TIOL-DDT 2287 · the untouched capture
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<p align="justify"><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><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></font><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong><font color="#663399" size="3">TIOL-DDT 2287 </font><br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>05.02.2014 <br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Wednesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>US Customs Seizes Chickpeas and Popcorn from India - No Chana masala in US? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GENERALLY</strong>, when international travellers try to smuggle prohibited food products through U.S. Customs and Border Protection (CBP), the food products are in small amounts or are cleverly concealed inside something else. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But recently CPB officers in Washington Dulles International Airport found an Indian couple trying to smuggle in about 25 pounds of chick peas and five pounds of popcorn with green curry leaves. Chickpeas from India are prohibited due to the possible introduction of harmful plant diseases and insect pests, such as the highly destructive Khapra beetle. The couple returned from India through Dubai and processed their international arrivals separately at the Global Entry self-help kiosks. Neither traveller declared possessing any food products. CBP officers referred them to a secondary compliance inspection. During that secondary inspection, the couple again declared not possessing food products in any of their eight pieces of baggage. After further questioning, they then declared possessing only sweets and spices. When a CBP agriculture specialist passed each bag through an x-ray, anomalies were detected in seven bags. Further examination discovered about 25 pounds of chick peas and five pounds of popcorn with green curry leaves. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They were however let off with a fine of 500 dollars. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - services in relation to a forward contract - retrospectively exempted </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> a retrospective exemption, Government has directed that the service tax payable on the services provided by an authorised person or sub-broker to the member of a recognised association or a registered association, in relation to a forward contract, shall not be required to be paid in respect of such taxable service on which the service tax was not being levied during the period commencing from the 10th day of September 2004 and ending with the 30th day of June 2012. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From 1.7.2012, this activity is outside the purview of service. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2014/stnot14_003.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 03/2014 - Service Tax., Dated: February 03 2014 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise - Di-calcium phosphate (DCP) of animal feed grade - Exempted </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has exempted <em>Di-calcium phosphate (DCP) of animal feed grade </em><font color="#FF0000"><strong><em>confirming</em></strong></font><strong><em> </em></strong><em> to IS specification No. 5470:2002 </em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The duty on <em>Di-calcium phosphate (DCP) </em>was in dispute since 1997. Now that the Government has exempted this product, the next step is exemption for the period prior to the exemption. A Section 11C notification is obviously on the way, but till then, we have to go through the legal maze. </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">By the way, the notification employs the word<em> "confirming"</em>. Should it not be <em>"conforming"</em>? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has also fixed the effective rate of duty on Railway or tramway track construction material of iron and steel at 12% subject to non-availment of CENVAT credit of the duty paid on rails as for the purposes of this exemption the value of the goods excludes the value of rails. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2014/etariff14_03.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 03/2014 - CE., Dated: February 03 2014 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs - Exemption to Tunnel Boring Machines </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has substituted Sl. No. 397 of Notification No. 12/2012-Cus, dated 17.03.2012 with a new entry. This entry relates to exemption for tunnel boring machines and parts: </font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>S. No. </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chapter or Heading or sub-heading or tariff item </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Description of goods </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Standard rate </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Additional duty rate </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Condition No. </strong></font></p></td>
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<tr>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(1) </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(2) </strong></font></p></td>
<td width="0"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(3) </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(4) </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(5) </strong></font></p></td>
<td width="0"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(6) </strong></font></p></td>
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<tr>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">397 </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">84 or any other Chapter </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The following goods, namely:- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(A) Tunnel boring machines </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(B) Parts and components of (A) for use in the assembly of Tunnel boring machines </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Nil </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Nil </strong></font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>- </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>- </strong></font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>- </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>- </strong></font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The entries under Col.5 were <strong>NIL </strong> earlier. And that is the only change. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2014/ctariff14_004.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No. 4/2014-Cus., Dated: February 03 2014 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Third party payments for export/import transactions - RBI clarifies </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AUTHORIZED</strong> Dealer Category - I banks have been permitted to allow third party payments for export of goods & software/import of goods subject to certain conditions one of which is that “ <em>firm irrevocable order backed by a tripartite agreement should be in place </em>”. In view of the difficulties faced by exporters/importers in meeting this condition, it has been decided that this requirement may not be insisted upon in case where documentary evidence for circumstances leading to third party payments/name of the third party being mentioned in the irrevocable order/ invoice has been produced. This shall be subject to conditions as under: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) AD bank should be satisfied with the bona-fides of the transaction and export documents, such as, invoice/FIRC. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) AD bank should consider the FATF statements while handling such transaction. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, with a view to liberalising the procedure, the limit of USD 100,000 eligible for third party payment for import of goods, stands withdrawn. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir100.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A P (DIR Series) CIRCULAR No. 100/RBI., Dated: February 4, 2014 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export of Goods and Services: Export Data Processing and Monitoring System (EDPMS) - RBI Instructions </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> of now, AD banks are submitting the various returns like </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. XOS (export outstanding statements), </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. ENC (Export Bills Negotiated/sent for collection) for acknowledgement of receipt of Export documents, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Sch.3 to 6 (realization of export proceeds), </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. EBW (write-off of export bills), </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. ETX (extension of realization of export bills) relating to Export transaction under FEMA to RBI. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These various returns are being managed on a different solo application or manually. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With a view to simplify the procedure for filling various returns and for better monitoring, a comprehensive IT- based system called EDPMS has been developed which will facilitate the banks to report all the above mentioned returns through a single platform. In the new system, the primary data on exports transactions including offsite software exports from all the sources viz. Customs/SEZ/STPI will flow to RBI secured server and then the same will be shared with the respective banks for follow up with the exporters. Subsequently, the document submission and realization data will be reported back by the AD banks to RBI through the same secured RBI server so as to update the RBI database on real time basis to facilitate quicker follow up/ data generation. The AD banks are required to download and upload the data on daily basis. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir101.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A P (DIR Series) CIRCULAR No. 101/RBI., Dated: February 4, 2014 </strong></font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> - Thursday's cases</font></strong></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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"></font><font color="#663399">Service Tax </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Services relating to transmission and distribution of electricity - retrospectively exempted by Notification No. 45/2010-Service Tax - Services provided to electricity distribution companies not taxable: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> singular defence urged by the appellant before the adjudicating authority was that these services were provided to instrumentalities of the State; no service tax was collected; as and when the service tax component is remitted by the service recipients, the appellant would remit the service tax. The Tribunal found this defence as fundamentally misconceived and rightly negated by the adjudicating authority. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was however brought to the notice of the Tribunal that the Central Government by Notification No. 45/2010-ST dt. 20/07/2010, in exercise of powers conferred by Section 11 C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, granted immunity from the liability to remit service tax in respect of any taxable service provided in relation to transmission and distribution of electricity, during the period up to 26/02/2010. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether when assessee does not utilise borrowed funds for business purpose and spends the same to purchase equity shares as investments, interest paid on such loans is not allowable as per provisions of Sec 36(1)(iii) - YES: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee borrowed the sum of Rs. 22.50 crores from ‘U' as loan which was utilized for purchasing the equity shares of DNL as investments. AO applied provisions of section 36(1)(iii) observing that the borrowed money was not utilized for the purpose of business. The CIT (A) confirmed the findings of AO but set off the interest received from ‘C' on advance given against the interest paid. Revenue contended that the money borrowed from ‘U' was not for the purpose of business and, therefore, the entire disallowance of interest was to be sustained. There is no provision under the Income-tax Act for setting off the interest received against the interest paid on the money which was not borrowed for the purpose of business. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether when the assessee does not utilise the borrowed funds for business purpose and spends the same to purchase equity shares as investments, interest paid on such loans is not allowable as per provisions of Sec 36(1)(iii). And the answer goes against the assessee. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">UP Trade Tax </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Preoperative expenses in the form of interest, not Capital Investment; Transformer is fixed capital investment: Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> following two questions of law would arise for consideration and decision in this appeal: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) Whether preoperative expenses in the form of payment of interest towards the advance loan taken from the financial institution would form part of additional fixed capital investment (FCI)? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii) Whether the transformer/C.V.T. installed for regulating voltage for running of the machinery in the factory premises would fall within the meaning of the expression "fixed capital investment"? </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our Columns Tomorrow for the judgements </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6666">Until tomorrow with more DDT </font></strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice day. </strong></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>
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