1. law, govt and politics

EDITORIAL
High Time for Educational Reform
According to the latest Economic Survey
2014-15, statistical Appendix No.A134 , the
population of India in 2011 was 121 Crores
and 79 Crores is in the age of 0-34 years
age which is almost two third of the entire
population of India and again within the
same 37 Crores, almost 43% is in the age
group of 0-14 years age and this is
considered to be very vital and powerful
asset of India. It is important that this
asset is effectively transformed into a vital
performing asset. There was a disturbing
scenario during the 10th Standard exams in
one of the states which was published by
the Media. This doesn’t mean that it is not
prevalent in other states, may be it is at
alarming in one state and not that rampant
as well as alarming in the other state. The
most disturbing factor was the statement
of the person heading the ministry coming
out with a statement saying only the
parents have to correct and the
Government is helpless in stopping the
menace inspite of the fact that the entire
Government machinery is at their
disposal. The picture carried out in the
Media showing people hanging on the
building wall and more than one person
trying to help the student to write the
exams. It is bonded duty of the
CASC Bulletin, April 2015
Government to administer and of course
parents responsibility also to see that the
children are not put into the wrong path
at that age which will mar their future. In
the Tamilnadu department certain
instances have occurred and the
Department have issued notification for
action in case of lapses and the same is
facing opposition which is disturbing. It
will not be wrong to state that it is just not
the duty of the Government but the duty
of each and every one of us to see that the
young population are shown the right
path and stop commercialising education.
The Government both at the Central Level
and State Level should consider the
reforms required in the way education is
administered.
Laxity in Court Matters
Time and again the Courts have conveyed
in strong terms its dissatisfaction with the
way the matters have been brought before
it. Now the CBDT have come out with two
letters namely F. No.279/Misc/54/2015SO(ITJ) dated 20 th March, 2015 and
F.No.279/Misc/54/2015-SO(ITJ) dated
20th March, 2015, the former addressed to
the Standing Counsels and the latter
addressed to the Commissioners of
Income Tax. The former letter sternly
states “The Counsel cannot absolve himself
from his responsibility to get the directions of
High Court complied with under any
3
circumstances”. Further latter ends with a
warning “Any laxity in adherence to this
instruction will be viewed adversely against
the erring officers”. It has to be seen
whether these instructions will be
implemented and in case it is not
implemented in its true spirit as in case of
other earlier instructions like the one in
case of search / survey cases, will it be
only a paper threat or action will be taken
against the erring officer and if taken will
it be shared in the public.
Bank Audit
One of the regular contributor to the
Bulletin has shared few files which may be
helpful while conducting the bank audit.
Considering the fact that it will serve the
purpose only if reaches the members
early, the same has been hosted on the
CASC website and the same was also
intimated through mail.
financial year with time bound workload,
we thought it as inappropriate to burden
the members with two meetings in the
month of March. Hence, we have only one
meeting scheduled for the month of
March and also kept the subject as nontechnical to make it lighter at the same
time useful for the members.
Appeal
Members are requested to attend the
programs conducted by CASC and are
also requested to send their suggestions
and / or value additions to the services
provided by CASC including this Bulletin.
The same can be sent by hard copy to the
office of the CASC or emailed to
admin@casconline.org or any of the
Members on the Management Committee.
For and on behalf of Editorial Board
After ending the financial year with hectic
workload as well as starting the next
Editor
CBDT takes stern view of Laxity by Counsel and CIT in Court Matters.
Sub.
F.No.279/Misc/54/2015-SO(ITJ) : Direction towards Responsibility of Standing Counsel
In Communicating Court's Decision-reg
F.No.279/Misc/54/2015-SO(ITJ) : Direction towards Responsibility of CIT to give assistance
to Department Counsels- Instruction no 7/2011 reg
Visit www.itatonline.org for details
4
CASC Bulletin, April 2015
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CASC Bulletin, April 2015
5
RECENT DECISIONS - SERVICE TAX
1. VCES 2013 overlapping of the burden
declared in the VCES 2013 with the
period covered in the earlier SCN –
no ground for rejection :
In ALP Consulting Ltd. v. ACST,
Bangalore – (2015) 37 STR 693 (Kar),
the petitioner filed an application
under VCES 2013 for the period from
Oct. 2007 to Dec. 2012 and this
application was rejected by the
department holding that the petitioner
was already issued a Show Cause
Notice (SCN) for the period Oct. 2004
to Mar. 2009 and, hence, was
disentitled to make an application
under second proviso to section 106 (1)
of the Finance Act, 2013, against which
the writ petition was filed before the
High Court which observed as under:
1. As per the second proviso to subsection (1) of section 106, if there is a
notice or order of determination,
which has been issued to an applicant
in respect of any period on any issue,
then no declaration shall be made with
regard to tax dues on the same issue
for any subsequent period.
2. There is considerable force in the
contention of the petitioner that
in the show-cause notice dated
6
CA. VIJAY ANAND
19/03/2010 culminating in the order
dated 23/12/2010 and there was no
invocation of Section 73A of the Act
and therefore the proviso does not
apply in the instant case. However, the
impugned order does not take into
consideration that aspect of the matter.
The findings given in the order dated
23/12/2010 prima facie was with
regard to Section 73 of the Act and not
Section 73A.
3. The submission of the petitioner as to
whether Section 73A was invoked in
the earlier show-cause notice dated
19/03/2010 culminating in the order
dated 23/12/2013 is a matter which
has to be considered in depth by the
first respondent - authority.
4. One of the reasons given in the
impugned order was that the earlier
show-cause notice and the order dated
CASC Bulletin, April 2015
23/12/2010 was for the period
October 2004 to March 2009, part of
which period is covered under the
Scheme, which was from 01/10/2007
up to 31/12/2012. It was reasoned by
the respondent officer that for the
period October 2007 to March 2009,
there was already an order passed on
23/12/2010 and therefore, the
petitioner was not entitled to file the
application under the Scheme. That
reason is not correct in view of the fact
that the period for tax dues is 01/10/
2007 up to 31/12/2012. That period
cannot be related to any period in
respect of which an order has been
passed by the authority under Section
73 of the Act.
5. If there were any dues between the
aforesaid dates, then the eligibility to
file the application under the Scheme
would arise provided no order was
passed prior to the enforcement of the
Scheme on any issue. Therefore,
linking the period of tax dues under
the Scheme with the period in respect
of which the order dated 23/12/2012
has been passed in petitioner’s case is
not correct as that order was prima
facie not in respect of Section 73A of
the Act.
Hence, the writ petition was allowed
by quashing the impugned order and
CASC Bulletin, April 2015
remanding the matter to the
adjudicating authority to reconsider
the issue in light of whether the earlier
show-cause notice dated 19/03/2010
culminating in the order dated 23/12/
2010 in respect of which certain issues
arose are the very same issues which
have arisen for the subsequent period
namely, April 2012 to December 2012
in respect of which, the petitioner
seeks benefit under the Scheme.
2. Support services rendered to a US
company relating to procurement of
goods, recommending vendors and
issue of inspection certificate, etc. –
export of service not to be denied
merely because the services were
rendered from india:
In GAP International Sourcing (I) P.
Ltd. v. CST, Delhi - [2015] 37 S.T.R. 757
(Tri. - Del), the appellant was a
subsidiary of M/s. GAPInternational
Sourcing, Inc., U.S.A. who are a
prominent retailer in U.S.A. and other
countries. The appellant entered into a
service support agreement with
M/s. GAP, U.S.A. for rendering
various services relating to
procurement of goods recommending
fabrics to be used for manufacture of
garments, recommending vendors
from which fabrics, yarn, zippers,
7
buttons, snap fasteners etc. can be
procured, reporting the status of
manufacture of products by the chosen
vendors, analyzing the reports of the
samples sent by the vendors, giving
recommendation about the product
integrity,
inspecting
export
consignments and issuing inspection
certificates, screening the vendors
suitability in terms of child labour
norms and pollution control norms
and recommending the teams to be
engaged in logistic work like
transportation,
clearing
and
forwarding etc. for export of the
purchased products out of India.
The department was of the view that
the services being rendered by the
appellant are Business Auxiliary
Service covered by Section 65 (105)
(zzb) read with Section 65 (19) of the
Finance Act, 1994. However, the
adjudicating authority confirmed the
demand, denying the claim of export
of service on account of the fact that
the services were rendered from India.
The Tribunal observed as under:1. The service provided by the appellant
to M/s. GAP, U.S.A., is in relation to
procurement of goods from India
wherein they conduct the survey of
the manufacturers of various products
required by M/s. GAP, U.S.A., and
8
recommend the vendors who can
supply the goods of the desired
quality. The appellants also render the
following activities:a. Conduct inspection of the export
consignments and issue inspection
certificates.
b.
Examining not only the quality of
their products, but also whether
they conform to child labour
norms, Pollution control norms etc.
as compliance with these norms is
important for their Principals.
c. Recommend the Transporters and
logistic service providers for export
of the products purchased.
2. Hence, the services being provided by
the appellant to their principal are the
services in relation to procurement of
the goods and there is no dispute that
these services are Business Auxiliary
Services covered by Section 65 (105)
(zzb) read with Section 65 (19) of the
Finance Act, 1994. The only point of
dispute is as to whether the services
are taxable in India or the same are
export of service outside India in terms
of Service Rules, 2005 and for this
reason are not taxable in India.
3. The services being provided by the
appellant are covered by Clause (iii) of
CASC Bulletin, April 2015
Rule 3 (1) of Export Service Rules,
2005, as these services are in relation
to business or commerce and in terms
of this clause, read with sub-rule (2) of
Rule 3, these services would be treated
as exported out of India if:a. The recipient is located outside
India; and
b. The services have been delivered
outside India; and
c. The payments for the services used
have been received by the service
provider in convertible foreign
exchange.
4. There is no dispute that the payment
for these services has been received in
convertible foreign exchange and the
payment has been made by M/s. GAP,
U.S.A. located abroad, not having any
establishment or branch in India. The
departments contention, however, is
that the conditions of delivery outside
India and “use outside India” are not
satisfied, as the services have been
performed in India and the same are
not capable of being used in territory
other than the place where the same
have been provided.
5. According to the department most of
the time, the provision and use of the
services is happening simultaneously
CASC Bulletin, April 2015
and it would be to naive to even
conceive
that
services
of
merchandising, product integrity,
vendor compliance, quality assurance,
fabric sourcing and logistic support
etc. provided in India can even be used
remotely in a territory other than
where the same have been provided.
6. Though the services have been
performed in India, these services
being Business Auxiliary Services are
in respect of the business of the
appellants principal located abroad.
The services being provided by the
appellant are obviously meant for and
are used by M/s. GAP, U.S.A. for their
business.
7. It would be absurd to say that the
recipient and user of these services are
the persons in India and not M/s.
GAP, U.S.A. for whom all these
services provided by the appellant are
meant, who have used these services
for their business and have made
payment for these service in
convertible foreign exchange.
8. As service is normally an activity
performed by a person A for some
other person B for some consideration
and this activity by A may affect some
other persons C, D and E in some
manner, good or bad, the persons C,
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D and E are the person affected by the
service, they cannot be treated as
service recipient the service recipient
would be B who has paid for the
service and whose need has been
satisfied by the provision of service.
The only situation where in respect of
some service provided by A which
was ordered and paid for by B, a
person C who has benefited from the
service, can be treated as service
recipient, when B has acted purely as
an agent of C.
9. In this case, M/s. GAP, U.S.A. do not
have any branch or project or business
establishment in India. The service in
relation to procurement of goods being
provided by the appellant are entirely
meant for M/s. GAP, U.S.A. and the
service in question, - business auxiliary
service, covered by Rule 3 (1) (iii) of
the Export of Service Rules, 2005 have
obviously been used by M/s. GAP,
U.S.A. in relation to their business
located abroad. Therefore these
services have to be treated as delivered
outside India and used outside India
and since payment for the service has
been received in convertible foreign
exchange, the same would have to be
treated as exported out of India. The
impugned order passed by the
commission is an absurd order
contrary to the provisions of Export of
Service Rules, 2005.
10
Hence, the appeal was allowed with a
consequential relief.
3. Services by non-resident service
provider installing cameras in the
stadium to capture images of cricket
match, setting up a broadcast control
room where matches played,
transmitting images to vision colour
collection units and viewed by
experts and transmitting to director’s
vision desk after processing –
classifiable under programme
producer notwithstanding the
presence of third party – service
receiver liable to tax:
In BCCI v. CST, Mumbai - [2015] 37
S.T.R. 785 (Tri. – Mumbai), the
appellant entered into agreements for
provision of services with M/s. Taj TV
Ltd., Dubai/Mauritius, M/s. TWIU.K. Ltd. London and Nimbus Sports
International Pte. Ltd., Singapore. The
appellant also entered into agreements
with M/s. Hawkeye Innovations Ltd.,
U.K. and IMG Media, London and
IMG, South Africa for coverage of
Indian Premier League Matches. As
per these agreements, the service
providers, who were non-residents,
were required to produce audio-visual
coverage of the cricket matches
conducted by BCCI and the digitalized
images of the coverage were uploaded
CASC Bulletin, April 2015
for broadcasting for the viewers of the
cricket match all over the world. The
appellant paid consideration for the
services received to these non-resident
service providers.
The department was of the view that
the services received by the appellant
came within the purview of
“programme producer’s service” and,
therefore, the appellant was required
to discharge service tax liability on
reverse charge basis under Section 66A
of the Finance Act, 1994 or under Rule
2(1)(d)(iv) of Service Tax Rules, 1994,
read with section 66 of the said
Finance Act. The adjudicating
authority confirmed the demand,
against which appeal was filed before
the Tribunal, which observed as
under:
1. The nature of activities undertaken by
the appellants is as under:a) The broadcast control room (BCR)
is set up by the company in the
stadium. It has various units, viz.
Vision colour correction unit,
Director’s vision desk, sound
engineer desk, replay desk, graphic
desk, hawk eye unit, ball speed
machine, other machine routers,
commentary unit, monitor wall.
b) Around 30-32 cameras are fixed
around the ground to take image
CASC Bulletin, April 2015
of
not
only
play
but
also of crowds and other
happenings in the stadium.
c) The images taken by camera are
transmitted to vision colour
correction unit. Each engineer
views the images taken by 4 to 6
cameras.
d) After processing, these images are
transmitted to Director’s vision
desk and also at action replay unit.
Images of all the cameras with
their numbers are displayed on
monitor wall having various
screens supervised by Director.
The
Director
in
charge
continuously instruct the desk in
charge the camera number whose
image is to be telecasted. The desk
in charge press the button of said
camera to send signal through
router to satellite uplink unit.
e) The BCR has sound engineer who
records all types of sounds through
the mike fitted around and on the
ground. The Director in charge of
sound desk decide the sound to be
transmitted to Director’s vision
desk from where images are
transmitted.
f) The BCR has action replay unit.
The images in this unit is also
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transmitted to Director’s vision
desk. The images shown through
these camera are given colour
code. The Director in charge of
vision unit keeps on continuously
instructing the vision desk in
charge the colour code. The images
shown in the said colour code is
finally telecasted.
g) The BCR has hawk eye unit which
tracks each ball played.
h) The BCR has graphic unit, which
produces graphic of average run
rate, standing of various teams,
score board etc. and as per
instruction of Director in charge of
vision desk, it is telecasted.
i) The sound and images are sent for
recording in to video tape recorder
and are also simultaneously sent
for converting into audit video
signals and sent out for up linking
to satellite uplink unit.
j) The finally vended programme is
transmitted to OB van stationed in
the stadium from where it is sent
to satellite for further transmission
to household.”
2. The taxable service has been defined
under Section 65(105)(zzu) as “any
service provided or to be provided to
any person, by a programme
12
producer, in relation to a programme”.
The activities undertaken by the nonresident service providers squarely
falls within the definition of
“programme” as defined in section 65
(86a) and the service providers are
‘programme producers’ as defined in
section 65 (86b).
3. As regards the contention that in
respect of Hawkeye Innovations Ltd.,
they were only supplying software
programmes for recording, this
contention does not seem to be flowing
from the contract entered into with
Hawkeye Innovations Ltd. A perusal
of the agreement with Hawkeye
Innovations Ltd. shows that Hawkeye
Innovations was required to supply
four units in connection with the
production by IMG Media for BCCI of
the world feed live coverage on the
IPL in the seasons 2008, 2009 and 2010.
Hawkeye Innovations was also
required to supply three engineers for
the recording of the events and the
consideration was paid for supply of
the equipment and the personnel for
recording purposes. Any service in
relation to ‘programme producer’s
services’ would also fall within the
definition of “taxable service”.
Therefore, the services provided by
Hawkeye Innovations by way of
supply of equipment and personnel
for recording the live programme and
CASC Bulletin, April 2015
actually participating in such
programme production would also fall
within the definition of ‘programme
producer’s services’.
4. As regards the contract entered into
with IMG S.A., the said agreement was
for booking of hotel accommodation
and transport of personnel in
connection with the recording of
cricket matches to be recorded by IMG
U.K. These services per se will not
qualify as ‘programme producer’s
services’ and they are in the nature of
supporting services. The contract was
a separate one and the service
provided and received consisted of
booking of hotel accommodation and
arrangements for transportation.
Therefore, though these services were
in connection with the production
agreement with IMG Media, U.K. for
recording of matches, they cannot be
considered as production of any
programme. Therefore, demand to this
extent has to be set aside.
5. The next issue pertains to the time bar
aspect raised by the appellant. The
details of the services received from
the non-resident service providers and
the consideration paid therefor was
never declared to the department in
the statutory returns filed by BCCI. In
terms of the provisions of section 66A
read with section 68 of the Finance
CASC Bulletin, April 2015
Act, 1994, the appellant BCCI was the
person responsible for paying service
tax and it was their duty to comply
with the statutory requirements which
they failed to do. After completion of
investigation, the show cause notices
were issued without any undue delay.
In these circumstances, invocation of
extended period of time cannot be
faulted at all. There has been no undue
delay on the part of the department
either in completing the investigation
or in issue of the show cause notices.
A belief can be said to be bona fide
only when it is formed after all
reasonable considerations are taken
into account.
6. Hence, the Tribunal concluded as
under:a. The services received by the
appellant, BCCI from the nonresident service providers, namely,
M/s. Taj TV Ltd., Dubai/
Mauritius, M/s. TWI-U.K.Ltd.
London,
Nimbus
Sports
International Pte. Ltd., Singapore,
M/s. Hawkeye Innovations Ltd.,
U.K. and IMG Media, London
merit
classification
under
‘programme producer’s services
and the appellant was liable to pay
service tax along with interest
13
thereon on the consideration paid
for the services received under the
provisions of section 66A of the
said Finance Act.
b. The services of hotel booking and
transportation received from IMG,
South Africa do not fall within the
scope of the said service and hence
demand of service tax on this
service under the category of
programme producer’s service is
not sustainable in law.
c. The Appellant had suppressed
material facts from the department
and hence, extended period of time
has rightly been invoked for
confirmation of service tax
demand.
Hence, the appeal was rejected in
terms of the above.
4. Joining of two pieces of thermite
welding at site for railways – no
activity of production or processing
not amounting to manufacture – no
taxability under bas:
In Harshad Thermic Industries (P) Ltd.
v. CCE&C, Raipur – 2015 (35) STR 808
(Tri. – Del.), the appellant was
engaged in the business of
manufacture of thermite mixture and
14
rendering service in relation to
thermite welding of rail joints. The
thermite mixture, which is used for
thermite welding consists of iron oxide
(ferric oxide) and metal powder like
aluminum powder, magnesium
powder zinc powder etc. In thermite
welding process using the mixture of
iron oxide and aluminum powder as
fuel, the aluminum reduces the iron
oxide and iron is produced with a
large amount of heat as the reaction is
exothermic.
The melted iron
produced fills the gap between the
rails to be joined. The appellant
undertook the joining of two pieces of
rails at site for Railways by thermite
welding.
The department was of the view that
the process undertaken by the
appellant is production or processing
of goods not amounting to
manufacture and, hence, attracting
service tax under the category of
Business Auxiliary Service (BAS)
mentioned in Section 65(105)(zzb) read
with Section 65(19) of the Finance Act,
1994. Hence, the adjudicating
authority confirmed the demand
under BAS while dropping the value
representing the cost of materials sold.
On appeal before the Tribunal, it was
observed as under:-
CASC Bulletin, April 2015
1. The appellant undertake the joining of
sections of rails at site by thermite
welding process. The welding of
section of rails which are of length of
100 Mtrs is done at site as result of
which there are lesser number of gaps
at every 2Km instead of at every 100
Mtrs resulting in smooth movement of
train on railway tracks. The process
undertaken by the Appellant is part of
the process of laying down of tracks
and make them fit for traffic
movement as before undertaking the
thermite welding process, the rails
have to be precisely aligned.
2. The activity of the appellant does not
result in any deliverable goods to the
railway and it cannot be said to be the
production or processing of goods not
amounting to manufacture.
Hence, the appeal was allowed with a
consequential relief.
5. Land development for housing
project – demand raised under
construction of complex upto
30.05.2007 and works contract from
01.06.2007 – not sustainable:
In Alokik Township Corpn. v.
CCE&ST – 2015 (37) STR 859 (Tri. –
Del.), the appellant was a partnership
firm and was engaged in development
of land for housing projects. On 10/
CASC Bulletin, April 2015
09/05 the appellant entered into an
MOU with M/s. Gopal Housing and
Plantation Corporation (GHP) under
which the appellant was to jointly
develop the land belonging to GHP
into a township comprising residential
and commercial buildings after getting
the necessary approval from the Jaipur
Development Authority (JDA).
However, this MOU was cancelled.
Subsequently, the appellant firm
entered into a joint venture with GHP
for development of a township name
Eden Garden on the land belonging to
GHP. According to the appellant, this
joint venture was also terminated.
Subsequently, the appellant firm
entered into an agreement with GHP
for the following:a. development of land belonging to
GHP by construction of roads,
laying of sewer lines, construction
drains, laying of water pipelines,
underground cabling works
including optical fiber cables,
installation of pre-cast iron poles
on road sides/dividers with lights,
panels
and
MCBs
etc.,
development of landscaped
gardens as per the design of
landscaping consultants alongwith
Plantation ;
15
b. construction of boundary wall ;
and
c. Other development works as
norms of JDA.
Thereafter the residential complexes
were constructed by engaging other
contractors. The department was of
the view that the activity of the
appellant would attract service tax
under Section 65 (105) (zzzh) readwith
Section 65 (30a) and 65 (91a) of the
Finance Act, 1994 as the same was
construction of residential complex
service. On this basis, the adjudicating
authority confirmed the demand,
against which appeal was filed before
the Tribunal which observed as
under:1. The appellants activity is only of
developing the land belonging to GHP
for township, which comprises
leveling of the land, demarcation of
plots/shops/business premises,
construction of boundary wall
surrounding
the
township,
construction of roads as per the norms
of JDA, erection of the iron poles with
lamps, panels, MCBs etc. underground
cabling work including laying of
optical fiber cables, laying of
16
construction of open as well as
underground drainage lines, as per the
norms of JDA, development of water
harvesting system, construction of
underground as well as overhead
tanks for storage of water, laying of
underground water pipelines in the
township, development of landscaped
lawns in the earmarked areas etc.
2. The development of land for township
is not covered by the definition of
construction of complex service as
given in Section 65 (105) (zzzh)
readwith Section 65 (39a) and 65 (91a)
or by the definition of Works Contract
Service in Section 65 (105) (zzzza)
w.e.f. 01/06/2007.
3. In view of this, the service tax demand
from the appellant firm by treating
their activity as taxable under Section
65 (105) (zzzh) as construction of
complex service upto 30/05/2007 and
under Section 65 (105) (zzzza) as
Works Contract Service w.e.f. 01/06/
2007 is not sustainable.
Hence, the impugned order was set
aside and the appeal was allowed.
(The author is a Chennai based Chartered
Accountant. He can be reached at
reachanandvis@gmail.com)
CASC Bulletin, April 2015
EXCEL TIPS
Returning the Last Non-Blank Cell In a Column or Row
If you update a worksheet frequently by adding new data
to its columns, at times, you may need a reference to the last
value in a particular column (the value most recently
entered).
The worksheet tracks the attendance of three projects
in columns B:D. Notice that the information does not arrive CA. DUNGAR CHAND U. JAIN
at the same time. The goal is to get the most recent
information of each project. These values are calculated in
the range G4 : G6.
Use a formula to return the last nonempty cell in columns B:D.
The formulas in G4, G5, and G6 are as follows:
= INDEX(B:B,COUNTA(B:B))
= INDEX(C:C,COUNTA(C:C))
= INDEX(D:D,COUNTA(D:D))
CASC Bulletin, April 2015
17
These formulas use the COUNTA function to count the number of nonempty cells in
column B,C,D. This value is used as the second argument for the INDEX function. For
example, in column B the last value is in row 4, COUNTA returns 4, and the INDEX
function returns the 4th value in the column.
The preceding formulas work in most, but not all, situations. However If the column has
one or more empty cells interspersed, determining the last nonblank cell is a bit more
challenging because the COUNTA function doesn't count the empty cells.
Choose Function
This function picks from a list of options based upon an Index value given to by the user.
It helps select one of up to 254 values based on the index number.
Syntax :
= CHOOSE(Index_num, Item1, Item2, Item3 through to Item 254)
How the VALUE is returned?
• If index_num is 1, CHOOSE returns value1; if it is 2, CHOOSE returns value2; and
so on.
• If index_num is less than 1 or greater than the number of the last value in the list,
CHOOSE returns the #VALUE! error value.
• If index_num is a fraction, it is truncated to the lowest integer before being used.
EXAMPLE
C
D
3
Index Value
Result
4
1
Raja
= CHOOSE (C4,"Raja","Rani","Mantri")
5
3
Mantri
= CHOOSE (C5,"Raja","Rani","Mantri")
6
2
Rani
= CHOOSE (C6,"Raja","Rani","Mantri")
7
3
15%
= CHOOSE (C7,65%,20%,15%)
8
1
65%
= CHOOSE (C8,65%,20%,15%)
9
2
20%
= CHOOSE (C9,65%,20%,15%)
B
Formula Used
Note : The value arguments to CHOOSE can be range references as well as single values.
(The author is a Chennai based Chartered Accountant and he can be reached at
dungarchand@hotmail.com)
18
CASC Bulletin, April 2015
CASC CHENNAI, MEMBERSHIP FEE
Corporate Membership
Corporate Annual Membership
Corporate Life Membership (20 Years)
3,000.00
PLUS SERVICE TAX
20,000.00
PLUS SERVICE TAX
750.00
PLUS SERVICE TAX
7,500.00
PLUS SERVICE TAX
Individual Membership
Annual Membership
Life Membership
CASC BULLETIN - ADVERTISEMENT TARIFF - PER MONTH
Full Page Back Cover
Full Page Inside Back Cover
2,000.00
1,600.00
PLUS SERVICE TAX
PLUS SERVICE TAX
Half Page Back Cover
Half Page Inside Back Cover
1,250.00
1,000.00
PLUS SERVICE TAX
PLUS SERVICE TAX
Full Page Inside
Half Page Inside
Strip Advertisement Inside
1,200.00
750.00
500.00
PLUS SERVICE TAX
PLUS SERVICE TAX
PLUS SERVICE TAX
Minimum 6 months advertisement is required.
If advertisement is 12 months or above, special discount of 15% is available
CASC - HALL RENT
HALL RENT FOR 2 HOURS
HALL RENT FOR 2-4 HOURS
HALL RENT FOR FULL DAY
1,000.00
1,500.00
2,500.00
PLUS SERVICE TAX
PLUS SERVICE TAX
PLUS SERVICE TAX
LCD RENT FOR 2 HOURS
LCD RENT FOR 2-4 HOURS
600.00
800.00
PLUS SERVICE TAX
PLUS SERVICE TAX
LCD RENT FOR FULL DAY
1,200.00
PLUS SERVICE TAX
Your demand draft should be drawn in the name of
“The Chartered Accountants Study Circle” payable at Chennai.
CASC Bulletin, April 2015
19
RECENT DECISIONS - CUSTOMS & EXCISE LAW
Fabrication of pipes out of iron and steel
is a manufacturing activity
In the case of Kaakteeya Fabs Pvt Ltd and
Simplex Infrastructure Ltd vs CCE [2015TIOL-275-CESTAT-DEL,
Simplex
Infrastructure Ltd (“taxpayer 1”) had
undertaken a turnkey contract with NTPC
and sub contracted the part of the contract
for laying down of pipes to Kaakteeya
Fabs Pvt Ltd (“taxpayer 2”). Service tax
was being discharged for the activity of
laying down of pipes.
The Revenue alleged that fabrication of
pipes is a manufacturing activity for
which excise liability has not been
discharged by taxpayer 2. The taxpayer
2 contended that they have already
discharged the service tax liability on the
activity of laying down the pipes and
liability for excise duty does not arise as
the various raw materials and capital
goods required for the construction
purposes where provided by taxpayer 1.
The taxpayer 2 also contended that even
if they are liable to discharge the excise
duty, they will be eligible for cenvat credit
of duty paid on steel items supplied to
them by taxpayer 1.
The Tribunal relied on Mahindra &
Mahindra Ltd (2005-TIOL-1215-CESTATDEL-LB) and held that fabrication of pipes
20
CA. S. VINODH
is a manufacturing activity and stayed the
matter till the disposal of final appeal.
Transportation charges collected by
raising debit notes not to be included in
Assessable Value
In the case of CCE vs Emerson Network
Power (I) Ltd [2015-TIOL-303-CESTATMUM], the taxpayer collected additional
amounts incurred on account of
transportation by raising debit notes. The
Revenue contended that such amount
should be included in the assessable value.
The Tribunal relied on CCE vs Garware
Enterprises Ltd [2014 (301) ELT349 (Tri
Mum)] and held that the taxpayer had
merely collected the freight charges paid
by them to the transporters, thus there is
no requirement to include the same in the
assessable value.
Eligibility to take suo moto re-credit of
duty paid
CASC Bulletin, April 2015
In the case of Jubiliant Engineering Ltd
vs CCE [2015-VIL-83-CESTAT], the
taxpayer is a manufacturer of valves
which are subsequently exported by them.
However on export, mistakenly they paid
excise duty by debiting their Cenvat credit
account and filed a rebate claim for the
same. Further the taxpayer availed the
suo moto re-credit of the Cenvat credit
and cancelled the rebate claim filed by
them.
The Revenue relied on Tribunal’s LB
decision in the case of BDH Industries
Ltd vs CCE [2008 (229) ELT 364 (Tri-LB)]
and contended that suo moto re-credit of
Cenvat credit is not allowed
The Tribunal observed that the issue
involved is already settled in the favour of
taxpayer holding that domestic taxes
incurred for the export of goods are
refunded on account of public interest.
Thus in the present case also the taxpayer
would be eligible to claim re-credit of their
Cenvat account.
Cenvat credit of technical know-how
acquired is available even if the products
have not been manufactured by using
the know-how
In the case of Indswift Laboratories Ltd
vs CCE&ST [Final order No 50026/2015],
the tax payer was a manufacturer of
pharmaceutical products. The Revenue
Authorities denied the Cenvat credit of
CASC Bulletin, April 2015
purchase of technical Know-how on the
ground that the products have not been
manufactured by the taxpayers using the
know-how.
The Tribunal observed that the technical
know-how once obtained begins to be
utilised for manufacturing purpose, since
the same is relevant right from setting up
of necessary wherewithal required for
manufacturing the product. There is
always a time lag between acquiring of
input service and actual production of
goods, depending upon their nature.
Further, as per Rule 4(7) of Cenvat Credit
Rules, 2004, Cenvat credit in respect of
input services becomes available on or
after the date on which payment is made
for the value of the input service. Cenvat
Rules do not provide that the credit of
input services can be taken only when the
final products get manufactured. Relying
on the case of Cadila Health Care Ltd. Vs.
CCE [2010 (17) STR (Tri.)], the Tribunal
held that the Cenvat credit of technical
knowhow was allowed even though the
goods were not manufactured by the
taxpayer at the time of availment of
Cenvat credit.
Transport charges incurred by taxpayer
in transporting and delivering the goods
upto buyers’ premises are includible in
Assessable Value
In the case of Uflex Ltd vs CCE&C [2015TIOL-245-CESTAT-DEL], the tax payer
21
was manufacturer based in Jammu and
Kashmir and had been claiming refund
(self-credit) of the Central Excise duty
paid under Notification No.56/2002-CE
dated November 4, 2002. The taxpayer
has been paying excise duty on assessable
value including the freight charges upto
the buyer’s premises. The Revenue
Authorities sought to disallow self-credit
to the extent of duty paid on said freight
charges on the ground the taxpayer had
paid extra duty in cash by including the
freight charges incurred for transport of
their goods while the same were not
includible in the assessment value.
The Tribunal observed that the sale is on
Free On Road (“FOR”) destination basis
and the destination is the buyers
premises; the transit insurance is borne by
the taxpayer; the ownership of the goods
remained with the taxpayer upto the
buyers premises. Considering the above,
the Tribunal held that the place of
removal is the buyer’s premises and the
taxpayer has rightly included the cost of
transportation in assessable value and are
entitled for the benefit under Notification
No.56/2002-CE.
Eligibility to MODVAT credit in cases
where inputs not received within 180
days from job worker
In the case of Cce Vs Godrej And Boyce
Mfg Co Ltd [2015-Tiol-263-Hc-Mum], the
taxpayer was the manufactures of
22
machines and mechanical appliances and
were sending inputs for further processing
to the job workers which were received
back beyond the period of 180 days. The
Revenue contended that the taxpayer have
availed inadmissible Modvat credit as the
input were received after the period of 180
days. The Tribunal held that mere noncompliance of the procedural provisions
should not result in denial of a relief or
benefit, as all the relevant documents were
furnished by the taxpayer.
The High Court observed that erstwhile
MODVAT credit rules does not make it
mandatory to receive back the goods
within 180 days to deny the eligibility of
credit. Thus there is no intention by the
framers of the Rules to deny credit on such
situations. Following this principle, the
High Court upheld the order of the
Tribunal.
Any term or expression defined in the
enactment must be understood in the
light of the definition given in the Act
In the case of BMM Ispat Ltd vs CC&CE
[2015-TIOL-263-CESTAT-MUM], the tax
payer imported coal and classified it under
CTH 2701 1920 as “Steam Coal”. Revenue
classified it as “Bituminous Coal” under
CTH 2701 1200 relying on the sub-heading
note 2 to Chapter 27 of Customs Tariff Act,
1975 (“Customs Tariff”). The said note
stated that coal having a volatile matter
exceeding 14% (on dry, mineral-matterCASC Bulletin, April 2015
free basis) and calorific value equal to or
greater than 5833 Kcal/Kg (on moist,
mineral-matter-free basis) would qualify
as “bituminous coal”.
The taxpayer contended that the imported
coal is known as “Steam Coal” in
commercial parlance and cannot be
considered as “Bituminous Coal” in
scientific terms. Further submitted that in
the decision of Coastal Energy Pvt. Ltd. &
Others, vide final order dated 20/06/
2014, wherein the Tribunal has classified
imported coal as “bituminous coal”, did
not examine this aspect and concluded
basis note 2 to Chapter 27 of Customs
Tariff.
The Tribunal held that any coal satisfying
this definition mentioned in Note 2 to
Chapter 27 of Customs Tariff would
qualify as “bituminous coal” and
accordingly liable to be classified under
CTH 2701.1200. Any term or expression
defined in the enactment must be
understood in the light of the definition
given in the Act. It is only in the absence
of which the meaning of the term as
understood in common parlance or
commercial parlance must be adopted.
Relying on the case of Coastal Energy Pvt.
Ltd. & Others the Tribunal ordered
predeposit.
Refund of customs duty expensed in
import is hit by unjust enrichment
CASC Bulletin, April 2015
In the case of Zodiac Clothing Company
Ltd vs CC & ST [Final Order No. 22075 /
2014], the taxpayer filed a refund claim of
excess customs duty paid, on account of
assessee erroneously declaring value in
Bill of Entry. The Revenue rejected the
claim that amount of duty paid was
shown as expenses in the P&L account of
the assessee and thereby, attracted
principles of doctrine of unjust
enrichment.
The taxpayer contended that excess
amount of customs duty was not loaded
to the cost of final products exported. The
taxpayer further contended that the
amount was shown as ‘receivable’ and
when the amount was collected without
authority of law, it had to be treated as
deposit, and thus, the mischief of ‘unjust
enrichment’ did not arise.
The Tribunal observed that –
-
Amount shown as ‘receivable’ is
succeeding year balance sheet as per
Income Tax Act applicable only to said
Act, not relevant for refund of customs
duty, which is an ‘indirect tax
-
Chartered Accountant certificate
stating that excess amount not loaded
to final product cost not a conclusive
evidence
Export order received much before
importation of goods and export price
remained constant is inapplicable to
unjust enrichment
-
23
Basis aforesaid, the refund claim was
rejected.
Applicability of one year time limit for
filing the second refund claim in one
month
In the case of M/s Devki Nandan J. Gupta
vs CC [Order No. A/96/15/SMB], the
taxpayer had filed a second refund claim
which was rejected on the ground that
para 4.2 of CBEC Circular No. 06/2008Cus. (Circular), dated April 28, 2008 only
allows for a single refund claim in respect
of one importer in a month irrespective of
the number of Bill of Entries processed by
the respective Commissionerate.
The Tribunal observed that
-
The intention of the Circular cannot be
to deny file more than one refund
claim in a month even though the
period of one year is getting expired
-
The Circular also had an exception for
situations when there is necessary at
the end of one year period.
In view of this, Tribunal held that even if
more than one claim in a month is filed,
the same cannot be denied only because
of the reason that circular prescribed only
one refund claim in a month otherwise
statutory time limit of one year provided
in the notification will become redundant.
24
The said procedure infraction should not
come in the way of the substantial claim
of the assessee.
Allows excess duty refund pursuant to
self-assessed Bill of Entry
In the case of Suryalaksmi Cotton Mills
Ltd vs CCE [Order No A/133/15/CB], the
taxpayer has filed an application for
refund of customs duty paid in excess
against imported goods. The Revenue
Authorities rejected the refund claim
mainly on the ground that taxpayer has
not challenged the assessment of bill of
entry.
Tribunal, after comparing the old and new
Sec 27 of Customs Act, 1962 (“Customs
Act”), observed that in the old provision,
refund was to be filed in pursuance of
assessment order. However, as per the
present provision, if the duty is paid by a
person under self-assessment, refund can
be filed without filing any appeal, because
if the self-assessment is done then there is
no order of assessment by any proper
officer. In view of the above, the Tribunal
held that the taxpayer was not required to
challenge the assessment of Bill of Entry
and are entitled to refund subjected to
unjust enrichment.
(The author is a Chennai based Chartered
Accountant and he can be reached at
S.Vinodh@bmradvisors.com)
CASC Bulletin, April 2015
RECENT DECISIONS IN SALES TAX / VAT
Opportunity of hearing: The dealer was
given proper opportunity of hearing
before the assessing authority and he was
also called upon by the assessing authority
to verify the information relating to sale
and purchase which was collected, but the
dealer had failed to appear before the
assessing authority as a result of which the
best judgment assessment was done. The
medical certificate produced in support of
the dealer’s submission that the dealer
was unwell and could not appear before
the assessing officer did not inspire
confidence since the medical certificate
had already been considered by the
Appellate Board. The first appeal
remained pending before the appellate
authority for about a year but the dealer
failed to produce any material in support
of his case. Even during the pendency of
the appeal before the Appellate Board no
cogent material was produced by the
dealer. Therefore, the submission of the
dealer at this stage, of writ petition
hearing, that he was not given proper
opportunity of hearing could not be
accepted. [2013] 65 VST 73 (MP) Gulab
Chand, Ajay Kumar Jain V. Assessing
Commercial tax officer and others
Alternative Remedy: Unless the petitioner
showed to the court there was violation or
infringement of fundamental rights,
CASC Bulletin, April 2015
CA. V.V. SAMPATHKUMAR
violation of principles of natural justice or
that the order passed was ultra vires the
provisions of the Act or Rules, the writ
court would not interfere with the order,
when there was effective and alternative
remedy of appeal available under the
statute. [2013] 65 VST 69 (MAD)
Greenland Exports (P) LTD. V. Assistant
Commissioner (CT), Nandanam
Assessment Circle, Chennai
Penalty against the officer: An aggrieved
person can seek two different types of
reliefs in a matter where any illegality was
done by the officer. He could get
compensation or he could initiate a penal
action against that officer. On the other
hand, he could get cancellation of the act
done by that officer, without seeking any
penalty against the officer in particular. If
relief is sought against the officer in
person the specific provisions of section
48(1) of the MP State VAT Act, shall apply
25
but, if the relief sought is of composite
nature then, provisions of section 48(2) of
the said Act would apply and if relief is
sought of the second nature that only the
action taken by the officer is to be nullified
then, such relief can be given against the
State and provisions relating to sanction
shall not be attracted.[2013] 65 VST 165
(MP) Smt.Shahjahan Iqbal V. State Of
Madhya Pradesh and others
from January 1, 2007 to March 31, 2008,
there appeared to be an omission, that
omission was sought to be corrected by
way of substitution. The substitution will
have to relate back to January 1, 2007
itself, when the 2006 Act came into force.
[2013] 65 VST 227 (Mad) Nazareth Foods
(P) Ltd. and another v. Assistant
Commissioner (CT), Aminjikkarai
Assessment Circle, Chennai and another
Substitution: For an escapement of
assessment to arise, it is necessary that
there should be an order of original
assessment made. Unless and until an
assessment order is made, the revision of
assessment or proceedings on escapement
of assessment will not arise. If there was
an omission or a specific statement the
court is empowered to give a constructive
meaning to the intention of the Legislature
and give it the force of life. There is
justification for the court to iron out the
creases by interpreting the word
“substitution” to mean that the intention
of the Legislature was to replace the old
entry 18 of Part B of the Fourth Schedule
with new entry 18 to have effect for the
period from January 1, 2007 to March 31,
2008. The understanding of the
Department prior to the coming into force
of the 2006 Act and from April 1, 2008,
was that the powder form of chilli,
turmeric and coriander was to be
exempted goods for all purposes. If
during the interregnum period, namely,
Discount: The Legislature can provide for
and also prescribe terms and conditions
for discounts in the sale price and as trade
practice discounts could be offered by
way of credit notes, but those discounts
offered by a selling dealer can have no
impact on the payment of tax. Any such
discount, be it a trade discount or a cash
discount, an incentive discount, quantifies
for deduction from payment of tax only
when it is separately mentioned in the
original tax invoice. Entry 54 of the State
List which authorises the State Legislature
to levy tax “on the sale or purchase of
goods other than newspapers” also
authorises an enactment to prevent the tax
evasion. Sub-section (20) of section 19
contains specific provision, where the
goods are re-sold at a lower price than the
price at which they were purchased, to
reverse the input-tax credit over and
above the output tax credit. There is no
infraction of the constitutional provisions.
A law cannot be held to be unreasonable
merely because it operates retrospectively.
26
CASC Bulletin, April 2015
The unreasonability must lie in some other
additional factors. The other factors are
period of retrospectively and degree of
unforeseen or unforeseeable financial
burden imposed for the past period.
Length of time is not by itself decisive to
affect retrospectively. The retrospective
operation of a fiscal statute would have to
be found to be unduly oppressive and
confiscatory, before it can be held to be
unreasonable as to violate constitutional
norms. Where a taxing statute is plainly
discriminatory or provides no procedural
machinery for assessment and levy of tax
or is confiscatory, courts will be justified
in striking down the impugned statute as
unconstitutional. [2013] 65 VST 260 (Mad)
Jayam & Co. v. Assistant Commissioner
(CT) Main Amaindakarai Assessment
Circle, chennai and another (and other
cases)
Registration: If the registered dealer was
not carrying on business from its
registered address, but from some other
address, the Act itself provides what
penalty may be imposed upon such
dealer. The allegation in the first
information report was in excess of the
jurisdiction or power of the officers, who
lodged it. Merely because a first
information report had been lodged,
neither the State, nor any of its officers,
could, because of such first information
report, interfere with right to livelihood of
the dealer by staying its registration and,
CASC Bulletin, April 2015
accordingly, stopping its business
affecting its right to life.[2013] 65 VST 307
(Uttarakhand)
Commissioner,
Commercial Tax v .Jai Durge Traders
Penalty: A truck carrying goods was
intercepted within the State of
Uttarakhand on its way to Haldwani. The
papers carried by the driver of the truck
suggested that the goods were being taken
from Roorkee to Haldwani. Despite the
papers being so, on the ground that the
driver held out that the goods came from
Muzaffarnagar penalty to the extent of the
amount of security was levied. On appeal,
the penalty was cancelled and this was
affirmed on appeal by the Department. On
a revision petition, it was held by the
Court that it was obligatory on the part of
the assessing officer, at the time of
assessment, to establish that, in fact, the
driver had stated that the goods were
coming from Muzaffarnagar in order to
prevail upon the documents, which
suggested that the goods were coming
from Roorkee. That having not been done,
the assessing officer could not impose
penalty. [2013] 65 VST 315 (Uttarakhand)
Commissioner, Commercial Tax (earlier
trade tax), Uttarakhand, Dehradun v.
Ranasteels
Interest: The liability to pay interest under
section 25(5) of the Haryana General Sales
Tax Act, 1973, in respect of additional
liability created under the assessment
27
order arises not on the date of transaction
of purchase and sale or filing of return but
only when the assessment is made. The
interest cannot be levied for the period
prior to the passing of the order of
assessment. [2013] 65 VST 318 (P&H)
Eicher Goodearth Limited and another v.
State Of Haryana and another
Exemption: When the purchaser of the
goods is exempted, the sales tax cannot be
collected from the selling dealer. The
petitioner-dealer supplied goods to the
Tirumala Tirupathi Devasthanam,
Tirupathi, a statutory religious
endowment, and Girijan Primary
Corporation
Marketing
Society,
Visakhapatnam. G. O. Ms. No. 314,
Revenue (CT-II) Department, dated April
28, 1988, and G: O. Ms. No. 31, Revenue
(CT-II), dated January 11, 1991 issued
under section 9(1) of the Andhra Pradesh
General Sales Tax Act, 1957 exempt the
Tirumala Tirupathi Devasthanam as well
as the Girijan Society from payment of tax
under the Act on the sales and purchases
of goods made by them and held
accordingly, that when the purchasers, the
Tirumala Tirupathi Devasthanam as well
as the Girijan Society, were exempted
from paying the tax on the purchases of
goods, impliedly, it followed that the
Department could not levy and collect the
tax on the sales effected by the dealer to a
buyer who was exempted from payment
of purchase tax. [2013] 65 VST 347
28
(AP) Vijaya Lakshmi Enterprises v. state
of A. P.
CST Section 8(5) Notification and Rate of
tax: During the assessment year 1999-2000,
a manufacturer of cereal and running a
flour mill, deposited in accordance with
the notification dated March 7, 1994
bearing No. 929, F.4 (8)FD/Gr.-4/94-71,
issued by the State Government in
exercise of power under section 8(5) of the
Central Sales Tax Act, 1956, on inter-State
sales of goods effected by it. The assessing
officer passed an order accepting the rate
of tax at the rate of four per cent but levied
surcharge on the tax and interest thereon.
The DC (Appeals) on appeal gave
direction to delete the surcharge levied.
When this was agitated by the CTO, the
Court, following the rulings in SREE
AYYANAR SPINNING AND WEAVING
MILLS LIMITED V. STATE OF TAMIL
NADU,[1998] 109 STC 205 (Mad) held that
tax rate of four per cent was prescribed for
the petitioner and similarly situated
dealers. It was also stated in that
notification that there was no requirement
of filing of form C when the sale was
outside the State of Rajasthan. Surcharge
under the Rajasthan Sales Tax Act, 1994
was not leviable in a case where tax was
payable under section 8(5) of the Central
Sales Tax Act. [2013] 65 VST 379 (Raj)
Commercial Taxes Officer v. Laxmi roller
floor mills
Appeal: The remedy of appeal is not a
CASC Bulletin, April 2015
matter of right. It is a right conferred by
the statute and it is axiomatic that the right
of appeal can be availed of only after
fulfilling the conditions laid down in the
statute. [2013] 65 VST 393 (AP) Swastic
Oleachems Ltd. v. State of A. P.
law to impose tax on the sale or purchase
of goods imported from outside the
country. Hence, the amendment is not
violative of article 304. [2013] 65 VST 401
(Karn) Balaji Silk House and others v.
State of Karnataka
Imported goods: Sale of raw silk and silk
yarn is exempt from the levy of tax. When
the levy of four per cent tax on the sale of
raw silk and silk yarn, imported from
outside the country, was made, by
amendment to entry 22 in Part S of the
Second Schedule to the Karnataka Sales
Tax Act, 1957, it was held that it would
not directly impede the free flow of trade
and commerce in these goods in the
territory of India. Accordingly, the
amendment is not violative of article 301
of the Constitution. A fiscal measure is not
outside the prohibition of article 301 but
only such taxes which directly or
immediately impede the free flow of
trade, commerce and intercourse will fall
within the prohibition of article 301.
However the State Legislature can by law
impose any tax on goods imported from
other States or Union Territories but
without offending article 304(a). The
object of article 304(a) is to prevent
discrimination against goods imported
from other States within the territory of
India by imposing on them a tax higher
than that borne by goods produced in the
State. It does not impose any restrictions
on the Legislature of a State to make any
Classification: A reading of the entry 6,
Part B of the Third Schedule of TNGST
Act 1959 as it stood during the period
from April 1, 2000 to March 26, 2002 and
entry 27(i), Part B of the Third Schedule
effective from March 27, 2002 would show
that exemption was granted in respect of
sale of fresh milk, pasteurised milk and
directly reconstituted milk. In this case,
milk treated to UHT was not separately
treated as an item of taxation or as an item
of exemption. It was the case of the
petitioner that what was sold was without,
any additives. Further when the
Commissioner himself had admitted in
clarification dated July 30, 2007 that toned
milk sold in sachets was also pasteurised
milk qualifying for exemption, there was
no justification to restrict it for a particular
period alone as referred to in it. Therefore,
the petitioner was entitled to exemption.
[2013] 65 VST 406 (Mad) Nestle India
Limited v. State of Tamil Nadu
CASC Bulletin, April 2015
(The author is a Chennai based Chartered
Accountant and he can be reached at
vvsampat@yahoo.com)
29
Finance Bill 2015, Direct Tax
Proposal to amend the definition of Charitable Purpose
does it serve any real purpose?
The Finance Bill 2015 has proposed to
amend the controversial and highly
litigated proviso to Section 2(15) of the
Income Tax Act, 1961 (‘the Act’) which
defines the term ‘Charitable Purpose’.
1. Provision of the Act
Section 2(15) of the Act as existing now
reads as under:
Charitable purpose” includes relief of the
poor, education, medical relief,
preservation of environment (including
watersheds, forests and wildlife) and
preservation of monuments or places or
objects of artistic or historic interest, and
the advancement of any other object of
general public utility:
Provided that the advancement of any
other object of general public utility shall
not be a charitable purpose, if it involves
the carrying on of any activity in the
nature of trade, commerce or business, or
any activity of rendering any service in
relation to any trade, commerce or
business, for a cess or fee or any other
consideration, irrespective of the nature of
use or application, or retention, of the
income from such activity:
30
CA. K. SUDARSHAN, CHENNAI
Provided further that the first proviso shall
not apply if the aggregate value of the
receipts from the activities referred to
therein is [twenty-five lakh rupees] or less
in the previous year;
2. Proposal under the Finance Bill 2015
The finance bill has proposed the
following to Section 2(15)
•
‘Yoga’ has been included as a
separate activity (previously it
was part of the General Public
Utility clause)
•
The first and second proviso shall
be replaced as follows
“Provided that the advancement
of any other object of general
public utility shall not be a
Charitable purpose, if it involves
the carrying on of any activity in
the nature of trade, commerce
CASC Bulletin, April 2015
Amendment of or business, or any
activity of rendering any service in
relation to any trade, commerce or
business, for a cess or fee or any
other consideration, irrespective of
the nature of use or application, or
retention, of the income from such
activity, unless—
(i) Such activity is undertaken in
the course of actual carrying out of
such advancement of any other
object of general public utility; and
(ii) The aggregate receipts from
such activity or activities during
the previous year, do not exceed
twenty per cent of the total
receipts, of the trust or institution
undertaking such activity or
activities, of that previous year;”;
3. Analysis on the proposal to proviso
to Section 2(15)
Therefore from the above paragraph,
we can decipher the proviso to Section
2(15) of the Act as follows
•
Any registered public charitable
trust engaging in the last limb i.e.,
the residuary activity clause of
general public utility and such
trust carries on any activity in the
nature of trade, commerce or
business shall cease to be a public
trust undertaking charitable
purpose and will be taxed as an
Association of Person, thereby
CASC Bulletin, April 2015
losing the exemption available
under Chapter III of the Act.
•
However there is an exception to
the above, accordingly which the
proviso shall not apply, subject to
satisfaction of the following two
conditions
➣ The activity involving
trade, commerce or
business is performed
during the course of
undertaking its objective of
general public utility;
and
➣ The gross receipts from
such activity involving
trade
commerce
or
business does not exceed
twenty percent of the total
receipts of such trust/
institution.
By invoking the term “and” between the
two conditions, the proviso has made the
conditions to be concomitant/mutually
dependent.
A. The first condition – No intention for
profit motive
The intention of first condition to the
proposal made under the proviso appears
to rationalize the controversy that proviso
to Section 2(15) of the Act has garnered
pursuant to the same being introduced
during Finance Act 2008. Post Finance Act
31
2008, unfortunately the Revenue
Authorities have acted as a wizard and
have used the impugned proviso as a
wand by cancelling the registrations of
many genuine registered trusts
undertaking any activity involving trade,
commerce or business whether or not it is
incidental to the attainment of its
objectives. The revenue authorities were
sacrosanct in their approach and did not
appreciate the reasoning for such trusts
performing the activity involving the
nature of trade, commerce or business.
Plethora of judgments1 have analyzed on
this impugned proviso and have arrived
at a pragmatic view that institutions
whose dominant activity are in the nature
of charity and have no intention to make/
earn any element of profit, then any such
activities involving trade, commerce or
business are mere subservient activities
and therefore the trust shall be treated as
one established for charitable purpose. It
is worth to mention here that recently in
a landmark ruling pronounced by the
Delhi High Court in the case of India Trade
Promotion Organization v. Director General
of Income tax (Exemptions) [2015] 53
taxmann.com 404 (Delhi), it held the
following:
1
“If the primary and dominant objective
of the institution is not to earn profits,
but to do charity through advancement
of an object of general public utility,
then such an institution shall be
regarded as established for charitable
purposes”
Therefore it is heartening to see that the
Government has taken cognizance to the
above ruling and accordingly have
proposed to include the principle of the
ruling as part of the first condition to
exemption available under Section 2(15).
However the intention of the Government
appears to be kind and benevolent, the
proposed proviso comes with certain
practical challenges as follows;
Challenges: The condition specifies that
the institution must undertake commercial
activity during the course of carrying out
the advancement of general public utility.
If any institution undertakes a commercial
activity and applies such income for
charitable purpose, then it appears that
the said activity will be devoid of charity.
Further in my view, the onus will be on
the assessee to prove the fact that the same
is performed during the course of its main
objective, this will again lead to
Trustee of the Tribune, In re [1939] 7 ITR 415 (PC)
CIT v. Federation of Indian Chambers of Commerce & Industries [1981] 6 Taxman 7 (SC)
- Victoria Technical Institute v. Addl. CIT [1991] 188 ITR 57 (SC)
- CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC)
ICAI Accounting Research Foundation v. DGIT (Exemptions) [2009] 183 Taxman 462 (Delhi)
32
CASC Bulletin, April 2015
unnecessary litigation and controversy.
For e.g. a trust undertaking general public
utility as its main objective has a marriage
hall as its property and lets it out on rent.
The proceeds from the letting out are
applied for the purpose of its objective.
There arises a question now as to whether
such activity can be said to be performed
during the course of carrying out its
objective in order to meet the first
condition to the proposed proviso??
Therefore these controversies will
continue to inflame.
It is also worth mentioning here that
Section 11(4) of the Act specifically
includes income from business as part of
property held under the trust, provided
such business is incidental to the
attainment of the objects of the trust.
Therefore there appears to be a dichotomy
with regards to Section 11(4) of the Act
and the Finance Bill 2015 proposal to
Section 2(15) proviso.
Since the conditions are exclusively
mutual, a charitable institution
undertaking commercial activity must also
satisfy the second condition.
B. Second Condition – Threshold limit
The second condition to the proposed
proviso to Section 2(15) of the Act is
indeed a welcoming step from the
Government to modify the existing
blanket threshold limit currently specified
CASC Bulletin, April 2015
at INR 25 lakhs to a percentage threshold
limit wherein the gross receipts from
activity of trade, commerce or business
not to exceed 20 percent of the total
receipts of the trust/ institution.
Challenges: The intention of the
Government from the proposal appears
largely to safeguard genuine trusts
undertaking general public utility activity
involving trade, commerce or business by
increasing the threshold limit from INR 25
Lakhs, which appears to be miniscule to
a percentage based threshold. However,
the amendment appearing to be
superfluous, shall primarily assist larger
institutions and shall have a vicarious
impact on smaller institutions who are say
having a total receipts of INR 25 Lakhs of
which the incidental activity pertaining to
trade, commerce /business is around 10
lakhs, in such scenario, these institutions
will completely lose the tax benefits
available under Chapter III of the Act.
Further with the proviso making the two
conditions mutually dependent, a
charitable institution satisfying the first
condition i.e. undertaking commercial
activity which is incidental to the
attainment of its objectives will lose the
status of charity if the second condition is
failed i.e. gross receipts from commercial
activity exceeding more than twenty
percent of the total receipts. This is harsh
and the proposal does not
33
Way ahead
34
•
The Government must definitely
rationalize the proposed provision
by making the two conditions
mutually exclusively. The word
“and” must be replaced by “or”.
•
Further the threshold limit
specified in the second condition
must be suitably amended to
include gross receipts not
exceeding 20% on the total receipts
or INR 1 crore, whichever is
higher. This will give a fillip to
many small genuine trusts
carrying out charitable activities.
•
Further the Finance minister had
specified that Yoga is a gift to the
world by India and accordingly
included Yoga as a specified
activity and no more it shall be a
residuary activity. It is well known
that there are many other
culturally phenomenal activities
which India has gifted to the
world viz., Fine Arts, Museums,
Vocational learning etc. It is also
a fact that the specified activity list
in Section 2(15) seems to be
inflating year on year, it will be no
surprise if we soon have a
negative list regime coming under
Section 2(15).
To conclude, it is fundamental that in any
country, the Government by itself cannot
undertake the welfare activities for its
people; therefore a HELPING HAND is
always required by the Government in
order to supplement its welfare activities.
This helping hand comes invariably in the
form of Non-Profit Organizations (NPO)
or Non-Governmental Organizations
(NGO). Especially for our Country’s vast
demographic structure and size, the
NGO’s play a pivotal role. Further with
the introduction of mandatory Corporate
Social Responsibility activities, the nonprofit charitable institutions will be of
utmost significance to the Country’s
growth, development and sustenance.
Therefore it is imperative that such
institutions are incentivized and
supported by the Government to
undertake the welfare/ benevolent
activities.
Just as ease of doing business is absolute
for Corporate India, similarly ease of
performing charitable activity is also the
need of the hour for the socially
responsible Indian groups/institutions.
Hope the Government shows some degree
of altruism on this as well.
(The author is a Chennai based Chartered
Accountant and he can be reached at
sudarshan@inbox.com)
CASC Bulletin, April 2015
RISK BASED INTERNAL AUDIT (RBIA) - A STEP BY STEP APPROACH
Welcome to the twenty second edition of the the series on Risk
based internal Audits and this edition continues with Internal
financial controls ("ICFR") by the Directors of the Company in
the Directors responsibility statement under Section 134(5) and
the requirements under Sec 143 of the Act in relation to the
modification of the audit report format, an extract of which was
published in the last edition, reproduced as under
CA. SRIPRIYA KUMAR
Contents of New Law
Old Law
Adequacy and operating effectiveness of internal financial
controls
Not in the Old Act
The requirement to report on ICFR by the auditors has been deferred by a year.
Nevertheless, organisations will be required to prepare themselves to ensure that auditors
obtain necessary comfort in this regard. This edition has been prepared in the format of
FAQ's to enable better understanding
1. What is ICFR ( reproduced from the last edition )
The term "internal financial controls" has been defined as the means the policies and
procedures adopted by the company for ensuring the
• orderly and efficient conduct of its business, including adherence to company's
policies,
• the safeguarding of its assets,
• the prevention and detection of frauds and errors,
• the accuracy and completeness of the accounting records,
• and the timely preparation of reliable financial information
2. What is the difference between ICFR and scope of internal audit
Internal audits focus on operations, financial and compliance risks in all aspects whereas,
ICFR refers only to risks which impact financial reporting. Hence the scope is restricted
to components of the Financial Statements including notes and disclosures.
CASC Bulletin, April 2015
35
For instance, Internal Audit would report on safety and security related risks in an
organisation which will not be the subject matter of ICFR
The scope of internal audit is wider than ICFR in the sense that it would cover both
financial reporting risks and other risks as well
1. Can the statutory auditor prepare a framework for ICFR
Preparation of a framework for ICFR cannot be done by the auditor as it would fall
under the scope of Sec 144 which restricts the auditor from performing certain nonaudit services. A logical understanding would be that since the statutory auditor is
required to comment on the ICFR, he cannot be engaged in the preparation of the same
2. Is ICFR the responsibility of the management
Yes, the preparation and documentation of the ICFR framework is to be done by the
management to be able to assure the Board of Directors as well as the auditors and
provide comfort in relation to the same
3. What are the elements of an ICFR template
The ICFR template should cover all components of the operations of the enterprise that
are likely to impact Financial Reporting. This would include the following aspects
viewed on a multi-dimensional matrix of process, risks and controls
4. Is ICFR the responsibility of the management
Yes, the preparation and documentation of the ICFR framework is to be done by the
management to be able to assure the Board of Directors as well as the auditors and
provide comfort in relation to the same
5. What are the elements of an ICFR template
The ICFR template should cover all components of the operations of the enterprise that
are likely to impact Financial Reporting. This would include the following aspects
viewed on a multi-dimensional matrix of process, risks and controls
•
Revenue Cycle - order to cash
•
Purchases of Goods
•
Purchases of Services
36
CASC Bulletin, April 2015
•
Banking and Treasury operations
•
Investments
•
Inventories
•
Employee costs
•
Fixed Assets
•
Advances and Borrowings
•
Direct and Indirect taxation
The following are the essential elements of the ICFR template
•
Component
•
Process
•
Sub process
•
Risks
•
Risk family
•
Risk impacting ICFR
•
Control exists
•
Control description
•
Type of control - preventive / detective
•
Type of control - manual / automated
•
Testing plan
•
Frequency of testing
•
Result of testing
•
Remediation
(The author is a member of the ICAI and can be contacted at Sripriya@spka.in)
CASC Bulletin, April 2015
37
PROVISIONS RELATING TO ISSUE OF SHARE
CERTIFICATES UNDER COMPANIES ACT 2013
Share Certificates which are duly issued and held in compliance
with provisions of law are deemed to be evidence of title of
the person to the shares contained therein. It is for this reason
that share certificates assume significant importance. In the
present write up, we have put forth the provisions relating to
issue of Share Certificates as contained in the Companies Act,
2013(Act) read with the relevant draft rules.
Share Certificate as Evidence of Title
CS. S. DHANAPAL
Section 46 of the Act contains that a certificate, issued under the common seal of the
company, specifying the shares held by any person, shall be prima facie evidence of the
title of the person to such shares.
Further, where a share is held in depository form, the record of the depository is the prima
facie evidence of the interest of the beneficial owner.
Manner of Issuance of Share Certificates
Irrespective of anything contained in the Articles of Association of the company, share
certificates have to be issued in the manner prescribed below:
Checks before Issue of Share Certificates
•
Share Certificates should be issued only pursuant to a resolution of the Board of
Directors.
•
Letter of allotment or fractional coupons of requisite value needs to be surrendered
to the company by the allottee except in cases of issues against letters of acceptance
or of renunciation, or in cases of issue of bonus shares.
•
In case the letter of allotment is lost or destroyed, the Board may impose such
reasonable terms, if any, as to seek supporting evidence and indemnity and the
payment of out-of-pocket expenses incurred by the company in investigating
evidence, as it may think fit.
38
CASC Bulletin, April 2015
Format of Share Certificate
•
Every certificate of share or shares shall be in Form SH.1 or as near thereto as
possible and shall specify the name(s) of the person(s) in whose favor the certificate
is issued, the shares to which it relates and the amount paid-up thereon.
•
Every Share Certificate has to be issued under the common seal of the company,
which shall be affixed in presence of and signed by directors/authorised
representatives in the manner prescribed below:
One Person Company
One Director OR One Person authorised
by Board for this purpose
+
Company Secretary OR One Person
authorised by Board for this purpose
Other Companies (all companies other
than One Person Company)
2 Directors duly authorised by the Board
for the purpose, out of which one director
shall be a director other than MD/WTD
where the Board composition so permits
+
Company Secretary (in case of companies
which have appointed a company
Secretary) OR
One Person authorised by Board for this
purpose (in case of companies which have
not appointed a Company Secretary)
•
Share certificates can be digitally signed by a director by electronic means or the
signature of the director may be printed on the share certificate as a facsimile
signature by means of any machine, equipment or other mechanical means such
as engraving in metal or lithography, or digitally signed but not by means of a
rubber stamp. The director concerned shall be personally responsible for
permitting the affixation of his signature as aforesaid and the safe custody of any
machine, equipment or other material used for the purpose.
Entry in Register of Members
•
Particulars of every share certificate issued as above shall be entered in the Register
of Members maintained in accordance with section 88 along with the name(s) of
person(s) to whom it has been issued, indicating the date of issue.
CASC Bulletin, April 2015
39
Issuance of Renewed / Duplicate Share Certificates
Circumstances in which duplicate share certificate may be issued
A duplicate certificate of shares may be issued, if—
1. Share certificate is proved to have been lost or destroyed; or
2. has been defaced, mutilated or torn or old, decrepit, worn out, or
3. where shares are sub-divided or consolidated, or
4. where the cages on the reverse for recording transfers have been duly utilized
Manner of issuance of duplicate share certificates
•
•
40
Where original certificate is lost or destroyed –
o
Prior consent of Board to be obtained for issuance of duplicate share
certificate.
o
Company to collect fees not exceeding rupees fifty per certificate and
impose such reasonable terms, as the Board thinks fit, such as furnishing
supporting evidence and indemnity and the payment of out-of-pocket
expenses incurred by the company in investigating the evidence produced.
o
The words “Duplicate” and “duplicate issued in lieu of share certificate No......”
to be stated prominently on the face of the share certificate and also
recorded in the Register maintained for the purpose.
In all other cases o
The certificate in lieu of which a duplicate is required to be issued should
be surrendered to the company.
o
The company may charge such fee as the Board thinks fit, not exceeding
Rs. 50/- per certificate, issued on splitting or consolidation of share
certificates or in replacement of share certificates that are defaced,
mutilated, torn or old, decrepit or worn out.
o
The words “Issued in lieu of share certificate No..... sub-divided/replaced/on
consolidation” shall be stated on the face of the duplicate share certificate
and also recorded in the Register maintained for the purpose.
o
A company may replace all the existing certificates by new certificates
upon sub-division or consolidation of shares or merger or demerger or
any reconstitution without requiring old certificates to be surrendered
subject to compliance with other rules discussed above.
CASC Bulletin, April 2015
Register of Renewed and Duplicate Share Certificates
•
Register of renewed and duplicate share certificates to be maintained in Form
No. SH.2, mentioning therein following details:
o
name(s) of the person(s) to whom the certificate is issued,
o
the number and date of issue of the share certificate in lieu of which the
new certificate is issued, and
o
Necessary changes indicated in the Register of Members by suitable crossreferences in the “Remarks” column.
•
Such register shall be kept at the registered office of the company or at such other
place where the Register of Members is kept.
•
The register shall be preserved permanently and shall be kept in the custody of
the secretary of the company or any other person authorized by the Board for
the purpose.
•
All entries made in the Register of Renewed and Duplicate Share Certificates shall
be authenticated by the secretary or such other person as may be authorized by
the Board for purposes of sealing and signing the share certificates.
Time Limit for Issuance of Share Certificates
•
As per Section 56(4), every company shall, unless prohibited by any provision
of law or any order of Court, Tribunal or other authority, deliver the certificates
of all securities allotted, transferred or transmitted within the time lines
mentioned below –
On Incorporation - to subscribers to
memorandum
Within 2 months
incorporation
On allotment - to allottee
Within 2 months from date of allotment
On Transfer/Transmission - to transferee
Within 1 month of date of receipt of
instrument of transfer or intimation of
transmission.
Duplicate Share Certificate
Unlisted Companies - Within 3 Months of
submission of complete documents and
details with the Company
Listed Companies - Within 15 Days of
submission of complete documents and
details with the Company
CASC Bulletin, April 2015
from
date
of
41
•
Where the shares are dealt with in a depository, the company shall intimate the
details of allotment of shares to depository immediately on allotment of such shares.
Maintenance of Share Certificate Forms and Related Books and Documents
•
All blank forms to be used for issue of share certificates shall be printed and the
printing shall be done only on the authority of a resolution of the Board.
•
The blank forms shall be consecutively machine-numbered and the forms and the
blocks, engravings, facsimiles and hues relating to the printing of such forms shall
be kept in the custody of the secretary or such other person as the Board may
authorize for the purpose; and the secretary or other person aforesaid shall be
responsible for rendering an account of these forms to the Board.
•
Maintenance, preservation and safe custody of all books and documents relating
to the issue of share certificates, including the blank forms of share certificates
shall be the responsibility of the committee of the Board, if so authorised by the
Board or Company Secretary, where the company has a company secretary,
otherwise a Director specifically authorized by the Board for such purpose (where
the company has no company secretary).
•
All books referred as above shall be preserved in good order for not less than 30
years and is case of disputed cases shall be preserved permanently.
•
All certificates surrendered to a company shall immediately be defaced by stamping
or printing the word “cancelled” in bold letters and may be destroyed after the
expiry of 3 years from the date on which they are surrendered, under the authority
of a resolution of the Board and in the presence of a person duly appointed by the
Board in this behalf except in case of dematerialization of securities.
Penalty for Fraudulent Issue of Share Certificates
If a company with intent to defraud, issues a duplicate certificate of shares, the company
shall be punishable with fine which shall not be less than five times the face value of the
shares involved in the issue of the duplicate certificate but which may extend to ten times
the face value of such shares or Rs. 10 Crores whichever is higher and every officer of the
company who is in default shall be liable for action under section 447.
(The author is a Chennai based Chartered Accountant and he can be reached at
csdhanapal@gmail.com)
42
CASC Bulletin, April 2015
UNION BUDGET 2015
The most awaited full term Budget of the
new Government, the Budget 2015 was
introduced, Though a common man
would not rate this budget as a good
budget for the obvious reason of no
increase in the basic tax slab, and with a
criticism of “What is the use of increase in
saving slabs?’ Where is the money to
save? “. However we would rate it as a
favorable budget to the economy in
general, the Budget 2015 is welfareoriented, growth oriented and of course a
friendly budget, because there are various
schemes of social security, especially for
the unorganized sector, and the
enhancement of the limits for tax
concessions will certainly be beneficial to
the common man. Deep analysis from a
professional perspective, one could
affirmatively see a silver lining on it.
Eradication of Wealth Tax
A very welcome measure is the abolition
of wealth tax. A few years back in 1998 the
gift tax act was abolished however, the
government found a method of
introducing it into the income tax act by
way of section 56. Similarly, the finance
minister found a way of including wealth
tax in the income tax act by increasing the
rate of tax by 2% surcharge for super rich
individuals and corporate. A good move
to fetch Government Rs 9,000 cr against Rs
1,008 currently mobilised under wealth
tax. Though a good initiative, does not
give in a psychological satisfaction to the
CASC Bulletin, April 2015
CA. Petchi Thangave & CA. Subashini Ganapathy
tax payers as a good move since there
were very few who were complying with
this.
Personal Taxation
Finance Minister Arun Jaitley in his
budget speech announced a slew of tax
measures and personal savings schemes
aimed at benefiting the taxpayer and
common man. While tax exemption limits
for various schemes were hiked, new
methods to monetize gold were also
announced. Let us take a look at the major
takeaways for the Individual segment
from Budget 2015.
No change in basic tax rates, however
surcharge has been increased to 12% from
10%, for individuals having income over
1 Crore. Thus, the Maximum Tax Rate for
Individuals having Income over 1 Crore is
34.608%.
The budget has brought in scope for tax
saving through increase in the limit of
savings for individual.
43
1) Tax exemptions:
• The limit of reduction of health
insurance premium was enhanced
from Rs 15,000 to Rs 25,000. For
senior citizens this limit has been
increased from Rs 20,000 to Rs
30,000.
• For senior citizen above the age of
80 years, not eligible to take health
insurance, deduction is allowed for
Rs 30,000 toward medical
expenditure. Deduction limit of Rs
60,000 on expenditure on account
of specified diseases is enhanced to
Rs. 80,000 in the case of senior
citizens.
• Additional deduction of Rs 25,000
is allowed for differently-abled
persons, increasing the limit from
Rs 50,000 to Rs 75,000. It is also
proposed to increase the limit of
deduction from Rs 1 lakh to Rs 1.25
lakh in case of severe disability.
• To provide that investment in
Sukanya Samriddhi Scheme will be
eligible for deduction under
section 80C of the income-tax and
the receipts from the scheme shall
also not be liable to tax.
• Limit on deduction on account of
contribution to a pension fund and
the new pension scheme is
proposed to be increased from Rs
1 lakh to Rs 1.5 lakh.
• Additional deduction of Rs 50,000
will be allowed for contribution to
the new pension scheme U/s. 80
CCD increasing from Rs 1 lakh.
44
2) Transport allowance: The transport
allowance for salaried, which currently
stands at Rs 800 per month was
increased to Rs 1,600 per month.
3) Universal Social Security System:
proposal to create a universal social
security system for all Indians,
specially the poor and the underprivileged. Pradhan Mantri Suraksha
Bima Yojana will be launched to cover
accidental death risk of Rs 2 lakh for a
premium of just Rs 12 per year.
4) For employees under EPF: The
employee to be provided two options:
(i) The employee may opt for EPF or
the New Pension Scheme (NPS).
(ii) For employees below a certain
threshold of monthly income,
contribution to EPF should be
optional, without affecting or
reducing
the
employer’s
contribution.
5) With respect to ESI, the employee
should have the option of choosing
either ESI or a Health Insurance
product, recognized by the Insurance
Regulatory Development Authority
IRDA).
6) Provision for document submission
by employee to employer
To allow certain deductions,
exemptions, or set-off of certain losses,
it is proposed to amend the provisions
to provide that the employer shall
obtain from the employees evidence /
documentary proof in such form and
manner as may be prescribed by the
CBDT in due course
CASC Bulletin, April 2015
7) Others
• It is proposed to remove the
requirement of obtaining a
certificate from a Government
doctor and now allows the
deduction to the taxpayer on the
basis of prescription, from a
specialist doctor under section
80DDB.
• Amendment in section 80DD and
section 80U so as to raise the limit
of deduction in respect of a person
with a disability from Rs. 50,000 to
Rs. 75,000. Also raised the limit of
deduction in respect of a person
with severe disability from Rs. 1
lakh to Rs. 1.25 lakhs.
Corporate Taxation
• No Change in the corporate tax
rate (i,e) 30% tax rate continues.
However increase in surcharge by
another 2% for domestic
companies, whose income exceeds
1 crore. Additional Surcharge of
2% is not applicable to foreign
companies.
•
Increase in Dividend Distribution
Tax (DDT) & Buyback of Shares,
due to increase in surcharge by
2%.
•
The threshold for specified
domestic transactions in order to
attract transfer pricing provisions
has been increased from 5 crore to
INR 20 crore
CASC Bulletin, April 2015
1. Indirect Transfer Provision
Presently there is no specific limit or
specific provision to tax indirect
transfer of shares of an Indian
company by non-resident (Vodafone
case). The foreign company shall be
deemed to derive its value
substantially from Indian assets if the
FMV of Indian assets represent at least
50 per cent of value of all the assets
owned by such foreign company or
entity, subject to minimum value of
Indian assets of INR 10 crore.
Indian assets include both tangible and
intangible assets as per specified
valuation as on date i.e 31 March or
accounting year end date, preceding
the date of transfer. In case of increase
in book value of the assets between
balance sheet date and date of transfer,
by 15% or more, then valuation date
would be date of transfer. Further,
Capital gains tax would be
proportional to the value of assets
located in India.
2. Tax Sops for AP and Telangana
Additional Investment Allowance for
manufacturing units in the State of
Andhra Pradesh and the State of
Telangana will lend great support
towards the development of the two
States. A new section 32AD is
proposed to be inserted to provide for
additional investment allowance of an
amount equal to 15% of the cost of
new asset acquired and installed by an
assessee, if—
45
(a) it sets up an undertaking or
enterprise for manufacture or
production of any article or thing
on or after 1st April, 2015 in any
notified backward areas in the
State of Andhra Pradesh and the
State of Telangana; and
(b) the new assets are acquired and
installed for the purposes of the
said undertaking or enterprise
during the period beginning from
the 1st April, 2015 to 31st March,
2020.
This deduction shall be available
over and above the existing
deduction available under section
32AC of the Act.
Additionally, in order to encourage
the acquisition and installation of
plant and machinery for setting up
of manufacturing units in the
notified backward area in the State
of Andhra Pradesh or the State of
Telangana, it is proposed to allow
higher additional depreciation at
the rate of 35% (instead of 20%) in
respect of the actual cost of new
machinery or plant (other than a
ship and aircraft) acquired and
installed by a manufacturing
undertaking or enterprise which is
set up in the notified backward
area of the State of Andhra
Pradesh or the State of Telangana
on or after the 1st day of April,
2015.
46
3. Clarification amendment
additional depreciation
for
Another welcome measure, to put an
end for lot of pending cases at various
levels in the matter of allowing
additional depreciation under section
32(1)(iia) on plant or machinery, it is
proposed to provide that the balance
50% of the additional depreciation on
new plant or machinery acquired and
used for less than 180 days which has
not been allowed in the year of
acquisition and installation of such
plant or machinery, shall be allowed in
the immediately succeeding previous
year.
4. General Anti Avoidance Rules
(‘GAAR’)
GAAR postponed for next 2 years so
as to implement it as part of a
comprehensive regime to deal with
OECD’s BEPS project of which India is
an active participant. Importantly, it
has been clarified that GAAR would
apply prospectively to investments
made on or after April 1, 2017.
5. Place of Effective Management
(PoEM) introduced
To control the creation of shell
companies which are incorporated
outside India but controlled from
India, the concept of Place of Effective
Management (‘POEM’) is now being
introduced. PoEM is an internationally
recognized concept and accepted even
by the OECD
CASC Bulletin, April 2015
6. Deduction under section 80G
100% deduction for donation to
‘Swachh Bharat Kosh’ and Clean
Ganga Fund – only by resident donor.
The amendment shall retrospectively
apply from Assessment Year 2015-16,
but would not include the amount
spent in pursuance of Corporate Social
Responsibility under the Companies
Act.
7. Rationalizing MAT provisions
• MAT provision will not be
applicable to Capital Gains
income of FPIs
• Company’s share of income from
AOP is exempted
As per MAT provisions, a
company which is a member of an
association of persons or body of
individuals is liable to MAT on its
share of income even if no income
tax is payable on the same under
the normal provisions.
Presently it is proposed to amend
MAT provisions to provide that
the company’s share of income
credited to its profit and loss
account (on which no income tax is
payable as per normal provisions),
shall be reduced from the book
profits for the purposes of MAT
provisions. Accordingly, the book
profits shall be increased by the
amount of expenditure relatable to
that income.
CASC Bulletin, April 2015
8. Deduction for employment of New
workmen
There is a special deduction of 30% of
additional wages which is paid to new
regular workmen employed by Indian
company in such factory for 3 years.
Additional wages means a wages paid
to new regular workmen in excess of
100 regular workmen employed
during the year. Proposed to extend
this benefit to units employing even 50
regular workmen.
Assessments
1. Two additional benches created in
Authority for Advance Rulings
(Income Tax) – one in New Delhi and
one in Mumbai
2. Section 139 – Return of income
Universities, educational institutions,
hospitals and other institutions for
medical treatment which are
substantially financed by government
will now be mandatorily required to
file return of income
3. Clarification on search and seizure
assessment
In case of search and seizure
assessment, if any books of account or
documents (seized or requisitioned)
pertain to any person other than the
person being assessed, then such other
person can also be assessed by the
jurisdictional Assessing Officer.
(Earlier it was only money, bullion, or
Jewelry)
47
4. Provisions to avoid repetitive appeals
A new section is introduced to provide
that where a question of law arising in
case of an assessee for any assessment
year is identical to the one pending
before the Supreme Court for another
assessment year for the same assessee
by the revenue. Earlier appealing before
High Court for block years by department
is not allowed, presently it is allowed.
5. Levy of interest for default in
payment of advance tax
It is proposed to amend the period for
which interest is payable under section
234B in case of reassessments so as to
align it with the objective of the
section. Accordingly, the period for
which the interest is to be computed
will begin from the 1st day of the
assessment year to the date of the
reassessment order.
6. Expansion in ambit of appeals to
Income Tax Appellate Tribunal
Now appeal can be filed before
Tribunal against an order passed by
the prescribed authority (Chief
Commissioner and Director General)
with respect to exemption to any
university or other educational
institution existing solely for
educational purposes, and any
hospital or other institution existing
solely for philanthropic purposes
7. Clarification on search and seizure
assessment
In case of search and seizure
assessment, if any books of account or
48
documents (seized or requisitioned)
pertain to any person other than the
person being assessed, then such other
person can also be assessed by the
jurisdictional Assessing Officer
8. Expansion of revisionary jurisdiction
Expressly clarified that the revisionary
proceedings can be initiated in case the
Commissioner is satisfied that the
Assessing Officer’s order has been
passed - Without making inquiries or
verification, Allowing relief without
inquiring into the claim, Not in
accordance with any order, direction
or instruction issued by the CBDT, Not
in accordance with any decision of the
jurisdictional High Court or Supreme
Court which is prejudicial to the
assessee.
9. Accountants not to issue reports /
certificates in certain circumstances
This is a welcome move by the finance
ministry in terms of the related party,
to be in line with the Companies Act,
1956.
• Proposed that except for the
purpose of representing the
assessee before any tax authority,
a chartered accountant cannot act
as accountant for an assessee if he
is related to the assessee.
• The meaning of related party for
different classes of the assessee has
been defined separately. This
provision has been inserted to
ensure the independence of the
auditor.
CASC Bulletin, April 2015
• A person who has been convicted
by a court for an offence involving
fraud will be disqualified to act as
an Authorised Representative for a
period of ten years from the date
of conviction. (Note: Extract of
memorandum bill 2015 “It is further
proposed to provide that the person
convicted by a court of an offence
involving fraud shall not be eligible to
act as authorised representative for a
period of 10 years from the date of such
conviction. (It is also proposed to
revise the definition of ‘accountant’ in
Explanation below section 288(2) of
the Act on the lines of definition of
‘chartered accountant’ in the
Companies Act, 2013)).
10. Rationalisation of provisions on
Settlement Commission:
individual, company, firm, AOP
and HUF has been defined
separately.
• An offender under the proposed
Bill on Black Money will not be
allowed to approach Settlement
Commission.
Withholding Tax
•
To implement and promote the
Make – in – India concept, and
also to welcome the
technical
expertise around the world and to
encourage
improvement,
Proposed to reduce the rate of tax
on royalty and fees for technical
services earned by non-residents,
from 25% to 10%.
•
Proposed that in case of premature
withdrawals of INR 30,000 or
more, where employers manage
their own private provident fund
trust, tax will be withheld @ 10%.
If PAN is not furnished by the
employee, tax will be withheld at
maximum marginal rate with
effect from June 1, 2015.
•
Proposed to exempt only small
transport operators (who owns
less than 10 goods carriage at any
time during the previous year)
from the purview of withholding
tax – effective from 1st June 2015.
Also, the transporter has to
provide a declaration that he was
not owning more than 10 vehicles
at any point of time for nondeduction of TDS.
Settlement commission, in common
parlance is meant for one – time –
Settlement and this is clearly defined
here.
• If a reassessment notice has been
issued for any one year, an
assessee can approach Settlement
Commission for other assessment
years involving similar issue
relating to escapement of income
provided that a valid return of
income has been furnished.
• If an assessee has already
approached the Settlement
Commission, certain related
persons will not be allowed to file
settlement application. The
meaning of related person for
CASC Bulletin, April 2015
49
•
•
Proposed that TDS shall be
applicable on interest paid on time
deposit by co-operative bank to its
members
•
Proposed
to
extend
the
concessional rate of 5 per cent for
TDS on interest on debt
investments by foreign investors
by two years (up to July 1, 2017)
•
Entities which have adopted core
banking solution, TDS on interest
should be computed on the
interest paid at the entity level
(and not at a branch level)
•
Proposed that TDS shall be
applicable for the interest
payments to foreign bank by its
Indian
branches
(banking
company)
•
It is proposed to insert provisions
to enable correction in and
processing of TCS statements on
same lines as TDS. It is also
clarified that the intimation
generated on processing TCS
statements will be regarded as a
notice of demand and will also be
subject to rectification and appeal.
•
50
Proposed that TDS shall be
applicable only on payment (and
not accrual) of interest on
compensation awarded by Motor
Accident Claim Tribunal
In case interest is charged for any
period on the tax amount specified
in the intimation, it is clarified that
no interest would be charged
under section 220(2) on the same
amount for the same period.
•
Interest U/s. 234E is applicable
while filing the return – Effective
from 1st June 2015
•
For TCS transaction filing of etds
return is mandatory
•
To reduce the compliance burden
of obtaining TAN for certain types
of deductors – TAN shall not
apply to the deductors or
collectors as may be notified by the
central Government – Effective
from 1st June 2015
Other Amendments
1. Charitable Trust
The definition of charitable purpose
has been expanded to include ‘yoga’.
Aggregate receipts from other trading
activities should not exceed 20% of the
total receipts (earlier 25 lakhs) of the
charitable institution during the year.
Benefit of income accumulation for
future will be available only if both,
the return of income and Form No. 10
are filed within the due date of filing
original return of income.
2. Reporting of payments to nonresidents
Any payment to non-resident shall be
under obligation to report by the payer
in specific information in the
prescribed form (whether or not such
payment is chargeable to tax).
3. Procedure for giving foreign tax
credit
Proposed to grant powers to the CBDT
to lay down the procedure for granting
CASC Bulletin, April 2015
relief of any tax paid by Indian
residents in any foreign country or
specified territory. This is a welcome
measure to easily avail the benefit
under the DTAA.
4. Tax implications on migration to
Business Trust (‘BT’)
As a boost to setting up of BT, it is
proposed that the gains arising on
transfer of Swap Units of BT would be
exempt from tax in case of long term
capital gains and would be subject to
concessional tax rate of 15% in case of
short term capital gains. This capital
gains tax treatment would be available
at the time of IPO or subsequent sale
on stock exchange (subject to levy of
STT).
Minimum alternate tax (‘MAT’) would
continue to apply to holding
companies on gains arising from swap
of shares of the SPV for units of the BT.
No capital gains tax exemption would
be available on swap of other assets
with units of BT
5. Consolidation of mutual fund
schemes
Proposed to provide tax neutrality to
unit holders upon consolidation or
merger of mutual fund schemes i.e.
consolidation shall not be regarded as
a taxable event in the hands of the unit
holders. This will take effect from 1st
April 2016.
6. Tax exemption for Core Settlement
Guarantee Fund
CASC Bulletin, April 2015
With the insertion of Sub Section (23
ED) under section 10, there is one
more clause inserted (23 EE) to tax the
share in the fund issued to the
beneficiaries of the fund being set up
as the Core Settlement Guarantee
Fund by a Clearing Corporation
according to the regulations set up by
the Central government. This will
take effect from 1st April 2016.
7. Intended ‘safe harbour’ rules for
fund managers :
To invite Venture Capital Investments
and to facilitate their operations, the
Finance Act allows a fund manager to
sit and function in India without
becoming a Permanent Establishment
in India, provided
He fulfills certain conditions
prescribed and according to the
definitions given for the terms
“associate”, Corpus, “Connected
Persons”, “entity”, and “ specified
Regulations”.
This section will be applicable
notwithstanding the provisions in
section 6 and section 9 for residential
status
and
accrued
Income
respectively and the computation of
total income shall not change because
of the presence of the fund manager in
India and there shall be no Business
connection in this regard, provided he
complies with all the conditions and
submits a report on the activities of the
fund to the assessing officer within 90
days from the end of the financial year.
This will take effect from 1st April
2016.
51
8. Transfer of shares in amalgamation
and demerger: (section 47)
It is proposed that the transfer of
shares of a foreign company which
basically derives its value from the
Indian Company to another foreign
company by amalgamation /
demerger shall not be considered as
transfer
notwithstanding
the
conditions laid down in section 9
provided certain conditions are
fulfilled. This amendment shall take
effect from 1st April 2016.
9. Rental income earned by Real Estate
Investment Trusts (‘REITs’)
Considering the state of Real Estate
Market in India, to promote and
support the Real Estate Trusts, the
rental revenue received by such
registered Trusts from the properties
owned by the trusts by renting/
leasing or letting out, shall be exempt
in the hands of such trusts with the
insertion of sub section (23 FCA).
Proposed to be provided to REITs in
respect of income earned from renting,
leasing or letting out any real estate
asset owned directly by the REITs.
Therefore, the rental income would be
exempt in the hands of REITs.
On distribution of rental income,
REITs would now be required to
deduct tax at source at 10% in case of
resident unit holders and at the
applicable tax rates in case of payment
to non-residents. Tax would not be
required to be deducted at source
under section 194-I by the tenants on
payment of rental income to the REITs.
52
10. Measures to Curb Black Money
Proposed to introduce Bill on Black
Money. To curb generation of black
money, any sum of money receivable
or payable in relation to transfer of
immovable property exceeding rupees
twenty thousand, is proposed to be
covered under section 269SS and
269T. Offence of making false
declaration/documents in the
transaction of any business relating to
Customs (section 132 of the Customs
Act) to be predicate offence under
PMLA to curb trade based money
laundering Concealment of income
will attract 10 years of rigorous
imprisonment and strict penalties up
to 300%. PAN to be quoted for all
purchases above 1 lakhs.
I would conclude by saying that there
may not be much apparent benefit
available to many, but it is an
appreciable start to “Make in India”
concept, since it channelizes funds to
infrastructure sectors and provides a
road map for GST in line with
International Standards, and has
clearly announced about the non –
implementation of the Direct Tax Code
by merging the required, relevant
provisions in the existing Income Tax
Act to keep it in line with the
International Standards.
(The authors are Chennai based Chartered
Accountants and they can be reach at
and
capetchit@gmail.com
subashiniassociates
@gmail.com
respectively)
CASC Bulletin, April 2015
November 21, 2014
Credit Card in the name of RBI : RBI cautions Once More
about the Newest Kind of Fraud perpetrated in its Name
The Reserve Bank of India today issued one more alert to the public about the newest
form of fraud perpetrated in its name - a credit card issued by fraudsters in the name of
the Reserve Bank. Explaining the modus operandi, the Reserve Bank stated that the
gullible member of the public is sent a credit card which allows withdrawal of money
up to a certain limit, albeit a small sum, from a bank account. Having gained the
confidence of the victim thus, the fraudster gets him to deposit a huge sum of money in
the same bank account. Once the money is deposited, the card stops working and that
would also be the last time the holder of the card (victim) would hear from the fraudster.
Warning against such efforts, the Reserve Bank has reiterated that as India’s central bank,
it does not carry out any business with an individual, whether through savings bank
account, current bank account, credit card, debit card, online banking services or receiving
and holding funds in foreign exchange or any other form of banking services. The Reserve
Bank has listed out the other kind of prevalent frauds, such as:
i)
Fictitious offers of large sum of money/lottery winnings by email or through
phone calls by posing as RBI official.
ii)
Fake Reserve Bank website for online transactions
iii)
Luring members of public to secure their bank accounts against such frauds by
asking them to share the bank account details, including user id/password,
through an email or by clicking on a link given in email.
iv)
Offer of employment in the Reserve Bank through email
The Reserve Bank has also stated that fictitious offers are also made in the name of other
public institutions, such as, International Monetary Fund (IMF), Income Tax authorities,
Customs authorities or public figures like Governor, Dr. Raghuram Rajan or other senior
RBI officials.
CASC Bulletin, April 2015
53
The Reserve Bank has pointed out that once the moneys are paid in fraudsters’ accounts,
there are remote chances of the members of public recovering the moneys.
The Reserve Bank has once again cautioned members of public that falling prey to such
offers can result in compromising one’s own crucial personal information that may be
misused to cause direct financial and other loss to them. They, in their own interest, should
refrain from responding to such offers in any manner. Rather, they should immediately
lodge a complaint with Cyber Crime branch of the Police, the contact details of which
are available in the Reserve Bank’s press release issued earlier (Complain to Local Police/
Cyber Crime Authorities against Fictitious Offers of Money from Abroad).
Press Release: 2014-2015/1046
Alpana Killawala
Principal Chief General Manager
Related Press Releases / Notifications
• May 26, 2014
RBI warns about Fake Website in its Name
• Oct 15, 2012
RBI cautions Public Not to respond to Phishing Mail sent in its Name
• Sep 14 2012
Do not respond to Mails asking for your Internet Banking Account
Details : RBI Cautions Public
• May 21, 2012
RBI warning on phishing mail
• Feb 06, 2012
RBI cautions Public Once Again against Fictitious Offers
• Jan 10, 2012
Complain to Local Police/Cyber Crime Authorities against Fictitious
Offers of Money from Abroad
• Apr 05, 2011
RBI Never asks for Your Bank Account Details
• Feb 15, 2011
Do Not Pay Money to receive Large Funds from Abroad : RBI
Advisory
• May 28, 2010
Do Not fall Prey to Fictitious Offers of Funds Transfer: RBI Advisory
• May 26, 2010
Remittance towards participation in lottery, money circulation
schemes, other fictitious offers of cheap funds, etc.
• Jul 30, 2009
Beware of Fictitious Offers/Lottery Winnings/Cheap Fund Offers:
RBI
• Aug 12, 2008
RBI cautions Public against Fictitious offers of Remitting cheap funds
from abroad
• Dec 07, 2007
RBI cautions Public against Fictitious Offers of Remitting Cheap Funds
from Abroad
54
CASC Bulletin, April 2015