Construction contracts are work contracts and liable to VAT; Larger bench of SC affirms Raheja’s cas

ST : Building/Construction contract is a 'works contract' and goods like cement, concrete, steel, bricks etc. are liable to VAT even if they lose their identity as goods

Reassessment sets-aside as revenue didn’t establish how project would be deemed as construction PE

IT/ILT: Reassessment abandoned where reasons recorded for reassessment did not indicate as to how and why income had escaped assessment and now in view of article 5 of DTAA with Korea, concerned project was a PE

Creation of an educational institute by a special statue of Parliament doesn't mean it is funded by

IT: It cannot be held that educational institution is only said to be substantially funded by Government, if it is either established or created by a special statute of Parliament

Co. could not deny to honour claim of creditor on mere reasonings that it failed to collect sum from

CL: Non-receipt of payment by company from party with whom it had entered into a sub-contract would not defeat claim of petitioning-creditor who had successfully and satisfactorily done its job

Family finances: Early start, high surplus will make the journey easy for Baraskars

Even when the markets were enjoying a bull run, several investors chose to stay away from equity. So, when the markets are churning out lackadaisical returns, it comes as no surprise that the portfolio of Baraskars, a Mumbai-based couple, is shorn of equity. Though they still have 27 years to retire, a little over half of their portfolio is invested in debt.

Gold comprises close to 36% of the total portfolio, while a meagre 9% is allocated to equities, and 4% is held as cash. "Equity is known to be volatile, and I felt that without proper investing guidance, it would be safer to opt for debt," says Yogesh Baraskar, a 33-year-old who works for an engineering firm.

Though their portfolio is currently skewed in favour of debt, the couple has little to worry since they have only three goals—their child's education and marriage, as well as their own retirement—all of which are more than 20 years away. With a little course correction, the couple should be able to achieve all their goals.

Yogesh lives with his 28-year-old wife, Trapti, in Mumbai, and the couple is expecting a baby in the next few months. Yogesh takes home a monthly salary of Rs 60,000, while Trapti is a homemaker. The couple spends about Rs 15,000 on household expenses, and another Rs 3,000 is used for miscellaneous items. In 2007, Yogesh had bought a house in Mumbai, in which he currently stays. He had taken a home loan for the Rs 12 lakh house and is paying an EMI of Rs 12,000 for it. After accouting for all these expenses, the couple is left with a monthly surplus of Rs 30,000.

Every financial plan must be covered for risk, which includes buying insurance as well as building an emergency corpus. Since the Baraskars have been extremely careless on the life and health insurance front, they need to address this issue immediately. Currently, Yogesh has a life cover of just Rs 8.75 lakh through three traditional plans. As he is the sole earning member and his responsibilities are going to increase when the child arrives, Shiv Kukreja of Ojas Capital suggests that Yogesh buy an online term plan of Rs 1 crore, which will cost him about Rs 800 every month.

Should you invest in tax-free bonds or prepay home loan?

By Narendra Nathan, ET Bureau | 21 Oct, 2013, 08.00AM IST

The market is flooded with taxfree bonds. Besides the three existing offerings (see table), the National Housing Bank is also expected to hit the market soon.

These are compelling investment options because the tax-free interest rates offered are very high and almost comparable with the pre-tax rates on bank fixed deposits.

The decision may not be that easy for those with a home loan to pay. The common refrain is that if there is any surplus money, shouldn't it be used to prepay the loan? Most borrowers may opt to prepay their loans than invest in tax-free bonds. If you are faced with the same dilemma, consider these factors before you decide.

Look at prepayment as an investment

Much of the confusion gets cleared if you see debt prepayment as just another investment. If you prepay Rs 1 lakh of a personal loan which was charging you an interest rate of 15%, you save Rs 15,000 in interest per annum.

And since money saved is money earned, your Rs 1 lakh will effectively earn you Rs 15,000 in a year. That's a good return and should be the first option for anybody with surplus cash. Evaluate your debts on the basis of the interest you are paying and start with repaying the costliest ones.

The credit card balance and personal loans should be the first in your cross-hairs. It doesn't make sense to keep money in a fixed deposit that fetches only 9% when you have a credit card outstanding with interest cost of around 42% and personal loans with interest cost of around 15%.

But you may also encounter situations where the loans are cheaper than what your investments can earn. That's when you should stop prepaying the loan and start investing. "Follow the simple rule that the return from the investments should be more than the interest on the loans," says Jaya Nagarmat from Investor Shoppe.

A small caveat here: You must also consider the risks involved in the investments when you make the comparison. You should only consider relatively safe investments such as bank fixed deposits and bonds.

Ensure your finances work as you ease into retirement years

Many people, who belong to the happy generation that worked in the post-1991 era, are financially well-placed but unsure about financial planning.

Several have built wealth over time, and navigated the world of investing to the best of their abilities, leaning on friends and relatives to learn the ropes. What should they know about personal finance at this stage of their careers?

First, it is important to recognise the peaking of one's income. A middle-aged professional should recognise that the return on the human asset is subject to risks, which can increase with age. Retirement is the most obvious risk, but economic cycles can create issues of job loss, retrenchment and lower increments.

Sportspersons, film stars, and media professionals may find that younger people encroach into their domains and render them less valuable. Poor assessment of future income has led many yesteryear filmstars to live in old-age penury.

While some professions may be based on reputation built over a lifetime, others may not be able to attract a consistent clientele with age. If you are 40, map your income realistically 50 years into the future, building in directorships and CEO positions you aspire for, with a good dose of realism. Not everyone finds an alternate profession easily.

Second, get real about the damage inflation can inflict over long periods of time. The key thing to remember is that the 'safe' bank deposit will provide a fixed and flat interest income, while expenses will compound over time at the rate of inflation.

If the calculations are too complex to comprehend, use a simple thumb rule: at an estimated inflation of 7-8%, your expenses will double every 9-10 years. This means your corpus should double every 10 years for you to stay above water. There are only two ways to deal with this problem.

First, save as much as you can in the years in which your income is higher than the expenses. Second, invest the savings in an investment that grows at least at the rate of inflation. At 50, when you already have a house and a car, and have reached the peak of your career, you should be saving 50% of your income. Put this to work for a later date when income falls and expenses move up.

Third, take a hard look at your assets and allocate them for future use. If you have a house that you live in, and a few deposits, shares and mutual funds, map these assets to your needs. The house will save you rental expense in the future.

The other assets should also have an identified use—your child's higher education and marriage, your international travel plans, your need for investment income when your regular income falls, and your need to leave behind assets for your children. Every asset should have an identified purpose and a possible time at which it will be liquidated or given away. Don't simply build assets and hope it will be fine.

If you leave your spouse with a large house and no income when you are gone, you may not have provided sensibly, even if that was your intention. Write down what you own and how you plan to use it. If the rent from your second house is supposed to fund your travels, put it down.

Fourth, divide your investments into three portions. The core portfolio is something you will need as long as you are alive, and its only purpose is to provide for your needs. You should lose sleep if this core is lost, erodes in value, or is inadequate.

No need to establish rendition of services in India to tax FTS as long as payer is a resident

IT/ILT : Rendering of service is not a pre-condition for attracting section 9(1)(vii) when Fees for Technical Services are payable by a person who is resident in India

RBI notifies definition of ‘group companies’ under FEMA Regulations with retro effect from June 3,

FEMA/ILT : FEM (Transfer or Issue of Security by a Person Resident Outside India) (Sixteenth Amendment) Regulations, 2013 - Amendment in regulation 2

SEBI allows Mutual funds to hold gold certificates in physical form

SEBI : Gold Exchange Traded Fund Scheme (Gold ETFS) and Gold Deposit Scheme (GDS) of Banks

Adjudication order passed without valid show-cause notice is a nullity in law

ST : Where, in show-cause notice, there was no mention of assessee anywhere in body of notice and assessee's name figured only at beginning, there was no valid demand of service tax from assessee and, therefore, adjudication order passed on such notice was invalid

Rewards accumulated through credit card spending is legal liability; Provision thereof is allowable

IT : Expenditure incurred by assessee in issuing bonds would be considered as cost of borrowing and was revenue in nature

No concealment if an expense was disallowed as two possible views existed on its allowance

IT: Where revenue authorities relying upon different set of evidences, took a different view in respect of assessee's claim of payment of certain expenses, having regard to existence of two possible views, penalty under section 271(1)(c) could not be imposed in respect of disallowance of aforesaid claim of assessee

Service provider and recipient both are bound by condition of non-availment of credit for ST exempti

ST : If exemption, subject to condition of non-availment of credit, is taken by service provider, service provider cannot take credit and even service recipient cannot indirectly take credit of inputs/input services of which credit cannot by service provider

Concealment penalty can’t be levied without recording finding as to concealment of income

IT : In absence of clear finding of Assessing Officer whether assessee is guilty of concealment of income or furnishing incorrect particulars of income, penalty levied under section 271(1)(c) cannot be sustained

Arbitration clause provided in ancillary objects in Memorandum doesn’t deal with shareholders’ dispu

CL: Where arbitration clause of MOA was contained in ancillary objects which was only to aid in attainment of main objects, same was not applicable to disputes related to shareholders of company in capacity exclusively as shareholders and therefore, could not be treated as arbitration agreement

Levy of Sec. 220 interest isn’t appealable in isolation; can be included in appeal in conjunction wi

IT: If in 'giving effect order', there were simple orders levying interest under section 220(2), it might not have been appealable; however, where orders show revised computation of total income and particular levy of interest under section 220(2) is only one of many items considered in 'giving effect' orders, it is appealable

Objections of assessee to be decided first before a case is transferred from one AO to another

IT: Where assessee was assessed by Assessing Officer, Delhi and suddenly Assessing Officer, NOIDA issued on assessee notice under section 147/148 and further he without deciding objections to jurisdiction raised by assessee got his case transferred from Assessing Officer, Delhi to him, it was mandatory for Assessing Officer, NOIDA to decide objections before proceeding further

Short-term capital loss to be set off against short-term capital gains irrespective of nature of tra

IT: Loss arising on short term capital assets is to be set off against income arising from such assets for same year, irrespective of whether transactions are categorized as 'off market transaction' or 'on market transactions'

No interest for TDS default if such default occurred due to bona fide belief of payer

IT : Where Tribunal found that action of assessee for not deducting tax at source on conveyance allowance paid to its employees was based on bona fide belief, assessee could not be treated as assessee in default liable to interest under section 201(1A)