TIOL-DDT 2137 · 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 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><font color="#663399" size="3">TIOL-DDT 2137</font><br> 28.06.2013<br> Friday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Gold - RBI wants Strict Discipline - No Credit in any form for import of Gold</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RBI </strong>in its recent Circulars dated 13th May 2013 and4th June 2013 had decided to restrict the import of gold on consignment basis by banks, nominated agencies/ premier/ star trading houses who have been permitted by Government of India, to import gold only to meet the genuine needs of the exporters of gold jewellery. Further, it was advised that all Letters of Credit (LC) to be opened by Nominated Banks / Agencies for import of gold under all categories will be only on 100 per cent cash margin basis and imports of gold will necessarily have to be on Documents against Payment (DP) basis. Accordingly, gold imports on Documents against Acceptance (DA) basis will not be permitted. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI now clarifies that upon the issue of above instructions, import of gold against suppliers/buyers credit, as also import of gold on unfixed price basis has to necessarily observe the discipline stipulated relating to cash margins and Documents against Payment (DP) basis. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI stipulates that Banks are required to ensure that<strong> credit in any form or name is not enabled for import of any form of gold.</strong> Import of gold on loan basis may, however, continue to be allowed since the scheme envisages that the nominated banks/nominated agencies can import gold on loan basis for on-lending only to the exporters of jewellery in sync with the non-applicability of the above restrictions to exporters of gold jewellery. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2012/rbi12cir122.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Circular AP (DIR Series) No. 122, Dated: June 27, 2013 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Classification of Elements of Filters of Heading 8421 </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>UNLIKE</strong> Circulars issued in the recent past, this Circular did not arise out of any reference from either the Trade or the field formations meaning to say that the Board itself has noted some anomalies in the classification of “Element of Filters”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Inasmuch as while majority of import data in National Import Data Base shows that “elements of Filters” are being classified under Tariff Item 8421 99 00 as parts of Filters, there are some instances where these articles are also being classified under other Tariff Items viz. 3926 90 99, 4812 00 00, 4823 90 90, 5911 90 90, 6815 99 90, 6909 19 10, 7326 90 99, etc. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be that as it may, the Board has examined the matter with a view to provide clarity in classification of said articles under the Customs Tariff Act, 1975. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has arrived at a conclusion that elements of Filters are to be classified as per their constituent material. For instance, elements (of Filters) that are made up of paper would be classified in Headings 4812 or 4823; if made up of textile material for technical use then in Heading 59.11; if made up of glass then in Heading 70.19; etc. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Filters by themselves would be classified under Heading 84.21</font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2013/cuscir13_024.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Circular No. 24 / 2013 - Customs, Dated June 26, 2013</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">IT - Toolbox of counter measures in respect of transactions with persons located in a non-cooperative jurisdiction</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> order to discourage transactions by a resident assessee with persons located in any country or jurisdiction, which does not effectively exchange information with India, a set of anti-avoidance measures have been provided. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A new section 94A has been inserted in the Act to specifically apply to transactions undertaken with persons located in such country or area. The section provides-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) an enabling power to the Central Government to notify any country or territory outside India, having regard to the lack of effective exchange of information by it with India, as a notified jurisdictional area; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) that if an assessee enters into a transaction, where one of the parties to the transaction is a person located in a notified jurisdictional area, then all the parties to the transaction shall be deemed to be associated enterprises and the transaction shall be deemed to be an international transaction and accordingly, transfer pricing regulations shall apply to such transactions; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) that no deduction in respect of any payment made to any financial institution shall be allowed unless the assessee <strong>furnishes an authorization, in the prescribed form</strong>, authorizing the Board or any other income-tax authority acting on its behalf, to seek relevant information from the said financial institution; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) that no deduction in respect of any other expenditure or allowance (including depreciation) arising from the transaction with a person located in a notified jurisdictional area shall be allowed under any provision of the Act unless the assessee maintains such other documents and furnishes the information <strong>as may be prescribed;</strong> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) that if any sum is received from a person located in the notified jurisdictional area, then, the onus is on the assessee to satisfactorily explain the source of such money in the hands of such person or in the hands of the beneficial owner, and in case of his failure to do so, the amount shall be deemed to be the income of the assessee; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) that any payment made to a person located in such area shall be liable to deduction of tax at the higher of the rates specified in the relevant provision of the Act or rate or rates in force or a rate of 30 per cent. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These amendments have been made effective from 1st June 2011. Though this Section came into effect from 1.6.2011, the Government really wanted to use it only as a threat and not a weapon. So far no country has been notified and no prescribed authorisation Form has been notified. But now, the Government seems to be serious about this and the Board has amended the Income Tax Rules to insert a new <em>Rule 21AC - Furnishing of authorisation and maintenance of documents etc. for the purposes of section 94A</em>. Form No. 10FC also has been notified. Perhaps they will notify a few countries as blacklisted in the next few days. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2013/it13not047.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Notification No. 47/2013 (F.No.142/12/2013-TPL), Dated: June 26, 2013 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade Mark Franchise - VAT vs Service Tax </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Single Judge of the High Court had held that VAT is leviable on royalty charges received for use of trade mark, even though the petitioner had paid Service Tax. Whether Service Tax was payable or not was not an issue before the judge and so he did not touch that issue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On writ appeal, the Division Bench reversed the Single Judge's order and held that VAT was not payable. You have to wait till <strong>Monday</strong> for this landmark judgement. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tariff Value of Silver Reduced - Gold Remains same </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has reduced the Tariff Value of Silver from USD 709 to USD 606. There is no change in the tariff values of other items including Gold. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_068.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 68/2013-Cus(NT), Dated: June 27, 2013</font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Election for Member, International Narcotics Control Board </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REVENUE</strong> Department seeks bio data from serving or retired Government employees to be nominated for election for the post of Member, International Narcotics Control Board. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Each candidate should have a wide and deep knowledge or experience of the drug situation. It is not essential however, that the candidate so nominated be technically qualified as medical doctors, chemists or pharmacists, as the INCB will always have at its command the benefit of such qualifications due to the presence of its scientific members nominated by WHO. It is, however, highly desirable that the candidates nominated by Governments possess a good knowledge of national and international narcotics administration. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is an honorary post and the Member gets an annual salary of 1 US Dollar; however they are paid travel expenses and daily allowance while on tour. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Applications should reach the Ministry latest by 2nd July 2013. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/member_incb.pdf"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MoF DoR F. No. V/25/2008-NC-II,Dated: June 27, 2013 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Powers are given to officers to sub-serve justice and not to deny them </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant while filing the Bill of Entry did not file any freight bill and, therefore, the Customs authorities took the value of freight as 20% of the FOB value and the goods were assessed to duty accordingly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant noticed the mistake and immediately furnished the freight bill and sought amendment of the B/E under Section 149 of the Customs Act, 1962. They also filed a refund claim for the excess duty paid of Rs.15,02,622/-. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the request for amendment of the B/E was pending, the refund claim was rejected on the ground that the appellant did not challenge the assessment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the meantime, the appellant sought information under the RTI Act, 2005 on the fate of his application for amendment of B/E from the note-sheet in the file concerned and this is what the Commissioner had mentioned in his noting - </font></p> <blockquote> <p align="justify"><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">“the letter of party dated 02/05/2009 may be considered as refund application as it has been held in such cases that letter of party (even though not on prescribed format) can be considered as a refund application. If the department felt that it is not a proper case under Section 149 we should have advised them. Please process the case as a refund case.” </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the appeal, after hearing both sides, the CESTAT observed - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ The only condition required to be satisfied for availing the provisions of Section 149 is that the documentary evidence on the basis of which the amendment is sought, should be in existence when the goods were cleared. In the instant case the Bill of Entry was filed on 21/04/2009 and the freight invoice indicating the amount of freight is dated 02/04/2009. It was only an inadvertent error committed by the CHA in not furnishing the freight invoice along with the Bill of Entry. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Powers of discretion under Section 149 has been provided to the Customs Officers to allow amendments in genuine cases. From the facts available on record and the notings made by the various sections of the Customs department, it is evident that the appellant's case is a genuine one. That is the reason why the Commissioner directed the lower authorities to treat the letter dated 02/05/2009 as refund application and grant relief to the appellant accordingly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ In spite of such decision by the superior authorities, the lower authority has chosen to disregard the direction of the Commissioner and deny the relief to the appellant. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Holding that the department ought to have allowed the amendment of the Bill of Entry u/s 149 and given consequential relief to the appellant, the matter was remanded. </font></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODg4NjY=" target="_blank">2013-TIOL-979-CESTAT-MUM</a></font></font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT Cartoon </font></strong></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Fleece Cloth.jpg" alt="Legal Corner Icon" width="424" height="479" hspace="5" border="0" align="center"></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"> - Monday'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">VAT vs Service Tax</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Trade Mark - VAT Vs Service tax - Franchise services are liable to service tax and demand of VAT on same transaction by state government as “right to use Trade Mark” rejected : HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> High Court, in a landmark decision dealt with the issue of overlap of Service Tax and VAT and held that VAT cannot be demanded on consideration received under franchisee agreement. The High Court relied on the Apex Court decisions in the case of <em>BSNL and another v. Union of India and others <strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2006/2006-TIOL-15-SC-CT-LB.htm" target="_blank">2006-TIOL-15-SC-CT-LB</a></font></font></strong></em>,<em> Tata Consultancy Services v. State of A.P -<strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2004/2004-TIOL-87-SC-CT-LB.htm" target="_blank"><strong> 2004-TIOL-87-SC-CT-LB</strong></a></font></font></strong> and Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes</em> <font size="1"><strong>(<font face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=42&filename=legal/sc/2008/2008-TIOL-04-SC-VAT.htm">2008-TIOL-04-SC-VAT</a></font>)</strong></font> , to arrive at this conclusion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant is a private limited company engaged in marketing, trading, export and import of gold and diamond Jewellery. The appellant entered into franchise agreements, by which the appellant had permitted the Franchisees to use of the Trade Mark of the appellant. In return the appellant receives royalty and paid Service Tax of 10% / 12% on the royalty. However, the department of Commercial Taxes contended that royalty would attract VAT. </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 benefit of exemption from capital gain tax u/s 47(xiv) is available, when assessee has corporatised his business of holding investments in proprietary concern by transferring same to an incorporated company in which he held virtually all shares - YES: ITAT </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 benefit of exemption from capital gain tax u/s 47(xiv) is available, when the assessee has corporatized his business of holding investments (shares) in the proprietary concern by transferring the same to an incorporated company in which he held virtually all the shares; Whether under the scheme of succession of section 47(xiv), there is any requirement that the capital or other intangible asset transferred to the company should be used by the sole proprietor for the purpose of his business; Whether when the only asset held in the proprietary concern was equity shares which got transferred into the succeeding company, the exemption of benefit from capital gain u/s 47(xiv) is not available; Whether the definition of "business" in Income Tax Act is an inclusive definition and includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and Whether there is any decisive test of the intention to carry on the business. And the verdict goes in favour of 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">By placing shares in private domain, no advice or technical assistance relating to conceptualizing, devising, development, modification, rectification or up-gradation of any working system of any organization could be said to have been rendered by appellant - classification done by department under ‘Management Consultancy Service' has no basis - Order set aside and appeal allowed: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant collected placement fee of Rs. 10 lakhs and Rs. 4,27,90,000/- for private placement of unlisted shares. Since the placement of listed shares was only taxable, the appellant did not discharge any service tax on the unlisted shares. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is seen that no attempt has been made by the Revenue to classify the service first and then demand service tax thereon. Therefore, the principles of natural justice have been clearly violated as the primary requirement is to put the appellant to notice under what taxable service category, he is liable to service tax. The activity undertaken by the appellant is private placement of shares which have not been listed in any recognized stock exchange. By placing shares in the private domain, no advice or technical assistance, relating to conceptualizing, devising, development, modification, rectification or up-gradation of any working system of any organization could said to have been rendered by the appellant. The classification done by the department of the transaction of private placement of shares under management consultancy service has no basis and is not in accordance with the law. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Monday for the judgements </font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more<strong> DDT</strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend.</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>