TMI Tax Updates - e-Newsletter
August 28, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Tribunal and subsequent court rulings in several cases have established that activities undertaken to fulfill statutory obligations are not subject to service tax. In the case involving packaging of fertilizers, the Tribunal ruled that packaging is a statutory requirement under the Essential Commodities Act and thus not a taxable service. Similarly, activities performed under statutory mandates, such as those by public authorities, are not considered taxable services. The Supreme Court upheld these decisions, confirming that service tax is not applicable to activities mandated by law, as they are not services rendered to any individual for consideration.
News
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 66.0605 on August 27, 2015, down from Rs. 66.1610 on August 26, 2015. Consequently, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were adjusted. On August 27, 2015, the rates were 1 Euro at Rs. 74.9655, 1 British Pound at Rs. 102.3475, and 100 Japanese Yen at Rs. 55.08. The SDR-Rupee rate is derived from this reference rate.
Summary: The Union Cabinet, led by the Prime Minister, approved amendments to the Arbitration and Conciliation Bill, 2015, based on the Law Commission's recommendations and stakeholder feedback. Key amendments include ensuring arbitrator neutrality by requiring disclosure of potential conflicts, setting a 12-month deadline for arbitral awards with possible extensions, introducing a fast-track arbitration procedure, and refining grounds for challenging awards based on public policy. The amendments also propose a comprehensive costs regime, empower arbitral tribunals to grant interim measures, and streamline processes for arbitrator appointments and award challenges. These changes aim to make arbitration in India more efficient and user-friendly.
Summary: The Union Cabinet, led by the Prime Minister, approved a four-month extension for the 7th Central Pay Commission, extending its term until December 31, 2015. Initially established on February 28, 2014, the Commission was expected to submit its recommendations by August 27, 2015. However, due to the extensive workload and the need for thorough consultations with stakeholders, the Commission requested additional time to complete its tasks.
Notifications
Income Tax
1.
03/2015 - dated
25-8-2015
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IT
Procedure for registration and submission of report as per clause (k) of sub section (1) of section 285BA of Income-tax Act, 1961 read with Sub rule (7) of Rule 114G of Income-tax Rules. 1962
Summary: The notification outlines the procedure for registration and submission of reports by reporting financial institutions as per the Income-tax Act, 1961 and related rules. Institutions must register through the e-filing website using their login ID and submit Form 61B or a Nil statement digitally signed. The Principal Director General of Income-tax (Systems) specifies the data structure and standards for secure data transmission. If the designated director is authorized to verify income returns, their digital signature is required for submission. The notification is intended for circulation among relevant tax authorities and professional bodies for compliance and awareness.
VAT - Delhi
2.
No.F.6/8/PF-CF/1999/dsvi/702 - dated
26-8-2015
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DVAT
Appointment of District Magistrate of Revenue Department
Summary: The Government of the National Capital Territory of Delhi has appointed the District Magistrate of the Revenue Department as the Competent Authority under Section 5 of the Delhi Protection of Interest of Depositors (In Financial Establishment) Act, 2001. This appointment is effective immediately and applies within their respective jurisdictions. The notification, issued by the Lieutenant Governor of Delhi, is to be published in the Delhi Gazette Part-IV Extraordinary. The document is circulated to relevant officials and departments for implementation and record-keeping.
3.
No. F.10(5)/Fin.(Rev.-I)/2014-15/dsVI/701 - dated
26-8-2015
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DVAT
Appointment of Sh.K.K.Mishra, Adhoc DANICS
Summary: The Lieutenant Governor of the National Capital Territory of Delhi has appointed an Adhoc DANICS officer as Assistant Commissioner for Excise, Luxury Tax, and Entertainment and Betting Tax. This appointment, effective from the date the officer assumes charge, is under the Delhi Excise Act, 2009, the Delhi Tax on Luxuries Act, 1996, and the Delhi Entertainment and Betting Tax Act, 1996. The officer will assist the Commissioner of Excise, Entertainment, Betting Tax, and Luxury Tax in performing duties as specified under the respective acts. The notification is issued by the Deputy Secretary-VI (Finance).
Circulars / Instructions / Orders
DGFT
1.
31/2015-20 - dated
26-8-2015
Amendments in paragraph (7) of Appendix-6B of Appendices and Aayat Niryat Forms of FTP 2015-2020.
Summary: The Directorate General of Foreign Trade has amended paragraph (7) of Appendix-6B in the Foreign Trade Policy 2015-2020. The amendment allows the Board of Approval to consider and decide on extending the Letter of Permission for existing Export Oriented Units (EOUs) involved in textile activities, such as reprocessing garments and other recyclable materials. This change provides a mechanism for the Board to evaluate and potentially extend permissions for these units, which were previously not allowed under EOU schemes.
2.
30/2015-20 - dated
26-8-2015
Amendment in paragraph 3.06 and 3.08 of Handbook of Procedures of Foreign Trade Policy(FTP) 2015-20
Summary: The circular announces amendments to paragraphs 3.06 and 3.08 of the Handbook of Procedures for the Foreign Trade Policy 2015-2020. It allows applicants to choose their Jurisdictional Regional Authority (RA) based on office address for submitting applications under MEIS and SEIS, and specifies that once chosen, the RA cannot be changed for that financial year. Importer Exporter Code holders with units in SEZs/EOUs must apply to the relevant Development Commissioner, while those with units in DTA must apply to the relevant RA. Additionally, it details the registration process for Duty Credit Scrips under MEIS and SEIS, including procedures for EDI and manual ports.
Highlights / Catch Notes
Income Tax
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Court Upholds Retrospective Amendment Reducing TDS Assessment Time Limit to Four Years u/s 201(3) of Income Tax Act.
Case-Laws - AT : TDS liability - time limit for making assessment u/s 201(1) - assessee “deemed to be in default” - Provisions of section 201(3) were amended and word six years were substituted by words four years with retrospective effect from 1April 2010. Survey action carried out in October 2010 and the amendment had come on statute before six months. So, the FAA, in our opinion has rightly interpreted the section and the time limit. - AT
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CIT(A) Revises AO's Assessment u/s 263, Orders Re-evaluation Despite Prior Inquiries Not in Assessment Order.
Case-Laws - AT : Revision u/s 263 by CIT(A) - it appears from record, the AO during the assessment proceedings has made enquiries on all these issues, though, it may not have been referred to in the assessment order. As it appears, in the garb of proceedings u/s 263 of the Act, the ld CIT in fact is undertaking an assessment proceeding himself - AO to re-consider the issues - AT
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No TDS Needed for Non-Resident Agent: Letters of Credit Opening Deemed Export Incident u/s 195.
Case-Laws - AT : TDS u/s 195 - opening of letters of credit for the purpose of completing the export obligation was an incident of export - The non resident agent did not provide technical services for the purpose of running of the business of the assessee in India - No TDS is required - AT
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Court Confirms Disallowance of Deductions for Non-Deduction of TDS on Rent Payments to Partners u/s 40(a)(ia.
Case-Laws - AT : Non-deduction of TDS towards payment of rent to the partners of the firm - There is no provision under the Act to suggest that the relationship between the two assessable entities will determine the applicability of Section.194-I - disallowance u/s 40(a)(ia) confirmed - AT
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Section 14A(2) & Rule 8D(2)(ii): Back-to-back transactions impact expense allocation for tax, not from common funds.
Case-Laws - AT : Disallowance u/s 14A(2) r.w.r. 8D(2)(ii) - expenditure will have to be excluded from the expenses to be allocated under rule 8D(2)(ii) - entire transaction of borrowing and landing is completely a back to back transaction - Just because it is routed through the same bank account, it cannot be presumed that the money is out of the common funds - AT
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Penalty for Non-Payment of Self-Assessment Tax Under Income Tax Act Sections 140A(3) and 221 is Discretionary, Not Automatic.
Case-Laws - AT : Penalty u/s.140A(3) r.w.s. 221 - assessee failed to pay self-assessment tax - levy of penalty by the u/s.221(1) is discretionary and not automatic. - for levy of penalty u/s. 221 such default must be wilful and not merely accidental. - AT
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Relinquishing property share to sisters is a transfer u/s 2(47), triggering capital gains tax per Section 45.
Case-Laws - AT : Relinquishment of the share of assessee in the property comprising of land in favour of sisters who is co-owner - whether was a transfer within the meaning of section 2(47) and capital gain accruing on such transfer was exigible to capital gains tax u/s. 45? - Held Yes - AT
Customs
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Imported Dry Betel Nuts Classified Under CTH 08028020, Not CTH 08129090, Per Test Reports on Consumption Suitability.
Case-Laws - AT : Classification of Dry (Betel) nuts under CTH 08129090 or CTH 08028020 – it is found from test reports that sample of imported goods are not unsuitable for immediate consumption and therefore they would merit classification under CTH 080280 and not under CTH 0812. - AT
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Show cause notice invalid as prior order merged with revisionary order; res judicata applies. Other legal remedies possible.
Case-Laws - SC : Issuance of show cause notice – Commissioner could not have issued show cause notice as prior order of Commissioner had merged into order passed by revisionary authority and principles of res judicata applied - department is allowed to pursue other legal remedies - SC
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Court Rules Customs Can't Claim Auctioned Property; No Priority for Dues Over Auction Purchaser's Rights.
Case-Laws - HC : Claim over property – Right over attachment – There was no indication in Customs Act that property of defaulter which was put to auction can still be claimed by Customs Department after title passes to auction purchaser once it was held that it has no primacy for its dues - HC
Service Tax
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Jurisdictional Central Excise Officer Cannot Challenge Service Classification for Denial of CENVAT Credit on Courier, CHA Services.
Case-Laws - AT : Denial of CENVAT Credit - Courier service and CHA service - jurisdictional Central Excise officer of the recipient of the service, cannot question the classification of the service of the service provider. - AT
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Stay Granted in Air Transport Case: No Deposit Required for Appellant After Revenue Officer Drops Proceedings.
Case-Laws - AT : Air transportation services - Issue of round trip tickets - when the officer of the Revenue himself has dropped the proceedings in a subsequent case, the appellant should not be directed to deposit any amount - stay granted - AT
Central Excise
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High Court Allows CENVAT Credit with Photocopies After Original Documents Misplaced Post-Receipt in Factory.
Case-Laws - HC : CENVAT Credit - duty paying document - photo copy - specified copy of bill of entry and the invoices were misplaced after the receipt of the goods in the factory - credit allowed - HC
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Tribunal Can Extend Stay Orders Indefinitely After Proviso Omission in Section 35C(2A), Removing 365-Day Limit.
Case-Laws - HC : Power of tribunal to extend the stay beyond the period of 365 days - Once the proviso to Section 35C(2A) of the Act has been omitted, the embargo upon the Tribunal to limit the stay order for a limited period has now been removed - Tribunal has the power to grant stay - HC
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Interest on Differential Duty Starts Month After Due Date for Cleared Goods, Even if Paid Before Assessment Finalized.
Case-Laws - HC : Demand of interest on differential duty - interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared. - interest is leviable even where differential duty was paid prior to the finalisation of the assessment - HC
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CENVAT Credit Case: Storage Tanks Not Capital Goods Pre-2001 Amendment; Change is Prospective, Not Retrospective.
Case-Laws - HC : Disallowance of CENVAT Credit - Inclusion of storage tanks/vessels within the scope of capital goods - effect of notification dated 1.3.2001 - prospective or retrospective - the amendment is not clarificatory in nature and prospective in nature - HC
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Extended Limitation Period Not Applicable Due to Consistent Audits and Inspections, No Suppression Evident.
Case-Laws - SC : Invocation of extended period of limitation - Unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression - SC
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Cenvat Credit Reversal Required for Caustic Soda Made with Mercury in Electrolytic Process, per Rule 3(4) Guidelines. (4.
Case-Laws - SC : Reversal of Cenvat Credit - Caustic Soda is manufactured by electrolytic method wherein mercury is used as cathode which after the use is procured and cleared - Credit is required to be reversed under Rule 3(4) - SC
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SSI Exemption: Brand Name Issue Cannot Be Introduced on Appeal Without Initial Notice, Being a Pure Fact Question.
Case-Laws - SC : Benefit of SSI exemption - Use of brand name of others - no such case was set up in the show cause notice issued by the authorities and therefore, such a plea cannot be allowed to be used for the first time in the present appeal, more so, when it is a pure question of fact - SC
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Supreme Court clarifies auto bulb valuation should not default to MRP u/s 4A; requires nuanced assessment.
Case-Laws - SC : Valuation of auto bulbs - MRP based value u/s 4A or transaction value u/s 4 - Section 4A in its wholesome form would not be applied in its entirety in cut and paste form. - SC
VAT
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High Court Invalidates Commissioner's Revisional Notice Due to Expired Limitation Period; Doctrine of Merger Discussed.
Case-Laws - HC : Validity of Revisional notice issued by the Commissioner – Barred by Limitation – Doctrine of merger - notice was barred because order of assessment was sought to be revised and that was made prior to more than three years from issuance of notice dated 13.7.2009 - HC
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