TMI Tax Updates - e-Newsletter
March 9, 2016
Case Laws in this Newsletter:
TMI SMS
Articles
By: DEVKUMAR KOTHARI
Summary: The article discusses provisions from the Indian Evidence Act relevant to tax law proceedings. It emphasizes that entries in business account books are primary evidence for liabilities but not sufficient alone for proving receivables. Public records, such as company incorporation documents, are considered statutory evidence. The character of individuals is deemed irrelevant in civil cases when documentary evidence is available. Oral evidence must be direct and cannot contradict document contents. Primary evidence is the original document itself, while secondary evidence includes certified copies. Public documents, like those held by the Registrar of Companies, are presumed genuine, and clear document language cannot be contradicted by other evidence.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Finance Bill, 2016 introduces an equalization levy aimed at taxing non-resident enterprises with significant economic presence in India, excluding Jammu & Kashmir. This levy, at 6%, targets cross-border digital transactions, particularly online advertising services. It applies when the annual consideration exceeds 1 lakh and is not connected to a permanent establishment in India. Collection involves deducting the levy from payments to non-residents, with penalties for non-compliance. The Bill outlines procedures for statement submission, levy processing, and appeals. It also allows prosecution for false statements and incorporates certain Income Tax Act provisions. The Central Government is empowered to make rules and resolve difficulties related to the levy.
By: Nexdigm IDT
Summary: A recent amendment in Notification no. 27/2012-C.E (N.T) has clarified the contentious issue of the "Relevant Date" for filing refund claims by service exporters. Previously, there was ambiguity over whether the date of issuance of invoice, receipt of payment, or completion of services should be considered the relevant date, leading to litigation. The new amendment specifies that if the service is completed before payment, the refund claim must be filed within one year from the payment receipt date. If payment is received in advance, the claim must be filed within one year from the invoice issuance date, aligning with the government's aim to promote exports.
News
Summary: The Tax Administration Reforms Commission (TARC) report, led by Dr. Parthsarathi Shome, outlines numerous tax administration reforms across four volumes, focusing on structural changes, taxpayer service improvements, and enhanced use of technology. Key recommendations include better information exchange, human resource management, and customs capacity building. Several initiatives have been implemented, such as reducing litigation, simplifying procedures, and enhancing e-facilities for direct taxpayers. For indirect taxpayers, measures include 24/7 customs clearance at major ports, a Customs Single Window Clearance Project, and rationalization of penal provisions. The government is progressively examining and implementing these recommendations.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 67.3380 on March 8, 2016, up from Rs. 67.2713 on March 4, 2016. Corresponding exchange rates for other currencies against the Rupee were also updated: the Euro rose from Rs. 73.6688 to Rs. 74.1930, the British Pound from Rs. 95.2158 to Rs. 95.9028, and the Japanese Yen from Rs. 59.10 to Rs. 59.59 per 100 Yen. The Special Drawing Rights (SDR) to Rupee rate will be determined based on this reference rate.
Summary: The Central Board of Direct Taxes issued two circulars to clarify Tax Deduction at Source (TDS) issues concerning payments by television channels, broadcasters, and newspapers. Circular No. 4/2016 specifies that payments to production houses for content created per broadcaster specifications, with copyright transferred, fall under section 194C, subject to a 2% TDS. Circular No. 5/2016 clarifies that payments to advertising agencies for booking or procuring advertisements are not subject to TDS, resolving disputes over whether such payments are commission-based and subject to a 10% TDS under section 194H.
Summary: The Central Board of Direct Taxes issued Circular No. 7/2016 to clarify the tax treatment of consortium members involved in Engineering, Procurement, and Construction (EPC) contracts or turnkey projects. The circular aims to resolve disputes between the Income-tax Department and consortiums by outlining attributes that prevent a consortium from being classified as an Association of Persons (AOP). This guidance is not exhaustive and excludes cases involving Associated Enterprises under section-92A of the Income-tax Act. The circular seeks to reduce litigation in this area and is accessible on the department's website.
Notifications
Customs
1.
7/2016 - dated
8-3-2016
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ADD
Seeks to levy definitive anti-dumping duty on Polypropylene, originating in, or exported from Singapore, for a period of five years
Summary: The Government of India has imposed a definitive anti-dumping duty on imports of Polypropylene from Singapore for five years, effective from the date of notification. This decision follows a review by the designated authority, which concluded that the cessation of the duty could harm the domestic industry. The duty applies to specific tariff items and varies based on the producer and exporter, with a rate of 145.2 USD per metric ton for most combinations. The duty is payable in Indian currency, with the exchange rate determined at the time of the bill of entry presentation.
2.
6/2016 - dated
8-3-2016
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ADD
Seeks to levy definitive anti-dumping duty on Phenol, originating in, or exported from the European Union, Singapore and Korea RP, for a period of five years
Summary: The Government of India imposed a definitive anti-dumping duty on imports of Phenol from the European Union, Singapore, and Korea RP for five years, as per Notification No. 6/2016-Customs (ADD) dated March 8, 2016. This duty aims to protect the domestic industry from material injury caused by imports sold below normal value. The duty rates vary based on the country of origin, export, and specific producers and exporters. The notification specifies the applicable duty amounts in US dollars per metric ton and outlines the conditions under which these duties apply. The anti-dumping measures were later rescinded by Notification No. 61/2021-Customs (ADD) dated October 20, 2021.
Income Tax
3.
12/2016 - dated
2-3-2016
-
IT
Exemption u/s 10(46) of the Income-tax Act, 1961 – State Load Despatch Centre Unscheduled Interchange Fund–West Bengal State Electricity Transmission Company Limited (PAN AAIAS0980J), a trust constituted under the Electricity Act, 2003 (36 of 2003) in respect of the specified income arising to that trust
Summary: The Central Government has issued a notification under section 10(46) of the Income-tax Act, 1961, granting tax exemption to the State Load Despatch Centre Unscheduled Interchange Fund, managed by West Bengal State Electricity Transmission Company Limited. The exemption applies to specified income, including residual money in the unscheduled interchange pool balance account, interest on fixed deposits and auto-sweep accounts, and income related to unscheduled interchange. Conditions include refraining from commercial activities, maintaining the nature of specified income, and filing income returns as per section 139(4C). The exemption is applicable for financial years 2012-2013 to 2016-2017.
Service Tax
4.
20/2016 - dated
8-3-2016
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ST
Service Tax (Second Amendment) Rules, 2016
Summary: The Government of India, through the Ministry of Finance, issued Notification No. 20/2016-Service Tax, amending the Service Tax Rules, 1994. Effective from its publication date, the amendment introduces provisions for the Swachh Bharat Cess in various parts of Form ST-3. New entries are added to Parts B and C, detailing the calculation and payment of the Swachh Bharat Cess for service providers and receivers. Part DA outlines the methods for paying the cess, including cash and adjustments. Additionally, Part G includes arrears, interest, and penalties related to the cess, while Part H updates challan details for payments.
VAT - Delhi
5.
F 3(619)/Policy/VAT/2016/1610-1623 - dated
7-3-2016
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DVAT
Regarding Form GE-II
Summary: The Commissioner of Value Added Tax, Government of NCT of Delhi, has issued a notification modifying previous directives regarding the filing of returns in Form GE-II for the first three quarters of the financial year 2015-2016. The returns are due by March 15, 2016. Due to reported functional difficulties, the description of goods purchased in sub field 5 of field 4 in Form GE-II is now optional. Additionally, purchases through work contract activities, which require a certificate of tax deduction and filing in Form DVAT 48, are excluded from Form GE-II. This notification is effective immediately.
Circulars / Instructions / Orders
DGFT
1.
63/2015-2020 - dated
7-3-2016
Amendment in Appendix 2C of Appendices and ANF of FTP 2015-20, list of agencies authorized to issue Generalized System of Preferences (GSP)
Summary: The Directorate General of Foreign Trade, under the Ministry of Commerce and Industry, Government of India, has amended Appendix 2C of the Foreign Trade Policy 2015-2020. This amendment authorizes the Tobacco Board, Guntur, to issue Generalized System of Preferences (GSP) Certificates of Origin specifically for tobacco and tobacco products. This change empowers the Tobacco Board to facilitate trade by certifying the origin of these products, thereby potentially enhancing their export opportunities under the GSP framework.
Customs
2.
07/2016 - dated
7-3-2016
Issue of Indian Currency Note- Foreign going vessels-Instructions
Summary: The circular from the Central Board of Excise and Customs, dated March 7, 2016, addresses the issue of carrying Indian currency on foreign-going vessels. It refers to a previous circular from 1999 that allowed merchant ships to carry Indian currency notes of Rs. 100 denomination for wage disbursement, subject to RBI conditions. The circular notes that the RBI has revised guidelines removing restrictions on currency denominations for Indian travelers or ship captains. Consequently, the Board has decided to withdraw the earlier restriction on currency denominations. Jurisdictional Chief Commissioners are instructed to issue suitable public notices, and any difficulties should be reported to the Board.
Highlights / Catch Notes
Income Tax
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Assessing Officer's Unscientific Method for Arm's Length Price Leads to Incorrect Transfer Pricing Adjustment, Dismissing Valid Quotations.
Case-Laws - AT : Transfer pricing adjustment - determining ALP - Assessing Officer was thus in error not only in resorting to an unscientific and unrecognized method ascertaining the arm’s length price of the services rendered by the assessee but also in rejecting bonafide quotations as a valid input for ascertaining the arm’s length price by the assessee. - AT
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Hypothetical Prices Cannot Determine Arm's Length Price for Transfer Pricing Adjustments in Tax Cases 'sLength.
Case-Laws - AT : Transfer pricing adjustment - determining ALP - whether hypothetical price which would have been charged under comparable uncontrolled conditions can be taken into account for computing the arm’s length price? - Held No - AT
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Court Rules TV Channel Payments Fall u/s 194J for TDS; Previous Oversights Don't Justify Future Misapplication.
Case-Laws - AT : TDS u/s 194J or 194C - payments made to various TV channels - section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee’s contention got accepted without verification, cannot give license to it claim in the later years that the correctly applicable section be put under carpet. - AT
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Software License Fees Classified as 'Royalty' u/s 9(1)(vi); Non-Deduction of TDS Leads to Default per Sections 201(1), 201(1A).
Case-Laws - AT : TDS - granting of any license to use the software amounts to ‘royalty’ and the provisions of sec.9(1)(vi) are applicable - assessee is in default u/s.201(1)/201(1A) for non-deduction of TDS - AT
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Contributions by Group Housing Society members for society work are not taxable income, supported by case law.
Case-Laws - AT : Principals of mutuality - Contribution by the members of a Group Housing Society - work is done by the society for and on behalf of that member - there is no question of any income - Not taxable - AT
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CIT's Directions u/s 263 Deemed Excessive; Reassessment Finds No Issues with Unsecured Creditors and Loans.
Case-Laws - AT : Revision u/s 263 - Directions of the Ld.CIT given to the AO to verify the unsecured creditors, unsecured loans, the AO in his fresh assessment order passed u/s 143(3) r.w.s.263 of the Act, did not draw any adverse inference. This direction of the Ld.CIT was in the nature of directing rowing enquiries. - Revision is bad in law - AT
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No Tax Deduction for Mobilization Costs Reimbursed to Non-Residents; Section 40(a)(ia) Disallowance Not Applicable.
Case-Laws - AT : TDS u/s 195 - Addition u/s 40(a)(ia) - no liability for deduction of tax at source arose under Section 195 in the case of mobilization and demobilization costs reimbursed to a non-resident, not being taxable in India, hence disallowance under Section 40(a)(ia) did not arise. - AT
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Section 68 Challenge: Assessee Not at Fault for Unserved Notices Due to Nonexistent Share Applicant Addresses.
Case-Laws - AT : Addition u/s 68 - Notice u/s 133(6) is issued by the AO could not be served on the share applicants and Inspector’s report also shows that this companies do not exists at the given address, we are of the view that no fault can be found against the assessee for this - AT
Customs
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CBEC Withdraws Circular on Indian Currency Notes for Foreign-Going Vessels; RBI Confirms No Denomination Restrictions.
Circulars : Issue of Indian Currency Note - Foreign going vessels - CBEC withdraws its earlier circular since RBI has not prescribed any restriction on denomination of Indian currency, carried by an Indian traveller or Captain of a Ship.
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Consumer Electronics: PCs with Additional Components Classified Under CTH 8471 per Chapter Note 7 Guidelines.
Case-Laws - AT : Classification - Consumer Electronics PC with additional components of audio, video, multimedia etc. - the goods are to be classified under CTH 8471 because in order to classify an item under 8479 as per the said Chapter Note 7, the principal function of the machine is for more than one purpose which is not the case here. - AT
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Show Cause Notice Must Be Served, Not Just Dispatched, Within Six Months to Meet Limitation Period Requirements.
Case-Laws - AT : Period of limitation - Mere dispatch of show cause notice within a period of 6 months is not sufficient but should be served on the assessee/importer is the law - AT
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Refund Claim Filed Over Incorrect 12.5% Transaction Value on Imported Branded Watches Under Customs Valuation Rules, 2007.
Case-Laws - AT : Refund claim - Loading of transaction value at 12.5% in terms of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on import of branded watches under a Distributorship Agreement from the foreign supplier is not correct - AT
Indian Laws
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India Unveils Tax Reforms to Simplify Procedures, Boost Compliance, and Strengthen Trust for Economic Growth
News : Tax Administration Reforms Commission
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Clarifying TDS Issues for Media Payments: Ensuring Compliance and Reducing Litigation in Broadcasting and Newspapers.
News : Issue of clarification on contentious TDS issues on payments made by Television channels, Broadcasters and Newspapers
Service Tax
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Appellant Entitled to Service Tax Refund as Tax Burden Not Transferred to Others; No Unjust Enrichment Involved.
Case-Laws - AT : Refund claim - As the service was rendered to self and service tax was paid thereon, burden can only passed on to self and passing on the burden to self is not tantamount to passing it to any other person. Therefore, the appellant is not hit by the doctrine of unjust enrichment - AT
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Tenant Wins Refund of Cenvat Credit for Repair, Maintenance, and Electricity Services Used Exclusively by Them.
Case-Laws - AT : Refund of Cenvat credit - input services - When the premises was occupied by the appellant and day-to-day repairs and maintenance are carried out in that premises then obviously, the said services i.e. repair, maintenance, electricity are received and used by the tenant only i.e. the appellant and not by the landlord - refund allowed - AT
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Cenvat Credit Dispute: Incorrect Reporting in ST-3 Return Leads to Unjust Demand Without Identified Exempted Services.
Case-Laws - AT : Cenvat Credit - Amount towards Exempted service wrongly shown in ST-3 return - In the absence of identification of the exempted service provided by the appellant and in the wake of the assertion of the appellant that it had not provided any exempted services during the relevant period, the demand cannot be sustained - AT
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Job Work Services in Factory Excluded from Manpower Recruitment or Supply Agency Services Classification.
Case-Laws - AT : Whether services of cutting, drilling, punching, bending and notching of material on job work basis, in the factory of the principal, provided by the respondent falls under the category of Manpower Recruitment or Supply Agency Services - Held No - AT
Central Excise
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Court Rules No Fraud: Extended Limitation Period Unjustified in Cenvat Credit Case Due to Consistent Disclosure.
Case-Laws - AT : Cenvat Credit - Non maintaining of separate accounts - extended period of limitation invoked - As there is no fraud or suppression of fact involved in this case as the department was all along kept informed of the respondent's activity and therefore there is no reason for justification of invoking the extended period of limitation. - AT
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PVC Doors and Windows: Unassembled Parts Classified as Finished Goods u/r 2(a), Heading 3925.20.
Case-Laws - AT : Classification of PVC Doors and Windows - The process involved before fixing the windows or doors is a simple assembly at site as the profiles beadings and other items required are as per the specific dimensions of various windows or doors. We find that applying the Rule 2 (a) of the interpretation Rules, it is clear that the unassembled windows and doors, even incomplete or unfinished are to be classified with reference to goods which are complete or finished - under heading 3925.20 - AT
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Penalty u/s 11AC Dismissed Due to Lack of Confirmation and Omission in Show Cause Notice.
Case-Laws - AT : Penalty under section 11AC - clearance against the dummy challan - clandestine removal - Penalty was not confirmed under any other provision nor also invoked in the show cause notice. Accordingly, confirmation of penalty cannot be sustained. - AT
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