TIOL-DDT 682 · the untouched capture
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<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
682</font><br>
20.08.2007<br>
Monday</b></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Prohibited exports - backdated contracts?</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Para 1.5 of the FT, <font color="#663399">In case an export or import that is permitted freely under FTP is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that shipment of export or import is made within original validity with respect to available balance and time period of an <b>irrevocable letter of credit</b> established before date of imposition of such restriction. However, a time limit for operationalising such LCs may be prescribed.</font></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The <b>irrevocable letter of credit</b> was recently changed to <b>'irrevocable commercial letter of credit'</b>.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFt now clarifies that while examining the documents submitted by applicant under Para 1.5 of FTP, it needs to also be ensured that the payments for exports covered under the documents are routed and deducted through the concerned commercial letter of credit and not from some other accounts/channels. Absence of the above mentioned mode and routing/deduction of payment would amount to violation of the Transitional Arrangements in Para 1.5 of FTP.</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=46&filename=notification/dgft/2007/dgft07cir004.htm" target="_blank">DGFT CIRCULAR NO. 4 (RE-2007)/2004-2009, Dated: August 16, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import of Rough marble blocks - ceiling reduced</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The present ceiling for import of rough marble blocks is 1.85 lakh Mts for the year 2007-08. Now this is reduced to 1.4 Lakhs Mts</strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>.</strong></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=46&filename=notification/dgft/2007/dgft07cir005.htm" target="_blank">DGFT CIRCULAR NO. 5(RE-2007)/2004-2009, Dated: August 20, 2007</a></u></font></p>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Principles of Sound Tax Policy</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <b>Transparency is a must. </b>A good tax system requires informed taxpayers who understand how taxes are assessed, collected and complied with. It should be clear to taxpayers who and what is being taxed, and how tax burdens affect them and the economy.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <b>Be neutral<font color="#663399">. </font></b>The fundamental purpose of taxes is to raise necessary revenue for programs, not micromanage a complex market economy with subsidies and penalties. The tax system's central aim should be to minimize distortions in the economy, and to interfere as little as possible with the decisions of free people in the marketplace.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. <b>Maintain a broad base. </b>Taxes should be broadly based, allowing tax rates to be as low as possible at all points.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. <b>Keep it simple. </b>The tax system should be as simple as possible, and should minimize gratuitous complexity. The cost of tax compliance is a real cost to society, and complex taxes create perverse incentives to shelter and disguise legitimately earned income.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. <b>Stability matters. </b>Tax law should not change continuously, and tax changes should be permanent and not temporary. Instability in the tax system makes long-term planning difficult, and increases uncertainty in the economy.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. <b>No retroactivity. </b>Changes in tax law should not be retroactive. As a matter of fairness, taxpayers should rely with confidence on the law as it exists when contracts are signed and transactions are made.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. <b>Keep tax burdens low. </b>It makes a difference how large a share of national income is taken by government in taxes. The private sector is the source of all wealth, and is what drives increases in the standard of living in a market-based economy. Taxes should consume as small a portion of national income as possible, and should not interfere with economic growth and investment.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. <b>Don't inhibit trade. </b>In our increasingly global marketplace, the tax system must be competitive with those of other developed countries. Our tax system should not penalize or subsidize imports, exports.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. <b>Ensure an open process. </b>Tax legislation should be based on careful economic analysis and transparent legislative procedures. Tax legislation should be subject to open hearings with full opportunity to comment on legislation and regulatory proposals.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Do you find our government violating every principle? </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>These are principles advocated by the US Tax Foundation for the last seventy years.</b></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><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></p>
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<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><u1:p><font color="#FF0000">Central Excise <u1:p></u1:p></font><u1:p></u1:p></strong></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>In the case of goods cleared by 100% EOU and sold in India whether with or without permission of the Development Commissioner, the assessment shall be made under proviso to Section 3(1) of the Central Excise Act, 1944 and the exemption under Notification 125/84CE shall not be applicable - Larger Bench of Tribunal. </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue referred to the Larger Bench was whether the goods which are cleared by 100% EOU clandestinely and without any permission are eligible to full exemption under Notification No. 125/84-CE and whether such goods are to be assessed under the provisions of main Section 3(1) of the Central Excise Act or under the proviso to Section 3 of the Central Excise Act. The reason for such a reference was that the referring Bench observed that there were conflicting views on the issue viz. decisions of the Tribunal in Modern Denim Ltd. and in the case of Sterlite Optical Technologies Ltd. </font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs</b></font></p>
<p align="justify" ><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Overvaluation of export goods - penalty on CHA upheld - CESTAT</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is an appeal by a Custom House Agent against a penalty of Rs. 50,000 imposed on him for overvaluation of export goods.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The contention of appellant is that he filed the shipping bills as per the instructions of the exporter. There is no evidence on record to show that appellants are in any way concerned with over-invoicing of the goods or he has got something extra than their charges. The contention is that as the appellants filed shipping bills at the instruction of exporter and all the documents were signed by the exporter, therefore, the appellant as CHA are not liable for penalty.</font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Service Tax</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u1:p><font color="#663399">Service Tax - User fee collected by airport from international passengers not liable to tax under airport services - in fact no service at all provided to passenger : CESTAT </font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE appellant M/s. Cochin International Airport known as CIAL are providing various services to air passengers and have been registered with the Central Excise department. They collected an amount of Rs. 500/- from each outgoing international passenger. As this amount was not included for payment of Service Tax, Revenue proceeded against them demanding Service tax. The Adjudicating Authority held that the amount collected as 'Users Fee' at the rate of Rs. 500/- per outgoing international passengers would form part of the assessable value for the purpose of payment of Service Tax on the 'Airport Services'. He held that the said amount is having nexus with the services that were being provided to the passengers. He confirmed the demand of over Rs. 2.8 Crores with an equal penalty.</font></p>
<p align="justify" ><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income Tax </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u1:p></b></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Deduction
for repairs - To decide applicability, test is not whether expenditure
is revenue or capital in nature, which test has been wrongly applied by
the HC, but whether expenditure is 'current reapirs' - Concurrent findings
of CIT(A), Tribunal and HC overruled</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS <span style=''><o:p></o:p></span></strong><span style=''>group
of civil appeals is to decide the extent and scope of Section 31(<span
class=SpellE>i</span>) of the Income Tax Act, 1961 as it "Stood during the
accounting years ending 31.3.1993 and 31.3.1994. <span class=GramE>which</span> was
as follows:-</span></font></p>
<p align="justify" style='margin-left:36.0pt;text-align:justify'><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style=''>"31.
Repairs and insurance of machinery, plant and furniture<span class=GramE>.-</span> In
respect of repairs and insurance of machinery, plant or furniture used
for the purposes of the business or profession, the following deductions
shall be allowed-<o:p></o:p></span></font></p>
<p align="justify" style='margin-left:36.0pt;text-align:justify'><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style=''>(<span class=SpellE>i</span>) <span
class=GramE>the</span> amount paid on account of current repairs thereto;<o:p></o:p></span></font></p>
<p align="justify" style='margin-left:36.0pt;text-align:justify'><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><span style=''>(ii) <span class=GramE>the</span> amount
of any premium paid in respect of insurance against risk of damage or destruction
thereof."<o:p></o:p></span></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>
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<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more DDT</font></p>
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<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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