TIOL-DDT 889 · 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 align="justify"><font size="3"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 889 </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><br> 18.06.2008 <br> Wednesday </strong></font></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Service Tax on fore-closure of bank loan accounts – CBE C clarifies </font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Service Tax C ommissioner in C hennai has informed the Board that divergent practices are being followed in respect of levy of service tax on services provided by banks and other financial institutions on the amount collected as pre-closure / fore-closure charges in relation to lending. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board clarifies that “Any amount collected by the service provider on account of lending is either interest or service charges. Pre-closure / fore-closure charges are not charges collected for delayed payment. These charges not being 'interest' are to be appropriately treated as consideration for the services provided and accordingly leviable to service tax” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And in tune with the recent trend in the Board, this important clarification is couched in a private letter. Why is the Board shy of making the circulars public? </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=41&filename=notification/servicetax/2008/foreclosure.htm" target="_blank">TRU letter No. F No 345/6/2008- TRU , Dated: June 11, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Requirement of minimum NOF of Rs. 200 lakh for all deposit taking NBF C s – RBI instructions </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The companies engaged in the business of non-banking financial institution ( NBFI ) are required to obtain a Certificate of Registration (CoR from Reserve Bank of India to commence/carry on business of NBFI in terms of Section 45- IA of the RBI Act, 1934. The said section also prescribes the minimum Net Owned Fund requirement. In terms of Notification No.DNBS.132 / CGM ( VSNM ) – 99 dated April 21, 1999 , the minimum NOF requirement for the new companies applying for grant of CoR to commence business of an NBFI is stipulated at Rs.200 lakh . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To ensure a measured movement towards strengthening the financials of all deposit taking NBF C s by increasing their NOF to a minimum of Rs.200 lakh in a gradual, non-disruptive and non-discriminatory manner, RBI has prescribed that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) As a first step, NBF C s having minimum NOF of less than Rs. 200 lakh may freeze their deposits at the level currently held by them. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Further, Asset Finance Companies (AFC) having minimum investment grade credit rating and CRAR of 12% may bring down public deposits to a level that is 1.5 times their NOF while all other companies may bring down their public deposits to a level equal to their NOF by March 31, 2009 . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) Those companies which are presently eligible to accept public deposits upto a certain level, but have, for any reason, not accepted deposits upto that level will be permitted to accept public deposits upto the revised ceiling prescribed above. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) Companies on attaining the NOF of Rs.200 lakh may submit statutory auditor's certificate certifying its NOF. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) The NBFC s failing to achieve the prescribed ceiling within the stipulated time period, may apply to the Reserve Bank for appropriate dispensation in this regard which may be considered on case to case basis. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank">RBI's DNBS (PD) C . C . No. 114 /03. 02.059/2007-08, Dated: June 17, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax Revenue up by 40% in the first month of new fiscal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue from Service Tax for April 2008 is up from 4352 Crores to 6093 Crores – an increase of 40% compared to the same period last year. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue from Customs and Excise in the months of April and May, 2008 is 35216 Crores compared to 31217 Crores last year during the same period. Customs Revenue is up by 25.1% while Excise showed a modest 0.9% increase. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BRIC economies to surpass US? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The economies of Brazil , Russia , India , and China -- known as the BRIC economies will grow 6.7% in 2008, far outpacing growth rates in the United States , Europe, and Japan . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Brazil is the economic model of the age: abundant minerals and crops, investment capital pouring in, a sugarcane-based energy policy, rising personal incomes, and an increasingly prosperous middle class, with plenty of land to mine, to plant, to expand. It is, in many ways, much of what the United States is not in 2008. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633" size="5"> tiol</font> – Tomorrow's cases</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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 color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><strong><font color="#663399">Customs </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>COFEPOSA and SAFEMA – Heirs cannot challenge action under SAFEMA if detention under COFEPOSA was not challenged - It is alarming that such a senior officer, as the Competent Authority, possesses this warped understanding of law. – High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi H C while deliberating on the Writ Petitions challenging detention orders under COFEPOSA and notices for possession of illegally acquired properties under SAFEMA , observed that if the detention orders are passed against the parents and notices are issued to acquire the properties under SAFEMA , then the heirs of the detunus do not have any legal right to challenge the detention orders and possession notices. </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>Different prices can be charged to different class of buyers - No case of undervaluation: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is undisputed that the purchasers/buyers in the Ulhasnagar regions are a different class of buyers and the reduction in price/value was resorted to by the appellant company in order to face the stiff competition from competitors. The appellant action is based on pure commercial consideration and there is no evidence on record to indicate that this was done on extraneous and irrational basis. </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>Non-resident company - payment received for outright sale of technical knowhow - Such payment cannot be treated as royalty income either under Sec 9(1)(vi) or DTAA with Germany - ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Payment received by the non-resident company under the engineering know-how agreement for the purchase of engineering designs and drawings in respect of equipments supplied and the same having been acquired on outright sale basis outside India, cannot be treated as royalty income and taxed u/s 9(1)(vi) of the income tax or under Article 12 of Indo-German DTAA . No tax can be levied as no income chargeable to tax accrued in India . </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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until Tomorrow with more DDT </font></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>