Service Tax : Consignment note issued by GTA represents its liability to : (a) transport consignment to destination, (b) undertake delivery to consignee, and (c) temporarily store it till delivery; therefore, transport of goods by individual truck owner without issue of consignment note, GR's & billties etc. does not amount to GTA service
Tuesday, 19 August 2014
Interest on deposits with Electricity Co. for electric connection to be taxed after reducing electri
IT : Where assessee, an association of owners of commercial areas owned in a building, deposited certain amount with BESCOM for availing electricity service connection, in view of fact that there was a direct nexus between interest received on said deposits and electricity consumption charges, assessee claim that electricity expenses had to be set off against interest income and it was only net interest, if any, could be brought to tax, was to be allowed
Higher Investment in PPF - FinMin notifies Rs. 1,50,000 as revised ceiling limit for investment in P
IT/ILT : Public Provident Fund (Amendment) Scheme, 2014 – Amendment in Paragraph 3 and Form-A
Refund of excess duty paid on provisional basis won’t attract doctrine of unjust enrichment
Excise & Customs : Doctrine of unjust enrichment would not be applicable on refund claim, where excess customs duty was paid provisionally on conversion of foreign run of ships to coastal run
Exp. on issue of FCCBs was allowable as holders had no compulsion but an option to convert them into
IT: Where Assessing Officer allowed assessee's claim for deduction of expenses incurred on issue of Foreign currency Covertible Bonds (FCCBs), in view of fact that unless option was exercised by bondholders, conversion of those bonds into equity shares was not permissible, impugned revisional order passed by Commissioner disallowing expenditure in question on ground that FCCBs in real sense, were equity shares right from beginning and that conversion of bonds was only a routine technical complia
Prior to 1-4-2011, services used for trading weren’t eligible for credit; credit already taken was t
Cenvat Credit : Trading would be comprehended as exempted service only with effect from 1-4-2011 when explanation was inserted below rule 2(e); hence, in case of services used for trading, entire credit is reversible and extended period invocable to sustain this demand
HC denied restoration of name of Co. who opted to get struck-off under an exit scheme which didn't a
CL: When action of striking off name of company from registrar of companies is not taken by ROC on his own motion and for any reason and/or circumstances mentioned under section 560(1) to (5) then any application/petition for recalling or setting aside action whereby company got struck-off (at its own request) from register, would not lie under section 560(6)
Re-assessment affirmed as commission paid to foreign agent was included in cost of asset to escape T
IT/ILT: Where commission paid to foreign party was not shown separately but added to cost of purchase to avoid TDS liability, there had been less than full and true disclosure of all material facts during assessment proceedings and, therefore, reopening of assessment even after four years from end of relevant assessment year was justified in law
Three Reasons Why Rising Food Prices Could Be Here To Stay
None of the standard explanations quite explain the rise in food prices India has seen: pronounced since 2006 and alarming after 2010. Drought and poor rain? The country has seen good aggregate rainfall in most of those years. Spike in global prices? Those were high in 2007-08, not now. Fragmented value chains that allow middlemen to grab large margins? The value chain has always been fragmented.
Growth has slowed in the last three years, but food inflation hasn't. After hitting 15.2 per cent in 2009-10, food inflation, notes former Planning Commission member Abhijit Sen, fell to 6.3 per cent in 2011-12. And then, it jerked up again, growing at 11.9 per cent and 12.4 per cent in 2012-13 and 2013-14, respectively.
The cast of commodities fanning these high numbers — and making households, central bank governors, finance ministers and company CEOs fret — have kept changing. Back in 2008, it was foodgrains and food products. By the fourth quarter of 2010, it was fruits and vegetables, led by onions. After that, cereals and pulses again. And, today, it is tomatoes and potatoes.
It is not very clear what explains these patterns. In most diagnoses doing the rounds, comments Sen, the question of food inflation "pre-dates the inflation itself". For instance, he says, the theory that blames inflation on India's agriculture markets (or mandis) has been around since the early 2000s. With this surge in prices, Sen says, "all the old views that say the government should not have anything to do with agriculture have come back out of the cupboard."
This lack of clarity on the reasons for food inflation could force the Narendra Modi-led NDA government into a tight spot. In a country with high malnourishment, and reducing per capita availability of cereals and pulses, among others, consistent price rise further aggravates food — and nutrient — deficiencies.
It also threatens to rapidly erode the social capital of the Modi government. "If Modi doesn't tackle onions, potatoes and tomatoes, his credibility will be gone," says Ashok Gulati, former head of the Commission of Agricultural Costs and Prices (CACP).
The government knows this. In the last two months, it asked state governments to allow farmers to bypass mandis and sell fruits and vegetables in the open market. It has added onions and potatoes to the Essential Commodities Act to check hoarding. It wants to cap the bonus states can add to the MSP. And it is now planning to break up the Food Corporation of India, the government company, to pave the way for the private sector to enter the foodgrain business.
It's too early to say, but nothing has changed so far: the latest Consumer Price Index numbers show that food inflation in July increased to 9.36 per cent in July, against 8.05 per cent in June.
The problem lies elsewhere. Over the last 10 or so years, India's food economy has seen a set of structural changes in farming, in agricultural produce marketing, and in demand itself. Some of these are reversible, others less so. These coexist with a set of short-term occurrences to create the complex outcomes that we see. To combat food inflation, it is these myriad factors the government needs to focus on.
Something incredible happened to the cost of cultivation between 2009-10 and 2013-14. For example, the cost of growing paddy increased by an average of 17.6 per cent a year during this four-year period, against 4 per cent in the five-year period preceding that. Other crops too showed a similar spike (See graphic: Rising Input Prices are Putting Pressure on Output Prices).
Three reasons why food prices have risen and could be here to stayCost of cultivation comprises many things. There's labour: human, machine and bullock. There's inputs: seeds, manure, fertilisers, pesticides, insecticides and irrigation. If the farming land is owned or the capital borrowed, there's rentals and interest. Just about every variable in that equation is seeing a strong — and concerted — upward pull.
Take labour, which, according to Sen, accounts for about 30 per cent of the cost of cultivation. A discussion paper by Ashok Gulati, Surbhi Jain and Nidhi Satija, titled 'Rising Farm Wages in India: The 'Pull' and 'Push' Factors', on the CACP website shows that growth in farm wages rose, dipped and then sharply rose again.
It grew at an "almost uniform rate" during the 1990s (around 3.7 per cent per year). Between 2001 and 2007, it fell by 1.8 per cent a year. Between 2007-08 and 2011-12, it grew 6.8 per cent a year, which is still less than the average rise in white-collar salaries and barely matches the rate of price rise. "When we started work on this paper, we thought it was NREGA (National Rural Employment Guarantee Act), but it wasn't," says Gulati.
The hypothesis is the ever-present NREGA option reduced the incentive for farm labourers to work in fields and increased their bargaining power. "Wages were going up across the country, even in states where NREGA was not being implemented well," adds Gulati. Last week, RBI governor Raghuram Rajan confirmed this reading, and quantified the NREGA impact on rural wage increase at 10 per cent.
Something else is going on. In the last 10-15 years, rural India has lost a large chunk of farmland to real estate and industry. This trend has also pulled labour.
The 2001 census counted 107.5 million agricultural labourers. Sen, quoting NSS (National Sample Survey) data, says between 2004-05 and now, about 34 million people left primary employment in India. Of these, 20 million were women, most of whom dropped out of the workforce. Of the 14 million men, most seem to have moved into construction work. This decline naturally puts upward pressure on farm wages, more so in areas abutting these construction boom sites.
Land transactions impact food inflation in another way. In most cases, says Sen, vegetables are grown near — up to 150km — large consumption centres like cities and towns. That's because vegetables are perishable and need an assured market nearby.
However, with the property boom, agricultural land in this radius is leaving farm use. As distances between vegetable fields and cities grow, says Sen, the cost of accessing markets goes up. In areas where less fertile land is replacing fertile land lost, agriculture gets more input-intensive or yields smaller crops. Labour is not the only input to get costlier. In a paper titled 'Making Sense of Persistently High Inflation in India', published in the Economic & Political Weekly in October 2013, Sthanu R Nair observes light diesel oil prices grew 19 per cent between December 2009 and August 2013, electricity for farm use by 12.7 per cent and fertilisers by 9.7 per cent.
These rates of increase are all well above, the paper says, "the average headline inflation of 8.17 per cent in the same period". This, adds Himanshu, an assistant professor of economics at New Delhi's Jawaharlal Nehru University, is also contributing to inflation. "Stability of input prices helps stabilise prices," he says.
In a recent interview, food and public distribution minister Ram Vilas Paswan pinned the responsibility for the current instability in food prices on middlemen. Farmers can mostly sell their produce only to registered traders in primary mandis, which are governed by the Agricultural Produce Marketing Committee Act — a model law whose jurisdiction lies with individual states.
The bigger problem is the very construct of agricultural produce marketing. Most crops are grown in a few states and then dispatched countrywide. In each of these states, a handful of mandis handle most of the trade and set reference prices. In onions, for instance, most of the surplus comes from Maharashtra and Karnataka. And the reference mandis in Maharashtra are Lasalgaon and Pimpalgaon.
In the last five years or so, two significant processes have played out in these mandis, says Himanshu. One, local politicians have come to control them. For instance, the Nationalist Congress Party hovers over almost all mandis in western Maharashtra, along with other rural institutions. Two, fewer traders (both in mandis and in entire commodities) account for a greater chunk of trade.
Three reasons why food prices have risen and could be here to stayA 2012 report commissioned by Geeta Gouri, member, Competition Commission of India (CCI), and prepared by researchers at Bangalore's Institute for Social and Economic Change, found rising volatility in onion prices. It found greater volatility in the wholesale market than in the retail market. And that the amplitude of this volatility was getting more pronounced from 2009 onwards.
The study notes that the main onion mandis have very few traders. Further, most of the onion produce enters the mandis between October and February. This is when prices are highest. This suggests, according to the report, that "other exogenous factors like hoarding, market cartels, etc are influencing onion prices".
The report showed the onion mandis don't allow new players to become traders, promoting cartelisation. An internal CCI note dated 10 April 2012 says that just one trader accounted for 7.2 per cent to 20.4 per cent of the onion trade in Lasalgaon mandi during December 2010, when onion prices climbed from Rs 35 to Rs 88 in just one week.
As in onions, so elsewhere. An February 2014 EPW paper by Kannan Kasturi, titled 'Have Farmers Benefited from High Vegetable Prices in 2013?', says prices of vegetables are spiking only after the crop has left farmers and reached aggregators, who need not be mandi traders. Says G Chandrashekhar, an advisor to the government on agricultural commodities: "If you look at rice, wheat, corn, cotton, sugar, the top five companies now account for 70 per cent of the business."
Numerous small processors, lacking economies of scale, used to supplant incomes through trading. However, the volatility is edging them out, Jigar Gala, a trader in tur and urad dal at Mumbai's APMC yard at Vashi, told ET in December 2013.
Another reason, added Devendra Vora, another trader at the yard, is government policies. There are three types of licences: retail trade, food dealer or industry. "Companies with these licences cannot keep a stock of over 300 tonnes," he says. "However, a company with a corporate licence can hold up to 50,000 tonnes without any declaration. With a declaration, they can hold more." The balance of power is, thus, increasingly tilting towards bigger players
From farms and mandis, the produce reaches consumers. The eating habits of Indians are changing. The more affluent are eating more proteins than carbs. Even the poor are moving from coarse cereals to finer ones like rice and wheat. But this is far from being the only process at work.
As Ramesh Chand writes in 'Understanding the Nature and Causes of Food Inflation', published in EPW on 27 February, 2010, the share of exports in domestic production increased between 2003 and 2009. This, he says, was the main cause of the rise in food prices in 2008. In 2009, he adds, food prices stayed up not due to exports but because of poor rain.
The current year throws up new problems. Sen says the raging inflation of the last two years is a mystery. "The economy is down. So, construction is down, labour shortage is down, even the wage growth rate is down," he elaborates. "Demand should have weakened. And with production continuing as before, inflation should have gone down, which did not happen."
According to Sen, one factor is the depreciation in the rupee, which makes imported fertiliser more expensive and also makes exports more attractive. In the last two years, agri exports, notably non-basmati rice and wheat, are up. Even this, Sen cautions, is only part of the larger narrative in inflation. "It is not clear if the amount exported is enough to explain the jump we see in inflation," he says. "Also, if you look at exports, it is true for rice and wheat, but not for vegetables."
The agriculture ministry can do little about currency movement. Or, weather patterns, which are unleashing floods and droughts more frequently in the country. India will keep encountering supply shocks from such changes.
These can be addressed, says Chand, by either maintaining buffer stocks or by tapping international markets judiciously. However, he adds, beyond wheat and rice, "there is no arrangement in the country to carry large inventories of other food items." Nor, he writes, can the country always turn to global markets. "The total trade in pulses is around 10 million tonnes, out of which India imports about 30 per cent.
The global market doesn't seem to be having the capacity to meet India's rising demand for pulses." At the same time, India's machinery of food imports and exports lacks "swiftness and efficiency", says Chand. For example, the first serious indications of a drop in sugarcane planting came by July 2008. Yet, sugar exports continued till March 2009, and in the first half of 2009-10, India had to import $306 million worth of sugar.
Being of a structural nature, a band-aid fix won't do in all three factors. Each needs a reformist intervention to bring about a change that is effective and enduring. And thus, by extension, each poses challenges and choices that involve tradeoffs.
Between the rising cost of cultivation and the fact that an assured government offtake at a fixed price, called minimum support price, is available only for some crops, and that too only in some regions, farmers are facing uncertain incomes. Keeping them there means either offering them higher prices, but that stokes inflation. Or, it means dampening the price of agricultural inputs like fertiliser, oil and electricity, but that might take the form of higher subsidies.
Source:- timesofindia.indiatimes.com
Revenue couldn’t demand ST by merging two separate contracts for supply of material and construction
Service Tax : Explanation added to Rule 3(1) of Works Contract Composition Rules is applicable only for contracts entered on or after 7-7-2009 and where execution of works contract had commenced prior to 7-7-2009, gross amount will not include free of cost supply by service recipient
No transfer of case without recording of reasons and without giving an opportunity of being heard to
IT : Power to transfer a case under section 127 is conditioned by requirement of furnishing a reasonable opportunity of being heard, wherever it is possible to do so, to assessee and of recording reasons
India Imposes Safeguard Duty On Import Of Seamless Pipes, Tubes
To give relief to domestic producers, the Indian government has imposed safeguard duty on the import of seamless pipes and tubes, based on a petition filed by the domestic producers. Seamless pipes and tubes are used in equipment for power generation, oil exploration, and bearing industry, besides others, reports said.
Safeguard and anti-dumping duty are imposed in cases where there is a fear that excessive or cheap import will harm the domestic industry.
As per notification issued by the Central Board of Excise and Custom (CBEC), safeguard duty will be imposed at 20 percent in the first year (August 13, 2014-August 12, 2015), ten percent in the second year (August 13, 2015-August 12, 2016) and at five percent in the third year (August 13, 2016-February 12, 2017).
This will not be applicable on imports from developing countries such as Indonesia, Malaysia, Thailand and South Africa, besides others.
The duty was imposed after a detailed study by the Director-General (Safeguard) which pointed out that increased imports from China and other countries have caused adversely impacted the domestic producers.
BHEL, ONGC and Oil India are among the largest consumers of such products, while Jindal Saw and ISMT Ltd. are key domestic producers of these products. BHEL also produces these products to meet part of its requirement.
Source:- rttnews.com
Rupee Strengthens 9 Paise Against Dollar To 60.68
The rupee strengthened against the dollar, supported by positive sentiment in the local stock market and as global crude oil prices declined.
Currency dealers awaited fresh economic data before taking new positions after a four-day long weekend as the currency market was shut for business on Friday and Monday.
At 2.25pm the rupee was trading at 60.6750, up 0.16% from the previous close of 60.77. It had opened flat at 60.775 and touched a high of 60.6575, its strongest level in August.
Dealers said a drop in global crude oil prices helped the rupee though trade was still picking up after a four-day break.
Brent crude for October delivery has dropped to near $101 per barrel this week from a high of more than $113 per barrel in June as geopolitical risks in West Asia receded.
The 30-share S&P BSE Sensex rose 0.11% to 26,418.89 while the National Stock Exchange’s broader 50-share Nifty rose 0.23% to 7,892.45 points.
Since January, the rupee has gained 1.86%. The dollar index, which measures the US currency’s strength against major currencies, trading at 81.659, up 0.1% from the previous close of 81.576.The 10-year bond rose to 8.53% from previous close of 8.52%. It had opened at 8.51%.
Source:- livemint.com
Custodian not liable to pay duty on goods if revenue failed to prove that pilferage had taken place
Excise & Customs : Custodian can be made liable to duty under Section 45(3) of Customs Act only if it is established that : (a) entire quantity of imported goods was unloaded and handed over to custodian; and (b) pilferage took place while goods were in custody of custodian
Renouncing of right to purchase a property in lieu of a sum was ‘transfer’; to be taxed as capital g
IT: Where on account of failure of vendor to act upon agreement to sell, assessee filed a civil suit for specific performance which ultimately resulted in compromise, in view of fact that as per terms of MOU, assessee gave up his claim over property against consideration received, it could be interpreted that assessee had relinquished or extinguished his right over property in terms of section 2(47)
Additions on basis of info extracted from loose paper found in search proceedings of third party set
IT: Where Assessing officer made additions in case of assessee on basis of noting in loose papers found during search proceedings in case of third party against name of assessee as there was no evidence to suggest that payments were made to assessee, additions so made were not justified
Dy. Commissioner(A) was not justified in demanding pre-deposit of part dues for granting stay withou
CST & VAT: Where against assessment order, assessee filed appeal along with stay application and Deputy Commissioner (Appeals) directed assessee to pay 30 per cent of amount due as a condition for grant of stay, since impugned order did not disclose basis for insisting on payment of even 30 per cent of dues conferred against assessee, Deputy Commissioner (Appeals) was directed to consider stay application afresh
Sum received from letting out an office space with facilities of cafeteria and conference room was b
IT : Where assessee earned licence fee by letting out office space alongwith other facilities such as cafeteria, conference rooms LCD projectors etc., it being a case where property had been exploited by undertaking complex commercial activities, amount in question was to be taxed as business income
Assessee could raise plea of dutiability to claim exemption even if SCN was issued on ground of unde
Excise & Customs : Where department issues notice seeking demand on account of undervaluation, assessee can very well raise ground of dutiability itself and if such ground is raised, department must first adjudicate upon dutiability and then, proceed with undervaluation only if production is found dutiable
Concealment penalty couldn’t be imposed when issue of unit-wise deduction to assessee was debatable
IT : Where Assessing Officer passed a penalty order under section 271(1)(c) for raising a false claim of deduction under section 80HHC, in view of fact that issues like unit wise deduction, exclusion of excise duty and sales-tax from total turnover etc. had been a matter of dispute between Department and assessee and, thus, issue of deduction was a debatable one, Tribunal was justified in setting aside impugned penalty order
Service of order on assessee's counsel amounts to valid service, says CESTAT
Service Tax : Communication of order on counsels of assessee, being authorized agent, is sufficient for service under section 37C read with rules 13 and 35 of CESTAT (Procedure) Rules, 1982; and time-limit for filing appeal would start from said date
HC directs ITAT to consider in detail issue of nature of income from sale of shares as business inco
IT : When specific case of assessee was that income arising from sale of shares could not be treated as income from business, in fairness to claim of assessee, Tribunal ought to have considered same in detail to arrive at a factual finding
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