slapp on colour TV picture tubes

Anti-dumping duty slapped on colour TV picture tubes

source- BUSINESS STANDARDS , 27.07.2008

The government today slapped a steep anti-dumping duty on imported picture tubes for colour TVs from China, Malaysia, Thailand and Korea after it found that these countries were “dumping” the product into India.
The duty will range between Rs 878 and Rs 4,369 on a cathode ray colour picture tube (CPT) depending on the size of screen.
The companies affected by the notification of the Department of Revenue include Samsung (Malaysia), LG Philips (Korea), Irico Group Electronics (China), Shenzen Samsug (China).
The decision was based on preliminary findings of the designated authority in the commerce ministry. The findings showed that the goods were being exported to India below their normal value, causing “material injury to the domestic industry”. It was also found that the “injury had been caused by the dumped imports from the subject countries”.
The consumer electronics industry reacted sharply to the government’s decision saying it would make colour TVs more expensive.
“The prices of colour television are set to go up due to the duty,” said Consumer Electronic Appliances Manufacturer Association (CEAMA) President R Zutsi. However, the impact would differ depending on the size of the TV.

A soft ruling

A soft ruling on software export turnover
Most software companies claim deduction under Section 10A/10B of the I-T Act, which postulates deduction in respect of the profits and gains derived from the export of computer software.

Recently, the Income-tax Appellate Tribunal (ITAT), Bangalore, passed a favourable decision in the MphasiS Ltd case, granting relief to the assessee in respect of the deduction under Section 10B of the Income-Tax Act, 1961.
According to the Tribunal, where the assessee is not involved in providing technical services, expenses incurred in foreign currency need not be excluded from the export turnover.

Section 10A, 10B
Most software companies claim deduction under Section 10A/10B of the Act, which postulates deduction in respect of the profits and gains derived from the export of computer software. The deduction would be in the proportion that the export turnover of the undertaking bears to the total turnover of the undertaking.
‘Export turnover’ is defined in Section 10A/10B. The definition provides that telecommunication, insurance and freight attributable to the delivery of software outside India would be required to be excluded from the export turnover. Further, expenses incurred in foreign exchange in providing technical services outside India should also be excluded.

Facts of the case
The assessee, a company involved in software development, claimed deduction under Section 10B. The assessee took a position that since it is not involved in providing technical services, it need not exclude foreign currency expenditure from the export turnover for computing the deduction under Section 10B. The assessee took an alternative argument that, if excluded from export turnover, such expenses should also be excluded from the total turnover.

The arguments

The assessing officer (AO) took a call that the expenditure incurred in foreign currency was in respect of the assessee’s personnel deputed outside India for providing technical services outside India and concluded that expenses incurred in foreign currency should be excluded from the export turnover.
Further, as total turnover is not defined in the Act, the AO did not make similar exclusions from the total turnover. The Commissioner Appeals confirmed the AO’s action as being correct.
On appeal before the Tribunal, the assessee explained that the expenses incurred in foreign currency in respect of the assessee’s personnel deputed outside India were in connection with the development of software and software development services provided by the assessee from India. The assessee is not engaged in the business of providing technical services outside India, the Revenue was not able to dispute these facts.

The Tribunal’s observations
The Tribunal relied on the Bangalore ITAT’s decision in the Infosys Technologies Ltd case, and concluded that since the assessee is not involved in the business of providing technical services outside India, expenses incurred in foreign currency for providing software development outside India need not be excluded from the export turnover.
Further, the ITAT also emphasised that incentive provisions should be construed liberally and in a manner so as to promote the object and not frustrate it.
In respect of exclusions to be made from total turnover, the ITAT, relying on the Infosys and Tata Elxsi decisions, held that based on the parity of basis between export turnover and total turnover, the exclusions made from export turnover should also be made from total turnover.

A good precedent
The ITAT had analysed the fact pattern before delivering its judgment on the interpretation of law.
In these types of cases, it is important for the assessee to substantiate that it is engaged only in software development and software development services that do not involve any element of rendering technical services.
Typically, the statement of work (SoW) and contracts with clients go on to illustrate the true facts of the case. The fact is that many software companies are predominantly involved in offshore delivery and onsite work only for data collation and installation. Hence no technical services are being rendered. The same may not be true of a product company which may be involved in customisation of the same, which would tantamount to technical services.
This decision lays down a good precedent on this issue. We now see an alarming trend of the need to take every matter before the ITAT even when it could have been very well adjudicated at the Commissioner Appeals level.
Also, there is this trend where the Revenue appeals against every judgment which is pro-assessee, thereby increasing the whole cost of litigation, which at the very first instance could have been avoided. A complete overhaul of the adjudication process by the Revenue authorities is needed.

source :Business Daily from THE HINDU group of publicationsSaturday, Jul 26, 2008

(The author is a Bangalore-based chartered accountant.)

MONEY MARKET

CONITNUED FROM YESTARDAY......
Certificate of Deposit: It is a short term borrowing more like a bank term deposit account. It
is a promissory note issued by a bank in form of a certificate entitling the bearer to receive
interest. The certificate bears the maturity date, the fixed rate of interest and the value. It can
be issued in any denomination. They are stamped and transferred by endorsement. Its term
generally ranges from three months to five years and restricts the holders to withdraw funds
on demand. However, on payment of certain penalty the money can be withdrawn on demand
also. The returns on certificate of deposits are higher than T-Bills because it assumes higher
level of risk. While buying Certificate of Deposit, return method should be seen. Returns can
be based on Annual Percentage Yield (APY) or Annual Percentage Rate (APR). In APY,
interest earned is based on compounded interest calculation. However, in APR method,
simple interest calculation is done to generate the return. Accordingly, if the interest is paid
annually, equal return is generated by both APY and APR methods. However, if interest is
paid more than once in a year, it is beneficial to opt APY over APR.
Banker’s Acceptance: It is a short term credit investment created by a non financial firm and
guaranteed by a bank to make payment. It is simply a bill of exchange drawn by a person and
accepted by a bank. It is a buyer’s promise to pay to the seller a certain specified amount at
certain date. The same is guaranteed by the banker of the buyer in exchange for a claim on
the goods as collateral. The person drawing the bill must have a good credit rating otherwise
the Banker’s Acceptance will not be tradable. The most common term for these instruments
is 90 days. However, they can very from 30 days to180 days. For corporations, it acts as a
negotiable time draft for financing imports, exports and other transactions in goods and is
highly useful when the credit worthiness of the foreign trade party is unknown. The seller
need not hold it until maturity and can sell off the same in secondary market at discount from
the face value to liquidate its receivables.
An individual player cannot invest in majority of the Money Market Instruments, hence for
retail market, money market instruments are repackaged into Money Market Funds. A
money market fund is an investment fund that invests in low risk and low return bucket of
securities viz money market instruments. It is like a mutual fund, except the fact mutual funds
cater to capital market and money market funds cater to money market. Money Market funds can be categorized as taxable funds or non taxable funds.
Thus there are two modes of investment in money market viz Direct Investment in Money
Market Instruments & Investment in Money Market Funds.

TO BE CONTINUED TOMORROW.......

TOPICS OF TOMORROW WILL BE......

Functioning of Money Market Account.................

“ENJOY TODAY ,WAIT FOR BEAUTIFUL TOMORROW ”

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PRESIDENT
JAB WE MET CA
REDEFINING PROFESSIONALISM......

IT TAKES TIME ...

THE ROSE BUDA ......IT TAKES ITS OWN TIME

young boy wanted to learn music. He had a good voice and he wanted to train to become an Indian classical singer. He visited a renowned music teacher and expressed his desire to him. The teacher conducted a preliminary test on him to guage his talent and decided to give him a try. The boy asked, “Guruji, how much time would I need to train under your guidance, how soon can I become a singer?”The teacher said, “Well, that depends upon how much work you are able to put into it. But one thing you can be sure of, its not going to be a short time, because singing is about learning more and more each day, even as long as you live.” The boy, smiled inwardly and thought, “I’ll soon learn everything there is to learn. I am determined.” A few months later, the boy asked the same question, “Guruji, how much time....?”The teacher said, “Do you see that rose bud on the bush outside. The number of days it takes to unfold its petals to become a full grown flower, that’s the number of years you’ll take to learn.”That evening, the boy went and squatted near the bush. Slowly and carefully he tried to open up the petals of the rose bud to make it look like a flower. However, hard he tried, some of the petals got torn and mutilated; others fell off. The inner most that were just beginning to form; got crushed into the stamen. The next morning the teacher saw the plight of the rose bud and understood what had happened. He called the boy and said, “Look son, this bud, it seems, was in a hurry to bloom from a bud into a flower overnight. It seems to have outdone its potential to grow. Just look at the state of its petals; it shall never become a perfect rose flower now. Hurry has now become a cause for worry. Had the bud grown naturally it would have been beautiful at each stage of its life. It would have spread fragrance all around and its beauty would have lent splendour to our garden. But, perhaps the bud was in too much of a hurry... ”By now, the boy was in tears. He wept, “Guruji, it’s not the buds fault. I pried it open. I am the cause of its present state. I have made a mistake. I cannot give back its babyhood to the bud, but I promise to let you shape me as you wish. Please unfold me petal by petal at your own pace and will.”

SANJAY TANDON

Golden Quotes

Calmness and tolerance act like air-conditioning in a room; they increase man’s efficiency...

Warren Buffet's-Golden Tips for Investor

CONITNUED FROM YESTARDAY......

How can the average investor employ Warren Buffett’s methods?

Love everything :-

Warren Buffett is, first of all, very content. He loves everything
he does, dealing with people and reading mass quantities of annual and
quarterly reports and numerous newspapers and periodicals. As an investor
he has discipline, patience, flexibility, courage, confidence, and
decisiveness. He is always searching for investments where risk is
eliminated or minimized. In addition, he is very adept at probability
and as an odds maker. I believe this ability comes from an inherent love
of simple math computations, his devotion and active participation in
the game of bridge, and his long experience in underwriting and accepting
high levels of risk in insurance and in reinsurance. He is willing
to take risks where the odds of total loss are low and upside
rewards are substantial. He lists his failures and mistakes and does not
apologize. He enjoys kidding himself and compliments his associates in
objective terms.

Become wonderful listener :-

Warren Buffett is a great student of business and a wonderful listener,
and able to determine the key elements of a company or a complex
issue with high speed and precision. He can make a decision not to
invest in something in as little as two minutes and conclude that it is
time to make a major purchase in just a few days of research. He is always
prepared, for as he has said in an annual report, “Noah did not start
building the Ark when it was raining.”


willingness to learn:-

Two examples of Warren Buffett’s willingness to learn and adapt
himself are:-

1) public speaking

In the 1950s Warren invested $100 in a Dale Carnegie course “not to prevent my knees from knocking when public speaking but to do public speaking while my
knees are knocking.”

2) computer usage

To be able to play more bridge, early in 1994 Warren learned how to use a computer so he could join a network where you can play with other individuals from their locations
all over the country. Perhaps in the near future he will begin to use some of the hundreds of data retrieval and information services on companies that are available on computers today for investment research.

Do not care stock market :-

Warren Buffett stresses that the critical investment factor is determining
the intrinsic value of a business and paying a fair or bargain price. He doesn’t care what the general stock market has done recently or will do in the future. He purchased over $1 billion of Coca-Cola in 1988 and 1989 after the stock had risen over five fold the prior six years and over five-hundredfold the previous sixty years. He made four times
his money in three years and plans to make a lot more the next five, ten, and twenty years with Coke. In 1976 he purchased a very major position in GEICO when the stock had declined from $61 to $2 and the general perception was that the stock was definitely going to zero.

Identify “Circle of Competence” :-

How can the average investor employ Warren Buffett’s methods?

Warren Buffett never invests in businesses he cannot understand or that
are outside his “Circle of Competence.” All investors can, over time,
obtain and intensify their “Circle of Competence” in an industry where
they are professionally involved or in some sector of business they enjoy
researching. One does not have to be correct very many times in a lifetime
as Warren states that twelve investments decisions in his forty year
career have made all the difference.

TO BE CONTINUED TOMORROW.......
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SATBIR SINGH
PRESIDENT
JAB WE MET CA
REDEFINING PROFESSIONALISM......
“ENJOY TODAY ,WAIT FOR BEAUTIFUL TOMORROW ”

SERVICE TAX ON BOOK ADJUSTMENTS

SERVICE TAX TO BE IMPOSED ON BOOK ADJUSTMENTS

Finance Act, 2008 has amended section 67 w.e.f. 10.5.2008 so as to include any amount debited or credited in the books of account within the scope of the term, 'gross amount charged' where transaction of taxable service is with associated enterprises including transactions in suspense account.

Transactions between associated enterprises

Transactions between associated enterprises would attract service tax even when there are only entries in the books of accounts and no money is actually exchanged. With the amendment made by Finance Act, 2008, associated enterprises will have to pay service tax on the basis of accruals instead of actual cash inflow / outflow, though there is no system of tax on accrual basis in service tax. For transactions between associated enterprises, any amounts debited or credited to books of accounts would be the basis for levy of service tax as such book entries will be included in the 'gross amount charged'. Thus, for such enterprises, book adjustments will also become basis for levy of service tax which was earlier based on actual receipts.
No service tax would be payable for such book adjustments in the following cases-
transactions are not between associated enterprises.
· transactions does take place between associated enterprises but they do not relate to any taxable service.
· associated enterprise does not render taxable services exceeding Rs. 10 lakh in aggregate, i.e., falling under small service provider exemption scheme.
· Service is otherwise exempt under any rules, notifications etc.
· Transactions between associated enterprises not involving services but relating to sale or other commercial transactions.

Book Adjustments

It is necessary to know what is meant by books and adjustment to understand this provision.
In business, the books most frequently referred to are the books of account in which business transactions are recorded. Books of account are normally considered to be legal documents. Books of account contain various accounts (say, debtors and creditors). Such accounts mean an account or register of debt or credit in a book. A "book account" means a book containing a statement in detail of the transactions between parties, including prices, made contemporaneously with the transaction, and entered in a book.
Adjustment in finance and accounts means to correct figures or make allowances for charges, credits etc. It involves alteration in debit or credit balances by way of allowances or charges posted in an account by means of debit or credit notes. It is a process of adjusting financially the sums due or owed. Such adjustments are done by way of adjusting entries by way of journal entries without directly affecting the cash flows. Such adjustments are absolutely legal and an universally accepted accounting practice.
According to Dictionary of Accounting Terms, adjustment means -
increase or decrease to an account resulting from an adjusting journal entry. For example, the accrual of wages at year-end will cause an increase in both salary expense and salary payable.
changing an account balance because of some happening or event. For example, a customer who returns merchandise ill receive a credit adjustment to the account.

Suspense Account

According to Black's Law Dictionary, 8th edition 2004, 'suspense account' means temporary record used in book keeping to track receipts and disbursements or an uncertain nature until they are identified and posted in the appropriate ledgers and journals. A suspense account does not appear in a final financial statement. It is a useful tool when, for example, a lump-sum receipt or expenditure must be broken down to match several transactions before posting.
Suspense accounts are accounts of transactions which being impossible to enter in the normal books of accounts in a regular way for one reason or the other are thus required to be held in suspense for the time being. Suspense account is a temporary account that records part of a transaction before complete analysis of that transaction, or that records sums to correct errors.
In banking, it is an expression where a person whose money is held in suspense is entitled to withdraw it any moment he likes, though he neither gets a pass book nor is entitled to draw any cheques or to be paid interest in respect of the amount. Commissioner of Income Tax v. K.R.M.T.T. Thiagaraja Chetty & Co., AIR 1952 Mad 305, 322.
In common parlance, it means an account in which the amount is held in deposit in favour of the person who remitted it and may be refunded in future, if the same is not appropriated or utilised for the purpose for which it was remitted. (LIC v. Prassana Devaraj, 1994 (2) KLT 541 at 545)
The expression 'suspense account' in the common parlance, means an account in which the amount is held in deposit in favour of the person who remitted it and may be refunded in future, if the same is not appropriated or utilised for the purpose for which it was remitted. LIC of India v. Prasanna Devraj, (1995) 82 Comp cases 611, 616 (Ker).
Suspense account is a temporary account in which entries of credits or charges are made until then proper disposition can be determined. Entries in suspense accounts are generally transitional. It is an account used temporarily to any doubtful receipts and disbursements or discrepancies pending their analysis and permanent classification.

Departmental Clarification on Book Adjustments

CBEC has clarified as follows in respect of levy of service tax on transactions between associated enterprises vide Circular No. 334/1/2008-TRU dated 29.2.2008
"6.1 Service tax is levied at the rate of 12% of the value of taxable services (section 66). Section 67 pertaining to valuation of taxable service for charging service tax states that value shall be the gross amount charged for the service provided or to be provided and includes book adjustment. As per rule 6 of the Service Tax Rules, 1994, service tax is required to be paid only after receipt of the payment.
6.2 It has been brought to the notice that the provision requiring payment of service tax after receipt of payment are used for tax avoidance especially when the transaction is between associated enterprises. There have been instances wherein service tax has not been paid on the ground of non-receipt of payment even though the transaction has been recognized as revenue/expenditure in the statement of profit and loss account for the purpose of determining corporate tax liability.
6.3 As an anti-avoidance measure, it is proposed to clarify that service tax is leviable on taxable services provided by the person liable to pay service tax even if the amount is not actually received, but the amount is credited or debited in the books of account of the service provider. In other words, service tax is required to be paid after receipt of payment or crediting/debiting of the amount in the books of accounts, whichever is earlier. However, this provision is restricted to transaction between associated enterprises. This provision shall also apply to service tax payable under reverse charge method (Section 66A) as taxable services received from associated enterprises. For this purpose section 67 and rule 6(1) are being amended.
6.4 The term 'associated enterprise' has the same meaning as assigned to it in section 92A of the Income Tax Act, 1961. It is a relative concept i.e. an enterprise is an associated enterprise when it is viewed in relation to other enterprises. This concept is used in the Income Tax Act for applying transfer pricing provisions. An enterprise which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise is considered as associated enterprise. It also covers an enterprise in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise.
6.5 Section 92A(2) of the Income Tax Act specifies various situations under which two enterprises shall be deemed to be associated enterprises. Enterprise means a person who is engaged in the provision of any services of any kind. For details, relevant provisions of Income Tax Act may be referred to."

Charge of Service Tax

Section 66 of Finance Act, 1994 is the charging section and section 68 is the collection section for the purpose of service tax. While service is levied on the basis of section 66, based upon rendering of taxable service as stated in section 65(105) of the Finance Act, 1994, service tax is payable on the basis of service tax collected by the provider of taxable service from the recipient of service. It is the receipt of gross amount which is taxed irrespective of whether it is received before, during or after rendering of taxable service. Service tax is also payable on advance payments against which service has yet to be rendered or performed. The payment of gross amount could be in cash or by way of cheque, draft, credit card, transfer, debit or credit notes or any book adjustment . Service tax is payable for the month or quarter ,as the case may be by fifth day of the month following the end of month or quarter.
However, in respect of associated enterprise, payment of service tax shall be based on book adjustments as per amendment made by Finance Act, 2008 (to be enacted ). Transactions between associated enterprises would attract service tax even when there are only entries in the books of accounts and no money is actually exchanged. With the amendment made by Finance Act, 2008, associated enterprises will have to pay service tax on the basis of accruals instead of actual cash inflow/outflow, though there is no system of tax on accrual basis in service tax. For transactions between associated enterprises, any amounts debited or credited to books of accounts would be the basis for levy of service tax as such book entries will be included in the 'gross amount charged'. Thus, for such enterprises, book adjustments will also become basis for levy of service tax which was earlier based or actual receipts.

= = = = = =

About the Author: -
Dr. Sanjiv Agarwal

FCA, FCS, ACIS(UK)

MONEY CHANGING ACTIVITIES

SERVICE TAX ON MONEY CHANGING ACTIVITIES

Amendment by Finance Act,2008
As per Finance Act 2008 amendments, w.e.f. 16.5.2008 banking and other financial services will now include purchase or sale of foreign currency, including money changing services provided by banking companies etc., and also by foreign exchange brokers or any authorised dealer in foreign exchange or an authorized money changer other than bank.
Accordingly, all money changing transactions undertaken by banks, forex brokers and money changes shall be subject to levy of service tax .The transactions could be between banks (service providers) and their customers, banks and their branches, one bank and other bank or between banks and Reserve Bank of India.
Erstwhile provisions
Prior to 16.5.2008 Finance Act, 2008 activities or transactions of purchase or sale of foreign exchange currency and money changing were not covered under scope of service tax based on logic given in Board circular. CBEC Circular No 96/7/2007 -ST dated 23.8.2007 also clarified that service tax is not leviable on money changing activities as it would not fall under foreign exchange broking. Finance Act,2008 has amended the definition of banking and other financial service u/s 65(12) to include purchase and sale of foreign exchange including money changing service provided by authorized money changers or dealers into service tax net.
Forex broking vis a vis money changing
Service tax on forex broking is already a taxable service w.e.f. 1.7.2003 and Finance Act, 2008 has amended the definition of banking and financial services to include money changing transactions also. Now, service tax will be levied on purchase or sale of foreign currency, including money changing, provided by an authorized dealer in foreign currency or an authorised money changer, in addition to a foreign exchange broker. An explanation has been added to the effect that explicit mention of the consideration for the services provided in relation to purchase or sale of foreign currency is not relevant for the purpose of levy of service tax. Taxable services [sections 65(105)(zzk) and 65(105)(zm)] has also been amended suitably. With these amendments, services provided in relation to purchase or sale of foreign currency by a foreign exchange broker, money changer and authorised dealer of foreign exchange shall also be leviable to service tax
In a typical money changing, the currencies of different countries are exchanged at the prevailing rates which change almost every hour. However, in case of a pure purchase and sale transaction, the net difference would imply trading margin and not a consideration for rendering a service, but it will be now subject to levy of service tax.
Foreign exchange brokers provide services as an intermediary in relation to purchase or sale of foreign currency on a commission/brokerage basis. Purchase or sale of foreign currency is undertaken by foreign exchange broker and also by persons authorized under Foreign Exchange Management Act, 1999 to deal in foreign exchange and having licence issued by RBI. Such authorised persons are known as money changers or authorised dealers of foreign exchange. Services in relation to purchase or sale of foreign currency is, therefore, provided by foreign exchange broker, money changer and also authorised dealer of foreign exchange.
Scope of money changing business
At one point of time (vide Circular No 92/3/2007 dated 12.3.2007),Government it self had clarified that money changing and forex broking are two different activities and money changing is an activity of sale and purchase of foreign exchange at prevailing market rates. Now, Finance Act, 2008 has taxed money changing also as a taxable service
The activities undertaken by money changers will also involve levy of service tax on both limbs of transaction - buying and selling. If a money changer buys one dollar @ Rs.39 and sells same @Rs 40, he shall have to pay service tax on both transactions on gross value rather than or net margin of Rs 1. Also, it is not just hard currencies but since currency has not been defined in service tax provisions, if one takes definition of foreign currency from FEMA, it would also include traveler's cheques and other instruments of foreign currency. Again, there is no charity on this. Similarly international credit cards may also be subjected to service tax for foreign currency transactions .
Types of transactions
While transactions between banks and customers would be taxable, inter bank transactions too are commercial in nature and would therefore, be taxable. On transactions with Reserve Bank of India, there exists an exemption vide Notification No 22/2006-ST dated 31.5.2006. Taxable services provided or to be provided by any person to Reserve Bank of India or by Reserve Bank to any person are exempt. This would cover forex services also. For transactions amongst bank branches (intra bank), service tax will generally not be applicable on the ground that service can not be provided to self and there ought to be two parties- service provider and service receiver. In case of centralized registration of such branches, there is no question of levy of service tax but is case of branches having different service tax registrations, problem may arise but as a principle, there should not be levy of service tax on intra bank transactions. Since section 67 on valuation now is specific on inclusion of book adjustments (debits and credits) in value of service, there is a need for clarity on this aspect as well.
Valuation of money changing business
Foreign exchange broker indicates the consideration for the services provided (commission) explicitly. Whereas money changers/authorised dealers of foreign exchange providing same services may not necessarily indicate the consideration explicitly.
To enable determination of taxable value, where the consideration for the services provided in relation to purchase or sale of foreign currency is not explicitly indicated by the service provider, a method under rule 6(7B) of the Service Tax Rules, 1994 has been prescribed. As per this provision, the service provider has the option to pay service tax calculated at the rate of 0.25% of the gross amount of currency exchanged.
CBEC has also illustrated the taxability by way of the following illustration -
Illustration:
Buying rate : US$ 1 = Rs.38 // Selling rate : US$ 1 = Rs.40
(i) Purchase of US$ 100 by the service provider:
Gross amount of currency exchanged in rupees = Rs.3800 (Rs.38 x 100)
Service tax payable = Rs.9.5 (0.25% x 3800)
(ii) Sale of US$ 100 by the service provider:
Gross amount of currency exchanged in rupees = Rs.4000 (Rs.40 x 100)
Service tax payable = Rs.10 (0.25% x 4000)"
While one may accept its inclusion in service tax net, the levying of a flat rate of 0.25% on gross amount exchanged is devoid of any basis or logic. One fails to understand how this percentage has been arrived at. The rule states that if no consideration is mentioned, service tax will be leviable @ 0.25 % .
An example will make this difference clear-
Case A Case B

100 US dollars exchanged for Indian Rupees Rs. 4000 RS. 4000
Fee charged and mentioned on advice/ invoice 40 not mentioned (say @ 1%)
Service tax @ 12.36 % including cess Rs. 4.94 -
Service tax @ 0.25 % on Rs 4000 including cess -- Rs 10.30
Thus, the service tax liability is double the service payable in a normal course on the service component .
It can be said that since implications are severe as the business operates on a wafer thin margin basis, it would be advisable for banks and other service providers to charge a consideration explicitly on such transactions to avoid litigation and huge taxation. This could be a percentage of the amount of currency involved or fixed amount per transaction.

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About the Author: -
Dr.Sanjiv Agarwal

FCA, FCS, ACIS(UK)

Golden Quotes

Head sees unity as diversity whereas heart proves unity in diversity.

circle of competence

CONITNUED FROM YESTARDAY......
We also know Buffett’s discipline of operating only within his “circle
of competence.” Think of this circle of competence as the cumulative
history of your experience. If someone had successfully operated a certain
business within a certain industry for a decade or more, we would say
that person had achieved a high level of competence for the task at hand.
However, if someone else had only a few years’ experience operating a
new business, we could reasonably question that person’s level of competence.

So perhaps Buffett faces a dilemma. Within his circle of competence,
the types of stocks he likes to purchase are not currently selling at
discounted prices. At the same time, outside his circle of competence,
faster-growing businesses are being born in new industries that have yet
to achieve the high level of economic certainty Buffett requires. If this
analysis is correct, it explains why there have been no new large buys of
common stocks in the past few years

We would be foolish indeed to assume that because the menu of
stocks available for purchase has been reduced, Warren Buffett is left
without investment options. Certainly he has been active in the fixedincome
market, including taking a significant position in high-yield
bonds in 2002. He is alert for the periodic arbitrage opportunity as well,
but considering the amount of capital Buffett needs to deploy to make
meaningful returns, the arbitrage markets are perhaps not as fruitful as
they once were.

The basic ideas of investing are to look at stocks as businesses,
use market f luctuations to your advantage, and seek a margin
of safety. That’s what Ben Graham taught us. A hundred years
from now they will still be the cornerstones of investing.4
WARREN BUFFETT

TO BE CONTINUED TOMORROW.......

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JAB WE MET CA
REDEFINING PROFESSIONALISM......
“ENJOY TODAY ,WAIT FOR BEAUTIFUL TOMORROW ”