Clarification on Payment of Service Tax on rent payable by Central/State Government Departments

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Trade Notice No. 47/ST/2012, dated 31-10-2012

It is to bring to the notice of all trade associations and stake holders that Clarification has been sought whether Service Tax is payable on rent paid by them to various building owners who has given the buildings on rent to Govt. Departments for office purpose.

2. In this connection it is clarified that w.e.f. 1-7-2012, Service Tax is payable by landlords/property owners on rent received by them for buildings given on rent to such organizations like State Govt./Central Govt. Offices, even though the said organizations are non-commercial organizations. This clarification is based on legal provisions that Section 66D of the Finance Act, 1994 (Negative List) as well as Notification 25/2012-Service Tax, dated 20-6-2012, do not provide any exemption for such activities. Hence Service Tax is payable on rent paid by Central Govt./State Govt./Local Authorities for office buildings taken by them on rent.

3. All the trade associations are requested to give wide publicity to the contents of this Trade Notice amongst their member & constitutes.

Service tax on interest for delayed payment payment of credit card dues

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CESTAT, BANGALORE BENCH

Canara Bank

v.

Commissioner of Central Excise and Customs (LTU)

Stay Order Nos. 975/2012

Stay Application No. 1927/2011

Service Tax Appeal No. 3083/2011

Date of pronouncement – May 30, 2012

 

The bank’s customers holding credit cards purchase goods from shops and the bank pays to the shop keeper on their behalf. Till the customers pay up the money to the bank, they are debtors and they stand in the shoes of borrowers. If that be the case, the amount transacted is a “loan” and interest must accrue to the bank in the event of delay in repayment thereof. In this scenario, the legal provisions cited by the learned counsel become relevant. During the period of dispute, “interest on loans” was in the excluded category and was not to be included in the gross value charged by the bank for rendering ‘credit card services’.

For Reassessment Issue of notice U/s. 148 is mandatory

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[1959] 35 ITR 388 (SC)

SUPREME COURT OF INDIA

Y. Narayana Chetty

v.

Income-tax Officer

VENKATARAMA AIYAR, GAJENDRAGADKAR AND SARKAR JJ.

C.A. NOS. 317 TO 320 OF 1957

OCTOBER 15, 1958

 

 

The notice prescribed by section 148 cannot be regarded as a mere procedural requirement. It is only if the said notice is served on the assessee that the ITO would be justified in taking proceedings against the assessee. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the ITO would be illegal and void – Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC); CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC); CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC).

AP High Court grant interim stay against CBEC’s Circular on recovery of confirmed demand during pendency of stay application

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The Central Board of Excise and Customs (CBEC) has issued its first Central Excise Circular No. 967/01/2013 – CX, dated January 01, 2013 on eve of New Year 2013, for recovery of confirmed demands during pendency of Stay applications. The Circular has rescinded seven previous circulars on the subject matter. The said Circular has brought about a significant shift in the timing of recovery of confirmed demands, where the stay applications are not disposed off by the appellate authorities, within a period of 30 days of filing thereof.

As per this Circular, if a stay application is filed before the Commissioner (Appeals) and CESTAT and if there is no stay within 30 days, recovery action has to be initiated. In case of stay applications before the High Courts and Supreme Court, even this 30 days’ time is not available. Recovery has to be initiated immediately after the orders if there is no stay.

The stated Circular issued by the Board lacks foresight, proper understanding of the real situation – draconian Circular

Big Relief is coming from the Andhra Pradesh High Court giving a major reprieve against the recent circular issued by CBEC in the case of Ultratech Cement Ltd. Vs. Union Of India {WPMP.NO:873 of 2013 dt. 9-1-2013}. The Court has passed a brief one-page order granting interim stay of recovery till the appellate authority disposes of the stay application.

Ultratech Cement had approached the AP High Court for a stay of the stated CBEC circular. “The court has held that no coercive action should be taken by the indirect tax authorities till the time the stay petition is disposed of by the appellate authorities.”

Incidentally, it will not be out of context to highlight another judgement delivered by AP High Court in the case of M/S. SIVA SAI CONSTRUCTIONS, HYDERABAD Vs. GOVERNMENT OF INDIA, REP BY ITS (2013-TIOL-09-HC-AP-ST), wherein the Court directed the Revenue not to initiate or pursue any coercive steps against the petitioner (or others who owe dues to the petitioner) under Section 87 of the Finance Act, 1994 or any other appropriate provision, till disposal of the petitioner’s applications for condonation of delay and for grant of interim relief in the appeal preferred by the petitioner to the Tribunal on 26-9-2012.

Income earned by trust from business activities eligible for exemption if primary objects were charitable

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HIGH COURT OF MADRAS

Commissioner of Income-tax, Madurai

v.

Janakiammal Ayyanadar Charitable Trust

Tax Case (Appeal) Nos. 1566 & 1567 of 2005

Date of Pronouncement – September 18, 2012

 

Even though the Tribunal had not given any finding as regards the primary purpose, yet a reading of the order of the Assessing Officer shows that he had considered the clauses in the trust deed to arrive at the finding that the primary objects of the trust are charitable in nature and that the property given was impressed with the character of trust property. Having held so the Assessing Officer nevertheless pointed out that there was no evidence to hold that the business of manufacture and sale of paper caps carried on by the trust was in the course of the actual carrying on of the primary objects. Hence, the trust was not entitled to claim exemption under section 11. With the finding of fact arrived at by the Assessing Officer that the primary objects of the trust were charitable in nature, in the face of sections 2(15) and 11(4A) read with section 13(1)(bb) the assessee was eligible for exemption.

CLB Chairman cannot transfer a case from one Regional Bench to another

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HIGH COURT OF BOMBAY

Arunachalam Muthu

v.

Nafan BV

S.J. KATHAWALLA, J.

CO. APPEAL (LODGING) NO. 28 OF 2012

CLB CO. APPLICATION NO. 275 OF 2012

CLB CO. PETITION NO. 62 OF 2009

NOVEMBER 30, 2012

 

A reading of Regulation 3 of the CLB Regulations makes it clear beyond any doubt that the Chairman of the CLB is empowered by the Board to constitute the Benches of the Board as per the composition of Benches prescribed under Section 10E (4B) of the Act. Regulation 3 (3) of the CLB Regulations empowers the Chairman to specify the Member of the Bench before whom every matter requiring decision by the Board shall be placed for orders and in the absence of such Member so specified every such matter shall be placed before any other member of the Bench who is present. Thus Regulation 3 (3) of the CLB Regulations delegates the power of intra Bench allocation of matters to the Chairman i.e. transfer of a matter from one Member of a Bench to another Member of a Bench but not inter Bench transfer i.e. from one Member of the Bench to a Member of another Bench. Regulation 4 empowers the Chairman to provide that matters falling under Sections 247, 250, 269 and 388B of the Act and under Section 2A of the Monopolies and Restrictive Trade Practice Act, 1969 shall be dealt with by the Principal Bench consisting of one or more Members. Therefore matters arising out of the Sections set out in Regulation 4 may be dealt with only by the Principal Bench consisting of one or more members of the CLB which shall be at New Delhi as provided in Regulation 4 (2) of the CLB Regulations. Regulation 4 (3) of the CLB Regulations provides that matters falling under all other sections of the Act [i.e. matters falling under Sections other than those set out in Regulation 4 (1) ], shall be dealt with by Regional benches, namely, New Delhi Bench, Chennai Bench, Kolkata Bench and Mumbai Bench, consisting of one or more Members. Since Regulation 4 came to be substituted by the CLB Amendment Regulations vide GSR 185 (E) dated 17th March, 2008 w.e.f. 1st April, 2008, it was provided in proviso (1) to Regulation 4 (3) that the matters pending before the Principal Bench and Additional Principal Bench as on 1st day of April 2008 shall continue to be disposed of by the Principal Bench and Additional Principal Bench respectively. In other words, the matters not falling under the Sections set out in Regulation 4 (1) and which were required to be dealt with by the Regional Benches under Regulation 4 (3) were allowed by the first proviso to Regulation 4 (3) to be continued and disposed of by the Principal Bench and Additional Principal Bench, in the event of such matters being pending before the Principal Bench as on 1st April, 2008. By proviso (2) to Regulation 4 (3), it was provided that notwithstanding anything contained in Regulation (7), the Chairman could transfer any matter pending before the Regional benches to the Principal Bench either at the joint request of all the parties or for other reasons to be recorded in writing. Regulation 7 (1) of the CLB Regulations provides as follows:

7. Jurisdiction of the Bench – (1) All proceedings, other than the proceedings before the Principal bench under Regulation 4, shall be instituted before the Bench within whose jurisdiction the registered office of the Company is situated”

In view of this Regulation, none of the proceedings other than the proceedings under Regulation 4 (1) and Regulation 4 (3) of the CLB Regulations could have been dealt with by the Principal Bench. All other proceedings are required to be instituted before and consequently to be heard by the respective Benches within whose jurisdiction the registered offices of Companies are situated. To this rule, the only exception is carved out in the second proviso to Regulation 4 (3), which contains the non obstante clause i.e. “Notwithstanding anything contained in Regulation 7″. This exception empowers the Chairman to transfer any matter from the Regional Benches to the Principal Bench. Thus the power delegated to the Chairman is the power to transfer matters before the Regional Benches only to the Principal Bench since any other transfer inter se between Regional Benches would otherwise violate the mandate of Regulation 7 (1), and this is not the power that the Company Law Board has delegated to the Chairman.

AAR cannot be approached for a ruling only on a part of a transaction

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AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX)

ZD, In re

P.K. Balasubramanyan, Chairman, J.

A.A.R. No. 1098 of 2011

June 8, 2012

 

A ruling pronounced by this Authority is binding on the applicant, in respect of the transaction in relation to which the ruling has been sought and on the Commissioner and the income-tax authorities subordinate to him. The ruling is in respect of the applicant and the transaction involved. This shows that this Authority is expected to give a ruling in respect of the transaction ; on the chargeability to tax either under the Act or the DTAC in appropriate cases, so that there will be a binding adjudication on the chargeability to tax under the Act. That, this is the purpose of creating this Authority, is also clear from the object sought to be achieved by the introduction of Chapter XIX-B in the Act, by the Finance Act of 1993. In my view, seeking of a ruling only on a part of a transaction or on a truncated transaction, cannot be said to be proper and in any event is not a practice that ought to be encouraged. The applicant is bound to come forward and seek a ruling on all the relevant aspects of the chargeability to tax, of a transaction and not rest content with raising questions on aspects of the transaction which may suit it.