TIOL-DDT 2274
17.01.2014
Friday

CBDT had issued a Circular No. 4/2008 dated 28.04.2008, wherein it was clarified that tax is to be deducted at source under Section 194-I of the Income-tax Act, 1961 on the amount of rent paid/payable without including the service tax component.

Representations/letters have been received seeking clarification whether such principle can be extended to other provisions of the Act also.

Board had actually clarified in Letter F.No. 275/73/2007-IT(B), dated 30-6-2008 as follows:

Deduction of Tax at source on Service Tax - The payments made under section 194-I differ significantly from payment made under section 194J in the way that in the case of 194-I TDS has to be deducted on any income paid as rent. However, in the case of section 194J TDS has to be deducted on any sum paid as professional and technical fees. The Board had decided to exclude TDS on service tax component on rental payment because it was construed that service tax payment cannot be regarded as income of the landlord. Since section 194J covers any sum paid, therefore the Board has decided not to extend the scope of Circular No. 4/2008, dated April 28, 2008 to such payment under section 194J.

Anyway Board seems to have forgotten this letter. They are reminded of a recent judgement of the Rajasthan High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs Rajasthan Urban Infrastructure - 2013-TIOL-663-HC-RAJ-IT, holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

On re-examination of the matter, in exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

CBDT Circular No. 1/2014 in F. No.275/59/2012-IT(B), Dated: January 13, 2014

Income Tax - Settlement Commission - Rule 44CA amended

THE CBDT has amended Rule 44CA of the Income Tax Rules to stipulate that:

1. Where an application has not been declared invalid or an application has been allowed to be further proceeded with, all the material and other information produced by the assessee before the Settlement Commission shall be sent to the Commissioner to enable him to furnish the report under sub-section (3) of section 245D.

2. Where the proceeding before the Settlement Commission abates, the Commission shall send, all the material and other information produced by the assessee before the Commission and the results of any enquiry held or evidence recorded in the course of proceedings before it, to the Commissioner.

Will CBEC follow suit with amendments to the Customs & Central Excise Settlement Commission Procedure?

CBDT Notification No.5/2014, Dated: January 15, 2014

Customs - New Exchange Rates from Today

CBEC has notified new exchange rates for Imported Goods and for Export Goods with effect from 17th January 2014. The US Dollar is 62.20 rupees for imports and 61.20 rupees for exports.

The Exchange rates were last notified on 02 January 2014

Notification No. 03/2014-Cus (N.T.), Dated: January 16, 2014

CESTAT has no Funds for basic requirements

OUR report CESTAT Mumbai has no money to dispatch notices/letters in DDT 2272-15.01.2014 was only a tip of the proverbial iceberg. Much before the Mumbai Circular, the Chennai CESTAT had issued a notice dated 06.12.2013 to the effect that, due to acute shortage of funds and due to mandatory reduction in the budget allocation, notices for hearing, appeal memos, defect notices etc., would be sent by ordinary post and Cause List from the CESTAT website/Notice Board may be viewed for all purposes .

Enquiry by TIOL reporters has revealed that all the Benches of the CESTAT are facing similar problem of acute shortage of funds and postage is not the only casualty; they have no money to pay for telephone bills, electricity bills, hiring cars for the Members….. They are deep in debts to several agencies - Public and Private and are running the show by requesting the debtors to bear with them till the financial position improves and whenever some funds are received, they are immediately exhausted for paying outstanding bills and again they are in debts. It seems some bills pertaining to May 2013 are yet to be paid.

What will happen if the Electricity Board cuts off power, the Telephone Company disconnects the phones and the Cabs Company stops the cars for the Hon'ble Members. Will they close down the Tribunal because they can't pay the bills?

Drastic expenditure cuts are being put in place like in one Bench, they have stopped typing the orders in double space and are now doing it in single space to save paper and postage!

There is a mandatory ten percent cut in expenditure imposed by the Government in all departments. This cut is blindly extended to the Tribunal also, where it is neither practically feasible nor physically possible. The number of appeals and applications received this year are nearly more than double those received in the previous year; then how do you implement a ten percent cut in expenditure?

CESTAT need not be in such pathetic condition - after all it collects a lot of money as fees from private litigants - if the amount of fees collected is not enough to meet the expenditure, let them increase the fees, but let the Tribunal retain the fees for its expenditure.

The Government treats the CESTAT as a subordinate office of the Revenue Department and not a very important one at that - and that is the reason for this kind of poverty for the Tribunal, which deals with the richest cases in India. The Tribunal cannot be at the mercy of the Revenue Department for its funds - we should devise an alternate mechanism - there should be some financial autonomy for the Tribunal. The whole issue boils down to a couple of crores for lack of which we are facing all these problems. Advocate Gururaj of Bangalore says in our Message Board that Counsels and litigants can contribute - maybe we should ask Commissioners to contribute immediately - after all they cause all the litigation in the Tribunal.

Arrests under Service Tax

WITH the VCES ending some Service Tax wings have become active in arresting alleged evaders.

We understand that a Service Tax assessee who failed to pay the first instalment under VCES has been arrested in Mumbai for alleged Service Tax evasion of nearly three Crores rupees.

Another assessee has been arrested in Bangalore for alleged evasion of about Rs. 1.16 Crores.

No Budget in February

IT is now clear that there would be no Budget presentation on February 28 as usual. The Government is planning an extended winter session of Parliament from February 5 to 21 and the vote on account is planned on February 17. So, there would be no budget exercises and the babus in North Block can relax. Of course this does not mean the Government cannot announce sops even without a budget.

There is going to be a constitutional crisis when Parliament meets on February 5. As per Article 87 of the Constitution, at the commencement of the first session of each year, the President is supposed to address a Joint sitting of both the Houses. But the BJP Government did not follow this provision in 2004. Will the President address the First session of the year and the last session of the present LokSabha?

And there is no TIOL Budget Run Up! - Not now.

DDT Cartoon

Jurisprudentiol - Monday's cases

FEMA

Transaction through authorized persons - No violation - Penalties quashed - Supreme Court

IT was concluded that it was incumbent upon the Appellants by virtue of the terms of instructions contained in paragraph 3 of the Memorandum of FLM issued by RBI to have verified the bonafides of the persons deputed to them by M/s Hotel ZamZam before handing over the foreign currencies to such persons. It was, therefore, ultimately concluded that the said failure on the part of the Appellants resulted in contravention of the directions contained in paragraph 3 of the Memorandum of FLM read with Section 6(4), 6(5) and 7 of FERA. Ultimately the Appellants were found guilty for the said contraventions and the penalty came to be imposed.

Income Tax

Whether employees' contribution to PF credited after statutory date under respective Provident Fund Acts but within due date of filing return u/s 139 is eligible for deduction u/s 36 - NO: High Court

THE assessee is a Corporation run by State of Gujarat, engaged in the business of public transportation. The assessee filed their return of income declaring total loss which was again filed through a revised return declaring more loss on the basis of the final audited accounts and auditor report u/s 44AB after considering the observations/comments of the Statutory Auditor. The case was selected for scrutiny and several notices were issued u/s 142(1) followed by notice u/s 143(2), to which finally the Accounts officer of the assessee along with its Chartered Accountant submitted submissions showing provident fund contribution collected from the employees and deposited with PF Trust as well as Corporation's contribution towards contributory provident fund and its deposit with the PF Trust.

THE issues before the Bench are - Whether employees' contribution to provident fund credited after the statutory date under the respective Provident Fund Acts but within the due date of filing return u/s 139 is eligible for deduction u/s 36 of the Income Tax Act; Whether amendment in section 43B vide Finance Act, 2003 which deleted the second proviso can be applied for interpreting section 36(1)(va); Whether section 36(1)(va) and section 43B operate in two different fields with respect to two different contributions and Whether merely because with respect to employer's contribution Second Proviso to Section 43B which provided that even with respect to employers' contribution, assessee was required to credit amount in the fund within the due date of the relevant Act, is deleted, it can be said that section 36(1)(va) also stands amended. And the verdict goes against the assessee.

Central Excise

SCN invokes extended period and alleges that the appellant has availed abatement wrongly -word ‘wrongly' means that there was no deliberate act by the appellant - duty liability not contested but paid along with interest - mandatory penalty u/s 11AC of CEA, 1944 not imposable: CESTAT

THE appellant is a manufacturer of Anti-freezing coolants (Heading 3820) which is subject to valuation on MRP basis. The appellant was claiming abatement of 40% as per the Notification 2/2006-CE(NT) and paying appropriate duty. On 01.03.2008, vide a superseding Notification 14/08-CE(NT) the abatement on the said product was reduced to 38% but the appellant continued to avail 40% abatement. This notification was again superseded by Notification No. 40/08-CE(NT) dated 24.12.2008 and the abatement was reduced to 35%. Since this date, the appellant paid the duty after availing the correct abatement of 35%.

Thanks to the Audit conducted by the department, the availment of excess abatement of 2% by the assessee during the period 01.03.2008 to 23.12.2008 came to notice and upon pointing out the same, the appellant paid the differential duty along with interest.

See our Columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend.

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