TIOL-DDT 1291
03.02.2010
Wednesday

IN DDT 1255 10.12.2009 , we carried a news item regarding Supreme Court asking why the Government cannot legalize the world's oldest profession when it is not able to curb it by laws. We also discussed a little about the applicability of service tax. A netizen has gone a step ahead and sent me this piece. The intention is only to just laugh it off and not to belittle any person or institution.

Issue: Whether condoms are eligible for credit as input:

Revenue: The input is not absolutely necessary for providing the output service. The service can also be performed without the use of the input. Therefore it fails the test of essentiality and hence cannot be treated as input.

Assessee: Though it is not disputed that the output service can be performed without the use of input, the input is required to shield the clients from possible transmission of diseases. Not only the clients, but in some cases, the service provider is also shielded. Hence it is eligible for input credit.

CESTAT: The facts are not in dispute. Though the output service can be provided without the use of the inputs, it cannot take the item outside the definition of input. To draw a parallel, pollution control equipment is eligible for credit. We are convinced that the item is eligible for credit.

DGCEI case of misuse of Credit:On detailed investigations conducted, it was found that the assessee have shown only 1 lakh clients in the records whereas they have availed credit on 1,50,000 items, thus availed credit of 50,000 items which are not used for output service, but diverted for other purposes.

CAG: In the Commissionerates of Bhopal, Bangalore and Ahmedabad, the Audit observed that some of the clients have disappeared in the darkness of night without paying for the service, which was finally written off. Therefore the assessee is not entitled for corresponding credit on inputs. The department's reply is awaited.

Finally,

KSWN Y, Consultants:

The gender of a human being is determined by the Chromosomes, X and Y. If it is XX, it is a female and if it is XY, it is a male. (Researchers are still working on the Transgenders). Thus, the whole world is divided into two sexes, Male and Female. With the globalization of world economy , certain new benefits are bound to accrue. When a falling apple has led to the discovery of gravity, eating it has resulted in attraction between the opposite sexes. Now, can the Government levy service tax if such attraction has some professionalism in it? The Supreme Court in Chartered Accountants Association Vs UOI , upheld the constitutional validity of imposing service tax on professionals.

After 40 such pages…….

The client is advised to buy the inputs not bearing a brand name from small manufacturers so that the dispute on input credit can be avoided.

Please find enclosed the bill for Rs 1,00,000/- towards PROFESSIONAL chares , Service Tax extra.

Tailspark:

Condoms are classified under CETH 4014 10 10 and attract NIL rate of duty.

NRI – Not required Indian – BJP wants IT exemption limit at 3 Lakhs

BHARATEEYA Janata party leaders met the FM yesterday and submitted its wish list and objections to the Direct taxes Code. BJP wants:-

i) Justice and protection to small and middle income group: 90% of the tax payers shall be paying more tax under DTC. Raising the minimum exemption limit to Rs.3,00,000, Rs.3,50,000 for women And Rs.4,00,000 for the senior citizens.

ii) Incentives for savings, medical expenses, etc.: The present provisions of tax incentive for savings and exemption regarding medical expenses, LTC, leave salary, etc., should not be withdrawn.

iii) House/quarters occupied by Govt. employees: The impractical suggestion regarding taxing house/quarters provided for the Government employees should be removed.

iv) Common maximum rate of tax for companies and individuals; DTC has proposed 30% highest rate of tax for individuals and partnership Firms while 25% for companies. Same 25% tax should be applicable to all

v) DTC detrimental to housing sector: a)The present provision regarding tax benefit for housing loan & interest be maintained & limit should be raised. b) Notional rent provision on rental housing should be removed.

vi) Social security: Government proposal to tax Provident Fund, Life Insurance should be scrapped. The present model EEE be continued.

vii) Long term capital gain: a) Security Transaction Tax should be removed. b) Concept of long term capital gain and short term capital gain be continued. c) Encouragement and protection to own a house, investment in housing be encouraged.

viii) Special incentive/secured investment for women and senior citizens: Interest received upto Rs.25,000 per month to women and senior citizens should be exempted. Tax incentive secured schemes, financial instrument should be provided for these.

ix) Small and Medium Entrepreneurs: DTC is harsh on small and medium entrepreneurs including thelawala. The present provision of 8% presumptive profit should be reviewed. (a) Harsh provision regarding maintenance of books and accounts and also keeping receipt of Rs.50/-, etc., should be revisited. (b) The provision regarding cash receipt/payment of Rs.20,000 should be increased to Rs.50,000.

x) Charitable and religious trusts: DTC's concept to tax the charitable and religious trusts and ignore their Constructive charitable activities is unhealthy provision regarding 15% Accumulation should be raised to 50%.

xi) MAT (Minimum Alternate Tax): DTC proposal to levy 2% tax on the asset shall be a deadly blow on the Infrastructure sector. The present system of MAT on the profit earning should be continued.

xii) NRI treated as “Not required Indian”: DTC treated Non-Resident Indians to ‘Not Required Indian”. Taxing the interest and investment income at flat rate 20 to 35% is objectionable.

xiii) TDS: DTC proposed provision harsh provision about TDS. This will be an additional harassment to the small tax payer, women and senior citizen. Proper protection and exemption be provided to this segment.

xiv) Arbitrary power to the Tax Administration: DTC has proposed arbitrary, draconian power to the Tax Administration. In the name of privatization and liberalization, Government has proposed Inspector raj. All provisions extending such arbitrary power regarding opening assessment, etc., should bedropped.

Political parties are wiser when they are in opposition.

Construction of New Tamil Nadu Legislative Assembly Complex - supply of architectural designs and drawings – It's fee not sale; no tax as there is no PE - AAR

ASSESSEE is engaged in the business of providing architectural designs and drawings - participates in a tender floated by TN Govt for preparation of designs and drawings for the construction of Legislative Assembly - gets selected as 'consultant for supply of architectural design - appoints an Indian company as sub-contractor for part of the work - whether payments made to the non-resident are fees for technical services - Whether the payments are to be treated as business profits as per the DTAA in the absence of PE.

The Authority for Advance Ruling, recently ruled that the inescapable conclusion is that the consideration received by the applicant under the contract with the Tamil Nadu Govt. can be legitimately treated as fees for technical services and it is not appropriate to describe the transaction as a pure and single sale of drawings and designs prepared in Germany. The applicant's contention is therefore liable to be rejected for more than one reason. Since the applicant's personnel were in India for only 89 days, there is no permanent establishment. Going by the scope and nature of work actually done by the applicant, it is difficult to infer that the applicant would have had a fixed place PE in India. Further it is not the case of the Revenue that the sub-contractor's place shall be deemed to be the PE of the applicant. The facts and material on record do not lead such inference.

We bring you this Ruling today. See Breaking News

Jurisprudentiol – Thursday's cases

Central Excise

Interest u/s 11BB of the CEA, 1944 is to be paid immediately after expiry of three months from the date of receipt of the refund application and if there is any subsequent litigation that does not bar the assessee to claim the interest from that date : CESTAT

IN all the six appeals (three filed by the Revenue and the other three by the party) the only issue is whether the interest on delayed refund (u/s 11BB of the CEA, 1944) is to be paid to the party immediately after expiry of three months from the date of receipt of the application of refund under section 11B of Central Excise Act, 1944.

'Inserts' missing from bonded warehouse despite tight security – no cause for remission of duty in respect of goods lost in theft – liability of an assessee to pay interest on duty is a statutory liability which requires to be honoured by the assessee without insisting on specific demand : CESTAT

In the instant case, the assessee even failed to prove theft of the goods in question. They chose to pay duty on the goods after the order of adjudication was passed by the original authority, which was not a payment under protest. Disappearance of the goods from the bonded warehouse is an admitted fact. What was pleaded by the appellant was only theft and nothing else. In the absence of proof of theft, there can be no inference other than clandestine removal of the goods without payment of duty. In other words, the substantive allegation raised in the show-cause notice stands substantiated. The demand of duty stands confirmed.

Income Tax

Income Tax – non payment of TDS – prior to 1.6.2007, individuals were not liable to deduct TDS; outright purchase of goods is not contract, not liable for TDS – when TDS was not deductible, disallowing expenditure is not correct: ITAT

THE provisions of s.194C(1) do not apply to the case of the present assessee being an individual for the assessment year under dispute; the amended provisions of s.194C(1)(k) brought on the Statute applicable prospectively w.e.f 1.6.2007 & the assessee was under no obligation to deduct tax while making the payment (s). Since the assessee was under no obligation to deduct tax, her case doesn't fall within the ambit of s. 40 (a) (ia) of the Act. the lower authorities were not justified in disallowing the sum of Rs.30,33,838/-.

Service Tax/CENVAT Credit

No bar on taking CENVAT credit on input services by SSI units working under exemption Notification 8/2003 CE - CESTAT

IN this case, Notification specifically provides for denial of credit of duty paid on inputs, but does not provide for denial of CENVAT credit on input service. It has to be noted at this stage that in respect of capital goods also, the credit is allowed even during the period of exemption to SSI Manufacturers and this is because Notification does not provide for denial of CENVAT credit on capital goods. Therefore, it is obvious that if the intention was to deny the benefit of CENVAT credit of service tax paid on input services to the assessee availing SSI exemption, input services would have been specifically excluded, as in the case of inputs. Since the Exemption Notification does not put such conditions, the appellants are eligible for the CENVAT credit of service tax paid on inputs services.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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