TMI Tax Updates - e-Newsletter
April 26, 2012
Case Laws in this Newsletter:
Articles
By: Dr. Sanjiv Agarwal
Summary: The article discusses service tax terminology related to agriculture as per the proposed Section 65B. It defines "agriculture" as the cultivation of plants and rearing of animals, excluding horses, for various products. "Agricultural extension" involves applying scientific research to farming through education. "Agricultural produce" refers to products of agriculture that undergo minimal processing, retaining their essential characteristics for marketability. It includes produce from agriculture, horticulture, animal husbandry, and related fields. The text also references various legal interpretations and definitions of agricultural produce, emphasizing that only processing that does not alter essential characteristics qualifies as agricultural produce.
By: DEVKUMAR KOTHARI
Summary: The article discusses a legal issue concerning the application of a limitation period for issuing notices under Section 143(2) of the Income Tax Act. Until March 31, 2007, notices could be issued within twelve months from the end of the month in which the return was filed. An amendment effective April 1, 2008, reduced this period to six months from the end of the financial year. In a case involving the assessment year 2007-08, the court ruled in favor of the taxpayer, holding that the pre-amendment limitation period applied, rendering the notice issued by the tax authorities invalid.
News
Summary: The international crude oil price for the Indian Basket increased to $115.57 per barrel on April 24, 2012, from $115.14 the previous day. In rupee terms, the price rose to Rs 6100.94 per barrel from Rs 6013.76, influenced by both the rise in dollar-denominated prices and the depreciation of the rupee, which stood at an exchange rate of Rs 52.79 per US dollar compared to Rs 52.23 the previous day. This data was reported by the Petroleum Planning and Analysis Cell under India's Ministry of Petroleum and Natural Gas.
Summary: The export of textile items from India increased significantly during the period of April to December 2011-12 compared to the same period in the previous financial year. Textile clothing exports grew by 23.87%, cotton yarn and fabric by 18.57%, and manmade yarn and fabrics by 32.03%. Woolen yarn and fabrics saw a substantial increase of 56.45%, while natural silk yarn and fabrics experienced a decline of 40.61%. Raw cotton exports also rose, with a 63.77% increase in quantity and a 32.68% rise in value. This data was provided by the Minister of State for Textiles in a parliamentary session.
Summary: The export of Indian handicrafts and handmade carpets declined in 2008-09 due to a global recession but has since shown an upward trend from 2009-10 to 2011-12. To boost exports, the Indian government has implemented initiatives such as participation in international fairs, thematic displays, buyer-seller meets, brand promotion, and hosting the Indian Handicrafts Gifts Fair. Additionally, the government offers financial incentives, including a 2% interest subvention on export credit, and supports the sector through schemes focused on development, marketing, research, and welfare for artisans. This information was provided by the Ministry of Textiles in a Rajya Sabha session.
Summary: The Government of India has developed the Ammonium Nitrate Rules, 2012, following stakeholder discussions, to regulate the manufacture, import, transport, sale, and possession of ammonium nitrate due to its use in terrorist activities, such as the bomb blasts in Pune, Delhi, and Mumbai. Ammonium nitrate is not allowed as a fertilizer under the Fertilizers Control Order, 1985, and is classified as an explosive under the Explosives Act, 1884. The new rules aim to prevent misuse and ensure safe usage, protecting the public from accidental explosions. This was disclosed by a government official in a written reply to the Rajya Sabha.
Summary: The tea industry in India's North Eastern Region, contributing 52% of the country's tea production, is receiving financial incentives from the Tea Board for modernization and development. These incentives support the modernization of processing factories, quality certification, value addition, and the establishment of factories for various tea types. During the XI Plan, approximately Rs.354 crores were allocated for development activities in the region, with Rs.49 crores specifically for factory modernization. This information was disclosed by the Minister of State for Commerce and Industry in a written reply to the Rajya Sabha.
Summary: Pakistan's cabinet decided to move forward with granting India Most Favoured Nation (MFN) status, transitioning from a Positive List to a Negative List of 1,209 items for imports from India, as per a notification dated March 20, 2012. This Negative List is expected to be phased out by the end of 2012, allowing preferential access to all items not on the SAFTA sensitive list at a peak tariff of 5%. The bilateral trade between India and Pakistan was $2.67 billion in 2010-11, with plans to increase it to $6 billion within three years.
Summary: The import policy for pulses and oilseeds in India is unrestricted, except for seed quality. In the fiscal year 2011-12, Public Sector Undertakings (PSUs) contracted 292,650 metric tons of pulses, with specific contributions from different PSUs: STC (98,490 MT), MMTC (11,000 MT), and PEC (183,160 MT). No oilseeds were imported by any PSU. The cost of importing pulses varies based on the exporting country, import timing, and Indian port of entry. Major sources for these imports include Australia, Canada, China, France, Tanzania, Myanmar, and the USA. This was reported in a written reply by the Minister of State for Commerce and Industry in the Rajya Sabha.
Summary: There are approximately 7,200 industrial clusters in India across traditional handloom, handicrafts, and modern SME sectors, with around 2,500 being unmapped rural clusters. These clusters are distributed regionally, with the highest concentration in the west. The Indian government emphasizes the need for modern technology integration for cluster development. Initiatives include the Micro and Small Enterprise Cluster Development Programme, Scheme of Fund for Regeneration of Traditional Industries, Industrial Infrastructure Upgradation Scheme, Mega Food Park Scheme, Scheme for Integrated Textile Parks, and AYUSH cluster development. This information was disclosed by a government official in the Rajya Sabha.
Summary: The Government of India set a target for agriculture credit flow in 2011-12 at Rs. 4,75,000 crore, with Rs. 3,93,410.99 crore disbursed by January 31, 2012. Of this, Rs. 1,65,440.16 crore was allocated to small and marginal farmers. The National Bank for Agriculture and Rural Development reported no complaints about loans meant for small farmers being diverted to wealthier farmers in Delhi. Crop loans extended by banks in Delhi amounted to Rs. 39.13 crore in 2010-11 and Rs. 23.50 crore up to December 31, 2011. This information was provided by the Minister of State for Finance in the Rajya Sabha.
Summary: The India Banks Association has updated its Model Educational Loan Scheme, allowing member banks to adopt and modify it as needed. The scheme is inclusive of all students, including those from minority communities, who have gained admission to professional or technical courses in India or abroad through entrance exams or merit-based selection. Complaints about loan processing issues are addressed with the banks for prompt resolution. Public Sector Banks' performance under this scheme is continuously monitored, and they are instructed to process loan applications promptly. This information was provided by the Minister of State for Finance in a Rajya Sabha session.
Summary: The Government of India allocated Rs. 43,580 crore for oil subsidies in the 2012-13 budget, with Rs. 40,000 crore designated for compensating oil companies for under-recoveries from petroleum product sales and Rs. 3,580 crore for post-APM subsidies. In 2011-12, Rs. 3,481 crore was spent on subsidies for PDS kerosene, domestic LPG, freight for remote areas, and natural gas supply to the North Eastern region. The government also covered Rs. 65,000 crore, addressing under-recoveries from the previous year. While diesel prices are set to become market-determined, cooking gas prices remain regulated to protect consumers from inflation.
Summary: The services sector's contribution to India's GDP increased from 50.4% in 2000-01 to 59.0% in 2011-12. Industrial growth has helped reduce poverty by generating 36.1 million jobs between 1999-00 and 2009-10. Key industrial segments like automobiles and machinery saw double-digit growth from 2009-11, while others, such as chemicals, grew less. To boost growth, India is enhancing infrastructure investment through an Infrastructure Debt Fund, promoting public-private partnerships, and implementing new manufacturing and banking policies. The Reserve Bank of India's recent 50 basis point rate cut is expected to further improve growth prospects.
Summary: The Finance Minister urged the sugar sector to adopt the latest technology to enhance production, productivity, and quality, and to improve sugar recovery from sugarcane. Highlighting the sector's significance in India's agricultural economy, he emphasized its role in rural development and economic progress, involving around 50 million farmers. The government has implemented policies like duty-free sugar imports to stabilize prices and support the industry. Key areas for technological improvement include sugar quality, energy conservation, and environmental considerations. The minister called for global cooperation in research and development to maximize the industry's potential, particularly in developing countries.
Summary: The Competition Commission of India (CCI) has been appointed as a Co-Chair of the Merger Working Group of the International Competition Network (ICN) following its successful introduction of a merger review process in India since June 2011. This appointment, alongside the European Commission and Italy, acknowledges India's efforts in building institutional capacity and regulatory frameworks for merger assessments. The role will allow India to contribute to the development of a global framework for merger review and gain insights from international practices. The announcement was made during the ICN's Eleventh annual conference in Rio de Janeiro, Brazil.
Notifications
Companies Law
1.
F. No.17/292/2011 CL-V - dated
17-4-2012
-
Co. Law
Alterations in the Schedule XIV of the Companies Act, 1956 in respect of Intangible Assets
Summary: The Central Government has amended Schedule XIV of the Companies Act, 1956, to include provisions for intangible assets, specifically those created under Public-Private Partnership models like Build, Operate and Transfer (BOT). The notification outlines the method for calculating the amortization rate of intangible assets such as toll roads. The amortization amount is determined by multiplying the cost of the intangible asset by the ratio of actual revenue for the year to projected revenue over the concession period. The total projected revenue is subject to annual review and adjustment to ensure full amortization over the concession period.
Customs
2.
36/2012 - dated
23-4-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has appointed a Joint Commissioner or Additional Commissioner of Customs at the Inland Container Depot in Sahnewal, Ludhiana, as the Common Adjudicating Authority. This authority will oversee adjudication for customs matters involving specific locations in Ludhiana, Chennai, Mumbai, Nhava Sheva, and Kolkata. The adjudication pertains to a Show Cause Notice issued to M/s Jupiter Tools Corporation and M/s Suri & Co. by the Directorate of Revenue Intelligence in Ludhiana concerning a case initiated in February 2012.
3.
35/2012 - dated
23-4-2012
-
Cus (NT)
Seeks to amend Notification No.12/97-Customs (N.T.) - Inland Container Depots for loading and unloading of goods .
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 35/2012 to amend Notification No. 12/97-Customs (N.T.) concerning Inland Container Depots (ICD) and Land Customs Stations (LCS). This amendment, effective from April 23, 2012, adds Wardha in Maharashtra to the list of locations authorized for unloading imported goods and loading export goods. This change is made under the authority granted by the Customs Act, 1962. The principal notification was initially published on April 2, 1997, and has undergone several amendments, the most recent being on April 20, 2012.
SEZ
4.
S.O. 632(E) - dated
28-3-2012
-
SEZ
U/s. 4 of the SEZ Act, 2005 - Set up a sector specific Special Economic Zone for handicraft sector within the village limits of Kalwara of Tehsil-Sanganer in the District of Jaipur, in the State of Rajasthan.
Summary: The Central Government has approved a proposal by a private company to modify a Special Economic Zone (SEZ) for the handicraft sector located in Kalwara, Tehsil Sanganer, Jaipur, Rajasthan. Originally notified in 2009, the SEZ's area has been adjusted by denotifying 1.095 hectares and adding 52.093 hectares, resulting in a total area of 153.7639 hectares. This adjustment complies with the requirements of the Special Economic Zones Act, 2005, and relevant rules. The changes involve specific survey numbers and areas as detailed in the notification.
5.
S.O. 583(E) - dated
26-3-2012
-
SEZ
Under Section 4 of the Special Economic Zones Act, 2005 - Set up a Sector Specific Special Economic Zone for Free Trade and Warehousing Zone at Village Dhrub, Taluka Mundra, district Kutch in the State Gujarat M/s. Adani Ports and Special Economic Zone Limited
Summary: Under the Special Economic Zones Act, 2005, the Central Government has approved the establishment of a sector-specific Special Economic Zone (SEZ) for Free Trade and Warehousing at Village Dhrub, Taluka Mundra, Kutch, Gujarat, by a private company. The notification, dated March 26, 2012, confirms that all legal requirements have been met, and the area is designated as an SEZ. An Approval Committee, comprising various government officials and a representative from the developer, is constituted to oversee the SEZ. The SEZ is also recognized as an Inland Container Depot under the Customs Act, effective from the same date.
VAT - Delhi
6.
No.F.7(433)/Policy-II/VAT/2012/011-22 - dated
12-4-2012
-
DVAT
Addition of kerosene oil in the exceptions mentioned in respect of petroleum products in the Notification No.F.7 (433)/Policy-II/VAT/2012/1464, dated 23.03.2012.
Summary: The Government of the National Capital Territory of Delhi, through the Commissioner of Value Added Tax, has amended Notification No.F.7 (433)/Policy-II/VAT/2012/1464, dated March 23, 2012, to include kerosene oil in the list of exceptions concerning petroleum products. This amendment is issued under the authority granted by the Delhi Value Added Tax Act, 2004, and is effective immediately.
Circulars / Instructions / Orders
FEMA
1.
113 - dated
24-4-2012
External Commercial Borrowings (ECB) for Civil Aviation Sector
Summary: The circular issued by the Reserve Bank of India allows airline companies in the civil aviation sector to avail External Commercial Borrowings (ECB) for working capital under certain conditions. Eligible airline companies must be registered under the Companies Act, 1956, and hold a scheduled operator permit from the DGCA. ECBs must be raised within 12 months with a minimum maturity period of three years, with a sector ceiling of USD 1 billion and a cap of USD 300 million per airline. ECBs cannot be rolled over, and applications require a chartered accountant's certification. These changes are effective immediately, with other ECB policies unchanged.
DGFT
2.
59 (RE-2010) /2009-14 - dated
24-4-2012
File applications for 53 SEZ ports codes - reg.
Summary: The Directorate General of Foreign Trade (DGFT) has issued a circular announcing the assignment of SEZ port codes to 53 Special Economic Zones (SEZs) across India. These codes are now available on the DGFT website for use in applications related to the Foreign Trade Policy 2009-14 and the SEZ Act and Rules. The SEZs are located in various states, including Gujarat, Karnataka, Kerala, Maharashtra, and Tamil Nadu. Applicants are instructed to use these codes when filing applications through the DGFT server. This circular has been approved by the DGFT.
Highlights / Catch Notes
Income Tax
-
Court Ruling Highlights Importance of Accurate Record-Keeping for Asset Depreciation Classification to Avoid Tax Issues
Case-Laws - AT : Depreciation - Reclassification - AT
-
Monetary limit for tribunal appeals can't rely solely on negative income outcomes; issues shouldn't be dismissed as academic.
Case-Laws - HC : Determination of monetary limit for filing appeal before tribunal - merely on the ground that even if the Assessing Officer's order is restored, the net result would be a negative income, the issue cannot be treated to be one of academic interest - - HC
-
Lack of Definition in Income Tax Act's Sections 10A and 10B Causes Confusion Over Business Profits Deductions.
Case-Laws - AT : Deduction u/s 10A/10B - sections 10A/10B having no definition of the expression "profits of the business" - AT
-
Court Rules Gifts Must Be Proven Genuine to Avoid Tax as Unexplained Cash Credits; Documentation Essential for Legitimacy.
Case-Laws - HC : Addition in respect of the gift received as unexplained cash credits as well as non-genuine - HC
-
Section 10B Income Tax: Understanding Extended 10-Year Exemption and "Undertaking" Definition for Tax Relief.
Case-Laws - AT : Exemption/deduction u/s 10B - extended period of ten years - meaning and scope of the term undertaking - AT
-
Land Not Depreciable Under Income Tax Act Section 50; Eligible for Exemption u/s 54EC.
Case-Laws - HC : Land is not a depreciable asset and hence can not form part of block of assets u/s 50 - investment eligible for exemption u/s 54EC
-
Section 40(a)(ia) Income Tax Act: No Expense Disallowance if TDS Paid by Section 139(1) Due Date, Retroactive from 2010.
Case-Laws - AT : Amended provisions of sec. 40(a)(ia) w.e.f. 1.4.2010 with retrospective effect - No disallowance if the TDS is paid on or before the due date specified in sec. 139(1)
-
DTAC Article 13: Marketing, Strategy, and Training Services Classified as Consultancy for Tax Purposes in India-France Agreement.
Case-Laws - AAR : Article 13 of the DTAC between India and France - Services rendered on marketing, strategy and training to optimize sales techniques come within the purview of consultancy services.
-
Senior Vice President and Vice Presidents gain new powers in Tribunal Zones, replacing 2006 order. Effective immediately.
Notifications : Delegation of specified powers and functions to Senior Vice President and Vice Presidents of various Zones of Tribunal with immediate effect - Supersession of Order No. VI(A)/2006, dated 20-9-2006 - Ntf. No. VI(A) - AD(AT)/2010, Dated: October 19, 2010
Customs
-
Customs Classification Challenge: Composite Absorbent Material of Cellulosic and Polymeric Components Reviewed for Import Duty Rates.
Case-Laws - AT : Classification of 'Composite absorbent material composed of celllulosic material (pulp) bonded/treated with polymeric absorbing material and additives with pre-made laminate of non-wovens' - AT
-
Foreign Trade Policy Update: Reduction in Benefits for Star Export Houses per Circular M.F. (D.R.) No. 58/2004-Cus.
Case-Laws - HC : Curtailing benefits and privileges conferred under the Foreign Trade Policy - Circular M.F. (D.R.) No. 58/2004-Cus., dated 21-10-2004 - star export house - HC
-
Importer Not Liable for Duty When Goods Relinquished; Property Transfers to Department u/s [Specify Section.
Case-Laws - HC : Once a relinquishment of title to the goods is made by the assessee then the said goods become the property of the Department and as a consequence of which no duty is payable by the importer. - HC
-
Entitlement to 20% DEPB Rate on Woven Jackets Upheld; Promissory Estoppel Prevents Enforcement of Revised Rates.
Case-Laws - HC : DEPB scheme - Revision in DEPB rates - Doctrine of promissory estoppel - respondent is entitled to DEPB rate as in the policy with effect from 15th April, 1998 @ 20% applicable to the woven jackets without any value cap. as existing before revision - HC
-
Common Adjudicating Authority Appointed for Customs Matters to Streamline Decision-Making and Enhance Efficiency under Notification No. 36/2012.
Notifications : Appointment of Common Adjudicating Authority. - Ntf. No. 36 / 2012 - Customs (N.T.) Dated: April 23, 2012
-
Amendment to Customs Notification Updates Rules for Inland Container Depots to Improve Efficiency and Compliance.
Notifications : Seeks to amend Notification No.12/97-Customs (N.T.) - Inland Container Depots for loading and unloading of goods . - Ntf. No. 35 / 2012 - Customs (N.T.) Dated: April 23, 2012
DGFT
-
File Applications for 53 SEZ Port Codes as per Circular No. 59 (RE-2010) for 2009-14 Compliance Updates.
Circulars : File applications for 53 SEZ ports codes - reg. - Cir. No. 59 (RE-2010) /2009-14 Dated: April 24, 2012
SEZ
-
New Special Economic Zone for Free Trade & Warehousing Established in Kutch, Gujarat u/s 4 of 2005 Act.
Notifications : Under Section 4 of the Special Economic Zones Act, 2005 - Set up a Sector Specific Special Economic Zone for Free Trade and Warehousing Zone at Village Dhrub, Taluka Mundra, district Kutch in the State Gujarat M/s. Adani Ports and Special Economic Zone Limited - Ntf. No. S.O. 583(E) Dated: March 26, 2012
-
Handicraft Sector SEZ Established in Kalwara, Jaipur u/s 4 of SEZ Act, 2005 via Notification S.O. 632(E).
Notifications : U/s. 4 of the SEZ Act, 2005 - Set up a sector specific Special Economic Zone for handicraft sector within the village limits of Kalwara of Tehsil-Sanganer in the District of Jaipur, in the State of Rajasthan. - Ntf. No. S.O. 632(E) Dated: March 28, 2012
FEMA
-
New Guidelines for Civil Aviation Sector on External Commercial Borrowings to Boost Financial Support for Aircraft Acquisition.
Circulars : External Commercial Borrowings (ECB) for Civil Aviation Sector - Cir. No. 113 Dated: April 24, 2012
Corporate Law
-
Companies Act 1956, Schedule XIV amended: New rules for intangible assets impact taxation and asset management.
Notifications : Alterations in the Schedule XIV of the Companies Act, 1956 in respect of Intangible Assets - Ntf. No. F. No.17/292/2011 CL-V Dated: April 17, 2012
Service Tax
-
Court Examines Eligibility for Service Tax Refund Under Notification No. 14/2004; Criteria for Claim Scrutinized.
Case-Laws - AT : Refund of service tax paid - Notification No. 14/2004, dated 10-9-2004 - AT
-
CENVAT Credit Eligibility for Cellular Services: Classification of Antennas, Towers, and Green Shelters as Capital Goods Analyzed.
Case-Laws - AT : CENVAT credit for cellular telephone service - Meaning and scope of the term capital goods - (i) antenna, (ii) tower and parts thereof and (iii) green shelter (same as PFB) - AT
-
Court to Decide If Appellant Can Claim Full Cenvat Credit on Agent Commissions and Insurance Premiums Tax Paid.
Case-Laws - AT : Cenvat credit - whether the appellant is eligible to take credit for the full amount of tax paid on the commission paid to the Agents and for the full amount of tax paid on insurance premium paid - AT
-
Dam Construction Dispute: Principal and Sub-Contractor Argue Over Service Tax Liability on Provided Services.
Case-Laws - AT : Construction of Dam or not - principal contractor as well as the sub-contractor, are denying the liability of Service Tax on the services which have been rendered by them - AT
Central Excise
-
Must Modvat/Cenvat Credit Be Reversed for Duty-Exempt Final Products? Exploring Input Use in Manufacturing.
Case-Laws - HC : Whether the Modvat/Cenvat credit on the inputs in process and in finished products is liable to be reversed/paid back when the final product becomes exempt from payment of duty - HC
-
Supplies to SEZs are considered "exports," exempting them from Cenvat Credit recovery u/r 6 of CCR, 2002/2004.
Case-Laws - AT : The supplies made to SEZ are held to be "export", the application of provisions of Cenvat Credit Rules for recovery of amounts on goods supplied to SEZ units in terms of Rule 6 of CCR, 2002 / CCR, 2004 does not arise - AT
-
Valuation Method u/s 4A: Including Optional Service and Rust Proof Charges with MRP for Tax Purposes.
Case-Laws - AT : MRP bases valuation under section 4A - Charging Optional Service Charges (OSC in short) and “Rust Proof Protection Charges (RPP in short) over and above the MRP - AT
-
Turnover Tax Deductible for Excise Duty Calculations; Exclude from Transaction Value for Accurate Liability Assessment.
Case-Laws - AT : Inclusion in Assessable value - turn over tax is a permissible deduction - tax paid or payable on the goods shall not form part of the transaction value for the purpose discharge of excise duty liability - AT
-
Reversal of CENVAT Credit: Duty Payment on Value Addition Alters Credit Management Under Central Excise Regulations.
Case-Laws - AT : Reversal of cenvat credit - payment of duty on value addition on the inputs received by the appellant amounts to reversal of the CENVAT credit as - AT
-
Carpets with jute base and polyester or polypropylene surface classified as "other carpets" under sub-heading 5703.90 for tax.
Case-Laws - AT : The carpets which are non-woven carpets with base/ground fabric of jute and exposed surface consisting of polyester/polypropylene fibre, are classifiable as “other carpets” under sub-heading 5703.90 - AT
VAT
-
Court Supports State's Retroactive Inclusion of Liquor Manufacturers in Tax Deferment Negative List, Aligns with Soft Drinks.
Case-Laws - HC : Benefit of deferment of tax - When soft drink manufactures are put in the negative list, it would indeed be surprising not to have liquor in the negative list, no fault can be found with the notification issued by the State including liquor in the negative list with retrospective effect - HC
-
Kerosene Oil Added to Exceptions List in VAT and Sales Tax Regulations as of April 2012 Notification.
Notifications : Addition of kerosene oil in the exceptions mentioned in respect of petroleum products in the Notification No.F.7 (433)/Policy-II/VAT/2012/1464, dated 23.03.2012. - Ntf. No. No.F.7(433)/Policy-II/VAT/2012/011-22 Dated: April 12, 2012
9911796707
