April 2012

Knowledge Flash

Contents

Editor’s message……………………………………………………………….2

News Flash………………………………………………………………………..3

Due Dates..………………………………………………………………………..4

Notifications/ Circulars……………………………………………………..5

Case Law Synopsis……………………………………………………………..7

Dear Reader,

We at JGarg Economic Advisors Private Limited havealways endeavoured to add value to our clients,associates and acquaintances through initiatingvarious knowledge offerings. With the onset of thisnew financial year 2012-13 and the introduction ofcardinal tax changes in the Finance Bill 2012, weattempt to capture the pulse of throbbingcontroversies attached to retroactive amendmentsbrought about in the Finance Bill, till such proposalsbecome the law of land. We hope that our limitedcontributions through circulating these knowledgeflashes shall be useful to you.

Happy reading.

CA Gaurav Garg CA Parul MittalCA Shweta Gupta CA Vineeta Goyal

“Everyone who’s ever taken a shower has an idea. It's the person who gets out of the shower, dries off and does something about it who makes a difference.”

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News FlashGAAR may lose bite to soothe investorsThe Finance ministry is considering exemptingtransactions or tax-saving arrangements less than INR15 crore to ensure only corporate structures ofsignificant size come under the ambit of the newregime, known as General Anti-Avoidance Rules (GAAR).It is also considering implementing GAAR after severalmonths or even in the financial year beginning April 01,2013, a ministry official said.Halved tax to keep alive & kicking in IndiaThe Finance ministry is set to halve the tax burden tokeep alive the interest of private equity (PE) players,who constitute the biggest foreign direct investor groupin India. The proposed change will put PE at par withforeign institutional investors , who currently enjoy aconcessional long-term capital gains tax of 10% on gainsfrom unlisted or off-market share transfers.

India & Switzerland signed treaty for identity requirements under their double taxation agreement inked on April 20, 2012Switzerland has agreed to provide information aboutIndian citizens with bank accounts. This will enable Indiato get information even if Indian government haslimited details regarding any person having a bankaccount in Switzerland. Agreement will be effective fromApril 01, 2011

RBI study for higher FDI cap in insurance sectorRBI, in a study released earlier his month on FDI flows toIndia said that there are certain sectors includingagriculture where FDI is not allowed while sectoral capsin some sectors such as insurance and media arerelatively low compared to global patterns. The RBIstudy found that sectoral cap was higher in China thanin India for insurance and a few other sectors, whilecountries like Brazil and Russia have higher sectoral capsthan India across most of the sectors.SEBI to announce new consent settlement norms soonSEBI is set to put in place a new and detailed mechanismfor its 'consent‘ procedure -- an out-of-court-likesettlement through which it settles cases of suspectedirregularities by listed companies and various marketentities. SEBI decided to revise the existing consentprocedure, after it found lack of uniformity andnecessary details in the prevailing system, which is inplace since 2007, a senior official said.

Exchange traded fund for PSUsThe government is toying with the idea of an exchangetraded fund for shares of public sector companies(PSUs) on the lines of Hong-Kong’s Tracker Fund, whichhas been a runaway success.

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Due Dates

Due Date Particulars Period Form/Challan No.

May 05, 2012 Monthly service tax payment

For the month ofApril, 2012

Challan No. GAR 7

May 07, 2012 TDS payment Form the month of April, 2012

Challan No. 281/17

May 15, 2012 Quarterly TDS return January – March, 2012

Form 24Q, 26Q, 27Q & 27EQ

May 12, 2012 Half-yearly ESI return

October 2011 –March 2012

Form 5

May 21, 2012 ESI payment For the month of April, 2012

ESI Challan

May 30, 2012 Issue TDS certificates

January – March 2012

Form 16A/ 27D

May 31, 2012 Issue of TDS certificates to employees

Annual from April 2011 – March 2012

Form 16

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Notifications/ CircularsService tax Circular No. 155/6/2012 - STCBEC clarified that for the airlines which were collectingdifferential service tax on tickets issued before April 01,2012 for journeys after April 01, 2012 (effective servicetax rate w.e.f April 01, 2012 is 12%),the point of taxationshall be the date if receipt of payment or date ofissuance of invoice, whichever is earlier. Thus theservice tax shall be charged @10% in case of ticketsissued before April 01, 2012 where payment receivedbefore April 01, 2012.

CBDT Circular No. 1/2012 dated April 09, 2012All deductors shall issue TDS certificate in Form 16Agenerated through TIN central system, which isdownloaded from TIN website with a unique TDScertificate number in respect of all sums deducted on orafter April 01, 2012 under any provision of Chapter XVII-B other than Section 192.

RBI (A.P. DIR Series) Circular No. 113 dated April 24, 2012As per the announcement made in the Union Budget forthe year 2012-13, it has been decided to allow ECB forworking capital as a permissible end-use for the civilaviation sector, under the approval route subject toprescribed conditions.

Service tax Circular No. 156/7/2012 - STA committee has been constituted to review the schemefor electronic refund of service tax paid on taxableservices used for export of goods, made operationalvide notification 52/2011-ST dated December 30, 2011.The Committee will submit its report to the chairman,CBEC before June 20, 2012.

Service tax Circular No. 157/8/2012 - STCBEC clarified that services provided by AgricultureProduce Marketing Committee (APMC) is not in natureof Business Support Service (BSS) and hence exemptionmade available under BAS in relation to agriculture videnotification no. 14/2004-ST on the market fee or ‘mandishulk”. Any other service provided by APMC for a chargeother than market fee would be taxable under therespective taxable head.

RBI (A.P. DIR Series) Circular No. 112 dated April 20, 2012As per the existing ECB guidelines, existing ECB may berefinanced by raising a fresh ECB subject to thecondition that the fresh ECB is raised at a lower all-incost. Through this Circular, it has been decided that theborrowers desirous of refinancing an existing ECB canraise fresh ECB at a higher all-in cost under the approvalroute subject to the condition that the enhanced all-incost does not exceed the prescribed all-in cost ceilingunder existing guidelines.

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Notifications/ Circulars

MCA General Circular No. 7/ 2012 dated April 25, 2012The Circular effective from May 20, 2012 clarifies that thefacility for name approval through STP mode oncertification by professional will continue to be available.However, such names will be put to online check by thesystem for ascertaining similarity with trademark, the workitem will be transferred for processing in non-STP mode.All name applications submitted in STP mode shall be putfor system check. All names approved in STP mode will bemade available on the dash board of the concerned ROC forimmediate examination. Name approval application in caseof single word (other than words private limited) shall notbe processed in STP mode.

CBEC Circular No. 962/05/2012-CX dated March 28, 2012CBEC clarified that duty payable under Rule 8 of CentralExcise Rules 2002, the cenvat credit allowed to be used iswhat was in balance on the last date of that month orquarter and not what is accrued thereafter. Whereas, dutypayable under section 11A where generally duty payableis determined by Central Excise officer, the restriction onthe utilization of the cenvat credit accruing subsequent tothe last date of the month or quarter in which the arrearsarise, is not applicable.

SEBI Circular No. CFD/DIL/LA/SK/AT/8278/2012 dated April 11, 2012For the quarter ended FY 2011-12 and in respect of annualaudited results for FY 2011-12, listed entities have anoption to either:•Submit limited reviewed Q4 results within 45 days fromthe end of the quarter and thereafter submit annualaudited results as soon as they are approved by the Board.(or)• Submit annual audited results within 60 days from theend of fourth quarter along with Q4 results which wouldbe a balancing figure.

MCA vide notification G.S.R. (E) dated April 17, 2012In Schedule XIV to the Companies Act, 1956 after serialnumber IV relating to Ships and the entries relatingthereto, serial number V is inserted pertaining to thetreatment of Intangible assets (Toll Road) created underBuild, Operate and Transfer, Build, Own, Operate andTransfer or any other form of Public Private PartnershipRoute.

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Case Law SynopsisTransfer Pricing

Lending or borrowing money between two associatedenterprises comes within the ambit of internationaltransaction and whether the same is at arm’s lengthprice has to be considered. Tata Autocomp Systems Ltd.vs. ACIT : Decided by Mumbai ITAT

There is no business connection between theexpenditure incurred on higher education of directorwho went abroad for doing M.Sc. in entrepreneurshipimmediately after completing her graduation and therebeing no history of the appellant company as far assending its workplace abroad for training which can besaid to have relation with the business activities. NatcoExports Pvt. Ltd. vs. CIT : Decided by Delhi High Court

Segmental accounts of assessee required to beconsidered for determination of assessee’s profit to totalcost from international transaction. Hinduja VenturesLtd. vs. ACIT : Decided by Mumbai ITAT

If TPO does not reject a comparable on the ground offunctional incomparability then neither the AO or therevenue can take a plea of functional incomparability ofthe comparables chosen by the assessee in its TP study.Carlyle India Advisors Pvt. Ltd. vs. ACIT : Decided byMumbai ITAT

Application of CUP method based on comparabletransactions of foreign AE with its unrelated customersupheld. Terms and conditions providing 50:50 split of netfreight revenue typical to the logistic industry,geographical difference not material in benchmarkingfor logistics industry, assessee’s own case for AYs 2004-05 and 2005-06 followed. Agility Logistics Pvt. Ltd. vs.DCIT : Decided by Mumbai ITAT

Income Tax

Section 28(iiid) of the Income Tax act, 1961 provides thatany profit from the sale of DEPB is chargeable to incometax under the head “PGBP”. The word “profit”means thegross proceeds of a business transaction less the costs ofthe transaction. DEPB is “cash assistance” receivable bya person against exports under the scheme of theGovernment of India and falls under clause (iiib) ofSection 28 and is chargeable to income tax under thehead Profits and Gains from Business or Profession”even before it is transferred by the assessee.Thus as per the explanation (baa) to Section 80HHC readwith the words used in clauses (iiid) and (iiie) of Section28, the assessee was entitled to a deduction underSection 80HHC on export profits.. M/s Topman Exportsvs. CIT : Decided by Supreme Court

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The sole purpose of this publication is to disseminate legal updates andapprise you of vital tax news. The content forming part of this knowledgeflash is broad in nature and comprises of information in public domain. Itdoes not involve any special analysis pertaining to any definite facts andcannot be used in any way, as a substitute for specific professional advice. Ithas been prepared for the general guidance on matters of interest. Due carehas been taken while compiling the information, however, no representation(express or implied) is given as to the accuracy or completeness of theinformation contained in this publication.

The sole purpose of this publication is to disseminate legal updates and apprise you of vital tax news. The contentforming part of this knowledge flash is broad in nature and comprises of information available in public domain. Itdoes not involve any special analysis pertaining to any definite facts and cannot be used in any way, as a substitute forspecific professional advice. It has been prepared for the general guidance on matters of interest. Due care has beentaken while compiling the information, however, no representation (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication.

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