TMI Tax Updates - e-Newsletter
August 19, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Pradeep Jain
Summary: The article analyzes a complex amendment to the basic customs duty (BCD) rates for iron and steel products as per Notification No. 45/2015-Customs dated 12.08.2015. This amendment modifies the earlier exemption notification, resulting in either increased or decreased BCD and Countervailing Duty (CVD) rates. The government introduced intricate changes, including new serial entries and exceptions, making the amendment difficult to comprehend without detailed comparison. The BCD rates for certain products increased from 7.5% to 10% and from 10% to 12.5%. The article critiques the complexity of these changes, suggesting they could lead to unnecessary litigation and confusion.
By: Dr. Sanjiv Agarwal
Summary: Service tax assessees must use correct eight-digit accounting codes for tax payments, as mandated by the Controller General of Accounts, CBEC. Errors in accounting codes can be rectified without additional payments, provided the same registration number is used. If the tax is paid under a wrong code, adjustments or refunds are possible under specific rules. Notably, service tax liability is not invalidated if paid under an incorrect head, as seen in various legal cases. Proper communication with the jurisdictional Commissionerate is essential for resolving such issues.
By: DEVKUMAR KOTHARI
Summary: The article discusses the Supreme Court ruling in the case involving a company that issued debentures with options for upfront interest payment. Despite following the matching principle in accounting, the company claimed the entire interest expense in the first year on a mercantile basis. Lower tax authorities denied the claim, allowing deductions only as per the matching principle. However, the Supreme Court ruled in favor of the company, allowing the full interest deduction in the first year, as it was accrued and paid, emphasizing that book entries are not conclusive if the claim is allowable by law.
News
Summary: The Commerce Minister held a meeting with senior officials from various departments to address challenges faced by the Indian pharmaceutical export sector. Discussions highlighted domestic and international barriers, emphasizing the need for policy convergence and collaboration among academia, industry, and the scientific community. The creation of a Think Tank comprising industry leaders and experts was proposed to address bottlenecks and promote seamless exports. The Indian pharmaceutical industry, known for its global contributions, particularly in combating diseases like HIV, was encouraged to maximize its potential. The Minister urged expedited action on proposals and assured government support to resolve industry issues.
Summary: The government has launched the Suraksha Bandhan drive to promote enrolment in the Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). The initiative includes Jeevan Suraksha Gift Cheques and deposit schemes to facilitate insurance coverage for accident, disability, and life. The drive targets bank account holders, especially the underprivileged, encouraging them to enroll without needing health certificates. The initiative, coinciding with Raksha Bandhan, involves banks and insurance companies conducting awareness and enrolment activities, with a deadline extended to September 30, 2015.
Summary: The Government of India announced the re-issue of four government stocks through a price-based auction, totaling Rs. 14,000 crore. The stocks include 7.35% Government Stock 2024 for Rs. 2,000 crore, 7.88% Government Stock 2030 for Rs. 6,000 crore, 7.95% Government Stock 2032 for Rs. 3,000 crore, and 8.17% Government Stock 2044 for Rs. 3,000 crore. Conducted by the Reserve Bank of India on August 21, 2015, the auctions use a multiple price method. Up to 5% of the stocks are reserved for eligible individuals and institutions under a non-competitive bidding scheme. Results will be announced on August 21, with payments due by August 24.
Summary: The Government of India has decided to advance the budget formulation process for the Financial Year 2016-17 by over two months, starting in mid-August 2015. This decision aims to facilitate broader consultations with stakeholders and allow more time for planning. The Budget Division of the Department of Economic Affairs in the Ministry of Finance is issuing the Budget circular, which officially begins the budget formulation exercise.
Notifications
Customs
1.
41/2015 - dated
17-8-2015
-
ADD
Seeks to levy definitive anti-dumping duty on imports of Diketopyrrolo Pyrrole Pigment Red 254 (DPP Red 254) , originating in or exported from the People's Republic of China and Switzerland for a period of five years.
Summary: The Government of India, through the Ministry of Finance, has imposed a definitive anti-dumping duty on imports of Diketopyrrolo Pyrrole Pigment Red 254 (DPP Red 254) from China and Switzerland. This measure, effective for five years, aims to address material injury caused to the domestic industry by imports priced below normal value. The duty rates vary based on the country of origin and export, with specific rates for different producers and exporters. The duty is payable in Indian currency, and the applicable exchange rate is determined by the Ministry of Finance. The duty on certain imports will remain effective until November 16, 2020.
2.
74/2015 - dated
11-8-2015
-
Cus (NT)
Amends Notification No. 62/94 –Customs (N.T), dated the 21st November, 1994
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has issued Notification No. 74/2015-Customs (N.T.) dated August 11, 2015, amending Notification No. 62/94-Customs (N.T.) from November 21, 1994. This amendment, under the Customs Act, 1962, adds a new entry to the table concerning the State of Maharashtra. Specifically, it includes Umroli as a location for the loading of bauxite ore for export. This change follows the previous amendment made by Notification No. 64/2015-Customs (N.T.) on June 30, 2015.
Income Tax
3.
71/2015 - dated
17-8-2015
-
IT
Central Government notifies the following districts of the State of Bihar as backward areas u/s 32 and 32AD
Summary: The Central Government has designated specific districts in the State of Bihar as backward areas under sections 32 and 32AD of the Income-tax Act, 1961. The districts identified are Patna, Nalanda, Bhojpur, Rohtas, Kaimur, Gaya, Jehanabad, Aurangabad, Nawada, Vaishali, Sheohar, Samastipur, Darbhanga, Madhubani, Purnea, Katihar, Araria, Jamui, Lakhisarai, Supaul, and Muzaffarpur. This classification is made under the first proviso to clause (iia) of sub-section (1) of section 32 and sub-section (1) of section 32AD. The notification takes effect upon its publication in the Official Gazette.
4.
70/2015 - dated
17-8-2015
-
IT
Income-tax (Twelfth Amendment) Rules, 2015
Summary: The Income-tax (Twelfth Amendment) Rules, 2015, effective retrospectively from April 1, 2015, introduce Rule 126 to the Income-tax Rules, 1962. This rule specifies the computation of the period of stay in India for Indian citizens who are crew members of ships. For eligible voyages, the stay period excludes the time between joining and signing off the ship, as recorded in the Continuous Discharge Certificate. An eligible voyage involves international traffic, with destinations either originating from or arriving at Indian ports. This amendment clarifies the tax residency status for seafarers under the Income-tax Act, 1961.
VAT - Delhi
5.
No.F.3(12)/Fin(Rev-I)/2015-2016/dsvi/650 - dated
12-8-2015
-
DVAT
Regarding Amendments in the Delhi Value Added Tax Rules, 2005
Summary: The notification issued by the Government of the National Capital Territory of Delhi announces amendments to the Delhi Value Added Tax Rules, 2005, under the authority of the Delhi Value Added Tax Act, 2004. Key changes include modifications to rules 6A, 7, 7A, 16, and 45, affecting tax credit reductions, the sale price of goods, and adjustments to tax invoices. Specific amendments involve the non-application of tax credit reduction for goods sold at a loss, changes in tax credit reduction percentages, and the omission of certain sub-rules. Additionally, updates are made to the forms associated with these rules.
Circulars / Instructions / Orders
VAT - Delhi
1.
19/2015-16 - dated
17-8-2015
Filing of online return for 1st quarter of 2015-16 - extension of period thereof.
Summary: The Department of Trade and Taxes of the Government of the National Capital Territory of Delhi has extended the deadline for filing the online or hard copy of the first quarter return for the year 2015-16 to August 25, 2015. This extension applies to returns in Form DVAT-16, DVAT-17, and DVAT-48, along with necessary annexures. Tax payments must still be made as usual, and dealers using digital signatures are exempt from submitting a hard copy of the return.
Income Tax
2.
14/2015 - dated
17-8-2015
Clarification on certain issues related to grant of approval and claim of exemption u/s 10(23C)(vi) of the Income-tax Act, 1961.
Summary: The circular provides clarifications on the approval and exemption claims under Section 10(23C)(vi) of the Income-tax Act, 1961, for educational institutions. It emphasizes that institutions must exist solely for educational purposes and not for profit to qualify for tax exemption. The circular addresses the scope of inquiry for granting approval, stating that authorities should focus on the institution's purpose rather than future compliance. It clarifies that registration under Section 12AA is not mandatory for approval, and generating surplus does not automatically imply profit-making. Additionally, collecting reasonable fees from students is not considered profit-making unless it involves capitation fees. The circular advises field authorities to apply these principles consistently.
Highlights / Catch Notes
Income Tax
-
Interest Payment Confirmed: Form I.T.N.S.150 Calculation Considered Part of Assessment Order u/s 234B.
Case-Laws - SC : Interest u/s 234B - no direction had actually been given in the assessment order for payment of interest - Form I.T.N.S.150 contained a calculation of interest payable on the tax assessed - this Form must be treated as part of the assessment order in the wider sense - levy of interest confirmed - SC
-
Small-scale industry can claim section 80-IB deduction for 10 years, even after growth changes its status.
Case-Laws - HC : Deduction u/s 80-IB - if a small scale industry, in the course of 10 years, stabilizes early, makes further investments in the business and it results in it's going outside the purview of the definition of a small scale industry, that should not come in the way of its claiming benefit under section 80-IB for 10 consecutive years, from the initial assessment year - HC
-
High Court Denies Exemption: Cash Credit u/s 68 Not Considered Income Application for Section 11, AY 2009-10.
Case-Laws - HC : Cash credit u/s 68 - whether forms part of the total income cannot be considered as application of income for the purpose of section 11 for the assessment year 2009-10 because the same is not a donation ? - Exemption dened - HC
-
High Court Clarifies Section 147: Reassessment Can Include 'Any Other Income' Without Changes to Initial 'Such Income'.
Case-Laws - HC : Reopening of assessment - the two parts of Section 147 (one relating to 'such income' and the other to 'any other income') are to be read independently - addition can be made on other income even if no addition made for the such income with regard to which reasons have been recorded - HC
-
Income-tax Officer's Interpretation on Bird Cage Depreciation Stands; Commissioner Can't Reopen for Alternative View.
Case-Laws - HC : Claim of depreciation on the cages to carry birds produced in the hatchery - where two views of a particular aspect are possible, for an Income-tax Officer, and he has chosen one, the Commissioner cannot reopen the matter on the ground that another view is possible. - HC
-
Court Rejects Applying Section 32(ii) for TV Programs, Film Rights; Stresses Consistent Accounting, No AS-26 Precedents.
Case-Laws - AT : Purchases of the TV Programs/Film rights - Assessee amortised the "inventories‟ as per the method of accounting consistently followed by him over the years - the argument towards applicability of the AS-26 to the TV Programs and Film rights is not supported by any precedents - AO's proposal to invoke the provisions of section 32(ii) rejected - AT
-
Microfinance Business Denied Tax Exemption u/ss 11 and 12 Due to Profit-Driven Operations, Lacking Charitable Activities.
Case-Laws - AT : Entitlement to exemption u/s.11 and 12 - as the assessee is carrying on micro finance business in a commercial manner so as to earn profit and there is no iota of charity carried on by the assessee so as to grant exemption under sec.11 of the Act - AT
-
Tax Exemption Denied for Assessee Engaging in Commercial Lending at Market Rates u/ss 11 and 12.
Case-Laws - AT : Entitlement to exemption u/s.11 and 12 - The assessee is availing loans from banks and advance the same and admitted that it has advanced the loans to the customers at 13%. It is a commercial rate prevailing in the market - exemption denied - AT
-
Court Rules Depreciation on Tools Must Follow Standard 10% Rate, Rejects Assessee's Expert-Determined Rate Claim.
Case-Laws - AT : Depreciation on loose tools - jigs and fixtures - change in the accounting policy without any reason - The rate of deprecation could not be claimed as fixed by the assessee's expert. It could be claimed only at the prescribed rate, i.e. at the general rate of 10%. - AT
-
Assessee's Challenge on Assessment Orders Issued After Midnight Rejected, Orders Dated December 31, 2009 Upheld.
Case-Laws - AT : Validity of assessment - assessee has pleaded that the assessment orders have been passed by the AO after 12o clock in the mid-night of 31-12-2009. - Had it been 12:15am after 31st January, then the AO would not have mentioned 31.12.2009, rather it would have been 1st January, 2010. - Decided against assessee. - AT
-
Assessee Meets Section 68 Criteria: Proves Identity, Creditworthiness, and Transaction Genuineness for Share Application Money Addition.
Case-Laws - AT : Addition on issued capital u/s 68 - share application money - the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction - AT
-
Assessing Officer's Failure to Issue Timely Notice u/s 143(2) Is Not Curable, Section 292BB Inapplicable. (2.
Case-Laws - AT : Validity of assessment - section 292BB of the Act is not applicable to the present case and omission on the part of AO to issue notice u/s 143(2) of the Act within prescribed time limit is not a procedural irregularity and the same is not curable - AT
-
Income from Sale of Excess Carbon Credits Classified as Capital Receipt, Not Business Income.
Case-Laws - AT : Sale of carbon credit - on the sale of excess Carbon Credits the income was received it is capital receipt and it cannot be business receipt or income - AT
-
Income Tax Appeals Commissioner Can't Address New Issues, But Can Rectify Orders on Assessee's Application.
Case-Laws - AT : Since the Commissioner of Income-tax (Appeals) has no jurisdiction to decide the issue which is not before the lower authorities at any stage originally, he could have rectified his order on the application filed by the assessee. - AT
Customs
-
Ductile pipes for water supply not classifiable under Customs Tariff heading 98.01; exemption under Notification No. 21/2002-Cus denied.
Case-Laws - SC : Project for drinking water supply project for supply of water for human and animal consumption - Ductile pipes were not classifiable under heading 98.01 of Customs Tariff and thus importer was not eligible for exemption under Notification No. 21/2002-Cus. - SC
Service Tax
-
Clarifying Course Fees in Franchise Agreements: Not All Fees Relate Solely to Franchise Grants, Impacting Service Tax Applicability.
Case-Laws - AT : Franchise service - Nature of Receipt of course fees - Only because all the fees are provided in one Agreement does not necessarily lead to a conclusion that the different components of fees are only for the purpose of grant of franchise - AT
-
Charitable Institute Disputes Tax Demands Citing Retrospective Amendment and Limitation Period Violation in Training Services Case.
Case-Laws - AT : Commercial Training and Coaching Services - Assessee contends that they are charitable institute - retrospective amendment - demands raised beyond the limitation period are liable to be set aside - AT
-
Service tax on HVAC installations under ECIS not applicable before June 16, 2005. Air-conditioning excluded prior to this date.
Case-Laws - AT : Erection, Installation and Commissioning Service - installation of HVAC systems (air conditioning systems) - demand under ECIS which pertains to the period prior to 16.06.2005 is not sustainable as installation of air-conditioning was not covered under ECIS prior to 16.06.2005. - AT
-
Charges for Bill of Lading Reissue and Switch B/L Exempt from Service Tax as Direct Services, Not BAS.
Case-Laws - AT : Nature of activity - the expenses charged directly from customers such as Bill of Lading (B/L) reissue charges, switch B/L charges, etc. - Since the services are provided directly to the client, not falling under Business Auxiliary service (BAS) - demand set aside - AT
Central Excise
-
High Court Rules Each Case Must Be Judged Individually, Criticizes Tribunal's Flawed Decision on SSI Exemption Appeals.
Case-Laws - HC : Denial of SSI Exemption - Clandestine Removal - Tribunal was clearly in error in holding that merely because no appeal has been filed against M.S. Jain, all the other appeals cannot be maintained - HC
-
Tribunal Decision Challenged Over Procedural Error; Case Remanded for Reconsideration Due to Member (Technical) Involvement.
Case-Laws - HC : Validity of order of the tribunal - The matter was heard by the Member (Judicial) of the Tribunal, however, the decision has been delivered by the Member (Technical) of the Tribunal, who had never dealt with the case in past. - matter remanded back before the tribunal with direction - HC
-
High Court Remands Case as Tribunal Fails to Consider Context in Refund Claim, Raising Legal Questions.
Case-Laws - HC : It was the duty of the tribunal as a last fact finding authority to have considered the backdrop in which the refund claim was made - The failure of the Tribunal to perform this duty and mandated by law itself is a substantial question - matter remanded back - HC
VAT
-
Delhi High Court Clarifies Tax on Digital Cameras: Ignore Brackets in Entry 41A, DVAT Act.
Case-Laws - HC : VAT in IT products - DVAT - Bracket preceding words 'other than' in Item 15 of Entry 41 A, closing with bracket after words 'digital still image video cameras' was certainly unique to Delhi statute - correct way to read Article 15 in Entry 41A to DVAT Act was to read it without two brackets and to read it in manner that item 'digital still image video cameras' was not excluded from ambit of Entry 15 - HC
9911796707
