Ezybiz Newsletter November 2016

BUDGET HIGHLIGHTS

Finance Minister Arun Jaitley presents his third Union Budget. With an eye on supporting the small tax-payer and the small investor, the Minister announced a slew of schemes, and income tax exemptions. Mr. Jaitley announces the nine pillars of his Budget — Agriculture and farmers' welfare, rural sector, social sector including healthcare, education, skills and job creation, infrastructure, financial sector reforms, ease of doing business, fiscal discipline, tax reforms to reduce compliance burden.

Major focus this year is on Rural and Agricultural growth and also incentives provided for start ups and ease of doing business.

Please Click on link http://goo.gl/9QvZbY to view budget highlights.

RBI allowed issue of Rupee Denominated Bonds known as Masala Bonds

Recently, some changes have been made in the foreign exchange regulations regarding overseas debt funding.  The Reserve Bank of India has recently issued a circular on issuance of bonds overseas in Indian currency normally known as “masala bonds”.

Salient features of this instrument are as under:

1)      These are Rupee denominated bonds settled in USD. Since it is denominated in Indian currency, there is no foreign exchange fluctuation risk for the borrower.

2)      Any corporate or body corporate is eligible to issue Rupee denominated bonds overseas.

3)      Any investor from a Financial Action Task Force (FATF) compliant jurisdiction can invest in these bonds.

4)      Minimum lock in period would be 5 years however funds can be raised in tranches.

5)      Interests paid on these bonds are subject to tax @ 5% only. Further these bonds are exempt from capital gains tax

6)      Maximum USD 750 million per annum can be raised under automatic route. Cases beyond this limit will require prior approval of the Reserve Bank.

7)      Bond issue in India requires interest between 7.5-8.5 % to attract investors. These Bonds can be issued at less than 7% interest. Rate of interest could be kept low such as Libor + 300 basis point ( maximum) however it may be kept as low as 5-6%

8)      Liberal end use restrictions - can be used for working capital purposes. However, cannot be used for following purposes:

                    i.            Real estate activities other than for development of integrated township / affordable housing projects;

                  ii.            Investing in capital market and using the proceeds for equity investment domestically;

                iii.            Activities prohibited as per the foreign direct investment (FDI) guidelines;

                iv.            On-lending to other entities for any of the above objectives; and

                  v.            Purchase of land.

Given the above, and considering that every company requires working capital loan, one may consider exploring the possibility of raising funds via debt funding from overseas company instead of equity. 

We may provide end to end assistance including drafting of loan agreement, compliances with RBI and FEMA; assistance with the AD etc

I am the senior partner in EzyBiz India Consulting LLP. For any queries relating to Direct Tax, Indirect Tax, ROC and FEMA kindly drop a mail @ anil@ezybizindia.in or contact@ezybizindia.in and we would be happy to assist.

Excise duty rate should be rate prevalent at the time of clearing. [M/s Siemens Ltd. vs. Commissioner of Central Excise (CESTAT Mumbai); Appeal No. E/3360/05]

Penalty cannot be levied unless evasion of duty alleged in SCN. [Precision Metals vs. CCEx, Raigad (CESTAT Mumbai), Appeal No.- E/633/11-Mum]

Job worker enjoying exemption under Notification No. 214/86 not liable to reverse Cenvat credit as the duty on job worked goods ultimately paid by principal manufacturer. [Precision Metals vs. CCEx (CESTAT Mumbai), Appeal No. E/740/07]

CENVAT credit eligible on furniture & fittings used for output service. [ICICI Lombard General Insurance Company Ltd. vs. Commissioner of Service Tax (Mumbai CESTAT)]

Transmission and exchange of financial messages service falls under the category of ‘Banking and Other Financial Services’ – CESTAT. [Bank of Baroda vs Commissioner of Service Tax (CESTAT-Mumbai)]

Mumbai ITAT deletes penalty levied u/s 271C for non-deduction of Sec 195 TDS on payments to non-residents for engineering and draughting services and for purchase of shrink wrapped software, grants immunity u/s 273B; 

Observes that assessee did not deduct TDS relying upon CA’s certificate u/s 195; Further, accepts assessee’s stand that the issue regarding TDS liability on  engineering services payment owing to the ‘make available condition’ was debatable in light of contradictory views taken by various HCs and ITATs, similarly  acknowledges huge controversy over software payments;  

Rules that “view adopted by the assessee based upon the certificate of the C.A., was one of the possible views and can be said to be based upon bonafide belief of the assessee”, thus holds existence of reasonable cause as envisaged u/s 273B for not deducting TDS; Dismisses Revenue’s stand that argument of ‘debatable issue’ was not available to assessee as it did not challenge order u/s 201 holding assessee in default for not deducting TDS and accepted the same: ITAT

SERVICE TAX RATE MIGHT INCREASE BEFORE INTRODUCTION OF GST

Finance minister Arun Jaitley is expected to hike service tax rates in order to bring closer to proposed GST regime. At the same time, the government needs to take steps for boosting local manufacturing and expand the tax payers’ base. 

Recently, the committee headed by chief economic advisor Arvind Subramanian has recommended a standard GST rate of 16.9 to 18.9%. Logically, no government would want to make such a steep increase in service tax rate at one go in a GST regime. Therefore the government may look at hiking the service tax rate before introduction of GST by 1-2% so that the further increase under GST regime would not look that steep.

Delhi High Court in case of (Director of Income Tax Versus New Skies Satellite BV, Shin Satellite Public Co. Ltd. - 2016 (2) TMI 415 - DELHI HIGH COURT)
                                                       
held that in case of Royalty u/s 9(1)(vi) read with DTAA - It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore mere amendment to Section 9(1)(vi) cannot result in a change

CBDT resolves 180 cases (involving approx. Rs 5,000 crores) under Mutual Agreement Procedure (MAP) under Double Taxation Avoidance Agreements (DTAAs) from April 1, 2014 till date; 

Cases resolved pertain to various sectors of the economy like software services, IT enabled services, manufacturing, consultancy services, etc. and countries involved include USA, UK, Japan and China;

 CBDT states that MAP has emerged as an effective alternative tax dispute resolution mechanism and its use to resolve disputes has provided comfort to foreign investors and also reduced the number of cases under litigation; 

Increased focus on MAP in the last 2 years has led to resolution of large number of disputes relating to double taxation and CBDT expresses that it is one of the actions taken to ensure a fair and judicious dispute resolution regime to encourage foreign investment : CBDT

MCA has started issuing notice for false statement for applicability of Cost Records. Pl see one such notice given below . 

In case you have any queries, please  feel free to contact us .

Sub: - Notice for false statement under Sec 448 of the Companies Act, 2013

This is with reference to the Form AOC-4 filed by your company for the Financial Year ended on 3/31/2015 (MM/DD/YYYY), wherein it is stated that the company is engaged in production of goods having CETA headings, which are prescribed under the Companies (Cost records and Audit) Rules, 2014 and as per the financial statements submitted by the company for the financial year ended on 31/03/2014, the annual turnover of the company for that year was “41.65 Crs”.

2.         It may be noted that as per the abovementioned information, maintenance of cost records is mandatory for the company for the financial year 2014-15 as per Section 148(1) of the Companies Act, 2013 read with Rule 3 of the Companies (Cost Records and Audit) Rules, 2014. However, you have stated in AOC-4 filed by the company that the company is not mandated to maintain the cost records under the abovementioned Rules.

3.         It, prima facie, appears that you have made a false statement which is punishable under section 448 read with section 447 of the Companies Act, 2013.

4.         In view of the above, you are directed to explain the reasons for such incorrect reporting, within fifteen days from the issue of the date of this notice, through speed post only.

Thanks & Regards

Anil

+91-9899217778

In yet another move to reduce litigation, CBDT clarifies the meaning of term “initial assessment year” u/s 80IA(5) relevant for assessees' claiming incentive-deduction; 

Notes that the term is being interpreted by AOs to mean the first year in which eligible business/ manufacturing activities commence operations; 

Clarifies that Sec 80IA(2) offers assessee an option to claim deduction for 10 consecutive years out of 15 years (20 years in certain cases), therefore ‘initial assessment year’ means the first AY opted by assessee to claim Sec 80IA benefit; 

As an abundant caution, CBDT states that total number of years for claiming deduction cannot exceed the prescribed slab of 15 or 20 years and claim should be availed in continuity; 

Directs AO to allow deduction in accordance with clarification and also instructs Standing Counsels/ Department Representatives to withdraw pending appeals to the extent that it pertains to the interpretation of term ‘initial assessment year’ 

MCA has issued a notice inviting comments on the Revised Schedule III to the Companies Act, 2013 for a Company whose financial statements are drawn up in compliance of Companies (Indian Accounting Standards) Rules 2015 dated 09.02.2016

MCA has started issuing notices to the companies which did not comply with section 148 of Companies Act 2013 relating to cost records and cost audit.
 

 10 MOST IMPORTANT NETWORKING ACQUISITIONS OF 2015 


 2015 was a big year for mergers and acquisitions in the networking industry. Here are the ones that are most likely to have the biggest long-term impact on the industry. 

 1) CHECK POINT SOFTWARE acquires HYPER WISE and LACOON BOTH IN THE $80 million range 

 Although these were small acquisitions (), they were notable as Check Point rarely makes acquisitions.

 2) CISCO ANNOUNCED PLANS TO ACQUIRE OpenDNS for $635 million 

 3) HP ACQUIRES ARUBA NETWORKS FOR $3 billion

Some important judgement on Transfer Pricing

Mumbai ITAT : Upholds CUP for indenting transactions: Sets average 3.63% as arm's-length commission rate

Hyderabad ITAT : FAR-analysis key for comparable selection; Rent non-operating income absent substantive evidence

Bangalore ITAT : Rejects Rs 1-200cr turnover-filter for giving absurd results, declines additional ground admission

Ministry of Corporate Affairs has recently modified the Form 4-LLP. The new version of Form 4-LLP (Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner and consent to become a partner/designated partner) available w.e.f. 10th February, 2016. Shakeholders are requested to plan accordingly.


RBI had notified the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 and old regulations have been repealed and replaced by the new regulations. These regulations seek to regulate opening and maintenance of foreign currency accounts in and outside India by a person resident in India.

Important Due Dates- January 2016

WISHING YOU ALL A VERY HAPPY AND PROSPEROUS NEW YEAR 2016!!

Please find enclosed list of important due dates for month of January 2016:

a) Due date for deposit of TDS deducted in December 2015 - 7th January 2016

b) Due date for deposit of monthly/quarterly service tax - 5th January 2016

c) Due date for deposit of monthly/quarterly VAT/CST - 21st January 2016

d) Due date for online filing of DVAT/CST return - 25th January 2016

 

e) Due date for manual deposit of DVAT/CST return - 28th January 2016

f) Due date for filing reconciliation statement in DVAT 9- 15th January 2016

g) Due date for preparation and filing of quarterly TDS return - 15th January, 2016