September 2016 STPAM NEWS BULLETIN (1) STPAM NEWS …September 2016 STPAM NEWS BULLETIN (2) FORTHCOMING PROGRAMMES Date Events 12-02-2017 41st RRC at Hotel Radission Blue, Kochi 09/02/2017

September 2016 STPAM NEWS BULLETIN (1)

Volume 1 Issue 10 Mumbai September 2016 Pages - 8 Price ` 5/-

STPAM NEWS BULLETINSagacity, Service, Solidarity Leads to Success

DR. SHASHANK DHOND President

AALOK MEHTA Convenor

I N D E X

1. Forthcoming Programmes ................................................................................. 2

2. Income Tax Updates ........................................................................................ 2

3. Service Tax Updates......................................................................................... 4

4. Our Publication ................................................................................................ 8


FORTHCOMING PROGRAMMES

Date Events

12-02-2017 41st RRC at Hotel Radission Blue, Kochi 09/02/2017 to 12/02/2017

22/10/2017 23-10-2017

Seminar on GST at Navinbhai Thakkar Auditorium, Vile Parle (E)

01-10-2016 Intensive Study Circle meeting on Vat, Service Tax & GST (already Commenced/ Limited Enrolments available)

11-11-2016 19th NRRC at Pune

12-11-2016 (Details & Forms on website)

22-11-2016 31st Batch of coaching Class on VAT & GST

(details & Forms on Website)

Income Tax UpdateCompiled by Advocate Ajay Talreja

Taxation Laws (Amendment) Act, 2016

Posted: 10 Sep 2016 08:52 PM PDT

For the purposes of this clause, the reconstruction or splitting up of a company, which ceased to be a public sector company as a result of transfer of its shares by the Central Government, into separate companies, shall be deemed to be a demerger, if such reconstruction or splitting up has been made to give effect to any condition attached to the said transfer of shares and also fulfils such other conditions as may be notified by the Central Government in the Official Gazette

Goods and Services Tax Council provisions notified wef 12.09.2016


In exercise of the powers conferred by sub-section (2) of section 1 of the Constitution (One Hundred and First Amendment) Act, 2016, the Central Government hereby appoints the 12th day of September, 2016 as the date on which the provisions of section 12 of the said Act shall come into force.

GST Bill gets President’s assent – Now becomes a law


The Government’s plan to roll out Goods and Services Tax (“GST”) from April 1, 2017, has moved an inched closer to the reality with the Hon’ble President Shri. Pranab Mukherjee signing the Government’s flagship Constitution (122nd Amendment) Bill, 2014 on GST (GST Bill), just a while ago.

CBDT Reacts To High Court Strictures And Revises Guidelines For Appointment Of, And Fees Payable To, Standing Counsel

The CBDT has issued Instruction Nos.6 and 7 of 2016, both dated 7th September 2016, by which it has revised the guidelines for engagement of standing counsels to represent the income-tax department before the High Courts and other judicial forums. The CBDT has also revised the schedule of fees payable to the Counsel

M. G. Contractors Pvt. Ltd vs. DCIT (ITAT Delhi)

As per CBDT Instruction No. 9/2013 dated 22.07.2013, appeals against imposition of penalty or


levy of interest in which the aggregate of penalty imposed or interest levied by the AO is more than Rs. 3 crore in the cities of Mumbai and Delhi are to be argued by the CIT(DR) and matters other than this are to be argued by the Senior DR

As per CBDT Instruction No. 9/2013 dated 22.07.2013, appeals against imposition of penalty or levy of interest in which the aggregate of penalty imposed or interest levied by the AO is more than Rs. 3 crore in the cities of Mumbai and Delhi are to be argued by the CIT(DR) and matters other than this are to be argued by the Senior DR

Amin Merchant vs. Chairman CBEC (Supreme Court)

The fact that the Finance Minster announced a concession in Parliament does not entitle the assessee to relief if the same is not set out in the Finance Act

The whole thrust of the appellant is that the proposals of the Finance Minister were duly approved by the Parliament. No doubt, the appellant has placed before this Court the proposals of the Finance Minister which discloses the intention of the Government but there is no material placed before us to demonstrate that the budget proposals are duly accepted by the Parliament. We are unable to agree with the argument advanced by the appellant for the reason that he is unable to make note of the difference between a proposal moved before the Parliament and a statutory provision enacted by the Parliament, because the process of Taxation involves various considerations and criteria

Humayun Suleman Merchant vs. CCIT (Bombay High Court)

S. 54F(4): Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. The fact that the entire amount has been paid to the developer/builder before the last date to file the ROI is irrelevant. Contrary view in K. Ramchandra Rao 277 CTR 0522 (Kar) is sub-silentio and is not good law

The sale of capital asset took place on 29th April, 1995 for a consideration of Rs.85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs.69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs.35 lakhs were utilized by the Appellant in purchase of flat before the return of income was filed on 4th November, 1996 under Section 139 of the Act. However, the mandate under sub Section (4) of Section 54F of the Act is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under Section 139(1) of the Act in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under Section 139(1) of the Act. Therefore where the amounts of capital gains is utilized before filing of the return of income in purchase / construction of a residential house, then the benefit of exemption under Section 54F of the Act is available. Before us it is an undisputed position that except Rs.35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income i.e. 4th November, 1996 under Section 139 of the Act. Therefore, on plain interpretation of Section 54F of the Act, it appears that the impugned order of the Tribunal cannot be faulted


Service Tax UpdateCompiled by CA Ashit Shah

1. Club Membership Fees:

The money/contribution received by company against issue of shares from the prospective members for raising funds which can be used for achieving the sole object of the company i.e. establishing a luxurious club, is taxable as service pursuant to S. 66B (44) read with Explanation 3 (a) of the Finance Act, 1994 and are liable to be service tax. This ratio was based in the matter of M/s Emerald Leisures Ltd., Mumbai, as reported in 2016(41) S.T.R. 321(A.A.R.)

[M/s Avadh Infratech Ltd. Versus Commissioner of Central Excise Surat-II, Surat - 2016 (9) TMI 145 – Authority for Advance Rulings.]

2. Clinical Research Activity:

Applicant is proposed to provide service of Clinical Pharmacology i.e. study to be carried out for generic drugs. Further, study is proposed to be undertaken using formulations in the form of tablets, capsules, gels sprinkles, syrups, sprays, inhalers etc. have to be provided by applicant’s customers located outside India, on eligible volunteers in India. Therefore, it is clear that the formulations in various forms (goods) shall be provided by applicant’s customers located outside India, who is recipient of service from the applicant to provider of service.

The proposed activities of undertaking Clinical Pharmacology by the applicant are taxable under the Act in light of Rule 4 of the Place of Provision of Services (POP) Rules, 2012, as the services are proposed to be provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant) and hence taxable services.

[M/s Steps Therapeutics Limited, Hyderabad Versus Commissioner of Customs, Central Excise and Service Tax, Hyderabad-IV, Hyderabad - 2016 (9) TMI 143 - AUTHORITY FOR ADVANCE RULINGS]

3. Cenvat Credit on landline telephone in name of employees:

Appellant had availed the Cenvat Credit of service tax paid on landline telephone installed at the premises of employees / top management / directors of the company. Department had dis-allowed the Cenvat Credit and levied penalty for wrong availment of Credit. Hon’ble Tribunal upheld that invoices were bearing name of the employees / top management / directors as well as these bills were paid by the company on the ground that such services were used in or in relation to manufacture of final products. Tribunal by relying on the judicial pronouncement in the matter of Excel crop care Ltd. [2008 (7) TMI 160 - HIGH COURT GUJARAT] and ITC Ltd. [2013 (3) TMI 44 - CESTAT KOLKATA] upheld that such services are eligible input service and cenvat credit is eligible.

[M/s. Cubex Tubings Limited Versus CCE, Hyderabad-I - 2016 (9) TMI 137 - CESTAT HYDERABAD]

4. Valuation – Import of Service:

Appellant had received the services of management consultancy from foreigners and discharged service tax liability under reverse charge mechanism on payments made to foreigners. Appellant had also incurred certain expenses viz. travel, lodging and boarding, rent-a-cab services etc. while their stay in India. Appellant had not discharged any service tax liability on such expenses incurred by them during their stay. Revenue contended that such expenses incurred by appellant needs to be included in the value of taxable services rendered by foreigners as the same is spent in relation to the services rendered by foreigners. Hon’ble Tribunal observed that (i) contractual obligations between the appellant and foreigners for payment of services provided by them is already taxed under reverse charge mechanism. There is no other amount which has been paid by the appellant to the foreigners as is evident from the records; (ii) The said amount being paid directly to the hotels and rent-a-cab operators, it cannot, by any stretch of imagination, be considered as an amount to be paid or payable to the foreigners who rendered the services of management consultancy; (iii) Revenue has not disputed the fact that the hotels as well as rent-a-cab services have discharged service tax liability on the amounts paid by the appellant for the services rendered by them. If that be so, the same cannot be added as an amount paid to the foreigners and taxed under reverse charge mechanism. Accordingly, upheld that amounts paid by the appellant to the hotels and the rent-a-cab services, etc. are actual expenses, these amounts cannot be considered as an amount which are to be taxed under reverse charge mechanism.

[Tata Quality Management Services Versus Commissioner of Central Excise Pune–III-2016(9) TMI 136 - CESTAT MUMBAI]


Tribunal JudgmentCompiled by Sonali Bapat & Amol Mane

1. VAT Second Appeal No. 137 of 2014.

Date of Judgment : 02.07.2015

Godrej & Boyce Mfg Co Ltd

v/s.

The State of Maharashtra

Order :-

Denying the appellant input tax credit on the ground that the appellants vendor had incorrectly charged higher rate of tax in tax invoice. Hence, he contended that these refusal of set off on input tax credit by the assessing as well as appellant authority was not justified.

Bare reading of this section would make it clear from the provision of sub section 48(1)(a) the words are very specific that subject to the conditions and restrictions as may be specified in the rules, a set off or refund of the whole or any part of the tax has to be granted. Here sub-clause (a)(ii) of the section 48 (1) further mentions that amount paid in respect of any earlier sale or purchase of goods under this Act be granted to the purchasing dealer. Thus this section is specifically clear that they are entitled to whole of the tax which they have paid in respect of earlier sale or purchase. Only question is whether there are any rules prohibiting them from asking for set-off. State has not been in a position to show any rules in this regard.

It was argued that the appellant should have asked for credit or debit notes from his vendors for being adjusted. If the appellant claimed credit or debit notes from his vendors, then in that regard their vendors have to claim excess amount of tax deposited, from the government.

5. Penalty:

Appellant could not discharge service tax liability within the time limit stipulated due to financial crises. However, tax was discharged along with interest before the issuance of show cause notice for recovery of tax. Appellant contended that proviso to Section 73(3) estopping issue of notice is applicable in the present matter. Revenue contended by relying on the Apex Court pronouncement in the matter of Dharmendra Textiles [2008 (231) ELT 3 (SC) which held that mandatory penalty in tax statutes cannot be diluted for any reason whatsoever. Hon’ble Tribunal upheld that we do not find any reason to disbelieve their claim of inability to pay tax owing to lack of funds. Such possibilities can and do occur in the world of business. That, however, does not confer immunity from being proceeded against for failure to comply with tax obligations. There is also no doubt that there is an obligation cast upon every service provider to collect the tax due through the service recipient and deposit the amount with the exchequer. However, the law does contemplate and is not averse to use of the tax so collected within the business till the stipulated date for payment. That this period was unilaterally extended by the assessee is not in dispute. Yet, the contention of the assessee that delay is not evidence of intention to evade tax is not one that can be dismissed out of hand. A delay is, without doubt, a delay but, in the absence of any other convincing evidence, is more reflective of lack of promptitude than deliberate evasion. Tax and interest were paid without waiting for a show cause notice by recourse to loan from a bank. The need to issue notice is, therefore, questionable and taxability before May 2006 is a matter of doubt. In view of the above we are of the opinion that this is a fit case for invoking of the provisions of section 80 to set aside the penalties imposed.

[Commissioner of Service Tax Mumbai Versus Shlok Media Pvt. Ltd. (Vice-versa) - 2016 (8) TMI 1123 - CESTAT MUMBAI]


Once again coming back to the same position that the tax has to be refunded back. (Refer Rule 52)

In the present case, as rightly mentioned that the excess tax element was collected by the trader, but never kept with him & the same was deposited into the government treasury & therefore there cannot be forfeiture of this part of the tax element. Hence, arguments of the State that this amount can be forfeited cannot be accepted. Hence, appellants are entitled to the set-off of excess tax paid to their vendors which has been deposited in Government Treasury.( Decision in case of Niranjan Mills Ltd 9957(58) followed. )

2 Reference Application No.11 of 2015 Date of Judgment : 06.07.2015

Addl.Commissioner of Sales Tax, Mumbai

v/s.

Indian Oil Corporation

Order :-

When we say question of law means enacted law, here directions to verify the error pointed out cannot be termed as a question of law, more especially when no interpretation is required of any particular enacted law. Hence it cannot be said to be a question of law that could be raised and could be referred to the Hon’ble High Court for its decision. Under these circumstances, we hold that the findings of the Tribunal directing the reworking of set-off to be properly made cannot be said to be a question of law for being referred to the High Court for its decision. Hence, Hon’ble Tribunal rejected the reference application.

3. VAT Second Appeal No. 56 of 2014 Date of Judgment : 13.07.2015

Sangvi Management Services Pvt Ltd

v/s.


Order :-

Hon’ble Tribunal held that, from directions of the Hon’ble Bombay High Court in the case of silver Dot Convertors Pvt Ltd, it is clear that the Hon’ble High Court has directed to process refunds as per applications in 501 (all pending applications ) for the period 2006-07. Since the appellant was in Second Appeal before the Tribunal against the orders of lower authorities, his refund application which was rejected by the lower authorities solely on the ground of delay possibly could not be processed. In view of this, Hon’ble Tribunal was inclined to direct the Assessing Authority to process the refund application filed by the Appellant as per the provisions of law.

4. Second Appeal No.627 & 628 of 2009 Date of Judgment : 13.07.2015


Pro sound Products

v/s.


Order :-

Hon’ble Tribunal held that, the goods purchased are to be used in SEEPZ area for manufacture of goods for export outside the territory of India. The total purchases of goods on G form declarations are used by appellant in manufacturer of goods export. The important condition, which is required to be fulfilled is satisfied in the present case. Certain labour work of marginal value out of the total labour charges is carried out side SEEPZ area. The process which could not be done within the SEEPZ area was carried outside. The percentage of the goods consumed in local sales or interstate sales is also marginal, and subsequent to the manufacture being surplus. In such circumstances, Hon’ble Tribunal was of the view that there would not be contravention or breach of conditions or declaration. Resultantly the purchase tax levied under section 41(2) of BST Act is not sustainable. Appellant is also entitled to consequential relief in interest u/s.36(3)(b) and penalty under u/s. 36(2)(c) of the BST Act. The interest and penalty would not stand in view of the fact that the purchases tax is not sustainable.

5. VAT Appeal No.62 to 63 of 2013 Date of Judgment : 14.07.2015

Anant Enterprises

v/s.


Order :-

The power of revising authority are wide enough, if any lower authority allows any claim of the appellant without verification and so if the revising authority forms opinion that claim was not allowed after proper verification by the lower authority, then he has every right to issue notice for revision of the order of the lower authority. In our considered view, the revising authority in this case did not make any fishy enquiry, but issued notices in Form 40 to the appellant on specific points based on his examination of orders & record. This formation of opinion is on the basis of examination of assessment orders and record. It is specifically observed that goods return claim was more than normal. Nature of discount is not clear. There are reasons, though subjective, but those are based on the examination of record. By issuing notice in Form 40, the Revising Authority gave an opportunity of hearing to the appellant. No reason is given for non-production of records. The appellant could have easily produced the record & evidence before revising authority to satisfy him. Moreover when it submits that assessing authority allowed the claim after verifying the record, non-production of such record before the revising authority, which is claimed to have been produced before the assessing authority, itself shows that claim was allowed without verification. Therefore Hon’ble Tribunal did not find any impropriety in the order passed in revision by the Revising Authority. Hence the appeal was dismissed.


THE SALES TAX PRACTITIONERS’ ASSOCIATION OF MAHARASHTRAOUR PUBLICATIONS AVAILABLE FOR SALE

Posted at Mumbai Patrika Channel, Mumbai GPO Complex, Mumbai-400 001.Date of Publishing : 10th & 11th of every month Date of Posting : 10th & 11th September, 2016

To

If undelivered, please return to :

THE SALES TAX PRACTITIONERS’ ASSOCIATION OF MAHARASHTRA8 & 9, Mazgaon Tower, 21, Mhatar Pakhadi Road, Mazgaon, Mumbai-400 010. Tel. : 2375 2267/68

Printed and Published by Shashank Dhond on behalf of The Sales Tax Practitioners’ Association of Maharashtra, and printed at Finesse Graphics & Prints Pvt. Ltd., 309, Parvati Industrial Premises, Sun Mill Compound, Lower Parel, Mumbai-400 013 and Published at 8 & 9, Mazgaon Tower, 21, Mhatar Pakhadi Road, Mazgaon, Mumbai-400 010.Editor - Shashank Dhond

The opinions and views expressed in this Bulletin are those of the contributors. The Association does not necessarily concur with the opinions/views expressed in this Bulletin.

RNI NO.: MAHENG12672/13/1/2010-TC

Sr. No.

Name Price `

1 39th Residential Refresher Course at New Delhi 2014-15 – Paper 180/-

2 40th Residential Refresher Course at Amritsar 2015-16 – Paper 250/-

3 Guide to Reverse and Partial Reverse Charge Mechanism under Service Tax – Compiled by CA Ashit Shah

50/-

4 STPAM Referencer - 2016-17 350/-

5 STPAM Pocket Referencer - 2016-17 100/-

6 Sales Tax Case Law Digest 2009 to 2014 400/-

Documents

September 2016 STPAM NEWS BULLETIN (1) STPAM NEWS …September 2016 STPAM NEWS BULLETIN (2) FORTHCOMING PROGRAMMES Date Events 12-02-2017 41st RRC at Hotel Radission Blue, Kochi 09/02/2017