The Foreign Contribution (Regulation) Bill, 2010 as passed by Rajya Sabha
Download Link :
https://docs.google.com/fileview?id=0B-0hzoMM8_XZY2I3OWYwNjMtNThlMi00NzJiLTk5MTgtOGRiNTYwMDZlMDZj&hl=en
Tuesday, September 21, 2010
Monday, September 20, 2010
Revised Guidance Note on Tax Audit u/Sec. 44AB of IT Act, 1961
Attention of members is invited towards the changes in the Guidance Note on tax Audit under section 44AB of the Income-tax Act, 1961 approved subsequent to the publication of the Supplementary Guidance Note, issued by the erstwhile Fiscal Laws Committee, as a part of the publication “Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961” in 2006.
The Fifth Edition of the Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 incorporating the law as amended by the Finance Act, 2005 was published in September, 2005.
Subsequently, a supplementary Guidance Note has been published on the amendments made by the notification No. 208/2006 dated 10th August, 2006 issued by the Central Board of Direct Taxes in Form No. 3CD.
Subsequent to the publishing of the above Supplementary Guidance Note, the Finance Act, 2007 has made amendments in section 40A(3). New Rule 6DD was inserted in the Income-tax Rules by notification No. 208/2007 dated 27.6.2007 w.e.f. A.Y. 2008-09.
The Council thereupon approved some more changes subsequent to the publication of the Supplementary Guidance Note. These may be taken into consideration while reading in the Guidance Note on Tax Audit [2005 Edition] and the Supplementary Guidance note on Tax Audit [2006 Edition published along with the Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961].
For convenience of members the clauses wherein there have been changes are listed hereunder and the full text which forms part of the Guidance to members is available at http://220.227.161.86/20408announ11236a.pdf. Please note that some changes approved relating to fringe benefits have not been given here since they are no longer relevant.
1. Clause No. 12(a) and (b) of Form 3CD Para No. 23 of the Guidance Note[2005 Edition]
2. Clause 17(h) of Form 3CD Para 35 of the Guidance Note (Subsequent changes have been made in section 40A(3) by the Finance Act, 2008 and Finance (No. 2) Act, 2009 and also in Rule 6DD.These changes may have an effect on the computation of the amount to be reported but no further guidelines in this regard is considered necessary)
3. Clause 17(l) of Form 3CD
4. Clause 17A in Form 3CD – Amount inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
5. Select issues in accounting for state level VAT. (These do not represent the views of the Council but are based on the original draft prepared by Indore Branch of the CIRC of the Institute.)
Download Link :
https://docs.google.com/fileview?id=0B-0hzoMM8_XZYjE2NWQ3MzYtZWIyOC00YjYyLThkOGQtMzQ1OTNmMDI1N2Vj&hl=en
The Fifth Edition of the Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 incorporating the law as amended by the Finance Act, 2005 was published in September, 2005.
Subsequently, a supplementary Guidance Note has been published on the amendments made by the notification No. 208/2006 dated 10th August, 2006 issued by the Central Board of Direct Taxes in Form No. 3CD.
Subsequent to the publishing of the above Supplementary Guidance Note, the Finance Act, 2007 has made amendments in section 40A(3). New Rule 6DD was inserted in the Income-tax Rules by notification No. 208/2007 dated 27.6.2007 w.e.f. A.Y. 2008-09.
The Council thereupon approved some more changes subsequent to the publication of the Supplementary Guidance Note. These may be taken into consideration while reading in the Guidance Note on Tax Audit [2005 Edition] and the Supplementary Guidance note on Tax Audit [2006 Edition published along with the Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961].
For convenience of members the clauses wherein there have been changes are listed hereunder and the full text which forms part of the Guidance to members is available at http://220.227.161.86/20408announ11236a.pdf. Please note that some changes approved relating to fringe benefits have not been given here since they are no longer relevant.
1. Clause No. 12(a) and (b) of Form 3CD Para No. 23 of the Guidance Note[2005 Edition]
2. Clause 17(h) of Form 3CD Para 35 of the Guidance Note (Subsequent changes have been made in section 40A(3) by the Finance Act, 2008 and Finance (No. 2) Act, 2009 and also in Rule 6DD.These changes may have an effect on the computation of the amount to be reported but no further guidelines in this regard is considered necessary)
3. Clause 17(l) of Form 3CD
4. Clause 17A in Form 3CD – Amount inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
5. Select issues in accounting for state level VAT. (These do not represent the views of the Council but are based on the original draft prepared by Indore Branch of the CIRC of the Institute.)
Download Link :
https://docs.google.com/fileview?id=0B-0hzoMM8_XZYjE2NWQ3MzYtZWIyOC00YjYyLThkOGQtMzQ1OTNmMDI1N2Vj&hl=en
DSC and E-filing related
1) E-filing of Returns - An Overview of the Process of e-Filing of Returns
Link : https://docs.google.com/present/edit?id=0Ae0hzoMM8_XZZGRkNTM5eHRfMTBmaHhxM21jcA&hl=en
2) Changed DSC Procedure
Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZjE4ODFiMDMtNTBlNC00ZDI3LWJkMTktNjM4MTU3YmQ2MzM4&hl=en
3) Help / Guidance for USB Token
Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZMTc0YTY2MDEtZGQ0My00NDA4LTlmODgtNWY5MmU1Y2Q2OWYw&hl=en
Link : https://docs.google.com/present/edit?id=0Ae0hzoMM8_XZZGRkNTM5eHRfMTBmaHhxM21jcA&hl=en
2) Changed DSC Procedure
Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZjE4ODFiMDMtNTBlNC00ZDI3LWJkMTktNjM4MTU3YmQ2MzM4&hl=en
3) Help / Guidance for USB Token
Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZMTc0YTY2MDEtZGQ0My00NDA4LTlmODgtNWY5MmU1Y2Q2OWYw&hl=en
MS-Office 2003 MENU for MS-Office 2007
For all those MS-Office 2007 users who are missing Office 2003 Menu features
Please load this utility.
Setup File Link1 : http://www.ubit.ch/fileadmin/UBitMenu/UBitMenuSetupUK.exe
Setup File Link2 : https://docs.google.com/leaf?id=0B-0hzoMM8_XZZjE4M2IyNmQtMzI0Zi00MjVmLTk5ZTItZmFhYmM1ZWE0Yjhl&hl=en&authkey=CJvAjLoI
Site Link : http://www.ubit.ch/software/ubitmenu-languages/
Save this exe file and run. This will load a small Add-in for Microsoft Office 2007 which will give you the MENU of Ms-office 2003.
Note : This utility is for users having MS-Office 2007 and ensure that No MS-Office 2007 application is running while loading this application.
Please load this utility.
Setup File Link1 : http://www.ubit.ch/fileadmin/UBitMenu/UBitMenuSetupUK.exe
Setup File Link2 : https://docs.google.com/leaf?id=0B-0hzoMM8_XZZjE4M2IyNmQtMzI0Zi00MjVmLTk5ZTItZmFhYmM1ZWE0Yjhl&hl=en&authkey=CJvAjLoI
Site Link : http://www.ubit.ch/software/ubitmenu-languages/
Save this exe file and run. This will load a small Add-in for Microsoft Office 2007 which will give you the MENU of Ms-office 2003.
Note : This utility is for users having MS-Office 2007 and ensure that No MS-Office 2007 application is running while loading this application.
E-books on Stock Market
All About Stocks
Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZNDRhOGE5NjItZjgwZC00NDAxLWE5YjEtMjA5YmQ0YzNiNmQ0&hl=en
Demystifying Derivatives
- Courtesy: Sharekhan
Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZTQxZWZlZWItMDViMy00ZWY0LTllM2ItM2QwM2UxMzczZmEx&hl=en
Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZNDRhOGE5NjItZjgwZC00NDAxLWE5YjEtMjA5YmQ0YzNiNmQ0&hl=en
Demystifying Derivatives
- Courtesy: Sharekhan
Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZTQxZWZlZWItMDViMy00ZWY0LTllM2ItM2QwM2UxMzczZmEx&hl=en
Sunday, September 19, 2010
HUF - Efiling - Date of Creation : Ancestral
For HUFs:
Date of creation of HUF shall be
01-01-0001
where the date of creation is not available / HUF date is ancestral.
The same can be used for e-filing of IT Returns as well of updation of PAN.
Date of creation of HUF shall be
01-01-0001
where the date of creation is not available / HUF date is ancestral.
The same can be used for e-filing of IT Returns as well of updation of PAN.
Tax Free Railway Bonds
NOTIFICATION NO. 72/2010, Dated: September 8, 2010
In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of Section 10 of the Income Tax Act, 1961 (43 of 1961), the Central Government hereby authorizes the Indian Railway Finance Corporation (IRFC) to issue, during Financial Year 2010-11, tax free secured, redeemable, non-convertible Railway Bonds of Rs. 1,000 each in case of public issue and Rs.1,00,000 each in other cases, aggregating to an amount of three thousand and eighty crore rupees only, carrying an interest rate in the range of 6% to 7.25% per annum, depending upon the size and tenor of a tranche:
Provided that the benefit under the said item shall be admissible only if the holder of such bonds registers his or her name and the holding with the said Corporation.
F.No.178/126/2009-ITA-1
(Raman Chopra)
Director (ITA-1)
Notification Download: https://docs.google.com/fileview?id=0B-0hzoMM8_XZMjQ3MmI3NDUtNWNlZi00MTlhLWI2NzctMWU4YTNiZDIzNmQ2&hl=en
Source Link :
http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=NOTF&schT=&csId=5857d9b4-0293-4146-a99b-8a28b50b200a&NtN=&yr=ALL&sec=&sch=&title=Taxmann
In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of Section 10 of the Income Tax Act, 1961 (43 of 1961), the Central Government hereby authorizes the Indian Railway Finance Corporation (IRFC) to issue, during Financial Year 2010-11, tax free secured, redeemable, non-convertible Railway Bonds of Rs. 1,000 each in case of public issue and Rs.1,00,000 each in other cases, aggregating to an amount of three thousand and eighty crore rupees only, carrying an interest rate in the range of 6% to 7.25% per annum, depending upon the size and tenor of a tranche:
Provided that the benefit under the said item shall be admissible only if the holder of such bonds registers his or her name and the holding with the said Corporation.
F.No.178/126/2009-ITA-1
(Raman Chopra)
Director (ITA-1)
Notification Download: https://docs.google.com/fileview?id=0B-0hzoMM8_XZMjQ3MmI3NDUtNWNlZi00MTlhLWI2NzctMWU4YTNiZDIzNmQ2&hl=en
Source Link :
http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=NOTF&schT=&csId=5857d9b4-0293-4146-a99b-8a28b50b200a&NtN=&yr=ALL&sec=&sch=&title=Taxmann
Sunday, September 12, 2010
Vodafone International Holdings B.V. vs. UOI (Bombay High Court)
The purchase of shares of a foreign company by one non-resident from another non-resident attracts Indian tax if the object was to acquire the Indian assets held by the foreign company
A Cayman Island company called CGP Investments held 52% of the share capital of Hutchison Essar Ltd, an Indian company engaged in the mobile telecom business in India. The shares of CGP Investments were in turn held by another Cayman Island company called Hutchison Telecommunications. The assessee, a Dutch company, acquired from the second Cayman Islands company, the shares in CGP Investments for a total consideration of US $ 11.08 billion. The AO issued a show-cause notice u/s 201 in which he took the view that as the ultimate asset acquired by the assessee were shares in an Indian company, the assessee ought to have deducted tax at source u/s 195 while making payment to the vendor. This notice was challenged by a Writ Petition but was dismissed by the Bombay High Court. In appeal, the Supreme Court remanded the matter to the AO to first pass a preliminary order of jurisdiction which the AO did. This order was challenged by the assessee by a Writ Petition on the ground that as one non-resident had acquired shares of a foreign company from another non-resident, s. 195 had no application. HELD dismissing the Petition:
(i) An assessee is entitled to arrange his affairs so as to avoid tax and the department is not entitled to disregard it on the ground of motive. However, a “sham” or “colourable” transaction can be disregarded by the AO. Azadi Bachao Andolan 263 ITR 706 (SC) & Wallfort followed;
(ii) A share, being a capital asset, comprises of an indivisible set of rights, not capable of being separately transferred at law. A controlling interest does not constitute a distinct capital asset because it is an incident of the ownership of shares and flows out of the holding of shares. Also, the business of a company is not the business of its shareholders and the assets of a company are not the assets of its shareholders;
(iii) The State has jurisdiction to tax non-residents if there is a nexus connecting the non-resident and the State. The nexus arises where the source of income originates in the jurisdiction. The source of income is determined in accordance with source rules. U/s 5 & 9, the nexus for charging a non-resident is provided by the receipt or accrual of income in India. If the income can be taxed in more than one jurisdiction, it has to be apportioned;
(iv) U/s 9(1)(i), income arising from the transfer of a capital asset situated in India is chargeable to tax. The situs of the capital asset is the crucial jurisdictional condition that must be fulfilled in order to attract chargeability to tax of income arising from the transfer of a capital asset;
(v) Article 13 of the OECD Model Convention illustrates how a value driven deeming nexus may be created by legislation and how one can look behind corporate structures if the ownership of shares represents an interest of a certain value in real estate situated within the taxing jurisdiction;
(vi) S. 195 creates an obligation to deduct tax where the sum payable to a non-resident is (even partly) chargeable to tax. If the sum payable is not assessable in India, there is no question of TDS being deducted by an assessee. The argument that as the payer is a non-resident, it was not obliged to deduct tax is not acceptable because there is sufficient territorial connection or nexus between the payer and India. The fact that enforcement of the obligation may be difficult as the payer is a non-resident does not mean that obligation is not applicable;
(vii) On facts, the argument that the transaction involved merely a sale of a share of a foreign company by one non-resident to another is not acceptable. It would be simplistic to assume that the entire transaction between the non-residents was fulfilled merely upon the transfer of a single share of the Cayman Islands company. The commercial and business understanding between the parties postulated that what was being transferred from one non-resident to the other was the controlling interest in Hutchison Essar, an Indian company. The object and intent of the parties was to achieve the transfer of control over the Indian company and the transfer of the solitary share of the Cayman Islands company was put into place as a mode of effectuating the goal;
(vii) Even the price of US $ 11.01 Billion paid by the assessee factored in diverse rights and entitlements that were being transferred to the assessee. Many of these entitlements were not relatable to the transfer of the CGP share. The transactional documents were not merely incidental or consequential to the transfer of the CGP share, but recognized independently the rights and entitlements of the vendor in relation to the Indian business which were being transferred to the assessee;
(viii) As the consideration was paid for acquisition of a panoply of entitlements including a control premium, use and rights to the Hutch brand in India, non-compete agreement with the Hutch group etc, it will have to be apportioned by the AO to determine which portion has a nexus within the Indian taxing jurisdiction and which lies outside;
(ix) Accordingly, as the transaction between the assessee and Hutchison Telecommunications had sufficient nexus with Indian fiscal jurisdiction, the AO did have jurisdiction to initiate proceedings against the assessee for failure to deduct tax at source.
Note1: The judgement was pronounced today via video-conferencing with Justice Chandrachud sitting in Mumbai and Justice Devadhar sitting in Nagpur. This is the first tax judgement delivered this way
Note2: Clause 5(4)(g) of the Direct Taxes Code Bill 2010 provides that income from transfer outside India of a share in a foreign company shall be deemed to arise in India unless if the FMV of assets in India owned by the foreign company is less that 50% of its total assets.
Legal reactions
DSK Legal partner Balbir Singh said that the decision opened a Pandora's box, "as tax authorities will find a reason and basis to open the already closed transactions".
"So long as this high court ruling remains," added Economic Laws Practice (ELP) partner Pranay Bhatia, "the tax dept may certainly say, I do have a legal basis to examine withholding tax liability of every offshore transaction which results in a change of ownership."
Singh said: "The Vodafone judgment will have far reaching impact as it would certainly influence the way transactions are structured in terms of instruments and jurisdiction."
Lawyers would have to "go back to the drawing board" to come up with new and valid tax efficient structures, agreed ALMT Legal partner Hitesh Jain, who had previously also advised Vodafone on the case.
Bhatia commented that structures such as the one in the Vodafone Hutch acquisition were used in “some” cases but were not unique. "This decision is backed on a very specific factual matrix. Every case may not be pari passu to the Vodafone and Hutch transaction because here there is a controlling stake involved, a third telecoms regulator and in every case that may not be the situation."
"There are a number of factors which could make a case go one way or another but this Vodafone case is an important one but can not be a decider whether everything going forward will be looked at like that," he said.
Singh said the consequences of the case could negatively affect foreign investment. "It will impact the cost of acquisition and doing business in India. By charging tax on offshore transactions, tax authorities may garner more tax but will lose on larger FDI in India."
"The most critical part of this judgment is confirming liability to withhold tax by an offshore company while making payment to the seller in another offshore jurisdiction and treating the underlying entity as an 'assessee in default'," noted Singh.
The reasoning
"The transaction was of a composite nature and created reciprocal rights and obligations which included but were not limited to the transfer of the CGP share," explained ELP in its analysis of the decision:
Link to Download the full 196 page judgment :
https://docs.google.com/fileview?id=0B-0hzoMM8_XZN2JmNjY3N2QtNDk1Mi00ZjQ1LTgxMDgtMjA4YWM3ZjIxNzY0&hl=en
A Cayman Island company called CGP Investments held 52% of the share capital of Hutchison Essar Ltd, an Indian company engaged in the mobile telecom business in India. The shares of CGP Investments were in turn held by another Cayman Island company called Hutchison Telecommunications. The assessee, a Dutch company, acquired from the second Cayman Islands company, the shares in CGP Investments for a total consideration of US $ 11.08 billion. The AO issued a show-cause notice u/s 201 in which he took the view that as the ultimate asset acquired by the assessee were shares in an Indian company, the assessee ought to have deducted tax at source u/s 195 while making payment to the vendor. This notice was challenged by a Writ Petition but was dismissed by the Bombay High Court. In appeal, the Supreme Court remanded the matter to the AO to first pass a preliminary order of jurisdiction which the AO did. This order was challenged by the assessee by a Writ Petition on the ground that as one non-resident had acquired shares of a foreign company from another non-resident, s. 195 had no application. HELD dismissing the Petition:
(i) An assessee is entitled to arrange his affairs so as to avoid tax and the department is not entitled to disregard it on the ground of motive. However, a “sham” or “colourable” transaction can be disregarded by the AO. Azadi Bachao Andolan 263 ITR 706 (SC) & Wallfort followed;
(ii) A share, being a capital asset, comprises of an indivisible set of rights, not capable of being separately transferred at law. A controlling interest does not constitute a distinct capital asset because it is an incident of the ownership of shares and flows out of the holding of shares. Also, the business of a company is not the business of its shareholders and the assets of a company are not the assets of its shareholders;
(iii) The State has jurisdiction to tax non-residents if there is a nexus connecting the non-resident and the State. The nexus arises where the source of income originates in the jurisdiction. The source of income is determined in accordance with source rules. U/s 5 & 9, the nexus for charging a non-resident is provided by the receipt or accrual of income in India. If the income can be taxed in more than one jurisdiction, it has to be apportioned;
(iv) U/s 9(1)(i), income arising from the transfer of a capital asset situated in India is chargeable to tax. The situs of the capital asset is the crucial jurisdictional condition that must be fulfilled in order to attract chargeability to tax of income arising from the transfer of a capital asset;
(v) Article 13 of the OECD Model Convention illustrates how a value driven deeming nexus may be created by legislation and how one can look behind corporate structures if the ownership of shares represents an interest of a certain value in real estate situated within the taxing jurisdiction;
(vi) S. 195 creates an obligation to deduct tax where the sum payable to a non-resident is (even partly) chargeable to tax. If the sum payable is not assessable in India, there is no question of TDS being deducted by an assessee. The argument that as the payer is a non-resident, it was not obliged to deduct tax is not acceptable because there is sufficient territorial connection or nexus between the payer and India. The fact that enforcement of the obligation may be difficult as the payer is a non-resident does not mean that obligation is not applicable;
(vii) On facts, the argument that the transaction involved merely a sale of a share of a foreign company by one non-resident to another is not acceptable. It would be simplistic to assume that the entire transaction between the non-residents was fulfilled merely upon the transfer of a single share of the Cayman Islands company. The commercial and business understanding between the parties postulated that what was being transferred from one non-resident to the other was the controlling interest in Hutchison Essar, an Indian company. The object and intent of the parties was to achieve the transfer of control over the Indian company and the transfer of the solitary share of the Cayman Islands company was put into place as a mode of effectuating the goal;
(vii) Even the price of US $ 11.01 Billion paid by the assessee factored in diverse rights and entitlements that were being transferred to the assessee. Many of these entitlements were not relatable to the transfer of the CGP share. The transactional documents were not merely incidental or consequential to the transfer of the CGP share, but recognized independently the rights and entitlements of the vendor in relation to the Indian business which were being transferred to the assessee;
(viii) As the consideration was paid for acquisition of a panoply of entitlements including a control premium, use and rights to the Hutch brand in India, non-compete agreement with the Hutch group etc, it will have to be apportioned by the AO to determine which portion has a nexus within the Indian taxing jurisdiction and which lies outside;
(ix) Accordingly, as the transaction between the assessee and Hutchison Telecommunications had sufficient nexus with Indian fiscal jurisdiction, the AO did have jurisdiction to initiate proceedings against the assessee for failure to deduct tax at source.
Note1: The judgement was pronounced today via video-conferencing with Justice Chandrachud sitting in Mumbai and Justice Devadhar sitting in Nagpur. This is the first tax judgement delivered this way
Note2: Clause 5(4)(g) of the Direct Taxes Code Bill 2010 provides that income from transfer outside India of a share in a foreign company shall be deemed to arise in India unless if the FMV of assets in India owned by the foreign company is less that 50% of its total assets.
Legal reactions
DSK Legal partner Balbir Singh said that the decision opened a Pandora's box, "as tax authorities will find a reason and basis to open the already closed transactions".
"So long as this high court ruling remains," added Economic Laws Practice (ELP) partner Pranay Bhatia, "the tax dept may certainly say, I do have a legal basis to examine withholding tax liability of every offshore transaction which results in a change of ownership."
Singh said: "The Vodafone judgment will have far reaching impact as it would certainly influence the way transactions are structured in terms of instruments and jurisdiction."
Lawyers would have to "go back to the drawing board" to come up with new and valid tax efficient structures, agreed ALMT Legal partner Hitesh Jain, who had previously also advised Vodafone on the case.
Bhatia commented that structures such as the one in the Vodafone Hutch acquisition were used in “some” cases but were not unique. "This decision is backed on a very specific factual matrix. Every case may not be pari passu to the Vodafone and Hutch transaction because here there is a controlling stake involved, a third telecoms regulator and in every case that may not be the situation."
"There are a number of factors which could make a case go one way or another but this Vodafone case is an important one but can not be a decider whether everything going forward will be looked at like that," he said.
Singh said the consequences of the case could negatively affect foreign investment. "It will impact the cost of acquisition and doing business in India. By charging tax on offshore transactions, tax authorities may garner more tax but will lose on larger FDI in India."
"The most critical part of this judgment is confirming liability to withhold tax by an offshore company while making payment to the seller in another offshore jurisdiction and treating the underlying entity as an 'assessee in default'," noted Singh.
The reasoning
"The transaction was of a composite nature and created reciprocal rights and obligations which included but were not limited to the transfer of the CGP share," explained ELP in its analysis of the decision:
Link to Download the full 196 page judgment :
https://docs.google.com/fileview?id=0B-0hzoMM8_XZN2JmNjY3N2QtNDk1Mi00ZjQ1LTgxMDgtMjA4YWM3ZjIxNzY0&hl=en
Vodafone ruling a game changer for share transfers to foreign companies
NEW DELHI: Tax treatment of overseas M&A deals involving Indian assets may have changed forever with the Bombay High Court ruling in the Vodafone tax issue.
The court on Wednesday accepted Indian tax authorities’ jurisdiction over the $11 billion acquisition of mobile phone operator Huchison Essar by Vodafone, making it difficult to conduct transfer of big assets held in a holding company structure through sale of shares.
Armed with the ruling, the income tax department plans to revisit other such transactions. “This is a test case, we will look at similar cases,” said Sudhir Chandra, acting chairman of the central board of direct taxes (CBDT).
There were already some cases under investigation, he said. The court order may have a bearing on deals such as SABMiller-Foster and Sanofi Aventis-Shanta Biotech transactions.
“The high court has accepted the contention that transfer of shares of the Cayman Company was only a mechanical step for the eventual transfer of various commercial rights of the telecom business situated in India,” says Sudhir Kapadia, tax markets leader at consultancy firm Ernst & Young.
Vodafone argues that it need not pay tax as the transaction was done between two offshore entities. Vodafone International Holdings BV, a Netherlands entity, had acquired 100% shares in CGP (Holdings) Ltd, a Cayman Islands company from Hutchison Telecommunications International Ltd for $11.2 billion.
Information available with the income tax authorities, however, show that only one $1 share was transferred by the Cayman islands-based entity, although the total consideration was much higher.
The income tax department issued a show cause notice to Vodafone to explain why tax was not withheld on payments made to HTIL in relation to the above transaction.
The court, while accepting that shares of a foreign company are located outside India, observed that the transfer of the attendant commercial rights would attract tax in India.
In other words, the court seems to be suggesting a bifurcation of the total consideration into two parts. First part attributable to the shareholding per se, which would include all the relevant shareholder rights and controlling interest, and the second part represented by various commercial interests such as telecom licences and brands situated in India.
“The High Court has mentioned about the proportionality theory. But, the issue of proportionality is tricky one and it is difficult to resolve. I guess it would have to be settled in a mutually acceptable manner,” said Mukesh Butani, partner, BMR Legal.
Tax authorities can also issue a show-cause notice to Vodafone, even as the matter looks all set to go to the Supreme Court, said another tax department official. The tax notice, he said, would be issued after the expiry of the eight-week period stipulated by the High Court.
Several countries have in their legislation something known as “look-through” provisions by which a tax is imposed on gains arising from transfer of shares outside the country if it results in the passing of control over a company, which holds specified assets or property in the country. Indian tax laws, however, do not have such provisions.
The Direct Taxes Code Bill, 2010, introduced in Parliament recently, proposes to tax transfers outside India of shares in a foreign company, in proportion to the fair market value of assets located in India. This rule will apply if the fair market value of assets in India exceeds 50% of the value of all assets owned by the foreign company.
Source : http://economictimes.indiatimes.com/Telecom//articleshow/6527486.cms
The court on Wednesday accepted Indian tax authorities’ jurisdiction over the $11 billion acquisition of mobile phone operator Huchison Essar by Vodafone, making it difficult to conduct transfer of big assets held in a holding company structure through sale of shares.
Armed with the ruling, the income tax department plans to revisit other such transactions. “This is a test case, we will look at similar cases,” said Sudhir Chandra, acting chairman of the central board of direct taxes (CBDT).
There were already some cases under investigation, he said. The court order may have a bearing on deals such as SABMiller-Foster and Sanofi Aventis-Shanta Biotech transactions.
“The high court has accepted the contention that transfer of shares of the Cayman Company was only a mechanical step for the eventual transfer of various commercial rights of the telecom business situated in India,” says Sudhir Kapadia, tax markets leader at consultancy firm Ernst & Young.
Vodafone argues that it need not pay tax as the transaction was done between two offshore entities. Vodafone International Holdings BV, a Netherlands entity, had acquired 100% shares in CGP (Holdings) Ltd, a Cayman Islands company from Hutchison Telecommunications International Ltd for $11.2 billion.
Information available with the income tax authorities, however, show that only one $1 share was transferred by the Cayman islands-based entity, although the total consideration was much higher.
The income tax department issued a show cause notice to Vodafone to explain why tax was not withheld on payments made to HTIL in relation to the above transaction.
The court, while accepting that shares of a foreign company are located outside India, observed that the transfer of the attendant commercial rights would attract tax in India.
In other words, the court seems to be suggesting a bifurcation of the total consideration into two parts. First part attributable to the shareholding per se, which would include all the relevant shareholder rights and controlling interest, and the second part represented by various commercial interests such as telecom licences and brands situated in India.
“The High Court has mentioned about the proportionality theory. But, the issue of proportionality is tricky one and it is difficult to resolve. I guess it would have to be settled in a mutually acceptable manner,” said Mukesh Butani, partner, BMR Legal.
Tax authorities can also issue a show-cause notice to Vodafone, even as the matter looks all set to go to the Supreme Court, said another tax department official. The tax notice, he said, would be issued after the expiry of the eight-week period stipulated by the High Court.
Several countries have in their legislation something known as “look-through” provisions by which a tax is imposed on gains arising from transfer of shares outside the country if it results in the passing of control over a company, which holds specified assets or property in the country. Indian tax laws, however, do not have such provisions.
The Direct Taxes Code Bill, 2010, introduced in Parliament recently, proposes to tax transfers outside India of shares in a foreign company, in proportion to the fair market value of assets located in India. This rule will apply if the fair market value of assets in India exceeds 50% of the value of all assets owned by the foreign company.
Source : http://economictimes.indiatimes.com/Telecom//articleshow/6527486.cms
All payments made abroad not within ambit of withholding tax, rules SC
NEW DELHI: The Supreme Court on Thursday rejected the income-tax department’s contention that companies based in India were liable to deduct tax when they make any payment overseas, offering relief to domestic firms and multinational companies based here that would have had to cough up huge amounts as tax on payments made to overseas suppliers.
The apex court rejected the sweeping interpretation of law on withholding tax, or tax deducted from overseas payments. The judgement clears the air on the contentious issue and removes uncertainties faced by companies that have overseas dealing.
Taxation experts and companies welcomed the ruling. “The ruling settles the issue of withholding tax on payments made to non-residents,” said Kaushik Mukherjee, partner at consulting firm PwC.
For GE, Samsung Electronics, Hewlett-Packard, Sonata Software and other firms, which had approached the Supreme Court against a Karnataka High Court decision, the issue is far from over. They will have to approach the high court to decide whether they will have to pay tax on payments made for shrink-wrapped software.
“Had the high court order been upheld, Sonata would have had to pay more than `200 crore to the income-tax department immediately,” said B Ramaswamy, president and managing director, Sonata Software.
Sonata had made a financial disclosure for a contingent liability of Rs 252 crore. “The company’s auditors would now take a call on how to treat it under the accounting standards,” said N Venkatraman, head of strategic finance at Sonata.
The Karnataka High Court ruling had allowed the tax authorities to take a larger interpretation of a provision that any import from a non-resident is an income to the seller, hence the buyer needs to deduct tax. If the buyer does not want to withhold tax, he has to get an approval from a revenue officer, instead of an auditor at present.
In this particular issue the goods concerned were software and buyers of software, the concerned companies, assuming that tax was not to be withheld in India on the payments made to the supplies of software, made the payment without deducting the tax.
However, the tax authorities treated the payments as “royalty” which is taxable here since those software packages had “copyrights”. The income tax department also declared that those who have not withheld taxes were “assessee in default” and hence liable to pay interest, penalty.
Samsung India was among the first batch of companies which had appealed against the I-T department’s decision. The company even got relief from the Income-Tax Appellate Tribunal. But, the Karnataka HC reversed the ITAT judgement and accepted the contention of tax authorities opening a pandora’s box with regard to taxation of overseas payments.
“The judgement has large ramifications not only on the applicability of withholding tax on payments towards packaged software but on cross-border payment towards goods or services,” said Mukesh Butani, partner, BMR Legal.
The Thursday’s judgement given by a bench comprising chief justice of India, justice S H Kapadia, and justice K S Radhakrisnan, has made it clear that withholding tax has to be deducted only if the non-resident’s income was chargeable to tax in India.
Senior advocates including Fali S Nariman, Harish Salve, Atul Chitale and S Ganesh represented the companies while additional solicitor general V Tankha appeared for the income-tax department. Interestingly, the new Direct Taxes Code bill, that seeks to replace the present income tax act, has a provision in line with today’s apex court’s decision.
Source Link : http://economictimes.indiatimes.com/news/economy/finance/All-payments-made-abroad-not-within-ambit-of-withholding-tax-rules-SC/articleshow/6527496.cms
Judgement Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZjM2YzY3ZTgtOGU2NS00YTdmLThkZGQtZmQ5Yzc2Y2MxOTg0&hl=en
The apex court rejected the sweeping interpretation of law on withholding tax, or tax deducted from overseas payments. The judgement clears the air on the contentious issue and removes uncertainties faced by companies that have overseas dealing.
Taxation experts and companies welcomed the ruling. “The ruling settles the issue of withholding tax on payments made to non-residents,” said Kaushik Mukherjee, partner at consulting firm PwC.
For GE, Samsung Electronics, Hewlett-Packard, Sonata Software and other firms, which had approached the Supreme Court against a Karnataka High Court decision, the issue is far from over. They will have to approach the high court to decide whether they will have to pay tax on payments made for shrink-wrapped software.
“Had the high court order been upheld, Sonata would have had to pay more than `200 crore to the income-tax department immediately,” said B Ramaswamy, president and managing director, Sonata Software.
Sonata had made a financial disclosure for a contingent liability of Rs 252 crore. “The company’s auditors would now take a call on how to treat it under the accounting standards,” said N Venkatraman, head of strategic finance at Sonata.
The Karnataka High Court ruling had allowed the tax authorities to take a larger interpretation of a provision that any import from a non-resident is an income to the seller, hence the buyer needs to deduct tax. If the buyer does not want to withhold tax, he has to get an approval from a revenue officer, instead of an auditor at present.
In this particular issue the goods concerned were software and buyers of software, the concerned companies, assuming that tax was not to be withheld in India on the payments made to the supplies of software, made the payment without deducting the tax.
However, the tax authorities treated the payments as “royalty” which is taxable here since those software packages had “copyrights”. The income tax department also declared that those who have not withheld taxes were “assessee in default” and hence liable to pay interest, penalty.
Samsung India was among the first batch of companies which had appealed against the I-T department’s decision. The company even got relief from the Income-Tax Appellate Tribunal. But, the Karnataka HC reversed the ITAT judgement and accepted the contention of tax authorities opening a pandora’s box with regard to taxation of overseas payments.
“The judgement has large ramifications not only on the applicability of withholding tax on payments towards packaged software but on cross-border payment towards goods or services,” said Mukesh Butani, partner, BMR Legal.
The Thursday’s judgement given by a bench comprising chief justice of India, justice S H Kapadia, and justice K S Radhakrisnan, has made it clear that withholding tax has to be deducted only if the non-resident’s income was chargeable to tax in India.
Senior advocates including Fali S Nariman, Harish Salve, Atul Chitale and S Ganesh represented the companies while additional solicitor general V Tankha appeared for the income-tax department. Interestingly, the new Direct Taxes Code bill, that seeks to replace the present income tax act, has a provision in line with today’s apex court’s decision.
Source Link : http://economictimes.indiatimes.com/news/economy/finance/All-payments-made-abroad-not-within-ambit-of-withholding-tax-rules-SC/articleshow/6527496.cms
Judgement Download Link : https://docs.google.com/fileview?id=0B-0hzoMM8_XZZjM2YzY3ZTgtOGU2NS00YTdmLThkZGQtZmQ5Yzc2Y2MxOTg0&hl=en
Saturday, September 11, 2010
NEFT Vs. RTGS
What is the difference between RTGS and NEFT?
NEFT = National Electronic Funds Transfer
RTGS = Real time Gross Settlement
NEFT is also an electric fund transfer system that operates on a Deferred Net Settlement (DNS) basis, which settles transactions in batches. In DNS the settlement takes place at a particular point of time. All transactions are held up till that time. For example, NEFT settlement takes place 6 times a day during the week days (9.30am, 10.30, 12.00 noon, 1.00 pm, 3.00 pm and 4.00 pm) and 3 times on Saturdays (9.30am, 10.30 and 12.00 noon). Any transaction initiated after a designated settlement time would have to wait till next designated settlement time.
Whereas in RTGS, transactions are processed continuously throughout the RTGS business hours.
NEFT = National Electronic Funds Transfer
RTGS = Real time Gross Settlement
NEFT is also an electric fund transfer system that operates on a Deferred Net Settlement (DNS) basis, which settles transactions in batches. In DNS the settlement takes place at a particular point of time. All transactions are held up till that time. For example, NEFT settlement takes place 6 times a day during the week days (9.30am, 10.30, 12.00 noon, 1.00 pm, 3.00 pm and 4.00 pm) and 3 times on Saturdays (9.30am, 10.30 and 12.00 noon). Any transaction initiated after a designated settlement time would have to wait till next designated settlement time.
Whereas in RTGS, transactions are processed continuously throughout the RTGS business hours.
Time limit for filing ITR-V for AY 2009-10 extended
PRESS RELEASE dated 1-9-2010
The Central Board of Direct Taxes (CBDT) has decided to extend the time limit for filing ITR-V forms relating to income-tax returns for A.Y. 2009-10 filed electronically (without digital signature) on or after 1st April 2009. These ITR-V forms can now be filed up to 31st December 2010 or within a period of 120 days of uploading of the electronic return data, whichever is later.
2. The relaxation has been made since there are still returns relating to A.Y. 2009-10 for which the ITR-V forms have not been received at the Centralised Processing Centre (CPC), Bengaluru or have been received after 31st March 2010 or have been filed with the Assessing Officers.
These taxpayers are being given a final opportunity to send ITR-V forms to the CPC by the dates mentioned in para 1 above.
3. The ITR-V forms should be sent by ordinary post or speed post to
Post Bag No.1,
Electronic City Post Office,
Bengaluru – 560100
(Karnataka).
*****
Source Link :
https://incometaxindiaefiling.gov.in/portal/downloads/Press%20Release%20.pdf
The Central Board of Direct Taxes (CBDT) has decided to extend the time limit for filing ITR-V forms relating to income-tax returns for A.Y. 2009-10 filed electronically (without digital signature) on or after 1st April 2009. These ITR-V forms can now be filed up to 31st December 2010 or within a period of 120 days of uploading of the electronic return data, whichever is later.
2. The relaxation has been made since there are still returns relating to A.Y. 2009-10 for which the ITR-V forms have not been received at the Centralised Processing Centre (CPC), Bengaluru or have been received after 31st March 2010 or have been filed with the Assessing Officers.
These taxpayers are being given a final opportunity to send ITR-V forms to the CPC by the dates mentioned in para 1 above.
3. The ITR-V forms should be sent by ordinary post or speed post to
Post Bag No.1,
Electronic City Post Office,
Bengaluru – 560100
(Karnataka).
*****
Source Link :
https://incometaxindiaefiling.gov.in/portal/downloads/Press%20Release%20.pdf
Is your MP underpaid? - Pritish Nandy
Is your MP underpaid? - Pritish Nandy
22 August 2010, 10:01 AM IST
I was a MP not very long ago. I loved those six years. Everyone called me sir, not because of my age but because I was a MP. And even though I never travelled anywhere by train during those years, I revelled in the fact that I could have gone anywhere I liked, on any train, first class with a bogey reserved for my family. Whenever I flew, there were always people around to pick up my baggage, not because I was travelling business class but because I was a MP. And yes, whenever I wrote to any Government officer to help someone in need, it was done. No, not because I was a journalist but because I was a MP.
The job had many perquisites, apart from the tax free wage of Rs 4,000. Then the wages were suddenly quadrupled to Rs 16,000, with office expenses of Rs 20,000 and a constituency allowance of Rs 20,000 thrown in. I could borrow interest free money to buy a car, get my petrol paid, make as many free phone calls as I wanted. My home came free. So did the furniture, the electricity, the water, the gardeners, the plants. There were also allowances to wash curtains and sofa covers and a rather funny allowance of Rs 1,000 per day to attend Parliament, which I always thought was a MP's job in the first place! And, O yes, we also got Rs 1 crore a year (now enhanced to Rs 2 crore) to spend on our constituencies. More enterprising MPs enjoyed many more perquisites best left to your imagination. While I was embarrassed being vastly overpaid for the job I was doing, they kept demanding more.
Today, out of 543 MPs in Lok Sabha, 315 are crorepatis. That's 60%. 43 out of the 54 newly elected Rajya Sabha MPs are also millionaires. Their average declared assets are over Rs 25 crore each. That's an awfully wealthy lot of people in whose hands we have vested out destiny. The assets of your average Lok Sabha MP have grown from Rs 1.86 crore in the last house to Rs 5.33 crore. That's 200% more. And, as we all know, not all our MPs are known to always declare all their assets. Much of these exist in a colour not recognised by our tax laws. That's fine, I guess. Being a MP gives you certain immunities, not all of them meant to be discussed in a public forum.
If you think it pays to be in the ruling party, you are dead right: 7 out of 10 MPs from the Congress are crorepatis. The BJP have 5. MPs from some of the smaller parties like SAD, TRS and JD (Secular) are all crorepatis while the NCP, DMK, RLD, BSP, Shiv Sena, National Conference and Samajwadi Party have more crorepatis than the 60% average. Only the CPM and the Trinamool, the two Bengal based parties, don't field crorepatis. The CPM has 1crorepati out of 16 MPs; the Trinamool has 7 out of 19. This shows in the state-wise average. West Bengal and Kerala have few crorepati MPs while Punjab and Delhi have only crorepati MPs and Haryana narrowly misses out on this distinction with one MP, poor guy, who's not a crorepati.
Do MPs become richer in office? Sure they do. Statistics show that the average assets of 304 MPs who contested in 2004 and then re-contested last year grew 300%. And, yes, we're only talking about declared assets here. But then, we can't complain. We are the ones who vote for the rich. Over 33% of those with assets above Rs 5 crore won the last elections while 99.5% of those with assets below Rs 10 lakhs lost! Apart from West Bengal and the North East, every other state voted for crorepati MPs. Haryana grabbed first place with its average MP worth Rs 18 crore. Andhra is not far behind at 16.
But no, this is not enough for our MPs. It's not enough that they are rich, infinitely richer than those who they represent, and every term makes them even richer. It's not enough that they openly perpetuate their families in power. It's not enough that all their vulgar indulgences and more are paid for by you and me through back breaking taxes. It's not enough that the number of days they actually work in Parliament are barely 60 in a year. The rest of the time goes in squabbling and ranting. Now they want a 500% pay hike and perquisites quadrupled. The Government, to buy peace, has already agreed to a 300% raise but that's not good enough for our MPs. They want more, much more.
And no, I'm not even mentioning that 150 MPs elected last year have criminal cases against them, with 73 serious, very serious cases ranging from rape to murder. Do you really think these people deserve to earn 104 times what the average Indian earns?
Courtesy :
Removal of ELSS from 80C in DTC Unfortunate
For many retail investors, ELSS funds are the first step in starting to invest in mutual funds. Unfortunately, the new Direct Tax Code has closed off this gateway to equities.
Removal of ELSS from 80C Unfortunate
For savers and investors, who were living in dread of new Direct Tax Code (DTC) completely transforming their tax-planning approach, the new law must come as a relief. There are two main reasons for this. One, generally, the basic structure and the approach to taxation is very much the same. And two, specifically, long-term capital gains on equity and equity-backed mutual funds remain untaxed.
The retention of the zero-tax rate on long-term equity gains is probably the fundamental difference between the DTC as it was proposed originally and the shape it has finally taken. However, on a relative basis, long-term capital gains are now more attractive by a smaller margin than earlier. Since short-term gains are now taxed effectively at half the rate of the income tax slab the investor is in, they can be no more than 15 per cent and potentially as low as 5 per cent. The basic bias of the tax laws for shorter-term gains remains intact.
For mutual fund investors, there are two big changes. One, the tax saving funds — the so-called equity-linked savings schemes (ELLS) — funds will be history after the act comes into force. What used to be the section 80C deductions are now applicable to much smaller range of investments. This is unfortunate — ELSS funds were important in being tax-saving investment, which brings the benefits of equity returns. ELSS funds also have another benefit. For many retail investors, they tend to be gateway products in which the investor gets the first taste of equity investing and mutual funds. The tax-savings attract people to these funds and the three year lock-in generally ensures that investors get good returns. This experience converts many of these investors to investing in equity mutual funds. Under the DTC, 80C-type benefits are limited only to term insurance, Provident Fund (PF), Public Provident Fund (PPF) and the New Pension System (NPS). Of these, only th e NPS offers some equity exposur -- only up to 50 per cent and with a lock-in to retirement age.
The other change is the imposition of tax on dividends distributed by mutual funds. In theory, this has been imposed on unit-linked insurance plans (ULIPs) as well but that’s just a characteristically fake attempt to show that the government is treating mutual funds and ULIPs similarly. In reality, ULIPs don’t actually pay dividends so this measure hits only mutual fund investors. Worse, this tax will be a disproportionately harder hit on older investors, who rely on mutual funds to provide regular income. Amongst fund companies, I would expect it to be a disproportionately harder hit on someone like UTI Mutual Fund, which has historically been stronger among this class of investors. For investors who understand the mechanics of fund dividend, it would be a better strategy now to derive regular income from redemptions rather than dividends. As long as they avoid short-term capital gains tax by not redeeming within one year of investing, they will find it better to simply redeem a regular income. Fund companies already offer a facility for this called systematic withdrawal plan (SWP).
Incidentally, the new tax code has added art and paintings to the list of assets which qualify as investments. These will now be available for a reduction of capital gains tax by becoming eligible for indexation of acquisition cost. Given the impossibility of nailing down an unambiguous valuation for all but a handful of art, I fully expect this to become a handy loophole for creating capital losses and gains by the art-owning classes. One can also look forward to a recurrence of the plague of art funds that were floated 2006 and 2007.
-- DhirendraKumar
-- Value Research
Removal of ELSS from 80C Unfortunate
For savers and investors, who were living in dread of new Direct Tax Code (DTC) completely transforming their tax-planning approach, the new law must come as a relief. There are two main reasons for this. One, generally, the basic structure and the approach to taxation is very much the same. And two, specifically, long-term capital gains on equity and equity-backed mutual funds remain untaxed.
The retention of the zero-tax rate on long-term equity gains is probably the fundamental difference between the DTC as it was proposed originally and the shape it has finally taken. However, on a relative basis, long-term capital gains are now more attractive by a smaller margin than earlier. Since short-term gains are now taxed effectively at half the rate of the income tax slab the investor is in, they can be no more than 15 per cent and potentially as low as 5 per cent. The basic bias of the tax laws for shorter-term gains remains intact.
For mutual fund investors, there are two big changes. One, the tax saving funds — the so-called equity-linked savings schemes (ELLS) — funds will be history after the act comes into force. What used to be the section 80C deductions are now applicable to much smaller range of investments. This is unfortunate — ELSS funds were important in being tax-saving investment, which brings the benefits of equity returns. ELSS funds also have another benefit. For many retail investors, they tend to be gateway products in which the investor gets the first taste of equity investing and mutual funds. The tax-savings attract people to these funds and the three year lock-in generally ensures that investors get good returns. This experience converts many of these investors to investing in equity mutual funds. Under the DTC, 80C-type benefits are limited only to term insurance, Provident Fund (PF), Public Provident Fund (PPF) and the New Pension System (NPS). Of these, only th e NPS offers some equity exposur -- only up to 50 per cent and with a lock-in to retirement age.
The other change is the imposition of tax on dividends distributed by mutual funds. In theory, this has been imposed on unit-linked insurance plans (ULIPs) as well but that’s just a characteristically fake attempt to show that the government is treating mutual funds and ULIPs similarly. In reality, ULIPs don’t actually pay dividends so this measure hits only mutual fund investors. Worse, this tax will be a disproportionately harder hit on older investors, who rely on mutual funds to provide regular income. Amongst fund companies, I would expect it to be a disproportionately harder hit on someone like UTI Mutual Fund, which has historically been stronger among this class of investors. For investors who understand the mechanics of fund dividend, it would be a better strategy now to derive regular income from redemptions rather than dividends. As long as they avoid short-term capital gains tax by not redeeming within one year of investing, they will find it better to simply redeem a regular income. Fund companies already offer a facility for this called systematic withdrawal plan (SWP).
Incidentally, the new tax code has added art and paintings to the list of assets which qualify as investments. These will now be available for a reduction of capital gains tax by becoming eligible for indexation of acquisition cost. Given the impossibility of nailing down an unambiguous valuation for all but a handful of art, I fully expect this to become a handy loophole for creating capital losses and gains by the art-owning classes. One can also look forward to a recurrence of the plague of art funds that were floated 2006 and 2007.
-- DhirendraKumar
-- Value Research
Requirement - Firm registration number (FRN) allotted by ICAI
Announcement on – Requirement to mention the firm registration number allotted by ICAI in all reports issued, including certificates, by members of the ICAI - (16-08-2010)
--------------------------------------------------------------------------------
ANNOUNCEMENT FOR THE ATTENTION OF THE MEMBERS
Attention of the members is invited to the announcement regarding requirement relating to mentioning the firm registration number in the audit reports and resolution passed by the company for appointment of statutory auditors, published on page 1312 of the February 2010 issue of the Journal.
The Council of the Institute of Chartered Accountants of India, in terms of the decision taken at the 296th meeting held in June 2010 has decided to extend the requirement to mention the firm registration number to all reports issued pursuant to any attestation engagement, including certificates, issued by the members as proprietor of/ partner in the said firm. The requirement shall apply where such firm registration number has been allotted by the Institute of Chartered Accountants of India.
The Council further decided to make this requirement effective for all attestation reports/ certificates issued on or after 1st October, 2010.
--------------------------------------------------------------------------------
ANNOUNCEMENT FOR THE ATTENTION OF THE MEMBERS
Attention of the members is invited to the announcement regarding requirement relating to mentioning the firm registration number in the audit reports and resolution passed by the company for appointment of statutory auditors, published on page 1312 of the February 2010 issue of the Journal.
The Council of the Institute of Chartered Accountants of India, in terms of the decision taken at the 296th meeting held in June 2010 has decided to extend the requirement to mention the firm registration number to all reports issued pursuant to any attestation engagement, including certificates, issued by the members as proprietor of/ partner in the said firm. The requirement shall apply where such firm registration number has been allotted by the Institute of Chartered Accountants of India.
The Council further decided to make this requirement effective for all attestation reports/ certificates issued on or after 1st October, 2010.
Important notification relating to filing of Balancesheet and Annual Return in MCA 21 portal
MINISTRY OF CORPORATE AFFAIRS
GOVERNMENT OF INDIA
DEAR CORPORATES,
TO AVOID LAST MINUTE RUSH AND SYSTEM CONGESTION IN MCA21 DUE TO HEAVY FILING IN LAST 10 DAYS OF THE MONTHS OF OCTOBER AND NOVEMBER 2010, IT IS REQUESTED THAT FILING OF ANNUAL RETURN AND BALANCE SHEET MAY BE DONE IN THE FOLLOWING ORDER:-
| Company Names starting with | Sep-10 | Oct-10 | Nov-10 |
| Alphabets A to D | All days | 1 to5 | 1 to5 |
| Alphabets E to K | do | 6 to 10 | 6 to 10 |
| Alphabets L to Q | do | 11 to 15 | 11 to 15 |
| Alphabets R & S | do | 16 to 20 | 16 to 20 |
| Alphabets T to Z | do | 21 to 25 | 21 to 25 |
| Remaining/ Left out companies | do | 26 to 31 | 26 to 30 |
YOU ARE REQUESTED TO PLAN YOUR ANNUAL GENERAL MEETING AND FILING ACCORDINGLY.
Change in DSC Registration Procedure
Change in procedure for registration of Digital Signature Certificate (effective from 17/08/2010) and FAQs
Direct Download Link :
https://docs.google.com/leaf?id=0B-0hzoMM8_XZZmUwMzIzYzQtODYzMS00OTU1LWI2ZTYtMzk3N2Q1OWM4ZGYx&sort=name&layout=list&num=50
Source Link :
https://incometaxindiaefiling.gov.in/portal/downloads10-11/itr/Procedure%20for%20Registration%20of%20Digital%20Signature%20and%20Upload%20of%20Income%20Tax%20Returns%20using%20Digital%20Signature.pdf
Direct Download Link :
https://docs.google.com/leaf?id=0B-0hzoMM8_XZZmUwMzIzYzQtODYzMS00OTU1LWI2ZTYtMzk3N2Q1OWM4ZGYx&sort=name&layout=list&num=50
Source Link :
https://incometaxindiaefiling.gov.in/portal/downloads10-11/itr/Procedure%20for%20Registration%20of%20Digital%20Signature%20and%20Upload%20of%20Income%20Tax%20Returns%20using%20Digital%20Signature.pdf
NEW FORMS - MCA
NEW VERSION OF FOLLOWING FORMS TO BE INTRODUCED BY THE MINISTRY OF CORPORATE AFFAIRS
* New version of Form 1, Form 1AA, Form 4, Form 4C, Form 15, Form 20A,Form 20B, Form 22, Form 22B, Form 23, Form 23AA, Form 25C, Form 44,Form 49, Form 52, Form 61, Form DD-B, Form I- Cost Audit Report and
Form 67 will be available on the Portal, effective 1st August, 2010.Therefore please be informed the clients to use new version w.e.f. 1st August,2010 (6.00 AM) as the current version of these forms will be discontinued.
Make sure to upload your old version forms (already filled by you) on or before 31.07.2010.
Courtesy :
CA.S.Ramamoorthy
Madurai
* New version of Form 1, Form 1AA, Form 4, Form 4C, Form 15, Form 20A,Form 20B, Form 22, Form 22B, Form 23, Form 23AA, Form 25C, Form 44,Form 49, Form 52, Form 61, Form DD-B, Form I- Cost Audit Report and
Form 67 will be available on the Portal, effective 1st August, 2010.Therefore please be informed the clients to use new version w.e.f. 1st August,2010 (6.00 AM) as the current version of these forms will be discontinued.
Make sure to upload your old version forms (already filled by you) on or before 31.07.2010.
Courtesy :
CA.S.Ramamoorthy
Madurai
Thursday, September 9, 2010
E-Learning Module on Corporate Governance
Press Information Bureau
Government of India
Ministry of Corporate Affairs
Shri Salman Khurshid to launch an E-Learning Module on Corporate Governance
Shri Salman Khurshid, Minister of Corporate Affairs, will launch here tomorrow evening(25-Aug-2010) an e-learning module on Corporate Governance: Voluntary Guidelines 2009. It will be a joint effort of the Ministry of Corporate Affairs and Dun & Bradstreet India. The Voluntary Guidelines issued by the Ministry are intended to be adopted by the Corporates so that by virtue of Good Corporate Governance they not only enhance their value but also gain stakeholders’ trust thereby leading to robust development of capital market, economy of the country and also help in the evolution of a vibrant and constructive shareholders’ activism. By adopting these Voluntary Guidelines, Indian Corporates can set global benchmark for good Corporate Governance. The e-learning module being launched will present these Guidelines in a more interesting, explanatory and interactive way.
Shri R. Bandyopadhyay, Secretary Ministry of Corporate Affairs, will also be present. Representatives from a number of leading companies will also grace the occasion.
-----------------------------------
CORPORATE GUIDELINES VOLUNTARY GUIDELINES 2009
LINK UPDATE for E-Learning Module on Corporate Governance :
http://www.dnb.co.in/emodule/Index.html
File download (PDF Format)
http://www.dnb.co.in/emodule/refrence/Corporate_Governance_Voluntary_Guidelines_2009.pdf
KKP/ska
Government of India
Ministry of Corporate Affairs
Shri Salman Khurshid to launch an E-Learning Module on Corporate Governance
Shri Salman Khurshid, Minister of Corporate Affairs, will launch here tomorrow evening(25-Aug-2010) an e-learning module on Corporate Governance: Voluntary Guidelines 2009. It will be a joint effort of the Ministry of Corporate Affairs and Dun & Bradstreet India. The Voluntary Guidelines issued by the Ministry are intended to be adopted by the Corporates so that by virtue of Good Corporate Governance they not only enhance their value but also gain stakeholders’ trust thereby leading to robust development of capital market, economy of the country and also help in the evolution of a vibrant and constructive shareholders’ activism. By adopting these Voluntary Guidelines, Indian Corporates can set global benchmark for good Corporate Governance. The e-learning module being launched will present these Guidelines in a more interesting, explanatory and interactive way.
Shri R. Bandyopadhyay, Secretary Ministry of Corporate Affairs, will also be present. Representatives from a number of leading companies will also grace the occasion.
-----------------------------------
CORPORATE GUIDELINES VOLUNTARY GUIDELINES 2009
LINK UPDATE for E-Learning Module on Corporate Governance :
http://www.dnb.co.in/emodule/Index.html
File download (PDF Format)
http://www.dnb.co.in/emodule/refrence/Corporate_Governance_Voluntary_Guidelines_2009.pdf
KKP/ska
Circular on Ongoing Works Contract
Circular No. 128/10/2010-ST
F.No.354/141/2010-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
(Tax Research Unit)
*****
North Block, New Delhi,
24 thAugust, 2010.
To
Director General (Service Tax),
Director General (Central Excise Intelligence)
Director General (Audit)
Chief Commissioner of Central Excise and Service Tax (All)
Commissioner of Central Excise and Customs (All)
Commissioner of Central Excise and Service Tax (All)
Commissioner of Service Tax (All)
Madam/Sir,
Subject: Service tax on on-going works contracts entered into prior to 01.06.2007 – regarding –
It has been brought to the notice of the Board that the following confusions/disputes prevail with respect to long term works contracts which were entered into prior to 01.06.2007 (when the taxable service, namely, Works contract came into effect) and were continued beyond that date:
(i) While prior to the said date services like Construction; Erection, commissioning or installation; Repair services were classifiable under respective taxable services even if they were in the nature of works contract, whether the classification of these activities would undergo a change?
(ii) Whether in such cases of continuing contracts, the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 under Notification No. 32/2007-ST dated 22/05/2007 would be applicable?
2. The matter has been examined. As regards the classification, with effect from 01.06.2007 when the new service ‘Works Contract’ service was made effective, classification of aforesaid services would undergo a change in case of long term contracts even though part of the service was classified under the respective taxable service prior to 01.06.2007. This is because ‘works contract’ describes the nature of the activity more specifically and, therefore, as per the provisions of section 65A of the Finance Act, 1994, it would be the appropriate classification for the part of the service provided after that date.
3. As regards applicability of composition scheme, the material fact would be whether such a contract satisfies rule 3 (3) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. This provision casts an obligation for exercising an option to choose the scheme prior to payment of service tax in respect of a particular works contract. Once such an option is made, it is applicable for the entire contract and cannot be altered. Therefore, in case a contract where the provision of service commenced prior to 01.06.2007 and any payment of service tax was made under the respective taxable service before 01.06.2007, the said condition under rule 3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 01.06.2007 but no payment of service tax was made till the taxpayer opted for the composition scheme after its coming into effect from 01.06.2007, such contracts would be eligible for opting of the composition scheme.
4. The Board’s previous Circular No. 98/1/2008-ST dated 04.01.2008 and the ratio of judgement of the High Court of Andhra Pradesh in the matter of M/s. Nagarjuna Construction Company Limited vs. Government of India (2010 TIOL 403 HC AP ST) are in line with the above interpretation.
5. Trade Notice/Public Notice may be issued accordingly.
Yours faithfully,
(J.M. Kennedy)
Director (TRU)
Tel: 011-23092634
F.No.354/141/2010-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
(Tax Research Unit)
*****
North Block, New Delhi,
24 thAugust, 2010.
To
Director General (Service Tax),
Director General (Central Excise Intelligence)
Director General (Audit)
Chief Commissioner of Central Excise and Service Tax (All)
Commissioner of Central Excise and Customs (All)
Commissioner of Central Excise and Service Tax (All)
Commissioner of Service Tax (All)
Madam/Sir,
Subject: Service tax on on-going works contracts entered into prior to 01.06.2007 – regarding –
It has been brought to the notice of the Board that the following confusions/disputes prevail with respect to long term works contracts which were entered into prior to 01.06.2007 (when the taxable service, namely, Works contract came into effect) and were continued beyond that date:
(i) While prior to the said date services like Construction; Erection, commissioning or installation; Repair services were classifiable under respective taxable services even if they were in the nature of works contract, whether the classification of these activities would undergo a change?
(ii) Whether in such cases of continuing contracts, the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 under Notification No. 32/2007-ST dated 22/05/2007 would be applicable?
2. The matter has been examined. As regards the classification, with effect from 01.06.2007 when the new service ‘Works Contract’ service was made effective, classification of aforesaid services would undergo a change in case of long term contracts even though part of the service was classified under the respective taxable service prior to 01.06.2007. This is because ‘works contract’ describes the nature of the activity more specifically and, therefore, as per the provisions of section 65A of the Finance Act, 1994, it would be the appropriate classification for the part of the service provided after that date.
3. As regards applicability of composition scheme, the material fact would be whether such a contract satisfies rule 3 (3) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. This provision casts an obligation for exercising an option to choose the scheme prior to payment of service tax in respect of a particular works contract. Once such an option is made, it is applicable for the entire contract and cannot be altered. Therefore, in case a contract where the provision of service commenced prior to 01.06.2007 and any payment of service tax was made under the respective taxable service before 01.06.2007, the said condition under rule 3(3) was not satisfied and thus no portion of that contract would be eligible for composition scheme. On the other hand, even if the provision of service commenced before 01.06.2007 but no payment of service tax was made till the taxpayer opted for the composition scheme after its coming into effect from 01.06.2007, such contracts would be eligible for opting of the composition scheme.
4. The Board’s previous Circular No. 98/1/2008-ST dated 04.01.2008 and the ratio of judgement of the High Court of Andhra Pradesh in the matter of M/s. Nagarjuna Construction Company Limited vs. Government of India (2010 TIOL 403 HC AP ST) are in line with the above interpretation.
5. Trade Notice/Public Notice may be issued accordingly.
Yours faithfully,
(J.M. Kennedy)
Director (TRU)
Tel: 011-23092634
Indian Government - Totally online
Service Tax - Draft rules - Full text
The Govt has circulated a paper asking for public comments on the proposed amendments in service tax provisions by which the obligation to deposit the tax would arise on raising of invoice or payment whichever is earlier. This is a step towards the GST regime. You are aware that most of the time realisation of bills is delayed and many a time not paid at all. I also remember having read that there will not be any provision for refund if the bills are not realised for the prescribed period and/ or not paid at all.
The draft rules along with explanatory notes and the rationale behind mooting such amendment, can be downladed here :-
Download direct link : https://docs.google.com/document/edit?id=1NMbgTbFKacMxrlZ6Ts_dbwW_1KatIqiK3iCdCCDZU8Q&hl=en
The draft rules are also available on the sites:
http://www.cbec.gov.in/; http://www.taxindiaonline.com/
The draft rules along with explanatory notes and the rationale behind mooting such amendment, can be downladed here :-
Download direct link : https://docs.google.com/document/edit?id=1NMbgTbFKacMxrlZ6Ts_dbwW_1KatIqiK3iCdCCDZU8Q&hl=en
The draft rules are also available on the sites:
http://www.cbec.gov.in/; http://www.taxindiaonline.com/
Selection of cases for Scrutiny Financial Year 2010-11
1. Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year. Manual Selection for scrutiny this year will be limited only to a few cases listed below
2. List of cases selected during each month in accordance with selection criteria mentioned below shall be submitted by the Assessing officers to their respective Range heads by the 15th of the following month and also displayed on the notice Board of their offices .
3. These guidelines are meant only for the use of officers of the Income Tax Department. These are not to be disclosed even if a request is made under Right to Information Act, In view of the decision of the Central Information Commission in the case of Shri Kamal Vs Director (ITAII),CBDT(order no CIC/AT/2007/00617 dated 21.02.2008)
a) Value of International transaction as defined in 92B exceeds 15 Crore.
b) Cases involving addition in an earlier assessment year in excess of Rs 10 lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before on appellate authority.
c) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10 Lakh or more.
d) Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled:
i.There are no impounded books or documents.
ii.There is no retraction of disclosure, if any, made during the survey.
iii.Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
e) Assessment in search & Seizure cases to be made under section 158B, 158BC, 158BD, 153A,153C & 143(3) of the IT Act.
f) Assessment Initiated under section 147/148 of the IT Act.
g) Assessing officer may select any return for scrutiny after recording he reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS. These cases should be watched by CCIT/CIT in respect of the quality of assessment.
(F.NO.225/93/2009/ITA.II)
2. List of cases selected during each month in accordance with selection criteria mentioned below shall be submitted by the Assessing officers to their respective Range heads by the 15th of the following month and also displayed on the notice Board of their offices .
3. These guidelines are meant only for the use of officers of the Income Tax Department. These are not to be disclosed even if a request is made under Right to Information Act, In view of the decision of the Central Information Commission in the case of Shri Kamal Vs Director (ITAII),CBDT(order no CIC/AT/2007/00617 dated 21.02.2008)
a) Value of International transaction as defined in 92B exceeds 15 Crore.
b) Cases involving addition in an earlier assessment year in excess of Rs 10 lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before on appellate authority.
c) Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs 10 Lakh or more.
d) Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled:
i.There are no impounded books or documents.
ii.There is no retraction of disclosure, if any, made during the survey.
iii.Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.
e) Assessment in search & Seizure cases to be made under section 158B, 158BC, 158BD, 153A,153C & 143(3) of the IT Act.
f) Assessment Initiated under section 147/148 of the IT Act.
g) Assessing officer may select any return for scrutiny after recording he reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS. These cases should be watched by CCIT/CIT in respect of the quality of assessment.
(F.NO.225/93/2009/ITA.II)
Too many GAAPS
 Too many 'GAAPS' MOHAN R. LAVI Entities have taken unfair advantage of the hazy accounting norms making the ordinary shareholder an innocent sufferer. Here's an anecdote on how business is conducted in the US: "You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows." The remark could also reflect on the state of accounting standards in the US considering the frequent announcements regarding accounting restatements and relapses. IT majors Dell and HP have both been in the news for accounting alarms. THE DELL EPISODE A year-long investigation at Dell revealed that accountants and senior management cooked the books for more than three years, moving funds between accounts; hence, the company could show that it was meeting its quarterly targets. Dell's malfeasance included creating and releasing accrual and reserves for the purpose of enhancing internal performance measures, transferring excess accruals between liability accounts, and using excess balances to offset unrelated expenses in later periods. The adjustments were as much as several million dollars per quarter and went as deep as the accountant who passed the journal entry for quarterly sales. In addition, business unit executives provided incomplete finances to headquarters, and purposefully lied to auditors, providing incorrect or incomplete information. The company identified two major deficiencies: Control and reporting. Most of those involved have been given the boot, internal control procedures are being ring-fenced, and a $100 million penalty to the Securities and Exchange Commission (SEC) will mitigate further damage. REVENUE RECOGNITION The happenings at Dell reignite the debate between the rule-based and industry-specific US GAAP and the principle based International Financial Reporting Standards (IFRS). Entities such as Dell can typically have multiple arrangements in a normal sale transaction, ranging from hardware bundled with software to warranties. Dell adopted the Guidance from the Financial Accounting Standards Board (FASB) which allowed the use of the management's best estimate of selling price for individual elements of an arrangement, when neither vendor-specific objective evidence nor third-party evidence was available. In conjunction with the new guidance on multiple deliverable arrangements, the FASB also issued a new pronouncement that modifies the scope of the software revenue recognition guidance to exclude tangible products that contain both software and non-software components that function together to deliver the product's essential functionality. It is apparent that the bean counters at the company used the exhaustive guidance above as well as in SOP-97-2 on Software Revenue Recognition in the manner beneficial to them. While it is not appropriate to comment on audit without evidence, there have been instances wherein the Public Company Accounting Oversight Board (PCAOB) have mentioned in their inspection reports on audit firms about instances of sales-boosting to meet result expectations. Any document on risk management considers the tendency to fudge books to fulfil revenue targets a perceptible risk. The impact of the restatement for Dell could be 1 per cent of revenue and $50 million on net results. The last two persons at the corner office at HP have left under a cloud. Earning millions of dollars but tweaking expense reports for a few thousand dollars is a phenomenon that can be explained in psychological, and not accounting terms. The efficacy of the internal control mechanism can be questioned here, too. Hazy norms There have been far too many accounting accidents in the US, post-Enron for anyone to term the country's accounting and regulatory standards spotless. Entities have taken unfair advantage of the hazy accounting norms for special purpose entities or the vague disclosure norms for collaterised debt obligations, which has made the ordinary shareholder an innocent sufferer. There appear to be far too many accounting standards and pronouncements in the US, permitting an entity to tweak them as per its whims. The recent codification initiative of the FASB has merely organised the standards better, but it has done little to simplify them and has not reduced the problem of plenty. The US permits IFRS-compliant financial statements for non-US filers. But it is pussyfooting on accepting IFRS as an acceptable alternative for all. A change for change's sake could well do the trick in the US. (The author is a Bangalore-based chartered accountant.) URL: http://www.thehindubusinessline.com/2010/08/12/stories/2010081250191100.htm |
Ecofont - Economical Font
This font set looks a lot like the familiar Arial typeface, but with one key difference. Each letter has lots of holes punched in it, and so requires less ink to print—and that also means you'll spend less money on ink cartridges.
EcoFont does this without too much hassle for user. It is a simple looking font with holes. Due to holes, less ink is used to print documents. Hence, overall it can save upto 20% of ink. “…
After Dutch holey cheese, there now is a Dutch font with holes as well.”
Source : http://www.ecofont.com/en/products/green/font/download-the-ink-saving-font.html
Download Direct Link : https://docs.google.com/leaf?id=0B-0hzoMM8_XZMjczMTE2YjgtZmFlMy00NWUzLThlODQtNWQxN2ZjM2YzM2Ey&hl=en&authkey=CNj4qdQI
If this is too much hassle, try using Garamond font already installed on the computer for some ink saving!
SAVE TREES !!! SAVE EARTH !!! SAVE MONEY TOO !!!
EcoFont does this without too much hassle for user. It is a simple looking font with holes. Due to holes, less ink is used to print documents. Hence, overall it can save upto 20% of ink. “…
After Dutch holey cheese, there now is a Dutch font with holes as well.”
Source : http://www.ecofont.com/en/products/green/font/download-the-ink-saving-font.html
Download Direct Link : https://docs.google.com/leaf?id=0B-0hzoMM8_XZMjczMTE2YjgtZmFlMy00NWUzLThlODQtNWQxN2ZjM2YzM2Ey&hl=en&authkey=CNj4qdQI
If this is too much hassle, try using Garamond font already installed on the computer for some ink saving!
SAVE TREES !!! SAVE EARTH !!! SAVE MONEY TOO !!!
Subscribe to:
Posts (Atom)