CA Terminal

Sunday, 13 October 2013

HC rejects alleged under-valuation of stock as same valuation methodology was being followed consist

IT: Claim of assessee in respect of valuation of stock which was accepted in preceding assessment year was to be accepted in current year also following doctrine of consistency

Himatasingike Seide Ltd vs. CIT (Supreme Court)

The assessee set up a 100% EOU in AY 1988-89. For want of profits it did not claim benefits u/s 10B in AYs 1988-89 to 1990-91. From AY 1992-93 it claimed the said benefits for a connective period of 5 years. In AY 1994-95, the assessee computed the profits of the EOU without adjusting the brought forward unabsorbed depreciation of AY 1988-89. It claimed that as s. 10B conferred “exemption” for the profits of the EOU, the said brought forward depreciation could not be set-off from the profits of the EOU but was available to be set-off against income from other sources. It was also claimed that the profits had to be computed on a “commercial” basis. The AO accepted the claim though the CIT revised his order u/s 263 and directed that the exemption be computed after set-off. On appeal by the assessee, the Tribunal reversed the CIT. On appeal by the department, the High Court (CIT vs. Himatasingike Seide Ltd 286 ITR 255 (Kar)) reversed the Tribunal and held that the brought forward depreciation had to be adjusted against the profits of the EOU before computing the exemption allowable u/s 10B. On appeal by the assessee to the Supreme Court HELD dismissing the appeal:

Having perused the records and in view of the facts and circumstances of the case, we are of the opinion that the Civil Appeal being devoid of any merit deserves to be dismissed and is dismissed accordingly

Note: S. 10A/10B(6) as amended by the FA 2003 w.r.e.f. 1.4.2001 provides that depreciation and business loss of the eligible unit relating to the AY 2001-02 & onwards is eligible for set-off & carry forward for set-off against income post tax holiday. Also, consider the impact on Yokogawa India Ltd 341 ITR 385 (Kar) where it was held that even after s. 10A/10B were converted into a “deduction” provision w.e.f 1.4.2001, the benefit of relief u/s 10A/10B is in the nature of “exemption” with reference to “commercial profits” and that as the income of the s. 10A unit has to be excluded at source itself before arriving at the gross total income, the question of setting off the loss of the current year’s or the brought forward business loss (and unabsorbed depreciation) against the s. 10A profits does not arise.

AO shall refer valuation of assets to Valuation Officer if assessee objects to value adopted, HC say

IT: In case assessee objects value of asset adopted by Assessing Officer for computing capital gain, Assessing Officer ought to refer valuation of asset to valuation officer

Locker is meant for safety of belongings; customer can take belongings from locker on winding up of

CL: Customer having safe-deposit locker in non-banking financial company which was ordered to be wound up would be allowed to take his personal belongings kept in that locker

Facts found by Tribunal can't be challenged before High Court

ST : Where Tribunal found that proper intimation, as required by law, had been filed by assessee and had, accordingly, allowed Modvat Credit, such finding of fact cannot be challenged in appeal/petition before High Court

Pricing of a product is influenced by its quality; ITAT stresses on quality for comparability under

IT/ILT : Quality of product to be considered in comparability of transaction for purpose of computing ALP

No. sec. 41(1) additions for recovery of an exp. which couldn't be claimed in earlier years due to l

IT : Non-consideration of alternate contention of assessee constituted a mistake apparent from record within meaning of section 254(2)

Are you ready to retire?

Nearly 78% of the Indian retirees say they prepared adequately for their sunset years, according to a worldwide survey, Life after Work?, conducted by HSBC. Here are some other revealing insights.

Transition to retirement

Do you expect to move into semiretirement before you retire fully?

Over half of the younger workers (25-34 years old) expect to reduce their working hours, but continue with some form of paid employment as they approach retirement.

Why do you expect to move into semiretirement?

While 44% of the respondents want to keep active, 43% like working and want to continue, and 39% feel it will ease the transition into retirement. However, financial worries are also a motivator.

Aspirations vs reality

Did you prepare adequately for a comfortable retirement?

Two out of 10 retirees didn't prepare well enough or at all. Of these, less than 24% realised their efforts were insufficient before retiring, and 18% don't think they will bridge the shortfall.

Which of these aspirations have you been unable to realise since retiring?

While key aspirations, like starting a business, remain unfulfilled for 25% of respondents, more modest ones like spending time with friends/family have been achieved by 41%.

Leaving a legacy

Have your parents/relatives given you a significant financial gift or loan?

Today's retirees are more likely to have received a financial legacy than the younger generations.

Will you leave an inheritance for your children?

86% of fully retired people expect to leave an inheritance.

Rs 27 lakh is the median value of inheritance the fully retired expect to leave.

Do you expect to 7% receive an inheritance?

59% of the working age people expect to receive an inheritance.

Rs 12 lakh is the median value of the inheritance the working age people expect to get.

The survey includes more than 1,000 respondents in India and was conducted between July 2012 and April 2013. All figures don't add up to 100 due to multiple responses.

How economic cycles influence investment returns

Uma Shashikant

Several investors worry whether the optimism of the 2003-7 period will return. The hope about emerging as the next big economic miracle has been replaced by despair. Everything that seemed to be a good thing feels like a burden now.

Investors refuse to see some of the issues as cyclical and agree that a downturn will unleash the very factors that shall take the economy back to an up cycle. The reluctance to build economic cycles into an investment strategy comes from a dominance of structural factors that have influenced returns for a long time.

Economic activity expands with assumptions about revenues, costs and profits riding on growing consumption and demand. Investment increases as revenues increase. Inevitably, these assumptions tend to be too sanguine to convert into reality over sustained, long periods. Unless unlimited capital is available at low costs and demand remains high even at higher prices, the up cycles cannot last forever.

The up cycle collapses and businesses soon reach the bottom, trying to protect against failure, while cutting investment and costs, and looking for demand for their products and services. The cycle of boom turns to bust, then moves on to recession, followed by recovery, and back again. The investors in emerging markets such as India take time to align their portfolio strategies with economic cycles.

This is because a dominant number of structural factors influence their returns, sometimes overshadowing the logic of economic cycles. If someone were to tell Indian investors that real estate prices tend to move cyclically on the basis of the demand and interest rates, they would laugh it off. The real estate market in India is structurally insulated from the developments in the economy by a blanket of black money.

It is a parallel asset market funded at high rates by cash, used dominantly by investors who want to acquire and hoard the asset. Several of these people are not impacted by the interest rates set by the RBI, the tax regime, the processes of the banking system, or the rules of law. When such an asset defies the laws of the economic cycle, it begins to attract ordinary investors, who see it as a safe haven during difficult times.

The problem with this approach is that the simpler investors assume risks they are ignorant about and could be hurt if these risks everal investors worry whether the optimism of the 2003-7 period will return. The hope about emerging as the next big economic miracle has been replaced by despair. Everything that seemed to be a good thing feels like a burden now.

Economic cycles represent the correction of excesses that take place over periods of time. During an up cycle, there is an overall optimism. Capital is available to set up several new businesses as investors are confident about the future. Economic activity expands with assumptions about revenues, costs and profits riding on growing consumption and demand.

Investment increases as revenues increase. Inevitably, these assumptions tend to be too sanguine to convert into reality over sustained, long periods. Unless unlimited capital is available at low costs and demand remains high even at higher prices, the up cycles cannot last forever.

The investors in emerging markets such as India take time to align their portfolio strategies with economic cycles. This is because a dominant number of structural factors influence their returns, sometimes overshadowing the logic of economic cycles.

Saturday, 12 October 2013

Filing online PF account transfer claims becomes a reality

PTI Oct 10, 2013, 03.27PM IST

(EPFO's K K Jalan said, "..handling…)

NEW DELHI: The filing of online provident fund account transfer claims on changing jobs for subscribers of the retirement fund body EPFO has become a reality now.

The facility has been made available as the Employees' Provident Fund Organisation (EPFO) has launched its online transfer claim portal (OTCP) on October 2, 2013, as per an office circular said.

According to the circular to its field staff, EPFO's Central Provident Fund Commissioner K K Jalan has said, "..handling of transfer cases generates maximum bad publicity and it is expected that this issue shall be resolved after OTCP is made fully functional".

Jalan has also directed that after October 31, there shall be no physical movement of paper (either claims or Annexure "K") in transferring member accounts from one office to another.

Annexure K contains details of service period with an employer and the amount of funds deposited in the pension fund account of the subscribers who seek transfer of PF accounts.

The facility of online transfer of provident fund accounts will reduce the work load of the body substantially as over 13 lakh applicants files such claims every year.

EPFO has set up a central clearance house for this purpose and the body envisages to reduce the time for transfer of PF accounts to three days through the online service.

The EPFO started registering digital signatures of companies from July 25, a prerequisite for the facility.

At present over 30,000 employers or establishments have already registered their digital signatures with EPFO.

According to the information available, 80 per cent of the firms employing more than 500 workers have already registered their digital signatures with EPFO.

EPFO officials say that job changes are more frequent in big firms employing more than 500 workers, especially in sectors such as information technology. The body managed PF accounts of about 6.9 lakh establishments in 2011-12.

The officials say it's easier for companies in sectors such as IT to register digital signatures as they already maintain them to comply with Ministry of Corporate Affairs requirements.

During 2012-13, the EPFO settled 107.62 lakh claims, 88 per cent of which were processed within 30 days, as prescribed by the body's citizen charter.

The EPFO expects 1.2 crore claims in 2013-14, including around 13 lakh PF transfer claims, largely from tech-savvy companies from sectors like IT.

Friday, 11 October 2013

CBDT issues circular on income-tax deduction from salaries for financial year 2013-14

IT : Section 192 of The Income-Tax Act - Deduction of Tax at Source - Salary - Instructions for Income-Tax Deduction from Salaries During The Financial Year 2013-2014 Under Section 192

RBI permits banks to access overseas funds from international financial institutions till November 3

FEMA/ILT : Overseas Foreign Currency Borrowings by Authorised Dealer Banks

SEBI permits listing of SMEs without IPO

SEBI : SEBI (Listing of Specified Securities on Institutional Trading - Platform) Regulations, 2013

Foreign borrowing norms eased; banks can access overseas funds from certain other entities permitted

FEMA/ILT : FEM (Borrowing or Lending in Foreign Exchange) (Fifth Amendment) Regulations, 2013 - Amendment in Regulation 4

Deposits received in course of business won’t be held as deemed dividend; ITAT differentiates deposi

IT : Deposits received by assessee during course of his business, which were purely business transactions, couldn't be held as deemed dividend

Deemed commencement of business if assessee started supplying water from its partially completed can

IT: Where State of Gujarat set up a Nigam for execution of Sardar Sarovar Project and one of purposes of setting up Nigam was to supply water through canal and during previous year when State faced scarcities of drinking water assessee had supplied drinking water through its partially completed main canal, it could be said that business had been set up during previous year

DRP has to pass a speaking order even if TPO doesn't take up impugned matter independently

IT/ILT: Where TPO clubbed payment for allied services with royalty paid by assessee and determined ALP at NIL, in view of fact that TPO discussed only transaction of royalty payment throughout his order and had not taken up any other allied payments independently, DRP was not justified to sustain addition with regard to other allied payment without giving any cogent reason