TMI Tax Updates - e-Newsletter
January 5, 2012
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
TMI SMS
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: Financial inclusion is the process of providing financial services and credit access to vulnerable and low-income groups at an affordable cost. It aims to overcome financial exclusion, which affects rural and urban poor due to unavailability, high costs, or lack of awareness of financial services. Banks play a crucial role in promoting financial inclusion by offering no-frills accounts, simplified credit facilities, and leveraging technology for better outreach. The Reserve Bank of India (RBI) has initiated various measures, including the use of business correspondents and electronic benefit transfers, to enhance financial inclusion. This effort is essential for inclusive growth and sustainable development, requiring collaboration among stakeholders and innovative approaches to reach underserved populations.
By: DEVKUMAR KOTHARI
Summary: The article discusses the complexities of tax laws and the need for limits on rectification, revision, and reassessment proceedings to prevent unnecessary litigation and harassment. It highlights that different interpretations of tax laws can lead to varied rulings and emphasizes that a view favorable to the taxpayer should be adopted. The article criticizes audit objections as a source of unnecessary litigation and suggests setting monetary thresholds for initiating proceedings. It stresses the importance of proper guidelines to avoid unwarranted actions and calls for checks to prevent unjust assessments. A recent Delhi High Court case illustrates the issue of reopening assessments based on changes in opinion.
News
Summary: The Consumer Protection (Amendment) Bill, 2011, introduced in India aims to expedite case resolution and broaden the Act's scope. Key proposals include enabling online filing and fee payment for complaints, enforcing orders as civil court decrees, and imposing penalties for non-compliance. The amendments empower District Forums to operate beyond district headquarters and grant them authority to award interest for prolonged litigation. The bill also revises the appointment criteria for commission members, enhancing age and experience requirements, and allows commissions to enlist experts for significant consumer interest cases. The Central Government will monitor pending cases to improve the system's efficiency.
Summary: India and Saudi Arabia's trade reached $25.6 billion in 2010-11, marking a significant increase from $15.9 billion in 2006-07. Exports from India to Saudi Arabia grew to $5.2 billion, with key items including petroleum products, basmati rice, and machinery. Imports from Saudi Arabia, primarily crude oil and chemicals, rose to $20.4 billion. India imports nearly 23% of its crude oil from Saudi Arabia. The focus is now on enhancing trade and services through investment and joint ventures. Both countries aim to elevate their relationship to strategic energy cooperation, with India seeking participation in Saudi petroleum and gas sectors.
Summary: The Ministry of Finance of India clarified that interest rates on small savings schemes are fixed at the time of investment and remain unchanged until maturity, except for the Public Provident Fund (PPF). This clarification addresses misconceptions that rates are floating and subject to change with government securities' yields. Any changes in interest rates will only affect new investments made after the revision date. For example, an investment made on December 1, 2011, will retain its interest rate until maturity, regardless of any rate changes from April 1, 2012. PPF rates, however, are updated annually for all accounts.
Summary: The Central Government of India has issued a notification to provide average service tax refund rates for goods exported from India, ranging from 0.03% to 0.20% of the F.O.B. value. This applies to 18 identified services used beyond the factory gate, as part of a simplified scheme announced by the Union Finance Minister in 2011. The service tax refunds will be processed through the Indian Customs EDI System, allowing direct credit to exporters' bank accounts, minimizing public interaction, and reducing transaction costs. Customs Officers are granted powers to facilitate this process, enhancing e-enabled service delivery for exporters.
Summary: The Government of India announced the re-issue of three government stocks through a price-based auction. These include the 7.83% Government Stock 2018 for Rs.4,000 crore, the 8.79% Government Stock 2021 for Rs.7,000 crore, and the 8.28% Government Stock 2032 for Rs.3,000 crore. The Reserve Bank of India will conduct the auctions on January 6, 2012, using a uniform price method. Up to 5% of the stocks are reserved for eligible individuals and institutions under a non-competitive bidding facility. Results will be announced on the same day, with payments due by January 9, 2012.
Notifications
Central Excise
1.
01/2012 - dated
3-1-2012
-
CE
Amends Notification No. 3/2006-Central Excise - Effective Rate of Duty on goods of Chapter 1 to Chapter 25.
Summary: The Government of India has issued Notification No. 1/2012-Central Excise, amending previous notifications related to the effective rate of duty on goods under Chapter 1 to Chapter 25. Specifically, Notification No. 03/2006-Central Excise is amended to include a new entry "11A" with goods under tariff headings 1701 13 20 and 1701 14 20, which are now exempt from duty. Similarly, Notification No. 6/2006-Central Excise is amended to include a new entry "14B" for goods under tariff heading 845290, also exempt from duty. These amendments are deemed necessary in the public interest.
Customs
2.
128/ 2011 - dated
30-12-2011
-
Cus
Amends notification no. 53/2011-Cus dated 1-7-2011 so as to effect HSN changes as well as to provide deeper tariff cut to Malaysia.
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 128/2011-Customs, amending Notification No. 53/2011-Customs dated July 1, 2011. This amendment, effective January 1, 2012, involves changes to the Harmonized System of Nomenclature (HSN) and provides a deeper tariff reduction for Malaysia. The amendment is made under the powers granted by the Customs Act, 1962, and is deemed necessary in the public interest. The revised notification is set to be published in the Gazette of India.
3.
127/ 2011 - dated
30-12-2011
-
Cus
Amends notification no. 46/2011-Cus dated 1-6-2011 so as to effect HSN changes as well as to provide deeper tariff cut to ASEAN nations.
Summary: Notification No. 127/2011-Customs, issued by the Government of India, amends the prior notification No. 46/2011-Customs dated June 1, 2011. This amendment, effective from January 1, 2012, incorporates changes to the Harmonized System of Nomenclature (HSN) and introduces deeper tariff reductions for ASEAN nations. The notification is executed under the powers granted by section 25 of the Customs Act, 1962, and is deemed necessary in the public interest. The changes include a substitution of the existing table in the original notification.
4.
126/2011 - dated
30-12-2011
-
Cus
Amends notification no. 116/2010-Cus dated 1-11-2010 (Special dispensation for Brunei Darussalam under ASEAN-India FTA).
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 126/2011-Customs, amending Notification No. 116/2010-Customs dated November 1, 2010. This amendment, effective from January 1, 2012, changes the customs duty rate from "2% ad valorem" to "1% ad valorem" for imports under the ASEAN-India Free Trade Agreement, specifically for Brunei Darussalam. This change is made under the authority of the Customs Act, 1962, and is deemed necessary in the public interest.
5.
125/2011 - dated
30-12-2011
-
Cus
Supersedes notification no 67/2006-Cus and 68/2006-Cus both dated 30-06-2006 and provides deeper tariff cuts to NLDCs (Srilanka & Pakistan) under SAFTA.
Summary: The notification dated December 30, 2011, issued by the Government of India under the Ministry of Finance, supersedes previous notifications from June 30, 2006, to provide deeper tariff cuts under the South Asian Free Trade Area (SAFTA) for imports from specified countries, including Sri Lanka and Pakistan. The notification exempts certain goods from customs duties exceeding specified rates, effective January 1, 2012. Importers must demonstrate the origin of goods from listed countries to benefit from these exemptions. The notification includes a comprehensive table detailing tariff cuts across various goods and categories, with specific exceptions outlined in an annexure.
6.
124/ 2011 - dated
30-12-2011
-
Cus
Amends notification no. 69/2011-Cus dated 29-07-2011 so as to effect HSN changes and to provide deeper cuts on two items namely tariff items 8408, 2020 and 870840.
Summary: The notification amends the previous notification No. 69/2011-Cus dated July 29, 2011, to implement changes in the Harmonized System of Nomenclature (HSN) and introduce deeper tariff cuts on two specific items, namely tariff items 8408, 2020, and 870840. Issued by the Ministry of Finance, Department of Revenue, under the Customs Act, 1962, the amendments are deemed necessary in the public interest. The changes are set to take effect from January 1, 2012.
7.
123/ 2011 - dated
30-12-2011
-
Cus
Amends notification no. 152/2009-Cus dated 31-12-2009 so as to provides deeper tariff cuts as agreed under India-Korea CEPA and effects HSN changes as well.
Summary: The Government of India has amended Notification No. 152/2009-Customs to implement deeper tariff cuts under the India-Korea Comprehensive Economic Partnership Agreement (CEPA) and to incorporate changes in the Harmonized System of Nomenclature (HSN). This amendment is issued under the authority of the Customs Act, 1962, and will take effect from January 1, 2012. The notification replaces the existing table in the original document and is part of the ongoing adjustments to customs tariffs and exemptions to align with international agreements and standards.
8.
122/ 2011 - dated
30-12-2011
-
Cus
Amends Notification No.151/2009-Customs, dated the 31st December, 2009 so as to effect HSN changes.
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has amended Notification No. 151/2009-Customs dated December 31, 2009, to incorporate changes in the Harmonized System of Nomenclature (HSN). The updated notification, No. 122/2011-Customs, effective from January 1, 2012, revises the table listing various goods under specific chapters, headings, sub-headings, or tariff items. The amendments aim to align with public interest considerations and involve a broad range of goods, including those under categories such as chemicals, textiles, machinery, and electronics.
9.
121 /2011 - dated
30-12-2011
-
Cus
Amends notification no. 28/1995-Cus dated 16-03-1995, 105/1999-Cus dated 10-08-1999, 26/2000-Cus dated 15-03-2000, 76/2003-Cus dated 13-05-2003, 72/2005-Cus dated 22-07-2005, 57/2009-Cus dated 30-05-2009 so as to effect HSN changes.
Summary: The Government of India, through the Ministry of Finance, issued Notification No. 121/2011-Customs on December 30, 2011, amending several prior customs notifications to incorporate changes in the Harmonized System of Nomenclature (HSN). The affected notifications include 28/1995, 105/1999, 26/2000, 76/2003, 72/2005, and 57/2009. These amendments involve substitutions of specific entries in the tables of these notifications to reflect updated HSN codes. The changes are set to take effect from January 1, 2012, ensuring compliance with updated international trade classification standards.
10.
ORDER F.No.437/72/2010-Cus. IV - dated
3-1-2012
-
Cus (NT)
Appointment of Common Adjudicating Authority
Summary: The Central Board of Excise & Customs has appointed the Commissioner of Customs (Import) at New Custom House, Ballard Estate, Mumbai, as the Common Adjudicating Authority for a Show Cause Notice issued to M/s SNS Enterprises and others. This appointment is made under the authority of Notification No. 15/2002-Customs (N.T.) and pertains to a notice issued by the Directorate of Revenue Intelligence, Mumbai Zonal Unit. The Commissioner was previously assigned a similar adjudication role in a related case involving the same parties.
Income Tax
11.
119/2011 - dated
19-12-2011
-
IT
Notification Under Section 35AC in respect of National Committee for Promotion of Social and Economic Welfare.
Summary: The Central Government, under Section 35AC of the Income-tax Act, 1961, has approved several institutions and their projects for tax deductions based on recommendations from the National Committee for Promotion of Social and Economic Welfare. The notification lists 31 institutions with their respective projects, estimated costs, and the maximum allowable deduction amounts for financial years 2011-12 to 2013-14. Projects include dementia care, vocational training, rural development, healthcare, and education for disadvantaged groups, with budgets ranging from Rs. 96 lakh to Rs. 17.73 crore. This notification is valid for three years, covering the specified financial periods.
Circulars / Instructions / Orders
Service Tax
1.
F. No. 137/21/2011 - dated
19-12-2011
Telecommunication service - Clarification on taxability in respect of International Private Leased Circuit (IPLC)
Summary: The circular addresses the taxability of International Private Leased Circuit (IPLC) services under the telecommunication service category as per the Finance Act, 1994. It clarifies that IPLC services are taxable only when provided by a licensed entity under the Indian Telegraph Act, 1985. Foreign telecom service providers are exempt from this taxability due to their inability to qualify as a telegraph authority under Indian law. The previous interpretation that IPLC services could be considered "business support services" is corrected, affirming their classification strictly as telecommunication services.
Highlights / Catch Notes
Income Tax
-
Airport Encroachment Removal Costs Classified as Revenue Expenditure Under Liability Provision.
Case-Laws - HC : Provision of liability made for expenditure to be incurred in removal of encroachments in and around the technical area of the Airport - held as revenue expenditure.... - HC
-
Taxpayers Can Choose Accounting System, But Must Comply with Section 145 Standards of Income Tax Act.
Case-Laws - HC : Assessee has right to adopt an accounting system of his choice. - Interference is permissible if the accounting system adopted is contrary to the prescribed accounting standards etc. under Section 145/145A of the Act..... - HC
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Court Rules No TDS Needed for Global Management Services, VSAT Uplinking Payments as Reimbursements.
Case-Laws - HC : TDS u/s 194J or 195 - global management services and VSAT uplinking - reimbursement of the expenses - no tax at source was deductible and the provisions of Section 40(a)(i) of the Act were not attracted. .... - HC
-
Voluntary Retirement Scheme: Payments Over Rs. 5 Lakhs Don't Automatically Violate Rule 2BA or Section 10(10A) Compliance.
Case-Laws - HC : Voluntary Retirement Scheme (VRS) u/s 35DDA - merely because payment of more than Rs. 5 lakhs is made would not mean that the schemes are not in conformity with Rule 2BA and the provisions of Section 10(10A) of the Act.... - HC
-
Payment to Vacate Property Can Offset Sale Proceeds for Capital Gains Tax, Court Rules.
Case-Laws - HC : Capital gains – payment made by the assessee for vacancy of the property had a link with the sale of property and, therefore, was entitled for set off against sale consideration.... - HC
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Unpaid Liabilities Not Income u/s 41(1) Despite Delays, High Court Clarifies.
Case-Laws - HC : Unpaid liabilities cannot be added as the assessee’s income under Section 41(1) merely because they remained unpaid for a sufficiently long time.... - HC
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Trust's School Deemed Commercial, Not Charitable; Revenue Wins Dispute on Tax Exemption Criteria.
Case-Laws - AT : The Revenue's principal objection is that the activities of the Trust, which are limited to running a School, is being run on commercial lines, so that there is no question of it being charitable - Decided in favor of revenue..... - AT
-
Road Construction Firms Ineligible for Section 80IB Tax Deduction, Not Considered Infrastructure Development.
Case-Laws - AT : Business of civil contracts for construction of roads, highways etc. - not engaged in the business of developing any infrastructure facility – Not eligible for deduction u/s 80IB .... - AT
-
Land Development Agreement Constitutes Transfer u/s 2(47)(v) of Income Tax Act, Court Rules on Ownership Rights.
Case-Laws - AT : The owners entered into land development agreement with the developer while retaining the ownership, assigned certain rights – Held as transfer u/s. 2(47)(v) of the I.T. Act..... - AT
-
Discounts to Collection Centers Not Subject to TDS u/s 194H; Not Considered Commission or Brokerage Payments.
Case-Laws - AT : TDS u/s 194H - Discount offered to Collection Centres for testing of samples - No TDS.... - AT
Indian Laws
-
Interest Rates on Small Savings Schemes in India Updated: Key Changes for Better Financial Planning Explained.
News : Clarification on Interest Rates on Small Savings Schemes.
Service Tax
-
Visa Facilitation Services Not Taxable u/s 65(105) of Finance Act, 1994.
Case-Laws - AT : Service provided by visa facilitator in the form of assistance to individuals who intend to travel abroad, directly, does not fall under any taxable service under Section 65(105) of Finance Act, 1994. .... - AT
-
Car Owned by Director, Not Company; Services Not Classified as Input for Appellant's Business.
Case-Laws - AT : Since the car is owned by an individual (director) and not by the appellant, the services rendered in relation to the car cannot be considered as input services for the appellants company..... - AT
-
Pre-commissioning civil work excluded from commissioning and installation category for service tax purposes.
Case-Laws - AT : Job for pre-commissioning - civil construction work performed does not fall under the category of commissioning and installation..... - AT
Central Excise
-
Refund of Cenvat Credit u/r 5: No Reduction Without Confirmed Demand Ensures Fair Taxpayer Treatment.
Case-Laws - AT : Refund of Cenvat credit - Rule 5 of CCR - in absence of any confirmed demand, reduction from the refund claim is not proper.... - AT
-
Appellant Can Claim CENVAT Credit for Service Tax on Courier Services for Business Operations, Rules Court.
Case-Laws - AT : since the Appellant could not have carried on his business without sending the samples to its dealers and prospective buyers and also without transmitting documents, cenvat credit of service tax paid on courier services allowed..... - AT
-
Electricity Usage Not a Valid Measure for Output Levels in Central Excise Cases; Direct Output Measures Preferred.
Case-Laws - AT : CE - electricity consumption is not the criteria to determine output level..... - AT
-
Excise Duty Rates Amended for Goods in Chapters 1-25 per Notification No. 1/2012-Central Excise, Effective January 3, 2012.
Notifications : Amends Notification No. 3/2006-Central Excise - Effective Rate of Duty on goods of Chapter 1 to Chapter 25. - Ntf. No. 1/2012-Central Excise Dated: January 3, 2012
Case Laws:
-
Income Tax
-
2011 (12) TMI 135
Validity of re-opening of assessment u/s 147/148 of the Act – assessee had not questioned the re-opening before the A.O. and the CIT – change in opinion of A.O. - Held that:- The relevant facts/materials were available before the tribunal, when the assessee raised the additional plea challenging the very initiation of re-assessment proceedings on the ground that the jurisdictional pre-conditions were not satisfied. No new or fresh evidence was adduced before the tribunal. If the jurisdictional pre-conditions are missing and are absent, the assessee can object and question the reopening in the appellate proceedings. Further, the tribunal has observed that no fresh material had come to the knowledge or information of the Assessing Officer after passing of the first assessment order. Therefore, this is a case of change of opinion as this issue in question was examined in the original assessment proceedings.- Decided against the Revenue
-
2011 (12) TMI 134
Addition on account of dis-allowance of interest and financial charges u/s 36(1)(iii) – Revenue contention that there is no co-relation between the utilization of borrowed funds and investments( selling off a segment of business to subsidiary & getting shares of it) made by it - Held that:- The Assessing Officer while disallowing the payment of interest and financial charges had failed to notice and given due credence to the fact that there was increase in interest payment this year, but the term loan and the credit facility had continued from the last year. Further, the assessee had declared a loss of Rs.1.88crs in the return filed for the assessment year in question. Lastly there are contradiction in the finding recorded by the Assessing Officer that involvement of the respondent in subsidiary company cannot be regarded as on account of business consideration.- Decided against the Revenue.
-
Service Tax
-
2011 (12) TMI 138
Power of the Commissioner (Appeals) to remand - export of IT software - refund claim under Rule 5 of CENVAT Credit Rules 2004 read with Notification No. 5/2006 dated 14.3.2006 on input services used in the export of output services – Held that:- The Commissioner (Appeals) has examined and found nexus between the input services (viz manpower recruitment, commercial training, management consultancy etc) and the output services. In effect, the Commissioner (Appeals) has not remitted any issue on merits to be decided by the original authority. It is basically for quantification purposes based on the Chartered Accountant's certificate as envisaged in the Board's Circular dated 19.1.2010. - Decided against the Revenue.
-
2011 (12) TMI 136
CENVAT Credit of Service Tax on rent-a-cab service - rent-a-cab service was not exclusively used in relation to manufacture – period involved April 2005 to October 2009 - Held that:- The issue is only of interpretation of law. However, the relevant decisions regarding limitation as well as admissibility of credit or otherwise, were not cited before lower authority and therefore, the matter is remanded to original adjudicating authority, who shall consider the issue afresh in the light of the decisions of the Supreme Court/High Court/Tribunal and also the provisions of law.
-
2011 (12) TMI 132
Power of the Commissioner (Appeals) to remand - export of IT software - refund claim under Rule 5 of CENVAT Credit Rules 2004 read with Notification No. 5/2006 dated 14.3.2006 on input services used in the export of output services – Held that:- The Commissioner (Appeals) has examined and found nexus between the input services( viz telcom service, security agency, chartered accountant service etc) and the output services. In effect, the Commissioner (Appeals) has not remitted any issue on merits to be decided by the original authority. It is basically for quantification purposes based on the Chartered Accountant's certificate as envisaged in the Board's Circular dated 19.1.2010. - Decided against the Revenue.
-
2011 (12) TMI 131
Refund of service tax to include education cess - Held that:- Board's Circular No. 134/3/2011-ST dated 8.4.2011 clarifies since Education Cess is levied and collected as percentage of service tax, when and wherever service tax is NIL by virtue of exemption, Education Cess would also be NIL. In view of the above, Order-in-Revision passed by the Commissioner to recover education cess from the refund granted on the ground that the exemption was only in respect of service tax and does not cover the education cess cannot be sustained.- Decided in favor of assessee.
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Central Excise
-
2011 (12) TMI 137
Manufacture of turpentine oil and rosin – assessee claimed nil rate of duty on the ground that the same are manufactured without the aid of power and also demands are time-barred - Held that:- Water is lifted to the water tank with the aid of power and the water so lifted is further used in the manufacture of final product, in view of the decision of the Supreme Court in CCE, Nagpur vs. Gurukripa Resins Pvt. Ltd. (2011 - TMI - 204457 - Supreme Court Of India) it is held that the goods are manufactured with the aid of power. Hence turpentine oil, is classifiable under Heading 3805.11 and rosin is classifiable under Heading 3806.11 of the Tariff. Further it is held that the demand beyond the normal period of limitation as provided under the provisions of Section 11A of the Central Excise Act are not sustainable hence set aside. Consequently, the demand for the normal period is confirmed and the Revenue's appeal is allowed to that extent.
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2011 (12) TMI 127
Classification of pleasure vessel – designed & registered as pleasure vessel - Casino and entertainment activity - Held that:- Vessel in question on one hand is classifiable as a cruise ship under heading 8901 and on the other hand it is classifiable as a vessel for pleasure under heading 8903. In such a situation the Rules for interpretation of the classification come into play. Since the Rule 1,2, & 3 (a) or (b) are not applicable in the present situation, it is found that under Rule 3(c) when the goods cannot be classified by reference to Rule 3 (a) & (b) they shall be classified under heading which occurs last in the numerical order among those which equally merit consideration. Therefore, it is more appropriately classifiable under heading 8903 of the Central Excise Tariff. Matter is remanded back to original authority for deciding issue relating to valuation of vessel, limitation whether there was any suppression of facts and imposition of penalty. - Decided in favor of Revenue
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