bangalore branch of icai novemeber newsletter

(Set up by an Act of Parliament)

The Institute of Chartered Accountants of India

BangaloreN e w s l e t t e rBranch of SIRC

Volume 01 | Issue 04 | November, 2012 | Pages : 20 ` 5/- per copyFor Private Circulation only

CPE

- N

ov. 2

012

45

English Monthly

Wish all our membersa very Happy and Prosperous Deepavali




PÀ£ÀßqÀ gÁeÉÆåÃvÀìªÀzÀ ±ÀÄ¨sÁ±ÀAiÀÄUÀ¼ÀÄPÀ£ÀßqÀ gÁeÉÆåÃvÀìªÀzÀ ±ÀÄ¨sÁ±ÀAiÀÄUÀ¼ÀÄPÀ£ÀßqÀ gÁeÉÆåÃvÀìªÀzÀ ±ÀÄ¨sÁ±ÀAiÀÄUÀ¼ÀÄ

gÁµÀÖç PÀ« PÀÄªÉA¥ÀÅgÀªÀgÀ¥ÀzÀå¢AzÀ DAiÀÄÝ ¸ÀÆàw ¸Á®ÄUÀ¼ÀÄð

gÁµÀÖç PÀ« PÀÄªÉA¥ÀÅgÀªÀgÀ¥ÀzÀå¢AzÀ DAiÀÄÝ ¸ÀÆàw ¸Á®ÄUÀ¼ÀÄð

"PÀ£ÁðlPÀ JA§ÄzÉÃ£ÀÄºÉ¸ÀgÉ §jAiÀÄ ªÀÄtÂÚUÉ ?

ªÀÄAvÀæ PÀuÁ ! ±ÀQÛ PÀuÁ !vÁ¬Ä PÀuÁ ! zÉÃ« PÀuÁ !¨ÉAQ PÀuÁ ! ¹r®Ä PÀuÁ !PÁªÀ PÉÆ®ÄªÀ M®ªÀ §®ªÀ¥ÀqÉzÀ ZÀ®zÀ ZÀAr PÀuÁ !

IÄ¶AiÀÄ PÁtâ PÀtÂÚUÉ !"

"PÀ£ÁðlPÀ JA§ÄzÉÃ£ÀÄºÉ¸ÀgÉ §jAiÀÄ ªÀÄtÂÚUÉ ?

ªÀÄAvÀæ PÀuÁ ! ±ÀQÛ PÀuÁ !vÁ¬Ä PÀuÁ ! zÉÃ« PÀuÁ !¨ÉAQ PÀuÁ ! ¹r®Ä PÀuÁ !PÁªÀ PÉÆ®ÄªÀ M®ªÀ §®ªÀ¥ÀqÉzÀ ZÀ®zÀ ZÀAr PÀuÁ !

IÄ¶AiÀÄ PÁtâ PÀtÂÚUÉ !"

Major Programmes in November

Workshop on

VAT

Workshop on

Enabling Service Tax

Practice(Level-II)

2

Managing Committee's Communique . . .Managing Committee's Communique . . .Dear Members,

October 2012Activities

¡**ø¶* ]JEx•C…d*§Õ*|* ¿*lÃJ¿*≈lÁ*\*l

dJ≈lløf≈l Ex•…Á*l\*¡x 'h®x…*l ©Jfi

Øh˘>lhËl|*l *•ml dxÁx≈lÂ¡x ]Jfi

¿J”|*—¡xÚ ¡*lDdJÁ* e…ÕJv‚ ÃJ±x

∂hÁ*r *lf>l*løÕ*Ï|*l F¡*y≈l ∂©x

The month of November in Karnataka triggers the

consciousness of Karnataka language among the people of

Karnataka. Bangalore branch of SIRC of ICAI wishes all the

Members, Students and General Public A HAPPY

KANNADA RAJYOTHSAVA. With the increasing volume

of practice in the field of local VAT laws in our country, the

well-versed knowledge of local languages is assuming

importance for all our members, more particularly for

members in practice. VAT Laws generally framed and

administered by the State Governments and use the local

language for day-to-day implementation of such laws. Be it

Kannada, Tamil, Telugu, Malayalam, depending on the state

in which the member is practicing, the knowledge of local

language carries considerable comfort level while dealing

with the VAT authorities. Therefore the speaking, reading and

writing skills in Kannada for our members in Karnataka are

important from practicing point of view and also respecting

such a wonderful language.

Considering the importance of complying with the local

language, ICAI New Delhi has issued a notification directing

all the Branches to display the name of the Institute in local

language on the premises of the branches. Accordingly, in

Bangalore branch, we have displayed the name of the

Institute prominently in Kannada language. Kannada as a

language has rich literary history and boasts of having eight

GNANA PEETA awards to its credit, more than any other

language in this country. Through this communiqué, our

branch takes this opportunity to support the cause of

undivided state of Karnataka by means of consolidated land

and language.

A well-known Kannada poet emphasizes the importance of

mother tongue along with need of coordinating with other

languages in the following lines.

Basics of Computer: This program is specially designed

for Beginners and Senior CAs.

CPE Tele conference

Study circle meetings

Impact Seminars

•

•

•

•

•

•

•

•

•

•

•

•

Meeting and Interactive session with Chief

Commissioners and Commissioners of Income Tax

This flagship program is one of the best programs on

Service Tax, and this three day program is going to be

addressed by the speakers of national and international

repute from across the country.

Workshop on VAT

Interactive Session with Income Tax Department

AppellateAuthorities.

Basics of Computer: The similar program conducted

during October 2012 was very well appreciated by senior

members and on request the same program is repeated

during November 2012.

CPE Tele conference

Study circle meetings

Impact Seminars

After successfully completing the first batch of RCA during

June this year, Bangalore Branch is commencing the second

batch in November. We request members of the profession to

refer their clients' accountants and encourage the Branch's

initiative. The glimpse of RCAis as follows;

This Refresher Course for Accountants (RCA) course is an

initiative of the ICAI as a Corporate Social Responsibility

and Bangalore Branch of SIRC of ICAI has designed this

course in a most befitting manner to empower the

participants in the area of Accounts, Taxation & Corporate &

Allied Laws. This course will equip them with the skills

necessary for improved performance as well as to motivate

them to reach new heights in the field of Finance &

Accounting.

All the programs at Bangalore Branch are live telecasted,

archived and available on demand. All the recorded

programs of Bangalore branch are hosted in the Bangalore

branch webs i te , to watch them please vis i t

www.bangaloreicai.org/resources/icai-tube.

We wish all the members and their family a HAPPY and

SAFE DEEPAVALI.

Workshop on Enabling Service Tax Practice (Level-

II):

November 2012 Activities

Refresher Course forAccountants (RCA)

Web-casting & ICAI Tube

Managing Committee

3 November2012

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

DISCLAIMER: The Bangalore Branch of ICAI is not in anyway responsible for the result of any action taken on the basis of the advertisement publishedin the newsletter. The members, however, bear in mind the provision of the code of ethics while responding to the advertisements. The views and opinionsexpressed or implied in the Branch Newsletter are those of the authors and do not necessarily reflect that of Bangalore Branch of ICAI.

Note : High Tea at 5.30 pm for programmes at 6.00 pm at Branch Premises.

Advertisement Tariff for the Branch NewsletterColour full pageOutside back ` 30,000/-Inside back ` 24,000/-

Advt. material should reach us before 22nd of previous month.

Inside Black & WhiteFull page ` 15,000/-Half page ` 8,000/-Quarter page ` 4,000/-

Editors & Sub Editors : Managing Committee

Cover Page SubhashitaTranslation by : CA. Allama Prabhu M.S.

CALENDAR OF EVENTS - November & December 2012Date/Day Topic /Speaker Venue/Time CPE Credit

07.11.12 CENVAT Credit under Input Services Branch PremisesWednesday CA. Nayaz Pasha 06.00pm to 08.00pm15.11.12 Domestic Transfer Pricing Provisions Branch PremisesThursday CA. B. P. Sachin Kumar 06.00pm to 08.00pm16.11.12 CPE Teleconference Programme on “XBRL” Branch PremisesFriday CA. Kanagaraj Antonysamy 11.00am to 01.00pm16.11.12 Transfer Pricing - TNMM - FAR Adjustment Branch PremisesFriday CA. K. K. Chythanya 05.30pm to 07.30pm19.11.12 Basics of Computer for beginners and Senior CAs ITT South Centre, ICAIMonday to as relevant to CA Profession Netkallappa Circle23.11.12 Basavanagudi, B'lore-4Friday Fees: `̀̀̀̀ 1000/- Ph: 080-266214340

Details on page No: 18 6.00pm to 08.00pm21.11.12 Workshop on VAT Branch PremisesWednesday 04.00pm to 08.00pmto 24.11.12 Delegate Fee: `̀̀̀̀ 1000/-Saturday For details visit Bangalore Branch website

23.11.12 CPE Teleconference Programme Branch PremisesFriday 11.00am to 01.00pm28.11.12 Interactive Session with Branch PremisesWednesday Income Tax Department Appellate Authorities 05.30pm to 08.30pm30.11.12 Workshop on Enabling Service Tax Practice(Level - II) Branch PremisesFriday & 10.00am to 05.30pm02.12.12Sunday Delegate Fee: `̀̀̀̀ 2000/- Details on page No: 1812.12.12 LLP Taxation Branch PremisesWednesday CA. Prinut Shah 06.00pm to 08.00pm

Live TV & ICAI TubeAll the programmes of Bangalore branch are live telecasted. To watch the programme, please visit :

www.bangaloreicai.org / resources/livetv.‘ICAI TUBE’ Bangalore branch’s initiative of archiving and streaming of programs in the form of videos

was well appreciated by the members. All the recorded programs of Bangalore branch are hosted in theBangalore branch website, to watch these videos please visit www.bangaloreicai.org/resources/icai-tube

for the benefit of the members. We welcome your suggestion & feedback to serve you better.

2 hrs

2 hrs

2 hrs

10hrs

3 hrs

16hrs

18hrs

2 hrs

2 hrs

2 hrs

4November2012

TAX UPDATES SEPTEMBER 2012CA. Chythanya K.K., B.Com, FCA, LL.B., Advocate

VAT, CST, ENTRY TAX,PROFESSIONAL TAXPARTS DIGESTED:a) 53 VST – Part 4 to 5b) 54 VST – Part 1 & 2c) 17 KCTJ – Part 6

Reference / Description[2012] 53 VST 382 (Mad. – HC):Sriram Refrigerator Industries Ltd.v. State of Tamil Nadu - In the instantcase the Madras High Court held thatthe replacement of a defectivecompressor with a re-conditionedcompressor of the same model is nota contract for sale of compressors.The transaction had to be treated asworks contract.With due respect, it may be noted thatthe aforesaid decision requires areview. For, the above is a clear caseof an exchange of a defective modelwith a rectified model. In such case,there cannot be a case of transfer ofproperty in goods involved inexecution of works contract as nolabour at all is bestowed on the goodsof the customer, which is a sine quanon for a valid works contract. Theabove is a clear case of barter notexigible to tax. If separate monetaryconsideration is agreed, it may be caseof purchase of the defective part andsale of the rectified part. In either case,it cannot be called as a works contract.[2012] 53 VST 489 (Karn. – HC):Mitsubishi Corporation v. State ofKarnataka & Others - In this case,Mitsubishi imported parts, assignedit to BEML for manufacturing onlabour contract basis and moved thesame to Delhi to be delivered to DelhiMetro. Before delivering rail cars to

Delhi Metro, signalling equipmentswere fixed in Delhi. Mitsubishiargued that it is not a case of interstatesale, but a stock transfer, particularlywhen certain value addition tookplace at the place of destination.In the instant case the Karnataka HighCourt held that if the goods aremanufactured and transported toanother State, merely because beforedelivery of the goods in terms of thecontract some additional fixture wereembedded to that manufacturedgoods, it would not nullify the effectof the goods being transported after itis being manufactured. In otherwords, the Court held that the effectof the inter-State sale is not effacedby such additions to the manufacturedproduct.Further, the Court observed that underSection 9 of the CST Act, the Statefrom which movement of goodscommences, is the authority to levytax. In the instant case, the movementof goods commenced from the Stateof Karnataka. Therefore, the Courtheld that the State of Karnataka is theauthority to levy tax under the CSTAct.In the aforesaid interesting case, thehonourable Karnataka High Courtconsidered that the rail cars thatmoved from Bangalore to Delhi, were,for a specific customer. It was thusheld that it is a clear case of interstatesale despite some value additiontaking place in the state of destination.It was further held that no CST isrequired to be paid in Karnataka, inrespect of value addition that tookplace in Delhi. By holding so, theKarnataka High Court applied the

principle enshrined in Explanation tosection 4 of the CST Act.

INCOME TAXPARTS DIGESTED:a) 346 ITR – Part 5 to 7b) 209 Taxman – Part 2 to 6c) 18 ITR (Trib) – Part 3 to 5d) 138 ITD – Part 2 to 4e) 145 TTJ – Part 1 to 3f) 148 TTJ – Part 2, 3 & 5g) 39 CAPJ – Part 5h) 44-A BCAJ – Part 6i) 61 TCA – Part 3j) 7 International Taxation – Part

3Reference / Description

[2012] 346 ITR 375 (Raj):Maheshwari Agro Industries v.Union of India and Others - In theinstant case, the Assessing Officerpassed the assessment order bymaking additions to the declaredincome, wherein the total incomeassessed by him was almost 47 timesthe income declared by the Petitioner.The Petitioner filed an appeal beforethe Commissioner (Appeals). He alsofiled an application under 220(6) ofthe Act for stay of the entire disputeddemand before the Assessing Officer.The Assessing Officer rejected thesaid application on the ground that thebusiness of the Petitioner was closed,therefore, to protect the interest of therevenue it was not possible for himto linger on recovery on demand.The Rajasthan High Court held asfollows:a) That the application cannot berejected merely describing it to beagainst the interests of the Revenueif recovery is not made, if taxdemanded is twice or more of thedeclared tax liability.

5 November2012


b) That the last words of sub-Section(6) to Section 220, i.e. “as long assuch appeal remains undisposed of”are not without significance. Themandate of Parliament in respect ofsub-section (6) seems to be that theAssessing Officer should abide by andbeing bound by the decision of theappellate authority, should normallywait for the fate of such appeal filedby the assessee.c) That the Assessing Officer’sdiscretion of not treating the assesseein default, conferred under sub-Section(6) should ordinarily be exercised infavour of the assessee, unlessoverriding and overwhelming reasonsare there to reject the application of theassessee under Section 220(6).d) That the powers under Section220(6) of the Act also have to beexercised in accordance with the letterand spirit of Instruction No. 96, dated21.08.1969, which even now holdsthe field and its spirit survives in allsubsequent CBDT Circulars and thesame is binding on all the assessingauthorities created under the Act.e) That the tendency of making highpitched assessments may result inserious prejudice to the assessee andmiscarriage of justice and sometimesmay even result into insolvency orclosure of the business if such powerwas to be exercised only in a prorevenue manner. It may be likeexecution of death sentence.The aforesaid decision should act asan eye-opener to the Departmentwhich has the tendency of makinghigh-pitched assessment and goingafter the recovery of the same beingoblivious to the fact that such actionmay result in closure of the businessitself.[2102] 346 ITR 467 (Karn): CIT andAnother v. De Beers India Minerals

P. Ltd. - In the instant case theAssessees were private companiesengaged in the business ofprospecting and mining for diamondsand other minerals. They had beengranted licences by the StateGovernment of Karnataka, AndhraPradesh and Chhattisgarh for mineralreconnaissance activities. For thepurpose of carrying out geophysicalsurvey, the assessee entered into anagreement with a NetherlandsCompany called Fugro. Assessee paidconsideration for the technicalservices rendered by them.The Assessing Officer treated theconsideration paid to Fugro as fallingwithin the definition of fees fortechnical services under Article 12 ofthe DTAA between India andNetherlands read with Section 90 ofthe Act and also held that the paymentwas for development and transfer ofa technical plan/design.The Honourable Karnataka HighCourt held that the Fugro has notmade available technical expertise,skill or knowledge in respect of data,photographs and maps given to theAssessees. Further, it held that theAssessees could not apply such data,photographs and maps independentlyand without the assistance of theFugro and undertake such surveyindependently. Therefore, the Courtheld that the said transaction cannotbe regarded as ‘technical services’.Further, the Court observed that underthe terms of agreement, the ownershipof the data collected or otherdocuments had vested with theAssessees and not with the Fugro.Therefore, the Court held that whenthe Fugro was never the owner of thesaid data, the question of transfer ofsuch data does not arise and hence thesaid transaction does not amounts to

development and transfer of plans anddesigns.The Karnataka High Court in theaforesaid decision (arguably the firstdecision of its kind by any HighCourt) elaborately dealt with theconcept of ‘make available’. In thewell reasoned judgement, thehonourable High Court succinctlyexplained the circumstances when thetechnology could be said to be madeavailable. Unless the recipient of theservice is in a position to apply thetechnology, inasmuch as he mayrender the service provider redundant,there cannot be making available oftechnology.[2012] 346 ITR 557 (AAR); [2012]24 taxmann.com 137 (AAR – NewDelhi): Orient Green Power Pte.Ltd., In Re (AAR) - In the instant casethe Applicant is a companyincorporated in Singapore, holding99.61 per cent of the share capital inOGPL, India. The Applicant also held49.75 per cent of the share capital inB, India. The Applicant transferred itsshares held in B, India, to OGPL Indiawithout consideration. According tothe Applicant, the transaction cannotbe said to have generated any taxableincome to the Applicant and iscovered under Section 47(iii) of theAct.The Authority for Advance Rulings,declined the prayer to rule on thequestions formulated on the materialsmade available and left open all thequestions for decision before theauthorities under the Act, aftermaking due inquiry into all relevantaspects.But, it opined that a gift by acorporation to another corporation(though a subsidiary or an associateenterprise, which always claimed tobe independent for tax purposes) is a

6November2012

strange transaction. A corporationgiving away its assets free to anothereven orally can only be aidingdubious attempts at avoidance of taxto be paid under the Act. Therefore, itfound it possible to say that a gift ofshares held in a company by onecompany to another company wouldnot fall under Section 47(iii) of theAct.With due respect, the honourableauthority ought to have restricted itsscope to examining the existingprovisions of law and not gone beyondthe same. As long as section 47 (iii)does not restrict the exemption inrespect of gifts to individuals alone,it is not for the authority to decide thatthe said clause is not applicable tocompanies. If for any reason, theParliament considers that theaforesaid clause is open to misuse, itis for the Parliament to step in. In fact,such provision may already be seenin the form of section 56 (2) (viia).[2012] 25 taxmann.com 261 (Mad. -HC); [2012] 209 Taxman (BN –XIV) Part 5: Chennai Port Trust v.ITO - In the instant case, theAssessee-port trust gave a workscontract to a joint venture consistingof one Indian and a foreign companyfor executing its break waterconstruction project. In respect ofexecution of work, Assessee deductedtax at rate of 2 per cent treating jointventure as an Association of Persons(AOP). The Assessing Officer refusedto accept the same and levied interestunder Section 201(1A) of the Act.The Madras High Court held thatsince there was debate regardingstatus of joint venture as AOP,Assessee could not be declared as anassessee-in-default, so as to attractinterest under Section 201(1A) of theAct.

[2012] 209 Taxman 519 (Raj. - HC);22 taxmann.com 248 (Raj. - HC):CIT v. Hindustan Zinc Ltd. - In theinstant case, the Commissioner(Appeals) had set aside the order ofAssessing Officer on ground that hefailed to carry out directions given inTribunal’s order passed in earlierproceedings and hence he directed theAssessing Officer to make freshassessment in accordance with thedirections of the Tribunal.Order of the Commissioner (Appeals)was challenged by the Revenue on theground that the Commissioner(Appeals) had no authority to remandthe matter to the Assessing Officerafter amendment to Section 251(1)(a)w.e.f. 1.6.2001 which took away hispowers in respect of remanding thematters to the Assessing Officer tomake fresh assessment.The Rajasthan High Court held thateven if amendment in Section251(1)(a) has been made so as toprovide that Commissioner (Appeals)may not set aside assessment and refercase back to Assessing Officer formaking fresh assessment to help inearly finalization of assessment, itcannot be assumed that theCommissioner (Appeals) is divestedof power to annul assessment and passappropriate consequential order.The Court held that whenCommissioner (Appeals) whilehearing an appeal against an order ofassessment passed after directions ofTribunal, which was found contraryto Tribunal’s directions and directingAssessing Officer to carry outrequirements of order of Tribunal, hispower to annul assessment order,could not be denied.[2012] 209 Taxman 529 (Karn. -HC); 19 taxmann.com 105 (Karn. -HC): CIT v. Sanu Family Trust - In

the instant case the Karnataka HighCourt held that where Commissioner(Appeals) relied upon informationwhich was furnished by Assessee inview of direction given byCommissioner (Appeals) for effectivedisposal of appeal, there was noviolation of Rule 46A of the IT Rules.Further, dealing with respect ofSection 40A(3) of the Act, the Courtheld that where Assessee was puttingup construction not for selfoccupation, but for business of sellinga portion of building and leasing overpremises, it could not be absolved ofits obligation under Section 40A(3).Therefore, the Court held that the cashpayments made by the Assessee inexcess of Rs. 20,000 could not beallowed.[2012] 209 Taxman 617 (Bom. -HC); 24 taxmann.com 111 (Bom. -HC): CIT v. Cello Plast - In theinstant case the Bombay High Courtheld that Section 54EC of the Actgives a choice to Assessee to investeither in bonds of RuralElectrification Corporation Ltd. orNational Highway Authority andRevenue cannot insist assessee toinvest its capital gain on sale ofproperty in a particular bond only.The Court further held that if bondsof Assessee’s choice are not availablethroughout period of six months asprovided under Section 54EC of theAct, time to invest in bonds would getautomatically extended till bonds areavailable in market and Assessee canpurchase same and claim exemptionunder Section 54EC of the Actaccordingly.[2012] 209 Taxman 628 (Mad. -HC); 23 taxmann.com 299 (Mad. -HC): Dr. Smt. P.K. VasanthiRangarajan v. CIT - In the instant theAssessee held a property jointly

7 November2012


which her husband. She transferredanother property owned by herindividually for consideration undera development agreement.Accordingly, she claimed exemptionunder Section 54F. The question thatarose for consideration before theMadras High Court was whether thejoint ownership of a property couldbe held to stand in her way of claimingexemption under Section 54F of theAct.The Madras High Court held that theassessee’s holding any propertyjointly is not to be considered for thepurpose of counting the number ofhouses in the context of section 54F.Although this is the beneficialjudgement, it is not a legally tenableproposition, to ignore joint holding ofproperty.In the very same decision, the MadrasHigh Court following its owndecision in the case of T.C. No. 656of 2005 dated 04.01.2012 held that thebenefit of section 54 F will apply toall the four flats received by theassessee.In holding so, the Madras High Courtapplied the principle adopted byhonourable Karnataka High Court inSmt K G Rukminiamma (Dated:August 27, 2010)++ 196 Taxman 87,331 ITR 211 in the context of section54 even to section 54F.[2012] 24 taxmann.com 298 (AAR);[2012] 7 International Taxation 340:Dishnet Wireless Ltd., In re (AAR) -In the instant case, the applicant is acompany incorporated in India and isengaged in the business of providingtelecom services in India. STC, acompany registered in Saudi Arabiaand holding indirectly 18.5% stake inapplicant company, was a member ofconsortium for construction andmaintenance of Europe India

Gateway high capacity fibre-opticsubmarine consortium system linkingterminal stations in India, UAE,Oman, Djibouti, Saudi Arabia, Egypt,Libya, France. Morocco, Gibraltar,Portugal and UK.It was assigned the right to transfer40% of its allotted capacity in the EIGcable system to the applicantcompany. Consideration payable byapplicant company to STC for thisright was $20 million. The applicantsought to claim this amount as capitalgain exempt under Indo-Saudi DTAAand that it was not required to deductTDS from these payments.The Authority for Advance Rulingruled that the right involved in thepresent case is right to access theparticular segment of a larger system,to use the capacity of the systempowered by the equipments of thewhole system. Such considerationpaid on this behalf is ‘royalty’, in viewof amendments made by Finance Act,2012 by inserting Explanation 5 and6 to Section 9(1)(vi). It further ruledas per Article 12(2), royalty is taxablein the country of the payer (i.e. as perIndian laws in the given case).[2012] 18 ITR (Trib) 358 (Kolkata);DIC Asia Pacific Pte. Ltd. v. ADIT(International Taxation) - In theinstant case the question that arosebefore the Kolkata Tribunal forconsideration was whether the term‘tax’ defined under Article 2(1) of theIndo-Singapore DTAA also includeseducation cess.The Tribunal observed that educationcess was introduced by the Finance(No. 2) Act, 2004 w.e.f. assessmentyear 2005-2006 which was much afterthe signing of the aforesaid DTAA onJanuary 24th, 1994. It also observedthat the said Finance Act described theeducation as in the nature of an

additional surcharge. It furtherobserved that Article 2(2) providesthat “any identical or substantiallysimilar taxes which are imposed byeither Contracting State after the dateof signature of the present Agreementin addition to, or in place of, the taxesreferred to paragraph 1”.In view of the above observation theTribunal held that the term ‘tax’ alsoincludes education cess.[2012] 148 TTJ (Chd) 369: RajinderMohan Lal v. DCIT - In the instantcase the Chandigarh Tribunal dealingin respect of expression ‘individual’in proviso to Section 56(2)(vi) & (vii)observed that the word ‘individual’used by the legislature is in thespecific context of marriage of theindividual. It further observed thatlegislature has consciously employeddefinite article ‘the’ and not indefinitearticle ‘a’ before the word‘individual’, which means the specificindividual.Therefore, the Tribunal held that theword ‘individual’ in the context ofmarriage can only be the bride or thebridegroom, whose marriage issolemnized and cannot include groupof individuals.[2012] 148 TTJ (Mumbai) 607:Avshesh Mercantile (P) Ltd. &Others v. DCIT - In the instant case,the Mumbai Tribunal held that thepremium paid by the Assessee onredemption of premium notes(OCPN) utilized for makinginvestment in the shares/debentures ofRUPL cannot be regarded asexpenditure incurred exclusively inrelation to earning of exempt incomeunder provisions of Section 14A issustainable.Further, it held that such investmenthad the potential of generating taxableincome in the form of short-term

8November2012

capital gains, etc. Thus, the Tribunalrelying on its Co-ordinate Bench’sdecision in the case of DeliteEnterprises (P) Ltd. [ITA No. 2983/Mum/2005] held that disallowancemade under Section 14A is notsustainable.[2012] 23 taxmann.com 347 (Mum.– Trib.); [2012] 44-A BCAJ 691:Ashok C Pratap v. ACIT - In theinstant case the Mumbai Tribunal heldthat the amount received by a Trustee-cum-Beneficiary of a discretionarytrust, on dissolution of a trust, is notchargeable to tax under Section56(2)(vi) of the Act.The aforesaid decision recognises theprinciple that the receipt by the

beneficiary from the trust cannot besaid to be without consideration.[2012] 146 TTJ 543 (Mum.); [2012]44-A BCAJ 695: Pranit Shipping &Services Ltd. v. ACIT - In the instantcase the Assessee had neither creditedthe interest in the books of accountunder any account no paid suchinterest in the year, but claimeddeduction on the basis of mercantilesystem of accounting straightway inthe computation of income withoutrouting it through books of account.The Assessing Officer disallowed thesame under Section 40(a)(ia) of theAct.The Mumbai Tribunal observed thatthe under Section 194A the essential

requirement is that the amount mustbe credited in the books of accounteither in the account of payee orinterest payable account or any otheraccount by whatever name called suchas suspense account. Once an amountis credited in the books of account, theliability to deduct tax at source arisesif the payment of such interest is madeafter the date of crediting.Since in the instant case assessee hasnot credited the amount of suchinterest in its books of account and,further, such interest has not been paidin this year, the Tribunal held that therequirement of Section 194A cannotbe attracted and subsequently, Section40(a)(ia) also cannot be attracted.

IMPORTANT DATES TO REMEMBER DURING THE MONTH OF NOVEMBER 2012

5th November 2012 Payment of Excise Duty for October 2012Payment of Service Tax for October 2011 by Corporates

6th November 2012 E-Payment of Excise duty for October 2012E-Payment of Service tax for October 2012 for Corporates

7th November 2012 Deposit of TDS/TCS Collected during October 2012STPI Monthly Returns

10th November 2012 Monthly Returns for Production and Removal of Goods and CENVAT Credit for October 2012Monthly Return of excisable Goods Manufactured & Receipt of Inputs & Capital Goods byUnits in EOU,STP,HTP for October 2012Monthly Returns of Information relating to Principal Inputs for October 2011 by Manufacturerof Specified Goods who Paid Duty of Rs.1 Crore or More during Financial Year 2011-12 ByPLA/CENVAT/Both

15th November 2012 Payment of EPF Contribution for October 2012Return of Employees Qualifying to EPF during October 2012Monthly Return (VAT 120) and Payment of VAT/COT for the month of October 2012.

20th November 2012 Consolidated Statements of Dues and Remittances Under EPF and EDLI for the October 2012Monthly Return and Payment of Profession Tax Collected During October 2012Monthly Return (VAT 100) and Payment of CST and VAT Collected During October 2012

21st November 2012 Deposit of ESI Contributions and Collections for October 201225th November 2012 Monthly Returns of Employees Joined & Left the organization during October 2012 under ESI

Monthly Returns of Employees Joined and left the organization during October 2012 under EPF

9 November2012


RECENT JUDICIALPRONOUNCEMENTS ININDIRECT TAXESCA. N.R. Badrinath, Grad C.W.A., F.C.A.CA. Madhur Harlalka, B.Com., F.C.A

Central Excise:1. Refund of excise duty paid on

account of price reduction: Theissue before the Tribunal waswhether the assessee is eligible toclaim refund of duty paid onaccount of reduction of price. Theassessee is engaged in themanufacture and supply of LPGcylinders to oil companies underpurchase order which had pricevariation clause. Subsequently, theprices were revised downwardswith retrospective effect and theoil companies adjusted the excesspayment made. The Tribunalupheld the order of loweradjudicating authority that theassessee is eligible to claim refundof excise duty since the buyer hasnot claimed the CENVAT creditof duty paid. Accordingly, theassessee is eligible for refundwhen refund claim is filed withinone year from the relevant dateunder Section 11B of CentralExcise Act, 1944. Tribunal hadrelied upon the decision ofTribunal in Universal CylindersLtd., Vs. CCS-Jaipur-I. (2004 (65)RLT 39 (Tri.– Del.)), which wasaffirmed by Apex Court asreported (2005 (179) E.L.T. A41(S.C.)). [CCE Ghaziabad Vs.Mahavir Cylinders 2012 (284)E.L.T. 54 (Tri. – Del.)]

2. Valuation for Central Excise –On the case relating to sale ofpetroleum products through

Company Owned CompanyOperated (COCO) Outlets, thequestion arose whether thetransportation charges incurred fortransport of goods from terminalpoints to COCO Outlets isincludable for computation ofexcise duty. In this regard, it wasobserved that the oil companieswere receiving Petroleumproducts from various refinerieslocated at different places in India,under bond without payment ofduty at their “terminal points” andstoring without payment of duty.The terminal points were clearingthe products on payment of duty.Accordingly, it is held that thereis no basis to consider the COCOoutlets as the “place of removal”.In the backdrop that it is not thecase of the department also thatthe petroleum products werereceived in COCO outlets withoutpayment of duty and sold from thesaid COCO outlets only onpayment of duty, it is held thatthere is no justification to treat theCOCO outlets as the “place ofremoval”. Nevertheless, the basison which the COCO outlets aretreated as depots also cannot beappreciated. In common parlance,a depot is meant to be a placefacilitating wholesale tradewhereas the COCO outlets in theinstant case are obviously retailoutlets. Since in respect oftransfers to COCO outlets, the

price applicable to dealers at the“place of removal” has beenadopted, the same is legal andproper. CCE Vs M/s BPCL (2012-TIOL-1481-CESTAT-BANG)

3. Trade discounts are deductible:The issue before the Tribunal waswhether trade discounts aredeductible. In the present case, thetrade discount was disallowed onthe grounds that trade discountswere not given at the time ofclearance and the goods but thesame were passed on to thecustomers later in the form ofcredit notes. The deduction oftrade discounts is permissiblewhich are known at the time ofclearance of final products underSection 4 of the Central ExciseAct, 1944. However, the Tribunalheld that the trade discount ispermissible if it is known andclearly understood prior to or atthe time of removal and it is notnecessary the same should bequantified and given to the buyeronly at the time of removal.Tribunal had placed reliance onApex Court’s Judgement in thecase of UOI Vs Bombay TyreInternational Ltd (1984 (17) ELT329 (SC)). [M/s. VardhmanSpinning and General Mills VsCCE, Ludhiana, 2012-TIOL-1421-CESTAT-DEL]

4. 8% amount is not payable onBagasse arising duringmanufacture of sugar andmolasses: The issue before theTribunal was whether 8% amountis payable on bagasse whicharouse during the manufacture ofsugar and molasses. The Tribunalheld that bagasse is the wasteproduct left after the crushing ofsugarcane and sugar cane juiceused for manufacture of sugar and

10November2012

molasses. Therefore, therequirement of maintenance ofseparate accounts for the inputsfor production of sugar andmolasses and bagasse does notarise. Moreover, neither the showcause notice nor the order-in-appeal mentions as to whichcommon CENVAT credit availedinputs have been used inmanufacture of sugar andmolasses and bagasse. Therefore,since bagasse emerges atsugarcane crushing stage andthere is no possibility of any inputviz. chemicals etc. having beenused at that stage, there is no casefor applying the provisions of rule6(3) and demanding an amount ofequal to 8% of the sale value ofbagasse. [Indian Potash Ltd VsCCE, Allahabad 2012-TIOL-1402-CESTAT-DEL]

5. In the absence of fraud,collusion, willful misstatement,or suppression of fact penaltyunder Section 11AC is notimposable: Assessee, a SSI unitavailing value based exemptioncrossed the exemption limit andmade a delay of about a week anddelayed a day in remitting theexcise duty. However it wasremitted with interest. TheDepartment levied penalty underSection 11AC of the CentralExcise Act, 1944 read with Rule25 and 27 of the Central ExciseRules, 2002 for delay in obtainingthe central excise registration. TheTribunal held that penalty is notleviable under Section 11AC ofthe Central Excise Act, 1944 asthere is no allegation that theappellant has evaded the duty byway of fraud, collusion, willfulmisstatement, or suppression offact or contravention of provision

of Central Excise Act or Rulesthereunder with an intent to evadeduty. The Tribunal relied onHon’ble Apex Court in RajasthanSpinning & Weaving Mills (2009(238) ELT 3 (SC)). [M/s AlphaTechno Systems P Ltd Vs CCE,Mumbai-V 2012-TIOL-1373-CESTAT-Mum]

6. Principles of natural justice: Inthe instant case, the Tribunalobserved that the approach andattitude of the assessee clearlyindicated that they have neverbeen serious in participating in theadjudication proceedings and inrebutting the allegation leveledagainst them in the Show CauseNotice. Thus, prima facie there isno merit in the argument that thereis a serious violation of principleof natural justice of not allowingfurther adjournment by theAdjudicating Authority who gavethree opportunities of hearing asper the adjudication procedurelaid down at Section 33A of theCentral Excise Act, 1944. AmbaRerolling Mill Pvt Ltd Vs CCE -2012-TIOL-1437-CESTAT-KOL

Service Tax:7. Foreign exchange conserved is

foreign exchange earned for thepurpose of qualifying as exportof service: The issue before theTribunal pertains to the refund ofservice tax on export of services.The assessee booked business forthe foreign supplier for export ofgoods to Indian Railways. Theassessee has received thecommission from IndianRailways instead of foreignsuppliers in India rupees. IndianRailways deducted such amountpaid to assessee from the paymentmade to foreign supplier. TheTribunal held that instead of

foreign exchange going out ofIndia, there is conservation offoreign exchange in India to theextent of commission earned bythe assessee which otherwisewould have flown out of India.Therefore, this appears to havefulfilled the object of earning offoreign exchange. The Tribunalrelied on in its own case and alsoassessee own case (2008–TIOL–939–CESTAT (Delhi)). [NationalEngineering Industries Ltd., Vs.CCE, Jaipur [2012] 36 STT 753/24 taxmann.com 328 (New Delhi– CESTAT)]

8. Penalty not to be imposed incase of revenue neutrality: In acase involving non-payment ofService Tax on amounts paid toForeign Commission Agent, theOIO imposed 25% of tax amounttowards penalty Under Section 78.The Appellate Authority allowedthe appeal of the Revenue andenhanced the penalty to an amountequal to the amount of service taxpayable. In this regard, on appeal,the Tribunal has held that since theservices were clearly inputservices for the appellant, theAppellant was eligible for creditof service tax if the same had beenpaid by them. Further, the assesseebeing an 100% EOU, they are alsoeligible to get refund of ServiceTax Credit under Rule 5 of theCENVAT Credit Rules, 2004 if thesame remains unutilized. Thus,the Appellants claim for therevenue neutrality andconsequently absence of intentionto evade service tax is fullyacceptable. Accordingly, it hasbeen held that there is nojustification for imposition ofpenalty under Section 78 andpenalty under Section 76 which is

11 November2012


imposable deserves to be waivedin the light of provisions ofSection 80 of the Finance Act,1994. CCL Products (India) LtdVs CCE & ST - 2012-TIOL-1457-CESTAT-BANG.

9. Refund of accumulatedCENVAT Credits: The Appellanthad a common registration for allthe units at Bangalore, Hyderabadand Chennai. The Appellantstarted another unit at Gurgaonand sought for inclusion in thecentralized registration. However,there was a delay in givingcentralized registration for theGurgaon premises. Nevertheless,the Appellant had claimedCENVAT credit (refund) on inputservices received at the Gurgaonpremises prior to obtaining theregistration. During the revisionproceedings, the Commissionerrestricted the refund claim to onlythree units covered by thecommon registration and orderedrecovery of refund alreadysanctioned relating to creditattributable to the Gurgaon unit.In this regard, the Tribunal hasprima facie held that since thereis no dispute that the applicant hadexported the services renderedfrom Gurgaon unit also and thatthe Bangalore unit was reportedlyraising the invoices for export ofsuch services, the denial of refundof credit in respect of the Gurgaonunit is not justified. Accordingly,at this stage, the pre-deposit hasbeen waived. The detailedproceedings on this matter are yetto be held. 24/7 Customer Pvt LtdVs CST - 2012-TIOL-1434-CESTAT-BANG

10. Brand Promotion ‘INTEL’ and‘MICROSOFT’: The issuebefore the Tribunal was whether

brand promotion of ‘INTEL’ and‘MICROSOFT’ is taxable underthe category of Business AuxiliaryServices. The appellants areengaged in brand promotion of‘INTEL’ and ‘MICROSOFT’ forwhich commercial considerationswere being paid by both the brandowners periodically. The revenuedemanded service tax under‘Business Auxiliary Service’ asper Finance Act, 1994 effectivefrom 01.07.2003. Being aggrievedwith the order, the assesseepreferred an appeal before theTribunal. In this regard, theHonourable Member (Judicial) isthe view that the appellants areengaged in the activity ofpromoting the brand of INTEL /MICROSOFT, consequently, theactivity of ‘promotion ormarketing of logo or brand’ whichis not covered under the categoryof Business Auxiliary Service.Reliance was placed on thejudgment of Jetlite (India) Ltd.However, the HonourableMember (Technical) is of the viewthat the appellants are engaged inthe activity of promoting thebranded goods of INTEL /MICROSOFT, therefore, thejudgment of Jetlite (India) Ltd.,(supra) is not applicable to thefacts of this case and the demandsare rightly confirmed under thecategory of Business AuxiliaryService. This difference ofopinion is placed before the thirdMember. [M/s DataminiTechnologies (India) Ltd andZenith Computers Ltd Vs CCE,Thane-I, 2012-TIOL-1349-CESTAT-MUM]

11. Renting of bullock carts doesnot fall under category of supplyof the tangible goods: The issue

before the Tribunal is whetherrenting bullock-carts for aconsideration amounts to supplyof tangible goods under Section65(105)(zzzj) of the Finance Act,1994. The Tribunal has held thatsupply of tangible goods includesmachinery, equipment andappliances and bullock-cartsprima facie cannot be consideredas machinery, equipment orappliances. Hence, the impugnedorder is set aside and the matter isremanded to the loweradjudicating authority to decideafresh on merits after affording anopportunity of hearing to theappellant. [Sahakar MaharshiShankarrao Mohite Patil SSK LtdVs CCE, Pune III 2012-TIOL-1381-CESTAT-MUM]

CENVAT Credit:12. No time limit for availment of

CENVAT credit: The issuebefore the Tribunal was whetherthere is any time period to availCENVAT credit. The assesseeclaimed the CENVAT credit in theyear 2009 for the tax paid in theyear 2004. Revenue hasdisallowed such CENVAT crediton the ground that the same wasnot claimed within one year andalso levied interest and penalty.The Tribunal held that nowhere inthe Central Excise Act, 1944 aswell as in the CENVAT CreditRules, 2994 any period in whichcredit has to be taken isprescribed. It is only mentioned inthe CENVAT Credit Rules thatassessee can take the creditimmediately but the time limit forclaiming the CENVAT creditneither mentioned in the CENVATCredit Rules, 2004 nor in theCentral Excise Act, 1944.Accordingly, the credit is allowed

12November2012

in the instant case. [M/s CentralBank of India Vs CCE & ST,Coimbatore 2012-TIOL-1314-CESTAT-MAD]

13. CENVAT on shifting of factoryto another site: In terms of Rule10(1) of Cenvat Credit Rules,2004, the manufacturer of finalproduct shall be entitled to transferof the unutilized CENVAT creditto the transferred factory providedhe shifts his factory at another siteand also fulfills the requirementof Rule 10(3) of CENVAT CreditRules, 2004. In this context, theword ‘another site’ used in Rule10(1) of CENVAT Credit Rulesmeans the site other than thefactory which is being shifted andnot a completely new site wherethere was no production unit inexistence prior to this shifting.Rule 10(3) of the CENVAT CreditRules provides that the transfer ofCENVAT credit under Rule 10(1)shall be allowed if the stock ofinputs as such or in process, or thecapital goods is also transferredalong with the factory. Thus, ifthere is no inputs in the stock,there is no occasion fortransferring the inputs to the newfactory. Admittedly, the assesseecan transfer only the capital goodsto another site and the conditionof Rule 10(3) of CENVAT CreditRules for transfer of CENVATcredit is fulfilled. Transfer ofCENVAT credit to another factorysite is thus allowed and is proper.Fabrico India Pvt Ltd Vs CCE-(2012-TIOL-1446-CESTAT-DEL)

Customs:14. Delay in filing the appeal cannot

be condoned since the revieworder was passed belatedly bythe Committee of ChiefCommissioner: The issue before

the Tribunal pertains to thecondonation of delay in filing anappeal filed by CustomsDepartment under Customs Act,1962. The Committee of ChiefCommissioners under Section129D(1) of the Customs Act, 1962passed the order to prefer an appealonly after expiry of the period ofthree months. On account of thesame, the appeal was preferredbelatedly. The Tribunal held that asineffective to condone the delay ofany order issued by Committeeafter expiry of limitation period asprescribed under Section 129D(3).[CCE, Delhi – III Vs. BharatCereals Pvt. Ltd., 2012 (284) E.L.T47 (Tri. – Del.)]

15. Import of goods without IECcannot be termed as prohibitedgoods and cannot be confis-cated: The issue before theTribunal pertains to the appealfiled onwhether thegoods importedwithout Import- Export Code(IEC) can beconsidered asprohibited andwhether theycan be confis-cated. Thed e p a r t m e n tlevied thepenalty underSection 117 ofCustoms Act bytreating thatimport of goodswithout IEC isin violation ofSection 7 ofForeign Trade(Development& Regulation)

Act, 1992. The Tribunal held thatthe import was neither forcommercial purposes nor incommercial quantity. Further, theRevenue has not furnished thedetails of quantity and value ofimported goods and copy of Billof Entry. The imported goodswere subject to assessment and thesame were cleared upon paymentof duty. It is held that merelybecause IE Code was not there, totreat the said goods as prohibitedgoods would be only on technicalground and could not be treatedas a prohibition in the real senseof them. As the goods areapparently cleared and notavailable for seizure, the questionof confiscating them at this stagealso does not arise. [CC&CE,Hyderabad Vs. Port WareInternational LLC 2012 (284)E.L.T. 50 (Tri. – Bang.)]

Adv

t.Advt.

13 November2012


The object of the law is toregulate the acceptance and utilisationof Foreign Contributions and toprohibit acceptance and utilisation ofForeign Contributions for anyactivities detrimental to the nationalinterest and matters connectedtherewith or incidental there to.

In international trade/business,the principle of “Quid-Pro-Quo”(something for something) exists.That is to say in import and exportscurrencies will inflow/outflow. Tocontrol such transactions, ReserveBank of India acts as a Controllerateunder Foreign ExchangeManagement Act, 1999 (FEMA).Therefore RBI controls and monitors.

Contrast to this, in InternationalCharity transactions, the principle of“Quid-Pro-Quo” does not exist. It isthe one sided unilateral transaction,and gratuitous in nature. For suchcharity transactions Ministry ofHome Affairs, Govt. of India (ForeignSection) regulates and supervisesthrough Foreign Contribution(Regulation) Act.

FC (R) Act, 1976 was abolishedand the new Act, called FC(R)Act,2010 with Rules 2011 came in forcewith effect from 1St May 2011. Thenew Act has nine chapters.

Very important features that areapplicable to Religious and CharitableOrganisations (Non–ProfitOrganisations) are listed here so thatpracticing Chartered Accountants canguide their clients and render quality

NEW FOREIGN CONTRIBUTION(REGULATION) ACT, 2010AND RULES 2011CA. L.Vittal Rao., B.Com., F.C.A.

professional services which in turnserves the nation.Important salient features of theAct & Rules are as follows:1. Foreign Contributions (for

charity) can be received only if theorganisation is registeredwith Ministry of Home Affairs,Govt. Of India , New Delhi andgranted a certificate.

2. A person can transfer FC to anyother person only if such otherperson is also registered or hasobtained prior permission underFC(R) Act.

3. FC received should be utilised forthe purpose for which such FC isreceived. (No mis-application/nodiversion of funds)

4. The administrative expenses shallnot exceed 50% of suchcontributions. If exceeds 50%,prior approval of CentralGovernment is required.(The exception to this is, a) if theorganisation is engaged inRESEARCH & TRAINING, theexpenditure incurred on Salaries& Remuneration of personnelengaged in training, collection , &analysis of Field data is not to beconsidered in arriving at 50%.Similarly b) if the organisation isWELFARE ORIENTED, Salariedof doctors of Hospitals & teachersof Schools is not to be consideredin arriving at 50 %.)

5. The existing registeredOrganisations get automatically

covered under new Act. Theregistration is valid for new onesunder this Act 5 years & for theexisting ones, 5 yearscommencing from 1st May 2011.

6. If FC is received by unregisteredbodies, the unutilised or un-received amount cannot beutilised or received, without priorapproval of Central Government.

7. When applied for registration,may ordinarily register and grantcertificate within 90 days (3months).

8. If prior permission, is valid for thespecific purpose or specific amountof FC proposed to be received.

9. Cancellation of certificate, ifa) Making incorrect or false

statement.b) Violated any terms & conditions

of the certificate or renewal.c) Necessary in the public interest.d) Has violated any provisions of this

Act, or Rules, or order made.e) Not been engaged in any

reasonable activities in its chosenfield for the benefit of the societyfor two Consecutive years or hasbecome defunct.(Note: If certificate is cancelled,not eligible for registration orprior permission for three yearsfrom the date of cancellation ofthe certificate).

10. Certificate to be renewed within6 months before the expiry of theperiod of certificate. (i.e. Applyfor renewal after four & half year)

11. The FC received shall be in asingle account only as specified inthe Certificate Granted. It canhave, more utilisation Accounts(may open one or more accountsin one or more banks.) for utilisingFC amounts.

14November2012

(Note: No funds other than FCshall be received or deposited insuch account or accounts.) Everybank shall report to MHA (or suchauthority as specified.)

12. Organisations to inform MHA,New Delhi in Form FC 6. Theyshall also submit a copy of bankstatement duly certified by thebank officer along with Form FC6.

13. Those who receive FC amountshall main a separate section ofBook-Keeping System.

14. The Central Govt. may authorisegazetted officer of Group ‘Á’ rankunder Central Govt. to audit anybooks of Accounts of such personin the following circumstances;

a) When failed to furnish anyintimation within the timespecified or

b) Intimation so furnished is not inaccordance with Law

c) Any provisions of FC (R) Act hasbeen contravened.

15. Any person receiving FC moneyfrom relatives for Charity inexcess of Rs. one lakh in afinancial year shall inform inForm FC-1 within 30days fromthe date of receipt.

16. Registration to receive FC is byapplication electronically on-line inForm FC-3. Followed by hard copyduly signed with the requireddocuments & such hard copy shouldreach within 30days of on-linesubmission. If lapsed, fresh on-lineapplication can be made only after6 months. No second applicationwithin a period of 6 months aftersubmission of an application.Fee for Priorpermission : Rs.1000/-Fee for GeneralRegistration : Rs.2000/-

Renewal fee : Rs.500/-17. When implementing an on-going

multi-year project, shall apply forrenewal 12 months before the dateof expiry of the Certificate ofRegistration.

18. When Foreign Contributionreceipts exceed Rs.1Crore in afinancial year

a) It shall place the summary date onthe public domain pertaining tothe year & one year thereafter.

b) The Central Govt. shall alsodisplay or upload the summarydata on its web-site forinformation of the general public.

19. The intimation of FC amount byrecipient is as follows

a) Submit a report in Form FC-6.b) To accompany financial

statements (FC only) for everyfinancial yearbeginning on 1st

day of April.c) It should reach

within9 months(i.e. before31st December)

d) To be sent tothe Secretary,Govt. of India,Ministry ofHome Affairs,New Delhi.

e) FC-6 to reflectFC received inexclusiveapproved bankaccount andalso to includethe details offundstransferred toother bankaccounts for

utilisation.f) Form FC-7 to be used when

foreign articles are received.

g) Form FC-8 to be used when FCrelated to foreign securities.

h) The above reports shall be dulycertified by Chartered Accountant.

20. In case, FC is proposed to betransferred to an unregisteredbody or having no priorpermission such concerned mayapply for permission to transfer apart of FC, not exceeding 10% oftotal FC received. Suchapplication shall be counter signedby the District Magistrate havingjurisdiction in the place wheretransferred fund utilised. Thedonor shall not transfer any FCamount until the Central Govt. hasapproved the transfer.

Adv

t.Advt.

15 November2012


SERVICES WITH RESPECT TO IMMOVABLE PROPERTYLOCATED OUTSIDE INDIA OR EVENTS ORGANIZEDOUTSIDE INDIA MAY NOT ALWAYS QUALIFY AS EXPORTSContributed by: CA. Badrinath NR, FCA. Grad CWA; CA. Prakash Bhansali, ACA

With effect from 01.07.2012, the Export of ServiceRules, 2006 is rescinded and the provisions relating toexport of services are now contained in Rule 6A of theService Tax Rules, 1994. Accordingly, services whichfulfill all the following conditions would qualify as exportswith effect from 01.07.2012. Provider of services is located in taxable territory Receiver of service is located outside India Service is not a service specified under the negative list Place of provision of service is outside India Payment is received in convertible foreign exchange Provider and receiver are not merely establishments

as required for reverse chargeAmongst others, one of the conditions is that the ‘place

of provision of services as per the Place of Provision ofService Rules, 2012 should be outside India’. In thisarticle,theimpacts of these Rules with a specific reference toservices in relation to immovable properties located outsideIndia and conducting of events outside India are discussed.The extract of the relevant Rules is furnishedhereunder:

Rule 5: The place of provision of services provideddirectly in relation to an immovable property, includingservices provided in this regard by experts and estate agents,provision of hotel accommodation by a hotel, inn, guesthouse, club or campsite, by whatever, name called, grantof rights to use immovable property, services for carryingout or co-ordination of construction work, includingarchitects or interior decorators, shall be the place wherethe immovable property is located or intended to be located.

Rule 6: The place of provision of services providedby way of admission to, or organization of, a cultural,artistic, sporting, scientific, educational, or entertainmentevent, or a celebration, conference, fair, exhibition, orsimilar events, and of services ancillary to such admission,shall be the place where the event is actually held.

Rule 8: Place of provision of a service, where thelocation of the provider of service as well as that of therecipient of service is in the taxable territory, shall be thelocation of the recipient of service.

Rule 14: Notwithstanding anything stated in any rule,where the provision of a service is, prima facie,determinable in terms of more than one rule, it shall bedetermined in accordance with the rule that occurs lateramong the rules that merit equal considerationServices in relation to immovable properties:

Hitherto, in terms of the provisions contained in theExport of Services Rules, 2006, any of the specified services,such as, architect services, interior decorator services, rentingof immovable property, legal consultancy and maintenanceof immovable properties qualified as exports if the immovableproperty was located or proposed to be located, outside India,subject to an additional condition that the consideration wasreceived in convertible foreign exchange.

In terms of the amended provisions with effect from01.07.2012, Rule 5 and Rule 8 read with Rule 14 meritanalysis. Prima facie, if the immovable property is locatedor proposed to be located outside India, the place of provisionof services shall be deemed to be outside India. However, interms of Rule 8, if both, the service provider and the recipientof services are located within the taxable territory, the placeof provision of such services shall be the location of therecipient of services, viz., within the taxable territory.

Thus, in circumstances where service, for instance,architect services are for a property located outside Indiaand where, the service provider and the recipient ofservices are located within the taxable territory, it primafacie appears that the said transaction would meritclassification under both, Rule 4 and Rule 8 indicatedabove. However, for the purposes of analyzing theimplications of the Place of Provision of Service Rules,2012, it is important to note that any service would haveto be classified into only one Rule. Accordingly, theprovisions contained in Rule 14 would merit applicationin such cases – viz., where more than one rule areapplicable, then the rule which comes later shall prevail.Accordingly, in the said instance, it would follow that theprovisions contained in Rule 8 would prevail – the placeof provision of services by the architect would be deemedto be within the taxable territory.

16November2012

Consequently, while such services qualified asexports under the erstwhile Export of Service Rules, 2006,the same would not qualify as exports under the newprovisions with effect from 01.07.2012.This can be better appreciated with the followingexample:

An Indian Architect and Interior designing companyenters in to contract with another Indian company locatedin Greater Noida, agreeing to provide architect servicesto its property located in Dubai.

Services in relation to events conducted outside India:Similar to the instance above, where an event was

conducted or proposed to be conducted outside India, theevent management services qualified as exports under theerstwhile Rules, subject to the additional condition that theconsideration was received in convertible foreign exchange.

However, as indicated above, under the newprovisions, it is essential that the place of provision ofsuch services is outside India – in the said instance thoughthe event is conducted or proposed to be conducted outsideIndia, if the provider of services and the recipient ofservices are located within the taxable territory, the placeof provision of services shall be deemed to be within thetaxable territory. Accordingly, the same would not qualifyas exports.This can be better appreciated with the followingexample:

An entertainment event organized in New Zealand,by an Indian Event Management Company located in NewDelhi for its client located in Mumbai.

Position up toJuly 01, 2012The above natureof service providedby an Indiancompany wasclassifiable underArchitect Services.In terms of Rule3(1) of Export ofServices Rules,2005 the saidservice ofproviding anarchitect servicewith respect to aproperty located /proposed to belocated in Dubaiqualified as exportso long as thepayment wasreceived inconvertible foreignexchange.

Position fromJuly 01, 2012The above nature of serviceprovided shall prima facie beclassified under Rule 5 of Placeof Provision of Rules 2012. Byvirtue of Rule 5, place ofprovision shall be deemed to beDubai i.e. where property islocated. Accordingly, the samewould qualify as exports, subjectto other conditions beingfulfilled.However, Rule 8 of Place ofProvision further provides that ina situation where serviceprovider and service receiver aresituated / located within taxableterritory, the place of provisionshall be deemed to the locationof the recipient of services, viz.,within the taxable territory, in theinstant case.Keeping in mind Rule 14, Rule 8would prevail over Rule 6,therefore from July 01 eventhough the immovable propertyis located outside India, the samewould not qualify as exports.

Position up toJuly 01, 2012The above natureof service providedby an Indian EventManagementCompany wasclassifiable underEvent ManagementService category ofSection 65(105)(zu). In terms ofRule 3(2) of Exportof Services Rules,2005 the saidservice oforganizing an eventin New Zealand byan Indian EventManagementCompany qualifiedas export so long asthe payment wasreceived inconvertible foreignexchange.

Position fromJuly 01, 2012The above nature of serviceprovided shall prima facie beclassifiable under Rule 6 of Placeof Provision of Rules 2012,considering the event is held inNew Zealand. By virtue of Rule6, place of provision shall bedeemed to be New Zealand i.e.where event is organized.Accordingly, the same wouldqualify as exports, subject toother conditions being fulfilled.However, Rule 8 of Place ofProvision further provides that ina situation where serviceprovider and service receiver aresituated / located within taxableterritory, the place of provisionshall be deemed to the locationof the recipient of services, viz.,within the taxable territory, in theinstant case. Keeping in mindRule 14, Rule 8 would prevailover Rule 6, therefore from July01 even though the event isconducted / organised outsideIndia, the same would not qualifyas exports.

17 November2012


REFRESHER COURSE FOR ACCOUNTANTSUnder the aegis of Management Development Programmes (MDP)

An appeal to the members

Second Batch of Refresher Course for AccountantsIn the present business scenario, Accountants are involvedin a wide range of commercial activities covering functionsrelating to Accounting, Finance, Costing, Tax laws andLabor laws. The objectives of the Course are to acquaintthe participants about the basics of these essential functionswhich are present in any organization. This is a FastForward Refresher Course for those who are interestedto learn the practical exposure to basic accounting &finance practices and to learn the most important andfundamental tax laws, in order to perform their accountingand finance works more effectively and competentlyFor whom:

Accountants, Accounts Executives & AccountsAssistants working in a manufacturing, service or tradingorganization.Course Contents:

• Accounting• Labor Laws & Business Laws• Income Tax & Wealth Tax• Central Excise, Service Tax and VAT• Cost Accounting• Banking

We request you to pass on this information to your clients enabling their accountants:Finance/ Accounts Executives to avail the benefits of this refresher course.

Duration :The first batch of the course will be conducted on thefollowing days:1. 19th, 20th & 21st Nov 2012 and2. 29th & 30th Nov 2012

Timings: 10.00am to 05.30pm

Fees: `̀̀̀̀ 5,000/- per participant,Cheque/DD should be drawn in favour of“Bangalore Branch of SIRC of ICAI” – payable at Bangalore.

Registrations Open onFirst Come First Served basis.

Venue:Management Training Centre,Bangalore Branch of SIRC ofThe Institute of Chartered Accountants of India,‘ICAI BHAWAN’, 16/O, Millers Tank Bed Area,Vasanthnagar, Bangalore – 560052Telephone: 080-30563500/511/512/513Email: [email protected] / [email protected]: www.bangaloreicai.org

Course Fees Duration (4 Months) TimingsCPT Rs.4500/- January to April – For June Exam 05.30pm to 07.30pm (Monday to Friday) &

July to Oct. – For Dec. Exam 03.00pm to 07.30pm (Saturday) &08.00am to 12.30pm (Sunday)

IPCC Rs.10000/- for Both Groups Dec. to March – For May Exam 07.30am to 09.30am and& Rs.10000/- for Single Group June to Sep. – For Nov. Exam 06.00pm to 09.00pmFINAL Rs.2000/- for Single Subject (Monday to Saturday)

08.00am to 12.30pm (Sunday)The faculty members are chosen after due consideration to their relevant industry exposure/experience coupled with passionand interest towards teaching at ICAI, including areas of competence and expertise.

For more details contact: Bangalore Branch of SIRC of ICAI, ‘ICAI BHAWAN’,#16/O, Millers Tank Bed Area,Vasanthnagar, Bangalore-560052 Tel: 080-30563500 / 511 / 512 Email: [email protected]

Coaching Classes at Bangalore Branch

18November2012

Three day Workshop on Enabling Service Tax PracticeAs you are aware, taxation of services has undergone a radical change with effect from July 2012. These developmentshave opened new professional opportunities and challenges for our Members. To cope up with these emergingchallenges in the area of Service Tax, a three day Workshop on Enabling Service Tax Practice (Level-2) is beingorganized by the Indirect Taxes Committee of ICAI, on 30th November, 01st & 2nd December 2012 at BangaloreBranch of SIRC of ICAI for the benefit of our Members.The aforesaid workshop is designed to cover all important aspects of Service Tax and it will enable ourmembers to play a significant role in assisting the government in implementing the new tax regime. Expertand experienced speakers from all over the country will be presenting the papers.

Only limited seats, restricted to 200. Registrations Open.Delegate Fees: ` ̀` ` ` 2,000/-

Cash/Cheque in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore.For further details please contact: Ms.Geetanjali D., Tel: 080-30563500 / 3513

Email: [email protected]

For more details visit : www.bangaloreicai.org

18 hrsCPE

10 hrsCPE

Basics of Computers to Beginners andSenior CAs as relevant to CA ProfessionDate : 19th Nov 2012, Monday to 23rd Nov 2012, Friday

Time : 06.00pm to 08.00pm dailyVenue: ITT South Centre, Sanjay Towers, No.216,

Near Netkalappa Circle, Basavanagudi, Bangalore-04 Tel: 26621434

Delegate fee : `̀̀̀̀ 1000/-

Only limited seats, restricted to 40on First Come First Served basis.

Contents of the Programme: Hands on Workshop

Introduction to Computer Basics, Data entry modules, Preparationof Profit & Loss Account and Balance Sheet, Editing of reports,Printing of statements, Presentation of accounts in RevisedSchedule VI format, Tax computation statements, Handling ofITR 1 and 2 in Excel format, Internet options, Excel formulas,Fundamentals of e-filing.

Course Co-ordinator : CA. H. Shivakumar

Faculty : ITT Staff of ICAI

For Registration Contact:

Ms.Geetanjali D., Tel: 080-30563500 / 3513,Email: [email protected], website: www.bangaloreicai.org

MEMBER RELATED QUERIES

CONTACT PERSON

MR. K.R. KULKARNIPHONE : 080 3056 3542MOBILE : 9448387853MAIL ID : [email protected]

STUDENT RELATED QUERIES

CONTACT PERSON

MR. RAGHAVENDRA.S.V.PHONE : 080 3056 3545MOBILE : 9886042556MAIL ID : svraghavendra

@icai.org

ESCALATION FORUNANSWERED QUERIES

CONTACT PERSON

1. SHRI N.S. JAGADISH KUMARPHONE : 080 3056 3541MOBILE : 9342732548MAIL ID : [email protected]

2. BRANCH CHAIRMANPHONE : 080 30563506MAIL : [email protected]

20 Bangalore Branch of SIRC News LetterBangalore Branch of SIRC of ICAI

SUB EDITOR: CA. Ravindranath S.N.

English Monthly Printed & Published & Edited by , on behalf of., No.16/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka

Printed at:Published at: ,

Sub Editor CA. Ravindranath S.N., Vice Chairman

44/1, K.R. Road, Basavanagudi, Bangalore-560 004, Ph : 080-26617243, e-mail : [email protected]/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka

Tel : 080 - 3056 3500, Fax : 080 - 3056 3542, www.bangaloreicai.org e-mail : [email protected] Mudranalaya Pvt. Ltd.,

RNI Regn. No. KARENG/2012/45348"Registered" News Letter for India vide KA/BGGPO/2523/12-13 Date of Posting 4th & 5th of the month, Place of posting at G.P.O, Bangalore.

Total No. of Pages printed : 20

Inauguration Dr. R. K. Sarmah,Sr. Asst. Director BOS, ICAI

FDP @ Bangalore

Group photo of the participants on the occasion of Faculty Development Programme

FDP @ Bangalore

Sri. Satyanarayana K.,CCIT-I

Interactive Session with Chief Commissioners & Commissioners of Income Tax Department

CA. D. S Vivek CA. Ravi Prasad CA. A. Sehar Ponraj Mr. K. S. NaveenKumar

CA. Amith Raj A.N CA. KrishnaPrasad

CA. S. Hariharan CA. Vijay Kotha CA. D. NareshPhanfat

Speakers at Study Circle Meetings

CA. M. N. Pai Mr. Kathiravan Pethi CA. Nanu R. MallyaMember, BOS, ICAI &Chief Facilitator Course

on GMCS & IPCCO

Workshop on Basics of Computers forBeginners & Senior CAs

Mr. S. M. Hussain Participants

Ayudha Pooja

Ayudha Pooja at Branch Premises

Sri. S. Gopalakrishna,CCIT-II

Sri. I. Suresh Babu,CCIT-III

Sri. S. Ravi, DG,(Income Tax Inv.)

Participants

Interactive Session with Chief Commissioners & Commissioners of Income Tax Department

Sri. Krishna Rao. K,CPC, CIT

Sri. Tirumala Kumar,CIT (Appeals-V)

Sri. S.S. Mantri,Additional CIT (TDS)

Dignitaries on the Dais

bangalore branch of icai novemeber newsletter

Documents