Simplified scheme for the refund of service tax

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An announcement was made by Hon’ble Finance Minister in the Budget Speech 2011 for introducing a simplified scheme for the refund of service tax paid on services used for export of goods on the lines of drawback of duties.

To implement the simplified scheme, the Government has issued notification No. 52/2011 – Service Tax effective 3rd January 2012 that will provide average rates of service tax refund, ranging from 0.03% to 0.20% of the F.O.B. value of export, for a wide range of goods exported from India. The average rate of refund is in respect of 18 identified services used beyond the factory gate.
As in the case of payment of duty drawback, the service tax refund will be enabled by the Indian Customs EDI System resulting in the amounts getting directly credited into the exporters’ bank accounts within a few days of confirmation of export without additional export documentation. Customs Officers have separately been vested with powers of Central Excise/Service Tax Officers for this purpose.
The scheme adds to the e-enabled service delivery to exporting community, limits public interface as well as reduces transaction costs in obtaining refunds.


 

Mere passage of 3 years will not mean that liabilities are no longer payable – Section 41(1) can not be ivoked for non trading Liabilities

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ACIT Vs. Afghan Crane Crusher (ITAT Delhi)- Upon assessee’s appeal Ld. Commissioner of Income Tax (Appeals) noted that the aforesaid loans were duly recorded in the books of accounts and confirmations of loans were also filed before the Assessing Officer wherein the depositors accepted to have made interest free loans to the assessee. Ld. Commissioner of Income Tax (Appeals) further observed that the unsecured loans have been raised by the assessee from relatives and friends in the financial year 2004- 05 for obtaining credit limit from banks and the impugned sums do not represent trading liability for invoking provisions of section 41(1) of the Act. In view of the above facts Ld. Commissioner of Income Tax (Appeals) held that the Assessing Officer was legally and factually incorrect in invoking provisions of section 41(1) of the Act and made disallowance of Rs. 13,80,000/-.

We have heard the Ld. Departmental Representative. None appeared on behalf of the assessee. Upon careful consideration, we find that the matter can be disposed of by perusing the records and hearing the Ld. Departmental Representative. We find that the addition in this case has been made by the Assessing Officer on the ground that the unsecured loans are more than 3 years old. Mere passage of 3 years will not mean that these liabilities are no longer payable. Moreover, the assessee has not written off these sums. Moreover these loans do not represent trading liability. Hence, section 41(1) cannot be invoked. The parties have also confirmed the same. Under the circumstances, there is no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals). Hence, we affirm the same in this regard.


 

Expenditure incurred for running the business or working it, with a view to produce profits is in the nature of revenue expenditure

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Airport Authority of India vs. CIT (Delhi High Court) – The Supreme Court has held in the case of Assam Bengal Cement Co. Ltd. Vs. CIT (1995) 25 ITR 34 that‘”If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business s is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure.”

Applying the text to the crux of the case before it, the Court was influenced by the fact that the assessee had already been granted a mining lease and under that lease it had acquired full rights to carry on mining operations in the entire area including the railway area. The payment of Rs. 3 lacs was not made for grant of permission to carry on mining operation within the railway area, instead it was made towards the cost of removing the construction which obstructed the mining operation. In this premise, the expenditure was treated to have been made in relation to carrying on business in a profitable manner and was, therefore held to be on revenue account.

 

Soon companies may be allowed to sell shares through electronic Initial Public Offers (e-IPOs)

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A committee set up by market regulator Sebi to examine IPO-related issues is looking into a proposal to allow companies to sell shares through electronic Initial Public Offers (e-IPOs). The proposed move would enable companies to sell shares electronically. Under such a system, investors would bid for shares online and would not be required to sign any papers physically.

“The committee set up by Sebi to undertake various issues relating to IPOs is looking into it (the e-IPO proposal). We are awaiting formal clearance from the ministry of corporate affairs for the e-IPO process,” Sebi chairman U K Sinha​ told Media.

Asked about Sebi’s proposal for reducing the number of days in the IPO process, he said, “The current period of 12-plus days and how to reduce it is part of the committee’s mandate.”

 

TDS U/s. 194C not deductible on Packing or Printed material supplied to us as per our specification

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DCIT Vs. Elgie Engineering Works (ITAT Calcutta)- On perusal of the bills of parties, it is seen that the payments are for manufacture and supply of items such as Buckstay Slings, Economiser coils, Lifting beams etc. The bills show that the price is inclusive of the material which indicates that the transactions were in the nature of sales contracts. I have perused the CBDT’s Guidelines in this regard as given in Circular No.681 dated 08.03.1994. Herein, it has been stated that where contractor undertakes to supply any article or thing fabricated according to specifications given by the Govt. or any other specified persons and the property in such article or thing passes to the Govt. or such person only after such article or thing is delivered, the contract will be a contract for sale and shall be outside the purview of section 194C. Further, reference is invited to the Punjab and Haryana High Court’s decision in the case of CIT vs. Deputy Chief Accounts Officer, Markfed, Khanna 304 1TR 17. In this case, the assessee had purchased printed packing material made according to its specifications but did not deduct tax at source. The Court held that the factum of such material carrying some printed work could only be regarded as the work executed by the supplier incidental to the sale made to the assessee. The raw material for the manufacturing of such packing material was not supplied by the assessee. It was, therefore, held that, the purchase of particular printed material by the assessee was a contract for sale and outside the purview of section 194C. In the present case under appeal, the bills clearly show that material has not been supplied by the assessee in respect of the purchase of equipment/machinery. I, therefore, in view of these facts and the CBDT’s Circular referred to above, hold that payment amounting to Rs.36,57,034/- made to 7 parties was for purchase of equipment/machinery and the assessee was not required to deduct tax u/s. 194C. The disallowance u/s.40(a)(ia) to the extent of Rs.36,57,034/- is, therefore, deleted.

 

Rule 8D applicable from A.Y. 2008-2009, however direct and indirect expenses to earn exempt Income has to be disallowed under Section 14A

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CIT Vs. Galileo India Pvt Ltd (Delhi HC) - Rule 8D has been held to be prospective in nature and applicable from assessment year 2008-09 by this Court in Maxopp Investment Ltd. v. CIT, New Delhi in ITA No.687/2009 dated 18.11.2011. However, in the said decision it has been observed that direct and indirect expenses have to be disallowed under Section 14A, when an assessee earns exempt income. In the present case no disallowance was made under Section 14A. In these circumstances, the CIT was justified in invoking supervisory jurisdiction under Section 263 of the Act. The said jurisdiction can be invoked when two conditions are satisfied. If the order by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. An order is erroneous, when the Assessing Officer does not correctly apply a provision or does not make enquiries which are required. When the order passed is contrary to law and not in conformity with the Act, it is erroneous and can be revised by the Commissioner. In the present case Section 14A was not applied and no disallowance was made by the Assessing Officer, though the assessee is a company and has admittedly earned exempt income of Rs.28,20,145/-.

 

Company Law – Structure of Additional Fees In Respect of Annual Filing of Private/ Public Limited Companies

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Vide General Circular No: 4/2010, Dated the 22nd November, 2010 , MCA had changed the structure of Additional Fees to be levied for delay in filing E Forms over the companies while filing their Balance Sheet and Annual Returns with concerned Registrarof Companies through MCA Portal. Such change of Additional Fee Structure encouraged the Corporate to file their returns as early as possible so that they can avoid the heavy additional fees. That has resulted in increase the percentage of filing within the due time. The structure of Additional Fees which had been applicable from 5-12-2010 is elaborated with an example as follows:

	Companies having Authorised Capital Rs. 1 Lakh to Rs. 4, 99, 999	Companies having Authorised Capital Rs. 5 lakh to Rs. 24, 99, 999	Companies having Authorised Capital Rs. 25 Lakh or more	Let the AGM date be Sep. 30. So, Due date for E- Form 23 AC, ACA and Form 66 is Oct. 30 and For E Form 20 B is Nov. 29
If filed in month of October (Oct. 30) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. Rs. 200 Rs. 200	Rs. 300 Rs. 300 Rs. 300	Rs. 500 Rs. 500 Rs. 500	Normal Fees Normal Fees Normal Fees
If filed in month of November (Nov. 29) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+400=600 200	300+600=900 300+600=900 300	500+1000=1500 500+1000=1500 500	Normal+ Double the Normal Fees Normal Fees
If filed in month of December (Dec. 29) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+800=1000 200+400=600	300+1200=1500 300+1200=1500 300+600=900	500+2000=2500 500+2000=2500 500+1000=1500	Normal + Four times of Normal Normal+ Double the Normal Fees
If filed in month of January (Jan. 28) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+1200=1400 200+800=1000	300+1800=2100 300+1800=2100 300+1200=1500	500+3000=3500 500+3000=3500 500+2000=2500	Normal+ Six times of Normal Normal + Four times of Normal
If filed in month of February (Feb. 27) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+1600=1800 200+1200=1400	300+2400=2700 300+2400=2700 300+1800=2100	500+4000=4500 500+4000=4500 500+3000=3500	Normal+ Eight times of Normal Normal+ Six times of Normal
If filed in month of March (Mar. 28) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+1800=2000 200+1600=1800	300+2700=3000 300+2700=3000 300+2400=2700	500+4500=5000 500+4500=5000 500+4000=4500	Normal+ Nine Times of Normal Normal+ Eight times of Normal
If filed in month of April (Apr. 27) E Form 66 E Form 23 AC,ACA E Form 20B	N.A. 200+1800=2000 200+1800=2000	300+2700=3000 300+2700=3000 300+2700=3000	500+4500=5000 500+4500=5000 500+4500=5000	Normal+ Nine Times of Normal Normal+ Nine Times of Normal

Note: After the Month of April, The Additional Fees will remain the Nine times of the Normal Fees, no matter when ever the Filing is being Done.