TMI Tax Updates - e-Newsletter
September 2, 2015
Case Laws in this Newsletter:
TMI SMS
Articles
By: Dr. Sanjiv Agarwal
Summary: Exempted services under Rule 2(e) include taxable services that are fully exempt from service tax, such as those paid in foreign exchange or rendered to diplomatic missions. These also cover services not subject to service tax under the Finance Act, 1994. Partial exemptions do not qualify, and self-use services are not considered exempt. From April 1, 2011, trading activities are included as exempted services. Legal cases, such as those involving motor vehicle dealers and manufacturers, have clarified that Cenvat credit should be proportionally reversed for services used in both taxable and trading activities. Trading activities are not considered services for Cenvat credit purposes.
By: CA Akash Phophalia
Summary: The article discusses the proposed scheme for transitioning unutilized credit from the pre-GST to the post-GST regime. It addresses how registered and unregistered assessees under the pre-GST regime can manage their input credit, including input goods, semi-finished and finished goods, capital goods, and input services. The proposals suggest allowing the carry forward of taxes paid on eligible goods and services, subject to verification and appropriate mechanisms for identification. The burden of proof lies with the claimant, requiring certified purchase invoices and stock records. The article emphasizes the complexity of transitioning credit and the need for clear guidelines.
News
Summary: A new Revenue Secretary has been appointed at the Ministry of Finance, Government of India. Previously serving as the Secretary of the Department of Financial Services, the new appointee aims to enhance transparency in the Revenue Department through improved use of Information Technology and simplifying tax rules. They plan to ensure the timely implementation of the Goods and Services Tax (GST) following the passage of the GST Constitutional Amendment Bill. The Revenue Secretary is also inviting public suggestions on tax reforms to improve taxpayer services.
Summary: The Government of India has partnered with the United Nations' Better Than Cash Alliance to enhance financial inclusion through digital payments. This collaboration marks the first anniversary of India's Pradhan Mantri Jan-Dhan Yojana (PMJDY), which opened 180 million new bank accounts in a year. The initiative aims to integrate citizens into the formal financial system, offering services like credit, insurance, and pensions. The move aligns with the upcoming launch of the Sustainable Development Goals, positioning India as a leader in digital financial services. The partnership is expected to provide research and policy support, sharing India's successes globally.
Summary: A new Secretary has assumed office at the Department of Economic Affairs within the Ministry of Finance. Previously serving as Secretary of the Department of Revenue, the official has also held roles as Additional Secretary and Joint Secretary (Budget) in the same department. Upon taking charge, the Secretary conducted a meeting with senior officers to assess the current status of various departmental issues.
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 66.2603 on September 1, 2015, down from Rs. 66.3062 on August 31, 2015. The exchange rates for other currencies against the Rupee were also noted: the Euro increased from Rs. 74.4950 to Rs. 74.7880, the British Pound decreased from Rs. 102.3105 to Rs. 101.9945, and 100 Japanese Yen rose from Rs. 54.75 to Rs. 55.05. The SDR-Rupee rate will be determined based on this reference rate.
Summary: The Central Board of Excise Customs has amended the tariff values for various goods under the Customs Act, 1962. The updated values include Crude Palm Oil at $532 per metric tonne, RBD Palm Oil at $571, and Crude Soyabean Oil at $704. Brass Scrap is set at $3179, Poppy Seeds at $2464, and Areca Nuts at $2452 per metric tonne. Gold is valued at $369 per 10 grams, and Silver at $471 per kilogram. These changes are part of the notification No. 36/2001-Customs (N.T.) and are effective immediately.
Notifications
Companies Law
1.
F. No. 01/34/2013-CL-V-Part-I - dated
28-8-2015
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Co. Law
Companies (Management and Administration) Amendment Rules, 2015
Summary: The Companies (Management and Administration) Amendment Rules, 2015, issued by the Ministry of Corporate Affairs, India, amends the 2014 rules under the Companies Act, 2013. Effective upon publication in the Official Gazette, the amendment changes the wording in Rule 23, sub-rule (1), replacing "not more than five lakh rupees" with "not less than five lakh rupees." Additionally, a new Form No. MGT-7 is introduced to replace the existing form. These amendments are made under various sections of the Companies Act, 2013.
Customs
2.
83/2015 - dated
31-8-2015
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Cus (NT)
Fixation of T V of Edible oil, Brass, Poppy seed, Areca nut, gold and Sliver
Summary: The Government of India, through the Ministry of Finance's Central Board of Excise and Customs, issued Notification No. 83/2015-CUSTOMS (N.T.) on August 31, 2015. This notification amends the tariff values for various goods under the Customs Act, 1962. The revised tariff values are specified for items such as crude palm oil, RBD palm oil, crude soya bean oil, brass scrap, poppy seeds, gold, silver, and areca nuts. These changes affect the valuation of these goods for customs purposes, with specific values provided in US dollars per metric tonne or per specified unit, as applicable.
VAT - Delhi
3.
No. F.3(352)Policy/VAT/2013/625-36 - dated
31-8-2015
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DVAT
Regarding submission of Form DP-1 online by all dealers latest by 30-09-2015
Summary: The Government of the National Capital Territory of Delhi has issued a notification requiring all dealers to submit Form DP-1 online by September 30, 2015. This modifies a previous notification dated June 30, 2015. The Commissioner of Value Added Tax, exercising powers under the Delhi Value Added Tax Act, 2004, mandates this submission. Other aspects of the prior notification remain unchanged. The notification has been distributed to relevant government officials and departments for necessary action and publication in the Delhi Gazette.
Circulars / Instructions / Orders
VAT - Delhi
1.
21/2015-16 - dated
1-9-2015
Input Tax Credit - difficulties to buyer due to revision of return by the seller - matched transaction of a tax period would be hard coded meaning thereby that after the filling of return such transactions would be unaffected by revision of return
Summary: The circular addresses issues faced by buyers due to sellers revising returns, which causes mismatches in Input Tax Credit (ITC). To resolve this, it has been decided that matched transactions will be hard coded, preventing them from being altered after return filing. In cases where both parties made errors, the buyer can approach the Assessing Authority with a seller's admission of the mistake to reopen and revise the transactions. This process allows both parties to correct entries within the prescribed period under the DVAT Act. The circular aims to alleviate unnecessary mismatches and streamline the ITC process.
2.
22/2015-16 - dated
1-9-2015
Objections pertaining to the tax period prior to 01/10/2011 - clarification
Summary: The circular clarifies that for objections related to tax periods beyond October 1, 2011, the Objection Hearing Authority (OHA) may require dealers to deposit a portion of the disputed amount before considering their objections. However, no such pre-condition is needed for objections concerning tax periods up to September 30, 2011. Additionally, the Systems Branch will only remove checks for dealers who have submitted objections both online and in hard copy for periods before October 1, 2011. This directive is issued with the approval of the Commissioner of VAT.
Highlights / Catch Notes
Income Tax
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Payment for Content Production Not Royalty or FTS Under Income Tax Rules; Content Owned by BCCI.
Case-Laws - AT : Nature of payment received - royalty or Fee for Technical services (FTS) - BCCI becomes the owner of the program content produced by the assessee. The job of the assessee ends upon the production of the program content and the broadcasting is carried out by some other entity to which license was given by the BCCI - cannot be held as royalty - AT
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Exemption Denied: Assessee Not Charitable, Services Facilitate Members' Business Activities u/s 11.
Case-Laws - AT : Claim of exemption under section 11 denied - assessee is rendering services to its members custom house agents, to carry out their business/professional activities - assessee cannot be considered as a charitable organization - AT
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Depreciation Cannot Be Disallowed: Section 40(a)(i) Inapplicable Due to Non-Deduction of Tax at Source on Capitalized Payment.
Case-Laws - AT : Once the assessee has capitalized the payment in question though the assessee has not deducted the tax at source on such payment, Section 40(a)(i) cannot be invoked for disallowance of depreciation - AT
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Futures and options losses offset against business profits; no restrictions on derivative loss offset against share trading income.
Case-Laws - AT : Loss on account of futures and options set off against the business profit - the entire transaction carried out by the assessee, indicated above, was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares - AT
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Rock Extraction Deemed Manufacturing, Section 10B Deduction Allowed for Transformation into New Product with Distinct Use.
Case-Laws - AT : Deduction u/s 10B - manufacturing activity or not - the process of extraction of rock and converting it into dimensional block had resulted in transformation of the object or article or thing into a new and a distinct object or thing having a different name, character and use - deduction allowed - AT
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Expenditure on brand building doesn't ensure capital benefit or lasting business value, despite statutory recognition of intangible assets.
Case-Laws - AT : Just because an expenditure is debited in books towards brand building, which it purportedly is, and statutory recognition has since been accorded to such an intangible asset, as a “brand” would not by itself imply that an advantage in the capital field, or of enduring value to the business has, arisen to the assessee upon incurring the expenditure. - AT
Customs
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Assessee awarded costs for department's 12-year delay in refund and refusal to pay interest despite Tribunal order.
Case-Laws - HC : Refund of Duty – Payment of Interest – assessee would be entitled to costs or compensation for high handedness of the department, by initially not refunding amount for over 12 years, and then refusing to pay interest even after order of Tribunal - HC
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ADGFT Directs Assistant Commissioner to Allow Exports Pending Appeal if Items Are Freely Exportable.
Case-Laws - HC : Non-fulfilment of export obligation – Order of ADGFT, was very clear and explicit in directing Assistant Commissioner not to stop exports of petitioner as long as items were freely exportable, as appeal preferred them was pending and not disposed of - HC
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High Court Orders Investigation into Delays in Provisional Assessment of Bills of Entries by C.B.E. & C. Commissioners.
Case-Laws - HC : Delay in Provisional Assessment of Bills of Entries – Central Board of Excise and Customs (C.B.E. & C.) to inquire into matter as to why there was delay at level of Commissioners in processing such like cases - HC
Indian Laws
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Chief Justice Cannot Form Larger Bench for Legal Questions Based on Personal Opinion Alone, Despite Division Bench Rulings.
Case-Laws - HC : The Chief Justice, in his administrative capacity, cannot constitute a Larger Bench for the purpose of deciding a pure question of law simply because the Chief Justice is of the view that such question, notwithstanding a decision of a Division Bench of this Court in one way or other, is required to be heard by a Larger Bench. - HC
Service Tax
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Input Tax Credit Allowed for Security and Telephone Services at Backup Office and GM's Residence.
Case-Laws - AT : Denial of input tax credit - the security guard service and telephone connections services has been availed by their back up office where General Manager is also residing and the services availed for the security guards at residence of General Manager and back up office cannot be segregated - credit allowed - AT
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Appellant's Role Defined as Commission Agent, Not Involved in Goods Clearing and Forwarding According to Agreement.
Case-Laws - AT : C&FA Service or BAS - appellant's principle activity is not related to clearing & forwarding of goods, as it is clearly evident from the agreement that the appellant was appointed as Commission Agent for marketing and sale of goods - AT
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Adjudicating authorities must share all evidence with the assessee for fair and transparent proceedings.
Case-Laws - AT : The principles of fair adjudication required the adjudicating authority to provide the material sought to be relied upon by him to the assessee and to seek his comments on the same - AT
Central Excise
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Court Rules on Refund Denial: Goods Cleared, Unjust Enrichment Irrelevant, Refund Entitled as Cenvat Credit Re-credit.
Case-Laws - AT : Denial of consequential refund - entire demand arose out of differential duty worked out in each invoice. The goods were already cleared - question of unjust enrichment does not arise. - appellants are eligible for refund amount debited in RG.23C-Part-II as re-credit of cenvat credit - AT
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Third-Party Statements Alone Insufficient as Evidence in Central Excise Cases Without Independent Corroboration.
Case-Laws - AT : Clandestine removal of goods - Recovery of incriminating documents - The uncorroborated statements of third party cannot be adopted as an evidence, without corroboration from an independent source though such statements can be of some value but cannot be solely relied upon for the purpose of holding against the assessee. - AT
VAT
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Court Rules Against Revenue Authority's Attempt to Reopen Tax Assessments and Impose Higher 16% Tax Rate.
Case-Laws - HC : Re-opening of Assessment – Fixation of tax rate at 16% against 10% –Revenue was not justified in demanding tax at 16% by seeking to reopen concluded assessments by issuing clarification - HC
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Refund Claim Denied for Manual Filing of W Form; Circular Can't Override Rule 11(2) of Tamil Nadu VAT Rules.
Case-Laws - HC : Rejection of refund claim – Filing of W form, manually – Circular cannot abridge or overrule provisions of Rule 11(2) of Tamil Nadu Value Added Tax Rules, 2007 - HC
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