Section I: Client Alerts Direct Tax Updates Indirect Tax Updates Legal & Regulatory Updates Section II: Thought Leadership Meet the Engineer Who’s the Raja of Hardware @ Google Section III: Column Swachh Bharat Cess – A New Member In The Tax Family Section IV: IBA's Club Section V: Compliance Calendar

News & Views from IBA

December 2015

Direct Tax CASE LAWS

Guangzhou is a company registered under the laws of the People’s Republic of China. It is a wholly owned subsidiary of Usha International Limited (“UIL”), an Indian company incorporated under the laws of India. Apart from carrying on the business of import and export, Guangzhou also provides services relating to the business of household electronic appliances and equipment, household goods and accessories etc., to UIL. In relation to this, Guangzhou entered into a Memorandum of Understanding (“MoU”) with UIL for providing services in connection with procurement of goods by UIL from vendors in China. However, the MoU was later converted into a service agreement under which services to be rendered by the applicant company to UIL included, inter alia, identification and evaluation of products and suppliers requested by UIL, generation of new products and ideas, market research, resolution of pricing issues, safety/endurance tests, review of quality systems and interaction with vendors. Under the services agreement, services were not actually performed in India but wholly undertaken in China. Guangzhou approached the AAR to decide on whether the service fee received by Guangzhou for providing services in connection with procurement of goods for UIL from China and other related services provided in China is taxable in India and Guangzhou is liable to pay tax thereon in India. Also, whether the services rendered fall within the definition of FTS under the India-China Tax Treaty and whether the service fee received by Guangzhou is chargeable to the extent of the full amount received by it or only to the extent of the mark-up received at 10% over and above the actual cost incurred by the applicant. The AAR held that the services provided by Guangzhou would fall within the scope of FTS as provided for under the India-China Tax Treaty. It held that the scope of the expression “provision of services” as provided under the India-China Tax Treaty is much wider in scope than the expression “provision of rendering of services” and will cover the services even when these are not rendered in the other contracting state, as long as these services are used in the other contracting state. The AAR ruled that the services provided by Guangzhou to UIL was highly specialized and technical, and hence would fall squarely within the ambit of ‘consultancy services’ and therefore should be taxable as FTS under the India-China Tax Treaty. The AAR observed that from the list of services rendered by Guangzhou to UIL, it can be concluded that the applicant is not only identifying new products and suppliers in response to UIL’s instructions, but is also generating new ideas for UIL after conducting the relevant market research. Further, Guangzhou is also charged with the additional mandate of evaluating the credit, finances, organization and production facility of the potential manufacturer, and forwarding a report to UIL based on the same. Thus, the AAR was of opinion that such a technical evaluation can only be made by an expert in the field and such kind of specialized services require a high degree of skill, acumen and knowledge and hence are in the nature of consultancy services. The test as identified by the AAR was whether UIL, in light of its inability to undertake a detailed technical and financial evaluation of various organizations, intended and desired to utilize expert services of qualified and experienced professionals. Therefore, since UIL was unable to perform these technical/specialized functions on its own, it approached Guangzhou who provided these services. In coming to the conclusion the services rendered by the Applicant fall within the scope of ‘consultancy services’, the AAR relied on the Supreme Court case of GVK Industries & Anr vs ITO & Anr. With regard to the final issue, the AAR relying on earlier cases, held that the gross amount will be chargeable to tax at the rate of 10% and not only the mark-up cost.

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PROCUREMENT SERVICES BY CHINESE COMPANY TAXABLE AS FEES FOR TECHNICAL SERVICES UNDER INDIA-CHINA TAX TREATY: AAR Recently, the Authority for Advance Rulings (“AAR”) in the matter of Guangzhou Usha International Ltd.(“Guangzhou”) held that the service fee received by Guangzhou in return for providing expert services in connection with procurement of goods from China are taxable as Fees for Technical Services (“FTS”) under the India-China Tax Double Taxation Avoidance Agreement (“India – China Tax Treaty”).

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Deputy Commissioner of Income Tax v. WS Atking India (P.) Ltd. Purchase of software, being in the nature of copyrighted article, is not covered under the definition of royalty and thereby, not liable for tax deduction. The assessee had purchased software and claimed depreciation on the same. The Assessing Officer was of the view that the amount paid by the assessee for acquiring software was in the nature of royalty within the meaning of Explanation 2 to section 9(1)(vi) of the Act and accordingly the Assessing Officer disallowed the claim of the assessee for depreciation under section 40(a)(ia) of the Act for non-deduction of tax. The assessee contended that software has been included in definition of royalty only by amendment vide Finance Act, 2012. Although this amendment is retrospective, there is no liability that can be fastened to deduct tax at source. The assessee further placed reliance on various decisions including the decision of Infotech Enterprises Ltd. v. Addl. CIT [2014] 41 taxmann.com 364 (Hyderabad Tribunal) wherein it has been held that section 40(a)(ia) of the Act would not apply to disallow payments on which there was no liability to deduct tax but subsequently becomes taxable on account of a retrospective amendment. The learned CIT(A), by holding in favour of the assessee, held that during the period when the purchase was made, i.e., financial year 2008-09, the assessee did not have the benefit of the clarification brought about by the retrospective amendment that the payment is in the nature of royalty and consequently tax was to be deducted under section 194J of the Act. The law which existed as on the date when the payment for obtaining the software was made, had not categorically laid down that tax is required to be deducted. The Hon’ble Tribunal, upheld the order of the learned CIT(A), and by placing reliance on the decision of Hon’ble Delhi ITAT in the case of SMS Demag (P.) Ltd. v. Dy. CIT [2010] 38 SOT 496 and on the decision of Hon’ble Mumbai ITAT in the case of Sonic Biochem Extractions (P.) Ltd. v. ITO [2013] 59 SOT 4, held that mere purchase of software, a copyrighted article, for utilisation of computers cannot be considered as purchase of copyright and consequently, cannot be considered as royalty. The Tribunal held that the assessee did not acquire any rights for making copies which generally could be considered within the definition of 'royalty'. Explanation 2 to section 9(1)(vi) of the Act cannot be applied to purchase of a copyrighted software, which does not involve any commercial exploitation thereof. The assessee simply purchased the software which was delivered along with computer hardware for utilisation in its day-to-day business.

Allscripts (India) Private Ltd.vs. Dy. Commissioner of Income Tax (ITAT Ahemdabad) Company with very high operating margin can be included in list of comparable after proper justification/investigation. company is engaged in providing captive software development services to its Associate Enterprise (AE) Eclipsys USA. Assessee electronically filed its return of income for A.Y. 2009-10 on 29.09.2009 declaring total income of Rs. 1,98,18,930/-. Thereafter Assessee revised its return of income on 23.07.2010 declaring total income at Rs. 5,42,868/- by claiming deduction u/s 10AA. Company had rendered software services to its Associated Enterprise (AE), Eclipsys USA, and for which company was remunerated on a cost plus markup basis. For determining arms length nature of the international transactions, company had selected Transactional Net Margin Method (TNMM) as the most appropriate method and had considered operating profit to total cost ratio as the profit level indicator (PLI) in TNMM analysis. The PLI of the company was arrived at 14.58% whereas the average PLI of the 14 comparables that were selected by the company was arrived at 14.45%. Since the price charged in the international transactions by the Assessee was higher than the arithmetical mean price, the price charged in the international transactions by the Assessee was treated as at arms length by the Assessee. Thereafter, during the course of assessment AO has noticed that the Assessee had selected 14 companies as comparables on the basis of search conducted in public data base. The filters/search applied by the Assessee were rejected by TPO and thereafter TPO disregarded the use of multiple year data for testing the markup for services rendered by Assessee, rejected certain quantitative filters applied by the Assessee and introduced certain new quantitative filter, included certain additional comparables which were not considered by the Assessee. Accordingly order u/s. 92CA(3) dated 18.01.2013 was made by TPO by making an upward adjustment in Arms Length Price (ALP) and by virtue of which an amount of Rs. 11,09,37,862/- was added to the total income of the Assessee. Thereafter, a draft order was passed u/s. 143(3) r.w.s. 144C(1) r.w.s. 92CA(3) by making transfer pricing adjustment of Rs. 11,09,37,862/- against which Assessee preferred the reference before Dispute Resolution Panel (DRP). Hon’ble DRP passed order u/s. 144C(5) r.w.s. 144C(8) on 26.12.2013 wherein the TPO was directed to verify the facts and also include some companies as comparables. Pursuant to the directions of DRP, A.O on 05.02.2014 after giving effect to DRP’s direction revised the adjustment at Rs. 4,12,15,474/- and accordingly vide order dated 13.02.2014 that was passed u/s. 143(3) r.w.s. 144C(5) r.w.s. 144C(8) r.w.s. 144C(13) r.w.s. 92CA(3) of the Act the total income of the Assessee was determined at Rs. 4,17,58,342/-. Aggrieved by the aforesaid order of A.O, Assessee appealed before ITAT where it was held that for the purpose of find our comparable companies for transfer pricing, companies with very high operating margin can’t be selected as comparable companies without justification/investigation by AO as to why such companies is to be included in the list.

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Press Release SECTION 90 OF THE INCOME-TAX ACT, 1961 - DOUBLE TAXATION AGREEMENT - AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES - KUWAIT - PROTOCOL AMENDING THE EXISTING AGREEMENT The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for the protocol amending the Agreement between India and Kuwait for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The Protocol provides for internationally accepted standards for effective exchange of information on tax matters including bank information and information without domestic tax interest. It is further provided that the information received from Kuwait in respect of a resident of India can be shared with other law enforcement agencies with authorization of the competent authority of Kuwait and vice versa. India and Kuwait signed the Double Taxation Avoidance Agreement (DTAA) in 2006 for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income, through the Protocol.

Indirect Tax CASE LAWS

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Roaming services to foreign telecom operators for international inbound customers, constitute exportsIn the present case, CESTAT allows assessee appeal wherein it held that services to foreign telecom operators (FTO) in relation to international inbound roamers (IIR) constitute ‘export and entitled to rebate under Rule 5 of Export of Service Rules. Following the coordinate bench ruling in assessee own case where relying on Paul Merchant Ltd decision, it was held that when service is rendered to a third party (i.e. IIR) at behest of customer (i.e. FTO), service recipient is the customer and not third party. In Paul Merchant Ltd ruling, Third Member discussed aspect of principle of equivalence and destination based consumption tax in detail, before concluding that ‘export of service’ is to be determined strictly w.r.t. provisions of Export of Services Rules, which contained nothing contrary to principle that service not consumed in India is not be taxed in India. However, on aspect of limitation, CESTAT reiterates that where statute provides period of limitation u/s 11B of Central Excise Act for a claim of rebate, provision has to be complied with as a mandatory requirement of law and accordingly, remits back matter for verification by Adjudicating Authority. M/s Vodafone Essar Gujarat Limited Vs Commissioner of Service Tax, Ahmedabad [TS-630-CESTAT-2015-ST] Refund on exports- one to one co relation with input service and export not required. Opining that notification No. 41/2007-ST does not prescribe a one to one co -relation between input service and export, the tribunal held that even if services have been availed prior to export, the assessee would be eligible for refund. The assessee argued that it did not have any domestic sale transaction and it was not possible to establish a one to one co relation with input services and export Imcola Export Limited Vs Commissioner of Service Tax, - Chennai [Final order No. 41372/2015, order dated 7-10-2015] Whether Education Cess paid on service tax paid by the service provider is to be refunded to the appellants when the export of service is not in dispute. CESTAT considered the judgement passed by the Tribunal in the case of Cauvery Coffee Traders and Kudremukh Iron Ore Co. Ltd. (supra). It has confirmed refund of education cess on service tax by the service provider of port related services, technical testing and analysing services. It is also to be noted that the CBEC Circular No. 134/3/2011 dated 08.04.2011 was issued specifically noting the judgement of the Tribunal in the case of Balasore Alloys Ltd. (supra) and the Boards view is that education cess paid on the service tax by the service providers is also to be refunded to appellants. M/s Tumkar Minerals Pvt. Ltd. v/s Custom, Excise & Service Tax, Appellate Tribunal- Mumbai [2015-TIOL-2444-CESTAT-MUM]

Indirect Tax CASE LAWS

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Can the valuation be rejected on the grounds that there is difference between the price charged by foreign supplier from related and unrelated parties in India In the present case, the suppliers supplied the goods to other unrelated customers in India from whom they charged higher prices than the price in the Global Pricelist by 10% to 30%. The contention of related party in India was that the difference between the prices charged to third party unrelated buyers and the prices at which they received the goods was paid to them by their Principal as a commission. The Tribunal observed that it is a well-known commercial practice that the related buyer is given commission in respect of supplies by the supplier abroad to unrelated buyers in India. The Sales Promotion Agreement also provides for this commission. And this manner of grant of commission is upheld in various judicial pronouncements such as Premnath Diesels Pvt. Ltd. vs. Commissioner of Customs, Calcutta 2000 (122) ELT 458 (Tribunal). The Department failed to proceed legally to determine the value by sequentially following the Valuation Rules. The Appellate Authority failed to examine the Valuation Rules, which provide the legal basis of arriving at the correct assessable value. In the present case, the situation was of commission being given which was the difference between the prices to the appellant and the unrelated buyer for taking care of after sales service/promotion etc. Commissioner of Customs (Import) Vs Lenze Mechatronics Pvt. Ltd. Mumbai [TS-631-CESTAT-2015-CUST] Whether it was right to penalise the employer where the employee of CHA firm had acted for his personal greed beyond the scope of duty. The penalty imposed on the employer was set aside as the employee admitted in his statement that he acted in his personal capacity and the appellant CHA was not aware his activities in this regard. It was also seen that the appellant's statement was never recorded and there was no evidence to suggest that the appellant was aware of the activities of the employee. Buhariwala Logistics Vs Commissioner of Custom, Delhi [2015-TIOL-2400-CESTAT-DEL]

Legal & Regulatory

NOTIFICATION RESERVE BANK OF INDIA Annual Return on Foreign Liabilities and Assets (FLA Return) – Reporting by Limited Liability Partnerships (RBI/2015-16/210 A. P. (DIR Series) Circular No. 22 dated October 21, 2015) In order to capture the statistics relating to Foreign Direct Investments (FDI), both inward and outward, by Limited Liabilities Partnerships (LLPs) in India, it has been decided that henceforth, all LLPs that have received FDI and/or made FDI abroad (i.e. overseas investment) in the previous year(s) as well as in the current year, shall submit the FLA return to the Reserve Bank of India by July 15 every year, in the format as prescribed in the A.P (DIR Series) Circular No. 145 dated June 18, 2014. Since, LLPs do not have21-Digit CIN (Corporate Identity Number), they are advised to enter ‘A99999AA9999LLP999999’ against CIN in the FLA Return. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10083&Mode=0

Subscription to National Pension System by Non-Resident Indians (NRIs) (RBI/2015-16/216 A.P. (DIR Series) Circular No.24 dated October 29, 2015) With a view to allowing NRIs’ access to old age income security, the Reserve Bank of India has now decided, to enable National Pension System (NPS) as an investment option for NRIs under FEMA, 1999. Accordingly, NRIs may subscribe to the NPS governed and administered by the Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act. https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10093&Mode=0

Sovereign Gold Bonds, 2015-16 (RBI 2015-16/218 IDMD.CDD.No.939/14.04.050/2015-16 October 30, 2015) The Government of India came with the scheme to issue Sovereign Gold Bonds, 2015 and the Operational Guidelines for the Scheme for the Gold Bonds were notified vide notification no. RBI/2015-16/222 IDMD. CDD. No. 968/14.04.050/2015-16 dated November 4, 2015. https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10095&Mode=0

Relaxation of facilities for residents for hedging of foreign currency borrowings (RBI/2015-16/232 A.P. (DIR Series) Circular No. 28 dated November 5, 2015) Under existing guidelines, residents having long term foreign currency liability are permitted to hedge exchange rate and/or interest rate risk exposure thereof by undertaking a foreign currency-INR swap with an AD Cat-I bank in order to move from a foreign currency liability to a rupee liability subject to the operational guidelines, terms and conditions. With the intent to further facilitate the hedging of long term foreign currency borrowings by residents, it has been decided to permit them to enter in to FCY-INR swaps directly with Multilateral or International Financial Institutions (MFI/IFI) in which Government of India is a shareholding member. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10114&Mode=0

Change in Certificate for claiming commission by Agency Banks (RBI/2015-16/233 DGBA.GAD.No. 1636/31.12.010/2015-16 dated November 10, 2015) Reserve Bank of India pays agency commission to the Agency Banks for the Government business handled by them. The format for certification of agency commission claims by external auditors has been amended and the said certificate now requires the external auditors to examine and audit the agency commission before issuance of such a certificate. The agency commission claims submitted to Regional Offices and Central Accounts Section, Nagpur may henceforth be accompanied by a certificate as per the revised format. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10115&Mode=0

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2015 (Notification No FEMA.355/2015 RB dated November 16, 2015) The Reserve Bank of India (RBI) has made various amendments with respect to the investment in an Investment vehicle under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, including the introduction of a new Schedule 11 i.e. “Investment by a person resident outside India in an Investment Vehicle”. https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10130&Mode=0

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Legal & Regulatory

NOTIFICATION Foreign Exchange Management (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015 (Notification No. FEMA 345/2015-RB dated November 16, 2015) As per the "Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000" no person resident outside India shall make investment in India, in any entity, which is engaged or proposes to engage in real estate business, or construction of farm houses. Explanation for the real estate business shall be referred as “real estate business” which shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10129&Mode=0

Provision of Factoring Services by Banks – Review (RBI/2015-16/239 DBR. No .FSD.BC. 58/24.01.007/2015-16 dated November 19, 2015) With a view to ensure that the bank offering factoring services has enough margin to cover any deficiencies in the payment of the related invoice, it should be ensured that the pre-payment amount offered by banks for the receivables acquired under factoring should not exceed 80% of the invoice value. https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10125&Mode=0

Import of Goods into India – Evidence of Import (RBI/2015-16/248 A.P. (DIR Series) Circular no. 29 dated November 26, 2015)The Reserve Bank of India (RBI) has issued directions under this circular wherein it is mentioned that, with the establishment of Free Trade Warehousing Zones / SEZ Unit warehouses, imported goods can be stored therein, for re-export / re-selling purposes for which Customs Authorities issue Ex-Bond Bill of Entry. AD banks are advised to consider the Bill of Entry issued by Customs Authorities named as Ex-Bond Bill of Entry or by any other similar nomenclature, as evidence for physical import of goods. Further, in cases where goods have been imported through couriers, the Courier Bill of Entry, as declared by the courier companies to the Customs Authorities, may also be considered as evidence of import of goods. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10142&Mode=0

Engagement of Services of Expatriate Officers in Indian Officers of Foreign Banks (RBI/2015-16/252 DBR.IBD.BC. 61/23.07.001/ 2015-16 dated November 26, 2015) The Reserve Bank of India (RBI) in consultation with the Government of India has reviewed the numerical restriction on engagement of expatriates. Now it has been decided that a foreign bank can deploy a maximum of four expatriates for each branch opened in India and not more than six expatriates for their Head Office functions. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10146&Mode=0

Advance Remittance for Import of aircrafts /helicopters / other aviation related purchases (RBI/2015-16/248 A.P. (DIR Series) Circular no. 29 dated November 26, 2015) Director General of Foreign Trade vide Notification No. 24/2015-2020 dated October 9, 2015 has announced amendment in Policy condition 1 of Chapter 88 of ITC (HS), 2012-Schedule – 1 (Import Policy). Accordingly, AD Category – I banks may, while allowing advance remittance without bank guarantee or an unconditional, irrevocable standby letter of credit up to USD 50 million, ensure that only the requisite approval of DGCA for import of aircrafts/helicopters in terms of the extant Foreign Trade Policy has been obtained by the company for operating Scheduled or Non-Scheduled Air Transport Services (including Air Taxi Services). In other words, the approval from Ministry of Civil Aviation will not be required. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10143&Mode=0 Online Returns to be submitted by NBFCs- Revised (RBI/2014-15/246 DNBS (PD).CC.No.03/03.02.02/2015-16 dated November 26, 2015) It has been decided to rationalize the returns’ to be submitted online through COSMOS and change in periodicity of NDSI-500cr and ALM-1 returns from monthly to quarterly. Also, NBS- 6 return will be discontinued as the same information is received through NBS-1 return. To maintain uniformity and avoid misunderstanding, it has been decided that the concerned NBFCs should report the stock data of branches as at end of every quarter rather than providing incremental number of branches during the quarter. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10140&Mode=0

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Legal & Regulatory

NOTIFICATION Investment by Foreign Portfolio Investors (FPI) in Corporate Bonds (RBI/2015-16/253 A.P. (DIR Series) Circular no. 31 dated November 26, 2015) The circular states that it has been decided to permit FPI to acquire NCDs/bonds, which are under default, either fully or partly, in the repayment of principal on maturity or principal instalment in the case of amortising bond. The revised maturity period of such NCDs/bonds, restructured based on negotiations with the issuing Indian company, should be three years or more. FPI which propose to acquire such NCDs/bonds under default is required to disclose to the Debenture Trustees the terms of their offer to the existing debenture holders / beneficial owners from whom they are acquiring. Such investment should be within the overall limit prescribed for corporate debt from time to time (currently Rs. 2443.23 billion). All other existing conditions for investment by FPIs in the debt market remain unchanged. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10147&Mode=0

Software Export – Filing of bulk SOFTEX-further liberalisation (RBI/2015-16/231 A.P. (DIR Series) Circular No.27 dated November 05, 2015) All software exporters can now file single as well as bulk SOFTEX form in excel format to the competent authority for certification. This facility was not there earlier for small exporters. Since the SOFTEX data from STPI/SEZ is being transmitted in electronic format to RBI, the exporters are required to submit the SOFTEX form in duplicate as per the revised procedure. The Foreign Exchange Management Act (FEMA),1999 requires exporters to complete the SOFTEX form using the number so allotted and submit it first to the competent authority for certification and then to the AD for further necessary action. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10113&Mode=0

MINISTRY OF CORPORATE AFFAIRS Companies (Share Capital and Debentures) Third Amendment Rules, 2015 (Dated November 06, 2015) As per the general rule a Company is not allowed to issue secured debentures for a term exceeding 10 years from the date of issue and exception to the rule is “Infrastructure Debt Fund Non-Banking financial Companies” as per Infrastructure Debt Fund Non-Banking financial Companies (Reserve Bank) Directions 2011. Adding to the exception list, the Ministry of Corporate Affairs vide this amendment in the (Share Capital and Debentures) Rules includes “Companies permitted by a Ministry or Department of the Central Government or by Reserve Bank of lndia or by the National Housing Bank or by any other Statutory Authority to issue debentures for a period exceeding ten years”.

http://www.mca.gov.in/Ministry/pdf/Amendement_Rules_06112015.pdf

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Thought LEADERSHIP

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Meet the Engineer Who’s the Raja of Hardware @ Google

Indian techies working for technology giants such as Microsoft and Google are very common nowadays. With companies giving placements and internships directly from universities the possibilities of Indians fetching their dream jobs have gone up. All of us are aware of the Google’s India origin CEO Sundar Pichai who recently got appointed for the position. But most of us don’t know the Bangalore born talent hardware engineer Hakim Raja who works on some of the interesting projects for the company, reports Economic Times. Hakim Raja was always been clear about his priorities and wanted to take up hardware technologies further in his life. His father’s hardware shop made him fall in love with nuts and bolts. Born in Bengaluru, Raja would tinker around with nuts and bolts at his father's hardware store, showing an early penchant for making stuff that has led him to a company where he is helping create futuristic technologies such as gesture recognition and cybernetic clothing through what are known as Project Soli and Project Jacquard.

Project Soli’ uses radar built into tiny microchips and has the potential to be a part of anything from cars to toys, furniture, a wearable computer and games, literally anywhere people want to connect with devices. He said that "Along with our semiconductor component partners, I design and implement the chip that enabled gesture sensing. I had found a new passion for product design. The Stanford years transformed me from a technology and domain-focused engineer into a product, user-focused engineer." The award winning scientist Ivan Poupyrev discovered the talented young man who was a newbie at Google at that time. The former principal research scientist at Walt Disney stated that "Hakim had a sparkle in his eyes when I first told him about my big ideas; he is certainly one of the most talented engineers I have worked with, "He led the gesture sensor's engineering from conception to tape-out and did it in record time just- four months,“ He Wanted to pursue a PhD in Computer architecture. But he ended up taking bare minimum courses in electrical engineering at Stanford. Spent most of his time taking courses in computer science, mechanical engineering, design, bio-medical engineering and businesses..

Column Swachh Bharat Cess - A New Member In The Tax Family by Mohit Gupta

The Central Government has recently introduced yet another Cess cum levy in the gamut of already expensive indirect taxation. Finding its genesis in Chapter VI (Section 119) of the Finance Act 2015, the Swachh Bharat Cess (‘SBC’) is introduced for the purposes of financing and promoting Swachh Bharat initiatives as envisioned by the Honourable Prime Minister. The Central Government on 15th November, 2015 brought into effect the SBC vide Notification No.21/2015-Service Tax, dated 6th November, 2015. As per the Notification, the SBC is to be levied at the rate of 0.5% on the value of all the taxable Services. It is to be noted that it shall not be a Cess on Service tax but in fact shall be calculated in the same way as Service tax is calculated. Effectively, the rate of SBC would be 0.5% and new rate of Service tax plus SBC would be 14.5%. It has been further provided that the SBC would be levied, charged, collected and paid to Government independent of Service consequently, it needs to be charged separately on the invoice, and accounted in the books of account separately. The tax has to be deposited separately under an independent accounting head. It is pertinent to note that the SBC is excluded from the purview of Cenvat Credit Chain i.e. the credit of same cannot be availed to discharge any Service tax/ Excise duty liability. Swachh Bharat Cess shall not be applicable to • Services which are either fully exempt from Service tax under any notification issued under section 93(1) of the Finance Act, 1994 or are otherwise

not leviable to Service tax under section 66B of the Finance Act, 1994. • Service in respect to which payment has been received and invoice is raised before the Service becomes taxable, i.e. prior to 15th November, 2015. • Service in respect to which payment has been received before the Service became taxable and invoice is raised within 14 days, i.e. upto 29th

November, 2015. Moreover, the Services which are provided on or after 15th Nov, 2015, and invoice in respect of which is issued on or after that date and payment is also received on or after that date, SBC would be levied in such case. SBC would also be levied where the Service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such Service is not issued by 29th Nov, 2015.

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Services Provided Invoice Issued Date of payment SBC liable?

Before 15 November Before 15 November After 15 November Not liable

Before 15 November After 15 November After 15 November Liable

- On or before 29

November

Before 15 November Not liable

- After 29 November Before 15 November Liable

Swachh Bharat Cess under special cases: • Services under Reverse Charge- Reverse charge under section 68(2) of the Finance Act, 1994, are made applicable to SBC. Government has issued

notification No. 24/2015-Service Tax dated 12th November, 2015 to provide that reverse charge under notification No.30/2012-Service Tax dated 20th June, 2012 shall be applicable for the purpose of levy of Swachh Bharat Cess mutatis mutandis. Where Services have been received prior to 15 November 2015 but consideration paid post 15 November 2015, SBC liability will be 0.5% X Value of taxable Service.

• Services where abatement is allowed - Taxable Services, on which Service tax is leviable on a certain percentage of value of taxable Service, will attract SBC on the same percentage of value as provided in the notification No. 26/2012-Service Tax, dated 20th June, 2012. So, this notification would apply for SBC in the same manner as it applies for Service tax.

• Services covered under Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006 - The tax (Service Tax and SBC) on Services covered by Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006, would be computed by multiplying the value determined in accordance with these respective rules with [14% + 0.5%]. Therefore, effective rate of Service Tax in case of original works and other than original works under the works contract Service would be 5.8% i.e. [(14% + 0.5%)*40%] and 10.15% [(14% + 0.5%)*70%] respectively. Similar, same would be the tax treatment for restaurant and outdoor catering Services.

• Services covered by Rule 6 of Service Tax Rules - Sub-rule (7D) to rule 6 has been inserted vide notification 25/2015-Service Tax, dated 12th

November, 2015 so as to provide that the person liable for paying the Service tax under sub- 6 rule (7), (7A), (7B) or (7C) of rule 6 of Service Tax Rules, shall have the option to pay SBC as determined as per the following formula:- Service Tax liability [calculated as per sub-rule (7), (7A), (7B) or (7C)] X 0.5%/14%]

Page : 11

Nature of

transaction

Date of invoice / Date

of accounting

Date of payment SBC liable?

Reverse

charge

Before 15 November After 15 November Liable

Nature

of

Service

Gross value

of Service

Abatement

(70%)

Taxable

value

Service tax

(14%*30,000)

SBC

(.5%*30,000)

GTA 1,00,000 70,000 30,000 4200 150

Nature of

Service

Gross value

of Service

Service portion

(40%)

Service tax

(14%*40,000)

SBC

(.5%*40,000)

Original

Works

Contract

1,00,000 40,000 5600 200

Birthdays of the Month

Priyanka Gera 05-Dec

Ujjwal Kumar Pawra 12-Dec

Shuchi Maitra 21-Dec

Surinder Singh 23-Dec

Manoj Singh Negi 26-Dec

IBA wishes You a Happy Birthday and a great year ahead!!

THOUGHTS WHICH INSPIRE US

Failure will never overtake if determination to succeed is strong enough.

Don’t take rest after your first victory because if you fail in second, more

lips are waiting to say that your first victory was just luck.

All Birds find shelter during a rain. But Eagle avoids rain by flying above the Clouds.

Man needs difficulties in life because they are necessary to enjoy the success

- A.P.J Abdul Kalam.

Who sell the products cheaper – a manufacturer or a distributor? The storehouse guard.

A client comes to a bank:

My cheque was returned with a remark: "Insufficient funds". I'd like to know whether it refers to mine or the Bank?

Client: Yesterday I have bought an energy saving bulb in your

shop, returned home, but it does not work. It should not, it saves energy.

Henry Ford produced the model T only in black because the black paint available at the time was the fastest to dry.

American Airlines saved $ 40,000 in 1987 by eliminating one

olive from each salad served in first class. It takes about 63,000 trees to make the newsprint for the

average Sunday edition of The New York Times. Everyday, U.S. business use enough paper to circle the Earth over

20 times.

Page : 12

JOKES

IBA‘s CLUB

INTERESTING FACTS

Sumit Vij - June 9th IBA wishes You a Happy Birthday and a great year

ahead!!

December 2015

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

Deposit of TDS/TCS deducted in November 2015

Service tax deposit for November -company (on-line)

Service tax Deposit for November – (Manually)

EPF deposit for November

EPF Monthly Return

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

22 23 24 25 26 27 28

Payment of DVAT/CST for November/ ESIC deposit for November

29 30

About Us IBA constitute a young team of path breaking professionals, who believe in creating value through innovation and creativity so as to provide ultimate client satisfaction. Clients benefit from our fresh thinking, constructive challenge and practical understanding of the issues they face. We aim to alloy a perfect blend of professionalism with high standards of service, in our pursuit of excellence. Ten years into conception, IBA continues to offer wholesome service experience to boost highly valued client relationships by combining the technical and industry expertise at par with well-placed firms together with a personal commitment to optimise client service. Our service lines are headed by experts from the varied fields of Financial Outsourcing, Assurance, Risk, Taxation, Regulatory, Mergers and Acquisition who ensure timely delivery of value added services to our clients.

Stay Connected New Delhi B 9, LGF, Green Park (Main) New Delhi – 110016 Ph. No – 011-46021550-52,46121553 403, 4th Floor, DLF Court Yard (DLF Place) District Centre, Saket New Delhi - 110017 Mumbai Suite 1108, Level 11 - 1102 Peninsula Business Park Tower B, S B Road Lower Parel Mumbai 400013 Bangalore Golden Square Serviced Office #No 1101,24th Main, JP Nagar 1st Phase (above ICICI Bank) Bangalore-560078

Editorial Team

Aditya Mehra Shivam Khandelwal

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A joint initiative of International Business Advisors Private Limited (IBA) and Nayyar Maniar & Associates LLP (NMA LLP). IBA is a Company registered under the Companies Act, 1956 having its registered office at B-9, LGF, Green Park (Main), New Delhi – 110016, India. NMA LLP is a

registered partnership firm.

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Disclaimer: The materials contained in this newsletter have been compiled from various sources. This information is for guidance only and should not be regarded as a substitute for appropriate professional advice. IBA accepts no liability with regard to the information herein or any action that may be taken by readers of this newsletter without any professional advice.

Shrawani Trivedi Nidhi Singh