TIOL-DDT 2514 · 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"><s><strong><font size="2"><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=20079"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2014_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="250" height="123" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font></strong></s><font color="#663399" size="3">TIOL-DDT 2514</font></font><br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>09 01 2015 <br>
</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Friday </strong></font></p>
<p align="center"><font color="#006600" size="3" face="Verdana, Arial, Helvetica, sans-serif"><em><strong>Income Computation and Disclosure Standards</strong> </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION</strong> 145 of the Income Tax Act provides that the method of accounting for computation of income under the heads <em>"Profits and gains of business or profession"</em> and <em>"Income from other sources"</em> can either be the cash or mercantile system of accounting. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Act, 1995 empowered the Central Government to notify Accounting Standards (AS) for any class of assessees or for any class of income. Since the introduction of these provisions, only two Accounting Standards relating to disclosure of accounting policies and disclosure of prior period and extraordinary items and changes in accounting policies have been notified. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Board of Direct Taxes (CBDT) had constituted an Accounting Standard Committee in 2010. The Committee has submitted its Final Report in August, 2012. The Committee recommended that the AS notified under the Act should be made applicable only to the computation of taxable income and a taxpayer should not be required to maintain books of account on the basis of AS notified under the Act. The Final Report of the Committee was placed in public domain for inviting comments from stakeholders and general public. After examining the comments/suggestions, the Committee inter alia recommended that the provisions of section 145 of the Act may be suitably amended to clarify that the notified AS are not meant for maintenance of books of account but are to be followed for computation of income. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to clarify that the standards notified under section 145(2) of the Act are to be followed for computation of income and disclosure of information by any class of assessees or for any class of income, Finance Act 2014 provided that the Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of or in respect of any class of income. It was further stipulated that the Assessing Officer may make an assessment in the manner provided in section 144 of the Act, if the income has not been computed in accordance with the standards notified under section 145(2) of the Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now CBDT has released the draft Income Computation And Disclosure Standards [ICDS]. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is clarified in the preamble itself that the <em>Income Computation and Disclosure Standard </em> is applicable for computation of income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" and not for the purpose of maintenance of books of accounts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is further clarified that in <em>case of conflict between the provisions of the Income-tax Act, 1961 and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Fundamental Accounting Assumptions:</strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) <strong>Going Concern </strong> refers to the assumption that the person has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the business, profession or vocation and intends to continue his business, profession or vocation for the foreseeable future. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) <strong>Consistency </strong> refers to the assumption that accounting policies are consistent from one period to another; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) <strong>Accrual </strong> refers to the assumption that revenues and costs are accrued, that is, recognised as they are earned or incurred (and not as money is received or paid) and recorded in the previous year to which they relate. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Disclosure of Accounting Policies </strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) All significant accounting policies adopted by a person shall be disclosed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Any change in an accounting policy which has a material effect shall be disclosed. The amount by which any item is affected by such change shall also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact shall be indicated. If a change is made in the accounting policies which has no material effect for the current previous year but which is reasonably expected to have a material effect in later previous years, the fact of such change shall be appropriately disclosed in the previous year in which the change is adopted and also in the previous year in which such change has material effect for the first time. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) If the fundamental accounting assumptions of Going Concern, Consistency and Accrual are followed, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact shall be disclosed. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All contract or transaction existing on the 1st day of April, 2015 or entered into on or after the 1st day of April, 2015 shall be dealt with in accordance with the provisions of this standard after taking into account the income, expense or loss, if any, recognised in respect of the said contract or transaction for the previous year ending on or before the 31st March, 2015. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/ICDS_draft_CBDT.pdf"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT's Income Computation and Disclosure Standards 2015 </strong></font></a></p>
<p align="center"><strong><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><em>Customs and Excise Exemption for Bunker Fuels for use in ships - extended </em></font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Notification No. 31/2014 -Cus and 21/2014-CE both dated 11.11.2014, customs and excise exemptions were given to bunker fuels for use in ships or vessels. These exemptions were to be valid till 11th May 2015. <strong>(<a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjE5NTc=" target="_blank">DDT 2474 - 13 11 2014</a>)</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Government has deleted the condition that they will be valid only till 11th May 2015. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTc1NDE=" target="_blank">Notification No. 3/2015-Cus., Dated: January 07, 2015</a> and <a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTc1NDI=" target="_blank">Notification No. 2/2015-CE., Dated: January 07, 2015 </a></font></strong></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600"><em>Good Governance at Work - Wednesdays are Taxpayers' day in CBEC </em></font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> reporting <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjI0NzQ="><em><strong>Good Governance at Work - Wednesdays are ‘Public Meeting Days' in Income Tax Department</strong></em></a>, DDT just two days ago commented, <em>"Most probably CBEC will soon follow suit"</em>. And they did. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC in its letter to all the Chief Commissioners explains its lofty ideals: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Central government has placed great emphasis on reform oriented non-adversarial tax administration. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Central Board of Excise and Customs has taken several initiatives over the years to facilitate trade and simplify procedures to reduce interface between the tax officials and the tax payers. <font color="#FF0000">(!!!) </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ It is our mission to achieve excellence in the formulation and implementation of Customs, Central Excise and Service Tax policies and enforcement of cross border controls for the benefit of trade, industry and other stakeholders. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The indirect tax administration considers all taxpayers as the cornerstone of our economic independence and prosperity. Therefore, it is important to further simplify and modernize the tax system, expand the tax base and improve compliance. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ This is in tandem with the Central Government's objective to ensure good governance. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To this end, it has been decided that one day of the week - Wednesday (9 AM to 1 PM) may be designated as Taxpayers' day wherein Heads of all offices in the field will meet the taxpayers without any prior appointment in order to address their grievances expeditiously. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the Chief Commissioners to inform the Trade and also to publicise this locally through Press Note. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTc1NDM=" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC F.No. 296/267/2014-CX-9.,Dated: January 07, 2015 </strong></font></a></p>
<p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">FTP - Allocation of 8 lakh MTs of Rough Marble and Travertine Blocks for import to 472 applicants </font></strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has allocated 8 lakh MTs of Rough Marble and Travertine Blocks for import to 472 applicants. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue of import authorisation by Regional Authorities of DGFT would commence from 9th January 2015 and end on 15th January 2015. In case, any applicant/firm is found to have submitted false or erroneous information or have made any mis-declaration / misrepresentation, such applicant/firm, (a) shall forfeit the allocation made in this Trade Notice, (b) shall be debarred from allocation of Rough Marble and Travertine Blocks in future and (c) shall be liable for penal action under the provisions of Foreign Trade (D&R) Act, 1992, as amended. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Authorisation holders shall file monthly returns regarding imports made by them, to the <em><strong>concerned</strong> </em> Regional Authority of DGFT by the 15th of each succeeding month in which license is obtained (for example, if a license is obtained on 9th January, the authorisation holder will file monthly return for imports made in January by 15th of February) and for each month thereafter by the 15th day. This is a mandatory requirement </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTc1NDQ=" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Trade Notice No. 12/2014., Dated: January 08, 2015 </strong></font></a></p>
<p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><strong><em>Zero Tax Tactics - Reinvent the Zero </em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> take pride in the fact that 'zero' was invented in India, but the great mathematician who invented this 'nothing' would have had no idea that his 'zero' will one day add to the tax burden of a trader. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ingenious are the ways of taxmen to collect more for the Government Kitty. One enterprising VAT officer simply added a ZERO and made a killing. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the assessment order, the value of plant and machinery sold taken as Rs.156.75 Cores instead of Rs.15.67 Crores by just adding a <em>"zero''</em> at the end - <strong>156,75,10,000 </strong> instead of <strong>15,67,51,000</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, a mistake can happen to anyone and this is not material that DDT should be made of. Mistake is not the problem - the AO refused to correct the mistake, in spite of an application by the assessee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The hapless assessee had to go in writ to the High Court to get a direction to get the wrong zero removed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see
<a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTg3NjU=" target="_blank">2015-TIOL-66-HC-MAD-VAT
</a></strong></font></p>
<p align="center"><strong> <font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><strong><font color="#006600">Jurispruden</font></strong></strong></em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em><font color="#FF6633" size="4">tiol<font color="#006600" size="3">-</font></font></em></strong></font></strong></font><em><strong><strong><font color="#006600">Monday's cases</font></strong></strong></em></font></strong></p>
<p align="justify"><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></strong></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tribunal should not pass drastic orders - Tribunal cannot defeat or frustrate right of Revenue or litigation itself - It should decide on case to case basis and Revenue should get opportunity to seek a stay of implementation of orders: HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is an appeal filed by the Commissioner of Customs (General) before the Bombay High Court against an order passed by the CESTAT allowing the Appeal of the Respondent. The Tribunal's order set aside the order-in-original, by which, the Customs House Agent Licence of the Respondent was revoked and security deposit made by it was forfeited. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the Tribunal's order was not implemented the respondent had filed a Miscellaneous application and the CESTAT had passed an order on 8th September, 2014 directing restoration of the Customs House Agent Licence and also mentioning that if the same is not complied with, the Tribunal intends to initiate contempt of Court proceedings. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether when assessee is Board of State Govt it cannot claim exemption for its income under Article 289(1) of Constitution - YES: ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</STRONG> is a statutory authority created by the Govt. of Andhra Pradesh with effect from 24/01/1976 in exercise of power conferred by section 4(1) of water (prevention and control of pollution) Act, 1974. Till AY 2002-03, assessee claimed exemption u/s 10(20) of the Act as a local authority. However, after amendment to the definition of local authority u/s 10(20) with effect from 01/04/2003, by Finance Act, 2002, assessee became liable to pay income-tax. Since assessee failed to file any return of income, even after it became liable to pay tax, AO initiated action u/s 147 of the Act by issuing a notice u/s 148 on 31/10/08 calling upon assessee to submit return of income for AYs. 2004-05 to 2008-09. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE issue before the Bench is - Whether when the assessee is a pollution control board it can also claim exemption for its income under Article 289(1) of the Constitution. NO is the answer. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ST was paid on amount of advances received by Respondent but ultimately no service could be provided as said works contract got terminated - if no service is rendered then no service tax is payable - amounts paid have to be considered as "deposit" - provisions of limitation u/s.11B of CEA, 1944 not applicable: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> facts are that the respondent entered into works contract with <em>M/s. Pipavav Energy Pvt. Limited </em> ('PEPL') and received mobilization advance of Rs.4.83 crores in July-August, 2010 upon execution of bank guarantee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They paid service tax @ 4.12% of a total amount of Rs.19,11,331/-, on the said mobilization advance, under Works Contract Composition Scheme. The said work contract was terminated by M/s. PEPL on 24.11.2011 and mobilization advance was recovered by M/s. PEPL by encashing the bank guarantee on 16.5.2012, for the service not provided.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Resultantly, the respondent filed an application on 25.10.2012 for refund of service tax paid. The adjudicating authority rejected the refund claim on the grounds of limitation. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Monday for the judgements</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more DDT</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice weekend. </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@tiol.in"><strong>vijaywrite@tiol.in </strong></a></font></p>
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