TMI Tax Updates - e-Newsletter
April 24, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Puneet Agrawal
Summary: The Punjab and Haryana High Court provided significant relief to developers in Haryana regarding VAT liability and the valuation of goods in works contracts. The court ruled that developers' activities fall under works contracts, and VAT should only be charged on goods incorporated in the execution of such contracts post-agreement with buyers. It clarified that if proper books are maintained, taxable turnover should reflect the actual value of goods used. If not, a formula can be prescribed. The court also held that VAT cannot be charged on goods already taxed at the subcontractor level and directed amendments to relevant rules, quashing previous exorbitant assessments.
By: harinath Reddy reddy
Summary: The article discusses the eligibility criteria for obtaining the STTG Certificate from Indian Railways, which is essential for claiming CENVAT Credit. According to the Railway Board Circular, the certificate is issued to the customer who pays the freight and service tax. The article questions whether the customer is the person who pays the freight or the one who unloads the material. It highlights the confusion arising from the interpretation of CENVAT Credit Rules, which suggest that the consignee should receive the credit, while Indian Railways issues the certificate to the consignor. The response suggests the certificate should be issued to the party paying the service tax.
By: Manoj Agarwal
Summary: The Central Government's Notification No. 08/2015-CE(NT) amended Rule 11(2) of the Central Excise Rules, 2002, causing confusion among manufacturers and dealers regarding CENVAT credit in transit sales. The amendment allows goods to be sent directly to consignees on a registered dealer's direction, with the consignee taking CENVAT credit based on the dealer's invoice. This change aims to reduce costs for registered dealers by avoiding unnecessary transportation. However, unregistered dealers can continue issuing commercial invoices without mandatory registration. The amendment provides an additional method for registered dealers to avail CENVAT credit, but it does not negate existing procedures for unregistered dealers.
News
Summary: The government has authorized the National Highways Authority of India (NHAI) to issue Tax-Free Infrastructure Bonds amounting to Rs. 24,000 crore and Capital Gain Tax Exemption Bonds totaling Rs. 4,000 crore for the financial year 2015-16. The Ministry of Finance, through the Department of Economic Affairs, has granted in-principle approval for the issuance of these Tax-Free Infrastructure Bonds, which are expected to provide tax benefits under section 10(15)(iv)(h) of the Income Tax Act 1961. No approval is needed for the Capital Gain Tax Exemption Bonds. This information was disclosed by a government official in a written response in the Lok Sabha.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.1850 on April 23, 2015, up from Rs. 62.8183 the previous day. Corresponding exchange rates for other currencies on April 23, 2015, were: 1 Euro at Rs. 67.6585, 1 British Pound at Rs. 94.9355, and 100 Japanese Yen at Rs. 52.75. These rates are determined based on the US Dollar reference rate and cross-currency quotes. The Special Drawing Rights (SDR) to Rupee rate will also be calculated using this reference rate.
Summary: The Indian government approved a proposal for the Reserve Bank of India to enter into a currency swap agreement with Sri Lanka's central bank, providing US$1.1 billion as a special swap outside the existing SAARC Currency Swap Framework. While US$400 million will be offered under the existing framework, the additional US$1.1 billion will be provided as an ad-hoc facility for six months. This arrangement aims to offer Sri Lanka a financial safety net against currency volatility and boost short-term liquidity, aiding its economic recovery and strengthening bilateral economic ties between India and Sri Lanka.
Notifications
Customs
1.
16/2015 - dated
22-4-2015
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ADD
Seeks to to extend the validity of Notification No 36/2011- Customs (ADD) dated 18.04.2011 for a further period of one year
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 16/2015-Customs (ADD) to extend the validity of the anti-dumping duty on "Acetone" originating from Japan and Thailand. This extension, recommended by the designated authority, prolongs the measures originally imposed by Notification No. 36/2011-Customs dated 18th April 2011. The anti-dumping duty will now remain in force until 8th April 2016, unless revoked earlier. This action is in accordance with section 9A of the Customs Tariff Act, 1975, and rule 23 of the related 1995 rules.
2.
15/2015 - dated
22-4-2015
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ADD
Seeks to further amend Notification No 6/2011 - Customs dated 7/2/2011
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 15/2015-Customs (ADD) to amend Notification No. 6/2011-Customs, extending the anti-dumping duty on "Barium Carbonate" from China. This amendment follows a review initiated by the designated authority under the Customs Tariff Act, 1975, and the related rules. The extension is set for one year, effective until March 22, 2016, unless revoked earlier. This action aims to continue protecting domestic industries from unfair trade practices by maintaining the anti-dumping duty initially imposed on February 7, 2011.
Income Tax
3.
42/2015 - dated
16-4-2015
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IT
Notification u/s 35(1) (ii) - Approved organization - Institute of Chemical Technology, Mumbai
Summary: The Institute of Chemical Technology in Mumbai has been approved by the Central Government under section 35(1)(ii) of the Income-tax Act, 1961, for scientific research activities. This approval is effective from the assessment year 2014-2015 onwards. The institute must utilize funds for scientific research, conduct research through faculty or students, maintain separate audited accounts for research funds, and provide certified statements of donations and expenditures. Failure to comply with these conditions, such as maintaining separate accounts or providing necessary reports, may result in withdrawal of the approval by the Central Government.
Highlights / Catch Notes
Income Tax
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TDS Applicability on SIM Card and Recharge Coupon Commissions u/s 194H of the Income Tax Act.
Case-Laws - AT : TDS u/s 194H - Supply of SIM card and recharge coupon - expenditure claimed under the head "dealer's scheme and incentives" - The amount is in the nature of commission and discount to distributors and exigible to tax deduction at source under section 194H - AT
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Reassessment u/s 68 Invalid: Missing Notice u/s 143(2) Voids Action u/s 147.
Case-Laws - AT : Addition of Income u/s 68 - no notice issued u/s. 143(2) which is very much essential for reassessment u/s 147 - If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of law and deserves to be cancelled - AT
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Reassessment of Section 80-IB(10) Deduction Claim Invalid; Prior Thorough Examination by Authorities Confirmed No Justification for Reopening.
Case-Laws - AT : Reopening of assessment - the claim of deduction under section 80-IB(10) of the Act have been thoroughly examined by the Assessing Officer as well as the appellate authorities - reassessment is not valid - AT
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Court Upholds Rejection of Appellant's Accounts for Inaccurate Entries, Unable to Verify Purchases, Sales, or Expenses.
Case-Laws - AT : Rejection of books of account - the way in which the books of accounts the appellant had been written, it is impossible to either determine purchases or the sales or the expenses. The books are not amenable any sort of verification and the entries mentioned are wrong - rejection sustained - AT
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Entity's Interest Income Not NBFC Business, Can't Offset Business Losses Against Income from Other Sources.
Case-Laws - AT : Reopening of assessment - assessee cannot be considered to be carrying on NBFC business - If the interest income is assessed under the head income from other sources, then the assessee would not be entitled to set off the brought forward business loss against the income declared under the head Income from other sources - reopening sustained - AT
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Unexplained Share Application Money Requires Detailed Inquiry, General Observations Insufficient for Valid Financial Conclusions.
Case-Laws - AT : Unexplained share application money - The inquiry for arriving at a proper conclusion is a sine qua non and that cannot be dispensed with by making general observations. - AT
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Section 68: Claim Rejected Due to Missing Supplier Confirmations and Addresses for Long-Term Credit Provision.
Case-Laws - AT : Deletion of addition u/s 68 - We fail to understand that whether small raw hide suppliers can afford to provide this long credit and hence, this claim cannot be accepted in the absence of confirmation from supplier and their addresses - Additions confirmed - AT
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Penalty u/s 271AAA removed after AO accepts disclosed income; no undisclosed income found.
Case-Laws - AT : Deletion of penalty levied u/s 271AAA - post search assessment - AO had accepted the disclosed income declared by the assessee and no addition on account of undisclosed income has been made by the AO - No penalty - AT
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Rental Income from Retail Mall Spaces Taxed as House Property, Classified as Capital Work in Progress, Not Stock in Trade.
Case-Laws - AT : Treatment of rental income by giving counters/spaces/shops in Retail Mall - property was shown as “capital work in progress” and not as “stock in trade” - Taxable as income from House property - AT
Customs
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Customs Duty Exemption Denied for Medical Equipment Due to Withdrawal of DGHS Certificate Under Notification No. 64/88-Cus.
Case-Laws - AT : Benefit of Notification No.64/88-Cus - medical equipment imported without payment of duty on the basis of customs duty exemption certificate issued by DGHS - The said exemption certificate was withdrawn by DGHS vide letter dated 30.8.2000 for non-fulfilment of the conditions of grant thereof - exemption rightly denied - AT
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Revenue Challenges Exporter's Duty Drawback Claim, Questions Intent Amid Discrepancy in Goods Quantity and Foreign Exchange Remittance.
Case-Laws - AT : Duty drawback claim - Revenue's contention that appellant acted deliberately cannot be ruled out for the reason that an exporter who has not remitted higher amount of foreign exchange to this country does not expect higher quantity of goods with higher value - AT
Service Tax
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CENVAT Credit Dispute: Invoices Missing Appellant's Name Spark Concerns Over Service Tax Benefits Claimed by Another Entity.
Case-Laws - AT : Availment of CENVAT Credit - Material fact of invoices without name of the appellant does not rule out abuse of law. Appellant was claiming to be beneficiary of service tax paid by a concern other than the appellant- AT
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Refund Denied for SEZ Unit Services; Lack of Explanation from Appellate Authority on Notification No. 17/2009 ST Compliance.
Case-Laws - AT : Denial of Refund claim - Exemption claim - services availed by SEZ unit - Since the appellant had paid the duty, no reasoning has been given by the first appellate authority as to why refund under Notification No. 17/2009 ST, as amended, will not be admissible - AT
Central Excise
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Crushing Fabrics Deemed Manufacturing Under Chapter 55; Excise Duty Imposed, Extended Limitation Period Granted.
Case-Laws - AT : Manufacturing activity or not - Crushing of fabrics - in view of Chapter Note 4 of the Chapter 55, this process would have to be treated as amounting to manufacture - since the product is marketable as admitted, demand confirmed - however benefit of period of limitation extended - AT
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Discrepancies in Sales Reports vs. Company Books Insufficient to Prove Clandestine Goods Removal Without Additional Evidence.
Case-Laws - AT : Clandestine removal of goods - difference between the sales declared in the ER-1 returns and sales figures as reflected in their books of accounts - merely on the basis of this difference, it cannot be presumed that the same represents either the value of the clandestinely cleared goods - AT
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Assessable Value of Halogen Capsules from EOU to DTA: Import Price of Gold-Coated Capsules Deemed Irrelevant.
Case-Laws - AT : Determination of assessable value of the halogen capsules cleared by the 100% EOU (Unit-I) to the DTA unit - ontemporaneous import price of identical goods or similar goods into India - the import price of gold coated Halogen Capsules was not relevant as the 100% EOU (Unit-I) was not manufacturing such halogen capsules. - AT
VAT
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High Court Eases VAT Burden for Haryana Developers in Works Contracts, Clarifies Goods Valuation for Tax Purposes.
Articles : Major Relief to Developers in Haryana on VAT libaility and Valuation of Goods for impsition of VAT in Works Contract clarified by High Court of Punjab & Haryana in the case of CHD Developers. - Value Added Tax - VAT and CST
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VAT Charging on Land: Exclude Immovable Property and Pre-Sale Actions from Taxable Value Calculation.
Case-Laws - HC : Inclusion of value of land for charging Value Added Tax - the value of immovable property and any other thing done prior to the date of entering of the agreement of sale is to be excluded from the agreement value / taxable value - HC
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Court: Excess ITC Claims Don't Bar Adjustment of Admissible ITC Against Current Output Tax Liability Under VAT Act.
Case-Laws - HC : Merely because while submitting the Form No.108 the assessee/dealer submitted the claim of Input Tax Credit more than which is held to be admissible on assessment may be original assessment or even audit assessment or even reassessment, by that itself is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit against its output tax liability of VAT Act of the current year under consideration - HC
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High Court Confirms VAT Imposed on Goods Exchanged During Warranty Period for Cars under Gujarat VAT Act 2003.
Case-Laws - HC : Transaction of exchange of goods during the Warranty Period of motor cars amounts to sale and consequent levy of VAT under the provisions of the Gujarat Value Added Tax Act, 2003 - Order of AO sustained - HC
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Form-C Issuance Rejected; Later Tax Assessments and Recovery Not Grounds for Denial of Form-C and Form-F.
Case-Laws - HC : Rejection of application for issuance of Form-C - So far as the assessments made after the date of the application and the recovery of tax thereon are concerned, the same stand on entirely different footings and they cannot be used for the purpose of denying of issuance of Form-C and Form-F - HC
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