TIOL-DDT 770 · the untouched capture
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<p><font size="2"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 770</font><font size="2"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><br>
</font></strong></font><font color="#006600" face="Verdana, Arial, Helvetica, sans-serif"> </font><font face="Verdana, Arial, Helvetica, sans-serif">28.12.2007 <br>
Friday </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Call girls hired by employees - Should company reimburse? Eligible as tax deduction? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An employee is given a credit card by his employer company to use for his legitimate tax related expenses as due to the employment, he was staying away from his family. He also suggested that he might be able to make tax claims for travel, accommodation or related expenses in performing his work in the new city away from his family. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Company discovered that he had used the card for hiring call girls/escort services. The Company felt that the company card being used for such entertainment brought a bad name to the Company and promptly dismissed him from service. The aggrieved employee approached the Industrial Court pleading unfair treatment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The judge remarked , <font color="#FF0000">I cannot comprehend how anyone would think that escort agency services could possibly be characterised as an expense that was in some way tax related. The applicant conceded that he had not received any advice about whether or not he might possibly be able to make a claim for taxation purposes for these services. This was despite the fact that his brother is a chartered accountant. </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It beggars belief that any such claim could be thought by anyone to be tax related. There is no suggestion of any kind that the "companionship" which the applicant purchased had anything to do with any activities of his employer. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However the judge did not find that the employee had violated any contract of employment by incurring personal expenditure through the Company card, but the Court was quick to point out that the employer was entitled to terminate the employee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The judge further remarked, </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">no reasonable person acting reasonably could proceed on the basis that expenses incurred for escort services could possibly be the subject of some form of taxation concession or relief in some manner. Even if the applicant had, in some way, some underlying impression about the possibility of any such claim being made, it was, in my view, incumbent upon him to obtain some advice at the least before availing himself of the right to use the respondent's assets in extending credit to him via the corporate card. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you think there is more masala in this case and as to which are the call girl agencies accepting credit cards in India, let me finish the story that this happened in Australia recently in <strong><em><font color="#FF6633">Sinadinos v EDI Rail Pty Limited [2007] NSWIRComm 294 </font></em></strong>decided on 5/12/2007 </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - services provided to SEZ - exempted or taxable? Commerce vs Finance </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the Commerce Ministry promises you something, please don't believe them, but please be kind to them and forgive them, for they have no right to promise or rather they have only a right to promise but no power to deliver. There is always the Finance ministry to thwart all the efforts of the Commerce Ministry in promoting exports - the Finance ministry is hell bent on exporting all the taxes which it imposes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Take the case of Service Tax. Ever since he took over, Mr. Kamal Nath had been loudly proclaiming that there would be no Service Tax on exports, no Service Tax on EOUs and he even got a law passed by Parliament - the SEZ Act, which says that there will be no Service Tax on services provided for SEZ units and that this law would prevail over all other laws. But he forgot to add a clause that the Act has supremacy over the Revenue Babus also. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commerce Ministry feels that services provided to the SEZ units are exempted and the Commerce Secretary wanted to issue a circular to that effect, but the Revenue babus are adamant that only services consumed within the SEZ are exempted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Member JMK Sekhar wrote a letter to the Additional secretary, Commerce that <font color="#FF0000">Department of Revenue is, of the view that the circular proposed by the Ministry of Commerce is not consistent with the statutory provisions of the SEZ Act and the Rules made thereunder. </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was followed by a letter from the Revenue Secretary to the Commerce Secretary (strict protocol) that <font color="#FF0000">in terms of Allocation of Business Rules, prior concurrence of the DOR would be required before taking any decision that adversely impinges tax revenues and you may like to bear this in mind before finalizing your views with respect of the proposed Circular. </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today we bring you an analysis of the issue from our Research Team. <strong>{<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6573" target="_blank">Please see</a></strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6573"><strong>TIOL TOP</strong></a><strong>}</strong></font></p>
<p align="center"><font color="#990033" size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong>Ninety-nine percent of all bureaucrats give the rest a bad name. </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>It's the Ministry of Corporate Affairs now </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per a Presidential order, the Ministry of Company affairs is now the Ministry of Corporate Affairs and it is not the name alone which has changed. The Ministry has prescribed new Accounting standards, amended the Acts relating to CAs , ICWAs and Company Secretaries, amended the Competition Act, proposes to amend the Companies Act, to constitute the National Company Law Appellate Tribunal - NCLAT and to set up the Indian Institute of Corporate Affairs. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font> <font color="#663399" size="5">tiol</font> -<font color="#006600"> Monday's cases </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><strong><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></strong></b></font></b></font></b></font></b></font></b></font></b></font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Payments made for services provided from abroad will be taxable as income in hands of recipient - payments made to foreign contractor are liable to TDS : ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee company which is engaged in the business of operating and maintaining hotels was constructing Lodhi hotel at New Delhi . For this purpose, the assessee had entered into an agreement dated 14.2.2003 with PSIL a foreign contractor, under which the latter was required to render project management services in relation to construction of the said hotel. The assessee submitted before the A.O. that the services rendered by PSIL were step in aid to the process of construction as ultimate aim of the services rendered was the construction of hotel building. Such services were therefore to be excluded from the definition of fees for technical services in view of exception provided in Explanation (2) of section 9(1)(vii). The A.O. however, did not accept the plea of the assessee and held that payment made by the assessee was for the various management services and not for construction of hotel and the case was therefore, not covered by the exception provided in Explanation (2) of Section 9(1 )( vii) and directed the assessee to deduct tax at source @ 20% of the gross payment. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Limitation: </strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6633">It is incumbent upon Revenue to serve adjudication order on petitioner and limitation commences from date of actual receipt of order by petitioner - Writ for Certiorari allowed : Allahabad High Court </font></font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">PETITIONERS </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">sought a writ order or direction in the nature of certiorari quashing the order dated 07-04-2003 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi , rejecting the application of the petitioner for condonation of delay. The Tribunal dismissed the appeals as the delay in filing the Appeals were not explained by the petitioners. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mere filing a petition before Settlement Commission cannot be considered as appellant's tacit admission of guilt - anxiety of adjudicating authority to deny credit on technical ground cannot be appreciated - Tribunal allows credit of Rs 5.8 Cr to Essar Steel </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE appellants imported a consignment 1 ,76,505 MTs. of Iron Ore Pellets from Brazil & the same was brought to their captive jetty at Hazira between May & June 2001. Appellant filed 15 BOE's and was in the process of filing another three bills of entry for the balance quantity, when the customs authorities discovered that almost the entire consignment of iron ore pellets had been cleared from the jetty and consumed in the appellant's factory without waiting for assessment in two cases and without waiting for an out of charge order to be passed in 14 out of the 15 bills of entry in question. For the balance quantity of iron ore pellets, appellant <strong><em><font color="#FF6633">made efforts</font> </em></strong>to file the remaining 3 BOE's subsequently, but <strong><em><font color="#FF6633">the customs authorities refused to accept them . </font></em></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></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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