TMI Tax Updates - e-Newsletter
August 28, 2014
Case Laws in this Newsletter:
Articles
By: P. Umanathan Narayanan
Summary: The article discusses the implications of the Supreme Court's decision in the FIAT case on the Central Excise Valuation Rules, 2000, particularly regarding amendments following the ruling. The Court accepted the Department's argument that cars sold below manufacturing cost for market penetration should have additional consideration added to their transaction value for excise duty purposes. The article critiques the amendment for its contradictions and lack of clarity, arguing that it does not align with the original case circumstances or the Central Excise Act. It highlights the complexities and potential inconsistencies in applying the new rules to determine transaction values.
News
Summary: The Prime Minister is set to launch the Pradhan Mantri Jan Dhan Yojana (PMJDY), aimed at achieving comprehensive financial inclusion through various phases. The initiative includes universal access to banking facilities, overdraft facilities, and RuPay debit cards with accident insurance. The program will expand banking infrastructure, including the establishment of new branches and ATMs, and utilize Business Correspondents for branchless banking. The plan also integrates government benefit transfers to these accounts. The launch will feature an exhibition, film screening, and the unveiling of a financial inclusion logo and mission document, with several dignitaries in attendance.
Summary: The Reserve Bank of India set the reference rate for the US dollar at Rs. 60.4678 and for the Euro at Rs. 79.6545 on August 27, 2014. The previous day's rates were Rs. 60.4960 for the US dollar and Rs. 79.9100 for the Euro. The exchange rates for the British Pound and Japanese Yen against the Rupee were also adjusted, with the Pound at Rs. 100.1468 and the Yen at Rs. 58.17 on August 27, 2014. The SDR-Rupee rate is determined based on these reference rates.
Summary: The Union Finance Minister announced the launch of a new website for the Pension Fund Regulatory and Development Authority (PFRDA) and released its first annual report. He emphasized the challenges of achieving consensus on pension reforms, which aim to free up resources for social sectors by reducing the public burden of unfunded pensions. The minister highlighted the increase in the foreign direct investment limit to 49% for the pension sector, which is expected to attract foreign capital and expertise. He also stressed the importance of promoting the NPS Swavalamban scheme for the unorganized sector and urged the PFRDA to foster a competitive pension industry.
Summary: On August 28, 2014, the Prime Minister will launch the Pradhan Mantri Jan Dhan Yojana (PMJDY), a national mission for financial inclusion, aiming to provide every household with banking facilities. Over 60,000 camps will be organized nationwide, targeting the opening of one crore bank accounts. The initiative includes financial literacy programs and offers each account holder a RuPay debit card with accident insurance. The mission will be implemented in two phases, focusing on universal banking access, financial literacy, micro insurance, and pension schemes. The plan emphasizes both rural and urban inclusion, shifting focus from villages to households.
Summary: The Union Finance Minister emphasized the need for a capital increase in the Asian Development Bank (ADB) to sustain its leadership in development financing in Asia. During a meeting with the ADB President, discussions focused on key government priorities and the ADB's strategy to alleviate poverty in Asia and the Pacific. The ADB President assured support for India's development goals through financing and capacity building. India, as the largest borrower from the World Bank and a significant partner in ADB's private sector operations, is also involved in developing the East Coast Corridor to enhance global manufacturing value chains.
Notifications
Central Excise
1.
26/2014 - dated
27-8-2014
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CE (NT)
CENVAT Credit (Eighth Amendment) Rules, 2004 - seeks to extend CENVAT credit benefit on the basis of Service Tax Certificate for transportation of goods (STTG Certificate) issued by the Indian Railways.
Summary: The CENVAT Credit (Eighth Amendment) Rules, 2004, effective from its publication date, allows the extension of CENVAT credit based on a Service Tax Certificate for Transportation of Goods (STTG Certificate) issued by Indian Railways. This amendment modifies rule 9 of the CENVAT Credit Rules, 2004, by adding a clause that permits the use of the STTG Certificate, along with photocopies of railway receipts, to claim credit. This notification, issued by the Ministry of Finance, amends previous rules published in the Gazette of India.
Income Tax
2.
36/2014 - dated
26-8-2014
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IT
Notification u/s 35(1) (iii) - Approved organization - Birbal Sahni Institute of Palaeobotany, Lucknow
Summary: The Central Government has approved an organization in Lucknow for scientific research under section 35(1)(iii) of the Income-tax Act, 1961, effective from the 2014-2015 assessment year. The organization must focus solely on scientific research, conduct research independently, maintain separate accounts for funds received and used, and have these accounts audited. It must also keep a certified statement of donations and research expenditures. Approval may be revoked if the organization fails to maintain accounts, submit audit reports, report donations, or if its research activities are not genuine or compliant with the specified provisions.
Highlights / Catch Notes
Income Tax
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Assessee Can Claim Deduction on Current Year Profits u/s 80IA Without Setting Off Past Losses or Depreciation.
Case-Laws - AT : Claim of deduction u/s 80IA - there is no question of setting off notionally carried forward unabsorbed depreciation or loss against the profits of the unit and the assessee is entitled to claim deduction u/s 80IA on the current assessment year on the current year profit - AT
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Sales Tax Retention from Expanded Unit Sales is a Capital Receipt under Haryana Subsidy Scheme, Section 28(iv) IT Act.
Case-Laws - AT : Nature of receipts – Revenue or Capital u/s 28(iv) - he assessee’s retention out of the sales tax collected on sale of finished products from expanded unit is part of capital receipt under the subsidy scheme of the Govt. of Haryana. - AT
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Depreciation Allowed on Leased Solar Systems Once Lease Rentals Are Accepted by Revenue Authorities.
Case-Laws - AT : Depreciation on leased asset - Solar Generating System – Once, lease rentals are accepted by the revenue, there is no reason to disallow the depreciation - AT
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Section 147: Reopening Assessments vs. Reviewing Powers-Balancing Authority Limits and Revenue Interests.
Case-Laws - AT : Reopening of assessment u/s 147 - There is a difference between the power to review and power to reassess - Placing such a restriction on the power of assessment of the assessing authority is contrary to the scheme of the Act, besides would operate to cause prejudice to the Revenue - AT
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Ex Gratia Payment Under SBI Exit Scheme Exempt from Taxation u/s 10(10C) of Income Tax Act.
Case-Laws - AT : Taxability of ex gratia payment received under Exit Option Scheme of State Bank of India - assessee entitled to exemption u/s 10(10C) of the Act - AT
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Assessee exempt from TDS deduction u/s 194C due to lack of contractual relationship with the society.
Case-Laws - AT : TDS on payment of society - there is no contract between the society and the assessee as there is a pure relation of member of the society – the assessee was not liable to deduct TDS as per section 194C - AT
Customs
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Customs Department Incorrectly Claims Importer Missed Deadline for Documents on Ship Unloaders Under Notification No.16/2000.
Case-Laws - HC : Import of Ship Unloaders for handling coal - Benefit of Customs Notification No.16/2000 - It is the case of the Department that the importer did not furnish the required documents within the stipulated period - contention of the department is not correct - HC
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Penalty Imposed on Customs House Agent for Import Diversion Reduced Upon Appeal Decision.
Case-Laws - AT : Penalty on the appellant who was attending to the day-to-day clearance work of the CHA - appellant has played an active role in import and diversion of imported goods - levy of penalty confirmed but reduced - AT
Service Tax
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Service Tax Applicability on Book Adjustments for Associated Companies: No Tax if Service Recipient Doesn't Exist.
Case-Laws - AT : Levy of service tax on services provided to associated companies - book adjustment entries - When the service recipient itself is not there, the question of book adjustment would not arise - AT
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Court Confirms C&F Services Classification; Appellant Eligible for Service Tax Refund on Exported Goods.
Case-Laws - AT : Refund of service tax - export of goods - The fact that the C&F agent which had provided this service to the appellant had itemised the total consideration into various components does not detract from the fact that the services provided are C&F - AT
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Ministry of Chemicals & Fertilizers' Urea Tenders Classified as Trading, Affecting Service Tax Rules.
Case-Laws - AT : Trading activity or service activity - tenders floated by Ministry of Chemicals & Fertilizers for receiving, bagging, standardization and distribution of imported urea - held as trading activity - AT
Central Excise
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Penalty Waiver Granted as Default Rectified Before Show Cause Notice; Prima Facie No Penalty Applicable.
Case-Laws - AT : Waiver of pre-deposit of penalty - default had already been made good by the Appellants much before the show cause notice was issued - prima facie no penalty is leviable - AT
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CENVAT Credit Applies to Warranty Period Services by Manufacturers, Linked to Final Product Production.
Case-Laws - AT : CENVAT Credit - Prima facie, any services rendered during warranty period which are rendered by the manufacturer of the goods, are in respect of final product and are in relation to the manufacture- AT
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Padding Not Manufacturing: No Excise Duty or Exemption Denial.
Case-Laws - AT : When the process of padding was held to be non-amounting to manufacture, no excise duty would be attracted and, as such, there is no question of denial of any exemption - AT
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