CA Terminal: 02/17/14

Monday, 17 February 2014

Profits derived by NBFCs from share dealings to be taxed as capital gains if they were working as in

IT : Where assessee-company was registered with RBI as a Non Banking Financing Company and its main object was to function as an investment company and from very beginning it had treated purchase of shares and mutual funds as investments, income derived from sale of shares during assessment year under consideration had to be treated as capital gain

Sum received by partner at the time to his retirement on transfer of goodwill couldn’t be taxed as c

IT : No capital gains tax on amount received by partner arising from transfer of goodwill would arise at time on retirement from firm

Provisions of Delhi Excise Act would override Code of Criminal Procedure

CST & VAT : In view of non-obstante clause in sections 59 and 61 of Delhi Excise Act, High Court cannot permit release of vehicle seized under said Act and sections 451, 452 and 457 of Code of Criminal Procedure cannot be pressed into service

Deemed transfer of property in development agreements if right to sell few flats was transferred to

IT: Where assessee had entered into development agreement under which developer had constructed a building on property of assessee and in turn developer had right to sale some flats on account of additional FSI by virtue of loading TDR, grant of development right to that extent in said plot of land was to be treated as transfer

Indian Mills, Pellet Producers Clash Over Iron Ore Pellet Export Duty

Indian steelmaker JSW Steel has Monday hit back at a parliamentary request made to the country's finance ministry late last week to do away with the 5% export duty on iron ore pellet, calling instead for the tariff to be raised to 30% -- the level imposed on iron ore fines.

The parliamentary request against the tariff was made by the Pellet Manufacturers Association of India and is also championed by state-owned pellet producer KIOCL, in reaction to the January 27 imposition of the 5% pellet export duty by the finance ministry.

JSW Steel's director of commercial and marketing, Jayant Acharya, told Platts Monday that the company and other local steelmakers have long been complaining of a shortage of iron ore and that Indian producers export the ore in the form of pellet.

"Environmental issues and [the adoption of] sustainable mining practices has kept many Indian mines from fully opening," the official said. "So there is still a shortage of iron ore in general, especially since a lot more fines material is being converted to pellet at a low cost of $10-15/mt."

Source:- platts.com

Interim Budget 2014: Exports To Grow By 6.3% To $326 Billion This Fiscal

India's exports are expected to grow by 6.3 per cent to $326 billion during the current fiscal, Finance Minister P Chidambaram said.

"Though 2013-14 began on a pessimistic note, I am happy to inform the House that the year will end with estimated merchandise exports of USD 326 billion, indicating a growth rate of 6.3 per cent," he said in the interim Budget speech in Parliament.

India's merchandise export was at $300.4 billion in 2012-13, a decline of 1.8 per cent over the previous year.

"However, imports are down and this does not augur well for either manufacturing or domestic trade. Our aim must be robust growth in both exports and imports, with trade in balance over a period of time," Mr Chidambaram added.

Further, he said exports have recovered sharply and the recovery must be seen in the context of growth of global trade declining from 6.1 per cent in 2011 to 2.7 per cent in 2013.

The country's apex exporters body Federation of Indian Export Organisations (FIEO) said that support extended by the minister for research and development activities and reduction of duties on capital goods will help in increasing competitiveness of Indian products in the global market.

"The Budget is not very exciting for exporters but the support for R&D activities and reduction of duties on capital goods will help in boosting competitiveness of our products," FIEO president Rafeeq Ahmed said.

However, he expressed doubt over touching the overall exports figure of $326 billion for the current fiscal.

"If the government will revise the export figures by about $8-10 billion then $326 billion is not difficult, otherwise it will be difficult, because to touch that figure we need about $30-35 billion each in the remaining two months," Ahmed said.

During April-January this fiscal, exports grew by 5.71 per cent to $257 billion, while imports dipped by 7.81 per cent to $377 billion. The trade deficit was about $119 billion.

India's exports increased 3.79 per cent to $26.75 billion in January, helping the trade deficit to narrow to $9.92 billion. On manufacturing, Mr Chidambaram said that it is the "Achilles heel" of the Indian economy.

Outlining his vision in the sector for the next fiscal, the Finance Minister said all taxes, central and state that go into an exported product should be waived or rebated.

There should be a minimum tariff protection to incentivise domestic manufacturing, he said.

Meanwhile, in his Budget speech, Mr Chidambaram said the deceleration in investment in manufacturing is particularly "worrying" and "consequently, there is no uptick yet in manufacturing".

The National Manufacturing Policy has set the goal of increasing the share of manufacturing in GDP to 25 per cent and creating 100 million jobs over a decade.

"Eight National Investment and Manufacturing Zones (NIMZ) have been announced along the Delhi-Mumbai Industrial Corridor and nine projects have been approved by the DMIC Trust. Five NIMZs outside DMIC have also been given in-principle approval," he added.

Three more corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata are under different stages of preparatory work, Mr Chidambaram said.

"Additional capacities are being installed in major manufacturing industries such as steel, cement, refinery, power and electronics," the minister added.

He said that several measures have been taken to promote MSMEs including notifying a public procurement policy, establishing technology centres and common facility centres, and launching the Khadi.

Source; -ndtv.com

Textiles Spools Of Opportunity For India

For many years now, developing countries have dominated the trade in textiles. The relative labour intensity of parts of the textile value chain has combined with low barriers to entry into the industry to give poorer countries an advantage in production and trade. This has held even when a few global majors dominate the value chain leading up to the supply of textiles to retail markets in the US and the European Union. Even they must locate the cutting, sewing and trimming operations in the garment industry in low-cost locations, often fed with cloth imports from abroad.

But with design, value chain management and retail distribution under the control of major global players, margins for most developing country producers remains low. Especially for those that have not managed to vertical integrate production and establish a textile production complex.

For country’s performing well in this business, the rewards have been significant in recent years. Cotton yarn production in 40 leading producers rose, according to Euromonitor International (using UN data), from 31 million tonnes in 2008 to 46 million tonnes in 2013 or at 8.4 per cent per annum (Chart 1). Production was dominated by China and India, partly because these countries were important suppliers to both world markets and their own substantial domestic markets (Chart 2). This domination at the yarn production stage is of considerable relevance, even though discussions on the geography of the textile business have focused on the trade.

The global textiles and clothing market rose in value from $480 billion in 2005 to $708 billion in 2012. That performance, over a period when much of the world economy was mired in recession, is remarkable given that the global textile market has been quite volatile (Chart 3). The late 1980s were a golden age for the textiles trade, after which growth rates have fallen and averaged between 5 and 7 per cent between 2000 and 2012. However, 2010 and 2011 were remarkable growth years.

Although 2012 was once again a bad year, possibly influenced by the crisis in Europe that resulted in a sharp fall in imports to that region, the evidence points to a recovery in 2013.

Bouncing back

An October 2013 estimate by PCI Fibres suggested that the apparel trade by weight, which was down 2 per cent in 2012, was likely to bounce back by 4 per cent to reach 16.5 million tonnes in 2013. In the case of textiles, defined as spun yarns, fabrics for onward processing, and household and technical articles, growth across all the fibre types was expected to rise by an estimated 7.5 per cent, to reach some 24.7 million tonnes.

Most developing countries have a special advantage in apparel exports. Globally, these grew in value from $278 billion in 2005 to $412 billion in 2012. The top ten developing country suppliers accounted in 2012 for 58 per cent of those exports. The most important global markets were the EU (38.5 per cent of total imports, with 20.3 per cent being extra EU), the US (19.9 per cent) and Japan (7.7 per cent) which, between them, accounted for 66 per cent of global imports of clothing in 2012. While other markets such as Canada, Russia, Korea, Australia and Switzerland have grown in importance over time, they accounted for just 8.3 per cent of the total in 2012.

Dramatic changes

There have been dramatic changes in the relative position of individual countries in the global apparel trade league table. For example, Bangladesh, which was the 76th largest clothing exporter in 1980, has become the fourth biggest garment exporter currently. But the change in geography is quite generalised. This comes through from an analysis of the changing sources of developing country supplies in apparel exports to the US and the EU.

Consider the US. In 1970, Japan, which had joined the OECD in 1964, was the leading apparel exporter to the US. Hong Kong, South Korea, the Philippines, Mexico and Israel were among the top 10 exporters to that country. By 1980 Canada, the UK and Israel made way for China, India and Singapore. The Dominican Republic and Indonesia appeared among the top 10 in 1990 and Japan and Singapore exited. By 2000 Bangladesh and Thailand were present and were joined by Vietnam in 2012. There have been significant changes in ranks as well. The only element of relative stability has been that since 2000 China has topped the list of leading apparel exporters. It is possibly time for a change there. In the EU, while developing country apparel exporters have gained dramatically, some countries in the region such as Turkey and the peripheral countries of Europe have also benefited. Geographical proximity seems to matter here and perhaps the relocation of EU producers to peripheral countries explains the significant share of intra-EU exports.

Turkey has been the second largest exporter to the EU since 2000. Interestingly, it does not feature in the list of the top 10 suppliers to the US. This is also true of Tunisia and Morocco. That is because, besides geographical proximity, preferential market access is a factor explaining market shares in the EU.

Differential ability

However, success in the apparel trade does not reflect the strengths that can prove crucial in the long run. While the leading exporters of apparel were often also the leading exporters of textiles, there have been some exceptions. On the one hand China, India, Turkey and Pakistan have been significant exporters of textiles, besides garments, whereas Vietnam and Bangladesh have not been so. This points to the differential ability of developing countries to exploit the benefits of having a textile production complex and appropriating an increasing share of value added in the global value chain.

This ability to create a textile production complex partly explains China’s long-term resilience in the global textiles market. That ability is in turn related to the large domestic market that helps build the foundation for a strong industry. According to the China National Textile and Apparel Council (CNTAC), the size of the Chinese domestic apparel market doubled between 2005 and 2011, increasing in value terms from 700 billion yuan to 1,400 billion yuan.

Often margins in these markets are also higher, especially for domestic producers able to access these markets by themselves without being subject to pricing pressure from aggressive global buyers. These are factors explaining China’s long-term success. India too has many of these advantages. It has a large market for textiles, which has been growing rapidly, driven by a high-spending middle class and a large population.

Advantage India?

Yarn production rose from 4 billion kg in 2000 to 5 billion kg in 2013, and cloth production from 39 billion metres in 2000 to 63 billion metres in 2013. India was the sixth largest developing country exporter of garments to the US and fourth largest to the EU. It has an important presence in global yarn production. So it is in a position to expand its presence in the global textiles market and increase its market.

This is a real possibility also because rising labour costs in China are likely to erode its competitiveness. According to the Bureau of Labour Statistics of the US, average hourly compensation costs in Chinese firms rose from $0.60 in 2002 to $1.74 in 2009 with much of the increase occurring in recent years.

On the other hand, labour compensation (including pay for time worked, directly-paid benefits — excluding payment in kind — social insurance expenditures, and labour-related taxes) in India’s organised manufacturing sector has only risen from $0.68 an hour in 1999 to $1.46 in 2010. The rise among production workers (as opposed to all employees) has been lower, from $0.53 to $0.92 per hour. This could give India a competitive edge in industries such as textiles.

We should not be surprised, therefore, if new changes in the geography of textile production occur, with China losing its position at the top of the export league table and giving way to India in a labour-intensive sector such as textiles.

Source:- thehindubusinessline.com

Cotton Market: Trade Volume Shrinks Amid Slow Demand

Volume of business shrunk on the cotton market on Monday due to fall in demand by mills and spinners, dealers said. The official spot rate was unchanged at Rs 7,000, they added.

Prices of seed cotton in Sindh per 40 kg were unchanged at Rs 2500 and Rs 2800, in Punjab, prices were inert at Rs 2500-3200, dealers said. In the ready session, around 400 bales of cotton changed hands at Rs 7000, dealers said.

Market sources said that mills, spinners and exporters were on the sidelines owing to lack of buying interest. Cotton analyst, Naseem Usman said that yarn rates were coming down day by day because of less interest among buyers. Economic crisis the world over is causing a sharp decline in the rates of cotton, except, the Bangladeshi textile products, which gained momentum despite political uncertainty there, he said.

Reuters adds: Chinese farmers are likely to reduce cotton acreage by 10.7 percent in 2014, cutting back for a third year in a row as they seek better returns from other crops, according to a survey by an influential think-tank issued on Monday. The expected 2014 decrease outpaced last year's decline and follows Beijing's decision to end its stockpile scheme, said the China Cotton Institute. The decline was also bigger than an earlier industry poll, which forecast a 9 percent cut. The following deals reported as 200 bales from Faqir Wali at Rs 6950 and same figure from Karror Pakka at the equal amount, they added.

Source:- brecorder.com

India's Gold Jewellery Exports Fall For 10Th Month In January

Gold jewellery exports continued to dive in January, the tenth consecutive monthly fall, with outbound shipments dropping 23 per cent to Rs 2,993 crore.

Besides, gold jewellery exports from April to January fell 44.42 per cent to Rs 33,178 crore from Rs 59,693 crore from the corresponding period of the previous fiscal.

High gold import was one of the major reasons for India's record CAD of USD 88 billion in the last fiscal, which in turn was putting pressure on value of rupee.

In the first two months of the current fiscal, gold imports had crossed 300 tonne.To restrict the gold imports, the government raised the customs duty thrice to 10 per cent in 2013.

The Reserve Bank too imposed several restrictions, including linking the gold import to exports.This financial year, the CAD is likely to be contained at USD 45 billion. The exchange rate too has stabilised.

(Reuters) Indian exports of gold jewellery dropped in January for a tenth consecutive month, and are likely to fall further due to no sign of any government incentives to revive the sagging shipments.

India, which is fighting to reduce its current account deficit, has brought in measures to restrict imports of gold, its second-biggest import item by value after oil.

The measures include a rule that 20 percent of all gold shipped in must be re-exported as jewellery, making it difficult for domestic jewellers and even exporters to get supplies despite high premiums.

"In most of the ports, due to procedural delays gold is not available," said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council (GJEPC).

Gold jewellery exports from April to January fell 49.5 percent to $5.5 billion, GJEPC said in a statement.January shipments fell 32.8 percent from a year earlier to $482.2 million, it said.Besides the 80/20 import rule, the federal government also levies a record 10 percent import duty on the yellow metal.

Source:- financialexpress.com

Sec. 142(1) doesn’t contemplate issue of notice before one year from AY as per retro-amendment made

IT : Where Assessing Officer issued on assessee a notice under section 142(1) on 30-8-2007 calling upon him to furnish return for assessment year 2005-06, in view of insertion of proviso in clause (i) of section 142(1) by Finance Act, 2006, with retrospective effect from 1-4-1990, said notice was issued within time limit

Sec. 80P relief to be computed after deducting exp. attributable to earning of exempt income

IT: An assessee in entitled to deduction under section 80P(2)(d) after deducting expenditure attributable to earning of income which does not form part of total income under Act

Assessee couldn't raise objection before ITAT for comparable chosen if it didn't oppose it before DR

IT/ILT : Where assessee had accepted certain company as a comparable by not raising any objection before DRP, he could not be permitted to raise objection with regard to said company as comparable before Tribunal

Assessee need not to verify payment of duty by manufacturer if goods were purchased from first stage

Cenvat Credit: Where assessee had purchased inputs from first stage dealer and had duly acted with all reasonable diligence in such dealings, it would be impractical to require assessee to go behind records maintained by first stage dealer and verify whether original manufacturer had paid duty on said goods

No petition against oppression if all actions were initiated with free consent of concerned parties

CL: Where transfer of shares held by petitioners in company and resignation of petitioner as its director were all effected with free will and consent of all parties concerned, filing of petition alleging oppression and mismanagement was not justified

Mini Budget - Notification No. 12/2012-CE amended

GST : CENTRAL EXCISE : Section 5A of The Central Excise Act, 1944 - Exemptions - Central Excise - Mega/General Exemption - Notification No. 12/2012-CE Amended; Duty Sops Increased

Loading/Packing/Storage, etc. of rice and Preservation of stem cells of blood, exempted

GST : SERVICE TAX : Section 93 of The Finance Act, 1994 - Exemptions - Service Tax - Mega/General Exemption - Loading, Packing, Storage, Etc. of Rice as Well as Preservation of Stem Cells of Blood by Blood Bank Exempted

Rice - Service tax exemptions clarified

GST : SERVICE TAX : Section 66D(d), Read With Sections 65B(3), 65B(4), 65B(5), 65B(6) and 93, of The Finance Act, 1994 - Negative List of Services - Services Relating to Agriculture or Agricultural Produce - Rice Not Agricultural Produce; But, Following Services are Exempted : (A) Transportation of Rice by Rail/Vessel/GTA; (B) Loading, Unloading, Packing, Storage and Warehousing of Rice; (C) Milling of Paddy Into Rice

No income attributable trust on receipt of Govt. grant which was later distributed to blood banks

IT: Amount received by assessee-council by way of grant from State Government could not be said to be its income; addition was to be deleted

Person soliciting order for dealer can't be deemed as 'dealer' itself; not liable to Kerala Sales Ta

CST & VAT : A person canvassing orders for another dealer and causing sale of goods directly to third parties does not become 'seller' himself and cannot be made liable to sales-tax/central sales-tax

HC affirms concealment penalty as false claim of losses proves wilful concealment

IT: Where carried forward losses of earlier years were sought to be set off against income of current year but, in fact, there was no such loss, concealment was wilful and, hence, levy of penalty was justified

Appellant can go to higher forum to seek justice, rehearing of appeal not permissible in garb of rev

SEBI : If a party is aggrieved by a judgment, it must approach higher Court but entertaining a review to reconsider case by Tribunal would amount to exceeding its limited jurisdiction conferred for purpose of review

Interest on deposit is to be included for purpose of calculating relief under sec. 80-IA

IT: Excise duty and sales-tax receipts are not to be considered as part of total turnover for purpose of working out deduction under section 80HHC

CBDT bans AAI from issuing tax-free bonds, raises cap on issuing tax-free bonds for certain entities

IT : Section 10(15), Item (h) of Sub-Clause (iv) of The Income-Tax Act, 1961 - Exemptions - Interest on Bonds/Debentures - Specified Companies Authorized To Issue Tax-Free, Secured, Redeemable, Non-Convertible Bonds During F.Y. 2013-14 Subject to Specified Conditions - Amendment in Notification No. 61/2013 [F.No.178/37/2013-(ITA-I)/SO 2424(E), Dated 8-8-2013

Fair market value under section 55A to be fixed without considering Stamp Duty Act or Wealth Tax Act

IT : Fair market value for purpose of computing capital gain tax, is price which property would fetch on sale in open market on relevant date; guideline value prescribed for purpose of stamp duty registration or net wealth value under Wealth Tax Act could not be guiding factor for determining fair market value

Glasses and frames used in sale of spectacles are liable to VAT under Gujarat Sales Tax

CST & VAT : In case of activity of selling spectacles by fixing glasses in frames, spectacles themselves were not to be treated as a new commodity and, in fact, glasses and frames used in preparation of spectacles were to be treated as taxable commodity and liable to Sales-tax/VAT accordingly

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