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Thinking of the Bottom Line – Think of Us JANUARY, 2013 ... Alert VOL... · PDF...

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  • Dear Readers, The pre-budget crescendo of second guessing the Hon’ble Finance Ministers speech on the floor of the Indian Parliament on 28th February is on full swing. Various sectors which have been facing a tough economic environment like Auto Component, Telecom, Real Estate and Hospitality have been asking for tax breaks and incentives to provide a stimulus to growth. Targeting higher revenue collections, there has been talk of taxing the Super Rich at a higher rate of tax

    (higher than the 30% rate presently in force) and introducing Estate or Inheritance Tax. RNM is of the view that although the creamy layer of society does have a higher level of responsibility towards upliftment of the poor, given the severe economic climate it is unlikely that the Government would be able to justify to India Inc. and its Pundits this Robin Hood approach. RNM had presented its pre-budget proposals to both the leading Opposition Party of the country as well as to the leading Chamber of Commerce in which nine issues were raised in the Direct and Indirect Tax field for consideration. The recent relaxation offered to Hotel sector by the Reserve Bank of India (RBI) which has permitted utilization of External Commercial Borrowing (ECB) towards repayment of Rupee Loans availed of for new hotel Projects of Rs. 250 cr and above upto certain limits, should provide a fillip to investments in this sector as well as help improve bottomline figures which were stressed due to high interest burdens. Hope all assessee’s are gearing up for payment of Advance Taxes, the next installment of which is due by March 15.

    Regards,

    U.N. Marwah

    For and behalf of the RNM Alert Editorial Board

    www.rnm.in

    ISSUE NO.49 JANUARY, 2013

    RNM ALERT Thinking of the Bottom Line – Think of Us

  • Issue No. 49: January, 2013 Page 2 of 22

    CONTENTS Direct Tax

    - Case Laws

    - Definition of Transfer 4 - Income from House Property 4 - Profit & Loss from Business and Profession 4 - Capital Gain 4-5 - Cash Credits 5 - Set off & carry forward 5 - Deduction 5 - Transfer Pricing 5-6 - Procedure for Assessment 6 - Procedure for Assessment for Search Cases 6 - Tax Deduction at Source 6 - Appeals to Appellate Tribunal 7 - Penalties 7

    Indirect Tax Central Excise

    - Case Laws - Tool Kits etc with tow wheelers are input 8 - No dues of private Co. can be removed from director 8 - Penalty not imposable when duty paid voluntarily 8 - No time limit is prescribed for availment of cenvat credit 8-9 - Grant of refund 9

    Service Tax - Case Laws

    - Validity of retrospective effect 9 - Inclusion of value of study material provided 9-10 - Cenvat Credit of outdoor catering services 10 - Penalty & payment before issuance of SCN 10 - Suo Moto Adjustmnet of differential service tax amount 10 - Penalty not imposed when no Mala fide alleged 10

  • Issue No. 49: January, 2013 Page 3 of 22

    DIRECT TAX DIRECT TAX

    Company Law Updates - Circular/ Notification/ Guidance

    - Filing of B/S & P&L in XBRL mode for F.Y. commencing on or after 1.4.11 11 - Filing of cost audit report & compliance report in XBRL mode 11

    RBI & SEBI Updates - Circular

    - ECB policy – NBFC – Infrastructure Finance Cos. 12 - FDI in India – issue of equity share under the FDI scheme 12 - ECB Policy – Repayment of Rupee loan & for fresh rupee capital expenditure 13

    Corporate Finance - Latest News

    - Private Equity 14-15 - Mergers & Acquisition 16-19 - Venture Capital 19-21 - Debt 21

  • Issue No. 49: January, 2013 Page 4 of 22

    DIRECT TAX  Case Laws Definition of Transfer Sec 2(47) - Capital gain assessable in year of development agreement; no matter when physical possession of asset is given. [Source: G. Sreenivasan vs DCIT [2012] 28 taxmann.com 200 (Coch.]

    House Property Sec 22 - ALV of flats, built by assessee engaged in construction business, lying unsold, is assessable as income from house property. [Source: Ansal Housing Finance & Leasing Co. Ltd. [2013] 29 taxmann.com 303 (Delhi)]

    Profit & Gain from Business & Profession Sec 37(1) - Allowability of Pollution control expenses - Assessee-company put up an affluent treatment plant - In order to control pollution, assessee incurred certain expenditure on maintenance of garden – Held, since expenditure on garden had nexus with assessee's business activity, same was to be allowed as revenue expenditure. Expenditure incurred by assessee on foreign country registration for marketing its products in foreign countries and promoting sales, was to be allowed as revenue expenditure. [Source: Torrent Pharmaceuticals Ltd. vs CIT [2013] 29 taxmann.com 405 (Gujarat)]

    Sec 40A(3) - Where assessee, who was supplying articles such as food items and other items necessary for travel in trains, purchased articles from a small concern which insisted on cash payment for ensuring continuity and timely supplies, benefit of rule 6DD(k) could not be denied to assessee. [Source: R.C.Goel vs CIT [2013] 29 taxmann.com 406 (Delhi)]

    Sec 41(1) - Where assessee unilaterally wrote back amount of retirement gratuity in assessment year 1976-77 which was allowed as expenditure in assessment year 1972-73, same would not be treated as remission or cessation of liability so as to attract provisions of section 41(1). [Source: Elgin Mill Co. Ltd vs CIT [2013] 29 taxmann.com 391 (Allahabad)]

    Capital Gain Sec 50C - Where assessee, a shareholder of KMPL, alongwith other shareholders sold entire shares of KMPL to 'R', it could not be regarded as an indirect transfer of flats owned by KMPL to 'R' and, consequently, provisions of section 50C could not be applied to transaction of sale of shares [Source: Irfan Abdul Kader Fazlani vs ACIT [2013] 29 taxmann.com 424 (Mum.)]

  • Issue No. 49: January, 2013 Page 5 of 22

    Sec 54EC - Exemption under section 54EC is available even on short-term capital gains calculated as per section 50 on sale of depreciable assets held for more than 36 months. [Himalaya Machinery (P.) Ltd. vs DCIT [2013] 29 taxmann.com 380 (Gujarat)]

    Cash Credits Sec 68 - Where assessee proved sale transaction of shares by filing mass documentary evidence and payment of sale price was made through bank channel, sale transaction could not be disbelieved only because assessee could not give identity of purchasers. [Source: Sudeep Goenka vs CIT [2013] 29 taxmann.com 402 (Allahabad)]

    Sec 69A - Where certain addition was made on ground of unaccounted income introduced in garb of cash deposits, assessee's plea that addition confirmed, if any, in trading results had to be set off against said unaccounted income, was to be accepted. [Source: Megha Industries vs CIT [2013] 29 taxmann.com 404 (Gujarat)]

    Set off and carry forward Sec 70 - Surrendered income during course of survey has to be assessed separately as deemed income without setting off losses under sections 70 and 71. [Source: Liberty Plywood (P.) Ltd. vs ACIT [2013] 29 taxmann.com 268 (Chandigarh - Trib.)]

    Deduction Sec 80I - Where an industrial undertaking, which was being run by a company, got amalgamated with assessee-Company, it was not a case of transfer and assessee was entitled to deduction under section 80-I in respect of profits earned from industrial undertaking. [Source: Bhuwalka Steel Industries Ltd. vs CIT [2013] 29 taxmann.com 384 (Karnataka)]

    Transfer Pricing Sec 92C - Transfer pricing adjustment in relation to advertisement, marketing and sales promotion expenses ("AMP expenses") incurred by the assessee for creating or improving the marketing intangible for and on behalf of the foreign AE is permissible.

  • Issue No. 49: January, 2013 Page 6 of 22

    Earning a mark-up from the Associated Enterprises ("the AE") in respect of AMP expenses incurred for and on behalf of the AE is allowable. However, the matter is restored to the file of TPO for de novo adjudication in the light of certain guidelines outlined by Tribunal in its order. [Source: L.G. Electronics India (P.) Ltd. [2013] 29 taxmann

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