TMI Tax Updates - e-Newsletter
January 28, 2016
Case Laws in this Newsletter:
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses the legal implications of actions taken by a power of attorney (POA) holder, particularly in the context of filing complaints under the Negotiable Instruments Act. It highlights that while a POA holder can act on behalf of the principal, they cannot testify on matters only the principal can address. The Supreme Court's rulings in cases like 'A.C. Narayanan v. State of Maharashtra' and 'G. Kamalakar v. Surana Securities Limited' clarify that a POA holder can legally file complaints and verify them on oath, provided they have direct knowledge of the transaction. However, complaints must be filed correctly, with proper authorization, to be valid.
News
Summary: The Gold Monetization Scheme has approved various centers across different regions to act as Collection and Purity Testing Centres (CPTC) as of January 20, 2016. The list includes numerous facilities in the Western, Southern, Eastern, Central, and Northern regions of India, all of which have qualified following inspections conducted in late 2015 and early 2016. These centers are responsible for assaying and hallmarking gold, ensuring its purity and authenticity. Notifications of qualification were sent to the respective centers shortly after their inspections.
Summary: The Gold Monetization Scheme has granted licenses to several refineries as of January 19, 2016. In the Western Region, licenses were issued to GGC Gujarat Gold Centre Pvt. Ltd. in Ahmedabad, India Government Mint in Mumbai, Shirpur Gold Refinery Limited in Dhule, and Edelweiss Metals Limited in Ahmedabad. In the Central Region, MMTC-PAMP India Pvt. Ltd. in Haryana and Jalan and Company in Delhi received licenses. In the Northern Region, M/s Kundan Care Products Ltd. in Haridwar was granted a license. These refineries are now authorized to operate under the scheme.
Summary: The Ministry of Shipping in India plans to invest Rs. 14,225 crores in various port projects to enhance capacity and modernize infrastructure. The initiative aims to improve mechanization levels, which currently vary significantly across ports. For instance, Kolkata Port is only 30% mechanized, whereas Kamarajar Port at Ennore is up to 90% mechanized. A consultant provided 101 recommendations for improving port efficiency, with several projects already underway. The Ministry is also considering the B.K. Chaturvedi Committee's advice to increase port draught to at least 14 meters, with dredging projects costing Rs. 793 crores to accommodate larger vessels at certain ports.
Summary: The Ministry of Railways has signed Memoranda of Understanding with the governments of Kerala and Andhra Pradesh to form joint venture companies aimed at developing railway infrastructure in these states. These agreements, part of a broader initiative involving 17 states, will see joint ventures with 51% state government and 49% Ministry of Railways ownership. The collaboration is intended to expedite project development, resource mobilization, and land acquisition, with a focus on critical rail projects. The agreements also allow for the formation of special purpose vehicles for specific projects, promoting financial leverage and enhancing project viability.
Summary: The India Investment Summit is scheduled for February 4-5, 2016, in the national capital, organized by the Department of Economic Affairs and SBI Caps. It aims to attract long-term investors, including global Sovereign Wealth Funds and Pension Funds, focusing on sectors like road transport, highways, ports, urban infrastructure, railways, power, and renewable energy. The event will feature participation from central ministries, state governments, and senior officials. The summit will highlight infrastructure investment opportunities, supported by the National Investment and Infrastructure Fund (NIIF), with a 49% government share, targeting economic impact through infrastructure projects. The Finance Minister will address the summit, and a project booklet will be released.
Summary: The Reserve Bank of India's reference rate for the US Dollar was set at Rs. 67.9803 on January 27, 2016, up from Rs. 67.6428 on January 25, 2016. Based on this reference rate and cross-currency quotes, the exchange rates against the Rupee for the Euro, British Pound, and Japanese Yen were also updated. On January 27, 2016, 1 Euro was valued at Rs. 73.8130, 1 British Pound at Rs. 97.5109, and 100 Japanese Yen at Rs. 57.45. The SDR-Rupee rate will be determined using this reference rate.
Summary: India and Armenia have signed a Protocol amending their existing Double Taxation Avoidance Convention, originally established on September 9, 2004. The amendment updates the Article on Exchange of Information for tax purposes to align with the OECD Model provisions. This change will facilitate the exchange of financial and banking information between the two nations, aiding in the prevention of tax evasion and supporting India's efforts to combat black money. The Protocol was signed by representatives from both countries, enhancing bilateral cooperation in addressing tax-related issues.
Summary: The Cabinet Committee on Economic Affairs in India approved the Hybrid Annuity Model for highway projects, aiming to enhance project viability and attract private investment. This model, distinct from the BOT (Toll) approach, involves shared financing between the government and private investors, with the latter recovering their investment through government annuity payments. It aims to boost highway project implementation by mitigating risks for private developers, such as traffic and inflation uncertainties, while maintaining construction and maintenance responsibilities. This initiative is expected to improve connectivity and stimulate economic activity across the country.
Summary: A pre-bid meeting was held on January 5, 2016, to discuss the appointment of an IT application development agency for the Startup India initiative by the Department of Industrial Policy and Promotion (DIPP). Key points included clarifications on the use of open-source versus licensed technology, technical evaluation criteria, and project budget set at Rs. 3 crore. Queries addressed topics like team composition, user capacity, application hosting, tender fee exemptions, and document management systems. Agencies were advised to propose solutions for evaluation, with the requirement for a functional web portal and mobile app by April 1, 2016. Other discussions covered integration with the 'Make in India' portal, multilingual support, and social media integration.
Notifications
Income Tax
1.
4/2016 - dated
22-1-2016
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IT
CORRIGENDUM - Notification No. S.O. 3313 (E), dated the 8th December, 2015
Summary: In the corrigendum to Notification No. S.O. 3313 (E) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, dated December 8, 2015, a typographical error in the English version is corrected. The date "9th December, 2015" is amended to "8th December, 2015" in line 5 of the original notification. This correction is officially noted in Notification No. 4/2016, dated January 22, 2016, and published in the Gazette of India.
Circulars / Instructions / Orders
Customs
1.
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 circular from the Ministry of Finance, Department of Revenue, Central Board of Excise & Customs, dated January 21, 2016, instructs all Principal Chief Commissioners and relevant officials to report the withdrawal of departmental appeals pending before High Courts and CESTAT. This action is based on an enhanced monetary limit and previous Supreme Court decisions on similar matters. The officials are required to submit monthly reports detailing cases reviewed and appeals withdrawn, adhering to instructions issued on December 17 and 18, 2015. Immediate action is mandated for cases below the new threshold limits, with compliance reports to be sent to the Board.
Highlights / Catch Notes
Income Tax
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Property Gift to Daughter Qualifies for Exemption Under Sec 54; Must Not Transfer Property During Restriction Period.
Case-Laws - AT : Exemption u/s 54 - gift of the property so purchased to the daughter - exemption allowed subject to that, during the restriction period, the daughter shall not transfer the property by any means - AT
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Repayment of "Ways and Means Loan" for 2004-05 Recognized as Income Application u/s 11 of Income Tax Act.
Case-Laws - AT : Application of income in the computation of total income of assessee u/s. 11 - claim of assessee in respect to repayment of 'ways and means loan', borrowed during assessment year 2004-05 and wholly and exclusively used for its objects, as an application of income in the computation of total income of assessee u/s. 11 allowed - AT
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Tax Assessment for 2010-11 Invalidated Due to Issuance in Name of Non-Existent Entity Post-Merger.
Case-Laws - AT : Validity of assessment - non-existent entity consequent to the order of merger - final order of assessment for Assessment Year 2010-11 dt.30.12.2014 passed in the name of ‘GE’ is null and void and the assessment is therefore held to be invalid and accordingly cancelled as the same has been passed after the appointed date 1.4.2012 on a non-existent entity. - AT
Customs
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Custom House Agent License Expires Due to Non-Compliance with Regulation 8/9 Employee Appointment Under CHALR 2004.
Case-Laws - AT : Renewal of nonest Custom House Agent License - CHALR 2004 - In the present case the appellant had failed to appoint a Regulation 8/9 qualified employee before the expiry of the license. As the license had already expired it did not remain an issue of being non operative, it was a matter of license becoming nonest as held by the Commissioner. - AT
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Refund Claim for Duty Paid on Provisional Assessment Not Subject to Unjust Enrichment Doctrine Before July 14, 2006 Amendment.
Case-Laws - AT : Claim of Refund of duty paid after finalization of provisional assessment - the doctrine of unjust enrichment will not be applicable as the present refund claim relates to the period prior to amendment in Section 18 of the Customs Act, 1962 i.e. 14.07.2006 - AT
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Commissioner's Addendum to 2009 Show-Cause Notice Deemed Erroneous Due to Lack of Sample Testing Reference.
Case-Laws - AT : Addendum to show-cause notice after receipt of the reply to show-cause - the learned Commissioner has erred in issuing addendum to show-cause notice after receipt of the reply to show-cause notice dated 18.12.2009. The addendum is also vitiated on the ground that there is no reference in the show-cause notice of any samples being forwarded for test. - AT
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DRI Officers Valid "Proper Officers" Under Customs Law; Section 28(11) Confirms Authority to Issue Show Cause Notices.
Case-Laws - AT : Proper officers - Whether DRI is the proper officer - jurisdiction of DRI to initiate proceedings - In the wake of Section 28(11) ibid, Show Cause Notices issued by DRI do not suffer from any jurisdictional infirmities - AT
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Customs House Agent license revocation and security deposit forfeiture upheld; appellant held responsible for employee's actions.
Case-Laws - AT : Revocation of CHA License - forfeited of entire amount of security deposit - We do not find any force in this argument for the reason that even if the offence is committed by employee but since it was authorized by the appellant to his employee, it is the appellant who is responsible for offence committed by his employee. - AT
Indian Laws
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Supreme Court: SARFAESI Act's Section 35 can't override tenant rights under Rent Control Act. Tenant protections upheld.
Case-Laws - SC : Eviction of tenant from mortgaged property - validity of lease - A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act - SC
Service Tax
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Capital Assets Use Classified as Service in Tax Case; Partial Stay Granted in "Supply of Tangible Goods" Category.
Case-Laws - AT : Supply of tangible goods - revenue was of the view that allowing use of such capital assets amounts to providing of services, namely, "supply of tangible goods" service. - stay granted partly - AT
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Gujarat High Court and Tribunal resolve 2005-06 subscription tax issue; service tax demand set aside.
Case-Laws - AT : Club or Association Services - collection of subscription from their members during the period 2005-06 - This issue is no more res-integra in view of various decisions of the Hon'ble Gujarat High Court and the Tribunal - Demand set aside - AT
Central Excise
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Appellant Exempt from Duty on Slag and Dust Removed in M.S. Ingots Manufacturing Process. No Duty Demand Applicable.
Case-Laws - AT : Duty demand - cenvat credit - appellant are not liable to pay any amount in respect of clearance of slag/dust which has been cleared by them without payment of duty as same has been emerged during the course of manufacture of M.S. Ingots - AT
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Section 11 Central Excise Act: No Adjustment of Refunds Against Penalty Dues Owed to Revenue.
Case-Laws - AT : Adjustment of amounts of refund due to the respondent against confirmed dues of penalty - Section 11 of the Central Excise Act does not provide for adjustment of money due towards the amount due to Revenue. - AT
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Under-Valuation Issues Confirmed: Related Entities' Case Invokes Extended Limitation Period Under Central Excise Regulations.
Case-Laws - AT : Under-valuation being from related persons - interconnected undertaking - Both the entities are controlled by the same person - All the observations are fact based observations. - demand confirmed invoking extended period of limitation - AT
VAT
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Court Rules Pure Labor Contracts Exempt from Composition Tax Under Delhi VAT Act, Section 6(1.
Case-Laws - HC : Demand of composition tax on service contract involving supply of labour, trenching and excavation works - Delhi Value Added Tax (DVAT) - the legislative intention was not to bring pure labour contracts within the purview of the Act, much less within the purview of Section 6 (1) - HC
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High Court Overrules Deputy Commissioner, Allows Concessional Tax on "Deep-Freezer" and "Tricycle" Under Form C.
Case-Laws - HC : Purchase of Goods against Form C - concessional rate of tax - Deputy Commissioner amended the registration certificate after deleting the two items, namely, “deep-freezer” and “tricycle”, on the ground, that the petitioner is not re-selling the said items. - Order of DC is wrong and incorrect - directed to issue Form-C - HC
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