TIOL-DDT 2798 · the untouched capture
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<p align="justify"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=23157"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2015_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="300" height="148" hspace="5" border="0" align="right" ></a></p>
<p align="justify"><font size="3"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 2798<br>
</font></strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">02 03 2016<br>
Wednesday</font></strong></p>
<p align="center"><em><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><strong>Retrospective exemption in Service Tax - What if case is already settled under VCES?</strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</STRONG> year's budget provided some retrospective beneficial amendments. One such instance is exemption provided to the Services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. The JSTRU letter explains this amendment as follows:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>K. Service Tax exemption to canal, dam or other irrigation works with retrospective effect:</strong></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Definition of Governmental authority was amended with effect from 30.01.2014 so as to exempt services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. However, services provided prior to 30.01.2014 to such bodies remained taxable. The benefit of exemption is proposed to be extended to the said services provided during the period from the 1st July, 2012 to 29.01.2014.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Refund of Service Tax paid on the said services during the period from the 1st July, 2012 to 29.01.2014 shall also be allowed in accordance with the law including the law of unjust enrichment. Application for refund may be allowed to be filed within a period of six months from the date on which the Finance Bill, 2016 receives the assent of the President.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">[New section 101 is being inserted in the Finance Act, 1994] (Clauses 156 of the Finance Bill, 2016 refers)</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, what will happen if an assessee has already settled his case under VCES 2013 in respect of liability up to December 2012? Can he get refund of the Service Tax paid for the period from July 2012 to December 2012? As per the provision of VCES, (Sec 109 of the Finance Act 2013) any amount paid in pursuance of a declaration made under sub-section (1) of section 107 shall not be refundable under any circumstances. But how could an assessee predict in 2013 that the Government would exempt his service retrospectively in 2016? This issue needs to be clarified as the assessee have to file the refund claims within six months from the date of enactment of the Finance Bill, 2016.</font></p>
<p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><em><strong>Central Excise - Refund - Interest on delayed refund - Section 11BB - Interest payable if refund not paid within three months from date of application: SC </strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>reluctance of the officers under CBEC to pay interest on delayed refunds is well known.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is a case in which the assessee was taken all the way to the Supreme Court and had to wait for more than 15 years to get the interest on delayed refund.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was a dispute between the assessee and the Department on classification of the goods manufactured by the assessee, which the assessee ultimately won in the Supreme Court. After winning in the Supreme Court, the assessee filed a refund claim of the duty paid during the disputed period. The refund claim was filed on 25th August 1999 and the refund was granted on 15.11.2000. The assessee claimed interest for the period of delay in granting the refund, which was obviously rejected.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee filed a writ in the High Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court observed,</font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From a bare reading of the provisions of Section 11BB of the Act, we find that the legislature by the aforesaid provision has cast a duty upon the adjudicating authority to decide the claim for refund immediately within three months failing which the liability for interest start running after excluding the period of three months from the date of the application. Admittedly, in the present case, it is not in dispute that the claim for refund was made on 25th August, 1999 whereas the order for refund has been passed on 16th November, 2000. Under the provision of Section 11BB of the Act, interest start running after three months from the date of the application irrespective of the fact as to whether the order for refund has been made subsequent to the period of three months. As in the present case, the order for refund has been made on 16th November, 2000 i.e. much after the expiry of period of three months from the date of making the application, therefore, the respondents are liable to pay interest at the specified rate therein. Liability for payment of interest is statutory and, therefore, it was the bounden duty of the Assistant Commissioner of Central Excise, Division-I, Ghaziabad to also pay interest from 26th November, 1999 to 16th November, 2000 at the rate specified under Section 11BB of the Act.</font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court ordered payment of interest and a cost of Rs. 10,000.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department was not impressed and took the matter in appeal to the Supreme Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court last week dismissed the Revenue appeal and confirmed the order of the High Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The interest that was to be paid in 2000 will now be hopefully paid in 2016, after 15 years. Who will pay interest (on the interest payable) for these 15 years? Will the assessee get that interest on the interest withheld by the Department?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Was the officer who denied the interest making or marring his department?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a belief among many officers that if they delay the grant of refund by raising objections or issue of Show Cause Notices, they are not liable to pay interest. Now, it is clarified that refund has to be given within three months from the date of application, and if not paid, the department cannot escape the liability of interest.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring this case today. Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26304" target="_blank"><strong>Breaking News</strong></a></font></p>
<p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><em><strong>Taxability of surplus on sale of shares and securities -CBDT issues instructions to reduce litigation</strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SUB-</STRONG>Section (14) of Section 2 of the Income-tax Act, 1961 defines the term <em>"capital asset" </em>to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Determination of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-in-trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No.4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principle in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, has instructed that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following-</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the Circulars issued by the CBDT.</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT has clarified that the above shall not apply in respect of such transactions in shares/securities where the genuineness of the transaction itself is questionable, such as bogus claims of Long Term Capital Gain/Short Term Capital Loss or any other sham transactions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board reiterates that the above principles have been formulated with </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">the sole objective of reducing litigation and maintaining consistency in approach </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">on the issue of treatment of income derived from transfer of shares and securities.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTkzMzU=" target="_blank">CBDT Circular No. 06/2016., Dated: February 29 2016</a></strong></font></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"><strong>Have a nice day.</strong></font></p>
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