TMI Tax Updates - e-Newsletter
August 7, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Dr. Sanjiv Agarwal
Summary: Section 83 of the Finance Act, 1994 applies certain provisions of the Central Excise Act, 1944 to service tax, including the issuance of summons under Section 14. Field officers often misuse summons, causing undue stress. To address this, the Central Board of Excise and Customs (CBEC) issued guidelines to limit summons use, recommending simpler communication methods like phone calls or letters. Summons should only be issued with higher officer approval and as a last resort. Senior officials should only be summoned if implicated in revenue loss. These guidelines aim to prevent routine or unnecessary summons, ensuring fair practice.
By: Sumit Arora
Summary: Registering a company in India involves an online process through the Ministry of Corporate Affairs (MCA). The key steps include acquiring a Digital Signature Certificate (DSC), obtaining a Director Identification Number (DIN), creating an account on the MCA portal, and filing necessary eForms for incorporation. Essential documents include the DIN, DSC, and forms related to company name, address, and director details. Additional formalities may involve obtaining a TAN card, PAN, and other specific registrations depending on the business nature. The process culminates with MCA approval, confirming the company's incorporation.
News
Summary: The Allahabad High Court has mandated that the CESTAT establish a circuit bench in Allahabad for at least seven days each month until a permanent bench is set up. The Registrar of CESTAT has been instructed to find suitable premises, and the Central Government is to acquire property for this purpose. Despite a 2013 notification from the Finance Ministry about creating an additional bench in Allahabad, progress has been lacking, prompting the court's intervention. Additionally, a member of CESTAT has been transferred from Ahmedabad to Kolkata following a colleague's retirement. Further directions are anticipated shortly.
Summary: The Central Board of Direct Taxes (CBDT) signed two unilateral Advance Pricing Agreements (APAs) with multinational companies on August 3, 2015, including the first with a Rollback provision, extending tax certainty for nine years. This brings the total to 14 APAs, covering sectors like telecommunication and pharmaceuticals. Unilateral APAs involve only Indian tax authorities, while bilateral APAs include foreign tax authorities. A Framework Agreement with the US under the India-US Double Taxation Avoidance Convention aims to resolve 200 past transfer pricing disputes, with 35 resolved so far. Ongoing negotiations with the UK and Japan are progressing, enhancing tax certainty for foreign investors in India.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 63.7603 on August 6, 2015, down from Rs. 63.8159 on August 5, 2015. Based on this rate and cross-currency quotes, the exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were updated. On August 6, 2015, the rates were Rs. 69.7091 for 1 Euro, Rs. 99.6000 for 1 British Pound, and Rs. 51.11 for 100 Japanese Yen. The SDR-Rupee rate will also be determined based on the reference rate.
Notifications
Customs
1.
73/2015 - dated
6-8-2015
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Cus (NT)
Rate of exchange of conversion of the foreign currency with effect from 07th August, 2015
Summary: Notification No. 73/2015 issued by the Central Board of Excise and Customs under the Ministry of Finance, Government of India, sets the exchange rates for converting foreign currencies into Indian rupees for imported and export goods effective from August 7, 2015. This notification supersedes the previous notification No. 68/2015. The exchange rates are detailed in two schedules: Schedule I lists rates for individual units of various currencies like the US Dollar, Euro, and British Pound, while Schedule II provides rates for 100 units of currencies such as the Japanese Yen and Kenyan Shilling.
DGFT
2.
17/2015-20 - dated
6-8-2015
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FTP
Amendment in export policy of edible oils.
Summary: The Government of India amended its export policy on edible oils, initially prohibiting their export since March 2008, with extensions until further notice. However, exemptions are allowed for certain oils like castor, coconut, and rice bran oil in bulk, among others. Exports are also permitted for organic edible oils and those used in specific economic zones, subject to conditions. Additionally, branded consumer packs of edible oils up to 5 kg can be exported with a minimum price. The prohibition does not apply to peanut butter. The amendment removes quantity limits on organic edible oils and exempts rice bran oil from the prohibition.
Circulars / Instructions / Orders
FEMA
1.
07 - dated
6-8-2015
Exim Bank's GoI supported Line of Credit of USD 18.08 million to the Government of Republic of Chad
Summary: Exim Bank has established a USD 18.08 million line of credit with the Government of Chad to finance a veterinary pharmaceutical manufacturing plant. Under the agreement, 75% of goods and services must be sourced from India, with the remaining 25% from outside India. The credit agreement became effective on June 30, 2015, with specific timelines for letters of credit and disbursement. No agency commission is payable, but exporters can use their resources for commission payments. Authorized banks are instructed to inform exporters about the line of credit and compliance with the Foreign Exchange Management Act, 1999.
Highlights / Catch Notes
Income Tax
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Supreme Court: No TDS on Aircraft Landing and Parking Charges at New Delhi Airport u/s 194-I.
Case-Laws - SC : TDS u/s 194-I - Payment of charges for landing the aircrafts and parking thereof at New Delhi Airport - whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to 'use of the land'? - Held No - No TDS required - SC
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Tax Deduction u/s 80IA Disallowed; Losses Already Set Off Against Other Business Income in Appeal Decision.
Case-Laws - HC : Disallowance of deduction claimed under section 80IA - Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. - HC
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Court Reverses Decision: Education Provision Qualifies as Charitable Purpose u/s 12AA.
Case-Laws - HC : Registration under Section 12AA declined - The purpose to provide education to the children would fall very much within the charitable purpose and predominant purpose of the appellant has to be seen - HC
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Court Rejects Accounts and Assessment Order as Unreliable; Tribunal Rightly Excludes Them from Consideration.
Case-Laws - HC : Once the accounts and the assessment order were disapproved by this Court and held it to be un-reliable, even if these documents were pressed into service by the appellant, the Tribunal could not have taken cognizance of these documents. Therefore, if the Tribunal has eschewed these documents from its consideration, the Tribunal was perfectly justified in doing so. - HC
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Income Tax Act Sec 33AB Deduction: Rare Benefit for Assessees Growing and Manufacturing Tea Without External Blending.
Case-Laws - HC : Computation of the quantum of deduction under section 33AB - in rare cases, where a very few fortunate assessees who grow and manufacture different varieties of tea and consequently, do not require purchase of any tea for blending with the final product, can only get the benefit of section 33AB of the Act - HC
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Section 263 Revision Validity: Multiple Proceedings Don't Block Jurisdiction Invocation Under Income Tax Act.
Case-Laws - AT : Validity of revision u/s 263 - The question of the assessee having to face multiple proceedings, in the present case, cannot be the basis to hold that jurisdiction u/s.263 of the Act cannot be invoked. - AT
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Insurance Premiums on Housing Loans: Essential Business Expenses, Not Capital in Nature, Says Assessee.
Case-Laws - AT : Disallowance of insurance premium paid on housing loans of customers - These expenses are related to the housing products which are very much a part of the assessee's business activities and the payment of insurance premium on the housing products is also not capital in nature. - AT
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Tax Assessment Order Invalidated: Faulty Satisfaction Note u/s 153C Fails to Meet Legal Requirements.
Case-Laws - AT : Validity of assessment order u/s. 153C/143(3) - On the same date i.e. 23.7.2010, similar satisfaction note, only with the change in the name of the assessee’s has been issued arbitrarily which does not in any manner satisfy the requirement of section 153C of the I.T. Act. - AT
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Assessee Association Retains Charitable Status for Advancing Public Utility, Even with Profitable Activities u/s 11.
Case-Laws - AT : Eligibity for exemption under section 11 - the assessee association's primary purpose was advancement of objects of general public utility and it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose was profitable in nature. - AT
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Cooperative societies in banking exempt from TDS on member deposits under Income Tax Act Section 194A(3)(i)(b). CBDT circulars can't override law.
Case-Laws - AT : TDS on interest paid on deposits by its members u/s 194A(3)(i)(b) - CBDT circular cannot over-ride the prescription of statute passed by the parliament. And, there is no quarrel that assessee is a co-operative society engaged in banking business - No TDS - AT
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Lease Payments for Asset Use Allowed as Revenue Expenditure u/s 37 of Income Tax Act.
Case-Laws - AT : Disallowance on account of lease payment made by the assessee - Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure u/s 37 - AT
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Income from a deceased person's estate is taxable u/s 168 of the Income Tax Act.
Case-Laws - AT : Business and interest income - Section 168 - once an income has arisen from the estate of a deceased and there are provisions under the Act mandating the charge thereon, such income cannot go tax free. - AT
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Income Tax Commissioner Approves Personal Savings Claim, Deletes Unaccounted Investment Addition u/s 69B.
Case-Laws - AT : Unaccounted investment - addition u/s 69B deleted by CIT(A) - it is reasonable to accept that the assessee may be having some cash as personal savings and he accepted this claim to the extent of ₹ 80,000/-. - the amount of personal cash accepted by CIT (A) is not excessive - AT
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Assessee's claim for 80% depreciation on energy-saving devices denied due to "block of assets" concept in tax law.
Case-Laws - AT : Claim of assessee for depreciation @ 80% of energy saving devices denied - after the introduction of concept of “block of assets”, the assets loose identity the moment they enter the block and therefore the rate of depreciation of a particular item of depreciable asset cannot be tampered with in a subsequent assessment year - AT
Customs
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Tax Authority Confirms Duty Evasion on Tiles; Misdeclaration of Retail Sale Price Leads to Extended Limitation Period.
Case-Laws - AT : Computation of CVD on MRP basis - importer himself is selling the tiles at a price higher - Tax payer cannot be permitted to himself misdeclare the RSP - demand of duty invoking extended period of limitation confirmed - AT
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Respondents Granted CVD Exemption on Imported Silk Yarn and Fabrics per Notification 30/2004-CE Dated July 9, 2004.
Case-Laws - AT : Admissibility of CVD exemption on imported goods - import of silk yarn, silk fabrics - respondents are eligible for CVD exemption under Notification 30/2004-CE dt. 9.7.2004 - AT
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Importing Scull and Slags Allowed with Restrictions; Pay Redemption Fine and Penalty for Restricted Items.
Case-Laws - AT : Import of prohibited goods - the scull and slags are not prohibited items - If item in question is restricted item, same can be allowed to be imported on payment of redemption fine and penalty. - AT
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Court Rules on Import of Goods: Slags and Sculls Not Classified as Hazardous; Revenue's Claim Considered Vague.
Case-Laws - AT : Import of Hazardous goods - If revenue want to say that these slags appears to be non hazardous in nature is a vague report then the observation by the Chartered Engineer that these waste contain irregular shape material appearing in shape of scull and lump is also vague. Further, the scull and slags are not prohibited items. - AT
Wealth-tax
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Commercial Establishments Allowed in House Properties u/s 2(ea); Owner Occupancy Not Required for Exclusion.
Case-Laws - AT : Enhancement in value of net wealth - sub-clause(5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property - it nowhere provides that only if such commercial complex is occupied by the owner then alone the exclusion shall take effect. - AT
Service Tax
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Sub-Contractors Not Liable for Additional Service Tax if Main Contractor Already Paid, per CBEC Circular No. 96/7/2007-ST.
Case-Laws - AT : Demand of service tax - sub-contractor - CBEC Circular No. 96/7/2007-ST dated 23.08.2007 - if the main contractor has paid Service Tax of the entire contract value, including the value for which contract was given to the present appellant then no Service Tax is required to be paid by the appellant due to revenue neutrality - AT
Central Excise
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Tribunal's handling of assessee's appeal u/s 4 criticized; case remanded to CESTAT for thorough review.
Case-Laws - SC : Valuation - Place of removal - Section 4 - contracts contain a clear stipulation that in case of any damage to the goods during transit, the supplier will lodge the claim and obtain compensation from the insurance company - The perfunctory manner in which the appeal of the assessee is allowed, by the tribunal, cannot be countenanced - Matter remanded back to CESTAT - SC
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Cenvat/MODVAT Credit Allowed Despite Missing Duty Details; Eligibility Conditions of 1992 & 1994 Notifications Met.
Case-Laws - SC : Cenvat / MODVAT Credit - Duty paying documents - Duty paid by Railway on scrap - document do not indicate the rate and amount of duty paid on the scrap/inputs at the time of clearance/sale by the Railways - appellant satisfies all the eligibility conditions contained in notifications dated 13.07.1992 and 01.03.1994 for availing the deemed MODVAT credit - credit allowed - SC
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Supreme Court mandates CESTAT to assess evidence on concessional duty for cement based on installed capacity.
Case-Laws - SC : Concessional rate of duty on Cement - installed capacity - CESTAT should have considered the material placed by the Revenue and only then come to a conclusion as to whether the certificate issued by Commissioner of Industries should be acted upon or not - SC
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Conveyor Belt Cutting Isn't Manufacturing Without New Product Outcome, Court Clarifies.
Case-Laws - SC : Mere cutting of the lengthy conveyor belt into smaller sizes would not amount to manufacture, ipso facto, unless it is shown that as a result of the said cutting, it was transferred into a new product which was a marketable product - SC
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Legal Debate: Are Waffles and Wafers Chocolate? Central Excise Entries 1905.31 vs. 1905.90 Examined.
Case-Laws - SC : Classification of waffles and wafers - Classification under Entry 1905.31 or under 1905.90 - if only cocoa is added or is contained in these products, that would not make it chocolate. Thus, there has to be a difference between cocoa and the chocolate that is made out of cocoa. - SC
VAT
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Exemption Denied for Safety Barrier Installation; Broad Interpretation of "Relating to" in Road Construction Context.
Case-Laws - HC : Denial of exemption claim - fixing and providing of Works Profile Safety Barrier - part of road construction activity or not - The words “relating to” has a wide meaning and cannot be restricted only to putting of concrete, grit, coal tar etc but it should mean everything relating to road - HC
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Rectification corrects errors, not for reevaluating evidence with new facts not previously presented.
Case-Laws - HC : Rectification of mistake - rectification implies the correction of an error or removal of defects or imperfections and could not be used to appreciate the evidence on new facts which were not placed earlier. - HC
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