TIOL-DDT 1973 · the untouched capture
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<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 1973</font><br>
31.10.2012 <br>
Wednesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Confusing Lines in Education Guide </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> a smooth transition into the new Service Tax regime, Team Negative List, (read TRU) released an Education Guide on 20th June 2012. The then Chairman CBEC in his message remarked, "our sincere effort will help to narrow the areas of differences while providing the taxpayers a ready guide for reference". While the effort is laudable, considering the enormous changes made, the Education Guide, instead of narrowing the areas of differences, has added a little more confusion in some areas. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While explaining the Service tax on export/import shipments, vide para 5.9.6, an illustration has been provided as under:</font></strong></p>
<blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Illustration </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A freight forwarder arranges for export and import shipments. There could be two possible situations here - one when he acts on his own account, and the other, when he acts as an intermediary. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the freight forwarder acts on his own account (say, for an export shipment) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A freight forwarder provides domestic transportation within taxable territory (say, from the exporter's factory located in Pune to Mumbai port) as well as international freight service (say, from Mumbai port to the international destination), under a single contract, on his own account (i.e. he buys-in and sells freight transport as a principal), and charges a consolidated amount to the exporter. This is a service of transportation of goods for which the place of supply is the destination of goods. Since the destination of goods is outside taxable territory, this service will not attract service tax. Here, it is presumed that ancillary freight services (i.e. services ancillary to transportation- loading, unloading, handling etc) are "bundled" with the principal service owing to a single contract or a single price (consideration). </font></p>
<p align="justify"><u><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">On an import shipment with similar conditions, the place of supply will be in the taxable territory, and so the service tax will be attracted. </font></strong></u></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is the above sentence is creating confusion among the trade and industry. While it is true that for import shipments, the place of supply will be in the taxable territory, as per Section 66D(p), the following services are covered under negative list: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">services by way of transportation of goods- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) by road except the services of- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(A) a goods transportation agency; or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(B) a courier agency; </font></p>
<p align="justify"><strong><u><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) by an aircraft or a vessel from a place outside India to the customs station of clearance in India; </font></u></strong></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the transportation of goods by an aircraft or a vessel from a place outside India to the Customs station of clearance in India is under negative list, the question of payment of service tax on such import shipments, by applying place of provision of service does not arise (save transportation by Road which is governed by a different set of provisions). <font color="#FF0000">Perhaps this negative list entry was not considered while drafting the above Illustration resulting in contradiction between the statutory provisions and the Education Guide</font>. One can only hope that the issue will be examined by the Team Negative list again.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CRR Cut by 25 Basis Points - No Change in Policy Interest Rate </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RESERVE</strong> Bank of India has cut the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.5 per cent to 4.25 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning November 3, 2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reduction in the CRR, will inject around Rs.175 billion of primary liquidity into the banking system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no change in policy interest rate. Accordingly, the repo rate under the liquidity adjustment facility remains at 8.0 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently, the reverse repo rate under the liquidity adjustment facility (LAF), determined with a spread of 100 basis points below the repo rate, will continue at 7.0 per cent, and the marginal standing facility (MSF) rate, determined with a spread of 100 bps above the repo rate, at 9.0 per cent. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why the Change? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Governor, Subba Rao has explained the rationale behind the policy action: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The decision to cut the CRR and keep the policy interest rate unchanged draws from the assessment of the evolving liquidity situation and the growth-inflation dynamic. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Liquidity: Systemic liquidity deficit has been high because of several factors: the wedge between deposit and credit growth, the build-up of Government's cash balances from mid-September and the drainage of liquidity on account of festival-related step-up in currency demand. This high systemic deficit will have adverse implications for the flow of credit to productive sectors and for the overall growth of the economy going forward. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ As regards the growth-inflation balance, headline WPI inflation moderated from its peak of 10.9 per cent in April 2010 to an average rate of 7.5 per cent over the period January-August 2012. During this time, growth has slowed and is currently below trend. This slowdown is due to a host of factors, including monetary tightening. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Since April 2012, the Reserve Bank's monetary policy stance has sought to balance the growth-inflation dynamic through calibrated easing. The transmission of these policy impulses through the economy is still underway. In conjunction with the fiscal and other measures recently announced by the Government, the Reserve Bank's monetary policy stance should work towards arresting the loss of growth momentum over the next few months. Yesterday's statement by the Finance Minister reaffirming commitment to fiscal consolidation will open up space for monetary policy to restrain inflation and support growth. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Inflation: It turned up again in September, reflecting the partial pass-through of adjustment of diesel and electricity prices, and elevated inflation in non-food manufactured products. It is, therefore, critical that even as the monetary policy stance shifts further towards addressing growth risks, the objective of containing inflation and anchoring inflation expectations is not de-emphasised. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CRR is a waste - SBI Chairman:</strong> The SBI Chairman was as usual not impressed. He says, "CRR is a waste" for the economy and successive interest rate cuts by central bank have failed to contain inflation. The SBI Chairman reiterated his demand to do away with CRR. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Use Official e-mail id - CBDT tells its Officers </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT</strong> tells the Chief Commissioners and Commissioners that its policy is that all important communications are to be sent through official email ids. Official email ids have been created for all Chief Commissioners and Commissioners including DGs and Directors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the senior officers start using their official emails? A Netizen asked me the other day as to why the government officers are using private email ids and not the government ones. Maybe the government emails don't work! DDT has been continuously campaigning for use of government email ids in place of the private ones. See <strong>DDT <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10393" target="_blank">1299</a> , <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11233" target="_blank">1418</a> & <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11299" target="_blank">1428</a></strong>. Hopefully the CBEC should also follow in the footsteps of the CBDT </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sernews/order/imail.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT F.No.e
Gov/iMail.Systems/3/2012-13, Dated: October 29, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax - Government Amends Capital Gains Accounts Scheme, 1988 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> new Section 54GB was inserted in the Income Tax Act by the Finance Act 2012 to provide that where the capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 utilises the net consideration for subscription in the equity shares of an eligible company and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer takes place, it shall be dealt with in accordance with the provisions of this section, that is to say, if the amount of the net consideration is greater than the cost of the new asset, then, so much of the capital gain as it bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 as the income of the previous year or if the amount of the net consideration is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 as the income of the previous year.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It further provided that the amount of the net consideration, which has been received by the company for issue of share to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the said due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the company, before the due date of furnishing, in an account in any such bank or institution as may be specified and shall be utilised in accordance with any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is also provided that the provisions of this section shall not apply to any transfer of residential property made after the 31st day of March, 2017.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was also provided to define the expressions "eligible assessee", "eligible company", "net consideration" and "new asset" for the purpose of this section.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These amendments will take effect from the 1st day of April, 2013 and will, accordingly, apply in relation to the assessment years 2013-2014 and subsequent assessment years.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently, the Government has now amended the Capital Gains Accounts Scheme, 1988 and this new section 54GB is inserted in various provisions of the Scheme, apart from other minor changes.</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2012/it12not044.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Notification No. 44/2012, Dated: October 25, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Angry Spouses as Informers </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>English HM Revenue & Customs is increasingly using the services of informers to increase Revenue - and one important source is - believe it or not, spouses involved in acrimonious divorce proceedings. A spouse involved in bitter divorce litigation will be more than happy to provide information about the life partner (soon to be ex) and the HMRC is happy to use such persons. Anything to get your tax! </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><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"><strong><font color="#663399">Service Tax </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit conducted in year 2009 and demand raised in respect of GTA service which applicant paid - later in October, 2010 SCN issued for period 2005-06 onwards demanding ST of Rs.6.35 Crores on gross amounts received in respect of various contracts of Erection, Installation & Commissioning - Prima facie applicant has strong case on issue of time bar: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>applicants are providing taxable services under erection, commissioning and installation of power stations to various Electricity Boards and also to other customers. Applicants are paying service tax on 10% of the value of the material used in respect of the erection, commission or installation where the service provider is the State Electricity Boards. Applicants are paying 15% on the contract amount received from other customers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue is demanding service tax of Rs. 6,35,71,242/- after taking into consideration the gross amount received in respect of the various contracts. </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 assessee is entitled to exemption u/s 54 in respect of purchase of tenancy rights in a residential property - NO: ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> sold a bungalow and purchased tenancy rights in two flats. Assessee claimed exemption u/s 54 of the Act because of the investments made in acquisition of the tenancy rights. AO observed that the exemption u/s 54 in respect of capital gain from sale of residential house property was available only when the assessee purchased or constructed a new residential flat. Assessee purchased only tenancy rights. The issue before the Tribunal is - Whether the assessee is entitled to exemption u/s 54 in respect of purchase of tenancy rights in a residential property. And the answer goes against the assessee. </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">Notfn. 23/2003-CE - Applicant exporting concentrated ceramic colours and clearing diluted ceramic colours to DTA by claiming the benefit of Notification - Revenue denying benefit on ground that what is cleared to DTA is not similar - similar goods means which are similar or which belong to same class of goods exported - Prima facie benefit of notification available - Pre-deposit of dues waived and stay granted: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>applicant is a 100% EOU and engaged in the manufacture of ceramic colours. The applicant got permission to sell the goods in DTA and the applicant cleared the goods to DTA by availing the benefit of Notification 23/2003-CE. The benefit of the Notification is being denied on the ground that the goods cleared to DTA are not similar to the goods exported. Accordingly, a demand of Rs.1.37 Crores was confirmed along with interest and penalties by the CCE, Belapur. The applicant is before the CESTAT with a Stay application. </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>
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