IT Industry Raises Service Tax, TDS Issues With Shome Panel

Amidst its tax woes, the IT industry raised issue of service tax refunds and interpretation on tax deducted at source (TDS) on softwares with Finance Ministry's high-level committee.

The committee, headed by the adviser to Finance Minister Parthasarthy Shome, was set up by the government last month to address tax-related issues that affect the industry.

"We had the first meeting among industry bodies with the Shome committee yesterday. This format is a very productive way of dealing with the industry issues in a collaborative manner," IT-ITeS industry body Nasscom President Som Mittal told PTI.

The industry has other issues also and Nasscom will seek another date from the committee after it has met with other industry sectors, he added.

On the issues raised by the industry, Mittal said: "We discussed about service tax refunds and what can be done there. We talked about interpretation issues on TDS on software products as there is a major problem on cascading of the TDS for small companies.

"Also issues on how the safe harbour provisions will come in, implementation of Rangachary committee recommendations, etc."

During the discussion, some of the issues were brought to the knowledge of the government on which it said will get back. On others the industry was asked to come back with further clarifications, he added.

"It was a very structured meeting, and we were asked to put our issues before the meeting and they had studied the issue. We met for an hour and 45 minutes. We had members from IT industry and Shome had people from direct and indirect taxes," he said.

Officers of the Tax Policy and Legislation (TPL) wing of the Central Board of Direct Taxes (CBDT) and the Tax Research Unit (TRU) of the Central Board of Excise and Customs ( CBEC) were also present at the meeting.

IT-ITeS sector has been demanding more clarity on tax on software treated as royalty, removal of the minimal contiguous land requirement for SEZs, dual levy of VAT and service tax on domestic software sales, and implementation of the Rangachary committee, among other issues.

Commercial rentals to jump 10pc with service tax

Rentals of commercial properties are expected to rise by 10 per cent after the Budget on Friday proposed to bring all lease agreement of shopping complexes, malls and vacant lands under the ambit of service tax.

Besides, development of real estate complexes will also attract service tax, unless the entire consideration for the property is paid after the completion of construction.

"This step will add to the cost and it will be a huge burden on owners. Rentals of commercial property will go up by 10 per cent and it will lead to inflationary pressure," apex realty body Credai resident director GP Savlani told PTI.

Global realty consultant Jones Lang LaSalle Meghraj (JLLM ) country head Anuj Puri also said rentals of office and retail space are likely to increase by 10 per cent.

The Finance Minister said all commercial agreements or contracts between lessor and lessee for rent and lease would come under the service tax net with retrospective effect from June 2007. It will also apply to all agreements for undertaking construction of building or structures on any vacant land for commercial use.

There is, however, no clarity on whether residential properties will be considered as 'complexes' for inclusion under the ambit of service tax.

While Puri of JLLM said it should not be valid on housing properties, another global property consultant CBRE said service tax is likely to be charged on first time home buyers.

Tax-efficient fixed maturity plans a good investment option now

In the past few weeks, the fixed income landscape in the country has changed drastically. Following the unprecedented liquidity tightening measures by the RBI in response to the sliding rupee, short-term rates have jumped up sharply. This has increased the attraction for investments in short-term debt instruments, such as the one-year certificates of deposit and commercial paper. The rates have risen to 9.5-10% for certain instruments, up to 150 basis points higher than that a month ago, when sliding interest rates had increased the preference for longer tenure instruments. The fund houses have been quick to take advantage of the short-term rates, with nearly all AMCs launching fixed maturity plans (FMPs) of different tenures in the past month. Should you bite the bait and include FMPs in your portfolio? If so, how should you identify the right one? Why invest in FMPs now These plans invest in a mix of short-term options, such as money market instruments, certificates of deposit, commercial papers, and the like. Given that these are currently offering a yield of 9.5-10%, the funds are also likely to deliver a similar pre-tax return. The investors who lock in money at the current level should enjoy double-digit returns over a one-year horizon. The uncertainty regarding the future interest rate movements makes FMPs a safer bet. The reversal in rates had played out to the hilt, giving a fillip to bond prices, especially those of longer duration. However, the recent RBI move to tighten liquidity has put a big question mark on the trajectory of rates. Debt funds, across categories, have taken a knock and there is a heightened element of risk. FMPs, on the other hand, offer returns that are relatively predictable, though not guaranteed. These are closed-ended, or of a fixed tenure, where the fund invests in instruments with a maturity profile matching that of the fund, and the instruments are typically held till maturity. For instance, a one-year FMP will invest in fixed income instruments bearing the same maturity. As such, any gyration in interest rates in the interim period does not affect the value of the fund. Hence, in an environment where the stability of the debt market is suspect, an FMP provides a safer way to navigate the uncertainty. Says Hemant Rustagi, CEO, Wiseinvest Advisors: "This is a good window for investors to lock in their money at higher yields through FMPs." They should supplement the riskier open-ended funds in their portfolios with more stable FMPs, he adds. Besides, FMPs are more tax-efficient. The plans with a horizon of more than a year provide the benefit of indexation, where investors are allowed to adjust returns against inflation. If you invest in the growth option of a one-year FMP, your returns are taxed as capital gains at a rate of 20% with indexation, or 10% without indexation. In case of fixed deposits, the interest is clubbed with income and is taxed as per the specified slab rates. So, if you fall in a higher income tax bracket of 20% or above, an FMP would be a better choice than an FD. During periods of high inflation, the indexation benefit allows you to enjoy near-zero tax on capital gains. However, the gains from FMPs with durations of less than one year will be taxed at your applicable tax rate, bringing them at par with FDs.

I-T department urges latecomers to file tax returns

The income tax department has urged all taxpayers who have not filed their returns, even by the extended deadline of August 5, 2013, to file at the earliest to "keep away from unavoidable difficulties".

A press release issued Friday said, "Those who missed the deadline of August 5 can still file their I-T returns. If all your taxes are paid and there are no refunds to be claimed it is quite straight and simple. The I-T return can be filed before March 31, 2014. If the return is not filed by that time a penalty of Rs 5,000 will be levied. Those with tax dues will have to pay late fee payable for every month of delay since April 2013."

All those with total income of Rs 5 lakh and above and all those having foreign assets have to necessarily file I-T returns online. More than 1.23 crore taxpayers filed their returns online this year.

Those whose total income is less than Rs 5 lakh can file their returns off-line. While the department gives taxpayers a certain "grace period" to file their returns, there are disadvantages to late filing. Those who file their returns late cannot modify them if there are any mistakes. They also cannot carry forward any short term and long term losses.

The department says it keeps a close watch on transactions and possesses the necessary tools to detect tax evasion. A person defaulting in filing returns of income could be liable for prosecution under Section 276CC of the Income Tax Act, 1961.

Conviction may result in rigorous imprisonment for a term not less than six months but which may extend to seven years and a fine, if the tax liability which has been evaded exceeds Rs 25 lakhs.

Recently, the additional chief metropolitan magistrate, New Delhi, sentenced a taxpayer to six months imprisonment in one assessment year and one year imprisonment in subsequent assessment year for repeating the offence of not filing tax returns.

No reassessment to deny deduction under sections 80HHC and 80-IA if all material facts were disclose

IT: Where there was no failure on part of assessee to disclose all material facts necessary for completing assessment, reassessment proceedings could not be initiated after expiry of four years from end of relevant assessment year on ground that claim of deductions under sections 80HHC and 80-IA were wrongly raised by assessee

HC upheld concealment penalty as assessee failed to disclose cap gains in original return

IT: Where assessee in original return had not disclosed transactions in shares and subsequently he based on an enquiry filed revised return offering income earned on sale of shares, levy of penalty under section 271(1)(c) upon assessee for disclosing incorrect particulars of income in original return was justified

Service tax on restaurants and hotel accommodations are unconstitutional; HC sets aside levy of ST

ST : Levy of service tax on : (1) service forming part of supply of goods in a restaurant, as well as, (2) short-term accommodation services in hotels, inns, etc. is unconstitutional being violative of Entries 54 and 62, respectively, of State List

Mere allegations against company won't prevent Court from granting sanction to amalgamation scheme

CL : Merely because a report has been tendered making allegations against company, it would not deter Court from granting sanction to scheme of amalgamation on that ground alone, if it is satisfied that provisions of section 391 have been complied with by company

Comparables with high brand value can be excluded only if they have higher profit margins

IT/ILT: In case of ITES/BPO services, in absence of evidence on record showing that comparables belonging to high end segments such as content development, KPO, medical-transcription, etc., earn higher margin, those comparables cannot be excluded from comparability list while determining arm's length price

Weak Rupee: Traders Cut Down Import From Pakistan

18-Aug-2013

CHANDIGARH: Sharp depreciation of the rupee against the US dollar has impacted imports from Pakistan through Attari-Wagah land route with traders cutting down on buying commodities fearing heavy losses.





With rupee showing no signs of stability against the dollar, panic-gripped importers are suffering losses on imports of dry fruits, cement and gypsum.



"We now fear placing new orders for import in the wake of sharp depreciation of rupee against the US dollar. We do not know what will be the new rate at the time of payment as the rupee is continuously weakening despite the efforts by the Centre," Amritsar-based Federation of Dry Fruits Association's President Anil Mehra told PTI.



As the new season begins for import of dry fruits from the neighbouring country, importers have scaled down its quantity by over 80 per cent because of weak rupee.



"At this time, 2.5 lakh bags (70 kg each bag) of dry fruits and dates should have been imported if we go by past trends. But so far, only 40,000 bags have been imported from Pakistan," Mehra said.



The season for import of dry dates and dry fruits starts from July-end which goes on till March. It is estimated that more than 15 lakh bags of dry fruits including almond, fig, raisins, etc, are imported annually from Pakistan.



Stating that it has become unsustainable to carry out import business in view of rupee depreciation, traders said, "record volatility in foreign exchange will hit the bilateral trade between India and Pakistan."



Financial transactions between traders of Pakistan and India through Attari-Wagah route is carried out in US currency.



Traders mainly import dry fruits, cement, gypsum and chemicals from Pakistan worth over Rs 1,000 crore per annum, an importer said.



"The number of truckloads carrying items such as cement, gypsum from Pakistan has dropped to just 30-40 trucks a day as against average 70-80 a truck a day normal," said another importer Jaspal Singh.



"We are curtailing import and waiting for rupee stabilisation as it is not feasible to import at this point of time," he added.



The rupee has depreciated over 13 per cent against US dollar since start of the current fiscal.

Source:- economictimes.indiatimes.com

Steel Companies Focus On Exports To Benefit From Weak Rupee

KOLKATA: With the rupee continuing with its free fall against the dollar, steel companies are redrawing their export strategies to make the most of windfall gains coming their way. In this new found thrust on exports, Indian steel makers are increasingly looking at markets in the Middle East & North Africa, South Asia and even Europe to beat low demand at home.



The fall in rupee will make imports costlier, thereby curbing the volume in next few months. This has brought some cheer to steel companies which are going through one of their most depressing phases.



"Rupee depreciation has helped steel exports which have gone up in last few months," said SAIL chairman CS Verma. SAIL hopes to double exports to 7 lakh tonnes this year, up from 3.7 lakh tonne in 2012-13.



Essar Steel, one of the largest steel exporters, hopes to raise exports by over 25% to 1.4 million tonne (mt) this year, up from 1.1 mt it did last year. "We are exporting to Middle East, Africa, South East Asia, and even Europe," a company official said.



"Rupee depreciation, along with a weak domestic steel market and capacity expansions, is forcing steel producers to sell more abroad," said Giriraj Daga, analyst at Nirmal Bang Securities. This year, steel exports crossed one-million mark to touch 1.13 mt in what is a seasonally weak first quarter.



In 2012-13, even as capacity went up to 90 mt, exports hobbled at around 4.7 mt. This year estimates suggest exports could rise almost 30% over last year. With its products finding a good market in Africa and the Middle East, Jindal Steel & Power Ltd (JSPL) also wants to increase its exports this year.



"We want to increase exports to 15% of our increased production base in 2013-14. We see huge opportunities for export, particularly in Middle East & North Africa," a JSPL spokesperson said.



Producers like Essar Steel feel the time is ideal for government to take decisive action on policy front to raise export volumes. "Exports have stagnated at around 4.5 mt since 2003-04. This can be increased by 3-4 mt easily," H Shivramkrshnan, Chief Commercial Officer, Special Projects, Essar Steel said.



Domestic consumption remained flat in the first four months of the FY14 growing a mere 0.2% to 24.1, mt due to poor offtake from consumer and auto sector. Steel production however, grew by 3.1 % to 26.1 mt during the April-July FY14, from 25.3 mt during the April-July FY13.

Source:- economictimes.indiatimes.com

Building under construction on date of transfer can't be deemed as an existing house to deny sec. 54

IT : Building under construction cannot be considered as an existing residential house on date of transfer of original asset for purpose of section 54F

Rains Take Heavy Toll On Cotton Crop

BATHINDA: Hot and humid atmosphere during the sowing season and now the heavy rains, when the picking season is about to start. It is a double whammy for cotton farmers in south western Punjab.



The accumulation of water in cotton farms after the rains in the past three days has damaged crop in Malwa region of Punjab. The farmers have been badly hit as the rains lashed the region when they were about to start picking of cotton.



The cotton crop, which is in flowering stage, is the worst hit. Cotton was sown in about 5.3 lakh hectares in Punjab and as per farmers more than 20% cotton could be damaged due to heavy rains and water accumulation in farms. Widespread damage has been caused in Bathinda, Muktsar and Ferozepur districts of Punjab. The agriculture department officials termed the situation as not that serious but added that more rains could cause damage.



"The rains in cotton belt of Bathinda, Muktsar, Ferozepur and Mansa have led to submerging of the cotton crop in many places at a time when it is ripening fast and plucking season was about to start," said Buta Singh, a farmer of Burjgill village in Bathinda. "I had sown cotton crop in 5 acres and due to heavy rains it has suffered extensive damage," claimed Mohinder Singh in Muktsar. Udekaran sarpanch Gurlab Singh said the cotton crop in about 5,000 acres has been damaged due to water-logging in the fields.



Farmer union BKU Dakonda leader Manjit Singh and labourer union leader Lachman Singh Sewewala said as the cotton crop has seen extensive damage, the state government needs to order special girdawari to compensate the aggrieved farmers. Punjab agriculture department joint director Gurdial Singh said, "The damage to cotton crop due to rains is not widespread. The crop could have been damaged to some extent at places where it was in flowering stage or had ripened, but if more rains continue to lash the region it can cause damage."

Souce:- timesofindia.indiatimes.com

House Panel Reports Point At Discrepancies In Ports

A memorandum of the Rajya Sabha secretariat and reports from CAG and a Parliamentary panel have highlighted a port sector scam, estimated at Rs 1.5 lakh crore. Major discrepancies found in the sector were appointing cargo handling agents and disposing waste oil from the ports.



While The Financial Express has already reported (on August 12) the CAG's findings of appointing unauthorised agents for onshore operation, it has found that the Parliamentary standing committee on transport, tourism and culture identified major financial leakages in waste oil disposal though the government is yet to take any action on it.



The Rajya Sabha secretariat, on the basis of the Parliamentary panel report, had issued a memorandum on July 12 seeking explanation from the shipping ministry and port authorities about waste oil disposal.



The secretariat in its memorandum said, "Around 18,000 kilo litres of waste oil is generated in Kolkata and Haldia ports annually. This waste oil is disposed off through private parties on nomination basis at throw away prices whereas this is reaching the market at a higher price later on. Similar situation prevails in all other major ports as well."



The memorandum further says, "Proper tendering for the purpose is not being done, which is mandatory under CVC guidelines. The CVC guidelines have been violated in other major ports also."



All India Major Ports and Dock Officer's Association, (AIMPDOA) which has helped the panel in identifying the leakages estimated that the country has lost the opportunity of generating more than Rs 10,500 crore revenue over a period of 35 years by not conforming with the provisions of the CVC.



The CAG has already reported violation of norms in allowing unauthorised agents to carry out onshore operation without sharing royalty with the ports. AIMPDOA says that with each agent carrying away Rs 450-500 crore annually from the ports. The loss to the exchequer adds up to Rs 1.4 lakh crore over a period of 35 years only on account of unauthorised cargo handling.

Source:- indianexpress.com

Oil Import: Time To Think Of Plan B For Smooth Supply

18-Aug-2013

New Delhi: The news of Iran detaining a Shipping Corporation of India vessel carrying crude oil from Iraq to India a few days back raises some serious questions.



Although Iran has downplayed the incident, oil industry veterans have put it under the ‘rarest of rare’ categories.



The incident underscores how crucial it is for India to make alternative plans for transportation of its imported crude. It is time the country expanded its energy basket and cut dependence on West Asian oil. Existing policies will also have to be tweaked to minimise dependence on crude oil itself, as the country imports 80 per cent of its requirement. And, of this over 60 per cent comes from West Asia. In fact, in the April-June quarter of the current fiscal 65 per cent of its imported crude came just from the Gulf nations (see graph).

Diversify



Tensions between Iran and Iraq are nothing new. The US and the European Union sanctions have put many curbs on Iran’s crude oil export. Once a major supplier to India, Iran has lost that position today, with Iraq emerging as the key beneficiary.



Since India imports crude from diverse regions, such as West Asia, Africa, Asia, South and North America, Eurasia, and Europe through oil tankers plying on key sea lanes, political turmoil and unrest in any of the regions can cause supply disruptions.



It is time the country started diversifying its supply sources. Simultaneously, India needs to aggressively look at international pipeline projects.



The Standing Committee on Petroleum and Natural Gas has stressed the crying need for an alternative plan for crude oil transportation. In a report on the long-term purchase policy and strategic storage of crude oil, the panel has asked the Petroleum and Natural Gas Ministry to keep a watch on the geopolitical situation along these sea routes , and keep alternative plans ready in case of disruptions. India also needs to look at other regions for supply. In 2012-13, the crude oil purchase plan of domestic oil refiners showed a heavy dependence on West Asia, almost 79 per cent, against five per cent from West Africa and seven per cent from other countries. Industry observers say dependence on West Asia has to be curtailed. China has already started doing so, and the US is on its way. .



Indian refineries must, however, be upgraded to process any variety of crudes — from the dirtiest, dense variety to the sweetest. India’s refining sector is dominated by public sector undertakings, which are always facing financial constraints to make required investments for these upgrades.



This incident should be a wake-up call. India’s energy mix, which is predominantly skewed towards crude oil for its energy requirements, needs to undergo a change. The country needs to look at gas, which is always trading at a discount to crude oil. It is also a cleaner burning fuel. The Standing Committee had urged India to take advantage of developments in the shale gas arena and promote the use of natural gas.

Source:- thehindubusinessline.com

Our Onion Sells Cheap In Bangla

Even as the sizzling price of onion that touched Rs 80 in districts across Bengal is scalding average consumers, Bangladesh is being spared the heat despite importing the commodity from India. Not only is 1,500 tonnes of onion being exported daily to Bangladesh via Bengal, it is retailing at Rs 50 a kilo in the neighbouring country, nearly 40% lower than the price it is commanding in markets across Bengal.



According to traders, had the huge quantity of export onion been diverted to the domestic market, it would have arrested the price in the state and brought relief to citizens. "In the past, whenever onion prices zoomed, curbs were placed on export to prevent this situation. But with the government failing to act this time, price of onion continues to zoom in the domestic market," said Samir Ghosh of Federation of the Bengal Exporters' Association.



With the government failing to impose restrictions on exports, truck loads of onion continue to roll into Bangladesh from India through five export centers in the state - Petrapol and Gojadanga in North 24-Parganas, Hijli in South Dinajpur, Changrabandha in Cooch Behar and Mahadipur in Malda. The vegetable is now among the most prized export to Bangladesh that also imports fruits, pulses, cement and stone chips.



Though the recent political unrest in Bangladesh did disturb the supply chain in spurts, demand for onion never declined. Being a non-perishable commodity, the consignments always found their way to the market. Around 150-200 tonnes of onion are exported daily through Mahadipur alone.



Hundreds of trucks carrying onions from Bihar, Andhra Pradesh and Uttar Pradesh find their way into the markets at Rs 50 a kg.



Mahendra Jadav of Bihar, who was on way to Bangladesh with a truck laden with onions, said more than 10 lorries, each carrying 15-18 tonnes of onion, had queued up at the border. There were also trucks from Andhra Pradesh and Uttar Pradesh, all carrying onions that would find their way into markets at Rs 50 a kilo.



Exporters' Coordination Committee joint secretary Uzzwal Saha said the skewed pricing of onion in the domestic and export market was a result of the pricing fixed by National Agricultural Co-operative Marketing Federation (Nafed).



"The agreement on export price and quantity was fixed long ago. The contract has to be honoured even if price shoots up in the domestic market. As a result, Bangladesh is getting onions at a cheaper price. We are facing losses and have asked Nafed to revise the export price. Unless that is done, we will suffer," he said.

Source:- timesofindia.indiatimes.com

Gold To Cost Rs 31,000 By Year End Despite Constant Demand And Import Curbs

18-Aug-2013

Gold prices are likely to hover at around Rs 31,000 per 10 grams by the end of this year even though the demand for the metal may remain at 860 tonne after the government restrictions to curb imports, say experts.



“Weak rupee and higher duty will keep the landed cost of gold higher. The yellow metal is likely to be around Rs 30,500 to Rs 31,000 level by December end,” Angel Broking head Commodities Naveen Mathur told PTI here.



On the MCX exchange, gold was priced at Rs 28,600 per 10 grams, while in the international market it was at $ 1,376.70 per ounce.



Mr. Mathur said if government takes more measures to discourage import of gold, it will affect its supply thus putting more pressure on its prices.



Internationally, gold is range bound at present with a bearish outlook due to a strong US dollar and reports of improving American economy.



“Gold will be around $ 1,375-1,400 an ounce level by the year end. It will be pulled by opposite fundamentals like US dollar gaining strength and the growing Chinese demand,” he said.



According to Mr. Mathur, demand for gold is likely to remain same as that of last year.



“Even as the good monsoon indicates that demand for gold will pick up during the fourth quarter, high prices following higher customs duty and lack of supply will keep it under control,” he said.



However, the World Gold Council, which represents leading gold mining companies across the globe, said demand for gold in India and China was expected between 900 and 1,000 tonnes (in each nation) in 2013.



Kotak Commodity Services Analyst Madhavi Mehta said that with recycling of gold drying up and people holding on to the stocks, demand will to go over 860 tonne this year.



“The government has taken steps to curb import in order to restrict demand. And with the international prices just recovering and rupee looking bearish the yellow metal may touch a new high of over Rs 32,000 by December,” she added.



Globally, the metal may hover around $ 1,300-1,465 by the end of this year, she said.



Commtrendz Research Director Gnanasekar Thiagarajan said that if the government hikes more duty, then the high premium on gold in the domestic market might act a dampener for demand during the festival season in the fourth quarter.



However, even if the gold imports are restricted to the previous year’s level it will be much higher in value terms with the weak rupee, he said.



He said that going forward, gold prices will be at around Rs 31,000 in the domestic market and at $1,320-1,400 in the international market.



To contain the current account deficit, government has increased import duty on gold, silver and platinum to 10 per cent with a view to arrest the declining value of rupee and contain the fiscal deficit to 3.7 per cent of the GDP.



The Reserve Bank has also imposed restrictions on gold imports by banks and other authorised agencies.

Source:- thehindu.com

Rupee Tumbles To All-Time Low Of 62.30

The rupee shed a staggering 64 paise to an all-time low of Rs 62.30 against the dollar in the opening session on Monday against the previous close of 61.66 on the back of weakness in the domestic equity market.

The benchmark BSE Sensex opened 0.39 per cent lower on Monday due to concerns over US monetary stimulus withdrawal which has put pressure on the domestic unit.

According to dealers, the heavy FII outflows from the domestic equity market have been weighing on the currency. The dollar saw high demand from importers as the currency market remained closed over the week-end.

Market players say the continuous slide in the rupee can only be halted if the Government hikes the import duty on non-essential goods such as mobile phones and electronic items.

Kuntal Sur, Director at KPMG India, said: “Overall, the market is in a state of panic and is moving on negative cues. Also, the measures announced by the RBI have not really taken the desired effect as they are more ad hoc in nature and not structural.”

Source:- thehindubusinessline.com