TMI Tax Updates - e-Newsletter
December 22, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Dr. Sanjiv Agarwal
Summary: The article discusses the impact of the Goods and Services Tax (GST) on various sectors. Intangible goods and services, currently subject to both VAT and Service Tax, will be unified under GST, resolving existing tax disputes. The electricity sector may face challenges due to the abolition of concessional tax rates unless GST includes electricity sales. The tourism and hospitality industry might experience higher rates, potentially discouraging tourists. Petroleum products, alcohol, and tobacco are excluded from GST to protect state revenues, despite criticism. Tobacco products may face increased taxation under GST, raising concerns about tax burdens and evasion. Uncertainty remains regarding GST's application to certain sectors like real estate, healthcare, and financial services.
By: Bimal jain
Summary: The Delhi High Court ruled that the provisions for interest on belated refunds under Section 27A of the Customs Act apply to the delayed refund of Special Additional Duty (SAD). In the case involving a company, the court determined that the definition of 'duty' under Section 2(15) of the Customs Act is broad enough to include SAD. Consequently, Sections 27 and 27A, which cover refunds and interest on delayed refunds, are applicable to SAD refunds. Therefore, if a SAD refund is delayed, the recipient is entitled to interest on the refund.
By: Rakesh Singh
Summary: Rule 8 of the Central Excise Valuation Rules, 2000, addresses the valuation of excisable goods that are not sold but consumed within the manufacturing unit, setting their value at 110% of the cost of production. However, in the case involving a company versus the Commissioners of Central Excise, Customs, and Service Tax, it was determined that Rule 4 should take precedence over Rule 8. This is because Rule 4 aligns more consistently with Section 4 of the Central Excise Act, 1944, and provides a more accurate valuation when both rules could apply.
News
Summary: The industrial growth rate in India increased to 4.8% during April-October 2015-16, compared to 2.2% in the previous year. All industrial sectors, including mining, manufacturing, and electricity, showed positive growth. The government has implemented measures such as the Make in India program, which targets 25 sectors, and initiatives to improve ease of doing business. Infrastructure projects like the Delhi Mumbai Industrial Corridor and others are underway. Various incentives and policies aim to boost industrial growth, particularly in labor-intensive sectors like textiles, leather, and food processing, with a goal to create 100 million jobs by 2022.
Summary: The Indian tech industry invested over USD 2 billion in the United States during fiscal years 2011-2013. Between fiscal years 2011-2015, it contributed USD 22.5 billion in taxes and supported 411,000 jobs, either directly or indirectly, in the fiscal year 2015. This information was disclosed by the Minister of State in the Ministry of Commerce and Industry in a written reply to the Lok Sabha.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 66.3240 on December 21, 2015, down from Rs. 66.4235 on December 18, 2015. Based on this rate and cross-currency quotes, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were as follows: 1 Euro was Rs. 72.1340, 1 British Pound was Rs. 98.9886, and 100 Japanese Yen was Rs. 54.67 on December 21, 2015. The Special Drawing Rights (SDR) to Rupee rate will also be determined using this reference rate.
Notifications
Companies Law
1.
F. No. 1/33/2013-CL-V - dated
14-12-2015
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Co. Law
Companies (Audit and Auditors) Amendment Rules, 2015 - Chartered Accountant, Cost Auditor or Secretarial Auditor has to report the fraud in the company in the prescribed manner.
Summary: The Companies (Audit and Auditors) Amendment Rules, 2015, mandate that auditors, including Chartered Accountants, Cost Auditors, and Secretarial Auditors, report frauds involving amounts of one crore rupees or more to the Central Government. The process involves notifying the company's Board or Audit Committee within two days of discovering the fraud and forwarding their responses to the government within 15 days. If no response is received within 45 days, the auditor must still report to the government. For frauds involving lesser amounts, the auditor reports to the Board or Audit Committee, and details are disclosed in the Board's Report.
Customs
2.
145/2015 - dated
18-12-2015
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Cus (NT)
Amendment in Principal Notification No. 12/97-Customs(N.T.) dated 02.04.1997
Summary: Notification No. 145/2015-Customs (N.T.), issued by the Government of India, amends the earlier Notification No. 12/97-Customs (N.T.) dated April 2, 1997. This amendment, effective from December 18, 2015, involves the addition of Powarkheda, District Hoshangabad, in the State of Madhya Pradesh to the list of locations authorized for the unloading of imported goods and loading of export goods. This change is made under the authority granted by clause (aa) of sub-section (1) of section 7 of the Customs Act, 1962.
FEMA
3.
360/2015-RB - dated
17-12-2015
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FEMA
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Thirteenth Amendment) Regulations, 2015
Summary: The Reserve Bank of India issued the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Thirteenth Amendment) Regulations, 2015, effective from its publication date. This amendment modifies the 2000 regulations by adding provisions related to security receipts issued by securitization companies in Schedule 5. These security receipts are subject to conditions specified by the Reserve Bank of India and the Securities and Exchange Board of India. The amendments were made under the authority of the Foreign Exchange Management Act, 1999, and were announced by the Principal Chief General Manager, B. P. Kanungo.
VAT - Delhi
4.
No. F.3(25)/Fin(Rev-I)/2015-2016/dsvi/954 - dated
18-12-2015
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DVAT
Amendment in Delhi Value Added Tax Rules, 2005
Summary: The Delhi Value Added Tax (Amendment) Rules, 2015, have been enacted under the authority of the Lt. Governor of Delhi, modifying the Delhi Value Added Tax Rules, 2005. Key amendments include a 100% reduction in tax credit for un-manufactured tobacco, tobacco products, and all kinds of lubricants. Additionally, a new formula is introduced for calculating reduced tax credit on these goods. Rule 43 is also amended, requiring transporters to carry specific documentation, such as Transport Receipt in Form DVAT-32 and others, as mandated by the Commissioner through official notifications.
Circulars / Instructions / Orders
Customs
1.
F. No.390/Misc./67/2014-JC - dated
18-12-2015
Withdrawal of cases pending before HC/CESTAT on the basis of earlier Supreme Court's decision on the identical matters
Summary: The circular from the Ministry of Finance instructs the withdrawal of cases pending before the High Court and CESTAT where the Supreme Court has already decided on identical matters, and the decision has been accepted by the Department. This process requires approval from the jurisdictional Chief Commissioner and involves the Committee of Principal Chief Commissioners/Chief Commissioners reviewing such appeals. Appeals with multiple issues or substantial legal questions not addressed by the Supreme Court decision are excluded. Monthly reports on reviews and withdrawals must be submitted to the Board. The instruction is effective immediately.
2.
F. No.390/Misc./69/2015-JC - dated
18-12-2015
Corrigendum - Authorizing officers of the Zone to appear before CESTAT Bench
Summary: The corrigendum issued by the Ministry of Finance, Department of Revenue, Central Board of Excise & Customs, addresses an earlier instruction dated December 15, 2015, concerning the authorization of officers from the Zone to appear before the CESTAT Bench. It directs the deletion of the text following clause (a) in paragraph 2 of the previous instruction. This amendment is communicated to all relevant Chief Commissioners, Directors General, Commissioners, and associated parties within the Central Board of Excise and Customs.
3.
F. No. 307/32/2015-SO(PAC-Cus.) - dated
18-12-2015
Action Taken By the Government on the Observation / Recommendations contained in their 20th Report (16th Lok Sabha)of the Public Accounts Committee on Non-compliance by the Ministries/Departments in timely submission of Action Taken Notes on the Non-selected Audit Paragraphs(Civil and other Ministries)
Summary: The government issued a directive addressing the non-compliance of ministries and departments in submitting Action Taken Notes (ATNs) on non-selected audit paragraphs. The Standing Audit Committee recommended action against officers responsible for significant lapses in providing corrective ATNs. The Ministry of Finance highlighted that these lapses often occur due to departmental officers' failures in detecting issues during document scrutiny and audits. Officers are reminded to adhere strictly to the Audit Manual instructions. Jurisdictional Commissioners are tasked with examining audit objections and initiating actions under conduct rules for serious lapses by officers.
4.
F. No. 390/Misc./163/2010-JC - dated
17-12-2015
Reduction of Government litigation providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme Court
Summary: The Central Board of Excise & Customs has established new monetary thresholds for government litigation to reduce the number of appeals filed by the Department. Appeals will not be filed if the disputed amount is below Rs. 10,00,000 for the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Rs. 15,00,000 for High Courts, and Rs. 25,00,000 for the Supreme Court. This instruction modifies an earlier directive from August 2011, adding a clause for classification and refund issues of a legal or recurring nature. Other conditions from the previous instruction remain unchanged.
5.
F. No.390/Misc./69/2015-JC - dated
15-12-2015
Authorizing officers of the Zone to appear before CESTAT Bench
Summary: The circular from the Central Board of Excise and Customs authorizes Principal Chief Commissioners and Chief Commissioners of Customs, Central Excise, and Service Tax to appoint officers from their zones to appear before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). This is in accordance with the provisions in the Customs Act, Central Excise Act, and the CESTAT Procedure Rules, which allow authorized representatives to plead on behalf of the department. If no officer is available to argue a case, Chief Commissioners may appoint another officer from their zone to represent the department before the Tribunal.
6.
No. 1/20/2014-MC/288 - dated
29-9-2015
Action Taken by the Government on the Observations/ Recommendations contained in their Twentieth Report (16th Lok sabha) of the Public Accounts Committee on “Non-Compliance by the Ministries/ Department in timely submission of Action Taken Notes on the Non-selected Audit Paragraphs (Civil and other Ministries)
Summary: The government has addressed the Public Accounts Committee's recommendations from their Twentieth Report on ministries' non-compliance in submitting Action Taken Notes on non-selected audit paragraphs. The committee emphasized the need for ministries to expedite the implementation of Standing Audit Committee recommendations, particularly in holding officers accountable for serious lapses in providing corrective actions. All ministries and departments are urged to adhere to these recommendations and establish a system for assigning responsibility for such lapses. The full report is accessible on the Public Accounts Committee's website.
Highlights / Catch Notes
Income Tax
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High Court: Erroneous PAN Issuance Doesn't Require Filing Tax Return; Non-Existent Partnership Firm Not Affected.
Case-Laws - HC : Status of the assessee - Merely because PAN was issued by the Department erroneously, there cannot be any insistence that return should be filed in the same capacity. Erroneous description in the PAN would not change the reality that no such partnership firm ever existed - HC
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Court Confirms Income Chargeability Using Photocopied Receipt; Receipt's Authenticity Supported by All Parties' Statements.
Case-Laws - HC : Photo copy of the receipt taken for the purpose of assessment - 'chargeability of income' - he genuineness of the receipt and also the contents thereof are duly corroborated by all the assessees in their respective statements. - additions confirmed - HC
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Government's Role in Financing Qualifies Assessee for Tax Exemption u/s 10(23C)(iiiab) of Income Tax Act.
Case-Laws - HC : Government was substantially financing and interested in the management of the respondent-assessee and, therefore, were eligible for exemption under Section 10(23C)(iiiab) of the Act. - HC
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Interest Payment on Capital Gains u/s 234C Found Unwarranted Due to Specific Provisions in Income Tax Act.
Case-Laws - HC : Interest u/s 234C - the liability to pay interest under Section 234C of the Act qua the capital gains was held to be unwarranted in view of the specific provisions of the Act - HC
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Court Rules Gold Chhabba Donation Not a Deemed Trust u/s 2(24)(iia) of Income Tax Act; No Exemptions Apply.
Case-Laws - HC : Donation of gold chhabba - whether in light of explanation to Section 2(24) (iia) of the Act, the Dera is not a deemed trust? - The cumulative effect of all the factors shows that all the transactions done by the appellant-assessee, were in his individual capacity - no exemptions - HC
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Hospital Doctors' Payments: TDS Deduction u/s 194J, Not Section 192, Per Income Tax Act.
Case-Laws - HC : TDS u/s 194J or 192 - payments made to doctors who are regular employees of the hospital - it is not a case of employer-employee relationship between the assessee and the doctors. - TDS liable to be deducted u/s 194J - HC
Customs
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Denial of EPCG License Benefit for Car Imports Premature; Export Obligations Still Under Review.
Case-Laws - AT : Denial of the benefit of EPCG license - Import of cars - export obligations - proceedings are pre-mature as HEL is still in possession of the cars and registered the same as tourist vehicle - AT
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Expenses for Advertising & Sales Promotion Not Includible Under Customs Valuation Rule 4; 12.5% Loading Not Sustainable.
Case-Laws - AT : Valuation - Rule 4 - includibility/ non includibility of the expenses on advertising and sales promotion etc. - loading of 12.5% is not sustainable in terms of Rule 4 of the CVR, 2007 - AT
FEMA
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Amendments Simplify Securities Transfers by Non-Residents in India Under 2015 Foreign Exchange Regulations.
Notifications : Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Thirteenth Amendment) Regulations, 2015 - Notification
Corporate Law
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Auditors Must Report Detected Fraud in Companies per Companies Law Procedures.
Notifications : Statutory Auditor (Chartered Accountant), Cost Auditor or Secretarial Auditor has to report the fraud in the company in the prescribed manner. - Notification
Service Tax
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CENVAT Credit Allowed for Inputs and Capital Goods Used in Jetty Construction for Port Services.
Case-Laws - AT : CENVAT Credit - inputs and capital goods were used in construction of jetty for rendering port service. There is no reason to deny CENVAT credit on such input and capital goods. - AT
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Royalty Charges from Licensee for Container Terminal on BOT Basis Subject to Service Tax under Port Service.
Case-Laws - AT : Royalty charges received by the appellant from Licensee as per Licence Agreement for Development of VII Berth as Container Terminal, operation and maintenance on BOT basis is chargeable to service tax under Port Service - AT
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Export-Oriented Unit's CENVAT Credit Refund: Export Invoice Date Sets One-Year Limit u/s 11B Central Excise Act.
Case-Laws - AT : Refund claim of accumulated CENVAT Credit - 100% EOU - export of services - period of limitation - the date of export invoice should be treated as the relevant date. The time limit of one year prescribed under Section 11B of the Central Excise Act would be computed from this date - AT
Central Excise
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No Interest on Reversed CENVAT Credit Taken in Error, If Reversed Before Use.
Case-Laws - AT : Demand of interest - whether interest is chargeable on the cenvat credit wrongly taken, though the same is reversed before utilization of the credit - Held No - AT
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Appellants Liable for Interest u/s 11AA on Differential Duty Including Charity Amounts in Assessable Value.
Case-Laws - AT : Levy of interest u/s 11AA - Demand of differential duty - value addition of charity amount in the assessable value - Appellants are liable to pay interest from the first day of the month following the month where the duty has become due. - AT
VAT
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Sodexo meal vouchers not taxable under VAT and sales tax; fail test to be classified as 'goods'.
Case-Laws - SC : Taxability of Sodexo Meal Vouchers - Paper based vouchers - affiliates are bound to honour - appropriate test would be as to whether such vouchers can be traded and sold separately. The answer is in the negative. Therefore, this test of ascertaining the same to be 'goods' is not satisfied. - SC
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Court to Decide If Bank's Sale of Repossessed Cars is Incidental to Main Business, Affecting VAT and Sales Tax.
Case-Laws - HC : Sale of hypothecated vehicles - disposal of repossessed cars by the bank - sale of the repossessed cars by the Appellant Bank is incidental or ancillary or in connection with the Appellant’s business - HC
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Dealers Cannot Charge Extra Tax on Exempt Sales, Avoid Unintended Tax Burden on Transactions.
Case-Laws - HC : In case where the sale or purchase is exempt from tax, the dealer would not be in a position to recover the additional tax from the purchaser, thereby frustrating the very object of the provision namely, to tax the sale or purchase and would result in taxing the dealer instead of the sale or purchase. - HC
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Delhi VAT Rules Amended to Streamline Tax Processes and Compliance; Impacts VAT Calculation and Administration.
Notifications : Amendment in Delhi Value Added Tax Rules, 2005 - Notification
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