TMI Tax Updates - e-Newsletter
May 24, 2016
Case Laws in this Newsletter:
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Customs Act, 1961, as amended by the Finance Act, 2016, outlines the regulations for licensing and managing public, private, and special warehouses for dutiable goods. The Principal Commissioner of Customs can license these warehouses with specific conditions. Sections 57, 58, and 58A detail the licensing requirements, while Section 73A addresses the custody and removal of goods. The Warehouse (Custody and Handling of Goods) Regulations, 2016, and the Special Warehouse Regulations ensure proper management, including appointing warehouse keepers, maintaining records, and securing facilities. Regulations also govern goods receipt, transfer, and removal for consumption or export, all under bond officer supervision.
News
Summary: The Finance Ministry has released draft rules and forms for determining the fair market value of Indian and global assets under Section 9 of the Income-tax Act, 1961. These rules address income arising from the indirect transfer of assets in India, where a foreign company's shares derive substantial value from Indian assets. If Indian assets constitute at least 50% of the total asset value, income from such shares is taxable in India. Section 285A requires Indian entities to report foreign-held assets. Stakeholders and the public are invited to submit comments on these drafts by May 29, 2016.
Summary: The Government of India has announced the re-issue of government stocks through a price-based auction. The stocks include 7.35% Government Stock 2024 for Rs. 3,000 crore, 7.61% Government Stock 2030 for Rs. 8,000 crore, 7.50% Government Stock 2034 for Rs. 2,000 crore, and 7.72% Government Stock 2055 for Rs. 2,000 crore. Conducted by the Reserve Bank of India on May 27, 2016, the auction will use a multiple price method. Up to 5% of the stocks will be allotted to eligible individuals and institutions under a non-competitive bidding facility. Results will be announced on the auction day, with payment due by May 30, 2016.
Summary: The Finance Act, 2015 introduced Section 9A to the Income-tax Act, 1961, effective from April 1, 2016, establishing a special regime for offshore funds with fund managers in India. Guidelines for this section were published, including rules 10V, 10VA, 10VB, and forms 3CEJ and 3CEK. Rule 10VA outlines the approval process by the Central Board of Direct Taxes (CBDT) for these funds. A committee has been formed to review applications for approval, comprising senior tax officials from Mumbai. The committee's recommendations will determine the approval and any conditions attached. The notification is available on the Income Tax Department's website.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 67.3492 on May 23, 2016, down from Rs. 67.4076 on May 20, 2016. Based on this rate and cross-currency quotes, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were updated. On May 23, 2016, 1 Euro equaled Rs. 75.6197, 1 British Pound equaled Rs. 97.7641, and 100 Japanese Yen equaled Rs. 61.38. The SDR-Rupee rate will also be based on this reference rate.
Notifications
Income Tax
1.
S.O.1525 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Karuna Setu Trust, Vadnagar, Gujarat
Summary: The Central Government has extended the eligibility of the project "Running of hospital, purchase of equipment, and welfare activities at Vadnagar, Mehsana District, Gujarat," managed by Karuna Setu Trust, as an eligible project under Section 35AC of the Income-tax Act, 1961. This extension is for three additional years, covering the financial years 2016-17 to 2018-19, with an approved cost of Rs. 679.20 lakh, including a corpus fund of Rs. 50 lakh. The exemption under Section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
2.
S.O.1524 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bellur Krishnamachar & Seshamma Smaraka Nidhi Trust, Bangalore
Summary: The Central Government has extended the eligibility of a project by a Bangalore-based trust, originally notified in 2007, to set up and run a school and medical center for marginalized communities. The project's cost has increased from Rs. 22.46 crore to Rs. 41.46 crore, with the corpus fund rising from Rs. 15 crore to Rs. 26 crore. This extension is for an additional three years, covering the financial years 2016-17 to 2018-19. However, the exemption under Section 35AC of the Income-tax Act does not apply to funds received under Schedule VII of the Section 135 of the Companies Act and CSR Rules 2014.
3.
S.O.1523 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Indian Medical Centre, Chennai, Tamil Nadu
Summary: The Central Government has extended the eligibility of the "Establishment of school of Nursing for vocational education" project by the Indian Medical Centre in Chennai, Tamil Nadu, under Section 35AC of the Income-tax Act, 1961. Initially approved for three years ending in 2012-13 and extended to 2015-16, the project is now eligible for a further three-year period from 2016-17 to 2018-19, maintaining the approved cost of Rs. 14.17 crore. However, the exemption does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
4.
S.O.1522 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Vishwas – Vision for health, welfare and special needs, New Delhi
Summary: The Central Government has extended the eligibility of the project "Resource Development on Sustainable Inclusive Practices" by an organization based in New Delhi for a further three years under Section 35AC of the Income-tax Act, 1961. Initially approved for the period ending in the financial year 2015-16, the project will continue through 2016-17, 2017-18, and 2018-19 with an unchanged estimated cost of Rs. 12.00 crore, including a Rs. 10.00 crore corpus fund. However, funds received under Schedule VII of the Companies Act and Companies (CSR) Rules 2014 are not eligible for exemption under this section.
5.
S.O.1521 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bharti Foundation, New Delhi
Summary: The Central Government has extended the eligibility of the "Satya Bharti Schools" project, managed by Bharti Foundation, as an eligible project under Section 35AC of the Income-tax Act, 1961, for an additional three years starting from the financial year 2016-17. The project's approved cost remains at Rs. 360 crore, including a corpus fund of Rs. 110 crore. This extension follows a recommendation from the National Committee for Promotion of Social and Economic Welfare, confirming the project's proper execution. However, the exemption under Section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
6.
S.O.1520 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Valluvar Gurukulam, Chennai
Summary: The Central Government has extended the eligibility of the project "Kala Bhavanam" by Valluvar Gurukulam in Chennai as an eligible project under Section 35AC of the Income-tax Act, 1961. Initially approved for three years starting from the financial year 2010-11 and extended until 2015-16, the project is now approved for an additional three years from 2016-17 to 2018-19 with an unchanged cost of Rs. 2.38 crore. The exemption under Section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
7.
S.O.1519 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Development Initiative for Self-Help and Awakening (DISHA) Pune
Summary: The Central Government has extended the eligibility of the project "Poverty alleviation through capacity building, market support and micro-credit programme for economically weaker sections," executed by Development Initiative for Self-Help and Awakening (DISHA) in Pune, for an additional three years from 2016-17 to 2018-19 under section 35AC of the Income-tax Act, 1961. The project, previously extended twice, will continue without altering the approved cost of Rs. 163.06 lakh. The exemption under section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and CSR Rules 2014.
8.
S.O.1518 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Rajah Charitable Medical Trust, Trichur, Kerala
Summary: The Central Government has extended the eligibility of the "Outreach Caring Hands" project by Rajah Charitable Medical Trust in Trichur, Kerala, under section 35AC of the Income-tax Act, 1961. Initially approved for a cost of Rs. 4.06 crore, the project was previously extended and will now continue for an additional three years starting from the financial year 2016-17. The exemption under section 35AC will not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
9.
S.O.1517 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Abhaya Ashraya, Mangalore Taluka, D.K. District, Karnataka
Summary: The Central Government has extended the eligibility of the project "Recurring cost of old age home, home for physically and mentally challenged older persons, recurring expenses of home for destitute children and for a corpus fund of Rs. 50 lakh" by Abhaya Ashraya in Mangalore Taluka, Karnataka, under Section 35AC of the Income-tax Act, 1961. The project, initially approved at a cost of Rs. 3.40 crore, is extended for three more years from the financial year 2016-17 to 2018-19. However, the exemption does not apply to funds received under Schedule VII of the Section 135 of the Companies Act and Companies (CSR) Rules 2014.
10.
S.O.1516 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sree Sree 108 Karunamoyee Kalimata Mandir, Dr. Meghnad Saha Sarani,Calcutta
Summary: The Central Government has issued a notification under Section 35AC of the Income-tax Act, 1961, recognizing the "Expansion of Old Age Home" project by an organization in Calcutta as an eligible project. Initially approved at a cost of Rs. 856.97 lakh, the project's funding has been increased to Rs. 1500.00 lakh, including a corpus fund of Rs. 700.00 lakh, for the financial years 2016-17 to 2018-19. The exemption under Section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
11.
S.O.1515 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sahyog Care for You, Paschim Vihar, New Delhi
Summary: The Central Government has extended the eligibility of certain projects by an organization in Paschim Vihar, New Delhi, under Section 35AC of the Income-tax Act, 1961, for three additional years starting from the financial year 2016-17. These projects include a vocational project on environmental hygiene and sanitation, an adult literacy program for women, cr`eche services and educational programs, and education for street and working children, with an estimated cost of Rs. 4.22 crore. However, the exemption does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
12.
S.O.1514 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Shri Ramana Maharishi Academy of the Blind, J.P. Nagar, Bangalore
Summary: The Central Government has extended the eligibility of the project "Construction of dormitory-cum-library and running of rehabilitation/welfare programmes for disabled/blind persons in Bangalore, Karnataka," managed by an academy for the blind, as an eligible project under Section 35AC of the Income-tax Act, 1961. This extension is for an additional three years, covering the financial years 2016-17, 2017-18, and 2018-19, with an approved cost of Rs. 197 lakh. However, the exemption under Section 35AC does not apply to funds received under Schedule VII of Section 135 of the Companies Act and Companies (CSR) Rules 2014.
13.
S.O.1513 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Delhi Council for Child Welfare, Delhi
Summary: The Central Government has extended the eligibility of certain projects run by the Delhi Council for Child Welfare under Section 35AC of the Income-tax Act, 1961. These projects include training centers for Anganwadi workers, orthopedic centers for children, and various programs for disadvantaged groups. Initially approved in 2007, the project cost was increased to Rs. 16.26 crore in 2015. The extension covers the financial years 2016-17 to 2018-19. However, funds received under Schedule VII of Section 135 of the Companies Act and CSR Rules 2014 are not eligible for exemption under this section.
14.
S.O.1512 (E) - dated
26-4-2016
-
IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sri Ramakrishna Sevashrama (Swami Vivekananda Integrated Rural Health Centre Shree Sharada Devi Eye Hospital), Tumkur, Karnataka
Summary: The Central Government has extended the eligibility of the "Construction, establishment and running of a 30-bed Swami Vivekananda Integrated Rural Centre for the elimination of leprosy and tuberculosis" in Tumkur, Karnataka, as a project under section 35AC of the Income-tax Act. Initially notified in 1995, the project has seen multiple extensions and cost increases, now set at Rs. 8.00 crore, with the latest extension covering the financial years 2016-17 to 2018-19. The exemption under section 35AC does not apply to funds received under Schedule VII of the Companies Act and CSR Rules 2014.
Highlights / Catch Notes
Income Tax
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Capital Gains Tax Triggered by Initial Transaction Year for Immovable Property, Regardless of Completion Status.
Case-Laws - AT : Capital gain - transfer - the transaction entered into by the parties herein, which have the effect of transferring or enabling the enjoyment of any immovable property, then capital gains would be taxable in the year in which the transactions were entered into even if the transfer of the immovable property was not effective or complete under the general law. - AT
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Entity's Section 12A Registration Canceled Due to Proviso in Section 2(15), Section 12AA Registration Unaffected.
Case-Laws - AT : Registration granted to the assessee u/s 12A cancelled - legally the impact of the proviso to section 2(15) being attracted is that the assessee will not be eligible for exemption u/s 11 of the Act. As a corollary to this legal position, registration u/s 12AA cannot be impacted by the object being hit by the first proviso to section 2(15). - AT
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Excise Duty Refund u/s 80IB Allowed Due to Manufacturing Link and Compliance with Tax Laws.
Case-Laws - AT : Allowability of excise duty refund u/s 80IB - There is an inextricable link between the manufacturing activity, the payment of central excise duty and its refund - Deduction allowed - AT
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Section 263 Revision: Assessing Officer's Order Deemed Erroneous Due to Lack of Inquiry on Fixed Assets Valuation.
Case-Laws - AT : Revision u/s 263 - correctness of the record or valuation ascribed by the assessee to the fixed assets - it is a case of complete lack of enquiry which renders the order of the AO erroneous so far as prejudicial to the interest of the revenue - AT
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Payment to Scheduled Banks for Letters of Credit Not Subject to TDS; No Disallowance u/s 40(a)(ia.
Case-Laws - AT : TDS - the payment paid by the assessee to scheduled banks for opening letters of credit was in the nature of interest u/s 2(28A) - but since the amount had been paid to scheduled banks no tax was required to be deducted at source u/s 194A - No disallowance u/s 40(a)(ia) - AT
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CIT (Appeals) Already Addressed Disallowances u/ss 14A and 36(1)(iii); Section 263 Revision Not Applicable.
Case-Laws - AT : Revision u/s 263 - the disallowances under sections 14A and 36(1)(iii) of the Act were the "matters" before the CIT (Appeals) - the same does not come under the jurisdiction of the CIT u/s 263 - AT
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Interest-Free Loans for Bank Employees Taxable as Salary Perquisites: Section 17(2)(viii) and Rule 3(7)(i) Upheld.
Case-Laws - HC : Salary income - taxability of interest free or concessional loan offered by a bank to its own employee - If salary is taxable and some perquisite or benefit forms part of a package, the same should also be taxed. Therefore, we are of the considered view that the challenge to Section 17(2)(viii) as well as Rule 3(7)(i) has to fail. - HC
Customs
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Customs House Agent Penalized for Ivory Import; Commissioner Did Not Justify Violation of CHALR 2004 Rule 13(d), (e), (o).
Case-Laws - AT : Levy of penalty on CHA - Import of Ivory and its articles - Ld. Commissioner has not given reason how the appellant has contravened the aforesaid provision. Therefore, it cannot be alleged that the appellant has not followed the provision of Rule 13(d), (e) and (o) of CHALR, 2004 - AT
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Anti-Dumping Duty Not Levied on Incomplete Injection Moulding Machines: Critical Parts Missing for Full Operation.
Case-Laws - AT : Leviability of Anti Dumping Duty - import of complete goods or import of parts only - The missing parts such as Control Unit (Computer Controller), Electrical Parts (Control Cabinet) and Drive Unit (Servo Drives & Pumps) are critical parts without which the injection moulding machine cannot be complete and operated - No demand - AT
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Import of Marble Slabs Faces Violation Due to Exchange Rate Changes, CIF Value Below Required $60/sqm.
Case-Laws - AT : Restriction on import of Random Polished Marble Slabs - there is no whiff of any deliberate misrepresentation and the goods were in violation of Exim Policy only marginally as the CIF value worked out to be only marginally less than US $ 60 per SQM and that too due to monthly exchange rate changes notified vide Customs Notification after the appellant obtained quotation for the goods on 10.09.2011. - AT
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LED Panels vs. LED TVs: Key Customs Classification Differences Impact Tax Implications Under Customs Law.
Case-Laws - AT : Classification - Import of LED panel or LED Television - LED panels devoid of speakers, remote controls, power cables, Mother board and sockets can scarcely be called as having essential characteristics of Television. - AT
Service Tax
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Court Grants Cenvat Credit for Cell Phone and Courier Services in Manufacturing and Commerce Activities.
Case-Laws - AT : Availment of Cenvat credit - the services related to cell phone, courier agency, it is quite possible as to the use of those services for the purpose of manufacturing and commercial activity of the appellant - credit allowed - AT
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Works contract service qualifies for Cenvat credit and refund u/r 5, not excluded from input service definition.
Case-Laws - AT : Entitlement of Cenvat credit and consequential refund - particular works contract service does not fall under the exclusion category in the definition of input service, therefore works contract service in the present case is input service and eligible of refund under Rule 5. - AT
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Refund Denied: Claim Not Eligible Under Notifications 41/2007-ST & 17/2009-ST Due to Drawback Condition.
Case-Laws - AT : Refund claim - Notification No. 41/2007-ST and 17/2009-ST - the condition of non claiming of drawback was prevailing during the relevant period therefore, the appellant are not entitle for the refund for the relevant period - AT
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Penalty Confirmed u/s 78 for Failure to Deposit Collected Service Tax; Financial Hardship Argument Rejected.
Case-Laws - AT : Imposition of penalty u/s 78 - Unable to understand that how the collected amount, which was required to be deposited, can lead to any financial hardship on the part of the assessee inasmuch as it was collected amount only which was required to be deposited - levy of penalty confirmed - AT
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Company Avoids Interest on Late Service Tax Deposit u/s 73B of Finance Act, 1994.
Case-Laws - AT : Recovery of interest - Section 73B of the Finance Act, 1994 - Collected Service tax from the transporters when no service tax was payble and not deposited to the Government - later amount was deposited with the government - Demand of interest set aside - AT
Central Excise
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Allegations of Undervaluation Unfounded Without Extra Commercial Ties Between Dealers and Respondents in Valuation Cases.
Case-Laws - AT : Valuation - Sale through dealers - in the absence of any extra commercial relationship between the dealers and the main respondent, there can be no reason to allege undervaluation on this ground alone - AT
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CENVAT Credit Entitlement Upheld Despite Record-Keeping Failures for Returned Goods u/r 16.
Case-Laws - AT : Entitlement of Cenvat credit - Returned goods - Rule 16 - Respondent neither maintained separate records nor could establish that the same were processed and returned to the same customer or sold to others - there is no reason to deny the CENVAT Credit - AT
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Exemption Granted for Electric Cables in Godavari River Water Project Under Notification No. 3/2004-CE.
Case-Laws - AT : Claim for exemption on electric cables were supplied for river water pump house at project for drawing water from Godavari river - Notification No. 3/2004-CE dated 8.1.2004 - Exemption allowed - AT
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Refund Approved as Debit Entry Treated Under Protest Per Central Excise Division Directions, Countersigned by Superintendent (Preventive.
Case-Laws - AT : Refund - debit entry was countersigned by Superintendent (Preventive) and the show cause notice itself mentions that the debit was made on pursuance of the officers of the Central Excise Division - to be treated as deposited under protest - refund allowed - AT
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Refund Claim Valid Despite Late Application; Made Within One Year, Not Time-Barred.
Case-Laws - AT : Refund claim - paid excess duty on the removal of input - the legitimate claim of refund stand made within one year itself even though the formal refund application was filed subsequently (after one year), therefore the refund cannot be rejected on the ground of time bar. - AT
VAT
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Court Rules VAT Inapplicable on Dyeing Chemicals if Transactions Aren't "Deemed Sales" Under VAT Law.
Case-Laws - HC : Imposition of VAT on the dyes, chemicals etc. - treating them to be deemed sales - used in the dyeing, colouring and printing of cloth for various traders - If the transaction does not satisfy the definition of sale, the question of subjecting it to tax under Vat Act does not arise. - HC
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State Law on Interstate Goods Tax Rate Upheld Despite Claims of Illogicality or Nonsensicality.
Case-Laws - HC : Validity of law - rate of tax - interstate movement of goods - The law validly enacted by a State Legislature, cannot be challenged on the ground that it defies logic and common sense. - HC
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