TIOL-DDT 2178 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 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="3">TIOL-DDT 2178</font><br>
29 .08.2013<br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ST - Import of Services - CAG raps CBEC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CAG has presented to Parliament a ‘Report for the year ended March 2012 on the performance audit of levy and collection of service tax on import of services.'</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Report says,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"An ideal tax administration system would be one in which all the tax due reaches the Government through voluntary compliance. Tax gap captures the gap between the collectible tax and the tax collected by the Government. Minimising the tax gap would be a goal a good tax administration would strive for. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The department could not arrive at reliable figures of tax gap relating to import of services in the absence of sufficient data on value of taxable services and mechanism to analyse tax collected data." </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG observed that out of the 14 Commissionerates selected for audit coverage, only Chennai ST Commissionerate had initiated action by addressing RBI in connection with remittances to service providers outside India. ST II Commissionerate in Mumbai stated that efforts were being made to collect data from RBI. DGST Mumbai had also not collected data from RBI/authorised dealers until July 2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit noted that the Income Tax department is another source for information relating to remittances to non-residents. Section 5 of the Income Tax Act, 1961 provides that income which accrues or arises (or is deemed to accrue or arise) in India and income received (or deemed to be received in India) is liable to be taxed in India. The law also provides for deduction of tax at source in respect of such remittances. Audit observed that payments to non-residents would include cases of provision of service from outside India. ST liability would exist in such cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit enquired from the selected 14 Commissionerates whether the department accesses information available with Income Tax authorities regarding remittance to foreign service providers. Ten Commissionerates informed in the negative. Mumbai ST- II Commissionerate stated that efforts were on to collect data from the Income Tax department. Mumbai LTU indicated that it would collect such data henceforth. Barring Hyderabad-II, which indicated conducting surveys for the purpose of identifying potential assessees, no other Commissionerate indicated any other specific procedures having been resorted to identify unregistered service recipients. DGST is yet to provide information relating to accessing of information from sources such as the Income Tax Department. The Ministry informed (in March 2013) Audit about the constitution of a committee consisting of representatives of both departments to work out modalities for sharing of information. Further, the department was examining the possibility of a system in which the Income Tax server can be linked to CBEC's server for secure data transfer. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit observes: </font></strong></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The department does not have a mechanism to arrive at a reliable estimate of value of taxable services imported. The department has however, initiated steps (since November 2011) to utilise primary data available with authorised dealers; the process is on going. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The department did not have any prescribed specific accounting codes or any alternative mechanism to arrive at reliable figures of the taxes collected relating to import of services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The system was not robust enough to provide information on the gap between the collectible tax and the tax actually collected. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The department did not have a system to utilise data available with the Income Tax department relating to remittances to NRls. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. RBI permits remittances towards import of services irrespective of non-fulfilment of corresponding service tax liability by the service recipient, in the absence of any requirement for submission of an undertaking by remitter/certificate from Accountant on the lines of the prescription in Income Tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. There was no system of calling for an Annual Information Return from identified parties such as authorised dealers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Non-fulfilment of liability by export oriented units and associated enterprises indicated the need for strengthening of monitoring on this front. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. The department did not have in place a system to utilise data on high value transactions of specific nature available with certain Central Ministries/RBI to check possible cases of evasion of tax. </font></p>
</blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recommendations </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit recommended that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. DG (Systems) consider the inclusion of facility in ACES to automatically update category of registrant assessee to include service recipient or to flag such cases where category of remitter in database needs updating, going by the data in returns filed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. The department take steps to encourage importers of service to get themselves registered as lack of awareness concerning liability on service recipient under reverse charge mechanism could be a factor for non-registration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The department utilise data from authorised dealers for broadening of ST base by identifying non registered importers of service by linking with ACES data. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. The department consider tapping data relating to Export Oriented Units available with the Development Commissioner's office as a lead for the purpose of assessing ST liability. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. Priority be given to scrutiny and audit of units having transactions involving associated enterprises/holding company-subsidiary company transactions etc. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">f. The department may consider issuing a clarification on whether incurring of expenses on behalf of an associated enterprise registered abroad would amount to evidence of import of service from the foreign company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">g. The department may take up with RBI the need for issue of suitable instructions to Authorised dealers concerning precautions to be taken for ensuring fulfilment of ST liability by remitter. </font></p>
</blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From CAG Report No. 9 of 2013 (Performance Audit) </font></em></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ST - Church of South India's Central Diocese is neither an assessee nor a person </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Commissioner of Service Tax passed an order clamping liability to pay service tax, interest and penalties on the Karnataka Central Diocese of the Church of South India Trust Association (CSITA) on the premise that the Diocese: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Was Trust Association registered under the Companies Act, 1913 owning immovable property in Bangalore city; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Were renting out the space in their properties for erection of hoardings and letting out, office/commercial premises under the category of 'Sale of Space or Time for Advertisement and Renting of Immovable Property Services'. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Counsel pleaded that the Karnataka Central Diocese is a Unit and is not a separate legal entity; that Karnataka Central Diocese is neither an assessee nor a person for the purpose of service tax. The Counsel for Revenue does not oppose the submission that petitioner is not a legal entity but serves as a Unit of the CSITA and that if at all any proceeding is to be initiated, it is against CSITA. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Karnataka High Court in a recent judgement quashed the Commissioner's order. The Court however held that, <em>if the Finance Act, 1994 in respect of the service tax applies to Church of South India Trust Association which is the organization which owns and holds immovable property, it is open for the respondent-revenue to apply its mind before taking any action for the purpose of issue of proposition notice</em>.</font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODk1OTU=" target="_blank">2013-TIOL-648-HC-KAR-ST</a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ITAT
recommends disciplinary action against Chartered Accountant </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> case had some very interesting turns and twists: An Income Tax assessee was accused of fraud in some share dealings and a minimum penalty was imposed on him, which was confirmed by CIT(A). The ITAT dismissed his appeal and he filed a further appeal in the High Court which was also dismissed. Thereafter instead of approaching the Supreme Court, the assessee came back to the Tribunal with a Rectification of Mistake application which was allowed. The assessee's counsel did not inform the Tribunal that its appeal against the ITAT order was dismissed by the High Court. This time Revenue filed a miscellaneous application pleading that the Tribunal cannot adjudicate the matter, which is already decided by the Superior Judicial Authority in the case of assessee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, criminal prosecution of the assessee was/is pending in court on the same issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal noted that the conduct of the assessee and his counsel, C.A. in concealing the relevant and material fact from the Tribunal would amount to professional misconduct on the part of the Chartered Accountant. The Chartered Accountant has not only the duty to defend the case of litigant to the best of his ability, but equally has duty to maintain dignity and decorum of the courts. He has to assist the Bench as per law in arriving at the just decision in the matter. The C.A. consciously and deliberately in the garb of legal advice has concealed and suppressed the relevant and material facts from the Tribunal while filing miscellaneous application and arguing the same before the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal therefore, recommended a disciplinary action against the Chartered Accountant. Copy of this order is to be forwarded to the President, Institute of Chartered Accountant of India, for necessary action in this regard. Copy of this order is also forwarded to the Chairman CBDT, to take necessary action in the matter. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal also directed the CIT-I, Agra to place copy of this order before the Criminal Court where the criminal prosecution of the assessee is pending on the matter in issue for appraisal of the concerned court and ensure implementation of this order. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But was the CIT not aware of the High Court order when the case came to the Tribunal, the second time? </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODk1ODA=" target="_blank">2013-TIOL-741-ITAT-AGRA</a></font></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Most Accountable Class in Country? - You can contest from jail - Rajya
Sabha passes Bill </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> Division Bench of the Supreme Court by its order dated the 10th July, 2013, in the case of Chief Election Commissioner vs. Jan Chaukidar and others has upheld an order of the High Court of Patna declaring that a person who has no right to vote is not an elector and is, therefore, not qualified to contest the election to either House of Parliament or the Legislative Assembly of a State. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government is of the view that there is a need for suitably addressing the situation arising out of the said order of the Supreme Court. Therefore, it is proposed to amend the Representation of the People Act, 1951 and so the Government brought in the Representation of the People (Amendment and Validation) Bill, 2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a rare show of collective identical thinking, the Rajya Sabha passed the Bill on 27th August unanimously. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Law Minister Kapil Sibal said, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact of the matter is that the political class is, perhaps, the most accountable class in this country. The politician is accountable to Parliament; the politician is accountable to the Election Commission; the politician is accountable to the court; the politician is accountable to the people because every five years he has to go back to the people. I want to know which institutional authority in this country is accountable to so many institutions. None. The fact of the matter is that we are the most accountable set of people in the country.</font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is we who have passed the law, the Anti Defection Law, to make ourselves accountable, not somebody else. It is we who have said, ‘okay, we will disclose our assets to the Election Commission, through law'. So, we have, in fact, furthered the process of our own accountability because we know that there is something wrong that is happening and we need to address that issue. How many institutions in this country have done that? Which other institution in this country has taken steps to make themselves more accountable? I think that is really the issue that this country has to move forward, we must accept that we must be transparent in our decision-making and accountable to the people of this country. And that is true not just of the political class but all institutions in this country.</font></em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> </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">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT - Mere discharging 10% of price of exempted goods due to non-availability of data at beginning of Financial year, would not disentitle manufacturer from exercising their option later during same financial year under clause (ii) of Sub-Rule (3) of Rule 6 of CENVAT Credit Rules, 2004 - <em>Prima facie</em> case in favour - Stay granted: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>applicants are engaged in the manufacture of finished goods viz. Coke. In the manufacture of the said finished goods, various inputs were used on which they avail CENVAT credit. During the process of manufacture of said finished goods, exempted products viz. Coal Tar and coke oven gas also emerge. Since the applicants were not able to maintain separate accounts of the inputs used in or in relation to the manufacture of dutiable products i.e. coke and exempted products viz. Coal Tar and Coke Oven Gas, they were paying 8%/10% of the price of the exempted goods as per sub-rule (3) of Rule (6) of CENVAT Credit rules, 2004.W.e.f. 01.04.2008, the Rule 6 of CCR, 2004 was amended, and under clause (i), the earlier position has been continued. But, under Clause (ii), the assessee is given an option to pay an amount equal to the CENVAT Credit attributable to the input and input services used in or in relation to the manufacture of exempted finished goods by following the procedure prescribed under Sub-rule (3A) of said Rule 6 CCR, 2004. </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 any TDS liability arises on payments made towards leasehold rights acquired by SEZ developer for further sale and not for its own use - NO: ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> paid lease premium to CIDCO in order to acquire various lands lying at Navi Mumbai on lease basis. By virtue of said lease deed(s), assessee had acquired leasehold rights in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining infrastructure administering and managing "SEZ". Assessee had also acquired the rights to determine, levy, collect, retain, utilize user charges fee for provision of services and /or tariffs in accordance with terms and conditions provided in the Development Agreement and the lease deed (s). Assessee had also acquired sole rights for marketing of the NMSEZ and the AO stated that no deduction of TDS had been made by assessee for any of such payments as lease premium fell within the ambit of section 194-I of the Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether any TDS liability arises on payments made towards leasehold rights acquired by the SEZ developer for further sale and not for its own use. And the answer goes against the Revenue. </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">Advance Ruling - Marketing and sales support in India to a firm in China and USA - Amounts to export of services: AAR </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> place of provision of service would be determined by rule 3 of Place of Provision of Service Rules, 2012 and the place of provision would be the location of the service recipients. The location of the applicant is within the taxable territory as its business premises are at Bengaluru, Karnataka. The recipients of service are located outside India. The service proposed to be provided by the applicant does not figure in the negative list specified in Sec. 66D of the Act. In terms of Place of Provision of Service Rules, 2012, the place of provision of service is outside India. The applicant would be receiving payment in convertible foreign exchange. The applicants, as well as the recipients of service, are independent legal entities, and not merely establishments of a distinct person, as evidenced by the certificates of incorporation under the respective laws, copies of which have been furnished by them. The provision of service by the applicant to the two recipients will amount to export of service within the meaning of Rule 6A of Service Tax Rules, 1994.</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 align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p align="justify"><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>