TIOL-DDT 647 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 647</font><br>
02.07.2007<br>
Monday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Income Tax - Payment of amounts exceeding Rs.20,000 in cash – rule amended </font>
</strong></p>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Don’t be too happy – there
is no major change. As per the Income Tax Act, payments made in excess
of Rs. 20,000/- other than by crossed cheque or DD, will not be allowed
as deduction except certain payments as specified in Rule 6DD. This Rule
is now amended to delete certain archaic restrictions and to include certain
modern items. And of course to change the names of various Acts mentioned
in the list.<br>
<br>
These are the exclusions:-</font></p>
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<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(a) payment made to-</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) the Reserve Bank of India or any banking company</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ii) the State Bank of India or any subsidiary bank</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iii) any co-operative bank or land mortgage bank</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iv) any primary agricultural credit society or any primary credit society</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (v) the Life Insurance Corporation of India</font></p></td>
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<tr>
<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The following organisations are deleted from the list</strong><br>
<br>
(vi) the Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948) ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (vii) the Industrial Credit and Investment Corporation of India Ltd. ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (viii) the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964) ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ix) the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963) ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (x) the Madras Industrial Investment Corporation Ltd., Madras ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xi) the Andhra Pradesh Industrial Development Corporation Ltd., Hyderabad ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xii) the Kerala State Industrial Development Corporation Ltd., Trivandrum ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xiii) the State Industrial and Investment Corporation of Maharashtra Ltd., Bombay ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xiv) the Punjab State Industrial Development Corporation Ltd., Chandigarh ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xv) the National Industrial Development Corporation Ltd., New Delhi ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xvi) the Mysore State Industrial Investment and Development Corporation Ltd., Bangalore ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xvii) the Haryana State Industrial Development Corporation Ltd., Chandigarh ;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (xviii) any State Financial Corporation established under section 3 of the State Financial Corporations Act, 1951 (63 of 1951) ;</font></p></td>
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<td><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender</strong></font></div></td>
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<td><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(c) where the payment is made by</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) any letter of credit arrangements through a bank;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ii) a mail or telegraphic transfer through a bank</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iii) a book adjustment from any account in a bank to any other account in that or any other bank;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iv) a bill of exchange made payable only to a bank;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (v) the use of electronic clearing system through a bank account;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) a credit card;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (vii) a debit card.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v, vi and vii are newly added in tune with the technology development)</font></p> </td>
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<td><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(d) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;</strong></font></div></td>
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<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(e) where the payment is made for the purchase of</strong>-</font>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) agricultural or forest produce; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iii) fish or fish products; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; </font></p></td>
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<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(f) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;</strong></font></p> </td>
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<td><div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(g) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;</font></strong></div></td>
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<td><div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(h) where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed fifty thousand rupees;</font></strong></div></td>
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<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(i) where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of Section 192 of the Act, and when such employee-</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (i) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ii) does not maintain any account in any bank at such place or ship;</font></p> </td>
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<td><div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike;</font></strong></div></td>
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<td><div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;</font></strong></div></td>
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<td><div align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(l) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business.</font></strong></div></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <br>
<strong>There was another exception,</strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> where under any contract entered into by the assessee before the 1st day of
April, 1969, the payment is required to be made in legal tender</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe now no agreement entered into prior to 1969 survives and so this clauses
is deleted.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>It takes a long time for Government to catch up with technology!</b><br>
<br>
<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2007/it07not208.htm" target="_blank">CBDT NOTIFICATION NO. 208/2007, Dated: June 27, 2007</a></font></p>
<p align="center"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Non
reversal of cenvat credit when process of manufacture held by court as not
excisable – New
Section 5B proposed to be put in effect</font></b></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
new Section 5B was inserted in the Central Excise Act by the Finance Act
2007 to provide for non reversal of cenvat credit when the process of manufacture
is held to be not excisable by the courts. There are several cases pending
on this issue. See <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5464">TIOL-DDT
612 14.05.2007</a> for a detailed analysis on the
issue.<br>
<br>
Now Board has realised that in the case of Metlex, the Supreme Court had
held that Metallising or laminating of duty paid film does not amount to
manufacture - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2004/2004-TIOL-77-SC-CX.htm">2004-TIOL-77-SC-CX</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">.
Apparently there are a large number of Show Cause Notices floating around on
the issue. Board has called for particulars of notices issued to manufacturers
and their customers. May be good times are ahead and Board will come up with
a notification soon.<br>
<br>
<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/manufacture.htm">F.No. 93/1/2007-CX-3 dated June 1, 2007</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Metalising
is indeed manufacture?</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Note 16 to Chapter No. 39 inserted vide Finance Bill 2006 provides that in
relation to the products of heading 3920 and 3921, the process of metallization
shall amount to 'manufacture'. Board is considering including the process
of lamination and lacquering in the above said Chapter Note and has asked
for particulars.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/levy.htm">F.No. 93/1/2005-CX-3 dated June 1, 2007</a></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#006600"><strong>FIRST INTERNATIONAL TAX CONFERENCE opens in Delhi today</strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The first international Tax Conference – co-hosted by the Ministry
of Finance, Asian Development Bank (ADB) and Organization of Economic Cooperation
and Development (OECD) will be held from 2nd July, 2007 in New Delhi. The
two-day Conference will bring together, on a common platform, experts from
the various countries and India as well as tax officials of the Government
of India to discuss tax reforms in different countries.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Conference provides to the international participants, a unique opportunity
of understanding Indian tax reforms as well as to contribute to the process.
Changes in the policies in India will have a large overall impact since one
sixth of the humanity lives in the country.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apart from the formal methods of interaction, the Conference provides an excellent
opportunity for the participants to develop informal contacts and exchange
views and information which may also develop some long-time associations.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a very
important conference where vital issues like transfer pricing are to be
discussed and if you look at the web sites of Income Tax, CBEC or Finance
Ministry, they seem to be oblivious to what is happening. And the PIB press
release is gloating over India’s fiscal
reforms, as if that is the only important thing that ever happened in the
international fiscal scenario.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Teeth to tax collection</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/dog.jpg" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b><br>
The Doberman dog was the creation of a tax collector in Germany Karl Friedrich
Louis Dobermann. He needed a protection dog to guard him in any situation
that might arise in his tax collection duties. He set out to breed a new
type of dog that, in his opinion, would be the perfect combination of strength,
loyalty, intelligence, and ferocity. He put real teeth into the tax collection
process.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Not many years ago, there was a high-profile Commissioner of Central Excise
who had four Doberman dogs that tailed him wherever he went emulating the
great German tax collector and sure enough, he was a terror in the field!</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> From our Legal Corner – tomorrow’s cases</font></strong></p>
<p align="justify"><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> <strong><font color="#FF0000">Service Tax</font></strong><br>
<br>
<font color="#663399">Maersk India gets reprieve in Service Tax case - Tribunal grants Stay from
recovery of 18 crores Service Tax demand and Rs.25 crores penalty</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#000000"> The
appellants had claimed the benefit of the exemption notification no. 6/99-ST
and notification no. 21/2003-ST on the ground that they had received payment
for taxable services rendered by them in convertible foreign exchange. </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, in terms of proviso to the said notification, if the payment received
in India in convertible foreign exchange for taxable services rendered is repatriated
from India there would not be any entitlement for the benefit of notification.</font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs</strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Denial of drawback - demand notice issued on Dec 26 th and order passed on
Dec 29 th without even waiting for reply - Order set aside - Opportunity to
be given for reply and personal hearing : Madras HC</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>THEY</b> are taught at the Academy that they cannot pass orders without giving
opportunity to party to reply and personally explain his position. But these
Revenue officers get more loyal than the king and break every accepted norm
in the book. Why? Because they can always get away with it.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is a case where a demand notice is given on 26th December 2006 and in
three days time the Revenue was frantic to adjudicate and passed an order.
The poor victim had to go the High Court twice and the case is back at the
Show Cause Notice stage. What did the Revenue gain by such super speed and
that too illegal?</font></p>
<p align="justify"> <font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Income Tax</strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> Debt Syndication Fees is not interest accrued on loans and advances. Debenture
Trust Fees are also not interest income. - Not entitled for deduction under
sec.10(23G) of the Act - Tribunal</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the grounds of appeal recently before the ITAT was that the CIT(Appeals)
had erred in directing the Assessing Officer(AO) to allocate 10% of the gross
Interest received under sec.10(23G) towards earning of exempted income though
admittedly there was a finding that borrowed funds were not used for investment
in Tax Free Bonds.</font></p>
<p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
<font color="#663399"><strong>See our columns tomorrow for the judgements</strong></font><br>
<br>
<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</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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