TIOL-DDT 613 · the untouched capture
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<p align=justify><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT 613</font></b><b></b></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><b><br>
15.05.2007<br>
Tuesday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Finance Act 2007 – changes in customs valuation</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 14 of the Customs Act, 1962 was further amended and the amended statute had come into effect from 11-05-2007(hopefully). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the latest amendment, the value of imported and exported goods :</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Shall be the Transaction Value – the price actually paid or payable;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ When sold for export to <st1:country-region
w:st="on">India</st1:country-region>;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ For delivery at the time and place of importation;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The transaction to be between un-related persons;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ price is to be the sole consideration for the sale subject to such other conditions as “may be specified in the rules” made in this behalf.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The transaction value - price in addition to the price paid or payable, <b><u>shall include</u></b> any amount paid or payable for costs and services including :</font></p>
<ul type=disc>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">commissions and brokerage,</font></b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>engineering, </b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>design work, </b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>royalties and license fees, </b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>costs of transportation to the place of importation, </b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>insurance,</b></font></li>
<li><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>loading, unloading and handling charges.</b></font></li>
</ul>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The significant amendments now made, when compared to the proposed amendments in the Finance Bill 2007 are that the important wording <b><i><font color="#663399">“for delivery at the time and place of importation”</font></i></b>found its way back into the statute. The costs and services required to be included to the price actually paid or payable are exhaustive. One important component of “cost and services” that is found missing when compared to the Finance Bill 2007 proposal is <b>“assists”. </b>“Assists” are costs relating to those goods, materials or services which a purchaser provides, directly or indirectly, free of charge or at a reduced cost, for use in connection with the production of imported goods. The value of these "assists" must be included in the value of those imported goods when entered for Customs purposes. It is not known why the “assists” are left out in the list of costs and services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Loading” and “unloading” charges have also been included along with the “handling charges”. Are these “loading” and “unloading” charges not part of “handling charges”? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another notable omission from the statute is that Sub-section 3 of the Section 14 is omitted. Since the proviso (ii) to the Section 14(1) specify that valuation rules may provide for “the manner of determination of value in respect of goods where there is no sale”</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax – review - Committee of Chief Commissioners of Central Excise to include Chief Commissioners, customs </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Chief Commissioners of Customs are appointed as Chief Commissioners of Central Excise for the purpose of reviewing orders under Service Tax for constitution of the Committee of Chief Commissioners</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_017.htm" target="_blank">NOTIFICATION NO. 17 /2007-Service Tax, Dated: May 12,2007 </a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board notifies committees of Chief Commissioner for Service Tax appeals.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has notified the committees of Chief Commissioners for review of Service Tax orders, for various jurisdictions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_018.htm" target="_blank">NOTIFICATION NO. 18 /2007-Service Tax, Dated: May 12,2007 </a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board notifies committees of Commissioner for Service Tax appeals.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has notified the committees of Commissioners for review of Service Tax orders, for various jurisdictions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=40&filename=notification/servicetax/2007/stnot07_019.htm" target="_blank">NOTIFICATION NO. 19 /2007-Service Tax, Dated: May 12,2007 </a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Anti-dumping duty on vitrified and porcelain tiles – CBEC extends yet another dead notification</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti-dumping duty on vitrified and porcelain tiles, other than vitrified industrial tiles, falling under headings 6907 or 6908 of the First Schedule to the Customs Tariff Act, originating in, or exported from, the People’s Republic of China and United Arab Emirates (UAE), imposed vide notification No.73/2003-Customs, dated the 1st May, 2003, is extended till 1st May, 2008, unless the notification is revoked earlier.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But the Notification was dead on 1<sup>st</sup> May 2007. What is the Board extending? A dead notification?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_067.htm" target="_blank">NOTIFICATION NO. 67/2007-Customs, Dated: May11, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CAG bowls Indian Cricket</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
humiliation in the world Cup, though recaptured a little with the win against
BanglaDesh is not really wiped off for Indian Cricket. Now the CAG is after
them. In his report to Parliament yesterday, the CAG has bowled the worst
possible bouncers against Indian Cricket and two of its finest batsmen, Sunil
Gavaskar and Sachin Tendulkar. The CAG also found fault with the Dalmia’s
Cricket Association of Bengal and Pawar’s BCCI. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Highlights from the CAG report.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In West Bengal, DIT (Exemption), Kolkata charge, assessment of Cricket Association of Bengal (CAB), for the assessment years 1979-80 to 1983-84 was completed after scrutiny in July 2002. (Assessee had not filed income tax returns for any of these years.) Assessments for these years under section 144 underwent several revisions. Audit scrutiny of assessment records pertaining to the assessment years 1979-80 to 1980-81 and 1982-83 to 1983-84 revealed that the assessee was not notified under section 10 (23) for these years.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, exemption under section 11 was also not available for these years as the same was effective from September 24, 1984 only. However, audit noticed that the assessee had claimed and was allowed exemptions under section 11(1) and 11(2).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In West Bengal, DIT (Exemption), Kolkata charge, assessment of Cricket Association of Bengal (CAB), for the assessment years 1991-92 to 1993-94 was completed after scrutiny in March 2000. Scrutiny of assessment records pertaining to the assessment years 1991-92 to 1993-94 revealed that neither was 75 per cent of the income applied for the purpose of games or sports, nor was the assessing officer informed of the same as required under section 11 (2). Further, utilization of unspent income (as required under section 11[2]) within 10 years i.e. up to assessment years 2001-02, 2002-03 and 2003-04 could also not be established as the department had not maintained the register, as prescribed by the Board’s instruction No. 1559 dated 23 April 1984, in order to check the accumulation of income and its proper utilization. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Maharashtra, DIT (Exemption), Mumbai charge, assessments of the Board of Control for Cricket in India (BCCI), for the assessment years 2002-03 and 2004-05 were completed in summary manner in December 2002 and August 2005 respectively. Assessee had claimed exemption under section 11. Audit scrutiny revealed that out of accumulations of Rs. 87.26 crore as created pertaining to the assessment years 2002-03 and 2004-05, assessee had invested only Rs. 30.43 crore during the two years. Thus, funds accumulated during assessment years 2002-03 and 2004-05 by the assessee were not commensurate with the accretion to the investments in the Balance Sheet. As a result, there was shortfall, in the investments made, amounting to Rs. 56.83 crore. As such, assessee was not eligible for claiming exemption to the extent of shortfall in investments made under section 11. Omission had resulted in under assessment of income by Rs. 28.32 crore in the assessment year 2002-03 and by Rs. 28.51 crore in the assessment year 2004-05 with total tax effect of Rs. 20.09 crore including interest. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Andhra Pradesh charge, it was noticed that Sports Authority of Andhra Pradesh (SAAP), Government of Andhra Pradesh, disbursed Rs. 3.62 crore to sports personalities as awards/ incentives during the period from April 2001 to March 2006. However, tax was not deducted at source from the amounts disbursed. Tax not deducted together with interest and penalty thereon was to the extent of Rs. 2.61 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Maharashtra, DIT (E) Mumbai charge, assessments of the Board of Control for Cricket in India (BCCI) for the assessment years 1999-2000 and 2000- 01 were completed after scrutiny in March 2002 and March 2003 respectively, and for assessment years 2002-03 and 2004-05 in summary manner in December 2002 and August 2005 respectively. Audit noticed that </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Interest income amounting to Rs. 4.05 crore pertaining to the assessment years 1999-2000 and 2000-01 was credited to various funds without treating the same as income. Similar interest income was held as taxable by the assessing officer in respect of the same assessee in scrutiny assessment for assessment year 2001-02 completed in March 2004 and for assessment year 2003-04 completed in March 2006. The omission resulted in short levy of tax of Rs. 1.90 crore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Assessee, while making payments to players/umpires during the assessment years 1999-2000, 2000-01, 2002-03 and 2004-05, had deducted certain amounts and credited these to the Benevolent Fund without treating the same as income. Similar deductions from the payments made to players/umpires were held as taxable by the assessing officer in respect of the same assessee in scrutiny assessment for assessment year 2001-02 completed in March 2004 and for assessment year 2003-04 completed in March 2006. The omission resulted in short levy of tax of Rs. 27.86 lakh. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Audit
on Sachin Tendulkar </b>revealed that aggregate deduction of Rs. 8.89 crore
was allowed on foreign remittance received by him on account of sport endorsement
i.e. advertisements and publicity activities as detailed below:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Irregular exemption under section 80 RR</b></font></p>
<table width="450" border=1 align=center cellpadding=3 cellspacing=0>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Assessment Year</b></font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Gross foreign exch. earning. (Rs. inlakh)</b></font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Percentage deduction allowed under section 80RR</b></font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Amount allowed (Rs. In lakh)</b></font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tax effect (including interest) (Rs. in lakh)</b></font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1998-99 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">282.04 </font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">75 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">189.28 </font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">88.88</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1999-2000 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">206.58 </font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">75 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">147.85 </font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">60.77</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2000-01 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">92.86 </font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">75 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">69.64 </font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">30.70</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2001-02 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">559.22 </font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">60 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">335.53 </font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">136.04</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2002-03 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">237.11 </font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">45 </font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">106. 70</font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">32.66</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2004-05</font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">255.77</font></p></td>
<td width=99 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15</font></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">38.36</font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12.67</font></p></td>
</tr>
<tr>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Total</b></font></p></td>
<td width=96 valign=top>
<p align="justify"></p></td>
<td width=99 valign=top>
<p align="justify"></p></td>
<td width=96 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>887.36</b></font></p></td>
<td width=98 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>361.72 </b></font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the income was not derived from the profession of sportsman, allowance of deduction was not in order. Department's argument that the assessee had derived it in the capacity of artist was not acceptable, as the assessee had received this income in the capacity of a model which cannot be construed as an artist for purpose of this section. It was further observed that during scrutiny assessment in March 2006 for assessment year 2003-04, deduction under section 80RR was not allowed by the assessing officer on similar grounds. Thus, incorrect allowance of deduction under section 80RR for the assessment years 1998-99 to 2002-03 and 2004-05 amounting to Rs. 8.87 crore resulted in short levy of tax of Rs. 3.62 crore. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Irregular exemption under section 80 RR – Sunil Gavaskar</b></font></p>
<table width="450" border=1 align="center" cellpadding=3 cellspacing=0>
<tr>
<td width=91 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Name of the assessee/ CIT charge</b></font></p></td>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Assessment year(s)</b></font></p></td>
<td width=145 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Type of assessment/date of assessment</b></font></p></td>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Nature of mistake</b></font></p></td>
<td width=57 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tax effect (Rs. In lakh)</b></font></p></td>
</tr>
<tr>
<td width=91 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Shri Sunil Gavaskar </font></p>
<p align="justify"></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Mumbai V</b></font></p></td>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2001-02 </font></p>
<p align="justify"></p>
<p align="justify"></p>
<p align="justify"></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2000-01 </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2002- 03 </font></p></td>
<td width=145 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Scrutiny 25 April 2003 Summary </font></p>
<p align="justify"></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">29 December 2000 </font></p>
<p align="justify"></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">24 February 2003</font></p>
<p align="justify"></p></td>
<td width=104 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Foreign remittances received in the capacity of commentator not covered under section 80 RR</font></p></td>
<td width=57 valign=top>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">80.34</font></p></td>
</tr>
</table>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more DDT</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">vijaywrite@taxindiaonline.com</a> </font></p>
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