Question of law can be raised before ITAT only if it arises from facts found by IT authorities

IT : Where Tribunal, while granting exemption from capital gains, did not consider whether lands in question were agricultural lands on not, since Assessing Officer did not doubt such fact, order of Tribunal did not call for interference

Appeal had to be dismissed for not making pre-deposit, even if pre-deposit requirement was challenge

ST : Where assessee had not complied with pre-deposit order, appeal was to be dismissed even if such order had been challenged by assessee before High Court and was still pending

Creditor can’t insist for ‘specific performance’ by directors if parties settled all pending matters

CL : Where on company's failure to pay creditor bank, settlement was arrived to settle all matters, separate proceeding for specific performance by director could not be proceeded

Conveying TDR of a flat to builder was not taxable as capital gain if no cost was incurred in acquir

IT : Capital gain is not attracted in cases of transfer of transferable development rights

Coarse Rice Dearer As Exporters Rush To Make Killing On Costly Dollar

NAGPUR: Rise of US dollar against rupee has made the poor man's food costly and also led to a lopsided exim trade in the region. Nagpur is the biggest centre for exporting non-basmati rice which is mainly par-boiled variety, the lowest grade having a fat grain.



To benefit from falling rupee, exporters are rushing to send their consignments to West Africa the major consumer of the Indian cheap rice owing to poverty there. However, this rush by exporters has also led to a hike of Rs 150 a quintal in the price of parboiled rice in domestic markets. It has now touched Rs 2100 a quintal within a couple of days. There are chances that the price may rise further. This variety of rice is largely consumed in southern states and a dry spell in Andhra Pradesh has already jacked up the prices, say sources in the business.



On the other hand, steel players, who are the main importers in the region, have virtually stopped their foreign transactions. Much of the scrap needed by the steel industry is imported. With that having been almost stopped, there are no incoming containers to take back rice being exported. So much is the demand from exporters that shipping lines are positioning empty containers at Nagpur Inland Container Depot of Concor, a railways subsidiary.



Normally, it is only feasible for a logistics or a shipping operator to bring containers full of imports and then go back with commodities being exported. However, now they are bringing in empty containers which are going back with rice. "This is has led to a major hike in freight rates as liners are covering their cost to keep empty containers here. Over a couple of months ago, freights from Nhava Shewa harbour were at around Rs 1600 a tonne for shipping rice to West Africa. But now ex-Nagpur rates stand at Rs 1950 a tonne," said Shiv Rao from R&Y Logistics, a local company.



The exports from Nagpur have been at 2500 containers in a month, around 40% higher than normal levels, said Rao. So much is the rush that some of the smaller ports in Africa are reportedly congested. Exporters do not mind the high rates as they still make a killing due to the costly dollar, added a source.



A representative of a shipping lines said since not all the lines dealt in rice consignments, inventory management had become a problem. The shipping companies are incurring a loss in some cases but continuing to offer services just to maintain long-term relationship with the clients.



Of course, there was a sharp increase in exports in the last year when the ban on exporting non-basmati rice was lifted. The figures for current year are yet to be complied but there are estimates of around 30 lakh tonnes being shipped so far as against 90 lakh tonnes last year, said Pratap Motwani Secretary of The Itwari Grains and Seeds Merchants Association. However, this has not impacted the rate of other varieties like Chinnor or HMT that is consumed here.



Local grain traders accept that dollar going up had increased exporters. However, a Gondia-based exporter said international demand had been hit due to cheaper rice coming from Vietnam.

Source:-timesofindia.indiatimes.com

Maize Exports Up By 24% In Fy'13

20-Jun-2013

India’s maize exports rose 24 per cent to 4.78 million tonnes in financial year 2012-13 due to adequate domestic supply and traders adopting better packaging practices to meet global standards, an industry body said today.



India had exported 3.85 million tonnes of maize (corn) in the previous financial year.



“There has been a substantial increase in maize exports. Production was higher and exporters took measures to improve packaging practices to meet the global standards of shipment,” Indian Maize Development Association President Sain Das said on the sidelines of an event here.



According to the data maintained by the Directorate General of Commercial Intelligence and Statistics (DGCIS), maize exports increased in value terms to $1,302 million in 2012-13, as against $1,075.70 million in the previous year.



Stating that maize production is on the rise every year, Das said production in the 2013-14 crop year (July-June) is expected to increase to 23 million tonnes, as against 21.82 million tonnes in the 2012-13 crop year.



Timely monsoon, adoption of improved technologies like single-cross hybrids and crop management practices would help increase overall production of maize this year, he said. Maize is cultivated twice a year, during summer and winter. India is Asia's largest exporter of the grain, with a major contribution coming from the summer crop.



Karnataka, Maharashtra, Rajasthan and Andhra Pradesh are major producers of maize crop in the country.

Source:-www.business-standard.com

Receipt from supply of equipment along with embedded software isn’t royalty if it can’t work in isol

IT/ILT : Amount received by a German company from software embedded in equipment supplied by it cannot be considered as 'royalty'

Rupee Slide And Impact Of A Weak Currency On Select Sectors

MUMBAI: For India Inc, the rupee's slide comes as another blow at a time revenue growth is slowing and margins are being squeezed. The currency has lost 11% since May. This will adversely impact capital-intensive sectors and firms with foreign borrowings and those who import raw materials heavily.



Automobiles, capital goods, petroleum, power and telecom companies will bear the brunt of a weak rupee. But, sectors such as software services and pharma, with major export revenues, will benefit, though the extent of gains at the net profit level will hinge greatly on their foreign exchange hedging policies.



The ET Intelligence Group analysed the impact of a weak currency on select sectors.



Pharma:



Most companies in the sector will gain from the rupee's fall, since a substantial proportion of their revenues comes from exports. A strong US dollar and yen will boost net sales and operating margins.



Gainers:



The major gainers will be Dr Reddy's Lab, Sun Pharma, Lupin, Glenmark, Wockhardt and Cadilla Healthcare as they derive significant earnings from overseas markets. Analysts reckon that with every Rs 1 movement, the earning per share of these companies will change by 1-2%. For Cipla, which focuses mostly on the domestic market, rupee's fall could be largely neutral. Aurobindo Pharma and Jubilant Lifescience may not gain much since they have huge foreign borrowings of up to $600 million (about Rs 3,600 crore).



Software:



The operating margins of software service exporters tend to go up by 30-35 bps when the rupee falls by 1% against the US dollar. What may limit the positive impact of a weak rupee on margins will be the strategy the companies adopt to pass on the benefits to clients. Besides, the amount of foreign exchange hedging and the rate at which receivables are sold in the currency forward market will also impact net profit.



Gainers:



Front-end companies, such as TCS, Infosys, Wipro, and HCL Tech, may report improved performance in rupee terms for the quarter to June. However, the impact on net profits will be determined by the extent of hedging losses.



Rupee slide and impact of a weak currency on select sectors



Telecom



Major telcos, including Bharti AirtelBSE 1.28 %, Idea CellularBSE -0.07 % and Reliance CommunicationsBSE 1.56 % (RCom), have substantial foreign currency debt on their books. The sharp fall in the rupee in a short span against major hard currencies will expose these debt positions.



The impact on Bharti will be partially offset by its overseas revenue from the African region. But, the company's net loss will get wider. Its debt-related currency exposure is limited to borrowings of over $500 million (about Rs 3,000 crore) contracted in India, of which 50% is hedged.



For Idea and RCom, external borrowings are 60-70% of their corresponding total debt. Idea has hedged over half of this exposure, while the impact on RCom will be partially offset by revenue from its overseas subsidiary Globalcom.



Automobiles



The automobile industry, which is a generous importer of auto components, could be hit because of a fall in the rupee not only against the US dollar but also against other global currencies, including the yen, euro and pound.



The stress will be reflected in the financials of companies such as Maruti SuzukiBSE 0.14 %, which has a sizeable exposure to the Japanese currency, and also on Tata MotorsBSE -0.47 % to the extent of foreign currency borrowings the company may have on its books.



Other unlisted automobile companies, which rely heavily on imported components for their products, will also be hurt and may have to raise prices despite the severe slowdown in the Indian auto industry.



Gainers:



Bajaj AutoBSE 0.58 %, with a decent exposure to the export market, will benefit because of the rupee's fall.

Source:-economictimes.indiatimes.com

Govt Unlikely To Ban Gold Imports Or Hike Gold Import Duty

20-Jun-2013

India is unlikely to ban gold imports or increase import taxes on the metal further, as that may lead to more gold smuggling, a senior finance ministry official said on Thursday.



Also Read: MCX Gold October contract trades lower



The official added that the government has limited options to stall a record fall in the rupee.



The rupee has fallen to 59.9350 to the dollar, a day after US Federal Reserve Chairman Ben Bernanke confrimed the Fed would begin winding down its stimulus spending later this year, and data showed China's factory activity weakened to a nine-month low in June.s

Source:-www.moneycontrol.com

Small investors should diversify to beat volatility and survive a choppy market

The biggest mistake made by small investors in a volatile market is taking tactical calls across asset classes without understanding the implications or how they will affect their portfolio.

When the equity markets rise, we go overboard on stocks, when gold is in the news we end up hoarding the yellow metal, when debt products are aggressively advertised, we turn into debt investors.

"Retail investors tend to panic when an asset class turns volatile, and immediately jump or go into another asset class," says Anshu Kapoor, head, global wealth management, Edelweiss Capital.

For instance, small investors ended up buying gold in the past couple of years based on the fabulous returns that the metal delivered in the past five years. After correction set in in April earlier this year, investors latched on to debt funds.

At that point of time, after two rate cuts, long-term debt funds were showing returns of 12-15% for a one-year period, enough to catch investors' fancy. When the government raised diesel prices and announced a series of reforms, many felt the government was serious about business and became optimistic about growth coming back on track.

Many latched on to equities, taking the Sensex above the 20,000 mark, close to its all-time high. "They make the mistake of chasing the best-performing asset class on the basis of historical data, and end up parking their money in that asset class," says Jyotheesh Kumar, senior vice-president, HDFC Securities.

However, the recent fall in the rupee that has taken it close to 60 against the dollar has taught a hard lesson to investors. "A fall in the rupee will lead to higher prices of imported commodities and increase our current account deficit," says Mahendra Kumar Jajoo, executive director and chief investment officer, Pramerica Mutual Fund. This could further slow down growth. Stocks have been badly hit and the Sensex plunged to 526 points on Thursday. Bond market investors expecting more rate cuts are now a worried lot.

"With the rupee strengthening, the central bank will pause, and rate cuts will be delayed," says Arvind Chari, head of fixed income, Quantum Mutual Fund. Bond yields have hardened, with the benchmark 10-year 7.16% 2023, moving up from 7.10% to 7.40% which, in turn, has hit debt market investors.

For every hardening of interest rates by one basis point, a 10-year bond could see its price fall by 5 paisa. Hence, debt investors who are fully into gilt funds could see mark-to-market losses in their portfolio in the near term.

"In choppy markets like this, diversify and do not go overboard. Stick to your asset allocation," says Vishal Dhawan, Chief Financial Planner, Plan Ahead Wealth Advisors.

So, if you started with Rs 100, in January 2011 with an asset allocation of 60% to equities, 30% to debt and 10% to gold, the value of Rs 100 invested would be Rs 104.46. However, if you changed the allocation midway in December 2011 to 70% equities and 30% into gold and 0% in debt since gold was giving high returns, the value of Rs 100 invested by you will be a mere Rs 101.85. Clearly, you have incurred transaction cost, short-term capital gains tax and yet lost about 3% in the process.

"Different asset classes can move in different directions, depending on a host of domestic as well as international factors, which are difficult for an investor to predict. Hence, it makes sense to follow an asset-allocation approach to investing," says AV Srikanth, CEO, Motilal Oswal Wealth Management.

Also, remember to periodically review your portfolio. "Review your asset allocation periodically. In case it has strayed away more than 5% from the original recommended for you, rebalance your portfolio and bring it back to the original allocation," says Vishal Dhawan.

Commodity Transaction Tax Rules notified; Forms prescribed for filing of return and appeals

IT/ILT : Commodities Transaction Tax Rules, 2013

Chapter VII of Finance Act, 2013 on Commodity Transaction Tax effective from July 1, 2013

IT/ILT : Section 115 of The Finance Act, 2013 - Commodities Transaction Tax – Notified Date for Enforcement of Chapter VII of Finance Act, 2013

Secondment of employees to group cos. can’t be compared with recruitment services for TP study

IT/ILT: Where assessee was engaged in employing skilled professionals and providing same to group companies on secondment, TPO/DRP in course of transfer pricing proceedings, was not justified in comparing assessee's case with case of recruitment agencies

Validating Act can operate retrospectively to cure anomaly in statute but can’t impose penalty retro

ST : Legislature can enact validating legislation with retrospective effect to cure a deficiency pointed out in a Court judgment in a provision which had as its object the restriction of sales tax incentives to an amount calculated on a proportional basis. Such legislation is not unconstitutional. However, if such validating legislation provides for imposition of penalty with retrospective effect, it would be unconstitutional to that extent only

Delay in filing refund claim by SEZ must be condoned liberally

ST : Delay in filing refund claim by SEZ unit in respect of tax paid on services used for SEZ operations must be condoned liberally

‘Goodwill’ represents future profit and eligible for depreciation; SC’s order in ‘Smifs Securities’

IT : Depreciation is allowable on amount paid for goodwill being future profits

Explanation to sec. 32 stipulating mandatory deduction of depreciation allowance have prospective ef

IT : Explanation 5 to section 32 introduced with effect from 1-4-2002 is only prospective and has no application to assessment year 1998-99

Assessee taking risks of investment and technical risks in a project is eligible for sec. 80-IA dedu

IT : Where assessee shouldered out investment and technical risk in respect of work, employed technically and administratively qualified team of persons and was liable for liquidated damages for non-fulfilment of obligations, it was not correct to say that assessee was merely a contractor and not a developer ineligible for deduction under section 80-IA

Contingent collections won’t be hit by provisions of sec. 73A

ST : Section 73A does not apply to an amount collected as 'contingent liability' and not as service tax per se

Interest under sections 234B and 234C can’t be levied on Cos liable to MAT under sec.115JA

IT: Interest under sections 234B and 234C is not leviable when assessment is completed under section 115JA

CBDT informs Vodafone on agreeing to non-binding conciliation

The Central Board of Direct Taxes (CBDT) has formally written to British telecom major Vodafone, agreeing to enter into a non-binding conciliation to resolve the long-standing tax dispute.

"The Income-Tax Department has written to Vodafone, agreeing to enter into a non-binding conciliation to resolve the long-standing tax dispute" said a senior CBDT official.

Both sides will soon appoint representatives to carry out the negotiations, he said further.

Seeking to resolve the long-standing tax dispute with Vodafone, the Cabinet earlier this month had approved a proposal for non-binding conciliation with the British telecom major, the outcome of which will ultimately be vetted by Parliament.

"We (have) accepted the offer of Vodafone to enter into a non-binding conciliation. The outcome of the non-binding conciliation will be brought back to the Cabinet.

"If both sides (Vodafone and the government) agree on the outcome of the non-binding conciliation then the matter will be taken to Parliament by an amendment to the Income Tax Act," Finance Minister P Chidambaram had said.

The Minister had added that no timeframe has been set for conclusion of the conciliation proceeding.

The conciliation will be under the Indian arbitration law and not under the United Nations Commission on International Trade Law (UNCITRAL) as sought by Vodafone.

Vodafone is facing the tax liability of over Rs 11,217 crore for purchase of Hong Kong-based Hutchison Whampoa's stake in Indian telecom business Hutchison Essar in 2007.

Although the UK-based giant had won the tax case in the Supreme Court (January 2012), the government had last year amended the Income-tax Act, 1961 with retrospective effect to undo the ruling.

Following that, the Income Tax Department had issued a letter in January to Vodafone International Holdings BV stating that the company is required to pay tax demand of about Rs 11,217 crore along with interest.

However, Vodafone replied saying that they do not owe anything to the Indian Government. Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.

Finance Ministry to notify Commodity Transaction Tax soon

Finance Ministry will soon notify implementation of Commodity Transaction Tax (CTT) which will be levied primarily on processed agricultural commodities, including sugar, soya oil and mentha oil.

About 11 processed farm commodities would attract CTT, which will be levied at the rate of 0.01 per cent of the transaction value. These would include sugar, guar gum, mentha oil, soya oil and rapeseed oil.

"We are working hard to implement CTT as soon as possible. It would be applicable on futures trading," sources said.

According to sources, as many as 30 pure agro commodities, including wheat, barley and chana, are likely to be kept out of the ambit of CTT.

Coriander, cardamom, cotton and guar seed is also likely to be out of the CTT, sources said.

CTT is like Securities Transaction Tax (STT) and would not be applicable on spot trading.

In Budget 2013-14, CTT was proposed at the rate of 0.01 per cent of the transaction value and payable by the seller, which would work out to Rs 10 for transaction worth Rs one lakh.

The turnover from futures trade contributed around 15 per cent of total trade in commodity segment. The remaining 85 per cent business came from bullion, metals and energy items.

Sources said the implementation of CTT has been delayed as there has been consultations between the stakeholders and the Finance Ministry over the number of commodities which are to be kept out of the purview of the levy.

The exchanges and brokers are of the view that CTT would discourage day-traders and speculators, resulting in a big drop in business of five national bourses.

Expenditure can’t be disallowed if tax isn't deducted on self-declaration by payee

IT : Where on receiving declaration in Form 15-I from truck owner for non-deduction of tax, amount was paid by transport contractor without deducting tax at source, same would be allowable