Certain important and recent enactments, legal developments and case laws in this area are set out below.

Income Tax, 1961 ("Act")

Accounting Standards Notified by the Central Board of Direct Tax

Section 145(2) of the Income-Tax Act, 1961 ("ITA") provides that the Central Government may notify Accounting Standards ("AS") for any class of assessees or for any class of income. The Central Board of Direct Tax ("CBDT") constituted a Committee comprising of departmental officers and professionals in December, 2010 to, inter alia, suggest AS for the said purpose.

Certain important and recent legal developments in this area are set out below.

Anti-Dumping Duties

GOI has imposed the anti-dumping duties against the dumping of certain products in the Indian market as per the details provided below:

Certain important and recent enactments, legal developments and case laws in this area are set out below.

Certain recent legal developments and case laws in this practice area are set out below. 

Service Tax 

Rate of Service Tax Hiked

Service tax rate has been increased from 10% to 12% thereby increasing the effective rate to 12.36% w.e.f. April 1, 2012 vide Notification No. 2/2012 - Service Tax dated the March 17, 2012.

Indirect Taxes

Certain recent legal developments and case laws in this practice area are set out below.

SERVICE TAX

New Taxable Services Introduced

Central Board of Excise and Customs (“CBEC”) has notified the following 8 new taxable services with effect from July 1, 2010:

Certain important and recent enactments, legal developments and case laws in this area are set out below.

Cases

Excise and Customs

Steag Encotec India Pvt. Ltd. v. Commr. Of Cus. (Airport)

The appellants imported Performance Analysis and Diagnostic Optimization System (“PADO”) software package and Boiler Performance Optimization System software package (“BPOS”) and claimed exemption from Additional Customs Duty and Education Cess in lieu of Central Excise Duty classifying the same as customized software.

Direct Tax

Signing of revised Double Taxation Avoidance Agreement with Finland

A revised agreement and protocol between India and Finland for ‘Avoidance of Double Taxation and the Prevention of Fiscal Evasion’ with respect to taxes on income has been entered into between GOI and Government of Finland. The revised Double Taxation Avoidance Agreement (“DTAA”) is yet to be notified.

Income-tax (Dispute Resolution Panel) Rules, 2009

In cases involving transfer pricing adjustments or cases involving income adjustments to be made on the foreign companies, which are prejudicial to the taxpayer, the tax officer is required to forward a draft order to the taxpayer, who can file objections against the draft order to the Dispute Resolution Panel (“DRP”).

Goods and Service Tax

The Empowered Committee of State Finance Ministers has released the first discussion paper on Goods and Service Tax (“GST”). The mechanics of the provisions and even the macro level parameters are still under discussion. GST is set to replace the various State and Union indirect taxes. The discussion paper provides for dual GST, State level and Union level. Though instead of compliances under plethora of taxes at present, the compliances would be restricted to GST, but the issues of interplay of State and Union taxation, rivalry amongst States to garner more revenue, would continue to haunt the taxpayers. The earlier deadline of April 01, 2010 for implementation of GST is likely to be missed.

  Excise Law and Customs

Exemption to Goods Imported from Antarctica

GOI has exempted all the goods imported from Antarctica into India from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 ("CTA") and from the whole of the additional duties leviable thereon under Section 3 of the CTA.

Income Tax Act, 1961 ("IT Act")

Instruction

Central Board of Direct Taxes has withdrawn Instruction no. 1829, dated September 21, 1989, which dealt with the taxability of income arising to non-residents from execution of turnkey projects.

Certain important and recent legal developments and case laws in this area are set out below: Income Tax Act, 1961 (“IT Act”) , Revised Procedure for Compliance with Withholding Tax Obligations

The revised procedure for furnishing information regarding remittances being made to non-residents with effective from July 1, 2009 is as follows:-

Certain recent case laws in this practice area are set out below.

Excise Law

Single Licence for Telecom Equipment Import

Director General of Foreign Trade (“DGFT”) via Notification No.103 (RE-2008)/2004-2009 dated April 1, 2009 clarified that the import of key communication hardware like radio equipment will require a licence from the Ministry of Communication and Information Technology (“Information Ministry”) without any approval of the Ministry of Commerce and Industry (“Ministry of Commerce”).

The notification said that “Radio Communication equipment including Very high frequency, Ultra high frequency and Microwave Communication equipments (used for wireless operations like mobile telephony) are not permitted to be imported except against a licence to be issued by the Wireless Planning Coordination wing of the Information Ministry”.

Thus, the notification clears the confusion prevailing over the notification dated March 2, 2009 which led to an impression that the importers were required to get a licence both from the Information Ministry as well as from the Ministry of Commerce.

The proposals of the Budget 2009-10 and Finance Bill, 2009 have been aptly summarized by the Hon'ble Finance Minister by quoting Mahatma Gandhi -

 "Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of all."

There were several challenges before the GOI in this year. It is paramount to lead economy to high GDP growth rate of 9 % per annum at the earliest. Then in continuation of its earlier practice, the GOI desire to express its sincerity to deepen and broaden the agenda for inclusive development. With respect to its earlier policy initiatives, GOI intends to improve its delivery mechanism.

Excise and Customs Laws

Post Budget Tax

 Reduction of Excise Duty 

GOI has made the following changes in duty rates, which came into effect from February 24, 2009.

·         The general rate of central excise duty is reduced from 10 per cent to 8 per cent for most of the goods.

 ·         The rate of excise duty on bulk cement has also been reduced from “Higher of 10 per cent or INR 290 per metric tonne” to “Higher of 8 per cent or INR 230 per metric tonne”.

Income Tax Act, 1961 (“IT Act”)Private Provident Fund & Superannuation Funds Equity Returns set to be Tax-Free The returns earned by private provident funds and superannuation funds from their in shares of companies will not attract income tax as GOI plans to give such investments income tax benefits, according to Finance Ministry officials

Commissioner of Customs (“CC”) v. Ferodo India Pvt. Ltd. The taxpayer is the manufacturer of brake liners and brake pads (“Products”)and entered into a technical assistance and trademark agreement (“TAA”) with its parent company M/s. T & N International Limited U.K. (”Licensor”). Under TAA, the taxpayer was required to import/ buy raw material and capital goods from the Licensor. 

Income Tax Act, 1961 (“IT Act”)

 Finance Act, 2008Provisions of Finance Act, 2008 (“Finance Act”) have been notified on May 10, 2008. The Finance Act made certain other amendments to the IT Act, in addition to those proposed under the Finance Bill, 2008 pronounced by the Hon’ble Minister of Finance, GOI on February 29, 2008. Certain important amendments under the Finance Act other than those contained in Finance Bill, 2008 are as follows:

Excise Laws  Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise (“CCE”), Pune  The taxpayer was engaged in manufacture of concentrates of non-alcoholic beverages base concentrates which was cleared by them on payment of duty to various bottlers for manufacture of aerated waters/beverages. The expenses incurred by the taxpayer for the advertisement of the aerated water were claimed as input service for the manufacture of concentrates on the basis that the said advertisements enhance the sale of aerated water which in turn enhances the sale of concentrates. However, the said claim was denied by the CCE on the ground that the advertisement is on account of final product i.e. aerated waters and not in respect of their concentrates and since the taxpayer is manufacturing and removing concentrates, for which no advertisement is undertaken, they are not entitled to take credit of the service tax paid on the advertisement. The Custom Excise Service Tax Appellate Tribunal (“CESTAT”) upheld the decision of the CCE and rejected the appeal.

Income Tax Act, 1961 (“IT Act”)

Tax Treaty between India and Iceland

 Government of the Republic of India and the Government of the Iceland have entered into an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The said tax treaty will be effective in the Union of India (UOI) from April 01, 2008. Tax rates specified for various streams of income are as follows:

Internet Protocol Television (“IPTV”): Draft Recommendations Telecom Regulatory Authority of India (“TRAI”) released the draft recommendation(s) on provision of IPTV services. IPTV is a new method of delivering and viewing television programs using an internet protocol network and high speed broadband technology.

Income Tax Act, 1961 (“IT Act”)

Refund of Withholding Tax to the Person Withholding it

Central Board of Direct Taxes (“CBDT”) has laid down procedure for refund of tax withheld under section 195 of the IT Act to the person withholding the tax under certain specified circumstances.

Service Tax Injunction Against Service Tax on Rent of Commercial Buildings The HC of Madras has granted an interim injunction restraining the Union Finance Ministry from collecting service tax on rent of commercial buildings. The Finance Act, 2007 introduced the provisions pertaining to levy of service tax on rent from immovable property.

Central government withdrew various technical and procedural circulars and promulgated two Circulars to clarify the technical issues (Circular No. 96/2007) and procedural issues (Circular No. 97/2007).

One of the group companies of Morgan Stanley & Co. (“MSC”), which is a Multinational Enterprise (“MNE”) is incorporated in India as Morgan Stanley Advantages Services Private Limited (“MSAS”). MSAS provide certain support services to MSC. Consideration is paid by MSC to MSAS comprising of costs and a mark-up of 29 per cent of such costs on the basis of transfer pricing study.

Central Excise Ford India Pvt. Ltd. v. Commissioner of Central Excise (“CCE”), Chennai

The taxpayer was engaged in the manufacture of motor vehicles. The cars were sold from the factory to the dealers for onward sale to the final customers.

Central Excise Re: Anod Plasma Spray Ltd. The assessee was engaged in the job of repair of old and used parts of machinery/dies and manufacture of new parts of machinery/dies.

I. T. Ombudsman Guidelines, 2006 The guidelines are introduced with the objective of enabling the resolution of grievances against the Income-Tax Department and to facilitate the satisfaction or settlement of such complaints. 

Certain recent legal developments and case laws in this practice area are set out below.

Guidelines for allotment of PAN to Foreign citizens, companies etc.

Revenue authorities have issued guidelines, vide a circular dated October 11, 2006 to simplify issue of Permanent Account Number (‘PAN’) to foreign citizens and other persons like companies/trusts/firms having no office of their own in India

Certain recent legal development and case laws in this practice area is set out below.

Tax Treaties

India Japan Tax Treaty

The Governments of India and Japan have agreed to a few amendments to the existing India Japan Tax Treaty. These amendments have come into force on June 28, 2006.

Certain recent legal development and case laws in this practice area is set out below.

Karnataka Value Added Tax Act, 2003

In an earlier update we have discussed in the case of Bharat Sanchar Nigam Ltd Vs UOI. The Supreme Court held in this case that to qualify as ‘goods' under the Value Added Tax Acts, the commodity should have (a) utility; (b) capability of being bought and sold; and (c) capability of being transmitted, delivered, stored and possessed.

Certain important and recent legal developments in this area (including policy changes, case laws and legislative amendments, as the case may be) are set out below.

Certain important and recent legal developments in this area (including policy changes, case laws and legislative amendments, as the case may be) are set out below.