TMI Tax Updates - e-Newsletter
January 9, 2012
Case Laws in this Newsletter:
Income Tax
TMI SMS
Articles
By: DEVKUMAR KOTHARI
Summary: The article discusses the concepts of allowable depreciation and actual allowance against chargeable profits or gains under Section 32 of the Income-tax Act, 1961. It explains that depreciation is calculated annually at prescribed rates on either a straight-line or written-down value basis, depending on the asset type. The allowable depreciation amount is determined by sub-section (1), while the actual allowance is made under sub-section (2), limited to the chargeable profits or gains. Unallowed depreciation due to insufficient chargeable income is carried forward to subsequent years. The article highlights differences between the 1922 and 1961 Income-tax Acts regarding depreciation treatment.
News
Summary: The Finance Minister of India announced the commissioning of a new banknote printing line at Dewas, highlighting the modernization and corporatization efforts of the Security Printing and Minting Corporation of India Limited (SPMCIL). This initiative aims to enhance efficiency and self-reliance in currency production. SPMCIL has significantly improved its financial performance, becoming a zero-debt company and achieving Mini Ratna status. The government is investing in indigenizing banknote paper and ink production, with facilities in Hoshangabad and Mysore. New security features for currency notes are being developed to combat counterfeiting, and the Coinage Act 2011 was enacted to streamline coinage regulations.
Summary: The Union Finance Minister inaugurated Indian Bank's new corporate office in Chennai, highlighting the bank's growth since its founding in 1907. Indian Bank now operates 1,927 branches and 1,209 ATMs, with significant profits and numerous awards. The new building features modern, energy-efficient technology and aligns with the government's financial inclusion goals, emphasizing access to banking for rural populations. The bank has made strides in financial inclusion, covering villages with populations below 2,000. The Minister also discussed the implementation of Basel III Capital Regulations, ensuring public sector banks remain well-capitalized, and expressed commitment to aligning Indian banks with global standards.
Summary: The Union Finance Minister addressed the Platinum Jubilee celebration of Indian Overseas Bank in Chennai, highlighting the bank's growth from a small entity at nationalization to a business mix exceeding Rs. 3 lakh crores. He emphasized the need for banks to manage risks associated with asset quality and global market volatility, while implementing Basel-III capital adequacy standards. The minister also stressed the importance of financial inclusion, aiming to cover 73,000 habitations with banking services, and praised Indian Overseas Bank for its achievements in this area. He underscored the need for talent development within banks to support these initiatives.
Summary: The Union Finance Minister addressed an event at Sri Venkateshwara Medical College, highlighting India's economic growth and challenges. He noted the need for improved healthcare facilities and education, emphasizing the importance of inclusive growth. Despite economic progress, human development indicators remain low, necessitating sustained efforts, especially in backward areas. The Eleventh Plan focused on healthcare, resulting in improved infrastructure and reduced infant and maternal mortality rates. The Twelfth Plan aims for increased health sector funding. Initiatives like financial inclusion and gender budgeting are crucial for development. The Minister also acknowledged state-level efforts and initiatives for women's empowerment and financial inclusion.
Summary: The Union Finance Minister highlighted the challenges posed by the global financial crisis and emphasized India's resilience in maintaining growth. He stressed the importance of inclusive growth, food security, education, and health improvements. The Minister underscored the role of the accountancy profession in ensuring financial probity and transparency, crucial for combating corruption and enhancing market confidence. He praised the Institute of Chartered Accountants of India for its efforts in aligning with international standards and contributing to global markets. The Minister also discussed tax reforms, including the Direct Taxes Code and GST, and urged the ICAI to support these initiatives.
Summary: The import of sensitive items in India from April to October 2011 totaled Rs. 57,399 crores, marking a 41.8% increase from Rs. 40,486 crores in the same period the previous year. These imports accounted for 4.6% of total gross imports. While imports of milk, milk products, and food grains declined, there was a significant rise in imports of edible oil, automobiles, fruits, vegetables, and other items. Edible oil imports surged due to increased crude palm oil imports. Notably, imports from countries like Indonesia, China, and Malaysia increased, while those from Myanmar, Brazil, and Australia decreased.
Summary: The Ministry of Finance clarified that interest rates on small savings schemes, except for the Public Provident Fund (PPF), are fixed at the time of investment and will not change until maturity. This clarification responds to media reports suggesting that these rates are floating and subject to changes based on government securities' yields. Changes in interest rates will only apply to new investments made during the period of revision. For PPF accounts, however, the interest rate is set annually and applies to all accounts. This policy was effective from December 1, 2011.
Notifications
Customs
1.
F.No.437/136/2009-Cus. IV - dated
4-1-2012
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Cus (NT)
Appointment of Common Adjudicating Authority
Summary: The Government of India's Ministry of Finance has appointed the Commissioner of Customs (Import & General) at New Custom House, New Delhi, as the Common Adjudicating Authority for specific Show Cause Notices issued by the Directorate of Revenue Intelligence, Delhi Zonal Unit. These notices, dated March 3, 2011, involve several companies, including entities based in Noida, Mumbai, Kolkata, and Bangalore. The adjudication pertains to cases involving these companies, and the Commissioner is tasked with resolving the matters as per the Customs Act, 1962.
DGFT
2.
93 (RE-2010)/2009-2014 - dated
6-1-2012
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FTP
Amendment in Appendix-3 to Schedule-2 of ITC(HS) Classification of Export and Import Items,2009-14-regarding supply of SCOMET Items from DTA to SEZ.
Summary: The notification amends Appendix-3 to Schedule-2 of the ITC(HS) Classification of Export and Import Items, 2009-14, regarding SCOMET items. It states that no export permission is needed for supplying SCOMET items from the Domestic Tariff Area (DTA) to Special Economic Zones (SEZ). Suppliers must report these supplies to the SEZ Development Commissioner within one week, and an annual report must be submitted by the Development Commissioner to the SCOMET Cell by May 15 each year. However, export permission is still required for exporting SCOMET items from SEZ to other countries.
Income Tax
3.
03/2012 - dated
4-1-2012
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IT
Assessment - General - Specified provisions of the Act which shall apply to Centralised Processing of Returns Scheme, 2011.
Summary: The notification outlines the application of specific provisions of the Income Tax Act, 1961, to the Centralised Processing of Returns Scheme, 2011. It specifies that electronically filed returns must be accompanied by a verified ITR-V form sent to the Centralised Processing Centre. The notification details procedures for handling defective returns, including electronic communication and rectification processes. It mandates electronic filing for revised returns and outlines the processing order and priority. The notification also addresses the service of notices, rectification applications, and appeal proceedings, emphasizing electronic communication and automated processes for efficiency.
4.
02/2012 - dated
4-1-2012
-
IT
Centralised Processing of Returns Scheme, 2011.
Summary: The Centralised Processing of Returns Scheme, 2011, established by the Central Board of Direct Taxes, outlines procedures for processing income tax returns. It applies to returns filed electronically or in paper form for specified classes. The scheme details the acknowledgment process for electronic filings, including digital signatures and Form ITR-V submission. It addresses handling revised, invalid, or defective returns, and outlines the role of Centralised Processing Centres. The scheme includes provisions for rectifying errors, adjusting refunds against tax demands, and specifies that no personal appearances are required at the Centre. Communication is primarily electronic, and the Director General has authority to define procedures for effective operation.
5.
01/2012 - dated
2-1-2012
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IT
Income-tax (First Amendment) Rules, 2012 - Insertion of rule 11-OA and form no. 3cn.
Summary: The Income-tax (First Amendment) Rules, 2012 introduces Rule 11-OA and Form No. 3CN for the notification of affordable housing projects as specified businesses under section 35AD of the Income-tax Act, 1961. Applicants must submit Form No. 3CN to the Central Board of Direct Taxes for project approval. The rule outlines conditions for project eligibility, including prior sanction, commencement after April 1, 2011, and specific area allocations for different income categories. The Board may reject or approve applications, with provisions for addressing deficiencies and withdrawal of approval if conditions are not met. Projects must maintain separate accounts for capital expenditures.
6.
63/2011 - dated
30-12-2011
-
IT
Income-tax authorities - Control of - DGIT (International Taxation) - Amendment in Notification No. S.O. 279(E) - Under section 118 of the Income-tax Act, 1961 the Transfer Pricing Officer referred.
Summary: The Central Board of Direct Taxes has amended Notification No. S.O. 279(E) under section 118 of the Income-tax Act, 1961. This amendment involves changes to the roles and responsibilities of income tax authorities, particularly the Transfer Pricing Officers. The updated notification specifies the positions and jurisdictions for the Director General of Income-tax (International Taxation) in Delhi, and the Directors of Income-tax (Transfer Pricing) in Bangalore and Hyderabad. The amendment includes detailed listings of Joint Commissioners and Deputy or Assistant Commissioners of Income-tax (Transfer Pricing Officers) in both Bangalore and Hyderabad.
Circulars / Instructions / Orders
Service Tax
1.
15/2011-ST - dated
15-11-2011
Section 69 of the Finance Act, 1994 - Registration - Conversion of temporary based registration (STC) into PAN based registration.
Summary: The circular addresses the conversion of temporary Service Tax Code (STC) registrations to Permanent Account Number (PAN) based registrations as per Section 69 of the Finance Act, 1994. It mandates that all service tax assessees with temporary registrations must apply for PAN-based registration within one month. Approximately 167 assessees in the Shillong Central Excise and Service Tax Commissionerate have not yet converted their registrations. Assessees must submit a PAN copy for verification. Temporary registrations will be invalidated after one month, and associations are urged to publicize this notice among their members.
2.
15/ST/2011 - dated
20-10-2011
Clarification on “Completion of Service” – reg.
Summary: The circular clarifies that under the Service Tax Rules, 1994, service providers must issue invoices within 14 days of completing taxable services. Completion includes not only the physical delivery of the service but also necessary auxiliary activities like measurement and quality testing. These activities must be completed to issue an invoice, excluding irrelevant delays. This interpretation also applies to continuous service supply. Trade associations are urged to disseminate this information widely among their members.
DGFT
3.
89 (RE-2010)/2009-2014 - dated
6-1-2012
Allocation of 10,000 MTs of white sugar for the year 2011-12 (October, 2011- September, 2012) for export to EU under CXL Quota.
Summary: The Directorate General of Foreign Trade has allocated 10,000 metric tonnes of white sugar for export to the European Union under the CXL Quota for the period from October 2011 to September 2012. The designated agency for this export is the Indian Sugar Exim Corporation Limited, based in New Delhi. The export requires a certificate of origin as per EU Regulation (EC) No. 891/2009, and the necessary documents, including the GSP Certificate and EUR Form, must be processed by the Export Inspection Agency and endorsed by Customs at the port of shipment.
4.
90 (RE-2010)/2009-2014 - dated
6-1-2012
Export of 8,300 MTs of Raw Cane Sugar to USA under Tariff Rate Quota.
Summary: The Government of India, through the Ministry of Commerce & Industry, has allocated 8,300 metric tons of raw cane sugar for export to the USA under the Tariff Rate Quota for the US fiscal year 2012. This export will be managed by Indian Sugar Exim Corporation Ltd. The existing procedures for preferential sugar export to the USA, including the issuance of GSP certificates and other required certifications, will remain in effect. This allocation was initially designated for white sugar but was amended to raw cane sugar as per a subsequent public notice.
Highlights / Catch Notes
Income Tax
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Centralised Processing of Returns Scheme 2011 aligns with Income Tax Act for efficient tax return assessment per Notification No. 03/2012.
Notifications : Assessment - General - Specified provisions of the Act which shall apply to Centralised Processing of Returns Scheme, 2011. - Ntf. No. 03/2012 Dated: January 4, 2012
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Centralised Processing of Returns Scheme 2011 Enhances Efficiency and Accuracy in Income Tax Return Handling.
Notifications : Centralised Processing of Returns Scheme, 2011. - Ntf. No. 02/2012 Dated: January 4, 2012
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New Income Tax Rules: Rule 11-OA and Form 3CN Introduced to Streamline Procedures per 2012 Amendment.
Notifications : Income-tax (First Amendment) Rules, 2012 - Insertion of rule 11-OA and form no. 3cn. - Ntf. No. 01/2012 Dated: January 2, 2012
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Amendment to Notification No. S.O. 279(E) alters Transfer Pricing Officer's role u/s 118 of Income-tax Act, 1961.
Notifications : Income-tax authorities - Control of - DGIT (International Taxation) - Amendment in Notification No. S.O. 279(E) - Under section 118 of the Income-tax Act, 1961 the Transfer Pricing Officer referred. - Ntf. No. 63/2011 Dated: December 30, 2011
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Software Payment Deemed 'Royalty' u/s 9(1)(vi) of Income Tax Act for Technical Knowledge Sharing.
Case-Laws - HC : Payment for software - payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to Section 9(1)(vi) of the Act..... - HC
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Gifts under 'Sales Promotion and Publicity' not considered trade schemes per section 115WB(2)(O) of Income Tax Act.
Case-Laws - AT : FBT - gift - 'Sales Promotion and Publicity' - the expenditure on gifts could not be treated as trade scheme or for promotion of company's product as per clause O of sub-section 2 of section 115WB..... - AT
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Charitable Trusts Must Specify Specific Purposes for Income Accumulation u/s 11(2) of the Income Tax Act.
Case-Laws - AT : Charitable Trust- voluntary accumulations - the charitable trust cannot list all its objects as purposes for accumulation of income under section 11(2)..... - AT
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Section 40A(2)(b) Disallowances Overturned: AO Failed to Prove Excessive Payments Beyond Fair Market Value.
Case-Laws - AT : Disallowances u/s 40A(2)(b) of the Income-tax Act, 1961 - AO being unable to establish the excessiveness or unreasonableness of the payments made by the assessee, when compared with the fair market value of the services rendered by them, the disallowances made were not warranted...... - AT
DGFT
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Exporting 8,300 Metric Tons of White Sugar to US Under Tariff Rate Quota, per DGFT Circular No. 90.
Circulars : Export of 8,300 MTs of white sugar to USA under Tariff Rate Quota. - Cir. No. 90 (RE-2010)/2009-2014 Dated: January 6, 2012
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India Allocates 10,000 Metric Tons of White Sugar for EU Export Under CXL Quota per DGFT Circular No. 89.
Circulars : Allocation of 10,000 MTs of white sugar for the year 2011-12 (October, 2011- September, 2012) for export to EU under CXL Quota. - Cir. No. 89 (RE-2010)/2009-2014 Dated: January 6, 2012
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DGFT Amends ITC(HS) Schedule-2: New Rules for SCOMET Item Transfers from DTA to SEZ Effective January 6, 2012 (HS.
Notifications : Amendment in Appendix-3 to Schedule-2 of ITC(HS) Classification of Export and Import Items,2009-14-regarding supply of SCOMET Items from DTA to SEZ. - Ntf. No. 93 (RE-2010)/2009-2014 Dated: January 6, 2012 - DGFT
Service Tax
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Finance Act 1994: Convert Temporary Service Tax Registrations to PAN-Based for Better Compliance, as per Circular No. 15/2011-ST.
Circulars : Section 69 of the Finance Act, 1994 - Registration - Conversion of temporary based registration (STC) into PAN based registration. - Cir. No. 15/2011-ST Dated: November 15, 2011
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Training Officers Isn't "Management Consultancy" Service under Law.
Case-Laws - AT : Just imparting training in certain areas to the Officers of certain organizations does not amount to rendering the service of "Management Consultancy" either directly or indirectly to that organization. .... - AT
Central Excise
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Export Unit Overpaid Duties, Claims Refund; Unjust Enrichment Rule Not Applicable, Refund Pursued Without Restrictions.
Case-Laws - AT : Payment of higher duty by an 100% EHTP at the instance of department - claim of refund - provision of unjust enrichment not applicable.... - AT
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Refund Claim Period Starts When Credit is Unusable: Rule 5 CCR & Section 11B Central Excise Act.
Case-Laws - AT : Refund of accumulated credit - Rule 5 of CCR - period of 1 year for the purpose of limitation under Section 11B of Central Excise Act, 1944 has to be counted from the date on which final conclusion is reached that the credit cannot be utilized..... - AT
Case Laws:
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Income Tax
-
2011 (12) TMI 146
Maintainability of appeal against levy of interest u/s 234A, 234B, 234C – adjustment of cash seized against advance tax liability – date from which adjustment would be effective – adjustment of cash seized from third party against the liability of the assessee - Held that:- Charging of interest under section 234A, 234B, and 234C is very much part and parcel of assessment proceedings and is an order against the assessee to which the assessee denies his liability to be assessed. Therefore, appeal against charging of interest under those sections is maintainable as in the case of an assessment order. The liability to pay the advance-tax constitutes a part of existing liability as per section 132B(1)(i). As per section 132B, the seized assets to be applied to the discharge of existing liabilities. Thus, the cash seized during the course of search is required to be adjusted against taxes due including advance-tax for the purpose of computation of interest u/s 234A, 234B and 234C. The adjustment towards the advance-tax would be from the date when it was seized. Further, cash seized from third party was found to be the cash of the assessee and this fact is not disputed therby, it is adjustable against the demand created on the assessee. Decided in favor of assessee.
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2011 (12) TMI 145
Preemptive purchase by the Central Government u/s 269 UD (1) – alleged undervaluation of property - cost of construction of flat to be received in lieu of consideration taken and its fair market value ignored while valuing property resulting in undervaluation – Petitioners agreed to give possession of the subject property on compliance with the obligations of the Transferee under the Agreement by Appropriate Authority - Appropriate Authority has not tendered the payment to the owners and amount was deposited by the Central Government in the P.D. Account of Appropriate Authority prior to the passing of the impugned orders - Difference in total consideration valued and as stated in order to be payable to transferor - Held that:- By ignoring fair market value of flat during valuation, there was an inherent flaw in the valuation of the said property by the Valuation Officer. Appropriate Authority has mechanically accepted the valuation and on this count alone the impugned orders would stand vitiated. Further Section 269 UF (1) stipulates consideration for such purchase, an amount equal to the amount of the apparent consideration. There was complete non application of mind on the part of the Appropriate Authority in stating in the impugned order that the amount payable was Rs.18,68,430/ when the apparent consideration was admittedly Rs.25,14,480/. Quantum of deposit is invalid Moreover, neither dispute was to title of property nor to the persons who should receive the payment, thereby, conditions mentioned in 269UG(2) and 269UG(3) are not satisfied which permit the Central Government to deposit the purchase price with the Appropriate Authority (instead of tender to the owners). Therefore, the deposit made in the P.D. account of the Appropriate Authority by the Central Government was impermissible and not in accordance with law. In view of the failure on the part of the Appropriate Authority to tender the apparent consideration within the period set out in Section 269UG of the Act, it has to be held that the order passed under Section 269UD(1) of the Act stood abrogated and the property is revested to the Petitioners. - Decided in favor of assessee.
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