| TDS on service tax kept in abeyance |
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New Delhi, 9 September A proposal to introduce the TDS (Tax Deducted at Source) mechanism for service tax on the lines of income tax has been put on the back burner. The finance ministry is instead thinking of expanding the list of services on which the tax would be levied under the reverse charge mechanism. At present, usually the service provider collects tax at a rate of 12 per cent and deposits it with the government. In a TDS mechanism, the recipient of the service is required to deduct the tax and deposit it with the government. The service provider gets the credit for the amount deducted on the basis of the certificate issued by the deductor. Under the reverse charge mechanism, the service recipient is liable to make the payment and gets credit for the amount paid. Earlier, the ministry was considering a proposal to introduce the TDS mechanism to check tax evasion and increase revenues. A study group was formed last year to examine its feasibility. However, it has shelved the plan, due to a lack of technology support for implementing the proposed mechanism. More, it did not receive positive feedback from the industry on the issue. "A lot of technological back-up is required for TDS on service tax and we are not ready. The Finance Act, 2012, has added three more services under the reverse charge basis. The list can be expanded if it works out well," said an official who did not wish to be identified. As the ministry wanted to check evasion by service providers, usually in the unorganised sector, it explored the possibility of the service recipient making the payment, as most of these were in the organised sector and it was easy to track their transactions. Bipin Sapra, tax partner, Ernst & Young, said TDS for service tax was tried in some jurisdictions but had not been successful. Reverse charge, he said, wa `s mainly used for import of services. "In a goods & services tax, this has to go back to the original system, as TDS does not work on sale of goods," he added. Sponsorship, a goods transport agency, an insurance agency, advocacy and works contracts are some services currently taxed on a reverse charge basis, as is import of services. In the previous Budget, the government had also brought hiring of means of transport, construction and manpower supply under reverse charge. TDS on service tax would have been similar to TDS on income tax, where the employer deducts tax at source before paying salary to the employee. The industry feared a TDS mechanism in service tax would increase the compliance burden on the service receiver, while requiring the government to expand its information technology infrastructure for paying refunds in large numbers. |
| SFIO scanner on various cases of company liquidations |
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New Delhi, 9 September The Serious Fraud Investigation Office (SFIO) is looking into various cases of companies' liquidation, to ascertain whether any financial irregularity has taken place at the entities being wound up. SFIO, a multi-disciplinary organisation under the ministry of corporate affairs with a mandate to probe serious financial fraud, is looking into such cases at the request of official liquidators and high courts hearing the winding-up petitions, a senior official said. SFIO mainly assists the high courts in these cases to ascertain if any violation had taken place in the companies put under the process of liquidation. In such cases, the agency's focus is on possible violations of the Companies Act while it also investigates the possibility of officials siphoning off money or misusing the assets. The services of SFIO have been sought so far in about 20 cases by the high courts of Delhi and Kolkata, where winding-up petitions have been moved by the creditors, the official said. SFIO expects its involvement in many more such cases in the future, he added. SFIO's expertise is generally sought by the court once an official liquidator is appointed to oversee the winding-up of a company to further strengthen the system to protect the interest of creditors and other stakeholders. Official liquidators are appointed by the central government under the Companies Act and are attached to various high courts. The courts require the investigations to be completed in a time-bound manner. Depending on cases, the deadlines vary and it can be 8-12 weeks or more. The official said that SFIO also provides additional information, regarding other violations, to the court, which can then be pursued by other competent authorities. Under the Companies Act, the court can order for investigation of affairs of a company by an entity appointed by the central government. Most of the requests so far have come from the Delhi High Court and SFIO's reports have been appreciated in many cases that have been completed, he noted. SFIO was well-appreciated for its probe into the Satyam Computer scandal and is currently investigating many high profile cases including alleged financial irregularities at Reebok and multi-layered marketing company Speak Asia. The new Companies Bill, which is awaiting Parliament approval, has proposed statutory status for the SFIO. With that status, the agency's investigation report submitted to the court would be treated at part with a report filed by a police officer. |
| LEGAL DIGEST |
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The Supreme Court last week severely criticised the Orissa High Court for directing the Orissa State Financial Corporation (OSFC) and Industrial Promotion and Investment Corporation of Odisha Ltd to offer afresh the benefit of "OneTime Settlement Scheme" to M/s Hotel Torrento Limited, a defaulter of loan. It had earlier been offered the scheme but did not avail of it. The high court had also ordered dispossession of Micro Hotel Ltd, the auction purchaser, which had bought the mortgaged property under the procedure followed by the State Financial Corporation Act. The Supreme Court listed 13 factors which the high court overlooked while deciding the case. Moreover, the order was also against that of another bench of the same court. "We express our strong disapproval of the manner in which the division bench of the high court virtually sat in judgment over the judgment of another co-ordinate bench," the Supreme Court judgment observed. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Labourissue forlargerbench The Supreme Court has referred to a larger bench an important question in labour law as two benches of the court had given different interpretations on the power of the labour court. In this case, Ram Shiroman Mishra vs Vishwanath Pandey, the labour court had ordered reinstatement of an employee with full back wages. However, the employer moved an application stating that he was not aware of the proceedings. The labour court rejected it observing that the application was filed after publication of the award and after issuance of the recovery certificate under the provisions of the Industrial Disputes Act. Therefore the labour cannot recall the order. The employer moved the Delhi High Court against the order, but it was dismissed. About the power of the labour court to recall its own order after 30 days of delivery, there are two streams of judgments which are contrary to each other. Therefore, the Supreme Court referred the question to a larger bench. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Arbitral award setaside The Delhi High Court has set aside the majority award of the arbitration tribunal allowing the claims and counter claims of E I Du Pont de Nemours and Indian Acrylic Ltd in their dispute over a know-how and engineering information agreement. Du Pont as licensor had agreed in a $5 million deal to provide the Indian company a non-exclusive licence to use Du Pont's confidential information and know-how as specified in the agreement to use polymer in the manufacture of a certain product. Later Du Pont allegedly closed its acrylic fibre production business and therefore it was unable to fulfil its obligations, starting disputes between the two followed by arbitration in Paris. The majority award allowed the claim of Du Pont and it was challenged by Indian Acrylic on the ground of delay. The high court accepted the contention and observed that "the majority award committed a patent illegality" on this issue. It added that the Limitation Act is part of the public policy inasmuch as it prohibits the entertaining of monetary claims that are timebarred. While rejecting claims and counterclaims, the court stated that "an award contrary to the express provisions of the Act would be in conflict with the public policy of India." >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Stop anti-competitive practice The Competition Commission of India has acted on a complaint filed by Vedant Bio Sciences against the Chemists and Druggists Association of Baroda and imposed penalty on the latter for adopting anti-competitive practices. The commission directed the association to file an undertaking that practices with respect to fixing of trade margins of pharma products, nonappointment of stockists or wholesalers from amongst non-members of the association, requirement of No Objection Certificate from the association for appointment of stockists or wholesalers and limit on number of stockists of pharmaceutical companies have been done away within 90 days. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Sugarmills notto pay marketfee The Supreme Court last week dismissed an appeal moved by the Madhya Pradesh government and ruled that sugar mills are not liable to pay market fee on the purchase of sugarcane from cane growers and their cooperative societies. The mills had filed writ petitions for quashing the notices issued by the market committees requiring them to take licence under the Market Act of the state and to pay market fee on the purchase of sugarcane, by asserting that the provisions of the Market Act are not applicable to the transactions which are exclusively governed by the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act and the Sugarcane (Control) Order issued by the Central Government under the Essential Commodities Act. The state government and the market committees had argued that the Market Act would prevail over the Control Order in transactions involving the purchase of sugarcane by the factories operating in the market areas. This was rejected by the high court as well as the Supreme Court in the case, Krishi Uptadan Mandi Samiti vs Shiv Shakti Khansari Udyog. MJ ANTONY THINKSTOCK |
Company Secretary, Chennai
email csarengarajan@gmail.com
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