MD SABIR & ASSOCIATES

noreply@blogger.com (TRP) — Fri, 10 Dec 2010 09:01:00 +0000

NO TAX ON LOAN INTEREST FOR FOREIGN ENTITIES' INDIA OPS [3 December 2010]

If a foreign company pays interest on loan for carrying out operations in India it will be allowed taxexemption under the Income Tax Act, 1961, a tax tribunal has ruled. This has put to rest uncertaintieson application of Thin Capitalisation rules that allow tax authorities to reclassify excessive debt as equity and tax it. The Mumbai Bench of the Income Tax Appellate Tribunal has ruled that interest paymentsby Belgium-based Besix Kier Dabhol's project office for debt taken to carry out operations in India, is an allowable expense under the Income Tax Act. The revenue department had argued that the debt of the assesseeshould be re-characterised as equity, but the tribunal said it was not sustainable as thin capitalisation rules do not exist in India. It said thin capitalisation rules or general anti-avoidance measures, proposedby the Direct Taxes Code cannot be applied to transactions which take advantage of treaty provisions, on the ground that some anti-abuse provisions will be introduced in the law in the future that may render such transactions illegal. Thin capitalisation is a situation where a higher proportion of funds are infused into a company in the form of debt rather than equity because interest paid on loans is normally deductible for calculating taxable profits, whereas dividends are paid post tax. "By holding that thin capitalisation rules and other anti-avoidance measures cannot be applied in India unless DTC is enforced, the Tribunal has put torest the uncertainty around the application of the provisions of the proposed DTC on matters pending before various courts/tribunals. This should provide some guidance to taxpayers in India," said Pranay Bhatia, The tribunal held that the assessee in this case earns income only from its operations in India, and thus, the income earned by the project office n India will be computed as per the provisions of the Double Taxation Avoidance Agreement (DTAA). There was no specific provision under the I-T Act which provides for computation of profits attributable to the Indian arm of a foreign enterprise. So the income is computed under normal accounting principles and in terms of general provisions of the Act. Thin capitalisation rules exist in the US, Poland, Hungry, Germany, the Netherlands, Russia and China. Most countries define a maximum debt to equityratio beyond which excess interest paid is disallowed, or penalty is imposed, or interest is reclassified as debt. While some countries limit the amount a company can claim as tax deduction on interest paid to a cross-borderor related company, some disallow interest deductions above a certain level from all sources.

noreply@blogger.com (TRP) — Fri, 10 Dec 2010 08:58:00 +0000

DISCLOSE ALL FEES IN APPLICATION FORM, SAYS RBI [2 December 2010]

The Reserve Bank of India (RBI) has once again advised banks and financial institutions to ensure that all information relating to charges or fees for processing of loans should be disclosed in the loan application forms. This is applicable to all loan application forms across all categories of loans, irrespective of the loan amount. This will facilitate comparison of charges across lenders. The circular posted on the RBI website says, "With a view to bringing in fairness and transparency, banks are advisedthat they must transparently disclose to the borrower all information about fees/charges payable for processing the loan applicationâ€¦" Lenders have been asked to disclose on their forms, any fees or charges payable to process the loan application. If the loan amount is not sanctioned or disbursed for some reason, the amount of fees that is refundable to you is to be mentioned on the application form. The form should carryinformation on prepayment options along with the charges, if any, states the circular. Details about the amount of late payment fee in case of delay in repayments and charges on switching loans from a fixed to a floating interest rate or vice versa are also to be mentioned. The lender would also have to mention interest reset clause,if any. RBI has also advised lenders to make this information available for the public on their websites. Some lenders still don't have information on fees and charges, especially interest rates, on their websites. Says K.V.S.Manian, group head (consumer banking), Kotak Mahindra Bank Ltd, "With us, the application form for home loan itselfis an agreement form, so all the details on fees and charges is normally there. In case of personal loan and creditcards, too, the details are on the form itself." But just because such details are mentioned on the application formdoes not mean you can't go ahead and negotiate. Manian says, "There is always room for negotiations. It depends onthe customer's relationship with the bank." As per an older circular, few banks charged a fee, apart from the processing fee. This charge was not disclosed to customers initially. The current circular, addressed to scheduledbanks and all India financial institutions, however, does not give any such details. Another RBI circular on the same issue, addressed to state and central cooperative banks, mentions that few banks are still continuing these unfair practices.

Rules of the Hon'ble High Court at Calcutta regarding matters under the R.T.I. ACT 2005

noreply@blogger.com (TRP) — Thu, 02 Dec 2010 19:18:00 +0000

Rules of the Hon'ble High Court at Calcutta regarding matters under the R.T.I. ACT 2005

HYDERABAD BENCHES - Firday Cause List for 03 Dec 2010

noreply@blogger.com (TRP) — Thu, 02 Dec 2010 18:58:00 +0000

HYDERABAD BENCHES - Firday Cause List for 03 Dec 2010

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 15:17:00 +0000

The different types of corrections that can make

The following are the various types of corrections that you can make to an accepted regular TDS/TCS statement:

Update deductor details such as Name, Address of Deductor. This type of correction is known as C1
Update challan details such as challan serial no., BSR code, challan tender date, challan amounts etc. This type of correction is known as C2.
Update/delete /add deductee details. This type of correction is known as C3.
Add / delete salary detail records. This type of correction is known as C4.
Update PAN of the deductee or employee in deductee/salary details. This type of correction is known as C5.
Add a new challan and underlying deductees. This type of correction is known as C9.
Cancel accepted statement. This type of correction is known as Y. Regular TDS /TCS statement can be cancelled only if the TAN of the deductor is to be corrected. After the regular statement with incorrect TAN is cancelled a regular TDS / TCS statement with the correct TAN should be filed.

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 15:11:00 +0000

Furnish a correction statement

The payment information provided in the regular TDS/TCS statement, is verified with the corresponding details provided by the bank where tax was deposited. On successful verification credit of tax deducted/collected by you is reflected in the annual tax statement (Form 26AS) of the deductees/transacting parties where PAN of deductee / transacting party is present.

In case of deficiencies in the accepted regular TDS/TCS statement such as incorrect challan details or PAN not provided or provided incorrectly, the tax credit will not reflect in the Form 26AS of the deductees in your statement.
To facilitate correct credit in Form 26AS of the deductees you are required to remove deficiencies, if any, in the accepted regular TDS/TCS statement by filing a correction statement.

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 15:09:00 +0000

Correction TDS/TCS statement

Deductor/collector is required to furnish one regular TDS/TCS statement for a particular TAN, Form, Financial year and quarter. In case there are any additions/updations to be made to the details of the regular statement accepted at the TIN central system, the same should be done by furnishing a correction statement.

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 14:53:00 +0000

SALARIED CAN CLAIM DEDUCTION FOR EMPLOYMENT-RELATED EXPENSES

The most wronged persons in the income-tax regime are salaried persons. The scheme of the Income-Tax Act, 1961 clearly shows that the income to be taxed under the Act has to be worked out after allowing the expenses, which are permitted under the Act or are allowable on the basis of commercial expediency/practices. However, in the cases of incomes from 'salary' or 'house property', the expenses are deductible not on the basis of actual expenditure but on estimated basis by way of standard deduction (SD) to ensure simplicity in tax administration. On this analogy, persons deriving income from salary were allowed deduction on standard basis (up to a maximum limit of Rs 30,000) in the computation of taxable income. It needs to be appreciated that a salaried employee too has to incur expenses, to continue and progress in the present day competitive environments, on books, newspapers, journals, computers, stationery, floppies, travelling, training, etc., on his own account. If he does not incur such expenses, he may stagnate and may even lose his job. These expenses cannot be considered as 'personal expenses'. Even the history of SD shows that it was being given in lieu of individual employment-related expenses.
Untenable grounds
However, ignoring these realities, the then Finance Minister, Mr P. Chidambaram, vide Finance Act, 2005, withdrew the SD available to salaried employees on totally untenable grounds, namely: (i) it is in the nature of personal allowance; (ii) exemption limit for taxpayers has been raised; and (iii) tax brackets have been scaled up. None of these justify withdrawal of SD, which was being given, in a consolidated way, for expenses incurred in the context of employment. The other two grounds - (ii) and (iii) - do not apply only to salary earners. All taxpayers are entitled to these benefits. Hence, there were no grounds to deny SD to salaried employees for these reasons too. However, despite the withdrawal of SD, salary earners can still claim deduction for employment-related expenses for the reasons mentioned hereinafter. As mentioned earlier, the 'gross receipts' are not to be taxed under the I-T Act. Taxable income is to be computed after deducting the expenses incurred in earning the income. The expenses allowable could be of two categories: (i) specifically mentioned in the Act; and (ii) allowable on commercial principles/expediency basis. It is, no doubt, true that the I-T Act has laid down its own standards and limits for allowing the expenses, but it nowhere provides that other expenses relating to earnings should not be allowed at all. In this context, the courts have held that expenditure is allowable if it is incidental to the business and is incurred in the character of a trader.
Commercial principles
Decisions in this regard are to be guided by commercial principles and expediency and if an expenditure is incurred for earning income/profit, it would be deductible eve if there is no specific provision for the same in the Act. Section 29 of the I-T Act provides that income from business/profession shall be computed in accordance with the provisions contained in Sections 30 to 43D, that is, after allowing the deductions mentioned in these sections. But it has been candidly held in many decisions that an item incidental to the business, will be deductible even if it does not fall within any of these sections (see CIT vs Chitnavis, AIR 1932 PC 178; Ramchander Shivnarayan v. CIT (1978) 111 ITR 263 (SC), and so on). In CIT vs Mysore Sugar Co. Ltd (1962 46 ITR 649 SC), the court has said that Sections 30 to 43C do not deal exhaustively with the deductions, which must be made to arrive at the true profit. The same logic should apply to Section 16 deductions. Even if an expenditure is not mentioned in Section 16, but it is necessary in the context of employment, it should be deductible in computing income under Section 15 if it has a direct nexus in earning the salary income. Hence, salary earners can claim employment-related expenses now (without any limits) if these (i) have nexus with the employment; (ii) have been genuinely incurred; and (iii) are prima facie reasonable.

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 14:31:00 +0000

NO TIME-FRAME TO TABLE CONSTITUTION AMENDMENT BILL FOR GST: FM

The government on Tuesday said it is not possible to fix a time-frame for the introduction of the constitution amendment bill, which will facilitate rolling out the proposed Goods and Service Tax (GST). In a written reply to the Rajya Sabha, Finance Minister Mr Pranab Mukherjee said the process requires consensus among various players and such an exercise will need time. "Since developing consensus on such issues generally takes time, it is not possible to indicate any time limit by which a decision for introduction of the constitutional amendment bill in the Parliament will be taken," he said. Mr Mukherjee said a draft constitution amendment bill has been prepared and sent to the Empowered Committee of State Finance Ministers for obtaining their views. "The draft constitutional amendment bill envisages inter-alia, setting up of a GST Council which will recommend to the centre and the states, the tax rates, items to be exempted, registration threshold, etc. EC (Empowered Committee) is yet to revert back with its clear view on the draft," Mr Mukherjee said. The bill is required because as of now the Centre cannot impose tax beyond manufacturing, and states cannot levy service tax. GST will allow both the centre and states to impose tax on common goods and services separately. It will subsume excise duty and service tax at the Centre's end and value added tax (VAT) on the States front, besides local levies, surcharges and cesses. In another reply, Mr Mukherjee said a section of the textile industry has sought exemption from the ambit of GST. He added, however, that the likely impact of the proposed GST to the textile sector cannot be assessed at this stage as the Empowered Committee has not reverted to the centre. "Under the dual GST model proposed by the Empowered Committee of State Finance Ministers and agreed upon by the union government, GST will have two components, viz., Central GST to be levied and collected by the centre and State GST to be levied and collected by the states," Mr Mukherjee said.

noreply@blogger.com (TRP) — Mon, 29 Nov 2010 14:28:00 +0000

TAX ARREARS UP 18 PCT TO RS 2.93 LAKH CR

The government said that tax arrears rose over 18 per cent to Rs 2.93 lakh crore as on March 31, 2010 against the year-ago period. The direct tax arrears grew over 16 per cent to Rs 2.48 lakh crore as on March 31, 2010 compared to Rs 2.13 lakh crore at the end of 2008-09, Minister of State for Finance S S Palanimanickam said in a written reply to Rajya Sabha. Direct tax includes income tax, corporate tax, wealth tax, among others. On the other hand, arrears of indirect tax, which constitutes central excise, customs and service tax, increased to Rs 44,212 crore as on March 31, 2010 as compared to Rs 33,790 crore at the end of 2008-09. Thus, registering a gain of over 30 per cent. Palanimanickam further said that the target of recovery of tax arrears pertaining to direct and indirect taxes is fixed at the beginning of the respective financial year. The targets of tax arrears' recovery in respect of direct and indirect taxes for the financial year 2010-11 are fixed at Rs 13,906 crore and Rs 3,250 crore, respectively. The government has set a budget target of Rs 4.3 lakh crore for the indirect tax kitty for this financial year. Combined target for both direct and indirect tax collections for the year is Rs 7.45 lakh crore.

noreply@blogger.com (TRP) — Fri, 26 Nov 2010 02:28:00 +0000

HUTCH DEAL: SC ASKS VODAFONE TO DEPOSIT RS 2500 CR IN TAX CASE

The Supreme Court on Monday directed Vodafone to deposit Rs 2500 crore ($550 million) within three weeks in relation to the $2.5 billion tax dispute, a Vodafone spokesman said. The Supreme Court has also fixed Feb 05 as final date of hearing. Vodafone has also been directed to make a bank guarantee worth Rs 8500 crore ($1.9 billion) within eight weeks, the official said. Vodafone, fighting a tax bill in India over its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country, had appealed to the Supreme Court challenging a lower court order that Indian tax authorities had jurisdiction over tax bills in cross-border deals. The tax office asked Vodafone to pay Rs 11,218 crore ($2.53 billion) within 30 days, but the British firm said it "strongly disagrees" with the calculation. Meanwhile, The Netherlands has now written to India asking it to consider an alternate dispute resolution that will run parallel to the ongoing court process through what is termed as a Mutual Agreement Procedure (MAP), a government official aware of the development said. India would examine the request and take a decision in accordance with the provisions of the India-Netherlands double tax avoidance agreement (DTAA), this official added. MAP is an alternate process of dispute resolution, and is an option available to a taxpayer in addition to and concurrent with the appellate process. However, under MAP, once the proceedings are initiated, it is possible to obtain a stay on the tax demand provided one gives a bank guarantee. This opens up the possibility of a settlement on the lines of what Vodafone clinched in the UK earlier this year, when it agreed to pay £1.25 billion in taxes to settle a decade- long dispute dating back to 2000 regarding its Luxembourg subsidiary.

noreply@blogger.com (TRP) — Fri, 26 Nov 2010 02:25:00 +0000

INCOME TAX PROBE ON 2G LICENCE HOLDERS BEGINS

In a development that could spell more trouble for embattled former union telecom minister A Raja, the Income Tax (I-T) department has begun probe into charges of alleged bribing and possession of disproportionate assets against some of the new operators who were awarded licences under the 2G spectrum deal and some telecom ministry officials. The department has also begun an investigation into the tax returns of telecom operators who were granted 2G licences to ascertain their registered profits and find discrepancies, if any, according to official sources. The department, according to sources, will specifically look into the angle of tax evasion in the entire process of allotment of the 2G spectrum through under-stating profits and escalating losses to allegedly facilitate bribes and kickbacks. The department is using its intelligence wing to gather financial information on all the stakeholders and individuals who were part of the spectrum allocation deal that has been marred by controversies, including on the role of Raja. The Comptroller and Auditor General has reportedly put the revenue loss to exchequer at Rs 1.4 lakh crore in addition to another Rs 36,700 crore on allocation of spectrum beyond contractual limit to existing nine operators. In 2008, the Department of Telecom (DoT) had issued 2G spectrum to eight new operators at Rs 1,658 crore for pan-India operations. DoT has asserted that there was no loss to the exchequer due to distribution of new licences in 2008. The CAG report is also understood to have castigated Raja for ignoring the advice of finance and law ministries on allocation of 2G spectrum licenses to benefit a few operators. On his part, Raja asserted had that he had not done anything wrong and had only followed the policies pursued by his predecessors. The companies that were allotted spectrum include Unitech Wireless Ltd (rebranded as Uninor), Loop Telecom, S Tel, Datacom Services (now known as Videocon Mobile) and DB Group-promoted Swan Telecom (now Etisalat DB Telecom). The telecom ministry has earlier told the Supreme Court that the government auditor CAG did not have the authority to question the policy decision according to which licence were issued to new players in 2008.

noreply@blogger.com (TRP) — Fri, 26 Nov 2010 02:23:00 +0000

COS CAN USE LEGAL FINANCIAL STRUCTURES TO SAVE TAX: TRIBUNAL

Tribunal In a ruling that will have a bearing on foreign companies operating in India, a Mumbai-based tax tribunal has held that tax-planning carried out within the provisions of law cannot be construed as a structured transaction carried out only for the purpose of evasion of taxes, even if the transaction helps the taxpaying company save taxes. In its November 10 order, a division bench of the Income-Tax Appellate Tribunal (ITAT), Mumbai, comprising NV Vasudevan and Pramod Kumar, held that the finance structure used by the taxpayer had to be specifically prohibited for it to be illegal. "As long as the finance structure adopted by the taxpayer is not specifically prohibited by the applicable tax treaty provisions and as long as there are no specific anti-abuse provisions, the effect of the finance structure cannot be ignored." Sanjay Sanghvi, tax partner of Khaitan & Co said: "This is a significant ruling by ITAT. The tribunal has observed that when there are no anti-abuse provisions in the treaty concerned, it is not open to the tax authorities to apply general anti-avoidance rules of the I-T Act to deny a tax benefit to a foreign company." The ITAT order was on an appeal filed by the Belgium company, Besix Kier Dabhol SA. The company, which has a permanent establishment (PE) in India, was engaged in the construction of a fuel jetty near Dabhol. The company, with a share capital of Rs 38 lakh, was owned by two foreign companies who had advanced Rs 94-crore loan. Hence, the debt-equity ratio was an abnormal 248:1. The company paid Rs 5.73 crore as interest on the loans advanced toit by the lenders, and claimed this as deduction. This deduction was the bone of contention. The assessing officer did not allow the deduction, saying the debt-equity ratio was abnormal and, therefore, the loan had to be treated as capital/loan taken from the head office. Borrowing from shareholders is tantamount to borrowing from the head office. Under the domestic tax laws, payment of interest on such borrowings do not constitute admissible deductions as these payments are from "self to self", the officer held. The officer held that the RBI had approved the PE on the condition that it should not borrow. Therefore, the loan was in contravention of law and the deduction of interest could not be allowed. The abnormal debt-equity ratio attracted "thin capitalisation rule", a ground for treating debt as equities, the officer said. After examining the finance structure, ITAT said since the company is taxable in India on the profit made in India, it is eligible for deduction on expenses incurred for generating the profit. It said the thin capitalisation rule, in existence in other countries, is not a law in India, except it being mentioned in the proposed Direct Tax Code. Also, the Indo-Belgium tax treaty did not have anti-treaty abuse provisions. ITAT stated: "It is also possible that tax consideration may have played a role in assessee's planing the capital structure but an element of planning in structuring capital does not transform a tax deductible expense of interest into an expense that is non-tax deductible.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:45:00 +0000

VODAFONE LOOKS FOR INDIA TAX DISPUTE SETTLEMENT: REPORT

The Dutch government has approached India on behalf of Vodafone's Netherlands unit to settle a three-year-old tax dispute involving a Rs 11,000 crore claim, an Indian newspaper reported on Monday. The Netherlands has asked India to consider an alternate dispute resolution that will run parallel to the ongoing court process, the paper said, quoting unnamed tax and government officials. Indian tax authorities had asked Vodafone to pay Rs 11,218 crore ($2.5 billion) tax on its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country, which the company is fighting in court. "The Dutch government has been in discussion with Vodafone and we believe it has initiated a formal process under the tax treaty between the Dutch and Indian governments," the paper quoted a Vodafone spokesperson as saying.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:40:00 +0000

A MENU FOR TAX-CONSCIOUS INVESTOR

After the financial crisis, Prakash has been following the asset allocation model and portfolio rebalancing as tools to ensure that he is invested as per his pre-defined asset allocation percentage. The recent spurt in equity has skewed the asset allocation in favour of equity. His advisor, Ravi, has now re-jigged his portfolio according to the pre-defined asset allocation score. Ravi has also suggested booking of partial profits and investing them in debt funds. Prakash considered bank fixed deposits as the safest form of debt investment. However, he has now been suggested to invest in debt mutual funds, which bring in both liquidity and tax efficiency. There is now a plethora of debt funds in the mutual fund space. Let's look at a few of them and understand the suitable debt fund options: Debt funds are mutual funds which invest in a variety of debt securities like commercial papers (CPs), certificate of deposits (CDs), government securities or gilts, treasury bills, bonds and money market securities. The most common classes of debt funds are:
Fixed maturity plans:
As the name suggests, the investment is for a fixed period, say 100 days, 370 days or even 1,000 days. FMPs invest in instruments that mature at the same time that their schemes come to an end. So, a 100-day FMP will invest in instruments that mature within this period. This insulates the schemes from volatility in interest rates. In FMPs, returns are not guaranteed. However, usually indicative returns are disclosed. The major advantage of an FMP investment is that it is tax efficient in two ways - double indexation benefits and lower tax rate In case an investor has a demat account and there is a need for liquidity, FMPs can also be traded. Besides FMPs, there are also interval funds, which are also valid for a fixed period, say, monthly, quarterly or annually. In this instance, the funds are open for redemption or purchase only during a specific day of the month or the quarter.
Liquid funds or money market funds:
Money market funds or liquid funds invest in money market securities and debt securities that mature in 91 days. This is an ideal instrument to park funds for short-term requirements, before allocating the funds for long-term investment needs. A major benefit of this is a higher interest rate than the savings bank rate, a zero exit load and easy liquidity.
Ultra short-term funds:
Ultra... short-term funds, earlier known as liquid-plus funds, are slightly riskier compared to liquid funds and tend to give slightly higher returns. The funds invest in debt securities maturing in over of one year. It suits investors who want to park their money for a few months.
Short-term funds:
Short-term funds invest in debt securities that mature in the next 15 -18 months. They invest mostly in AAA or AA+ rated debt securities and interest rate hikes mildly impact the returns. Short-term funds are best suited for invstors with an investment horizon of 1 - 2 years.
G-secs:
G-secs or government securities or gilt funds invest in debt securities issued by RBI on behalf of the g overnment of India or the state governments. G-secs have no risk of default, as they have a sovereign guarantee but are, however, prone to interest rate movements. G-secs come with a wide range of maturity periods, from a few days to 10, 20 and 30 years. So, many gilt funds have short-term and long-term plans. Ideally, they are suited for an investment horizon in line with the asset allocation strategy.
Monthly income plans:
Monthly income plans or MIPs are hybrid investment funds and are being aggressively sold today. They invest a minor portion (5-25%) in equities and the rest in debt securities. MIPs aim to provide regular and periodic incomes, either monthly, quarterly, half-yearly or yearly. The income is guaranteed, which is not the case in mutual fund MIPs. Only the surplus distributable income is available for distribution. They are more suitable for investors looking for regular income rather than capital appreciation.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:36:00 +0000

REFUNDS SCAM HITS TAXPAYERS

Worried over reports of alleged corruption especially in issuing refunds to taxpayers, the Income Tax Department has brought its own officials under strict vigilance scanner and has issued instructions to the top brass to constantly monitor the process. The I-T vigilance wing has also decided to conduct surprise inspections to check the process of issuing refunds from both the department and the bankers side. The vigilance wing has found that the issue of refunds is "prone to grievances" from taxpayers and that pro-active measures should be taken by top I-T officials to make the process more transparent. The I-T vigilance wing has written to all the Chief Commissioners of Income Tax (CCITs) in the country in this regard. "A number of complaints regarding refunds including those issued under the Refund Banker Scheme have been brought to the notice of the department. Due to various reasons, the refunds do not reach the taxpayer that result into corruption related complaints," a senior I-T officer said. A huge amount of money, running into few crores is processed by the department as a part of refunds, the official said. "Timely issue and proper delivery of refunds has been a major source of grievance and complaints leading to cases of punitive vigilance. "As predominant task of vigilance is to prevent fault from taking place, Refund Banker Scheme is one such landmark measure in this area which would go in a long way in further reducing the number of public grievances, besides improving quality of service, accountability of employees and consequently, the reputation of the organisation," the vigilance letter said. The department has also decided to deploy surprise inspection and audit teams to check proper delivery of refunds. The I-T department has extended the Refund Banker Scheme to almost all its offices across the country in collaboration with the State Bank of India (SBI) since September this year. "Supervisory authority may ask assessing officers to furnish list of all cases where refund remains unpaid for more than a month and ascertain the reasons thereof to take corrective measures. Constant monitoring and follow up would reduce the grievances to a large extent," the anti-corruption watchdog of the department told the CCITs. The department has identified atleast two main reasons for delay in refunds and subsequent complaints against tax officials by taxpayers. The first category of cases is where necessary instructions were issued by the Assessing Officer (AO) for grant of refunds but same remained unpaid by the banker for.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:31:00 +0000

GST CAN USHER IN A LEVEL-PLAYING FIELD

The rollout of GST (Goods and Services Tax) and the removal of exemptions and tariff variations will change the market dynamics, feels Mr K. P. Gopal, Director, Stuser Tools Pvt Ltd, Chennai ( http://bit.ly/F4TKPGopal). "It can make some companies more price- competitive than earlier, while it can make others (who enjoyed the benefit of tariff variations) less competitive," he adds, during the course of a recent interaction with Business Line.
Excerpts from the interview: What do you see as the top two areas in your industry that will be impacted the most by the proposed GST regime?
The primary area that will be impacted would be the ushering in of the "simplicity" factor. Historically, Indian industry has resigned itself to a highly complicated and cumbersome way of doing business. This problem is compounded in the case of MSMEs (micro, small, and medium enterprises) since they have to deal with the same plethora of taxes, rates, and agencies like a large industry but with only a fraction of the manpower available at their disposal. If GST is implemented in its true spirit, simplicity and transparency are what most companies are looking forward to. The second important area is that GST would create a level-playing field for companies where success would be determined by efficiency and not by artificial factors such as tax rates offered by different States. Kindly specify one key issue on which policy clarity required, as regards GST. One key issue would be whether GST will be administered by a single agency or if there will be a Central and State level agency administering it. The standoff between the Centre and the States has made the possibility of a two-agency solution very likely. This can be a major disappointment since it will be against the very fabric of an efficient GST and will only end up as a modified version of the current system. It would be better if in the ongoing dialogue between the Centre and the States, the basic principles of GST are not forgotten - one tax at one rate for goods and services across all States, managed by a single agency. So long as this final objective is not diluted and there is a roadmap to achieve it, it is better for the country as a whole. Your take on one priority that merits attention in enterprises, ahead of the GST rollout. For most companies the focus in the run-up to GST has been the law itself and compliance issues. However, the issue they need to focus on with equal if not more importance is the business angle and the impact on it. Every enterprise would do well to be prepared in factoring this impact on both their purchases as well as on their final product pricing. To facilitate full understanding of this impact and enable readiness for the same, it would be necessary for the rates of GST to be finalised at the earliest.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:27:00 +0000

WHERE THERE'S WILL, THERE'S TAX

It is admirable that many Indians are in the Forbes list of richest persons in the world. It is equally gratifying that an Indian citizen has built a mansion apartment at a cost of around 5,000 crore as residence, equipped with gardens, swimming pools, helipads and a host of other amenities not commonly perceived. Predictably, the project has drawn mixed reaction. Instances of ostentious spending are many in a country where nearly 30% of the population lives below the poverty line. Much of such affluence can be attributed to faulty tax policies persued over the past several years where dividend income is totally exempt and wealth taxation has been reduced to a farce through the introduction of the concept of productive and non-productive assets. As a result, the wealth tax gets the government a mere 420 crore in a year although the country is home to quite a few of the worldâ€˜s richest individuals and some very prosperous companies. Such instances demonstrate the need to have an effective law for wealth taxation. Historical account of inheritance tax: Wealth taxation has two dimensions: an annual tax on wealth, and when it gets passed on by way of gift or on inheritance. The weakness in annual taxation of wealth in the existing law has been stated earlier. Gifts, though exempt from tax for years, are now taxable as income since 2005 at income-tax rates with an exemption limit. This article considers the case for reintroducing inheritance tax/estate duty, which the country had for nearly 32 years from 1953 till it was scrapped in 1985 by the then-finance minister Late V P Singh. "The estate duty has not achieved the twin objectives to reduce the unequal distribution of wealth and assist the states in financing their development schemes. While the yield from estate duty is only about 20 crore, the cost of administration is relatively high," he had said in his Budget speech. Hence, the estate duty was abolished from March 16, 1985. This tax had to be scrapped not because of a conceptual flaw or deficiency but because of its wrong designing and weak administration. Another attempt was made in 1989 to tax property passing on death by Wealth (Inheritance) Duty Bill, 1989. This was more simple, pragmatic and easy-to-administer enactment. The rate of tax was moderate, highest being 10%, where the property passing on death exceeded 20 lakh. But it lapsed following the dissolution of Parliament, and has not been discussed since then. Why inheritance tax?: Wealth-transfer tax complements income tax. An income tax by itself does not tax wealth - only accretions to it. In various countries, wealth is being taxed when it is transferred by way of gifts or bequeaths as a surrogate to income tax. England, France, Germany, US and Greece tax properties passing on death at rates of about 40%. Economic benefits of inheritance tax: Inheritance tax has economic benefits. An individual, who inherits property, has less incentive to wokand accumulate assets on his or her own. Taxing inherited wealth pushes up incentive to work. Also, by inheritance, wealth can pass into wrong hands and may get squandered away. It is better that the state gets a share of such wealth for nation-building. Administrative cost of such tax in comparison to revenue gained is comparatively low vis-a-vis income tax because the former is to be collected only once on death. Inheritance tax has many benefits. It is a revenue-raiser, a means to redistribute wealth, supplements income tax by compensating for its deficiencies in reflecting taxable capacity, can help in lowering income-tax rates by an increase in collection of taxes through this tax on principle of ability to pay, and gives greater equality of opportunities. The Taxation Review Committee, 1975, of the US in paragraph 24.4 of its report has argued that death taxes serve to "support the progressivity of the tax structure by the indirect means of progressive levy on wealth once a generation" and that they remove the â€˜undesirable social consequencesâ€˜ of the â€˜growth of large inherited fortunesâ€˜. With prosperity growing in India - Mumbai alone is reported to have more than one million wealthy people - it is time to think of an inheritance tax. After all, the Indian Constitution proclaims it to be a â€˜sovereign socialistic republicâ€˜ and Article 39 provides, inter-alia, that (i) the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good, and (ii) the operation of economic system does not result in the concentration of wealth and means of production to the common detriment. An inheritance tax will further these objectives. To start with, the exemption limit can be fixed at a higher figure, say, 25-30 crore, with the rates rising progressively to a maximum of 30% for amounts over 100 crore.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:15:00 +0000

TAXING WITH CONNECTION OR WITHOUT?

The general rule of imposition of tax hinges on the connection of the taxpayer with the taxing state and/or the relationship of the taxpayer with the taxing state based on his residence or nationality. In the case of non-residents, the jurisdiction of a state to tax them would, therefore, be based on the existence of such connection of the person sought to be taxed. The activities of such nonresidents may enure incidence of tax either as a result of physical presence or by virtue of application of the source rule, where the income earned by the non-resident has a source in the taxing state. This concept of 'nexus' for taxing non-residents in the country is gaining momentum because of the notable tax disputes, legislative proposals and amendments. Under the existing income-tax framework, as regards nexus arising from source, tax can be imposed on income that (i) is received in India, (ii) accrues and arises in India, and (iii) is deemed to accrue or arise in India. Such situation resulting in incidence of tax in the country would only arise when there is some nexus with India. The domestic tax laws recognise the concept of nexus in the most widely interpreted and complex connotation termed as business connection. The expression business connection has been explained and interpreted by several courts denoting something that produces profit or gain and not just a situation that is conducive of earning such profit. The term business connection was given an inclusive, but not exhaustive, explanation through an amendment to section 9 of the Income-Tax Act introduced in the Finance Act, 2003. Earlier, the circular number 23 of July 23, 1969, had provided sufficient guidance to the befuddled taxpayer from the labyrinth of tax laws. Drafted in an easy-tounderstand style, the clarificatory circular provided the taxpayer guidance on whether they have a business connection in the country and whether an income accrued in their hands through that business connection, giving specific instances. But this circular was withdrawn in 2009 vide circular 7 of 2009 to reaffirm the mandate of section 9, which, according to the CBDT, was vehemently ignored by taxpayers to claim relief. According to CBDT, the new circular puts the rationale of section 9 back on track. The irony of circular 7 of 2009 is that it fails to provide clarity about the implication of the circular vis-a-vis different situations that the circular did touch upon. Thus, the complexities existing in the interpretation of the term business connection and taxation of non-residents have been amplified by the manner in which the circular has been withdrawn without providing alternate means of interpreting the specific situations. Amendments through the Finance Act, 2010, that have retrospective effect from June 1, 1976, to tax services of a non-resident utilised in the country regardless of whether rendered in India or not has not helped either. The Direct Taxes Code Bil, 2010, has increased uncertainties as it includes many activities of nonresidents that are not considered as business connection under the law. These include collection of news from India for transmission abroad by a nonresident news agency or publishers of newspapers, magazines or journals, and shooting of cinematograph films in the country. Existing ambiguities have also increased following the removal of the proviso that clarified that a broker or a commission agent, where acting wholly on behalf of the non-resident or those subject to common control, would constitute a business connection. The extant Act incorporates the principle of apportionment, i.e., taxes only such income attributable to operations carried out in India that has been imbibed into the provisions of the code on as-is basis. Moreover, taxing mergers between foreign companies having underlying Indian subsidiaries may be taxed in India where not sanctioned under the domestic corporate law regime and expanding the tax net to offshore share acquisitions where the target foreign company holds direct or indirect assets in India that are more than 50% of the fair market value of all assets held by the company at any time within 12 months preceding the transfer also depicts an intention of taxing offshore transaction having 'some' connection with India. Here, the Vodafone case and its likes may in future clearly fall under the tax net in the country, thereby expanding its ambit expansively. Further, the ramifications of such changes in the domestic direct-tax laws would also merit consideration while interpreting use of similar expressions like that of fixed establishment for provisions relating to service tax payable on a reverse-charge basis. Thus, with the ever-increasing pursuit of the country's tax department to tax overseas activities having some connection with India and the legislative mandate, it needs to be seen if India can deviate from the source principle to the extent of modifying the concept of business connection and, thereby, widening its tax footprint. Such keen and vigorous envisaged initiatives would need to be examined on the touchstone of principle of territoriality and sovereignty, being inherent for every nation.

noreply@blogger.com (TRP) — Thu, 25 Nov 2010 14:06:00 +0000

GST ROLLOUT ONLY AFTER APRIL 2011, SAYS FINMIN

The finance ministry on Wednesday admitted that the proposed goods and services tax (GST) regime will not be implemented from April 1, 2011 and said that no timeframe for the introduction of the new indirect tax system has been set yet. Revenue secretary Sunil Mitra said it would be difficult to roll out GST without constitutional amendments , contrary to the suggestion made by some states. "No question of it (GST) happening (from) April 1, 2011. Certainly not. It is not possible ," Mr Mitra said. For GST to be implemented , certain amendments to the constitution are needed, he said. These amendments require time, Mitra said, adding that the finance ministry has not decided on new timeframe for introducing GST. Originally scheduled to be implemented from the beginning of this fiscal, the GST regime will subsume excise duty, service tax at the Centre's end and VAT on states front, besides some local levies surcharges and cesses. However, differences between states and the Centre over the structure of the new tax regime has led to delays in its implementation. Now, even the revised deadline will be missed. Constitution amendments are required because, under the current mechanism, the Centre cannot impose tax beyond manufacturing , and states cannot levy service tax.

noreply@blogger.com (TRP) — Sat, 20 Nov 2010 13:04:00 +0000

Service Tax :

Supreme Court upheld levy of service tax on financial leasing services

The service tax imposed by section 66 of the Finance Act, 1994 (as amended) on the value of taxable services referred to in section 65(105)(zm) read with section 65(12) of the said Act, insofar as it relates to financial leasing services including equipment leasing and hire-purchase is within the legislative competence of the Parliament under Entry 97, List 1 of the Seventh Schedule to the Constitution.

Judgement of Supreme Court

noreply@blogger.com (TRP) — Fri, 19 Nov 2010 04:53:00 +0000

HIGHLIGHTS OF DIRECT TAXES CODE BILL, 2010

Separate threshold exemption limits for men and women done away with. Common threshold limit of Rs. 2,00,000. For resident senior citizens, threshold increased from Rs. 2,40,000 to Rs. 2,50,000.
HRA exemption restored.
Employer's contributions to NPS (not exceeding 10% of salary), to approved superannuation fund (no limit - limit of 1,00,000 done away with), to approved PF (not exceeding 12% of salary), interest credited to approved fund not to be included in salary.
Only actual rent from house property to be taxed. Present system of taxing notional value called 'annual value' proposed to be done away with.
Interest on loan taken to repay housing loan deductible in calculating income from house property. This is in line with judicial interpretations.
Rent received in arrears to be included in the year of receipt, whether person in owner of property or not, after allowing 20% deduction towards repairs & maintenance.
Consideration received from transfer of carbon credits to be taxed as business income.
Remission or cessation of any liability by way of loan/deposit/advance/credit to be taxed as business income.
Scientific Research and Development in house facility expenses - weighted deduction proposed to be increased from 150% to 200%.
Transfer of land of a sick industrial company made under a scheme sanctioned under section 18 of SICA where such company is being managed by worker's co-operative not to attract capital gains tax.
Reverse mortgage under notified scheme to continue to be exempt from capital gains tax.
Exemption for long-term capital gains from equity shares/units of equity oriented mutual funds retained. STT to be retained.
Short-term capital gains (where equity shares/units are held for 1 year or less) - deduction of 50% to be are allowed and balance 50% taxed. Likewise short-term capital loss to be scaled down by 50%.
Deduction for interest on housing loan/loan taken for repair or renovation of house property upto limit of Rs. 1,50,000 in respect of one house pro-perty not let out. No deduction for re-payment of principal under the Code.
Limit for tax audits for professionals increased from Rs. 15 lakhs to Rs. 25 lakhs. Limit for tax audit for business increased from Rs. 60 lakhs to Rs. 1 crore.
TDS of 10% on payments in respect of life policies which are not exempt from tax from code.
Amount received by employee from NPS trust is tax-free. Thus, NPS which is taxed on EET basis is proposed to be made EEE (Exempt-Exempt-Exempt) for employees.
MAT rate - Increased from 15% of book profits to 20%. MAT Credit carry forward period increased from 10 years to 15 years.
DDT on dividend of domestic company - 15%.
DDT on incomedistributed by mutual fund/life insurance to unitholder/policy holder - 5%
Wealth tax - threshold increased from Rs. 30,00,000 to Rs. 1 crore. Tax rate will be 1% of net wealth in excess of Rs. 1 crore.

Direct Taxes Code : Tax Tables

I. TAX PAYABLE AT VARIOUS LEVELS OF INCOME BY INDIVIDUALS (OTHER THAN WOMEN AND SENIOR CITIZENS) AND HUFs

Income	Tax liability under the Act (excluding EC and SHEC) (Rs.)	Tax liability under the Code (excluding EC and SHEC) (Rs.)	Tax savings(Rs.)
200000	4,000	0	4000
300000	14,000	10,000	4000
400000	24,000	20,000	4,000
500000	34,000	30,000	4000
600000	54,000	50,000	4000
700000	74,000	70,000	4000
800000	94,000	90,000	4000
900000	124,000	110,000	14000
1000000	154,000	130,000	24000
1100000	184,000	160,000	24000
1200000	214,000	190,000	24000
1300000	244,000	220,000	24000
1400000	274,000	250,000	24000
1500000	304,000	280,000	24000
1600000	334,000	310,000	24000
1700000	364,000	340,000	24000
1800000	394,000	370,000	24000
1900000	424,000	400,000	24000
2000000	454,000	430,000	24000
2100000	484,000	460,000	24000
2200000	514,000	490,000	24000
2300000	544,000	520,000	24000
2400000	574,000	550,000	24000
2500000	604,000	580,000	24000
2600000	634,000	610,000	24000
2700000	664,000	640,000	24000
2800000	694,000	670,000	24000
2900000	724,000	700,000	24000
3000000	754,000	730,000	24000
3100000	2,854,000	2,830,000	24000

II. TAX PAYABLE AT VARIOUS LEVELS OF INCOME BY WOMEN RESIDENT IN INDIA AND NOT ATTAINED THE AGE OF 65 YEARS DURING THE FINANCIAL YEAR

Income	Tax liability under the Act (excluding EC and SHEC) (Rs.)	Tax liability under the Code (excluding EC and SHEC) (Rs.)	Tax savings(Rs.)
1,90,000	0	0	0
2,00,000	1,000	0	1000
3,00,000	11,000	10,000	1000
4,00,000	21,000	20,000	1000
5,00,000	31,000	30,000	1000
6,00,000	51,000	50,000	1000
7,00,000	71,000	70,000	1000
8,00,000	91,000	90,000	1000
9,00,000	121,000	110,000	11000
10,00,000	151,000	130,000	21000
11,00,000	181,000	160,000	21000
12,00,000	211,000	190,000	21000
13,00,000	241,000	220,000	21000
14,00,000	271,000	250,000	21000
15,00,000	301,000	280,000	21000
16,00,000	331,000	310,000	21000
17,00,000	361,000	340,000	21000
18,00,000	391,000	370,000	21000
19,00,000	421,000	400,000	21000
20,00,000	451,000	430,000	21000
21,00,000	481,000	460,000	21000
22,00,000	511,000	490,000	21000
23,00,000	541,000	520,000	21000
24,00,000	571,000	550,000	21000
25,00,000	601,000	580,000	21000
26,00,000	631,000	610,000	21000
27,00,000	661,000	640,000	21000
28,00,000	691,000	670,000	21000
29,00,000	721,000	700,000	21000
30,00,000	751,000	730,000	21000
1,00,00,000	2,851,000	2,830,000	21000

III. TAX PAYABLE AT VARIOUS LEVELS OF INCOME BY SENIOR CITIZENS (I.E. INDIVIDUALS RESIDENT IN INDIA AND ATTAINED THE AGE OF 65 YEARS OR MORE ANYTIME DURING THE FINANCIAL YEAR)

Income	Tax liability under the Act (excluding EC and SHEC) (Rs.)	Tax liability under the Code (excluding EC and SHEC) (Rs.)	Tax savings(Rs.)
2,40,000	0	0	0
2,50,000	1,000	0	1000
3,00,000	6,000	5,000	1000
4,00,000	16,000	15,000	1000
5,00,000	26,000	25,000	1000
6,00,000	46,000	45,000	1000
7,00,000	66,000	65,000	1000
8,00,000	86,000	85,000	1000
9,00,000	116,000	105,000	11000
10,00,000	146,000	125,000	21000
11,00,000	176,000	155,000	21000
12,00,000	206,000	185,000	21000
13,00,000	236,000	215,000

Direct Taxes Code : TDS Tables

Sr. No.	Nature of Payment	Rates of TDS where deductee is a resident		Remarks
		The present rates	Proposed rates under the Code
1.	Salary paid to employees	Rates as per the slabs and rates prescribed by the Finance Act	Average rate of tax on salary paid during the financial year	__
2.	Payment in respect of works contract	1% (where deductee is individual/HUF) 2% (where deductee is person other than individual/HUF)	2%	__
3.	Payment in respect of any service contract	__	2%	__
4.	Payment in respect of broadcasting and telecasting/advertising	1% (where deductee is individual/HUF) 2% (where deductee is person other than individual/HUF)	2%	__
5.	Supply of labour for carrying out any works, or service contract	1% (where deductee is individual/HUF) 2% (where deductee is person other than individual/HUF)	2%	__
6.	Payment in respect of carriage of goods and passengers by any mode of transport other than railways	1% (where deductee is individual/HUF) 2% (where deductee is person other than individual/HUF)	2% (No deduction of TDS in case of carriage of goods by road if deductee furnishes PAN)	__
7.	Interest	10%	10%	__
8.	Dividend other than dividend on which DDT is payable	10%	10%	__
9.	Commission, brokerage, remuneration or prize (by whatever name called) for rendering any services	10%	10%	__
10.	Fees for professional or technical services	10%	10%	__
11.	Payment for royalty or non-compete fees	10%	10%	__
12.	Compensation on compulsory acquisition of immovable property other than agricultural land	10%	10%	__
13.	Rent for the use of machinery or plant or equipment	2%	2%	__
14.	Rent for use of land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings	10%	10%	__
15.	Winning from any lottery or crossword puzzle or card game or other game of any sort	30%	30%	__
16.	Winnings from any horse race	30%	30%	__
17.	Income distributed by mutual fund on which income distribution tax is not paid	__	10% (where deductee is individual/HUF) 20% (where deductee is person other than individual/ HUF)	Threshold for not deducting TDS-where payment to unitholder does not exceed Rs. 10,000 in any financial year. TDS proposed to be introduced for 1st time. No TDS in 1961 Act at present on this payment.
18.	Payment by a life-insurer where payment under life policy is not tax-exempt	__	10% (where deductee is individual/HUF) 20% (where deductee is person other than individual/HUF)	Threshold for not deducting TDS-where payment to policyholder does not exceed Rs. 10,000 in any financial year. TDS proposed to be introduced for 1st time. No TDS in 1961 Act at present on this payment.

Endorsement of Way Bill

noreply@blogger.com (TRP) — Tue, 16 Nov 2010 13:37:00 +0000

Transporters / Dealers entering into West Bengal on and from 15.11.2010 through the routes where there is no Commercial Taxes Checkpost will submit one copy of the Way Bill to the Charge Office where the importing dealer is registered, within seven days from the date of entry of the consignment in West Bengal.

Checkposts abolished and operational from 15/11/2010

noreply@blogger.com (TRP) — Tue, 16 Nov 2010 13:28:00 +0000

The following Checkposts under DIRECTORATE OF COMMERCIAL TAXES GOVERNMENT OF WEST BENGAL will stand abolished (w.e.f. 15/11/2010)-

1. Barabazar (District- Purulia)
2. Bundwan -do-
3. Kelyasota -do-
4. Tulin -do-
5. Gopiballavpur (District-Paschim Medinipur)
6. Matiberua -do-
7. Orwo -do-
8. Sonakania -do-
9. Banhat (District- Birbhum)
10. Muraroi -do-
11. Sheorakuri -do-
12. Barakar (District-Burdwan)
13. Rupnarayanpur -do-
14. Dhuliyan (Ghoramara) (District- Murshidabad)
15. Jaypur (District- North 24 Parganas)
16. Padima (District- Purba Medinipur)
17. Bastadangi (District- Uttar Dinajpur)

There will also be no checkpost at Howrah Station, Sealdah Station, Shalimar Station, Kantapukur and Cossipore from the aforesaid date.

The following checkposts, however, will remain operational until further notification of WB Govt.:-

1. Barabisha
2. Baxirhat
3. Berma
4. Birpara
5. Chasmore
6. Chichira
7. Dalkhola
8. Duburdih
9. Jaigaon
10. Melli
11. Phansidewa More
12. Haldia Dock area

AMENDMENT MADE IN THE WEST BENGAL VALUE ADDEDTAX ACT, 2003

noreply@blogger.com (TRP) — Tue, 16 Nov 2010 13:06:00 +0000

AN AMENDMENT MADE IN THE WEST BENGAL VALUE ADDED TAX ACT, 2003, THE GOODS WHICH ARE PRESENTLY TAXABLE @12.5% UNDER SCHEDULE-CA TO THE ACT, WILL ATTRACT TAX @ 13.5% ON SALE OF SUCH GOODS, ON AND FROM 15.11.2010