TIOL-DDT 1916 · 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 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="#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><font color="#663399" size="3">TIOL-DDT 1916</font><br> 06.08.2012 <br> Monday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income tax - No Deduction for Freebies to Doctors </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT</strong> has noticed that some pharmaceutical and allied health sector Industries are providing freebies to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India which is a regulatory body constituted under the Medical Council Act, 1956. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under Section 37(1) of the Income Tax Act, deduction is allowed of any revenue expenditure from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose, which is either an offence or prohibited by law. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board clarifies that the claim of any expense incurred in providing above mentioned or similar freebies in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee that has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has further clarified that the sum equivalent to value of freebies enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources, as the case may be, depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2012/it12cir05.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Circular No. 5/2012., Dated: August 01, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax - No Compulsory E-Filing of Return for Representative Assessees of NRIs </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Rule 12 of the Income-tax Rules, 1962, an individual or Hindu undivided family, if his or its total income or the total income in respect of which he is or it is assessable under the Act, during the previous year, exceeds ten lakh rupees, shall furnish the return electronically for the assessment year 2012-13 and subsequent assessment years. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been brought to the notice of the Board that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The agents of non-residents are facing difficulties in electronically furnishing the returns of non-residents. This is because there may be more than one agent of the non-resident in India for different transactions or a person in India may be an agent of more than one non-resident. Such situations are not covered by the existing e-filing software which functions on the principle of one assessee-one PAN-one return. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. ‘Private discretionary trusts' having total income exceeding ten lakh rupees are facing problems in filing their return of income electronically in cases where they are filing their return in the status of an individual. This is because status of a private discretionary trust has been held in law as that of an ‘individual'. The existing e-filing software does not accept the return of a private discretionary trust in the status of an ‘individual'. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has now decided that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. It will not be mandatory for agents of non-residents, within the meaning of section 160(1) (i) of the Income -tax Act, if his or its total income exceeds ten lakh rupees, to electronically furnish the return of income of non-residents for assessment year 2012-13; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. it will not be mandatory for ‘private discretionary trusts', if its total income exceeds ten lakh rupees, to electronically furnish the return of income for assessment year 2012-13. </font></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=36&filename=notification/cbdt/2012/it12cir06.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Circular No. 6/2012., Dated: August 03, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Cross Objection - A Parallel Appeal </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> happens if you have not appealed against the order of a Commissioner and the other party has appealed to the Tribunal? All doors are not closed and you still have a chance to appeal. Just have a look at Section 35B (4) of the Central Excise Act 1944. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 35 B(4): <strong>On receipt of notice that an appeal has been preferred under this section, the party against whom the appeal has been preferred may, notwithstanding that he may not have appealed against such order or any part thereof, file, within forty-five days of the receipt of the notice, a memorandum of cross-objections verified in the prescribed manner against any part of the order appealed against and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).</strong> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is an identical provision in Section 129 A(4) of the Customs Act. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So even if you have not appealed, if the other party had appealed, you are given another opportunity to appeal by way of cross objection and the cross objection is treated as if it is an appeal. This is a scarcely understood and rarely used provision of the law, at least by the department. Board had noticed this lapse thirteen years ago. In Circular No.<strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/1999/excircular453.htm" target="_blank">453/19/99-CX</a></strong>., dated 9-4-1999, Board observed, <em>"It has been brought to the notice of the Board that the Commissioners of Customs and Central Excise in the field are generally neither filling Cross Objections under Section 35B(4) of the Central Excise Act or Section 129A(4) of the Customs Act against the appeals filed by the assessees/importers in CEGAT…". The Board, therefore directed that, "Commissioners shall, henceforth, ensure quick critical examination undertaken on appeals filed by parties in CEGAT relating to their charge, in all cases involving important law points and revenue of more than Rs. 20 lakhs each and file a memorandum of Cross Objections in the Tribunal with copy to the concerned CDR/JCDR/SDR (regional benches), within 45 days of receipt of notice from CEGAT (as per Section 35B(4) or Section 129A(4) of Central Excise & Customs Act) …" </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Following Board instructions and filing cross objections are not really favourite pastime of the Commissioners. Board realised this and reiterated the instructions inCircular No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2001/excircular596.htm" target="_blank">596/33/2001-CX</a></strong>, dated 5-11-2001. The Board sadly commented ,<em> "It has been brought to the notice of the Board that the field Commissioners both in Customs as well as in Central Excise, in spite of Board's Circular No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/1999/excircular453.htm" target="_blank">453/19/99-CX</a></strong>, dated 9-4-1999 issued vide F. No. 390/48/90-JC are neither filing Cross Objections under Section 35B(4) of the Central Excise Act or Section 129A(4) of the Customs Act against appeals filed by the assessees or importers in CEGAT" The Board further lamented that, "<a>It has been brought to the notice of Board that most of the time, neither Cross Objections are being filed nor comments are being furnished. </a>Even in cases where specific comments are sought for, by the Departmental Representative or suomotu comments sent by Commissionerates, the same are being furnished by a junior functionary without much application of mind and that too not expeditiously." </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board had to reiterate these instructions in Circular No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2003/excircular710.htm" target="_blank">710/26/2003-CX</a></strong>., dated 23-4-2003 where it said , <em>"Cross objections are <strong>not being </strong>filed to derive the benefit of Section 35B(4), <strong>under which parallel appeal can be filed by the Department in the form of a Memorandum of Cross Objection, which is to be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3) of the said Section. On receipt of appeal memo filed by the party, simply para wise comments are being filed thereby nullifying the opportunity given to the Department to seek favourable orders on issues conceded (wrongly) by the lower authority. </strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Most often, neither the Department nor the assessee is aware that the Cross Objection is another opportunity to file an appeal.</font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Customs Postage Stamp</font></strong></p> <p align="center"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Postage_Stamp.jpeg" alt="The Customs Postage Stamp" width="350" height="458" hspace="5" border="0" align="center"></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 color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> - Tuesday'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">Central Excise</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mutton masala packing machine presumed to be used for packing Pan Masala gutka - C.Ex duty demand of Rs.13.67 Crores confirmed on assumption and presumption - prima facie strong case in favour - Pre-deposit waived and stay petition allowed: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> case of the Revenue is that the applicants had not followed the procedure laid down under Rules. From the records, it is found that the applicants have filed necessary declaration on asking by the Revenue. In the declaration, the applicant specifically mentioned that there is no packing machine installed in their factory. In the forwarding letter also, the applicants intimated that no production of Pan Masala Gutka is being undertaken. There is no evidence on record to show that the applicants had manufactured Pan Masala Gutka. As per the information received under RTI, it was specifically informed that ShriMahajan, Inspector has not submitted any findings in relation to existence of any pouch packing machine for packing of Pan Masala and Pan Masala with Tobacco. </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 when assessee carries forward business loss, same has to be necessarily set off against business profits and not income under other heads in subsequent year - NO: Delhi HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is carrying on the business of sale and purchase of properties and also earning rental and other income. The assessee set off the business loss brought forward against its income by way of rent; car and computer hire charges and commission income and declared a net loss. AO held that rental income was chargeable to tax under the head "income from house property" and that the hire charges and commission income was chargeable to tax under the head "income from other sources", therefore, the brought forward business loss was not permitted to be set off against the income shown under these two heads of income u/s 72(1). The relevant Section permitted adjustment of brought forward business loss only against profits assessed under the head "business". </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">Advertising Services - Amount of "Write backs" viz. amount retained by paying less to media than that received from client is prima facie chargeable to Service Tax - pre-deposit ordered of Rs.34 lakhs - ST prima facie not leviable on "Volume discounts": CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>applicant undertook advertising work for their clients and which comprised of the following - (i) creation of advertising material and (ii) placement of advertising material in the media for display. For providing this service to their client i.eadvertising, they are getting certain commission and discharging the service tax liability. There is no dispute on that. The dispute is regarding the payments received by applicant for media cost. For example out of Rs.100/- billed to the client, Rs.85/- is as media cost and Rs.15/- as commission (which is taxable). Out of Rs.85/- only Rs.80/- is actually paid to the media/broadcaster. As the applicants are paying less amount to the broadcaster and keeping some amount with them which has been written off in the books of accounts as "write backs", a service tax demand was issued and the same has been confirmed under the category of "advertising agency service", the amount involved is Rs.1,36,84,668/-. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrowfor 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>