TMI Tax Updates - e-Newsletter
April 28, 2017
Case Laws in this Newsletter:
News
Summary: The Jharkhand Assembly passed the Jharkhand Goods and Services Taxes Bill, 2017, facilitating the implementation of the Goods and Services Tax (GST) from July 1. The bill was introduced during a special one-day session and was approved by a voice vote. The Urban Development Minister emphasized that the unanimous passage of the bill is a significant step towards achieving a unified tax system across the country. Prior to Jharkhand, the assemblies of Telangana and Bihar had also ratified the GST, which requires state approval following its passage in Parliament.
Summary: The Supreme Court extended the parole of a business group leader until June 19, warning that failure to pay Rs. 1,500 crore by June 15 would result in imprisonment. The leader committed to depositing Rs. 1,500 crore by June 15 and an additional Rs. 552.22 crore by July 15 into the SEBI-Sahara account. The court also ordered the arrest of an individual from Chennai for contempt of court due to non-payment of Rs. 10 crore, as previously ordered. The court permitted electronic payment and instructed the preparation of auction terms for a property, with the leader required to appear in court on June 19.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 64.1141 on April 27, 2017, compared to Rs. 64.0013 on April 26, 2017. The exchange rates for other currencies against the Rupee were also updated: 1 Euro was Rs. 69.8908, down from Rs. 70.0430; 1 British Pound was Rs. 82.5854, up from Rs. 82.1265; and 100 Japanese Yen was Rs. 57.60, up from Rs. 57.47. The Special Drawing Rights (SDR) to Rupee rate will be determined based on these reference rates.
Notifications
Indian Laws
1.
F. No. 5(91)/2015-BE.I - G.S.R. 401(E) - dated
21-4-2017
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Indian Law
Modification of Notification No. (s), G.S.R. 180(E), dated 17th February 2016 and in supersession of G.S.R. 439(E), dated 22nd April 2016
Summary: The notification from the Ministry of Commerce and Industry, dated April 21, 2017, modifies previous notifications regarding the Inter-Ministerial Board responsible for certifying startups for tax benefits under the Income Tax Act, 1961. The board now includes the Joint Secretary from the Department of Industrial Policy and Promotion, and representatives from the Departments of Biotechnology, Science & Technology, and the Ministry of Electronics and Information Technology. The Secretary of the Department of Industrial Policy and Promotion is authorized to nominate representatives from other departments as necessary.
2.
F. No. 13/20/2014- NS.II - G.S.R. 380(E) - dated
11-4-2017
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Indian Law
‘Senior Citizens’ Welfare Fund (Amendment) Rules, 2017
Summary: The Senior Citizens' Welfare Fund (Amendment) Rules, 2017, issued by the Ministry of Finance, amends the 2016 rules under the authority of the Finance Act, 2015. Effective upon publication in the Official Gazette, the amendment adds new clauses to Rule 3, sub-rule (3), specifying additional accounts and financial instruments to be included. These include accounts from various banking entities, dividend accounts, company deposits and debentures, insurance policies, and accounts related to the Coal Mines Provident Fund. The original rules were published in March 2016 and previously amended in October 2016.
Circulars / Instructions / Orders
Income Tax
1.
17/2017 - dated
26-4-2017
Corrigendum to Circular No. 13/2017 dated 11.04.2017 on the clarification regarding liability to income-tax in India for a non-resident seafarer receiving salary in NRE (Non Resident External) account maintained with an Indian Bank
Summary: Circular No. 17/2017, issued by the Central Board of Direct Taxes, serves as a corrigendum to Circular No. 13/2017. It addresses the income tax liability of non-resident seafarers receiving salaries in Non-Resident External (NRE) accounts with Indian banks. The correction specifies that the term "foreign ship" should be read as "foreign going ship (with Indian flag or foreign flag)" in the original circular. This clarification aims to ensure accurate interpretation regarding the tax obligations of non-resident seafarers.
FEMA
2.
45 - dated
27-4-2017
Exim Bank's Government of India supported Line of Credit of USD 52.30 million to the Government of the Republic of Mauritius
Summary: Exim Bank, supported by the Government of India, has provided a Line of Credit (LoC) of USD 52.30 million to the Government of Mauritius for Project Trident. The agreement, effective from April 3, 2017, mandates that at least 75% of goods and services under the contract must be sourced from India, with the remaining 25% potentially sourced internationally. Shipments must comply with Reserve Bank guidelines, and no agency commission is payable under this LoC. Authorized banks are instructed to inform exporters and facilitate compliance with the Foreign Exchange Management Act, 1999.
DGFT
3.
06/2015-2020 - dated
27-4-2017
Inclusion of Seaport located at Hazira (Surat) Port as a Port of registration under Para 4.37 of Handbook of Procedures 2015-20 - reg.
Summary: The seaport at Hazira (Surat) has been added as a Port of Registration under Paragraph 4.37 of the Handbook of Procedures 2015-2020, as per the powers granted under Paragraph 1.03 of the Foreign Trade Policy 2015-2020. This amendment, issued by the Director General of Foreign Trade, allows the Hazira seaport to be eligible for export promotion benefits under Chapter 4 of the Foreign Trade Policy. The seaport's inclusion will be arranged in alphabetical order in the revised edition of the Handbook of Procedures.
4.
05/2015-2020 - dated
27-4-2017
Change in office address of Regional Office of DGFT at Puducherry and Head of Office at Regional Office of DGFT at Ludhiana, Ahmedabad, Hyderabad and Bengaluru in Appendix — 1A of Foreign Trade Policy, 2015-20
Summary: The Directorate General of Foreign Trade has updated the office addresses in Appendix 1A of the Foreign Trade Policy, 2015-2020. The changes affect the Regional Office in Puducherry and the Head Offices in Ludhiana, Ahmedabad, Bengaluru, and Hyderabad. The specific territorial jurisdictions and contact details for each location are outlined, with the Ludhiana office overseeing most of Punjab, the Ahmedabad office covering parts of Gujarat, the Puducherry office managing the Union Territory and nearby districts, the Bengaluru office covering Karnataka, and the Hyderabad office overseeing Andhra Pradesh and Telangana, excluding certain areas.
Highlights / Catch Notes
Income Tax
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Company Must Deduct TDS on F-1 Circuit Profits u/s 195; Construction Costs Irrelevant to Tax Implications.
Case-Laws - SC : Income accrues or arises or is deemed to accrue or arise - Mere construction of the track by Jaypee at its expense will be of no consequence. Its ownership or organising other events by Jaypee is also immaterial - Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out - TDS was required to be deducted u/s 195 on the profit portion - SC
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High Court Upholds Validity of Notice Issued u/s 201 of the Income Tax Act, Requires Petitioner Information.
Case-Laws - HC : Validity of notice issued under Section 201(1)/201(1A) - It may be a notice u/s 201 (3) of the Act but it only requires the petitioner to furnish the certain information and nothing else - there is no necessity or any justification for us to disturb or quash the above notice - HC
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Tribunal Rules Assessee Can Adjust Seized Funds for Advance Tax from Application Date, No Interest Charged.
Case-Laws - HC : Assessee is entitled to adjustment of seized amount towards advance tax liability from the date of making the application in that regard. The Tribunal has rightly held that the assessee was entitled to adjustment of the said amount and no interest could be charged on that basis - HC
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Assessing Officer Rejects Books u/s 145(3) Due to Unproven Material Movement; Additions Confirmed.
Case-Laws - AT : Bogus purchases - The assessee could not establish movement of material as well could not produce the parties before Revenue. The books of accounts were rejected by AO u/s 145(3) of 1961 Act - Additions confirmed - AT
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CIT Corrects AO's Deduction Error: Section 263 Invoked to Address Revenue Loss Due to Misapplication of Section 115JB.
Case-Laws - AT : Revision u/s 263 - deduction u/s. 80IB(10) - AO failed to apply the provisions of section 115JB - CIT was able to demonstrate that the view taken by the AO was not plausible rather it was legally unsustainable and incorrect. Besides it resulted in loss of revenue. Thus both the prerequisites were there when the CIT issued the notice u/s. 263 - AT
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Christian Literature Publisher Recognized as Religious Organization; Misapplication of Income Tax Act Section 2(15) Corrected.
Case-Laws - AT : The assessee which was pursuing printing, publishing and distribution of Christian literature and tracts as its main activity, could be considered only as a religious one - lower authorities fell in error by applying section 2(15) to it, when said Section has no applicability on religious institutions. - AT
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Development Agreement Isn't a Property Sale; No Capital Gains Tax Due to Section 53(A) of Transfer of Property Act.
Case-Laws - AT : LTCG - since the agreement was a Development Agreement, there was no transfer of property by way of sale and even the ingredients of “Part Performance” as per Sec.53(A) of the Transfer of Property Act cannot be said to have been attracted, so as to attract the provisions of Capital Gains tax - AT
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Transfer Pricing Adjustments: Use Operating Profit, Not Net Profit, for TNMM Comparisons in International Transactions.
Case-Laws - AT : TPA - 'operating profit’ from the international transaction is compared with the operating profit margin of the comparables under the TNMM. Thus the addition based on the transfer pricing adjustment, on the strength of `net profit’ as numerator in contrast to `operating profit’, cannot be upheld - AT
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Corporate Guarantee Commission Fee for Associated Enterprise Set at 0.50% to Meet Arm's Length Requirement in Transfer Pricing.
Case-Laws - AT : TPA - corporate guarantee commission fee which is to be recovered from AE should be @ 0.50% which would meet the arms length requirement. - AT
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Hawala Operator's Admission: Bogus Purchases from Grey Market Not Added as Income for Assessee.
Case-Laws - AT : Bogus purchases - when the hawala person himself had admitted that he had arranged the purchases from grey market and got them supplied, the addition on account of so called alleged bogus purchases cannot be added as income of the assessee - AT
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Section 41(1) Update: Write-back of Creditors Reduces Depreciation Claim; Depreciation Not a Loss or Liability.
Case-Laws - AT : Additions u/s 41(1) qua write-back of certain creditors - resulting into less depreciation claim for the assessee - depreciation is neither a loss, nor an expenditure, nor a trading liability, referred to in s. 41(1). - AT
Customs
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Immediate Customs Duty Refunds Ordered Without Application u/s 27 of the Customs Act, 1962.
Case-Laws - AT : Refund of customs duty - when an amount becomes refundable after a final order is passed, the same has to be refunded immediately and for such purpose, the assessee is not required to move an application u/S 27 of CA, 1962 - AT
Service Tax
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Service Tax Demand on Renting Hotels Dismissed: Buildings Not Considered Immovable Property Under Finance Act, 1994.
Case-Laws - AT : Renting of immovable property services - The term “hotel” is not defined in the Finance Act, 1994 - buildings used for or as hotels do not amount to immovable property for the purpose of service tax - demand set aside - AT
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Assessee Liable for Service Tax on "Other Charges" as Pure Agent Conditions u/r 5(2) Not Satisfied.
Case-Laws - AT : Valuation of taxable services - assessee is collecting “other charges” and did not pay service tax on such charges - where the conditions of Pure Agent, condition of Rule 5(2) are not fulfilled, demand of service tax is to be confirmed - AT
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Transaction Fees Retained by Appellant Considered Additional Income in Forward Contract Service Case.
Case-Laws - AT : Forward Contract Service - any amount collected in the name of transaction fee is not remitted to the exchange and is retained by the appellant, it is apparent that the same will be an additional consideration accruing to the appellant towards service rendered to the clients. The name of such consideration becomes immaterial - AT
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Court Rules 80% of Composite Contract Value Subject to VAT; Notification No. 12/2003-ST Benefits Upheld.
Case-Laws - AT : Valuation - composite contract - 80% of the value shown to have suffered VAT with reference to supply of materials - benefit of notification no.12/2003-ST cannot be denied - AT
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Refund Claims Must Include NEFT Remittances in Export Turnover u/r 5, Even for Prior Invoices and Services.
Case-Laws - AT : Refund claims - unutilized CENVAT credit - Rule 5 of CCR - remittances including by NEFT, received during a particular quarter even though related to invoices issued or export services provided for the period prior to that quarter, will definitely required to be included in the export turnover of services for that quarter. - AT
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Appellants Denied CENVAT Credit Claim for Passive Infrastructure on Towers and Pre-Fabricated Shelters.
Case-Laws - AT : CENVAT credit - providing passive infrastructure - the appellants are not entitled to take Cenvat credit on towers, pre-fabricated shelters parts thereof etc. - AT
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Refund Claim for Non-Taxable Service Tax in Works Contract; Unjust Enrichment Principle Not Applicable, Duty Included in Contract Price.
Case-Laws - AT : Refund claim - Service Tax paid under works contract service which were not taxable - unjust enrichment is not applicable as the contract price is inclusive of duty and duty payable reduced or becomes zero is immaterial. - AT
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Technical Know-How Transfers Exempt from Consultancy Service Tax; Different Classification for Consideration Received.
Case-Laws - AT : Classification of service - when the agreement is for transfer of exclusive/non-exclusive technical know-how the consideration received cannot be taxed under consultancy service - AT
Central Excise
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Manufactured goods classification under Insecticides Act 1968 isn't changed by Schedule omission; inclusion isn't sole criteria.
Case-Laws - AT : Classification of manufactured goods - A mere non-mention of the item in the Schedule to the Insecticides Act 1968 will not change the situation and cannot automatically gives the conclusion that because of the non-mentioning of subject item in the said Schedule, the item is not an “insecticide‟ - AT
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Repairing Old Card Clothing Is Separate from Manufacturing New, Affecting Tax Valuation.
Case-Laws - AT : Valuation - Since the repairing activity is carried out on the old card clothing which also includes the goods initially supplied by some other manufacturer, therefore the said repairing activity has no relation to the manufacture and clearance of new card clothing manufactured by the appellant - AT
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Form H Clearance Deemed Export; Excluded from SSI Exemption Aggregate Value Under Notification No. 8/2003-C.E.
Case-Laws - AT : SSI exemption - the clearance against Form H has to be treated as clearance of export and same is not includable in the aggregate value for the purpose of SSI exemption N/N. 8/2003-C.E - AT
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Assessee Can Self-Calculate Duty on Pan Masala with Tobacco Without Violating Central Excise Laws.
Case-Laws - AT : Abatement - suo-moto calculation - Pan Masala containing Tobacco - assessee could on their own calculate duty and set off same against duty payable in the next month and such action of the assessee is not violative of any rule or any provision of law - AT
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