TIOL-DDT 1954 · 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 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><font color="#663399" size="3">TIOL-DDT 1954</font><br> 03.10.2012<br> Wednesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Kelkar Wants Comprehensive Review of DTC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Kelkar Committee was appointed by the Finance Minister to give a report outlining a roadmap for fiscal consolidation in a medium term framework. The Committee says that keeping both urgency and credibility as touchstones, it has proposed necessary policy actions which are within the realm of feasibility. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indirect Taxes </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Union Excise Duties (UED) and Service Tax (ST) must be reformed so as to be in a state of preparedness for smooth integration of these levies into the Goods and Services Tax. The standard rate of 12 percent should be progressively reduced to align with the GST rate of 8 <strong>percent </strong>proposed for the Central GST. This will send out positive signals regarding Government's commitment to introduce GST. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The list of commodities subject to UED at a lower rate of 6 percent should be comprehensively reviewed to restrict it to <strong>merit goods</strong>. The rate of tax in the case of all other goods should be increased to the standard rate. Similarly, list of all commodities liable to tax at rates lower than 6 percent should also be reviewed to restrict it to merit goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The negative list of services introduced in the Union Budget, 2012 should be reviewed for further pruning. For example, there is no case for exempting non-profit organizations from the Service Tax levy. <font color="#FF0000">[Who told him they are exempted?]</font> Similarly, exempting infrastructure projects from the levy implies that the tax on inputs is embedded into the cost of the infrastructure resulting in higher project cost. Further, even where exemption from UED and ST is justified, as a general rule, the supplier of goods and services should have the option to opt into the system.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. CBEC should put in place a robust information system to increase the deterrence level and the cost of evasion. Since both Union Excise Duties and Service Tax are VAT-type, the information system should provide for a mechanism for cross- verification of all claims for input-tax credit. At present, such a mechanism does not exist. As a result, the ability of the Excise Department to detect fraudulent claims is severely undermined. Therefore, CBEC should also develop a model for comprehensive cross-verification of claims for input tax credit . This will significantly improve the economics of non-compliance in favour of the tax administration. Further, this should be implemented immediately and <strong>need to wait</strong> till the introduction of the GST. [<font color="#FF0000">What he means is perhaps it need NOT wait till GST. You don't need Kelkar to tell you this; you should have done it long ago. The CBEC had been experimenting with computerization and wasting crores of rupees and still they don't have a proper system to capture data on input credit</font>.] </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Effort should be made to expedite the implementation of the Goods and Services Tax as recommended by the Thirteenth Finance Commission (TFC). This will enhance output, exports and tax revenues. Even though the roll-out of GST from 1st April, 2013 does not appear to be feasible, the passage of the pending Constitutional Amendment relating to introduction of GST in the Winter Session of the Parliament would send out very strong signal to trade and industry about Government's serious intent to move forward on this issue. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Direct Taxes: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Direct Taxes Code Bill, 2010 which intends to revamp the law relating to direct taxes is likely to result in considerable unacceptable losses on a continuing basis. Given the low tax-GDP ratio and the existing fiscal crisis, there is absolutely no fiscal space for such large revenue loss. Therefore, the Direct Taxes Code Bill, 2010 <strong>should be comprehensively reviewed before it is enacted into law for implementation. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The following measures are recommended to improve efficiency of the tax administration:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>a. </strong>Establish a data-warehousing and data-mining infrastructure within the tax administration and build capacity for undertaking data mining and taxpayer profiling. The tax administration should introduce one-year intensive and mandatory induction training in data-mining for all direct recruit inspectors and Assistant Commissioners. The training could be organized in co-operation with large IT companies. The programme should gradually be extended to in-service Inspectors, Assistant and Deputy Commissioners. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>b.</strong> Modernize the out dated and ineffective scrutiny and investigation processes by shifting from the current system of carrying out a post- mortem after two years to real-time verification of transactions reported under TDS, AIR and STRs sent by the Financial Intelligence Unit (FIU). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>c. </strong>A large volume of data continues to be collected by the Central Information Branch. The problems associated with this method of collection are well-documented in the various reports on tax reforms by various expert committees in the past. This system should be fully- integrated with the AIR to facilitate cross-verification. The CIB should be assigned the responsibility of managing the composite data-base and undertaking verification. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>d. </strong>The requirement of obtaining PAN is mandatory for taxpayers and those undertaking specific transactions. The law should be amended to provide quoting of PAN or the UID in all economic transactions including bank accounts, fixed deposits with banks, all financial transactions, all salary payments and all immoveable property transactions. This requirement should be mandatory irrespective of the amount/level of transaction so as to prevent splitting of transaction; and whether the person is liable to tax or not. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>e. </strong>Undertake reconciliation of the ITR and TDS database for- i. expanding and deepening of the tax base; and ii. Identifying those deductors who have issued TDS certificates to deductees but have failed to report the deduction and also failed to remit the amount to the Central Government. Enforce collection of such unpaid amount. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>f. </strong>Undertake data-mining of ITRs and TDS returns to-identify all deductors who have claimed to have deducted the tax but have failed to remit the same to the account of the Central Government. Enforce collection of such unpaid amount; and identify all taxpayers who have failed to pay to self-assessment tax and enforce immediate collection;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>g. </strong>Since there is no interest liability if the shortfall is less than 10 percent of the total liability, there is a tendency to defer payment of advance tax. This tendency is more pronounced when the cost of borrowing is high. In order to discourage taxpayers from deferring payment of advance tax, identify all cases where self-assessment tax has been paid or payable and take steps to prevent deferment of advance tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>h.</strong> Amend the provisions of <strong>all tax laws</strong> to charge interest at rates which reflects the market rate of interest to the defaulters and a penalty for such default; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>i.</strong> TDS administration should be re-engineered to optimize efficiency and minimize leakages. In this regard, a notification no S.O. 858 (E) dated 25th March, 2009 streamlining the compliance management of TDS was issued but later withdrawn since the tax administration was not prepared to implement. Since more than three years have elapsed, the notification should be re-issued; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>j.</strong> The Income Tax Department should immediately set-up a separate Directorate of Risk Management for designing a robust risk management system which will improve the efficiency of the tax administration and enhance transparency; </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">k.</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Non-issue of refunds is a constant source of grievance for taxpayers. When tax administration issues refund, it inspires taxpayers' confidence in the tax administration. <font color="#FF0000">Taxpayers err on the side of revenue and pay excess tax. This has a positive effect on compliance.</font> Therefore, all pending refunds should be issued at the earliest. This will also improve liquidity of taxpayers and reduce their dependence on market borrowings at a relatively high interest rate. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>l.</strong> Another source of constant grievance relates to failure of the tax administration to carry out rectifications and appeal effect. The Department should create a national portal to enable taxpayers to file applications seeking rectifications and appeal effect. This will enable the management in the tax administration to monitor progress in the disposal of such applications. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>m.</strong> A 360 degree profile of all taxpaying individuals and institutions should be created to help decrease tax evasion and tax fraud. This profile should also draw information from the AIR, TDS and other databases of the Income tax Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>n.</strong> Online verification of PAN could be made mandatory for all high value transactions, in order to reduce black money transactions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Kelkar <a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/Kelkar_Committee_Report_September2012.pdf">Committee Report</a></strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">What is Sanctity of CBEC Transfer orders? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong> 7th June 2012, the Board issued a transfer order of 60 Joint/Addl Commissioners. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Order clearly stipulated, "<em>All the officers mentioned above must be relieved immediately and they must join at their new place of posting on or before 22.06.2012, under intimation to the Board. <strong>No representations whatsoever shall be entertained before the officers join at their new places of posting</strong>." </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 28th September 2012, the Board issued another transfer order of 14 Joint/Addl Commissioners. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This order also clearly stipulates, "<em>All the officers mentioned above must be relieved immediately and they must join at their new place of posting on or before 12.10.2012, under intimation to the Board. <strong>No representations whatsoever shall be entertained before the officers join at their new places of posting</strong>.</em>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This second transfer order contains the names of five officers who figured in the first transfer order also. And all five of them have been retained in their original place of posting. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apparently these officers did not join at the new place as directed by CBEC and contrary to what CBEC preaches in all the transfer orders, their representations were considered before they joined their new places of posting. Where were these officers for the last three months? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, everybody knows that the Board is not serious when it says that a transferred officer has to be relieved by a particular date and that their representations will not be considered before they join. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is not doubted even remotely that these officers deserve to be retained in their existing posts; they all surely have genuine reasons. But what about the officers who obeyed the Board and joined at the new places? They are condemned, for no fault, other than respect for the Board! Will they not learn a lesson? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why should the Board lose its credibility by lofty declarations that transferred officers have to join at the new place and that representations will not be considered? Why can't they simply say that the transfer orders are provisional and subject to changes as are unavoidable and officers are invited to submit their representations and use all pressure tactics latest by...</font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Filling of Balance Sheet and profit and loss Account by companies in Non-XBRL - Date Extended </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Ministry of Corporate Affairs has extended the due date of filing of e-forms 23AC (Non-XBRL) or 23ACA (Non-XBRL) without any additional fees:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) Company holding AGM or whose due date for holding AGM is on or before20/09/12, the time limit will be 03/11/12 or due date of filing, whichever is later. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Company holding AGM or whose due date for holding AGM is on or after 21/09/12, the time limit will be 22/11/12 or due date of filing, whichever is later. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similarly, with the approval of the competent authority, the filing of e-form 23B is extended without any additional fees till 23/12/12 or due date of filing, whichever is later. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_30_2012.htm" target="_blank">Ministry of Corporate Affairs General Circular No. 30/2012., Dated: September 28, 2012</a> and <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_31_2012.htm" target="_blank">General Circular No. 31/2012., Dated: September 28, 2012 </a></font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Running Officers - Cheering Chairperson</font></strong></p> <p align="center"><img src="http://www.taxindiaonline.com/RC2/image/stories/running_officers.jpg" alt="Legal Corner Icon" width="400" height="300" hspace="5" border="0" align="center"></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> was all in the game – The officers were running the Delhi Marathon and they had the honour of having their Chief to cheer them. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Chairperson, Central Board of Excise Customs (CBEC), Praveen Mahajan, was present to flag off and cheer officers of CBEC participating in the 5th Delhi Half Marathon. 42 officers of CBEC, mostly probationers participated in the Half Marathon held on 30th September, Sunday. Ten of them ran for the half marathon of 21 kms and 32 officers participated in the Great Delhi Run of 6kms. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC Chief looks as young as some of the probationers! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was the first ever participation by the officers of CBEC, who ran with the slogan "<font color="#FF0000"><strong>A NATION IS MADE, WHEN TAXES ARE PAID</strong></font>". </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"> – Thursday'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">Recovery of arrears – Central Excise dues cannot have precedence over claims made by Banks: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> oft-repeated dispute of whether the tax dues to the Government have the precedence over the secured creditors like banks and other financial institutions has been resolved again by the High Court of Andhra Pradesh while disposing of a bunch of Writ Petitions filed by the Financial Institutions / Banks and the Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 12 of the Central Excise Act enables Government to make applicable the provisions of the Customs Act relating to various aspects of <em><strong>levy </strong></em>and <em><strong>collection</strong></em> of Customs duty etc and when Section 12 is silent as to the procedure of <em><strong>recovery</strong></em> of sum due to government under the Customs Act, vires of notification No.68/63 is doubted. The Bench, however, decided the case on the assumption that Section 11 of the Central Excise Act, 1944 read with Notification No 68/63 CE(NT) enables the empowered officer to recover the excise dues also by attachment and sale of movable or immovable property as the vires of notification No.68/63 was not specifically challenged. </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">Income tax - Whether when assessee incurs certain expenditure on abandoned project, even if such expenses are pre-operational in nature, it is to be allowed as revenue expenditure - YES: 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 the expenses on lease-rent can be claimed as revenue expenditure when lease agreement has all the features of a hire-purchase agreement; Whether when there is a binding obligation on the hirer to ultimately purchase the leased asset, it is a case of hire purchase; Whether there is any difference between the 'lease' and 'hire purchase' transactions and Whether when the assessee incurs certain expenditure on abandoned project, even if such expenses are pre-operational in nature, it is to be allowed as revenue expenditure. And the verdict goes against the Revenue. </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">Appellants engaged in brand promotion of ‘INTEL' and ‘MICROSOFT' for which commercial considerations were being paid by both brand owners periodically - Matter referred to third Member: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants are engaged in brand promotion of ‘INTEL' and ‘MICROSOFT' for which commercial considerations were being paid by both the brand owners periodically. It appeared that the services provided by the appellants are taxable under ‘Business Auxiliary Service' as per Finance Act, 1994 effective from 01.07.2003. It was found that the appellants were not discharging their service tax liability on the commercial considerations received by them from the two brand owners. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Member (Judicial) held: the appellants are engaged in the activity of promoting the brand of Intel/Microsoft consequently, the activity of ‘promotion or marketing of logo or brand' does not cover under the category of Business Auxilliary Service by relying on the judgment of Jetlite (India) Ltd. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Member (T) held: the appellants are engaged in the activity of promoting the branded goods of Intel/Microsoft, therefore, the judgment of Jetlite (India) Ltd., (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxilliary Service and the extended period of limitation has rightly been invoked. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Matter referred to Third Member.</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 align="justify"><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>