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.
Wednesday, 19 December 2012
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.
Updates on Operating Lease
Judicial update: (Important
decision u/s 32 of Act 1961)
In case of operating lease, it is the
lessor who is the owner of the
asset and therefore, the lessor is
entitled to depreciation.
However, in case of finance lease,
it is the lessee who is to be
considered as ownerand
therefore, the lessee is entitled to
depreciation.
The above view is taken by the
special bench of the tribunal in
the case of Indusind bank ltd
following SC decision in the case
of Asea Brown Boveri....135 ITD
165 (SB)
decision u/s 32 of Act 1961)
In case of operating lease, it is the
lessor who is the owner of the
asset and therefore, the lessor is
entitled to depreciation.
However, in case of finance lease,
it is the lessee who is to be
considered as ownerand
therefore, the lessee is entitled to
depreciation.
The above view is taken by the
special bench of the tribunal in
the case of Indusind bank ltd
following SC decision in the case
of Asea Brown Boveri....135 ITD
165 (SB)
REGISTRATION OF TRUST IS NOT CANCELLED AUTOMATICALLY WHEN RECEIPTS EXCEED THRESHOLD LIMIT SPECIFIED IN U/S 2(15)
REGISTRATION OF TRUST IS NOT CANCELLED AUTOMATICALLY WHEN RECEIPTS EXCEED THRESHOLD LIMIT SPECIFIED IN U/S 2(15)
Section 12AA(3) provides for
cancellation of registration of a trust only on the grounds that the activities of such trust are not genuine or are not being carried out in accordance with the objects of the trust. Section 12AA (3) does not envisage examination of activities of trust in the light of section 2(15) and does not provide for cancellation of registration of trust on the
grounds of violation of the two provisos of section 2(15). Thus, if in any year, the gross receipts from the trade or commerce of the trust exceeds Rs. 10 lakhs/Rs. 25 lakhs, as stipulated in section 2(15), then the AO can examine the allowability of exemption under Sec. 11 but the same has no effect on cancellation of registration of trust - RAJASTHAN HOUSING BOARD v. CIT [2012]
Section 12AA(3) provides for
cancellation of registration of a trust only on the grounds that the activities of such trust are not genuine or are not being carried out in accordance with the objects of the trust. Section 12AA (3) does not envisage examination of activities of trust in the light of section 2(15) and does not provide for cancellation of registration of trust on the
grounds of violation of the two provisos of section 2(15). Thus, if in any year, the gross receipts from the trade or commerce of the trust exceeds Rs. 10 lakhs/Rs. 25 lakhs, as stipulated in section 2(15), then the AO can examine the allowability of exemption under Sec. 11 but the same has no effect on cancellation of registration of trust - RAJASTHAN HOUSING BOARD v. CIT [2012]
Thursday, 24 May 2012
Service Tax
IMP News (Service Tax) >>>
> Department has clarified that,
in respect of invoices raised up to
31.03.2012 by individuals or
proprietary firms or partnership
firms providing below 8 specified
services, rate of service tax shall
be 12%...
( Up to 31.03.2012, if the
following 8 services provided by
individuals or proprietary firms or
partnership firms then these
services shall be deemed to have
been provided on the date on
which payment is received:)
1. Consulting Engineer’s Services
[Section 65(105)(g)]
2. Architect’s Services[section
65(105)(p)]
3. Interior Decorator’s Services
[Section 65(105)(q)
4. Practicing Chartered
Accountant’s Services[Section
65(105)(s)]
5. Practicing Cost Accountant’s
Services[Section 65(105)(t)
6. Practicing Company Secretary’s
Services[Section 65(105)(u)]
7. Scientific or Technical
Consultancy Services [Section
65(105)(za)
8. Legal Consultancy Services
[Section 65(105)(zzzzm)]
> Department has clarified that,
in respect of invoices raised up to
31.03.2012 by individuals or
proprietary firms or partnership
firms providing below 8 specified
services, rate of service tax shall
be 12%...
( Up to 31.03.2012, if the
following 8 services provided by
individuals or proprietary firms or
partnership firms then these
services shall be deemed to have
been provided on the date on
which payment is received:)
1. Consulting Engineer’s Services
[Section 65(105)(g)]
2. Architect’s Services[section
65(105)(p)]
3. Interior Decorator’s Services
[Section 65(105)(q)
4. Practicing Chartered
Accountant’s Services[Section
65(105)(s)]
5. Practicing Cost Accountant’s
Services[Section 65(105)(t)
6. Practicing Company Secretary’s
Services[Section 65(105)(u)]
7. Scientific or Technical
Consultancy Services [Section
65(105)(za)
8. Legal Consultancy Services
[Section 65(105)(zzzzm)]
Thursday, 23 February 2012
Reasons of INflation
Gasoline could inflame inflation Gasoline prices could soar as high as $7 a gallon this summer thanks to supply threats stemming from Middle East unrest as well as OPEC policy, says real estate mogul Donald Trump. Iran has already cut off supply to France and to the U.K. to protest sanctions from the west, who accuse Tehran of developing a nuclear weapons program. U.S. military officials have said they feel they can ration with Iran, although fears are growing that Israel may consider a unilateral strike on Iran anyway, which is sending crude oil skyrocketing. Higher oil prices lead to high gasoline prices, which have prompted some U.S. refineries to close up shop when people buy less fuel, which further exacerbates supply issues. The result: pain at the pump — prices are soaring and well earlier
than they should be. Prices commonly peak in spring and summer due to seasonal factors like the price of refinery feedstocks and the arrival of the U.S. summer driving season. "We are going to have a crisis, a crisis on energy like you've never seen before, and if you see gasoline is going to be at $4 and it already is at $4 — the highest it's ever been in history at this time of the year," Trump tells CNBC.
"Oil continues to go up, gasoline is going to be at $5 or $6 or maybe $7 a gallon in the summer when they really have the demand. And it's going to really be destructive to this country." Don't blame speculators on rising prices either. OPEC countries are ensuring prices stay high by regulating output, Trump said. "OPEC is the one that's setting the prices and OPEC is laughing at us like nobody's ever laughed before," Trump says, adding swings in energy prices threaten the U.S. more than big banks, which continue to receive blame
from politicians, regulators and the Occupy Wall Street movement for the economy's woes.
"Energy as you know is a tremendous factor and when we had our last — call it a mini depression, that's really what it was — you know, everybody was blaming the banks and the bankers. And certainly the banks had something to do with it, but I always felt that energy had more to do with it than the banks," Trump says.
"I consider oil to be the blood of the nation and the blood of the world. And that blood was so high, and I really believed that had more to do with our depression/major recession, whatever you want to call it, than interest rates or banks or problems or mortgages or home loans or anything." Gasoline prices are currently averaging $3.53 a gallon, and some experts see that figure hitting a record $4.25 a gallon by
April, well before the peak season.
"You're going to see a lot more 'staycations' this year," says Michael Lynch, president of Strategic Energy & Economic Research, according to the Associated Press. "When the price gets anywhere near $4, you really see people react."
than they should be. Prices commonly peak in spring and summer due to seasonal factors like the price of refinery feedstocks and the arrival of the U.S. summer driving season. "We are going to have a crisis, a crisis on energy like you've never seen before, and if you see gasoline is going to be at $4 and it already is at $4 — the highest it's ever been in history at this time of the year," Trump tells CNBC.
"Oil continues to go up, gasoline is going to be at $5 or $6 or maybe $7 a gallon in the summer when they really have the demand. And it's going to really be destructive to this country." Don't blame speculators on rising prices either. OPEC countries are ensuring prices stay high by regulating output, Trump said. "OPEC is the one that's setting the prices and OPEC is laughing at us like nobody's ever laughed before," Trump says, adding swings in energy prices threaten the U.S. more than big banks, which continue to receive blame
from politicians, regulators and the Occupy Wall Street movement for the economy's woes.
"Energy as you know is a tremendous factor and when we had our last — call it a mini depression, that's really what it was — you know, everybody was blaming the banks and the bankers. And certainly the banks had something to do with it, but I always felt that energy had more to do with it than the banks," Trump says.
"I consider oil to be the blood of the nation and the blood of the world. And that blood was so high, and I really believed that had more to do with our depression/major recession, whatever you want to call it, than interest rates or banks or problems or mortgages or home loans or anything." Gasoline prices are currently averaging $3.53 a gallon, and some experts see that figure hitting a record $4.25 a gallon by
April, well before the peak season.
"You're going to see a lot more 'staycations' this year," says Michael Lynch, president of Strategic Energy & Economic Research, according to the Associated Press. "When the price gets anywhere near $4, you really see people react."
Exemption to Specified Persons
NOTIFICATION NO 9/2012,
dated - February 17, 2012
Exemption to specified persons from furnishing a return of income U/s 139(1) for AY 2012-13
Class of persons.
-An individual whose total income does not exceed 5 lakh rupees and consists of income only chargeable to following head,-
(A) "Salaries";
(B) "Income from other sources",
by way of interest from a saving account in a bank, not exceeding ten thousand rupees.
dated - February 17, 2012
Exemption to specified persons from furnishing a return of income U/s 139(1) for AY 2012-13
Class of persons.
-An individual whose total income does not exceed 5 lakh rupees and consists of income only chargeable to following head,-
(A) "Salaries";
(B) "Income from other sources",
by way of interest from a saving account in a bank, not exceeding ten thousand rupees.
Income Tax Update Information
No filing of tax return for salary and interest income up to Rs 5 lakh
NEW DELHI: As many 85 lakh salaried tax payers whose taxable income, including salary and interest income, is up to Rs 5 lakh, are not required to file income-tax return from now onwards..
NEW DELHI: As many 85 lakh salaried tax payers whose taxable income, including salary and interest income, is up to Rs 5 lakh, are not required to file income-tax return from now onwards..
Sunday, 19 February 2012
Treatment of Interest on borrowed loan taken for construction or purchase of House Property
Deduction of Interest Paid on More Than One Loan Borrowed for Purchase or Construction of same House There is no bar in section 24 of the Income Tax Act regarding the number of loans on which interest is allowable simultaneously. In fact ,the simple rule of the deduction of interest u/s 24 of the Income Tax Act is that whatever be the interest paidor due on loan borrowed for purchase or construction of house is allowable as deduction. So, whether you take loan from one bank or five banks , all loan should be utilised for buying or constructing the house for allowance of interest paid to all the banks. However, as far as self occupied house is concerned, the allowanceof interest is limited to Rs 1,50,000 per owner.
How to determine share in property?
The documents of registration of the property is the main document in which proportion the house is registered along different co-owners. If nothing has been written specifically about share in which property is shared between two owners (Likeyou and your wife ) in the registration document , the ownership should be deemed to be 50 : 50.
Can owners claim RS 1.5 Lakh each on co-owned self occupied property?
Yes , each co-owner is assessed for income from house property separately . Therefore , allowance of interest u/s 24 is also given separately. But interest is deductible only if the same is borrowed by co-owners i.e even ifone is joint owner but not a borrower of the loan is not allowed any deduction of interest.Only the person borrowing the loan is allowed deduction.In case of joint loan , each co-owner gets 1.5 lakh of maximum interest deduction u/s 24 of the I T Act.
Question - I and my wife are both salaried employees. We are purchasing a house jointly. I am taking a loan of Rs 25 Lakhs from Govt and another loan of Rs.10 Lakhs from HDFC which is on joint name of both self and wife. Total interest outgo will be approx Rs. 2.5 Lakhs in initial years. My question is- can we split the total interest equally between self and wife for the purpose of claiming deduction under Sec 24 C or only the interest component from Rs 10 Lakhs loan (which is in joint name) can be shared ? Also how to determine the share of property between husband and wife for the purpose of claiming tax deduction ?
Answer – As , you and your wife have taken joint loan from HDFC only , therefore, both co-owner can claim interest 50 % each in case of interest paid to HDFC. You can additionally claim for interest on loan from govt. sources to the extent that aggregate can not exceed RS 1.5 lakh.
How to determine share in property?
The documents of registration of the property is the main document in which proportion the house is registered along different co-owners. If nothing has been written specifically about share in which property is shared between two owners (Likeyou and your wife ) in the registration document , the ownership should be deemed to be 50 : 50.
Can owners claim RS 1.5 Lakh each on co-owned self occupied property?
Yes , each co-owner is assessed for income from house property separately . Therefore , allowance of interest u/s 24 is also given separately. But interest is deductible only if the same is borrowed by co-owners i.e even ifone is joint owner but not a borrower of the loan is not allowed any deduction of interest.Only the person borrowing the loan is allowed deduction.In case of joint loan , each co-owner gets 1.5 lakh of maximum interest deduction u/s 24 of the I T Act.
Question - I and my wife are both salaried employees. We are purchasing a house jointly. I am taking a loan of Rs 25 Lakhs from Govt and another loan of Rs.10 Lakhs from HDFC which is on joint name of both self and wife. Total interest outgo will be approx Rs. 2.5 Lakhs in initial years. My question is- can we split the total interest equally between self and wife for the purpose of claiming deduction under Sec 24 C or only the interest component from Rs 10 Lakhs loan (which is in joint name) can be shared ? Also how to determine the share of property between husband and wife for the purpose of claiming tax deduction ?
Answer – As , you and your wife have taken joint loan from HDFC only , therefore, both co-owner can claim interest 50 % each in case of interest paid to HDFC. You can additionally claim for interest on loan from govt. sources to the extent that aggregate can not exceed RS 1.5 lakh.
Case Laws
The assessee received lease charges and claimed a reduction towards “lease equalization charges” on the ground that reduction was in accordance with the Guidance Note dated 20.09.1995 issued by the ICAI in respect of Accounting for Leases and the Accounting Standard AS-1 notified u/s 145 which mandated that the accounting policy of the assessee should represent a true and fair view. The AO & CIT (A) rejected the claim on the ground that it was a “notional charge” and that the accounting guidelines could not override the Act. The Tribunal (38 SOT 412), however, allowed the claim. On appeal by the department, the appeal was dismissed.
CIT vs. Virtual Soft Systems Ltd (Delhi High Court)
CIT vs. Virtual Soft Systems Ltd (Delhi High Court)
Income tax update
Income Tax update:
No Penalty can be levied for wrong/non furnishing of PAN in TDS return if Asseee files later revised return with Correct PAN. The ITAT concluded that it is apparent from the record that the assessee deducted TDS correctly and revised the PAN and filed revised statement in Form No. 26Q, hence there was sufficient compliance of the provisions of section 139A of the Act. If there was reasonable cause for alleged failure, no penalty can be levied. -ITO (TDS) Panchkula v. Bharat Electronics Ltd. (ITAT Chandigarh)
No Penalty can be levied for wrong/non furnishing of PAN in TDS return if Asseee files later revised return with Correct PAN. The ITAT concluded that it is apparent from the record that the assessee deducted TDS correctly and revised the PAN and filed revised statement in Form No. 26Q, hence there was sufficient compliance of the provisions of section 139A of the Act. If there was reasonable cause for alleged failure, no penalty can be levied. -ITO (TDS) Panchkula v. Bharat Electronics Ltd. (ITAT Chandigarh)
Case Laws Judicial Update
Judicial update: (Important decision of SC)
"Under Clause (1) of Explanation (baa) to s. 80HHC, 90% of any receipts by way of brokerage, commission, etc “included in any such profits” have to be deductedfrom the profits & gains of business. The expression “included any such profits” meanssuch receipts by way of brokerage, commission, etc included in the profits & gains. Therefore, if any quantum of receipts by way of brokerage, commission, etc is allowed as expenses u/s 30 to 44D and is notincluded in the profits of business, 90% of such quantum of receipts cannot be reduced under clause (1) of Explanation (baa) to s. 80HHC. In other words, only 90% of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining “profits of the business”. The High Court wronglyrelied on CIT vs. K. RavindranathanNair 295 ITR 228 (SC) & circular dated 19.12.1991 explaining the clauses of the Finance Bill, 1991 (Principle in Distributors (Baroda) 155 ITR 120 (SC) followed; Shri Ram Honda Power Equip 289 ITR 475 (Del) approved)"
Held recently by SC in case of ACG Associated Capsules P Ltd-vs-CIT
"Under Clause (1) of Explanation (baa) to s. 80HHC, 90% of any receipts by way of brokerage, commission, etc “included in any such profits” have to be deductedfrom the profits & gains of business. The expression “included any such profits” meanssuch receipts by way of brokerage, commission, etc included in the profits & gains. Therefore, if any quantum of receipts by way of brokerage, commission, etc is allowed as expenses u/s 30 to 44D and is notincluded in the profits of business, 90% of such quantum of receipts cannot be reduced under clause (1) of Explanation (baa) to s. 80HHC. In other words, only 90% of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining “profits of the business”. The High Court wronglyrelied on CIT vs. K. RavindranathanNair 295 ITR 228 (SC) & circular dated 19.12.1991 explaining the clauses of the Finance Bill, 1991 (Principle in Distributors (Baroda) 155 ITR 120 (SC) followed; Shri Ram Honda Power Equip 289 ITR 475 (Del) approved)"
Held recently by SC in case of ACG Associated Capsules P Ltd-vs-CIT
Federal Reserve Chairman's Monetary Policy
Federal Reserve Chairman Ben Bernanke is running the economy in such a heavy-handed manner that he more resembles a socialist strongman reminiscent of the Soviet Union than the head of the world's largest and most iconic of capitalist economies, former GOP presidential hopeful and publisher Steve Forbes writes. By swelling the Fed's balance sheets via massive purchases of Treausrys and mortgage-backed securities from banks and by controlling interest rates and money supply with various monetary policy tools, Bernanke has become a "supreme socialist" who dictates how Americans manage their money. "Our central bank tries to manipulate our economy in ways befitting a Soviet commissar. Take interest rates. Fixing the price of money is a form of price control, pure and simple," Forbes writes in a column in the magazine that bears his name. "Until Ben Bernanke, our central bank was content to fix short-
term interest rates, which he announced would be kept at virtually zero through 2014. But in the aftermath of the financial crisis Bernanke is, in effect, dictating the price of all money, regardless of duration." Bernanke claims his ultra-loose monetary policies, which include keeping interest rates low through 2014, were necessary to steer the economy from the edge of deflationary collapse and to spur job creation. Critics say the tactics have distorted portions of the economy while sapping the dollar of most of its strength and pushing up inflationary pressures in the process. "All of this means the government is picking winners and losers. And in this case the losers are savers. Bernanke & Co. want to effectively force Americans to put their cash in riskier assets, such as stocks," Forbes writes.
"You thought socialism was dead, other than in miserable countries such as North Korea and Cuba? Think again. It’s alive and well at the Federal Reserve, and we and the world are paying a price for it." Bernanke, meanwhile, tells Congress his policies are going nowhere. Even though unemployment rates are falling, they still remain a big problem for the economy. The unemployment rate measures the percentage of those who are out of work but are actively looking. Those workers who have lost their jobs and have given up looking aren't counted as part of the labor force. Factor them in as well as younger workers entering the work force and the unemployment picture becomes a lot bleaker. "It's very important to look not just at the unemployment rate, which reflects only people who are actively seeking work," Bernanke told a Senate hearing recently, according to the Associated Press. "There are also a lot of people who are either out of the labor force because they don't think they can find work. ... There are also a lot of people who are working part-time, and they'd like to be working full-time but they can't find full-time work.
term interest rates, which he announced would be kept at virtually zero through 2014. But in the aftermath of the financial crisis Bernanke is, in effect, dictating the price of all money, regardless of duration." Bernanke claims his ultra-loose monetary policies, which include keeping interest rates low through 2014, were necessary to steer the economy from the edge of deflationary collapse and to spur job creation. Critics say the tactics have distorted portions of the economy while sapping the dollar of most of its strength and pushing up inflationary pressures in the process. "All of this means the government is picking winners and losers. And in this case the losers are savers. Bernanke & Co. want to effectively force Americans to put their cash in riskier assets, such as stocks," Forbes writes.
"You thought socialism was dead, other than in miserable countries such as North Korea and Cuba? Think again. It’s alive and well at the Federal Reserve, and we and the world are paying a price for it." Bernanke, meanwhile, tells Congress his policies are going nowhere. Even though unemployment rates are falling, they still remain a big problem for the economy. The unemployment rate measures the percentage of those who are out of work but are actively looking. Those workers who have lost their jobs and have given up looking aren't counted as part of the labor force. Factor them in as well as younger workers entering the work force and the unemployment picture becomes a lot bleaker. "It's very important to look not just at the unemployment rate, which reflects only people who are actively seeking work," Bernanke told a Senate hearing recently, according to the Associated Press. "There are also a lot of people who are either out of the labor force because they don't think they can find work. ... There are also a lot of people who are working part-time, and they'd like to be working full-time but they can't find full-time work.
THREATS TO THE GLOBAL OIL SUPPLY
A report from Deutsche Bank says the potential threats to the global oil supply — especially Iran's vow to close the Strait of Hormuz — haven't been this great since the Iranian Revolution and Iran-Iraq War three decades ago, CNBC reports. “In our view, not since the late 1970s/early 1980s has there been such a serious threat to oil supply,” wrote Soozhana Choi, Deutsche Bank’s head of Asia commodities research, in a note to clients. “Our assertion is in part because of the Iranian threat to close the Strait of Hormuz.” “We view potential Iranian disruption of shipping in the Strait as a low probability given the high damaging impact it would have
on Iran itself,” said Choi. “However, the mere utterance of such a threat is a grave concern for the oil market given the
strategic importance of the Strait on a global scale.” Though Deutsche Bank stopped short of predicting what could happen to oil prices if this or military action against Iran comes to pass, the bank’s report did note that the last four major oil disruptions (Gulf War I, Gulf War II, Iran-Iraq War, Iranian Revolution) caused Brent oil prices to jump 38 percent, on average, during these events. According to trader Dennis Gartman, author of The Gartman Letter, the world is facing an over-supply of energy, not an undersupply. “There may be trouble in the Persian Gulf or one of the other ‘hot spots’ around the world, but there is no tightness of supply given the huge new finds of oil and nat-gas,” says Gartman.
on Iran itself,” said Choi. “However, the mere utterance of such a threat is a grave concern for the oil market given the
strategic importance of the Strait on a global scale.” Though Deutsche Bank stopped short of predicting what could happen to oil prices if this or military action against Iran comes to pass, the bank’s report did note that the last four major oil disruptions (Gulf War I, Gulf War II, Iran-Iraq War, Iranian Revolution) caused Brent oil prices to jump 38 percent, on average, during these events. According to trader Dennis Gartman, author of The Gartman Letter, the world is facing an over-supply of energy, not an undersupply. “There may be trouble in the Persian Gulf or one of the other ‘hot spots’ around the world, but there is no tightness of supply given the huge new finds of oil and nat-gas,” says Gartman.
SECTION-37 OF INCOME TAX INDIA
TAX LAWS
Know the powerful section 37 of the income tax act, 1961 it provides deduction of any EXPENDITURE not covered by section 30 to 36.
following conditions must be satisfied:-
1) expenditure must not be covered by the sec. 30 to 36
2) expenditure wholly and exclusively for the business purpose
3) it should not be nature of capital expenditure
4) it should not personal expenditure of the assessee
5) expenditure must not be an offence or is prohibited by law Satisfy these and enjoy the deduction.
Know the powerful section 37 of the income tax act, 1961 it provides deduction of any EXPENDITURE not covered by section 30 to 36.
following conditions must be satisfied:-
1) expenditure must not be covered by the sec. 30 to 36
2) expenditure wholly and exclusively for the business purpose
3) it should not be nature of capital expenditure
4) it should not personal expenditure of the assessee
5) expenditure must not be an offence or is prohibited by law Satisfy these and enjoy the deduction.
Tuesday, 24 January 2012
Vodafone to go slow with IPO plans post SC verdict: Sources
Vodafone to go slow with IPO
plans post SC verdict: Sources
Tue, Jan 24, 2012
Vodafone is likely to go slow on
its IPO plans, and the much
anticipated issue may hit the
street only in 2013, reports
CNBC-TV18's Kritika Saxena.
It is leant that there has been a
communication internally and a
decision has been taken by the
Vodafone Plc Management that
they are looking at CY13 for the
IPO.
There are two key reasons for
this, one is the unfavourable
market condition; it is not the
right time to go ahead with an
IPO that can be USD 2 billion
plus. Secondly, the India arm is
currently cash flow positive. There
is no specific hurry to raise funds
currently specially, after the
Supreme Courts verdict in
Vodafone's favour.
Sources say that a large amount
of the refund that Vodafone will
be getting from the taxman will
go into Vodafone Plc and a part
will come in the India arm as well.
Aside from that, it is also learnt
that they have been talking to
specific players for selling
Vodafone towers outside of the
India Joint venture because they
haven't got in the right response
and the market conditions are
slightly difficult so they may have
put that on hold as well. They
have lot of plans, but they will be
largely focused on expansion as
far as 3G outlook and broadband
is concerned.
plans post SC verdict: Sources
Tue, Jan 24, 2012
Vodafone is likely to go slow on
its IPO plans, and the much
anticipated issue may hit the
street only in 2013, reports
CNBC-TV18's Kritika Saxena.
It is leant that there has been a
communication internally and a
decision has been taken by the
Vodafone Plc Management that
they are looking at CY13 for the
IPO.
There are two key reasons for
this, one is the unfavourable
market condition; it is not the
right time to go ahead with an
IPO that can be USD 2 billion
plus. Secondly, the India arm is
currently cash flow positive. There
is no specific hurry to raise funds
currently specially, after the
Supreme Courts verdict in
Vodafone's favour.
Sources say that a large amount
of the refund that Vodafone will
be getting from the taxman will
go into Vodafone Plc and a part
will come in the India arm as well.
Aside from that, it is also learnt
that they have been talking to
specific players for selling
Vodafone towers outside of the
India Joint venture because they
haven't got in the right response
and the market conditions are
slightly difficult so they may have
put that on hold as well. They
have lot of plans, but they will be
largely focused on expansion as
far as 3G outlook and broadband
is concerned.
TAXMANN CASE LAWS
K.c. Singhal >>>
Judicial update:
where cash is seized in the course of search and assessee makes a request to adjust the same against advance tax liability, AO is bound
to adjust the same. Hence, no interest u/s 234B can be levied in such cases.--Recentl y held by ITAT in the case of shri RAm Sarda (2012) 17 Taxmann.com
23(Raj)
Judicial update:
where cash is seized in the course of search and assessee makes a request to adjust the same against advance tax liability, AO is bound
to adjust the same. Hence, no interest u/s 234B can be levied in such cases.--Recentl y held by ITAT in the case of shri RAm Sarda (2012) 17 Taxmann.com
23(Raj)
vodafone international holdings B.V. vs UOI (supreme court)
Transfer of shares of foreign company by non-resident to non-resident does not attract Indian tax even if object is to acquire Indian assets held by the foreign company
vodafone judgement
A Cayman Island company called CGP Investments held 52% of the share capital of Hutchison Essar Ltd, an Indian company engaged in the mobile telecom business in India. The shares of CGP Investments were in turn held by another Cayman Island company called Hutchison Telecommunicati ons. The assessee, a Dutch company, acquired from the second Cayman Islands company, the shares in CGP Investments for a total consideration of US $ 11.08billion. The AO issued a show-cause notice u/s 201 in which he took the view that as the ultimate asset acquired by the assessee were shares in an Indiancompany, the assessee ought to have deducted tax at source u/s 195 while making payment to the vendor. This notice was challenged by a Writ Petition but was dismissed by the Bombay High Court. In appeal, the SupremeCourt remanded the matter to the AO to first pass a preliminary order of jurisdiction which the AOdid. This order was challenged by the assessee by a Writ Petition which was dismissed by the High Court (329 ITR 126 (Bom). On appeal by the assessee, HELD allowing the appeal:
(By the Court)
(i) The department’s argument that there is a conflict between Azadi Bachao Andolan 263 ITR 706 (SC) & McDowell 154 ITR 148 (SC) and that Azadi Bachao is not good law is not acceptable. While tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges is not permissible, it cannot be said that all tax planning is impermissible;
(ii) In the taxation of a Holding Structure the burden at the threshold is on the Revenue to establish abuse in the sense of taxavoidance in the creation and/or use of such structure(s). The Revenue may invoke the “substance over form” principle or “piercing the corporate veil” test only after it is able to establish that the transaction is a sham or tax avoidant (e.g. structures used for circular trading or round tripping or to pay bribes) or if the Holding Structure entity has no commercial or business substanceand has been interposed only to avoid tax. A strategic foreign direct investment coming to India should be seen in a holistic manner and keeping in mind certain factors like the period of business operations in India etc. On facts, the Hutchison structure was in place since 1994 and couldnot be said to be created as a sham or tax avoidant. The holdingcompanies were not a “fly by night” operator or short time investor;
(iii) The Revenue’s argument that u/s 9(1)(i) it can “look through” the transfer of shares of a foreigncompany holding shares in an Indian company and treat the transfer of shares of the foreign company as equivalent to the transfer of the shares of the Indian company on the premise that s. 9(1)(i) covers direct and indirect transfers of capital assets is not acceptable. S. 9(1)(i) (unlike the DTC Bill, 2010) does not use the word “indirect transfer”;
(iv) The argument that CGP, the intervened entity, had no businessor commercial purpose and that its situs was not in the Cayman Islands but in India (where the assets were) is also not acceptable. The situs of the sharesof a company is where the registered office is;
(v) The High Court’s finding that, applying the “nature and character of the transaction” test, the transfer of the CGP share was not adequate in itself to achieve the object of consummating the transaction between HTIL and VIHand that there was a transfer of other “rights and entitlements” which were “capital assets” is notcorrect because the transaction was one of “share sale” and not an “asset sale”. It had to be viewed from a commercial and realistic perspective. As it was not a case of sale of assets on itemized basis, the entire structure, as it existed, ought to have been looked at holistically. A transfer of shares lock, stock and barrel cannot be broken up into separate individual components, assets or rights such as right to vote, right to participate in company meetings, management rights, controlling rights, control premium, brand licences and so on as shares constitute a bundle of rights. The sum of US$ 11.08 bnwas paid for the “entire package”and it was not permissible to split the payment and consider a part of it towards individual items
(Mugneeram Bangur 57 ITR 299 (SC) followed);
Per Radhakrishnan, J (concurring):
(i) On the conflict between McDowell & Azadi, It is a cornerstone of law that a tax payer is enabled to arrange his affairs so as to reduce the liability of tax and the fact that the motivefor a transaction is to avoid tax does not invalidate it unless a particular enactment so provides. However, for the arrangement to be effective, it is essential that the transaction has some economic or commercial substance;
(ii) On facts, CGP’s interposition in the corporate structure and its disposition, by way of transfer, forexit, was for a commercial or business purpose and not with the ulterior motive for evading tax. It cannot be considered to be an artificially interposed device and the principle of “fiscal nullity” will not apply. For the principle of “fiscal nullity” to apply, there should be a pre-ordained series of transactions and there should be steps inserted that have no commercial purpose. In that case, the inserted steps can be disregarded for fiscal purpose and one can look at the end result. However, the sale of the CGP shares was a genuine business transaction, not a fraudulent or dubious method to avoid capital gains tax. The situs of the shares was in the Cayman Islands;
(iii) The argument that s. 9(1) should be given a purposive interpretation so as to cover even indirect transfers is not acceptable. On the transfer of shares of a foreign company to a non-resident off-shore, there is no transfer of shares of the Indian company, though held by the foreign company and it cannot be contended that the transfer of shares of the foreign holding company, results in an extinguishment of the foreign company control of the Indian company and it also does not constitute an extinguishment and transfer of an asset situate in India. Transfer of the foreign holding company’s share off-shore, cannot result in an extinguishment of the holding company right of control of the Indian company nor can it be stated that the same constitutes extinguishment and transfer of anasset/ management and control of property situated in India;
(iv) S. 195 applies only if paymentsare made from a resident to another non-resident and not between two non-residents situated outside India. The transaction was between two non-resident entities through a contract executed outside India, consideration passed outside India and the transaction had no nexus with the underlying assets in India. In order to establish a nexus, the legal nature of the transaction has to be examined and not the indirect transfer of rights and entitlements in India.
(iii) The argument that s. 9(1) should be given a purposive interpretation so as to cover even indirect transfers is not acceptable. On the transfer of shares of a foreign company to a non-resident off-shore, there is no transfer of shares of the Indian company, though held by the foreign company and it cannot be contended that the transfer of shares of the foreign holding company, results in an extinguishment of the foreign company control of the Indian company and it also does not constitute an extinguishment and transfer of an asset situate in India. Transfer of the foreign holding company’s share off-shore, cannot result in an extinguishment of the holding company right of control of the Indian company nor can it be stated that the same constitutes extinguishment and transfer of anasset/ management and control of property situated in India;
(iv) S. 195 applies only if paymentsare made from a resident to another non-resident and not between two non-residents situated outside India. The transaction was between two non-resident entities through a contract executed outside India, consideration passed outside India and the transaction had no nexus with the underlying assets in India. In order to establish a nexus, the legal nature of the transaction has to be examined and not the indirect transfer of rights and entitlements in India.
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