TIOL-DDT 929 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!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 bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 929</font> <br> 13.08.2008 <br> Wednesday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export incentives – Commerce Ministry's plea to 13th Finance Commission </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commerce Ministry appears to be very serious in promoting exports, in spite of the spokes put in by the Finance Ministry. Finance ministry being more powerful, always has the last laugh, but the poor Commerce guys are not giving up. Now they have come up with some dynamiCsuggestions for the Finance Commission. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The bright Export scene: 136 lakh new jobs in the last four years </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Exports have been one of the prime contributors as growth engine for sustained economiCdevelopment in India. Export growth of India in last 5 years has been remarkable. In 2007-08, our merchandise exports have exceeded US $ 155 billion whereas it was a little over US $ 63 billion in 2004. This means our exports are not just double of what they were 4 years ago, but 2½ times of that. The average cumulative annual growth rate (CAGR) of exports at 23%, year on year, was way ahead of the average growth rate of international trade. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our total merchandise trade was US $ 400 billion last year, accounting for nearly 1.5% of world trade. If the trade in services is added to this, our commercial engagement with the world would be in the region of US $ 525 billion. Our total trade in goods and services is now equivalent to almost 50% of our GDP. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government has committed to an ambitious target of achieving a 5% share in world trade by the year 2020. In practical terms, this means a four-fold increase in our percentage share in the next 12 years. Considering that world trade is itself increasing, this would translate into an eight-fold increase in absolute terms. It means we would have to ensure an average annual growth rate of 25% consistently for the next 12 years. This target seems to be achievable based on the macroeconomiCindicators such as growth in GDP, the growing % of trade, in particular the exports, to GDP etC. For the current year 2008-09, Government has fixed a target of US $ 200 billion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exports are not just about earning foreign exchange but about boosting our manufacturing sector, creating large scale economiCactivity and generating fresh employment opportunities. On the issue of employment, as per an estimate, during the last 4 years increased trade activity has created 136 lakh new jobs. </strong></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export Goods and Services, not taxes: Reimbursement of State level taxes/duties levied on exports: </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Government of India firmly believes that Goods and services are to be exported and not the levies and duties. In the Indian Context, there are not only Central Levies and taxes but also a plethora of taxes levied by the State Governments, which are Non-VATable. Agreement on Subsidies and Countervailing Measures (ASCM) in WTO also provides for exemption / re-imbursement of all such Indirect taxes which have been incurred in the manufacture of the exported products. Though the Central Indirect Taxes such as Customs duty, Excise Duty etc. on inputs are being reimbursed on the exported goods by way of Duty Exemption schemes such as Advance Authorisation Scheme, Duty Free Import Authorisation Scheme etc and Duty Remission schemes such as Duty Drawback Scheme, Duty Entitlement Passbook Scheme (DEPB) etc, Indirect taxes levied by State Governments however remain un-rebated, in particular for the units operating in DTA. Some of these duties/levies having significant impact on the cost of the export products are Central Sales tax (@2% since 2008), Electricity Duty, Sales Tax on Petroleum Products, Octroi, Mandi Tax, Entry Tax etc. Even VAT, which has been exempted on exports by only a few States, a large proportion of VAT refund remains delayed thereby increasing the cost of funds for the exporters. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Relief from these State Indirect taxes is a legitimate goal which is in tune with the commitment of Government of India that ‘only goods and services are exported, not the levies and duties', and would in any case be self-limiting as CST is abolished and as the country moves towards GST. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Financial implication on rebate of State Cumulative non-VATable Indirect Taxes will vary with the coverage of the scheme. As per a rough estimate, Average rate for such rebate on exports would be 3.01 % i.e., 2.74% (for the components of electricity duty, Sales Tax on petroleum products and Central Sales Tax @ 2%) + 0.27 % (approx. for the component of Octroi, Mandi Tax, turnover tax, entry tax etC). After 2010, when CST will be completely withdrawn, the surrogate average rate will be 1.89%. With the present export growth rate of 23%, India 's merchandise export turnover will be $234 billion (Rs 9828 billion approx) by 2010 and $660 billion (Rs 27720 billion approx) at the terminal year of the Thirteenth Finance Commission award. Hence financial implication on rebating of these unrebated State Indirect taxes will be around Rs 18500 crores for exports of $234 billion and Rs52390 crores for exports of $660 billion. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Recommendation to the Finance Commission: </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Commission is, therefore, requested to evolve a Scheme whereby the unremitted State Taxes are refunded to the exporters. Since most State Governments are unwilling/unable to refund these taxes, it would be in order to allow the Central Government to reimburse these State Taxes/Duties paid by the exporters and recover the same from out of the payments due to the States as per the devolution formula approved by the Finance Commission. An appropriate provision for this may be incorporated in the final recommendations of the Finance Commission. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Provision of Funds for creation of export related infrastructure:</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Central Initiative</font></strong><font color="#FF6633">:</font> Department of Commerce has been mandated to provide environment conducive for facilitating Export and Import from the country. At National level, the Central Government has taken major initiatives to develop infrastructure. National Highway network, railways, major ports, airports and national waterways are being developed and maintained by the Central Government either directly or through organisations under it. However, there is a critical need to focus on infrastructure specifically catering to facilitating exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Special Economic Zones, Export Clusters and manufacturing/processing/packing units engaged mainly in exports located in the various States require state-of-the-art infrastructure including power, water, sanitation etc. and also roads/connectivity to the main national infrastructure grid. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">No initiative in States: Why States are not keen to encourage exports?</font> </strong> The States which could provide these infrastructure supports have seen exponential growth of their industry and other allied sectors. However, in respect of many other States, such a support has not been made available due to a number of reasons. It is a fact that many States do not provide adequate support to exports as they do not derive any direct fiscal benefits as most of these export clusters do not pay taxes. Even if these clusters provide employment, they do not appear to be a prime mover in motivating States for improving the infrastructure for exports. On the other hand, exports have directly contributed to value addition in manufacturing, sustainability of traditional handicrafts, deceleration in migration to urban areas, growth in wages, migration of key technology to the country and increased comfort in terms of foreign exchange reserves. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under the <strong>ASIDE</strong> Scheme of the Ministry of Commerce & Industry, launched in 2002, funding for infrastructure directly linked with exports has been taken up. A sum of Rs.2050 crores have been spent in the 10 th Plan and it is proposed to spend a further a sum of Rs.3600 crores in the 11 th Plan. But it is felt that there will still be a huge gap in the availability of infrastructure for exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With a view to developing infrastructure for exports, various Ministries handling infrastructure have been sensitised on the need to improve infrastructure specifically with reference to improving infrastructure used by industries and services for exports. With a serious gap in the general infrastructure in the country, it is not clear how the various Ministries would be approaching the issue of deficit in infrastructure for exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Recommendation to the Commission</font></strong><font color="#663399">:</font> The Thirteenth Finance Commission, while making devolution under its award, should favourably consider the objective of creating infrastructure and specifically filling up gaps in infrastructure for exports. Towards this in view, it will be appropriate if the Thirteenth Finance Commission sets apart funds to be utilised by the States for providing and strengthening infrastructure for exports. A sum of Rs.20000 crores will be required for the purpose for the five years of the award period of the Thirteenth Finance Commission. The State Governments should be requested to focus its efforts for creating infrastructure in select clusters which have potential for exports. The States must develop infrastructure on a PPP mode using these funds. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope, the Finance Ministry does not stall these suggestions. </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/om-ministry.htm" target="_blank">Commerce Ministry's F.No. 19/4/2007-FT(ST) Dated: July 1, 2008</a> </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC website goes out of publiCdomain</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Try logging on to the official website of the CBEC, <a href="http://www.cbec.gov.in">www.cbeC.gov.in </a> and you get a message “Enter username and password for “radware” at http:/www.cbeC.gov.in” You can find below an image of the screen that you get. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We hope CBEC rectifies this soon. </font></p> <p align="justify"><span class="MsoNormal"><u><span style='font-size:10.0pt;font-family:"Verdana","sans-serif"; color:blue'><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2008/dgft08cir026.htm" target="_blank">DGFT Policy Circular No. 26 (RE-08)/2004-2009 Dated: <st1:date ls="trans" Month="8" Day="11" Year="2008" w:st="on">August 11, 2008</st1:date><o:p></o:p></a><o:p></o:p></span></u></span></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Issues pending before Special Bench of ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>1. Deduction u/s 80IB(10) </strong></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether deduction u/s 80IB(10) of the Act, as applicable prior to 01-04-2005, is admissible in the case of a “Housing Project” comprising residential housing units and commercial establishments? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. In case the question no.1 is answered in affirmative, whether considering the facts and circumstances of a particular case, a proportionate deduction should be allowed? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In case the question no.1 and 2 are answered in the affirmative, whether the limit prescribed by clause (d) of section 80IB(10) should operate? </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>2. Treatment of Exchange rate difference in relation to export turnover as per section 80HH C</strong></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether the difference on account of fluctuation in exchange rate relating to sale proceeds of exports effected in the earlier year should be treated as export turnover of the year in which such rate difference is received or of the year of export? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. If the aforesaid sum is to be treated as export Turnover of the year of export, whether such receipt should also be considered as income of the year of export and consequently, be excluded from the year of receipt? </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>“ 3. Amendment via Miscellaneous Application </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the order of the Tribunal requires to be amended under section 254(2) in order to bring the same in conformity with the judgment of the jurisdictional High Court rendered subsequent to the passing of the order? ” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>4. Secret Formula or process as per section 9(1)(vi) </strong></font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Whether the services rendered by the assessee through their satellites for telecommunication or broadcasting, amount to ‘' secret process or only process"? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Whether the term ‘secret' appearing in the phrase ‘secret' formula or process' in Explanation 2 to section 9(1)(vi) and in the relevant the Treaties, will qualify the word ‘process' also? If so, whether the services rendered through secret process only will be covered within th e meaning of royalty? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Whether, on the facts and in the circumstances of the case, the payment received by the assessees from their customers on account of use their satellites for telecommunication and broadcasting amounts to ‘royalty' and if so, whether the same is liable to tax under section 9 (1)(vi) of the Income Tax Act, 1961 read with relevant provisions of DTAA? </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>5. Time-share membership fee receivable upfront at time of enrolment. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the entire amount of the time-share membership fee receivable by the assessee upfront at the time of enrolment of a member is the income chargeable to tax in the initial year when there is a contractual obligation fastened to the receipt to provide the services in future over the term of the contract? ” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>6. Deduction u/s 80IA and Duty Drawback </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the duty drawback receipts will qualify for deduction u/s 80IA for the assessment year 1997-98? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>7. Deduction for pre-paid lease rent </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the Assessee is entitled to get the deduction of the pre-paid lease rent for which the liability has arisen during the previous year relevant to the concerned Assessment Year? ” </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBI traps Central Excise Superintendent – CBI SMS to mobile phones </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Central Excise Superintendent in remote Vizianagram of Vizag Commissionerate was arrested by CBI yesterday while accepting a bribe of Rs. 20,000/- for issuing a Registration Certificate. The Registration Certificate is generated online and it is a mystery why should anyone pay for it! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Are you bored with the trash SMS that you get on your mobile? Soon you may get a message, “"If a Central Govt/PSU/Bank employee demands bribe for any official work, plz contact SP CBI at …..” The CBI is planning to take the help of mobile service providers to send the above kind of SMSs to mobile users. Officers beware, CBI is just a phone call away! </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> </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><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></strong></strong></strong></strong></strong></strong></strong></font><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>Providing cab with a driver and collecting charges on per km basis or lump sum amount is transport service and this activity is outside purview of ‘rent a cab operator's service: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a significant judgement, the Principle Bench of Tribunal held that giving cabs on hire basis and collecting charges per kilometre or lump sum amount is outside the purview of Service tax under Rent-a-cab operator service. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Imported goods exported and re-imported after repairs – Customs Valuation Rules not applicable; No refund if assessment is not challenged; Appellants should assail infirmities in order and not abuse adjudication Authority - VitrioliCremarks and observations with acidiCsarcasm, devoid of elementary courtesy, condemned: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> time around the CESTAT was angry that untribunalary words were used by the appellant against the Adjudicating Commissioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the instant appeal we find that the appellants have made <strong>vitriolic</strong> remarks and observations with <strong>acidicsarcasm, devoid of elementary courtesy </strong> while referring to the adjudicating authority and his decision. <strong>We are at a loss to understand why the appellants, instead of assailing the infirmities in the order, have chosen to abuse the adjudicating authority </strong>. </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>Transfer fee earned from sub-licencees on transfer of licences to be excluded from profits for arriving at deduction u/s 80HHD but rent received from rooms given for long term occupation eligible for deduction: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is a popular five-star hotel, located close to the seat of powers in New Delhi . The dominant activity of the assessee is to provide hotel facilities to its customers and to earn income from such business activity. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A part of the building was leased out by assessee to various parties on the basis of interest free security deposit and without charging any rent. According to the AO, assessee is the owner of the premises by virtue of the license deed executed by NDMC in its favour and hence liable for notional income from House Property u/s 22 & 23 of the I.T. Act. </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>Credit availed on furnace oil used as a fuel for purpose of generation of steam in boiler – Benefit of Exemption notification 4/97- CE, 5/99- CE rightly denied in respect of Rubberised Textile fabrics: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed that even if the credit availed on furnace oil is <strong>minuscule</strong>; it would not make the assessee eligible for exemption under the notifications 4/97- CE and 5/99- CE as the notification stipulates that no credit should be availed on inputs. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Day. </font></p> <p align="justify"><font color="#FF6633" 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>