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Category: Direct Taxes

Filing of claim for refund of service tax paid under Notification No. 41/2007 — Circular No. 106/9/2008-ST, dated 11-12-2008.

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Service tax

19 Filing of claim for refund of service tax
paid under Notification No. 41/2007 — Circular No. 106/9/2008-ST, dated
11-12-2008.

Certain clarifications have been provided by the Board as
regards the refund claims of exporters, important ones being :



  • The invoices/challans/bills issued by supplier of taxable service containing
    requisite details (name, address and registration No. of service provider, Sr.
    No. and date of invoice, name and address of service receiver, description,
    classification and value of taxable service and the service tax payable
    thereon), are reasonable evidence that the services on which refund is being
    sought are taxable service used by the exporter. Random checks are suggested
    for actual payment of service tax and where the amounts involved are
    substantial, post-refund audit has been suggested.


  • Clear instructions have been passed on to the field force to dispose of the
    pending refund claims expeditiously and adhere to the timeline of 30 days
    refund from the date of application of refund to the extent feasible.


  • Simplified procedure for refund under sanction of refund/rebate of unutilised
    CENVAT credit has been made applicable to refund claims under this
    Notification. This would mean an interim refund of 80% of taxes paid for
    complete applications by specified exporters within 15 days of filing of the
    application.


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Amendments to Notification exempting services availed by exporters — Notification No. 33/2008-Service Tax, dated 7-12-2008.

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Service tax

18 Amendments to Notification exempting
services availed by exporters — Notification No. 33/2008-Service Tax, dated
7-12-2008.

This Notification makes the following amendments :



  • Exemption is granted to exporters who use certain specified services for
    export of goods subject to certain conditions. Condition of exporting the
    goods without availing duty drawbacks of service tax paid has been removed by
    the Notification.


  • Refund amount on services availed from clearing and forwarding agents outside
    India, was restricted to actual amount of service tax paid or service tax
    calculated on 2% of FOB value of export goods, whichever is less. This has
    been changed to 10% instead of 2%


  • Additional category of services rendered by clearing and forwarding agents is
    included in the list of exempt services, subject to the fulfilment of
    conditions prescribed.


  • Consequential amendments are made in the Form for the claim.


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India-Tajikistan DTAA signed on 20th November 2008. It would be effective post date of being published in the official gazette — Press Release dated 20-11-2008.

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17 India-Tajikistan DTAA signed on 20th
November 2008. It would be effective post date of being published in the
official gazette — Press Release dated 20-11-2008.


 

The
Income-tax Department has uploaded list of assessees whose income-tax refund has
been returned due to address being wrong or non-available.
Data is available from A.Y.
2003-04 till A.Y. 2007-08. The link for this is

http://www.incometaxindia.gov.in/CCIT/refundsearch.asp

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Clarification on date of filing return of income — Press Release No. BSC/SS/GN- 338, dated 22-12-2008.

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16 Clarification on date of filing return of
income — Press Release No. BSC/SS/GN- 338, dated 22-12-2008.


There have been many instances that returns have been
electronically filed on 30 September, however, the acknowledgement number
generated electronically mentions the date of filing as 1 October. The CBDT has
issued a Press Release to clarify that in all such cases, the date of filing the
return would be considered as 30 September, being filed within due date as
prescribed and would be eligible to all the benefits thereof and consequently no
penal consequences would be attracted and interest u/s.234 would also be averted
to this effect.

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Income-tax (Eleventh Amendment) Rules, 2008 — Notification No. 107/2008, dated 11-12-2008.

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15 Income-tax (Eleventh Amendment) Rules,
2008 — Notification No. 107/2008, dated 11-12-2008.

In the last budget, S. 35(1)(iia) had been newly introduced
to provide weighted deduction of one and one-fourth times for expenses for
outsourcing research and development to an eligible approved scientific research
company. This deduction is only available to the company outsourcing such R&D
activities and not to the company who actually undertakes these activities. A
new Rule 5F and Form No. 3CF-III have been inserted, which prescribe the
authority, guidelines, form, manner and conditions for approval u/s.35(1)(iia)
of the Act.

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Definition of ‘Charitable purpose’ u/s.2(15) of the Income-tax Act, 1961 — Circular No. 11/2008, dated 19-12-2008.

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14 Definition of ‘Charitable purpose’
u/s.2(15) of the Income-tax Act, 1961 — Circular No. 11/2008, dated 19-12-2008.


S. 2(15) of the Income-tax Act, 1961 (‘Act’) defines
‘charitable purpose’ to include the following :



(i) Relief of the poor

(ii) Education

(iii) Medical relief, and

(iv) The advancement of any other object of general public
utility.

 



An entity with a charitable object of the above nature was
eligible for exemption from tax u/s.11 or alternatively u/s.10(23C) of the Act.
However, it was seen that a number of entities who were engaged in commercial
activities were also claiming exemption on the ground that such activities were
for the advancement of objects of general public utility in terms of the fourth
limb of the definition of ‘charitable purpose’. Therefore, S. 2(15) was amended
vide the Finance Act, 2008 by adding a proviso which states that the
‘advancement of any other object of general public utility shall not be a
charitable purpose if it involves the carrying on of :

(a) any activity in the nature of trade, commerce or
business; or

(b) any activity of rendering any service in relation to
any trade, commerce or business;

for a cess or fee or any other consideration, irrespective of
the nature of use or application, or retention of the income from such
activity’.

 

2. The following implications arise from this amendment :

2.1 The newly inserted proviso to S. 2(15) will not apply in
respect of the first three limbs of S. 2(15), i.e., relief of the poor,
education or medical relief. Consequently, where the purpose of a trust or
institution is relief of the poor, education or medical relief, it will
constitute ‘charitable purpose’ even if it incidentally involves the carrying on
of commercial activities.

 

2.2. ‘Relief of the poor’ encompasses a wide range of objects
for the welfare of the economically and socially disadvantaged or needy. It
will, therefore, include within its ambit purposes such as relief to destitute,
orphans or the handicapped, disadvantaged women or children, small and marginal
farmers, indigent artisans or senior citizens in need of aid. Entities who have
these objects will continue to be eligible for exemption even if they
incidentally carry on a commercial activity, subject, however, to the conditions
stipulated u/s.11(4A) or the seventh proviso to S. 10(23C), which are that



(i) the business should be incidental to the attainment of
the objectives of the entity,

and

(ii) separate books of account should be maintained in
respect of such business.

 


Similarly, entities whose object is ‘education’ or ‘medical
relief’ would also continue to be eligible for exemption as charitable
institutions even if they incidentally carry on a commercial activity, subject
to the conditions mentioned above.

 

3. The newly inserted proviso to S. 2(15) will apply only to
entities whose purpose is ‘advancement of any other object of general public
utility’ i.e., the fourth limb of the definition of ‘charitable purpose’
contained in S. 2(15). Hence, such entities will not be eligible for exemption
u/s.11 or u/s.10(23C) of the Act if they carry on commercial activities. Whether
such an entity is carrying on an activity in the nature of trade, commerce or
business is a question of fact which will be decided based on the nature, scope,
extent and frequency of the activity.

 

3.1 There are industry and trade associations who claim
exemption from tax u/s.11 on the ground that their objects are for charitable
purpose, as these are covered under ‘any other object of general public
utility’. Under the principle of mutuality, if trading takes place between
persons who are associated together and contribute to a common fund for the
financing of some venture or object and in this respect have no dealings or
relations with any outside body, then any surplus returned to the persons
forming such association is not chargeable to tax. In such cases, there must be
complete identity between the contributors and the participants.

 

Therefore, where industry or trade associations claim both to
be charitable institutions as well as mutual organisations and their activities
are restricted to contributions from and participation of only their members,
these would not fall under the purview of the proviso to S. 2(15), owing to the
principle of mutuality. However, if such organisations have dealings with
non-members, their claim to be charitable organisations would now be governed by
the additional conditions stipulated in the proviso to S. 2(15).

 

3.2 In the final analysis, however, whether the assessee has
for its object ‘the advancement of any other object of general public utility’
is a question of fact. If such assessee is engaged in any activity in the nature
of trade, commerce or business or renders any service in relation to trade,
commerce or business, it would not be entitled to claim that its object is
charitable purpose. In such a case, the object of ‘general public utility’ will
be only a mask or a device to hide the true purpose which is trade, commerce or
business or the rendering of any service in relation to trade, commerce or
business. Each case would, therefore, be decided on its own facts and no
generalisation is possible. Assessees, who claim that their object is
‘charitable purpose’ within the meaning of S. 2(15), would be well advised to
eschew any activity which is in the nature of trade, commerce or business or the
rendering of any service in relation to any trade, commerce or business.

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Issuing of Tax Clearance Certificates:

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43 i. Issuing of Tax Clearance Certificates:

Trade Circular No.1T of 2010, Dated 05/01/2010

By this Circular procedure for applying and obtaining Tax
Clearance Certificates under the MVAT Act, CST Act, Profession Tax Act, etc. has
been standardized and explained.

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Revised Forms ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V, are notified — Notification No. 33/2010/ F.No.142/12/2010-SO(TPL), dated 11-5-2010.

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58
Revised Forms ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V, are notified —
Notification No. 33/2010/ F.No.142/12/2010-SO(TPL), dated 11-5-2010.

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Explanatory Notes to Finance (no. 2) Act, 2009—Circular No. 5, dated 3-6-2010.

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57 Explanatory Notes to Finance (no. 2) Act, 2009—Circular
No. 5, dated 3-6-2010.

Circular No. 5, dated 3rd June 2010 is issued containing
Explanatory Notes to the Provisions of the Finance (No. 2) Act, 2009.


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Revised Discussion Paper on DTC—

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56 Revised Discussion Paper on DTC—

The draft Direct Taxes Code (DTC) along with a Discussion
Paper was released in August, 2009 for public comments.

After considering the inputs given by various organisations
and individuals, major issues have been identified and Revised Discussion Paper
on DTC is released. This Revised Discussion Paper is available on finmin.nic.in
and incometaxindia.gov.in.


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Industrial Park Scheme, 2008 amended — Notification No. 37, dated 21-5-2010.

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Industrial Park Scheme, 2008 is amended to extend the last
date of commencement of the industrial park to claim deduction under clause
(iii) of Ss.(4) of S. 80-IA from 31st of March 2009 to 31st March, 2011.



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Income-tax (5th Amendment) Rules, 2010 — Notification No. 38, dated 21-5-2010.

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The date by which an industrial undertaking, claiming
deduction u/s.80IA(4)(iii) develops, develops and operates or maintains and
operates an industrial park has been extended from 31st March 2009 to 31st
March, 2011.


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Gratuity Exemption Limit Enhanced—Notification No. 43, dated 11-6-2010.

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The exemption limit under S. 10(10)(iii) is increased to ten
lakh rupees in relation to gratuity received by employees who retire or become
incapacitated prior to such retirement or die on or after the 24th day of May,
2010 or whose employment is terminated on or after the said date.


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Income-tax (6th Amendment) Rules, 2010 — Notification No. 41/2010, dated 31-5-2010.

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Rules 30, 31, 31A, 31AA, 37CA and 37D have been substituted,
which provide for time and mode of payment of TDS/TCS to the Government account,
issue of certificate of TDS/TCS and filing of quarterly statements thereof. The
said rules shall apply in respect of tax deducted/collected on or after 1st
April, 2010. The major amendments include :


  • Revised forms of TDS
    certificates to include the receipt number of TDS return filed by the tax
    deductor, which along with the PAN of the deductee and the TAN of the deductor
    would form the unique identification, based on which credit for TDS would be
    available.

  • Even the Government
    authorities are now required to furnish a monthly return electronically in new
    Form 24G.

  • The due date of filing
    the TDS return for the last quarter of the financial year has been pre-poned
    from 15th June to 15th May and the due dates for furnishing the TDS
    certificates have also been modified to 15th May for Form 16 to be furnished
    annually and fifteen days from the date of submitting TDS certificates for
    other non-salary TDS certificates to be issued quarterly.



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A.P. (DIR Series) Circular No. 50, dated 3-6-2008 — Export of goods and services — Realisation of export proceeds — Liberalisation.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 

54 A.P. (DIR Series) Circular No. 50, dated
3-6-2008 — Export of goods and services — Realisation of export proceeds —
Liberalisation.

 

This Circular has enhanced the present period of realisation
and repatriation to India of the amount representing the full value of goods or
software exported from the present period of six months to twelve months from
the date of export. There has been no change in the period of realisation in
case of exports by an SEZ unit or exports to overseas warehouses.

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A.P. (DIR Series) Circular No. 48, dated 3-6-2008 — Overseas Investments — Liberalisation/Rationalisation.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 

53 A.P. (DIR Series) Circular No. 48, dated
3-6-2008 — Overseas Investments — Liberalisation/Rationalisation.

This Circular has further liberalised the provisions of
Notification No. FEMA 120/RB-2004, dated July 7, 2004 in the following cases :

1. Overseas Investment in Energy and Natural Resources
Sectors — Indian companies can invest in excess of 400 % of their net worth as
on the date of the last audited balance sheet, after obtaining prior approval
of RBI, in the energy and natural resources sectors such as oil, gas, coal and
mineral oil.

2. Investment in Overseas Unincorporated Entities in Oil
Sector :

(a) ONGC Videsh Limited and Oil India Limited are
permitted to invest in overseas unincorporated entities in oil sector (for
exploration and drilling for oil and natural gas, etc.) without any limits.

(b) Subject to certain conditions, Indian companies can
invest up to 400% of their net worth as on the date of the last audited
balance sheet in overseas unincorporated entities in the oil sector.
Investments in excess of 400% of their net worth require prior approval of
RBI.

 



In case of capitalisation of exports — the time limit for
obtaining prior approval of RBI has been aligned with the time limit provided
for in the Foreign Trade Policy. Thus, prior approval of RBI for capitalisation
of export proceeds will be required only where the exports remain outstanding
beyond the period of realisation prescribed by the Foreign Trade Policy.

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A.P. (DIR Series) Circular No. 46, dated 2-6-2008 — External Commercial Borrowings (ECB) by Services Sector — Liberalisation.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 

52 A.P. (DIR Series) Circular No. 46, dated
2-6-2008 — External Commercial Borrowings (ECB) by Services Sector —
Liberalisation.

This Circular permits borrowers in service sector viz.
hotels, hospitals and software companies to avail ECB up to US $ 100 million,
per financial year, under the approval route for the purpose of import of
capital goods. This is in addition to the existing facility for availing trade
credit up to US $ 20 million per import transaction, for a period of less than 3
years.

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A.P. (DIR Series) Circular No. 44, dated 30-5-2008 — Reporting under FDI Scheme — Revised procedure.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 

51 A.P. (DIR Series) Circular No. 44, dated
30-5-2008 — Reporting under FDI Scheme — Revised procedure.

This Circular has made the following changes in respect of
reporting the details of the issue of shares/convertible debentures :

1. Form FC-GPR has been revised.

2. A standard format for reporting receipt of monetary
consideration for issue of shares/convertible debentures has been prescribed.
Upon receipt of this report, the concerned Regional office of RBI will allot a
Unique Identification Number.

3. A format for KYC report on the non-resident investor
from the overseas bank remitting the amount has been prescribed. This report
has to be submitted along with the report of receipt of money.

4. The annual report of all investments will now have to be
submitted before July 31 every year instead of June 30.


 

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A.P. (DIR Series) Circular No. 43, dated 29-5-2008 — External Commercial Borrowings Policy — Liberalisation.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 


50 A.P. (DIR Series) Circular No. 43, dated
29-5-2008 — External Commercial Borrowings Policy — Liberalisation.

Presently, borrowers proposing to avail ECB up to US $ 20
million for Rupee expenditure for permissible end-uses require prior approval of
the Reserve Bank under the approval route.

 

This Circular has relaxed the above limit of US $ 20 million
for Rupee expenditure under the approval route as under :

(i) Borrowers in infrastructure sector can avail ECB up to
US $ 100 million.

(ii) Other borrowers can avail ECB up to US $ 50 million.

 


The all-in-cost ceilings in respect of ECB have been revised,
with immediate effect, as under :

Maturity
period

All-in-cost ceiling over 6-month LIBOR for the respective
currency of credit or applicable benchmark
  Existing
 Revised
Three years
and up to five years 		150 basis
points		 200 basis
points
More than five
years 		250 basis
points 		350 basis
points

 

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A.P. (DIR Series) Circular No. 42, dated 28-5-2008 — Trade credits for imports into India — Review of all-in-cost ceiling.

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Part C : RBI/FEMA


Given below are the highlights of certain RBI Circulars.

 

49 A.P. (DIR Series) Circular No. 42, dated
28-5-2008 — Trade credits for imports into India — Review of all-in-cost
ceiling.

This Circular has revised the all-in-cost ceiling in respect
of Trade Credits, with immediate effect, as under :

Maturity
period

All-in-cost ceiling over 6-month LIBOR for the respective
currency of credit or applicable benchmark
  Existing
 Revised
Up to one year
 50 basis
points		 75 basis
points
More than one
year up to three years  		125 basis
points		 125 basis
points

 

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Processing of returns of A.Y. 2007-08 — Steps to clear the backlog — Instruction No. 6/2008, dated 18-6-2008 issued by CBDT.

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48 Processing of returns of A.Y. 2007-08 —
Steps to clear the backlog — Instruction No. 6/2008, dated 18-6-2008 issued by
CBDT.

Kindly refer to above. The issue of processing of pending
returns has been discussed by the Board and following decisions have been taken
in order to clear the backlog :

(i) It has been decided that all CCsIT (CCA) should
redeploy officers and staff to clear the backlog in high pendency charges
keeping in view the overall work load including pendency of scrutiny cases.
Concerned CCsIT may take recourse to outsourcing of data entry as per standing
instructions of the Board/Directorate of Systems on the subject. For this
purpose, necessary funds would be placed at the disposal of the CCIT (CCA) for
outsourcing of data entry. CCsIT (CCA) should send proposals to the
Directorate of Income-tax (Systems) for outsourcing of data entry.


(ii) It has also been decided that in order to clear the
backlog of I-T returns for A.Y. 2007-08 in networked stations, 2D based AST
Software would continue to be used for processing the returns in ITR 1, 2, 3,
4. For non-networked stations, TMS Software would continue to be used.


(iii) Non-networked stations using TMS Software would be
provided CDs with OLTAS data as was done previously by the RCC so that the
Assessing Officers could verify tax payments.


(iv) In all I-T returns for A.Y. 2007-08 where the
aggregate TDS claim does not exceed Rs.5 lakh and where the refund computed
does not exceed Rs.25,000, the TDS claim of tax payer should be accepted at
the time of processing of returns. In all remaining returns, the AO shall
verify the TDS claim from the deductor or assessee as the case may be, before
processing the return. In all cases selected for scrutiny, all TDS claims
should be verified. In all cases where PAN was earlier found to be duplicate
or bogus and in cases where TDS certificates were called for processing
returns for the A.Y. 2006-07 but were not produced, the credit for TDS shall
be given after full verification.


(v) The rules in AST Software for matching OLTAS data with
the claim for credit made in the return are being modified to take care of the
common data deficiencies.


(vi) It has also been decided to launch a time bound TDS
drive to make those deductors who have not filed their TDS returns for F.Y.
2006-07 do so. The CsIT in charge of TDS functions are requested to follow up
cases where TDS returns were filed but PAN of some deductors were not reported
in TDS returns even though the TDS deducted from such deductees exceeded Rs.l
lakh. Information relating to such deductors/deductees will be provided by DIT
(Systems). This drive is to be an intensive two month campaign which is to be
monitored weekly by the Board and has to be completed by 31-8-2008. This drive
should be followed up by a concerted effort in improving TDS compliance.
Proforma of sending compliance report after TDS verification shall be sent
separately by DIT (Systems), New Delhi.




 



 

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Procedure for selection of cases for ‘scrutiny’ for non-corporate assessees

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47 Procedure for selection of cases for
‘scrutiny’ for non-corporate assessees



In supersession of earlier instructions on the above subject,
the Board hereby lays down the following procedure for selection of
returns/cases of non-corporate assessees for scrutiny during the current
financial year i.e., 2007-08.

 

2. The following categories of cases shall be compulsorily
scrutinised :


(i) All assessments pertaining to search and seizure
cases.


(ii) All assessments pertaining to surveys conducted
u/s.133A of the Income-tax Act.


(iii)
1All returns where deduction
claimed under Chapter VIA of the Income-tax Act is Rs.25 lakhs or above in
stations other than the cities on computer network.


(iv) 1All returns, including those of non-residents,
where refund claimed is Rs.5 lakhs or above in stations other than the
cities on computer network.


(v) (a) All cases in which the CIT (Appeals) or ITAT
has confirmed an addition/disallowance of Rs.5 lakhs or above or if the
assessee has conceded an addition in any preceding assessment year and
identical issue is arising in the current year. But if the issue involves
a substantial question of law, the cases may be picked up for scrutiny,
irrespective of the quantum of tax involved. However, if the addition has
been deleted by a superior appellate authority and the Department has
accepted that decision, the case need not be taken up for scrutiny.

(b) All cases in which an appeal is pending before the
CIT (Appeals) against an addition/disallowance of Rs.5 lakhs or above, or
the Department has filed an appeal before the ITAT against the order of
the CIT (Appeals) deleting such an addition/disallowance and an identical
issue is arising in the current year. However, as in (i) above, the
quantum ceiling may not be taken into account if a substantial question of
law is involved.


(vi) All returns filed by statutory bodies, marketing
committees and other authorities assessable to income-tax.


(vii) All cases of banks and non-banking financial
institutions with deposits of Rs.5 crores and above.


(viii) Cases of universities, educational institutions,
hospitals, nursing homes and other institutions for rehabilitation of
patients (other than those which are substantially financed by the
Government), the aggregate annual receipts (including donations credited to
the corpus/ any other fund) of which exceed Rs.10 crores in Delhi, Mumbai,
Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs.5 crores
in other places [Ref. S. 10(23c) & Rule 2BC].


(ix) All cases where exemption is claimed u/s.11 of the
Income-tax Act and the gross receipts (including donations credited to the
corpus/ any other fund) exceed Rs.5 crores in Delhi, Mumbai, Chennai,
Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs.1 crore in other
places.


(x) (a) All cases where total value of International
Transactions (as defined u/s.92B of the Income-tax Act) exceeds Rs.15
crores).

(b) In all other cases where the Transfer Pricing Audit
carried out in the earlier year had led to an adjustment/addition to the
total income.


(xi) All cases of stockbrokers and commodity brokers as
well as their sub-brokers where brokerage received is disclosed at Rs.1
crore or above.


(xii) All cases of stockbrokers and commodity brokers as
well as their sub-brokers where there are claims of bad debts of Rs.5 lakhs
or more.


(xiii) All cases of professionals with gross receipts of
Rs.20 lakhs or more if total income declared is less than 20% of gross
professional receipts.


(xiv) All cases of deductions u/s.10A, u/s.10AA,
u/s.10BA, u/s.10B of the Income-tax Act exceeding Rs.25 lakhs.


(xv) All cases of contractors (excluding transporters)
whose gross contractual receipts exceed Rs.1 crore if total income declared
from contract work is less than 5% of gross contractual receipts.


(xvi) All cases of builders following project completion
method.


(xvii) All cases in which fresh capital introduced during
the year exceeds Rs.50 lakhs in Delhi, Mumbai, Chennai, Kolkata, Pune,
Hyderabad, Bangalore and Ahmedabad and Rs.10 lakhs in other cities.


(xviii) ¹All cases in which new unsecured loan introduced
during the year exceeds Rs.25 lakhs.


(xix) All cases in which deduction u/s.80IA(4), u/s.80IB,
u/s.80IC, u/s.80JJA, u/s.80JJAA, u/s.80LA, u/s.10(21), u/s.10(22B), u/s.
10(23A), u/s.10(23B), u/s.10(23C), u/s.10 (23D), u/s.10(23EA), u/s.10(23FB),
u/s.10(23G), u/s.10(37), u/s.10A, u/s.10AA, u/s.10B, or u/s.10BA of the
Income-tax Act is claimed for the first time.


(xx) *All cases in which loss from house property is more
than Rs.2,50,000.


(xxi) *All cases in which investment in property is more
than five times the gross receipts (i.e., purchase of property (008
from AIR)/[Gross total income (746) + Agricultural income (762) + Income
claimed exempt (125)>5]


(xxii) *All cases in which sum of short-term capital
gains u/s.111A and long-term capital gain is more than Rs.25 lakh.


(xxiii) *All cases in which sale of property has been
shown as per AIR return, but no capital gains have been declared in the
return of Income.


(xxiv) *All cases in which commission paid is more than
Rs.10 lakhs.


(xxv) *All cases having business of real estate with
gross turnover exceeding Rs.5 crores.


(xxvi) *All cases having business of hotels/tour
operations with gross turnover exceeding Rs.5 crores if net profit shown is
less than 0.05%


(xxvii) *All cases in which total depreciation claimed at
the rates of 80% and 100% is more than Rs.25 lakhs.


(xxviii) All cases in which net agricultural income is
more than Rs.10 lakhs.

Cabinet agreed to amend the DTAA between India and Syria : Press release dated 1-6-2008.

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46 Cabinet agreed to amend the DTAA between
India and Syria : Press release dated 1-6-2008.


 

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Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the B

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New Page 2

Part C : RBI/FEMA

Given below are the
highlights of certain RBI Circulars.

33. Prevention of
Money-laundering (Maintenance of Records of the Nature and Value of
Transactions, the Procedure and Manner of Maintaining and Time for Furnishing
Information and Verification and Maintenance of Records of the Identity of the
Clients of the Banking Companies, Financial Institutions and Intermediaries)
Second Amendment Rules, 2010 — Obligation of Authorised Persons.

The Government of India has
vide Notification No. 10/2010-E.S./F.No.6/8/2009-E.S., dated June 16, 2010,
amended the Prevention of Money-laundering (Maintenance of Records of the Nature
and Value of Transactions, the Procedure and Manner of Maintaining and Time for
Furnishing Information and Verification and Maintenance of Records of the
Identity of the Clients of the Banking Companies, Financial Institutions and
Intermediaries) Rules, 2005. A copy of the Notification is attached to this
Circular.

The highlights of the
amendments are :


(a) in Rule 2 in
sub-rule (1), after clause (g),
the following Explanation shall be inserted, namely :




Explanation :
Transaction involving financing of the activities relating to terrorism includes
transaction involving funds suspected to be linked or related to, or to be used
for terrorism, terrorist act or by a terrorist, terrorist organisation or those
who finance or are attempting to financing of terrorism.


(b) in Rule 9, for
sub-rule (1A), the following sub- rule shall be substituted, namely :


(1A) Every banking company,
financial institution and intermediary, as the case may be, shall determine
whether a client is acting on behalf of a beneficial owner, identify the
beneficial owner and take all reasonable steps to verify his identity.


(c) in Rule 9, for
sub-rule (1B), the following sub-rule shall be substituted, namely :


(1B) Every banking company,
financial institution and intermediary, as the case may be, shall exercise
ongoing due diligence with respect to the business relationship with every
client and closely examine the transactions in order to ensure that they are
consistent with their knowledge of the client, his business and risk profile and
where necessary, the source of funds.


(d) in Rule 9, for
sub-rule (1C), the following sub- rule shall be substituted, namely :


(1C) No banking company,
financial institution and intermediary, as the case may be, shall allow the
opening of or keep any anonymous account or account in fictitious names or
account on behalf of other persons whose identity has not been disclosed or
cannot be verified.


(e) in Rule 9, after
sub-rule (1C), the following sub- rule shall be inserted, namely :


(1D) When there is a
suspicion of money laundering or financing of activities relating to terrorism
or where there are doubts about the adequacy or vera-city of previously obtained
customer identification data, every banking company, financial institution and
intermediary shall review the due diligence measures including verifying again
the identity of the client and obtaining information on the purpose and intended
nature of the business relationship, as the case
may be.


(f) in Rule 10, after
sub-rule (3), the following Explanation shall be inserted, namely :


“Explanation : For the
purpose of this rule :


(i) the expression
‘records of the identity of clients’ shall include records of the
identification data, account files and business correspondence.

(ii) the expression
‘cessation of the transactions’ means termination of an account or business
relationship.



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Know Your Customer (KYC) Norms/Anti-Money Laundering (AML), Standards/Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendme

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New Page 2

Part C : RBI/FEMA

Given below are the
highlights of certain RBI Circulars.

32. Know Your Customer (KYC)
Norms/Anti-Money Laundering (AML), Standards/Combating the Financing of
Terrorism (CFT)/Obligation of Authorised Persons under Prevention of Money
Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering
(Amendment) Act, 2009 — Cross-Border Inward Remittance under Money Transfer
Service Scheme.

This Circular advices
Authorised Persons (AP) and their sub-agents (for whom they are responsible
under MTSS) to not only take into account the risks arising from the
deficiencies in the AML/CFT regime of certain jurisdictions, as identified in
the Financial Action Task Force (FATF) Statement, issued from time to time,
while dealing with the individuals or businesses from these jurisdictions but in
addition also consider using publicly available information for identifying
countries, which do not or insufficiently apply the FATF Recommendations.

AP are further advised to
examine the background and purpose of transactions with persons (including legal
persons and other financial institutions) from jurisdictions included in FATF
Statements and countries that do not or insufficiently apply the FATF
Recommendations and where the transactions have no apparent economic or visible
lawful purpose, written findings together with all the documents should be
retained and made available to the Reserve Bank/other relevant authorities, on
request.

A.P. (DIR Series) Circular
No. 24,

dated 13-12-2010

A.P. (FL/RL Series) Circular
No. 5,

dated 13-12-2010

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A.P. (DIR Series) Circular No. 17, dated 16-11-2010 — Processing and settlement of export-related receipts facilitated by Online Payment Gateways.

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Part c : rbi fema


Given below are the highlights of certain RBI Circulars.

25. A.P. (DIR Series) Circular No. 17, dated 16-11-2010 —
Processing and settlement of export-related receipts facilitated by Online
Payment Gateways.

This Circular allows banks, subject to certain conditions, to
offer the facility of repatriation of export-related remittances by entering
into standing arrangements with Online Payment Gateway Services Providers
(OPGSP). Some of the important conditions are :


1. Banks offering this facility must carry out the due
diligence of the OPGSP.

2. This facility will only be available for export of
goods and services of value not exceeding US $ 500.

3. Banks providing such facilities must open a NOSTRO
collection account for receipt of the export-related payments facilitated
through such arrangements.

4. A separate NOSTRO collection account must be
maintained for each OPGSP or the bank must be able to delineate the
transactions in the NOSTRO account of each OPGSP.

5. Only the following debits will be permitted to the
NOSTRO collection account opened under this arrangement :

(a) Repatriation of funds representing export proceeds to
India for credit to the exporters’ account;

 

(b) Payment of fee/commission to the OPGSP as per the
predetermined rates/frequency/arrangement; and

 

(c) Charge back to the importer where the exporter has
failed in discharging his obligations under the sale contract.

 

6. Balances in the NOSTRO collection account must be
repatriated and credited to the respective exporter’s account with a bank in
India within seven days from the date of credit to the NOSTRO collection
account.

7. Banks shall satisfy themselves as to the bona fides of
the transactions.


8. OPGSP who are already providing such services as per the
specific holding-on approvals issued by the Reserve Bank shall open a liaison
office in India within three months from the date of this Circular. All new
OPGSP must open a liaison office with the approval of the Reserve Bank before
operationalising the arrangement.

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A.P. (DIR Series) Circular No. 16, dated 16-11-2010 — Reporting Mechanism — Data of Authorised Deler Category-I Branches.

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Part c : rbi fema


Given below are the highlights of certain RBI Circulars.

24. A.P. (DIR Series) Circular No. 16, dated 16-11-2010 —
Reporting Mechanism — Data of Authorised Deler Category-I Branches.

Presently, banks are required to inform RBI, via email, any
changes in the categorisation of their branches dealing in foreign exchange.
This Circular states that the path to the web directory has been changed from
www.rbi.org.in to http://dbie.rbi.org.in. The full details of the path and
options are given in Annex-II to this Circular.

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Extension of Advance Ruling Schemes to certain categories of Residents — Notification No. 27/2009-ST, dated 2-8-2009.

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Part B : Indirect Taxes

 

Updates in VAT and Service Tax :

Service Tax UPDATE

Notifications

  1. Extension of Advance Ruling Schemes to certain categories
    of Residents — Notification No. 27/2009-ST, dated 2-8-2009.

The Advance Ruling Schemes shall be applicable to a public
sector company.

Public sector company shall have the same meaning assigned
to it in Section 2(36A) of the Income-tax Act, 1961.

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Effective date for new services — Notification No. 26/2009-ST, dated 19-8-2009.

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Part B : Indirect Taxes

Updates in VAT and Service Tax :

Service Tax UPDATE

Notifications

  1. Effective date for new services — Notification No.
    26/2009-ST, dated 19-8-2009.

The effective date for new services introduced vide the
Finance Act, 2009 shall be 1st September, 2009.

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S. 28, S. 41 — Waiver of amount of loan taken for acquiring capital asset is not taxable under the Act.

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  1. 2009 TIOL 707 ITAT Mum.


Cipla Investments Ltd. v. ITO

ITA No. 1996/Mum./2008

A.Y. : 2003-04. Dated : 28-8-2009

S. 28, S. 41 — Waiver of amount of loan taken for acquiring
capital asset is not taxable under the Act.

Facts :

The assessee had in 1998 received a sum of Rs.82,91,076
from its holding company towards share application money which was
subsequently transferred to unsecured loans. The amount was utilised for
investment in shares of other concerns. The shares so purchased with borrowed
funds were held as capital assets and income arising on transfer of shares was
offered for tax under the head ‘Income from Capital Gains’. In view of the
losses incurred by the assessee, the holding company had written off the
amount as unrecoverable whereas the assessee company had not written back the
said amount as cessation of liability. The AO taxed the sum of Rs.82,91,076
u/s.41(1) of the Act.

On appeal by the assessee CIT(A), the CIT(A) held that the
provisions of S. 41(1) are not attracted but he held that the assessee’s
business activity comprised investment in shares and securities and
advancement of loan to various parties on interest. He also held that the
amount was obtained in the course of business and by virtue of waiver of the
amount by the holding company the assessee had gained in the course of the
business and therefore the sum waived was held to be taxable u/s.28 of the
Act.

Aggrieved, the assessee preferred an appeal to the
Tribunal.

Held :

(i) The CIT(A) was correct in holding that the provisions
of S. 41(1) do not apply.

(ii) In view of the assessee’s contention that it has not
done any trading activity nor shown any income as business income on
investments made the findings of the CIT(A) that the amount was received in
the course of its business are against his findings given while considering
the addition u/s.41(1).

(iii) The assessee’s business activity may comprise
investment in shares and securities, but as far as computation of income is
concerned the profit and loss in those transactions are said to be under the
head ‘Capital Gains’ but not ‘Business Income’, hence, the gain earned by the
assessee in the course of business in investment and advance of loans is in
the capital field but cannot be on the revenue field.

(iv) Remission of a debt by the holding company which was
not claimed and allowed as a deduction in any manner in any earlier previous
year could not be brought to tax either u/s. 41(1) or u/s.28(iv). There is no
benefit or perquisite arising to the assessee in this regard.

(v) The decision of the Bombay High Court in the case of
Solid Containers Ltd. v. Dy. CIT, (308 ITR 417) does not apply to the
facts of the case. The facts of the present case are similar to the decision
of the Bombay High Court in the case of Mahindra & Mahindra Ltd. v. CIT,
(261 ITR 501). The loans availed for acquiring the capital assets i.e.,
shares, when waived cannot be treated as assessable income by invoking the
provisions of S. 28.

(vi) Since the original receipt was undoubtedly capital in
nature its waiver does not have the quality of changing the same into a
revenue receipt.

(vii) On facts, the provisions of S. 28 do not apply and
the amount is not taxable.


 


The assessee’s appeal was allowed.


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S. 14A r.w. S. 143(3) and S. 147 — Proviso to S. 14A inserted by Finance Act, 2002 w.e.f. 11-5-2001 does not confer any jurisdiction on Assessing Officer to make reassessment u/s.147 for any assessment year beginning on or before 1-4-2001.

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  1. (2009) 30 SOT 461 (Mum.)


Jt. CIT v. Bombay Dyeing Mfg. Co. Ltd.

ITA Nos. 1632 and 2208 (Mum.) of 2006

A.Y. : 1998-99. Dated : 16-4-2009.

S. 14A r.w. S. 143(3) and S. 147 — Proviso to S. 14A
inserted by Finance Act, 2002 w.e.f. 11-5-2001 does not confer any
jurisdiction on Assessing Officer to make reassessment u/s.147 for any
assessment year beginning on or before 1-4-2001.

For the relevant A.Y. 1998-99, the Assessing Officer issued
notice u/s.148 on 21-4-2004, with a view to reopen the concluded assessment
and disallowed certain expenses, which the assessee had claimed as deduction,
on account of exempted income u/s.14A. On appeal, the CIT(A) upheld the order
of the Assessing Officer.

The Tribunal held that the disallowance made was contrary
to the proviso to S. 14A, as the same was not permissible under reassessment
proceedings u/s.147 in respect of the assessment year beginning on or before
1-4-2001.

The Tribunal noted as under :

1. A bare perusal of the proviso to S. 14A clearly
demonstrates the legislative intent in placing absolute embargo on the
jurisdiction of the Assessing Officer to re-assess the case u/s.147. Having
regard to the express legislative intent, as enshrined by the Parliament,
vide the Finance Act 2002, w.e.f. 11-5-2001, the Assessing Officer ceases to
have any jurisdiction to re-assess any case u/s.147. In such a statutorily
explicit and undisputed position, the question of reopening of the case or
initiation of the re-assessment proceedings u/s.147 r.w. S. 148, is
inconceivable and incomprehensible. Thus, in the absence of existence of
statutory jurisdiction, in terms of proviso to S. 14A with the Assessing
Officer, to make reassessment u/s.47 the very discussion on the validity or
otherwise of assumption of such jurisdiction, by way of issuance of the said
notice u/s.148, is irrelevant and an exercise in futility.

2. The CBDT issued Circular No. 11 of 2001, dated
23-7-2001, and placed restrictions on reopening of completed assessments, on
account of provisions of S. 14A. The said circular clearly demonstrates the
legislative intent in interpreting the newly inserted proviso to S. 14A.

3. The Circulars issued by the CBDT are binding on the
Assessing Officer, even where the same are not in consonance with the
meaning of the provisions, if they are benevolent and issued to mitigate the
hardship of the assessee. It is pertinent to add that the Assessing Officer
had ignored the said Circular of the Board and judicial mandate of the Apex
Court as contained in the various decisions and initiated reassessment
proceedings, in the instant case, despite there being express exclusion of
such jurisdiction of the Assessing Officer by the proviso to S. 14A.

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S. 234B r.w. S. 195 and S. 209 — No interest can be levied where advance tax is not paid in respect of income on which tax is not deducted at source by payers who were obliged to deduct the same.

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  1. (2009) 30 SOT 248 (Delhi)


Turner Broadcasting System Asia Pacific, Inc., America
v.
Asst. DIT

ITA Nos. 724, 728 and 733 (Delhi) of 2008

A.Ys. : 2001-02 & 2004-05

Dated : 13-3-2009

S. 234B r.w. S. 195 and S. 209 — No interest can be levied
where advance tax is not paid in respect of income on which tax is not
deducted at source by payers who were obliged to deduct the same.

During the relevant assessment years, various parties
advertising their products paid consideration to the Indian agent of the
assessee, who, in turn, remitted such amounts to the assessee. Neither the
advertiser nor the agent deducted tax at source before payment or repatriation
of money, respectively, as provided u/s.195. The AO levied interest upon the
assessee u/s.234B for non-payment of advance tax. The CIT(A) upheld the levy
of interest.

The Tribunal, applying the decisions in the following
cases, deleted the interest levied u/s.234B :

(a) CIT v. Madras Fertilizers Ltd., (1984) 49 ITR
703 (Mad.)

(b) CIT v. Ranoli Investment (P) Ltd., (1999) 235
ITR 433 (Guj.)

(c) CIT v. Sedco Forex International Drilling Co.
Ltd., (2003) 264 ITR 320/(2004) 134 Taxman 109 (Uttaranchal)

The Tribunal noted as under :

1. Since the assessee was a non-resident person, the
amounts paid to their agent in India by the Indian advertisers were liable
for tax deduction u/s.195. The tax had not been so deducted and,
consequently, not paid to the credit of the Government.

2. As provided in S. 209, while computing the amount of
advance tax, the tax deductible at source was to be reduced from the total
tax liability.

3. In the assessee’s case the advance tax payable was Nil
after considering the amount of tax deductible at source u/s.195. It was not
the assessee’s fault, if no tax was deducted by the payers.

4. Since no advance tax was payable as per calculations
in terms of S. 209 and S. 195, there would be no liability to pay interest
u/s.234B. The charge of interest will follow only if there is a default of
non-payment of advance tax. In the absence of default, interest cannot be
charged.



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S. 41(1) — Limitation of time is not a determining factor in matters relating to remission or cessation of liabilities.

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  1. (2009) 30 SOT 31 (Mum.)


DSA Engineers (Bombay) v. ITO

ITA No. 5354 (Mum.) of 2007

A.Y. : 2003-04. Dated : 12-3-2009

S. 41(1) — Limitation of time is not a determining factor
in matters relating to remission or cessation of liabilities.

For the relevant assessment year, in respect of certain
creditors appearing in the Balance Sheet of the assessee, the AO found that
there was neither a pending litigation in existence nor any correspondence
from the parties demanding for clearing the liabilities and held that the
assessee had not proved that it was yet to make the payment of the said
outstanding balances to the creditors, that it had the intention to make the
said payment, and that the liability had not ceased. He, accordingly, invoked
the provisions of S. 41(1) and deemed the liabilities of the creditors as the
profits and gains of business or profession and treated them as the income of
the year. The CIT(A) upheld the order of the AO.

The Tribunal set aside the orders of the lower authorities.
The Tribunal noted as under :

2. From the rival positions of both parties as well as
the provisions of S. 41(1) and the legal propositions of various judicial
fora, the following issues have emerged :



  •  the
    issue of limitation of period of three years



  •  the
    issue of discharge of onus when the assessee had not unilaterally written
    them off



  •  the
    issue of unilateral write-off for the assessments of the post-amendment
    period, i.e., after 1-4-1997.


3. Regarding the issue of limitation of three years, it
was noticed that there is no such limitation provided in S. 41(1) or in its
Explanation 1. In the case of Dy. CIT v. Himalaya Refrigeration & Air
Conditioning Co. (P.) Ltd., (2003) 91 TTJ (Delhi) 296, the Tribunal held
that in the absence of any evidence of cessation of liabilities, mere fact
that the liabilities were outstanding for more than three years and were
time barred, was not sufficient ground for addition u/s.41(1). The
limitation of time is not a determining factor in the matters relating to
remission or cessation of liabilities.

4. Regarding the issue of discharging of onus, it was
held that when the assessee continues to reflect or record the liabilities
as still payable to the creditors and decides not to write them off
unilaterally, the Assessing Officer has higher levels of responsibility and,
hence, he has to establish with evidence that the said book entries are
wrong or not bona fide and, thus, the Assessing Officer is under the
obligation to discharge the onus in this regard. The onus is on the revenue
to prove that the liabilities have ceased finally and there is no
possibility of their revival.

5. Regarding the issue of unilateral write off for the
assessments of the post amendment period, i.e. 1-4-1997, it was
noticed that Explanation 1 was brought into statute by the Finance (No. 2)
Act, 1996 with effect from 1-4-1997. Mere unilateral transfer entry in the
accounts does not confer any benefit to the assessee and, therefore, the
revenue cannot invoke S. 41(1). The assessee’s case, being one where the
alleged liabilities were not unilaterally written off, the requirements of
the Explanation were not met and, therefore, it could not be considered as
the case of obtaining of the benefit during the year under consideration.

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(a) S. 68 — Since no new amount credited in accounts of creditors during year, addition could not be made u/s.68. (b) S. 41(1) — Brought forward balances of creditors could not be added to assessee’s income.

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19 (2008) 24 SOT 393 (Delhi)

Shri Vardhman Overseas Ltd. v. ACIT

ITA No. 440 (Delhi) of 2006

A.Y. : 2002-03. Dated : 11-7-2008



(a) S. 68 of the Income-tax Act, 1961 — Since no new
amount had been credited in accounts of creditors during year under
consideration, addition could not be made u/s.68.


(b) S. 41(1) of the Income-tax Act, 1961 — Brought
forward balances of creditors could not be added to assessee’s income, as
question of genuineness could be examined only in the year in which they were
credited to the account.


 



During the relevant assessment year, the Assessing Officer
asked the assessee-company to prove the genuineness of certain sundry creditors.
The assessee could not file confirmations from the said creditors except one.
The Assessing Officer, thus, treated the credit balances appearing in the
assessee’s books of account as unexplained credits u/s.68. On appeal, the CIT(A)
confirmed the additions u/s.41(1).


 


The Tribunal deleted the additions made u/s.68 and u/s.41(1).
The Tribunal followed the decisions in the cases of :

(a) CIT v. Sugauli Sugar Works (P.) Ltd., (1999) 236
ITR 518; 102 Taxman 713 (SC)

(b) Chief CIT v. Kesaria Tea Co. Ltd., (2002) 254
ITR 434/122 Taxman 91 (SC)

 



The Tribunal noted as under :


(a) No new amount had been credited by the assessee in
their accounts during the year under consideration. Therefore, applicability
of S. 68 was ruled out and addition could not be made under this Section.

(b) The balances were brought forward balances. If the same
were added on account of their non-genuineness, then also those amounts could
not be added to the income of the assessee for the year under consideration,
as the question of genuineness thereof could be examined only in the year in
which they were credited to the account.

(c) The amount could also not be considered to be the
income of the assessee on the ground of expiry of limitation, as according to
well-settled law explained by the Supreme Court in the case of CIT v.
Sugauli Sugar Works (P.) Ltd., (1999) 236 ITR 518; 102 Taxman 713 in the
absence of creditor, it is not possible for the Department to come to the
conclusion that the debt is barred and has become un-enforceable as there may
be some circumstances which may enable the creditor to come with a proceeding
for enforcement of the debt even after expiry of the normal period of
limitation, as provided in the Limitation Act, 1963.



(d) It had not been shown by the CIT(A) that the assessee
had acquired any benefit from these liabilities which were still outstanding
in the balance sheet of the assessee and it had also not been shown that these
liabilities had ceased finally without the possibility of revival. Thus, the
onus had wrongly been shifted by the Revenue on the assessee. The assessee had
shown these liabilities outstanding in its balance sheet. Therefore, there was
no occasion to treat the said amounts as taxable u/s.41(1) and if the
Department intended to assess the same by applying the provisions of S. 41(1),
then the onus was on the Revenue to show that the liabilities which were
appearing in the balance sheet had ceased finally and there was no possibility
of their revival.

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S. 48 r.w. S. 45 and S. 55 — Right to construct additional floors acquired without incurring any cost and had no inherent quality of being available on expenditure of money — Such right is outside scope of S. 45.

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18 (2008) 24 SOT 366 (Mum.)

Maheshwar Prakash-2 CHS Ltd. v. ITO

ITA No. 34 (Mum.) of 2008

A.Y. : 2003-04. Dated : 15-5-2008

S. 48, read with S. 45 and S. 55 of the Income-tax Act, 1961
— Right to construct additional floors under Development Control Regulations,
1991, acquired by assessee without incurring any cost and, moreover, such right
had no inherent quality of being available on expenditure of money — Such right
is outside the scope of S. 45.

 


The assessee, a co-operative housing society established in
the year 1962, owned a building in Santacruz, Mumbai. This building had been
constructed after utilising the entire FSI available to it and, therefore, no
right was available for any further construction on this plot of land. However,
the Bombay Municipal Corporation (BMC) relaxed the development regulations in
the year 1991 and on that account additional Transferable Development Right
(TDR) of FSI was allowed under the newly enacted Development Control
Regulations, 1991 (DCR). Thus, the assessee became entitled to construct
additional space of 15,000 sq.ft. In view of the availability of such right, the
assessee entered into an agreement with two developers on 25-11-2002 for
construction of additional floors on the existing structure of the society’s
building and development of the said property against a consideration of Rs.42
lacs. Under this agreement, TDR was to be arranged by the developers at their
own cost. For the relevant A.Y. 2003-04, the assessee did not admit of any
capital gain tax liability on the aforesaid amount of Rs.42 lacs. The Assessing
Officer held that as per the amended provisions of S. 55(2) applicable to the
year under consideration, the cost of acquisition was to be taken as NIL and,
since the assessee had surrendered its right to the developers against the
consideration, the income had accrued to it in the year under consideration. The
Assessing Officer, therefore, assessed the entire sum of Rs.42 lacs in the hands
of the assessee as long-term capital gain, holding that the right to construct
was embedded in the land which was held by the assessee for more than three
years.

 

The CIT(A) upheld the order of the Assessing Officer and also
held that the instant issue was akin to the issue of bonus shares, which are
issued only to the persons who own the original shares. He also held that the
decision of the Supreme Court in the case of B. C. Shrinivasa Shetty (1981) 128
ITR 294/5 Taxman, relied on by the assessee was not applicable in the instant
case.

 

The Tribunal set aside the orders of the lower authorities
and held that the sum of Rs.42 lacs received by the assessee was not chargeable
to tax u/s.45. Relying on the decision of the Mumbai Bench of the Tribunal in
the case of Jethalal D. Mehta v. Dy. CIT, (2005) 2 SOT 422, the Tribunal
noted as under :

(a) Clause (aa) and Clause (ab) of S. 55(2) deal with the
case of shares or securities and, therefore, the same are not relevant for
disposal of the instant appeal.

(b) The perusal of S. 55(2)(a) reveals that the cost of
acquisition is to be taken at NIL in those cases where the capital asset
transferred is either goodwill of business or a trademark or a brand name
associated with business or a right to manufacture, produce or process any
article or thing or right to carry on any business, tenancy rights, stage
carrier permits or loom hours. In the instant case, the assessee was not
carrying on any business and the right to construct additional floors was not
covered by any of the assets mentioned in the aforesaid Ss.(2) of S. 55.
Therefore, the amended provisions of S. 55(2) did not apply to the instant
case and the lower authorities were not justified in taking the cost of
acquisition of the capital asset being a right to construct the additional
floors at NIL.

(c) Further, the contention of the Revenue that right to
construct the additional floors was embedded in the land and, therefore, the
instant case was akin to the issue of bonus shares and, consequently, it could
not be said that there was no cost of acquisition in respect of such right,
was not acceptable for two reasons, firstly, because it was not the case of AO
or the CIT(A) that the cost of acquisition was taken by them as NIL as per the
amended provisions; secondly, because the theory of spreading over the cost of
original shares over the original shares and bonus shares was based on the
fact that bonus shares were issued to the detriment of the original shares. In
the instant case, the right to construct attached to the land on the date of
purchase of land had already been exhausted by construction of flats prior to
1991 as per the FSI available according to law as was in force. Therefore,
there was no further right to construct any flat on that land. It was because
of DCR, 1991 that additional right had accrued to the assessee, which was
distinct and separate from the original right. Therefore, it could not be said
that such right was embedded in the land. Even assuming, for the sake of
argument, that such right was embedded in the land, there was no detriment to
the cost of land by granting such right on the assessee-society. On the
contrary, price of the land had increased because of the additional right made
available to the assessee-society.

d) Ignoring the events involving the surrendered row house and on examination of the facts regarding the flat in Abhijit building, the assessee’s investment of capital gain in the purchase of block of shares of company, which, in turn, got him entitled to a flat in the Abhijit building, was within the period of three years. After all, the purchases of block of shares of company’S’ and procuring the entitlement to a flat were composite transactions which were interlinked. Therefore, the investment in block of shares of the company’S’ was the investment of capital gain in the flat.

e) On the issue of how the assessee’s case was a case of construction, the assessee’s reliance on Circular Nos. 471 and 672 was relevant. The combined reading of Circular Nos. 471 and 672 shows that investment as in the assessee’s case was to be treated as a case of construction for the purpose of 5. 54F. The assessee’s investment of Rs.30.50 lacs in the construction of the house in Abhijit building fell within three years of the first sale of the shares.

f) Therefore, the investment of the long-term capital gain in the flat in Abhijit building was a case of construction and applicable time limitation was three years and not two years as held in the impugned order by the CIT(A).

S. 54F — Investment in flat in building under construction was a case of ‘construction’ and time limit of 3 years (and not 2 years) applicable

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17 (2008) 24 SOT 312 (Mum.)


Mukesh G. Desai HUF v. ITO

ITA No. 2077 (Mum.) of 2007

A.Y. : 1996-97. Dated : 24-6-2008

S. 54F of the Income-tax Act, 1961 — On facts, investment of
long-term capital gain in a flat in a building under construction was a case of
‘construction’ and time limit of three years (and not two years) was applicable
— Exemption u/s.54F was available.

 

The assessee invested a sum of Rs.30.50 lacs with a builder
for purchase of a row house. Subsequently, the assessee having come to know that
there was a drive by District Authorities for demolition of row houses,
cancelled the aforesaid agreement dated 26-8-1996 and received back whole amount
from the builder. Subsequently, the assessee entered into an agreement with a
company ‘S’, which was engaged in construction of a building known as Abhijit,
and paid a sum of Rs.30.50 lacs to ‘S’ for purchasing ‘block of shares’ of
company ‘S’ and got them transferred to his name. On this basis, the assessee
became entitled to allotment of a flat in the under-construction building,
Abhijit. The said building was constructed and the assessee got occupancy
certificate from the Municipal Corporation of Greater Mumbai (MCGM). The
assessee’s claim for exemption u/s.54F was denied by the Assessing Officer, on
the ground that the investment in the row house was an investment for purchase
of a ‘new asset’ as per Ss.(1) of the S. 54F and that cancellation of the above
transaction amounted to transfer of new asset during the lock-in period of 3
years, violating the condition of Ss.(3) of S. 54F. He, therefore, ignored the
investment in flat in Abhijit building and, thus, denied the exemption u/s.54F.

 

The CIT(A) held that the assessee’s case is the case of
purchase of new asset and not the construction of new asset and, accordingly,
the applicable time limit is of two years and not three years, hence the
exemption is not available. Further, the CIT(A) also observed that the assessee
has not utilised long-term capital gains for the purchase or construction of new
asset before filing the return of income u/s.139 and also failed to deposit the
same as per the scheme specified in Ss.(4) of S. 54F and, therefore, the
exemption should be denied on this ground also.

 

The Tribunal held that the assessee was entitled to exemption
u/s.54F. The Tribunal relied on the decisions in the following cases :

(a) CIT v. T. N. Aravinda Reddy, (1979) 120 ITR 46/
2 Taxman 541

(b) Jagan Nath Singh Lodha v. ITO, (2004) 85 TTJ 173
(Jodh.)(Para 6)

(c) Asst. CIT v. Smt. Sunder Kaur Sujan Singh Gadh,
(2005) 3 SOT 206 (Mum.)(Para 6)

(d) Mrs. Seetha Subramanian v. Asst. CIT, (1996) 56
TTJ 417 (Mad.)

The Tribunal noted as under :

(a) The sequence of events in the instant case revealed
that the assessee’s intention to invest the capital gains in the residential
house to avail of the exemption u/s.54 was beyond any doubt. The Assessing
Officer had not established that the agreement with the first builder and the
agreement for cancellation were bogus. Therefore, the cancellation of the
agreement by the assessee would fall within the ambit of the doctrine of
caveat emptor (i.e., buyers beware) and surrender of row house was
legally justified. The assessee was not expected to proceed to buy a defective
residential house (new asset), which was prone to demolition by the Municipal
Authorities, in order to qualify for exemption for exemption u/s.54F.
Therefore, the decision of the lower authorities in treating the row house as
a new asset was misplaced.

(b) Ss.(3) of S. 54F stipulates that the ‘new asset’
purchased or constructed must not be transferred within the lock-in period of
3 years from the date of such purchase or construction of ‘new asset’. The
Assessing Officer denied the claim of exemption u/s.54F for the reason of
violation of the said condition, considering the row house as a ‘new asset’.
The assessee did not actually purchase a ‘new asset’ and, therefore, the
refund received by the assessee from ‘D’ in respect of the surrender of the
row house was not relatable to any transfer of the new asset. Resultantly, the
violation of the said condition in Ss.(3) of S. 54F did not arise.

(c) Ss.(4) of S. 54F provides for depositing the unutilised
capital gains in the bank as per the prescribed Capital Gain Scheme and manner
of taxing such gains if not utilised before the due date for furnishing the
return of income u/s.139. Since the assessee had already parted with the
capital gain before the due date for filing the return in connection with the
‘row house’ acquisition, there was no way in which the assessee would have
complied with the condition of depositing it in the bank as per Ss.(4) of S.
54F. There was no violation of the condition of Ss.(4) of S. 54F by the
assessee.

(d) Ignoring the events involving the surrendered row house
and on examination of the facts regarding the flat in Abhijit building, the
assessee’s investment of capital gain in the purchase of block of shares of
company ‘S’, which, in turn, got him entitled to a flat in the Abhijit
building, was within the period of three years. After all, the purchases of
block of shares of company ‘S’ and procuring the entitlement to a flat were
composite transactions which were interlinked. Therefore, the investment in
block of shares of the company ‘S’ was the investment of capital gain in the
flat.

S. 45 r.w. S. 28(i) — Where stock-in-trade is converted into investment and later sold on profit, formula favourable to assessee to be accepted

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16 (2008) 24 SOT 288 (Mum.)

ACIT v. Bright Star Investment (P.) Ltd.

ITA Nos. 6374 & 9543 (Mum.) of 2004

A.Ys. : 2000-01 and 2001-02. Dated : 2-7-2008

S. 45 r.w. S. 28(i) of the Income-tax Act, 1961 — In absence
of specific provision in S. 45(2) to deal with a situation where stock-in-trade
is converted into investment and later on investment is sold for profit, formula
which is favourable to an assessee should be accepted.

 


The assessee had converted some shares from stock-in-trade to
investment as on 1-4-1998 at its book value. Thereafter, the assessee sold some
of the shares out of the above shares and offered profit earned as long-term
capital gain. The Assessing Officer opined that in view of the provisions laid
down u/s.45(2), the income of the assessee would be computed separately as
business income till the date of conversion of the shares from the stock to
investment and, thereafter, as long-term capital gain. The AO, therefore, took
the highest market rate of the said shares on the date of conversion and
computed the business income, being the difference in the value at which the
said shares were converted into investment and the market value of the said
shares on the date of conversion, i.e., 1-4-1998 and, further computed
the long-term capital gain at Rs.457.62 lacs being the difference between the
market value and the actual sale value of the shares.

The CIT(A) held that the action of the Assessing Officer to
segregate the long-term capital gain as shown by the assessee in the return of
income into business income and capital gain was totally arbitrary and
unjustified.

The Tribunal held in favour of the assessee. The Tribunal
relied on the decisions in the following cases :

(a) Sir Kikabhai Premchand v. CIT, (1953) 24 ITR 506
(SC)

(b) CIT v. Dhanuka & Sons, (1980) 124 ITR 24; (1979)
1 Taxman 417 (Cal.)

The Tribunal noted as under :


(a) The provisions of S. 45(2) deal with the issue of
capital gain where the investment is converted into stock-in-trade.


(b) While incorporating Ss.(2) to S. 45, the Legislature
has not visualised the situation in other way round, where the stock-in-trade
is to be converted into investment and later on the investment is sold on
profit. In the absence of a specific provision to deal with this type of
situation, a rational formula should be worked out to determine the profits
and gains on transfer of the asset.


(c) In the absence of a specific provision to deal with the
present situation, two formulas can be evolved to work out the profits and
gains on transfer of the assets.


(d) One formula which had been adopted by the Assessing
Officer, i.e., difference between the book value of the shares and the
market value of the shares on the date of conversion should be taken as a
business income and the difference between the sale price of the shares, and
the market value of the shares on the date of conversion, be taken as a
capital gain.


(e) The other formula which was adopted by the assessee,
i.e., the difference between the sale price
of the shares and the cost of acquisition of shares, which was the book value
on the date of conversion with indexation from the date of conversion, should
be computed as a capital gain.


(f) In the absence of a specific provision, out of these
two formulae, the formula which was favourable to the assessee should be
accepted.



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S. 2(22)(e) — Payment made by a co. out of its share premium a/c. cannot be taxed as deemed dividend.

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15 (2008) 24 SOT 42 (Delhi)

Dy. CIT v. MAIPO India Ltd.

ITA No. 2266 (Delhi) of 2005

A.Y. : 1996-97. Dated : 7-3-2008

S. 2(22)(e) of the Income-tax Act, 1961 r.w. S. 78 of the
Companies Act, 1956 — Payment made by a company out of its Share Premium a/c.
cannot be taxed in hands of receiver as deemed dividend.


During the A.Y. 1996-97, an amount of Rs.25.43 lacs was
advanced to the assessee-company by another company ‘G’ Ltd., in which the
assessee held 40% of shares. The amount was advanced in the nature of loans and
advances. Towards the end of the year, the assessee repaid Rs.14.31 lacs and the
AO included the balance amount of Rs.11.12 lacs as deemed dividend in the hands
of the assessee u/s. 2(22)(e). The case of the assessee was that entire reserve
and surplus amount appearing in the books of ‘G’ Ltd. consisted of share premium
which was a capital receipt and could not have been distributed as dividend. The
AO, however, treated the amount as deemed dividend u/s.2(22)(e). The CIT(A)
accepted the assessee’s contention.

The Tribunal also ruled in favour of the assessee. The
Tribunal noted as under :


(a) S. 78(2) of the Companies Act, 1956 states the five
purposes for which the Share Premium a/c. may be used. The Share Premium a/c.
cannot be used otherwise than for the specified purposes.


(b) When there is a statutory bar on the Share Premium a/c.
being used for distribution of dividend, the deeming provisions of S. 2(22)(e)
cannot apply.


(c) Not only is there a prohibition on the distribution of
the Share Premium a/c. as dividend under the 1956 Act, but the same is obliged
to be treated as a part of the share capital of the company and this is made
clear in S. 78(1) of the 1956 Act, which says that any payment out of the
Share Premium a/c., except for purposes authorised by Ss.(2), will be treated
as reduction of share capital attracting the provisions of the 1956 Act in
relation thereto.


(d) This provision of the 1956 Act takes care of the
argument of the Revenue that S. 2(22)(e) does not use the expression ‘whether
capitalised or not’. These words can have application only where the profits
are capable of being capitalised. They are not applicable where the receipt in
question forms part of the share capital of the company under the provisions
of the 1956 Act.



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Mere inclusion of land in industrial zone could not convert agricultural land into NA land, given no infrastructure development, and use for non-agricultural purposes not established — Gain arising on sale of land by assessee exempted from tax

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14 (2008) 114 ITD 428 (Pune)

Haresh V. Milani v. JCIT

A.Y. :1995-96. Dated : 7-9-2006

Whether the mere inclusion of land in industrial zone could
convert agricultural land into non-agricultural land, given that there had been
no infrastructure development on the same, and the fact that it had been used
for non-agricultural purposes had also not been established — Held, No.
Therefore, whether the gain arising on sale of such agricultural land by the
assessee was exempted from tax — Held, Yes.

Facts :

The assessee sold certain agricultural land in the relevant
A.Y., and thus claimed exemption of the long-term capital gains arising
therefrom. The AO accepted the assessee’s claim in the assessment completed
u/s.143(3). Subsequently, the Commissioner noted the fact that the land was
located in industrial zone, the fact which the AO had failed to take note of,
and therefore, under powers assigned to him u/s.263, he set aside the order and
directed the AO to reconsider the exemption granted to the assessee from the
capital gains tax.

Accordingly, the AO after issue of notice u/s.143(2) and
after considering the assessee’s submission, concluded that the land was not
used for agricultural purposes, and hence was not an agricultural land, and the
exemption allowed earlier was withdrawn. On appeal, the Commissioner (Appeals)
upheld the AO’s decision.

On second appeal before the Tribunal, it was observed as
under :

1. The question as to whether a land is agricultural
or not is a question of fact to be answered having regard to the facts and
circumstances of each case. In the instant case, the said land had been
classified in the Revenue records as agricultural land. The assessee had not
given any evidence of incurring any expenditure on agricultural operations on
the said land, as also he had not established that any agricultural produce in
the nature of rice, jowar, etc. was produced from the land.

2. On the other hand, the Revenue has also not produced any
evidence to show that the land was used for other than agricultural purposes.
No permission for non-agricultural use had been obtained by the assessee, and
no evidence of such use was brought on record.

3. Merely the fact that the land in question was brought in
an industrial zone could not be a determining factor by itself to say that the
land was converted into use for agricultural purposes.

4. Further, the profit motive of the assessee in selling
the land, without anything more than itself, could never be decisive to say
that the assessee had used the land for non-agricultural purposes. Therefore,
the land in question sold by the assessee was an agricultural land in nature
at the relevant point of time when the land was sold, and any gain arising
from such sale was exempted from tax.

 


Cases referred to :



(i) CIT v. Raja Benoy Kumar Sahas Roy, (1957) 32 ITR
566 (SC)

(ii) ACIT v. Tarachand Jain, (1980) 123 ITR 567
(Patna)

(iii) CWT v. Officer-in-charge (Court of Wards) Paigah,
(1976) 105 ITR 133 (SC)



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Where assessee had advanced amounts to sister concerns as prevented by regulations from prepaying its ECBs, interest income assessable under head ‘business income’ — Post-amendment to S. 10B, assessee entitled to deduction of interest income, and expenses

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13 114 ITD 387 (Bang.) (2008)

ACIT v. Motorola India Electronics (P.) Ltd.

A.Ys. : 1997-98, 1998-99, 2001-02. Dated : 28-11-2006

Whether in view of the fact that the assessee had advanced
certain amounts to its sister concerns from the monies available to it, because
it had been prevented by Government regulations from prepaying its External
Commercial Borrowings, interest income on the same could be considered to have
close nexus with the business of the assessee, and would be assessable under the
head ‘business income’ — Yes. Post-amendment to S. 10B, as entire profits
derived from business of an undertaking are to be considered for calculation of
eligible deduction, whether the assessee would be entitled to deduction of such
interest income, and expenses incurred in relation to such income were allowable
— Yes.

 

Facts :

The assessee-company earned certain interest income from
deposits lying in the EEFC account and from advancing of intercorporate loans
out of the funds of the undertaking. The assessee had certain External
Commercial Borrowings (ECB’s) obtained in the earlier years, which could be
repaid only in accordance with the repayment schedule, and thus it could repay
only a small portion of its outstanding loans, even though it had the liquidity
to pay more. The assessee took a business decision to place these funds with
various sister concerns as inter- corporate deposits. The assessee claimed that
both these types of interest income were a part of ‘income from business’.

 

Further, from A.Y. 2001-02, S. 10B has been substituted and
as per the new provisions, the interest income so derived would be entitled to
deduction u/s.10B.

According to the AO, only those profits derived from an
eligible undertaking from export of article or thing were entitled for deduction
for A.Y. 2001-02. On appeal, the CIT(A) upheld the order of the AO. On second
appeal, the Tribunal held that :

1. The interest income arose on deposits in the EEFC
account from export profits. The Government had stipulated the maximum amount
that could be held as deposits in the EEFC account, and as per the relevant
regulations, the assessee had also been prevented from pre-paying the External
Commercial Borrowings. Therefore, the assessee advanced the monies to its
sister concerns. The interest income on the same could be considered as having
close nexus with the business activity of the assessee and was assessable
under ‘business income’.

2. For the A.Ys 1997-98 and 1998-99, the assessee was not
eligible for grant of relief on interest income while computing deduction
u/s.10A and 10B. From A.Y 2001-02, S. 10B was substituted. Earlier, it was an
exemption Section, and income from these undertakings did not form part of
total income. However from that particular year, even though the Section
appears in Chapter 3, a deduction from business income from the undertaking is
to be granted by applying the substituted provision. For the A.Y in
discussion, the AO was directed to recompute the deduction u/s.10A and
u/s.10B, such that entire profits derived from the business of the undertaking
would be taken into consideration.

3. Regarding the allowability of expenditure relatable to
the interest income, as it had already been held that interest income was
assessable as business income, all related expenditures had to be allowed in
computing the interest income.

Cases referred to :



(i) CIT v. Tirupati Woollen Mills Ltd., (1992) 193
ITR 252 (Cal.)

(ii) CIT v. Tamil Nadu Dairy Development Corporation
Ltd., (1995) 216 ITR 535 (Mad.)

(iii) Synopsys India (P.) Ltd v. ITO, Appeal No.
1100 (Bangalore) of 2003

(iv) K. S. Subbiah Pillai & Co., (India) (P.) Ltd v.
CIT, (2003) 260 ITR 304 (Mad.) distinguished.


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S. 36(1)(vii) r/w S. 36(2) — Money-lending activity of non-banking finance business — Where assessee provided funds to sister entity, and amount became irrecoverable, allowable as bad debts — Where assessee gave certain amount to entity for allotment of

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12 114 ITD 202 (Delhi)

Tulip Star Hotels Ltd. v. ACIT

A.Ys. : 1998-99, 1999-2000 and 2003-04

Dated : 1-6-2007

S. 36(1)(vii) r/w S. 36(2) — Money-lending activity is a part
of non-banking finance business — Providing funds to entities where assessee was
a promoter was a part of fund-based activities carried on by the company —
Whether where assessee had provided funds to one such assessee, and the said
amount had become irrecoverable, the same could be claimed as bad debts — Also,
where the assessee had given certain amount to an entity for allotment of
preference shares — The entity refused to allot the same, and further the said
amount advanced by the assessee to this entity also became irrecoverable — Held,
the same could be claimed as bad debts.

 

Facts :

The assessee, a non-banking finance company, was incorporated
in the year 1987, and was mainly engaged in providing fund- and non-fund-based
financial services. In the relevant assessment years,
the assessee had paid certain amount to some villagers as advance for purchase
of land for business of development activities. Further, the assessee had also
advanced money to two companies, ‘F’ and ‘P’. The assessee had promoted ‘F’ and
had deposited certain amount with a bank and stood guarantor for money given to
‘F’ by the bank. On the guarantee money, the assessee earned interest from bank
as well as from ‘F’ and offered the same for taxation. Business of ‘F’ was
abandoned and despite all efforts, the assessee was not able to recover the
amount from ‘F’ and claimed the same as bad debts u/s.36(1)(vii). Further, the
assessee had given certain amount to ‘P’ for allotment of preference shares, but
‘P’ refused to allot the same. The assessee, therefore, asked ‘P’ to refund the
amount with interest and on P’s failure, claimed the said amount as bad debts.

 

The assessee’s claim was disallowed on the ground that it was
not carrying on any money-lending business.

 

On appeal before the Tribunal, the Tribunal held the
following :

1. The contention of the lower authorities that the
assessee was not carrying on any money-lending business was incorrect. This
was because; carrying on money-lending activities was a part of doing
non-banking financial business. Huge amounts earned as interest were offered
for taxation, and the same had been taxed in the earlier years as well as the
year under consideration. The objects clause of the assessee-company clearly
stated that the object of the assessee was to run non-banking business and
advance money as intercorporate deposits.

2. The Delhi Bench of the Tribunal has held that there is
no qualification in S. 36(2) that the business of money lending should be
understood only in traditional sense.

3. Further, the guarantee stood by the assessee has to be
taken as an activity of money lending. The assessee has earned interest on the
guarantee amount from the bank as well as from ‘F’. As the business of ‘F’
company was abandoned, whatever amount was recoverable from it by the assessee
was treated as bad debts by the assessee. All the conditions of S. 36(1)(vii)
r/w S. 36(2) being satisfied in this case, amount recoverable from ‘F’ was
allowable as bad debts.

4. With regard to the amount advanced to ‘P’, for allotment
of preference shares, the Tribunal observed that since ‘P’ had refused to
allot the shares, the assessee had asked it to refund the amount. ‘P’ in turn
had instructed its debtor M to pay the said amount to the assessee on its
behalf. The assessee had shown this amount as intercorporate deposit with M,
and interest had also been shown. Therefore, it cannot be said that the said
amount had the character of share application money, as it was in the nature
of intercorporate deposit, on which the assessee was to receive interest. The
conditions of S. 36(2) were satisfied in this case, and the amount recoverable
from ‘P’ was allowable as bad debts u/s.36(1)(vii).

 


Case referred to :

DCIT v. SREI International Finance Ltd., 10 SOT 722
(2006) (Delhi) (para 11)


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Mandatory digitally signed e-return for companies — Notification No. 49/2010, dated 9-7-2010.

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Part A : Direct Taxes


68 Mandatory digitally signed e-return for companies —
Notification No. 49/2010, dated 9-7-2010.

The CBDT vide Income-tax (Seventh Amendment) Rules, 2010 has
amended Rule 12 which prescribes the manner of filing the income-tax return for
A.Y. 2010-2011. It is now provided that companies need to file their income-tax
e-return digitally signed and hence the process of filing an e-return without
digital signature and sending the acknow-ledgement in Form ITR V has been done
away with. Further individuals and HUFs liable to tax audit u/s.44AB of the Act
are now mandatorily required to need to file the returns electronically with or
without digital signature. The Rule does not change for the firms subjected to
tax audit.

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Points for Company Law for the period 15th September 2010 to 15th October 2010.

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Spotlight

18. Points for Company Law for the period 15th September 2010
to 15th October 2010.


1. Computer-generated show-cause notices have been issued to
a number of defaulting companies that were not filing their documents in the
MCA21 system as a part of the drive to cleanse the MCA Registry by the Ministry
of Corporate Affairs. The Ministry notes that while migrating data from manual
registry into electronic registry under MCA21, certain inaccuracies might have
crept in; and as such computer-generated notices may contain some errors, like
wrong addresses/wrong names of companies, etc. Some directors who have already
resigned, or some companies which may have been merged or liquidated, might not
have been recorded in the electronic registry. In case any discrepancy is found
in such show-cause notice issued, the same may kindly be intimated to the
respective ROC, so that the electronic registry data is made up-to-date.

2. MCA is planning to introduce SMS alert facility for the
Annual Filing eForms. Stakeholders can register for this service using the ‘Register
for SMS alerts’ link after logging on to the portal. Presently, this
facility is applicable only for Annual Filing eForms i.e., 20B, 23AC, 23ACA, 66
and 21A.

3. The MCA can be contacted in case of any technical difficulty, at the
following numbers : North (011-64506000), East (033-23675242/033-64506000),
South (044-28152455/044-64506000), West (022-65161996/ 022-64506000) or an email
can be sent to appl.helpdesk@mca.gov.in. Details of the Certified Filing Centres
(CFC’s) and the ROC Facilitation Centre in major cities can be seen on the MCA
website.

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The Government has signed an agreement with Permanent Court of Arbitration (PCA), the Hague, to open its regional facility in India — Information provided by Shri H. R. Bhardwaj, Minister of Law and Justice, in the Lok Sabha.

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Full texts of relevant Notifications, Circulars and Forms are
available on the BCAS website : www.bcasonline.org

Part D : Miscellaneous

24 The Government has signed an agreement
with Permanent Court of Arbitration (PCA), the Hague, to open its regional
facility in India — Information provided by Shri H. R. Bhardwaj, Minister of Law
and Justice, in the Lok Sabha.

This would provide more frequent recourse to international
arbitration as a means of settling disputes since the cost would reduce
considerably. This would apply to disputes between two states as well as foreign
companies having some concern in India or vice versa. It would also open
newer avenues of practice for legal fraternity.

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Exchange Earner’s Foreign Currency (EEFC) Account – Clarification

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 Part C:
FEMA

Given below are the highlights of certain RBI
circulars, press notes and notifications

32 A. P. (DIR Series) Circular No. 22, dated 
December 29, 2009

Exchange Earner’s Foreign Currency (EEFC) Account –
Clarification

This circular clarifies that all categories of
foreign exchange earners, including SEZ developers, are allowed to credit up to
100% of their foreign exchange earnings to their EEFC Accounts.

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Advance Remittance for Import of Rough Diamonds

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Part C:
FEMA

Given below are the highlights of certain RBI
circulars, press notes and notifications

31 A. P. (DIR Series) Circular No. 21, dated
December 29, 2009

Advance Remittance for Import of Rough Diamonds

Presently, advance remittances without any limit
and without a bank guarantee or standby letter of credit for import of rough
diamonds into India, can be made to eight mining companies by eligible
importers.

Average
Maturity Period
All-in-cost ceilings over six month Libor for the respective currency of
borrowing or applicable benchmark
3 years
and up to 5 years		 300
basis points
More
than 5 years		 500
basis points

Now, advance remittances can be made by eligible
importers without any limit and without a bank guarantee or standby letter of
credit for import of rough diamonds into India to Namibia Diamond Trading
Company (PTY) Limited (NDTC).

The names of the nine mining companies to whom
advance remittance as above can be made are: –

1. De Beers UK Limited

2. RIO TINTO, UK

3. BHP Billiton, Australia

4. ENDIAMA, E. P. Angola

5. ALROSA, Russia

6. GOKHARAN, Russia

7. RIO TINTO, Belgium

8. BHP Billiton, Belgium

9. Namibia Diamond Trading Company (PTY) Limited
(NDTC).


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External Commercial Borrowings (ECB) Policy

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 Part C:
FEMA

Given below are the highlights of certain RBI
circulars, press notes and notifications

30 A. P. (DIR Series) Circular No. 19, dated
December 9, 2009

External Commercial Borrowings (ECB) Policy

This circular has carried out the following changes
to some aspects of the ECB Policy: –

1.
All-in-cost ceilings

All-in-cost ceilings, applicable with effect from
January 1, 2010 under the approval route, will be as under: –

2.
Integrated township

Presently, companies engaged in the development of
integrated townships are permitted to avail ECB under the approval route only up
to December 31, 2009. This facility for availing ECB under the approval route is
being extended up to December 31, 2010.

3.
Buyback of Foreign Currency Convertible Bonds (FCCBs)

Presently, Indian companies are allowed to buy-back
their FCCB both under the automatic route as well as the approval route. This
facility will be available only up to December 31, 2009 and will be discontinued
on and from January 1, 2010.

4.
ECB for NBFC Sector

Presently, NBFCs, exclusively engaged in the
financing of infrastructure sector, are permitted to avail of ECB under the
approval route only from multilateral / regional financial institutions and
government-owned development financial institutions for on-lending to borrowers
in the infrastructure sector. These NBFCs have, with immediate effect, been
permitted to avail of ECB from any recognized lender under the approval route.

5.
ECB for Spectrum in the Telecommunication Sector

Eligible borrowers in the telecommunications sector
are now permitted to avail of ECB for the purpose of payment for ‘Spectrum’
allocation’.

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Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards / Combating of Financing of Terrorism (CFT) / Obligation of Authorized Persons under Prevention of Money-Laundering Act, (PMLA) 2002, as amended by Prevention of Money Laundering Act,

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Part C:
FEMA

Given below are the highlights of certain RBI
circulars, press notes and notifications

 

28 A. P. (DIR Series) Circular No. 15, dated
November 19, 2009

A. P. (FL/RL Series) Circular No. 2

Notification No. 13/2009/F. No. 6/8/2009 – ES,
dated November 12, 2009

 

Know Your Customer (KYC) norms / Anti-Money
Laundering (AML) standards / Combating of Financing of Terrorism (CFT) /
Obligation of Authorized Persons under Prevention of Money-Laundering Act, (PMLA)
2002, as amended by Prevention of Money Laundering Act, 2009 – Money changing
activities – Suspicious Transaction Reporting Format

 

This circular states that the Prevention of Money
Laundering (Amendment) Act, 2009 has brought
authorised persons within the definition of “Financial Institutions” under
Section 2(1) of the Prevention of Money-Laundering Act, 2002. As a result,
authorised persons are required to furnish information to the Financial
Intelligence Unit – India (FIU-IND) in the prescribed format. The procedure and
manner of maintaining records, etc., as notified by the Government of India, are
annexed to this circular.

Authorised persons / franchisees of authorised
persons are required to furnish Suspicious Transaction Report (STR) to FIU-IND
in respect of money changing activities within 7 days of arriving at a
conclusion that a transaction / attempted transaction, whether made in cash or
otherwise, or a series of transactions integrally connected are of a suspicious
nature. The formats of STR can be downloaded from the website of FIU-IND –
http://fiuindia.gov.in.

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Clarification F. No. 404/10/2009-ITCC issued by CBDT dated 1.12.2009

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27 Clarification F. No. 404/10/2009-ITCC issued by
CBDT dated 1.12.2009


 


Subject :
Clarification on Instructions
on Stay of Demand

 

Many queries have been received regarding the
applicability of Instruction number 95 dated 21.8.1969 vis-à-vis Instruction
number 1914 dated 2.12.1993. Many assessees are taking the plea that Instruction
No.1914 does not supersede Instruction No.95 dated 21.8.1969.

1. Instruction No.95 dated 22.8.1969 was an
assurance given by the then Deputy Prime Minister during the 8th Meeting of the
Informal Consultative Committee held on 13th May, 1969. The observations made by
the Deputy Prime Minister were as under :-

“Where the income determined on assessment was
substantially higher than the returned income, say twice the latter amount or
more, the collection of the tax in dispute should be held in abeyance till the
decision on the appeal provided there were no lapses on the part of the assessee”.

The above observations were circulated to the field
officers by the Board as Instruction number 95 dated 21.8.1969.

2. The matter has been considered by the Board and
the decision of the Board has been approved by the Finance Minister. It is
hereby clarified that subsequent to Instruction No.95, following
instructions/clarifications on the stay of demand were issued till 15th October,
1980 :



(i) Clarification to Instruction number 95 was
issued on 14/09/1970 stating that it relates to disputed demands only,

(ii) Instruction number 635 was issued on
12/11/1973 stating that stay should be granted only in those cases where
demands are attributable to substantial points of dispute.

(iii) Clarification to Instruction number 95
dated 13/07/1976 held that the Instruction becomes operative only in cases
where there are no lapses on the part of the assessee.

(iv) Instruction number 1067 dated 21/06/1977
held that the ITO can pass the necessary orders u/s.220(6) in all cases except
cases under section 144A or 144B where the approval of IAC is required.

(v) Instruction number 1158 dated 27th March,
1978 held that in suitable cases the assessee may be allowed to furnish
security.

(vi) Instruction number 1282 dated 4th October,
1979 held that requests should be made to CIT(A) and ITAT for early disposal
of appeals and constant watch should be kept on progress of appeals.

(vii) Instruction number 1362 was issued on
15/10/1980 in supersession of all the earlier Instructions. It was an
Instruction covering the issue in detail and in para 4 of the same there was a
clear reference to the proposition laid down in Instruction number 95 which is
as follows :-

In exercising this
discretion, the Income-tax Officer should take into account factors such as;
whether the points in dispute relate to facts; whether they arise from
different interpretations of law; whether the additions have been made as a
result of detailed investigation; whether the additions are based on materials
gathered through enquiry/survey/search and seizure operations; whether the
disputed addition to income has been assessed elsewhere by way of protective
assessment and the tax thereon has been paid by such person etc. The magnitude
of addition to income returned cannot be the sole determinant in this regard.
Each disputed addition will need to be considered to arrive at the quantum of
tax that may need to be stayed.

 


3. It is clear that the substance of the assurance
as laid down in Instruction number 95 dated 21.8.1969 was submerged in the
Instruction number 1362 dated 15/10/1980 which was issued in supersession of all
earlier Instructions on the subject. Instruction No.1914 dated 2.12.1993 was
issued subsequently in supersession of all the earlier Instructions on the
subject and the said instruction also covers unreasonably high pitched
assessment orders and genuine hardship cases.

 

4. It is therefore clarified that there is no
separate existence of the Instruction number 95 dated 21.8.1969. Instruction
number 95 and all subsequent Instructions on the issue ceased to exist from the
date Instruction No.1362 came into operation. In turn Instruction number 1362
and all subsequent Instructions on the issue also ceased to exist the day
Instruction number 1914 came into operation i.e. 2/12/1993. The Instruction
number 1914 holds the field currently and a copy of Instruction number 1914 is
enclosed for reference.

 

(Mona Singh)

Director (ITCC)

Annexure – Instruction No : 1914

The Board has felt the need for a comprehensive
Instruction on the subject of recovery of tax demand in order to streamline
recovery procedures. This Instruction is accordingly being issued in
supersession of all earlier Instructions on the subject and reiterates the
existing Circulars on the subject.

2. The Board is of the view that as a matter of
principle, every demand should be recovered as soon as it becomes due. Demand
may be kept in abeyance for valid reasons only in accordance with the guidelines
given below :

A. Responsibility

 


(i) It shall be the responsibility of the
Assessing Officers and the TRO to collect every demand that has been raised,
except the following :

(a) Demand which has not fallen due;

(b) Demand which has been stayed by a Court or
ITAT or Settlement Commission;

  c) Demand for which a proper proposal for write off has been submitted;

  d)  Demand stayed in accordance with para B & C below.

  ii)  Where demand in respect of which a Recovery Certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO.

  iii)  It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow up is not to be regarded as adequate effort to recover taxes.

 B.   Stay petitions :

i)    Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax payer. The asses-see must be intimated of the decision without delay.

ii)    Where stay petitions are made to the authori-ties higher than the Assessing Officer (DC/ CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately.

iii)    The decision in the matter of stay of demand should normally be taken by Assessing Officer/TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances e.g. where the assessment order appears to be unreasonably high pitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes.

C.    Guidelines for staying demand

i)    A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are –

  a)  If the demand in dispute relates to issues that have been decided in assessee’s favour by an appellate authority or court earlier; or
 

    If the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which there ex-ist conflicting decisions of one or more High Courts (not of the High Court under whose jurisdiction the Assessing Officer is working); or

 b)   If the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment.

c) It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not cooperated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive.

  ii)  In granting stay, the Assessing Officer may impose such conditions as he may think fit. Thus he may.

  a)  require the assessee to offer suitable security to safeguard the interest of revenue;

  b)  require the assessee to pay towards the dis-puted taxes a reasonable amount in lumpsum or in instalments;

c)    require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled;

 d)   reserve the right to review the order passed after expiry of reasonable period, say upto 6 months, or if the assessee has not co-operated in the early disposal of appeal, or where a subsequent pronouncement by a higher appellate authority or court alters the above situations;

e) reserve a right to adjust refunds arising, if any against the damand;

 iii)   Payment by installments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 10 months.

 iv)   Since the phrase ‘stay of demand’ does not occur in Section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) of section 220(7)], the expression that occurs in the section viz, that the agrees to treat the assessee as not being in default in respect of amount specified, subject to such conditions as he deems fit to impose.

 v)   While, considering an application under Section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order.

  D.  Miscellaneous :

  i)  Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the condi-tions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn.

  ii)  Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunal’s order on the appeal can be known within two months.

   iii) Appeal effects will have to be given within 2 weeks from the receipt of the appellate order. Similarly, rectification application should be decided within 2 weeks of the receipt thereof. Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs /CITs.

  4.  The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate superior officer shall be held responsible for ensuring compliance with these instructions.

  5.  This procedure would apply mutatis mutandis to demands created under other Direct Taxes enact-ments also.

Scheme for improving quality of assessments regarding – Instruction No. 6/2009 F. No. 225/11/2006-ITA.II], dated 18th December, 2009 –

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26 Scheme for improving quality of assessments regarding – Instruction No.
6/2009 F. No. 225/11/2006-ITA.II], dated 18th December, 2009 –

Copy available for down load on the website –
www.bcasonline.org

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Certificate of lower deduction or non-deduction of tax at source u/s 197 of the Act- matter reg. – Instruction No. 7/2009 F. No. 275/23/2007-IT(B)], dated 22nd / 23rd December, 2009

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25 Certificate of lower
deduction or non-deduction of tax at source u/s 197 of the Act- matter reg. –
Instruction No. 7/2009 F. No. 275/23/2007-IT(B)], dated 22nd / 23rd December,
2009 – Copy
available for down load on the website – www.bcasonline.org


CBDT vide the above Instructions have notified that prior
administrative approval of the CIT (TDS) is required before issuing certificate
u/s 197, where the cumulative amount of tax forgone by non-deduction/lower
deduction during the financial year for a particular assessee exceeds Rs. 50
lakh in Delhi, Mumbai, Chennai, Kolkata, Banglore, Hydrabad, Ahmadabad and Pune
and Rs. 10 lakh in other cities.

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CBDT F. NO. 275/70/2009-IT(B)], dated 22nd December, 2009 regarding tax deduction at source u/s 194 on commission/supplementary commission

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24 CBDT F. NO. 275/70/2009-IT(B)], dated 22nd December, 2009
regarding tax deduction at source u/s 194 on commission/supplementary commission


CBDT has clarified that tax should be deducted at source by
airlines under section 194H from the commission and supplementary commission
paid to their travel agents.

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Notification No. 2/2010 [F. NO. 142/25/2009-SO(TPL)], dated 12th January, 2010

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23 Notification No. 2/2010 [F. NO. 142/25/2009-SO(TPL)],
dated 12th  January, 2010


The new perquisite valuation rules – amendments to Rule 3
were recently notified by the CBDT vide Notification no. 94/2009 dated 18th
December, 2009. CBDT has issued Notification no 2/2010 dated 12th January, 2010
as a corrigendum to notification no. 94/2009 to rectify the drafting errors in
perquisite valuation rules notified earlier.

 

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Annual Detailed Circular on TDS on Salaries for the FY 2009-10 – Circular No. 1/2010 [F.No. 275/192/2009IT(B)], dated 11th January, 2010

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New Page 122 Annual Detailed Circular
on TDS on Salaries for the FY 2009-10 – Circular No. 1/2010 [F.No.
275/192/2009IT(B)], dated 11th January, 2010 –
Copy available
for down load on the website – www.bcasonline.org

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LLP Act has received the Presidential Assent and has been gazetted on 9 January 2009.

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Part D :
Miscellaneous


38 LLP Act has received the Presidential
Assent and has been gazetted on 9 January 2009.

It will come into force from a date to be notified.

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Exemption to specific services provided to GTA —Notification No. 1/2009 — Service Tax, dated 5-1-2009.

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Part B :
INDIRECT TAXES


Service Tax Update

37 Exemption to specific services provided
to GTA —Notification No. 1/2009 — Service Tax, dated 5-1-2009.

This Notification supersedes earlier Notification No.
29/2008-Service Tax, dated 29-6-2008, exempting taxable services provided by
following persons :



  • Clearing and forwarding agent



  • Manpower recruitment or supply agency


  • Cargo handling agency


  • Storage or warehouse keeper


In relation to :


  • business auxiliary service


  • packaging activity


  • support services of business or commerce


  • supply of tangible goods.


 



To a goods transport agency, in relation to transport of
goods by road, subject to the condition that the invoice issued by such service
provider, for providing services should mention the name and address of the
goods transport agency and also the name and date of the consignment note, by
whatever name called.

 

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E-filing of Returns — Notification No. VAT/AMD-1007/IB/Adm-6, dated 20-12-2008.

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Part B :
INDIRECT TAXES


MVAT Update


MVAT Notifications

36 E-filing of Returns — Notification No.
VAT/AMD-1007/IB/Adm-6, dated 20-12-2008.

E-filing of MVAT returns made applicable to dealers required
to file half-yearly returns under sub-clause (i) of clause (a), clauses (b), (c)
and (d) of sub-rule (4) of Rule 17 in respect of the period starting on or after
1st October 2008 and deemed dealers required to file annual return under
sub-clause (ii) of clause (a) of sub-rule (4) of Rule 17 in respect of the
period starting on or after 1st April 2008.

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More items added to medical devices — Notification No. VAT.1508/CR-5/Taxation-1 dated 27-11-2008

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Part B :
INDIRECT TAXES


MVAT Update


MVAT Notifications

35 More items added to medical devices —
Notification No. VAT.1508/CR-5/Taxation-1 dated 27-11-2008.

This Notification amends the Notification for medical devices
No. VAT-1505/CR-233/Taxation-1 issued on 23-11-2005 by adding some more items to
the list of medical devices under sub-entry (8) of entry 107 of Schedule ‘C’.

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Composition rate for a drug retailer —Notification No. VAT/1507/CR-55/Taxation-1, dated 27-11-2008

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Part B :
INDIRECT TAXES


MVAT Update


MVAT Notifications

34 Composition rate for a drug retailer
—Notification No. VAT/1507/CR-55/Taxation-1, dated 27-11-2008.

Composition rate of 6% is notified for drug retailers. This
rate is applicable for retailers whose at least ¾th of the turnover of sales of
goods is of drugs covered under Entries 29 and 29A of Schedule C appended to the
MVAT Act, 2002.

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Trade Circular 1T of 2009, dated 12-1-2009

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Part B :
INDIRECT TAXES


MVAT Update


Mandatory filing of E-Returns.

 

33
Trade Circular 1T of 2009, dated 12-1-2009 :

It has been decided to extend the provisions of filing of
electronic returns to all the registered dealers in Maharashtra under MVAT and
CST Acts from the 1st October, 2008 onwards. Thus, now the filing of e-return
becomes mandatory for all the dealers for the period ending March, 2009 onwards.

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Change in procedure for payments in the absence of TIN.

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Part B :
INDIRECT TAXES


MVAT Update

MVAT Circulars


32 Change in procedure for payments in the
absence of TIN.

Trade Circular 42T of 2008, dated 26-12-2008 :

To avoid hardships in the absence of TINs, w.e.f. 1st January
2009 applicants seeking registration, voluntary or non-voluntary, would pay fees
and deposit by separate DDs. Fee of Rs.25 for registration under the C.S.T. Act
is to be paid in the form of court fee stamps.

Unregistered employers deducting tax at source, on payments
made to contractors, who are required to file returns in Form No. 405 shall pay
the TDS amount by DDs only.

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VAT Audit Report for the year 2007-08 can be in Old Form or New Form.

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Part B :
INDIRECT TAXES


MVAT Update

MVAT Circulars

31 VAT Audit Report for the year 2007-08 can
be in Old Form or New Form.

Trade Circular 41T of 2008 dated 18-12-2008 :

Dealers have been allowed the option to file Form-704 in Old
Form or in New Form in respect of the (financial) year 2007-08. It has been
further clarified that even after 10th November, 2008 the Old Form No. 704 can
be filed in respect of the said year and that option is only for the year
2007-08. The Circular emphasises that the due date for filing Form 704 for the
year 2007-08, which is 31st January, 2009 will not be extended in any
circumstances. The Circular mentions that in the context of several important
issues raised by the WIRC of ICAI and other professional organisations regarding
the New Form 704 seeking clarifications, the required clarifications will be
issued separately.

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TDS time limit under Rule 37A revised — Income-tax (Fourth Amendment) Rules, 2009 dated 21-1-2009.

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Part A : DIRECT TAXES


30 TDS time limit under Rule 37A revised —
Income-tax (Fourth Amendment) Rules, 2009 dated 21-1-2009.

The CBDT has amended Rule 37A pertaining to TDS returns for
non-residents. The TDS return, in case of tax deducted at source from payments
to non-residents, shall now be furnished on or before the 15th July, the 15th
October, the 15th January in respect of the first three quarters of the
financial year, and, on or before the 15th June, for the last quarter of the
financial year instead of the existing time-limit of fourteen days from the end
of each quarter.

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Depreciation on new commercial vehicles @ 50% : Income-tax (Third Amendment) Rules, 2009, dated 19-1-2009.

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Part A : DIRECT TAXES


29 Depreciation on new commercial vehicles @
50% : Income-tax (Third Amendment) Rules, 2009, dated 19-1-2009.

The CBDT has provided accelerated depreciation @ 50% to new
commercial vehicles which are acquired on or after 1-1-2009, but before
1-4-2009, and put to use before 1-4-2009.

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DTAA between India and Tajikistan notified — Notification No. 58/2009-FT and TR-II [F.No. 503/10/95-FT & TR-II], dated 16-7-2009.

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  1. DTAA between India and Tajikistan notified — Notification
    No. 58/2009-FT and TR-II [F.No. 503/10/95-FT & TR-II], dated 16-7-2009.
     

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Extension of time limit to file ITR V in case E-return filed without digital signature — Press Release, dated 13-8-2009.

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  1. Extension of time limit to file ITR V in case E-return
    filed without digital signature — Press Release, dated 13-8-2009.

In case an E-return has been filed which has not been
digitally signed, the ITR V needs to be sent via Ordinary Post to Bangalore
office within 30 days from the date of uploading such return. This time limit
of 30 days has been extended till 30 September 2009 or within 60 days from the
date of uploading, whichever is later.

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Finance Bill (No. 2) of 2009 gets Presidential Assent on 19 August 2009 — [Act No. 33 of 2009]

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  1. Finance Bill (No. 2) of 2009 gets Presidential Assent on 19
    August 2009 — [Act No. 33 of 2009]

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S. 264 and S. 246A — Appeal against assessment made consequent to order passed u/s.264 is maintainable u/s.246A, but only to the extent of issues which have not attained finality in order passed u/s.264.

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38 Dr. A. Naresh Babu v.
ITO
(2010) 124 ITD 28 (Hyd.)
A.Ys. : 1996-97 to 2003-04. Dated : 5-9-2008


 


S. 264 and S. 246A — Appeal against assessment made
consequent to order passed u/s.264 is maintainable u/s.246A, but only to the
extent of issues which have not attained finality in order passed u/s.264.


Facts :

The assessee’s case was scrutinised and the Assessing Officer
passed the assessment order. The assessee filed an appeal before the CIT(A).
Later on the appeal filed before the CIT(A) was withdrawn. Thereafter the
assessee filed petition before the CIT seeking revision u/s.264. The CIT set
aside the assessments and restored the matter with certain directions on various
issues to the Assessing Officer to re-do the assessments afresh. The Assessing
Officer completed the assessment afresh.

Being aggrieved by the additions made by the Assessing
Officer in the fresh assessment, the assessee preferred appeal before the
CIT(A). The CIT(A) held that the assessments made in consequence to the order
passed by the CIT, particularly when the assessee’s case has been decided
u/s.264 on merits, cannot be subject matter of appeal before the CIT(A).

Held :

Appeal from fresh order passed by the Assessing Officer to
give effect to the revisional order passed u/s.264 is maintainable, but only
such issues can be taken in appeal which have not attained the finality in the
order passed u/s.264 of the Act.

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Persons marketing lottery tickets exempted — Notification No. 50/2010-ST, dated 8-10-2010.

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Part B : INDIRECT TAXES


SERVICE TAX UPDATE

23. Persons marketing lottery tickets exempted — Notification
No. 50/2010-ST, dated 8-10-2010.

Persons appointed or authorised by the lottery organising
State for marketing lottery tickets, would be exempted from service tax if the
distributor or selling agent avails of optional composition scheme notified vide
Notification No. 49/2010-ST, dated 8-10-2010 in respect of such lottery during
the financial year.

 

 

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Optional Composition Scheme for Distributor/Selling Agent of Lottery Notification No. 49/2010-ST, dated 8-10-2010.

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Part B : INDIRECT TAXES


 

SERVICE TAX UPDATE

22. Optional Composition Scheme for Distributor/Selling Agent
of Lottery Notification No. 49/2010-ST, dated 8-10-2010.

Under the lottery or lottery scheme, where the guaranteed
prize payout is more than 80%, a distributor or selling agent can opt to pay
flat service tax of Rs.6000 and where the guaranteed prize payout is less than
80%, he can opt to pay flat service tax of Rs.9000, on every Rs.10 lakh of
aggregate face value of lottery tickets printed by the organising State for a
draw.

Such option will have to be exercised within one month of the
beginning of each financial year (for F.Y. 2010-11 by 7-11-2010) for the entire
financial year. A new service provider can exercise such option within one month
of providing such service.

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Profession Tax — E-Services Enrolment/Registration

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Part B : INDIRECT TAXES


 

PROFESSION TAX UPDATE

21. Profession Tax — E-Services Enrolment/Registration

Procedure and instructions for E-Services
Enrolment/Registration for Profession Tax RC holders (PTRC) displayed on sales
tax website.

Trade Circular has not yet been issued.

The Department through this instruction has specified the
procedure and has required all the employers paying profession tax, to register/enrol
for PTRC e-services immediately and latest by 31st December, 2010. This
enrolment process is not meant for PTEC holders.

Facility of e-return filing would be extended to PTRC holders
and thereafter e-payment facility.

 

 

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Press Release by the Press Information Bureau, Government of India, dated February 11, 2010

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55 Press Release by the Press Information Bureau,
Government of India, dated February 11, 2010

Review of cases requiring prior approval of the
Foreign Investment Promotion Board

The Cabinet Committee on Economic Affairs (CCEA)
has taken the following decisions with regard to cases of foreign investment
requiring prior government approval.

Presently, proposals with total project cost of up
to Rs. 600 crores require approval from the Finance Ministry, and proposals with
total project cost of up to Rs. 1,200 crores require approval from the CCEA.
Henceforth, only proposals involving total foreign equity inflow of more than Rs.
1,200 crores will require CCEA approval. And the Finance Ministry, based on the
recommendations of the FIPB, will consider proposals with total foreign equity
inflow of up to Rs. 1,200 crores.

In the following cases where prior approval of FIPB / CCEA
for making the initial foreign investment was taken, fresh approval will not be
required to be obtained from the FIPB / CCEA:

1. Cases of entities whose activities had earlier required
prior approval of FIPB / CCFI / CCEA, and who had, accordingly, earlier obtained
prior approval of FIPB / CCFI / CCEA for their initial foreign investment but
subsequently where such activities/sectors have been placed under the automatic
route.

2. Cases of entities whose activities had sectoral caps
earlier and who had, accordingly, earlier obtained prior approval of FIPB / CCFI
/ CCEA for their initial foreign investment, but subsequently where such caps
were removed or increased and the activity placed under the automatic route.

3. Cases where prior approval of FIPB / CCFI / CCEA had been
obtained with reference to activities / sectors requiring prior approval and
also from the angle of provisions of Press Note 18/1998 or Press Note 1 of 2005.


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A. P. (DIR Series) Circular No. 33, dated February 09, 2010

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54 A. P. (DIR Series) Circular No. 33, dated
February 09, 2010

External Commercial Borrowings (ECB) Policy –
Liberalisation

Presently, any change in the terms and conditions
of ECB after obtaining Loan Registration Number (LRN) requires prior permission
from the RBI.

This circular has delegated powers to authorized
banks, with immediate effect, to approve requests for changes in the following
cases, subject to specified conditions:

a) Changes / modifications in the drawdown /
repayment schedule

Changes / modifications in the drawdown / repayment
schedule of the ECB already availed, both under the approval and the automatic
routes, may be permitted subject to the condition that the average maturity
period, as declared while obtaining the LRN, is maintained. The changes in the
drawdown / repayment schedule should be promptly reported to the DSIM, Reserve
Bank through Form 83. However, any elongation / rollover in the repayment on
expiry of the original maturity of the ECB would require the prior approval of
the Reserve Bank.


b) Changes in the currency of borrowing

Change in the currency of borrowing, if so desired,
by the borrower company, in respect of ECB availed of both under the automatic
and the approval routes, may be permitted subject to all other terms and
conditions of the ECB remaining unchanged. Designated AD banks should, however,
ensure that the proposed currency of borrowing is freely convertible.

c) Change of the AD bank

Change of the existing designated AD bank by the
borrower company for effecting its transactions pertaining to the ECB may be
permitted subject to a No-Objection Certificate (NOC) from the existing
designated AD bank, and after due diligence.

d) Changes in the name of the borrower company

Changes in the name of the borrower company may be
permitted subject to production of supporting documents evidencing the change in
the name from the Registrar of Companies.


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A. P. (DIR Series) Circular No. 30, dated February 01, 2010

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53 A. P. (DIR Series) Circular No. 30, dated
February 01, 2010

Export and Import of Currency

Notification No. FEMA 195 / 2009-RB, dated July 7,
2009

Presently, a resident individual who is going on a
temporary visit outside India (other than to and from Nepal and Bhutan) is
permitted to take or bring back Indian currency notes issued by the Government
of India or RBI not exceeding Rs. 5,000.

This circular has raised this limit to Rs. 7,500.
Accordingly, a resident individual who is going on a temporary visit outside
India (other than to and from Nepal and Bhutan) is permitted to take or bring
back Indian currency notes issued by the Government of India or RBI not
exceeding Rs. 7,500.


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A. P. (DIR Series) Circular No. 28, dated January 25, 2010

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52 A. P. (DIR Series) Circular No. 28, dated
January 25, 2010

External Commercial Borrowings (ECB) Policy

Presently, eligible borrowers in the
telecommunications sector can avail of ECB for the purpose of payment for
spectrum allocation, under the automatic route.

This circular has made a one-time relaxation in the
end-use conditions of the ECB policy. As a result, successful bidders can
initially pay for spectrum allocation out of Rupee funds and can subsequently
avail ECB under the approval route to refinance the Rupee payments. This is
subject to the following conditions:

1. The ECB should be raised within 12 months from
the date of payment of the final instalment to the government.

2. The designated AD – Category I bank must
monitor the end-use of funds.

3. Banks in India cannot provide any form of
guarantees.

4. All other conditions of ECB, such as eligible
borrower, recognized lender, all-in-cost, average maturity, etc., will have to
be complied with.


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Procedure for allowing refund of excess credit to exporters made friendly :

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51 Procedure for allowing refund of excess credit to
exporters made friendly :

Circular No. 120/01/2010-ST dated the 19th January, 2010

By this Circular, procedure for granting refund of excess
credit has been made easy and the Department has been instructed to dispose all
pending claims in accordance with instructions contained in this Circular.

In the background, this Circular gives details of feedback
and representations received at meetings held with the refund sanctioning
authorities about the causes of delays in granting refund of excess credit to
exporters and the manner in which existing Notification No. 5/2006-CE(NT) dated
14.03.2006 is implemented by the Department and thereafter on consideration of
such feedback by this Circular instructions have been issued as follows :

(1) There cannot be different yardsticks for establishing
the nexus for taking of credit and for refund of credit. Even if different
phrases are used under different rules of CENVAT Credit Rules, they have to be
construed in a harmonious manner. The phrase “used in” mentioned in the
Notification to show nexus should be interpreted in a harmonious manner. The
test to be applied to check whether nexus exists or not is that in case the
absence of input/input service adversely impacts quality and efficiency of
provision of service exported, it should be considered as eligible input or
input service for taking credit.

(2) To address similar problems of co-relation and scrutiny
of a large number of documents faced in another scheme, Finance Act, 2009
(Notification No. 17/2009-ST) had provided for the procedure of
self-certification of invoices about the co-relation and nexus between
inputs/input services and exports by the exporter or by the Chartered
Accountant. To follow similar procedure here also, the exporters are also
advised to provide a duly certified list of invoices and the departmental
officers are only required to make a basic scrutiny of the documents and, if
found in order, sanction the refund within one month.

The exporter should, along with the refund claim, file a
declaration in the prescribed manner as notified in this Circular.

(3) Sometimes, it is possible that during certain quarters,
there may not be any exports and therefore the exporter does not file any
claim though he receives inputs/input services during this period. In this
regard, the Board has clarified that since no bar is provided in the
notification, there should not be any objection in allowing refund of credit
of the past period in subsequent quarters.

(4) In case of incomplete invoices, the Department should
take a liberal view in view of various judicial pronouncements by Courts i.e.
invoices are incomplete but are complying with Rule 5 which provides, (i) so
far as the nature of the service which has been received by the exporter can
be ascertained; (ii) tax paid therein is clearly mentioned; and (iii) other
details as required under rule 4(a) are mentioned, the refund should be
allowed if the input service has a nexus with the services/goods exported as
discussed earlier.


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Electronic Payment under MVAT Act, 2002 and CST Act, 1956:

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50 viii. Electronic Payment under MVAT Act, 2002 and CST Act,
1956:

Circular No.8T of 2010. Dated 06/02/2010

Procedure for optional E-payment of MVAT and CST has been
explained and the same is also placed on the Website of the Department.

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Clarification regarding Schedule Entry C-70 – Paper:

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49 vii. Clarification regarding Schedule Entry C-70 – Paper:

Circular No.7T of 2010. Dated 03/02/2010

Scope of Schedule Entry C-70 was earlier clarified by
Circular No.35-T of 2005 and Circular No. 1-T of 2006 but in consideration of
representations now, the said Circulars are withdrawn and from the date of
issuance of this Circular, the Scope of the said Schedule Entry C-70 covering
various types of papers has been clarified.

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Penalty w.r.t. Revised Return under MVAT Act :

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48 vi. Penalty w.r.t. Revised Return under MVAT Act :

Circular No.6T of 2010. Dated 02/02/2010

Since as per the periodicity determined by the Department,
date of filing of revised return has been extended from 31st January, 2010 to
15th March, 2010. Therefore, if the revised return is filed by 15th March, 2010,
penalty u/s.sec 29 (8) of MVAT Act, 2002 will not be levied.

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Extension of date for Submission of Audit Report for the year 2008-09:

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47 v. Extension of date for Submission of Audit Report for
the year 2008-09:

Trade Circular No.5T of 2010 Dated 28/01/2010

The last date for submission of Audit Report in Form-704 for
the period 2008-09 has been extended from 31st January, 2010 to 31st March, 2010
and statement of submission along with requisite documents would have to be
submitted by 10th April 2010.

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Filing of Audit Report in Form-704 for the periods 2005-06, 2006-07 and 2007-08:

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46 iv. Filing of Audit Report in Form-704 for the periods
2005-06, 2006-07 and 2007-08:

Trade Circular No.4T of 2010. Dated 18/01/2010

Earlier by Circular No. 27T of 2009 filing of MVAT Audit
Report after 01/10/2009 for any period was to be by E-Form and in new Form No.
704 only. By this Circular, it has been clarified that the dealer will have an
option to file Audit Report in Form – 704 in old format physically for the
periods 2005-06, 2006-07, 2007-08.

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Refund under MVAT and Bank Guarantee:

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45 iii. Refund under MVAT and Bank Guarantee:

Trade Circular No.3T of 2010, Dated18/01/2010

Parameters to be applied to different categories of dealers
willing to submit bank guarantee for early refund have been revised by this
Circular.

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Tax Treatment of Goods sent to other States:

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44 ii. Tax Treatment of Goods sent to other States:

Trade Circular No.2T of 2010, Dated 11/01/2010

Referred Trade Circulars issued explaining scope of section
6A of CST Act, 1956

In view of the Hon’ble Supreme Court judgment in case of M/s
Ambica Steels Ltd. vs. State of Uttar Pradesh (24 VST 356) upholding
applicability of mandatory F Forms to non-sale transactions like job work even
in respect of transactions from principal to principal basis, it is now
clarified by this Circular that F forms are mandatory for all transactions of
inter-state transfers (not by way of sale), including job work and goods return.
Consequently, Trade Circular 16T of 2007 dated 20th February 2007 and Trade
Circular 5T of 2009 dated 29th January 2009 are withdrawn.

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Press Note 7 (2008) No. 5(10)/2006-FC, dated 16-6-2008 — Consolidated Policy on Foreign Direct Investment.

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Part C : RBI/FEMA


The Reserve Bank of India has issued 3 Circulars. The DIPP
has issued 1 Press Note.

 

61 Press Note 7 (2008) No. 5(10)/2006-FC,
dated 16-6-2008 — Consolidated Policy on Foreign Direct Investment.

This Press Note contains a summary of the FDI policy and regulations
applicable to various sectors and activities. The Press Note has incorporated
policy changes up to March 31, 2008.

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A.P. (DIR Series) Circular No. 1, dated 11-7-2008 —Security for External Commercial Borrowings — Liberalisation.

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Part C : RBI/FEMA


The Reserve Bank of India has issued 3 Circulars. The DIPP
has issued 1 Press Note.


60 A.P. (DIR Series) Circular No. 1, dated
11-7-2008 —Security for External Commercial Borrowings — Liberalisation.

Presently, RBI permission is required for creation of charge
on immovable assets, financial securities and issue of corporate or personal
guarantees, on behalf of the borrower in favour of the overseas lender, to
secure the ECB under automatic/approval route.

 

Through this circular RBI has delegated, subject to certain
terms and conditions, the power to grant ‘no objection’ under FEMA for creation
of charge on immovable assets, financial securities and issue of corporate or
personal guarantees, in favour of the overseas lender security trustee, to
secure the ECB to be raised by the borrower.

 

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A.P. (DIR Series) Circular No. 53, dated 27-6-2008 — Overseas Direct Investment by Registered Trust/Society.

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Part C : RBI/FEMA


The Reserve Bank of India has issued 3 Circulars. The DIPP
has issued 1 Press Note.


59 A.P. (DIR Series) Circular No. 53, dated
27-6-2008 — Overseas Direct Investment by Registered Trust/Society.

This Circular permits registered trusts and societies engaged
in manufacturing/educational sector to make investment in the same sector(s),
after obtaining prior approval of RBI, by way of joint venture or wholly-owned
subsidiary outside India. Application for permission has to be made in Form ODI.

 

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A.P. (DIR Series) Circular No. 52, dated 11-6-2008 — Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and the erstwhile USSR.

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Part C : RBI/FEMA


The Reserve Bank of India has issued 3 Circulars. The DIPP
has issued 1 Press Note.

 

58 A.P. (DIR Series) Circular No. 52, dated
11-6-2008 — Deferred Payment Protocols dated April 30, 1981 and December 23,
1985 between Government of India and the erstwhile USSR.

The Rupee value of the special currency basket has been fixed
at Rs.62.5198 with effect from May 23, 2008 as against the earlier value of
Rs.60.5828.

 

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Suspension of collection of taxes during Mutual Agreement Procedure under the India-Danish Double Taxation Avoidance Convention (DTAC) — Instruction No. 7/2008, dated 24-6-2008.

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Part A : DIRECT TAXES

57 Suspension of collection of taxes during
Mutual Agreement Procedure under the India-Danish Double Taxation Avoidance
Convention (DTAC) — Instruction No. 7/2008, dated 24-6-2008.

Competent authorities of India and Denmark have entered into
a Memorandum of Understanding to avoid the unintended hardship to the taxpayers,
as well as for efficient management of collection of revenue for the captioned
subject.

 

Summary of amendments made to the Finance Bill, at the time of
enactment.


The following are the important additional amendments which
were made to the Finance Bill, which have been passed by the Parliament and
enacted in the Finance Act, 2008 :



  • Exemption available u/s.10A and u/s.10B has been extended by one more year


  •  Relief is given u/s.40(a)(ia) for TDS on amounts provided/payments in March
    and paid after the due date of payment of TDS, but before the due date of
    filing the return of income would be allowable as a deduction in that previous
    year itself. It is in line with the deduction available u/s.43B of the Act.
    This amendment is retrospective with effect from A.Y. 2005-06


  • Due date for obtaining the tax audit report has been pre-poned to 30 September


  • For eligibility of deduction u/s.80-IB, if an undertaking begins refining of
    mineral oil on or after April 1, 2009, deduction will be allowed to such
    undertaking only if the following conditions are satisfied :



  • It is wholly owned by a public sector company or any other company in which
    a public sector company or companies hold at least 49% of the voting rights


  • It is notified by the Central Government before June 1, 2008


  • It begins refining during April 1, 2009 and March 31, 2012



  • Since an amendment is made in S. 115JB for addition of deferred tax liability,
    similar adjustment has been provided for a credit in the deferred tax asset
    created during the previous year


  • Notice for scrutiny assessment for Fringe Benefit Tax u/s.115WE shall be
    served on the assessee within a period of 6 months from the end of the
    financial year in which return is furnished. This amendment is applicable from
    April 1, 2008


  • AOP/BOI have been made liable to TDS provisions u/s.194-C if they are subject
    to tax audit


  • Certain powers have been given to the Commissioner of Income-tax (Appeals) in
    case of an appeal filed against the assessment order in respect of which the
    proceeding before the Settlement Commission abates u/s.245HA. Similar
    amendment has been provided under the Wealth-tax Act also.


  • S. 292BB has been inserted, wherein if the assessee appears for proceedings, it
    would be deemed that the Notice has been duly served on him as per the provision
    of the Act. Consequently, claims of objection for the notice not served or
    served late, etc., would be precluded. However, in case the assessee has filed
    such an objection and then appeared for the proceedings, the provisions of S.
    292BB would not apply.
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Clarifications from CBDT regarding filing of returns of income for the assessment year 2008-09 — Circular No. 6/2008, dated 18-7-2008.

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Part A : DIRECT TAXES


56 Clarifications from CBDT regarding filing
of returns of income for the assessment year 2008-09 — Circular No. 6/2008,
dated 18-7-2008.

It has been reiterated by the Board that no annexures need to
be filed with the return of income for the captioned assessment year. It has
been emphasised that the CCIT needs to look into strict compliance of this rule.
TDS/TCS, Advance Tax and Self-Assessment Tax credit would be given on the basis
of the details filed in the return of income, subject to relevant instructions
on verification of TDS claims. However, the assessees are advised to retain all
the annexures, which otherwise would have been filed with the return of income.

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Clarifications from CBDT regarding e-payment of taxes — Circular No. 5/2008, dated 14-7-2008.

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Part A : DIRECT TAXES


55 Clarifications from CBDT regarding
e-payment of taxes — Circular No. 5/2008, dated 14-7-2008.

It has been clarified by the Board that in instances where
the taxpayer does not have a bank account, taxes can be paid from some other
person’s bank account. However, the challan should clearly reflect the PAN of
the person whose tax has been paid. Further, it has been clarified that the
rules for e-payment would apply to tax deducted at source and tax collected at
source.

 

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Implications of non-availability of PAN of the payee with effect from 1 April 2010 – Press Release No.402/92/2006-MC (04 of 2010) dated 20 January 2010

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40 Implications of non-availability of PAN of the payee with
effect from 1 April 2010 – Press Release No.402/92/2006-MC (04 of 2010) dated 20
January 2010


CBDT re-iterates the amendment with effect from 1 April 2010
pertaining to TDS at higher rate in absence of PAN of the payee. Further, the
certificate for lower / non deduction of tax at source would not be given
without PAN mentioned in the application. The law will apply to all including
non-resident assessees. PAN needs to be quoted in all the correspondences,
bills, vouchers and other documents sent to each other by deductor and deductee.

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Advance Fringe Benefit Tax paid to be treated as advance income tax for the FY 2009-2010 – Press Release No. 402/92/2006-MC (07 of 2010) dated 29 January 2010

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39 Advance Fringe Benefit Tax paid to be treated as advance
income tax for the FY 2009-2010 – Press Release No. 402/92/2006-MC (07 of 2010)
dated 29 January 2010


The CBDT has clarified vide the aforementioned Press Release
that advance tax paid in respect of fringe benefits would be treated as advance
income tax and accordingly, can be adjusted against the advance income tax
liability. The additional FBT advance tax if paid, can be claimed as a refund
while filing the tax return.

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Sanction and disbursement of Industrial Promotion Subsidy (IPS) to Mega Projects and Non-Mega Projects under PSI-2001 & PSI-2007, Reconciliation of IPS by Sales Tax Department & Procedure to be followed by the Department.

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Part B : INDIRECT TAXES


51 Sanction and disbursement of Industrial
Promotion Subsidy (IPS) to Mega Projects and Non-Mega Projects under PSI-2001 &
PSI-2007, Reconciliation of IPS by Sales Tax Department & Procedure to be
followed by the Department.

Trade Circular 8T of 2009, dated 7-2-2009 :


  • In this Circular detailed procedure has been laid down for sanction and
    disbursement of the IPS as per two Government Resolutions No.
    PSI-2108/CR-36/Ind-8, dated the 3rd December 2008 and No.
    PSI-2108/CR-s278/Ind-8, dated the 4th December 2008.


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Take evidences to the bank while making payments.

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Part B : INDIRECT TAXES


50 Take evidences to the bank while making
payments.

Trade Circular 7T of 2009, dated 5-2-2009 :

Dealers should carry photocopies of TIN Certificate/TIN
Allotment Letter/E-services Enrolment Acknowledgment/Certificate of Registration
/Certificate of Enrolment/Courtesy Letter/Any Order issued by the Department
along with the returns/challans henceforth for verifying the relevant details
before recording entries.

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Mandatory Filing of E-returns.

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Part B : INDIRECT TAXES


49 Mandatory Filing of E-returns.

 

Trade Circular 6T of 2009, dated 30-1-2009 :

It has been now made mandatory for all dealers to file VAT
returns electronically. The Commissioner has advised dealers to file fresh,
revised returns for the previous defaulting period in the electronic form.

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Tax Treatment of Goods sent to other States.

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Part B : INDIRECT TAXES


48 Tax Treatment of Goods sent to other
States.

Trade Circular 5T of 2009, dated 29-1-2009 :




  • It appears that the question whether S. 6A deals only with transactions
    between agent and principal or whether it deals with transactions which are on
    a principal-to-principal basis was not raised before the decision dated 17th
    August 2007 in the case of M/s. Ambica Steels Ltd. v. the State of Uttar
    Pradesh     (All.) It is, therefore, decided that in such cases, declaration
    in Form F will be issued as per normal procedure.



  • There is no change in the views expressed in Trade Cir. 16T of 2007, dated
    20th February 2007 that S. 6A will have no application as regards transactions
    on principal-to-principal basis.



  • In the aforesaid Trade Circular dated 20th February 2007, a view has been
    taken that when goods are sent to another State for job work or for
    manufacturing, etc., the transaction will normally be on a principal to
    principal basis with an independent operator and not on a principal to agent
    basis.



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Enrolment for E-services.

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Part B : INDIRECT TAXES


47 Enrolment for E-services.

 

Trade Circular 4T of 2009, dated 23-1-2009 :




  • E-enrolment has been made mandatory for all dealers.



  • Copy of the acknowledgement of E-enrolment generated by computer system will
    have to be submitted to the Department.



  • Procedure for E-enrolment is explained in this Circular.



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Submission of Audit Report — Form No. 704 for the year 2007-08 extended up to 2-3-2009.

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Part B : INDIRECT TAXES


MVAT CIRCULARS

46 Submission of Audit Report — Form No. 704
for the year 2007-08 extended up to 2-3-2009.

Trade Circular 3T of 2009, dated 23-1-2009 :




  • Extension is given for submission of Audit Report in respect of the period
    2007-08 up to 2nd March 2009 with a condition that the dealer will have to
    submit copy of an acknowledgement of e-enrolment along with Audit Report.



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Procedure for online submissions for the statutory Forms C/F/H/E I/E II under the CST Act, 1956 : Trade Circular 2T of 2009, dated 23-1-2009 :

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Part B : INDIRECT TAXES


MVAT CIRCULARS

45 Procedure for online submissions for the
statutory Forms C/F/H/E I/E II under the CST Act, 1956 : Trade Circular 2T of
2009, dated 23-1-2009 :




  • Online applications for CST Declarations C/F/H/E I/E II made applicable
    to all locations of Central Repository Offices in the State from 2nd February
    2009.



  • The new procedure provides time-bound programme for decisions of approval,
    rejection, etc. via e-mail or sms within 7 working days and thereafter the
    dealer should get declaration in another 10 days by post or courier. The new
    procedure is available for the declarations pertaining to period from 1-4-2008
    onward.



  • Applications for prior periods would be administered as per the existing
    manual system and such application shall be made prior to 31-3-2009.
    Declarations for prior periods shall not be issued after 31-3-2009.



  • No change in the procedure for cancellation, rectification and issuance of
    duplicate declarations.



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Adjudication of cases by Chief Commissioners Central Excise — Notification No. 6/2009 — Service Tax, dated 30-1-2009.

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Part B : INDIRECT TAXES


SERVICE TAX UPDATE

44 Adjudication of cases by Chief
Commissioners Central Excise — Notification No. 6/2009 — Service Tax, dated
30-1-2009.

The powers exercisable by the Central Board of Excise and
Customs under the provisions of S. 83A read with the Notification of the
Government of India in the Ministry of Finance (Department of Revenue) No.
16/2007-ST, dated 19th April 2007 [G.S.R. No. 303(E) dated the 19th April 2007],
shall also be exercised by the Chief Commissioner of Central Excise for the
purpose of assigning the adjudication of cases, under the provisions of the said
Finance Act or rules made thereunder, within his jurisdiction.

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