TIOL-DDT 965 · 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 965</font><br>
06.10.2008<br>
Monday</strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Capital Gains Tax – CBDT Notifies Reverse Mortgage Scheme</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per section 45 of the Income Tax Act, any profits or gains arising from the transfer of a capital asset shall be chargeable to Income Tax under the head, “Capital Gains”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under Section 47, nothing contained in section 45 shall apply to certain transactions like transfer due to partition, amalgamation, demerger, etc., Into this exclusion, a new item was added by Finance Act, 2008, by a new clause xvi,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"(xvi) any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government.”</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That is, no Capital gains Tax is payable on the Capital Gains in case of reverse mortgage - under a scheme made and notified by the Central Government.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Scheme had to be made and notified by the Government, which it has now done.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Scheme is called the <strong>Reverse Mortgage Scheme, 2008.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Reverse Mortgage” means mortgage of a capital asset by an <strong>eligible person </strong> against a loan obtained by him from an approved lending institution;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Who is the <strong>eligible person?</strong></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">i) any person, being an individual, who is of, or above, the age of sixty years; or</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ii) any married couple, if either of the husband or wife is of, or above, the age of sixty years</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his Budget speech 2007, the Finance Minister had stated, <font color="#FF6633">“The National Housing Bank (NHB) will shortly introduce a novel product for senior citizens: a 'reverse mortgage' under which a senior citizen who is the owner of a house can avail of a monthly stream of income against the mortgage of his/her house, while remaining the owner and occupying the house throughout his/her lifetime, without repayment or servicing of the loan.”</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his 2008 Budget Speech the FM declared,<font color="#FF6633"> “The Reverse Mortgage Scheme was notified by the National Housing Bank in the current financial year. In order to clarify the tax issues arising out of the scheme, I propose to amend the Income Tax Act to provide that:</font></font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) reverse mortgage would not amount to "transfer"; and</font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) the stream of revenue received by the senior citizen would not be "income";</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In pursuance, the Government has now notified the Scheme. The Scheme is deemed to have come into effect from 15th April 2008.</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/it08not093.htm" target="_blank">NOTIFICATION NO 93/2008, Dated: September 30, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax by CISF – Reverse Payment – Request not Accepted</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CISF is hiring – not security personnel; they will have to soon hire tax consultants. The Service Tax Department was always sure that Government bodies like CISF are not exempted from Service Tax and the mighty CISF caved in and made a meek request to shift the liability to pay service tax from CISF to the recipient of service. May be the CISF feels it is not as good in dealing with the assaults from the taxmen as it is in dealing with those toughies out to destroy industrial peace and security.
</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue officers have a habit of lecturing – you ask them a question, they will tell you a story – you will never get a straight reply. You ask them how to fit in your marketing model within the excise law, they will advise on how to do business – they can advise on anything under the Sun except the tax laws which they are meant to administer. And this lecture system is prevalent right till the top including the FM – sometime back at the peak of the oil crisis, our FM had lectured to Ministers of Oil Countries as to how they should do business.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Coming back to the CISF's request – it had come from the Home Ministry – Revenue has clarified:- </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Government departments and organisations under Central and State Governments including CISF are deducting TDS on payments made to suppliers of services and on wages and salaries paid to staff and deposit the same with the Income Tax department along with details.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And so what is your problem in following a similar system for Service Tax?</font></p>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif" align="justify">Revenue has also educated the Home Ministry on essential features of Service Tax:-</font></li>
</ul>
<div align="justify">
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As a general principle, service tax is required to be paid by the service provider, for the amount received during the month, on the 5th day of the following month.</font></li>
</ul>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax return is required to be filed once in six months.</font></li>
</ul>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the purpose of payment of service tax, service tax registration can be taken either at a single location or at more than one locations depending upon the accounting system and the convenience of the tax payer.</font></li>
</ul>
<ul>
<li><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax paid is available as input credit to the consumers of service and thus the tax paid is only a pass-through.</font></li>
</ul>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pray, who asked you all this? Are you going to make the recipient pay instead of the CISF? That was the question. That was also answered,</font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It is, therefore, appropriate for CISF, being the service provider, to deposit the service tax on taxable services such as security service, consulting service provided instead of asking the recipient to deposit the service tax.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue therefore advised the Home Ministry to advise the CISF to take appropriate steps to discharge the service tax liability.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CISF should have approached the All India Motor Transport Congress to effectively submit its representation to the Revenue Department to make the recipient liable to pay the tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CISF is an armed force of the Government of India and the entire fee (including Service Tax) collected by it is credited into the Consolidated fund of India – if at all Service tax is to be paid by CISF, instead of hundreds of registrations and returns, can't the central organisation be asked to pay one service tax amount at the end of the year on its entire income – one cheque and no return, will do.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whose money are we wasting in these payments, returns, litigation and clarifications?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And soon we will have SCNs flying around with CISF being accused of suppression, fraud and intent to evade payment of tax and so some overactive Commissioner may even impose Crores of Rupees as penalty on CISF or even some IPS officers manning it.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CISF Act is an Act of Parliament to <strong> provide for the constitution and regulation of an armed force of the Union for the better protection and security of Industrial Undertakings owned by the Central Government and certain other Industrial Undertaking, employees of all such Industrial Undertakings......</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can you say it is a Security Agency? The CISF actually deputes its staff to work under the Managing Director of a Central Industrial Undertaking;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">it does not really provide security service. And given a chance, no undertaking would hire the CISF; it is mandatory for them to do so.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the State Police providing Security on payment be also called a security agency liable to pay Service Tax?</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/file345.htm" target="_blank">CBEC F. No. 345/1/2007 – TRU dated 19.8.2008</a> + <strong>Also See: </strong><a href="http://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7975" target="_blank">CISF, Whether Liable To Pay Service Tax? </a> </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Difficulties in processing ITR -5 return in cities where refund banker scheme is operational – manual for now</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has come to the notice of the CBDT that in the cities where the refund banker scheme is currently operational, the assessing officers are facing difficulty in processing ITR - 5 returns (combined Form for return of income and fringe benefits for firms/association of persons/body of individuals), which contain an FBT component, due to some technical problems.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As the number of such cases is not very large, Board has decided that for the assessment year 2007-08, such cases may be processed manually.</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/instruct0814.htm" target="_blank">CBDT Instruction No. 14/2008, Dated: October 1, 2008</a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Even Cabinet Secretary's instructions not followed</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are living in an era of indiscipline, where we expect discipline most like judiciary, bureaucracy, Defence etc.,</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The cabinet Secretariat had written several times to the Ministries/Departments that the notes for the Cabinet/Cabinet Committee will not be entertained unless these are circulated five clear working days in advance of the meeting of the Cabinet/Cabinet Committee. The instructions has also highlighted that, taking into account the time required for examination of the notes in the Cabinet Secretariat, only notes received seven working days before the scheduled meeting will be circulated for the meeting provided they meet with the procedural requirements.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In spite of repeated instructions, the Cabsec finds that notes for the consideration of the Cabinet/Cabinet Committees continue to be forwarded by the Ministries/Departments till the last day prior to the Cabinet meetings, leaving very little time for its examination and for ensuring its timely circulation by the Cabinet Secretariat.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Secretariat wants the Ministries/Departments to adhere to the time lines.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Cabsec is the highest bureaucrat of the country.</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/doletter.htm" target="_blank">Cabinet Secretariat D.O. No. 1/13/2/2008-Cab Dated : September 25, 2008</a></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="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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></strong></font>Summons – Anticipatory Bail </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Imposition of conditions before arrest not legal or valid - power to arrest a person by a Custom Officer is statutory in character and cannot be interfered with – A person summoned is bound to comply: Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> expression ('anticipatory bail') has not been defined in the Code. But anticipatory bail means a bail in anticipation of arrest. The expression `anticipatory bail' is a misnomer inasmuch as it is not as if bail presently granted in anticipation of arrest. Where a competent court grants `anticipatory bail', it makes an order that in the event of arrest, a person shall be released on bail. There is no question of release on bail unless a person is arrested and, therefore, it is only on arrest that the order granting anticipatory bail becomes operative.</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 Pricing provisions are to prevent flight of profit outside India and cannot be invoked in all cases, particularly where Sec 10A benefits being availed by the taxpayer: Bangalore ITAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Transfer Pricing provisions of the Indian Income Tax Act have been evolving rapidly, and with all the necessary healthy interpretations from the judiciary. Close on the heels of the Sony India case, the Bangalore Bench of the Tribunal has held in the case of Philips Software Centre that <strong> the basic premise of the TP provisions is to prevent the flight of profit outside India, and since the assessee in this case was happily availing Sec 10A benefits, it was not a fit case for application of TP laws.</strong></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>Whether Revenue appeal is to be dismissed or decided on merits – whether Doctrine of Merger comes into play – Difference of Opinion – matter referred to Third Member</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> respondent company raised a preliminary objection on the sustainability of the appeal inasmuch as <strong>they argued that the doctrine of merger applies and since the appeal was filed by the Revenue after the Tribunal had passed the order, the order of the Commissioner had merged with the order of the Tribunal and, therefore, the Tribunal could not pass any further order</strong>.</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>No depreciation on capital goods is allowed for EOUs on failure to fulfil export obligation: CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS </strong> is a routine case of non-fulfilment of export obligation by a 100% EOU and demand of duty foregone on imported capital goods, but the findings are not routine. The Tribunal has answered some of the valid and important questions that arise in cases of non-fulfilment of export obligation.</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>