VAT – Service provider cannot be compelled to be registered as a ‘dealer’ under the VAT Act

By using its own equipments, did not amount to transfer of right to use of equipments and, hence, the agreement, in question, could not make the petitioner liable to pay sales tax on account of transfer of right to use goods for any purpose.

HLS Asia Ltd vs State of Tripura (GAUHATI HIGH COURT)

The petitioner is a Company incorporated under the Companies Act, 1956, having its registered office at New Delhi, and a branch office at Agartala and deals with the business of providing services including ‘Well Logging Perforating and other Wire Line Services’, on contract basis, in the entire country including the State of Tripura. Pursuant to a notice inviting tender, issued by the ONGC for executing the work of Well Logging, Perforating and other Wire Line Services for its oil and natural gas exploration and exploitation, to be carried out in the State including other States. The petitioner tender was accepted by the ONGC and a contract agreement was executed between ONGC and the petitioner. The agreement contained provisions for payment of rentals for equipments deployed and used in rendering services and also for operating and other charges in accordance with the pricing structure for such type of services including provision for payment of mobilisation charges, demobilisation charges etc. The contract also contained various other provisions regulating the reciprocal rights and liabilities of the parties to the contract. According to the provisions of the agreement, the equipments, on rental, were to remain in possession of the contractor, i.e., the petitioner as its exclusive property. All the equipments were simply used by the contractor-petitioner for providing the services under the agreement and the contractor-petitioner was to remain entitled to compensation under various heads as per the agreement.

Whether the petitioner fall in the category of ‘dealer’ u/s 4(2) of the TVAT Act compelling the petitioner to pay tax under the TVAT Act.

On behalf of responded it was contended that the equipments and tools to be provided by the contractor, i.e., the petitioner, shall remain in the possession of the petitioner, as contractor, the petitioner having the exclusive right to use such equipments and tools, the fact remains that the contractor was required to provide 24 hour service, as and when required by the company, by mobilizing crew and equipments and tools for the services of ONGC Ltd. monthly rental charges, on the equipments, were payable by ONGC for the equipments, which the petitioner was to include in its invoices. The contract was for supply of materials, such as, spares, explosives, logging cables, etc., which are taxable under TST Act, 1976, as well as the TVAT Act, 2004. All the rates, estimated by the ONGC Ltd., were inclusive of excise duty, sales tax and octroi, etc., if any, and, thus, the petitioner was liable to be registered under TVAT Act, 2004, and was liable to file return in accordance with the relevant provisions of law.

Held, the petitioner merely worked as a service provider and, for the purpose of rendering services, under the contract agreement, the petitioner had mobilized equipments and accessories in order to execute the works contract and the respondents could not show any material to prove any element of transfer of right to use any of the equipments/accessories by the petitioner to the ONGC. It is, no doubt, that tax is chargeable in the event of transfer of the property in goods or if there is a deemed transfer, and, as it has already been decided by this Court, there was no element of transfer of right to use any goods and therefore, the petitioner was not chargeable to pay sales tax.

Notification: Goa Excise Duty Act, 1964

GOVERNMENT OF GOA

Department of Finance

Revenue & Control Division

___

Notification

1/7/2012-Fin(R&C)

In exercise of the powers conferred by section 22 of the Goa Excise Duty Act, 1964 (Act 5 of 1964), the Government of Goa hereby makes the following rules so as to amend the Goa, Daman and Diu (Excise Duty) Rules, 1964, namely:—

1. Short title and commencement.— (1) These rules may be called the Goa Excise Duty (Amendment) Rules, 2012.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment of rule 43A.— In rule 43A of the Goa, Daman and Diu (Excise Duty) Rules, 1964, for clause (i), the following shall be substituted, namely:—

“(i) strength of IMFL shall not exceed 60% v/v”.

By order and in the name of the Governor of Goa.

Michael M. D’Souza, Additional Secretary, Finance (R&C).

Porvorim, 7th November, 2012.

e-filing of return - Chartered Accountant's are requested to register on new website

Tax Professional (CA) is a new user on this portal and can e-File Income Tax Forms (other than Income Tax Returns). Chartered Accountant's are requested to register. Click here to register and to know more about this website by Income Tax Department, Government of India.

 

Forms to be authorized by CA Form Name          

 

Description

 

Form 3CA            Audit report under section 44AB of the Income-tax Act, 1961, in a case where the accounts of the business or profession of a person have been audited under any other law - Certificate of Audit from CA obtained by the assessee whose Income from Business is more than INR 60 Lakhs or Income from Profession is more than INR 15 Lakhs for Companies

 

Form 3CB             Audit report under section 44AB of the Income-tax Act, 1961, in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G - Certificate of Audit from CA obtained by the assesssee whose Income from Business is more than INR 60 Lakhs or Income from Profession is more than INR 15 Lakhs for other than companies

 

Form 3CD            Statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 - Annexure Form for audit report u/s 44AB

 

Form 3CEB          Report from an accountant to be furnished under section 92E relating to international transaction(s) - Every person entering International Transaction

 

Form 29B             Report under Section 115JB of the Income-tax Act, 1961 for computing the book profits of the company - MAT applicable for companies

 

Visit new website for e-filing of return

 

To be an “intangible asset” u/s 32(1)(ii), the rights must be “in rem” & transferable. A “non-compete right” is not an “intangible asset” though “goodwill” is

Sharp Business System vs. CIT

The assessee, a joint venture of Sharp Corp, Japan, and L&T Ltd, paid Rs. 3 crores to L&T as consideration for the latter not competing with the assessee for 7 years. The assessee claimed that the non-compete fee was revenue in nature. It also claimed, in the alternative, that the rights under the non-compete agreement were an “intangible asset” u/s 32(1)(ii) eligible for depreciation. The AO, CIT(A) & Tribunal rejected the assessee’s claim. On further appeal by the assessee before the Tribunal, HELD dismissing the appeal: 

(i) The advantage derived by the assessee from the non-compete agreement entered into with L&T is for a substantial period of 7 years and ensures a certain position in the market by keeping out L&T. The advantage cannot be regarded as being merely for facilitation of business and ensuring greater efficiency & profitability. The advantage falls in the capital field (Eicher 302 ITR 249 (Del) distinguished; Pitney Bowles 204 Taxman 333 (Del) followed);

(ii) The non-compete rights cannot be treated as an “intangible asset” u/s 32(1)(ii) because (a) the nature of the rights mentioned in the definition of “intangible asset” spell out an element of exclusivity which enures to the assessee as a sequel to the ownership. But for the ownership of the intellectual property or know-how or license or franchise, it would be unable to assert the right “in rem”, as against the world. In the case of a non-competition agreement, it is a right “in personam” where the advantage is restricted & does not confer an exclusive right to carry-on the primary business activity. (b) Another way of looking at the issue is whether such rights can be treated or transferred. Every species of right spelt-out such as know-how, franchise, license etc. and even those considered by Courts, such as goodwill, can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal (Techno Shares & Stocks 327 ITR 323 (SC), Hindustan Coco Cola Beverages 331 ITR 192 (Del) & B. Ravindran Pillai 332 ITR 531 (Ker) distinguished)

Note: The judgement in CIT vs. Smifs Securities Ltd (Supreme Court) was not considered. See also ACIT vs. GE Plastics India Ltd (ITAT Ahmedabad) where the law is considered.

SC: Works contract, where service tax had already been paid, no option to pay service tax under the Composition Scheme could be exercised

M/s NAGRJUNA CONSTRUCTION CO. LTD  vs GOI & ANR (Supreme Court)

 

Service Tax - Works Contracts (Composition Scheme for Payment of Service Tax) Rules, 2007

 

In respect of a works contract, where service tax had already been paid, no option to pay service tax under the Composition Scheme can be exercised. Assessee who wants to avail of the benefit under Rule 3 of the 2007 Rules must opt to pay service tax in respect of a works contract before payment of service tax in respect of the works contract and the option so exercised is to be applied to the entire works contract and the assessee is not permitted to change the option till the said works contract is completed.

 

S. 14A - Trader in shares / securities interest paid on borrowings for purchase of shares / securities cannot be disallowed u/s 14A

Shri Zaver Virjibhai Mandalia v. ACIT

 

The assessee is an Individual engaged in the business as Jewellery valuer and also engaged in the trading of shares, securities, mutual funds and has income from share business. The assessee filed his return of income showing loss of Rs.86,72,520/-, in the course of scrutiny AO observed that assessee had purchased/allotted units of Rs.11,50,04,800/- and had made sales of units of Rs.9,88,98,039. The assessee had also earned dividend income of Rs.1,44,72,449. The A.O. also observed that the assessee had claimed interest expenses of Rs.6,50,456/- being the interest paid to Kotak Mahindra Investments Pvt. Ltd. The assessee had made investments in Mutual funds by borrowing the amount from Kotak Mahindra Investments Ltd. A.O. was of the view that the investments were made with a motive to earn dividend which are exempt u/s. 10(33). He also observed that the transaction of purchase and redemption was structured together. He was of the view that the expenses on account of interest incurred was towards cost to earn dividend income. Since the assessee had borrowed the amount from Kotak Mahindra and the borrowed amount was fully utilised for purchasing units, the dividend of which was exempt u/s.10(33), the interest expenses was required to be disallowed u/s. 14A of the Act. He accordingly, disallowed the interest expenses of Rs.6,50,456/- and added it to the total income of the assessee and the order of AO was upheld by the CIT(A).

 

Assessee on further appeal before ITAT

 

The ITAT bench observed that AO also held that assessee is in the business of purchase/sale of shares, and while framing assessment u/s.143(3) the loss of Rs.1,51,21,196/- incurred on the sale/purchase of units have been treated as business loss. In view of the aforesaid facts, it can be stated that assessee is in the business of purchase and sale of shares. Once the purchase and sale of shares is held to be a business activity, the interest paid thereon has to be treated as business expenses in view of the Hon’ble High Court decision in the case reported in (1976) 42 TAXATION 105 (GUJ) thus following the decision of, in the present facts of the case the interest expenses incurred by the assessee has to be treated as business expenses and no disallowance can be made u/s.14A. We accordingly direct the deletion of the disallowance made by A.O. Thus this ground of assessee is allowed.

 

Also Read: Yatis Trading Co. (P.) Ltd. vs. ACIT held “that interest on borrowed funds used for trading activity is an allowable expenditure u/s. 36(1)(iii) and the same cannot be treated as expenditure for earning dividend income which incidental to trading activity. When the real purpose and intent to use the borrowed funds was for trading activity and if incidentally resulted some dividend income on the shares purchased for trading then the same would not change the purpose, nature and character of the expenditure. Thus when the said expenditure (interest) incurred for trading activity then the same cannot be said to have been incurred for earning the dividend in come. As per the basic principle of taxation only the net income i.e. gross income minus expenditure is taxed. Accordingly, the expenditure which was incurred for earning the taxable business income has to be allowed against the taxable income and the question of apportionment of the said expenditure does not arise. The expression “in relation to” used in Sec. 14A means dominant and immediate connection or nexus. Thus in order to disallow the expenses u/s. 14A there must be a live nexus between the expenditure incurred and the income not forming part of the total income. Disallowance cannot be made on the basis of presumption and estimation of the A.O. If the expenditure is incurred with a view to earn taxable income and there is apparent dominant and immediate connection between the expenditure incurred and taxable income then as such no disallowance can be made u/s. 14A merely because some tax exempt income is received incidentally.”

New KYC Norms

New KYC Norms

RBI/2012-13/294
A.P. (DIR Series) Circular No. 51

November 15, 2012

To

All Authorised Persons in Foreign Exchange

Madam/Sir,

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards / Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 Money changing activities

Attention of Authorised Persons is invited to F-Part-II of the Annex to the A.P. (Dir Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended by the A.P. (Dir Series) Circular No. 60 dated December 22, 2011.

2.Based on several representations received from Full Fledged Money Changers (FFMCs), regarding difficulties in obtaining documents other than passport, and taking into account the procedure followed for money changing in other countries, it has been decided to amend certain instructions contained in the aforementioned Part. The amended instructions are given in the Annex.

3. All the other instructions contained in the A.P. (DIR Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time shall remain unchanged.

4. Authorised Persons may bring the contents of this circular to the notice of their constituents concerned.

5. These guidelines are also applicable mutatis mutandis to all agents/ franchisees of Authorised Persons and it will be the sole responsibility of the franchisers to ensure that their agents / franchisees also adhere to these guidelines.

6. Please advise your Principal Officer to acknowledge receipt of this circular letter.

7. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999)and also under the, Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 and Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 as amended from time to time and are without prejudice to permission /approvals, if any, required under any other law.

Yours faithfully,

Rudra Narayan Kar
Chief General Manager

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Annex

[Annex to A.P. (DIR Series) Circular No. dated November , 2012]

Customer Identification Procedure Features to be verified and documents that may be obtained from customers

Extant Guidelines		Revised Guidelines
Features	Documents	Features	Documents
Transactions With Individuals		Transactions With Individuals
- Legal name and any other names used	i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP.	- Legal name and any other names used	i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP.
- Correct permanent address	(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). (any one of the documents, which provides customer information to the satisfaction of the AP will suffice). Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record.	- Correct permanent address	(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). (any one of the documents, which provides customer information to the satisfaction of the AP will suffice). Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record. However, where neither passports contain any address nor foreign tourists are able to produce any address proof, APs may obtain and keep on record, a copy of passport and visa duly stamped by the Indian Immigration authorities and a declaration duly signed from foreign tourists regarding the permanent address.