TIOL-DDT 2120 · 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><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 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 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></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></font></strong></font></strong></font></strong><font color="#663399" size="3">TIOL-DDT 2120 </font><br> 05.06.2013 <br> Wednesday </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">VCES, 2013 and section 87 of FA, 1994 </font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received this in our mail-box - </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Pursuant to the enactment of the Finance Bill, 2013, on 10th May, 2013, the VCES, 2013 has come into force. Except for the issuance of the notification 10/2013-ST dt. 13/05/2013 framing the Service Tax Voluntary Compliance Encouragement Rules, 2013 and the Circular 169/4/2013-ST dated 13/05/2013 carrying clarifications to four self-made questions, it seems there is not much enthusiasm amongst the Trade and the officers concerned to goad the so-called non-filers/stop-filers from reaping (or ripping) the benefits of the Voluntary Scheme. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A few pertinent issues have been raised in <strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTc3MDI=" target="_blank">DDT 2100</a>, <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTc3NTg=" target="_blank">2105</a> & <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTc3NjU=" target="_blank">2106</a></strong> and it would be prudent on the part of the Board to come out with fresh Circulars before the VCES, 2013 actually gets going. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">At the same time, I have some doubts on the following VCES issue - </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Section 110 of the FA, 2013 mentions that if the declarant fails to pay the tax dues, either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the FA, 1994. Once the scheme has been anointed as "Voluntary Compliance Encouragement Scheme", hounding a declarant or the service recipient etc. for getting the "tax" is totally unfair and against the tenets of the concept of voluntary disclosure. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ And assuming that the department recovers the tax dues by usage of section 87 of the FA, 1994, will the declarant get any immunity from penalty, interest or any other proceeding under the Chapter V of the Finance Act, 1994. The answer probably lies in the <strong>NEGATIVE</strong> for the reason that section 108(1) of the FA, 2013 grants such immunities if the "<font color="#FF0000">declarant, <u><strong>on his own</strong></u>, pays the tax dues declared by him under sub-section (1) of section 107 and the interest payable under the proviso to sub-section (4) thereof</font>". </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, in spite of the department getting the entire amount of "tax dues" declared under the VCES, 2013, after having recourse to section 87 of the FA, 1994, the declarant is the loser inasmuch he will not get any immunity. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With all this Negativity in the VCES, will anyone be interested in laying his cards on the table? He would prefer to hold it close to his chest and bid his time." </font></em></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT feels that the Board should hold interactive seminars on the VCES, 2013 so that the doubts in the minds of the "potential declarants" are clarified. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI imposes further restrictions on Gold Imports </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Circular No. 103 dated 13.5.2013 <strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTc3NDc=" target="_blank">(DDT 2104)</a>,</strong> RBI had restricted the import of gold on consignment basis by banks, only to meet the genuine needs of the exporters of gold jewellery. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI has now decided to extend this restriction to all nominated agencies/ premier / star trading houses who have been permitted by Government of India to import gold. Accordingly, any import of gold on consignment basis by both nominated agencies and banks shall now be permissible only to meet the needs of exporters of gold jewellery. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This has come into effect yesterday. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Huge gold import is a serious concern for the Finance Managers of the Government of India. Yesterday Commerce Secretary SR Rao said, <em>"Trade deficit is of concern to the government. But this is a step in which RBI, Finance Ministry and Commerce Ministry are involved. So, we are consulting."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Financial Stability and Development Council (FSDC) chaired by Finance Minister Chidambaram and attended by Secretaries of all Fiscal Departments and the RBI Governor met on Monday and discussed the issue. A PIB Press Release stated, <em>"The Council noted with concern the significant increase in gold imports in recent months and deliberated on the issues involved in this regard." </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whatever the Nation's Financial Wizards do, the fact remains that gold imports are zooming. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir107.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI/2012-13/520; A.P.(DIR Series) Circular No.107, Dated: June 04, 2013 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Conciliation with Vodafone - Tax by Talks? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TODAY every Newspaper must have reported that the Union Cabinet has approved a Finance Ministry proposal for a conciliation process with telecom giant Vodafone in the Rs. 11,200 crore Income Tax case. It seems the conciliators will sit together and come out with a solution which will again go the cabinet and Parliament. The PIB Press Release is totally silent on the issue. Why is the Government shy of informing the people? </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You may like to read our 2005 article <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2573"><strong>Tax by Talks </strong></a></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">United Nations Practical Manual on Transfer Pricing - Taxpayers in India can postpone payment of tax liability by resorting to litigation </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Department of Economic & Social Affairs of the United Nations has just published a <strong>Practical Manual on Transfer Pricing for Developing Countries</strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The United Nations Practical Manual on Transfer Pricing for Developing Countries is a response to the need, oft en expressed by developing countries, for clearer guidance on the policy and administrative aspects of applying transfer pricing analysis to some of the transactions of multinational enterprises (MNEs) in particular. Such guidance should not only assist policy makers and administrators in dealing with complex transfer pricing issues, but should also assist taxpayers in their dealings with tax administrations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is Transfer Pricing?</strong> "Transfer pricing" is the general term for the pricing of cross-border, intra-firm transactions between related parties. An Example: a profitable computer group in Country A buys "solid state drives" from its own subsidiary in Country B. The price the parent company in country A pays its subsidiary company in country B (the "transfer price") will determine how much profit the country B unit reports and how much local tax it pays. If the parent pays the subsidiary a price that is lower than the appropriate arm's length price, the country B unit may appear to be in financial difficulty, even if the group as a whole shows a reasonable profit margin when the completed computer is sold. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In India the burden of proof to establish the arm's length nature of international transactions is generally with the taxpayer. Once the taxpayer discharges this burden, the burden shift s to the tax authorities to establish that the arm's length price has not been determined in accordance with the provisions of the law or that the information or data used in the computation is not reliable or correct. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Manual has a section, <strong>Emerging Transfer Pricing Challenges in India</strong>. The Indian Transfer Pricing Regulations are based on the arm's length principle. The regulations came into effect from 1 April 2001. The regulations provide that any income arising from an international transaction between associated enterprises shall be computed having regard to the arm's length price (ALP). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The manual says, <font color="#CC3333"><strong><font color="#993333">Taxpayers in India can postpone payment of tax liability by resorting to litigation</font>. </strong></font></font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/UN_Manual_TransferPricing.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Practical Manual on Transfer Pricing for Developing Countries </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Argument advanced for condonation of delay is purely bureaucratic red-tape and not satisfactory - COD application dismissed </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> <strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTc4Njg=" target="_blank">DDT 2115</a></strong> we reported that the <strong><em>Central Railway</em> had failed to pay the pre-deposit ordered of Rs.25 lakhs and hence their Service Tax appeal was dismissed by the CESTAT. See <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODgzODY=" target="_blank">2013-TIOL-799-CESTAT-MUM</a></font>. The respondent<em> Commissioner was CCE, Nagpur</em>. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The present case concerns <em><strong>Central Railway, Solapur</strong></em> and the respondent Commissioner is <em>CCE, Pune-III</em>. This too is a Service Tax case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Against an order-in-appeal dated 30.11.2011 passed by the Commissioner of Central Excise (Appeals), Pune-II, the Central Railway, Solapur filed an appeal before the CESTAT on 12.12.2012. Incidentally, they had received the o-in-a on 11.01.2012 and, therefore, the appeal was to be filed on or before 10.04.2012. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, as mentioned, the appeal was filed eight months late and so <em><strong>CR, Solapur</strong></em> had also filed an application for Condonation of Delay along with the Stay application/Appeal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant submitted that the reason for the delay is that the appellant being a Division of Indian Railways, they had to forward the papers to their Headquarters for review, clearance etc. and hence the delay. The appellant also pleaded that the appellant being a Govt. department, the matter be considered leniently. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench was not impressed at all. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After extracting passages from the Apex Court decisions in <em>N.Balakrishnan vs. M. Krishnamurthy</em> - <strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2002/2002-TIOL-737-SC-LMT.htm" target="_blank"><em>(2002-TIOL-737-SC-LMT)</em></a></font></font></strong> & Chief <em>Post Master General vs. Living Media India Ltd. </em><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODg0NjY=" target="_blank">2012-TIOL-123-SC-LMT</a></font></font></strong>, the Bench observed - </font></p> <blockquote> <p align="justify"><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">"4. In the present case, we find that the argument advanced for the delay is purely bureaucratic red-tape which is not satisfactory to this Bench. Accordingly, we dismiss the application for condonation of delay. Consequently, the stay application and the appeal also get dismissed." </font></em></p> </blockquote> <p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODg0ODM=" target="_blank">2013-TIOL-842-CESTAT-MUM </a></font></strong></font></p> <p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/Saab_bacha.jpg" alt="Legal Corner Icon" width="400" height="336" hspace="5" border="0" align="center"></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> </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"><font color="#663399"><strong>Service Tax</strong></font> </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In case installation and commissioning of plant was done by a different party, then <em>prima facie </em> assessee who undertakes operation and maintenance activity cannot take credit in respect of service tax paid on installation and commissioning activity - Pre-deposit ordered of 25% of ST demand of Rs.1.62 Crores: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the present case, different activities are undertaken by the applicants under a different agreements and the dispute is in respect of the credit which was availed in respect of installation and commissioning of the plant under a different contract and the applicants want to utilize that credit towards payment of service tax in respect of operation and maintenance service which is under a different contract. In this view of the matter, prima facie, the applicants have not made out a case for total waiver of service tax. </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 an undertaking employs workers of sister concern and has total control over him regarding work done, deduction u/s 80I can be availed by undertaking - 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 requisite conditions of sec. 80-I are to be satisfied only in first year or in all the assessment years in which the deduction u/s 80I is claimed; Whether the activity of printing carried out by the assessee constituted profits and gains derived by the assessee from an industrial undertaking within the meaning of section 80I; Whether the assessee could claim deduction u/s 80-I in respect of Units, even though it did not employ 10 or more workers on its rolls; Whether when an undertaking employs workers of sister concern and has total control over him regarding the work done, deduction u/s 80I can be denied to such undertaking; Whether the industrial undertaking which undertakes job work are entitled to claim deduction u/s 80-I; Whether the term ‘manufacture' and ‘produce' can be assigned similar meaning in context of section 80I deduction; Whether the benefit of Section 80-I should be denied to the assessee as the units have been formed by splitting up of the business of the assessee; Whether in order to test the independence of two undertakings, the criteria of analyzing their work style is the only decisive one and Whether in case there is a material change in justifying the revenue to take a different view, the earlier view which has been settled and accepted of a several years can be disturbed. And the verdict went in favour of the assessee. </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">Denial of Cross examination of witnesses - Unless exceptional circumstances under Section 9D of CE Act, 1944 or138B of Customs Act, 1962 exist, opportunity of cross examination cannot be denied - Delhi HC remits matter to Tribunal</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INSOFAR </strong>as the general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee. Though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. Such circumstances have to be exceptional such as the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi-judicial proceedings. </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>