TIOL-DDT 636 · 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 636</font></b><b></b></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><b><br>
15.06.2007<br>
Friday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>FBT on shares to employees – need not pay today; wait till September</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per clause (d) of sub-section (1) section 115 WB, introduced by Finance Act, 2007, an employer is liable to pay Fringe Benefit Tax on any consideration for employment provided by way of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by such employer free of cost or at concessional rate to his employees. The value of the fringe benefit is determined as the fair market value of the specified security or sweat equity share on the date on which the option vests with the employee as reduced by the amount actually paid, by or recovered from the employee in respect of such security or shares. The fair market value for this purpose is to be determined in accordance with the method prescribed by the Board.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">CBDT is yet to prescribe the method.</font></b> It seems CBDT is currently in the process of notifying the method for determination of the fair market value. In the meantime, the first instalment of advance tax in respect of fringe benefit tax falls due on 15<sup>th</sup> of June. In the absence of a method for determination of the fair market value, it will not be possible for an employer to determine the value of the first instalment of advance tax related to fringe benefit tax in respect of allotment or transfer of specified security or sweat equity shares to its employees.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the kind Board (CBDT) has decided that the first installment of Fringe Benefit Tax, which is payable by today in respect of transfer or allotment of specified security or sweat equity shares to its employees, may now be paid by 15<sup>th</sup> of September, 2007 (the date of second instalment).</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>But what prevented the CBDT from notifying the procedure? What happens to the Tax that would have been paid by today if the CBDT had prescribed the procedure? Will this become a future Audit para for the CAG to tell the parliament that we lost so much of money because CBDT could not frame the method? Why can’t the method of collection be framed at the time of imposition of the tax? These are questions and will remain questions!</b></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs Competence – CAG doubts!</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">Two classic cases:</font></b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Classification issue pending for more than twenty years!</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">M/s. Kasturi and Sons Ltd., imported laser press facsimile equipment in May 1984 which was cleared classifying it under CTH 8435. Subsequently, a notice under Section 28(1) for a differential duty of Rs.38.07lakh was issued on 29 May 1984 classifying the goods under different CTH 8515. On appeal, the Collector of Customs (Appeals) Madras-1, remanded (13 June 1985) the case back for reconsideration by the lower authority, after waiving pre-deposit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instead of completing denovo adjudication, department issued a SCN under Section 28(1) on 6 August 1985. The fresh SCN was challenged in High Court of <st1:City w:st="on"><st1:place w:st="on">Madras</st1:place></st1:City> in 1985, on grounds of being time barred and disputing re-classification under different CTH. High Court directed (21 January 1998) the department after 13 years to pass appropriate orders on merit.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department instead of completing denovo adjudication, once again issued a letter on 25 October 1998 calling for payment of arrears Rs.38.07lakh. On further writ petition of importer in 1998, High Court granted interim stay on 16 November 1998/absolute stay on 27 December 2002 and finally appeal was allowed on 10 August 2004 on grounds that duty demanded was not based on adjudication process. The order in original was passed on 30 September 2004 confirming demand of Rs.38.07lakh along with applicable interest. Lack of proper action, inadequate pursuance and demanding duty without adjudication process resulted in non realisation of revenue for nearly 20 years.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Demand of Rs. 1.78 Crores pending since 1995 – Legal ingenuity? </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
SCN issued (August 1995) to M/s. Kusum Alloys demanding duty of Rs.1.78 crore
with penalty of Rs.1.65 crore for misuse of DEEC scheme was confirmed (February
1998) after 29 months, despite Board’s circular No.79/88 requiring
adjudication of cases involving duty of Rupees one crore and above within
one year. On importer’s appeal, CEGAT remanded (March 1999) the case
back with direction to pre-deposit Rs.50lakh. In May 2002, settlement commission
also rejected the application of the party. However, despite rejection of
application by settlement commission and non compliance of orders of CEGAT
to predepositRs.50lakh, department filed application before CESTAT in November
2004 after a delay of 29 months for dismissal of appeal. Further outcome
of the case is awaited.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Non-initiation
of recovery action</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Scrutiny of records in nine commissionerates revealed that after exhausting appeal channels, ten cases were fit enough for action for recovery due to non compliance of pre-deposit orders of the courts/dismissal of party’s appeals, but the department failed to initiate recovery action resulting in non realisation of revenue amounting to Rs.23.33crore even after delays ranging between eight months to nine years. Interest on delay in payment of duty is also recoverable.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>These are some of the observations of the CAG in his 7<sup>th</sup> Report to Parliament. </b></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Import of reconditioned components of computers – policy condition deleted</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AS per Schedule-I of the ITC (HS) Classification of Export and Import Items, 2004-09 , for exim code 847330 - Parts and accessories of the machines of heading 8471, the policy condition is - <b><font color="#663399">Import of reconditioned components of computers is free.</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this policy condition is deleted. Does it mean that import of reconditioned computer components require a licence?</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=45&filename=notification/dgft/2007/dgft07not008.htm" target="_blank">NOTIFICATION NO. 8 (RE-2007)/2004-2009, Dated: June 11, 2007 </a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import of rough diamond from <st1:country-region w:st="on"><st1:place
w:st="on">Cote d'Ivoire</st1:place></st1:country-region> - prohibited</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FTP is amended to prohibit import of rough diamond from Cote d'Ivoire in compliance to Paragraph 6 of UN Security Council Resolution (UNSCR) 1643(2005).</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=45&filename=notification/dgft/2007/dgft07not009.htm" target="_blank">NOTIFICATION NO. 9 (RE-2007)/2004-2009, Dated: June 11, 2007 </a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Export of Sugar to EU – quantity increased</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per DGFT’s Public Notice No.5 dated 17.5.2007, Raw Sugar up to 16,000 MTs can be exported to EU. Now this quantity is increased to 16,500 MTs. </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=47&filename=notification/dgft/2007/dgft07pn008.htm" target="_blank">DGFT PUBLIC NOTICE NO. 8 (RE-2007)/2004-2009,Dated: June 7, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Lady Rashtrapati?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rashtrapati is essentially masculine. What do you call a woman Rashtrapati? Rashtrapatni would be too bad! We are most likely to face this problem very soon as a woman is likely to occupy the largest Presidential palace in the world. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Rashtrapati Bhavan is larger than the Buckingham palace and the White House. With its more than 350 rooms and lovely <st1:place
w:st="on"><st1:PlaceName w:st="on">Rose</st1:PlaceName> <st1:PlaceName w:st="on">Gardens</st1:PlaceName></st1:place>, it’s a dream palace for a Moghul prince. Unfortunately nobody reaches the Rashtrapati Bhavan before he is seventy plus. Why can’t we elect a young person with a small beautiful family to be the President of India so that he/she can enjoy the comforts of <st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place>’s most luxurious palace? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems Governor-General Rajaji used to get lost in the Palace and he used to ask for directions to reach his bedroom! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was only yesterday that I called up a former Governor and she told me that there would be a surprise candidate for President and most probably it would be a woman. I asked her if she was the candidate. She sounded disappointed that she was not being considered in spite of her eminent qualifications. “But what would you call a Lady Rashtarpati?”, I asked her. Madam President is okay, but Rashtrapatniji certainly sounds odd – maybe we should change the designation, at least in Hindi.</font></p>
<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>
<p align=justify><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font><font color="#663399">Even if the fact remains that goods have been removed clandestinely, the question of confirmation of demand will not arise as goods are entitled for full exemption - Stay granted by Tribunal</font></b><font color="#663399">.</font></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>MAT assessment : Deductions to be worked out on basis of adjusted book profit and not profits computed under regular provisions - ITAT</b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Will taking photographs for voter identity cards, and bus passes fall under scope of photography service? CESTAT grants stay and full waiver</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<br>
</u></b></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">Have a nice Weekend.</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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