IT/ILT : Where export commission were paid outside India to Non-resident prior to applicability of Circular No. 7 of 2009, same was not chargeable to tax in India under section 9(1)(vii)
Wednesday 27 November 2013
Same income can’t be taxed both in hands of AOP and its members on substantive and protective basis
IT: Where premium arising from sale of land was added on substantive basis to income of an AOP which consisted of nine persons including assessee, protective assessment of said amount again in hands of assessee in its individual capacity was not sustainable
Appellate Tribunal not to sit over matters which could fundamentally frustrate purpose of legislatio
CL: An action taken by bank under SARFAESI Act is subject to assail before DRT and a further appeal to DRAT; neither DRT nor appellate Tribunal can afford to sit over matters as that would fundamentally frustrate purpose of legislation
Revenue exempted from disclosing info obtained from Financial Intelligence Unit justifying search op
IT: Where search and seizure operation were carried out against assessee on receipt of information from national agency which was responsible for collecting information related to suspected financial transaction against money laundering, terrorist financing and related crimes, preparation of satisfaction note on such information would be treated as unpublished document for which privilege from disclosing source of information could be validly claimed
Hc Sets Aside Land Acquisition For Sez In Chittoor
In a judgement with far reaching implications, Justice SV Bhatt of AP High Court on Wednesday set aside the action of the revenue authorities of Chittoor District in resuming land from locals for the Special Economic Zone (SEZ) being promoted by Sri City Private Limited.
The judge allowed a writ petition filed by N Sakkubayamma and 29 others questioning the action of the state authorities in resuming their land without taking recourse to the provisions of the Land Acquisition Act.
Justice Bhatt, in his order, traced the background of the land owners who were assigned the land in question after they were displaced for establishing the rocket launching station at Sriharikota. With the state once again taking away their lands, Justice Bhatt was critical of how the authorities went about dispossessing the citizens of their property. "If the executive instructions or authority is to deprive property in this objectionable manner, I am afraid that any officer with his insignia and its authority will deprive property in a way not known to law. Such action negate rule of law," the judge said and set up a new calendar of dates for the authorities to follow under the Land Acquisition Act and said that the compensation payable should be determined expeditiously in accordance with the provisions of the Land Acquisition Act.
Source:- timesofindia.indiatimes.com
Drop In Captive Coal Output May Have Cost India Rs 1.46 Lakh Cr
The loss of production from captive coal mines allocated to companies has surely cost India dear. Delayed clearances for coal blocks, as well as companies’ own failure in developing mines, appear to have had a financial implication of Rs 1.46 lakh crore for the country.
The figure has been arrived at by adding the actual loss the country has incurred in partly making up for the production shortfall — by importing more expensive coal from other countries — and the opportunity loss due to non-generation of electricity because of coal crunch over the past five years.
According to consultancy firm KPMG, the total loss of output from captive coal mines over this period has been 394 million tonnes (mt) — based on delays with reference to a normative time of 54 months for developing allocated mines. Of this, 200 mt shortfall has been substituted with imported coal. Assuming the delivered cost of imported coal at Rs 3,980 a tonne and that of domestic coal for a port-based plant at Rs 2,380 a tonne, the additional cost on imported coal works out to Rs 1,600 a tonne — Rs 32,000 crore for 200 mt imported coal. (COST OF COAL INEFFICIENCY)
Since 194 mt of coal shortage could still not be made up for, the electricity-generation opportunity lost due to this — assuming 0.68 kg coal consumption for generating every unit (1 kWh) — would have been to the tune of 285.2 billion units. Further, considering the average cost of power at Rs 4 a unit, the total value of lost generation comes to Rs 1.14 lakh crore.
Putting the two figures together, the total loss due to captive mining shortfall, in value terms, come to a staggering Rs 1.46 lakh crore.
The emails Business Standard sent to the power and coal ministries for comments on the alarming loss figure did not elicit any response.
According to KPMG Partner Santosh Kamath, the loss figure for the power sector highlights the need for speedy clearances and permits. “The calculation shows the value of time is not adequately recognised or appreciated. This is a loss to the nation. Not all of the Rs 1,46,118-crore loss would be due to delays in clearances — there could be other factors, too — but clearance delays definitely are one of the major reasons,” he says.
The private power sector, on the other hand, does not seem to agree with the analysis. “The coal imports carried out to bridge the shortfall have to be seen only in the cases where projects are ready but mines are not. There are very few such instances,” says Ashok Khurana, director-general, Association of Power Producers.
Since 1993, when the coal mining sector was partially opened for captive production by private firms, the Centre has allocated 218 coal blocks, with reserves exceeding 49 billion tonnes. About half of the reserves have been allocated to the private sector, while state-run power generator NTPC has bagged a 10th of the reserves.
Under fire for alleged irregularities in allocation of coal blocks, the coal ministry has so far cancelled 51 block allocations, based on the recommendations of an inter-ministerial panel that found the companies concerned had not made enough efforts to develop the blocks given to them. Most companies have cited delays in environment and forest clearances and issues related to land acquisition, as well as resettlement and rehabilitation, for their failure in commissioning mines.
Source:- business-standard.com
Drop In Rubber Prices Augurs Well For Tyre Firms
Rubber prices fell as Indian tyre makers started importing rubber about three months ago, when local prices were firm while they softened overseas. Photo: Prashanth Vishwanathan/Bloomberg
Rubber prices (RSS-grade 4) have plunged by about 22% after having scaled a 52-week high of Rs.195 in early August. Prices fell as Indian tyre makers started importing rubber about three months ago, when local prices were firm while they softened overseas.
The main dampener is that the demand-supply indicators point to oversupply in the medium term, following the weak demand from tyre manufacturers because of slowing auto sales. Rubber consumption in the European Union countries, the US, Japan and South Korea has declined considerably, while consumption in China is slow of late. “Most of the fresh plantations in Thailand, Indonesia and Malaysia came up in 2005. Given the seven-year gestation period, rubber supply from these three regions, which account for bulk of the global production, is likely to improve,” said Surjit Arora, an analyst at Prabhudas Lilladher Pvt. Ltd.
Lower rubber prices augurs well for tyre makers, for whom rubber accounts for two-thirds of raw material costs.
Data analysis of seven listed tyre firms shows that as material cost to sales declined in the last eight quarters from 65.5% to 58.9%, operating margin improved from 8% to 12.2%. Even on a year-on-year basis, September-quarter operating margin improved by around two percentage points on average. Reasonably good sales of replacement tyres helped volumes.
Margins could improve further if the lower rubber price is followed by a turnaround in the auto sector. No wonder then, in anticipation of better days ahead, shares of key manufacturers are on a roll. Since August, Ceat Ltd soared 114%, JK Tyre and Industries Ltd jumped 47%, Apollo Tyres Ltd by 16% and MRF Ltd by around 34%.
A further rise in tyre stocks will depend on improved auto sales in the domestic market, which is languishing, and also on profitability, which hinges on the extent to which tyre makers pass on rubber price declines.
Source:- livemint.com
How Steel Can Become The Next Oil For India
This year's rise in the current account deficit, the associated impact on the economy and subsequent measures to control the deficit beg the question: apart from oil (and gold), are there other import categories that could derail us in the short-to medium term?
One can't help but think about steel as a possible candidate. On the face of it, this hypothesis is untenable. While both oil and steel are expected to witness continued demand growth, the comparison ends there. India is among the lowest-cost producers of steel and has the potential to emerge as a regional hub.
Sample this: India is home to the fifth-largest reserves of high-grade iron ore and has vast reserves of coking coal. Together, these minerals form the key inputs into steel-making, accounting for over 50% of the total cost of finished steel. With access to cheap labour and technically qualified engineers, and with over half a century of iron- and steel-making expertise in the nation, certainly India should be expected to have a vibrant, not to mention selfsufficient, steel industry.
Strong domestic demand is expected to underpin the growth of the industry in India. While the current demand growth is below the trend in recent history, given India's stage of economic development, we estimate India has the potential to consume about 250 MT of steel per annum by the middle of the next decade. However, will India be able to feed the demand through local production and build a thriving steel industry? The period between 2005 and 2008 witnessed a series of capacity announcements — over 50 million tonnes — which seemed to support the theory of India emerging as a steel hub and being self-sufficient in steel.
However, several large greenfield projects have not taken off and several others have been severely delayed. At around 96 million tonnes per annum (MTPA) of current capacity, India would have to triple its capacity by the middle of the next decade to meet the expected demand. About 60% of this additional capacity is expected to be greenfield projects that take longer to implement due to challenges related to land acquisition, clearances and financial closure. At eight to 10 years to commission a steel plant, India already takes twice as much time as China to put up these capacities. This will only go up due to the changed regulatory and business context.
In a business-as-usual scenario, India is likely to fall significantly short of the capacity required to feed its domestic demand. Assuming no dramatic fall in demand, we estimate a shortfall in capacity of 60-70 MTPA by 2025. We would have no choice but to import steel or curb the rapid development we aspire to achieve.
In an economy already strained by oil and other imports, such a magnitude of import would increase the current account deficit by about $20 billion, or anywhere between 25% and 30% of this year's expected deficit. Differently put, in such a scenario, steel imports would be second only to oil imports. If this were to happen, it would have far-reaching consequences well beyond the strain on our national finances.
Not only is a vibrant domestic steel industry important for a developing economy as it builds its infrastructure and manufacturing, it also has a significant multiplier effect in terms of jobs and economic growth.
It is estimated that for every unit increase in steel output, the economy has a multiplier effect of about five times. Up to eight million additional jobs will be created if India is able to meet its steel demand of 250 MT through domestic production.
Several large economies like the US and Germany to China and South Korea have developed a thriving steel industry during their developmental stages. India is at the crossroads of a similar opportunity and the stakes are high. The window of opportunity is limited before we are compelled to find a solution possibly less optimal.
Source:- economictimes.indiatimes.com
India Likely To Fast-Track Iran Port, Oil Plans
India is looking at ways to intensify engagement with Iran after the country's nuclear agreement with the P5+1 over the weekend.
A strategy session chaired by national security adviser Shivshankar Menon on Tuesday with senior officials from the ministries of finance, shipping and petroleum zeroed in on three sectors where India would try to do something extra for Iran.
An Iranian ship, Dinayat, has been stranded in Mundra port in Gujarat for the past year-and-a-half over some payments owed to a Singapore-based firm. The Iranian government has repeatedly urged India to release the ship but sources said there was a court order to seize the ship. In recent months, Iran has asked India to pay off the ship's debts from the huge amount of money kept in UCO Bank. India pays 45% of its oil payments to Iran in rupees.
However, so far, India has refused to pay, because the ship is actually owned by Iran's infamous Revolutionary Guards who come under UN sanctions. India was worried that making payments on behalf of the Revolutionary Guards may be tantamount to violating the sanctions. But now, the government is looking for ways to circumvent this restriction to see if an exception can be made for Iran.
India has declared its intention to develop Iran's Chahbahar port, which could become an important alternative to Pakistan's Karachi port. However, in the past year, since the Iranian government gave the final clearances, the delays have been on the Indian side. Finance minister P Chidambaram has added a killer clause to his permission on the port, by demanding a certain percentage return on investment from the port development project.
A naturally indolent Indian government has used this pre-condition as an excuse to delay work on the Chahbahar project. Sources said it had been difficult to get officials to put together a plan on the port. Equally, nobody at the senior levels, Menon or foreign minister Salman Khurshid, have been able to gather the courage to ask Chidambaram to modify his order since this is a strategic project.
In his meeting, Menon gave officials six months to firm up plans and get on the ground in Chahbahar. The MEA came in for some special beating, because the foreign office has been sceptical about the success of the US-Iran agreement. Menon reportedly told them to refrain from anticipating outcomes.
Other officials pointed to the difficulties in working with the Iranians, but Menon chided them for failing to exploit opportunities with Iran that could close once the US and the west returned to that country.
Third, India may source additional oil from Iran in the coming six months, or even explore joint ventures in the oil sector in Iran. Iran has slipped to third position behind Saudi Arabia and Iraq as India's oil supplier, dropping below the floor demanded by the US sanctions. Despite this, India has remained among the top two destinations for Iran's oil, even during the sanctions.
But now, India may try and make up the difference in a shorter period of time.
Source:- timesofindia.indiatimes.com
Rice Export To Iran May Be Casualties Of Nuclear Deal
India's near-monopoly in rice and soymeal exports to Iran could break following Tehran's nuclear deal with the West which is expected to pave the way for rival suppliers to boost their trading with the oil-rich country.
The landmark deal struck between the Islamic Republic and six world powers on Sunday eases some of the sanctions on trade with Iran that have slashed the OPEC member's oil exports by more than half and narrowed its options to secure food and agriculture goods to just a few countries.
The sanctions forced India to trim oil purchases from Iran, but it remained a loyal and large customer. In 2012 as sanctions stalled dollar payments, it started settling part of its oil debt in rupees and Iran was using those to buy goods from India.
That trade in rupees gave India an edge over other rice and soymeal suppliers such as Pakistan and Brazil who do not have such huge debts with Tehran and quickly the south Asian country established a near-monopoly in exports.
"Rice exports to Iran rose as India had an advantage over other suppliers in payment mechanism. As sanctions are easing, India has to become much more competitive to retain the share," R.S. Seshadri, director of Gurgaon-based rice exporter Tilda Riceland, told Reuters.
"Pakistan, Thailand lost share, but they can start grabbing that share again once financial institutions start trade with Iran in dollar terms," he said.
India's rice exports to Tehran, mainly of the basmati variety, surged 80 percent in the year ended March 31, 2013 from a year ago to 1.1 million tonnes. During the same period, shipments of soymeal jumped nearly four-fold to 886,776 tonnes.
Iran's difficulties in securing rice and soymeal from other producers due to the sanctions prompted Indian exporters to seek hefty premiums over global prices, sometimes as high as 20 percent. But that premium has to come down now.
"Dollar trade would end India's monopoly. We can't take Iran for granted. We need to rationalise our prices," said a rice exporter based in the northern state of Punjab, who did not want to be named.
Like India, Pakistan was a leading rice supplier to Iran as it had a freight advantage, but due to the Western sanctions its shipments dwindled last year.
But as restrictions are set to ease, "Pakistan can become a major player as it has a logistical advantage over India", Seshadri of Tilda Riceland said.
"Rupee payment helped India in increasing soymeal shipments. Iran is paying higher prices compared to other buyers," said Rajesh Agrawal, chief co-ordinator at the Soybean Processors' Association of India (SOPA), a trade body.
Now, Indian exporters "need to align prices in line with international prices", otherwise India will lose its share, Agarwal said.
But that could prove a difficult task for exporters. The competition among them due to the robust Iran demand has doubled prices across India of basmati rice and soybean in the past two years and now local farmers see little reason for discounts.
A lack of supplies domestically has halved soybean crushing and farmers are holding back in the hope that local prices will stay high, said a spokesman with India's largest soymeal exporter, Ruchi Soya Industries Limited (RCSY.NS).
"Right now our soybean prices are high, we are not competitive in the world market. Even at this price some farmers are not willing to sell," SOPA's Agrawal said.
Source:- in.reuters.com
Assessees to be vigilant if appeal was filed, they must not solely rely on CAs; says HC
ST : Plea that Chartered Accountant retained by assessee did not pursue appeal, does not absolve assessee or its officers from seeking information relating to appeal
Wockhardt's Second Plant Faces Import Alert From Us Food And Drug Administration
Drug company Wockhardt suffered a huge blow on Wednesday with the US Food and Drug Administration (FDA) banning products shipped from its key plant located at Chikalthana in Maharashtra. This is the second plant to face US regulatory action on account of poor manufacturing standards, and the impact on the company will be significant.
In May, its facility at Waluj came under the USFDA scanner, with the regulator issuing a warning letter as well as an import alert, banning drugs from the facility.
An ""import alert"" results in the detention without physical examination of drugs from firms that have not met so-called good manufacturing practices, according to the FDA website.The company is expected to face a sharp drop in market share and delays in new launch approvals, after its second plant was hit by the FDA's ""import alert"". Echoing the drag on the company, the Wockhardt scrip slipped by over 9% to close at Rs 426 on BSE.
Source:- timesofindia.indiatimes.com
India To Import 11 Mt Crude Oil From Iran This Fiscal
India would import 11 million tonnes of crude oil from Iran in the current fiscal, according to Petroleum Secretary, Vivek Rae.
“We were importing 21 mt of oil from Iran... If the sanctions get resolved, we can go back to 21 mt,’’ Rae told media persons on the sidelines of Energy Security Conference 2013 organised by CII in New Delhi.
Talking about the benefits to India after the recent agreement between world powers and Iran on the Islamic nation’s nuclear programme, Rae said: “Iran is a great source of oil and gas. Once the problem being faced by Iran is solved, there would be more oil and gas available in the market and there would be liquidity and prices tend to soften. As an importing country, this would certainly benefit us. We welcome any decision in the world that enhances the supply of oil and gas.’’
A delegation from India is going to Iran shortly to discuss several issues.
The Secretary further added that the sanctions will be worked out in the next six months and India will have to see how the policy regime changes. “And we will calibrate our decisions for next year based on that.’’
Rae also said that if the issues get resolved, India may not need the insurance fund. The country is trying to put in place an insurance fund to cover crude oil shipments from Iran.
“We are not giving it (insurance fund) a pause. The inter-ministerial consultations are going on. After the consultations are over, then we will take a call,’’ Rae said.
Currently, India is paying only 45 per cent of payments for crude oil in rupees. The payment mechanism is based on a MoU between India’s Finance Ministry and Iran.
“Right now, 45 per cent payment is made in rupee and 55 per cent is stuck. Because, we were hoping it to be in rupee, while Iranian Government is saying it should be in foreign exchange. We probably imported $5 billion worth of crude oil from Iran. Of this, we may have to pay $2-2.5 billion to the Iranian oil companies,’’ he said.
Source:- thehindubusinessline.com
Rupee Up 36 Paise To A Three Week High Vs Dollar
The rupee climbed 36 paise to a three-week high of 62.14 against the dollar on Wednesday after banks and exporters sold the US currency as it weakened overseas.
The rupee resumed higher at 62.45 per dollar from the previous close of 62.50 at the interbank foreign exchange market and firmed up further to end at 62.14, a gain of 36 paise or 0.57 per cent.
It was the highest close for the rupee since 61.62 on November 5. The local currency ended unchanged yesterday.
Bankers and exporters reduced their dollar positions due to the currency’s weakness overseas, a forex dealer said.
The dollar slipped against the euro on Wednesday, ahead of economic data before Thanksgiving Day. Releases scheduled include durable goods orders, the Chicago purchasing managers’ index and consumer sentiment numbers.
“Apart from strong euro and a slight weakness in the US dollar, the rupee was getting support from dollar selling by banks. Yesterday’s economic reports out from the US were quite mixed, with consumer confidence tumbling and the housing market showing a recovery,” said Abhishek Goenka, CEO of India Forex Advisors.
Local equities closed near Tuesday’s close but the rupee appreciated, taking cues from the dollar index, which traded weak for the fifth consecutive day ahead of Thursday’s Thanksgiving Day holiday, said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). Later today, data on weekly US jobless claims is due, he said.
The benchmark Sensex ended at 20,420.26, down 4.76 points.
Source:- thehindu.com
Sec. 54F investment may sprout from borrowed sum; AO can’t insist on utilization of sales considerat
IT : There is no condition that assessee should utilize sale consideration only for purpose of acquisition of new property
RBI permits residents to borrow from NRs for further lending to infra sector and for investment in F
FEMA/ILT : FEM (Borrowing and Lending in Rupees) (Amendment) Regulations, 2013-Amendment in Regulation 6
Overseas commission not supported by any rendition of services held allowable as it actually represe
IT : Where assessee paid certain amount as agency commission and overseas commission and Assessing Officer had disallowed overseas commission on ground that no services had been rendered by overseas agents, since overseas commission represented a discount given to purchasers and not a business commission, impugned disallowance was not justified
No more depreciation on BSE cards after extinguishment of rights of members in lieu of BSEL shares
IT: Where assessee failed to produce any cash flow statement or any other material which could establish that borrowed funds had not been utilized for earning of exempt income, disallowance under section 14A was justified
Organizing study trips abroad tantamounts to 'Tour Operator Services'
ST/ECJ : Organisation of language and study trips abroad along with provision of services of travel and stay abroad services in consideration of composite payment amounts to 'tour and travel' services
Scope of Sections 271AAA and 271(1)(c) expired
IT : Where for assessment years 2007-08 and 2008-09 assessee filed returns of income on 5-7-2007 and 7-7-2008 respectively and later on 15-10-2008 authorised officer conducted a search under section 132 upon assessee and found undisclosed income, provisions of sub-section (1) of section 277AAA were not applicable to instant case and penalty, if any, was imposable under section 271(1)(c)
Banks to levy charges for sending SMS alerts on actual usage basis
BANKING : Charges Levied by Banks for Sending SMS Alerts
No disallowances for cash payment for food grains in agency business; an exception carved out in Rul
IT : No disallowance under section 40A(3), read with rule 6DD(e) and (k), was called for where cash purchases were made in commission agency business in food grains and assessee was maintaining all books of account and also accounts on all statutory forms required under U.P. Krishi Utpadan Mandi Adhiniyam, 1962
Residual income from a sham transaction held taxable as unexplained cash credits under sec. 68
IT : Where assessee in return of income under head 'income from other sources' had shown certain income as commodity income received from a party and it was not relatable to business of assessee and was a sham transaction, said income would fall under section 68, being unexplained cash receipts
A letter conveying rejection of centralized ST registration with reasons thereof is an appealable or
ST : If a letter conveys rejection of centralized registration and ground thereof, it can be treated as an order eligible for appellate remedies
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