TMI Tax Updates - e-Newsletter
January 23, 2016
Case Laws in this Newsletter:
Articles
By: Monarch Bhatt
Summary: The article discusses the complexities surrounding the Swachh Bharat Cess (SBC), introduced on November 15, 2015, for taxable services. It critiques the FAQs issued by the board for creating confusion rather than clarity, particularly concerning the point of taxation. The article argues that the FAQs fail to distinguish between "levy" (imposition of tax) and "collection" (realization of tax), emphasizing that levy must precede collection. It explains that SBC should be levied under section 66B of the Finance Act, 1994, not section 119 of the Finance Act, 2015, which merely imposes SBC. The article concludes that proper determination of levy is essential before applying the rules for tax collection.
News
Summary: The Central Board of Direct Taxes (CBDT) has signed seven additional unilateral Advance Pricing Agreements (APAs) with taxpayers, increasing the total to 39 agreements. This includes 38 unilateral and one bilateral agreement, with 30 signed in the current fiscal year. The new agreements cover sectors such as investment advisory, software development, IT-enabled services, and manufacturing. Introduced in 2012, the APA scheme aims to provide transfer pricing certainty by pre-determining pricing methods for international transactions. The initiative has been well-received by the industry for enhancing tax predictability and supporting a stable business environment.
Summary: The Government of India announced the re-issue of four government stocks through a price-based auction, totaling Rs. 14,000 crore. The stocks include 7.35% government stock maturing in 2024 for Rs. 2,000 crore, 7.59% stock maturing in 2029 for Rs. 6,000 crore, 8.24% stock maturing in 2033 for Rs. 3,000 crore, and 8.13% stock maturing in 2045 for Rs. 3,000 crore. The Reserve Bank of India will conduct the auctions on January 29, 2016, using a multiple price method. Up to 5% of the stocks will be allocated to eligible individuals and institutions via non-competitive bidding. Results will be announced the same day, with payments due by February 1, 2016.
Summary: The Income-Tax Appellate Tribunal (ITAT) will celebrate its Platinum Jubilee on January 24-25, 2016, with the President of India as the Chief Guest. The event will feature speeches by the Chief Justice of India, the Union Ministers of Law and Justice, and Communications and Information Technology. Established in 1941, the ITAT is a second appellate authority for tax disputes. The celebrations will include technical sessions on tax jurisprudence, technology in justice delivery, and tax litigation. Legal experts and government officials will participate, and a commemorative postal stamp will be released. The Finance Minister will chair the valedictory session.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 67.7480 on January 22, 2016, down from Rs. 68.0600 on January 21, 2016. Consequently, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were adjusted. On January 22, the Euro was valued at Rs. 73.4050, the British Pound at Rs. 96.4461, and 100 Japanese Yen at Rs. 57.38. The SDR-Rupee rate is determined based on this reference rate.
Summary: The Reserve Bank of India has revised its Gold Monetization Scheme to enhance customer convenience. Amendments, made with government consultation, allow premature withdrawal of medium-term deposits after three years and long-term deposits after five years, albeit with interest penalties. Large gold deposits can be made directly with refiners to expedite interest accrual. Participating banks will receive a 2.5% commission in the first year, covering handling charges and commission. The scheme will undergo regular reviews to ensure effective implementation and customer satisfaction.
Notifications
Central Excise
1.
03/2016 - dated
22-1-2016
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CE
Seeks to amend Notifications No.56/2002-CE & No.57/2002-CE both dated 14.11.2002 so as to insert a sunset clause of 31.03.2016 and to deny the benefit of the exemption to goods on which certain specified processes have been undertaken
Summary: The Government of India has amended Notifications No. 56/2002-CE and No. 57/2002-CE, both dated November 14, 2002, to include a sunset clause effective March 31, 2016. These amendments specify that the exemptions provided by these notifications will not apply to goods that have undergone only specific processes such as preservation, cleaning, packing, labeling, sorting, or price alteration, without any further manufacturing processes in Jammu and Kashmir. The amendments aim to limit exemptions to products that undergo significant manufacturing processes, ensuring compliance with the Central Excise Act and related legislation.
Customs
2.
15/2016 - dated
22-1-2016
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Cus (NT)
Regarding grant of Presidential Award of Appreciation Certificate to the officers of the Customs & Central Excise on the eve of Republic Day, 2016
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has announced the Presidential Award of Appreciation Certificates for distinguished service to officers in the Customs & Central Excise Department. This recognition, coinciding with Republic Day 2016, honors various officers across different ranks, including Principal Commissioners, Additional Commissioners, Deputy Commissioners, Superintendents, Inspectors, and Senior Private Secretaries. The awards are granted under a specific scheme outlined in the Gazette of India, recognizing outstanding contributions to the department. The notification lists the names and positions of the awardees without personal identifiers.
Income Tax
3.
1/ 2016 - dated
19-1-2016
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IT
Two additional modes of generating Electronic Verification Code (EVC) have been notified By pre-validating Bank account details and By pre-validating Demat account details.
Summary: The Government of India has introduced two new methods for generating an Electronic Verification Code (EVC) for electronically filed income tax returns. These methods involve pre-validating bank account details or Demat account details. Taxpayers can pre-validate their bank or Demat account information through the e-filing website, providing necessary details such as account numbers, email, and mobile numbers. Once validated, the EVC is sent to the taxpayer's verified email and/or mobile number. These additional modes are effective immediately, with all other conditions remaining as per the previous notification dated July 13, 2015.
Law of Competition
4.
F. No. 5/21/2015-CS - dated
14-1-2016
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Competition Law
Competition Commission of India (salary, allowances, other terms and conditions of service of the Secretary and officers and other employees of the Commission and the number of such officers and other employees) (Second Amendment) Rules, 2016
Summary: The Ministry of Corporate Affairs issued a notification amending the Competition Commission of India Rules, 2009, concerning the salary, allowances, and service conditions of the Secretary, officers, and employees. Effective from its publication date, the amendment revises the pay scale for the Private Secretary position, changing the grade pay from Rs. 4200 to Rs. 4600. Additionally, it updates the criteria for deputation or absorption, specifying that officers holding analogous posts or Stenographers Grade-I with five years of regular service in the specified pay band are eligible.
Circulars / Instructions / Orders
DGFT
1.
56/2015-2020 - dated
22-1-2016
Procedure to deal with the pending applications for issuance of Duty Free Import Authorisation(s) (DFIA) and their transferability.
Summary: The Directorate General of Foreign Trade (DGFT) has outlined procedures for handling pending Duty Free Import Authorisation (DFIA) applications and their transferability. The DFIA scheme, previously available with an AU condition, is now only on a post-export basis with exemptions limited to basic customs duty. Applications filed before April 1, 2015, will be processed under the new guidelines. Import of raw sugar under DFIA has been withdrawn as of May 1, 2015. Transferability requests for DFIAs involving raw sugar will be considered only for exports with Let Export Orders issued before May 1, 2015. The notice clarifies the processing of pending applications and transferability requests.
2.
15/2015 - dated
21-1-2016
Strict adherence to the Notification No 114 dated 12th March 2015 specifying number of mandatory documents required for Export and Import
Summary: The Directorate General of Foreign Trade (DGFT) mandates strict adherence to Notification No. 114 dated 12th March 2015, which requires only three mandatory documents for exports and imports: Bill of Lading/Airway Bill, Commercial Invoice cum Packing List, and Shipping Bill/Bill of Export for exports, or Bill of Entry for imports. Additional documents may only be required for specific goods subject to restrictions or legal compliance. All relevant departments must comply with this notification, and any deviations should be reported to the DGFT through trade bodies.
Central Excise
3.
F.No.390/Misc./163/2010-JC - dated
21-1-2016
Report in respect of withdrawal of department’s appeals pending before High Court / CESTAT on the basis of ; (i) enhanced monetary limit and (ii) earlier Supreme Court’s decision on the identical matters
Summary: The Ministry of Finance's Department of Revenue has issued instructions for withdrawing certain departmental appeals pending before the High Court and CESTAT. These withdrawals are based on an enhanced monetary limit and prior Supreme Court decisions on similar matters. Principal Chief Commissioners and Chief Commissioners were instructed to submit monthly reports detailing the number of cases reviewed and appeals withdrawn. Immediate action is required for cases below the new threshold limits, as per instructions dated December 17 and 18, 2015. Compliance reports must be sent to the Board promptly.
Highlights / Catch Notes
Income Tax
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New Modes Introduced for Electronic Verification of Tax Returns to Enhance Convenience and Security for Taxpayers.
Notifications : Electronic Verification CODE (EVC) for electronically filed Income Tax Return - Additional Modes - Notification
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Settlement for Surrendering Right to Sue Deemed Capital Receipt, Not Taxable u/s 45 of Income Tax Act.
Case-Laws - AAR : Taxability of Settlement amount received - The nature of settlement amount is of capital receipt and it cannot be categorized as income. Further this amount has been received against surrender of right to sue which cannot be considered for the purpose of capital gains u/s 45 - AAR
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AAR Rules Supply Management Service Fees Not FTS or Royalties Under India-UK Tax Treaty.
Case-Laws - AAR : The Supply Management Services fees received by the applicant is not in the nature of FTS or royalties under the India-UK Tax Treaty - AAR
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Investment in Dow Agrosciences India Shares is Capital Asset; No Permanent Establishment in India for Applicant.
Case-Laws - AAR : Investment in equity shares of Dow Agrosciences India Private Limited - capital asset u/s 2(14) - There is no material to hold that the applicant has a PE in India and therefore, the income arising out of the transfer of shares should be treated as business income. - AAR
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Tax Assessment Reopening Challenged: Incorrect Authority Filing Doesn't Mean Return Failure; Notice Basis Undermined.
Case-Laws - HC : Reopening of assessment - return was filed before the wrong authority - Such being the facts, it cannot be stated that the petitioner had filed no return. The very foundation for issuing notice, therefore, as recorded in the reasons, would be belied. - HC
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Assessment Reopening Blocked After Four Years Due to Full Disclosure by Assessee; Other Remedies Were Available.
Case-Laws - HC : Reopening of assessment - There were multiple other remedies available to the revenue to exercise within the time frame provided under the statute, but to reopen an assessment beyond the period of four years of the assessment order was simply not one of them since there is no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment - HC
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Depreciation Calculated Using Written Down Value u/s 250(6) Deemed Accurate and Error-Free.
Case-Laws - HC : Depreciation worked out with reference to the written down value computed as a result of order passed under Section 250(6) - Higher WDV - No error could be pointed out in the approach - HC
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Tea Scheme Focuses on Profit Boost for Manufacturers; Revenue Subsidy Taxable u/s 28(iv.
Case-Laws - AT : Nature of Subsidy - The predominant purpose of the scheme is to ensure that tea manufactures function more profitably and not for setting up of a new unit or expansion of the existing unit. - the subsidy in question is revenue subsidy and was rightly brought to tax - AT
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Interest on Late Excise Duty or Sales Tax is Compensatory, Not Law Violation; Shouldn't be Disallowed for Tax.
Case-Laws - AT : Disallowance of interest on delayed payment on excise duty or delayed payment of sales-tax - These are more or less compensatory in nature and cannot be held as any infraction or violation of any law - AT
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Income Tax Case: Firm Allowed to Carry Forward Losses Despite Changes in Partnership's Profit-Sharing Ratio (Sections 187 & 78.
Case-Laws - AT : Brought forward losses of firm - covered u/s 187 OR u/s. 78 - change in the terms and conditions of the partnership - the reconstitution of the partnership was made only as a result of changes in the profit sharing ratio amongst the partners - CIT(A) has rightly allowed carry forward losses to be set off, as claimed by the assessee - AT
DGFT
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New Trade Notification: March 2015 Sets Document Requirements for Import/Export to Streamline Operations and Ensure Compliance.
Circulars : Strict adherence to the Notification No 114 dated 12th March 2015 specifying number of mandatory documents required for Export and Import - Trade Notice
Corporate Law
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Petition Challenges Liquidator's Possession of Plot; Questions Transaction Validity Post-Winding-Up Order Per Legal Principles.
Case-Laws - HC : Petition praying the official liquidator be restrained from taking possession of the said plot - transaction itself is not bona-fide and in view of the settled legal position that a transaction not completed before the order of winding up has been passed, cannot be completed after the winding up order is passe - HC
Indian Laws
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Supreme Court Affirms Registrar's Power to Correct Trademark Register; Highlights Three-Month Opposition Notice Period.
Case-Laws - SC : Rectification of register where trademark 'BLENDERS PRIDE' was registered by inadvertence/error - time for filing notice of opposition within the three month - The Registrar's power to maintain the purity of the register of trademarks would still remain intact - SC
Service Tax
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Can Swachh Bharat Cess Be Collected Without Formal Levy? Examining Legal Framework and Need for Clear Legislative Backing.
Articles : Swachh Bharat Cess – Can it be “collected” without “levy”? - Service Tax
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Court Orders Release of Seized Goods Amid Unassessed Service Tax Liabilities; Conditions Apply.
Case-Laws - HC : Attachment and seizure by the Service Tax Department for substantial service tax dues not paid - there is no final assessment of the petitioner's duty and penalty liabilities. - Goods to be releases subject to specific conditions - HC
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Dispute Over Cenvat Credit Allocation for Table-C Department Services: Taxable vs. Exempted Services Examined.
Case-Laws - AT : Cenvat Credit - Allocation of input services to the concerned department as earned by the Table-C department - appellant provides taxable service as well as exempted service - entire disallowance does not call for any decision in favour of Revenue. - AT
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Tax Demand on SWIFT Services: Reverse Charge Mechanism and Extended Limitation Period Explored in India.
Case-Laws - AT : Classification of Import of services from M/s. Society for Worldwide Interbank Financial Telecommunication (SWIFT) which is a non-resident entity, not having an office in India - reverse charge - Demand conformed invoking the extended period of limitation - AT
Central Excise
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Amendments to Notifications No.56/2002-CE and No.57/2002-CE introduce sunset clause, ending exemptions for specified goods by 2016.
Notifications : Seeks to amend Notifications No.56/2002-CE & No.57/2002-CE both dated 14.11.2002 so as to insert a sunset clause of 31.03.2016 and to deny the benefit of the exemption to goods on which certain specified processes have been undertaken - Notification
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Appellant Not Liable for Department's Lapses in Fraudulent Export Case to Nepal; Internal Verification Issues Highlighted.
Case-Laws - AT : Allegation of fraudulent export of goods to Nepal - . It is the departmental internal correspondence to ascertain the fact that export is complete or not. For the lapses of the department, appellant cannot be held faulted - AT
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Valuation of Stock Transfers: Comparable Prices Must Be Used, Not Highest Sale Price, Under Central Excise Laws.
Case-Laws - AT : Valuation - stock transfer - Differential duty on clearances to their Faridabad unit - comparable price - while the value adopted is to be based on comparable value there is no sanction to take highest of the independent sale price for such purpose. - AT
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Iron & Steel Structures Like Trusses and Columns Not Excisable Under Current Central Excise Tariff Entries.
Case-Laws - AT : Classification - manufacture - change in the scope of tariff entries - iron and steel structures like trusses, columns, staircase, windows and section etc. - These steel structures are commonly known as component parts of building/ shed. - these goods are not excisable - AT
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