Sunday, 17 February 2013
Wednesday, 19 December 2012
Brief about FEMA
The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA became an act on the 1st day of June, 2000. FEMA was introduced because the FERA didn’t fit in with post-liberalisation policies. A significant change that the FEMA brought with it, was that it made all offenses regarding foreign exchange civil offenses, as opposed to criminal offenses as dictated by FERA.
The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments. It was also formulated to promote the orderly development and maintenance of foreign exchange market in India.
FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India.
The FEMA head-office, also known as Enforcement Directorate is situated in New Delhi and is headed by a Director. The Directorate is further divided into 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai and Jalandhar and each office is headed by a Deputy Director. Each zone is further divided into 7 sub-zonal offices headed by the Assistant Directors and 5 field units headed by Chief Enforcement Officers.
The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments. It was also formulated to promote the orderly development and maintenance of foreign exchange market in India.
FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India.
The FEMA head-office, also known as Enforcement Directorate is situated in New Delhi and is headed by a Director. The Directorate is further divided into 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai and Jalandhar and each office is headed by a Deputy Director. Each zone is further divided into 7 sub-zonal offices headed by the Assistant Directors and 5 field units headed by Chief Enforcement Officers.
Saturday, 26 May 2012
Sumitomo Mitsui Banking Corporation vs. DDIT
Sumitomo Mitsui Banking Corporation vs. DDIT (ITAT Special Bench) (5 Member)
While interest paid by PE of foreign bank to H.O. is deductible in hands of PE, same interest is not taxable in hands of H.O. The assessee, a Japanese bank, carrying on business through a PE in India, paid interest of Rs. 5 crores to its H.O. & other branches. The assessee, in computing the profits assessable to tax in India, claimed that while the interest received by the H.O. & other branches from the PE was not chargeable to tax in India on the principle that the PE & H.O. were one & the same entity, the PE was entitled to claim a deduction under Article 7 of the DTAA. The AO held that the PE & the H.O. were deemed to be separate entities and that while the interest received by the H.O. from the PE was taxable under Article 11, deduction for that interest could not be allowed to the PE u/s 40(a)(i) as it had failed to deduct TDS. The CIT (A) followed the verdict of the Special Bench in ABN Amro Bank 98 TTJ 295 (Kol) (partly affirmed in ABN AMRO 198 TM 376) and held that the interest was neither chargeable to tax nor allowable as a deduction. On appeal to the Tribunal, the matter was referred to a 5 Member Special Bench. HELD by the Special Bench:
(i) On the question whether the interest paid by the PE to the H.O. is deductible, while such interest is not deductible under the Act because the payer & payee are the same person, Article 7(2) and 7(3) of the DTAA & its Protocol makes it clear that for the purpose of computing the profits attributable to the PE in India, the PE is to be treated as a distinct and separate entity which is dealing wholly independently with the general enterprise of which it is a part and deduction has to be allowed for, inter alia, interest on moneys lent by the PE of a bank to its H.O.
(ii) On the question of taxability of the interest received by the H.O. from the PE, such interest is not taxable under the Act as both are, under the Act, the same person and not separate entities & one cannot make profit out of himself. The fiction created in Article 7(2) of the DTAA treating the PE as separate and independent entity does not extend to Article 11. Also, the interest paid by the PE is not interest paid in respect of debt claims forming part of the assets of the PE so as to attract Article 11(6). The DTAA, even assuming that it does create a liability, cannot be applied u/s 90(2) as it is contrary to the Act and less favorable to the assessee (Q whether the interest paid by the
PE should be netted off against the interest received left open).
While interest paid by PE of foreign bank to H.O. is deductible in hands of PE, same interest is not taxable in hands of H.O. The assessee, a Japanese bank, carrying on business through a PE in India, paid interest of Rs. 5 crores to its H.O. & other branches. The assessee, in computing the profits assessable to tax in India, claimed that while the interest received by the H.O. & other branches from the PE was not chargeable to tax in India on the principle that the PE & H.O. were one & the same entity, the PE was entitled to claim a deduction under Article 7 of the DTAA. The AO held that the PE & the H.O. were deemed to be separate entities and that while the interest received by the H.O. from the PE was taxable under Article 11, deduction for that interest could not be allowed to the PE u/s 40(a)(i) as it had failed to deduct TDS. The CIT (A) followed the verdict of the Special Bench in ABN Amro Bank 98 TTJ 295 (Kol) (partly affirmed in ABN AMRO 198 TM 376) and held that the interest was neither chargeable to tax nor allowable as a deduction. On appeal to the Tribunal, the matter was referred to a 5 Member Special Bench. HELD by the Special Bench:
(i) On the question whether the interest paid by the PE to the H.O. is deductible, while such interest is not deductible under the Act because the payer & payee are the same person, Article 7(2) and 7(3) of the DTAA & its Protocol makes it clear that for the purpose of computing the profits attributable to the PE in India, the PE is to be treated as a distinct and separate entity which is dealing wholly independently with the general enterprise of which it is a part and deduction has to be allowed for, inter alia, interest on moneys lent by the PE of a bank to its H.O.
(ii) On the question of taxability of the interest received by the H.O. from the PE, such interest is not taxable under the Act as both are, under the Act, the same person and not separate entities & one cannot make profit out of himself. The fiction created in Article 7(2) of the DTAA treating the PE as separate and independent entity does not extend to Article 11. Also, the interest paid by the PE is not interest paid in respect of debt claims forming part of the assets of the PE so as to attract Article 11(6). The DTAA, even assuming that it does create a liability, cannot be applied u/s 90(2) as it is contrary to the Act and less favorable to the assessee (Q whether the interest paid by the
PE should be netted off against the interest received left open).
Impact of Excise Duty on BHEL
Uncertainty over import levy, higher excise duty impacts BHEL April, 09th 2012 State-run BHEL's business prospects are getting impacted by the continuing uncertainty over higher levy on imported power equipment as well as the hike in excise duty, according to company officials. To provide a cushion for Bharat Heavy Electricals and other domestic players against cheaper overseas power equipment, especially from China, the government is looking at slapping higher duty on imported gear. The government is yet to finalise the quantum of duty hike on imported equipment while speculations are rife that the increase could be up to 19 percent.
"It (uncertainty over higher import duty) is impacting our operations... Whatever the government is going to
implement, definitely we will be getting the advantage," a senior BHEL official said. Further, the government's move to increase excise duty by two per cent is also impacting the company.
"It hurts a little more after the (imposition) of two per cent excise duty. The situation is accentuated, especially with the two per cent excise duty," another BHEL official said. In the 2012-13 Budget unveiled last month, Finance Minister Pranab Mukherjee hiked excise duty to 12 per cent from 10 percent.
BHEL and other domestic entities, including L&T, are grappling with stiff competition from cheaper overseas gear mainly from China. Many private power producers have placed equipment orders with Chinese entities. Presently, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment. Hit by sluggishness in the power sector, BHEL saw its order book more than halve to Rs 22,096 crore in 2011-12 period as compared to the year-ago period. The company's cumulative orders in hand stood at Rs 1,34,681 crore at the end of last fiscal. However, BHEL expects to get orders of about 15,000 to 16,000 MW in the current financial year. The power equipment maker's net profit jumped 14 per cent to Rs 6,868 crore for the financial year ended March 2012 on the back of improved operational efficiency. The net profit stood at Rs 6,011 crore in 2010-11
"It (uncertainty over higher import duty) is impacting our operations... Whatever the government is going to
implement, definitely we will be getting the advantage," a senior BHEL official said. Further, the government's move to increase excise duty by two per cent is also impacting the company.
"It hurts a little more after the (imposition) of two per cent excise duty. The situation is accentuated, especially with the two per cent excise duty," another BHEL official said. In the 2012-13 Budget unveiled last month, Finance Minister Pranab Mukherjee hiked excise duty to 12 per cent from 10 percent.
BHEL and other domestic entities, including L&T, are grappling with stiff competition from cheaper overseas gear mainly from China. Many private power producers have placed equipment orders with Chinese entities. Presently, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment. Hit by sluggishness in the power sector, BHEL saw its order book more than halve to Rs 22,096 crore in 2011-12 period as compared to the year-ago period. The company's cumulative orders in hand stood at Rs 1,34,681 crore at the end of last fiscal. However, BHEL expects to get orders of about 15,000 to 16,000 MW in the current financial year. The power equipment maker's net profit jumped 14 per cent to Rs 6,868 crore for the financial year ended March 2012 on the back of improved operational efficiency. The net profit stood at Rs 6,011 crore in 2010-11
Requirement of PAN to be furnished in the new forms prescribed by IDT
NEWS :::
> With effect from April 8, 2012,
PAN applications are
required to be furnished in the
new forms prescribed
by ITD.
> Indian citizens will have to
submit their
‘Application for allotment of new
PAN’ in revised Form
49A only.
> Foreign citizens will have to
submit their
‘Application for allotment of new
PAN’ in newly notified
Form 49AA only.
>>> With effect from April 1,
2012, fees for PAN
application has changed to 96.
(For dispatch outside
India 962). (Due to increase in
Service Tax from 10% to 12%)
> With effect from April 8, 2012,
PAN applications are
required to be furnished in the
new forms prescribed
by ITD.
> Indian citizens will have to
submit their
‘Application for allotment of new
PAN’ in revised Form
49A only.
> Foreign citizens will have to
submit their
‘Application for allotment of new
PAN’ in newly notified
Form 49AA only.
>>> With effect from April 1,
2012, fees for PAN
application has changed to 96.
(For dispatch outside
India 962). (Due to increase in
Service Tax from 10% to 12%)
Procedural changes in payment of Service Tax
Notification 3/2012 and
Notification 4/2012 both dated
17.03.2012 has brought certain
procedural changes in payment
of service tax by amending Service
Tax Rules, 1994 and Point of
Taxation Rules, 2012 respectively.
These amendments are
summarised as under:
1.0 Liability on receipt basis if
turnover is less than 50 lacs for
assesses – However, special
benefit to professionals
withdrawn.
2.0 Period for issuance of invoice
extended from 14 days to 30 days
– impact in determining point of
taxation.
3.0 Definition of continuously
supply of service amended to
bring clarity.
4.0 Adjustment of service tax
without any monetary limit.
5.0 In case of export—no service
tax liability if payment received
within the time as extended by
RBI.
6.0 Clarification in turnover based
exemption – amendment in
Notification no. 6/2005 vide
Notification No. 5/2012.
7.0 Payment of service tax after
issuance of invoice if amount to
the extent of Rs.1000/- excess
received.
Notification 4/2012 both dated
17.03.2012 has brought certain
procedural changes in payment
of service tax by amending Service
Tax Rules, 1994 and Point of
Taxation Rules, 2012 respectively.
These amendments are
summarised as under:
1.0 Liability on receipt basis if
turnover is less than 50 lacs for
assesses – However, special
benefit to professionals
withdrawn.
2.0 Period for issuance of invoice
extended from 14 days to 30 days
– impact in determining point of
taxation.
3.0 Definition of continuously
supply of service amended to
bring clarity.
4.0 Adjustment of service tax
without any monetary limit.
5.0 In case of export—no service
tax liability if payment received
within the time as extended by
RBI.
6.0 Clarification in turnover based
exemption – amendment in
Notification no. 6/2005 vide
Notification No. 5/2012.
7.0 Payment of service tax after
issuance of invoice if amount to
the extent of Rs.1000/- excess
received.
Permanent Account Number (PAN)
PAN explained.......
PAN is a 10 digit alpha numeric
number, where the first 5
characters are letters, the next 4
numbers and the last one a letter
again. These 10 characters can be
divided in five parts as can be
seen below. The meaning of each
number has been explained
further.
1. First three characters are
alphabetic series running from
AAA to ZZZ
2. Fourth character of PAN
represents the status of the PAN
holder.
• C — Company
• P — Person
• H — HUF(Hindu Undivided
Family)
• F — Firm
• A — Association of Persons
(AOP)
• T — AOP (Trust)
• B — Body of Individuals (BOI)
• L — Local Authority
• J — Artificial Juridical Person
• G — Government
3. Fifth character represents first
character of the PAN holder’s last
name/surname.
4. Next four characters are
sequential number running from
0001 to 9999.
5. Last character in the PAN is an
alphabetic check digit.
Nowadays, the DOI (Date of
Issue) of PAN card is mentioned
at the right (vertical) hand side of
the photo on the PAN card.
PAN is a 10 digit alpha numeric
number, where the first 5
characters are letters, the next 4
numbers and the last one a letter
again. These 10 characters can be
divided in five parts as can be
seen below. The meaning of each
number has been explained
further.
1. First three characters are
alphabetic series running from
AAA to ZZZ
2. Fourth character of PAN
represents the status of the PAN
holder.
• C — Company
• P — Person
• H — HUF(Hindu Undivided
Family)
• F — Firm
• A — Association of Persons
(AOP)
• T — AOP (Trust)
• B — Body of Individuals (BOI)
• L — Local Authority
• J — Artificial Juridical Person
• G — Government
3. Fifth character represents first
character of the PAN holder’s last
name/surname.
4. Next four characters are
sequential number running from
0001 to 9999.
5. Last character in the PAN is an
alphabetic check digit.
Nowadays, the DOI (Date of
Issue) of PAN card is mentioned
at the right (vertical) hand side of
the photo on the PAN card.
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