RULE 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, reads as:

Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to Four per cent. of the gross amount charged for the works contract.

Explanation.-For the purposes of this sub-rule, gross amount charged for the works contract shall be the sum,-

(a) including-

(i) the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; and

(ii) the value of all the services that are required to be provided for the execution of the works contract;

(b) excluding-

(i) the value added tax or sales tax as the case may be paid on transfer of property in goods involved; and

(ii) the cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire:

Provided that nothing contained in this Explanation shall apply to a works contract, where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7th day of July, 2009.

Now there is a doubt as to whether ‘gross amount', for the purpose of payment of service tax under the Works Contract Composition Scheme, included the value of free of cost supplies, for the period prior to 07/07/2009.

Board clarifies that the explanation appended to Rule 3(1) with effect from 07/07/2009, categorically says in the proviso that “…nothing contained in this Explanation shall apply to a works contract where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7th day of July, 2009.”  Where execution of works contract has commenced prior to 07/07/2009 or where any payment(except payment through credit or debit) has been made towards a works contract prior to 07/07/2009, then in those cases ‘gross amount' for the purpose of payment of service tax does not include the value of free of cost supplies.

CBEC Circular No. 150/1/2011-ST, Dated: February 08, 2012

Customs – Exemption For International Thermonuclear Experimental Reactor

GOVERNMENT has exempted from Customs Duty “Machinery, equipment, instruments, components, spares, jigs, fixtures, dies, tools, accessories, computer software, computer hardware, castings, forgings piping, tubing, chemicals, bio-chemicals, refrigerants, raw materials and consumables”, imported by authorised works centres of the International Thermonuclear Experimental Reactor (ITER) –India, Institute of Plasma Research, as may be designated by an officer not below the rank of Deputy Secretary to the Government of India in the Department of Atomic Energy.

The importer is to produce to the Assistant Commissioner at the time of import, in each case, a list of the said goods with their relevant description duly certified by the Project Director, (ITER)-India project, to the effect that -

(i) the goods mentioned in the said list are required for the purposes of the ITER –India project;

(ii) the said goods shall be used only for the said project.

Notification No. 05/2012-Cus, Dated: February 07, 2012

Income Tax – Deduction Under Section 80HHE

IN AN order delivered last week, the Supreme Court held, “In view of this Court's Order in the case of Commissioner of Income-Tax vs. Bhari Information Technology Systems (P) Ltd. (2011-TIOL-107-SC-IT), upholding the judgment of the Special Bench of Income Tax Appellate Tribunal in the case of Deputy Commissioner of Income Tax vs. Syncome Formulations (I) Ltd., (2007-TIOL-96-ITAT-MUM-SB), the impugned judgment of the High Court is set aside and the judgments of the ITAT in these cases stand affirmed.

The lower authorities had held that, “deduction claimed by the assessee under Section 80HHE has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business”.

Supreme Court Order here

Income Tax – Validity of Section 80 HHC – All cases transferred to Gujarat HC

SEVERAL cases challenging the validity of Section 80 HHC of the Income Tax Act, are pending in various High Courts. The Supreme Court felt that looking to the large number of matters pending in various High Courts and since the question relates to vires, it would be more convenient and beneficial if all the matters were decided by one High Court in the Country. Supreme Court was informed that maximum number of matters are pending in the High Court of Gujarat. Consequently, Supreme Court directed that all the matters be sent to the High Court of Gujarat. The Union of India is directed to place this Order before the Acting Chief Justice of the High Court for information and doing the needful.

Supreme Court Order here

CBEC Achieves 81 percent of Budget Estimates

THE Central Board of Excise and Customs (CBEC) has been able to achieve nearly 80.74% of Budget Estimate up-to the month of January, 2012 in the current fiscal year by collecting Rs. 317233 Crores. At the present rate of growth, CBEC should be able to achieve the target of Rs. 3,92,908 Crores.

The overall growth in indirect tax revenue collections during the month of January 2012 is around 7.2%. However, the progressive growth during April-January of current fiscal year has shown 15.1% over the corresponding period of last financial year. The growth in Central Excise revenue has been negative for January, 2012. However, the overall growth in Central Excise Revenue up to January, 2012 is 6.8% showing a positive trend. The Service Tax revenue collection continues to be buoyant and has shown 34.2% growth during January, 2012. The Customs growth has been 2.5% during the month of January, 2012, though the overall growth up to January, 2012 has been 12.7%.

Thigh to Ankle - Data Cards - Huge Haul by Chennai Air Customs

ACTING on tip off that memory cards in huge quantity are being smuggled into the country by way of concealment, officers of the Air Intelligence Unit of Chennai Airport maintained strict vigil on the passengers arriving from Bangkok.

On 7.2.2012, while keeping surveillance over the passengers arriving from Bangkok by flight No.TG 337, the officers intercepted two passengers, including a woman, both hailing from New Delhi, holders of Indian Passport, on the reasonable suspicion (seizure on suspicion, may not be good – belief could have been better) that they might be carrying memory cards and on examination of their body, 2 GB memory cards totally numbering 62,400 which were kept concealed in their legs by using stockings running from thigh to ankle were recovered.

The passengers admitted that they were carrying the memory cards for handing over to someone in Chennai for a financial consideration.

The total value of the memory cards recovered is Rs.68 lakhs. Both passengers were arrested under the Customs Act, 1962. Further investigation is on to nab the kingpins behind the operation, according to the Chennai Airport Customs Commissioner Sanjay Kumar Agarwal.

BUDGET 2012 – Your suggestions, Please

FINANCE Minister Pranab Mukherji is likely to present the 2012 BUDGET on 16 March 2012. We will start our “BUDGET RUN UP” soon – Please send in your suggestions to editor@taxindiaonline.com.

We will tell the FM what you want in his budget.

Jurisprudentiol – Friday's cases

Central Excise

Rebate - Interest payable for delayed rebate on expiry of three months from date of receipt of the application: HC

IT is now a settled position in law that the liability of the Revenue to pay interest under Section 11BB commences from the expiry of three months from the date of receipt of the application for refund under Section 11B(1) and not on the expiry of the said period from the date on which an order for refund is made.

Income Tax

Whether when developer is not willing to perform terms of agreement, even then provisions of Transfer of Property Act will apply and transaction would fall within scope of deemed transfer u/s 2(47)(v) to attract capital gains tax - NO, rules ITAT

‘K' and remaining three co-owners had specified shares in immovable property - land which was the subject matter of the Development Agreement. A search was conducted on the residential premises of the co-owners. The co-owners did not disclose any income prior to the date of search as the Development Agreement to develop the property was executed after search and became the subject matter of post search proceedings. As per the development agreement, the co-owners were to get 45% of the property and the balance 55% was in favour of developer. The developers were to develop land as well as construct dwelling units. AO held that the entire capital gain accrues on the date of execution of Development Agreement.

Service Tax

Board's Circular No. 137/2007-ST clarifying section 73(3) incorrect in as much as this provision only prohibits issue/service of SCN under sub-section (1) in r/o payment made by party – There is no bar to issue SCN for imposing a penalty under section 76: CESTAT

SINCE default in payment of service tax is an admitted fact in the instant case, such default would per se invite section 76 as rightly decided by the original authority. There was no argument put forth that section 76 is not applicable to cases involving default in payment of service tax. In view of this, the decision to set aside penalty under section 76 by lower appellate authority is not correct and the said order is set aside. The order of original authority to impose penalty at the rate of Rs. 100 per day under section 76 is upheld as valid under law.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a Nice Day.

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