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Tax Amicus: October 2013

Value Added Tax (VAT) on developers is at the centre of discussion this month. Article in this issue discusses in detail, recent Supreme Court Judgment in the case of Larsen and Toubro upholding the interpretation of law as held by Division Bench in the case of K. Raheja Development. According to the authors, intensive research, deep understanding, economic implications, top level expertise and above all a benevolent approach, are required to find proper solutions that will satisfy all parties to the dispute. Central Excise section covers amendments to Cenvat Credit Rules, 2004 relating to duty payable when capital goods are removed as waste and scrap and the Supreme Court order holding that Modvat credit (now Cenvat credit) cannot be denied merely on the ground that duty was not paid by the supplier of inputs.

Service Tax portion of this issue covers CBEC clarification on exemption to auxiliary educational services when provided to an educational institution in respect of education exempted from Service tax. CESTAT has held that service rendered to international in-bound roamer should be treated as export of service and Allahabad High Court has stayed recovery proceedings till the time assessees' application under Service Tax Voluntary Compliance Encouragement Scheme (VCES) is disposed by the competent authority. These orders are also summarized in this issue.

New All India Drawback rates have been notified and residuary rates have been provided for several items earlier carrying nil rates. Important changes made in Delhi VAT Rules relating to determination of taxable turnover in respect of works contract, are also covered in this issue of Tax Amicus. Highlights under Income Tax section are prescription of criteria by CBDT for manual selection of cases for scrutiny during the financial year 2013-14 and notification of Safe Harbor Rules besides the ITAT decision holding that Section 50C of the Income Tax Act is not applicable on transfer of a capital asset being a 'leasehold right'.

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