TMI Tax Updates - e-Newsletter
January 28, 2012
Case Laws in this Newsletter:
Income Tax
Articles
By: Dr. Sanjiv Agarwal
Summary: Section 67(2) of the Service Tax law stipulates that when the gross amount charged by a service provider includes service tax, the value of the taxable service is considered inclusive of service tax. This is supported by several judicial rulings, which have consistently held that if service tax is not separately collected, the gross amount received is treated as inclusive of service tax. The article discusses various cases where courts have reaffirmed this interpretation, emphasizing that the service tax liability should be recalculated accordingly. The discussion also touches upon the applicability of cum-tax valuation in reverse charge scenarios, highlighting uncertainties in such cases.
News
Summary: India has signed a Multilateral Convention on Mutual Administrative Assistance in Tax Matters, joining 31 other countries to enhance international tax cooperation. The Convention, originally for OECD and Council of Europe members, was amended in 2010 to include all countries, aiming to combat tax avoidance and evasion. It facilitates transparency, information exchange, and tax recovery assistance, allowing simultaneous tax examinations and participation across borders. The agreement supports automatic and spontaneous information exchange, document service, and use of tax information for countering money laundering. This initiative is expected to attract more signatories, broadening the network of tax cooperation.
Summary: The reduction of transaction costs has generated $450 million for exporters, as announced by a government official at the World Economic Forum in Davos. The official highlighted India's commitment to equitable and inclusive growth, emphasizing initiatives like the National Skill Development Mission and National Manufacturing Policy. The creation of National Investment and Manufacturing zones aims to establish world-class manufacturing hubs. The official stressed the importance of economic and political stability in South Asia and highlighted India's liberalization efforts, which have enhanced transparency and efficiency. Programs like Bharat Nirman aim to empower the poor and improve infrastructure, leveraging India's young demographic.
Summary: The Wholesale Price Index (WPI) for primary articles and fuel & power in India, for the week ending January 14, 2012, remained stable at 199.1 and 172.7, respectively. The annual inflation rate for primary articles decreased to 1.89% from 2.47% the previous week. Food articles saw a 0.3% increase due to rising prices of certain grains and milk, while non-food articles dropped by 1.5% due to lower prices of flowers and raw cotton. The minerals index rose by 0.7% due to increased prices of zinc concentrate and copper ore. The fuel & power index remained unchanged with an annual inflation rate of 14.45%.
Notifications
Customs
1.
CORRIGENDUM - dated
23-1-2012
-
Cus
Corrigendum of Notification no. 2/2012- Custom.
Summary: In the corrigendum to Notification No. 2/2012-Customs dated January 16, 2012, published by the Ministry of Finance, Department of Revenue, a correction is made in paragraph 2, sub-paragraph (i). The phrase "gold content not below" is amended to "gold content below." This change is officially recorded in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i). The document is issued by the Under Secretary to the Government of India, with reference number F. No. 354/4/2012-TRU.
Circulars / Instructions / Orders
Companies Law
1.
[F.No. 52/26/CAB-2010] - dated
24-1-2012
Section 233B of the Companies Act, 1956 - Audit of Cost accounts in certain cases - order under section 233B(1).
Summary: The Central Government mandates that companies engaged in specified industries with a turnover exceeding 100 crore rupees or those with listed securities must have their cost accounting records audited by a certified cost auditor. This applies to financial years starting on or after April 1, 2012, under the Companies (Cost Accounting Records) Rules, 2011. The specified industries include textiles, edible oils, packaged foods, chemicals, coal, mining, vehicles, plantation products, and engineering machinery. Previous company-specific audit orders are withdrawn, and compliance with industry-specific orders is required. Non-compliance may result in penalties as per the Companies Act, 1956.
Highlights / Catch Notes
Customs
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Corrigendum Issued for Notification No. 2/2012-Customs: Clarifies Errors and Updates for Accurate Implementation of Customs Regulations.
Notifications : Corrigendum of Notification no. 2/2012- Custom. - Ntf. No. CORRIGENDUM Dated: January 23, 2012
Corporate Law
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Companies Act Section 233B: Cost Account Audits Required for Specific Firms; 2012 Circular Updates Guidelines for Compliance.
Circulars : Section 233B of the Companies Act, 1956 - Audit of Cost accounts in certain cases - order under section 233B(1). - Cir. No. [F.No. 52/26/CAB-2010] Dated: January 24, 2012
Case Laws:
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Income Tax
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2012 (1) TMI 86
Contract Construction activity - Commissioner exercised revisionary powers u/s 263 on the ground that A.O. had not examined whether the assessee was following completion method or percentage completion method and whether the said expenditure could be claimed as an expense in the A.Y. in question - non-inquiry by the Assessing Officer with regard to squared up loans – Tribunal quashed the order of Commissioner on ground that expenditure would be allowed as assessee has commenced business activities – Held that:- There was error on the part of the A.O. in not making verification and inquiries, regarding both the aspects discussed aforesaid, which were required and the assessment order was prejudicial to the interest of the Revenue. The tribunal has completely ignored the said aspect and has proceeded on an entirely different basis which was not edifice and foundation of the order passed by the CIT u/s 263 of the Act. Order of Tribunal quashing CIT order is set aside – Decided in favor of Revenue.
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