TIOL-DDT 787 · 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 face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 787 </font><font size="2"><br> 23.01.2008 <br> Wednesday </font></strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Fringe Benefit Tax </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 40 C of the Income Tax Rules relates to <strong><em>FRINGE BENEFIT TAX </em></strong> and <strong>Valuation of specified security or sweat equity share being a share in the company </strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per clause (f) of sub rule 4 of this rule, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(f) equity share shall have the meaning assigned to it in section 85 of the Companies Act, 1956 (1 of 1956). </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this clause is omitted. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A new Rule , 40 D is now added which reads as, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>“Valuation of specified security not being an equity share in the company. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>40D . </strong> For the purposes of clause ( ba ) of sub-section (1) of section 115WC , the fair market value of any specified security, not being an equity share in a company, on the date on which the option vests with the employee, shall be such value as determined by a merchant banker on the specified date. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation.- For the purposes of this rule, “merchant banker” and “specified date” shall have the meanings assigned to them in clause (b) and clause (e) respectively of sub-rule 4 of Rule 40C .” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But why these amendments? </font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Act, 2007 amended the provisions of the Income-tax Act to provide that employers will be liable to pay fringe benefit tax on the value of ESOPs granted to employees as and when the specified security or sweat equity share were allotted or transferred to the employees. The value of ESOPs for the purposes of levy of FBT shall be the fair market value of the specified security or sweat equity share on the date of vesting of the options as reduced by the amount actually paid, or recovered from, the employee. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation ( i ) to clause ( ba ) of sub-section (1) of section 115WC of the Income-tax Act defines “fair market value” to mean the value determined in accordance with the method as may be prescribed by the Board. Earlier, Rule 40C was inserted in the Income-tax Rules which prescribed guidelines for valuation of specified security or sweat equity shares being an equity share in the company. The said rule 40C has been amended to omit the definition of “equity share” as the same was not necessary in view of the term having been used in the charging section of the Income-tax Act without a definition, thereby allowing it to take its natural meaning. Further, a new Rule 40D has been inserted in the Income-tax Rules for the purposes of valuation of specified security not being an equity share in the company. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The amended Rule 40C and the new Rule 40D will take effect from the 1st April, 2008 and will, accordingly, apply in relation to the assessment year 2008-2009 and subsequent years. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the explanatory memo issued by the CBDT along with the notification amending the Rules. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is a wonderful step by the Board to explain why a notification is issued and what it purports to serve. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A couple of years ago, when <strong>TIOL </strong> was invited to address the CBEC, a Member asked me, “Why don't you publish the explanatory memorandum for each notification so that the intent of legislation is available to posterity? ”. I told them that we would be too happy to publish that if the Board can make the purpose available to us. But many in the Board felt that making the intent clear to us would be too much and asked us to get from the informal source rather than the official one. </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/it08not011.htm" target="_blank">CBDT Notification No. 11/ 2008 Dated : January 18, 2008</a></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Customs - Alert in view of outbreak of ‘Avian Flu' in West Bengal </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC reminds that the Board had issued instructions from time to time vide letters of dated 13.10.2005, 28.3.2007, 5.4.2007, 11.4.2007 and 5.9.2007 and Board's circular Nos. 48/2005-Customs dated 28.11.2005 and 13/2007-Customs dated 2.3.2007 alerting the Customs field formations about the Avian Flu and the detailed procedure to be followed for clearance of livestock and livestock products. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board wants the field to remain vigilant on international movement of poultry and poultry products at the border. </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/cusinsfile08_450.htm" target="_blank">CBEC's F.No.450 /122/2005- Cus -IV </a><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2008/cusinsfile08_450.htm">Dated: January 21, 2008 </a></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Mr & Mrs. Avinash Bhosale pay 40 Crores as advance tax </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember the famous Pune Builder, Avinash Bhosale who was arrested by DRI in Mumbai airport recently who was released on bail by a Bombay night Magistrate? This case went right up to the Supreme Court and the Apex Court held that the offence under the Customs Act was bailable and the magistrate was right in releasing Bhosale on bail. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now Bhosale and his wife have paid up advance income-tax of Rs 40 Crores. </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"><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></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Income Tax </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">"stock appreciation rights" different from “stock options” – redemption of stock appreciation taxable under salary; if it is not covered under salary, it would be covered under “income from other sources” High Court and Supreme Court judges are not employees, but their salary is taxably under heading ‘salary'- ITAT SB </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Special Bench of the Tribunal, in a landmark judgement decided an issue for which there is no judicial precedence. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Tribunal expresses regret for delay in judgement:</font> </strong> But we will start at the end. Have you ever come across judges expressing regret for delay in delivering the judgement? This is exactly what happened in this case, where in the last para of the order, the tribunal observed, </font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">As we part the matter, we would like to place on record the fact that though this appeal was finally heard in the month of April 2007, our decision thereon could only be finalized only in the month of December 2007. The unusual delay in disposing of this Special Bench matter was due to the fact that shortly after the appeal was heard, one of us (i.e. the author) was transferred out of Mumbai benches and the meeting of the Members constituting this Special Bench, to discuss and finalise the draft order, was inordinately delayed. There were certain aspects of the matter on which we could not immediately reach a consensus in the source of our discussions immediately after the hearing was over, and, therefore, need of further discussions on those issues was felt. However, due to certain reasons beyond our control, we could not meet to discuss these issues. It was only pursuant to Hon'ble President being kind enough to facilitate a meeting of all the three of us for the said purpose, that the Members constituting this Special Bench could finally meet on 10th December 2007 to discuss those issues as also deliberate on the proposed draft order. It is in this backdrop that there is a delay in disposal of this appeal, which is regretted. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though originally only a particular issue was referred to the special Bench, in certain peculiar circumstances, the whole appeal was transferred to the Special Bench. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">JAYALLALITHA CASE -Condonation of Delay – delay due to negligence and inaction of officers – cannot be condoned: “Set aside” means “annulled”; Assessing Officer has no jurisdiction to pass any further order: ITAT </font></strong></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THESE</font> </strong>cross appeals of the Revenue and the Assessee are directed against different orders of the CIT (Appeals), Chennai. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Condonation of Delay of 2569 days.</font> </strong>The Revenue filed an affidavit seeking condonation of delay of 7 years on the ground that, </font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue while perusing the CIT (A)'s order in ITA No. 1, 5 & 7, dated 15.9.98 was under the bonafide impression that setting aside of assessment has conferred the jurisdiction on the Assessing Officer to make a fresh assessment after giving reasonable opportunity to the assessee. In view of the recent judicial pronouncement to the effect that setting aside of assessments by CIT (A) without giving any direction for fresh assessment amounts to annulment of assessment, it is felt necessary to contest the impugned order of the CIT (A). </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Later they realised that the delay was actually 7 years and 18 days and so they filed another application seeking condonation of 7 years and 18 days and not 7 years as prayed earlier! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What would have happened if the Tribunal had condoned the delay of 7 years as prayed for in the first application? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6666">Careless drafting?</font> </strong>The Tribunal noted that both the affidavits have been filed by higher officers. Actually, the delay to be filed in days and not in years and this is not expected from such Higher Authorities of the Income-tax Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Central Excise </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Miscellaneous applications for rectification of Miscellaneous order, passed on ROM application in respect of final order, is not maintainable: Tribunal </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FIRST </strong>things first. <strong>Usage of reiteration is purely intentional. </strong></font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>“ Chahiye hi Chahiye ” </em>Kellogg 's chocos with the goodness of whole wheat is enriched with Calcium Shakti ! It has goodness of 2 chappatis and Calcium of 2 glasses of milk and is further enriched with 11 essential vitamins and minerals – all in that great yummy taste you love!” [Source</strong> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.chocos.co.in/home/default.html" target="_blank">www.chocos.co.in</a></font> <font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>]</strong></font> </p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, what's missing – nothing Sir, only a mention of the content of “ Cocoa ”. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be that as it may, we are not interested in saying “ chahiye hi chahiye ” of this word “cocoa” in the advertisement for a related issue is at present hanging fire on the central excise side, as far as we know. In a related matter, Netizens may also like to browse through the Bombay High Court decision reported by us as <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2005/2005-TIOL-165-HC-MUM-CX.htm"><font size="1">2005-TIOL-165-HC-MUM- CX</font> </a> wherein the Court had ruled that an order passed in violation of natural justice is void & not curable. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sometime after that, the Tribunal, WZB , Ahmedabad <strong>[ </strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2007/2007-TIOL-1018-CESTAT-AHM.htm"><font size="1">2007-TIOL-1018-CESTAT- AHM</font> </a><strong>] </strong> while rejecting the appeal filed by the company held that Chocos ' which is being marketed by them as “Crunchy Chocolate Wheat Scoops ”, is properly classifiable under Heading 18.04 viz. Other food preparations containing cocoa, as held by the lower authorities & not under heading 19.04 as contended by the appellant. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Rebate – Revenue wins in appeal in High Court but contempt proceedings against JS, Review continues for differing with High Court : Madras High Court </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"> respondent claimed refund of rebate amount to the tune of Rs.6 ,84,590 /-. The Revenue, by their order dated 30th Oct., 2003, rejected such prayer. The prayer of the respondent having been allowed by the single Judge, the present appeal has been preferred. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The case of the respondent Company before the writ court was that the company cleared 2000 Kgs ., of Cresol Chloride on 29th Dec., 1990, on payment of duty of Rs.5,35,500 /= in GPI No.20 to one M/ s.Colour Chem Ltd. The said M/ s.Colour Chem Ltd ., took credit in their RG 23-A Part II account as an input and resold the entire quantity on 11th Dec., 1992 to the company by paying in terms with Rule 57 F (1) (ii) of the Central Excise Rules. In this background, the company requested the Assistant Commissioner, Pondicherry Division for re-entry of Cresol Chloride for reprocessing the same. It filed necessary D3 intimation under Rule 173-H, whereinafter the Assistant Commissioner, vide communication dated 30th Dec., 1992, granted permission under Rule 173-H for re-entry and reprocessing. The company exported the material with additional quantity of 5000 Kgs ., of Cresol Chloride under AR4 No.30 . Though duty was paid with regard to others, no duty was paid on 2000 Kgs . of Cresol Chloride on which duty was earlier paid and was returned by M/ s.Colour Chem Ltd., after reprocessing. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns tomorrow for the judgements </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 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> </body> </html>