TIOL-DDT 1979 · 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 1979 </font><br>
08.11.2012<br>
Thursday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax by Restaurants - A Little Garnishing </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WITHIN a few minutes of uploading yesterday's <strong>DDT</strong>, we received several calls and mails from Netizens seeking more light on the issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Someone wanted to know if it is legal to collect service tax by all restaurants. Absolutely <strong>NOT</strong>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">First of all, is the activity of supplying food by a restaurant liable to Service Tax? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 66E (i) of the Finance Act 1994, <font color="#663399">"<em>service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity</em>" </font>is a declared service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Act, <font color="#663399">"declared service" means any activity carried out by a person for another person for consideration and declared as such under section 66E ; and "service" means any activity carried out by a person for another for consideration, and includes a declared service.</font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, supply of food, is a declared service - of course only the service portion in the activity of supply of food is liable to Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again, not all restaurants are levied Service Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Entry No 19 of Notification No 25/2012 ST dated 20.06.2012 exempts: </font></p>
<blockquote>
<p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages; </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, service tax is applicable only if the restaurant has the facility of air-conditioning or central air heating in any part of the establishment at any time during the year (year has not been defined - Previous version of this tax under sub-clause 65(105)(zzzzv) clearly mentioned "financial year" - Now apply General Clauses Act?)and also has a licence to serve alcoholic beverages. If the restaurant does not have any of these two, no service tax will be applicable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Someone asked about the valuation. In the example quoted yesterday, since the service charges (Rs 100/-) are shown separately in the Bill, he pointed out that service tax payable will be only Rs 12.36/- but not Rs. 54.34/-, computed at the rate of 12.36% on 40% of the gross amount charged. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is important to note that serving of food in a restaurant is a composite transaction involving sale and service. While food is sold, services relate to the use of restaurant space and furniture, air-conditioning, waiters, linen, cutlery and crockery, music etc which are included in the Bill. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Article 366 (29A) includes the following in the definition of "tax on sale or purchase of goods" </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Having recognized serving food in a restaurant as a composite transaction, the question arises as to how to identify the service component. For arriving at the service component, an abatement of 60% has been provided for food sold under Rule 2C of Service Tax (Determination of Value) Rules, 2006 and the rest of the bill amount (i.e 40%) relates to services provided by restaurant on which restaurant is liable to pay service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In yesterday's example, though Rs 100/- has been shown separately as service charges, these charges are often shared among the staff who attend on the customers. This amount does not represent full value of the service rendered by the restaurant, like space and furniture, air-conditioning, waiters, linen, cutlery and crockery, music etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hence, in the example given yesterday, there is absolutely no error in computing tax liability. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our last caller asked, "What if I carry my own bottle to the restaurant and get intoxicated"? Should the value be included? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, after getting intoxicated, it doesn't really matter even if the neighbouring table Bill value is also included! </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Budget 2013 - Suggestions from Industry and Trade Associations Sought </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Finance Ministry has sought suggestions from the Industry and Trade Associations in the context of formulating the proposals for the Union Budget of 2013-14. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The suggestions and views may be supplemented and justified by relevant statistical information about production, prices, revenue implication of the changes suggested and any other information to support the proposal. It would not be feasible to examine suggestions that are either not clearly explained or which are not supported by adequate justification/ statistics. Further, as regards direct taxes, the government policy is to phase out profit linked deductions and minimizes exemption. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suggestions and views may be emailed, as word document in the form of separate attachments, in respect of: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indirect Taxes (1. Customs and Central Excise, 2. Service Tax) to<strong> <a href="mailto:budget-cbec@nic.in">budget-cbec@nic.in</a></strong><a href="mailto:budget-cbec@nic.in"> </a>and 3. Direct Tax to <a href="mailto:ustpl3@nic.in"><strong>ustpl3@nic.in</strong> </a></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hard copies of the Pre-Budget proposals/ suggestions relating to Customs & Central Excise may be sent to Shri P. K. Mohanty , Joint Secretary (TRU-I), and Service Tax to Shri V K Garg, Joint Secretary (TRU-II), CBEC, while the suggestions relating to Direct Taxes may be sent to Shri Sunil Gupta, Joint Secretary, Tax Policy and Legislation (TPL), CBDT. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/budget_suggestions_letter_2013.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MoF DoR TRU F.No.334/6/2012-TRU, Dated: November 06 2012. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Free Bonds for 2012-13 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has notified the following entities to issue during the financial year 2012-13 tax-free, secured, redeemable, non-convertible bonds, aggregating to amounts mentioned against each. </font></p>
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<td valign="top"><p align="center"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">S. No. (1) </font></em></p></td>
<td valign="top"><p align="center"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Entities (2) </font></em></p></td>
<td valign="top"><p align="center"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Aggregate amount of bonds (3) </font></em></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">National Highways Authority of India </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 10,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Indian Railway Finance Corporation Limited </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 10,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">India infrastructure Finance Company Limited </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 10,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Housing and Urban Development Corporation Limited </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 5,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">National Housing Bank </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 5,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Power Finance Corporation </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 5,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rural Electrical Corporation </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 5,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Jawaharlal Nehru Port Trust </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 2,000 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dredging Corporation of India Limited </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 500 crores </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ennore Port Limited </font></p></td>
<td valign="top"><p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs. 1,000 crores </font></p></td>
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</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Eligibility.</strong> - The following shall be eligible to subscribe to the bonds:- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) Retail Individual Investors (RII); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Qualified Institutional Buyers (QIBs); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Corporates;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) High Net Worth Individuals (HNIs); </font></p>
</blockquote>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2012/it12not046.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Notification No. 46/2012, Dated: November 06 2012. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit of Money Changers - RBI Instructions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per the existing RBI instructions of RBI, <em>all single branch Authorised Money Changers (AMCs) having a turnover of more than USD 100,000 or equivalent per month and all multiple branch AMCs should institute a system of monthly audit</em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On a review based on representations received, it has been decided to allow AMCs having multiple branches to put in place a system of Concurrent Audit which will cover80 per cent of the transactions value-wise under a system of monthly audit and rest 20 per cent of the transactions value-wise under quarterly audit. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir050.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI AP (DIR Series) Circular No. 50, Dated: November 07 2012. </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Chidambaram, Shome, Monica in Global Tax 50 </font></strong></p>
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<td><div 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"><img src="http://www.taxindiaonline.com/RC2/image/stories/web_intl_tax_review.png" alt="" width="120" height="107" hspace="5" border="0" align="left"></font>INDIA's</strong> </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Minister P. Chidambaram, IRS Officer Monica Bhatia, Parthasarathi Shome and WCO Secretary General Kunio Mikuriya figure in the International Tax Review's Global Tax Top 50 for 2012. The list includes the President of Chile, the President of France, Australia's Deputy Prime Minister and Treasurer, Mauritius' Minister of Foreign Affairs, the Chairman of the US Senate Finance Committee, etc.</font> </font></div></td>
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<td><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Monica_Bhatia.png" alt="" width="60" height="70" hspace="5" border="0" align="left"></font>MONICA BHATIA</strong> is an IRS officer from India's CBDT, currently with OECD. <strong>(Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14418" target="_blank">DDT 1808-05.03.2012</a>)</strong>. In her 21 years of experience in the Indian Revenue Service, she says she has played different roles; that of a tax auditor, of a DR in the Tribunal, a policy maker, a negotiator of tax treaties and an official in the Exchange of Information Unit.</font></div></td>
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<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Objective of DTC is not to Amend the Income Tax Act - PC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FINANCE</strong> Minister Chidambaram told the ‘International Tax Review', the DTC needs a fresh look for no reason other than that there are several versions of the DTC. (<font color="#0000FF">How can there be several versions of the DTC? Who has authorised all these several versions?</font>) The objective is not to amend the Income Tax Act, 1961, which has already been amended hundreds of times. The objective is to write a new Direct Taxes Code (DTC). </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">What is PC's Biggest Achievement in, or influence on Taxation? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PC</strong> tells ITR, "<em>Two things come to mind immediately. The first is the new income tax slabs that I had implemented in the 1997-1998 budget. The three rates of 10%, 20% and 30% for individuals and the rate of 30% for corporates have, much to my surprise, survived several governments and three finance ministers! The other big achievement was the introduction of VAT in 2004-2005</em>." </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"> - Friday'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">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import - Section 149 of Customs Act, 1962 cannot be used to revive time expired refund claim: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>OBVIOUSLY</strong>, the appellants paid duty at higher rate than what was applicable, and they have woken up after several years and sought for refund in 2009 and did not succeed before the original authority and also before the Commissioner (Appeals). They have attempted to reopen the issue by invoking provisions under Section 149. Section 149 gives discretionary power to Customs authorities for amending the documents in certain circumstances. This provision cannot be used to revive a time expired refund claim </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 non-compete fee paid for gaining substantial market share over period of seven years is to be treated as revenue expenditure - NO: Delhi 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 non-compete fees paid for not engaging in a similar line of business for a period of seven years can give rise to an enduring benefit of capital nature; Whether such expenses can be classified as revenue expenditure u/s 37(1) of the Act, even though the assessee has gained a substantial market share out of such non-compete arrangement; Whether non-compete right which are rights in personam amounts to a depreciable intangible asset within the meaning of rights spelt-out in Section 32(1)(ii) of the Act; Whether a right in personam enforceable only against a specified person and not against the whole word, can satisfy the nature of intangible rights mentioned in Section 32(1)(ii) of the Act and Whether for a right to be classified as intangible asset, the same must be freely alienable. And the verdict 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">CENVAT credit cannot be denied simply on ground that goods manufactured by job worker are not received in factory of applicant but after payment of duty by job worker are further used for manufacture of goods which are finally cleared to appellant: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROBABLY</strong> the dispute involved is the brain child of an Audit team which had to come out with an objection as large as the company itself. To cite specifics, the demand notice is worth almost Rs.3.89 Crores. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And when such an Audit objection is approved by the Audit Board headed by the Commissionerate head, it does not require rocket science to tell one as to what would be the fate of the demand notice except being religiously confirmed along with equivalent penalty and interest. </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"> <strong><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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