TMI Tax Updates - e-Newsletter
August 27, 2016
Case Laws in this Newsletter:
TMI SMS
Articles
By: Dr. Sanjiv Agarwal
Summary: The Goods and Services Tax (GST) Bill, a significant constitutional amendment, was passed by the Rajya Sabha on August 3, 2016, after extensive deliberations. Key amendments included provisions for state revenue during emergencies, a cap on GST rates, improved dispute resolution, and compensation to states for revenue loss. The Bill requires ratification by at least half of the state assemblies and presidential assent before implementation. Challenges ahead include state ratification, finalizing GST rates, exemptions, and dual control issues. States like Assam and Bihar have ratified the Bill, with others expected to follow.
By: CSHithakar Chouta
Summary: The Companies Act, 2013 introduces several key changes, including the concept of a one-person company and a maximum of 200 members for private companies. It mandates at least one resident director and restricts directorships to 20 companies. The Act prohibits loans to directors and limits investments through multiple layers of companies. Related party transactions no longer require central government approval. Board meetings must occur at least four times annually, with no more than 120 days between them. Stringent share allotment rules and mandatory adherence to secretarial standards are introduced. Specific financial thresholds trigger requirements for internal auditing, CSR contributions, and vigil mechanisms. Non-compliance penalties are stricter, including potential imprisonment.
News
Summary: The Deputy Governor of the Reserve Bank of India addressed the India Banking Reforms Conclave 2016, emphasizing the ongoing nature of banking sector reforms. He highlighted the historical context of public sector banks (PSBs) and the significant reforms since 1991, such as deregulation and improved asset classification norms. Despite progress, challenges remain due to weak governance and policy issues, especially post-2008. The need for strong governance, managerial autonomy, and capital recapitalization is crucial for PSBs. He also stressed the importance of risk management, operational risk mitigation, and embracing technology while ensuring customer service and fraud prevention.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 67.0299 on August 26, 2016, compared to Rs. 67.0876 on August 25, 2016. Based on this, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were also updated. On August 26, 2016, 1 Euro was valued at Rs. 75.7371, 1 British Pound at Rs. 88.5934, and 100 Japanese Yen at Rs. 66.72. The SDR-Rupee rate will be determined using this reference rate.
Notifications
Central Excise
1.
32/2016 - dated
26-8-2016
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CE
Seeks to further amend notification No.12/2012-Central Excise dated 17.03.2012 so as to levy Basic Excise Duty at a concessional rate of 2% on Aviation Turbine Fuel drawn by operators or cargo operators from the Regional Connectivity Scheme (RCS) airports for a period of 3 years
Summary: Notification No. 32/2016-Central Excise, issued by the Government of India, amends the earlier notification No. 12/2012-Central Excise to impose a concessional Basic Excise Duty rate of 2% on Aviation Turbine Fuel drawn by operators or cargo operators from Regional Connectivity Scheme (RCS) airports. This amendment is valid for a period of three years, effective from August 26, 2016. The notification specifies that this concessional rate will not apply to goods specified against serial number 77 of the table after August 25, 2019.
Customs
2.
117/2016 - dated
26-8-2016
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Cus (NT)
Exchange Rate Notification with effect from 27th Aug., 2016 thereby amending Notfn. 112/2016-Cus (NT)
Summary: The Government of India, through the Central Board of Excise and Customs, issued Notification No. 117/2016 on August 26, 2016, amending Notification No. 112/2016-CUSTOMS (N.T.) effective from August 27, 2016. This amendment involves changes in the exchange rate for the South African Rand in Schedule-I. The new rates are set at 4.90 Indian Rupees for imported goods and 4.55 Indian Rupees for export goods. These adjustments are made under the authority of section 14 of the Customs Act, 1962.
3.
116/2016 - dated
26-8-2016
-
Cus (NT)
Regarding appointment of CAA by M/s Nagarjuna Oil Corporation Ltd, Chennai
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has issued Notification No. 116/2016 under the Customs Act, 1962. This notification appoints the Commissioner of Customs, Chennai-II, as the Common Adjudicating Authority (CAA) for the adjudication of specific cases involving M/s Nagarjuna Oil Corporation Ltd, Chennai. This appointment follows the Hon'ble CESTAT's directive to remand the matter for de novo proceedings as per their Final Order dated 11.11.2015. The CAA will handle the adjudication of appeals related to orders previously issued by various customs officers, as specified in the notification's table.
4.
115/2016 - dated
26-8-2016
-
Cus (NT)
Handling of Cargo in Customs Areas (Amendment) Regulations, 2016
Summary: The Handling of Cargo in Customs Areas (Amendment) Regulations, 2016, issued by the Central Board of Excise and Customs, amends the 2009 regulations. Effective from its publication date, the amendment changes regulation 5, sub-regulation (3), reducing the period from "thirty" to "ten" days. Additionally, a proviso is added to sub-regulation (4), exempting certain ports, government entities, and authorized customs cargo service providers from the requirement to furnish a bank guarantee. These amendments aim to streamline customs procedures and reduce administrative burdens for specified entities.
5.
114/2016 - dated
26-8-2016
-
Cus (NT)
Amendment in Notification No.78/2014-Customs (N.T.) dated the 16th September, 2014
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has issued Notification No. 114/2016-Customs, amending Notification No. 78/2014-Customs dated September 16, 2014. This amendment, effective August 26, 2016, updates the designated areas under serial number 23 in the notification's table. The revised entry now includes the Port of Visakhapatnam, Gangavaram Port, Visakhapatnam International Airport, Container Freight Station at Bayyavaram Village, Kasimkota Mandal, Visakhapatnam District, Visakhapatnam Special Economic Zone, and areas under the Greater Visakhapatnam Municipal Corporation in Andhra Pradesh.
SEZ
6.
S.O. 2736 (E) - dated
9-8-2016
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SEZ
Central Government de-notifies an area of 102.36382 hectares, thereby making resultant area as 98.13878 hectares - sector specific Special Economic Zone for High tech Engineering products and related goods and services at Nadasalu
Summary: The Central Government has de-notified 102.36382 hectares from a Special Economic Zone (SEZ) initially designated for high-tech engineering products in Karnataka, reducing the SEZ area to 98.13878 hectares. Originally proposed by a private company, the SEZ underwent several changes, including sector and company name adjustments, before the de-notification. The State Government of Karnataka and the Development Commissioner of Cochin SEZ approved the de-notification. The decision aligns with the requirements of the Special Economic Zones Act, 2005, and related rules, reflecting changes in land usage and company operations over time.
Circulars / Instructions / Orders
Customs
1.
39/2016 - dated
26-8-2016
Revised guidelines for disposal of confiscated goods - regarding
Summary: The revised guidelines for the disposal of confiscated goods outline changes in procedures for selling such items. Previously, preferential treatment was given to certain cooperatives, but this was discontinued in 2015. Now, confiscated goods valued up to Rs. 5 lakh can be offered to registered cooperatives with a 10% rebate, provided they meet specific criteria. Goods exceeding this value must be sold via e-auction or auction-cum-tender, with no discounts available. The guidelines emphasize transparency and fairness in the disposal process, aligning with recommendations from a task force and existing e-auction procedures. These instructions are effective immediately.
Highlights / Catch Notes
Income Tax
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Court Disallows Deductions for Foreign Visits u/s 40A(2)(a) and 69C; Insufficient Business Promotion Evidence.
Case-Laws - HC : Addition u/s 40A(2)(a) r.w.s 69C - whether the appellant has substantiated the plea that the visits made to foreign countries were for promotion of business? - appellant did not satisfy the requirements for claiming deductions, disallowance has to consequently follow. - HC
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Eligibility for Section 54F Deduction Hinges on Property's Actual Residential Use, Not Just Municipal Classification.
Case-Laws - AT : Eligible to claim deduction under sec. 54F - For availing deduction under sec. 54F of the Act, the property though shown as residential on the record of the municipality but the test will be actual user of the premises by the assessee during the relevant period. - AT
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Donation to Unrecognized Political Party JOGO Allowed Deduction u/s 80GGC of Income Tax Act.
Case-Laws - AT : Donation paid to political party - deduction u/s 80GGC - All the documents indicate that JOGO party is unrecognized registered political party u/s 29A of the Representation of People Act, 1951. The contribution return in form No. 24A filed with Election Commission of India, indicate the name and address of donor details - Deduction allowed - AT
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CIT's Section 263 Order Against AO Overruled: No Fault in Assessee's Classification of Brand Sales as LTCG.
Case-Laws - AT : CIT u/s 263 has simply directed the AO, without satisfying himself, to verify whether the bifurcation made by assessee was with a view to reduce tax or not. No infirmity for offering the tax on sale of brands as LTCG. There is no merit in CITs observation for treating the same as business income. - AT
Customs
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Court Rules Speed Post Delivery as Valid Service u/s 153(a) of the Customs Act, 1962.
Case-Laws - HC : Validity of delivery of order by speed post authorized mode of service Whether the service of a copy of the order by Speed Post, would constitute valid service under Section 153(a) of the Customs Act, 1962, or not? - Held Yes - HC
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Plastic Housing Not Exempt from Connector Rules; Penalty Imposed But Reduced for Misclassification.
Case-Laws - AT : Housing' made of plastic is not eligible for exemption available to the 'connector's. However many of such small consignments have been cleared under claim for exemption. - levy of penalty confirmed, though reduced - AT
Service Tax
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Nepalese suppliers billing separately for transport doesn't classify appellants as GTA service recipients; no service tax due.
Case-Laws - AT : Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants - tappellants cannot be treated as recipients of GTA services in terms of Notification No. 35/04-S.T. appellant not liable to pay service tax - AT
Central Excise
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Food Processor and Accessories Classified as Electric Appliance; Duty Based on Maximum Retail Price (MRP).
Case-Laws - AT : Method of valuation - the food processor basic unit along with the accessories are to be assessed together as electric mechanical domestic appliance with self contained electric motor and are chargeable to duty on MRP basis. - AT
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Extended Limitation in Central Excise Requires More Than Willful Misstatement; Additional Evidence Needed for Proviso Application.
Case-Laws - AT : Invokation of extended period of limitation - willful misstatement/ suppression of facts - something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso. - AT
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Exemption Benefit Should Cover Casing Pipes Essential for Water Delivery, Not Just Water-Carrying Pipes.
Case-Laws - AT : To take a view that the benefit of exemption can be extended only to those pipes which physically carry water and deny it to those which are used as Casing Pipes (which are also needed for delivery of water) would defeat very purpose of the Exemption Notification meant for giving the benefit to water treatment plants - AT
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No time limit for show-cause notice u/s 11B in Central Excise refund claims; Revenue can address deficiencies anytime.
Case-Laws - AT : Refund claim - period of limitation - In fact there is no time limit prescribed for issue of show-cause notice under Section 11B and thus it is open to Revenue to point out the short comings in the refund claim - AT
VAT
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High Court Rules Retrospective Amendment on Sales Tax Incentives Unconstitutional; Inapplicable to Current Cases.
Case-Laws - HC : Retrospective amendment - curtailment of the sales tax incentives by way of deferral constitutional validity - impact on completed assessment - The amended provisions cannot be invoked and applied in the present factual controversy. - HC
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Appellant Not Liable for Additional Penalty and Interest on Works Contract; Tax Already Paid at 12% Rate.
Case-Laws - HC : Demand of interest and penalty - bonafide belief - Nature of works contract civil contract or construction contract - appellant paid the tax on the basis of 12% later on - The authorities below have committed an error of law and when the tax imposed has already been paid by the appellant, the penalty and interest is therefore not required to be liable to be paid by the appellant. - HC
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