notification for refund of Cenvat for service provider under reverse charge mechanism for few service provider

notification for refund of Cenvat for service provider under reverse charge mechanism 

Notification No.12/2014 –Central Excise (N.T.)G.S.R. (E) dated the 3rd March,2014.–

In exercise of the powers conferred by rule 5B of the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), the Central Board of Excise and Customs hereby directs that the refund of CENVAT credit shall be allowed to a provider of services notified under sub-section (2) of section 68 of the Finance Act,1994, subject to the procedures, safeguards, conditions and limitations, as specified below, namely:-

1.      Safeguards, conditions and limitations.–

(a)   the refund shall be claimed of unutilised CENVAT credit taken on inputs and input services during the half year for which refund is claimed, for providing following output services namely:-

(i)           renting of a motor vehicle designed to carry passengers on non abated value,to any person who is not engaged in a similar business;

(ii)        supply of manpower for any purpose or security services; or

(iii)      service portion in the execution of a works contract;

(hereinafter the above mentioned services will be termed as partial reverse charge services).

Explanation:-For the purpose of this notification,-

Unutilised CENVAT credit taken on inputs and input services during the half year for providing partial reverse charge services = (A)–(B)

Where,

(A) = Cenvat credit taken on inputs and input services during the half year * turnover of output service under partial reverse charge during the half year / total turnover of goods and services during the half year

(B) = service tax paid by the service provider for such partial reverse charge services during the half year;

(b)   the refund of unutilized Cenvat credit shall not exceed an amount of service tax liability paid or payable by the recipient of service with respect to the partial reverse charge services provided during the period of half year  for which refund is claimed;

(c)    the amount claimed as refund shall be debited by the claimant from his Cenvat credit account at time of making the claim;

(d)  in case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back the credit of the difference between the amount claimed and the amount sanctioned;

(e)   the claimant shall submit not more than one claim of refund under this notification for every half year;

(f)     the refund claim shall be filed after filing of service tax return as prescribed under rule 7 of the Service Tax Rules for the period for which refund is claimed;

(g)   no refund shall be admissible for the CENVAT credit taken on input or input services received prior to the 1stday of July,2012;

Explanation.–

For the            purposes of this notification, half year means a period of six consecutive months with the first half year beginning from the 1^st day of April every year and second half year from the 1^st day of October of every year.

2.      Procedure for filing the refund claim.–

(a)   the provider of output service, shall submit an application in Form A annexed hereto, along with the documents and enclosures specified therein, to the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, before the expiry of one year from the due date of filing of return for the half year:

Provided that the last date of filing of application in Form A, for the period starting from the 1st day of July,2012 to the 30th day of September,2012, shall be the 30th day of June,2014;

(b)   if more than one return is required to be filed for the half year, then the time limit of one year shall be calculated from the due date of filing of the return for the later period;

(c)    the applicant shall file the refund claim along with copies of the return(s) filed for the half year for which the refund is claimed;

(d)  the Assistant Commissioner or Deputy Commissioner to whom the application for refund is made may call for any document in case he has reason to believe that information provided in the refund claim is incorrect or insufficient and further enquiry needs to be caused before the sanction of refund claim ;

(e) at the time of sanctioning the refund claim, the Assistant Commissioner or Deputy Commissioner shall satisfy himself or herself in respect of the correctness of the refund claim and that the refund claim is complete in every respect

-- 

Income tax - Whether assessment can be reopened when issue of non-receipt of forex within a period of 6 months from end of AY was not subject matter of original assessment - YES: HC

MUMBAI, MARCH 05, 2014: THE issues before the Bench are - Whether the assessment can be reopened when the issue of non receipt of convertible foreign exchange within a period of 6 months from the end of the assessment year was not the subject matter of original assessment; Whether when the issue whether theassessee has declared its book profits after reducing the amount of deductions u/s 10AA was not considered during the original proceedings, the assessment can be reopened and Whether there is any bar on reopening of an assessment even if there has been no failure to make full and true disclosure necessary for assessment within the period of 4 years from the end of the relevant AY. And the verdict goes against the assessee.

Facts of the case

The assessee is established as a 100% Export Oriented Unit (EOU) in Special Economic Zone (SEZ) and engaged in the business of manufacture and export of gold and diamonds jewellery. The assessee is entitled to a deduction u/s 10AA in respect of its income. The assessment was completed and the deduction u/s 10AA was granted to the extent of Rs. 28.74 crores. However, in March 2013, the AO issued a notice u/s 148 for reopening the assessment. The reason give in the notice was that the assessee had relied on the RBI circular No. 91 dated 1.04.2003 for removing the stipulation of time limit for bringing in convertible foreign exchange and although its exports proceeds in convertible foreign exchange amounting to Rs. 100,74,49,184/- it claimed deduction against the export turnover of Rs. 114,10,82,258. This lead to excess deduction and thus escapement of income. Further, the notice mentioned that the book profit was shown to be NIL after reducing by the amount of profits of 10AA unit. However, as per the amended provision with effect from A.Y. 2008-09, the amount of income as per section 10A/10B would not have been reduced while computing the book profit. The assessee contended on the ground that reopening of assessment was based on mere change of opinion since all the details were furnished by the assessee. Also, it was submitted that when previous claims of deduction u/s 10AA have been allowed, the same should also have been. Finally, the assessee placed reliance on the RBI Circular. However, the contentions were rejected. Aggrieved, the assessee has filed this petition before the High Court.

The Counsel of the assessee reiterate the submissions as raised before the AO and further submitted that the lifting of time limit of 6 months for receiving the export proceeds in convertible foreign exchange had been lifted and was duly considered by the AO at the time of passing the assessment order. It was also submitted that the export turn over as defined in Section 10A of the Act was being sought to be introduced while interpreting Section 10AA of the Act under which the assessee sought deduction.

On the other hand, the Departmental Representative contended that even though the assessee had disclosed all the details, the AO had the power to reopen the assessment within the period of 4 years from the end of the relevant AY and also submitted that the issue relating to realization of exports proceeds was not examined in the original assessment.

Having heard the parties, the High Court held that,

++ we find that, in this case, there has been a full and true disclosure of all relevant material necessary by the petitioner for the purpose of assessment. However, as the assessment sought to be reopened i.e., assessment year 2008-09 by a notice dated 25 March 2013 is less than 4 years from the end of the assessment year, the jurisdictional requirement of there being a failure to make full and true disclosure would not be applicable. In such cases of less than 4 years from the end of the relevant assessment year even if there has been no failure to make full and true disclosure of all relevant material necessary for assessment, there is no bar/prohibition for issuing a notice under Section 147/148 of the Act for reopening of an assessment;

++ therefore, in this particular case the only thing to be examined is whether or not the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment while issuing the impugned notice dated 25 March 2013. It is well settled that the reason to believe cannot be founded merely on change of opinion. In this case the grounds/reasons recorded for reopening the assessment were not the issues which were considered by the Assessing Officer while passing the assessment order dated 18 May 2010 in respect of assessment year 2008-09. This is evident from the fact that during the assessment proceeding no query was raised by the Assessing Officer with regard to the grounds/reasons now recorded for reopening the assessment under Section 147/148 of the Act. Therefore, there was no occasion for the Assessing Officer to apply his mind to the tangible material to form any opinion with regard to it during the original assessment proceeding. It has been held by this Court in Export Credit Guarantee Corporation India Ltd. vs. Additional that reopening of an assessment is permissible when the original assessment order passed under Section 143(3) of the Act is silent in respect of the issue/point on which reassessment notice is issued. Further, no query with regard to the above issue having been made during the assessment proceeding would also indicate absence of application of mind to the tangible material;

++ in this case non receipt of convertible foreign exchange within a period of 6 months from the end of the assessment year was not the subject matter of consideration nor the fact that the petitioner had declared its book profits after reducing the amount of deductions under Section 10AA of the Act during the original proceedings. Both these issues were not the subject matter of consideration during the original assessment proceedings leading to assessment order dated 18 May 2010. In the above view, it is permissible for the Assessing Officer to have a reasonable belief that income chargeable to tax has escaped assessment and the same does not stem from a change of opinion.

 

Regards

Prarthana Jalan

Exemption for agricultural income denied as assessee couldn't produce certificate of Tehsildar and financials

IT: Where assessee in support of claim of agricultural income, failed to produce certificate of Tensildar and accounts pertaining to agricultural activities, revenue authorities were justified in rejecting said ad hoc claim of assessee

■■■

[2014] 42 taxmann.com 178 (Allahabad)

HIGH COURT OF ALLAHABAD

Smt. Prem Sundari

v.

Commissioner of Income-tax*

RAJIV SHARMA AND DR. SATISH CHANDRA, JJ.

IT APPEAL NO. 95 OF 2008†

MAY  31, 2013 

Section 2(1A) of the Income-tax Act, 1961 - Agricultural income [Burden of proof] - Assessment year 1997-98 - Assessee filed her return declaring certain agricultural income - In absence of any evidence brought in support of said income, Assessing Officer rejected assessee's claim - Tribunal upheld order of Assessing Officer - It was undisputed that for claiming benefit of agriculture income, assessee was required to produce certificate of Tehsildar for assessment year under consideration - Further, assessee had to maintain accounts pertaining to entire agriculture activity - Whether since assessee failed to fulfill aforesaid obligations, Assessing Officer was justified in rejecting assessee's ad hoc claim relating to agricultural income - Held, yes [Paras 10 & 13] [In favour of revenue]

CASES REFERRED TO

 

Sudarshan Silks & Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 (SC) (para 10).

Dwijendra Mishra for the Appellant. D.D. Chopra for the Respondent.

ORDER

 

Dr. Satish Chandra, J. - The present appeal has been filed by the assessee under Section 260A of the Income-tax Act, 1961 against the judgment and order dated 31-1-2008, passed by the Income-tax Appellate Tribunal, Lucknow in ITA No. 882/Luc/02 for the assessment year mentioned above.

2. On 30-06-2008, a coordinate Bench of this Hon'ble Court has admitted the appeal on the following substantial questions of law, reads as under:—

"(b) Whether Income-tax authorities such as Assessing Officer, CIT(Appeals) or I.T.A.T. can take a different view in subsequent assessment year in the matter where facts and law are the same ?

(e) Whether the same income derived from the house property as rent can be assessed to income-tax first for Smt. Ansuya for the assessment year 1997-98 and there after the appellant and thus income from house property of Lucknow was subjected to double taxation of income-tax ?

(g) Whether ITAT, Commissioner Income-tax (Appeals) and Assessing Officer can change the A.L.V. for rented property for 9 months to 12 months without any evidence to support the finding and a finding without evidence on record is unsustainable ?

(j) Whether agriculture income given by the assessee if only partly accepted by the income-tax authorities the non-accepted portion of the agriculture income can be treated as income from other sources without any evidence or material for the same?

(k) Whether agriculture being in "state list" under schedule VII of the Constitution of India any mode of keeping account of Agriculture income can be imposed by the income-tax authorities ?

(m) Whether I.T.A.T. or CIT (appeals) or Assessing Officer can pass any order in contravention to law laid down by the Hon'ble Supreme Court or this Hon'ble Court or any other Hon'ble High Court if the same is not at variance with law laid down by this Hon'ble Court and such order passed by the I.T.A.T. or CIT (appeals) or Assessing Officer shall be illegal void and inoperative ?"

3. The brief facts of the case are that for the assessment year under consideration, the assessee has filed the return declared the income of Rs.2,80,120/-, out of which, Rs.60,120/- as the rental income and Rs.2,20,000/- as agriculture income. The Assessing Officer (AO) observed that on 16-11-1992, the Tehsildar has issued a certificate, where the agriculture income was indicated at about Rs.84,000/- only. Whereas for the assessment year under consideration, no evidence was produced. In these circumstances, the AO has estimated the agriculture income at Rs.50,000/- and the remaining amount of Rs.1,70,000/- was considered as income from undisclosed sources. The CIT(Appeals) upholds the same. However, in the second appeal, the Tribunal after considering the total area owned by the assessee and other material assessed the agricultural income at Rs.1,00,000/-. Thus, the assessee got a relief of Rs.50,000/-. Hence, the addition pertaining to agriculture income was sustained at Rs.1,20,000/-.

4. Regarding the rental income from the properties, it appears that the assessee was having two properties situated at Allahabad and Lucknow. For Allahabad property, the assessee has shown the rental income at Rs.90,000/-. 1/5th for repair etc. i.e. Rs.18,000/- was deducted. Thus, A.L.V. comes to Rs.90,000-18,000 = Rs.72,000/-only. The AO, as per computation given in his order, has taken the half share of the rental income of Rs.36,000/- as the assessee is the co-sharer in this property. The claim under Section 23(1) of the Income-tax Act, was denied, as the property was newly constructed property.

5. Regarding the Lucknow property, the A.L.V. was taken @ 9,900 per month, which comes at Rs.1,18,800/- and 1/5th was deducted i.e. Rs.23,760/-. Thus, the total income comes to Rs.95,040/-. The claim under Section 23(1) was denied, as the property was less than 5 years old. The property was not a joint property. So, the entire income was assessed in the hands of the assessee as no evidence for co-ownership was furnished. The same was upheld by the first appellate authority as well as by the Tribunal. Being aggrieved, the assessee has filed the present appeal.

6. With this background, Sri Dwijendra Mishra, learned counsel for the appellant-assessee submits that the AO has ignored the agricultural income of the previous assessment years of the assessee. In this regard, the certificate issued by the Tehsildar on 16-11-1992 was ignored.

7. Learned counsel further submits that the agricultural income is not subject to verification and no account is needed for the same. So, the claim of the assessee was wrongly rejected by the lower authorities.

8. Regarding the rental (A.L.V.) income, learned counsel submits that the rental income cannot be doubled for Lucknow property without mentioning the reason. The AO has enhanced the rental income illegally which was upheld by the appellate authorities. He also submits that the income from the house property remain the same as half share of the co-owner of the appellant Smt. Ansuya was shown in the earlier assessment years. He submits that the owner of the house property means persons entitled to receive the rent. He also submits that the A.L.V. was wrongly taken by the AO pertaining to the Lucknow property.

9. On the other hand, Sri D.D. Chopra, learned standing counsel for the Income-tax Department justified the impugned order.

10. After hearing both the parties, it appears that on 16-11-1992, a certificate of the Tehsildar was issued, which is not relevant for the assessment year under consideration i.e. 1997-98. For claiming the benefit of the agriculture income, it is necessary to produce the certificate for the assessment year under consideration. Further, the assessee should maintain the accounts pertaining to entire agriculture activity. In the instant case, no account was maintained by the assessee. The claim was ad hoc, which was examined by the lower authorities. The addition was restricted on the basis of estimation. The estimation is a question of facts as per the ratio laid down in the case of Sudarshan Silks & Sarees v. CIT [2008] 300 ITR 205/169 Taxman 321 (SC).

11. Regarding A.L.V. i.e. rental income, it appears that the assessee is the owner of two residential units. Allahabad property is jointly owned by one Smt. Ansuya Devi as per the Court Decree. For Allahabad property, A.L.V. was considered at Rs.90,000/-. 1/5th was deducted for the house repair etc. Thus, the A.L.V. comes at Rs.72,000/-. Being 50% owner, it comes to Rs.36,000/-.

12. Regarding Lucknow property, the A.L.V. @ 9,000/- per month which comes to Rs.1,18,800/-. 1/5th repair was deducted i.e. Rs.23,760/-. Thus, the net rental income for Lucknow property comes to Rs.95,040/-. The deduction under Section 23(1) of the Act was denied for both the properties as the properties were less than 5 years old. The assessee has wrongly claimed that properties were more than 5 years old. The assessee could not substantiate her claim by producing any documentary evidence pertaining to co-ownership for the Lucknow property. So, the entire income from this property was rightly assessed in the hands of the assessee.

13. In other words, the assessee has produced the documents i.e. the Court decree pertaining to the half share of the Allahabad property, but regarding Lucknow Property, no evidence was furnished. Nothing was produced before the Tribunal as well as before this Hon'ble High Court. Moreover, in the absence of documents, A.L.V. is to be estimated and the same is the question of facts. No question of law emerges from the impugned order. When it is so, then we decline to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with the reasons mentioned therein. No substantial question of law is emerging from the impugned order passed by the Tribunal.

14. In the circumstances, the answer to the substantial questions is either not required or in favour of the Department and against the assessee.

15. In the result, the appeal filed by the appellant-assessee is dismissed.

No cost.

Trust's objects can be scrutinized for allowing sec. 11 relief and not for allowing sec. 12AA registration

IT: Question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant only when income of trust is being assessed in terms of section 11, however, at time of disposing of application of a trust seeking registration, Commissioner has to merely decide whether said trust has fulfilled necessary requirements of registration as provided under section 12A

■■■

[2014] 42 taxmann.com 181 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax, Rajkot -II

v.

Leuva Patel Seva Samaj Trust*

AKIL KURESHI AND MS. HARSHA DEVANI, JJ.

TAX APPEAL NO. 59 OF 2012

NOVEMBER  6, 2012 

Section 12AA, read with sections 11 and 13, of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure [Scope of power] - Assessee, a public charitable trust, applied for registration under section 12AA - Commissioner rejected said application holding that trust was for benefit of Leuva Patel Community and, therefore, it would be covered under section 13(1)(b) - Tribunal, however, allowed assessee's application - Whether question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant when income of trust is being assessed in terms of section 11 - Held, yes - Whether insofar as section 12AA is concerned, Commissioner has to merely decide if trust has fulfilled necessary requirements of registration as provided under section 12A - Held, yes - Whether in view of above, impugned order passed by Tribunal was to be upheld - Held, yes [Para 4][In favour of assessee]

CASES REFERRED TO

 

Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) (para 3) and Shantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528 (para 4).

Pranav G. Desai for the Appellant.

ORDER

 

Akil Kureshi, J. - The appellant-revenue is in appeal against the judgment of the Income-tax Appellate Tribunal ("the Tribunal" for short), dated 8-7-2011. Following question has been framed for our consideration:

"Whether in the facts and circumstances of the case, the learned ITAT has erred in law in directing the Commissioner of Income-tax to grant the assessee registration under section 12AA of the Income-tax Act 1961?"

2. The question arises in following factual background. The respondent, a Public Charitable Trust had applied for registration under section 12AA of the Income-tax Act, 1961 ("the Act" for short). The Commissioner, however, under his order dated 21-3-2011, rejected such an application on the ground that under section 13(1)(b) of the Act, nothing contained in section 11 or 12 would operate to exclude from the total income of such trust in case the trust is created or established for the benefit of any particular religious community or caste. The Commissioner after examining the objects of the trust, came to the conclusion that the trust was for the benefit of Leuva Patel Community and therefore, would be covered under section 13(1)(b) of the Act.

3. In appeal before the Tribunal, the Tribunal reversed the decision of the Commissioner. The Tribunal referred to several decisions including the decision of the Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704. The Tribunal also examined the objects of the trust and observed as under:

"7. From the above clauses of the Trust Deed, any adult person after paying prescribed fees can become a member of the said trust. This trust will perform without any discrimination in Leuva Patel caste and will follow non-political and secular objects of the trust. The first object of the trust is to carry out activities for the purpose of development and improvement of the education. The ITAT, Ahmedabad Bench in case of Leuva Patel Nutan Kelwani Mandal v. ITO, 12 ITD 276 (Ahd.) on identical set of facts held that the case of the assessee could not brought within the provisions of section 13(1)(b) in view of the Explanation 2 to the said section. Apart from this, it was also held that the Leuva Patel community consists mainly of agriculturists. Such community cannot be dubed as religious community or caste as had been held by the Income-tax Authorities.

I also found that in the case of dissolution of the trust the accumulated fund or capital will not be distributed for personal benefit but it will be handing over to the other institution having similar object. In the light of the above discussion, I find that the facts of the case are identical to the facts in the case of Leuva Patel Nutan Kelwani Mandal v. ITO, 12 ITD 276 (Ahd.). I follow the same and in the light of that, the CIT is directed to allow the registration u/s. 12AA of the Act."

4. Having thus heard the learned counsel for the revenue, we are of the opinion that the question whether the trust is created or established for the benefit of any particular religious community or caste would be relevant when the income of the trust is being assessed and the question whether such income should be excluded from the total income of the trust in terms of section 11 of the Act. Insofar as section 12AA of the Act is concerned, the Commissioner had to take a decision if the trust fulfilled necessary requirements of registration as provided under section 12A of the Act. A Division Bench of this Court in the case ofShantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528, in this context, observed as under :

"While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not."

5. In view of the above conclusive opinion of a Division Bench of this Court, we do not see any reason to interfere. Tax Appeal is, therefore, dismissed.

Updates on TDS

This is to inform that the Central Board of Direct Taxes has issued a detailed circular in the context of Late Fee, Levied under Section 234E of the Income Tax Act, 1961 vide Circular 07 of 2014 dated March 04, 2014 (attached with this communication for your reference). The circular provides for ex-post facto extension of the due dates of filing TDS/ TCS Statements, prescribed under section 200(3)/ proviso to section 206C(3) of the Income Tax Act read with Rule 31A/ 31AA of the Income Tax Rules 1962.

Accordingly, the due date of filing the statement is hereby extended to March 31, 2014 for the Government Deductors for the statements filed for: · 2nd to 4th Quarter of FY 2012-13 · 1st to 3rd Quarter of FY 2013-14

In view the above circular, please note the following important points: · This is only a one-time relaxation in the due date for filing TDS/ TCS statements for the concerned quarters and you are encouraged to take benefit of the same to avoid Levy of Late Fee · CPC (TDS) strongly recommends that the TDS/ TCS quarterly statements for all quarters up to Q3, 2014 may be filed without any further delay · Any further delay after April 1, 2014 in filing the statements for these quarters of the aforesaid Financial Years will attract Late Filing Levy u/s 234E of Rupees two hundred for every day during which the failure continues Attention PAOs/ DDOs:

· PAOs are requested to file 24G statements at the earliest, if not already done, to facilitate the Government deductors with timely provision of BIN for filing of their TDS statements. · DDOs are requested to quote correct BIN while filing the statements.

Late filing of TDS statements also results into the TDS Credit not being available to the deductees (employees /vendors) for claiming the amount of tax already deducted from the payments made to them besides generating correct TDS Certificates for them

Three Important High Court Judgements On Stay Of Demand, Reopening And Special Audit

The following important judgements are available for download at itatonline.org.

Sony India Pvt. Ltd vs. ACIT (Delhi High Court)

S. 220: After rejecting stay application AO must give reasonable time before taking steps for coercive recovery

Having said that this is a case in which technically no fault could be found with the assessing officer, we feel that there was there was an element of impropriety in his action in issuing the garnishee order under section 226(3) on 17.2.2014, the very day on which he rejected the stay application filed by the petitioner under section 220(3). It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. That opportunity was not afforded by the assessing officer in the present cases. The assessing officer is a prospector of the revenue and he is no doubt expected to protect the interests of the revenue zealously, but such zeal has to be tempered with the rules of fair play and an anxiety to ensure that a opportunity is not lost to the assessee to make alternative arrangements for clearing the tax dues, once the stay applications filed under section 220(3) are rejected. Taking away the amount of Rs.43.87 crores from the bank account of the petitioner may perhaps not be legally faulted, but taking into account the haste with which the assessing officer acted in the present case it seems to us that there was an element of arbitrariness in the action of the assessing officer. In our opinion, since the stay applications filed by the petitioners are pending before the Tribunal, the more appropriate course would be to issue the following directions

Acorus Unitech Wireless Pvt. Ltd vs. ACIT (Delhi High Court)

S. 147: Court can examine existence but not adequacy of reasons. AO is only required to provide material on which he relies to reopen the assessment

(ii) The law only requires that the information or material on which the AO records his or her satisfaction is communicated to the asseseee, without mandating the disclosure of any specific document. While the 2G Spectrum Report has not been supplied in this case on grounds of confidentiality, the reasons recorded have been communicated and do provide – independent of the 2G Report – details of the new and tangible information that support the AO’s opinion. These facts are capable of justifying the satisfaction recorded on their own terms, as discussed above. In this context, there is no legal proposition that mandates the disclosure of any additional document. This is not the say that the AO may in all cases refuse to disclose documents relied upon by him on account of confidentiality, but rather, that fact must be judged on the basis of whether other tangible and specific information is available so as to justify the conclusion irrespective of the contents of the document sought to be kept confidential.

AT&T Communication Services India (P) Ltd vs. CIT (Delhi High Court)

S. 142(2A): AO need not examine books of account before directing special audit. Q whether accounts are “complex” has to decided by AO & Court can interfere sparingly

(ii) The question whether the accounts and the related documents and records available with the A.O. present complexity is essentially to be decided by the A.O. and in this area the power of the court to intrude should necessarily be used sparingly. It is the A.O. who has to complete the assessment. It is he who has to understand and appreciate the accounts. If he finds that the accounts are complex, the court normally will not interfere under Article 226. The power of the court to control the discretion of the A.O. in this field is limited only to examine whether his discretion to refer the accounts for special audit was exercised objectively

Regards,

Editor,

Service Tax - Infosys wins Rs 160 Crores case in CESTAT

 BANGALORE, MAR 18, 2014: THERE is a demand of service tax of 148 crores under reverse charge on the appellant Infosys. Also there is denial ofCenvat credit on various input services including tax paid on group health insurance of employees and construction services availed at Mysore campus. Further the overseas branches of the appellant undertook several projects relating to software development etc., which were entrusted to overseas sub-contractors. The appellant received certain services outside the territory of India relating to data link and communication charges from foreign service providers, who were not licensed in terms of the provisions of section 4 of the Indian Telegraph Act, 1885.

Adjudication proceedings have culminated in a total demand of Service Tax and CENVAT Credit of nearly Rs. 164 Crores.

The Issues and the Tribunal's Decisions are:

Liability to pay service tax in respect of information technology software services received from overseas sub-contractors to overseas branches of the appellant : The most important evidence for identifying a service recipient is the agreement between the parties where it is available, invoices raised by the service provider to the service recipient and details of evidence relating to the nature of the service provided if any. The conclusion of the Commissioner about the liability has arisen on two grounds viz. the appellant has incurred foreign exchange expenditure towards services received by sub-contractors/branches and the payments made by the appellant directly or through branches can be said to have been made for services received. He has observed that services have been received by the appellant from the sub-contractors through their branches only on the ground or on the basis of payments in foreign exchange made.

If the service has been rendered in USA or Canada received by the branch office of the appellant in USA or Canada and utilised by the branch office at USA or Canada and paid for out of the foreign exchange earned, unless the Revenue is able to show that the service has been received in India, or the benefit of service rendered abroad has been received in India, the tax, would not be payable.

Unlike the case of availment of CENVAT credit where the receipt of service is required to be proved and shown to the Department by the assessee, in the case of determination of liability for service tax in the hands of receiver or provider, it is for the Department to show that taxable event has taken place. This issue is no longer res integra and there are several decisions in the case of Central Excise matters and Customs matters wherein it has been held that taxable even has to be proved by the Revenue. In the case of Central Excise duty, it is for the Revenue to show that manufacture has taken place and if the Revenue cannot show it, no liability arises. Therefore in this case the observation of the Commissioner that payment has been made by Infosys and when the payment is made by the branch, it has been made by Infosys through their branch and therefore obviously service has been received cannot be a conclusion and especially in this case when such an allegation is made and is rebutted, such rebuttal will have to be properly considered and evidence shown to show why such rebuttal is not accepted which, has not been admitted even.

Revenue has not been able to show that ITSS has been received through their branch office in India and in the absence of receipt of service, in our opinion, there is no taxable event and therefore there is no liability on the receiver to pay tax. Therefore the entire demand of Rs.132,35,71,266/- cannot be sustained and has to be set aside and is set aside.

Liability for payment of service tax on services received in respect of International Private Leased Circuit (IPLC): the service is correctly classifiable under “Tele Communication Service's and such services are taxable only when the same is provided by person who has been granted a licence under Indian Telegraph Act, 1985. It is not the case of the department that Foreign Service suppliers have been licensed under the Indian Telegraph Act. Therefore, the demand in this category is not sustainable and is set aside

Insurance Premium in respect of Group Health Insurance Scheme for the employees : On a specific query from the Bench as to whether Heath Insurance Policy covered the employees alone or the parents and others also, there was no categorical submission that it covers only employees. If the insurance policy covers persons other than employees and no contribution is required from the employees towards such coverage, the service tax paid on insurance premium to that extent on a proportionate basis will have to be reversed. It cannot be said that the insurance provided to the parents or family towards all the employees is relatable to output services provided by the appellant. Therefore, this matter is required to be reconsidered in view of the fact that investigating officers/adjudicating authority would not have considered this aspect since the entire credit was proposed to be denied. Matter remanded to limit the demand to the extent admissible.

Admissibility of credit of service tax paid on various activities relating to construction of Hostel, Food Court, Gym & Global Education Centre which have been constructed at Mysore campus: .The appellant has taken the credit in respect services rendered for global training centre, hostel and gym which have been disallowed. As regards global training centre, in view of the fact that counsel has made vehement submission that the appellant was providing commercial training and coaching service and the premises of global training centre is often used for conducting commercial coaching service on which service tax is paid, credit would be admissible since it becomes a premises of the service provider for providing the service of commercial training or coaching centre. At this juncture, it becomes necessary to note the fact up to 1.4.2011, setting up of a premises of output service provider was also an activity for which services used were eligible for credit. Therefore, in respect of construction services used for setting up global training centre, would be covered by definition of input service up to 1/4/2011, since it is the claim of the appellant that the services were used for setting up a global training centre. This view is supported by the decision of High Court of Andhra Pradesh in the case of SaiSamhita Storages (P) Ltd. - 2011-TIOL-863-HC-AP-CX.However, subsequent to 1.4.2011, it is to be made clear that the services used in respect of modernization, renovation or repairs of premises from where service is provided only would be admissible.

As regards hostel and gym, in respect of which various services received had been claimed to be input service, it is quite clear from the definition that both of them cannot be considered as premises from where the service is provided or an office relating to the premises from where service is provided. Therefore, the question of their necessity or essentiality is not really material once it is clear that the services are not covered by the definition itself.

The matter is remanded for recalculation of admissible amount since it is held that:

a. Credit is admissible in respect of ‘global training centre' up to 1.4.2011;

b.After 1.4.2011, the services used for setting up of ‘global training centre' would not be input service but services used for repairs, renovation or modernization would be admissible;

c. Cenvat credit of service tax paid on services used in respect of hostel and gym whether it is setting up or repair or renovation or modernization cannot be considered as input service.

Conclusions :

(a) Denial of CENVAT credit and demand for the same in respect of service tax paid on insurance premium in respect of group health insurance scheme as regards employees is set aside. However, the matter is remanded to verify and limit the demand to the extent of service tax payable on insurance premium attributable to families of employees, if other family members are covered and expenses are borne by the appellant.

(b)(1) Denial of CENVAT credit attributable to services utilised for construction, maintenance or repair or renovation of Global Training Centre up to 01/04/2011 is not sustainable and is set aside. However for the period subsequent to 01/04/2011, if any service has been used for setting up of global training center, such credit would not be available. To examine this aspect and to quantify the amount in this regard, the matter is remanded to Original Authority.

(b)(2) As regards credit of service tax paid on services used in respect of hostel, food court, gym etc., in view of the interpretation of definition we have given, CENVAT credit would not be admissible in respect of service tax paid relating to construction, maintenance, repair or renovation to these facilities. Credit has been simply disallowed in relation to all services attributable to construction service and maintenance or repair service. The adjudicating authority is requested to get each invoice verified and quantify the demand.

(c) The demand of service tax with interest in respect of Telecommunication service is set aside.

(d) The demand for service tax in the capacity of receiver for ITSS received from overseas sub-contractor by overseas branches of the appellant is also set aside.

(e) All the penalties under various Sections imposed on the appellant in their entirety set aside.

Regards

Prarthana Jalan

__._,_.___