1. law, govt and politics

Volume 14
Issue 12
Monthly
March 2015
Rs.25/-
INDEX
Page No.
• Recent Decisions - Service Tax
4
• Excel Tips
13
• Recent Decisions - Customs & Excise Law
17
• Recent Decisions in Sales Tax / VAT
22
• Direct Tax - Overview on Recent Judicial Precedents
26
• Case Studies on Specific Anti Avoidance Rules in Direct Taxation
32
• Article on Labour Laws for CASC 16th RRC
37
• Notification
43
• Snippets of 16th Residential Conference of your CASC
49
• Glimpses of 16th RRC
52
MEETINGS
Date
Time
Speaker
Topic
05.03.2015
Thursday
06.30 p.m.
CA. Shaikh Abdul
Samad Ahmad
Service Tax Budget Proposals
20.03.2015
Friday
06.00 p.m.
CA. Sriram Seshadhri
Real Estate
Transactions Tax Implications
Preceeded with High Tea Half an hour before the scheduled time of meeting.
“Kindly note the change in time and day for second meeting”.
CASC Annual Members are requested to renew their
subscription for 2014 - 2015
EDITORIAL
felt that “……….the revenue targets are
being unrealistically fixed by the Ministry
of Finance. This has happened particularly
In Time to Deliver
after the FRBM-related fiscal monitoring.”
This has only increased the friction
It was said that the Finance Minister had
between the department and the tax
very little time to prepare and present a
payers though this is not mentioned in this
budget which could transform or include
report. The report also states that “Over-
the reforms promised by the party and
estimated tax receipt forecasts often leaves
now by the time this bulletin is in the
the CBDT and CBEC dissatisfied with the
member’s possession the Finance Minister
overall budget making process, and the
would have laid down the first full
government with an inaccurate tax
budget. The expectations are high and the
revenue forecast. Credible revenue
recent developments have given the
estimates, based on realistic assumptions,
signals that the public at large expect as
are thus required on a regular basis to
well as forgive at a great speed and also
achieve a tax environment characterised
are ready to take risks for the same. Hope
by better accountability to taxpayers.” The
the Finance Minister delivers and brings
Tax Administration reforms Committee
the reforms cum growth momentum for
through its four reports have given
India though many steps are already taken
extensive inputs for reforms in Tax
but the same are too little to have the
Administration and hope the Finance
required impact.
Minister looks the same and adopts major
of its recommendation which will go a
Hope the Finance Minister does consider
long way in improving the administration
the four the reports submitted by the Tax
as well as built a good atmosphere for the
Administration Reforms Committee, the
public at large as regards to tax levy and
last and final report was submitted to the
collections thereof.
Finance Minister vide F. No. TARC/
Report/36/2014-15 dated 20th February,
The CBDT has formed a committee vide
2015 and it covers the area relating to the
F.No.375/0I/2011-IT(B)
last three of the terms of reference to the
February, 2015, for “Redraft Existing
said committee. According to this report
Guidelines for Irrecoverable Demand
the CBDT as well as CBEC have generally
Write-off. Existing Manual of Write-off of
CASC Bulletin, March 2015
dated
5 th
1
Tax Arrears to be updated” with an
16 th RRC is carried and also the poem
intention of harmonizing the same with
narrated in Tamil by one of the delegate
the
and
in the valedictory session is also carried.
administrative circumstances as well as to
A write up on the RRC by the delegate
make these simpler and easier to
who has a unique record of attending all
administer.
the RRCs till date is also carried. The
prevailing
economic
Management Committee takes this
We the professionals have to improve our
opportunity to thank all the persons who
standards of deliverables particularly after
are directly and or indirectly contributed
looking into the way the Courts and
to the success of the 16th RRC
Tribunals have remarked about the way
we work. We professionals go out of way
Appeal
and try to safeguard the assessee and in
the process expose ourselves to the types
Members are requested to attend the
of remarks which off late the Courts have
programs conducted by CASC and are
come
Chartered
also requested to send their suggestions
Accountants in particular. It is time we
and / or value additions to the services
also learn from the other professionals
provided by CASC including this Bulletin.
about how to get the documents done by
The same can be sent by hard copy to the
the assessee, to charge / collect fees before
office of the CASC or emailed to
providing service, etc.
[email protected] or any of the
out
against
the
Members on the Management Committee.
16th RRC at Yercaud
For and on behalf of Editorial Board
The 16 RRC of CASC was successfully
th
held in Yercaud and was well received.
Elsewhere in this Bulletin the snaps of the
Editor
“I am bigger than anything that can happen to me. All these things, sorrow, misfortune,
and suffering, are outside my door. I am in the house and I have the key.“
- Charles Fletcher Lummis
2
CASC Bulletin, March 2015
DISCLAIMER :
The contents of this Monthly Bulletin are solely for informational purpose. It
neither constitutes professional advice nor a formal recommendation. While
due care has been taken in assimilating the write-ups of all the authors. Neither
the respective authors nor the Chartered Accountants Study Circle accepts
any liabilities for any loss or damage of any kind. No part of this Monthly
Bulletin should be distributed or copied (except for personal, non-commercial
use) without express written permission of Chartered Accountants Study Circle.
COPYRIGHT NOTICE :
All information and material printed in this Bulletin (including but not
flowcharts or graphs), are subject to copyrights of Chartered Accountants Study
Circle and its contributors. Any reproduction, retransmission, republication,
or other use of all or part of this document is expressly prohibited, unless
prior permission has been granted by Chartered Accountants Study Circle.
All other rights reserved.
ANNOUNCEMENTS :
1. The copies of the material used by the speakers for the regular meetings held
twice in a month is available on the website and is freely downloadable.
2. Earlier issues of the bulletin is also available on the website in the “News” column.
The soft copy of this bulletin will be hosted on the website shortly.
READER’S ATTENTION
You may please send your Feedback Contributions / Queries on Direct Taxes, Indirect
Taxes, Company Law, FEMA, Accounting and Auditing Standards, Allied Laws or
any other subject of professional interest at [email protected]
For Further Details contact :
“The Chartered Accountants Study Circle”
“Prince Arcade”, 2-L, Rear Block, 2nd Floor, 22-A, Cathedral Road,
Chennai - 600 086. Phone 91-44-28114283
Log on to our Website :
www.casconline.org
for updates on monthly meetings and professional news.
Please email your suggestions / feedback to [email protected]
CASC Bulletin, March 2015
3
RECENT DECISIONS - SERVICE TAX
1. Works contract service – composite
contract for supply of goods – value
of transfer of property of goods
involved leviable to tax under vat not
to be included in the value of taxable
service – amendments in the
composition scheme for works
contract not to apply for contracts
commenced prior to 07.07.2009:
In Gammon India Ltd. v. CCE&CST–
(2015) 37 STR 225 (Tri. - Mumbai), the
appellant was engaged in the
manufacture and sale of electricity
transmission tower and parts thereof.
The appellants were awarded two
types of contract i.e. (a) for supply of
tower; and (b) for erection and
installation for which the appellant
paid excise duty and VAT on the
supply of goods. With respect to the
service contract for the period April
2008 to March 2012, the appellant paid
service tax under composition scheme,
which was disputed by the revenue
citing that as per rule 2A of the Service
Tax (Determination of Value) Rules,
2006, the value of works contract shall
be equivalent value to the gross amount
under works contract less the value of
property in goods transfer and that the
appellant had not included the value
of goods involved in the supply
contract, which was an ineligible
4
CA. VIJAY ANAND
condition, against which further appeal
was preferred before the Tribunal
which observed as under:1. Two conditions were needed to satisfy
the definition of works contract viz. (a)
there must be transfer of property in
goods involved; and (b) such transfer
of property is leviable to tax as sale of
goods.
2. Records shown by the appellant
indicate that significant percentage of
the total contract work under service
contract involves material and
components. Hence, the first condition
was satisfied.
3. CBEC Circular No.B1/16/2007-TRU
dated 22.05.2007, clarified that
contracts which are treated as works
contract for the purpose of levy of
VAT/sales tax shall also be treated as
works contract for the purpose of levy
of service tax. Hence, the second
condition was also satisfied.
CASC Bulletin, March 2015
4. As per Rule 3 of the Composition
Scheme, the following three elements
has to be fulfilled, for eligibility under
Composition Scheme:i.
There must be transfer of property
in goods involved in the execution
of such contract.
ii. The provider of the service must
not have taken Cenvat Credit on the
inputs.
iii. The provider of the service must
exercise such option to avail the
Composition Scheme.
5. The first two have already been
discussed. With respect to the third,
there was no allegation that the
appellant has claimed credit on inputs
and hence there was no reason to deny
such option of Composition Scheme to
such an appellant.
6. Explanation to Rule 3(1) was inserted
w.e.f. 07.07.2009 whereby the value of
goods used, whether supplied under
any other contract or not, was to be
included and since the revenue not
disputed that the contract had
commenced before 07.07.2009, the
amended rule also does not apply to
the appellant.
7. Hence, there was no reason to dispute
the correctness as to the appellant’s
eligibility to claim the benefit of the
composition scheme, irrespective of the
nomenclature of the agreement.
CASC Bulletin, March 2015
Consequently, the appeal was allowed
and the impugned order was set aside.
2. Agreement to use property in the
name of legendary martial artist Bruce
Lee embodied in visual images
supplied for which royalty is paid –
artistic work covered under copyright
and excluded under intellectual
property rights service:
In Indiagames Ltd. V. CST, Mumbai [2015] 37 S.T.R. 299 (Tri. - Mumbai), the
appellant entered into a licence
agreement with Universal Studio
Licensing LLLP, California, USA (USL
for short) wherein the appellants were
permitted to use the USL’s property in
the name and licenses of the legendary
martial artist Bruce Lee as embodied in
the visual images supplied to licensee
by USL. The appellants used the said
images in mobile games and paid
royalty to USL for the right to use the
said property. The adjudicating
authority confirmed the demand under
‘intellectual property services’ (IPR for
short), for which the appellants filed an
appeal before the Tribunal which
observed as under:a) The appellant was permitted to use
property in the name and likeness
of the legendary martial artist Bruce
Lee embodied in visual images
supplied by USL for which
consideration was paid by way of
royalty.
5
b) Such property would squarely
within the ambit of Copyrights Act,
1957 as an artistic work defined
under Sec. 14(c) of that Act.
c) If it is to be treated as computer
programme it would still fall under
copyright service as defined under
Sec. 14(b).
d) There is no question of levy of
service tax on copyright work as
IPR Services specifically excluded
copyright from the definition.
Hence, the appeal was allowed and the
impugned order was set aside.
3. Parallel assessment proceedings – ex
parte order passed by another
Commissionerate for the same
transactions – complete nullity and
without authority non est and void
have been issued:
In Vandana Travels & Tours V.
CCE&ST (Appeals) - [2015] 37 S.T.R.
417 (All.), the petitioner was a Rent-aCab Operator. The Dy. Commissioner,
Divn.-I, Allahabad confirmed the
demand and the petitioners appeal
before Commissioner (Appeals) was
dismissed for non-compliance, against
which further appeal was filed before
the Tribunal which remanded the
matter to the adjudicating authority.
On re-adjudication, certain demands
were confirmed with penalty which
was been paid by the petitioners.
6
However, parallel assessment
proceedings for the same transactions,
same period in respect of the same
amount received by the petitioner from
the service recipient were initiated by
Asstt. Commissioner, Division II,
Allahabad, and confirmed the demand
on the assessee on another address.
The petitioner was aware of the order
only after the receipt of recovery letter
and thereafter filed an application to
recall the order on the grounds that Dy.
Commissioner, Divn. I had already
passed the order for the same period.
This application was rejected by Asstt.
Commissioner, Divn. II holding that is
earlier OIO was not challenged by the
petitioner in appeal.
Thereafter, the petitioner applied and
obtained the certificate copy of
Demand-Cum-Show Cause notice
made by Asstt. Commissioner, Divn. II
for filing and filed an appeal before the
Commissioner (Appeals) which was
rejected on the ground of belated reply,
consequent to which the petitioner
approached the High Court which
observed as under:1. Asst. Commissioner, Division-I is
the jurisdictional authority of the
petitioner and Asst. Commissioner,
Division-II has no jurisdiction and
has passed an ex-parte order.
CASC Bulletin, March 2015
2. Asst. Commissioner, Division-II
has initiated parallel assessment
proceedings against the petitioner
and passed ex-parte order in
original dated 22.5.2008 in respect
of the same transactions and for the
same period for which the
petitioner was assessed by Assst.
Commissioner, Division-I.
3. The only objection taken by the
Asst. Commissioner, Division-II
was that since the petitioner has
failed to challenge within limitation
the unauthorized ex-parte order
dated 22.5.2008 passed by him and
appeal against it was also rejected
on the ground of delay and as such
the demand created under the said
orders cannot be withdrawn and is
liable to be recovered from the
petitioner.
4. Neither the Act nor the rules
provides for any double assessment
nor can it be permitted in view of
the fact that the transaction in
question have been assessed by the
jurisdictional authority. Article 265
of the Constitution of India
provides that no tax shall be levied
or collected except by authority of
law.
5. Thus the order dated 22.5.2008
passed by the Asst. Commissioner,
Division - II was a complete nullity
CASC Bulletin, March 2015
and therefore, the demand created
there under was not legally
recoverable from the petitioner as
the Asst. Commissioner lacked
inherent jurisdiction to pass the
impugned order dated 22.5.2008 as
well as consequential recovery
proceedings.
6. Thus for about one year the
petitioner was deprived by the
respondent no. 3 of the use of his
money of his capital to the tune of
amount demanded by the
respondent no. 3.
7. It is settled law that if an authority
or court lacks inherent jurisdiction
to pass a decree or order, the decree
or order passed by such authority
or court would be non est and void
ab-initio. The defect of jurisdiction
goes to the root of the matter. It
strikes at the very authority of the
court to pass the order. Competence
of a court to try a case goes to the
very root of the jurisdiction, and
where it is lacking, it is a case of
inherent lack of jurisdiction.
8. The proper course for the Asst.
Commissioner, Division II was to
recall the order dated 22.5.2008
when wholly undisputed facts
came to his notice that Asst.
Commissioner, Division I is
jurisdictional assessing authority
7
who has assessed and passed
assessment order in respect of the
same transactions and for the same
periods. It was a case of creation of
a demand of service tax without
jurisdiction.
9. Under the circumstances the
impugned order dated 30.1.2014
passed by Asst. Commissioner,
Division-II cannot be sustained and
ought to be set aside.
Hence, the writ petition was allowed
with a cost of Rs.25,000/-.
4. Refund – adjustment towards service
tax along with interest and penalty
confirmed on which assessee appeal
is pending before the appellate
authority:
In Solvay Specialities India P. Ltd. V.
UOI – 2015 (37) STR 465 (Guj.), the
adjudicating authority confirmed the
demand along with interest and
penalty on which further appeal was
preferred before the CESTAT. Despite
that, the department had recovered the
tax dues in the OIO by way of adjusting
from the other 9 sanctioned rebate
claims of exports of the petitioner
during the pendency of the appeal
before the CESTAT. On a writ petition
filed before the High Court which was
observed as under:-
8
1. The petitioner submitted appeals
within statutory period of
limitation along with stay
applications. However, stay
applications could not be heard by
the learned CESTAT at the earliest.
It is not the case on behalf of the
respondent that as such there was
any deliberate delay on the part of
the petitioner in getting the stay
applications decided. It is also not
the case on behalf of the respondent
that the delay in deciding the stay
application is attributable to the
petitioner.
2. Subsequently the stay applications
are decided and the petitioner is
directed to deposit a sum of Rs. 10
lakh only as pre-deposit and on
such deposit further recovery has
been stayed. As stated above, in the
meantime respondent No. 2 has
recovered an amount by adjusting
the same from the other 9
sanctioned rebate claims of exports
of the petitioner resulting in a
refund after deducting Rs. 10 lakh
which the petitioner is directed to
deposit as pre-deposit).
3. Hence, the petitioner is entitled to
refund which the respondent has
recovered by way of adjusting the
same from the other 9 sanctioned
rebate claims of exports of the
petitioner.
CASC Bulletin, March 2015
Hence, the petition was disposed-off on
the aforesaid manner.
5. Buying old vehicles and selling them
after refurbishment - no liability
under service tax,:
In Sai Service Station Ltd. V.
CCECU&ST – 2015 (37) STR 516 (Tri. –
Bang.), the appellant is an authorized
dealer of Maruti Suzuki India Ltd. and
was also undertaking the activity of
exchanging old cars of customers for a
new one. The adjudicating authority
confirmed the demand along with
penalties under Business Auxiliary
Service (BAS) on the value of difference
between the sale price of old cars and
purchase price, against which appeal
was filed before the Tribunal, which
observed as under:1. The Commissioner himself
observed that the old car owners
come to the appellants for selling
their vehicles and they hand over
all the documents and receive the
agreed price and the possession of
the vehicle is also transferred.
2. The conclusion that appellants are
rendering a service and it is not a
transaction of sale and purchase is
coming only because registration
certificate remains in the name of
the owner and he provides blank
forms enabling transfer of the
vehicle as required under the Motor
Vehicles Act.
CASC Bulletin, March 2015
3. Therefore, the only point that arises
for consideration is whether nontransfer of registration at the time
of transferring possession of the old
vehicle by the owner cannot be
considered as a sale as held by the
Commissioner or not.
4. In Premsankar K.G. v. Sunil
Krishnan 2014 (4) KHC 895, the
Kerala High Court held as when a
property in a motor vehicle is
delivered to another person and the
price is paid, the transaction
becomes a sale, notwithstanding
the non registration of the transfer
with the RTO.
5. Hence, the entire transaction
becomes a transaction of purchase
and sale of old vehicles and It is not
the case of the Revenue that
refurbishing of the vehicle, repair
and other activities undertaken by
the appellants when the vehicle was
in their possession is a service
rendered to any person. These
activities are undertaken as value
addition by them and it is neither
for the seller nor the purchaser. It
is an activity undertaken to increase
the value of the vehicle so that they
get the maximum return out of it.
Therefore there is no service
element in this transaction either.
Hence, the appeal was allowed with
consequential relief.
9
6. Export of service – for scientific and
technical services & business
auxiliary service – if the recipient is
located outside India and received in
convertible foreign exchange –
condition for export satisfied –
CENVAT credit without questioning
the credit taken eligibility to rebate
cannot be questioned:
In CST, Mumbai v. Exxon Mobile Co.
India P. Ltd. – 2015 (37) STR 591 (Tri. –
Mumbai), the respondent, M/s. Exxon
Mobile Co. India Pvt. Ltd. provided
services under the category of
“Scientific and Technical Services” and
“Business Auxiliary Services” (BAS) for
their holding companies and affiliated
companies situated in abroad. They
undertook testing of the products
manufactured by the foreign entities
and gave advice with regard to
improving the quality of the product.
Similarly, they also undertook
identification of potential customers in
India, market potential for products in
India and similar activities for the sale
of the products in India manufactured
by the foreign affiliates and thereafter,
they filed the refund claim towards
refund of input service credit taken by
them.
The Department denied the refund on
the grounds that (a) there was no export
of service as the activity was
undertaken in India and (b) in respect
10
of some input invoices, the respondent
was not the party mentioned therein
and/or there was no co-relation
between the input services on which
credit is taken and the output service
rendered.
On,
appeal
the
Commissioner (Appeals) sustained the
claim of refund, against which further
departmental appeal was preferred
before the Tribunal which observed as
under:1. To qualify as exports, two
conditions are required to be
satisfied, viz. (a) such services
should be provided from India and
used outside India and (b)
payments for the service is received
in convertible foreign exchange. As
regards the receipt of the payment
in convertible foreign exchange,
there is no dispute. As regards the
first condition, when the service
provider is located in India and the
service recipient is located in
abroad, use of the service rendered
by the service provider is by the
recipient located abroad and
therefore, the services can said to
be used outside India.
2. The respondent herein undertakes
only exports of services and is not
rendering any services in India.
Therefore, all the input services on
which he has taken the credit is in
relation to the exports made by him.
CASC Bulletin, March 2015
3. Consequently the appellant would
be eligible for refund of the input
service tax paid under Rule 5 of the
Cenvat Credit Rules, 2004.
4. The only objection raised by the
Revenue is that in respect of some
services, the invoices are not in the
name of the respondent but in the
names of parent company. It is not
the contention of the Revenue, the
appellant is not entitled for the
credit. The objection is only in
respect of claiming of refund/
rebate. This Tribunal in the case of
CST, Delhi Vs. Convergys India
Pvt. Ltd. – 2009 (16) STR 198 (TriDel) observed that there cannot be
two different yardsticks, one for
permitting the credit and the other
for eligibility for granting rebate.
Whatever credit has been permitted
to be taken, the same is permitted
to be utilised. When the same is not
possible, there is provision for grant
of refund or rebate. Without
questioning the credit taken, the
eligibility to rebate cannot be
questioned.
Hence, the appeal was dismissed.
7. Valuation – notional interest on
security deposits towards rent to
immovable property – not to be
included:
CASC Bulletin, March 2015
In Murli Realtors P.Ltd. v. CCE, Pune
III – 2015 (37) STR 618 (Tri. – Mumbai),
the appellants are lessors of immovable
property and are paying service tax on
lease rentals. In addition, the
appellants have received interest from
security deposit, the Adjudicating
Authority confirmed the demand on
the inclusion of notional interest at 18%
of the deposit against which the
appellant filed an appeal before the
Tribunal which observed as under:
1. The consideration for renting of the
immovable property is the amount
agreed upon between the parties
and on this amount the appellant is
discharging service tax liability.
2. Deposit is taken for a security in
case of default in rent by the lessee
or default in payment of utility
charges or for damages, if any,
cause to the leased property. Thus,
the security deposit serves a
different purpose altogether and it
is not a consideration for leasing of
the property.
3. The consideration of the leasing of
the property is the rent and,
therefore, what can be levied to
service tax is only the rent charged
and no notional interest on the
security deposit taken can be levied
to tax.
11
4. There is no provision in service tax
law for deeming notional interest
on security deposit taken as a
consideration for leasing of the
immovable property. Therefore, in
the absence of a specific provision
in law, there is no scope for adding
any notional interest to the value of
taxable service rendered, relying on
the decision of the Apex Court in
Moriroku UT India (P) Ltd. v. State
of UP 2008 (224) ELT 365 (S.C.)
5. Even in the excise law, under Rule
6 of the Valuation Rules, unless the
department shows that the deposit
taken has influenced the sale price,
notional interest cannot be
automatically included in the sale
price for the purpose of levy.
6. In the absence of a provision in law
providing for a notional addition to
the value/price charged, the
question of adding notional interest
on the security deposit as a
consideration received for the
services rendered cannot be
sustained and be hold accordingly.
7. CCE, Mumbai-III v. ISPL Industries
Ltd 2003 (154) ELT 3 (S.C.) it was
held that to include the interest of
security deposit, proof and
12
evidence to show that fixation of
price has been influenced on the
lower side by such a transaction of
interest free advance are needed.
8. In the instant case, there is not even
an iota of evidence adduced by the
Revenue to show that the security
deposit taken has influenced the
price i.e. the rent in any way. In the
absence of such evidence, it is not
possible to conclude that the
notional interest on the security
deposit would form part of the rent.
9. There is no reason for adopting a
rate of 18% per annum as rate of
interest, which is neither the bank
rate of interest for deposits or loans
nor the market rate of interest.
Adoption of such an arbitrary rate
militates against the concept of
valuation.
Consequently, notional interest on
interest free security deposit cannot
be added to the rent agreed upon
between the parties for the purpose
of levy of service tax on renting of
immovable property. Hence, the
appeal was allowed with a
consequential relief.
(The author is a Chennai based Chartered Accountant.
He can be reached at reachanandvis@ gmail.com)
CASC Bulletin, March 2015
EXCEL TIPS
MIN, MAX, LARGE Functions
MIN & MAX FUNCTION:
What it does?
MINIMUM FUNCTION: Returns the smallest number in a
set of values.
CA. DUNGAR CHAND U. JAIN
MAXIIMUM FUNCTION: Returns the largest number in a set of values.
Syntax :
MINIMUM FUNCTION: =MIN(number1, [number2], ...)
MAXIMUM FUNCTION: =MAX(number1, [number2], ...)
Remarks for MAX and MIN Functions
• Arguments can either be numbers or names, arrays, or references that contain
numbers.
• Logical values and text representations of numbers that you type directly into the
list of arguments are counted.
• If an argument is an array or reference, only numbers in that array or reference are
used. Empty cells, logical values, or text in the array or reference are ignored.
• If the arguments contain no numbers, MIN / MAX returns 0.
• Arguments that are error values or text that cannot be translated into numbers
cause errors.
• If you want to include logical values and text representations of numbers in a
reference as part of the calculation, use the MINA / MAXA function.
LARGE FUNCTION
What it does?
This function examines a list of values and picks the value at a user specified position in
the list. You can use this function to select a value based on its relative standing. For
example, you can use LARGE to return the highest, runner-up, or third-place score.
CASC Bulletin, March 2015
13
Syntax
=LARGE (List of Numbers to Examine, Position to Pick From)
Remarks for LARGE Function
• If array is empty, LARGE returns the #NUM! error value.
• If “Position to pick from” d” 0 or if “Position to pick from” is greater than the
number of data points, LARGE returns the #NUM! error value.
If n is the number of data points in a range, then LARGE(array,1) returns the largest
value, and LARGE(array,n) returns the smallest value.
EXAMPLE 1 :
A
B
1
Data
Data
2
3
4
3
5
2
4
3
4
5
5
6
6
4
7
8
Formula
Description (Result)
9
=LARGE(A2:B6,3)
3rd largest number in the numbers above (5)
10
=LARGE(A2:B6,7)
7th largest number in the numbers above (4)
7
11
12
Alternatively, to find only the highest and lowest value
13
Formula
Description (Result)
14
=MIN(A2:B6)
returns smallest number in the numbers above (2)
15
=MAX(A2:B6)
returns largest number in the numbers above (7)
16
17
18
14
CASC Bulletin, March 2015
EXAMPLE 2 :
A
B
C
1
Sales
Jan
Feb
Mar
2
Chennai
Rs. 1,50,000
Rs. 60,000
Rs. 45,000
3
Trichy
Rs. 58,000
Rs. 70,000
Rs. 30,000
4
Madurai
Rs. 35,000
Rs. 20,000
Rs. 90,000
5
Tirunelveli
Rs. 1,20,000
Rs. 40,000
Rs. 60,000
6
Tuticorin
Rs. 25,000
Rs. 15,000
Rs. 45,000
8
Highest Value
Rs. 1,50,000
=LARGE(B2:D6,1)
9
2nd Highest Value
Rs. 1,20,000
=LARGE(B2:D6,2)
10
3rd Highest Value
Rs. 90,000
=LARGE(B2:D6,3)
7
11
12
(The author is a Madurai based Chartered Accountant. He can be reached at
[email protected])
Public Meeting on Union Budget
Venue : TAG Dakshinamurthy Hall
Date
: 3rd March 2015
Time
: 06.00 p.m.
Speakers S.No.
Speaker
Topic
1.
CA. S. Gurumurthy
Economic Analysis & Special Address
2.
CA Sriram Seshadri
Direct Tax
3.
K.K. Sekhar
Indirect Tax
CASC Bulletin, March 2015
15
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.
16
CASC Bulletin, March 2015
RECENT DECISIONS - CUSTOMS & EXCISE LAW
Eligibility of CENVAT credit reversed
and then re-availed suo moto in the same
month
In the case of Aarti Industries Ltd vs.
CCE(2015-TIOL-115-CESTAT-AHM), the
taxpayer reversed the CENVAT credit for
input services due to some computational
errors. Simultaneously, the taxpayer suo
moto availed the credit for the correct
amount computed. However the revenue
alleged that suo moto availment of credit
is not permissible and demanded
CENVAT credit amount along with
interest and penalty.
The Tribunal in this regard relied on the
case of ICMC Corporation Ltd vs CESTAT,
Chennai [2014-TIOL-121-HCMAD-CX] and
held that the taxpayer can rightly avail
credit if it gets proved that the CENVAT
credit documents based on which it took
credit are the same CENVAT credit
documents initially submitted to take the
credit, apart from the additional
documents put forth. Thus the matter was
remanded back to the revenue for
verification of the two sets of documents
submitted.
Inclusion of freight charges when
goods are removed from factory
but sold at customer’s site
CASC Bulletin, March 2015
CA. S. VINODH & CA. SUKHPAL SINGH
In the case of Balmer Lawrie Van Leer
Ltd vs. CCE (2015-TIOL-127-CESTATMUM), the taxpayer being the
manufacturers of drums/containers
removed goods from the factory to
warehouse on payment of excise duty and
thereafter sold to the ultimate customers
from the warehouse on receiving the
orders. The assessable value on which the
duty is paid did not include the freight
and other loading/unloading charges but
were indicated on the invoice.
Revenue argued that the assessable value
should include the freight and other
charges as the ultimate sale occurs at the
customer’s site and relied on the case of
Hard Castle Petrofer Pvt Ltd vs CCE
[2014(304) ELT 576 (Tri-Del)] to support
their contention
The Tribunal basis above held that act of
sale takes place at the premises of
customer, therefore, charges are
includible.
17
Eligibility of availing CENVAT credit
for the inputs used in manufacturing of
capital goods
In the case of CCE vs. Parabolic drugs Ltd
(2015-VIL-17-CESTAT-DEL-CE), the
taxpayer was engaged in manufacture of
structures and fixtures for which several
inputs like MS Channels, pipes and angles
were used by the taxpayer on which the
input credit was availed. Revenue alleged
that the CENVAT credit availed on such
goods are not eligible as they are not
capital goods
Taxpayer contended that the items were
used by them for manufacturing of capital
goods and they are entitled to take Cenvat
credit on the said goods as held by
Hon’ble High Court of Madras in the case
of CCE vs. India Cements Ltd. [2014 (305)
ELT 558 (Mad)]
The Tribunal held that the taxpayer have
submitted enough proof to exhibit a nexus
for the inputs used in construction of the
capital goods and therefore the CENVAT
credit for MS Channels, pipes and angles
will be eligible.
Eligibility of availing input credit on
services provided by overseas service
provider
In the case of CCE vs. Axles India Ltd
(2015-TIOL-153-CESTAT-MAD), the
taxpayer was engaged in manufacture and
export of Rear Axles Housing. While
exporting the goods to USA, the taxpayer
18
applied quality control checks and
cleaning activities at the warehouse of the
buyer for which an overseas service
provider was engaged and service tax on
the same was paid by the taxpayer under
reverse charge mechanism, being the
recipient of service.
Revenue disallowed the credit on the
ground that the activity carried out by the
overseas company do not qualify as input
services as it has no nexus to the
manufacture of final product said service
is to be considered as post-manufacturing
and post-clearance activity after the sale.
The Tribunal observed that providing
quality control services are necessary for
the taxpayer to meet the business
obligations, failure of which will lead to a
loss. Thus the services has direct nexus
with the manufacturing activity and
covered under the definition of input
services as well and held that the taxpayer
will be eligible to claim input credit of the
service tax paid under reverse charge.
Eligibility of CENVAT credit on plastic
crates as inputs
In the case of CCE vs. M/s Tractors and
Farm Equipments Ltd / M/s I M Gears
Pvt Ltd (2015-VIL-31-CESTAT-CHE-CE),
the Revenue has disallowed the credit on
plastic crates.
The revenue contended that credit on
plastic crates are not eligible as capital
goods since they are classifiable under 39
CASC Bulletin, March 2015
of the Central Excise Tariff Act, 1985
(“CETA”) and relied on Tribunal’s
decision in the case of PKPN Spinning
Mills (P) Ltd to hold that they are not
eligible for credit as capital goods [2005
(192) ELT 541].
The taxpayer argued that they have never
claimed credit on plastic crates as capital
goods and issue is covered by the Larger
bench decision of Banco Products (India)
Ltd [2009 (23) ELT 636 (Tri. LB) and
Pallipalayam Spinners Ltd [2014-TIOL2288-HC-MAD]
The Tribunal relying on the above
decisions held that CENVAT credit on
plastic crates is available as inputs/
material handling equipment.
Eligibility of CENVAT credit on Naptha
used as fuel for generation electricity
wheeled out to sister unit
In the case of Arvind Ltd vs. CCE (2015VIL-51-CESTAT-AHM-CE), the taxpayer
was engaged in the manufacture of cotton
yarn etc and were availing CENVAT
credit on Naptha used as fuel in
generation of electricity, a part of which
is captively consumed and balance portion
is wheeled out to their sister unit.
Revenue proposed to recover amount of
re-credit attributable electricity supplied
to sister unit.
The taxpayer contended that –
-
They did not charge any price to sister
unit and revenue erroneously
CASC Bulletin, March 2015
proceeded on the basis of journal
voucher entries, which is a mere book
adjustment; and
-
CENVAT credit was not used by them
after the favorable order from this
Tribunal but credit amount was frozen
after the Supreme Court remanded
back the matter;
Revenue argued that book adjustment
would be construed as a payment to sister
unit and therefore recovery is justified.
The Tribunal upheld this and held that
reversal of credit is justified.
No time limit prescribed under Cenvat
Credit Rules, 2004 to take CENVAT
credit
In the case of CCE vs. Borosil Glass
Works Ltd (2014-TIOL-2645-CESTATMUM), the taxpayer took CENVAT credit
on inputs after one year of purchase which
was disallowed by the revenue on the
ground that CENVAT credit has been
availed with inordinate delay.
Tribunal observed that –
-
Under Cenvat Credit Rules, 2004
(“CCR”) there is no time period
prescribed for taking CENVAT credit
on input; and
-
In the case of SGS India Pvt Ltd vs. CCE
(2011 (270) ELT 115 (Tri-Mum), it was
held that CENVAT credit can be taken
at any time after purchase of the goods.
19
the discounts given to unrelated
parties by the exporter in the course of
import;
Basis aforesaid, it was held that taxpayer
was entitled to credit.
Levy of SAD in case of inter-unit
transfers by a 100% EOU
In the case of M/s Barco Electronics
Systems Pvt Ltd vs. CCE&ST(2015-TIOL182-CESTAT-DEL), the taxpayer was a
100% EOU who cleared the goods on the
inter unit transfer to their sister unit in
DTA without paying SAD
The Revenue was of the view that since no
sales tax is paid on such transfers, benefit
of Notification No.23/2003-CE exempting
payment of SAD not available.
The Tribunal relying on the decision of
Micro Inks vs CCE [2014-TIOL-258-CESAHD) observed that inter-unit transfers
are not sales transaction to attract sales tax
and it does not ipso fact mean that
exemption is granted by the State
government. Thus, the Tribunal set aside
the demand of SAD on inter-unit
transfers.
Inclusion of discount in the transaction
value for the customs duty
In the case of CC vs. GE Healthcare Bio
Sciences Ltd (2015-TIOL-216-CESTATMAD), the taxpayer was allowed discount
in the range of 25% to 43% on the import.
The lower authority granted the
deduction of discount on the ground that–
-
It is permissible to determine the
transaction value keeping in par with
20
-
In series of imports, the discount being
fluctuating reasonable discount may
be determinable within the above
range, without a straight jacket
formula;
-
Imports of taxpayers are subject to
warranty condition which calls for
higher rate of discount to be allowed
and the level of discount varies with
the commercial quantity imported
The Tribunal on appeal held that sincere
venue has no material to prove that the
relation of the parties has depressed
import value, there is no scope to set aside
the order.
Inclusion of lumpsum payment made as
royalty in the assessable value of raw
materials
In the case of Can-pack (India) Pvt Ltd vs.
CC (2015-TIOL-158-CESTAT-MUM), the
taxpayer was making payment of
lumpsum trademark fee and lumpsum
royalty for technical know-how (together
referred as “royalty”) which was sought
to be included in the value of imports
made from related overseas suppliers.
The taxpayer contended that-
The agreements relating to royalty
payment do not contain any
provisions relating to procurement of
raw materials; and
CASC Bulletin, March 2015
-
The separate supply agreement was
entered which did not impose any
condition with regard to the source of
procurement of raw materials
Revenue argued that-
Payment of royalty is a condition of
sale for the purchase of raw materials
from related parties but the said
condition would not apply in respect
of running royalty; and
-
Supply agreement contains a clause
that raw materials should be of
prescribed quality which indirectly
signifies that supplier have control
over the taxpayer which may have
influenced the price
The Tribunal observed that –
-
The agreement for supply and royalty
are separate and independent which
signifies that relationship has not
influence the price of raw materials;
and
Inclusion of freight and insurance
charges recovered over and above the
charges actually incurred in the
assessable value
In the case of M/s. Indo Rama Synthetics
(I) Ltd vs. CCE(2015-TIOL-69-CESTATMUM), the taxpayer engaged in the
manufacture of polyester yarn was
recovering freight, insurance and textile
committee fees more than the charges
incurred by them. Revenue sought to
include excess transportation charges and
insurance charges in the assessable value.
The taxpayer relying on the decision of
Baroda Electric Meters vs CCE (1997 (94)
ELT 13 (SC) contended that differential
amount not includible in the assessable
value since the duty of excise is on
manufacture and not on profit made by
the dealer on transportation.
Revenue relied on Tripty Drinks (P) Ltd vs.
CCE (2002 (147) ELT 586 (Tri.-Kol) to
include freight and insurance charges.
The stand of the revenue that running
royalty cannot be added to assessable
value but lumpsum payment can only
be added is contradictory and cannot
be accepted.
Tribunal observed that Baroda Electric
(supra) is squarely applicable to the case
and held that such charges recovered in
excess will not be includible in the
assessable value.
Basis above, it was held that lumpsum
payment of royalty cannot be added to
assessable value.
(The authors are Chennai based Chartered Accountants.
-
They can be reached at s.vinodh @bmradvisors.com &
sukhpal.singh@bm radvisors. com respectively)
“Experience is one thing you can't get for nothing.“ - Oscar Wilde
CASC Bulletin, March 2015
21
RECENT DECISIONS IN SALES TAX / VAT
Sale price:
The optional service charges of Rs 200/collected at the time of sale for providing
the after sales services is not part of sale
price. [2013] 64 VST 379 (Raj)
ASSISTANT COMMERCIAL TAXES
OFFICER,
ANTI-EVASION-II,
RAJASTHAN, JAIPUR v. ELECTROLUX
KELVINATOR LTD.
Classification:
Chilly and Chilly powder, turmeric and
turmeric powder and coriander and
coriander powder were one and the same.
It was so not only to the understanding of
the petitioners, but also to that of the State.
This fact stood amplified by the
Government Order dated October 22, 1998
and the clarification dated December 9,
2002 issued under section 28A of the
TNGST Act. The Government thought it
fit to correct the error in not bringing the
powder form of chilly, turmeric and
coriander in the Fourth Schedule to the
2006 Act by substitution under section 3
of the 2008 Act. It was not the case of the
Department that powder forms of chilly,
coriander and turmeric were different
goods. Therefore, powder forms of chilly,
turmeric and coriander, were exempted
goods and were entitled to the benefit of
exemption as before. It was also observed
22
CA. V.V. SAMPATHKUMAR
that If there was an omission or a specific
statement to that effect, the court is
empowered to give a constructive meaning
to the intention of the Legislature and
give it the force of life. [2013] 64 VST 385
(Mad) SAKTHI MASALA (P) LTD
AND ANOTHER v. ASSISTANT
COMMISSIONER (CT), PERUNDURAI
ASSESSMENT CIRCLE, PERUNDURAI.
Transfer of property in goods:
The various provisions of the agreement
showed that the effective control of the
machinery, even while the machinery was
under use, was with the owners. The
contractors were not free to make use of
the machinery for other works or move the
machinery during the period the
machinery was in use. The owners were
responsible for the custody of the machines
while those were on the site. All these facts
lead to the assumption that no absolute
right to use was created by the execution
CASC Bulletin, March 2015
of the agreements. What the works
contractors were permitted was to make
use of the property, with the possession
and overall control of the crane remaining
with the owners. The direction to pay sales
tax was not sustainable, in as such as the
transaction did not involve the transfer of
the absolute right to use the property in
question, i.e., cranes. The direction to get
the petitioners registered under the Act
and seizure of the documents on that score
also were not sustainable in the eye of law.
[2013] 64 VST 435 (WBTT) W. B. CRANE
& EQUIPMENT OWNERS’ WELFARE
ASSN. AND OTHERS v. ASSISTANT
SALES TAX OFFICER, CENTRAL
SECTION,INVESTIGATION WING,
KOLKATA OTHERS.
Penalty:
Given the degree of knowledge that a
dealer may have, as to whether the
concessional forms furnished by the
outstation purchaser were bogus or
genuine, there was no justifiable ground
to attribute motive to levy penalty in this
case.
[2013] 64 VST 440 (Mad) WESTERN
INDIA PLYWOODS LIMITED v. STATE
OF TAMIL NADU
Purchase tax:
The levy of purchase tax under section 9
of the Haryana General Sales tax Act, 1973
CASC Bulletin, March 2015
if raw material is purchased in the State
and used in manufacture of goods which
are sent out from the State other than by
way of inter-State sale or export, is valid.
[2013] 64 VST 456 (P&H) MOHTA
ELECTRO STEEL LIMITED AND
ANOTHER v. STATE OF HARYANA
AND ANOTHER
Check Post:
Since the dealer had no objection to
furnishing a bank guarantee for the
Compounding Fee demanded without
prejudice to the dealer’s right of revision
before the authority concerned the court
directed the dealer to pay the tax demand
and, without prejudice to the dealer’s right
to file a revision before the competent
authority, to furnish bank guarantee the
compounding fee demanded by the
Deputy Commercial Tax Officer. Upon
compliance with these conditions, the
Deputy Commercial Tax Officer was to
release the goods detained immediately.
[2013J 64 VST 458 (Mad) BRIDGESTONE
INDIA
PVT.
LTD.
DEPUTY
COMMERCIAL
TAX
OFFICER,
PATTANUR
CHECK-POST,
VILLVPURAM DISTRICT
Limitation:
The power for issuing notice for
reassessment is governed by the provision
existing on the date the power is to be
exercised. When the officer takes recourse
23
to the proceedings for reassessment and
issues notice, it has to be within the period
of limitation prescribed under the
provision at the time the authority seeks
to exercise power conferred by the statute.
[2013] 64 VST 510(Raj) ASSISTANT
COMMERCIAL TAXES OFFICER, SRI
GANGANAGAR, v. EAGLE RUBBER
INDUSTRIES
Forms:
The dispute raised in these appeals being
confined to exemption claimed in respect
of inter-State sales turnover effected in
respect of turnover not supported by
production of C or D forms, the decision
would not in any way avoid requirement
of production of C or D forms in respect of
sales effected in favour of registered
dealers and Government in terms
of the amended provisions.
[2013] 64 VST 519 (Karn) ADESHWAR
GRANITES PVT. LTD. v. ADDITIONAL
COMMISSIONER OF COMMERCIAL
TAXES, ZONE-II, BANGALORE AND
ANOTHER
Penalty:
Pursuant to notice, the alleged offence
committed by the owner of the vehicle in
question had been compounded by the
Department under section 68 of the Act and
after the order of composition, separate
notice under section 76(9) of the Act to
the driver of the vehicle for levy of penalty
on the driver of the vehicle was not
sustainable.
24
[2013] 64 VST 538 (Raj) ASSISTANT
COMMERCIAL TAXES OFFICER,
ANTI-EVASION, ZONE-I, JAIPUR v.
IQBAL KHAN
Transit pass:
When the imported goods were transferred
to Pondicherry, it was detained for absence
of a transit pass. When it was contended
that, in view of section 88(3)(i) of the Tamil
Nadu Value Added Tax Act, 2006, the
clarification issued by the Commissioner
of Commercial Taxes, Chennai, in Circular
Acts Cell-IV /69980/2000 dated November
23, 2000 would apply, the court held that
section 70(2)(a) of the Tamil Nadu Value
Added Tax Act, 2006 clearly provides that
when any goods specified in the Sixth
Schedule are sold or consigned or
transferred by any goods vehicle to another
State from any place within the State, the
seller or consignor or transferor of the
goods shall obtain a transit pass in the
prescribed form and in the prescribed
manner, from the assessing authority and
produce it at the time of crossing the checkpost. Admittedly, the goods were
transferred from one State to another State.
Hence, according to section 70(2) of the
Tamil Nadu Value Added Tax Act, 2006,
the dealer had to necessarily obtain a
transit pass in the prescribed form and in
the prescribed manner. In such view of the
matter, the plea of the dealer that the
Circular Act Cell-IV/69980/2000 dated
November 23, 2000 issued by the
Commissioner would apply, was not
CASC Bulletin, March 2015
tenable as it would have no force in law
after the coming into force of the 2006 Act.
[2013] 64 VST 541 (Mad) SHIV A
POLYMERS v. DEPUTY COMMERCIAL
TAX OFFICER, KANDAMANGALAM
CHECK-POST,
VILLUPURAM
DISTRICT
Works contract:
Taxing the sale of goods element in a works
contract under article 366(29A)(b) read
with entry 54 of List II of the Seventh
Schedule to the Constitution is permissible
even after incorporation of the goods in the
contract provided tax is directed to the
value of goods and does not purport to tax
the transfer of immovable property. The
value of the goods which can constitute the
measure for the levy of the tax has to be
the value of the goods at the time of
incorporation of the goods in the works
even though the property passes as
between the developer and the flat
purchaser after incorporation of goods.
[2013] 65 VST 1 (SC) LARSEN AND
TOUBRO UMITED AND ANOTHER v.
STATE OF KARNATAKA AND
ANOTHER
(The author is a Chennai based Chartered
Accountant. He can be reached at vvsampat@
yahoo.com)
CPC-TDS Defaulters Data
F. No. 380/02/2014-IT(B)
5th February, 2015
Subject : Measures for Revenue Augmentation - data uploaded by CPC-TDS, Vaishali
action thereon
The CPC -TDS, Vaishali has uploaded data of various categories of TDS defaulters on
the AOs Portal (TRACES website) for action by the TDS field formations, details of
same are as below:
(i)
Short payment (non-Government) above Rs 1 Lakh
(ii) Short payment (Corporates) above Rs 10 Lakh
(iii) Top 500 cases for each CIT(TDS) charge where the interest u/s 201 (1A) is
outstanding
Data includes list of deductors - paying TDS belatedly - ensuring that their TDS
payments for FY 2014-15 deposited by 25.03.2015.
Besides the CPC-TDS has reported - on the AOs portal huge amount of demand raised
manually has been uploaded - efforts to collect the demand so raised should be made.
CASC Bulletin, March 2015
25
DIRECT TAX-OVERVIEW ON RECENT JUDICIAL PRECEDENTS
A. Capital Gains
Sale of Hospital land and building by the
firm but held in the name of partners in
their individual capacity, shall be treated
as Capital Gains for the firm. Further the
benefit of Section 54EC exemption shall
be available to the firm despite the
CA. K. SUDARSHAN, CHENNAI
investment being made in the partner’s
individual capacity.
Chakrabarty Medical Centre vs. TRO (ITAT
Pune) ITA No. 2277/PN/2012
Facts
The assessee firm engaged in the running
a hospital, being the plot of land on which
the hospital was built was brought in by
the partners as their share of capital into
The
Assessing
officer
and
the
Commissioner of Income Tax (Appeals)
held that the sale of hospital land and
building was taxable as short term capital
gains in the hands of the firm as the
property belonged to the firm and u/s
45(4) as this property was distributed
amongst the partners.
Held
the partnership. The said land and building
• The ITAT relying on the Hon’ble
and the assets of the firm were sold. The
Allahabad High Court decision in
assessee firm had claimed depreciation on
the case of KD Pandey 108 ITR 214,
such building of the hospital. The partners
held that no registered requirement
of the firm declared the capital gain on the
is necessary when a partner
sale of the property in their individual
contributes
capacity and also claimed the benefit of
property as his share of the
investment under section 54 and 54EC of
partnership because of section 14 of
the Act.
the Partnership Act.
26
his
immovable
CASC Bulletin, March 2015
• Therefore once it is brought in as
capital contribution, it is said to be
the firm’s asset and therefore it will
be liable to capital gains as rightly
held by the AO and CIT (A).
Expro Gulf Ltd. v. Union of India {Uttarakhand
High Court} [2015] 53 taxmann.com 413
Facts
Section 94A, anti-avoidance provision
• However, the ITAT Relying on
under the Income tax Act, provides powers
the decision in the case of DIT
to the Central Government to specify by
(International Taxation) Vs. Mrs.
notification a country or territory as a
Jennifer Bhide 252 CTR 444
notified jurisdictional area, where there is
(Karnataka High Court),held that the
lack of effective exchange of information
assessee firm shall be eligible to get
with that country or territory. The Central
the benefit under Section 54EC even
Government by virtue of notification dated
though an investment in respect of
01 November 2013, notified Cyprus as a
capital gain is made by the two
notified jurisdictional area due to lack of
partners individually in the notified
exchange of information flowing from the
securities.
Cyprus. It is imperative to note that India
• Further, it also relied on the legal
principles laid down by the Hon’ble
Bombay High Court in the case of
ACE Builders (P) Ltd 195 CTR 1,
wherein even though the assessee
firm has claimed the depreciation
on the hospital building but benefit
of Section 54EC can be given.
has entered into an international tax treaty
with Cyprus.
The assessee/petitioner has filed a writ
petition before the Hon’ble Uttarakhand
High Court mainly on the ground that the
“Cyprus” should not have been declared
as notified jurisdictional area under Section
94A in lieu of the international tax treaty
B. International Taxation
entered between India and Cyprus,
i) Despite the existence of Double Tax
specifically carries out the fact that the
Avoidance Agreement with Cyprus,
parties to the agreement are bound to
declaring
exchange information to the other
Cyprus
as
wherein Article 28 of the tax treaty
a
notified
jurisdictional area under Section 94-A is
respective counter party.
constitutionally valid.
CASC Bulletin, March 2015
27
Held
• The purpose of the Central
Government for declaring Cyprus
as a notified jurisdiction area is on
account of the fact that Cyprus was
not cooperating in exchanging
information despite repeated
requests.
• The Hon’ble High Court, dismissed
the petition on the ground that it
shall not while exercising the writ
jurisdiction under Article 226 of the
Constitution of India, proceed to
look into as to whether information
sought by the Indian Authorities
were ever declined by the
Government of Cyprus or
Government of Cyprus is ready and
willing to supply the information
sought by the Indian Authorities.
Moreover, there seems to be no
valid reason to disbelieve the
satisfaction so recorded by the
Indian Authorities.
• Accordingly the notification stands
valid.
ii) Incidental payment for Installation
and commissioning services to nonresidents at the time of import of plant,
equipment and machinery are not liable
to tax as “Fees for technical services” and
28
accordingly no need for withholding of
taxes. Also once the payments are not
taxable under the tax treaties, there is no
requirement to look into the provisions
of the income tax act for a more beneficial
treatment.
Birla Corporation Limited v. ACIT [Jabalpur
ITAT] [2015] 53 taxmann.com 1
Facts
The assessee has made foreign remittances
without deducting tax at source. These
remittances according to the assessee were
for imports of plant, equipment and
machinery. The assessee has not deducted
TDS on the grounds that the income
embedded in these payments was not
chargeable to tax in India as these
payments were for imports of plant,
equipment and machinery. It was also
contended that as the payments were made
for purchases, which did not give rise to
taxability of related income in India, hence
there was no requirement of tax
withholding for these payments.
The Assessing officer did not agree to this
contention of the assessee, as according to
him the payment was not only for
purchases but also for incidental services
in connection with installation and
commissioning of these machines, and
accordingly, the assessee was required to
CASC Bulletin, March 2015
deduct tax at source from these payments.
CIT (Appeals) upheld the view of the AO.
Held
• The ITAT looked into the taxability
of the incidental services i.e.
commissioning and installation
services same from the tax treaty
perspective and accordingly if the
same is not taxable under the
DTAA, then even if the sum is
taxable under the Act, it is of no
relevance.
• Further, the ITAT held that services
in the nature of installation and
commissioning would, de facto,
amount to ‘technical services’.
There is an overlapping effect, such
that, there is a general provision [of
Fees for Technical Services (FTS)/
Fees for Included Services (FIS)] for
taxability of technical services and
a specific provision (of installation
PE) for taxability of technical
services in the nature of
construction, installation and
supervision activities
• The ITAT relied on Supreme Court
judgment in the case of India
fisheries (P) Limited [57 ITR 331]and
applying the principles of
generalibusspecialiaDerogant, where
CASC Bulletin, March 2015
specific provision shall override
general provision.Accordingly it
held that the provisions of taxability
as FTS/FIS will not come into play
in such cases.
• It held that these payments shall be
taxable under Article 7 read with
Article 5 of respective tax treaties,
provided the day’s threshold
criteria specified in relevant tax
treaties gets satisfied. Since in the
given same, the criteria is not
satisfied, the same will not trigger
taxation under the respective
treaties. However the ITAT has
given another opportunity to the
AO to verify the existence of PE in
India for the non-residents and
accordingly arrive at a conclusion.
Author’s note: This is an extremely well
analyzed, articulated Judgement factoring
various legal principles and interpretation.
Recommended read for all professionals.
C. TDS
Section 234E provision is constitutionally
valid.
Rashmikant Kundalia v. Union of India
{Bombay High Court} [2015] 54 taxmann.com
200 (Bombay)
29
under section 234E is really nothing
Facts
Section 234E was introduced with effect 1
but a collection in the guise of a tax.
July 2012, wherein a fee levied on a person
• Further cannot agree with the
who fails to deliver or cause to be delivered
argument of the Petitioners that
the TDS return/statements within the
simply because no remedy of
prescribed time in sub-section (3) of section
appeal is provided for, the
200. The fee prescribed is Rs.200/- for
provisions of section 234E are
every day during which the failure
onerous.
continues.
• The court must, make every effort
A writ petition under Article 226 of the
to uphold the Constitutional
Constitution was filed, challenging the
validity of a statute,even if that
validity of Section 234E on the grounds that
requires giving the statutory
the fee levied can only be levied only in
provision a strained meaning, or
the event the Government was providing
narrower or widermeaning, than
any service or any special service. It cannot
what appears on the face of it. It is
be collected for any dis-service or default.
only when all efforts to do so fail
should the court declare a statute
Held
to be unconstitutional.
• The TDS return/statements are
regularized upon payment of the
fee as set out in section 234E. This
is nothing but a privilege and a
special service to the deductor
allowing him to file the TDS return/
statements beyond the time
prescribed by the Act and/or the
Rules.
• Therefore it held that Section 234E
does not violate any provision of
the Constitution and therefore intra
vires, Constitution of India.
D. Trust Taxation
If the primary and dominant objective of
the institution is not to earn profits, but
to do charity through advancement of an
• Court therefore cannot agree with
object of general public utility, then such
the argument of the Petitioners that
an institution shall be regarded as
the fee that is sought to be collected
established for charitable purposes.
30
CASC Bulletin, March 2015
India Trade Promotion Organization v.
withdrawing the exemption granted under
Director General of Income tax (Exemptions)
10(23C)(iv) to the assessee.
{Delhi High Court}[2015] 53 taxmann.com
404 (Delhi)
Facts
Held
• As the dominant and prime activity
of the assessee is for charitable
The assessee was engaged in socially and
purpose and not for earning any
economically desirableactivities relating to
profits, exemption under Section
the promotion of Indian trade. The assessee
10(23C)(iv) shall be approved.
was availing exemption under Section
10(23C)(iv). The assessee had huge
surpluses in banks, it had given its space
for rent during Trade Fairs and Exhibitions,
it hadreceived income by way of sale of
tickets and income from food and beverage
outlets in PragatiMaidan, Delhi.
• Further if the activity involving
trade, commerce or business is
incidental to the objective of the
trust and if the objective of the trust
is primarily for charitable purpose,
then the dominant activity has to be
looked into. Therefore the trust
On this background, the assessing officer
shall be regarded as set up for
withdrew the exemption granted under
charitable purpose.
Section 10(23C)(iv) on the ground that the
main object ofthe petitioner being
advancement of objects of general public
utility, the proviso to Section2(15), which
had been introduced with effect from
01.04.2009 was applicable. The assessee
filed a writ before the Hon’ble Delhi High
Court contending the constitutional
validity of the first proviso to Section 2(15)
under Article 14 and also to quash the
order passed by the assessing officer for
CASC Bulletin, March 2015
• With regards to the constitutional
validity, the Court applying the
doctrine of ‘reading down’, held
that the first proviso to Section 2(15)
has to be read along with Section
10(23C)(iv)and hence it cannot be
held unconstitutional .
(The author is a Chennai based tax professional
and can be reached at [email protected])
31
CASE STUDIES ON SPECIFIC ANTI - AVOIDANCE
RULES IN DIRECT TAXATION
- CA. Gautam Nayak, Mumbai
1. Dividend
Stripping
Stripping
&
Bonus
Amit Dalal has earned long term capital
gains of Rs.2.50 crore on sale of an
immovable property during the
previous year relevant to AY 2015-16,
the sale having taken place in April
2014.
He has also carried out the following
transactions during the year:
i.
32
He earlier held 2000 shares of
Infosys Ltd acquired at a cost of
Rs.400 per share 5 years before. He
has sold these shares on 22.9.2014
at Rs.4,000 per share. He has
purchased 4000 shares of Infosys
Ltd on 30.9.2014 for Rs.4,200 each,
his total cost being Rs.1.68 crore,
just before the shares became exbonus on 2.10.2014. After receiving
4000 bonus shares, he has sold 4000
shares for Rs.1,950 each on
20.10.2014, the total sale price being
Rs.0.78
crore.
He
has
simultaneously sold 4000 shares of
Infosys Ltd in the futures market on
3.10.2014, and intends to carry
forward such futures to hedge his
balance holding of 4000 shares of
Infosys Ltd. He intends to claim a
short term capital loss on sale of
shares of Infosys Ltd of Rs.0.90
crore against his long term capital
gains on sale of property.
ii. He has acquired 545,389 units of JM
Arbitrage Advantage Fund
(Growth), an equity oriented
scheme which had an annual bonus
option, at an NAV of Rs.18.34 per
unit on 25 th July 2014, the total
investment being Rs.1 crore. On
29.10.2014, the Fund announced
85% bonus units, and he received
463,581 bonus units on that date. On
30.10.2014, he redeemed 545,389
units at Rs.10.16 per unit, for a total
of Rs.55,41,909. He intends to hold
on to the bonus units till 28.10.2015,
and claim a loss of Rs.44,58,091 on
sale of the units during AY 201516, which he will set off against long
term capital gains on sale of
property.
iii. He invested Rs.4.40 crore in HDFC
Liquid Fund – Monthly Dividend
Payout option on 15.4.2014 at an
NAV of Rs.11.00 per unit. He
received the following income
distributions from the Fund:
CASC Bulletin, March 2015
30.04.2014
31.05.2014
30.06.2014
31.07.2014
31.08.2014
30.09.2014
31.10.2014
Rs. 23,000
Rs. 23,250
Rs. 22,750
Rs. 23,300
Rs. 23,400
Rs. 22,800
Rs. 23,300
He has redeemed the units on
15.11.2014 at an NAV of Rs.10.75 per
unit, the redemption amount being
Rs.4.30 crore. He intends to set off the
short term loss of Rs.10 lakh against his
long term capital gain on sale of
property, and claim exemption for the
income distribution received of
Rs.1,61,800 u/s 10(35).
He seeks your advice on the allowability
of the claim and set off of the short term
capital losses against his long term capital
gains on sale of the property.
Relevant Sections & References:
Sections 94(7) & 94(8)
Section 55(2)(aa)
2. Transfer of Assets without Transfer of
Income – Subscription to Social
Venture Funds
A Department of the Government of
UK (UKD) engaged in development
activities around the world, has
invested Rs.300 crore (70% of the
capital) in a social venture fund, along
with an Indian financial institution and
some banks and insurance companies.
CASC Bulletin, March 2015
The social venture fund has been set up
under an umbrella trust registered with
SEBI as an Alternative Investment
Fund (AIF) in the sub-category of Social
Venture Fund under Category I AIF.
The trust deed does not mention the
names of the investors or their ratio of
sharing the income of the Fund.
However, the Private Placement
Memorandum and the Contribution
Agreement specify that each investor
will get proportionate share of income
of the Fund in the ratio of its
contribution to the total contributions
by the Contributors. In accordance with
SEBI Regulations, 75% of the investors
by value have the right to seek winding
up of the Fund at any point of time, in
which case the assets of the Fund will
either be liquidated and monies
distributed amongst the Contributors
pro rata, or assets will be distributed
pro rata amongst the Contributors.
UKD has received conflicting advice
regarding its taxation in relation to
income earned by it through the Fund.
While one advisor has advised that
UKD would have no tax liability with
the entire tax liability on the income
having to be borne by the Fund, based
on a recent CBDT Circular No 13 of
2014 dated 28 th July 2014, the tax
advisor to the Fund has advised the
Fund that the taxes on its income have
to be borne by the Contributors instead
of by the Fund, since the Contributors
have made a revocable transfer to the
33
Fund. The Fund has accordingly
decided not to pay taxes on its income,
but has advised each Contributor to
pay the tax on its proportionate share.
UKD seeks your advice for some clarity
on the matter.
Relevant Sections & References:
Section 10(23FB)
Sections 61 to 63
CBDT Circular No 13 of 2014 dated
28.7.2014
3. Remuneration to Spouse from LLP
Mr B C Srinivasan, an NRI who has
returned to India from the USA in 2012,
has invested an amount of Rs.10 crore
from his joint bank account with his
wife, in tax-free bonds in the joint
names of his wife and himself. He
claims that this amount belongs to his
wife for income tax purposes.
According to him, this represents his
wife’s half of the wealth which they
held when he was carrying on a
business in the USA, where he was
filing joint income tax returns. His wife
was also involved in his business of
mobile apps. While he conceptualized,
designed and coded the apps, his wife
was assisting by purchasing required
software and hardware, managing the
accounts, billing and recovery from the
play stores through whom the apps
were marketed, as well as attending to
compliance with VAT and other tax
laws, besides providing ideas for new
apps.
34
Mr Srinivasan has also continued the
business in India, by setting up an LLP,
with him and his wife as the two
working partners, the entire capital of
Rs.5 crore being contributed by Mr
Srinivasan, bearing interest at 12% p.a.
As per the LLP agreement, the partners
are entitled to the maximum
remuneration allowable as a deduction
under section 40(b) of the Income Tax
Act, 1961, with remuneration and
profits being shared equally.
Mrs. Srinivasan is a commerce
graduate from Annamalai University,
while Mr. Srinivasan is an engineer
from IIT, Chennai. The status of both
is that of Resident but Not Ordinarily
Resident in India for the current year.
Mrs. Srinivasan has income from taxfree bonds of Rs.80 lakh, and other
interest income of Rs.15 lakh (from
bank deposits created out of interest
earned on tax free bonds), besides
remuneration and share of profit from
the firm. Mr. Srinivasan has bank
interest income of Rs.10 lakh, besides
interest income from the LLP of Rs.60
lakh, interest income in the USA of USD
12,000 and remuneration and share of
profit from the LLP.
The Srinivasans seek your advice in
respect of taxability of their incomes,
and also as to whether Mr Srinivasan
should consider waiver of interest on
the capital from the LLP.
CASC Bulletin, March 2015
Relevant Sections & References:
Section 64(1)(ii) & (iv), read with
explanations 1, 2 & 3
4. Assignment of Lease Rentals
V Suryanarayana, a lawyer who is
subject to tax audit, owns a building in
Annanagar, which has been let out to
Citibank at a monthly rental of Rs. 25
lakh for 5 years. 3 years of the lease are
yet to run, and he discovers that the
building is in need of urgent repairs,
which is likely to cost about Rs.4 crore.
He approaches HDFC Ltd for a loan for
such repairs. HDFC gives him an
option of either taking a two year loan
by mortgage of the property and
pledge of rentals receivable, or
alternatively, of assigning the next 20
months lease rentals to HDFC for an
amount of Rs.4 crore.
Since the second alternative seems to
involve a lower cost, Suryanarayana is
inclined to prefer assignment of the
receivables. He however seeks your
advice as to the tax implications of such
a transaction.
Reference
Section 60, Section 24(b), Section 194A
5. Carry Forward of losses on merger of
foreign subsidiary with parent
Datamind India Pvt Ltd is a wholly
owned subsidiary of Datamind
CASC Bulletin, March 2015
Mauritius Ltd (a Mauritius company),
which in turn is wholly owned by
Datamind Singapore Pte Ltd (a
Singapore company), itself a wholly
owned subsidiary of Datamind Inc.,
USA.
Datamind India has incurred tax losses
of Rs.2.52 crore in 2011-12, Rs.1.46 crore
in 2012-13, and made a tax profit of
Rs.0.25 crore in 2013-14. It expects to
earn profits of Rs.3 crore for the year
2014-15.
Datamind Mauritius Ltd has been
merged with Datamind Singapore Pte
Ltd with effect from 1 st April 2014,
whereby all the shares of Datamind
Mauritius Ltd held by Datamind
Singapore Pte Ltd have been cancelled,
and the shares of Datamind India are
now directly held by Datamind
Singapore Pte Ltd.
Another company, Clouddata India
Pvt Ltd, was wholly owned by
Datamind Singapore Pvt Ltd since
2002. In April 2012, 75% of its equity
shares were transferred to Datamind
Mauritius Pvt Ltd. It incurred tax losses
of Rs.4.30 crore in 2010-11, Rs.2.38 crore
in 2011-12, Rs. 1.04 core in 2012-13 and
Rs. 0.42 crore in 2013-14. It expects to
make a profit of about Rs.2 crore in
2014-15.
35
Datamind India and Clouddata India
seek your advice as to their tax liability
(other than MAT) for the current year.
Share Premium
Account
Sections & References:
(Subsidy Received) Rs.
Section 79
Section 2(1B)
Revaluation Reserve Rs. 2,00,00,000
6. Deemed Dividend – S.2(22)(e)
India Forgings Pvt Ltd is a
manufacturing company, whose shares
are held by two brothers, P
Ramaswamy and P Rangachary, who
each hold 31% of the equity share
capital. Mrs Ramaswamy and Mrs
Rangachary, each hold 9.5% of the
share capital, on behalf of Ramaswamy
Family Trust and Rangachary Family
Trust respectively, of which each of
them is a trustee. Each trust is a
discretionary trust having 3
beneficiaries consisting of the husband,
wife and son, who are also the trustees
of each of the trusts. Their respective
sons, P Raman and P Rangan each hold
9.5% of the equity share capital of the
company. The Company is managed
by the 2 Managing directors,
Ramaswamy & Rangachary, and the
two executive directors, Raman and
Rangan.
As on 1st April 2014, the company’s net
worth was as under:
Equity Share Capital Rs.1,00,00,000
(including bonus shares of Rs.50 lakh
issued out of General Reserve)
36
Rs.
50,00,000
Capital Reserve Account
General Reserve
25,00,000
Rs.
20,00,000
Rs.
10,00,000
Profit & Loss
Account
Rs. 4,05,00,000
On 1st July 2014, the company has given
loans of Rs.1 crore each to the two family
trusts and on 20th July 2014, a loan of Rs.2
crore to Ramrang, a partnership firm,
where Raman and Rangan are equal
partners, the loans given totalling Rs.4
crore. The loans bear an interest of 12% p.a.
The company has also given a travel
advance of Rs.25 lakh to Ramaswamy, for
a trip to Europe to attend a trade fair in
February on behalf of the company. As
managing director in charge of the factory,
Rs. 30 lakh of the cash of the company is
kept with Rangachary in safe custody to
meet any urgent expenditure. This cash is
kept in his residence, which is adjacent to
the factory.
The shareholders seek your advice
regarding the tax implications of such loans
and advances, and cash kept with the
managing director.
Sections & References:
Section 2(22)(e)
CASC Bulletin, March 2015
ARTICLE ON LABOUR LAWS FOR CASC 16TH RRC
COMPLIED BY Mr. S. S. MADHAVAN, Advocate
V&M Associates (Advocates & Solicitors) Chennai
APPLICABILITY OF LABOUR LAWS
IN THE PRESENT SCENARIO
Employees’ State Insurance Act, 1948
Applicability of the Act and Regulation is
extended to area-wise employing 10 or
more persons drawing Gross salary up
to Rs.15,000/- per month engaged either
directly or through Contractor is covered
under the Scheme. It has been extended
upon shops, hotels, restaurants, motor
transport undertakings, equipment
maintenance staff in the hospitals,
including educational institutions.
Employees’ Provident Fund Act, 1952
The Act is applicable to every
establishment / factory in which having
20 or more persons are employed. This
includes the casual, trainee, stipendiary,
temporary employee, part time worker,
Daily wage contract working in the
premises will be covered under the
purview of the Act.
Any Establishment employing even less
than 20 persons can be covered
voluntarily under Section 1 (4) of the Act
CASC Bulletin, March 2015
Payment of Bonus Act, 1965
The Act is applicable to every factory
wherein 10 or more persons are employed
with the aid of power or An Establishment
in which 20 or more persons are employed
without the aid of power on any day
during an accounting year
Payment of Gratuity Act, 1972
The Act is applicable to every factory,
mine, Oilfield, Plantation, Port, Company,
every shop, establishment or educational
institutions employing 10 or more
employees or were employed on any day
of the preceding twelve months
Contract Labour Act, 1970
The Act is applicable to every
establishment in which 20 or more
workmen are employed or were
employed on any day of the preceding 12
months as Contract Labour. Every
Contractor who employs or who
employed on any day of the preceding
twelve months 20 or more workmen will
be covered under the CLR Act
37
Motor Transport Workers Act, 1961
The Act is applicable to every motor
transport undertaking employing 5 or
more motor transport workers or by a
notification issued by the state
Government.
Maternity Benefit Act, 1961
The Act is applicable to every
establishment being a factory, mine or
plantation and to every establishment
wherein persons are employed directly or
through contractor. Women indulging
temporary or unmarried are eligible for
maternity benefit. She might have worked
for 80 days in the 12 months immediately
preceding the date of her expected
delivery for claiming the Maternity
benefit.
Industrial Employment (Standing
Orders) Act, 1946
It applies to every industrial establishment
in Tamil Nadu in which less than fifty
workers and not less than twenty workers
are employed or were employed on any
day of the preceding twelve months.
Inter-State Migrant workmen Act, 1979
It applies to every establishment in which
five or more inter-state migrant workmen
38
are employed or who were employed on
any day of the preceding twelve months.
It applies to every contractor who
employs or who employed five or more
inter-state migrant workmen on any day
of the preceding twelve months.
Shops and Commercial Establishment
Act, 1948
It is applicable to all commercial
Establishments in Tamil Nadu having
even one employee. In Tamil Nadu, there
is no Registration of Establishment
specified under the Act. Instead, under the
Tamil Nadu National and Festival
Holiday Rules, every establishment
should obtain the proceeding number
from the concern Labour office in Form –
III
Factories Act, 1948
Any premises whereon 10 or more
workers are working, or were working on
any day of the preceding twelve months,
in any part of which a manufacturing
process is being carried on with the aid of
power or whereon twenty or more
workers are working, or were working on
any day of the preceding twelve months
in any part of which a manufacturing
process is being carried on without the aid
of power is deemed to be Factory under
the Act as per Section 2 (ii).
CASC Bulletin, March 2015
RECENT NEWS ON LABOUR LAWS
ESTABLISHMENTS
WITH
10
EMPLOYEES LIKELY TO BE COVERED
UNDER PROVIDENT FUND:
The government is considering a
reduction in the ceiling on the number of
employees in an establishment eligible to
be covered under the Employees’
Provident Fund Organisation (EPFO)
from 20 to 10, a move that is expected to
bring another 50 lakh employees under
the EPF net.
A proposal to cover all companies having
more than 10 employees under the
Employees’ Provident Fund (EPF) scheme
is under consideration of the Government.
“A proposal to reduce threshold limit for
coverage under the Employees’ Provident
Funds and Miscellaneous Provisions Act,
1952 from 20 to 10 employees is included
in the proposed comprehensive
amendment to the Act”, Minister for
Labour and Employment Bandaru
Dattatreya informed in Lok Sabha.
EPFO MAY HELP MEMBERS BUY
HOMES:
The Employees Provident Fund
Organisation (EPFO) may help subscribers
to buy homes through a possible range of
CASC Bulletin, March 2015
options that include facilitating loans and
partnering with state-owned property
developers.
The 19th December, 2014 meeting of
EPFO’s central board of trustees
deliberated on providing low-cost housing
facility to its subscribers.
The EPFO has received a proposal note
from the Prime Minister’s Office
suggesting that 15% of its corpus should
be invested towards loans for low-cost
housing. It could generate a credit flow of
Rs.70, 000 crore towards home loans for
low-cost housing, which, in turn, will
create 350,000 additional low-cost homes,
the EPFO has said in a note.
EPFO EASES NORMS ON DEPOSITS
IN GOVT BANKS:
The Employees Provident Fund
Organisation’s trustees relaxed the norms
for parking funds in bank deposits, And,
referred the issue of investing a portion of
its funds into the equity market and
housing sector to a committee.
The trustees also approved a proposal to
allow all nationalised banks to handle its
PF collections. At present, SBI is the only
commercial bank so entitled.
39
Meanwhile, the Union finance ministry
has approved the trustees’ decision to give
a 8.75 per cent return to the 50 million
subscribers of the retirement fund body
for 2014-15.
(1) of section 7D of the Employees’
The Central Board of Trustees (CBT),
highest decision making body of EPFO,
also decided to ease the norms on bad
debts, to deposit its funds in term deposits
of the public sector lenders. This would
ensure entities such as State Bank of India
(SBI) remain eligible for this. It would
make 20 banks eligible for taking fixed
deposits (FDs) from EPFO, against eight
at present.
Territory of Karnataka, Tamil Nadu,
EPFO LAUNCHES CAMPAIGN FOR
ISSUE OF UAN:
India.
Employees’ Provident Fund Organisation
(EPFO) has launched a campaign for issue
of Universal Account Number (UAN) to
its all subscribers. For this purpose, all
employers are required to upload Know
Your Customer (KYC) details in respect of
all of their employees. The bank account
number is mandatory KYC for all
subscribers.
EPF APPELLATE TRIBUNAL SET UP
IN BENGALURU FOR SOUTHERN
STATES:
The Ministry of Labour and Employment
by exercising its powers under sub section
40
Provident Funds & Misc. Provisions Act,
1952 by its Notification dated 7.11.2014 EPF Appellate Tribunal will be set up in
Bengaluru for the States and Union
Kerala, Andhra Pradesh, Telangana and
Goa, and the Union Territories of
Andaman and Nicobar Islands and
Puducherry.
Prior to above there was only one
Presiding Officer for the EPF Appellate
Tribunal functioning at Scope Minar,
Laxmi Nagar in Delhi for the whole of
PLEASE NOTE:
The decision of the Government by setting
up more EPFA Tribunal will rein the
EPFO authorities while exercising powers
of a Judge in passing arbitrary orders
resulting into harassment of the
employers. Now, it will be easier for the
aggrieved persons to seek relief without
travelling all the way to Delhi. Hopefully,
similar appointments will be made in
other regions also. However, the condition
for 75% pre-deposit of the determined
amount for entertainment of an appeal (as
per section 7-Q of the Employees’
CASC Bulletin, March 2015
Provident Funds & Miscellaneous
Provisions Act) remains a deterrent for the
aggrieved persons hence it needs to be
either removed or at least softened.
PERSONAL PRESENCE OF EMPLOYER
& RECORD FOR PAST PERIOD
CANNOT BE INSISTED BY EPF
DEPARTMENT
FOR
SEEKING
ONLINE
REGISTRATION
OF
ESTABLISHMENT:
It will be recollected that the EPFO has
extended the facility for applying online
code number on 30.6.2014. By circular
No.C-III/Compliance-2001/Cir/E.I/24045
dated 20.11.2014 instructions have been
issued by the Head Office of the
Employees’ Provident Fund Organisation
advising the Field Functionaries not to
direct Establishments who have registered
online for PF Code to appear personally
and to produce all original records for
periods beyond 15 to 20 years.
of limitation for production of records as
fixed in ESI Act w.e.f. 24.5.2010.
EPF PORTABILITY, SINGLE-WINDOW
PORTAL ISSUED:
Prime Minister Narendra Modi has
launched a number of initiatives on labour
reforms and ease of doing business, on
16.10.2014. He dedicated schemes such as
portability through a universal account
number (UAN) for Employees’ Provident
Fund subscribers, a single window portal
to enable doing business, and a Labour
Inspection Scheme in the Central sphere.
He said all these schemes were already in
place and it was only after their
implementation that he was launching
them formally.
EPF OFFICE’S NEW FACILITY TO
TRANSFER PROVIDENT FUND
MONEY OF FOREIGN EMPLOYEES TO
THEIR HOME COUNTRY ACCOUNTS
DIRECTLY:
PLEASE NOTE:
The language of the above mentioned
circular refers to period even beyond 1520 years is really shocking since it can be
construed that the EPF Authorities have
been asking for production of records
even beyond 20 years. It is high time that
the government should fix 5 years period
CASC Bulletin, March 2015
Retirement fund body EPFO has started a
new facility to transfer provident funds of
foreign employees to bank accounts in
their own countries. The facility will help
international workers to avoid opening of
bank accounts in India for settling their PF
dues.
41
GOVT COMMITTED TO MORE
LABOUR REFORMS: MINISTER:
The Government is committed to go
ahead with further labour law reforms,
Minister of State for Labour Bandaru
Dattatreya said on 11.11.2014 even as
trade unions are opposing such measures.
“The Government is totally committed to
reform the labour sector. We need to bring
in changes in the labour laws in a manner
that they are in the interest of all the
stakeholders – the industry, employer and
employees”, Dattatreya, who recently
took charge as the Labour and
Employment Minister, told reporters.
Central trade unions have called for a
nationwide protest on December 5
BILL TO AMEND APPRENTICES ACT
PASSED BY BOTH THE HOUSES
A bill seeking to remove imprisonment as
punishment for violating the provisions of
the Apprentices Act, 1961, and allowing
employers to fix the hours of work and
leave as per their discretion or policy was
passed by the Rajya Sabha on 26.11.2014.
The Lok Sabha has also passed the Bill on
17.12.2014.The Apprentices (Amendment)
Bill, 2014 was passed by a voice vote, with
a majority of speakers favouring the
42
legislation, saying it was aimed at
enhancing the skills of youth and making
them employable.
THE LABOUR LAWS (EXEMPTION
FROM FURNISHING RETURNS AND
MAINTAINING REGISTERS BY
CERTAIN
ESTABLISHMENTS)
AMENDMENT BILL, 2014:
The Government has succeeded in setting
one of the laws in its labour laws reform
kitty, the Labour Laws (Exemption from
Furnishing Returns and Maintaining
Registers by Certain Establishments).
Amendment Bill, 2011, The Amendments
have been passed by the Parliament and
received the assent of the President on
9.12.2014.
The Bill increases the number of laws
under which units and small
establishments will be exempt from
maintaining registers and filings returns.
It also redefines “small establishment” to
mean a unit employing between 10-40
people. (The original Act capped the limit
at 19 workers).
(The author is a Chennai based Advocate. He
can be reached at madhavs@ vmlegal
associates.com)
CASC Bulletin, March 2015
[To be published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (i)]
Government of India
Ministry of Corporate Affairs
Notification
New Delhi, dated 16 th February2015
G.S.R …………(E).- In exercise of the powers conferred by section 133 read with section
469 of the Companies Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the
Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the National
Advisory Committee on Accounting Standards, hereby makes the following rules, namely:1. Short title and commencement.- (1) These rules may be called the Companies (Indian
Accounting Standards) Rules, 2015.
(2) They shall come into force on the 1 st day of April, 2015
2. Definitions.- (1) In these rules, unless the context otherwise requires,(a) “Accounting Standards “ means the standards of accounting, or any addendum
thereto for companies or class of companies as specified in rule 3;
(b) “Act “ means the Companies Act, 2013 (18 of 2013);
(c) “Annexure “ in relation to these rules means the Annexure containing the Indian
Accounting Standards (Ind AS) appended to these rules;
(d) “entity “ means a company as defined in claus e (20) of section 2 of the Act;
(e) “financial statements “ means financial statements as defined in clause (40) of section
2 of the Act;
(f) “net worth “ shall have the meaning assigned to it in clause (57) of section 2 of the
Act.
CASC Bulletin, March 2015
43
(2) Words and expressions used herein and not defined in these rules but defined in
the Act shall have the same meaning respectively assigned to them in the Act.
3. Applicability of Accounting Standards. - (1) The accounting standards as specified in
the Annexure to these rules to be called the Indian Accounting Standards (Ind AS)
shall be the accounting standards applicable to classes of companies specified in rule 4.
(2) The Accounting standards as specified in Annexure to the Companies (Accounting
Standards) Rules, 2006 shall be the Accounting Standards applicable to the
companies other than the classes of companies specified in rule 4.
(3) A company which follows the Indian Accounting Standards (Ind AS) specified in
Annexure to these rules in accordance with the provisions of rule 4 shall follow
such standards only.
(4) A company which follows the accounting standards specified in Annexure to the
Companies (Accounting Standards) Rules, 2006 shall comply with such standards
only and not the Standards specified in Annexure to these rules.
4. Obligation to comply with Indian Accounting Standards (Ind AS). - (1) The
Companies and their auditors shall comply with the Indian Accounting Standards
(Ind AS) specified in Annexure to these rules in preparation of their financial statements
and audit respectively, in the following manner, namely:(i) any company may comply with the Indian Accounting Standards (Ind AS) for
financial statements for accounting periods beginning on or after 1 st April, 2015,
with the comparatives for the periods ending on 31 st March, 2015, or thereafter;
(ii) the following companies shall comply with the Indian Accounting Standards (Ind
AS) for the accounting periods beginning on or after 1 st April, 2016, with the
comparatives for the periods ending on 31 st March, 2016, or thereafter, namely:(a) companies whose equity or debt securities are listed or are in the process of
being listed on any stock exchange in India or outside India and having net
worth of rupees five hundred crore or more;
44
CASC Bulletin, March 2015
(b) companies other than those covered by sub-clause (a) of clause (ii) of sub- rule
(1) and having net worth of rupees five hundred crore or more;
(c) holding, subsidiary, joint venture or associate companies of companies covered
by sub-clause (a) of clause (ii) of sub- rule (1) and sub-clause (b) of clause (ii) of
sub- rule (1) as the case may be; and
(iii)
the following companies shall comply with the Indian Accounting Standards
(Ind AS) for the accounting periods beginning on or after 1 st April, 2017, with
the comparatives for the periods ending on 31 st March, 2017, or thereafter,
namely:(a) companies whose equity or debt securities are listed or are in the process of
being listed on any stock exchange in India or outside India and having net
worth of less than rupees five hundred crore;
(b) companies other than those covered in clause (ii) of sub- rule (1) and sub-clause
(a) of clause (iii) of sub-rule (1), that is, unlisted companies having net worth of
rupees two hundred and fifty crore or more but less than rupees five hundred
crore.
(c) holding, subsidiary, joint venture or associate companies of companies covered
under sub-clause (a) of clause (iii) of sub- rule (1) and sub-clause (b) of clause
(iii) of sub- rule (1), as the case may be:
Provided that nothing in this sub-rule, except clause (i), shall apply to companies whose
securities are listed or are in the process of being listed on SME exchange as referred to in
Chapter XB or on the Institutional Trading Platform without initial public offering in
accordance with the provisions of Chapter XC of the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations,
2009.
Explanation 1. - SME Exchange shall have the same meaning as assigned to it in Chapter
XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009.
CASC Bulletin, March 2015
45
Explanation 2. - “Comparatives “shall mean comparative figures for the preceding
accounting period.
(2) For the purposes of calculation of net worth of companies under sub-rule (1), the
following principles shall apply, namely:(a) the net worth shall be calculated in accordance with the stand-alone financial
statements of the company as on 31st March, 2014 or the first audited financial
statements for accounting period which ends after that date;
(b) for companies which are not in existence on 31st March, 2014 or an existing company
falling under any of thresholds specified in sub-rule (1) for the first time after 31 st
March, 2014, the net worth shall be calculated on the basis of the first audited
financial statements ending after that date in respect of which it meets the thresholds
specified in sub-rule (1).
Explanation.- For the purposes of sub-clause (b), the companies meeting the
specified thresholds given in sub-rule (1) for the first time at the end of an accounting
year shall apply Indian Accounting Standards (Ind AS) from the immediate next
accounting year in the manner specified in sub-rule (1).
Illustration .- (i) The companies meeting threshold for the first time as on 31 st
March, 2017 shall apply Ind AS for the financial year 2017-18 onwards.
(ii) The companies meeting threshold for the first time as on 31 st March, 2018
shall apply Ind AS for the financial year 2018-19 onwards and so on.
(3) Standards in Annexure to these rules once required to be complied with in accordance
with these rules, shall apply to both stand-alone financial statements and consolidated
financial statements.
(4) Companies to which Indian Accounting Standards (Ind AS) are applicable as specified
in these rules shall prepare their first set of financial statements in accordance with the
Indian Accounting Standards (Ind AS) effective at the end of its first Indian Accounting
Standards (Ind AS) reporting period.
46
CASC Bulletin, March 2015
Explanation.- For the removal of doubts, it is hereby clarified that the companies
preparing financial statements applying the Indian Accounting Standards (Ind AS) for
the accounting period beginning on 1 st April, 2016 shall apply the Indian Accounting
Standards (Ind AS) effective for the financial year ending on 31 st March, 2017.
(5) Overseas subsidiary, associate, joint venture and other similar entities of an Indian
company may prepare its standalone financial statements in accordance with the
requirements of the specific jurisdiction:
Provided that such Indian company shall prepare its consolidated financial statements
in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or
mandatorily if it meets the criteria as specified in sub-rule (1).
(6) Indian company which is a subsidiary, associate, joint venture and other similar entities
of a foreign company shall prepare its financial statements in accordance with the
Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets
the criteria as specified in sub-rule (1).
(7) Any company opting to apply the Indian Accounting Standards (Ind AS) voluntarily
as specified in sub-rule (1) for its financial statements shall prepare its financial
statements as per the Indian Accounting Standards (Ind AS) consistently.
(8) Once the Indian Accounting Standards (Ind AS) are applied voluntarily, it shall be
irrevocable and such companies shall not be required to prepare another set of financial
statements in accordance with Accounting Standards specified in Annexure to
Companies (Accounting Standards) Rules, 2006.
(9) Once a company starts following the Indian Accounting Standards (Ind AS) either
voluntarily or mandatorily on the basis of criteria specified in sub-rule (1), it shall be
required to follow the Indian Accounting Standards (Ind AS) for all the subsequent
financial statements even if any of the criteria specified in this rule does not subsequently
apply to it.
CASC Bulletin, March 2015
47
5. Exemptions.- The insurance companies, banking companies and non-banking finance
companies shall not be required to apply Indian Accounting Standards (Ind AS) for
preparation of their financial statements either voluntarily or mandatorily as specified
in sub-rule (1) of rule 4.
[File Number 01/01/2009/CL-V(Part)]
[Ajai Das Mehrotra]
Joint Secretary to Government of India
Annexure
[See rule 3]
A. General Instruction. - (1) Indian Accounting Standards, which are specified, are intended
to be in conformity with the provisions of applicable laws. However, if due to subsequent
amendments in the law, a particular Indian Accounting Standard is found to be not in
conformity with such law, the provisions of the said law shall prevail and the financial
statements shall be prepared in conformity with such law.
(2) Indian Accounting Standards are intended to apply only to items which are material.
(3) The Indian Accounting Standards include paragraphs set in bold italic type and plain
type, which have equal authority. Paragraphs in bold italic type indicate the main
principles. An individual Indian Accounting Standard shall be read in the context of
the objective, if stated, in that Indian Accounting Standard and in accordance with
these General Instructions.
B. Indian Accounting Standards (Ind AS)
48
CASC Bulletin, March 2015
SNIPPETS OF 16th RESIDENTIAL CONFERENCE OF YOUR CASC
By CA. R. G. Rajan
The journey to the Yericaadu turned
Yercaud began on 24 th Jan 15 early
morning at Chennai Central. With the
journey booked in Shatabdi on which
refreshments are served, the organizers
thought it fit to dispense the usual masala
milk, bananas that were usually served
when the train journey started late in the
evening. The usual serving of dry fruits
pockets were missed too. This is the first
time the entire delegates undertook the
journey in the comfort of air-conditioned
class. Though the tickets were allotted in
two different coaches, with a few
cancellations,
the
organizers
accommodated everyone in the same
coach, C4 to be precise. The absence of
regular birds at the conference like
Sundararajan, R Ravi and K Ravi were
initially felt, but soon reconciled once the
journey started. In their joy of being with
the friends and their families, the
delegates did not mind the sachet coffee
and dip tea served with hot water in a
flask to be shared between the 2 or 3
occupants in a row. The breakfast
comprising of Upma, Bread, Butter and
Jam was served around 7.45 am. Though
the bread was not fresh, it was not
noticed. The serious(?) group leaders like
RGR, Navaratan tried their best to prepare
for the group discussion slated for the
later part of the day, others merrily
CASC Bulletin, March 2015
enjoyed with jokes all around which
reminded of a UKG class in a school.
Other passengers did not mind it too. The
weather was pleasant and cloudy
throughout the journey. In the journey
RGR complained that the venue
arrangement did not meet his expectations
in all the previous conferences as there
were no comb, hair oil, hair dryer and
towels kept in his room and wished at
least this conference will be a different
one.
The train reached Salem, the base
wherefrom the uphill journey started, an
hour late. Due to cloudy weather chill
encircled slowly in the journey which was
smooth with only 20 hairpin bends and
the delegates reached the venue around
1.15 pm. A nice cup of hot (or) cold tea
were served as the welcome drink. The
duo of Satya Yanmantram and
Vijayaraghavan (affectionately called
senior partner of Sundararajan Associates)
made the transition to the renovated and
refurbished rooms at the venue a smooth
affair. After a sumptuous lunch which
made delegates to ponder between the
inaugural session followed by group
discussion or a nap, many of the delegates
chose the first option. A courageous
decision indeed. The invocation song
‘Venkatachala Nilayam’, a popular
49
number, was rendered by young melody
queen of the CASC Divya Yanmantram
after which the traditional lighting of the
Kuthuvilakku
was
done
by
Thulasidharan, Ganesh Prakash, G
Subramanian, R G Rajan and J Murali.
Then the delegates dispersed for group
discussion on the technical papers.
In the meanwhile the accompanying
family members were escorted to a
walkathon to Gents Seat, a popular spot
for viewing the Salem city, which is very
near to the venue, by G Subramanian and
Sriram Seshadri (who did the duty of a
responsible father taking care of his two
sons wonderfully well)
After the group discussions the evening
bonfire session mixed with professional
and amateur singers entertained
themselves, the session was well
conducted by Kripakar, dinner was taken
and delegates went to their temporary
abode for a well deserved rest.
On the second day, a few early birds
braved the chill to have a morning walk
and then assembled to have hot tea and
coffee served at a common point. After the
breakfast, a short conducted tour was
undertaken to Boat House, Shevrayon
temple, Rajarajeswari temple, Meru
Temple and Pagoda point. Sun came out
on the second day, but the visits were
enjoyable as chill weather prevailed. After
visits lunch was taken and the technical
50
sessions started. Shri Chinnasamy
Ganesan in his usual inimitable style
explained the answers to his case studies.
This was followed by a presentation on
the Labour Law compliance by Shri
Madhavan, Advocate. His presentation
was full of practical examples. After the
session ended, a few of the conference
birds like J Murali, Sankaran, G
Subramanian, Rajendra Kumar and
Kripakar left to Chennai to attend other
social calls on the 26th Jan 15.
Third day, the Republic day saw one of
the delegates, Smt Geetha Kumar donned
the role of chief guest in flat hoisting. The
third and final technical session wherein
Shri Gautam Nayak, replied to the group
observations on his case study paper with
a lot of case law citations. His command
over the subject was stunning to say the
least.
After the technical sessions over the
regular feedback session started wherein
compliments and suggestions flowed.
(One suggestion was to have a room
without snakes came from Shashank
Sriram who sighted a small snake in his
room. No one had an idea whether it was
an intended to be a delegate).
After the lunch the journey downhill
began and the train was on time. A nice
filter coffee arranged by Salem Shri
Natarajan, one of the delegates of the
conference, was offered before the train
CASC Bulletin, March 2015
journey started. With every one
accommodated in the same coach,
delegates enjoyed (?) the evening snacks
and the dinner. The quality and taste of
the Roti made one wonder whether it was
made out of base oil! The group also a
discovered a near doctor within it.
Satyamurthy, who came prepared for any
medical emergency had a bag full of
medicines to treat variety of ailments and
the bag resembled almost a pharmacy on
train! Uttam was wondering with a near
doctor qualification, whether Satyamurthy
will invite professional disqualification on
his attempted practice of medicine along
with that of Chartered Accountancy.
Satyamurthy also undertook the
responsibility of booking many requests
for call taxi from other delegates made
Uttam to wonder whether he is also
engaged in commission agency. Before
Uttam’s questions were answered, the
train reached Central on time, the
conferences birds flew home to meet
again……
Poem sung at Valedictory Session of 16th RRC at Yercaud
CA V. Thomas
CA V. Renu
Latha Thomas
Esther T
CASC Bulletin, March 2015
51
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CASC Bulletin, March 2015