TMI Tax Updates - e-Newsletter
April 18, 2014
Case Laws in this Newsletter:
Articles
By: priyanka bhutani
Summary: Corporate Social Responsibility (CSR) in the oil and gas sector involves companies operating ethically and sustainably, balancing profit with societal and environmental contributions. This concept has gained prominence as businesses face increasing expectations to address social and environmental impacts. CSR encompasses various dimensions, including stakeholder engagement, environmental sustainability, and social development. In India, CSR has evolved from charity to strategic corporate initiatives, with companies like Oil India Limited and Indian Oil Corporation implementing structured CSR programs. Despite challenges, CSR aims to integrate business goals with social responsibility, promoting sustainable development and addressing global governance issues.
By: Dr. Sanjiv Agarwal
Summary: Effective from July 1, 2012, under the reverse charge mechanism, service tax liability for certain services must be shared between the service provider and receiver as per specified ratios. This can lead to unutilized Cenvat credit for service providers, particularly when they are individuals or partnerships and the receiver is a corporate entity. Refunds for unutilized credit can be claimed semi-annually using 'Form-A', with specific deadlines for each period. The refund mechanism is not applicable when the service provider and receiver are both individuals or proprietors, as normal tax provisions apply.
News
Summary: The Commerce Secretary of India will lead a high-level delegation to the India Show in Hong Kong, coinciding with the Hong Kong Spring Fair from April 27-30, 2014. Organized by the Confederation of Indian Industry and the Ministry of Commerce, the event will feature over 100 Indian companies and 200 participants showcasing innovations. The Hong Kong Spring Fair, Asia's largest, offers Indian exhibitors opportunities for networking and business development with international buyers. Despite a decline in bilateral trade in 2012, the event aims to strengthen economic ties and enhance strategic cooperation between India and Hong Kong.
Summary: The Reserve Bank of India set the reference rate for the US dollar at Rs.60.3805 and for the Euro at Rs.83.5737 on April 17, 2014. The previous day's rates were Rs.60.2263 for the US dollar and Rs.83.2910 for the Euro. Consequently, the exchange rate for the British Pound was Rs.101.6325 and for 100 Japanese Yen was Rs.59.20 on April 17, compared to Rs.100.7887 and Rs.58.91, respectively, on April 16. The SDR-Rupee rate is determined based on this reference rate.
Notifications
Companies Law
1.
F. No. 4-1/2013-CL.VI - G.S.R. 262(E) - dated
31-3-2014
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Co. Law
U/s 620A of the Companies Act, 1956 (1 of 1956) - The Central Government declares the companies to be Nidhis
Summary: The Central Government, under sections 620A(1) and (2) of the Companies Act, 1956, declares two companies as Nidhis: M/s Navanithi Benefit Fund Limited and M/s Tiruninravur Mutual Benefit Fund Limited, both located in Tamil Nadu. These companies are added to Schedule I of a previous notification dated May 28, 1963, which has been amended multiple times. This declaration formalizes their status as Nidhis, which are mutual benefit societies recognized under Indian law. The notification was issued by the Ministry of Corporate Affairs on March 31, 2014.
Customs
2.
32/2014 - dated
17-4-2014
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Cus (NT)
Rate of exchange of conversion of each of the foreign currency with effect from 18th April, 2014
Summary: The notification from the Government of India's Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, dated April 17, 2014, outlines the exchange rates for conversion of various foreign currencies into Indian Rupees effective April 18, 2014. It supersedes a previous notification dated April 3, 2014. The rates are specified for both imported and export goods across different currencies, including the US Dollar, Euro, British Pound, and others. For instance, the rate for the US Dollar is set at 60.80 for imports and 59.80 for exports. The notification includes two schedules detailing the rates for individual and 100 units of foreign currencies.
FEMA
3.
10A/2014-RB - dated
21-3-2014
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FEMA
Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014.
Summary: The Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014, established by the Reserve Bank under the Foreign Exchange Management Act, 1999, dictate the conversion of inoperative foreign currency deposits into Indian Rupees. If a fixed maturity deposit remains inactive for three years post-maturity, or if a deposit without a fixed maturity is inactive for three years, the authorized bank must convert the balance into Indian Rupees at the prevailing exchange rate. Depositors can then claim the Indian Rupee proceeds or their foreign currency equivalent, including any applicable interest. A three-month notice is required for deposits without a fixed maturity.
4.
298/2014-RB - dated
13-3-2014
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FEMA
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Third Amendment) Regulations, 2014
Summary: The Reserve Bank of India issued amendments to the Foreign Exchange Management Regulations, allowing foreign direct investment (FDI) in Limited Liability Partnerships (LLPs) under specific conditions. Foreign residents, excluding citizens or entities from Pakistan and Bangladesh, can invest in LLPs through capital contributions or profit share acquisitions. LLPs must operate in sectors allowing 100% FDI under the automatic route without performance conditions. Investments require government approval and must adhere to fair pricing norms. LLPs with FDI cannot make downstream investments, and specific reporting requirements apply. The amendments retroactively apply from May 20, 2011.
5.
296/2014-RB - dated
3-3-2014
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FEMA
Foreign Exchange Management (Transfer or Issue of Security by A Person Resident Outside India) (Amendment) Regulations, 2014
Summary: The Reserve Bank of India issued an amendment to the Foreign Exchange Management Regulations concerning the transfer or issue of security by persons resident outside India. Effective from January 8, 2014, the amendment modifies entry 25 in Annex B of Schedule 1 of the 2000 regulations. The changes specify that 100% foreign direct investment (FDI) is allowed automatically in greenfield pharmaceutical projects and through government approval in brownfield projects, with potential conditions imposed by the government. Additionally, a 'non-compete' clause is generally prohibited unless approved by the Foreign Investment Promotion Board under special circumstances.
6.
No. 1/37/EM/2012 - G.S.R. 112(E) - dated
5-2-2014
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FEMA
CORRIGENDUM - Notification No. FEMA. 277/2013-RB dated 8th May 2013.
Summary: The corrigendum issued by the Reserve Bank of India on February 5, 2014, amends Notification No. FEMA. 277/2013-RB dated May 8, 2013, concerning the Foreign Exchange Management Act. It modifies Regulation 15 by replacing sub-regulation (iv) with sub-regulation (v), effective retroactively from March 28, 2012. This change allows Indian parties to submit the Annual Performance Report (APR) based on un-audited accounts of joint ventures or wholly-owned subsidiaries if the host country's law does not require auditing, provided the accounts are certified by statutory auditors and ratified by the Indian party's board.
Law of Competition
7.
F. No. 5/5/2003-IGC/CS - G.S.R. 164(E) - dated
5-3-2014
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Competition Law
Competition Commission of India (Salary, Allowances and other Terms and Conditions of Service of Chairperson and other Members) Amendment Rules, 2014.
Summary: The Ministry of Corporate Affairs issued an amendment to the Competition Commission of India (CCI) rules regarding the salary, allowances, and terms of service for the Chairperson and Members. Effective retrospectively from July 1, 2013, the Chairperson will receive a consolidated monthly salary of INR 450,000, and each Member will receive INR 375,000. No additional allowances for housing or vehicles will be provided. The amendment ensures no adverse effects on any individual's interests due to its retrospective application. Previous amendments to these rules were made in 2009 and 2011.
Circulars / Instructions / Orders
FEMA
1.
123 - dated
16-4-2014
Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP)
Summary: The circular issued on April 16, 2014, outlines the eligibility and conditions for Foreign Direct Investment (FDI) in Limited Liability Partnerships (LLPs) in India. It permits LLPs registered under the Limited Liability Partnership Act, 2008, to accept FDI under specific conditions. Eligible investors include persons or entities outside India, excluding certain nationalities and registered investors. LLPs can receive FDI in sectors allowing 100% FDI under the automatic route without performance-linked conditions. FDI requires government approval, and transactions must adhere to fair pricing norms. Reporting requirements and restrictions on downstream investments and external borrowings are also specified.
Highlights / Catch Notes
Income Tax
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High Court Affirms CIT(A) and Tribunal's Authority in Dismissing TPO's ALP Objections u/s 92CA(3.
Case-Laws - HC : Deletion made u/s 92CA(3) of the Act – Determination of ALP – When the CIT (A) as well as the Tribunal have accepted the reliability and authenticity of the organisation and its publication of rate list, objection of the TPO must be overruled - HC
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Interest on Margin Money for Business Loan Not Taxable Income, Says Court Ruling.
Case-Laws - HC : Nature of income - Interest earned on margin money - The margin money from which the interest was earned was placed for the purpose of taking the loan - The loan was given for the purpose of expansion - income not taxable - HC
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Penalty Waived u/s 271E for Cash Loan Repayment Between Father and Son Due to Close Relationship.
Case-Laws - AT : Penalty u/s 271E of the Act – Repayment of loan made in cash – the confirmation letter from the father cannot be completely brushed aside, especially when the transaction is between a very close relationship i.e., father and son - penalty waived - AT
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Section 153C Proceedings Invalid for Dissolved Companies Amalgamated Under Companies Act Sections 391 and 394.
Case-Laws - AT : Validity of proceedings u/s 153C of the Act – assessment on a company which has been dissolved by amalgamation u/s. 391 and 394 of the Companies Act, 1956 is invalid. - AT
Customs
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Department Adopts Unrecognized Valuation Method Based on Public Ledger, Contrary to Valuation Rules Guidelines.
Case-Laws - AT : Valuation - department has straightaway adopted the value given in the public ledger which is not a prescribed method of valuation under the Valuation Rules - AT
Service Tax
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Court Overturns Service Tax Demand on Corrugated Box Manufacturing, Not Falling Under Business Auxiliary Services Category.
Case-Laws - AT : Demand of service tax - Manufacture of corrugated boxes from craft paper on job work basis - Business Auxiliary services - demand set aside - AT
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Delayed Payment Charges Not Subject to Service Tax If Separately Recovered and Clearly Displayed on Invoices or Bills.
Case-Laws - AT : Valuation - inclusion of Delayed Payment Charges (DPC) - DPCs recovered separately and shown separately in the invoices/bills cannot be held liable to payment of service tax. - AT
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Residential Complex Construction Involving Property Transfer Taxed as Goods Sale; Eligible for Works Contract Benefits Under Service Tax.
Case-Laws - AT : Construction residential complex - if the contract involves transfer of property in the execution of such contract leviable to tax sale of goods, can be classifiable as works contract - benefit of composition scheme allowed - AT
Central Excise
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Goods for Transport of Compressed Gas Classified Under Subheading 87.16 Due to Semi-Trailer Fabrication.
Case-Laws - AT : Classification of goods manufactured for use of transport of compressed or liquefied gas - since the tanks were not manufactured/ fabricated on chassis of Motor Vehicles but on semi trailer/ running gear, consequentially the goods merits classification under chapter sub heading 87.16 - AT
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Appellant Must Pay Duty as Job Work Process Differs from Clearing Finished Goods Made with Own Materials.
Case-Laws - AT : Job Work - appellant should discharge the duty liability as the procedure for functioning under the job work is different and clearance of finished goods manufactured in the appellants factory from his own raw materials is different - AT
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Demand for 5% Value on Exempted Goods Like Bagasse and Bio-Compost Overturned; Claim Not Upheld by Court.
Case-Laws - AT : Cenvat Credit - Demand of 5% of the value of the exempted goods cleared from their factory premises which are Bagasse, Press-mud and Bio-compost - demand set aside - AT
VAT
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Supreme Court Clarifies: Brand Name Holders, Not Licensees, Liable for Sales Tax under Kerala Act Section 5(2.
Case-Laws - SC : Leviability of Tax – Sales tax on Brand name holder & Licensee - Tax u/s 5(2) the Kerala General Sales Tax Act, 1963 – It is the brand name holder, who has to pay tax u/s 5(2) - SC
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Surgical Cotton Classified as Distinct Commodity, Affecting VAT and Sales Tax Rates for Separate Identification.
Case-Laws - SC : Rate of tax on Surgical Cotton - Classification – surgical cotton is a separately identifiable and distinct commercial commodity manufactured out of raw cotton - SC
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Quarterly Discount Deduction Disallowed Due to Non-Relation to Sales in Tax Invoices.
Case-Laws - HC : Valuation - Quarterly discount in the form of quantity discount/scheme discount was allowed in the tax invoices on the basis of performance of the previous quarter and not in respect of the sales reflected in the said invoices - deduction not allowed - HC
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