Tax Update - MAY 2013

Direct Tax

High Court

Re-initiation of assessment proceedings under compulsion of the Audit Party and not independently is invalid and unsustainable

The taxpayer, an individual, during the relevant assessment year (“AY”) leased entire assets of his restaurant business to a third party for an agreed consideration. Further, the taxpayer also supplied manpower for the purpose of food preparation and incurred certain expenses in relation thereto. The assessing officer (“AO”), while passing the assessment order under the provisions of section 143(3) of the Income tax Act, 1961 (“Act”), assessed the income of the taxpayer as business income. Against the assessment order, the Revenue Audit Party raised an objection contending that since the taxpayer had ceased to carry on restaurant business, the income of the taxpayer should be assessed as ‘income from other sources’. The AO replied to the Revenue Audit Party stating that the objection was not correct and the income of the taxpayer was correctly assessed as ‘business income’. The Revenue Audit Party thereafter wrote to the Commissioner of Income tax (“CIT”) that the AO’s stand was not correct. Consequently, the AO was compelled to issue a notice for reopening the assessment proceedings. The reasons recorded by the AO specified that since the taxpayer had ceased to carry on its restaurant business and had leased the entire assets of the restaurant to third parties for which he had received rents and derived income under certain service agreements, his income had to be treated as ‘income from other sources’.

Against the notice, the taxpayer filed a writ petition before the High Court (“HC”) wherein it was contended that the AO was compelled by the objections of the Revenue Audit Party to reopen the assessment proceedings.

The HC ruled in favour of the taxpayer by quashing the notice for re-initiation of the assessment proceedings on the following basis:

· Where the Revenue Audit Party brings certain aspects to the notice of the AO, he is entitled to reopen the assessment only after forming his own belief.

· In cases, where the AO is compelled to act as per the objections of the Revenue Audit Party without forming his own belief, such action of re-opening should be liable to be quashed.

Vijay Rameshbhai Gupta v ACIT (Special Civil Application No 17207 of 2012) (Gujarat HC)

Income from home loan processing fees, loan pre-closure charges etc, amounts to income from business of ‘long term finance’ and eligible for deduction under section 36(1)(viii)

The taxpayer, a housing finance company carrying on the business of long term finance, claimed a deduction under section 36(1)(viii) of the Act for the amount transferred to special reserve. The taxpayer had considered income from processing fees, penal interest and pre-closure charges for computing the deduction under section 36(1)(viii) of the Act. While passing the assessment order, the AO held that the processing fee is derived from normal business activity, independent of terms and conditions of loan, quantum of loan, etc. Further, it is not related to long term finance and therefore, the same cannot be treated as eligible profit for the purpose of
section 36(1)(viii) of the Act.

On appeal, the Commissioner of Income-tax (Appeals) [“CIT(A)”] and Income tax Appellate Tribunal (“ITAT”) allowed the claim of the taxpayer. The ITAT by holding that the said income was directly attributable to and derived from the business of long term finance directed the AO to consider the same as part of eligible profit under section 36(1)(viii) of the Act. On further appeal by the Revenue Authorities, the HC confirmed this view. In arriving at the said conclusion, the HC held that the processing fees, penal interest, pre-closure charges etc, have a direct nexus with the taxpayer’s business and accordingly, these incomes were derived from the business of long term finance. Thus, the same would be eligible for deduction under section 36(1)(viii) of the Act.

CIT v Weizmann Homes Ltd (ITA No 918 of 2006) (Karnataka HC)

Adjustment of refunds against the demand arising from covered issues not permissible by the Revenue Authorities

The taxpayer, an Indian company, filed an application for stay of demand arising out of the assessment proceedings. In the assessment order, the AO had made certain disallowances out of which two disallowances were covered in favour of the taxpayer by the appellate orders for earlier years. In the stay order, the demand arising on covered issues was adjusted against the refunds available to the taxpayer (for previous years), while for other issues, the demand was required to be paid by the taxpayer. Aggrieved by the same, the taxpayer filed a writ petition before the HC.

Before the HC, the taxpayer contended that the AO while disposing off the application for stay of demand had accepted that two disallowances were covered in favour of the taxpayer. Even though the stay order states that the taxpayer would not be treated as an ‘assessee in default’ in respect of the covered issues, the Revenue Authorities proceeded to adjust the refund due and payable to the taxpayer merely on the ground that the matter was sub-judice as the appeal by the Revenue Authorities was pending before the appellate authorities.

The HC ruling in favour of the taxpayer observed that:

· The tax demand arising against the issues covered in the favour of the taxpayer and the issues for which strong prima facie evidences have been provided, should be stayed;

· Once an issue has been covered in favour of the taxpayer in respect of another AY on the same facts, it was wholly arbitrary on the part of the Revenue Authorities to proceed to make an adjustment of the refund;

· The demand cannot be adjusted by the Revenue Authorities merely because it was in possession of the funds belonging to the taxpayer, to which, the taxpayer was legitimately entitled to.

Thus, the HC held that the adjustment of refund in the present case was totally arbitrary and contrary to law. Accordingly, it stayed the recovery of demand on the covered issues and the issues where strong evidences were submitted. However, for the other issues, the HC directed the AO to adjust the refunds against the net demand payable.

HDFC Bank Limited v ACIT (ITA No 770 of 2013) (Bombay HC)

ITAT

Valuation of shares as per exchange control guidelines is not binding for computing capital gains

The taxpayer, a tax resident in Germany, sold part shares of its Indian subsidiary to another Indian company. The taxpayer reported the income from sale of shares as capital gains in its return of income (“ROI”). While passing the draft assessment order, the AO observed that the sale price of the shares used by the taxpayer for computing capital gains was less than the value of shares computed as per the guidelines issued by the Reserve Bank of India (“RBI”). The AO held that such guidelines were binding on the taxpayer and accordingly, computed the capital gains by using the value as per the RBI guidelines. Aggrieved by the same, the taxpayer filed objections before the Dispute Resolution Panel (“DRP”). The DRP, in its directions, confirmed the draft order of the AO.

The taxpayer filed an appeal before the ITAT against the assessment order. Before the ITAT, the taxpayer contended that the guidelines issued by the RBI were for remittance of money on sale of shares and the same were not binding for computing capital gains under the Act. The taxpayer further contended that the guidelines relied upon by the AO were addressed to the Authorised Dealer (“AD”) Banks and the duty to examine the compliance of such guidelines was of the AD Banks, not of the Revenue Authorities. Further, the value of shares adopted by the taxpayer was agreed by the two parties in the memorandum of understanding and the same was approved by the RBI itself.

The ITAT after considering the facts of the case ruled in favour of the taxpayer and directed the AO to compute the capital gains after taking into consideration the sale price actually agreed between the parties, which was also approved by RBI. Further, the ITAT observed that:

· The RBI guidelines have been issued under the Foreign Exchange Management Act (“FEMA”);

· It is the duty of the FEMA Authorities (and not the Revenue Authorities) to examine the compliance of such guidelines and take appropriate action in case of any breach of the guidelines;

· In the present case, the approval was accorded by the RBI on the value of the shares as agreed by the parties and accordingly, the higher sale price under the RBI guidelines cannot be adopted for Income-tax purposes.

Zeppelin Mobile System GmbH v ADIT (ITA No 5179 of 2010) (Delhi ITAT)

Offshore activities not connected with the permanent establishment in India should not be taxable as per India-Japan Double Taxation Avoidance Agreement

The taxpayer, a company resident in Japan, was awarded engineering, procurement, construction and commissioning (“EPC”) contract in India for which it had set up a project office in India. The contract was segregated into offshore and onshore scopes of work. The offshore work comprised offshore supply of equipments and services from outside India. The taxpayer in its ROI offered only the income from onshore activities to tax.

Before the AO, the taxpayer contended that since all the activities in relation to the offshore supplies were carried outside India and since the transfer of property in goods took place outside India as well as the payment was received outside India, the transaction should not be taxable in India. The AO accepted the contention of the taxpayer. The taxpayer further contended that the offshore services were rendered from outside India and the permanent establishment (“PE”) in India had no role in rendering the offshore services, hence, the offshore services should not be taxed in India. Reliance was also placed on the decision of the Supreme Court (“SC”) in taxpayer’s own case. The AO, in this regard, held that the decision of the SC was rendered prior to the amendment carried out to section 9(1)(vii) of the Act.

Accordingly, while passing the draft assessment order, the AO held that income from offshore supply was not taxable in India, however, the income from offshore services, being, fee from technical services (“FTS”), was held taxable in India. Aggrieved by the same, the taxpayer filed objections before the DRP. The DRP, in its directions, confirmed the draft order of the AO.

On appeal before the ITAT, the taxpayer, inter alia, contended that the offshore services were not taxable as per the India-Japan Double Taxation Avoidance Agreement (“DTAA”) because of the following reasons:

· The offshore services were rendered because of the composite contracts which were effectively connected with the PE in India. Accordingly, the FTS could be taxed in India only if the same was effectively connected with the PE under Article 7 of the India-Japan DTAA (rather than Article 12 providing for taxation of FTS);

· The SC, in taxpayer’s own case, had held that income from offshore services falls under Article 7 of the India-Japan DTAA which should not be taxable in India as the same cannot be attributed to the PE in India.

In this regard, the Revenue Authorities contended as follows:

· Since the offshore services had no direct link with the PE in India, it cannot be said that such services are effectively connected with the PE and thus, should be taxed as FTS under the Article 12 of the India-Japan DTAA; and

· SC has not given any decision on this aspect.

The ITAT after considering the facts of the case ruled in favour of the taxpayer and observed as follows:

· Position under the Act

- Before the amendment, the provisions of section 9(1)(vii) envisaged fulfilment of two conditions for treating the payment as FTS, viz, the services which were the source of income should be utilized in India and should be rendered in India;

- However, the amendment by the Finance Act, 2010 had diluted these twin conditions. Now, the rendering of services even outside India would be within the purview of section 9(1)(vii), if such services were utilized in India;

- Thus, the payment for offshore services, even though carried outside India, would be taxable as FTS.

· Position under India-Japan DTAA

- The SC in the case of Ishikawajma-Harima Heavy Industries Ltd v DIT has held that Article 7 (Business Profits) would be relevant insofar as the income from offshore services are concerned;

- Since, the entire services rendered outside India were not attributable to the PE in India, the same could not be taxed in India.

IHI Corporation v ADIT (ITA No 7227 of 2012) (Mumbai ITAT)

DRP has the power to enhance the adjustment made by the Transfer Pricing Officer

The taxpayer, an Indian company, entered into international transactions with its associated enterprises (“AE”). During the course of the assessment proceedings, the AO referred the case to the transfer pricing officer (“TPO”) for determination of arm’s length price (“ALP”). The TPO, in his order, proposed certain transfer pricing (“TP”) adjustments on the basis of which, the AO proceeded to issue the draft assessment order.

Against the draft assessment order, objections were filed before the DRP. The DRP, in its directions, further enhanced the adjustments made by the TPO. On appeal to the ITAT, the taxpayer inter-alia contended that the DRP does not have the powers to enhance the disallowances or adjustments made by the AO or TPO respectively.

The ITAT, in this regard, observed that the provisions of section 144C of the Act empower the DRP to enhance the variation proposed in the draft assessment order to the prejudice of the taxpayer. It observed that such powers were derived due to the use of expression ‘as it thinks fit’ in subsection (5) of section 144C of the Act. Accordingly, the ITAT held that the DRP was fully empowered to enhance the variations proposed in the draft assessment order.

M/s Hamon Shriram Cottrell Private Limited v ITO (ITA No 7982 of 2011) (Mumbai ITAT)

Export commission paid to a foreign agent not to be taxed in India

The taxpayer, an Indian company, paid commission to its non-resident agents for rendering services in respect of procuring export orders from various countries. All the services were rendered outside India and commission income was also directly paid outside India. The taxpayer paid the commission to its agents without affecting any tax withholding on the basis that the agents did not have any business connection / place of business in India. As no tax was withheld, the AO disallowed the same in the hands of the taxpayer under section 40(a)(ia) of Act.

The CIT(A) confirmed the order of the AO for one year and for another year, the CIT(A), after elaborate discussion deleted the disallowance made by the AO. Aggrieved by the orders of the CIT(A), both the taxpayer and the Revenue Authorities filed an appeal before the ITAT. The ITAT upheld the decision of the CIT(A) for the second year and observed as follows:

· The commission income was not received in India or was not accruing or arising in India, whether directly or indirectly, as all the activities took place outside India;

· Such income was also not accruing or arising to non-resident through or from any business connection in India, since these non-resident agents were rendering services outside India and the payments were also made outside India;

· Income in the form of commission did not accrue or arise to those non-residents through or from any asset or sources of income in India or through transfer of capital asset situated in India. Accordingly, the provisions of section 9(1)(i) of the Act were not applicable;

· The taxpayer had relied on the Circular No 23 of 1969 and 786 of 2000 which was subsequently withdrawn by Central Board of Direct Taxes (“CBDT”) vide Circular No 7 of 2009. The Circular No 23 had clarified that the payment made to non-resident commission agents was not liable to income tax in India. The position of taxability of non-resident agents would apply for the year under consideration as the withdrawal of such Circular is applicable prospectively;

· When the taxpayer was claiming that such payment of commission to
non-resident agents was not liable for tax, there was no need to approach the tax department for obtaining tax withholding certificate.

Accordingly, the ITAT held that since the commission income of the foreign agents was not liable to tax in India, the taxpayer was not liable to withhold any tax on the payments made to such agents. Therefore, provisions of section 40(a)(ia) of the Act would not apply to the present case.

Gujarat Reclaim & Rubber Products Limited v ACIT (ITA No 8868 of 2010) (Mumbai ITAT)

Liability to withhold tax under section 194I of the Act does not arise in the absence of a landlord-tenant / licensor-licensee relationship

The taxpayer, an Indian company, took over the running business of another Indian company. It was agreed that the infrastructure of the seller would be used by the taxpayer for running its business which also included the use of tenanted premises registered in the name of the seller. All the payments were made to various parties by the seller on behalf of the taxpayer. In turn, the taxpayer reimbursed the said payments to the seller after withholding tax as per section 194C of the Act. The AO held that the taxpayer was required to withhold tax at a higher rate under the provisions of section 194I of the Act as the payments were in the nature of rent. Accordingly, the AO raised a demand under section 201(1) of the Act for short withholding of tax and levied interest on the same.

On first appeal, the taxpayer contended that it had not occupied the premises as a tenant or a lessee or a sub-tenant and was only reimbursing the actual amount paid by the seller to the landlords. Further, while making the payments to the landlords, due tax was withheld by the seller as per the provisions of section 194I of the Act. The CIT(A) ruled in favour of the taxpayer and held that demand cannot be raised against the taxpayer when he has satisfied the Revenue Authorities that the seller has paid the due taxes.

On appeal, the ITAT upheld the decision of the CIT(A). The ITAT held that the existence of landlord-tenant relationship or a licensor-licensee relationship is necessary before a payment can be termed as rent. It was held that no evidence has been brought forward by the Revenue Authorities to demonstrate that the said relationship existed between the taxpayer and the seller and accordingly, the appeal of the Revenue Authorities was rejected.

ACIT v Serco BPO (P) Ltd (ITA No 5003 of 2012) (Delhi ITAT)

Existence of elements of international transaction is a must for any transaction to qualify as deemed international transaction

The taxpayer, an Indian company, sold its medical – imaging business to another Indian company through an asset purchase agreement pursuant to the global agreement between respective holding companies. The taxpayer treated this transaction as a domestic transaction, not subject to TP provisions. The TPO suo moto assumed jurisdiction and proceeded to determine the ALP of the said transaction alleging the same to be a deemed international transaction as per section 92B(2) of the Act. Aggrieved, the taxpayer filed its objections with the DRP which sustained the findings of the TPO.

On appeal to the ITAT, the taxpayer inter alia contended that:

· The current transaction is a domestic transaction as it is entered between two resident entities in India. For a transaction to be termed as an international transaction either of the parties must be a non-resident, which is not satisfied in the instant case. Reliance, in this regard, was placed on the CBDT Circular no 14 of 2001 dated November 9, 2011;

· The words ‘for the purpose of sub-section (1)’ used in section 92B(2) of the Act clearly indicates that section 92B(2) of the Act has to be read in conjunction with section 92B(1) of the Act;

· The terms and conditions of the agreement entered between the taxpayer and the Indian buyer were independently negotiated between the parties.

The ITAT ruled in favour of the taxpayer and inter alia observed as follows:

· The first criteria for any transaction to be covered within the purview of ‘deemed international transaction’ is that it should qualify as ‘international transaction’ which was not satisfied in this case since none of the parties were non-residents;

· There was no prior agreement between the taxpayer and the holding company of the buyer or the buyer and the holding company of the taxpayer, as required under section 92B(2) of the Act; and

· On perusal of the Global Asset Purchase Agreement, it was evident that the Indian parties had full authority to take independent decisions for the sale of the imaging business.

Kodak India Private Limited v ACIT (ITA No 7349 of 2012) (Mumbai ITAT)

Toll collection rights held to be intangible asset eligible for depreciation

The taxpayer, an Indian company, was awarded a contract from the Government for development, operation and maintenance of infrastructure facility on Build, Operate and Transfer (“BOT”) basis. The taxpayer was required to build and maintain the facility on its own cost and after a specified period, transfer it to the Government. In consideration of the same, the taxpayer was bestowed a right to collect toll from motorists using the road during the specified period.

The taxpayer capitalised the costs incurred by it on the development and construction of the infrastructural facility under the head ‘License to collect toll’ and claimed depreciation on the same as an intangible asset. The AO held that such right to collect toll was neither a license nor a valuable commercial or business right covered under the expression ‘intangible asset’ and accordingly, disallowed the depreciation claimed by the taxpayer. However, the AO allowed proportionate deduction of actual cost incurred on development and construction of the facility on a pro-rata basis spread over the entire toll collection period.

On first appeal, the CIT(A) relying on various decisions of the ITAT on similar issue allowed the claim of the taxpayer. Aggrieved by the order of the CIT(A), the Revenue Authorities filed an appeal before the ITAT. The Revenue Authorities contended that as per section 32 of the Act, depreciation can be claimed only in relation to those intangible assets which are owned by the taxpayer and have been acquired after incurring expenditure. In the case of the taxpayer, since the expenditure incurred by it was allowed to be recouped by collection of toll from the motorists using the road, it could not be said that such a right was within the purview of section 32(1)(ii) of the Act.

The ITAT, relying on various judicial precedents, ruled in favour of the taxpayer and observed that the taxpayer obtained the intangible asset only after incurring certain expenditure and the same was owned by the taxpayer. Thus, it held that the asset was eligible for depreciation as an intangible asset under section 32(1)(ii) of the Act.

ACIT v Ashoka Infraways Private Limited (ITA No 185 & 186 of 2012) (Pune ITAT)

Vishakhapatnam ITAT takes a divergent view and holds that disallowance under section 40(a)(ia) of the Act would be applicable even if the income of the taxpayer is assessed on an estimated basis

The taxpayer, a partnership firm, was engaged in the business of undertaking and execution of civil contracts. While passing the assessment order, the AO, inter alia, estimated the total income of the taxpayer at 8 percent of net contract receipts since the taxpayer was not able to produce its complete books of accounts and supporting documents. The AO also noticed that the taxpayer had paid freight charges without withholding taxes under section 194C of the Act and hence, disallowed the claim of freight charges by invoking the provisions of section 40(a)(ia) of the Act.

The CIT(A) confirmed the order of the AO except for the estimated income from
sub-contract work which was reduced to 6 percent of the sub-contract receipts. Aggrieved by the order of the CIT(A), the taxpayer filed an appeal before the ITAT. The ITAT granted partial relief to the taxpayer by reducing its estimated income to 4.5 percent of the contract receipts [in view of huge depreciation benefit available to the taxpayer which was ignored by the AO and the CIT(A)].

However, the disallowance made under section 40(a)(ia) of the Act was upheld by the ITAT on the following basis:

· Disallowances under section 40(a)(ia) of the Act are not absolute disallowances but are only a deferment of allowance for non-compliance with tax withholding provisions; the deduction is allowed in the year in which the provisions are complied with;

· Such disallowances could not be equated with other disallowances under sections 40, 40A, etc which are absolute disallowances;

· Non-compliance with tax withholding provisions, not being an irregularity committed in the process of earning the business income, cannot be said to be automatically taken care of, where the business income of the taxpayer is assessed on an estimated basis.

K Venkatraju Vemagiri v ACIT (ITA No 312 of 2008) (Visakhapatnam ITAT)

Slot charter held to be charter per se and eligible for the benefit of Article 8 of the
India-Singapore DTAA

The taxpayer, a company resident of Singapore, was engaged in the business of operation of ships for carrying of cargo in international traffic. The taxpayer operations involved use of feeder vessels under slot charter arrangement wherein, cargo was picked from Indian ports and then delivered at its hubs in Singapore or Sri Lanka. At such hubs, the cargo was loaded onto the mother vessels owned by the taxpayer and subsequently delivered to final destination. The taxpayer claimed Article 8 exemption under the India-Singapore DTAA for income derived from its shipping operations. While passing the assessment order, the AO allowed Article 8 exemption to the taxpayer only for income derived from ships for which, the taxpayer was able to submit registration certificates / charter certificates, etc. On an appeal to the CIT(A), Article 8 exemption was granted to additional vessels as well.

Aggrieved, both, the taxpayer as well as the Revenue Authorities filed an appeal before the ITAT. The Revenue Authorities contended that the taxpayer was neither the owner, nor the charter but only availed services under a slot charterer arrangement. It was further argued that income arising under slot charter arrangements was not eligible for relief under Article 8 of India-Singapore DTAA.

The taxpayer relied on the recent decision of Bombay HC in the case of
DIT vs Balaji Shipping UK Ltd (ITA no 3024 & 3215 of 2009) and further contended as follows:

· The decision of the Mumbai ITAT in the case of DIT v CIE DE Navegacao Norsul was based on India-Brazil DTAA. Under the India-Brazil DTAA, the definition of ‘profits derived from operations of ships’ does not include profits from any other activity directly related with transportation by sea and thus, was different from the definition under India-Singapore DTAA;

· The term ‘charter’ includes slot charter as per the Maritime & Shipping dictionary. Reliance was also placed on the decision of the British Court in the case of Tychy (1999) 2 Lloyd Law Report, wherein it was held that the expression ‘charter of ship’ shall include slot charter;

· Without prejudice, the taxpayer contended that the provision of section 44B of the Act shall be applicable to the taxpayer which provides for a deemed profit regime for non-residents engaged in the business of operation of ships.

The ITAT after considering the facts of the case, ruled in favour of the taxpayer and observed that Article 8 of the India-Brazil DTAA was worded differently vis-à-vis
Article 8 of the India-Singapore DTAA. On a comparison of the two DTAAs, the ITAT observed that India-Brazil DTAA talks of ‘business as such’ but India-Singapore DTAA mentioned ‘profits from the operation’ under Article 8. Another difference between the two DTAAs was that Article 8 exemption under India-Singapore DTAA applies to ‘any other activity directly connected with such transportation’, which was not provided for under Article 8 of the India-Brazil DTAA. Thus, owing to the difference in construct of two DTAA’s, the ITAT allowed the claim of the taxpayer and held that Article 8 exemption was available to the taxpayer.

APL Co Pte Limited v DDIT (ITA No 1702 and 1703 of 2010) (Mumbai ITAT)

Payment for non-compete fee not eligible for depreciation or amortization

The taxpayer, an Indian company, acquired the business of manufacture of glass from one of its group companies in India as a slump sale. The taxpayer also entered into a non-compete agreement with the seller whereby the seller agreed not to carry on a competing business for a period of 18 years for a fixed consideration. The taxpayer claimed the said payment as a revenue deduction and in the alternate as a depreciable asset.

The AO, during the assessment proceedings, disallowed both the claims of the taxpayer. On appeal, the CIT(A) held that although the non-compete fee was not a depreciable asset, the amount paid for it was entitled to be amortized over the period of the agreement (ie 18 years).

Aggrieved, both, the taxpayer as well as the Revenue Authorities filed an appeal before the ITAT. The taxpayer contended that the aforesaid expenditure was incurred for acquisition of a capital asset and thus, was eligible for depreciation under section 32 of the Act. The taxpayer relied on various judicial precedents and contended that since payment for goodwill is treated as an intangible asset, non-compete fees, being of similar nature should also be eligible for depreciation as an intangible asset. The Revenue Authorities, on the other hand, contended that the non-compete fee is not an asset, but it is an arrangement between two parties wherein one party allows the other to establish itself in the market. To substantiate further, the Revenue Authorities relied on the decision of the ITAT in the case of Sharp business Systems (India) Limited (133 ITD 275) wherein it was held that non-compete fee is not an asset but is an arrangement.

After hearing both the parties, the ITAT held that that non-compete fee does not fall within the meaning of intangible assets under section 32(1)(ii) of the Act. The ITAT observed that the expression used in the section after specific words like knowhow, copyrights, trademarks, etc is ‘or any other business or commercial rights of similar nature’ and does not cover the term non-compete fee by using the rule of ejusdem generis. From the meaning of the words used ie knowhow, copyrights, trademarks, etc, the expression non-compete fee cannot be extracted. Further, relying on the decision of the ITAT in case of Sharp business Systems (India) Limited (supra), the ITAT held that since the aforesaid payment is a capital expenditure, it cannot be allowed as an expense and also cannot be amortized.

Gujarat Glass Private Limited v ACIT (ITA No 4842 & 4779 of 2004) (Mumbai ITAT)

Circulars/ Notifications

The Central Government notifies new Income-tax return (“ITR”) forms for the AY 2013-14

The Central Government (“CG”) has notified new ITR forms ie ITR 1 to ITR 5 for
non-corporate tax payers for the AY 2013-14 not subject to tax audit under section 44AB or not required to submit a TP certificate as per section 92E of the Act. The deadline for filing tax returns is July 31, 2013. The new form ITR 3 and ITR 4 require an individual and a Hindu Undivided Family (“HUF”), whose income exceeds INR 2.5 million, to disclose Indian assets and liabilities which include land, building, shares, insurance policies, etc.

Source: http://www.incometaxindia.gov.in/download_all.asp

CBDT directs mandatory e-filling of audit report, transfer pricing report and report regarding Minimum Alternate Tax (“MAT”) calculation, wherever applicable

The CBDT has issued a notification wherein it has made it mandatory to e-file the audit report obtained by a taxpayer under section 44AB of the Act, transfer pricing report obtained under section 92E of the Act and the report obtained under section 115JB of the Act regarding MAT calculation. Further, the CBDT has made it mandatory for an individual or HUF to file a ROI in case their total income exceeds INR 0.5 million.

Source: Notification No 34 dated May 1, 2013

Link: http://law.incometaxindia.gov.in/DIT/Notifications.aspx

RBI notifies Monetary Policy Statement 2013-14

The RBI has notified the Monetary Policy Statement for 2013-14. Amongst other things, the Bank rate has been notified as 8.25 percent, the cash reserve ratio of scheduled banks has been retained at 4 percent of net demand and time liabilities.

Source: Monetary Policy Statement 2013-14, dated May 3, 2013

Link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7956&Mode=0

RBI notifies new Repo and Reverse Repo and Marginal Standing Facility rates

RBI has notified that the Repo rate under the Liquidity Adjustment Facility (“LAF”) shall be reduced by 25 basis points from 7.50 percent to 7.25 percent with immediate effect. Consequently, the Reverse Repo rate under LAF and Marginal Standing Facility (“MSF”) stands automatically adjusted to 6.25 percent and 8.25 percent respectively.

Link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7959&Mode=0

RBI notifies implementation of DBT Scheme

The RBI has notified implementation of the Direct Benefit Transfer (“DBT”) scheme. The RBI with a view to facilitate DBT for the delivery of social welfare benefits by direct credit to the bank accounts of beneficiaries has given its recommendation to banks.

Link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7976&Mode=0

Indirect tax

Value Added Tax (“VAT”) / Central Sales Tax (“CST”)

Lease rentals of machinery purchased from Delhi but used in Haryana are not liable to tax under Haryana General Sales Tax Act, 1973 - Place of taxation is the place where the contract is entered into and not the place of location or delivery of goods

The taxpayer was engaged in the business of manufacture and sale of air conditioning system and its components for automobiles in the State of Haryana and procured machinery on lease basis from outside the State of Haryana. The Revenue Authorities sought to levy purchase tax on such lease rentals.

The matter reached the HC. The HC relied on the decision of SC in the case of 20^th Century Finance Corporation Ltd v State of Maharashtra and held that transfer of right to use goods outside the State of Haryana cannot be taxed in the State of Haryana merely because the goods were within the State at the time of use. The HC held that the tax is not leviable in Haryana since the goods were not in the State at the time of entering into transaction of lease. Accordingly, the lease rentals could not be subject to tax in State of Haryana.

Sandan Vikas (India) Limited v State of Haryana and Others [2013 (59) VST 165 (Punjab & Haryana HC)]

Central Excise

Interest on delayed payment of interest allowed at a reasonable rate of 9 percent per annum from the date of filing of refund application even though there was no statutory provision for such interest on interest

The taxpayer was engaged in the manufacture of various plastic products like HDPE and PP tapes etc. These goods were classified under Chapter 39 of the Excise Tariff of India Act,1985 (“Excise Tarrif ”) which provided the rate of duty applicable to such goods and also exemption from payment of certain duties. However, the Revenue Authorities were of the view that the said goods were not classifiable under Chapter 39 and on insistence of the Revenue Authorities, the taxpayer paid higher duty under protest for the period February 1987 to February 1992. In the meantime the matter was settled in favour of the taxpayer by a decision of the Madhya Pradesh HC as well as Central Board of Excise and Customs (“CBEC”) (vide Circular No 8/ 92 dated September 24, 1992 classifying the concerned goods under Chapter 39 of the Excise Tariff.

The taxpayer was litigating for obtaining refund and interest on delayed payment thereof. In this regard, the taxpayer filed a petition before the HC of Gujarat claiming interest on the delayed payment of interest for the period April 1, 2003 to September 2004. The taxpayer contended that there was a gross delay on the part of the Revenue Authorities at all stages while sanctioning the refund claim and therefore, the taxpayer is entitled for interest on the delayed payment of interest by the Revenue Authorities. The Revenue Authorities contended that in the absence of any statutory provision providing for interest on interest, the taxpayer’s claim was rightly rejected by the Revenue Authorities. Further, the Revenue Authorities also contended that payment of interest is governed either by a statute or under contractual agreement between the parties which is not applicable in the present case.

The HC noted that the taxpayer had lodged their refund claim way back in 1991 when the issue of classification was decided in their favour and also Revenue Authorities did not release the refund for a considerable period of time. It also noted that the taxpayer engaged in continuous litigation for years together before initially their refund claims were sanctioned even after the issue of classification was decided in their favour. Further, the interest on such delayed payment was also paid after a delay of 530 odd days. It held that the Revenue Authorities cannot avoid the liability of accounting for interest on the delayed payment of interest to the extent the same was paid late. Since such claim does not fall under statutory provisions therefore interest on delayed payment of interest at a reasonable rate of 9 percent shall be paid to the taxpayer.

Shri Jagdamba Polymers Ltd v UOI [2013 (289) ELT 429 (Gujarat HC)]

Permission to job work under Rule 4(6) can be granted to taxpayer’s own unit for
job-work on intermediate products which are independently marketable as well

The taxpayer has one factory at Tuticorin wherein they manufactured copper anode, copper cathode and continuous copper wire and they also had other factories at Silvassa, Chinchpada and Pipara. The taxpayer sought permission from the Deputy Commissioner of Central Excise, Tuticorin for removal of copper anode to their units at Silvassa , Chinchpada and Pipara under Cenvat Credit Rules, 2004 (“CCR 2004”) for converting it to cathodes or copper wire. The Deputy Commissioner refused the permission on the ground that the taxpayers unit at Silvassa is not a job worker as it is their own unit and copper anode is neither an input nor partially processed input so as to qualify for movement under CCR 2004.

The matter reached the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”). The CESTAT held that that anode is both final product as well as intermediate product at their factory at Tuticorin. It also held that it is a final product when it is cleared on payment of duty and it is an intermediate product when it is further used in the manufacture of cathode or wire rods. Further, once the goods are recognized to be intermediate products, there is no reason to deny the benefit of CCR 2004.

CCE, Tirunelveli v M/s Sterlite Industries (I) Ltd [2013-TIOL-545-CESTAT-MAD] (Madras CESTAT)

Duty paid on procurement of JO trucks used for transportation of raw materials within the premises of manufacturing unit are eligible for Cenvat Credit

The taxpayer claimed Cenvat Credit of excise duty paid on purchase of JO trucks used for transporting raw materials within the manufacturing unit. The same was disallowed by the Revenue Authorities on the premise that JO trucks were not covered under the definition of ‘capital goods’ or ‘inputs’ as given under CCR 2004.

The matter reached the CESTAT where it was observed that the definition of ‘inputs’ covered those goods which are used in or in relation to manufacture of final products whether directly or indirectly irrespective of the fact that whether such goods are contained in the final product or not. Basis the above observation, the CESTAT prima facie held that the impugned trucks would be regarded as inputs used in relation to manufacture of final products. Accordingly, credit of excise duty on purchase of such trucks will be available to the taxpayer in terms of Rule 3 of CCR 2004 which provides that a manufacturer can avail credit of excise duty paid in relation to inputs. The CESTAT allowed the stay application and waived the condition of pre-deposit of duty demand, interest and penalty till the disposal of the appeal.

Jindal Steel and Power Ltd v CCE [2013 (290) ELT 121 (TRI-DEL)] (Delhi CESTAT)

Extended period of limitation cannot be invoked for denial of Cenvat Credit where the taxpayer has made the relevant disclosures and there is no suppression of facts on his part with intent to evade payment of duty

The taxpayer procured HR sheets in coils from M/s TISCO which were used for manufacturing of finished goods, namely Tin Mill Black Plates, Full Hard Cold Rolled Coils and Electrolytic Tinplates. These HR sheets in coils qualified as ‘inputs’ for the taxpayer and accordingly, they availed Cenvat Credit of the duty paid on the said HR sheets. During the manufacturing process, certain sheets were found unfit for use in the manufacture of the finished goods and were rejected. Such rejected inputs were cleared in the name of ‘Pickled & Oiled HR Coils’ to the consignment agent of M/s TISCO and credit was reversed at the price which was lower than the price basis which credit was availed. The Revenue Authorities was of the view that credit reversal should be equal to the amount of credit availed on the ‘inputs’ which are returned to the supplier. A demand of tax along with interest and penalty was raised.

The taxpayer contended that since the rejected inputs were sold at lower price, therefore, it was not liable to pay duty at par with the Cenvat Credit benefit which they have availed. The aforesaid contention was rejected by the CESTAT on the ground that the rejects (ie Pickled & Oiled HR Coils) were not new products as they were not subjected to any manufacturing process. The CESTAT held that the reversal has to be of the same amount as contended by the Revenue Authorities. The CESTAT dropped the equivalent penalty imposed on the taxpayer while dismissing the Revenue Authorities’s contention that there was suppression of facts with intent to evade payment of duty because the taxpayer was submitting statutory monthly returns showing clearance of the ‘inputs’ under consideration. Extended period of limitation for the purposes of levying penalty was thus, held inapplicable.

The present appeal before the HC of Jharkhand was filed by the Revenue Authorities against the decision of the CESTAT in so far as it dropped the levy of penalty. The HC observed that the taxpayer was continuously making disclosures of the clearance of the impugned goods in every statutory monthly return and the same was in the knowledge of the Revenue Authorities. Therefore, the HC dismissed the appeal by stating that extended period of limitation could not be invoked as there was no suppression of facts on the part of taxpayer with intent to evade payment of duty and consequently, demand beyond the period of 12 months cannot be sustained in the eyes of law.

CCE v Tinplate Company of India Ltd [2013 (289) ELT 414 (Jharkhand HC)]

Service tax

Services used for installation of storage tank containing raw material outside factory are eligible as input services for claiming Cenvat Credit

The taxpayer was engaged in manufacturing of excisable goods and has installed storage tanks for storing ammonia outside his factory. The taxpayer claimed Cenvat Credit of service tax paid on input services like the services of consulting engineers, construction, erection etc for the installation of these storage tanks on the basis that the input / raw material stored therein is intended to be used for manufacture of final product. Taxpayer received a show cause notice demanding the reversal of Cenvat Credit. Aggrieved by the same taxpayer filed an appeal before the CESTAT which was dismissed and hence the issue was directed to the HC.

HC placed reliance on Rule 3(1) of the CCR 2004 and held that the input services were eligible for Cenvat Credit as the only stipulation in the provision is that the input services should be received by the manufacturer. Hence, it is irrelevant whether they are received in the factory or not. Also Rule 2(l) of the CCR 2004 provides that services used by the manufacturer either directly or indirectly, in or in relation to the manufacture of final products are eligible input services. Hence, the services used for erection and installation of storage tank containing ammonia are input services and hence eligible for Cenvat Credit.

Deepak Fertilizers and Petrochemicals Corporation Ltd v CCE, Belapur [2013-TIOL-212-HC-MUM-CX (Mumbai HC)]

Cenvat Credit on the input services is not deniable which were used for providing an output service, the value of which is not recovered

The taxpayer was engaged in the business of advertising services. During the course of an audit, it emerged that the taxpayer was discharging service tax on receipt basis as laid down under the law. In certain cases where the amount billed by the taxpayer could not be realized, no service tax was being paid. An order was passed by the Assistant Commissioner denying input credit in respect of services where no amount could be recovered. An appeal was made to the Commissioner (Appeals) by the taxpayer wherein the appeal was decided in their favour.

Revenue Authorities made an appeal to the CESTAT. The CESTAT rejected Revenue Authorities’s appeal by agreeing with the first appellate authority’s decision wherein it was stated that there was no specific provision in CCR 2004 denying Cenvat Credit on the input services where were used for providing an output service, the value of which is not recovered. It was also held that Rule 14 of CCR 2004 was inapplicable for the reason that it envisaged reversal of Cenvat Credit wrongly utilized or erroneously refunded and not reversal of Cenvat Credit in situations where recovery was pending and written off as bad debts later. It further held that there cannot be one-to-one co-relation in availing of Cenvat Credit of input services to the provision of output services.

CST v Krishna Communication [2013-TIOL-490-CESTAT-AHM] (Ahmedabad CESTAT)

No liability of taxpayer under Goods Transport Agency (“GTA”) service when no consignment note is issued by the owner of the vehicles that are used for transporting goods from place of manufacture to the place of delivery

The taxpayer was engaged in manufacturing Ready Mix Concrete ("RMC") and hired vehicles for carrying RMC from place of manufacture to place of delivery of the goods. The vehicles were provided by the owner for use as per terms of a contract in receipt of consideration which involved certain payments on monthly basis and certain payments based on the number of kilometers run. Revenue Authorities considered this as a consideration for services of GTA and demanded service tax from the taxpayer on a reverse charge basis. The taxpayer filed appeal before the CESTAT.

On examining the terms of the contract, the CESTAT held that the contract is for hiring of vehicles under which the vehicles are to be painted as directed by the taxpayer and showing his logo. The operator was responsible only for the vehicle and there are no custodial rights or responsibilities of goods carried and no consignment note (which normally is a document of title for the goods) was issued. Therefore, in the event of such non-issuance of consignment note by the operator, they cannot be considered as a GTA. CESTAT also held that the services provided were that of a Goods Transport Operator and not of a GTA and mere fact that the operator is doing an activity of transportation cannot make the operator a GTA. CESTAT disagreed with the argument of Revenue Authorities that the log-book maintained by the operators should be considered as equivalent to consignment note and allowed the appeals.

Birla Ready Mix v CCE [2013 (30) STR 99 (Delhi CESTAT)]

Services provided to international inbound roamers on behalf of a foreign telecommunication provider (“FTP”), are to be treated as export under Export of Service Rules, 2005 (“Export of Service Rules”)

Taxpayer was engaged in providing telecom services in India. It entered into agreements with various FTPs to provide services to international inbound roamers who are registered with the foreign operators. The lower appellate authority held that these services were chargeable to service tax in India and not eligible for export status under the Export of Service Rules. Taxpayer hence filed an appeal before the CESTAT.

Taxpayer contended that as per the agreement, the service is rendered to the FTP who discharges the consideration for such services in convertible foreign exchange. Hence, the transaction is one as defined in Rule 3(1) (iii) of Export of Service Rules. They also relied on Circular no 111/5/2009-ST dated February 24, 2009, which clarified that for the services that fall under Category III [Rule 3(1) (iii)], the relevant factor is the location of the service receiver and not the place of performance when the benefit of the service accrues outside India. Also as per the UK and Australian laws, the receiver of service is the FTP and not their subscribers. Reliance was also placed on the case of Paul Merchants Ltd [2012-TIOL-1877-CESTAT-DEL] wherein in it was held that Western Union was the actual recipient of the services provided by its agents and sub-agents and not the persons receiving money in India.

On the other hand, Revenue Authorities relied on CBEC Circular 141/10/2011-TRU dated May 13, 2011 which clarified that the Circular No 111/5/2009-ST dated February 24, 2009 stated that the accrual of benefit should be judged based on where the effective use and enjoyment of service has been obtained and in the present case the subscriber is situated in India and hence, the consumption and enjoyment of the service is in India.

CESTAT allowed the appeal by holding that the agreement for supply of services and also the consideration flow is between the taxpayer and the FTP therefore FTP is the actual recipient. The CESTAT also placed reliance on the laws relating to GST in UK and Australia, it is evident that when a service is rendered to a third party on your customer’s behalf, the service recipient is your customer and not the third party. Reliance was also placed on Circular No111/5/2009-ST dated
February 24, 2009 and Paul Merchant’s case to hold that the FTP was the actual beneficiary and the actual service recipient of the services provided by the taxpayer.

Vodafone Essar Cellular Ltd v CCE (2013-TIOL-566-CESTAT-MUM)(Mumbai CESTAT)

Services provided to an overseas client by two group companies under a joint agreement wherein consideration is routed through one company to another. In such a case, the receiving company cannot be treated as sub-contractor. Therefore, the services qualify as exports under Export of Services Rules under Rule 3(1)(iii) hence not liable to service tax

The taxpayers along with Jubilant Biosys Ltd, Bangalore (“Group Company”) are subsidiaries of Jubilant Life Sciences Ltd. Both the units are 100 percent export oriented units (“EOUs”). While the taxpayer conducts research on the synthesis of the drug molecules based on the information supplied to them and manufactures the drug on laboratory scale, the group company gets some quantity of the drugs so manufactured by the taxpayer and conducts research on its biological properties. The services or the product manufactured by the taxpayer are sent either directly or through its group company to the offshore clients. The payment for the services rendered by the taxpayer ie the payment for the services of synthesis of the molecules, from offshore clients is received through the group company.

Show cause notice and the Order-in-Original (“order”) were issued holding that the taxpayer has provided the taxable services of scientific and technical consultancy covered by section 65(105) (za) of the Finance Act, 1994 to group company and that the same does not constitute export of services under Export of Service Rules. Aggrieved by the order, the taxpayer filed an appeal along with the stay application and contended that the services to the overseas client were provided under a joint agreement between the two group companies. Merely because the consideration was routed through the group company to the taxpayer, the taxpayer cannot be treated as sub-contractor.

Basis the agreement between the group companies and the overseas client, it was prima facie held by the CESTAT that the group company can directly deal with the offshore clients and therefore, shall not be regarded as sub-contractors. In view of the agreement, the service of developing the process of synthesis of drug molecules provided by the taxpayer has to be treated as having been provided to their overseas clients. Merely because the payment for their portion of service has been received by them through their group company, they cannot be treated as sub-contractor of the group company. Prima facie, the CESTAT concluded that the service rendered by the taxpayer had been received by the overseas clients for the use in their business (the payment for which has been received in foreign currency) and is, therefore, covered by Rule 3(1)(iii) of the Export of Service Rules. Consequently, they are not liable to pay service tax and the stay application is allowed.

Jubilant Chemsys Ltd v CCE [2013-TIOL-448-CESTAT-DEL] (Delhi CESTAT)

Sharing of staff with group companies to carry out their daily activities and reimbursement of their salaries on cost to cost basis, does not fall within the purview of Business Auxiliary Services (“BAS”)

The taxpayer was engaged in recruitment and supply of manpower for the group companies and the cost of expenditure towards the salaries and other administrative expenses were reimbursed to the taxpayer by other group companies on actual basis from May 2006 onwards.

Show cause notices were issued to the taxpayer to show as to why the services rendered by the taxpayer to their group companies would not come within the purview of BAS. Thereafter, the order in Original was issued to the taxpayer. Aggrieved by it, the taxpayer filed the present appeal.

CESTAT granted stay and held that the services provided by the taxpayer include recruiting staff and supplying them to the group companies to deal with activities taken by the group companies and thus, does not fall under the purview of the BAS.

K Raheja Real Estate Pvt Ltd v CCE [2013-TIOL-535-CESTAT-MUM] (Mumbai CESTAT)

Customs

No penalty under section 117 of the Customs Act, 1962 (“Customs Act”) can be imposed upon an importer for his failure to file Bill of Entry and clear the goods within 30 days of unloading thereof at a customs stations

The Revenue Authorities had imposed different penalties on the taxpayer for
non-filing of bill of entry for release of goods for home consumption or warehouse within 30 days of the date of unloading the goods at the custom station.

The matter reached the HC, which, after an analysis of section 46, section 48 and section 117 of the Customs Act held that there is no time limit specified under the Customs Act for filing of the bill of entry. Section 48 of the Customs Act only provides for the time limit post which the goods at the custom station can be sold by the Revenue Authorities. However, such time limit cannot be inferred to mean the time limit for filing of the bill of entry. Furthermore, where no time limit has been specified under the Customs Act, non-filing of bill of entry within a period of 30 days cannot be treated as breach of section 117 of the Customs Act. Accordingly, no penalty is leviable.

Commissioner of Customs v Shreeji Overseas (India) Pvt Ltd [2013 (289) ELT 401 (Gujarat HC)]

Other taxes

Entertainment tax is leviable on each purchase of ticket for the rides in an amusement park and not on the entry fee for entry into the amusement park

The taxpayer was engaged in the business of running and operating an amusement park (“the park”) with the name ‘Funworld’ at Rajkot in the State of Gujarat. The amusement park had been built on the land leased out by the Municipal Corporation of Rajkot for the purpose of running an amusement park. The park became operational on January 17, 1991. Subsequently, the Government of Gujarat vide the powers conferred upon it by the provisions of the Gujarat Entertainment Act, 1977 (“Entertainment Act”) exempted entertainment tax on amusement parks for a period of 6 years. Accordingly, the taxpayer was exempted from the payment of entertainment tax on the income derived from the operation of the park till January 16, 1997. The Revenue Authorities issued a notice to the taxpayer assessing tax. The said assessment was confirmed by the Revenue Authorities after relying on the Instructions dated September 15, 1990 issued by the Commissioner of Entertainment Tax, Gandhinagar, that if the different items are owned by one owner and if its charges are more than the prescribed limit, the tax shall be charged in that case. Accordingly, since all the rides in the amusement park are owned by the taxpayer and the consolidated amount recovered exceeds the specified limit tax has to be paid by them.

Being aggrieved by the order of the Revenue Authorities, appeal was made before the Collector, Rajkot which was rejected by the Collector. The matter finally reached the HC. The taxpayer drew attention to Notification dated September 4, 1992, whereby the Government exempted the levy of entertainment tax on classes of entertainment where the entry is subject to the payment of an amount not exceeding Rs 6/-. In this context, the taxpayer submitted that each ride is a separate entertainment for which an amount is less than INR 6/- was being charged. Accordingly, the taxpayer was eligible for the exemption from the levy of entertainment tax. It was reiterated that purchase of a ticket for a particular ride is nothing but a ticket for an entry in such a ride and accordingly, usage of each and every ride by a visitor is required to be viewed as a separate and distinct transaction of entertainment. The entry fee paid at the time of entry into the park would not entitle any visitor to enjoy the benefits of the rides and thus the entry fee cannot be treated as the amount paid for entry into an entertainment.

The HC after analyzing the provisions of the Entertainment Act and on hearing the arguments put forth by both the parties held that the chargeable event is the admission to an entertainment. Accordingly, if in the case of individual owners of rides, each ride is considered as a separate entertainment, merely because the owner of all the rides is the same, the charging event would not change. In the present situation, the payment made for entry in the park was not the payment for admission to an entertainment the question of clubbing the same with tickets for rides does not arise. Accordingly, as the taxpayer was recovering an amount less than INR 6/- for each entertainment provided by it, exemption in terms of Notification dated September 4, 1992 was available to the taxpayer.

Funworld and Tourism Development Ltd v State of Gujarat and Others [2013 (59) VST 306 (Gujarat HC)]

Circulars / Notifications

Central Excise

CBEC notifies a Circular providing clarification with respect to admissibility of area-based exemption

The Central Board of Excise and Customs (“CBEC”) has issued Circular No 968/02/2013- CX, dated April 01, 2013 (“Circular”) providing clarification with respect to admissibility of area-based exemption Notification No 49/2003-CE and 50/2003-CE, dated June 10, 2003 (“Notifications”). CBEC had earlier issued Circular No 960/03/2012-CX, dated February 17, 2012 clarifying that expansion of a Unit (which is claiming exemption under the Notifications) by acquiring an ‘adjacent plot of land’ and installing new plant and machinery on such land would also be eligible for availing exemption under the Notifications. The Circular has now clarified the expression ‘adjacent plot of land’.

Source: Central Excise Circular No 968/02/2013- CX, dated April 01, 2013

Link: http://www.cbec.gov.in/excise/cx-circulars/cx-circ13/968-2013cx.htm

Director General Foreign Trade (“DGFT”)

DGFT notified amendments to the provision of Foreign Trade Policy 2009-14 (“FTP”)

The Ministry of Commerce announced the amendments to the provisions of FTP applicable for 2013-14. Extensive changes have been made vis-a-vis various export promotion schemes. Also, the much anticipated policy reforms for SEZ have been announced as part of the policy reforms in the FTP supplement

Source: Annual Supplement (2013-14) to the Foreign Trade Policy 2009-14

Links

(i) Official highlights of the amendments as per Ministry of Commerce click here

(ii) For detailed overview of key amendments to the FTP and BMR analysis - click here ; and

(iii) To view the SEZ policy amendments click here