TIOL-DDT 2259 · 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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong><strong><img width="115" height="125" border="0" align="right" src="image/ddt/10yearsDDT.jpg" alt="" /></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=17063"><img width="175" hspace="5" height="120" border="0" align="right" src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.jpg" alt="DDT in Limca Book of Records" /></a></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong><font color="#663399" size="3">TIOL-DDT 2259 </font><br>
26.12.2013<br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Investments by persons resident outside India in tax free, secured, redeemable, non-convertible bonds - RBI Instructions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REGULATION</strong> No. 6 (2) of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 imposes restrictions on person resident in India who have borrowed in Rupees from a person resident outside India to the effect that such borrowed funds cannot be used for any investment, whether by way of capital or otherwise, in any company or partnership firm or proprietorship concern or any entity, whether incorporated or not, or for relending. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI has now decided to permit such resident entities / companies in India, authorised by the Government of India, to issue tax-free, secured, redeemable, non-convertible bonds in Rupees to persons resident outside India to use such borrowed funds for the following purposes: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) for on lending / re-lending to the infrastructure sector; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) for keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Reserve Bank has since amended the Regulations accordingly through the Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment) Regulations , 2013, which have been notified, vide Notification No. FEMA.287/2013-RB dated September 17, 2013. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir081.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI/2013-14/416 - A.P. (DIR Series) Circular No.81, Dated: December 24, 2013</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Safe Harbour Rules - Immediate actions required - CBDT Instructions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> order to apprise the CCIT(CCAs) about the provisions of Safe Harbour Rules as notified by the Board vide <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2013/it13not073.htm"><strong>Notification No. 73/2013</strong> </a>on 18th September 2013, Chairperson, CBDT held a video conference with CCIT(CCAs) New Delhi, Mumbai, Kolkata, Bangalore, Ahmedabad, Hyderabad, Chennai, Pune, Chandigarh and DGIT (International Taxation) on 17th December at 10.30 am. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBDT Chairperson provided a summary of Rules 10TA to 10TG relating to Safe Harbour prescribed under Section 92CB of the Income-tax Act. It was informed by the Chairperson that Safe Harbour options in Form 3CEFA would have been filed by 30th November, 2013 and that all CCIT(CCAs) should ensure that the Assessing Officers (AOs) carefully verify and provide in writing to the Board the details of all Form 3CEFA received by them. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Safe Harbour option in Form 3CEFA would have been filed in paper format with the AOs, and should not be confused with Form 3CEB (detailing International Transactions) which is filed electronically. Under the Rules, the AO is required to examine the form and decide within 2 months from the end of the month in which the option was filed, whether to accept the Safe Harbour option or to make a reference to the TPO. If no action is taken within this period by the AO, the Safe Harbour option will be considered as having been accepted, and may then remain valid for 5 years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For minor defects in Form 3CEFA the AO can provide an opportunity to the taxpayer to rectify the same. However, the statutory time limit of 2 months provided in Rule 10TE (14)(i) cannot be exceeded by the AO under any circumstances. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AO is required to verify the eligibility of the assessee and the international transactions. As per Rule 10 TF, Safe Harbour Rules will not apply to eligible international transactions entered into with an associated enterprise located in any country or territory notified under Section 94A, for example Cyprus, or in a no tax or low tax country or territory as defined in the Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AO should take note of those cases where the taxpayer has opted for Safe Harbour but has reported rates or margins less than the Safe Harbour rates or margins. In such cases, the income is to be computed on the basis of the Safe Harbour rates or margins only. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Chairperson further emphasized that as stated clearly in the Rules, the Safe Harbour rates or margins specified therein are not to be considered as a benchmark by the AO or TPO in cases not covered by the Safe Harbour Rules. In cases where assessee has not opted for Safe Harbour or the option has not been found to be valid, and a regular transfer pricing audit is considered necessary, such transfer pricing audit will be carried out without regard to the Safe Harbour rates or margins. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2013/cbdt_letter_13_01.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Letter in F. No. 500/139/2012-FTD-I , Dated: December 20, 2013</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Charitable Trusts - Inconsistencies in the Income Tax Act - CAG </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>CAG has pointed out several inconsistencies in the Income Tax Act in relation to Trusts:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Act does not specifically allow deficit of earlier years, depreciation and repayment of loan in case of exempt entities. In the absence of any express provision in Act, the courts have taken divergent views. ITD has also not taken uniform practice in allowing depreciation, repayment of loan and deficit of earlier years. [<em>In Kerala, CIT Kottayam, Matha Amrithanandamayi Math, claimed depreciation of 138.46 crore during AY 07 to AY 09 as application against income from property held under Trust. This was not in order as Trust has not added back depreciation for any of the AYs for which it already claimed deduction for acquisition of capital asset as application of money involving potential revenue impact of 46.77 crore.</em>] </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ITD did not take uniform stand to allow/disallow deficit of earlier years to 110 Trusts involving tax effect of 327.48 crore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no internal mechanism within ITD to have control over the receipts issued by the entity having registration under section 80G. ITD did not cross-check the donations received by 24 Trusts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no provision in Act to invest corpus fund in specified mode and tax interest earned thereon. In absence of this AOs allowed exemptions on interest earned on corpus fund to two Trusts involving tax effect of Rs.69.67 crore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no enabling provision in Act to deduct TDS in case of Trusts. Therefore, AOs allowed expenditure incurred by Trusts in seven cases, without deducting TDS which involved tax effect of Rs. 9.49 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Audit Recommends:</strong> CAG recommended that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> a. The Ministry may bring suitable amendment in Act to streamline the treatment of depreciation, deficit and repayment of loans. <em>The Ministry stated (May 2013) that the matter will be examined. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> b. The Ministry should issue suitable instructions to verify information of major donations received u/s 80G during scrutiny cases to ensure the proper accounting of donations/transaction in the accounts of donors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The Ministry may bring suitable definition for the phrase "<em>substantially financed</em>" to clarify provisions of section 10(23C). <em>The Ministry stated {May 2013} that the matter will be examined. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. The Ministry may consider bringing suitable modifications in provisions for compliance with TDS provisions by Trusts and the provisions may be made for proper disclosure in the Audit Reports. <em>The Ministry stated (May 2013) that the matter will be examined. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">e. The Ministry may consider bringing out suitable changes in Forms to be submitted by Trusts.</font></p>
</blockquote>
<p><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">From CAG Report No. 20/2013</font></em></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Stock Guru Scam - CBI arrests Income Tax Deputy Commissioner </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CBI has arrested a 2006 batch IRS officer - a Deputy Commissioner of Income Tax in the notorious Stock Guru Scam in which about Rs. 500 Crores were duped from gullible investors. The scamsters allegedly bribed the Income Tax officers to settle their case. It seems the bribes collected by Income Tax officers run into crores. And this young 2006 batch officer is said to have pocketed 15 Crores! What does a babu do with that kind of money? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Movie Stars under Service Tax Investigation </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> the Cochin Central Excise raided a super star and even seized some unaccounted cash (under what law?) for alleged Service Tax evasion. Are all the film actors paying up their Service Tax dues? Does the Department try to bring them into VCES? Maybe the next few days can be used for that.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe actors need not be encouraged to come under VCES - they are known - they can be attacked after 31st December - beware super stars.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods returned as defective - since they could not be re-processed, assessee writing them off in books of accounts - as goods are lying in factory, no duty payable - consequently mandatory penalty not imposable </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondents are manufacturer of pesticide and insecticides and were clearing the goods on payment of duty. The respondents have received back some goods in their factory, earlier cleared by them, as defective. Therefore, following the provisions of Rule 16(1) of the CER, 2001 the respondents took credit on the goods returned to them by their customers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After certain period of time, the respondent realized that they could not re-process these goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, these goods, lying in the factory, were written off in their Books of Accounts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But naturally, this came to the notice of the department. The respondents were directed to reverse the credit taken by them on these goods and which they did along with the interest. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SCN followed and the adjudicating authority imposed a mandatory penalty u/s 11AC of the Act r/w Rule 13 of the CCR, 2002. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The respondents challenged this order and the Commissioner(A) was pleased to set aside the penalty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue is, therefore, in appeal before the CESTAT and submits that mandatory penalty is imposable in view of the SC decision in <em>Rajasthan Spinning & Weaving Mills</em> - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2009/2009-TIOL-63-SC-CX.htm" target="_blank"><font size="1">2009-TIOL-63-SC-CX</font></a></strong> inasmuch since the demand has been confirmed, penalty is inescapable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The respondent submitted that duty is payable at the time of clearance of the goods and since in the present case the goods were lying in the factory, they were not required to pay even duty. However, since they have paid duty along with interest and which they are not protesting, penalty is not imposable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CESTAT observed -</font></p>
<blockquote>
<p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">"6. As per the section 3 of the Central Excise Act, 1944, as the goods were lying in the factory of the respondents, therefore, the respondents were not required to pay duty. Although the respondents are not contesting duty liability and interest paid by them, therefore, I am not passing any order on the liability of the duty. As the duty is not payable, question of mandatory penalty does not arise. Therefore the decision cited by the learned AR is not applicable to the facts of this case. In these circumstances, the impugned order is upheld and the appeal filed by the Revenue is dismissed." </font></em></p>
</blockquote>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTEyODc=" target="_blank"><font size="1">2013-TIOL-1911-CESTAT-MUM</font></a></font></strong></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">Service Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Club or Association Service provided by appellant is not utilized by poor and needy but by people who have social status and are financially well off - promoting particular game or sport is not public service - object of appellants cannot be considered as charitable in nature - Appellant liable to pay ST: CESTAT by Majority </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant is a member of the Board of Control for Cricket in India (BCCI). From the income proceeds of BCCI, the members were given reimbursement under various categories such as, TV Rights subsidy, Tournament receipts, IPL subsidy players' expenses reimbursements and subsidy for international matches. These amounts are given to promote the game of cricket and also to undertake construction of infrastructure for playing cricket within the jurisdiction of the members. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CCE & ST, Nagpur was of the view that the amounts received from BCCI by the appellant is for providing infrastructure support to BCCI for conducting tournaments and, therefore, the same is classifiable under the category of 'Business Support Services'. </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 nothing is found during a Search & Seizure operation, even then an exhaustive panchnama is required to be made - YES: Delhi HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> search and seizure operation u/s 132 was carried out against the assessee group on 31st January, 2008. Assessee had accepted and not disputed the search and seizure operations in the writ petitions but the contention raised was that against 22 petitioners, no panchnamas were drawn/issued and thus proceedings u/s 153A were void and bad for want of jurisdiction. The issues before the Bench are - Whether delay in raising the contention that names of assessee's group concerns are not in the panchnamas, specially when the said concerns have the requisite copy of the panchnamas and were aware that their names did not figure in the panchnamas, is a valid ground to deny search warrants; Whether the address mentioned in case of search of a company has to be its registered office only; Whether for the purpose of making assessment u/s 153A, issue of punchnama is a necessary condition; Whether punchnama is required, in case where nothing is found or seized in the search; Whether in case of defective panchnamas, search or initiation of search can be disputed and Whether the assessment orders u/s 153A can be permitted to become a matter of writ proceedings as the first appellate forum. And the verdict goes in four of the Revenue. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit on returned goods - Duty paying Documents - Adjudication Order beyond scope of Show Cause Notice not sustainable: CESTAT by majority </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>REVENUE</strong> proposed to deny the credit on the sole ground that the delivery challans issued by the sales depots are not prescribed documents under Rule 7 and as such, the credit availed by the appellant was not proper. However, while adjudicating, lower authorities have drifted from the said allegation and has extended the scope of proceeding by introducing another allegation that the goods received back from the sales depots cannot be correlated with the goods originally cleared. It is well settled law that the orders beyond the scope of allegations made in the show cause notice are not sustainable. There was no allegation in the notice doubting the fact of returned goods being different than the one originally cleared. The revenue cannot make out a new case at the adjudicating or appellate stage. As it is well settled that the Revenue has to adjudicate the matter on the basis of allegations made in the show cause notice and no new case can be made out without putting the assessee on notice, and as such, on this short ground itself the impugned orders are required to be set aside. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
</body>
</html>