TMI Tax Updates - e-Newsletter
February 2, 2012
Case Laws in this Newsletter:
Income Tax
CST, VAT & Sales Tax
Articles
By: Dr. Sanjiv Agarwal
Summary: Service tax on site formation and clearance services was introduced by the Finance Act, 2005, effective from June 16, 2005. These services include drilling, soil stabilization, land reclamation, and demolition, but exclude activities related to agriculture and water sources. The tax applies to services provided for site preparation before construction or other activities. Exemptions are available for services related to infrastructure projects like roads and airports. The definition is broad, covering various preparatory activities, but excludes dredging and construction services, which are taxed separately. Providers of these services are liable for service tax.
By: Dr. Sanjiv Agarwal
Summary: The article discusses the scope of taxable services under "management, maintenance, or repair" as defined by various amendments to tax laws from 2003 to 2008. Initially, the service covered maintenance or repair of goods or equipment, excluding motor vehicles. Over time, it expanded to include management of properties and servicing of goods, including computer software. The definitions of "maintenance" and "repair" are explored through legal dictionaries, emphasizing their nuances. The article clarifies that while reconditioning and restoration of goods are taxable, these services for immovable properties are not subject to service tax under the specified law.
News
Summary: The Union Corporate Affairs Minister emphasized the importance of corporate culture aligned with good governance principles such as accountability, transparency, responsibility, and responsiveness. Speaking at the National CSR Conclave, he highlighted the role of Central Public Sector Undertakings (CPSEs) in promoting social activities, including employment for underprivileged groups and disaster relief. The Ministry of Corporate Affairs has introduced guidelines for CPSEs' CSR activities, defining them as commitments beyond statutory requirements. The Minister also discussed strategies for businesses to engage with the poor, leveraging their potential for innovation and entrepreneurship. The Planning Commission proposed PSUs establish higher education hubs to boost enrollment rates.
Summary: The Union Minister of Commerce, Industry, and Textiles addressed the World CEO Sustainability Summit, highlighting India's strides in sustainable development and corporate leadership in renewable energy. He emphasized the importance of adhering to the Kyoto Protocol and announced India's goal to reduce emission intensity by 20-25% by 2020. A new National Manufacturing Policy aims to create 100 million jobs by 2020, focusing on green technologies. The Minister noted that sourcing from MSMEs is beneficial for investors and confirmed that India-EU FTA negotiations are nearing completion. He also mentioned ongoing healthy trade with Iran, allowing for potential barter payment systems.
Summary: India aims to invest in Belarus's pharmaceutical sector to boost domestic production to 50% and seeks a long-term agreement for potash fertilizer supply. At the Fifth India-Belarus Inter-Governmental Commission session in Minsk, both countries discussed enhancing economic ties. India plans to expand cooperation in pharmaceuticals, fertilizers, IT, power, and agriculture. A joint venture in potash production and collaboration in IT and renewable energy were highlighted. The meeting emphasized the need for increased trade, aiming for $1 billion by 2015-16, and proposed a Joint Working Group to address trade issues. Belarus values India's economic partnership and seeks further collaboration.
Summary: The Finance Minister of India held a pre-budget consultation meeting with leading economists to gather suggestions for the upcoming budget. Economists emphasized the need for the budget to restore investor confidence in India's growth and suggested it should focus on fiscal consolidation and reducing populist expenditure. Recommendations included decontrolling diesel prices, increasing excise duty on diesel cars, and implementing direct cash transfers for subsidies. They also proposed clearing stalled mega projects, amending the APMC Act, and increasing investment in health, education, and infrastructure. Other suggestions included tax reforms, environmental incentives, and focusing on development in the northeast regions.
Summary: The Central Board of Excise and Customs (CBEC), under the Department of Revenue, has issued Notification No.10/2012-Customs (N.T.) dated January 31, 2012, announcing revised tariff values for certain commodities. The updated values include brass scrap at $4078 per metric tonne, poppy seeds at $2205 per metric tonne, gold at $556 per 10 grams, and silver at $1067 per kilogram. These changes are part of the government's regular review and adjustment of tariff values to align with market conditions. Other commodities such as various palm oils and crude soybean oil remain unchanged.
Summary: India's exports in December 2011 were valued at $25,015.89 million, marking a 6.71% increase from December 2010. From April to December 2011, exports totaled $217,663.66 million, a 25.84% growth compared to the previous year. Imports in December 2011 reached $37,753.36 million, a 19.81% rise from the previous year, with cumulative imports from April to December 2011 at $350,935.69 million, up 30.37%. The trade deficit for April-December 2011-12 was $133,272.03 million, higher than the $96,210.22 million deficit during the same period in 2010-11.
Summary: The Indian economy is projected to have an inflation rate between 6% and 7% and a growth rate above 7% by March 2012. In 2010-11, the GDP grew by 8.4%, with agriculture, industry, and services sectors showing varied growth rates. Savings and investment rates declined slightly. The Ministry of Finance anticipates a moderate economic upswing in 2012-13, supported by improved industrial performance, particularly in manufacturing. Credit growth to the manufacturing sector increased, and indicators like HSBC PMI and UBS LEI suggest strong conditions. Coal and cement production, along with electricity sector growth, also showed positive trends. Inflation moderation may boost investment.
Summary: The Finance Ministry of India has developed the Comparative Rating Index of Sovereigns (CRIS), a new index that evaluates sovereign credit ratings comparatively using Moody's ratings and GDP data from the IMF. This index ranks 101 economies over five years (2007-2011) to provide a relative investment attractiveness measure. India improved its CRIS score and ranking, moving from the fourth to the third quintile. European countries like Greece, Ireland, and Portugal saw significant declines in their CRIS scores. In contrast, countries like China, Brazil, and South Africa showed improvements. The index highlights shifts in global economic standings based on relative performance.
Summary: India and France are eager to finalize the India-EU Broad-based Trade and Investment Agreement (BTIA) negotiations promptly. The Indian Commerce Minister met with the French Foreign Trade Minister in Paris, emphasizing the need for a balanced agreement to enhance market access in goods and services. They also discussed the progress in bilateral trade and the potential for deeper economic ties. The Indian Minister invited French investment in sectors like automobiles, fashion, IT, pharmaceuticals, and energy. Additionally, the CEO of IKEA met with the Indian Minister, expressing interest in the Indian market and discussing the implications of the recent FDI policy changes.
Summary: The Indian Minister for Commerce, Industry, and Textiles has invited French luxury goods companies to establish manufacturing bases in India, highlighting the potential for increased French investment in the country. With India set to receive over US$ 100 billion in nuclear power sector investments in the next two decades, at least a quarter from France, the Minister emphasized the strong partnership between the two nations. He also encouraged French involvement in India's IT, automobile, and infrastructure sectors, citing successful examples like Capgemini and Renault. The Minister noted India's recent policy changes, such as allowing 100% FDI in single-brand retail, as opportunities for French companies.
Notifications
Customs
1.
10/2012 - dated
31-1-2012
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Cus (NT)
Amends Notification No. 36/2001-Customs(N.T) Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.
Summary: The Government of India, through the Ministry of Finance's Department of Revenue, has issued Notification No. 10/2012-Customs (N.T.) amending Notification No. 36/2001-Customs (N.T.). This amendment, effective from January 31, 2012, revises tariff values for specific goods under the Customs Act, 1962. The updated tables list tariff values for crude palm oil, RBD palm oil, palmolein, crude soybean oil, brass scrap, poppy seeds, gold, and silver. Notably, the values for palm oil, palmolein, and soybean oil remain unchanged, while new values are set for brass scrap, poppy seeds, gold, and silver.
Indian Laws
2.
F.7/9/2008-NS.II - dated
19-1-2012
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Indian Law
IT : PPF Scheme, 1968/Senior Citizens Savings Scheme Rules, 2004 - Notified branches of Central Bank of India authorized to receive, with immediate effect, subscriptions under said schemes.
Summary: The Central Government has authorized 111 branches of the Central Bank of India to accept subscriptions for the Public Provident Fund Scheme, 1968, and the Senior Citizens Savings Scheme Rules, 2004, effective immediately. These branches are located across various cities including New Delhi, Mumbai, Goa, and others. The authorization is subject to conditions such as remitting funds to the Government Account at RBI, CAS, Nagpur within three days, with penalties for delays. Compliance with scheme rules is mandatory, and non-compliance may result in penalties or de-authorization, with the bank bearing any financial liabilities from non-compliance.
Circulars / Instructions / Orders
FEMA
1.
73 - dated
31-1-2012
Opening of Diamond Dollar Accounts (DDAs).
Summary: The circular addresses all Category-I Authorized Dealer banks, instructing them to submit fortnightly data on Diamond Dollar Account (DDA) balances to the Reserve Bank of India's Foreign Exchange Department. This requirement, effective from January 31, 2012, mandates the submission within seven days after the fortnight's end. The circular maintains the existing terms and conditions from previous circulars dated February 13, 2009, and October 29, 2009. Issued under the Foreign Exchange Management Act, 1999, it requires banks to inform their clients about these directives.
Customs
2.
03/2012 - dated
1-2-2012
Classification of Fused Silica under Customs Tariff Act, 1975 - regarding.
Summary: The circular addresses the classification of 'Fused Silica' under the Customs Tariff Act, 1975, due to divergent practices in its classification. After discussions and expert consultation, it was determined that synthetically produced fused silica, primarily a type of glass, should not be classified under sub-heading 2506 or 28112200. Instead, it is classified under tariff item 32074000 for glass in powder, granules, or flakes form, and under 70023100 for glass in tube, rod, or unworked form. Instructions are given for field formations to finalize pending assessments based on this classification.
3.
F.No. 528/109/2011-STO (TU) - dated
30-1-2012
Implementation of The Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order 2009 – reg.
Summary: The circular from the Central Board of Excise & Customs, dated January 30, 2012, addresses the implementation of the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 2009. It clarifies that certain types of tyres, including specific commercial vehicle tyres, off-the-road tyres, run-flat tyres, and collapsible mini tyres, are not covered under this order. The document emphasizes that except for these exempted categories, no individual or entity is permitted to import, store, sell, or distribute pneumatic tyres that do not comply with the specified standards and lack the BIS Standard Mark.
Highlights / Catch Notes
Income Tax
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Extended Deadline for Capital Gain Account Deposits u/s 139(4) Validates Early Tax Returns.
Case-Laws - HC : Capital gain - period of limitation for deposit the amount in Capital Gain Account Scheme - Sub-Section (4) of Section 139 provides extended period of limitation as an exception to Sub-Section (1) of Section 139 of the Act. Sub-Section (4) is in relation to the time allowed to an assessee under Sub-Section (1) to file return. Therefore return filed by the assessee before the expiry of the year ending with the Assessment Year is valid under Section 139(4) of the Act..... - HC
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Car Dealer Expenses on Accessories for Customers Not Sale Promotion or Publicity u/s 115WB(2) for Tax Purposes.
Case-Laws - HC : Fringe Benefit Tax – car dealer - Expenditure incurred on accessories which were supplied to customers who have purchased cars cannot be treated as sale promotion including publicity expenses under clause (D) of Section 115WB(2)..... - HC
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Assessing Officer Must Use DVO's Valuation for LTCG if Lower Than Stamp Duty Value per Section 50C(2.
Case-Laws - AT : Capital gains – In view of the provisions of sub-section (2) of section 50C, if fair market value as assessed by the DVO is lower than the value adopted by Stamp Duty Authorities for collecting stamp duty then the value so adopted by DVO has to be adopted by the Assessing Officer for the purpose of computation of LTCG..... - AT
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Expenses for Black Rose Tennis Court Construction Allowed as Revenue Expenses u/s 37(1) of Income Tax Act.
Case-Laws - HC : Allowable u/s 37(1)- Whether the expenses incurred on construction of tennis court are allowable as revenue expenses or are capital in nature - the expenditure on Black Rose Tennis Court by the appellant firm is allowable u/s 37(1) of the Act .... - HC
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Tribunal Corrects Obvious Mistake in Stock Valuation; Decision Favors Assessee's Recorded Cost Price.
Case-Laws - HC : Unexplained Investment – The assessee had valued the stock at cost price. The cost price as recorded in the books was not rejected or adversely commented upon in the assessment order. Thus an obvious mistake has been corrected by the Tribunal – Decided in favor of assessee..... - HC
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Tribunal denies Section 43B deduction for interest on additional sales tax, overlooks Himachal Pradesh Sales Tax Act provisions.
Case-Laws - HC : Deduction u/s 43B in respect of interest paid on additional sales-tax - Tribunal rejected the claim on the ground that interest did not fall within the expression “any sum payable” used in Section 43B - Tribunal, not having considered the said provisions of Himachal Pradesh General Sales Tax Act has committed an error in law.... - HC
Customs
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Automotive Tyres and Tubes Quality Control Order 2009 Enforces Standards for Safety and Performance from January 2012.
Circulars : Implementation of The Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order 2009 – reg. - Cir. No. F.No. 528/109/2011-STO (TU) Dated: January 30, 2012
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Fused Silica Classification Clarified in Circular No. 03/2012 for Uniform Customs Tariff Application.
Circulars : Classification of Fused Silica under Customs Tariff Act, 1975 - regarding. - Cir. No. 03 / 2012 - Customs Dated: February 1, 2012
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Amendment to Tariff Values for Palm Oil, Palmolein, Crude Soybean Oil, Brass Scrap under Notification No. 10/2012-Customs(N.T.
Notifications : Amends Notification No. 36/2001-Customs(N.T) Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values. - Ntf. No. 10/2012 – Customs (N. T.) Dated: January 31, 2012
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EPCG Scheme: Cars Not Registered as Tourist Vehicles Still Qualify for Customs Duty Exemption Under Notification 44/2002.
Case-Laws - AT : Notification 44/2002 - EPCG Scheme - The facts that the cars were not registered as a tourist vehicle and the Appellants did not bill for the use of car separately cannot be fatal for claiming the customs duty exemption... - AT
FEMA
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Guidelines for Opening Diamond Dollar Accounts Under FEMA to Streamline Foreign Exchange for Diamond Exporters.
Circulars : Opening of Diamond Dollar Accounts (DDAs). - Cir. No. 73 Dated: January 31, 2012
Service Tax
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General Motors Dealer Not Taxed for Servicing Non-GM Vehicles Under Finance Act 1994, Section 65(9) Definition.
Case-Laws - AT : Authorized service station - authorised dealers of General Motors - also undertook the servicing of vehicles manufactured by the other manufacturers – services provided in respect of vehicle cannot be held to be taxable services in the light of the definition of the authorized service station appearing under section 65 (9) of Finance Act 1994.... - AT
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Government Insurance Business Liable for Service Tax; Not a Sovereign Act under Taxable Services.
Case-Laws - HC : Liability to pay Service tax by government authority undertaking Insurance business – Insurance business is not a sovereign act. - service tax would be leviable and it falls within the ambit of taxable service. .... - HC
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High Court Rules Service Tax Registration Not Required for Cenavt Refund on Software Exports; Supports Previous Case Laws.
Case-Laws - HC : Refund of Cenavt - Requirement of Service Tax Registration - Registration not compulsory for refund - Export of software not a taxable service still refund cannot be denied.... - HC
Central Excise
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High Court Rules: Interest Claims Limited to Same Period as Principal, Demand Beyond One Year Set Aside.
Case-Laws - HC : Period of limitation, unless otherwise stipulated by the statute, which applies to a claim for the principal amount should also apply to the claim for interest thereon. - Demand of interest beyond one year set aside.... - HC
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Central Excise Registration: Premises Change Deemed Minor Breach, Existing Registration Validated, Favoring Assessee. Department Directed.
Case-Laws - HC : Central Excise Registration - Change in premises - new address communicated - existing registration continue and no new registration sought - a technical or venial breach - Decided in favor of assessee with direction to department.... - HC
Case Laws:
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Income Tax
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2012 (2) TMI 8
Penalty u/s 271(1)(c) – dis-allowance of expenses on ground of non-deduction of tax at source u/s 40(a)(i) – Tribunal deleted the penalty levied by A.O. on ground that assessee has been able to justify and discharge the onus under Explanation 1 to Section 271(1)(c) - A.Y. 2000-01 – Held that:- In present case, assessee had contended that Section 40(a)(i) was not applicable as the words used were „tax has been paid or deducted . It is possible to submit that the amendment which came in 2004 was clarificatory in nature, but this is different from stating and holding that the assessee could not have raised the said plea or argued that the dis-allowance under the pre amended Section 40(a)(i) was not justified or mandatory. It is undisputed that TDS has been deducted and paid in the next A.Y. Assessee can in the penalty proceeding show and explain that interpretation was plausible and had merit, though was not accepted. Order of Tribunal deleting penalty is justified – Decided against the revenue.
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2012 (2) TMI 7
Composite sale - Capital Gains - Allocation of sale value towards land and the factory building – composite sale of Rs 17. 50 lacs – reference made to Departmental Valuation Officer on direction of Tribunal – DVO bifurcated sales and estimated sale consideration to be 21.42 lacs – A.O. computed capital gain taking sale consideration to be Rs 21.42 lacs and not Rs 17.50 lacs – Held that:- D.V.O. and A.O. was not required and permitted by the said order to examine the total sale consideration as the appellant in the present case had applied under Chapter XXC and the appropriate authority had accepted the sale consideration mentioned by the appellant. The sale consideration and the quantum thereof was never in question and need not be re-examined. Thus, the enhancement made by the A.O. was not justified and as per law – Decided in favor of assessee.
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2012 (1) TMI 100
Validity of reassessment proceedings – failure to issue notice u/s 143(2) within the period stipulated in the proviso to clause (ii) - effect of Section 292BB - petitioner had filed returns of income vide letter dated 19th November, 2009 in response of notice issued u/s 147/148, adopting their earlier returns u/s 139(1) – objections to the reopening were filed by petitioner on 13th July, 2010 and 19th July, 2010 and supplementary objections on 8th August, 2010 - A.O. issued notice u/s 143(2) on 23rd November, 2010 which is beyond the period of six months prescribed in the proviso to Section 143(2)(ii) - petitioner being foreign company, filed an application with the RBI for closure of their liaison office – NOC required from the Income Tax Department – Held that:- In the present case, the final assessment order has not been passed and only a draft assessment order u/s 144C has been passed. The proviso to section 292BB is applicable. The principle of estoppel u/s 292BB will, therefore, not apply. In respect of returns filed pursuant to notice u/s 148 after 1st October, 2005, it is mandatory to serve notice u/s 143(2), within the stipulated time limit. Thus, in present case, notice u/s 143(2) is deemed not to be served within the stipulated time. See ACIT vs. Hotel Blue Moon (2010 - TMI - 35251 - Supreme Court Of India. In view of the aforesaid position, reassessment proceedings should not continue as no notice u/s 143(2) was served on the assessee within the stipulated time. Accordingly, the writ petition is allowed and a Writ of Certiorari is issued quashing the assessment proceedings pursuant to the notices u/s 148. A Writ of Mandamus is issued to the Department to issue NOC to the petitioner as per the needs and requirements of the RBI within the stipulated time – Decided in favor of petitioner.
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CST, VAT & Sales Tax
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2012 (2) TMI 5
Bombay Sales Tax Act 1959 - whether sales made to vendee situated in the Mumbai High Region are sales in the course of export out of India – alternative contention of Revenue to tax it as local sale – assessee is a licensed manufacturer of Helium gas - sales of Helium gas to ONGC situated at Mumbai High – Held that:-Once the customs frontier stands extended to a territory, there can obviously be no export of goods to a territory which falls within the customs frontier. Thus, for period both before and after 15 January 1987, sale was not a sale in the course of export. See Aban Loyd Chiles Offshore Ltd & Anr. Vs Union of India & ors (2008 - TMI - 3611 - Supreme Court) Further, movement of goods from the State of Maharashtra to Mumbai High does not constitute a movement from one State to another State. Mumbai High does not form part of any State in the Union of India. Therefore it cannot be regarded as inter-state sale. In respect of treating it as local sale , we are firmly of the view that this issue did not arise out of the order of the Tribunal. The State has not sought to levy sales tax in the present case on the basis that there was a local sale. Having held that the State was not justified in bringing the sale to tax as a sale in the course of interstate trade and commerce, we are not called upon to decide any other hypothetical issue.
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