TMI Tax Updates - e-Newsletter
January 30, 2014
Case Laws in this Newsletter:
News
Summary: The Indian Finance Minister visited Saudi Arabia to co-chair the 10th India-Saudi Arabia Joint Commission Meeting, focusing on enhancing bilateral cooperation. Discussions included promoting Saudi investments in Indian projects like the Delhi Mumbai Industrial Corridor and various petrochemical complexes. The meeting addressed cooperation in sectors such as oil, gas, pharmaceuticals, and higher education. Agreements were made on establishing a joint investment fund and strengthening security collaboration. The minister emphasized increasing bilateral trade, which was $43 billion in 2013, and encouraged Saudi investments in Indian infrastructure. The visit also included meetings with Saudi leaders and business representatives.
Summary: India has attracted USD 306.88 billion in foreign investment since 2000, with 94% received in the last nine years. The government has liberalized its Foreign Direct Investment (FDI) policy, adjusting sectoral caps and entry routes in areas like telecom, insurance, and defence. FDI in multi-brand retail is capped at 51%, while single-brand retail is now open to 100% foreign investment. These reforms have positioned India as a top global investment destination, boosting economic growth, enhancing domestic industries, and benefiting consumers and farmers. The policy changes aim to improve infrastructure, create jobs, and stabilize prices through enhanced supply chain efficiencies.
Summary: The Reserve Bank of India set the reference rate for the US dollar at Rs.62.2005 and the Euro at Rs.84.9640 on January 29, 2014. The previous day's rates were Rs.62.9898 for the US dollar and Rs.86.1715 for the Euro. The exchange rates for the British Pound and Japanese Yen against the Rupee were 103.1160 and 60.22, respectively, on January 29, compared to 104.6135 and 61.36 on January 28. The SDR-Rupee rate will be determined based on this reference rate.
Circulars / Instructions / Orders
Income Tax
1.
F.NO.199/03/2013-ITA.1 - dated
28-1-2014
Exemption for rewards by Central Government or State Government to medal winners of Olympic Games or Common Wealth Games or Asain Games under clause (17A) of section 10 of the Income Tax Act 1961 (43 of 1961).
Summary: The Central Government has approved exemptions under clause (17A) of section 10 of the Income Tax Act, 1961, for rewards given to medal winners of the Olympic Games, Commonwealth Games, or Asian Games. This applies to any payments made by the Central or State Governments, either in cash or kind, effective from the date of the order, January 28, 2014.
FEMA
2.
99 - dated
29-1-2014
Foreign investment in India by SEBI registered Long term investors in Government dated Securities
Summary: The circular addresses foreign investment in Indian government securities by SEBI-registered long-term investors. It highlights that the existing sub-limit for such investments, previously set at USD 5 billion, has been increased to USD 10 billion, within the overall USD 30 billion limit for foreign investments in government securities. This change was made in consultation with the Government of India. The circular also mentions that SEBI will issue operational guidelines, and all other conditions for investment remain unchanged. Authorized Dealer Category-I banks are instructed to inform their clients about these updates.
Highlights / Catch Notes
Income Tax
-
One-time NPV payment to Forest Department for non-forest use is revenue expenditure under tax rules.
Case-Laws - AT : Expenses as NPV of compensation paid to the Forest Department for utilization of forest land for non-forest purpose - Though NPV payment is a one-time payment, the same was not made to acquire any asset - allowed as revenue expenditure - AT
-
Income Tax Act Section 40(a)(ia): Training Costs for Pilots and Aviation Staff Not "Service Make Available," Affects Disallowance Applicability.
Case-Laws - AT : Disallowance u/s 40(a)(ia) - The training was given to the pilots and other staff as per the requirement of the DGCA Rules – thus, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available" - AT
-
No Tax Deduction at Source for Lease Premium Payments to CIDCO u/s 194I of Income Tax Act.
Case-Laws - AT : TDS u/s 194I - Whether the assessee is required to deduct tax at source from the payment of lease premium made to CIDCO during the years under consideration u/s 194I - Held no - AT
-
Assessing Officer Needs Evidence to Invoke Section 40A(2)(a) for Disallowing Excessive Expenses Under Income Tax Act.
Case-Laws - AT : Disallowance u/s 40A(2)(b) - there should be some material available before the AO for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder - AT
-
Section 10A Deduction Applies Before Section 72 Loss Set-off for Business Profit Calculation.
Case-Laws - HC : The deduction u/s 10A, has to be given effect to at the stage of computing the profits and gains of business - This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses - HC
-
High Court Clarifies Section 54F: Start House Construction Within 2 Years for Tax Exemption, Completion Not Required.
Case-Laws - HC : Exemption u/s 54F - provision says that within two years of sale the sass should have constructed the house but it does not mean that the construction should necessarily be complete within two years - HC
-
Cash System Accounting: Advance Not Automatically Income; CIT(A) Addition Deleted.
Case-Laws - AT : Merely that the assessee followed cash system of accounting does not mean that any sum received as advance for his future use becomes his income - The addition made by CIT(A) deleted - AT
-
Section 40(a)(ia) Disallowance: Only Specific Deductions, Not Reimbursements, Affected for TDS u/s 194J.
Case-Laws - AT : TDS u/s 194J - Disallowance under section 40(a)(ia) can be made only in respect of an amount which is sought to be deducted under section 30 to 38 and not in respect of reimbursement simplicitor which is profit neutral and routed through the Profit & Loss Account - AT
-
Interest on Unpaid Purchase Price Excluded from Section 194A; No TDS on Discount or Factoring Charges.
Case-Laws - AT : TDS u/s 194A - Interest on unpaid purchase price was not treated as interest on loan - discount / factoring charges do not come within the purview of section 194A - not liable to TDS - AT
-
Appellate authorities can consider new claims on indexed cost of acquisition for capital gains tax at appeal stage.
Case-Laws - AT : Deduction of indexed cost of acquisition - appellate authorities have jurisdiction to consider the additional claim made for the first time before them - AT
Customs
-
Exporter Not Penalized for Department's Inaction in Denied Conversion of Shipping Bills from DEPB to Drawback Scheme.
Case-Laws - AT : Denial of conversion of 3 Shipping Bills from DEPB scheme to Drawback - exporter cannot be penalized for the inaction of the department at the time of allowing the shipment and thereafter - AT
-
Car Export Obligation: Earnings from Fare Charges Insufficient for Fulfillment.
Case-Laws - AT : Car should have been put to use for activities which earn foreign exchange though the argument that the entire export obligation should be discharged by earning from fare charges of the cars was not accepted - AT
Corporate Law
-
ZIL Directors Accused of Diverting Funds, Triggering Winding Up Proceedings Under Company Law for Financial Mismanagement.
Case-Laws - HC : Winding up of company - Inability to pay debts - ZIL and its promoters/directors employed a device or artifice to fraudulently divert the sale proceeds of its MSD Division - HC
Service Tax
-
Service Tax Demand Confirmed Under Extended Time; Penalty Waived Due to Reasonable Cause u/s 80.
Case-Laws - AT : Confirmation of service tax demand by invoking proviso to Section 73 (1) and waiver of penalty by invoking Section 80 do not go hand in hand- AT
-
Service Tax on Reverse Charge Basis Applies to Applicant, Not Dubai Office, for Foreign Service Provider Agreement.
Case-Laws - AT : Service tax on Reverse change basis - the agreement is made between the applicant and the foreign service provider. Therefore, it cannot be said that the Foreign Service provider has provided service to Dubai office and not to the present applicant - AT
-
Court Allows Tax Refund Despite Time Limit Due to Misunderstanding of Law; Refund Ordered for Appellant.
Case-Laws - AT : Refund claim - Bar of limitation - appellant’s refund claim was maintainable and tax paid by the appellant under misconception of law was to be refunded - AT
Central Excise
-
Assessee Shows Due Diligence in Transactions with First Stage Dealer Before Availing Cenvat Credit.
Case-Laws - HC : Reasonable steps / care to be taken before availing Cenvat Credit - The assessee, in the present case, was found to have duly acted with all reasonable diligence in its dealings with the first stage dealer - HC
-
Tribunal Must Justify Reversal of Extended Limitation Period, Especially When Overruling Additional Commissioner's Findings.
Case-Laws - HC : If the Tribunal had to reverse this view regarding invocation of the extended period of limitation, it was necessary for it to indicate some reasons why the factual findings contained in the order of the Additional Commissioner and the Commissioner (Appeals) were being overruled - HC
-
High Court Affirms Taxpayer's Right to Reclaim Reversed Suo Moto Credits u/r 6(5) of Cenvat Credit Rules.
Case-Laws - HC : Availment of suo moto credit which was reversed earlier - eligible cenvat credit credit under Rule 6(5) of CCR - legally speaking there is no impediment in the asseesee taking suo motu credit - HC
-
Revenue Can Appropriate Duty with Rebate Claims Post-Stay Expiry, Must Release Remaining Balance Without Adjusting Penalty.
Case-Laws - HC : Appropriation of the rebate claims with duty demand on the expiry of a stay - Revenue allowed to appropriate the duty amount with rebate but not allowed to adjust penalty amount, the balance would be released to the assessee - HC
-
Tribunal Can Recall Dismissal of Appeal for Non-Deposit of Penalty if No Prohibition Exists in Act or Rules.
Case-Laws - HC : In the absence of any provision in the Act or Rules specifically prohibiting restoration of appeal dismissed on the ground of non-deposit of penalty, the learned Tribunal has a power and jurisdiction to recall its order, if ends of justice require such course of action - HC
9911796707
