TIOL-DDT 771 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 771 </font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font face="Verdana, Arial, Helvetica, sans-serif"><br> 31.12.2007 <br> Monday </font></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Interest on loans – taxable service? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We received a mail yesterday from a Netizen with a query, </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">I am holding an ICICI Bank credit card which offered me a personal loan of Rs. 40,000/- . The loan is being repaid by me in 36 EMI which includes principal & interest. It is noticed that they are charging service tax @ 12.36% on the loan interest amount. But as per my opinion “interest on loan” is not taxable under Service tax rule. In support of my opinion I would like to bring your attention to the following Service tax Rules / Notification / Circular: </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(a) Notification No.15/2006 dated 25.04.2006: </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>CREDIT CARD , DEBIT CARD , CHARGE CARD OR OTHER PAYMENT CARDS RELATED SERVICE </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“taxable service” means any service provided or to be provided to to any person, by any other person, in relation to credit card, debit card, charge card or other payment card service, in any manner; (section 65(105)(zzzw) of the Finance Act, 1994) <strong>Value of Taxable Service: </strong>The value of taxable service shall be the gross amount charged by the service provider for providing such service and the money value of any other consideration ( if any) received for providing such service. <strong>The value of taxable service shall be determined as per the provisions made under section 67 of the Finance Act, read with Service Tax (Determination of Value) Rules, 2006 </strong></em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(b) Clause 6(2) (iv) of the Service tax (Determination of Value) Rules 2006 </strong>: </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include– </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i)…. </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(ii)….. </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(iii)…... </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(iv) <strong>interest on loans. </strong></em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>(c) The para 19.2 of Circular No. 80/2004-Service Tax dated17-9-04 </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The "interest on loans" has been specifically excluded by way of amendment to the provisions relating to valuation. All such interests that are in the nature of interests on loans would thus remain excluded from taxable value.</em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> </em></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The ICICI Bank is not accepting my plea. Therefore, I request for your help in this issue. It will be appreciated if you kindly give your opinion whether interest on personal loan sanctioned by banking institution to their credit card customer is taxable under Service tax rule or not. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Here is an ordinary citizen, who has understood the law so well. Yes Sir, you are absolutely right – <strong>no Service Tax is payable on interest on loans and you can claim a refund from the Department. But maybe the Board should clarify this situation so that poor tax payers are not burdened with tax they are not liable to pay. </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service charges collected from credit card-holders on overdue payments – liable to Service Tax? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though it is clear that no Service Tax is payable on interest on loans, there is a doubt regarding the service charges collected by banks from Credit card holders for overdue payments. Is it interest on loan and covered under the above situation? Or is Service Tax payable? <strong>Do send in your opinion and we will come out with an answer soon. </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Compounding of offences - Government amends Rules </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Excise (Compounding of Offences) Rules, 2005 have been amended. See our story <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6576">CBEC repackages Compounding Scheme and reduces amount significantly in Central Excise cases to make scheme more attractive</a> for details of the scheme. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of reduction of compounding amount, Board wants the assessees to be persuaded to opt for compounding route in more number of cases. Board wants the Filed to give adequate publicity to be given about reduction of compounding amount, in order to make the scheme more popular as to reduce the cases pending in the Court. Further, in order to make best use of compounding of offence scheme, all persons against whom prosecution is initiated or contemplated, should be informed separately in writing, the offer of compounding. </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=30&filename=notification/excise/2007/exnt07_42.htm" target="_blank">NOTIFICATION NO. 42 /2007- Cex.(N.T.), Dated: December 27, 2007</a><strong> and </strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/excircular862.htm" target="_blank">CIRCULAR NO. 861/20/2007-Cx., Dated: December 27, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export of Ketamine - restrictions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP is amended to provide free export of Ketamine subject to obtaining No Objection Certificate from Narcotics Commissioner. </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=45&filename=notification/dgft/2007/dgft07not067.htm" target="_blank">NOTIFICATION NO. 67 (RE - 2007)/2004-2009, Dated: December 27, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Prohibition on export of non-basmati rice - amendment of Minimum Export Price </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prohibition on export of rice was not to be applicable to the export of non-basmati rice if the Minimum Export Price (MEP) is more than US$ 425 per ton FOB or Rs. 17,000/-. Now this is amended to read as <strong>more than US$ 500 per ton FOB or Rs . 20,000/- per ton FOB . </strong></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=45&filename=notification/dgft/2007/dgft07not068.htm" target="_blank">NOTIFICATION NO. 68 (RE – 2007)/2004-2009, Dated: December 27, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> Import of Soyabean Oil - relaxation extended </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Condition 18 Chapter of 1A (General Notes Regarding Import Policy) of the ITC(HS) Classification </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">18. Import of Genetically Modified Food, Feed, Genetically Modified Organism (GMOs) and Living Modified Organisms (LMOs) will be subject to the following conditions : </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The import of GMOs / LMOs for the purpose of (i) R & D; (ii) Food; (iii) Feed; (iv) Processing in Bulk and (v) For Environment release will be governed by the provisions of the Environment Protection Act, 1986 and Rules 1989. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) The import of any Food, Feed, raw or processed or any ingredient of food, food additives or any food product that contains GM material and is being used either for Industrial production, Environmental release, or field application will be allowed only with the approval of the Genetic Engineering Approval Committee (GEAC). </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) Institutes / Companies who wish to import Genetically Modified material for R & D purposes will submit their proposal to the Review Committee for Genetic Modification (RCGM) under the Department of Bio-Technology. In case the Companies / Institutes use these Genetically Modified material for commercial purposes, approval of GEAC is also required. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) At the time of import all consignments containing products which have been subjected to Genetic Modification will carry a declaration stating that the product is Genetically Modified. In case a consignment does not carry such a declaration and is later found to contain Genetically Modified material, the importer is liable to penal action under the Foreign Trade (Development and Regulation) Act, 1992. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 54 (RE-2006)/2004-2009 dated 13 th March, 2007, the above condition will not apply to import of Soyabean oil for the purpose of consumption after refining, till 31.12.2007. Before the yearend revelry could start, the DGFT has extended this concession “till further orders” </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=45&filename=notification/dgft/2007/dgft07not069.htm" target="_blank">NOTIFICATION NO. 69 (RE – 2007)/2004-2009, Dated: December 27, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EOUs – refund of duty paid on fuels procured from Oil Companies and Depots of Public Sector Oil Companies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per para 6.11(c )( iv) of the FTP, EOUs are eligible for the benefits </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">c) In addition, EOU / EHTP / STP / BTP units shall be entitled to following:- </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">i. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">ii. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">iii. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">iv) Reimbursement of Duty paid on fuels procured from domestic oil companies as per Drawback rate notified by DGFT from time to time.</font><font color="#990033" size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is amended to read as <em><font color="#663399">“Reimbursement of duty paid on fuel procured from domestic oil companies </font></em><font color="#663399"><strong><em>/</em></strong></font><font color="#990033"><strong><em> <font color="#FF6633">Depots of domestic oil Public Sector Undertakings</font> </em></strong><em> <font color="#663399">as per drawback rate notified by DGFT from time to time.” </font> </em></font></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=45&filename=notification/dgft/2007/dgft07not070.htm" target="_blank">NOTIFICATION NO. 70 (RE -2007)/2004-2009, Dated: December 27, 2007 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IRSLA wishes you a Happy New Year </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the uninitiated, <strong><font color="#FF6633">IRSLA</font> </strong> stands for IRS Ladies Association. Once upon a time, when there were not many ladies in the service, this used to be an association of the wives of the IRS officers, of course with the active support of their powerful IRS husbands. Now that there are many ladies in the service, it is not very clear as to who the IRS ladies are. Are they the lady IRS officers or wives of IRS officers or both? </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whatever it may be the IRSLA, Hyderabad Chapter has come up with greeting cards with pictures drawn by IRS kids. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The card proclaims, “The proceeds from sale of these cards would be used for the causes promoted by IRSLA, Hyderabad Chapter” </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen sent us this IRSLA card. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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_731.jpg" alt="Legal Corner Icon" width="425" height="632" hspace="5" border="0" align="center"></b></strong></b></font></b></font></b></font></b></font></b></font></b></font></strong></font></p> <p></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden <font color="#663399" size="5">tiol</font> - Tomorrow's cases </strong></font></p> <p align="left"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong></strong></strong></strong></strong></strong></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Sec 110 of Finance Act, 2000 would not apply to those SCNs where it is held that invoking larger period of limitation is unjustified on ground that there is no fraud, collusion or suppression of facts for invoking larger period : Bombay HC </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">questions of Law raised in this Revenue appeal are :- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1) Whether the CESTAT is justified in holding that the extended period of limitation is not applicable in the present case without even discussing the elements of expenses incurred by the assessee which were suppressed with intent to evade central excise duty ? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2) Whether the department is entitled to invoke extended period of limitation when the wilful suppression of certain expenses incurred by the assessee while declaring the assessable value with intent to evade central excise duty ? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3) Whether CESTAT has erred in setting aside the demand as time barred, by not justifying the amendment made in section 11A vide section 110 of Finance Act, 2000 ? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the famous <em>Cotspun </em> case, the Supreme Court held that larger period of limitation was not available when the classification list was approved by the Department. To undo this order, the Government brought in Section 110 of the Finance Act, 2000, to proclaim that any demand issued between 1980 and 2000 would not be hit by time bar notwithstanding any approval, acceptance or assessment relating to the rate of duty on or value of, the excisable goods by any Central Excise Officer under any other provision of the Central Excise Act or the rules made thereunder. </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="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I-T - if two views are possible and AO has taken one of them, such view cannot be revised u/s 263 - Before invoking Sec 263, it is necessary for Revenue to make out a case that assessment order is not only erroneous but also prejudicial to the interest of Revenue : ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ON scrutiny, the CIT has noticed that the AO has allowed the claim of the assessee in respect of claim of exemption of capital gains u/s. 10(23G) of Rs.53,70,49,727/-arising out of conversion of 1 crore equity share of Gujarat Pipavav Port Ltd. (in short GPP) as stock in trade in assessment year 2000-01 and subsequent sale of these shares in the A.Y. 2002-03 and claim of interest of Rs.1,87,06,108/- on borrowed funds from Gujarat Maritime Board used for purchase of shares as a business expenditure without verifying the fact that the conditions laid down in Section 10(23G) has not been satisfied and the interest paid on funds utilised for purchase of shares held as an investment is a Capital expenditure not allowable u/s. 36(1)(iii). Even otherwise the interest payable to Gujarat Maritime Board is covered by the provisions of Section 43B of the I.T. Act. By allowing the claims the AO in the computation of income for A.Y. 2002-03 has rendered the assessment order u/s. 143(3) dated 24.3.2005 erroneous and prejudicial to the interest of Revenue and the CIT proposed the assessment to revise u/s. 263(1) of the I.T. Act, 1961. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>When transactions between two companies are at arms' length and no controlling interest is established, lifting corporate veil will not serve purpose to establish avoidance of tax : ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SINCE the issues in all these appeals and cross appeals by revenue and assessees are inter-related all these appeals were heard together and disposed of by a common order. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The primary issue to be decided is whether </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The appellants Fine Instalments (P) Limited and Handsome Investments (P) Ltd. should be treated as merely paper or dummy entities and are conduits of Xerox Modicorp Limited. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Validity of reopening of assessment in the case of Indian Xerox systems Ltd, under section 147 of the Act,when the assessments were reopened beyond a period of four years from the end of relevant assessment years as barred by law, and whether such reassessment is justified to show that any income chargeable to tax has escaped assessment for the reason of failures on the part of the assessee to disclose fully and truly of material facts necessary for his assessment for that assessment year. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tomorrow for the judgements </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more DDT </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice New Year Eve-party. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>