TMI Tax Updates - e-Newsletter
August 17, 2016
Case Laws in this Newsletter:
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses the legal implications of cheque dishonor under the Negotiable Instruments Act, 1881, specifically Section 138, which penalizes dishonor due to insufficient funds. It examines a Supreme Court case where cheques issued as security were dishonored. The appellant, a partner in a consortium, had an agreement with a third party for construction work. When the work was canceled, the third party issued post-dated cheques as security for repayment. The cheques were dishonored, leading to legal proceedings. The Supreme Court ruled that such cheques could be presented for payment if the underlying debt was not settled, reversing a High Court decision.
News
Summary: The Governor of India's central bank addressed the FICCI-IBA Annual Banking Conference, highlighting the impact of the Asset Quality Review on recognizing non-performing assets and improving bank provisioning. He emphasized the need for banks to enhance operational efficiency and restructure capital for stressed assets. The banking sector faces opportunities and challenges with new niche banks, fintech innovations, and increased competition. Public sector banks must clean up balance sheets, improve governance, recruit talent, and adapt to technological advancements. Regulatory authorities should streamline oversight and adapt mandates to new technologies. Cybersecurity remains a critical focus for all banks.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 66.8983 on August 16, 2016, up from Rs. 66.8252 on August 12, 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. The Euro increased from Rs. 74.4633 to Rs. 75.0198, while the British Pound decreased slightly from Rs. 86.6255 to Rs. 86.3389. The Japanese Yen rose from Rs. 65.44 to Rs. 66.68 per 100 Yen. The SDR-Rupee rate will also be adjusted according to this reference rate.
Notifications
Companies Law
1.
G.S.R. 791(E) - dated
12-8-2016
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Co. Law
Companies (Share Capital and Debentures) Fourth Amendment Rules, 2016
Summary: The Companies (Share Capital and Debentures) Fourth Amendment Rules, 2016, issued by the Ministry of Corporate Affairs, amends the Companies (Share Capital and Debentures) Rules, 2014. Effective from its publication date, the amendment introduces a new sub-rule to Rule 18, stating that the rule does not apply to rupee-denominated bonds issued exclusively to overseas investors, as per a specific Reserve Bank of India circular from September 29, 2015. This amendment follows several previous updates to the principal rules initially published in March 2014.
DGFT
2.
23/2015-2020 - dated
13-8-2016
-
FTP
Removal of mandatory warehousing requirements for EOUs, STPIs, EHTPs etc. - amendment in paras 6.01, 6.13, 6.19 and 6.28 of FTP 2015-2020
Summary: The Government of India has amended the Foreign Trade Policy (FTP) 2015-2020, removing mandatory warehousing requirements for Export Oriented Units (EOUs), Software Technology Parks (STPIs), and Electronic Hardware Technology Parks (EHTPs). Changes include allowing EOUs engaged in specific sectors to use goods outside their premises, updating procedures for transferring manufactured goods between units, and permitting conversions between EHTP/STP and EOU units with applicable duty exemptions. The provision allowing EOUs to set up external warehousing facilities has been deleted. These amendments aim to streamline operations and reduce logistical constraints for these units.
Income Tax
3.
70/2016 - dated
12-8-2016
-
IT
Income Declaration Scheme, (Second Amendment) Rules, 2016
Summary: The Central Board of Direct Taxes issued the Income Declaration Scheme (Second Amendment) Rules, 2016, effective from its publication date. The amendment modifies Rule 4 of the principal rules, requiring proof of "full and final" payment. It specifies a payment schedule for declarants: at least 25% by November 30, 2016, 50% by March 31, 2017, and the full amount by September 30, 2017. Non-compliance renders the declaration void. Form-3 has been updated for payment intimation under the scheme. These changes follow prior amendments to the principal rules published in May and July 2016.
Circulars / Instructions / Orders
SEZ
1.
Instruction No. 85 - dated
2-8-2016
Allowing of authorized employees of IT/ITeS units in SEZ to Work from Home or place outside the SEZ unit
Summary: Authorized employees of IT/ITeS units in Special Economic Zones (SEZ) are permitted to work from home or outside the SEZ, subject to specific conditions. Employees must be regular staff, authorized by their SEZ unit, and perform work related to approved services and projects of the SEZ unit. The SEZ unit must provide secure connectivity and ensure that export revenue is accounted for by the unit. Employees must be untagged from the SEZ unit upon project completion. SEZ units registered as Other Service Providers with the Department of Telecommunications must adhere to OSP guidelines.
DGFT
2.
25/2015-2020 - dated
13-8-2016
Removal of mandatory warehousing requirements for EOUs, STPIs, EHTPs etc. - Amendment in (i) paras 6.06, 6.20 and 6.40 of Hand Book of Procedures(HBP) 2015-2020; and (ii) Appendix 6E, 6G, 6H, 6M, 5C and ANF 6A, ANF 6B of Appendices and Aayat Niryat Forms of FTP 2015-2020
Summary: The circular issued by the Directorate General of Foreign Trade, Government of India, announces the removal of mandatory warehousing requirements for Export Oriented Units (EOUs), Software Technology Parks of India (STPIs), Electronic Hardware Technology Parks (EHTPs), and similar entities. It amends specific paragraphs and appendices in the Hand Book of Procedures (HBP) 2015-2020 and the Appendices and Aayat Niryat Forms of the Foreign Trade Policy (FTP) 2015-2020. The amendments primarily involve procedural changes, such as eliminating the need for bonding licenses and modifying requirements for equipment use and installation outside bonded premises. These changes aim to simplify compliance and operational procedures for eligible units.
Highlights / Catch Notes
Income Tax
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Income Declaration Scheme (Second Amendment) 2016: New Rules for Declaring Undisclosed Income and Paying Taxes, Penalties, Surcharges.
Notifications : Income Declaration Scheme, (Second Amendment) Rules, 2016 - Notification
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Tribunal's Error: Payment to Settle New Tobacco Co. Debt Misclassified as Business Loss for Appellant.
Case-Laws - HC : Business loss - Nature of payment made towards one time settlement to clear the dues - Tribunal was utterly wrong in holding that the amount paid by the assessee to the bank in settlement of the debt owed by New Tobacco Company was a business loss of the appellant - HC
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Court Disallows 50% of Tax Deductions for Labor and Material Expenses Due to Unverifiable Vouchers in Tax Case.
Case-Laws - AT : Disallowance on account of labour charges, jelly purchase, sand purchase and gravel purchase and vouchers are self made could not be verified - disallowance at 50% to be made on self made vouchers - AT
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No Interest on Late TDS Deposit if Cheque Given to Bank by 7th of Following Month u/ss 201(1), 201(1A.
Case-Laws - AT : Interest on account of late deposit of TDS u/s. 201(1)/201(1A) - where the cheque had been deposited with the bank or before 7th day of next month in which TDS was deducted no interest will be chargeable - AT
Customs
-
Assessee's Claim of Unassessed Anti-Dumping Duty Payment Dismissed; Payment Made During Assessment and Clearance Process.
Case-Laws - AT : Refund - The contention of the assessee that the ADD was paid without assessment is totally untenable. It was paid very much in the process of assessment and clearance before allowing out-of-charge and clearance of the goods was allowed only after the payment of ADD - AT
DGFT
-
Mandatory Warehousing Removed for EOUs, STPIs, EHTPs; Amended FTP 2015-2020 Paras 6.01, 6.13, 6.19, 6.28.
Notifications : Removal of mandatory warehousing requirements for EOUs, STPIs, EHTPs etc. - amendment in paras 6.01, 6.13, 6.19 and 6.28 of FTP 2015-2020 - Notification
SEZ
-
Govt of India Permits IT/ITeS Employees in SEZs to Work Remotely from Home or Any Location Outside SEZ Unit.
Circulars : Authorized employees of IT/ITeS units in SEZ allowed to Work from Home or place outside the SEZ unit - Government of India
Corporate Law
-
2016 Amendment Updates Share Capital and Debentures Rules for Improved Transparency and Accountability in Corporate Governance.
Notifications : Companies (Share Capital and Debentures) Fourth Amendment Rules, 2016 - Notification
Service Tax
-
Tax Confusion: No Penalty Imposed on Assessee Due to Uncertainty Between Tour Operator and Rent-a-Cab Services.
Case-Laws - AT : Levy of penalty - benefit of doubt - rent-a-cab service - the revenue was not clear about category of services under which assessee can be taxed and that is why initially revenue issued a show cause notice under the category of tour operator services - No penalty - AT
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Refund Granted for Incorrectly Paid Service Tax on GTA Services; Liability Falls on Recipient Under Reverse Charge Mechanism.
Case-Laws - AT : Refund of service tax paid on GTA services - service tax was paid directly by the provider of services whereas it was the liability of the recipient under reverse charge - refund allowed - AT
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Civil Construction Services for Varanasi Development Authority Not Subject to Service Tax.
Case-Laws - AT : All the services of the appellant related to civil construction under Management, Maintenance or Repair and construction of govt. buildings, rendered to Varanasi Development authority are not liable to Service Tax. - AT
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Cenvat Credit and Refund Issues Resolved: Holding Company Deemed Service Recipient u/r 3(2) for Export of Services.
Case-Laws - AT : Cenvat credit - Refund – Export of call centre services – remuneration given by the holding company – whether the holding company is service recipient for the purpose of Rule 3(2) of the Export of Service Rules, 2005 or the customers situated in and outside India - Held Yes - AT
Central Excise
-
Appellants Can Use CENVAT Credit for Duty Payment on Waste and Scrap from Job Work.
Case-Laws - AT : Whether the Appellants are eligible to pay duty by debitting CENVAT Credit account on the waste and scrap generated during the course of job work - Held Yes - AT
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Cenvat Credit Allowed for Consultancy on Solar Project Setup, Not Denied on Speculative Electricity Sales.
Case-Laws - AT : Cenvat credit - Service Tax paid on Consultancy Service in connection with setting-up of Solar Power Project - the denial of credit, on the speculation that the electricity likely to be generated in such Solar Project could also be sold by the appellant, is not justified - AT
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Duty Valuation Based on Reel Value Only, Excluding Transport and Insurance Costs to Cutting Location.
Case-Laws - AT : Valuation - it is the value of the reels which has to be adopted for charging duty and the cost of transportation and insurance from factory gate to the cutting would not be includable in the assessable value. - AT
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