04.09.2014
Thursday
IN TIOL-DDT 2414 11.08.2014 we carried a report 'Only Advocates to appear before VAT Authorities' informing the decision of the Allahabad High Court that any person, who is not a registered Advocate, shall not be permitted to appear before the Authority under the VAT Act.
Affected & concerned by this decision, The Institute of Chartered Accountants of India made an announcement on its website which read -
This is with reference to the order passed by the Lucknow Bench of the Allahabad High Court in the matter of Tax Lawyers Association &Anr. v/s State of U.P. &Ors. whereby only registered advocates are permitted to appear before the Authority under the VAT Act in the State Of U.P. The Institute is seized of the matter and taking all steps to ensure that the status quo ante is restored in the matter and interest of the profession is preserved. As a first step, it is proposed to implead ICAI in the aforesaid matter as ICAI is not a party to the said case.
DDT 2416 covered the above.
So, the ICAI was impleaded and so was the Institute of Company Secretaries of India. The High Court has clarified that that the interim order dated 6 August 2014 shall stand vacated insofar as the categories of (i) Chartered Accountants; (ii) Cost and Works Accountants; and (iii) Company Secretaries are concerned.
For now, CAs, CSs and CWAs are back in practice. There is a third category of practitioners - 'authorised representatives' who are not advocates, Chartered Accountants, Cost and Works Accountants or Company Secretaries. They had also filed an implead petition which was allowed by the High Court but their case is deferred till 16th September. In the meanwhile, the application for impleadment filed by the Bar Council of Uttar Pradesh is allowed.
It is going to be the Clash of Titans.
Incidentally, the Lucknow Bench of the Allahabad High Court in another case has held that the Service Tax officers have no power to audit the assesses and Audit can be done only by Chartered Accountants and in the case of PSUs by the CAG. We carried this report in DDT 2283 31.01.2014.
Income Tax - Compulsory manual selection of cases for scrutiny during the Financial Year 2014-15 - CBDT Instructions
IN supersession of earlier Instructions on the above subject, the CBDT haslaid down the following procedure and criteria for manual selection of returns/cases for scrutiny during the financial-year 2014-2015:-
a) Cases involving addition in an earlier assessment year in excess of Rs. 10 lakhs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before an appellate authority.
b) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs. 10 crore or more on a substantial and recurring question of Jaw or fact which is confirmed in appeal or is pending before an appellate authority.
c) All assessments pertaining to Survey under section 133A of the Act excluding the cases where there are no impounded books of accounts/documents and returned income excluding any disclosure made during the Survey is not less than returned income of preceding assessment year. However, where assessee retracts the disclosure made during the Survey will not be covered by this exclusion.
d) Assessments in search and seizure cases to be made under section 1588, 1588C, 1588D, 153A&153C read with section 143(3) of the Act and also for the returns filed for the assessment year relevant to the previous year in which authorization for search and seizure was executed u/s 132 or 132A of the Act.
e) Returns filed in response to notice under section 148 of the Act.
f) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assessee has been found to be claiming tax-exemption under section 11 of the Act. However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.
g) Cases where order denying the approval u/s 10(23C) of the Act or withdrawing the approval already granted has been passed by the Competent Authority, yet the assessee has been found claiming tax-exemption under the aforesaid provision of the Act.
h) Cases in respect of which specific and verifiable information pointing out tax- evasion is given by Government Departments/Authorities. The Assessing Officer shall record reasons and take prior approval from jurisdictional Pr.CCIT/CCIT/Pr.DGIT/DGIT concerned before selecting such a case for scrutiny.
Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS on the basis of broad based selection filters. List of such cases will be separately intimated in due course by the DGIT(Systems) to the jurisdictional authorities concerned.
CBDT Instruction No. 6/2014,Dated: September 02 2014
What about interest u/s 35FF in case of refund of pre-deposit made from Cenvat credit account?
SHVETAL B. PARIKH writes in:
In last two DDT there is very good deliberation regarding payment of pre-deposit (@7.5% / 10%) by debit from Cenvat credit account. Under new Section 35FF, interest is to be given by department on refund of such pre-deposit from the date of payment till the date of refund. If pre-deposit has been made from Cenvat credit account, refund of the same is to be given by way of credit in that account (i.e. no cash refund). But, whether interest u/s 35FF is also required to be given by way of credit in Cenvat credit account? If so, Cenvat Credit Rules, 2004, needs suitable amendment. What will be the fate of such refund of pre-deposit and interest in Cenvat credit account, if the assessee has closed down his business or he has no use of Cenvat credit at the time of getting refund of pre-deposit with interest?
A consultant answers:
I am of the view that in case of pre-deposit made from CENVAT account, the interest has to be paid by Government in cash - The assessee needs to be compensated for the debit which was not required to be made in the first place, in case of a favourable final order. He is forced to debit because of a wrong case booked against him by the department - So, the Department is responsible for paying interest.
Shouldn't the Board clarify some of the doubts it created in the Budget 2014? But they seem to be busy with postings, promotions and Cadre Review - and with about 25 vacancies of technical officers, when will they clarify these issues. Better litigation take over?
PMO wants Publicity for Income Tax Exemption to PM's Relief Fund
THE DoPT has communicated a letter from the PMO which states,
Prime Minister's National Relief Fund (PMNRF) was constituted in January, 1948 to assist displaced persons from Pakistan. The resources of the PMNRF are now utilized primarily to render immediate relief to the affected families of those killed/injured in natural calamities like floods, cyclones and earthquakes, etc. or in the major accidents/ riots. The fund is also utilized to provide financial assistance for medical treatment like heart surgeries, kidney transplantation, cancer treatment, etc. The fund consists entirely of voluntary public contributions and does not get any budgetary support. Prime Minister is the Chairman of the fund.
Arrangements may be made to display a caption "All donations towards the Prime Minister's National Relief Fund (PMNRF) are notified for 100% deduction from taxable income under Section 80G of the Income Tax Act, 1961." by your Department at its home webpage. Besides, Department may also request the PSUs concerned with the Department to carry out this exercise also.
DoPT F. No. I-28011/2/2013-Coord, Dated: September 03 2014
Jurisprudentiol - Friday's cases
 Central Excise
Apart from undertaking cutting and slitting of coils, appellants are putting of layer of plastic for improving drawability and applying inter-leaving paper for protection of material for end use application - such activity is ancillary to completion of manufactured product and, therefore, amounts to manufacture: CESTAT
THE appellants are engaged in the activity of cutting and slitting of coils. In addition to that they carried out slitting into desirable width as per the customers' requirement; larger weight coils are cut into smaller weight as per the customers' requirement; that the coils are coated and layered with plastic for improving drawability of, besides applying inter-leaving paper for protection of the material so as to be fit for end use application. The appellant took registration as a manufacturer in the 2006& thereafter they procured capital goods and inputs for the manufacturing activity.
CENVAT credit availed on these capital goods, inputs and input services is denied by the CCE, Raigad on the ground that the activity undertaken does not amount to manufacture.
Income Tax
Whether, for purpose of taxation, cost of acquisition of tenancy right is to be taken as NIL in case of enhanced compensation - YES: HC
THE assessee, late G S Bapna, was wife of late Kesar Singh, who was a sub-lessee to M/s Delhi Pottery Works (P) Ltd. During the relevant year under consideration, the Govt. of India had transferred 24.1 acres of Arkpur village land in favour of Delhi Pottery through registered lease deed dated 19 th Mar, 1924. Subsequently, 19.1 acres out of this land was sub-leased by Delhi Pottery to late Kesar Singh and his sons for a period of 17 years at a rent of Rs. 500 p.m., whereupon factory premises were constructed and machineries were installed by Kesar Singh. Thereafter, Delhi Pottery went into liquidation and the leasehold rights were transferred in favour of Harnam Kaur, widow of Ram Singh Kabli, on March, 1949 and rent payable under the sub-lease was paid to her.
The issue before the Bench is - Whether, for the purpose of taxation, cost of acquisition of tenancy right is to be taken as NIL in case of enhanced compensation. And the answer of the High Court is YES.
Service Tax
Outdoor Catering Service - Appellant supplying ready-to-serve food to Khanna Hotels Pvt. Ltd. - whether the food prepared is served by employees of KHPL or by the appellant himself requires verification - Matter remanded: CESTAT
A mouth-watering demand (for Revenue, of course) of Rs.2,47,23,573/- with interest & penalties was confirmed against the appellant on the ground that they had provided Outdoor catering service but not paid service tax.
Before the CESTAT, the appellant submitted that they are engaged in supply of foods to Khanna Hotels Pvt Ltd. (KHPL); they entered into an agreement for preparation of ready-to-serve food and beverages except liquor, soft drinks and aerated waters and to provide banquet service in the Club; as per the agreement, KHPL had provided necessary equipment including kitchen equipment, crockery, cutlery, linen etc. required for preparation of food and beverages;the food prepared by the appellants is served by the employees of KHPL; charges to be charged from the customers for various items are decided by KHPL; KHPL issued bills for catering and other services to the customers; the amount of bills was credited to KHPL's account and as per the agreement, the appellants were receiving 75% of the net sale collection as consideration towards sale of ready-to-serve food;that the appellants are paying VAT in respect of the sale of food to KHPL; that they are raising bills on KHPL for supply of food by 5th of every month, which was to be paid by KHPL within 15 days.
See our Columns Tomorrow for the judgements
Until Tomorrow with more DDT
Have a nice day.
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