TIOL-DDT 830 · the untouched capture
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<div align="justify"><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong>TIOL-DDT
830</strong></font><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
24.03.2008<br>
Monday </font></strong></div>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Corporation
Tax – CAG lambasts CBDT </font></strong></p>
<p align="justify"></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One
single factor attributed for the totally illogical actions of the babus, is
the fear of Audit, especially the Audit by the CAG’s audit teams.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This
is how it works - After completion of audit of each assessment unit, audit observations
are conveyed to the department through a local audit report (LAR). In the case
of important observations, a statement of facts (SOF) is issued to the department
for verification of facts and obtaining their comments. Important audit findings
are forwarded to the Board and Ministry of Finance in the form of draft paragraphs
(DAP). Finally, the Audit Report on direct taxes is forwarded to Parliament
through the President of India.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
the next few days<strong> <font color="#FF6633">DDT</font></strong> will bring you extracts from the CAG’s
latest Audit reports to Parliament on both the Direct Taxes and Indirect Taxes.
Mind you, these reports have crossed the stages of LAR, SOF and DAPs and are
pure distilled objections for consideration by the ultimate supreme authority
– the parliament.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today
we bring you highlights from the CAG’s report on Corporation Taxes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Corporation
tax constituted 62.71 percent of the total collection from direct taxes in 2006-07.
There were 3,99,627 corporate assessees as on 31 March 2007, which represented
a slight increase of 1.80 percent over the previous year.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit
issued 686 observations to the Ministry of Finance involving revenue impact
of Rs. 1669.38 crore highlighting various irregularities, omissions and mistakes,
for comments. The Ministry had accepted 204 observations involving revenue impact
of Rs. 712.44 crore till 7 December 2007.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessing
officers committed mistakes in:</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Computation,
carry forward and set off of losses in 59 cases involving revenue impact of
Rs. 414.22 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Allowance
of deduction towards depreciation, actual payment and capital/non business expenditure
in 113 cases involving revenue impact of Rs. 398.62 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Implementation
of appellate orders and non/short levy of interest in 61 cases involving revenue
impact of Rs. 199.02 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Adoption
of correct figures, allowance of provisions and computation of income under
special provisions in 102 cases involving revenue impact of Rs. 174.24 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Allowance
of prior period expenses / deductions not admissible, exemptions and relief
in 49 cases involving revenue impact of Rs. 71.63 crore.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Deductions
under chapter VIA and allowance of refund in 51 cases involving revenue impact
of Rs. 24.20 crore</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Assessees
had availed unentitled benefit in summary assessments in 145 cases involving
revenue impact of Rs. 149.30 crore.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mistakes
in implementation of appellate orders</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An
aggrieved assessee can appeal to the Commissioner of Income Tax (Appeals) against
the order of an assessing officer who shall comply with the directions given
in the appellate order. Further appeal is also permitted to be made on questions
of fact and law to Income Tax Appellate Tribunal and on the questions of law
alone to the High Court and the Supreme Court thereafter. Any mistake committed
while giving effect to an appellate order results in underassessment/over assessment
of income.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessing
officers did not implement appellate orders correctly, which resulted in short
levy of tax totalling <strong>Rs. 105.68 crore</strong> in <strong>9 cases</strong>
in Gujarat, Haryana, Maharashtra, Orissa, Rajasthan, Tamil Nadu and Uttaranchal.
</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">One
sample case </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In
Haryana, CIT, Hisar charge, the assessment of a company, <strong><font color="#FF6633">M/s Parkash
Industries Ltd</font>.</strong>, for the assessment year 1999-2000, was finalised in
scrutiny manner in March 2002 determining a loss of Rs. 33.40 crore. The assessee
had filed an appeal before the Commissioner of Income Tax (Appeals) against
this assessment order and was allowed a relief of Rs. four lakh in February
2006. Audit examination revealed that the assessing officer while giving effect
to the appellate orders, incorrectly determined the net loss as Rs. 274.21 crore
instead of Rs. 33.44 crore. The mistake resulted in overassessment of loss of
Rs. 240.77 crore involving potential revenue impact of Rs. 84.27 crore.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Excess
allowance of refund / interest on refund</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where,
as a result of any order passed in assessment, appeal, revision or any other
proceedings, refund of any amount becomes due to an assessee, this may be granted
in cash or adjusted or set off against the outstanding dues to the assessee
for any assessment year.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest
on excess payment of advance tax, tax deducted or collected at source and any
other tax or penalty becoming refundable will be paid at the rate of one percent
(since reduced to two third percent with effect from 1 June 2002 and one half-percent
from 8 September 2003) for every month or part of month for the period from
1 April of the relevant assessment year to the date on which the refund is granted.
No interest will be payable, if the amount of refund is less than ten percent
of the tax determined under summary or on regular assessment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where
as a result of an order under section 154, 155, 250, 254, 260, 262, 263 and
264, the amount of refund on which interest was payable has been increased or
reduced, the interest thereon shall be increased or reduced accordingly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If
the proceedings resulting in refund is delayed for reasons attributable to the
assessee, whether wholly or in part, the period of delay so attributable to
him shall be excluded from the period for which interest is payable.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Non
compliance with the above provisions by the assessing officers resulted in excess
allowance of refund or interest on refund totalling Rs. 6.68 crore in 10 cases
in Gujarat, Karnataka, Kerala, Maharashtra and West Bengal.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mistakes
in computation of capital gains</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any
profit and gains arising from the transfer of a capital asset shall be chargeable
to income tax under the head ‘capital gains’ and is taxable in the
year in which the transfer took place. The mode of computation of capital gains
in respect of long-term capital asset provides for deduction, from the consideration
received, of the cost of acquisition of assets and the cost of any improvement
thereto and of expenditure incurred wholly and exclusively in connection with
such transfer.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where
full value of consideration received or accruing as a result of transfer of
any capital asset falling within a block of assets, on which depreciation has
been allowed under the Act, exceeds the written down value of the block of assets
at the beginning of the relevant previous year, the excess shall be deemed to
be capital gains arising from the transfer of short term assets.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Where
a capital asset is converted by the owner thereof into, or is treated by him
as stock-in-trade of a business carried on by him, such conversion or treatment
shall be treated as transfer and capital gain thereon shall be computed as per
section 45(2). Further, as per Supreme Court’s decision, the business
income shall be computed on the difference between the sale proceeds and the
fair market value of the asset as on the date of conversion into stock-in-trade.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessing
officers did not apply the above provisions correctly, which resulted in short
levy of tax aggregating Rs. 2.36 crore in five cases in Tamil Nadu and Maharashtra.</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods,
in which more than 25% by weight of red mud, press mud or blast furnace slag
are used – exempted twice?</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have
a look at sl. No. 58 of Notification No. 3/2005 – C.E dated 24.02.2005,
</font></p>
<table width="477" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td width="20">58.</td>
<td width="16">68</td>
<td width="394"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods,
in which more than 25% by weight of red mud, press mud or blast furnace
slag or one or more of these materials, have been used</font></div></td>
<td width="13"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nil</font></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And
now have a look at Sl. No. 10 of Notification No. 5/.2006 –C.E dated 1.3.2006</font></p>
<table width="450" border="1" align="center" cellpadding="3" cellspacing="0">
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (except 6804,
6805, 6811, 6812 and 6813)<br>
</font></td>
<td><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Goods,
in which more than 25% by weight of red mud, press mud or blast furnace
slag or one or more of these materials, have been used, <strong>manufactured
at the site of construction for use in construction work at such site</strong></font></div></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Nil</font></td>
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">-</font></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As
per the first notification, all goods under chapter 68 in which 25% of red mud
is used is unconditionally exempted, while the second notification exempts certain
goods falling under chapter 68 using 25% of mud used at the construction. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now
those goods which are not exempted under the second notification will any way
be exempted by the first notification. Then what is the need for the second
notification?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You
must have heard the story of the great scientist who made two holes in his room,
one for the big cat and the other for the small cat, never realising that the
small cat also could pass through the big hole. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ICE
in TIOL </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ICE</strong>
is the in-house magazine of the Indian Customs, Central Excise and Service
Tax Department, published by the Directorate of Publicity and Publications
of the Customs, Excise and Service Tax Department. ICE editor Dr. Rishi
is a dynamic officer and has brought out a special edition this march
with reminiscences from retired officers. Rishi himself interviewed Lachman
Dev who joined the Indian Customs in 1937 – yes 71 years ago! And
who retired in 1974 –
a full 34 years ago. Rishi has also roped in Mausumi Bhattacharya, Accountant
General, Bhopal to design the cover page for ICE.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are happy to bring you the softcopy of ICE in our<u> '<strong><a href="http:www.taxindiaonline.com/RC2/pdfdocs/icemarch.pdf">What’s
New'</a></strong></u><strong>.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
will be happy to bring you the future and past issues of ICE, Department
and God willing. Dr. Rishi is full of humility and responsibility – he
told us, “Placing ICE on Taxindiaonline will serve a great purpose
- our departmental readers would have higher expectations from the journal''.
Rishi is one officer who had the <strong>‘privilege’</strong> of
the Bandit queen Phoolan Devi waiting to present a ‘submission’ to
him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And
do keep up to the expectations Dr. Rishi! </font></p>
<p align="center"><strong><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"><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"><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"><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"><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"><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"><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"><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"><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></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></b></font></b></font></b></font></b></font></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Passport</strong>
</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Suresh
Nanda gets his passport back! - Impounding of passport by CBI illegal –
Evan Courts cannot impound a passport; it can be done only by Passport Authority:
Supreme Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Difference
between seizing of a document and impounding a document</font></strong>. A seizure
is made at a particular moment when a person or authority takes into his possession
some property which was earlier not in his possession. Thus, seizure is done
at a particular moment of time. However, if after seizing of a property or document
the said property or document is retained for some period of time, then such
retention amounts to impounding of the property/or document. In the Law Lexicon
by P. Ramanatha Aiyar (2nd Edition), the word impound has been defined to mean
to take possession of a document or thing for being held in custody in accordance
with law. Thus, the word impounding really means retention of possession of
a good or a document which has been seized. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Police
can seize a passport, but cannot impound it;</font></strong> Hence, while the police
may have power to seize a passport under Section 102 Cr.P.C. if it is permissible
within the authority given under Section 102 of Cr.P.C., it does not have power
to retain or impound the same, because that can only be done by the passport
authority under Section 10(3) of the Passports Act. Hence, if the police seizes
a passport (which it has power to do under Section 102 Cr.P.C.), thereafter
the police must send it along with a letter to the passport authority clearly
stating that the seized passport Hence, while the police may have power to seize
a passport under Section 102 Cr.P.C. if it is permissible within the authority
given under Section 102 of Cr.P.C., it does not have power to retain or impound
the same, because that can only be done by the passport authority under Section
10(3) of the Passports Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Only
passport authority can impound passport:</font></strong> Hence, if the police seizes
a passport (which it has power to do under Section 102 Cr.P.C.), thereafter
the police must send it along with a letter to the passport authority clearly
stating that the seized passport deserves to be impounded for one of the reasons
mentioned in Section 10(3) of the Act. It is thereafter the passport authority
to decide whether to impound the passport or not. Since impounding of a passport
has civil consequences, the passport authority must give an opportunity of hearing
to the person concerned before impounding his passport. It is well settled that
any order which has civil consequences must be passed after giving opportunity
of hearing to a party. Even the Court cannot impound a passport. Though, no
doubt, Section 104 Cr.P.C. states that the Court may, if it thinks fit, impound
any document or thing produced before it, in our opinion, this provision will
only enable the Court to impound any document or thing other than a passport.
This is because impounding a passport is provided for in Section 10(3) of the
Passports Act. The Passports Act is a special law while the Cr.P.C. is a general
law. It is well settled that the special law prevails over the general law vide
G.P. Singh 's Principles of Statutory Interpretation (9th Edition pg. 133).</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>Duty
paid before Show cause Notice – interest and penalty liable: Karnataka
High Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">RINL,
Machino Montel </font></strong><font color="#FF6633">,</font> Padmashri V V Patil Sahakari Sakkar Karkhana and now
Kennametal, there seems to be no waiver of interest and penalty even if duty
is paid before Show cause Notice. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
respondent assessee availed credit of excise duty on the inputs. During the
course of the audit of the accounts of the assessee it was observed that the
assessee had availed Modvat credit of Rs. 1,18,940/- on "painting equipments
and its parts" falling under Chapter 8421.10 of Central Excise Tariff Act,
1985, which were not falling within the ambit of definition of capital goods
under the erstwhile Rule 57Q of the Excise Rules. On pointing out the same the
respondent-assessee agreed to pay and reverse the Cenvat credit of Rs. 1,18,940/-
availed by him. Accordingly he made payment of the said amount on 30.12.2000.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A
show cause notice dated 26.12.2001 was issued to him demanding interest for
the period from 12.6.96 to 30.12.00 at the rate of 25% on the said amount of
credit. Penalty under Rule 173Q of the Excise Rules was also proposed in the
said notice. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Asst. Commissioner 'D' Division, Bangalore, confirmed the demand of interest
of Rs. 1,12,944/- under erstwhile Rule 57AH of the Excise Rules read with Section
11AB of the Act.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On
not being successful with the Commissioner (Appeals), the assessee approached
the CESTAT, which allowed the appeal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue
is in appeal before the High Court with the following substantial question of
law:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Whether
the Tribunal was not justified in setting aside the order of Commissioner of
Central Excise (Appeals-II) whereby the order of the Assessing Authority was
confirmed, holding that the respondent assessee was not liable to pay interest
under Rule 57AH of the Excise Rules, 1944 read with Section 11AB of the Act
as the irregular credit that was availed by the assessee was paid before the
issue of show cause notice against him.?</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Assessee
pays differential duty before finalization of provisional assessment - whether
liable to payment of interest u/r 7(4) of CCR, 2002 r/w s.11AB after passing
of order of finalization – Tribunal says No and refuses to refer matter
to Larger Bench</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">VISUALISE
THIS.</font></strong> The assessee seeks provisional assessment in respect of clearances
effected by them to their sister units. He executes a bond binding himself
for payment of difference between the amount of duty as may be finally assessed
& the amount of duty provisionally assessed. Before the assessment is finalized
by the jurisdictional authorities, the assessee pays the differential duty. Later,
the provisional assessment is finalized & the adjudicating authority adjusts
the differential duty paid against the duty due consequent upon finalization.<font color="#FF6633"> <strong><em>He,
however, does not demand any interest from the assessee</em></strong></font>. Revenue
is aggrieved on this count and approaches the Commissioner(A) who takes sides
with the arguments made in Revenue appeal. Now, the assessee goes to the
Tribunal.</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>Bad
news for big brothers of courier service – CESTAT rules that charging
service tax on franchise charges collected from their franchisees does not amount
to double taxation</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">THE</font></strong>
success of courier service depends on the extent of penetration levels into
every nook and corner of the country with wide network of delivery and pick
up points. So it is not uncommon for many big courier companies to appoint agents/
franchisees to transact business under their brand for which the agents/ franchisees
will be allowed commission. This amount will be deducted from the gross business
receipts of the franchisee and the remaining amount will be paid to the franchisor.
To give an example, if the franchisee collected Rs 100/- towards courier charges
( on which the franchisee pays service tax of Rs 12.36 under courier service),
he would retain Rs 60/- as his revenue and deposit the remaining Rs 40/- to
the franchisor.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You
guessed it right. The revenue demanded service tax on Rs 40/- under franchisee
service. The demand was confirmed with interest and penalties under Sections
75,76,77 and 78 of the Finance Act. Aggrieved with the order, the appellant
approached the Tribunal.</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>Payment
for technical knowhow - Revenue for taxing it under Indo-US Treaty - Since assessee
is covered under automatic approval, exemption cannot be denied - No need for
Revenue to apply both conditions of Sec 10(6A) : ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS
dispute is related to exemption under Sec 10(6A). Such an exemption which was
provided under the I-T Act was envisaged by the Govt till 2002 in the light
of the long-term objective to allow Indian high-priority sectors to upgrade
their technologies. But a dispute cropped up when the AO insisted that an exemption
can be allowed only the Govt-approved technology transfer agreements. However,
the Tribunal has now held that the fulfilment of both the conditions enumerated
in the Sec 10(6A) is not required to avail the exemption.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until
tomorrow with more <strong>DDT</strong></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">
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