The sunset clauses under Sections 10A and 10B of the Income-Tax Act 1961 have been extended and exemptions will be continued until March 31, 2010. These sections make special provisions in respect of newly established undertakings in Free Trade Zones (FTZs) and 100 per cent Export-Oriented Undertakings (EOUs).
Serving of Notice

The Finance Bill laid down that if the taxpayer appeared in any proceedings or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the I-T Act has been duly served in time in accordance with the provisions of the Act.

The assessee shall be precluded from taking any objection that the notice was not served or not served in time or not served in a proper manner. This amendment to Section 292BB evoked protests before the passing of the Bill.

The Finance Minister inserted provisions in the Section laying down that the amended provision will not apply wherever the assessee has raised objections before the completion of such assessment or reassessment.

This is a welcome change in the attitude of the Government. Taxpayers need not resort to writ petitions in the High Court to challenge notices from the department. They can register the objection and pursue the matter in appeal.

At the discussion stage in Parliament, the Government accepted the suggestion that audit report under Section 44AB should also be obtained on or before September 30 of the assessment year (AY) w.e.f. the AY 2008-09. This is in line with the amendment to Section 139 which requires returns to be filed on or before September 30.
Depreciation in books

The Finance Act has added Explanation 6 to Section 43(6) retrospectively from AY 2003-04 to deem depreciation provided in the books, as depreciation actually allowed for determining the written-down value (WDV) even though due to various circumstances of the case, such depreciation might not have been actually allowed in any assessment year.

This amendment seems unfair. Deprecation is for the age of the asset and its user. The Supreme Court had held that the WDV will have to be determined after reducing depreciation due for an assessment year even if it is not actually allowed (Straw Products vs ITO -- 68 ITR 227).

This was followed by the Income-Tax Appellate Tribunal (ITAT) in the recent Kandla Port Trust vs Assistant (CIT 104 ITD 1 Rajkot) case. The present amendment annuls these rulings.

A significant amendment has been effected in Section 35D relating to amortisation of preliminary expenses. This benefit was hitherto available only to industrial undertakings. The amendment now extends this benefit to the services sector. The benefit hitherto confined to the manufacturing sector for the extension of the undertaking or the setting up of a new unit will hereafter be available even to non-industrial unit. This is a big gain.

The Finance Act, 2008 represents a sea-change in the attitude of the Government with regard to the levy of taxes. As there is no system for adjusting tax brackets automatically for inflation, the Government has thought it fit to make an upward revision of tax slabs and exemption limits without lowering the tax rates.

The euphoria generated by this revision is already evaporating with inflation touching 8 per cent. European fiscal pundits are fond of criticising the tax system in Europe as leading to what they called "cold progression". Taxpayers are pushed into higher tax brackets even when real incomes have not risen. Inflation is itself a hidden tax.
Tax exemption limit

The lifting of the threshold for applying the tax rates may not be sufficient in inflationary times. This is especially true in the case of senior citizens with fixed incomes. Section 88B allowed a rebate of tax up to Rs 20,000 to senior citizens.

The Finance Act, 2005 provided for exemption limit of Rs 1,85,000 to senior citizens in lieu of the rebate. This was raised to Rs 1,95,000 last year and Rs 2,25,000 this year.

The senior citizen gets a relief of Rs 7,500 in 2008 when they were getting a relief of Rs 20,000 under the old Section 88B. The liberalisation of health insurance premium for parents under Section 80D is not much of a help.

Not many insurance companies are enthusiastic to extend insurance schemes to those aged above 70 years. While the general exemption limit has been increased by Rs 40,000 (from Rs 1,10,000 to Rs 1,50,000), the increase in the exemption limit for senior citizens is just Rs 30,000.

Many senior citizen must be wishing that the scheme of rebate under Section 88B will be restored instead of the misleading higher exemption limit.

The provision would be in sharp contrast to the earlier one wherein only employers or companies who failed to deduct TDS or to deposit it after deduction were considered defaulters.

The Budget has proposed that the amendment take place retrospectively from June 1, 2003, making many cases to be reopened and many to be considered as defaulters. The amendment will also include TDS on dividends within its scope.

In such cases, principal officers of companies will be considered defaulters. Most such defaulters are fined and have to pay the TDS amount along with interest. It may also land some in prison, depending on the severity of the case.

Tax officials said the amendment had been brought to bring greater clarity on the issue. The move will also strengthen the TDS net by increasing compliance among companies and employers. Ernst & Young tax partner Amitabh Singh said, "The move is aimed basically at strengthening compliance amongst companies."

Chidambaram presented his seventh full budget - two when the United Front government was in power and the remaining five under the United Progressive Alliance government.

The Finance Minister presented the Budget against a backdrop of slowing expansion and creeping inflation which has hit the poor hardest.

Here are the major highlights:

    * Personal income tax exemption hiked to Rs 1.5 lakh
    * Senior citizens threshold tax limit increased from Rs 1,95,000 to Rs 2,25,000
    * Tax exemption for women increased to Rs 1.8 lakh

New tax slabs: 10 per cent for 1,50,000 to 3,00,000, 20 per cent for 3,00,000 to 5,00,000 and 30 per cent above 5,00,000

    * Excise on packaged softwares to be lower from 8% to 12%
    * No excise duty on refrigerating equipments
    * Anti-Aids drug exempted from excise duty
    * Small cars to become cheaper
    * Reduced excise duty on two, three wheelers
    * Excise duty on hybrid cars cut from 24 pct to 14 pct
    * Excise on small cars cut to 12 pct from 16 pct
    * Rs 50 cr for tiger conservation
    * Sixth Pay Commission report by March 2008
    * Defence allocation up by 10% from Rs 96,000 cr to Rs 1,56,000 cr
    * 22 Sainik schools get Rs 44 crore
    * Rs 624 cr for Commonwealth Games
    * PAN sole identification in securities market
    * Debt waiver scheme and relief to small and marginal farmers
    * Duty reduced on life saving drugs
    * Rs 750 crore for upgradation of 300 ITIs in 25 districts.
    * No change in peak customs duty
    * Central sales tax cut from 3% to 2%
    * Govt withdraws banking transaction tax
    * Revenue implication of Indirect taxation to be 5900 cr
    * Direct taxation changes to be revenue neutral
    * Levy on STT only on option premiums
    * Commodities transaction tax introduced like STT
    * Short term capital gains to be taxed at 15%
    * No change in surcharge of corporate tax
    * Money changers and people running gains of chance and tour operators to be brought under service tax net
    * Revenue Deficit is Rs 55,184 cr at 1% of GDP and fiscal deficit is Rs 1,33,287 cr at 3.1% of GDP
    * Estimated planned expenditure at Rs 2,43,086 cr and non-panned expenditure Rs 57,409 cr
    * Central Plans Scheme monitoring system under Plan Panel to be unveiled
    * Non-agri peak rates for customs raises to 10% from 2% in 2004
    * Tax to GDP ratio at 9.2% in 2004 up by 12.5% in 2007-08
    * Custom duty on steel scrapped
    * Set-top boxes to become cheaper
    * Custom duty on vitamin pre-mixes to lower from 30% to 20%

    * Agri loans disbursed by rural banks, RRBs and Cooperative banks before March 2007 and overdue on Dec 2007 waived
    * Overdue agri loans amount to Rs 50,000 cr under the waiver and Rs 10,000 cr under the one time settlement
    * Implementation of waiver to be completed by June 2008
    * Farmers eligible for fresh agri loans post the waiver or one time settlement
    * Haryana and Chandigarh to introduce smart card based delivery system under PDS
    * National Agri Insurance scheme get Rs 640 cr
    * National Highway development program gets Rs 12966 cr
    * Rs 8000 cr plan for faster power reforms
    * National housing bank gets Rs 1,200 cr for refinancing
    * Govt asks commercial banks to add 250 rural household accounts every year in rural and semi-urban banks
    * States urged to open bidding for 5 more ultra mega power projects
    * All 30 integrated textile parks approved
    * Rs 340 cr insurance scheme to cover 17 lakh farmers and weavers
    * SITP gets Rs 450 crore
    * Rs 275 cr earmarked for state data centres
    * NHDP allocation up from Rs 10,866 cr to Rs 12,966 cr
    * Move towards nutrient-based fertiliser subsidy stressed
    * National fund for transmission and distribution reforms for power sector
    * FDI in Apr-Dec at $12.7 billion, FII inflow over $18 billion
    * PNB says banks to be reimbursed accordingly
    * Tea Research association gets Rs 20 cr
    * 500 soil testing labs to be set up in the 11th plan, govt to give 1 time budgetary assistance of Rs 75 cr to agri ministry for setting up mobile soil testing facilities
    * National Horticulure Mission to get Rs 1,100 cr
    * Govt sets up irrigation and water resource finance corp with an initial corpus of Rs 100 cr
    * Schedule Commercial Banks farm credit 75%
    * Micro irrigation scheme gets Rs 500 cr to cover 4,00,000 additional hectares
    * Rs 12050 cr for strengthening rural health services
    * 24 pct allocation hike for women, child development
    * Inflation will be kept under check
    * Jawaharlal Navoday Vidyalaya to be set in 20 new districts for SC/STs
    * Healthcare allocation to be raised by 15%
    * Bhopal and Tripura to get one IIScR each and 2 colleges of art
    * 3 IITs to be set up in Bihar, AP, Rajasthan
    * 288 public sector bank branches to be opened in areas with concentration of minorities
    * Irrigation outlay increased
    * National Minority Development and Finance Corp to get Rs 75 cr
    * Special attention, more funds for North East
    * 54 gender budgeting cells set up
    * Agriculture share in total investment up from 10.2% in 2003-04 to 16% during the 11th Plan
    * Agri credit target to be Rs 2,80,000 cr for 2008-09
    * LIC to cover all woman SHGs linked to the bank
    * Mobilisation of additional resources of Rs 10,000 cr as planned capital expenditure under Plan-B
    * Allocation for ministry of minorities doubled to Rs 1,000 cr
    * Schemes for woman to get Rs 1,460 cr this fiscal
    * Child related schemes to get Rs 33,434 cr
    * 54 departments to be set up gender budgeting divisions
    * Rajiv Gandhi drinking water mission to get Rs 7,300 cr
    * Rs 3,966 cr for SC/STs schemes
    * Allocation of Rs 75 cr for 2008-09 for the Rajiv Gandhi felicitation programme
    * Sanitation to get Rs1,200 cr
    * Rs 200 cr for providing portable water system in each school in areas of water scarce regions
    * IT industry gets Rs 100 cr for connecting knowledge institutions
    * NREGS to be extended to 596 rural distt with an outlay of Rs 16,000cr
    * The remuneration Angan Bari workers has been increased from Rs 1000 cr-1500 cr per month
    * Women entitled to equal share and equal say
    * Science scholarships for young learners
    * 16 Central universities to be set up
    * 6000 model high schools to be started
    * Science scholarships for young learners
    * Inflation will be kept under check
    * More allocation for polio and AIDS
    * Health covers of Rs 30000 for workers in unorganised sectors
    * Education sector gets a boost
    * Agri credit doubled in first two years
    * Bharat Nirman allocation to go up to Rs 31,280 cr from Rs 24,603 cr
    * Gross Budgetary support to be Rs 24,3386 cr about Rs 38,286 cr more than 2007-08
    * Agriculture credit to touch 2,40,000 cr in 2008
    * Focus on achievement of self-sufficiency in food grain
    * Soyabean output to be 9.45 mn tonnes
    * Maize production to be 16.78 mn tonnes
    * Rice production to be 94.08 mn tonnes
    * Total agri production to be 219.32 mn tonnes at all time high
    * Agriculture disappointing at average annual growth of 2.6%
    * Keeping inflation under check to be on focus
    * Focus on management of supply side of food, market, capital inflows next year
    * India has registered a growth of over 8%$ for 12 successive quarters till Dec 2007

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI

Chitrakoot Steel & Power Pvt. Ltd.      
V.
Commissioner of Central Excise, Chennai

E/PD/419/2007ANDE/626/2007
DECIDED ON: 29.11.2007
PRIOR HISTORY: Arising out of Order-in-Appeal No. 120/2007 (M-II) dated, 25"' June 2007 passed by the Commissioner of Central Excise (Appeals), Chennai.

Member

P. Karthikeyan, Member (Technical)    

Excise -- Service Tax -- Education cess -- Demand -- Non-reversal of credit -- Rule 14 of the CENVAT Credit Rules -- Section 11A of the Central Excise Act, 1944 -- Finance Act, 1994 -- Appellant received consignments of iron ore and availed service tax under the category "Goods Transport Agency" -- Some of the consignments of iron ore received were returned back -- Credit of service tax and education cess availed on the rejected quantity was not reversed -- Assistant Commissioner demanded the impugned credit under Rule 14, CENVAT Credit Rules read with Section 11A, Central Excise Act, 1944 -- Appellant contended that an Assessee is not required to reverse the credit availed or pay back the same when any inputs in relation to the receipt of which service tax was availed are returned back and not used in the manufacture of final products or output service and as the Appellant had not taken or utilised the credit wrongly, Rule 14, CENVAT Credit Rules is not applicable -- Revenue contended that that since the inputs were returned and not used in the manufacture of final products, service tax credit associated with receipt of such inputs is liable to be denied/recovered --Whether the demand is sustainable
Held, Appellants had taken the credit correctly in terms of the statutory provisions -- There is no provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory under Rule 3(5), CENVAT Credit Rules, 2004 -- Also, no provision exists in the Finance Act, 1994, which would render utilisation of such credit erroneous -- Credit availed is used to pay duty on the finished goods -- Impugned order vacated -- Appeal allowed. [Para 5]

Counsel

For Appellant/Petitioner/Plaintiff: K. Balasubramaniam, Adv.
For Respondents)/Defendant: B.L. Meena. SDR '

ORDER

Final Order No. 1420/07 dated, 29th November, 07
Stay Order No. 1189/07
P. Karthikeyan, Member (Technical)

1. After hearing both sides on the stay application, the requirement of pre-deposit is waived and the appeal itself is taken up for disposal.
   
2. In the impugned Order, the Commissioner (Appeals) has sustained demand of service tax of Rs. 4,40,536 and vacated a penalty of Rs. 1 lac imposed on the Appellants. After going through the case records and listening to the arguments of both sides, it is seen that M.S. Chitrakoot Steel and Power Pvt. Ltd., the Appellant herein, had received consignments of iron ore during the period June, 2006 to October, 2006 and had availed service tax under the category "Goods Transport Agency". Some of the consignments of iron ore received were found to be not upto the mark and the Appellants returned back the same. However, the credit of service tax and education cess availed on the rejected quantity of 4,471 MTs was not reversed. After due process of law, the Assistant Commissioner has demanded the impugned credit under Rule 14 of the CENVAT Credit Rules read with Section 11A. of the Central Excise Act, 1944.
   
3. Arguing the appeal, the learned Counsel submitted that an Assessee is not required to reverse the credit availed or pay back the same when any inputs in receipt of which service tax was availed are returned back and not used in the manufacture of final products or output service. According to him, Sub-rule (5) of Rule 3 of the CENVAT Credit Rules. 2004 provided for payment of an amount to the Department equal to the credit availed in respect of any inputs or capital goods when they are removed as such from the factory of the Assessee. There is no similar requirement in respect of service tax associated with the return of input goods or capital goods. He also submitted that Rule 14 of the CEXVAT Credit Rules provided for recovery of CEIWAT credit taken or utilised wrongly. The Appellants had not taken or utilised the credit wrongly. The Appellants had validity availed the credit on receipt of the inputs. On return of the same to the supplier, similar amount of service tax accrued to the Government under the GTA service. He has also relied on DOF No. 334/1/2007-TRU dated, 28th February, 2007 addressed to the Commissioners and Chief Commissioners wherein, it was clarified as follows:
   

4. Learned SDR defends the impugned Order and states that since the inputs were returned and not used in the manufacture of final products, service tax credit associated with receipt of such inputs is liable to be denied/recovered.
   
5. On a careful study of the statutory provisions, it is seen that when the credit-availed inputs or capital goods are removed from the factory of the Assessee, Sub-rule (5) of Rule 3 of the CENVAT Credit Rules, 2004 provides for recovery of equal amount of credit. There is no such provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory. Moreover, Rule 14 of the CENVAT Credit Rules, 20O4 provides for recovery of CENVAT credit availed or utilised wrongly. In the instant case, the Appellants had taken the credit correctly in terms of the statutory provisions. No provision exists in the Finance Act, 1994, which would render utilisation of such credit erroneous for the reason that some of the inputs, transport of which yielded GTA service tax credit are returned as not suitable. The credit availed is anyway used to pay duty on the finished goods. In the circumstances, I find that the impugned Order sustaining the demand of service tax and education cess to be not sustainable and accordingly vacate the same.
   

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, KOLKATA EAST REGIONAL BENCH KOLKATA

Pankaj Steels
V.
Commr. Of Central Excise, Ranchi

CENTRAL APPEAL NO. ESM- 385/06      
DECIDED ON: 14.08.2007
PRIOR HISTORY; Arising out of Order-in-Original No. 23 - 25/MP/Commr./2006 dated, 27th  March 2006 passed by Commr. of Central Excise, Ranchi.

Member

D.N. Panda, Member (Judicial)    

Excise -- Annual capacity of production -- Date of grant of issue of license as against the actual date of start of manufacture -- Date from when the ACP should be calculation
Held, registration date may not be decisive to determine the annual capacity unless the entire plants commissioned undergoes production -- Therefore, such circumstances can only be visualized on the date when the Appellants become ready for manufacture -- Appellant should no more be required to discharge duty liability from any other date other than when there was a physical output production so as to invite liability under the law -- Appeal allowed [para 2]

Counsel

For Appellant/Petitioner/Plaintiff: P.R. Das, Adv.
For Respondent(s)/Defendant: J.K. Jha, Authorized Representative (S.D.R.)

ORDER

Order No. A-1606/KOL/07
D.N. Panda, Member (Judicial)

1. Learned Authorised Representative, appearing for the Appellant submitted that although there was a specific direction by the Tribunal in terms of Order No. M-639/A-952/Cal/1999 dated, 25th August, 1999 for determination of annual capacity of production and such determination to come into effect from the determined date, the Authorities below failed to carry out such direction for which there was another litigation on the self same dispute. The second dispute was redressed by Tribunal's Order No. S-631 /A-863/Kol/05. Even after the second direction, the Authorities have failed to pass a reasoned and speaking Order, which compelled the Appellant to approach again this Tribunal in third round of litigation. He made it clear categorically that Appellant's factory did not undergo manufacturing w.e.f. 29th July 1998, i.e. date of grant of issue of license and determination of annual capacity from that date would be unjust and unfair. Therefore, the date of production being 12th October 1998, such date should be reckoned for the purposes of annual capacity determination and liability to follow, accordingly. This has not been done even in spite of repeated direction. Hence, the Order of adjudication dated, 27th March 2006 has no legs to stand. The learned SDR appreciates the difficulties that the present litigation is third round of litigation. He is fair enough to state that although there were difficulties in the earlier occasion, the learned Authorities below have determined the capacity in para 10 of the Order. Therefore, the Appellant should have no grievance further and no dispute arises out of the Order dated, 10th April 2006.

2. Heard both sides and perused the records. It is an admitted fact by both sides that the Appellant has been compelled to approach the Tribunal in third round of litigation for selfsame cause and for inability of the Authorities to redress the wrong done to the Appellant. There is no doubt that the Appellant commenced its production w.e.f. 12th October 98. The registration date may not be decisive to determine the annual capacity unless the entire plants commissioned undergoes production. Therefore, such circumstances can only be visualized on the date when the Appellants factory becomes ready for manufacture. Such date being 12th October, 1998, the Appellant should no more be required to discharge duty liability from any other date (Sic) when there was a physical output production from 12th October, 1998 so as to invite liability under the law. To resolve entire dispute persisting in record from 1999, it is no longer required to further ask the Authorities to determine the annual capacity except without holding as above. Accordingly, Appellant succeeds in appeal.
   

The coming Budget is expected to bring more income heads in the ambit of tax deducted at source (TDS). The scope of TDS maybe expanded to include more trades and professions, at present, the TDS net covers income from salary, interest on securities, dividend from domestic companies and prize money from sweepstakes among others. Budget 2007-08 had brought a few more income heads under TDS, such as award of contracts by individuals for business purposes. According to government data, tax deduction/ collection at source increased by over 51 % until January 15 this year. Meanwhile, the net direct tax collection has continued its 40% growth to be at Rs 2,18,538 crore until January 31 .The government is likely to strengthen the administration of TDS as well. Major changes in the TDS system, however, are unlikely. But government sources said revenue leakage and non-crediting of TDS continued to plague the income tax authorities. "The objective here is not to increase tax collection, but to prevent evasion and try and remove whatever little problems exist in the TDS system on issues of crediting the deducted tax," a government official said. Commenting on the move, Ernst and Young tax partner Amitabh Singh said, "Most areas are already covered by TDS and I don't think there is scope for widening the base too much."

BANK RATINGS COULD SOON BE MADE PUBLIC

Essar Group's BPO arm, Aegis, is close to acquiring a BPO company in the Philippines, a top company official said. "We are in the advanced stages of acquiring a BPO in the Philippines. We hope to start our operations there within the next two months," Aegis chief financial officer C M Sharma said. However, he refused to name the company and the kind of investment being made in it. Presently, the BPO has around 500 seats and depending on the business Aegis plans to recruit more personnel after the acquisition, he added. "It can be extended to at least 1,000 seats and we plan to recruit more people after the acquisition is over," he added. Aegis had recently acquired Gurgaon-based Tele Tech Services (India) Ltd, a front-to-back-office business process-outsourcing firm for around Rs 55 crore, Sharma said.

MAKING TAX LAW MORE HUMANE

GOVT MAKING USE OF IT TO SIMPLIFY TAX ADMINISTRATION, INCREASE COLLECTIONS