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is a company engaged in the business of share broking, depositories, mobilization of deposits and marketing of public issues. Trading was carried out through various Stock Exchanges. Trading in securities were carried out under the open outcry system where the member brokers used to assemble in a trading ring for doing transaction in securities. The issue before the Bench is - Whether the assessee is liable to deduct tax at source on the payments to be made to stock exchanges as fees for rendering managerial service. And the verdict goes in favour of the Revenue. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commercial Training or Coaching service - AP High Court orders pre-deposit of Rs 80 crores, holds order of CESTAT granting full waiver erroneous</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOT</strong> all the Stay orders passed by the Tribunal are appealed against by the revenue as basically they are interlocutory orders. But in this case, the Stay order passed by the Tribunal was appealed against by the revenue, not once, but twice successfully before the High Court of Andhra Pradesh. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns Tomorrow for the judgements </font></strong></font></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> </body> </html>