Deflation

Term of the Day - deflation
A decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. opposite of inflation.

Advance tax versus TDS

Advance tax versus TDS
The tax deductible at source has to be excluded while computing the advance tax liability, even if the tax had not actually been deducted.

The Income-Tax Appellate Tribunal (ITAT), G-Bench, Delhi, in the DCIT vs Pride Foramer SAS (2008 24(II) ITCL 259) case has decided an interesting issue concerning tax deducted at source (TDS), advance tax and charging of interest under Section 234B of the Income-Tax Act, 1961.
The assessee before the assessing officer (AO) was a non-resident French company, which had engaged employees of an associate company for providing technical services in connection with offshore drilling in India.
Tax not deducted at source
The AO noticed that these employees drew salaries exceeding the exemption limit and, therefore, passed an order under Section 163(1), read with Section 143(3), treating the French company as agent of the technicians and made assessments on it on income from salary and perquisites received by these technicians.
Since no tax was deducted at source from the salaries paid and no advance tax was paid for such employees, the AO charged interest under Section 234B(1) of the Act also.
On appeal, the CIT(A) observed that the entire income of the foreign technicians was liable to TDS and, therefore, as per Section 209(1)(d) the tax payable for the purpose of advance tax was required to be reduced by the tax ‘deductible at source’.
Since the entire tax payable was deductible at source, there was no advance tax payable by the assessees and, hence, the AO was directed to delete the interest charged under Section 234B. Against this order of the CIT(A), the I-T Department went on appeal before the ITAT.
The Revenue’s contention before the ITAT was that the Section 191 was not overridden by Section 209 and, therefore, once the tax had not been deducted at source, the same was payable as advance tax.
Tribunal’s view
The Tribunal did not agree with this view of the Department. It held that Section 191 along with Section 190 falls in Part-A of Chapter XII, which relates to collection and recovery of tax.
Section 190 relates to deduction at source and advance payment, and provides that notwithstanding that regular assessment in respect of any income is to be made in a later assessment year, tax on such income shall be payable by deduction or collection at source or by advance payment, as the case may be, in accordance with the provisions of the chapter. Section 191 provides for another mode of collection of tax by way of direct payment.
Therefore, even if Section 191 is not overridden by Section 209, the amount payable by the assessee direct under Section 191 in cases where tax had not been deducted at source, is not the amount payable as advance tax.
The amount payable as advance tax has to be computed under Section 209, which is a specific provision for this purpose. Under clause (d) of sub-section (1) of Section 209, the tax deductible at source has to be excluded while computing the advance tax payable.
Had the legislature wanted that only the tax actually deducted at source or collected at source should be excluded, it would not have used the words ‘tax deductible at source’ or ‘collectible at source’.
‘Deductible at source’
The phrase ‘deductible at source’ has not been used casually or without any purpose. There is a reasoning for excluding the ‘tax deductible at source’ because in cases where tax has not been deducted at source by the person responsible, the said person is deemed to be assessee-in-default under Section 201 in respect of whole or any part of tax, which had not been deducted at source and he is also liable for payment of interest and penalty under the said section.
Since the ‘tax deductible at source’, in case not deducted, could be recovered with interest from the person responsible for deducting the same at source, the ‘tax deductible’ has been excluded from the advance tax liability of the assessee.
Section 191 contains only an alternative mode of recovery so that in case tax could not be recovered from the person responsible in case of default, it could be collected from the assessee, who is primarily responsible for paying the tax. The section does not say that the same is payable as advance tax. The tax deductible at source has to be excluded while computing the advance tax liability as provided in Section 209(1)(d), even if the tax had not actually been deducted. In the case before the ITAT, the entire income of the assessee was deductible at source.
Therefore, no advance tax was payable by the technician employees and, as a result, there would be no case for charging interest under Section 234B of the Act. Hence, the ITAT has held that the order of the CIT(A), directing the AO to delete the interest charged under Section 234B, is correct.

ITAT to decide on tax cases within three months

HC directs ITAT to decide on tax cases within three months

MUMBAI: Corporate taxpayers can now hope for speedy justice. The Bombay High Court has set aside an order of the Income Tax

Appellate Tribunal

(ITAT) on the ground that the tribunal took four months to deliver the order. Delivering the order, a division bench comprising Justice VC Daga and Justice S Radhakrishnan observed that justice delayed is justice denied, but justice withheld is even worse. Observing that often orders are passed four to 10 months after the tax cases have been heard, the court issued a guideline to the ITAT asking it not to take more than three months to give an order. The division bench also directed ITAT that its order should be self-containing and reasoned. HC gave this order on an appeal filed by Shivsagar Veg Restaurant. The appeal was based on the inordinate delay by ITAT in giving out the order. The taxpayer also alleged non-application of mind as the order did not furnish reasons in detail, did not discuss the issues raised by the taxpayer and did not cite the case laws. The HC said that since ITAT is the final authority on facts, the tribunal is required to appreciate the evidence, consider the reasons of the authorities below and assign its own reasons as to why it disagreed with the findings of the authority below. This would help the HC, where appeals are filed on questions of law, to have a clearer understanding of the issues that come up before it, the division bench said. “Merely because the tribunal happens to be an appellate authority, it does not get the right to brush aside reasons or the findings recorded by the first authority or the lower appellate authority. It has to examine the validity of the reasons and findings recorded,” the bench added. K Shivram, who appeared for Shivsagar Veg Restaurant told ET: “ITAT president Vimal Gandhi had issued detailed guidelines (on speedy clearance) to ITAT members sometime ago. However, those guidelines are not being followed by the ITAT members.”

Rent -a -Cab is Input Service

Whether Rent-a-cab service used for bringing employees to work in the factory for manufacture goods is eligible Input Service for the purpose of Cenvat Credit.


The answer is yes.
While referring the meaning of Input Service assigned to rule 2(l) of the Cenvat Credit Rules, 2004, honorable tribunal has held that:
"From the above definition, it is very clear that the input services besides being used in or in relation to the manufacture of final products and clearances of final products from the place of removal includes a plethora of other services such as service used in relation to setting up, modernization, renovation or repairs of factory, premises of provider of input service or an office relating to such factory or premises, advertisement or sales, activities of business, accounting, auditing, financing, recruitment, quality control, training and coaching etc. and therefore its scope is much larger than being used directly or indirectly in relation to manufacture. The decision cited by Revenue are therefore not relevant as those decisions have not considered the inclusive part of input service as defined under rule 2(l) of Cenvat Credit Rules and these decisions have only considered the term in or in relation to the manufacture. Since Rent-a-Cab service is used for bringing employees to work in the factory for manufacture of goods it has to be considered as being used indirectly in relation to the manufacture or as part of business activity for promoting the business as any facility given to the employees will result in greater efficiency and promotion of business."

Refund of Service Tax paid in excess wrongly

Service Tax paid in excess wrongly - Can department refuse to refund the same?
Where it is found that that service tax has been paid in excess wrongly - department should refund the same on making an application for refund the same.
In the instant case, CESTAT has refused to allow the claim of refund on the ground that
"…..that since the assessee had not challenged the assessment order, the claim of refund cannot be entertained, so as to indirectly challenge the assessment order, without filing statutory appeal, against the assessment order. It was also found, that in the case in hand, the order is appelable and no appeal having been filed, the claim of refund has no merit, and the appeal was dismissed."
In this matter, Honorable High Court of Rajasthan held that:"At the outset, it may be observed, that under the scheme of things, starting from Section 73 onwards it is clear, that the assessee himself is to deposit service tax in form ST-3, there is no provision for assessment. Passing of assessment order is contemplated only in cases where the notice is issued under Section 73, and it is found, that service tax is not levied or paid, or has been short levied or short paid etc. In that view of the matter, the very basis/reasonings given by the learned Tribunal, simply have no legs to stand. Admittedly, the appeal under Section 85 lies against a specific order of the concerned authority in Form ST-4, which requires to disclose, designation and address of the officer passing the decision or order appealed against, and the date of decision or order, so also the date of communication of the decision or order appealed against to the appellant. Admittedly, when no order capable of being appealed against, had ever been passed, it cannot be said that the assessee could file appeal against the assessment order, and not having so filed appeal he cannot lay the claim of refund. Thus, the order of the Tribunal cannot sustain."