TIOL-DDT 781 · 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 781 </font><font size="3" face="Verdana, Arial, Helvetica, sans-serif"></font><font face="Verdana, Arial, Helvetica, sans-serif"><br>
14.01.2008 <br>
Monday </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Classification of carpets and floor coverings having mixed composition in the Drawback Schedule – CBEC clarifies </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Several representations have been received by the Board on the issue of classification of carpets having mixed composition under the Drawback Schedule, 2007-08. It has been represented that hand woven rugs/floor coverings made of 57% wool +25% cotton +18% viscose or 52% wool +13% nylon+ 35% cotton are being assessed by the Customs authorities under the Drawback Schedule entry 570299 (“others including coir mats”) at the drawback rate of 2.5% instead of the entry number 570201 which covers carpets of wool or fine animal hair with a drawback of 12.5%. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been further stated that in the Drawback Schedule, 2006-07 such items were being classified under the entry 570203 which read “others including of man-made fibers” with drawback rate of 9%. However, after creation of a separate entry for carpets and floor coverings of MMF in the Drawback Schedule, 2007-08 with a drawback rate of 12%, the carpets of mixed composition are being classified under the residuary entry 570299 which reads “others including coir mats” with a drawback rate of 2.5%. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Handloom Export Promotion Council (HEPC) has stated that carpets/floor coverings of wool contain other materials such as cotton, viscose, nylon etc. ranging between 10% to 40% and since the duty drawback rates are on ad valorem basis, any change in FOB value on account of composition or quality of goods would automatically determine the quantum of drawback. The HEPC has recommended that the carpets of mixed composition may be classified on the basis of predominant fibre. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, Board has clarified that carpets and floor coverings, whether knotted, woven, tufted or others may be classified as carpets or floor coverings of that textile material (wool/ silk/ MMF etc.) which predominates by weight. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the Chief Commissioners to issue a Public Notice for information of the Trade and Standing Order for guidance of the staff. </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=25&filename=notification/custom/2008/cuscir08_02.htm" target="_blank">CBEC Circular - NO.2 /2008-CUS ., Dated: January 10, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax - Compulsory scrutiny of returns involving refund of Rs.5 lakhs or above </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instances have been brought to the notice of the Board wherein cases involving refund of Rs. 5 lakhs or above are not being picked up for scrutiny by the CASS in the networked stations. This happened in cases where credit for prepaid taxes is not being given at the time of processing for want of necessary documentary evidence. Such cases, therefore, do not fall in the category of determined refund of Rs. 5 lakhs or more and consequently are not picked up by the CASS . Subsequently, rectification orders are passed manually on submission of necessary evidence in respect of prepaid taxes and the data is not captured in the AST. As a result, several such cases involving refund of Rs.5 lakhs or above have been left out of the selection process. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants all such refund cases that have been left out by CASS should be picked up for scrutiny through manual intervention in the networked stations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CASS = Computer Assisted Scrutiny System </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AST = Assessment Information System </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=67&filename=notification/cbdt/2008/instruct0801.htm" target="_blank">CBDT Instruction No. 1/2008 Dated: January 9, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cooling charges paid to cold storage owners – 194 I not applicable as it is not rent; 194 C applicable as it is contractual – CBDT clarifies </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT has received representations that the cold storage owners provide a composite service, which involves preservation of essential food items including perishable goods at various temperatures suitable for specific food items for required periods and storage of goods being incidental to the activity of preservation. The cooling of goods is controlled through mechanical process. The customer brings its packages for preservation for a required period and takes away its packages after paying cooling charges. The customer does not hire the building, plant/machinery etc. in any manner and does not become a tenant of any kind. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TDS on Rent </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 194 I of the Income Tax Act, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>194-I. </strong>Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon.,.. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TDS on contracts </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">And as per section 194 C , </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">194C . <em>(1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work in pursuance of a contract between the contractor and </em></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>xxxxxx </em></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount….. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Board clarifies:- </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The main function of the cold storage is to preserve perishable goods by means of a mechanical process, and storage of such goods is only incidental in nature. The customer is also not given any right to use any demarcated space/place or the machinery of the cold store and thus does not become a tenant. Therefore, the provision of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, since the arrangements between the customers and cold storage owners are basically contractual in nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by the customers of the cold storage. </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=36&filename=notification/cbdt/2008/it08cir01.htm" target="_blank">CBDT Circular NO. 1/ 2008-Cus., Dated: January 10, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DTAA between India and Finland – interest paid to FINNERA or Finnish Credit on or after 28 th August 2007 exempted </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under the provisions of paragraph 3 of Article 12 of the Convention between the Government of the Republic of India and the Government of the Republic of Finland for the avoidance of double taxation with respect to taxes on income and on capital, interest arising in India shall be exempt from Indian tax if the interest is paid to FINNVERA or Finnish Export Credit on or after 28th day of August, 2007. </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=35&filename=notification/cbdt/2008/it08not005.htm" target="_blank">CBDT Notification No. 5/ 2008 Dated: January 10, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT amends Handbook of Procedures </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Focus Product Scheme: </strong>Shipments from EDI Ports and Non-EDI Ports cannot be clubbed in one application. Port of registration for EDI enabled ports shall be any one EDI port of exports, as per the choice of the applicant. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In case of exports through non-EDI port, the port of registration shall be the relevant non EDI port of exports. Accordingly separate application shall be filed for each non EDI port. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Revised ANF 3E for Focus Product Scheme is issued. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>High-Tech Products Export Promotion Scheme: </strong>application for obtaining Duty Credit scrip for incremental growth in exports during current licensing year 2007-08 shall be filed in ANF 3F within a period of twelve months after expiry of current licensing year. Application filed in ANF 3F , shipments from EDI Ports and Non-EDI Ports can be clubbed in one application and the port of registration shall be any one of the ports of exports, as per the choice of the applicant. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Focus Market Scheme: </strong>Any one of the following documents should suffice, as a proof of landing of export consignment in specified Focus Market: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i. A self attested copy of import bill of entry filed by importer in specified market, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii. Delivery order issued by port authorities, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iii. Arrival notice issued by goods carrier, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">iv. Tracking report from the goods carrier duly certified by them, evidencing arrival of export cargo to destination Focus Market, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">v. Lorry receipts of transportation of goods from Port into the Focus Market, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">vi. For Land locked Focus Market, Lorry receipts of transportation of goods from Port to Land locked Focus Market, or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">vii. Any other documents that may satisfactory prove to RA concerned that goods have landed in / reached the Focus Market. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 100 (RE-2007)/ 2004-2009, Dated: January 10, 2008 </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise officer found dead in Thiruvananthapuram </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We were told on Saturday that Gali Kodandapani , Additional Commissioner of Central Excise in Kerala's capital Thiruvananthapuram was found dead in his rented house. As per the Police, the death seems to be a natural one, possibly a heart attack, but the poor Central Excise officers of Trivandrum had no clue as to how to inform his near relatives. It seems that nobody had the contact numbers of his wife who they heard is a teacher somewhere in Goa or Hyderabad and his only daughter who is said to be studying in Bangalore . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is unfortunate that in these days of fast communications, we are not able to reach out to people in such situations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There should be a system where the office keeps a record of all the employees with contact numbers of people to be contacted in case of emergency and this should be updated every week. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And government has a policy of posting the husband and wife in the same station but sadistic administrators of the policy would ensure that this is not done. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Kodandapani would have retired in August 2008 and perhaps his life could have been saved if he was staying with his wife – only if they could be posted in the same place as the government policy directs! </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font> <font color="#FF6633" size="5">tiol</font> – <font color="#006600">Tomorrow's cases </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Entry Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AP Entry Tax struck down as unconstitutional - Provision of facilities like illumination of streets or provision of parks cannot be rolled up and presented as the 'specific end objectives' of intended promotion of the interests of tradesmen or businessmen : AP High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For one to justify, a particular tax levied to be compensatory in nature, it is essential that there should be direct and intricate relationship between the collection of tax and its intended expenditure. The broad and generalized statements mentioned by the State Government, are all representing or corresponding to the basic and fundamental obligations of any Government, which they owe to their citizens. They are not special features specific to cater to the needs of the people indulging in trade or commerce. Construction of roads, culverts and bridges or providing basic health care facilities or rest-houses for the transport operators on the waysides are not exclusively intended or meant for promoting any class, or even generally, the trade or commerce. Such basic and essential infrastructural facilities are also liable to be put to use by all others as well. In that respect, <strong><font color="#FF6633">provision of such facilities like good motorable roads, illumination of streets or provision of parks or gardens cannot be rolled up and presented as the “specific end objectives” of the intended promotion of the interests of tradesmen or businessmen.</font> </strong> The essential link between the infrastructure or facility or service, which is directly or even indirectly held to promote the cause of trade or commerce, is missing in them. </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>Surcharge leviable under Finance Act was a distinct charge, not dependant for its leviability on assessee's liability to pay income tax : Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ON 17.1.2001 a search under Section 132 of the 1961 Act was carried out at the premises of the respondent-assessee, an individual. The search unearthed an unexplained investment of Rs. 65,000/- being the value of household valuables and Rs. 97,427/- on account of unexplained marriage expenses (undisclosed income). Accordingly, in the block assessment, the A.O. determined the assessee's undisclosed income at Rs. 1,62,427/-. He computed tax thereon at 60% in terms of Section 113 of the 1961 Act amounting to Rs. 97,456/- on which surcharge was levied at 17%, i.e., Rs.16,504/-. The levy of surcharge was challenged by the assessee in appeal before the CIT (A). The said appeal was allowed. The decision of CIT (A) has been confirmed by the Tribunal and the High Court. Hence, this civil appeal. Points for determination: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Two points arise for determination: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether on the facts and circumstances of this case, the Finance Act, 2001 ("FA" for short) was applicable to "block assessment" under Chapter XIV-B in respect of the search carried out on 17.1.2001; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Whether the proviso inserted in Section 113 by the Finance Act, 2002 is clarificatory? </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mechanical transfer of coal from coal face to tippers - does not come under purview of cargo handing service : CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants, M/s Sainik Mining & Allied Services Ltd. worked inside the mining area as per an agreement entered into with M/s Mahanadi Coalfields Ltd. The work performed by the appellants involved transportation of coal inside the colliery area and mechanical transfer of coal to Tippers at quarry face. The authorities below have held that the appellants have provided cargo handling services to M/s Mahanadi Coalfields Ltd. and hence have demanded service tax on the gross amount received by the appellants. </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="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Dr. Gopal 's cartoon </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Dr. Gopalakrishnan , IAS (former) needs no introduction in these columns. Enjoy another cartoon from him. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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_781.jpg" alt="Legal Corner Icon" width="345" height="504" hspace="5" border="0" align="center"></b></strong></b></font></b></font></b></font></b></font></b></font></b></font></strong></font></strong></font></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 time. </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>
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