Amendment to seventh Schedule (CSR):
to add sanitation and 'Swachh Bharat Mission' MCA today vide its notification dated 24th October, 2014 amended Seventh Schedule to include
'sanitation', 'Swachh Bharat Mission', 'cleaning of water and
Ganga' as a part of CSR activity.
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
New Delhi, the 24th October, 2014
ORDER NO 02/2014-SERVICE TAX
In exercise of the powers conferred by sub-rule (4) of rule 7 of the Service Tax Rules, 1994, the Central Board of Excise & Customs hereby extends the date of submission of the Form ST-3 for the period from 1st April 2014 to 30th September 2014, from 25th October, 2014 to 14th November, 2014.
In exercise of the powers conferred by sub-rule (4) of rule 7 of the Service Tax Rules, 1994, the Central Board of Excise & Customs hereby extends the date of submission of the Form ST-3 for the period from 1st April 2014 to 30th September 2014, from 25th October, 2014 to 14th November, 2014.
The circumstances of a special nature, which have given rise to this extension of time, are as follows:
"Natural calamities in certain parts of the country."
F.No.137/99/2011-Service Tax
Himani Bhayana
Under Secretary (Service Tax)
Central Board of Excise and Customs
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Extension of CLSS till November 15, 2014. General Circular No 40/2014 dated 15/10/2014.
Wef FY 2015-16, Co Audit Report to state about existence of Adequate Internal Financial Controls System & its Operating Effectiveness. Notification of 14-10-14.
Alert on Re-oganisation of CBEC Officer
Although the reorganization of formations under CBEC will take effect from 15th October 2014, to avoid inconvenience to the existing Central Excise and Service Tax assessees, they will continue to be mapped in ACES to the existing location codes (Commissionerate, Division and Range). Applicants for new registration can also apply to the existing formations. After migration of the assessees to the new formations, information will be sent to the assessees via email informing them of their new locations. Facility will also be provided in ACES for assessees to ascertain their new location codes, on their own, without visiting the Range offices, through "know you location code" on ACES website and filling of the registration number.
|
October 10th, 2014
| COURT: | |
| CORAM: | |
| SECTION(S): | |
| GENRE: | |
| CATCH NOTE: | Neither the capital receipts received by the Petitioner on issue of equity shares to its holding company, a non-resident entity, nor the alleged short-fall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act. |
| CATCH WORDS: | |
| COUNSEL: | |
| FILE: | http://laws4.us/wp-content/uploads/vodafone_transfer_pricing3.pdf |
| DATE: | October 10, 2014 (Date of pronouncement) |
| DATE: | October 10, 2014 (Date of publication) |
The assessee, an Indian company, issued equity shares at the premium of Rs.8591 per share aggregating Rs.246.38 crores to its holding company. Though the transaction was reported as an "international transaction" in Form 3 CEB, the assessee claimed that the transfer pricing provisions did not apply as there was no income arising to it. The AO referred the issue to the TPO without dealing with the preliminary objection. The TPO held that he could not go into the issue whether income had arisen or not because his jurisdiction was limited to determine the ALP. He held that the assessee ought to have charged the NAV of the share (Rs. 53,775) and that the difference between the NAV and the issue price was a deemed loan from the assessee to the holding company for which the assessee ought to have received 13.5% interest. He accordingly computed the adjustment for the shares premium at Rs. 1308 crore and the interest thereon at Rs. 88 crore. The AO passed a draft assessment order u/s 144C(1) in which he held that he was bound u/s 92-CA(4) with the TPO's determination and could not consider the contention whether the transfer pricing provisions applied. The assessee filed a Writ Petition challenging the jurisdiction of the TPO/AO to make the adjustment. The High Court directed the DRP to decide the assessee's objection regarding chargeability of alleged shortfall in share premium as a preliminary issue. Upon the DRP's decision, the assessee filed another Writ Petition. HELD by the High Court allowing the Petition:
(1) A plain reading of Section 92(1) of the Act very clearly brings out that income arising from a International Transaction is a condition precedent for application of Chapter X of the Act.
(2) The word income for the purpose of the Act has a well understood meaning as defined in s. 2(24) of the Act. The amounts received on issue of share capital including the premium is undoubtedly on capital account. Share premium have been made taxable by a legal fiction u/s 56(2)(viib) of the Act and the same is enumerated as Income in s. 2(24)(xvi) of the Act. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received on application of ALP. Therefore, absent express legislation, no amount received, accrued or arising on capital account transaction can be subjected to tax as Income (Cadell Weaving Mill Co. vs. CIT 249 ITR 265 approved in CIT vs. D.P. Sandu Bros 273 ITR 1 followed);
(3) In case of taxing statutes, in the absence of the provision by itself being susceptible to two or more meanings, it is not permissible to forgo the strict rules of interpretation while construing it. It was not open to the DRP to seek aid of the supposed intent of the Legislature to give a wider meaning to the word 'Income';
(4) The other basis in the impugned order, namely that as a consequence of under valuation of shares, there is an impact on potential income and that if the ALP were received, the Petitioner would be able to invest the same and earn income, proceeds on a mere surmise/assumption. This cannot be the basis of taxation. In any case, the entire exercise of charging to tax the amounts allegedly not received as share premium fails, as no tax is being charged on the amount received as share premium.
(5) Chapter X is invoked to ensure that the transaction is charged to tax only on working out the income after arriving at the ALP of the transaction. This is only to ensure that there is no manipulation of prices/consideration between AEs. The entire consideration received would not be a subject-matter of taxation;
(6) The department's method of interpretation indeed is a unique way of reading a provision i.e. to omit words in the Section. This manner of reading a provision by ignoring/rejecting certain words without any finding that in the absence of so rejecting, the provision would become unworkable, is certainly not a permitted mode of interpretation. It would lead to burial of the settled legal position that a provision should be read as a whole, without rejecting and/or adding words thereto. This rejecting of words in a statute to achieve a predetermined objective is not permissible. This would amount to redrafting the legislation which is beyond/outside the jurisdiction of Courts.
(7) In tax jurisprudence, it is well settled that following four factors are essential ingredients to a taxing statute:- (a) subject of tax; (b) person liable to pay the tax; (c) rate at which tax is to be paid, and (d) measure or value on which the rate is to be applied. Thus, there is difference between a charge to tax and the measure of tax (a) & (d) above;
(8) The contention that in view of Chapter X of the Act, the notional income is to be brought to tax and real income will have no place is not acceptable because the entire exercise of determining the ALP is only to arrive at the real income earned i.e. the correct price of the transaction, shorn of the price arrived at between the parties on account of their relationship viz. AEs. In this case, the revenue seems to be confusing the measure to a charge and calling the measure a notional income. We find that there is absence of any charge in the Act to subject issue of shares at a premium to tax.
(9) W.e.f. 1 April 2013, the definition of income u/s 2(24)(xvi) includes within its scope the provisions of s. 56(2) (vii-b) of the Act. This indicates the intent of the Parliament to tax issue of shares to a resident, when the issue price is above its fair market value. In the instant case, the Revenue's case is that the issue price of equity share is below the fair market value of the shares issued to a non-resident. Thus Parliament has consciously not brought to tax amounts received from a non-resident for issue of shares, as it would discourage capital inflow from abroad.
(10) Consequently, the issue of shares at a premium by the Petitioner to its non resident holding company does not give rise to any income from an admitted International Transaction. Thus, no occasion to apply Chapter X of the Act can arise in such a case.
Date for rectification in case of rejected Co-op Empanelment application of Maharashtra is from 11.10.14 to 16.10.14.Circular coming soon.
Earlier, in Travelite (India) case [TS-310-HC-2014(DEL)-ST], Delhi HC struck down Rule 5A(2) of Service Tax Rules requiring production of records to audit party on demand and CBEC Circular dated January 1, 2008 pertaining to general audit, as ultra vires the Finance Act. It held that Parliament had clear intention to provide for only special audit u/s 72A of Finance Act on fulfilment of special circumstances, and it did not contemplate a general audit that "every assessee" may be subjected to "on demand".
However, now the CBEC has issued Circular clarifying on powers of Central Excise Officers to conduct audit. Clarifies that the above refereed Judgment does not deal with issue of audit in Central Excise and there is adequate statutory backing for conducting audit by Excise officers.
Therefore, Central Excise Officers to continue conduct of audit, as provided in statute.
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SECTION 92C OF THE INCOME-TAX ACT, 1961 - TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE - NOTIFIED TOLERABLE LIMIT FOR DETERMINATION OF ALP
NOTIFICATION NO. 45/2014 [F.NO.500/1/2014-APA-II]/SO 2478(E), DATED 23-9-2014
In exercise of the powers conferred by the second proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where the variation between the arm's length price determined under section 92C and the price of which the international transaction or specified domestic transaction has actually been undertaken does not exceed one percent of the latter in respect of wholesale trading and three percent of the latter. In all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm's length price for assessment year 2014-15.
Explanation.—For the purposes of this notification, "wholesale trading" means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely :—
| (i) |
| purchase cost of finished goods is eighty percent or more of the total cost pertaining to such trading activities; and |
| (ii) |
| average monthly closing inventory of such goods is ten percent or less of sales pertaining to such trading activities. |
The Hindu has made available a copy of the judgement of John Michael Cunha J. in the case of State vs. Selvi. J. Jayalalitha (pdf). The judgement exposes the intricate arrangements that were made to launder the huge amount of cash credits that were received by J. Jayalalitha (former Chief Minister of Tamil Nadu) from alleged corrupt means. The judgement also raises disturbing questions as to the role of the auditors of the front companies in seeking to camouflage the true nature of the transactions. A few passages from the judgement are noteworthy.
(i) As in s. 68 of the Income-tax Act, the onus is on the accused to explain the nature and source of the investment & cash credits because he has special knowledge about how a particular asset was acquired or an investment therein was made. Such proof includes proof of the identity of the person who according to the accused provided the source, capacity of such person to advance or spend the money, and lastly, the genuineness of the transaction. On facts, the accused have failed to offer any satisfactory explanation as to the enormous unexplained credits entered into their bank accounts. Whatever explanation offered by the accused by way of confirmatory letters are proved to be false and bogus. The identity of the persons who provided the source is not proved. The transactions which resulted in the cash credit is also not established (Kale Khan Mohammed Hanif (1963) 50 ITR 1 (SC) followed);
(ii) The auditors examined by the accused are found to be propped up to support the false defence set up by the accused. It is proved in evidence that the auditors examined by the accused did not handle their accounts during the check period and they were not conversant with the true facts. It is also proved in evidence that, the returns and the balance sheet and the profit and loss account were maneuvred solely with a view to offer an explanation to the huge unexplained credits entered in their respective bank accounts;
(iii) Mere declaration of property in the Income Tax returns does not amount to showing the same was acquired from the known source of income. The prosecution could show that, there was no real source of income with the assessees and the public servant is the real source. In the instant case, the prosecution has succeeded in proving beyond reasonable doubt that the only source for the acquisition of the large assets is A-1 (J. Jayalalitha) herself.
F.No. 385/10/2014-IT(B) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes
PRESS RELEASE
1st October, 2014
Extension of the due date of deposit of tax deducted at source/tax collected at source during the month of September, 2014.
Considering the consecutive holidays owing to the festive season and weekend during the first week in the month of October, 2014, the Central Board of Direct Taxes has issued an order to extend the last date of deposit of tax deducted at source/tax collected at source during the month of September, 2014 from 7th October, 2014 to 10th October, 2014 without entailing any consequential interest.
2. However, the due date for filing of TDS/TCS statements for the 2nd Quarter of the F.Y. 2014-15 shall remain the same.
(Rekha Shukla) Commissioner of Income Tax
(Media & Technical Policy) Official Spokesperson, CBDT
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The Finance Ministry has made it clear that "taxable services" provided by members of a joint venture (JV) to a JV and vice-versa will attract service tax. This will be the case when the "taxable services" are provided for a consideration, the Finance Ministry said in a circular on Wednesday.
The same treatment will hold good when taxable services are provided between members of a JV for a consideration, says the circular.
India is currently adopting the concept of negative list for services taxation and except for a specified set of services in this list, all other services are subject to service tax.
As regards taxation of cash calls or capital contributions made by the members to the JV, the Ministry said that detailed and close scrutiny of the terms of JV agreement may be required in each case.
If "cash calls" are merely a transaction in money, they are excluded from the definition of service and, therefore, will not attract tax, says the circular.
Tax authorities at the field level have been advised to carefully examine the leviability of service tax with reference to the specific terms/clauses of each JV agreement.
India is currently adopting the concept of negative list for services taxation and except for a specified set of services in this list, all other services are subject to service tax.
National Taxation Tribunal law is unconstitutional, rules apex courtTerms it the ultimate encroachment on the exclusive domain of superior courts The Supreme Court on Thursday declared as unconstitutional a law under which a national tribunal was to be set up to decide tax-related cases by taking away the jurisdiction of High Courts in such matters. A five-Judge Constitution Bench comprising Chief Justice RM Lodha and Justices JS Khehar, J Chelameswar, AK Sikri and Rohinton Nariman held that the law, the National Tax Tribunal Act, was the ultimate encroachment on the exclusive domain of the superior Courts of Record. The UPA-I had enacted the law paving the way for the creation of National Tax Tribunals, which would have helped reduce pendency of tax cases before High Courts. Tax experts say this decision could impact speedier disposal of pending cases that run into thousands of crores of rupees. The Bench passed the order on a batch of petitions filed by the Madras Bar Association and others challenging the constitutional validity of the NTT Act contending that there was a grave danger that the judiciary would be substituted by quasi-judicial tribunals functioning as departments of ministries. Writing the main judgment, Justice Khehar said: "The Parliament has the power to enact legislation and to vest adjudicatory functions, earlier vested in the High Court, with an alternative court/tribunal. Exercise of such power by the Parliament would not per se violate the basic structure of the Constitution. Conform to standards "The basic structure of the Constitution will stand violated if, while enacting legislation pertaining to transfer of judicial power, the Parliament does not ensure that the newly created court/tribunal conforms with the salient characteristics and standards of the court sought to be substituted…" "The National Tax Tribunal encroaches upon the power of higher judiciary, which can only decide issues involving substantial laws and not a tribunal." Justice Nariman wrote in a separate but concurring judgment. The Bench said: "It is obvious that substantial questions of law which relate to taxation would also involve many areas of civil and criminal law… It is therefore not correct to say that taxation, being a specialised subject, can be dealt with by a tribunal. All substantial questions of law have, under our constitutional scheme, to be decided by the superior courts and the superior courts alone. "Indeed, one of the objects for enacting the National Tax Tribunals Act, as stated by the Minister on the floor of the House, is that the National Tax Tribunal can lay down the law for the whole of India which then would bind all other authorities and tribunals. This is a direct encroachment on High Courts' power under Article 227 of the Constitution to decide substantial questions of law which would bind all tribunals." Verdict on tax tribunal law may delay casesThe Supreme Court's move to strike down the National Tax Tribunal as "unconstitutional" will impact speedier disposal of appeals before High Courts, say tax experts. This verdict is certainly a legal victory and in the bargain may turn out to be a loss for taxpayers, as huge number of tax cases are pending before High Courts, Aseem Chawla, Partner, MPC Legal, a law firm, told BusinessLine . R Sekar, Partner, Deloitte, Haskins & Sells LLP, said the ruling may be appreciated for upholding Constitutional principles and judicial hierarchy. However, the verdict will go against the concept or intention of setting up of tribunals by the Government for speedy disposal of appeals, he said. Now the Government will have to find a way of ensuring the speedier disposal of appeals, Sekar said, adding that the creation of NTT and constitution of NTT was a step in the right direction. The Apex Court on Thursday held that NTT cannot decide on the matters involving substantial questions of law and also that Tribunals cannot take away the power of High Court. Pallavi Bakhru, Director-Grant Thornton Advisory, said striking down the NTT does create a void of expectations in taxpayers' minds who were looking forward to an alternative to the judicial process. Judicial delays notwithstanding, the points raised by the Supreme Court are well-noted, and the Central Government could, after careful analysis , propose an alternative institutional set up to cleanse up the pending litigation on central tax laws, she added. Chawla said tribunalisation of justice had always been a contentious matter. Now one needs to see that how judicial reforms in the tax sphere are carried out, he said.
Madras Bar Association vs. UOI (Supreme Court – Full Bench) The NTT Act "crosses the boundary" & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding 'Substantial Questions Of Law' The Full Bench of the Supreme Court had to consider whether the National Tax Tribunals Act, 2005, which sought to take away the jurisdiction of the High Courts in tax matters was constitutional. The Full Bench has struck down the entire Act as being unconstitutional on the ground that though "tribunalization" has been allowed subject to safeguards, the NTT Act "crosses the boundary" and "encroaches the exclusive domain" of the High Courts. In the course of the judgement, the Supreme Court had to consider whether Chartered Accountants could be appointed Members of the NTT and whether s. 13(1) of the Act which permitted Chartered Accountants to represent a party to an appeal before the NTT was valid in law. It also had to consider the application by the Company Secretaries that they are equal in all respects to the CAs and should also be permitted to appear and plead before the NTT. HELD by the Full Bench: A perusal of the reported judgements shows that while deciding tax related disputes, provisions of different laws on diverse subjects had to be taken into consideration. The Members of the NTT would most definitely be confronted with the legal issues emerging out of Family Law, Hindu Law, Mohammedan Law, Company Law, Law of Partnership, Law related to Territoriality, Law related to Trusts and Societies, Contract Law, Law relating to Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes, and other Miscellaneous Provisions of Law, from time to time. The NTT besides the aforesaid statutes, will not only have to interpret the provisions of the three statutes, out of which appeals will be heard by it, but will also have to examine a challenge to the vires of statutory amendments made in the said provisions, from time to time. They will also have to determine in some cases, whether the provisions relied upon had a prospective or retrospective applicability. Keeping in mind the fact, that in terms of s. 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the CESTAT only on "substantial questions of law", it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only "substantial questions of law". In our understanding, Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law. |
SC: Substantial questions of law to be decided only by superior crts. Basic structure of the constitution has been violated.
SC: NTT is not endowed with salient features of judicial powers. Separation of powers between executive and the judiciary is critical.
National tax tribunal unconstitutional says SC
