TIOL-DDT 1996 · 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 1996</font><br> 05.12.2012<br> Wednesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Delhi High Court Quashes Rule 5(1) of Service Tax Valuation Rules</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Revenue winning spree is halted. It is a huge win for the assessees after the series of recent decisions in favour of the Revenue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, reads as: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Illustration 3 to this Rule reads as: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Illustration 3: A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the Petitioner Company is engaged in providing consulting engineer services and receives payments not only for its service but is also reimbursed expenses incurred by it such as air travel, hotel stay, etc. It was paying service tax in respect of amounts received by it for services rendered to its clients. It was not paying any service tax in respect of the expenses incurred by it, which was reimbursed by the clients. Department issued Show Cause Notice demanding service tax on the expenses reimbursed by invoking the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rules 2006. The Petitioner has challenged the provisions of Rule 5(1) in a Writ Petition. <a></a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi High Court, while allowing the petition, observed,<em> "We have no hesitation in ruling that Rule 5 (1) which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. To that extent it has to be struck down as bad in law. The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider "for such service" provided by him."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This may not be the end of litigation in this matter. The Budget is just round the corner and the Government would be tempted to retrospectively validate an invalid levy.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this landmark judgement today. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16431" target="_blank">Please see Breaking News</a></strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16431">.</a></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Act - Deduction under section 10A(1A) not allowed to an assesse who does not furnish a return of his income on or before due date specified under Sec.139(1) - This is Mandatory not merely directory - ITAT SB</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Section 10A (1A) of the Income Tax Act, deduction is allowed on export profits, but as per the proviso to this Section, no deduction shall be allowed if the return is not filed within the time limit specified under Section 139(1). In this case, the assessee filed the Return on 31.01.2007 when it was required to file the return latest by 31.12.2006. And the AO promptly disallowed the deduction. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question before the Special Bench of the ITAT was: "<em>Whether the proviso to Sec.10A(1A) of the Income Tax Act, which says that no deduction under Sec.10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sec.139(1), is mandatory or merely directory?</em>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Special Bench of the ITAT had no hesitation in holding that <font color="#FF0000">the provisions of the proviso to Section 10A(1A) is mandatory and not directory.</font> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this order today. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16430" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see Breaking News.</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on Digital Offset Printing Plates - Just In Time </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROVISIONAL</strong> anti dumping duty was imposed on Digital Offset Printing Plates originating in or exported from Peoples' Republic of China (China PR) and Japan, by Notification No. 31/2012 -Cus(ADD) dated 04.06.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While reporting this <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=15159" target="_blank">DDT-1873 - 06.06.2012</a></strong>, observed, "<em>The Board should mark somewhere on the wall that this notification expires on 03.12.2012 and if they want to extend it, they should do it before 03.12.2012.</em>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT is happy to note that the CBEC had indeed made a mark on the wall and they have now imposed definitive anti dumping duty on this product with effect from the date of provisional imposition. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They have issued this notification on 03.12.2012 - just a day before the expiry of the Provisional notification. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well Done Board! </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=337&filename=notification/custom/2012/ctariffadd12_051.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 51/2012-Cus.,(ADD), Dated: December 03, 2012 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">NDPS - Juvenile Delinquency - Age of Accused - When School Certificate is not disputed, no justification in relying on certain statements - SC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HOW</strong> do you determine the age of an accused in a NDPS case? Is he a juvenile to be tried by the Juvenile Justice Board or an adult who can be tried by a Criminal trial court? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the appellant pleaded that he was a juvenile at the time of offence based on his school certificate. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Trial Court did not accept the school certificate. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed, "<em>in a case where genuineness of the school leaving certificate has not been questioned, the Sessions Court and the High Court were not justified in placing reliance on certain statements made by Parkash Kaur, mother of the accused in the cross-examination. The Sessions Court also committed an error in placing reliance on the certificate issued by the village Chowkidar who was examined as RW2 . When the law gives prime importance to the date of birth certificate issued by the school first attended, the genuineness of which is not disputed, there is no question of placing reliance on the certificate issued by the village Chowkidar</em>" . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court held the appellant to be a juvenile on the date of the incident and had to be tried by the Juvenile Justice Board.</font></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see the Supreme Court Order - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2012/2012-TIOL-116-SC-NDPS.htm"><font size="1">2012-TIOL-116-SC-NDPS </font></a> </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Corporate Social Responsibility (CSR) - Statutory Status </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MINSTER</strong> of Corporate Affairs, Sachin Pilot had an interactive session with the leaders and senior executives from the corporate world in Delhi yesterday to discuss ways and means of making Corporate Social Responsibility (CSR) as a major contributor to growth and quality of life of the common people particularly as the Companies Bill now pending in the Lok Sabha proposes to give statutory status to this responsibility. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The minister emphasised the need for the corporates in the private sector to systematically plan and execute their CSR initiatives to build synergies and to achieve results that are visible within a short timeframe. While the Government wishes the corporates to decide the areas of activities and strategies for execution, it will be happy to play a facilitating role in the process. As a pointer to socially relevant activities, the Minister drew attention to the need to give priority to hygiene and sanitation in rural areas particularly for provision of toilets in Girls' schools in Government run and Government aided institutions in the Secondary and Senior Secondary sectors with water conservation technologies. 1.37crores girls are enrolled in the Country at Secondary Level (Classes IX-X) and 78.32 lacs at Senior Secondary level (classes XI and XII). There are 19,351 Girls only school in the Country, of which 10,365 are in the Government Sector, 6511 are Government Aided and 2475 are Privately Managed. Pilot said that espousing such projects as part of the CSR efforts would synergize public-private efforts in socially important areas. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The representatives in the interactive session were appreciative of the initiative taken and have promised to commence positive action with agencies like Indian Institute of Corporate Affairs and the National Foundation of Corporate Social Responsibility and the National Foundation of Corporate Governance set up with an outlay of 10 crores to play an enabling and effective role. </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">Dispute on rebate coupled with classification - Where to file appeal? Confused department files appeal belatedly with CESTAT and loses same - Tribunal by majority decides against the revenue. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>operative portion of the Jt. Secretary (RA) order rejects the Department's revision application and confirms the Commissioner Central Excise (Appeals)'s order allowing the rebate by treating the goods as classifiable under heading 73.26, the order of the Commissioner (Appeals) stands merged in the order of the Jt. Secretary (RA). Hence, no appeal against order of the Commissioner (Appeals) can be filed before Tribunal, as it no longer exists. Since what exists is the order of the Jt. Secretary (R.A.), it has to be challenged before the higher forum i.e. High Court. In a situation where the main issue is export rebate covered by first proviso to Section 35B(1) and if for deciding the issue relating to export rebate, some other issues have also to be decided, the Tribunal would not have jurisdiction and that order of Commissioner (Appeals) can be challenged only before the Jt. Secretary (RA) by filing a revision application. As Tribunal has no jurisdiction, delay in filing appeal cannot be condoned. </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 while working as employee of firm controlled by him, earns salary as well as commission arising out of non-compete agreement signed between him and firm, commission paid by firm is to be treated as part of his salary - YES: HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Bench is - Whether when the assessee while working as an employee of a firm controlled by him, earns salary as well as commission arising out of non-compete agreement signed between him and the firm, the commission paid by the firm is to be treated as part of his salary and not business income. And the answer goes against the assessee. </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">Prior to May, 2008, ST was payable only on receipt basis - for later period service provided does not appear to qualify as ‘Scientific & Technical Consultancy Services' - <em>prima facie</em> case made for waiver of pre-deposit of Rs.1.56 Crores - Stay granted: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants submitted that - </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ the applicant has not received any amounts towards providing the above service, therefore, they are not liable to pay any service tax at all. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ prior to May, 2008 service tax was payable on actual receipt of the amount of service rendered from the service recipient. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ It is a fact on record that only entries were made in the books of accounts of service recipient as well as the service provider but no amount for service rendered has been recovered. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ the adjudicating authority has classified their service of ‘technical knowhow' under the category of 'Scientific and Technical Consultancy Service' and which is improper so they are not liable to pay service tax post May, 2008 also. </font></p> <p><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> </body> </html>