TIOL-DDT 635 · the untouched capture
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<body><p align="justify"><b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 635</font></b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><br>
14.06.2007<br>
Thursday</b></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>No Service Tax services rendered abroad before 18.4.2006 - CESTAT</b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>It has finally come! There is no Service Tax on services rendered abroad. In a landmark judgement, the Ahmedabad Bench of the Tribunal has held that services rendered abroad are not taxable prior to 18.4.2006 when Section 66A was inserted into the Finance Act, 1994.</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though it is an eminently welcome order, there are certain questions which this order is bound to raise.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Section 66A came into force from 18.4.2006, but the same was inserted as an explanation to Section 65(105) with effect from 16.6.2005. Now what is the status of that explanation? But <b><font color="#663399">The Taxation of Services (Provided from Outside <st1:country-region
w:st="on">India</st1:country-region> and Received in <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region></st1:place>) Rules, 2006,</font> </b>came into existence from 19.4.2006.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Tribunal has relied on a Board Circular No.36/4/01 dt. 8/10/2001 and held that this circular holds that service provided beyond the territorial waters will not attract service tax. This circular will be relevant till the amendment brought out in service tax laws by insertion of Section 66A w.e.f. 18/4/2006. This circular was regarding the liability of Service Tax in the Continental Shelf and the Exclusive Economic Zone of India. The Circular reads as,</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">I am directed to say that question has arisen whether services provided outside the limits of the Indian territorial waters are liable to Service Tax or not.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter has been examined. At present the levy of service tax extends to the whole of <st1:country-region w:st="on">India</st1:country-region> except the State of <st1:place w:st="on"><st1:State w:st="on">Jammu and Kashmir</st1:State></st1:place>. The expression “<st1:country-region w:st="on">India</st1:country-region>” includes the territorial waters of <st1:place w:st="on"><st1:country-region
w:st="on">India</st1:country-region></st1:place>. Indian territorial waters extend up to twelve nautical miles from the Indian land mass. Chapter V of the Finance Act which governs the levy of Service Tax has not extended to the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has been done in case of Central Excise vide Notification No. 166/87-C.E., dated 11-6-87 and in case of Customs by Notification Nos. 11/87-Cus., Dated 14-1-87 & 64/97-Cus., dated 1-12-97). It is, therefore, clarified that the services provided beyond the territorial waters of <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place> are not liable to Service Tax as provisions of Service tax have not been extended to such areas so far.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this lapse has been rectified by Notification No. 1/2002-Service Tax, dated 1-3-2002 when Service Tax when Service Tax was extended to the designated areas in the Continental Shelf and Exclusive Economic Zone of India. So that circular lost its validity on 1.3.2002. </font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact the Board should have withdrawn this circular on 1.3.2002. Maintaining a large mortuary will lead to skeletons rising up and menacingly dancing before future law.</font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5622" target="_blank">Breaking News</a></u> today for more details</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Is Zebra a white animal with black stripes or a black animal with white </b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>stripes? </b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Service Tax case we are reporting today the Tribunal expressed a doubt, </font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>In whatever field, when the people rise high in the organization, management expertise becomes a necessity. Whether they can be treated as engineers with management expertise or managers with engineering expertise?</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our <u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5622" target="_blank">Breaking News</a></u> for more details. </font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs House Agents Licensing Regulations- CBEC clarifies</b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has issued certain clarifications regarding CHA licences:- <br>
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<b><font color="#663399">Renewal of licence for 10 years:</font></b></font></p>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif">The complaint is that renewal is not given for ten years but shorter periods like six month sunder the pretext of some Show Cause Notice.
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Board has now observed that there are sufficient powers provided to the Commissioner, to immediately suspend any errant CHA in deserving cases. Hence, it does not appear to be correct to extend the renewal for shorter period instead of extending for 10 years as provided in the regulations in cases where SCN has been issued.
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</font><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And has clarified <b><font color="#663399">that renewal of Custom House License in all cases should be given for a period of 10 years.</font></b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Refund of deposit upon cancellation / surrender</b></font></p>
<div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board has reiterated that in cases where the CHAs are surrendering the licences in the Customs stations, other than the one in which they had preferred as the main place of business for the purpose of single common CHA under the present regulations, the Custom House should return the security executed by CHA under earlier regulations for obtaining licence at individual locations. Further, as per the above said clarification such an enhanced amount will apply to only for fresh cases where CHA licence has been applied for in terms of the provisions of regulation 9(2).
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<b><font color="#663399">Calling for records and inspection of accounts</font></b>
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Board has clarified that field formations, wherever feasible, <b><font color="#663399">should specifically mention the purpose or grounds</font> </b>under which the records are sought from the CHA or <b><font color="#663399">the specific records which are being required</font> </b>shall be mentioned in the letter issued by field formations.
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<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Employment of persons by CHA licence holder </b></font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"><p align="justify"><font size="2">Board has clarified that the restriction on employment of person with prior approval by CHA licence holder applies only in respect of persons who would assist in his work as CHA and not to general staff or other persons employed by CHA. </font></p><p align="justify"><font size="2"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2007/instructions.htm" target="_blank">F. No. 502/ 6/ 2007-Cus.VIDated: June 8, 2007</a></u></font></p>
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<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>IT - EXEMPTION TO CHARITABLE AND RELIGIOUS ENTITIES MODIFIED</b></font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"><p align="justify"><font size="2">Sections 11 and 12 of the Income Tax Act, 1961 provide for exemption of income of charitable and religious entities. In order to avail of such exemption, the entity is required to make an application for registration under section 12A in form No. 10 A to the Commissioner of Income Tax. Prior to 1<sup>st</sup> day of June. 2007, the application had to be made by the entity within one year from the date of its creation/establishment and the Commissioner had discretion to condone the delay if the application was filed belatedly. However, the Finance Act, 2007 has removed the requirement of filing the application for registration by the entity within one year and has also removed the power vested with the Commissioner for condonation of delay in respect of any application made on or after 1<sup>st</sup> day of June, 2007. A new clause (aa) to sub-section (1) of section 12A of the Income Tax Act has been inserted in this regard.</font></p><p align="justify"><font size="2">Income received on behalf of certain charitable and religious entities is entitled for exemption from tax. Till now, in order to be eligible for such exemption, the entities had to be notified by Central Government or had to be approved by the prescribed authorities. Vide Finance Act, 2007, the approvals have also to be granted by the prescribed authorities with effect from 1<sup>st</sup> June, 2007. </font></p><p align="justify"><font size="2">Notifications have been issued on 30<sup>th</sup> May, 2007 to amend the relevant rules viz,.Rule 2C and Rule 2CA of the Income Tax Rules, 1962 to specify the Chief Commissioners of Income Tax/Directors General of Income Tax who will be the prescribed authorities for receipt of applications and grant of approvals.</font></p>
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<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>No routine telephone tapping by Income Tax – govt clarifies</b></font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"><p align="justify"><font size="2">Are you apprehensive that Big Brother is hearing your conversation and watching your every movement? You don’t really need to worry if you believe the government which has clarified that:-</font></p>
</font><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> There are some misconceptions regarding telephone interception by the Investigation Wing of the Income Tax Department.</font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"></font><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Phone interception is done only in very exceptional and the rarest of cases after obtaining due authorisation from the appropriate authority.</font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"></font><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Reports suggesting that the interception facility is used for routinely tapping corporate conversations or keeping a tab on top bracket taxpayers are totally baseless.</font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Imports of Diclofenac Sodium from <st1:country-region w:st="on"><st1:place
w:st="on">China–</st1:place></st1:country-region> anti dumping investigation on </font></b></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b></b></font></p>
<font face="Verdana, Arial, Helvetica, sans-serif"><p align="justify"><font size="2">The Designated Authority has initiated investigation regarding the import of phenol and invites comments to be sent within 40 days.</font></p><p align="justify"><font size="2"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/sernews/order/anti_dum.htm" target="_blank">DGAD Notification Dated : June 04 2007</a></font></p>
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<div align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600" size="2">Former Revenue Secretary Chandrasekhar is the new Cabinet Secretary</font></b><font size="2"></font>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/he_km_chandrasekhar.jpg" alt="Legal Corner Icon" width="186" height="183" hspace="5" border="0" align="left"></b></b></b>Former Revenue Secretary K.M. Chandrasekhar assumed charge as the Union Cabinet Secretary, the topmost bureaucrat of the Country. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As Revenue in Secretary, it was his dream that the CBEC/CBDT web sites should be the first to upload the Government notifications and circulars. The Boards understood it as “don’t release the notifications till the official web sites are able to carry them – may be after two weeks. <b><font color="#663399">DDT</font></b> called him up and asked him the justification for suppressing government notifications. He admitted that he only wanted them to be published in the official websites and this did not mean that notifications are to be kept a secret till they are carried in the official websites. Now maybe as Cabinet Secretary, he can ask all his secretaries not to shy away from publishing the government’s proclaimed policy. DDT wishes the top Babu all the Best. </font></p>
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<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner – tomorrow’s cases</b></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Excise duty not includible in valuation of closing stocks - Re-opening of assessment based on audit objection is not bad in law : ITAT</font></b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Unloading and transferring of LPG gas from ship to tanks, cannot get attracted under Services of Storage and Warehousing : Tribunal </b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Tribunal rectified certain mistakes which did occur in impugned order and that power is available to the tribunal - Revenue appeal rejected : Karnataka HC</b></font></p><p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u>See our columns tomorrow for the judgements</u></b></font></p><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until Tomorrow with more DDT</font></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<a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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