What is the applicable rate of service tax post-Budget, in view of the fact that one per cent and two per cent cess have been withdrawn?
The proposed new rate of service tax of 14 per cent will be applicable from a date to be notified by the government after passage of the Finance Bill 2015 by Parliament. Till then the current rate of 12 per cent will continue along with two per cent education cess and one per cent secondary and higher education cess, which have not yet been exempted on service tax.
We are an SME located at Yamunanagar in Haryana and a recognised export house. Sixty per cent of our production is exported mainly to GCC countries. Two years back, we set up a wholly-owned unit in UAE. At the close of the second year, the unit has made a handsome turnover and profits. Our unit wishes to pay us 100 per cent dividend on our 1 million AED, which is the basic investment. What will be the rate of tax leviable on this dividend? Also, we had also advanced around AED 915,000 (0.915 million) as temporary loan to our unit for working capital, which is also being returned by our unit. Kindly advise in what way we can ask for interest on this amount advanced or some other way to get some income on the money advanced, which may be free from levy of income tax.
Section 115BBD of the Income Tax Act, 1961 specifies the provisions pertaining to tax on dividends received from foreign companies. If the income of an Indian company includes any income by way of dividends declared, distributed or paid by its foreign subsidiary, the dividend shall be taxable at 15 per cent (plus applicable surcharge and cess). Subsection (2) of the said section denies any deduction in respect of any expenditure or allowance while computing income by way of dividend. There is no provision not to tax income derived by way of interest on any loans or advances given.
Can you give us reference of any case laws stating that the adjudicating authorities are bound to follow the decisions of the Tribunal?
You may refer to Shiva Texfabs Ltd. Vs CCE, Chandigarh [2015 (315) ELT 83 (Tri. Delhi) wherein the Tribunal held as follows: "There is no doubt that the Tribunal's decisions have precedential value. It is also seen that the adjudicating authority while not following the said judgement has not quite distinguished the same and such an act (of not following the said order) is not in conformity with the requirement of judicial discipline inasmuch as the distinguishment has to be rational, logical and substantive enough to take away the precedential value of the judgement and the adjudicating authority's attempt at distinguishing the CESTAT order falls abysmally short of that requirement."
So, the adjudicating authority must follow binding precedents on identical issues that have attained finality at the Tribunal, or High Court, or Supreme Court. However, if he decides to depart from settled judgments, he should give cogent and valid reasons for doing so.
Business Standard invites readers' SME queries related to excise, VAT and exim policy. You can write to us at smechat@bsmail.in
