CA Terminal: 08/24/15

Monday, 24 August 2015

High Court convicted lessee for dishonouring cheque of rental payments

Negotiable Instruments Act : Where accused lessee had retained possession of premises leased out by appellant even though same had been sealed by municipal authorities, accused incurred liability to pay rent and was to be convicted under section 138 on dishonour of cheques issued towards payment of rent

Marketing services provided by agents of bank can't be termed services provided under brand name of

Service Tax : Commission agents' services/marketing services provided to ICICI Bank, using publicity materials provided by ICICI Banks, cannot be regarded as having been provided under brand/trade name of ICICI Bank; said services are eligible for small service provider's exemption

High Court unhappy with CBDT for refusing to condone delay of one day in filing return

IT: Refusal by CBDT to condone one day delay in filing of return of income is a failure to exercise of power vested under section 119(2)(b)

No mistake apparent from record if adjudication order was based on provisional figures submitted by

Service Tax : Where adjudication order was based on figures submitted by assessee, assessee could not challenge said order on ground of 'mistake apparent from record' even if said adjudication was based on provisional figures and final figures were available now

A Co. owing significant intangibles as compared to assessee can't be selected as comparable for TP s

IT/ILT : In case of assessee, rendering purely software development services to its AE, companies with functional dissimilarities and companies owning huge intangibles, could not be accepted as valid comparables while determining ALP

Notification for revising tariff value comes into force only when it is offered for sale

Excise & Customs : Notification fixing/revising tariff values would come into force when it is notified to public i.e., offered for sale to public; hence, when Notification dated 3-8-2001 was offered for sale on 6-8-2001, it would come into force on 6-8-2001

Filing of revised computation of income after a notice by AO couldn't be a ground for re-assessment

IT: When on basis of valuation made by sub-registrar, Assessing Officer issued notice to assessee for adoption of higher sale value of property, and assessee filed revised computation of income which was accepted by Assessing Officer, re-assessment could not be initiated

Overseas Textile Importers Seek A Pie In Higher Realisation For Indian Exporters

Depreciating rupee has prompted overseas textile and apparel importers to re-negotiate their contract terms to get a pie in higher realisation by Indian exporters. New contract orders are being deferred till Indian currency stabilises.

Since August 11, the day China's Yuan first depreciated, the rupee has fallen by over 3.37% to trade at 65.50 against the dollar early Monday. The Indian currency has depreciated by 5.28% so far this year.

Normally, depreciation in rupee results into higher realisation of export driven products from India without raising their prices. As a consequence, global importers get an opportunity to re-negotiate their price of the product for which they had already contracted earlier.

"Yes. New buyers have started re-negotiating contract terms and prices. Normally, overseas buyers have started inducting a new clause in the contracts which keeps re-negotiation of price open. Old customers, however, have not intervened yet. Clients that had negotiated apparel import terms, have deferred their orders by two-four weeks, which may get prolonged till the rupee stabilises," said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI).

India exports around $41 billion worth of garments and apparels annually and hence, re-negotiation in contract terms and prices makes huge difference in exporters' overall realisation. The impact has been severe since the Chinese currency Yuan was devalued on August 11.

New overseas customers, meanwhile, have started fixing up apparel price in dollar term with a condition of the rupee to remain at the current level. In terms of sharp currency fluctuations, however, the price would be re-negotiated, said Mehta.

R K Dalmia, President of Century Textiles and chairman of the Cotton Textiles Export Promotion Council (Texprocil), believes that the benefit for Indian textile exporters would depend upon the currency fluctuations in competing country.

"In case of Indian exporters compete with their counterpart in China, we would not get much benefit due to Yuan devaluation. If we are competing with Bangladesh, we will get some benefit. But, since overall Asian currency has depreciated due to Yuan devaluation, Indian exporters would not get the benefit which they could otherwise have got, had Yuan not been devalued," said Dalmia.

In fact, overseas textile importers have gone into 'wait and watch' mode which is not good for business. For a smooth business, stability in the rupee is required for long term sustainability, he added.

Overall textile exports rose a marginal 5.4% to $41.4 billion in 2014-15 as compared to $39.3 billion in the previous year. Echoing similar response, D K Nair, Secretary General, Confederation of Indian Textile Industry (CITI), believes that overseas importers who are confident about the product and quality, have started re-negotiating price and contract terms.

Depreciating rupee is good for textile exporters. Indian exporters with deep pocket who can resist price re-negotiation for higher realisation may continue to resist, said Nair.

Source:- business-standard.com

Crude Prices At Six-And-A-Half Year Low; India Might Gain Over Rs 1 Lakh Crore

Global crude oil prices fell to a six-and-a-half year low in Monday morning trade on the back of Iran’s fresh commitment to boost production and higher drilling activity in the US coupled with renewed growth concerns in China, the second largest consumer of oil, impacting the global economy.

Brent crude for October settlement declined by more than 1.7 per cent to $44.3 a barrel on the London-based ICE futures exchange, the level last seen before March 2009. Rent, the benchmark for half the world’s oil was trading at a premium of over $5 over the US benchmark West Texas Intermediate (WTI).

Iran will expand output “at any cost” to defend market share, that nation’s oil minister Bijan Namdar Zanganeh said on Saturday, according to his ministry’s news website. The number of active US oil rigs increased for the seventh time in eight weeks, Baker Hughes rig count data showed.

The Indian basket of crude oil prices, which represents the average price of Oman and Dubai sour-grade and sweet Brent crude oil processed in Indian refineries (in the ratio of 72:28), stood at $45.21 a barrel on 21 august, the lowest in the past seven months since 26 January this year.

“The combined impact of the crude price slump and the depreciation in the rupee over the past few days would result in a Rs 100,500 crore impact on India’s import bill along with a Rs 9,000 crore impact on the government’s petroleum subsidy,” K Ravichandran, Senior Vice-President at research and ratings agency ICRA, told Business Standard.

At current levels of consumption and prices, every $1 decline in the crude rates eases India’s import bill by Rs 6,700 crore and pulls down the government’s subsidy bill by Rs 600 crore. The crude oil prices of Indian basket has averaged at $55.50 per barrel in the current financial year so far, ranging between a high of $66.54 per barrel on 6 may and the 21 August price of $45.21 per barrel. This is $15 per barrel less than the government’s budgeted crude oil price of $70 per barrel for the current fiscal.

The decline in crude oil prices is positive for Indian refiners — Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — as their working-capital requirements would come down. Product prices and gross under-recoveries (GURs) would also come down.

IOC Chairman B Ashok had last week told Business Standard the current subdued crude price is likely to continue for the next couple of years, owing to higher US shale production, Organization of Petroleum Exporting Countries’ (OPEC’s) insistence on not cutting production, and possibility of more oil from Iran. For refiners, however, the gaisn could be limited by inventory losses. IOC had to suffer Rs 15,000 crore of inventory losses last financial year.

Lower underrecoveries for refiners would also mean reduced subsidy-sharing for upstream companies like Oil and Natural Gas Corp (ONGC). The OMCs’ underrecoveries came down from Rs 139,869 crore in 2013-14 to Rs 72,314 crore last financial year, thanks to a deregulation of the diesel price and rollout of the direct benefits transfer scheme for LPG (DBTL).

Source:- business-standard.com

Volkswagen India's Exports To Mexico Cross 1 Lakh Units

Volkswagen India has shipped its 1,00,000th car built for Mexico. The company's plant in Chakan, Pune has achieved this milestone in less than two years since it started exporting cars to the North American country.

The company claims that the Indian-built Vento sedan and Polo hatchback are in high demand in Mexico. The 1,00,000th car is a red Volkswagen Vento, powered by a 1.6-litre, petrol engine. It will take seven weeks to reach its destination.

Volkswagen India started exporting cars to Mexico with the Volkswagen Vento less than two years ago. The Vento, built at the Pune Plant, replaced the outgoing Jetta Classico in the Mexican market.

The Vento is in the top three most sold cars in Mexico in the first half of 2015. It is also Volkswagens highest-seller Volkswagen car in the country at the moment.

In 2014, nearly every second car produced at the Volkswagen Pune Plant was shipped to Mexico, which is the single largest export market for the company.

Currently Volkswagen India exports the Volkswagen Polo and Vento in right-hand as well as left-hand drive versions to over 32 countries in Asia, Africa and North America. The first single export market for Volkswagen India was South Africa in 2011.

Volkswagen Pune Plant Chronicles

    March 2009: Volkswagen Pune Plant inaugurated
    December 2009: Start of Polo production
    August 2010: Start of Vento production
    December 2010: Start of production for export to South Africa
    July 2011: 1,00,000th car rolled out of Pune Plant
    July 2012: Start of production of left-hand drive cars
    October 2013: Start of export to Mexico
    April 2014: 50,000th export car rolled out of Volkswagen Pune Plant
    December 2014: With 1,11,444 units, the highest number of cars produced at the Pune Plant within one year
    19 May 2015: 5,00,000th car rolled out of Pune Plant
    20 August 2015: 1,00,000th car exported to Mexico from Pune Plant

Source:- team-bhp.com

India's Gold Demand Could Hit 950 Tonnes As Prices Fall

India's gold demand might reach 950 tonnes this year as lower prices spur buying during the peak festival season and for weddings, the world's biggest gold refiner, Valcambi, said.

Stronger demand in the world's second-biggest gold consumer could support global prices, which rebounded this week after hitting a 5-1/2 year low under $1,100 an ounce in July.

Valcambi chief executive Michael Mesaric said gold demand would be strong this year. "It could be between 900 tonnes to 950 tonnes," he said on the sidelines of the International Gold Convention in the city of Panaji in Goa state.

Demand for gold jewellery is usually robust in the final quarter as India celebrates festivals such as Diwali and Dussehra, when buying the metal is considered auspicious.

"All this should boost demand," said Alistair Hewitt, the World Gold Council's (WGC) market intelligence director.

In the first half of 2015, Indian demand fell 7 per cent from a year earlier to 346.2 tonnes. But gold prices in India have risen more than 11 per cent since hitting their lowest in four years in late July.

Industry officials say Indian demand is determined more by perceptions about future price movements.

"If consumers feel prices will go up, then they will buy during the festive season," said Rajan Venkatesh, managing director, India bullion, ScotiaMocatta, part of the Bank of Nova Scotia.

He expects Indian gold imports of between 850 tonnes and 900 tonnes in 2015, compared with 891.5 tonnes in 2014.

Another factor affecting gold buying will be the June-September monsoon rains. While some parts of the country had good rainfall the season is expected to be deficient overall.

Earlier this month the India Meteorological Department (IMD) kept its forecast that rains would be 88 per cent of the long-run average as a strengthening El Nino weather pattern was likely to trim rainfall in August-September to 84 percent, raising fears of the first drought in six years.

"If monsoon remains weak, then it will be a big negative for gold. More than 60 per cent of demand comes from rural India," Rajan said.

Source:- timesofindia.indiatimes.com

As Rupee Sinks To 66.74, Rajan Says India Better Placed Than Others

As the rupee slumped to 66.74 per dollar on Monday, its lowest since September 2013, Reserve Bank of India governor Raghuram Rajan said the central bank will not have any "hesitation" in using foreign exchange reserves to reduce currency volatility. (Watch Video)

The selloff in the rupee weighed on the domestic markets too, with the BSE Sensex crashing over 1,700 points on Monday as Asian markets reeled under fears of a China-led global economic slowdown.

Dr Rajan noted that India was in a better position relative to other countries. He also said India's macro-economic problems were "under control" although he added that the country would need to focus on increasing domestic production as an effective way to protect itself against a global economic slowdown. (Read: RBI Can Use Forex Reserves to Curb Volatility: Raghuram Rajan)

"Many of you are watching markets this morning worried about the continued volatility from last week. While I don't want to opine on the future direction of markets, I will say that relative to other countries India is in a good position with strengthening growth, a low current account deficit and narrowing fiscal deficit, moderating inflation, low short term foreign currency liabilities and very size-able exchange reserves relative to imports and liabilities," Dr Rajan said.

The Reserve Bank does not target a specific level for the rupee, but intervenes in forex markets to curb volatility in the currency through state-run banks.

The rupee has come under huge selling pressure since August 11, when China devalued its yuan currency. The devaluation of the yuan stoked concerns about the state of China's economy, already growing at the slowest pace in 25 years.

Traders fear that China could be forced to devalue the yuan even more should its economy falter. This has led to concerns about a currency war that could prove disastrous for global equity markets.

Last week, Dr Rajan said China's devaluation of the yuan was not a concern, but did not rule out a currency war if the move was part of a long-term competitive devaluation.

The Indian rupee has fared better than its emerging market counterparts, though it has lost nearly 4 per cent in the last two weeks. South Africa's rand struggled at 14-year lows, the Turkish lira languished near a record low, while the Malaysian ringgit hit a 17-year low. South Korean authorities were suspected of selling dollars to arrest the won's fall.

The depreciation in the rupee hits foreign investors and diminishes their returns. Analysts say foreign funds have started selling shares aggressively because of the rupee fall.

The rupee ended 81 paise lower at 66.64 on Monday as compared to its Friday's close of 65.83/dollar.

Source:- profit.ndtv.com

Institute providing training on banking and finance is charitable trust; eligible for sec. 11 relief

IT: Where principal objects of assessee were to encourage study of theory of banking and for that purpose to institute a scheme of examinations and to give certificates, scholarships and prizes, activities of assessee would squarely be covered by definition of charitable purpose and it was eligible for exemption under section 11

Now DTA units can supply goods to SEZ through ARE-2 form

SEZ/GST/INDIAN ACTS & RULES : Special Economic Zones (Second Amendment) Rules, 2015 – Amendment in Rule 30

Charges recovered by State Excise Dept. for supervising 'storage of liquor' aren't liable to service

Service Tax : Supervision of storage of 'liquor' undertaken by State Excise Officers against payment of supervision charges, as per State Excise Laws, does not amount to 'service' and is not taxable under Storage and Warehouse Services

Companies should be functionally comparable and not identical for transfer pricing study

IT : In transfer pricing study, companies selected as comparables should be functionally comparable and not identical

Credit can't be denied merely on basis of doubtful purchases

Cenvat Credit : If department alleges purchase transactions as bogus but does not carry out requisite verifications, such transactions can, at best, be regarded as 'doubtful' and benefit of doubt would go in favour of assessee; hence, credit cannot be denied

Ministry notifies norms on Nation Mineral Exploration Trust

CORPORATE LAWS/INDIAN ACTS & RULES : National Mineral Exploration Trust Rules, 2015

Assembly of various parts to make water purification system would amount to manufacture

Central Excise : Assembly of various parts on job-work basis to make Water Purification and Filteration System (WPFS) amounts to 'manufacture', as resultant product was new and different commercial product

In-house preparation of midday meals for schools isn't outdoor catering services

Service Tax : Preparation of cooked food at owned premises and supply thereof to schools under midday-meal scheme (without actual serving of food at schools) would not amount to 'outdoor catering services'

Govt. notifies Rules on maintenance of annual statements of accounts and records by Pension Fund Aut

CORPORATE LAWS/AAA/INDIAN ACTS & RULES : Pension Fund Regulatory and Development Authority (Form of Annual Statement of Accounts and Records) Rules, 2015

No addition of notional interest on sums due from AE if interest isn't charged from unrelated partie

IT/ILT : Where in transfer pricing proceedings, assessee claimed that from AMP expenses, trade discount, commission, and other selling expenses had to be excluded to workout expenses relatable to brand building, matter was to be disposed in light of L.G. Electronics India (P.) Ltd. v. Asstt. CIT [2013] 140 ITD 41/29 taxmann.com 30 (Delhi)(SB)

CA Terminal