TIOL-DDT 2064 · 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 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=17063"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.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></strong></font><font color="#663399" size="3">TIOL-DDT 2064</font><br>
13.03.2013<br>
Wednesday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">English
Vinglish: </font></strong><font color="#006600"><strong>Service Tax - Abatement
- Construction of Residential Unit - Confusion between FM's Speech and CBEC Notification</strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><strong>A</strong> Netizen writes in:</em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Para 182 of the Budget Speech reads as: </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">182. Homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs. 1 crore or more are high-end constructions where the component of ‘service' is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 percent to 70 percent. Existing exemptions from service tax for low cost housing and single residential units will continue. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Honourable Finance Minister has included homes and flats in the category of high-end constructions if these meet the following conditions: </font></em></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. If the Carpet Area is equal to or greater than 2000 sq. ft; or </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. If the value is equal to or greater than Rs. 1 Crore. </font></em></p>
</blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If one of the conditions specified above meets, then that construction will fall under high-end category and the abatement will be limited 70% and taxable portion will be 30%. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, Sl. No. 12 to be substituted in Notification No. 26/2012 - ST dated 20th June, 2012 vide Notification No. 2/2013-ST dated 1st March, 2013 is reproduced below: </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. " ………. (i) for residential unit having carpet area upto 2000 sq. ft; or where the amount charged is less than rupees one crore" - 25% </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per this condition, if the carpet area is less than or equal to 2000 sq. feet; or if the value is less than Rs. 1 crore., the taxable portion will remain at 25%, which means, if any one of these conditions are satisfied, the rebate will be 75% and taxable portion will be 25% only. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is this the intention of the budget speech? Meaning thereby if the carpet area is 1000 sq. ft; and the value charged is Rs. 2.00 crores, will that be not a high-end construction? </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, can the assessee be denied 75% rebate (taxable portion only 25%), when he is meeting one of the conditions of clause (i) of the Notification No. 2/2013? </font></em></p>
<p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT adds: </font></strong></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The notification clearly failed to give effect to the intention of the Government reflected in the Budget speech of FM. The Notification in the present form allows 75% abatement to a flat having a carpet area of 1000 sft and costing Rs 2 crores. Actually, in such cases, the abatement should have been only 70%, if we go by the Budget Speech. </font></p>
<p><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Notification reads now: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr valign="top">
<td rowspan="3"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority,- </font></td>
<td> </td>
<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004;</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The value of land is included in the amount charged from the service receiver </font></p></td>
</tr>
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore;</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">25</font></td>
<td> </td>
</tr>
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) for other than the (i) above</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">30</font></td>
<td> </td>
</tr>
</table>
<p><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps, it should have been worded like this: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority,-</font></td>
<td> </td>
<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The value of land is included in the amount charged from the service receiver.</font></p></td>
</tr>
<tr valign="top">
<td> </td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) for residential unit having carpet area of 2000 square feet or more OR where the amount charged is more than rupees one crore;</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">30 </font></td>
<td> </td>
</tr>
<tr valign="top">
<td> </td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) for other than the (i) above.</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">25 </font></td>
<td> </td>
</tr>
</table>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is obviously difficult for the babus to translate the FM's English into Notifications. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">4 Lakh Crores - Income Tax Arrears </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“<strong>THE</strong> total income-tax arrears outstanding as on December 31, 2012 are Rs 4,18,696 crore,” the Finance Minister informed the Rajya Sabha yesterday. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This includes tax arrears of Rs 1,16,773.77 crore by major defaulter Hassan Ali Khan, Chandrika Tapuriah (Rs 47,040.99 crore) and (late) Harshad S. Mehta (Rs 17,050.56 crore). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has constituted a Special Cell to exclusively deal with recovery of arrears classified as “Assessee not traceable” and “Assessee with no assets/ inadequate assets for recovery”. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As a result of recovery measures undertaken by the Income-Tax Department, total amount of Rs 16,686 crore has been collected during April 1, 2012, to December 31, 2012, which includes Rs 4.65 crore due to the efforts of the Special Cell. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“As tax arrear is not a static concept, it is not possible to recover in full at any given point of time,” enlightened the FM. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Minister of State for Finance S.S. Palanimanickam informed that arrears of indirect taxes was Rs 68,741.02 crore in 2011-12 and Rs 56,889.62 crore in 2010-11 and Rs 44,212.23 crore, in 2009-10. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Targets for recovery of arrears of indirect taxes for 2013-14 is fixed at Rs 4,000 crore. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FEMA - Export of Goods and Services - 'Write-off' of unrealized bills </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> of now, exporters have limited powers of write-off and AD Category - I banks are permitted to accede to the requests for "write-off" made by the exporters, subject to the conditions, inter alia, that the exporter has to surrender proportionate export incentives, if availed of, in respect of the relative shipments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has now been decided to effect the following liberalization in the limits of “write-offs” of unrealized export bills: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1.</font></td>
<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Self “write-off” by an exporter </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(Other than Status Holder Exporter)</font></p> </td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5% of the total export proceeds realized during the previous calendar year. </font></td>
</tr>
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2.</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Self “write-off” by Status Holder Exporters </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10% of the total export proceeds realized during the previous calendar year.</font></td>
</tr>
<tr>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Write-off” by Authorized Dealer bank </font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10% of the total export proceeds realized during the previous calendar year. </font></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The “write-off” will be subject to the following conditions: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The relevant amount has remained outstanding for more than one year; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realize the dues; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) The case falls under any of the following categories: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) The overseas buyer has been declared insolvent and a certificate from the official liquidator indicating that there is no possibility of recovery of export proceeds has been produced. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The overseas buyer is not traceable over a reasonably long period of time. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amount has remained unrealized consequent on dishonour of the bills by the overseas buyer and there are no prospects of realization. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) The exporter has surrendered proportionate export incentives if any, availed of in respect of the relative shipments. The AD Category - I banks should obtain documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written off. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) In case of self write-off, the exporter should submit to the concerned AD bank, a Chartered Accountant's certificate, indicating the export realization in the preceding calendar year and also the amount of write-off already availed of during the year. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir088.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI/2012-13/435 - A.P. (DIR Series) Circular No. 88; Dated, March 12 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Ojhar in Maharashtra appointed as Customs Airport for Defence </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has notified Ojhar in Maharashtra as a Customs Airport for unloading of baggage of defence personnel & imported goods related to Ministry of Defence and loading of baggage of defence personnel & export goods related to Ministry of Defence. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_029.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 29/2013-Cus., (N.T.), Dated: March 11, 2013</font></strong></a></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 color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Service Tax</strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Non-payment due to different interpretation - No deliberate violation; no penalty: CESTAT</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a Revenue appeal. And the service tax involved is a princely amount of Rs.86,198/-, an equivalent amount of penalty u/s 78 and another Rs.2000/- of penalty u/s 77 of FA, 1994, all of which were dropped by the Commissioner(Appeals) way back in the year 2008. </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 has received only advance payment against sale transaction, Revenue is right in law to bring entire sum to tax in same year - NO: 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 when assessee has received only advance payment against a sale transaction, Revenue is right in law to bring entire sum to tax in same year and Whether when there is no evidence that borrowed capital has been used for the purchase, the gain on sale of such asset can be taxed under the head 'Profits and Gains for Business & profession'. And the verdict goes against the Revenue. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of ‘Hydraulic Piling Rig' - To equate MMRDA with a road construction corporation would be an insult, both to common sense and to said organization, especially when one considers vast and varied nature of activities undertaken by said authority - CESTAT.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PRIOR</strong> to budget 2012, benefit of customs duty exemption on road construction equipment was not available in cases where the contract for such construction was awarded by a Metropolitan Development Authority. Thus the appellant in the present case is not eligible for the benefit of duty exemption under notification No. 21/2002-Cus </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>
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