CA Terminal: 03/18/14

Tuesday 18 March 2014

Interest earned on Govt. grant not taxable if it formed part of grant to be released in totality

IT: Interest earned on Central Government grant which had so far released, would not be treated as a taxable income of assessee if conditions stipulated that interest so earned would form part of Central grant

Concealment penalty set aside as particular disclosed by assessee were found bonafide

IT: If assessee had disclosed facts before department/authority and established his bona fides on legal interpretation put forward for making his claim, penalty under section 271(1)(c) could not be imposed

Review application shall be filed in writing; oral prayer not maintainable

CST & VAT : An ' application' for review has to be filed in writing stating grounds of review and in absence thereof, so-called oral prayer for review cannot be entertained

Case remanded to AO as explanations for docs found during survey were made for first time before CIT

IT: Where survey was conducted in case of assessee, he was required to explain entries written on loose papers at time of survey itself and, therefore, where he explained said entries in appellate proceedings and obtained some relief, Tribunal was justified in remanding matter back to Assessing Officer for disposal afresh

AO couldn’t pass order to give effect to revisionary order of CIT even after quashing of such order

IT: When revisional order passed by Commissioner was set aside by Tribunal, Assessing Officer thereafter could not proceed to pass a consequential order in order to carry out directions contained in such revisional order

Haldia Port Facing Severe Crisis

The Haldia Dock Complex (HDC) under Kolkata Port Trust (KoPT) seems to be fighting a losing battle against the forces of nature as well as government apathy. Senior officials feel that unless corrective measures are taken immediately, the port facility - Bengal's only one that can handle vessels of a respectable size - may be beyond salvage by the time it turns 40 in 2017. The KoPT management in Kolkata, however, doesn't agree.

"Port users are facing infrastructural bottlenecks at every stage. Previously, importers could bring in ships after unloading 35% of their cargo at other ports. It was still economical for them to unload 65% cargo at HDC. Now, they are only able to bring in 35% of the cargo after unloading 65% in ports like Dhamra and Paradip. The economics of bringing in cargo has been completely destroyed," a senior official said.

Statistics reveal that the draught in the channel outside HDC has fallen by 0.4 metres in a year. This has had devastating results on the carrying capacity of ships. A drop in draught by 10cm results in a 50-tonne fall in the carrying capacity.

"A drop of 0.4 metres (40cm) has led to a fall of 2,000 tonnes per ship. HDC handles nearly 2,000 ships a year. A drop of 40cm has thereby led to a drop in overall cargo by nearly 4 million tonnes per year. Panamax vessels would earlier enter HDC with nearly 35,000 tonnes of cargo. Today, they can't carry more than 22,000-25,000 tonnes. This makes it extremely expensive for the importer. Industry is now considering unloading import cargo from Cape-size vessels at Dhamra. By bringing in cargo in such large vessels, the importers are saving between US$ 5-6 per tonne," the officer added.

Cape-size ships or even Panamax vessels with full loads can't enter HDC. The better-draughted Eden Channel was thrown open with much fanfare a few years ago but its utilization has been restricted. Little work has been done for the improvement of Jellingham, which is a governing bar for the channel outside HDC.

"The ministry of shipping also seems to be dragging its feet on the transloading plans. Though KoPT has extended its limits, transloading is still not possible at Kanika Sands.

Even NTPC has started moving its coal cargo for Farakka and Kahalgaon in barges without touching HDC. Dhamra is a deep-draughted facility and Paradip is also working towards increasing its draught.

It will be very difficult for HDC to survive unless immediate steps are taken. We started with a 9-10% growth in cargo volume in this financial year. Now, this has come down to 1-1.5%," another official said.

KoPT chairman RPS Kahlon denied that there has been any 'recorded' cut in draught. "The draught has remained what it was and cargo volumes will not be hit. In fact, the Indian Ports Association has forecast a growth in cargo. As far as transloading is concerned, we have written to the secretary, ministry of shipping, to expedite the matter as the Odisha government hasn't yet submitted its affidavit in court," he said.

Source:- timesofindia.indiatimes.com

Liberalised Trade With India: Concessions Must Be Offered On Reciprocal Basis: Ptea

Liberalised trade regime with India will help to boost the economy but the concessions offered should be on reciprocal basis with meaningful market access and level playing field for Pakistani's exports to India, said Sheikh Ilyas Mahmood, Chairman Pakistan Textile Exporters Association (PTEA).

Talking to news persons after a meeting with Minister of Commerce Engr Khurram Dastgir Khan, he said improved trade relations between India and Pakistan will trigger pace of development and will affect positively on the whole SAARC region. "Pakistan and India have tremendous potential of trade but no serious attempt has ever been made to develop and strengthen a framework of terms and conditions of formal bilateral trade between both the countries," he said.

Bilateral formal trade valued at USD 1,705.7 million during 2008. This level proved to be a peak level in last five years as trade between both the countries kept on decreasing and reached USD 1,586 million in 2012. Pakistan's exports to India have remained much lower than its imports from India. Pakistan's exports have been increased from US $263 million in 2008 to US $333 million. On the other hand, Pakistan's imports from India were worth of US $1,443 million in 2008 that have been declined to US $1,253 million in 2012.

In case of textiles, which are our main exporting sector, Pakistan exported only US $45 million worth of textiles products to India whereas India exported US $566 million worth of textiles product in the calendar year 2010. India has kept high duties on most textile products which are barrier to Pakistan's exports as there is multilayered tariff system in India, he said. Indian customs authorities have also levied other special duties on imports in the presence of which there is very less export potential to tap Indian domestic market.

Source:- brecorder.com

India Calls For China Investments To Offset Huge Trade Deficit

Calling for major Chinese investments in India to offset the ballooning trade deficit which now averaged over USD 35 billion in the last three years, New Delhi today sought Beijing's financial and technical collaboration to upgrade its ageing railway network.

"I must, at his stage, mention the growing imbalance in our trade which is a cause of concern in India," Deputy Chief of the Planning Commission Montek Singh Ahluwalia said addressing the third meeting of the high level India-China Strategic Economic Dialogue (SED) here today.

"Trade is an important indicator of economic cooperation and we are happy at the remarkable expansion that has taken place," he said expressing hope that bilateral trade would reach the official target of USD 100 billion by 2015.

"We recognise that trade does not have to be balanced between each pair of countries. However, India's trade deficit over the last three successive years has been in excess of USD 35 billion per annum which is not sustainable.

"It needs to be reduced to sustainable levels by more exports from India to China, and also by Chinese building manufacturing capacities from India for goods it currently export," he said.

On the declining trend, India-China bilateral trade totalled to USD 66.5 billion last year as Indian exports continued to fall due various reasons including rupee depreciation and reduced iron ore exports.

Indian officials say that the deficit reached such levels that it virtually amounted to India borrowing from abroad to finance the imbalance with China and Chinese recognise that.

Chinese investment in India at present is less than USD 1 billion.

One way to reduce the imbalance is to open up Chinese markets to IT-enabled services, cotton textiles and home furnishings and also in pharmaceuticals, Ahluwalia said adding that China should step up investments in India specially in the industrial parks to offset Indian losses.

"I hope the Chinese government will help to provide our exports greater access to the market so that the target of USD 100 billion can be achieved in a more balanced manner," he said.

Describing today's meeting attended by a host of officials from both sides representing five working groups, as good, he said they moved beyond statements of possible areas of cooperation to statements which are more precise.

Source:- business-standard.com

European Union Threatens To Ban Import Of Indian Fruit, Vegetables

After Australia issued a serious advisory to Indian exporters over deteriorating quality of milk and its derivatives a few weeks ago, the European Union (EU) has now warned India over the poor quality of its fresh fruits and vegetables. Late last year, Saudi Arabia had threatened to ban Indian fresh fruits and vegetables, following which Indian exporters had adopted quality norms prevailing in the global market.

As recently as March 14, export promotion body, the Agricultural Produce Export Development Authority (Apeda), had issued an advisory to Indian fresh fruit and vegetable exporters to adhere to global quality norms. “The EU has raised serious concerns regarding the interception of harmful organisms in fresh fruits and vegetables exported to the European region. The EU has also threatened to take stern action (including a ban) unless the situation improves. We have assured the EU that India is fully committed to providing safe and pest-free exports of fresh fruits and vegetables to the EU and all necessary steps are begin taken in this direction,” said B K Boyal, director of Apeda in its advisory.

India has steadily increased its fresh fruit and vegetable exports to the EU in the past three years. From the level of Rs 1.29 billion worth of shipments in 2010-11, India’s exports of fresh fruits and vegetables shot up sharply to Rs 1.65 billion in the financial year 2012-13. But, India is estimated to surpass Rs 2 million during the current financial year in terms of fresh fruit and vegetable exports.

The warning from the EU has come at a time when India is looking to increase its exports all-round to raise foreign currency income and reduce the current account deficit. “India has committed that effective April 1, 2014, all exports of fresh fruits and vegetables to the EU would be routed through Apeda approved pack houses wherein inspections, examinations/testing of export consignments will be conducted under the supervision of plant quarantine personnel,” Boyal said.

Apeda, according to an official, has already conducted extensive sensitisation programmes to apprise the trade about the impending scenario. The authority has, therefore, warned that exports of fresh fruits and vegetables to the EU would be routed only through the pack houses recognised by it. “Though the quantity of exports is not big enough to worry, the threat will percolate to other markets, which would have a negative impact on India’s overall agri exports,” said the official.

Source:- freshplaza.com

Smuggled Gold In Flower Pots Defying India Import Limits

A pedestrian walks past an advertisement for Riddisiddhi Bullions Ltd. (RSBL) in the Zaveri Bazaar area of Mumbai. Strong physical demand for gold in Asia helped spur a rebound in prices in 2014, after a 28 percent plunge last year that was the biggest drop since 1981.

Returning home to the southern Indian state of Kerala from Dubai last month, 27-year-old welder Mohammed Ahmed Jaffer was arrested after customs agents said they discovered gold in the lining of his brass flower pot.

Jaffer allegedly was offered 30,000 rupees ($491) from an importer seeking to bring in 1 kilogram of bullion valued at about $50,000 without paying the 10 percent customs tax, case documents made available to Bloomberg show. Such stories have become commonplace in India, where the government raised duties on gold three times last year and illegal imports almost doubled to about 200 metric tons, the World Gold Council estimates.

“Smuggling is like cancer,” said T.S. Kalyanaraman, the billionaire chairman of Thrissur, India-based Kalyan Jewellers Ltd., which sells everything from necklaces to pendants at 55 stores in India and the United Arab Emirates. “It will spoil the country’s economy. If they continue this arrangement, it will be a heavy loss for the country.”

While Prime Minister Manmohan Singh’s increase in gold levies was intended to help fix India’s record current-account deficit, the move is also fostering the black market for smuggled metal to a country that was the world’s largest buyer in 2012. Based on last year’s average price, the value of illegally imported gold in 2013 totaled about $9 billion, or more than twice the annual revenue of Signet Jewelers Ltd., the largest U.S. jewelry chain.

Gifting Gold

Demand remains robust in India, where gold is considered a good omen when given as a gift for weddings and festivals, and citizens have “no social security other than gold,” said Haresh Soni, chairman of the Mumbai-based All India Gems & Jewellery Trade Federation, which represents about 300,000 jewelers and bullion dealers. “Consumption will not go down.”

Strong physical demand for gold in Asia helped spur a rebound in prices in 2014, after a 28 percent plunge last year that was the biggest drop since 1981. Gold for immediate delivery increased 13 percent this year in London compared with a 1.5 percent advance for the Standard & Poor’s GSCI Spot Index (SPGSCI) of 24 raw materials.

Gold smuggling has a long history in India. With a virtual ban on official imports for domestic use until 1990, demand was met by illegal supplies, according to Y.V. Reddy, a former Reserve Bank of India Governor. From 1968 to 1995, smuggling mostly ranged from 10 tons to 217 tons a year, he said. Smugglers were common villains in Bollywood films of the 1970s, with some portrayed as gang leaders. Matinee idol Amitabh Bachchan played one such role in a 1975 hit, Deewaar, based on a real-life Mumbai gangster.

Singapore, Dubai

Gold costs about 20 percent more in India than in the metal’s major regional trading hubs of Dubai or Singapore, reflecting the import tax and a premium to secure supplies. That’s a big financial incentive for smugglers looking to exploit demand in India, according to K.N. Raghavan, commissioner at the Customs House Cochin in Kochi.

Since restrictions were imposed last year, the biggest bust at Cochin International Airport occurred in September. Two women wearing burqas, the full-length body garments worn by some Muslim women, were found to be carrying 20 kilograms of gold when they walked through the customs area, said Raghavan. One was pregnant and the other was carrying a child.

“We used to see sporadic instances of smuggling in the last 10 years,” said Raghavan. “Since August, the frequency of such incidences jumped. Carriers used to hail from the poorer socio-economic strata. Now we’re seeing people who are respectably employed, smuggling in gold as margins are good.”

Bear Market

Prime Minister Singh, 81, targeted gold for higher duties as part of a government attempt to tame a widening current-account deficit, accelerating inflation and a weakening rupee. The Reserve Bank of India estimates bullion contributed to almost 80 percent of a record $87.8 billion deficit in the year ended March 31, when the nation imported 845 tons of gold.

The trigger for import restrictions occurred in April, when gold prices plunged into a bear market, down as much as 26 percent from the previous year’s high, as global investors lost faith in the metal as a store of value and equities rallied. The cheaper metal sparked a demand surge in India. In the two months through May, jewelry buyers and investors imported 304 tons, or 37 percent of the total for all of 2013, based on WGC data.

Finance Minister Palaniappan Chidambaram responded by boosting the import tax three times. The central bank barred jewelers from buying gold on credit from banks and required evidence that 20 percent of the purchases were being used to make items that were exported rather than sold at home.

Retail Sales

The restrictions worked. Gold shipments slumped 57 percent to 205 tons in the six months through December from a year earlier and premiums paid by jewelers rose to a record $160 an ounce over the London cash price, which traded at $1,358.23 today. Sales fell at retailers including Gitanjali Gems Ltd. (GITG), Titan Co. Ltd. and Tribhovandas Bhimji Zaveri Ltd. (TBZL) in the quarter ended December.

The current-account deficit, the broadest measure of trade, tracking goods, services and investment income, shrank in the fourth quarter to the smallest in at least four years to $4.2 billion. The gap for fiscal 2013-2014 will be contained below $40 billion, Chidambaram said on March 7, less than the $70 billion targeted by the government. The rupee rallied about 11 percent through March 14 from a record low in August.

As the government’s measures cut demand for ornaments and bars, India was overtaken by China in 2013 as the world’s biggest gold consumer, WGC data show.

‘Beyond Expectations’

With the deficit shrinking more than anticipated and smuggling on the increase, the government may soon ease the import curbs, said Dharmakirti Joshi, the chief economist in Mumbai at Crisil Ltd., the Indian unit of Standard & Poor’s.

“You are leaning on unofficial channels for getting gold into the country,” said Joshi. “This creates the case for easing restrictions because you have tried to correct one distortion, but created another.”

Robin Bhar, the London-based head of metals research at Societe Generale SA, also expects policy makers may reduce the import tax and change the rule on re-exports. Keeping limits as they are will hurt the domestic industry, he said in an e-mail.

For now, there are no plans to ease the duties. The government will review the curbs when this year’s current-account data can be calculated and analyzed, Chidambaram said at a press briefing with the central bank Governor Raghuram Rajan in New Delhi on March 7.

As sales in India slow, smuggling is expanding. Cochin Airport reported 79 cases from April to January and seized more than 27.4 kilograms of gold, according to customs data. That’s up from 18 cases and 2.39 kilograms in the previous year.

Bizarre Methods

Air travelers are resorting to innovative ways to conceal gold to escape detection, said Raghavan, the customs commissioner. Smugglers have tried to sneak in gold in the form of trolley wheels or beading on handbags, or stashed in mobile phones and body cavities, according to customs.

“All of them are very bizarre,” he said.

About 24 kilograms of bars were found by cleaners in the toilet of an aircraft in Kolkata about two months ago, said Gaurav Sinha, additional customs commissioner. Most of those arrested for smuggling are carriers who have no stake in the consignment, he said by telephone on March 12.

Deterrent Undermined

While the punishment for convicted smugglers is three to seven years in prison, the deterrent is undermined by lax bail rules and drawn-out trials, said Ravi Hirani, a lawyer with the Mumbai High Court. Offenders can get bail from courts for a surety of as little as 50,000 rupees, and trials can be delayed by a year or two, he said.

“The government should make gold smuggling a non-bailable offence,” if it is serious about stopping the practice, said Hirani. “Currently, an offender can pay a bail and get away without being taken into police custody. If you smuggle in drugs, the sentence is 10 years to life imprisonment.”

Jaffer, the welder arrested in Cochin, was released after his family posted bail, mostly because the value of the gold was less than 10 million rupees, customs records show. His case may be delayed for months because of the court’s crowded agenda, according to customs.

“We have been seeing different modus operandi for getting gold in the country,” said Raghavan. “As long as the restrictions stay in place, we can expect smuggling to continue.”

Source:- bloomberg.com

India Raises Import Tariff On Gold, Lowers Import Tariff On Silver

The Government of India has hiked the import tariff value on gold from $433 per 10 ‎gram to $445 per 10 grams, Times of India reports. The import tariff value on silver, ‎previously at $699 per kg, was reduced to $694 per kg. ‎

A notification in this regard has been issued by the Central Board of Excise and ‎Customs (CBEC). The tariff value is revised every fortnight after analyzing the global ‎price trend.‎

For India, gold is the second largest import item after petroleum, and the government ‎has already taken several measures to curb gold shipments in order to address the ‎high current account deficit. Total gold import is not expected to exceed 550 tons this ‎financial year, down from 845 tons in 2013.

Source:- israelidiamond.co.il

MCA notifies rules on remuneration and service terms of CCI bench with retro effect from July 1, 201

Competition Act/Indian Acts & Rules : Competition Commission of India (Salary, Allowance and Other Terms and Conditions of Service of Chairperson and Other Members) Amendment Rules, 2014 - Amendment in Rule 3

Rupee Opens Higher At 61.07 Per Dollar

The Indian rupee on Wednesday opened higher on expectations of continued dollar inflows from foreign institutional investors in the local stock markets.

Such expectations have increase due to hopes of a stable government at the Centre and improvement in the country’s macroeconomic situation.

The domestic currency opened the session at 61.07 per dollar, up 0.23% from its Tuesday’s close of 61.205.

Since the beginning of this year, the rupee has gained 1.21%, while foreign institutional investors have bought $1.59 billion from local equity markets.

The yield on India’s 10-year benchmark bond was trading at 8.795%, compared with its Tuesday’s close of 8.806%. Bond yields and prices move in opposite directions.

At 9.09am, the rupee was trading at 61.07, while India’s benchmark Sensex was trading at 21,872.68 points on BSE, up 0.18%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 79.4, down 0.02% from its previous close of 79.414.

Source:- livemint.com

Fuel used in generation of electricity, in turn, used for manufacturing is 'indirect usage for manuf

CST & VAT : Fuel and lubricant used for generation of electricity, which, in turn, is used for manufacturing is to be regarded as 'raw material used in process of manufacture' and eligible for concessional sales/purchase-tax rate

CCI in view of approved combination of Etihad and Jet allows further acquisition of shares by Etihad

Competition Law: Where Etihad and Jet were frequent flyer partners and Commission had approved their earlier combination, proposed combination for Etihad's acquisition of 50.1 per cent stake in JPPL (Jet's wholly owned subsidiary) was to be approved

Rates of corporate bond can't be applied to make TP adjustment for interest on loan as LIBOR was app

IT/ILT : Where assessee, engaged in manufacture and sale of pharmaceutical products, provided loans to AEs, interest on said loans had to be charged on basis of LIBOR plus specific percentage points, as approved by RBI

MCA notifies rules on remuneration and services terms of CCI bench with retro effect from July 1, 20

HC slams AO for denying sec. 10(23C) relief to assessee prior to withdrawal of approval by CBDT

IT : Where on subject to certain conditions CBDT accorded approval to assessee-society for purpose of exemption under section 10(23C)(vi) and for assessment years 1999-2000 and 2001-02 it claimed exemption under section 10(23C)(vi) and Assessing Officer declined to grant exemption, only after withdrawal of approval granted by CBDT, Assessing Officer could have passed an order denying exemption on ground of non-compliance of conditions

Time-limit for issue of show-cause notice applies to recovery of interest as well

Excise & Customs : Time-limit of section 11A of Central Excise Act for recovery of duty is applicable to interest thereon as well; therefore, if there is no suppression of facts, interest cannot be recovered beyond 1 year

Mere filing of appeal won’t entitle assessee to plead for stay of tax demand, unless it has valid re

IT: Where mere filing of appeal against assessment order, would not entitle petition to stay demand; it should be done on valid reason in view of liquidity of assessee

Co’s bonafide omission to provide info about sale of units in AGM’s notice wasn’t oppression

CL : Where petitioner had failed to substantiate that act complained off was designed to secure pecuniary advantage to detriment of R1 Company, mere failure to comply with requirements of section 173 did not amount to an act of oppression

HC upheld sec. 69C addition as assessee failed to prove that stamp duty was includible in price of p

IT : Where assessee purchased a property, in absence of any document on record showing that stamp duty and corporation tax were inclusive of selling price of property, Assessing Officer was justified in adding said amounts to assessee's taxable income by invoking provisions of section 69C

SC upholds right of deductor to claim interest on excess TDS deposited to and refunded by revenue su

IT/ILT : The object behind insertion of section 244A is that an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/ deductor who has erroneously deducted tax at source /deducted excess TDS and deposited the same before remitting the amount payable to a non-resident/ foreign company.

Input service credit available as abatement notification bars only credit of input and capital goods

Service Tax : Where abatement notification bars credit of input and capital goods, no demand can be raised against assessee if he avails of credit of input services along with availment of abatement

HC slams revenue for making addition for unexplained credit even after rejection of assessee’s books

IT : Where books of account are rejected in their entirety, Assessing Officer cannot rely upon any entry in those books of account for making an addition to assessee's taxable income under section 68

Matter remanded as TPO adopted TNMM to determine ALP at entity level instead of at transaction level

IT/ILT : Where assessee, engaged in freight forwarding services, adopted Profit Split Method for cost collection received and cost collections paid in order to determine ALP of international transactions with its AEs without doing bench making with reliable external market data and, at same time, TPO also adopted TNMM incorrectly at entity level in order to make some adjustment to assessee's ALP, impugned adjustment was to be set aside and, matter was to be remanded back for disposal afresh

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