TMI Tax Updates - e-Newsletter
April 2, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
By: rajavel calaimany
Summary: In the 2012-13 budget, it was clarified that only one cess would apply to imported goods, eliminating the CVD Cess and Customs Cess. Notifications No. 13/2012-CUS and 14/2012-CUS exempt these cesses, which were previously imposed under the Finance Acts of 2004 and 2007. Consequently, there will be no Education Cess (E.Cess) and Secondary and Higher Education Cess (SHE Cess) on imported goods. This exemption appears to be an unintended oversight by the Central Board of Excise and Customs (CBEC), suggesting a potential amendment might be forthcoming.
By: CSSwati Rawat
Summary: The 2012 budget introduced several amendments to tax deduction at source (TDS) and tax collection at source (TCS) regulations, effective from July 1, 2012. Key changes include an increase in TDS rates for non-resident entertainers to 20% and adjustments in TDS thresholds for interest on debentures and compulsory acquisition of immovable property. New sections were introduced, such as Section 194LAA, requiring a 1% TDS on certain property transactions, and Section 194LC, which reduces the tax rate on foreign currency borrowings to 5%. Amendments also clarified the responsibilities of tax deductors and introduced TCS on minerals and high-value bullion and jewelry sales.
By: CSSwati Rawat
Summary: The 2012 budget introduced several changes to income tax deductions. Under Section 80C, the deduction limit for life insurance premiums was reduced from 20% to 10% of the insured sum for policies issued after April 1, 2012. Section 80D allows a Rs. 5000 deduction for preventive health checkups, with payments in cash permitted for checkups but not for insurance. The senior citizen age for Sections 80D and 80DDB deductions was lowered to 60. Donations under Sections 80G and 80GGA have specific payment modes based on amount. Section 80TTA allows a Rs. 10,000 deduction for interest on savings accounts, excluding time deposits. The deadline for infrastructure project deductions under Section 80 IA(4)(iv) was extended to March 31, 2013.
By: DEVKUMAR KOTHARI
Summary: The Supreme Court upheld the dismissal of a judge from Jharkhand for not writing his own judgments, invoking Article 311(2)(b) of the Indian Constitution. This provision allows dismissal without an inquiry if it's impractical, which the High Court deemed necessary to avoid questioning the validity of numerous judgments. The judge contested the lack of inquiry and notification, claiming a breach of natural justice. However, the court maintained that the decision was within the constitutional framework, emphasizing the judiciary's independence and the necessity to uphold its standards. The Governor's order was based on the High Court's recommendation, aligning with constitutional requirements.
News
Summary: The Union Finance Minister and the World Bank Group President held discussions emphasizing the importance of the Bank's ongoing engagement with India. The Finance Minister praised the President's contributions, highlighting the Bank's support during the financial crisis and its role in India's development, particularly in infrastructure and poverty alleviation. The World Bank President, concluding his visit to India, expressed gratitude for the partnership and stressed the need for continued collaboration to address India's developmental challenges. Both parties acknowledged India's global influence and the mutual benefits of deepening ties, with discussions on leveraging private sector funding and regional integration to support growth.
Summary: Income Tax Offices across India will remain open on March 31, 2012, a Saturday, to assist taxpayers with filing their returns as the financial year ends. The Central Board of Direct Taxes (CBDT) issued this directive for administrative convenience, utilizing powers under section 119 of the Income Tax Act, 1961. Normal office hours will be maintained, and additional receipt counters may be set up as needed on March 30 and 31 to ensure taxpayers can file their returns efficiently.
Summary: As of December 31, 2011, approximately Rs. 2481.39 crores in 11,249,844 accounts remain unclaimed with Scheduled Commercial Banks in India. The Reserve Bank of India (RBI) has issued guidelines urging banks to actively locate account holders of inoperative accounts. Banks are required to conduct annual reviews and launch special drives to find account holders or their legal heirs. By June 30, 2012, banks must display lists of unclaimed deposits inactive for ten years or more on their websites, providing information on the claiming process. Safeguards must be in place to verify the authenticity of claimants.
Summary: The Reserve Bank of India (RBI) established the Damodaran Committee in 2010 to enhance banking services for retail and small customers. The committee recommended allowing customers to retain the same savings account number when relocating to another city or transferring accounts within the same city. The RBI endorsed these recommendations in October 2011 and instructed the Indian Banks Association to implement them. However, the Prevention of Money Laundering Act (PMLA) requirements hinder account portability between banks, as banks must retain client identity records for ten years after the end of the banking relationship. This information was disclosed by the Minister of State for Finance in a Lok Sabha session.
Summary: The Insurance Regulatory and Development Authority (IRDA) ensures that all life insurance products and their sales literature are approved before sale, focusing on transparency and informed decision-making for consumers. IRDA mandates comprehensible advertisements and conducts a multimedia campaign to raise public awareness about insurance. Sales literature must include benefit illustrations of 6% and 10%, and only approved materials are permitted for promotion. Complaints about unapproved or non-compliant advertisements lead to their withdrawal and potential action against offenders. This information was disclosed by the Minister of State for Finance in a Lok Sabha session.
Summary: The Government of India has provided financial assistance to Northern Bihar for flood relief through the State Disaster Response Fund (SDRF) and the National Disaster Response Fund (NDRF). During the fiscal years 2010-11 and 2011-12, the central government released Rs. 250.87 crore and Rs. 131.71 crore respectively to Bihar from the SDRF. Additionally, Rs. 368.01 crore was allocated from the NDRF in 2010-11. The Bihar State Government is responsible for rehabilitation efforts, utilizing its resources and sector-specific plans. This information was disclosed by a government official in response to a parliamentary inquiry.
Summary: Six credit rating agencies are registered with the Securities and Exchange Board of India (SEBI), including CRISIL, Fitch Ratings India, and ICRA. SEBI's regulations require these agencies to adhere to a Code of Conduct, ensuring due diligence and independent judgment. They must undergo biannual internal audits covering operations, investor grievances, and compliance with securities laws. The Board of Directors must address audit findings and report actions to SEBI. Transparency and disclosure requirements are mandated, including rating procedures and conflict of interest measures. SEBI has standardized rating symbols and definitions for uniformity. This information was provided by the Minister of State for Finance in response to a Lok Sabha query.
Summary: The Government of India reported the import figures for gold over two financial years: 850,985 kg valued at 135,877.91 crore in 2009-10, and 969,731 kg valued at 184,728.74 crore in 2010-11. Gold imports, excluding those for monetary purposes, are permitted under Exim Code 7108 of ITC (HS) Classifications, subject to Reserve Bank of India regulations. Currently, there are no plans to amend this import policy. This information was disclosed by the Minister of State for Finance in a written response to a question in the Lok Sabha.
Summary: The Reserve Bank of India mandates that banks release all securities upon loan repayment, as per the Banking Codes and Standards Board of India's Code. Banks must return securities, documents, and title deeds within 15 days after dues are settled, compensating for any delays. Since February 3, 2009, violations of these guidelines are grounds for complaints under the Banking Ombudsman Scheme 2006. Unsatisfied borrowers can approach the Banking Ombudsman. The RBI's Department of Banking Supervision reviews compliance during inspections, and the Indian Banks Association has been notified for further action. This was reported by the Minister of State for Finance in the Lok Sabha.
Summary: Since April 26, 2010, the Reserve Bank of India has adjusted the Cash Reserve Ratio (CRR) twice. On January 28, 2012, the CRR was reduced from 6% to 5.5%, and on March 10, 2012, it was further reduced to 4.75%. These changes aim to inject primary liquidity into the system, support credit growth in productive sectors, mitigate growth risks, and maintain low and stable inflation. This information was provided by a government official in response to a parliamentary question.
Summary: A Working Group established by the Reserve Bank of India recommended limits on the expansion of non-banking businesses for Financial Holding Companies (FHCs) in India. This initiative aims to regulate the transition of existing bank-dominated financial groups to a holding company structure. The group's report, submitted in May 2011, outlines these proposals and is accessible on the RBI's website. This information was disclosed by the Minister of State for Finance in a written response to a question in the Lok Sabha.
Summary: A mission mode project for the computerization of Commercial Tax Departments across Indian States and Union Territories was initiated under the National e-Governance Plan. Approved by the Cabinet in February 2010, the project has a total value of Rs. 1133.41 crore, with Rs. 800 crore as central assistance. As of the report, Rs. 433.44 crore has been released to the States. The computerization efforts are expected to be completed by March 2013, as stated by the Minister of State for Finance in a written reply to the Lok Sabha.
Summary: The Reserve Bank of India (RBI) has announced a decision to allow non-bank entities to establish, own, and operate ATMs, known as White Label ATMs, to enhance ATM accessibility in India. This move aims to address the low ATM penetration per capita and improve ATM availability in Tier III to VI areas, thereby supporting financial inclusion. The draft guidelines specify that the issuing bank will handle customer grievances related to failed transactions, with support from the sponsor bank, which must have arrangements with the White Label ATM operator. This information was shared by a government official in a written response to a parliamentary question.
Summary: The Indian government is implementing advanced security features in banknotes of all denominations to combat counterfeit currency. This initiative follows an eight-stage acquisition process recommended by the Banerjee Committee, which the government has approved to ensure transparency and accountability. This update was provided by the Minister of State for Finance in a written response to a query in the Lok Sabha.
Summary: At the end of December 2011, India's external debt reached $334.9 billion, marking a 9.4% increase from March 2011. This rise was primarily due to higher commercial borrowings and short-term trade credit. Long-term debt was $256.9 billion, while short-term debt increased to $78.1 billion. Short-term debt comprised 23.3% of the total, with commercial borrowings being the largest component at 29.9%. Government debt was $81.2 billion. The US dollar dominated the debt currency composition at 56.9%. The external debt to GDP ratio rose to 20%, and foreign exchange reserves covered 88.6% of the debt.
Summary: To address inflation and manage inflationary expectations, the Reserve Bank of India (RBI) increased the repo rate 13 times by 375 basis points from March 2010 to October 2011. Due to slowing growth and expected inflation moderation, the RBI paused further repo rate hikes, maintaining the repo rate at 8.5% and the reverse repo rate at 7.5% as of December 2011. To ease liquidity, the RBI reduced the Cash Reserve Ratio for Scheduled Commercial Banks from 6.0% to 5.5% in January 2012, and further to 4.75% in March 2012. This was reported by a government official in the Lok Sabha.
Summary: The Government of India has introduced the Banking Laws (Amendment) Bill, 2011, in the Lok Sabha, aiming to enhance regulatory oversight. The Bill proposes to empower the Reserve Bank of India (RBI) to inspect the books of accounts of any associate enterprise of a banking company. This measure is intended to strengthen the regulatory framework and ensure better supervision of banking subsidiaries. The details were provided by the Minister of State for Finance in response to a question in the Lok Sabha.
Summary: The Government of India implemented the New Pension System (NPS) starting January 1, 2004, for new Central Government employees, excluding the Armed Forces. This system replaced the defined benefit pension system and has been extended to autonomous bodies, State Governments, and the unorganized sector. Central Public Sector Enterprises (CPSEs) are not required to adopt NPS, but three CPSEs-Konkan Railway Corporation Ltd., Manganese Ore (India) Ltd., and NALCO-have voluntarily adopted it starting from 2004, 2011, and 2007, respectively. This information was provided by a government official in response to a parliamentary question.
Summary: The National Innovation Council of India is launching the India Inclusive Innovation Fund (IIIF) to finance innovations addressing the developmental needs of India's most marginalized 500 million citizens. The fund will focus on sectors such as education, health, energy, agriculture, water, and sanitation, aiming to generate both social and commercial returns. The Government of India will provide seed investment, not exceeding 20% of the total corpus, with additional funding from public and private sectors. The initial target for the fund is Rs. 500 crore, with future expansion contingent on further institutional support.
Summary: India and the Asian Development Bank (ADB) signed three loan agreements totaling $826 million to enhance power transmission across the country. The agreements include a $500 million sovereign-guaranteed loan and a $250 million non-sovereign corporate loan to establish a 1,300-kilometer transmission link from Chhattisgarh to northern regions, including Delhi. A third $76 million loan will connect the western grid to Daman and Diu and Dadra and Nagar Haveli. This initiative aims to improve transmission capacity and reliability, supporting the transfer of electricity from surplus to deficit areas. The loans will also help Power Grid Corporation of India Limited access foreign commercial markets.
Summary: KfW, the German Development Bank, has entered into a Euro 100.1 million loan and financing agreement with the Rural Electrification Corporation (REC) under the Indo-German Bilateral Development Cooperation. The agreement includes a Euro 0.5 million grant and aims to finance clean energy projects for rural development in India, focusing on renewable energy and energy efficiency. The agreement was signed by representatives from REC, KfW, and the Indian government. This marks the third Line of Credit REC has received under the Indo-German Bilateral Development Programme.
Summary: At the end of December 2011, India's external debt reached $334.9 billion, marking a 9.4% increase from the $306.1 billion recorded at the end of March 2011. This rise was primarily due to increased commercial borrowings and short-term trade credits. Long-term debt was $256.9 billion, while short-term debt rose to $78.1 billion. The largest share of debt was in US dollars at 56.9%. The external debt to GDP ratio increased to 20%, and foreign exchange reserves covered 88.6% of the total debt. Government external debt stood at $81.2 billion.
Summary: Japan committed to providing India with an Official Development Assistance loan of 134.288 billion yen for fiscal year 2011, as part of the JICA loan package. This funding will support two major projects: the Delhi Mass Rapid Transport System Project Phase III with a loan amount of 7909.10 crore INR, and the West Bengal Forest and Biodiversity Conservation Project with 393.91 crore INR. This agreement enhances the longstanding bilateral development cooperation between India and Japan, which has been strengthened through multiple high-level visits and the India-Japan Global Partnership.
Summary: The Government of India announced the sale of four re-issued government stocks through price-based auctions. These include an 8.19% stock maturing in 2020 for Rs. 4,000 crore, a 9.15% stock maturing in 2024 for Rs. 8,000 crore, an 8.97% stock maturing in 2030 for Rs. 3,000 crore, and an 8.83% stock maturing in 2041 for Rs. 3,000 crore. The Reserve Bank of India will conduct these auctions on April 3, 2012, using a uniform price method, allowing up to 5% allocation for eligible individuals and institutions under a non-competitive bidding scheme. Results will be announced the same day, with payments due by April 4, 2012.
Summary: The Index of Eight Core Industries, with a base year of 2004-05, recorded a growth rate of 6.8% in February 2012, up from 6.4% in February 2011. The cumulative growth rate for April-February 2011-12 was 4.4%, compared to 5.8% in the previous year. Coal production saw significant growth at 17.8%, while crude oil and natural gas experienced lower growth rates. Petroleum refinery products, fertilizers, steel, cement, and electricity also showed varied growth rates, with notable increases in cement and electricity production. The data is provisional and subject to revision.
Notifications
Customs
1.
Corrigendum - dated
28-3-2012
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Cus
5th Corrigendum of Notification No. 21/2002-Customs.
Summary: The corrigendum to Notification No. 21/2002-Customs, dated March 28, 2012, issued by the Ministry of Finance, Department of Revenue, details amendments to a prior notification. In the table, Serial No. 236 has been revised to exclude "3903 & 3908" instead of just "3908". Serial No. 516, item (b), in column (6), changes the figure from "8" to "10". Additionally, Condition No. 74 has been corrected by updating clause (ii) to refer to "item (b)" and clause (iii) to "item (c)".
2.
F.No.437/08/2010-Cus.IV - dated
28-3-2012
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Cus (NT)
Appointment of Common Adjudicating Authority.
Summary: The Central Board of Excise & Customs, under the Ministry of Finance, has appointed the Commissioner (Adjudication) at the New Custom House, New Delhi, as the Common Adjudicating Authority for several Show Cause Notices issued by the Additional Director of the DRI Zonal Unit in Bangalore. This order, dated March 28, 2012, supersedes previous orders from November and December 2010. The notices pertain to various entities, including a private data processing company in Bangalore and others, and involve cases under the Customs Act, 1962. The appointment aims to consolidate the adjudication process for these cases.
3.
27/2012 - dated
28-3-2012
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Cus (NT)
Seeks to amend Notification No.16/2011-Cus (N. T.) - Prohibits import of Acetate tow and Filter Rod except use in manufacturing of specified goods.
Summary: The Government of India, through the Ministry of Finance, has issued Notification No. 27/2012-Customs (N.T.) dated 28th March 2012, amending Notification No. 16/2011-Cus (N.T.). This amendment, under the Customs Act, 1962, modifies the restrictions on the import of acetate tow and filter rods, specifying that these materials can only be used in the manufacture of filter cigarettes, bidis, or pharmaceutical products under Chapter 30. This change is deemed necessary in the public interest.
Income Tax
4.
15/2012 - dated
30-3-2012
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IT
Income-tax (Fourth Amendment Rules, 2012 – Depreciation restricted to 15% on wind mills installed after 31-3-2012.
Summary: The Central Board of Direct Taxes has amended the Income-tax Rules, 1962, through the Income-tax (Fourth Amendment) Rules, 2012, effective April 1, 2012. The amendment restricts the depreciation rate to 15% for windmills installed after March 31, 2012. This change affects the classification of tangible assets under the "Machinery and Plant" category in the New Appendix I of the Income-tax Rules. The amendment specifies that higher depreciation rates apply only to windmills installed on or before March 31, 2012.
5.
14/2012 - dated
28-3-2012
-
IT
Income-tax (third amendment) Rules, 2012 - amendment in rule 12 and substitution of forms sahaj (itr-1), ITR-2, ITR-3, SUGAM (itr-4s), ITR-4 and itr-v.
Summary: The Income-tax (Third Amendment) Rules, 2012, effective April 1, 2012, amend the Income-tax Rules, 1962, under section 295 of the Income-tax Act, 1961. Changes include updates to rule 12, where the year "2011" is replaced with "2012." New provisions exclude individuals or Hindu undivided families with assets or signing authority outside India from certain clauses. Individuals or Hindu undivided families with income over ten lakh rupees must file returns in specified forms for the assessment year 2012-13 onward. Appendix-II updates substitute the forms SAHAJ (ITR-1), ITR-2, ITR-3, SUGAM (ITR-4S), ITR-4, and ITR-V.
Circulars / Instructions / Orders
Service Tax
1.
154/5/2012 - dated
28-3-2012
Clarification on Point of Taxation Rules - regarding.
Summary: The circular issued by the Ministry of Finance, Government of India, addresses amendments to the Point of Taxation Rules 2011, effective from April 1, 2012. The amendment allows individuals and partnership firms with a taxable service turnover of Rs 50 lakhs or less in the previous financial year to defer tax payment until receipt of payment, up to a value of Rs 50 lakhs. It clarifies that for invoices issued on or before March 31, 2012, the point of taxation remains the date of payment as per the existing Rule 7. Field formations are instructed to issue corresponding trade or public notices.
Income Tax
2.
F.No.225/138/2011/ITA.II - dated
30-3-2012
Section 119 of the Income-tax act, 1961 - income-tax authorities - instructions to subordinate authorities - order under section 119(1).
Summary: The Central Board of Direct Taxes issued an order under Section 119 of the Income Tax Act, 1961, requiring all Income Tax Offices in India to remain open on Saturday, March 31, 2012, the last day of the financial year 2011-12. This measure is intended to facilitate taxpayers in filing their returns conveniently. Additional receipt counters may be opened as needed on March 30 and 31, 2012. The directive emphasizes administrative convenience and mandates that these instructions receive wide publicity to ensure taxpayer awareness.
FEMA
3.
100 - dated
30-3-2012
Trade Credits for Imports into India – Review of all-in-cost ceiling.
Summary: The Reserve Bank of India has decided to maintain the enhanced all-in-cost ceiling for trade credits for imports into India due to global financial market conditions. This ceiling, effective from November 15, 2011, is set at 6-month LIBOR plus 350 basis points for maturities up to one year and more than one year up to three years. This policy will remain in effect until September 30, 2012, subject to review. The all-in-cost includes various fees and charges, and other aspects of the trade credit policy remain unchanged. This directive is issued under the Foreign Exchange Management Act, 1999.
4.
98 - dated
30-3-2012
Discontinuation of Supplying Printed GR forms by Reserve Bank.
Summary: The Reserve Bank has decided to discontinue the supply of printed GR forms through its Regional Offices, effective July 1, 2012. This decision follows the increased accessibility of online resources. GR forms will now be available exclusively online on the Reserve Bank's website. Exporters are advised to print these forms on legal-size paper, ensuring the correct printer settings. Authorized Dealer Category - I banks are instructed to inform their clients about this change. This directive is issued under the Foreign Exchange Management Act, 1999, and does not affect any other legal permissions or approvals required.
5.
99 - dated
30-3-2012
External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling.
Summary: The Reserve Bank of India (RBI) has decided to maintain the enhanced all-in-cost ceiling for External Commercial Borrowings (ECBs) due to challenges faced by borrowers in raising funds within the previous limits. For ECBs with an average maturity of three to five years, the ceiling is set at 6-month LIBOR plus 350 basis points, and for those exceeding five years, it is 500 basis points. These rates are applicable until September 30, 2012, with a subsequent review planned. The circular also applies to trade credit, and all other ECB policy aspects remain unchanged. Authorized banks are instructed to inform their clients accordingly.
6.
96 - dated
28-3-2012
Overseas Direct Investments by Indian Party – Rationalisation.
Summary: The circular addresses the rationalization of overseas direct investments by Indian parties, introducing several liberalizations. It allows Indian parties to create charges on immovable/movable property and financial assets under an approval route, with a 'No Objection' from Indian lenders. Bank guarantees backed by Indian parties will now be included in financial commitment calculations. Personal guarantees by indirect promoters are permitted, and financial commitments without equity contributions in JVs/WOS may be considered. Annual Performance Reports can be based on unaudited accounts if certified by statutory auditors. Compulsorily Convertible Preference Shares are treated as equity. Amendments to relevant regulations are forthcoming.
7.
97 - dated
28-3-2012
Overseas Investments by Resident Individuals – Liberalisation / Rationalisation.
Summary: The Reserve Bank of India has liberalized regulations for resident individuals making overseas investments. General permission is now granted for acquiring qualification shares necessary for holding a director position in a foreign company, without the previous 1% cap, subject to host country laws and within the Liberalized Remittance Scheme (LRS) limits. Individuals can also acquire shares in foreign companies as compensation for professional services or director's remuneration under the LRS limits. Additionally, employees and directors can accept shares under an Employee Stock Option Plan (ESOP) globally, regardless of the foreign company's equity stake in the Indian company, with required annual reporting to the RBI.
DGFT
8.
25 - dated
29-3-2012
Aayat Niryat Form 2E(ANF 2E) – Application for Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) Export Licence – Introduction of Provision for On-line filing.
Summary: The Directorate General of Foreign Trade (DGFT) has introduced an online filing system for the Aayat Niryat Form 2E (ANF 2E), which is used to apply for a Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) export license. This move aims to reduce processing time and costs for exporters. The online application process will become mandatory from July 1, 2012, replacing paper submissions. Detailed guidelines and a step-by-step guide for the online application are available on the DGFT website. Exporters can contact designated officials for assistance and are encouraged to provide feedback on the new system.
Customs
9.
10/2012 - dated
29-3-2012
Refund of 4% CVD (SAD)-Extension of time upto 30th June 2012, for using re-credited 4% CVD (SAD) amount in DEPB-Regarding.
Summary: The circular issued by the Ministry of Finance extends the deadline for using re-credited 4% CVD (SAD) amounts in DEPB and Reward Scheme scrips until June 30, 2012. It instructs all Chief Commissioners of Customs to resolve pending refund applications for 4% SAD paid through these scrips by April 30, 2012, and to report to the Board by May 4, 2012. Importers are advised to pay the 4% CVD in cash for future refunds, as re-crediting will not be allowed if payment is made via scrips. Public notices and standing orders are to be issued for guidance.
10.
F. No. 473/02/2011-LC - dated
29-2-2012
Request for an Extended Period of Warehousing under Section 61 of Customs Act, 1962 - Reference from Shipyards - Reg.
Summary: The circular addresses requests for extending the warehousing period under Section 61 of the Customs Act, 1962, specifically for goods imported by shipyards. It clarifies that the Chief Commissioner of Customs may grant extensions beyond three months if the goods remain in good condition and interest accrued is realized. However, the requirement to pay interest before extending the warehousing period is causing hardship, especially when goods are exempt from customs duty. The circular references guidelines for waiving interest on machinery and materials used in shipbuilding, emphasizing that interest demands should be raised but not enforced until the goods are used for their intended purpose.
Central Excise
11.
963/06/2012-CX - dated
29-3-2012
Clarification Regarding Mega Power Project (MPP) exemption – reg.
Summary: The circular addresses clarifications regarding the Mega Power Project (MPP) exemption under Notification No. 6/2006-CE. It specifies that the Fixed Deposit Receipt (FDR) for the Central Excise duty must be submitted to the jurisdictional Deputy or Assistant Commissioner in charge of the factory supplying goods, not the project site. Multiple FDRs can be submitted over time as clearances occur, each valid for at least 36 months. Additionally, the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, do not apply to these clearances, as the rules are intended for manufacturing inputs, not project supplies.
Highlights / Catch Notes
Income Tax
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New Depreciation Limit Set at 15% for Windmills Installed Post-March 31, 2012 Under Income-tax Fourth Amendment Rules 2012.
Notifications : Income-tax (Fourth Amendment Rules, 2012 – Depreciation restricted to 15% on wind mills installed after 31-3-2012. - Ntf. No. 15/2012 Dated: March 30, 2012
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Income Tax Rule 12 Amended: New ITR Forms Introduced for Easier Filing, Effective March 28, 2012.
Notifications : Income-tax (third amendment) Rules, 2012 - amendment in rule 12 and substitution of forms sahaj (itr-1), ITR-2, ITR-3, SUGAM (itr-4s), ITR-4 and itr-v. - Ntf. No. 14/2012 Dated: March 28, 2012
Customs
-
5th Corrigendum Amends Notification No. 21/2002-Customs for Clarity and Compliance in Customs Regulations.
Notifications : 5th Corrigendum of Notification No. 21/2002-Customs. - Ntf. No. Corrigendum Dated: March 28, 2012
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Extended Warehousing for Shipyards Requested u/s 61 of Customs Act, 1962; Refer to Circular F. No. 473/02/2011-LC.
Circulars : Request for an Extended Period of Warehousing under Section 61 of Customs Act, 1962 - Reference from Shipyards - Reg. - Cir. No. F. No. 473/02/2011-LC Dated: February 29, 2012
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Deadline Extended for Using 4% CVD Under DEPB Scheme Until June 30, 2012, Per Circular No. 10/2012-Customs.
Circulars : Refund of 4% CVD (SAD)-Extension of time upto 30th June 2012, for using re-credited 4% CVD (SAD) amount in DEPB-Regarding. - Cir. No. 10/2012-Customs Dated: March 29, 2012
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Amendment to Notification No. 16/2011-Cus continues import ban on Acetate Tow and Filter Rod, with specific exceptions.
Notifications : Seeks to amend Notification No.16/2011-Cus (N. T.) - Prohibits import of Acetate tow and Filter Rod except use in manufacturing of specified goods. - Ntf. No. 27/2012 - Customs (N.T.) Dated: March 28, 2012
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Common Adjudicating Authority Appointed for Customs Cases to Streamline Adjudication and Enhance Decision-Making Consistency.
Notifications : Appointment of Common Adjudicating Authority. - Ntf. No. F.No.437/08/2010-Cus.IV Dated: March 28, 2012
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Customs Duty Rates Updated: Notification 12/2012 Amended to Align with Notification 24/2012 for Import Compliance.
Notifications : Seeks to amend Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Ntf. No. 24/2012-Customs Dated: March 28, 2012
DGFT
-
DGFT Introduces Online Filing for ANF 2E Export License Applications for SCOMET Items, Simplifying Exporter Process.
Circulars : Aayat Niryat Form 2E(ANF 2E) – Application for Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) Export Licence – Introduction of Provision for On-line filing. - Cir. No. 25 Dated: March 29, 2012
FEMA
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India Revises All-In-Cost Ceiling for Trade Credits on Imports Under FEMA to Ensure Compliance and Stability.
Circulars : Trade Credits for Imports into India – Review of all-in-cost ceiling. - Cir. No. 100 Dated: March 30, 2012
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ECB Policy Update: Revised All-In-Cost Ceiling under Circular No. 99 Affects Foreign Borrowing Rules and Tax Implications.
Circulars : External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling. - Cir. No. 99 Dated: March 30, 2012
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Reserve Bank Ends Printed GR Forms Supply from March 30, 2012, Under FEMA Circular No. 98 for Efficiency.
Circulars : Discontinuation of Supplying Printed GR forms by Reserve Bank. - Cir. No. 98 Dated: March 30, 2012
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New Circular Streamlines Overseas Direct Investments by Indian Parties under FEMA, Enhancing Clarity and Compliance.
Circulars : Overseas Direct Investments by Indian Party – Rationalisation. - Cir. No. 96 Dated: March 28, 2012
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FEMA Circular Eases Overseas Investment Rules for Residents, Boosting Global Market Access and Portfolio Diversification.
Circulars : Overseas Investments by Resident Individuals – Liberalisation / Rationalisation. - Cir. No. 97 Dated: March 28, 2012
Service Tax
-
Clarification on Point of Taxation Rules: Understanding Timing for Service Tax Compliance and Accurate Liability Assessment.
Circulars : Clarification on Point of Taxation Rules - regarding. - Cir. No. 154/5/ 2012 – ST Dated: March 28, 2012
Central Excise
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Circular Clarifies Mega Power Projects' Eligibility for Central Excise Duty Exemption, Outlines Necessary Documentation and Procedures.
Circulars : Clarification Regarding Mega Power Project (MPP) exemption – reg. - Cir. No. 963/06/2012-CX Dated: March 29, 2012
Case Laws:
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Income Tax
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2012 (4) TMI 54
Deduction u/s 80IB - Housing projects – assessee constructed buildings A, B, C and D and did not claimed deduction on ground of approval being granted prior to 01.10.1998 – approval for additional 'E' building received on 11.10.2002 - Revenue contended that 'E' building being continuation of A, B, C and D buildings, the project must be held to have commenced prior to 1st October 1998 hence no deduction – deduction also denied on ground of area of plot and size of the flats – Held that:- Construction of 'E' building constitutes an independent housing project and, therefore, the date on which the earlier housing project had commenced construction could not be applied to the housing project consisting of 'E' building merely because the conditions set out while granting approval to the earlier housing project have also been made applicable to the housing project in question. In present case, total area of plot for 5 buildings is 2.36 acres – Revenue contending proportionate vacant area for E building would be less than one acre – Held that:- Section 80IB(10) does not suggest that the plot of land must be vacant. Deduction is available on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. Further, as contended by Revenue that two flats were merged and size of flat exceeded 1000 sq ft – It is found that there was no merger of flats. Therefore, Tribunal rightly allowed deduction u/s 80IB – Decided in favor of assessee.
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2012 (4) TMI 53
Reopening - Set off of business loss ignoring the provisions of section 90(2) - held that:- From the prescription of section 71, it is palpable that there is no bar in allowing set off of loss under the head "Profits and gains of business or profession" against income under the head "Income from other sources". This section applies to all assesses, whether resident or non-residents, so long as income of non-resident assesses is computed under the provisions of the Act. The present assessee has also chosen to be covered under the Act. It is seeking loss under the head 'Profits and gains of business or profession' to be set off against 'Income from other source'. There is hardly any difficulty in holding that the Assessing Officer was not justified in taxing 'Income from other sources' amounting to Rs. 12.57 crore without allowing its set off against the business loss of Rs. 48.80 crore. - Decided in favor of assessee. Regarding reassessment - it is abundantly clear that where an assessment order is passed u/s 143(3), no action can be taken under this section after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax escaped assessment by reason of failure on the part of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment - The reassessment has been initiated on the score that the loss so declared by the assessee was liable to be considered as 'Capital gain' and not 'Business income' and hence its set off was not permissible against income from other sources - It is a trite law that change of opinion cannot be a reason to reopen the completed assessment - Appeal is allowed
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2012 (4) TMI 52
Nature of DEPB credit and premium received on transfer of DEPB – impact on eligible profits for section 80HHC – alleged non-satisfaction of conditions prescribed in the third proviso to Section 80HHC(3) - Held that:- DEPB credit falls under Clause (iiib) of Section 28, whereas the premium received thereon on transfer will represent profits chargeable u/s Clause (iiid) and the deduction u/s 80HHC has to be computed accordingly. It was held that only 90% of the “profits” can be excluded by applying Explanation (baa) below Section 80HHC – Decided in favor of assessee. Applicability of third proviso to Section 80 HHC(3) is not examined and have been referred back to the Assessing Officer.
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2012 (4) TMI 51
Method of accounting - works contract – denial of project completion method – rejection of books of account – addition made - assessee have shown running payment and expenses against WIP in Balance sheet and excluded it from P/L A/c - Held that:- CIT(A) while confirming addition made contradictory statements – on one hand allowed project completion method & on other hand denied it. Accordingly, it is clarified that in case assessee had not claimed loss in the P/L A/c, the same will not be reduced. In case he had claimed this loss, it will be disallowed. Also, amounts related to payments received/bills raised and the expenditure incurred will be excluded from P/L A/c. Further, Completed contract method is not contrary and can be adopted and applied when an assessee follows mercantile system of accounting. However, we remand the matter to the tribunal to examine the other aspects relating to computation of taxable income on the basis of completed contract method – Decided partly in favor of assessee.
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2012 (4) TMI 50
DTAA between India and Netherlands - Capital gain - release and relinquishment of tenancy rights - The applicant is a Dutch citizen since 1984 and holds a card of Person of Indian Origin since 6.10.2003 - As regards the amount received on release of tenancy rights, the tenancy rights are in respect of real estate and would be gains derived from alienation of immovable property. As the immovable property is situated in India, the gains are taxable in India under Article 13.1 of the DTAA Regarding capital gain - since the value of the shares is derived principally from immovable property situated in India, the same are taxable under Article 13.4 of the DTAA in India - TDS already paid on the sale of shares is to be allowed credit against any tax demanded by the Revenue, upon its proper verification - Ruling is given
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2012 (4) TMI 49
Refund of the tax amount with interest - the petitioner submitted that petitioner's applications submitted on 06.06.2008, 06.10.2008, 25.11.2008, 16.12.2009 and 27.04.2011 are pending consideration before the authority under Section 132B(4) of the Income Tax Act, 1961 - If the authorities have not decided these applications for such a long time, then it is a serious matter but we are not taking immediate action and in future there may be harsh order against the officers who have not decided the applications - Petition is allowed
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2012 (4) TMI 48
Reassessment - Assessment was completed u/s 143(3) - The investigation had been conducted and on the basis of information received, the Assessing Officer formed a prima facie or tentative opinion that the assessee had received bogus credit entries of Rs.42,03,250/- from the parties mentioned in the table - the information provided by the Directorate of Income Tax Investigation was not available with the Assessing Officer during the course of the first/original proceedings - Decided against the assessee. Regarding approval u/s 151 - assessee submits that one of the conditions raised by the assessee was that there was no valid approval under Section 151 of the Act and the said aspect has not been examined by the tribunal as they had decided the appeal as noticed above on a different contention/argument. It will be open to the tribunal to examine the question whether or not there was a valid approval under Section 151 of the Act and decide the appeal of the Revenue on merits. - Matter remanded back to tribunal.
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Customs
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2012 (4) TMI 60
Redemption fine - Penalty - the respondent refuses to allow the petitioner to clear the goods on the ground that the imported goods comprises of hazardous electronic waste - The grievance of the petitioner in this writ petition is that despite the appellate order, the respondent is not permitting clearance of the goods, although the petitioner is willing to pay the redemption fine and penalty - The only contention raised by the respondent is that against the appellate order, the respondent has already approached the Tribunal with an appeal and, therefore, the goods cannot be released until the appeal is disposed of - that is no ground to refuse the relief to the petitioner in accordance with the appellate order obtained by him insofar as there is no order staying the appellate order yet - Petition is disposed of
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2012 (4) TMI 59
Differential duty - Writ petition for a Mandamus directing the respondents to release the goods namely 42.260 kilograms of Slack Wax, imported vide Bill of Entry No.5526310, dated 21.12.2011 on the value declared by the petitioner at USD 16,904.00 - the claim of the petitioner is that they had imported 42.260 kilograms of Slack Wax from M/s.Baykim Chemicals, Turkey, vide invoice No.70221, dated 19.08.2011 - While examining the claim of the petitioner for provisional release, it is to be seen what are all the circumstances under which the import was done and thereafter, the value so declared by the petitioner is a matter to be taken into account - The only reason for non releasing of the goods is that the petitioner has undervalued the goods at USD 400 per MT. Now the Directorate of Revenue Intelligence, Thoothukudi, on investigation found that the value of goods is USD 1058 per MT - the goods in question is not a prohibitory item under the provisions of the Act and having regard to the foregoing reasons and discussions and considering the circumstances of the case, provisional release of the goods is ordered with reasonable conditions.
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2012 (4) TMI 43
Demand - Notification Nos.13/81-Cus dated 9/2/1981 and 53/97-Cus dated 3/6/1997 - Assessee, a 100% Export Oriented Unit (EOU) failed to fulfill the export obligation even after importing duty free import of raw materials to the tune of Rs.3.94 crores - The Tribunal held that the extension of the Bonding period could be granted even after the expiry of the bond period in appropriate cases and accordingly, granted extension of the bond period to the assessee. It is not in dispute that in the present case, the respondent-assessee had neither sought re-warehousing of the goods nor sought extension of the bond period. - matter remanded back to tribunal for fresh decision.
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Corporate Laws
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2012 (4) TMI 47
Annual general meeting - the 7th to 12th annual general meetings of the company could not be held. On 28th May, 2008 the company issued notices for holding these annual general meetings on 27th and 28th June, 2008 at diverse timings specified in the notices. - Sajal was aggrieved by issuance of these notices and approached the Company Law Board by filing an application to restrain holding these meetings. The Company Law Board allowed that application on 25th June, 2008. The company and Kamal and his group were restrained from holding these meetings on 27th and 28th June, 2008 further to the notice dated 28th May, 2008. Held that:- Board of directors to be constituted as per the direction - in view of the Supreme Court order read with the Company Law Board order and the Companies Act, 1956 Mr. Sajal Dutta would retire by rotation but would be deemed to be re-elected at the general meeting. - Board of directors will issue fesh notice holding all the 7th to 12th AGM. The Company Law Board (CLB) fell into great error in altogether preventing holding meetings as mentioned in the above notices. It ought to have permitted them to be held
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2012 (4) TMI 46
Petition u/s 100 to 105 - Rule 46 of the Companies (Court) Rules, 1959 - Reduction of share capital - Upon the respondent Company thereafter filing the petition aforesaid for approval of its action of reduction of share capital, initially 24 shareholders including the appellant filed objections - Held that: the valuation of the shares, since the Board of Directors of the respondent Company itself had not accepted the valuation at Rs. 836/- per share of the Accountants engaged by the respondent Company and had increased the valuation to Rs. 940/- and further since the respondent Company when faced with the objections had further increased the said valuation to Rs. 1,500/- but nevertheless find that there can be no better indice of valuation than the market forces - The acceptance by all the other public shareholders except the appellant of the price of Rs. 1,500/- clearly establishes that though the price of Rs. 940/- offered may not have been the correct price but the price of Rs. 1,500/- clearly was - Appeal is dismissed
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2012 (4) TMI 45
Registrar of Companies (ROC) received a complaint regarding the affairs of M/s. Tianjin Tianshi India Pvt. Ltd. (the Company) being irregular and illegal - a report was sent by ROC to the Central Government in terms of section 234 (6) of the Act seeking advice for prosecution of company u/s 234 of the Act - It was submitted that the alleged offences being punishable with fine only, the limitation of taking cognizance under Section 468(2) Cr.PC was six months - It was submitted that the alleged offences being punishable with fine only, the limitation of taking cognizance under Section 468(2) Cr.PC was six months - There is no dispute with regard to the proposition of law that the powers of this Court under Section 482 Cr.PC were to be exercised sparingly and in exceptional circumstances where there appeared to be glaring injustice or manifest error committed by the trial court Regarding non-issuance of notice under Section 234 of the Act to the petitioners, it is seen that ROC issued a letter dated 24.2.2004 to the company to enquire about its affairs - the contention of the petitioner that cognizance by the Trial Court was barred by the limitation, the Trial Court record must be perused - The period of limitation for taking cognizance of the offences commences when the knowledge of the commission of offence is gained by the prosecuting agency - Held that: present offence arises out of a failure to comply with the statutory rule and such liability will continue until the requirement is complied with - Petition is allowed
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Service Tax
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2012 (4) TMI 57
Writ petition - The learned counsel appearing on behalf of the petitioner had submitted that it would suffice, if the respondent is directed to consider the representation of the petitioner on merits, within a specified period - Held that:- the respondent is directed to consider the representation of the petitioner on merits and in accordance with law, within a period of two weeks from the date of receipt of a copy of this order - Petition is disposed of
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2012 (4) TMI 56
Application for stay - Demand - Suppression of facts - The department was of the view that the service undertaken by the appellants is liable to be taxed under the category of "Manpower Recruitment or Supply Agency Service" for the period prior to 01.05.2006 and under the category of "Ship Management Services" w.e.f 01.05.2006 - Board's Circular no. 334/1/2008-TRU dated 29.02.2008 - As per the agreement entered into by the appellant with their customers, it is seen that the appellant has to arrange for Master, officers and crew on-board the vessels as required under the Merchant Shipping Act, 1958 and any other International Maritime Act and as per manning standards - The very fact that the appellants have collected the Service Tax from their customers such as M/s ABG Shipping Co. and M/s Pranik Shipping without remitting the same to the exchequer clearly shows that they were fully aware of their service tax liability CBE & C in their letter dated 29.02.2008 has clarified that introduction of a later entry under the Service Tax does not ipso facto mean that the said activity was not covered under the previous entry though they were specifically included under the definition of taxable services - the appellant has not made out any prima facie case for grant of complete waiver of pre-deposit. Inasmuch as the appellant has collected the amount of service tax form some of their clients, the balance of convenience lies in favour of the Revenue by way of direction to deposit Rs. 85 Lakhs
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2012 (4) TMI 55
Overseas commission agent services received – 'Business Auxillary Services' - services provided being before 18.04.2006 - Held that:- Liability under Finance Act 1994 for availing service of foreign agents arise after 18.04.2006 following Apex Court decision in case of Indian National Shipowners Association v. Union of India (2010 - TMI - 78723 - Supreme Court of India) - Decided in favor of assessee
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Central Excise
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2012 (4) TMI 44
Waiver of pre-deposit - In the present case, by a showcause notice dated 24th June 2008, the assessee was called upon to showcause as to why the price charged by Thomson India to Tata Sky Limited (instead of the price charged by the assessee to Thomson India) in respect of the goods cleared during the period from 1st April 2007 to 23rd January 2008 should not be treated as the transaction value of the goods sold by the assessee to Thomson India under Rule 10A of the 2000 Rules and the duty be recovered accordingly - Advocate appearing on behalf of the assessee submitted firstly that in the present case, the sale effected by the assessee is governed by the provisions contained in Section 4(1)(a) of the Act and, therefore, the transaction value alone should be the basis for determining the central excise duty liability - the Adjudicating Authority concluded that the price of the raw materials purchased by the assessee are controlled by the Thomson India and, therefore, Thomson India indirectly supplied the inputs to the assessee through its sister concerns set out in the approved Vendors List at the price controlled / approved by the Thomson India - the prima facie view of the CESTAT that the Adjudicating Authority was justified in holding that Thomson India supplied the inputs to the assessee by persons authorized by Thomson India and, therefore, the assessee being a jobworker manufacturing goods on behalf of Thomson India would be covered under rule 10A of the 2000 Rules cannot be faulted.
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2012 (4) TMI 42
Recovery Rules - father of the Petitioner during his life time had by a deed of Gift gifted a property to her daughter (petitioner)- a notice of demand was addressed to the Petitioner’s father to pay Central Excise duty and penalty on the basis of a Certificate No.01/2011-12 dated 2 May 2011 else the procedure for attachment under the Recovery Rules 1995 would follow - the Petitioner was informed by notice that arrears of duty and penalty are recoverable from the Company; in the Municipal record the property stands in the name of the Petitioner’s father and as she was in occupation of the said property - petitioner contented that neither she nor her father was a defaulter of Excise duty under Section 142 (1) and the notice itself which very clearly states that the arrears of duty and penalty are recoverable from the company - Respondents have filed an affidavit that an agreement exists Mukherjee Brothers and Kapoor family who together controlled the said company, the shares of the Kapoor family were transferred to Mukherjee Brothers provided that the Mukherjee family would be responsible to discharge the Excise duty liabilities of the said company -Held that :- as per the Recovery Rules, 1995 “Defaulter” means any person from whom government dues are recoverable under the Act and in this case neither the Petitioner nor her father who was a Director of the company, were defaulters hence recovery rules will be applicable for the company - It is an undisputed position that duty and penalty are arrears of the company as per the agreement - allow the petition of assessee.
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2012 (4) TMI 41
Availability of turnover discounts – Commissioner dismissed appeal for non-compliance with the stay order – pre-deposit confirmed - Held that:- Identical issue came before Tribunal in 2011 and unconditional stay was granted. Since Commissioner has not decided the appeal, matter is remanded back for decision on merits without insisting of any pre-deposit.
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CST, VAT & Sales Tax
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2012 (4) TMI 58
Demand - whether imposing/charging of interest under Section 30(4) of the Maharashtra Value Added Tax Act 2002 in respect of the late payment of tax for the years 2005-06, 2006-07 and 2007-08 is valid in law - Consequent to the Intimation, on 20 August 2009 the Petitioner filed revised returns for the years 2005-06, 2006-07 and 2007-08 and also paid the differential tax demanded consequent to the audit, aggregating to Rs. 41,38,416/- along with interest thereon under Section 30(3) of the Act - The demand for interest is not for the period prior to 1 July 2009 as the interest is being charged not with regard to a delay (period/time wise) in making the payment of tax to the State but is charged at a flat rate of 25 per cent of the additional tax payable as per the revised returns - In the present case, the interest is being charged at a flat rate and has no relation to the length of time(delay) in making the payment of tax - Petition is dismissed
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