TIOL-DDT 1877 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font></strong></font><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 1877</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>12.06.2012 <br>
Tuesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - Construction of Residential Complex for Army Personnel in Cantonments </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> got this rather monumental doubt from a Netizen. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen, who was in the business of construction of residential complex service, sought a clarification if the quarters constructed by him to defence personnel in a Cantonment area would attract service tax under Construction of Complex service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the definition of 'residential complex' given in the Finance Act, 1994 (extracted below) construction of complex service attracts service tax only if such construction is done in a premises approved under law and also if such residential units constructed are not for personal use. </font></p>
<blockquote>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF0000"><em>91a) "residential complex" means any complex comprising of- </em></font></font></p>
<blockquote>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) a building or buildings, having more than twelve residential units; </font></em></font></p>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) a common area; and </font></em></font></p>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, </font></em></font></p>
</blockquote>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">located within a premises and the layout of such premises is <strong>approved by an authority under any law </strong> for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for <strong> personal use </strong>as residence by such person. </font></em></font></p>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, - </font></em></font></p>
<blockquote>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) "personal use" includes permitting the complex for use as residence by another person on rent or without consideration; </font></em></font></p>
<p align="justify"><font color="#FF0000"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) "residential unit" means a single house or a single apartment intended for use as a place of residence; </font></em></font></p>
</blockquote>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is understood that for construction of quarters for defence personnel in a military Cantonment Area, field formations of Ministry of Defence (obviously by engaging services of a construction contractor), do not require any approval by an authority under law. This is the view taken by the CBEC in a letter addressed to the Commissioner of Service Tax, New Delhi <strong>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/construction_residential_complexes.htm" target="_blank">F.No.137/26/2006-CX.4 dated 5.7.2006</a>)</strong>, wherein it is clarified that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"4. <em> In view of the above, it is now further clarified that service tax would not be leviable on construction of complexes under question if their layout does not require approval by an authority under any law for the time being in force."</em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, in reply dt. 3.10.2011 to an RTI Applicant, MoD (Army), New Delhi, had also clarified that no layout approval by Cantonment Board is required for construction of residential quarters to Army personnel in a cantonment Area. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The RTI Reply states: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>S. No. </strong></font></p></td>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Info Demanded</strong></font></p></td>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Info Supplied </strong></font></p></td>
</tr>
<tr>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the construction of residential accommodation for army personnel, which are being carried out by your organization in cantonment area, Lucknow, requires the Layout to be sanctioned by the Cantonment Board. </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No </font></p></td>
</tr>
<tr>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If it is so, then under what provisions <em>of </em>the law </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not Applicable </font></p></td>
</tr>
<tr>
<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Supply a copy of the sanctioned layout of construction being completed under phase I in relation to the above stated Cantonment Area, Lucknow. </font></p>
<p align="justify"> </p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not Applicable </font></p></td>
</tr>
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<td width="0" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Also supply a copy of fee deposited to them for sanctioning of such layout </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not Applicable </font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is also the view of the Government, as clarified by the letter <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/NBCC_construction.htm" target="_blank">F.No.332/16/2010-TRU
dt. 24.05.2010</a></strong> that construction of residential houses by National
Building Construction Corporation Limited (NBCC) for Central Government officers
is not liable to service tax as the quarters constructed to Government personnel
by the Government are not to be considered as intended for 'personal use';
hence the same is out of the purview of definition of residential complex.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Taking into consideration the above clarifications issued by the Government/respective authorities, it is clear that construction of quarters to defence personnel in a cantonment area is out of the purview of the 'construction of complex service' as such construction do not require any layout approval and also such quarters constructed are not for personal use. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore, construction of quarters to Government/military personnel should be considered as out of the service tax net. However, there is no surprise if the service providers, like that of the Netizen, are made to knock at the doors of CESTAT/High Courts for justice, as the Adjudication authorities at the lower level, always take whimsical interpretation and find excuse to reject the clarification issued by the Government as above, just to confirm the demand as the motto consciously pursued by the authorities in the field formations is 'I Remain Safe' (for short 'IRS') </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>And what is the position from 1.7.2012? </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax Revenue up by 40 percent in April May </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WILL</strong> February march; April may! The Service Tax Revenue for the first two months of this financial year amounted to 17,453 Crores, up by 40% compared to 2011-12. The overall revenue growth for CBEC is 13.3% and Revenue collected from Customs, Excise and Service Tax for the first two months is 70,211 Crores and is sure to cross one Lakh Crores by June end. In spite of messing up of the economy, Revenue is booming! </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Internship Programme in the Department of Expenditure - Ministry of Finance</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Department of Expenditure is the nodal Department for overseeing the public financial management system in the Central Government and matters connected with State finances. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What does this Department do?</strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) pre-sanction appraisal of major schemes/projects (involving both Plan and Non-plan expenditure); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) handling the bulk of the Central budgetary resources transferred to States; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) implementation of the recommendations of the Finance and Central Pay Commissions; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) overseeing expenditure management in the Central Ministries/Departments through interface with the Financial Advisors; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) administration of Financial Rules/Regulations/Orders; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) submission of 'Action Taken Notes' on monitoring of Audit paras; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) preparation of Central Government Accounts; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(h) managing various aspects of financial management in the Central Government; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) scrutiny of legislation having financial and economic implications; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(j) appraisal/approval of capital restructuring/revival proposals of Central Public Sector Undertakings; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(k) assisting Central Ministries/Departments in controlling costs and prices of public services, assisting organizational re-engineering through review of staffing patterns and O&M studies; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(l) reviewing systems and procedures to optimize outputs and outcomes of public expenditure. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, the Department is launching an internship programme. The Interns are expected to be instruments par excellence pursuing Post-Graduation Research Courses in Economics/Finance/Management and in the 4th and 5th year of Integrated Courses in Law/any other professional course from Universities/Institutions of National and International repute. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/internship_programme.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MoF Department of Expenditure No. A.33025/4/2012-Ad.I Dated, June 11 2012 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Two Lakh cases Pending with Appellate Commissioners in Income Tax - FM </strong></font></p>
<p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/FM_conf.jpg" alt="" width="450" height="289" hspace="5" border="0" align="center"></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADDRESSING </strong>the Chief Commissioners and DGs of Income Tax yesterday, the FM said; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Direct Taxes are the most important source of tax revenues for the Government under a progressive tax regime. For us, they contribute around <strong>56 per cent </strong>of total tax revenues for the Central Government. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Inthelastdecade, for every 1 per cent growth in GDP there was a growth of <strong>nearly 1.9 per cent </strong>in direct tax collections. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ For the Financial Year 2012-13, the Income-tax Department has been given a tax collections target of about <strong>Rs. 5.70 Lakh Crore </strong>, which is about 15 per cent more than the actual collections in 2011-12. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The proposed Direct Tax Code (DTC) is expected to bring in a much awaited transformation in tax structure and its administration. The Standing Committee on Finance, after its examination, has already submitted its report on the Direct Tax Code Bill. I have indicated that the amended Bill will be introduced in the Parliament in the Monsoon Session. I am hoping that DTCwill be effective from April 1, 2013.The time has come for the Department to prepare itself for the transition from the Income Tax Act 1961 to the new DTC regime.It would include addressing various issues like reframing of rules and forms, redrawing of business processes, training needs of human resources and the necessary infrastructure needs for smooth transition to the new regime. All this has to be completed in a manner so as to avoid any inconvenience to tax-payers and also to sustain the revenue buoyancy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Tax Deduction at Source (TDS) is a major component of tax collected and is based on very healthy principle of "pay as you earn”. I am informed that the Centralized Processing Centre (CPC) for TDS matters being set-up at Ghaziabad is likely to be functional very soon. CPC (TDS) would mark a major step in ensuring TDS compliance through processing of TDS statements with a focus on usage of technology driven end to end processes.Its main objective is to eliminate the TDS mismatch cases which are presently a matter of concern for the taxpayers in the proper claim of TDS credits. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In line with the Governments emphasis on promoting voluntary compliance of tax laws and recognizing the role that today's children will play in tomorrow's society, we need to educate them on the importance of taxes for the nation building process. I am happy to know that the Department has partnered with NCERT to introduce information in this regard in the school textbooks. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ I am of firm opinion that no organization can function efficiently unless it has a motivated workforce. The human resource management should be transparent, stable and the aim should be to become a model employer, to provide equal opportunity to all.This includes adherence to time schedule for holding DPCs for promotions to various cadres, employees' welfare measures, and improved working environment in offices. I expect that the CBDT takes appropriate steps to fulfill the expectations of its officers in this regard. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Rising litigation with the tax payers and amount locked-up in appeal before Commissioners of Income Tax (Appeals)/CIT (A), Income Tax Appellate Tribunals (ITATs), High Courts and the Supreme Court has been a matter of serious concern.I am informed that a total amount of <strong>Rs. 4,36,741 Crore </strong>was locked-up in 2,59,523 cases as on 31 st December, 2011.Out of this <strong>Rs. 2,52,846 Crore </strong>is locked-up in 1,93,525 cases which are pending before CIT(A).</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"> – Wednesday's cases</font></strong></font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"></font>Central Excise </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>For purpose of valuation under rule 8 of Valuation Rules, cost of production is required to be taken and this cannot be equated to conversion charges charged by appellants in respect of goods manufactured on job work - Demand of Rs.1.18 Crores set aside and appeal allowed: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant is manufacturing wire rods from billets. During the course of audit, it was noticed that the appellants were undervaluing the wire rods cleared to their own units at Tarapur and Borivali. On being asked by the department, the appellant furnished the debit notes and invoices for <strong>conversion charges </strong>billed to TISCO, Jamshedpur, vide their letter dated 09.06.2003. On further query by the Department as to how they had arrived at the value for clearances of wire rods to their own units, the assessee vide their letter dt. <strong>25.06.2003</strong>, submitted a statement of cost of production for transfer price of wire rods to their units at Tarapur and Borivali. </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>Whetherfor purpose of filing appeal before High Court, it is fair on part of Revenue to club tax effect of two appeals relating to same year to meet guidelines prescribed by CBDT - NO: Gujarat High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee, at the outset, raised a preliminary objection as regards maintainability of the Appeals on the ground that according to the Standing Instruction No. 5 of 2008 issued by the CBDT, the Revenue should not have preferred these Appeals as the tax-effect in the Tax Appeal No. 1847 of 2010 is less than Rs. 4.00 Lac. The Revenue, on the other hand, opposed the above contention by contending that if the total tax-effect of these two Appeals is taken into consideration, it would exceed Rs. 4.00 Lac. According to the Revenue, the total tax-effect involved in these two appeals should be considered for the purpose of the above Standing Instruction, because, by the common order, the Tribunal disposed of both the appeal and Cross-Objection. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exemption Notification No. 64/88-Cus - Fulfillment of conditions - Continuous obligation of hospital - Whether exemption notification calls for consideration of ground realities pragmatically to make that workable? - Matter referred to President to resolve difference of views between Member (T) and Member (J)</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Appellant, are a super specialty hospital in New Delhi. They, during 1989 to 1993 period, imported 85 consignments of various medical equipments free of duty under Notification No.64/88-Cus dated 1.3.88. Notification No.64/88-Cus exempted from the whole of the customs duty leviable under first schedule to the Customs Tariff Act, 1975 and Additional Customs duty leviable under Section 3 of the Customs Tariff Act, 1975 subject to the conditions specified in it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font><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"><strong><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font>
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