The Negative List Taxation introduced by the Finance Bill 2012 substantially reinvents the law on Service Tax and will have a deep impact on service transactions. The authors, well known experts in the field of service-tax, have meticulously studied the entire law on the subject and have explained the implications of the proposed amendments in a succinct and clear manner. A pdf copy of the Guide is available for download
The Finance Minister has proposed paradigm shift in service tax law in Union Budget, 2012. From selective approach of levy of service tax on taxable services, this years budget has shifted to negative list of services. Until this year, the service tax was payable on 117 taxable services. Now it is proposed that barring 17 services in negative list, all services will become taxable from the date to be notified upon passage of the bill. A list of exempted services is also proposed. The levy specifically provides for “declared services” and definitions of these services are given. First time after introduction of service tax in 1994, definition of the term, “service” is provided in the law. The Negative List Taxation introduced by Service Tax substantially reinvents the law on Service Tax and will have a deep impact on service transactions. The introduction of the Negative List prior to the introduction of GST leads to significant gaps in relation to generation and use of tax credits. This anomaly will doubtless add to the real indirect tax cost of transactions in India.
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The author is upset at the recent judgement of the Supreme Court in Post Master vs. Living Media India that if the department delays filing an appeal without sufficient cause, the appeal has to be dismissed to “teach the department a lesson“. This amounts to punishing innocent citizens for the incompetence of one officer says the author. Instead, the incompetent officer(s) should be made to pay costs from his pocket to “teach him a lesson” rather than to dismiss the appeal and prejudice innocent citizens, argues the author.
I just can’t understand why Judges keep talking about it but just can’t do anything about it. Since time immemorial, Judges have been lamenting the indifferent attitude amongst the officers in the department towards filing appeals in time. Almost every single appeal is delayed – some by a few months and some by a few years! Judges give an earful to the department’s counsel but then meekly condone the delay. This has become a ritual.
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What was in the realm of fantasy till yesterday is now in the realm of reality thanks to the forward-looking approach adopted by the Tribunal. The Tribunal, grappling with the problems of paucity of Members and the increasing case load, is contemplating setting up E-Courts/ E-Benches to solve the problem. This will help clear the pendency of cases and bring justice to the assessee’s doorstep. If the concept is successful, it can be extended to the High Courts & the Supreme Court. The author explains the practical implications of the proposal and makes suggestions on how the concept should be implemented to make it a grand success
The Income-tax Appellate Tribunal which was established on 25th January, 1941 has completed more than 71 years of its existence. It is considered as mother of all Tribunal’s established in our country. It has 63 benches at 27 stations. The Hon’ble President of ITAT Mr. G. E. Veerabhadrappa with the help of Hon’ble Vice-presidents and Members desire to establish e-Tribunal for better administration of justice. Tax Bar, Departmental representatives and Hon’ble Members of the Tribunal had an interactive meeting with the Hon’ble President of ITAT on 2-3-2012 and all the members present at the meeting are of the considered view that the concept of e-Tribunal will benefit the assessees, tax administration and tax consultants. It will also benefit the Institution in reducing the pendency of tax appeals and substantial amount of tax payers money will be saved which otherwise required to be spent for setting up the Benches, at different places.
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Its’ that time of the year when Tax Officers across the Country go into a frenzy to collect taxes by fair or foul means. And with the CBDT Chairman’s brazen promise to link promotions and postings to the quantum of tax recovered, it will be a no-holds barred blood fest between the assessees and the Tax department apprehends the author. The absence of an accountability mechanism to punish the Officer in case the tax demands are held to be untenable means that there is no deterrent to prevent frivolous high-pitched assessments muses the author
January, February & March of every year is very important for the tax administration as they have to meet the target of tax collection and the assesses have to face the recovery proceedings, whether the additions are justified or not. Recent paper reports says “Income tax raids to increases as tax collection falls short”. Another leading paper carried the news that “Collect more taxes to get rewarded”.
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On the occasion of the “Foundation Day” of the Tribunal, the author ponders over what can be done to improve the functioning of the Tribunal. Using his vast experience, he makes a check-list of the known problem areas which invariably result in adjournments & delays. The author implores professionals to be proactive in ensuring that speedy justice is delivered to the assessees. The author also gently reminds the Hon’ble Members of the immense power vested in them to do justice to the parties
The 25th January, 2012 will be the foundation day of the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal which was established on 25th January, 1941 will be completing the 71st year. When we enter 72nd year it is the time to look back and learn which are the areas which requires to be debated and implemented for better administration of justice, so that this mother Institution retain its glory as one of the finest institution of country. In the year 1988-89, the pendency before the Appellate Tribunal was 3,00,597 cases where as on 1-1-2012 the pendency before the Appellate Tribunal is only 60,241, out of which 18,193 appeals are pending before the Income-tax Appellate Tribunal Mumbai. (Refer page56) One must give deserved credit to the institution for making all efforts to reduce the pendency of cases. This is the only institution where the pendency has reduced where as all other courts and institutions the pendency of cases have been increasing every year. For better administration of justice delivery system before the Appellate Tribunal we make an appeal to professionals to consider the following check lists, which will help the Appellate Tribunal to deliver speedy justice:-
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The author goes ballistic over the Rolls Royce Plc vs. DDIT case and claims that Rolls Royce’s “timid surrender” against the damning findings of the AO proves that even marquee companies like Rolls Royce are not averse to pinching a few dollars from the exchequer of third world countries if they think nobody’s looking. Rolls-Royce must be prosecuted for tax fraud demands the author
The recent report in the Economic Times about how multinational companies were using their subsidiaries and affiliates to avoid taxes in India made for shocking reading even as a lot of readers reacted with disbelief and a sense that the author was exaggerating the issue.
However, the case of Rolls Royce Plc, UK vs. DDIT which ended in a whimper in the Delhi High Court, exposes the myth that marquee companies like Rolls Royce, with supposedly high governance standards, are supposed to above board when it comes to compliance with the laws of the foreign countries that they do business in.
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This week, the author suggests that a Anna Hazare style crusader is needed to explain to the CBDT the irrationality of its stand that the monetary limits for filing appeals will apply only to fresh appeals and not to pending appeals. Also, on the issue whether software income is assesable as “royalty”, the CBDT should abandon its ostrich-like stance and take a firm stand one way or the other like its Australian counterpart says the author
Legislature Proposes; Judiciary Disposes
Old timers will recollect the excitement that the judgement of the Tribunal in Pranav Constructions 61 TTJ (Mum) 145 had created. The Tribunal had done the unthinkabale. It held that the hafta or protection money paid by the assessee to local politicians and goons could be claimed as “business expenditure” on the footing that without such payments, business could not be conducted. Till then, unsavoury issues like hafta were meant to be confined to a fiction writer’s imagination without official cognizance.
The judgement obviously upset somebody high up in the department because in the very next Budget a retrospective amendment “for the removal of doubts” was inserted in the form of Explanation to s. 37(1) to provide that a payment for a purpose which is an offence or which is prohibited by law was not incurred for business purposes. In the Memorandum as well in the Explanatory Circular it was made clear that “The amendment will result in disallowance of the claim made by certain tax payers of payments on account of protection money, extortion, hafta, bribes, etc. as business expenditure“. The amendment was made effective from the date of commencement of the Act, 1.4.1962 to ensure that all traces of Pranav Construction was removed.
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On the occasion of the Bombay High Court’s 150th Anniversary, the author pays rich tribute to the judicial independence and integrity of the Bombay High Court and recollects the stellar contribution of the tax professionals in bringing glory to the High Court. This is the time for all professionals to re-dedicate themselves to the cause of the Judiciary exhorts the author
The Bombay High Court, which was established on August 14, 1862 & entered into the 150th year on 14th August 2011. On this auspicious day a memorable function was held at Bombay High Court to mark the beginning of the sesquicentennial celebration of the Bombay High Court.
Bombay High Court as an institution has produced what can be described as galaxy of legal luminaries. The publication titled “The Bombay High Court -The story of building – 1878-2003”. In the foreword written by then Hon’ble Chief Justice of Bombay High Court Mr. C. K. Thakker reads as under “There are, too men who became legends in their own life times, perhaps most of all M. C. Chagla. The Lawyers from this Court have shone bright and long in the legal firmament: Sir Dinshaw Mulla, the doyen of Indian jurisprudence, Sir Jamshedji Kanga, Nani Palkhivala, H. M. Seervai, C. K. Daphtary, Sir Chimanlal Setalvad, Motilal Setalwad and others” – “As much as the Judges, it is the Bombay Bar that has given the Bombay High Court its unique culture and reputation. This is a Bar that is fiercely – even frighteningly – independent. It is unforgiving of moral and legal transgressions amongst itself and its judges and yet, strangely, is gentle Bar that adopts as its own every judge who sits here”.
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Get up to speed with the latest developments in the World of Tax. This week, the author wonders whether it is time to write an obituary for the DRP. Also another body-blow on the reopening front should shake the Babus of Aaykar Bhavan out of their reverie. And yes, don’t forget to tighten your seat belt because the CBDT Chairman’s missive on recovery might just prompt the AO to demand that you pay up that long outstanding arrear
Fasten Your Seat Belts – Its’ Recovery Time
The CBDT normally goes into “recovery & collection” mode in March when they have to report the figures of tax collection to the mandarins of South Block. So, the Chairman’s letter of 25th July telling his juniors that “focus” on “concerted efforts in certain categories may expedite cash collection” came as a bit of a surprise. However, it seems just to be more a case of saber-rattling rather than anything serious. The Chairman’s tone seemed quite casual. There was no sense of urgency in it. No words to shake the Babus of Aaykar Bhavan out of their reverie. His use of the words “I suggest” was significant. Also, the suggestions appear to have been casually made. The Chairman said “more than 20,000 crores have been stayed by courts/ITAT” and that “counsels should be advised to get the stay vacated” by bringing “the direction of the Supreme Court in the Vodafone case” to the notice of the concerned authority. Well, all that one can say politely and with humility is that a tutorial on the working of the Tribunal and the Courts may be in order! Meanwhile the ground reality is that assessees continue to enjoy unlimited stay from the Tribunal despite the clear legislative intent to the contrary. This is thanks to the blunders of the department (see Dear Department, Thank You For Giving Us Infinite Stay Of Demand). Mr. Chairman, can you do something to rectify this please?
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The author trains his guns again on the proposed National Tax Tribunal and makes out a compelling case on why it should never be implemented. Instead, a different approach is required to solve the problems of delay and cost in justice delivery says the author. The ten-point agenda formulated by the author will, if implemented in true earnest, deliver us the Nirvana of “Sulabh Nyay Satvar Nyay” (Simple justice, Speedy justice) assures the author
The Constitution of India is the Supreme Law of the Land. One of the most important provisions of the Constitution of India is Article 265, which provides that “No tax shall be levied or collected except by authority of law”.
In the year 1998-99, the total pendency of tax appeals before the Income Tax Appellate Tribunal were 3,00,597 it took six to seven years to hear the appeal before the Tribunal, and in High Courts the matters were heard after 10 to 15 years. Shri Palkhivala in his article “The Maddening Instability of Income Tax Law” (Income Tax Review – August-Sept, 1996 P. 57 has stated as under “A telling example of the total absence of a sense of time in our tax administration is afforded by Supreme Court’s decision rendered last November in the case of Sutlej Cotton Mills Ltd. vs. CIT (1990) 2 SCALE 931. It was a case under Business Profits Tax, 1947. The accounting period was 1946-47. The amount involved was paltry sum of a few lakhs of rupees. The High Court’s order was rendered in 1965. The Supreme Court sent the matter back to the Income Tax Appellate Tribunal to re- hear the appeal 44 years after the close of the accounting period. Is there any other civilized country where a tax payer would not know the quantum of his liability for 44 years?”.
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