TMI Tax Updates - e-Newsletter
July 2, 2015
Case Laws in this Newsletter:
Articles
By: Dr. Sanjiv Agarwal
Summary: The reverse charge mechanism, effective from July 1, 2012, requires service receivers to pay taxes without threshold exemptions, with service providers also liable for a percentage depending on the service. Amendments include full reverse charge for aggregator services, manpower supply, and security services. The liability for mutual fund and lottery agent services has shifted to the asset management company or lottery distributor. Definitions for "aggregator" and "brand name or trade name" have been specified. The mechanism outlines the tax liabilities for various services, emphasizing a 100% liability on service receivers for specified services.
News
Summary: The Delhi government announced its budget for the fiscal year 2015-16, focusing on various sectors to enhance the city's infrastructure and public services. Key allocations were made for health, education, and transportation, aiming to improve facilities and accessibility. The budget also emphasized tax reforms to increase revenue without burdening the common citizen. Investments in renewable energy and environmental initiatives were highlighted to promote sustainable development. The government outlined plans to boost economic growth while ensuring social welfare, reflecting a balanced approach to address the needs of Delhi's diverse population.
Summary: The Income Tax Department has released software for electronic filing of Income Tax Returns for the Assessment Year 2015-16. Individuals or Hindu Undivided Families (HUF) without business income can use ITR 1-Sahaj, 2, and 2A forms, while those with business income assessable on a presumptive basis can use ITR 4S-Sugam. The software includes features for pre-filling personal and tax information using the PAN. Taxpayers are encouraged to file early to avoid last-minute rushes. The software is available for free on the Income Tax Department's e-filing website.
Summary: The Delhi Budget for 2015-16, totaling Rs. 41,129 crore, marks an 18% increase from the previous year. It introduces the first "Swaraj Budget," emphasizing citizen participation in governance, with a Swaraj Fund of Rs. 253 crore. Key initiatives include reducing electricity bills, providing free water, and launching free Wi-Fi in colleges and rural areas. Significant investments are planned in education, healthcare, and transportation, including new schools, hospitals, and buses. The budget also focuses on transparency, corruption reduction, and eco-friendly initiatives, such as energy conservation and promoting battery-operated vehicles. Various social welfare measures, including compensation for defense personnel and farmers, are also outlined.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.6223 on July 1, 2015, down from Rs. 63.7549 on June 30, 2015. The exchange rates for other currencies against the Rupee were also adjusted: the Euro was Rs. 70.7671, the British Pound was Rs. 99.8934, and 100 Japanese Yen was Rs. 51.85 on July 1, 2015. These rates are determined based on the US Dollar reference rate and middle rates of cross-currency quotes. The SDR-Rupee rate will also be based on this reference rate.
Summary: The Central Board of Excise Customs has amended the tariff values for various commodities under the Customs Act, 1962. The updated values include Crude Palm Oil at $662 per metric tonne, RBD Palm Oil at $682, and Crude Soya bean Oil at $763. Brass Scrap is set at $3533, Poppy Seeds at $2602, and Areca Nuts at $2268 per metric tonne. Gold is valued at $382 per 10 grams and Silver at $516 per kilogram. These changes are part of the notification No. 36/2001-Customs (N.T.) from the Ministry of Finance.
Notifications
Customs
1.
65/2015 - dated
30-6-2015
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Cus (NT)
Amendment in Tariff Notification 36/2001, dated 03-8-2001 in respect of fixation of Tariff Value of Edible oils, Brass scrap, Poppy seeds, Areca nuts, Gold and Silver.
Summary: The Government of India, through the Ministry of Finance's Central Board of Excise and Customs, issued Notification No. 65/2015-CUSTOMS (N.T.) on June 30, 2015. This notification amends the earlier Notification No. 36/2001-Customs, dated August 3, 2001, concerning the fixation of tariff values for various goods. The updated tariff values in US dollars per metric tonne or per specified unit are provided for crude palm oil, RBD palm oil, palmolein, crude soybean oil, brass scrap, poppy seeds, gold, silver, and areca nuts. These changes are enacted under the powers conferred by the Customs Act, 1962.
DGFT
2.
14/2015-2020 - dated
30-6-2015
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FTP
Prohibition on Trade with the Islamic State in Iraq and the Levant [ISIL], Al Nusrah Front [ANF] and other individuals, groups, undertakings and entities associated with Al Qaida.
Summary: The Government of India, through the Ministry of Commerce and Industry, has issued a notification prohibiting trade with the Islamic State in Iraq and the Levant (ISIL), Al Nusrah Front (ANF), and other entities associated with Al Qaida. This action, in accordance with the United Nations Security Council Resolution No. 2199 (2015), bans trade in oil, refined oil products, modular refineries, and items of cultural, scientific, and religious significance with these groups. The Foreign Trade Policy 2015-2020 has been updated to reflect these prohibitions, emphasizing the restriction on trade with these terrorist organizations.
VAT - Delhi
3.
No. F.5/54/Policy/VAT/2013/PF/364-375 - dated
1-7-2015
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DVAT
Modification in Notification No.F.5(54)/Policy/VAT/ 2013/PF/ 1123-1135 dated 26/12/2013, regarding condition in case of Embassy of Portugal (Registration No./TIN 07229892120) w.e.f. 01-6-2015.
Summary: The notification modifies a previous directive regarding the Embassy of Portugal under the Delhi Value Added Tax Act, 2004. Effective from June 1, 2015, a new condition is added, requiring a minimum invoice value of 19,000 per purchase for the embassy. Other provisions of the original notification remain unchanged. The notice is issued by the Commissioner of Value Added Tax and disseminated to various government officials and departments for necessary action and publication in the Delhi Gazette.
Circulars / Instructions / Orders
FEMA
1.
11/2015-16 - dated
1-7-2015
Master Circular on Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad
Summary: The Master Circular issued by the Reserve Bank of India (RBI) consolidates guidelines on direct investments by Indian residents in Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) abroad under the Foreign Exchange Management Act, 1999. It outlines the statutory basis, prohibitions, and general permissions related to these investments. The circular details the automatic and approval routes for overseas investments, methods of funding, and specific conditions for investments in various sectors. It also addresses the procedural aspects for authorized dealer banks, including reporting requirements and operational instructions. The circular is updated periodically to reflect new instructions.
2.
09/2015-16 - dated
1-7-2015
Master Circular on Compounding of Contraventions under FEMA, 1999
Summary: The Master Circular on Compounding of Contraventions under FEMA, 1999, issued by the Reserve Bank of India, outlines the process for voluntarily compounding contraventions under the Foreign Exchange Management Act (FEMA), 1999. It consolidates instructions related to compounding contraventions, detailing the powers of the Reserve Bank and the Directorate of Enforcement. The circular specifies the procedures for application, the scope of compounding, and the roles of various authorities. It includes guidelines for compounding orders, post-compounding procedures, and pre-requisites, aiming to simplify compliance and reduce transaction costs while ensuring serious violations are addressed appropriately.
3.
07/2015-16 - dated
1-7-2015
Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities
Summary: The Master Circular outlines the regulations for establishing Liaison, Branch, and Project Offices in India by foreign entities under the Foreign Exchange Management Act (FEMA) of 1999. It consolidates existing instructions and provides guidance for obtaining permissions from the Reserve Bank of India (RBI) through either the Reserve Bank Route or the Government Route, depending on the sector of business. The circular details permissible activities, application processes, reporting requirements, and conditions for closure of these offices. It also specifies general conditions applicable to foreign entities, including criteria for financial support, asset transfer, and tax compliance.
4.
12/2015-16 - dated
1-7-2015
Master Circular on External Commercial Borrowings and Trade Credits((Updated as on September 11, 2015)
Summary: The Master Circular on External Commercial Borrowings (ECB) and Trade Credits consolidates guidelines related to ECBs and trade credits for Indian residents under the Foreign Exchange Management Act, 1999. It outlines the procedures for accessing ECBs via the Automatic and Approval Routes, detailing eligible borrowers, recognized lenders, permissible end-uses, and restrictions. The circular covers various instruments like Foreign Currency Convertible Bonds and Foreign Currency Exchangeable Bonds, and stipulates reporting requirements. It also addresses trade credits for imports, specifying conditions for maturity, costs, and guarantees. The document serves as a comprehensive reference for authorized banks and borrowers.
DGFT
5.
23/2015-20 - dated
30-6-2015
Provisions relating to import of certain categories of processed metallic scrap, at designated ports having Scanners/Radiological Detection Equipments (RDEs) facilities
Summary: The Directorate General of Foreign Trade has issued guidelines for importing specific categories of processed metallic scrap at designated Indian ports equipped with Scanners/Radiological Detection Equipment (RDEs). Importers must submit a self-declaration, a legal undertaking, and a Pre-shipment Inspection Certificate, confirming the absence of explosive or radioactive materials. A bank guarantee of Rs. 10,00,000 is required, and contracts must assure the exporter's acceptance of returns if contamination is detected. All scrap consignments must be scanned upon arrival. False declarations can lead to re-export and penalties. New appendices detailing procedures and designated ports are included in the Foreign Trade Policy 2015-20.
Highlights / Catch Notes
Income Tax
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Section 41(1) Update: No Additions Needed for Creditors Listed Over Three Years in Balance Sheet Acknowledgment.
Case-Laws - HC : Addition made under Section 41(1) - creditors outstanding for more than three years in the books of respondent-assessee - The settled position in law is that showing the amount due to the creditors in the balance-sheet amounts to acknowledgment of liability - No additions - HC
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High Court Clarifies Limits on Extending Stay of Demand Beyond 365 Days in Income Tax Cases; Justification Required.
Case-Laws - HC : Extension of stay of demand beyond the period of 365 days - on expiry of every 180 days, the appellant / assessee is required to make an application to extend stay granted earlier - However, at the same time, it may not be construed that widest powers are given to the Appellate Tribunal to extend the stay indefinitely - HC
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Assessing Officer Can Use Section 69C to Add Unapproved, Unsubstantiated Sundry Credit Purchases as Expenditures.
Case-Laws - HC : Unapproved sundry creditors - credit purchases are nothing but expenditure and if sundry credits are not proved by the assessee addition can be made by the assessing officer by resorting to section 69C - HC
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Court Waives Interest u/ss 234B and 234C of Income Tax Act for Petitioner During Writ Petition Period.
Case-Laws - HC : Waiver of the interest charged under Sections 234B and 234C - Since the matter is pending before this Court from 8.4.2008, the petitioner shall be absolved from the liability to pay interest for the period during which the writ petition was pending before this Court, and it is ordered accordingly. - HC
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Court Upholds Penalty for Unreported Donations; Assessee Lacks Explanation for Omission in Tax Returns u/s 271(1)(c).
Case-Laws - AT : Penalty under section 271(1)(c) - unaccounted donations - there was no explanation at the end of assessee for not showing these donations as its income in the original return(s) or in the return(s) filed in response to notice under section 153C. - penalty confirmed - AT
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Commissioner's Powers in Penalty Appeals: Confirm, Cancel, Enhance, or Reduce Penalties Only, No Additional Investigations.
Case-Laws - AT : Powers of the Commissioner while dealing with penalty appeal are restricted to the penalty proceedings only. He may confirm or cancel the imposition of penalty. He may enhance or reduce the penalty. He cannot give direction to the AO for exploring the additions in an assessment - AT
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No Penalty Imposed for Undisclosed Business Income as Voluntary Surrender Not Considered Concealment u/s 271(1)(c.
Case-Laws - AT : Penalty u/s 271(1)(c) - addition on account of undisclosed business income - In the instant case the assessee himself agreed for surrender, so it was a good case to make the addition, however the said surrender itself cannot be considered as a concealment of particulars of income - No penalty - AT
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Assessee Can Include Merging Companies' Losses and Depreciation for Book Profit Calculations u/s 115JB.
Case-Laws - AT : MAT - Book Adjustments - assessee that brought forward business losses and depreciation of the merging companies is a part of the brought forward business loss and depreciation of Dhariwal Industries Ltd and the assessee is entitled to take into account the same for the purpose of computation of book profit u/s.115JB. - AT
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CUP Method Deemed Inappropriate for Assessee; Adjustments for Arm's Length Price Unjustified and Not Required.
Case-Laws - AT : TPA - The CUP method is not the most appropriate method in the case of the assessee since suitable adjustments are not possible to be made in respect of the above differences. So, the addition on this account is not justified. No adjustment is to be made for determining the arm's length price - AT
Customs
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Refund Claim Approved: Excess Duty on Liquid Cargo Based on Shore Tank Value Refunded.
Case-Laws - AT : Rejection of refund claim - Assessment of liquid cargo - The law as it exists clearly lays down that the value on which duty is payable will be the value of goods actually imported into the shore tanks - refund of excess duty allowed - AT
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Customs House Agent License Revocation Overturned; Subletting Allegations Unproven, Three-Year Business Absence Considered Sufficient Penalty.
Case-Laws - AT : Revocation of CHA license - Subletting of license - Charge of subletting stands not proved. - appellant is out of business from last more than three years and the said punishment is sufficient in the facts and circumstances of the case - AT
Service Tax
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Appellant Allowed Cenvat Credit for Free Services as Input Services by Authorized Service Station Under Cenvat Rules.
Case-Laws - AT : Cenvat credit on free service provided to customers - the service provided by authorized service station has become input service for the appellant and appellant is entitled to take cenvat credit. - AT
Central Excise
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Excise duty confirmation using extended limitation period is improper without addressing if activity qualifies as manufacturing.
Case-Laws - AT : Confirmation of excise duty by invoking longer period of limitation, without going into the legal issue as to whether the activity amount to manufacture or not, would not be appropriate inasmuch as the appellant was admittedly discharging the service tax liability - AT
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