`20/-For

www.vasai-icai.org SEPTEMBER 2012

VASAIBRANCH OF WIRC

NEWSLETTER

VASAIBRANCH OF WIRC

NEWSLETTER

VASAIBRANCH OF WIRC

NEWSLETTER

VASAIBRANCH OF WIRC

NEWSLETTER

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The Institute of Chartered Accountants of India

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter

GLIMPSES ATDATED 15th AUG to 19th AUG, 2012 at

INTERNATIONAL RESIDENTIAL REFRESHER COURSE MAURITIUS

September 201202

MANAGING COMMITTEE

EDITORIAL BOARD

CA Shweta Jain, CA Ramanand Gupta CA Kishor Vaishnav CA Unmesh Narvekar | 9920737198 Treasurer | 9892194382 Imm. Past Chairman | 9821236179

CA Lalit Bajaj CA Pramod Dhamankar CA Haresh Mehta CA Ashok JainPast Chairman | 9867692321 Past Chairman | 9987155522 Committee Member | 9823137477 WIRC Nominee | 9833512888

CA Shweta Jain CA Haresh Mehta CA Lalit Munoyat CA Hemant Shah CA Kamal Sharma CA Alpesh ShahCA Dushyant Chaudhary CA Anil Kabra CA Vikas Soni CA Haresh Kenia CA Prasad Chitre

Chairperson Vice-Chairman | 9322231113 Secretary &

Members & their families present during the Conference at Mauritius

(L-R): CA Ramanand Gupta, Vice-Chairman, Vasai Br.,Mr. K. C. Li, Member of Parliament, Mauritius,CA Shweta Jain, Chairperson, Vasai Br., CA Lalit Bajaj, Past Chairman, Vasai Br.

CA Anu Agrawal, Speaker

Mr. K. C. Li, Speaker

Mr. K. C. Li, Member of Parliament, Mauritius. Also seen CA Lalit Bajaj,Past Chairman, Vasai Br.

CA Shweta Jain, Chairperson, Vasai Br., welcoming

CA Sanjay Khairnar giving floral welcome to CA Anu Agrawal, Speaker Group photo taken at Mauritius

Participants at Conference held at Mauritius

03

FROM CHAIRPERSON’S DESKMy Dear Professional Colleagues

I believe you will all agree with me in the last few years, thebranch has come a long way both in matters concerningthe development of the profession. Simultaneously, wehave also taken major strides in issues relating tostudents. And all this we have been able to achieve onlywith the dedication, commitment and the enthusiasm ofour members, seniors & guides. Now that we have crossedsix months of my tenure, I am myself experiencing theinfluence of the ‘feel good’ factor and therefore, I thoughtI should share this feeling with all of you. I would like toadd however that resting on our laurels is not somethingthat we should make a habit of. We have a long way to go,and we can get there only by looking at what we have doneand analyzing it to find out how we could have done itbetter. An element of dynamism is something that is reallythe heart of a flourishing branch and therefore, it is up tous to see that our strides do not falter, and that our growthis an holistic one – it makes no sense to grow in onedirection and be deficient in others. To that end, we allneed to pull together. Now to some things that havehappened during the last one month.

Workshop on MVAT - Frequent changes in indirecttaxation through Finance Acts, Notifications and Circularsare one of the significant features of Indian tax laws.Appreciating these increasing complexities and changingfacade of indirect taxes, branch successfully completedworkshop on MVAT, C.S.T. & Allied Laws with the galaxy ofspeakers & attendees which resultant in enhancing theupdating of knowledge & expertise.

ISA Course -With the large attendees , we have startedInformation System Audit course which is offered by ICAI ,now we got an oppourtunity in our branch area and we aredelighted to serve the members in the area of postqualification degree.

IRRC to the Mauritius- Firstly I would extent my heartiestthanks to Mr M. P. Sarda - Chairman of InternationalTaxation Committee & Mr. Durgesh Kabra – Chairman ofWIRC of ICAI for giving us the opportunity to organise IRRC.It has indeed been a fantastic event, the memories of whichshall be remembered & cherished throughout. we got anopportunity to meet and interact with Mr K C Li – member ofParliament, Mauritius, he guided us about Investmentopportunity in Mauritius and shared his knowledge aboutMauritius treaty & also CA Anu Agrawal enlightened andstimulated with sharing of such a great insights andexpertise on double taxation treaties with our attendees,my heartiest thanks to both of them.

Seminar on SME Listing- In India since, SMEs aremaking tremendous progress and are getting more andmore opportunities to enhance their activities and expand& diversify their business in core sectors. And as suchprogrammes will assist the present and prospectiveentrepreneurs in their business growth so serving this as aplatform for the extensive exchange of ideas among thehuge participants, and promoting further studies andactions leading to a better trading environment at thiscritical junction against the backdrop of global financialturmoil.

In the mist of Audit pressure it is important for everyChartered Accountant that he familiarizes himself with therevisions and guides the accountants at his office or hisclient's office for compliance with the new Schedule VI.As auditor, he is under obligation to ensure the compliancewith Accounting Standards as updated from time to timeand hence, it is his prime duty to ensure compliance withthe Accounting Standards.

LONG Awaited decision has been finally taken….!There is good news for student those who want to join CAafter graduation that rule for exemption in CPT forgraduates has been implemented by CA institute. Nowgraduate from commerce having 55% and non commercehaving 60% can directly get admission in IPCC. Not onlywill that but their article ship also started with IPCCregistration.

We know that you all will be busy in Tax Audits & CorporateAudits, but not to forego the new due date for Vat Audit sokeeping this in mind we have organized a seminar on MVATAudit in the month of October , looking forward for thehuge positive response.

At the end, taking a cue from the pattern of events that Ihave just now Related, I would like to say that while as faras the members of the profession are concerned, there isno Dearth of enthusiasm in keeping the communitytogether through programs, And so forth, it is necessarynow, in my view to channelize this immense energy toavenues that will have a definite impact on the future ofthe profession as well as opportunities for the members.I have already said that one way of doing this is toimprove individual effectiveness, and this can be done inmore ways than one. I am looking forward to receivingresponses from members on their ideas on thesematters.

“One day, in retrospect, the years of struggle willstrike you as the most beautiful.”

With warm regards,

CA Shweta Jain

ChairpersonVasai Branch of WIRCof ICAI

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter September 2012

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter04

FORTHCOMING PROGRAMMES

September 2012

FORTHCOMING PROGRAMMES FOR MEMBERS

FORTHCOMING PROGRAMMES OF VASAI VIRAR STUDY CIRCLE

FORTHCOMING PROGRAMMES OF BHAYANDAR STUDY CIRCLE

Date Seminar on Timings Venue Speakers Co-ordinators Fees CPE

08th, Lecture Meeting on Reliable classes, 200/-September, Corporate Compliance to Mira Road (E) 93222311132012 9.00 p.m.

13th MVAT Audit 6.00 p.m. ITT Centre, Eminent Speaker CA Haresh Mehta ` 200/- 3to Mira Road (E) 98231374779.00 p.m.

Date Seminar on Timings Venue Speakers Co-ordinators Fees CPE

08th Issues in Vat Audit 4.00 p.m. Hotel Kubera CA Suhas Chhajad CA Rajesh Kotak Articles & 3September, to 9561330333 Students,2012 7.00 p.m. CA Aniket Padhye others-

9922063800 300/-

Date Seminar on Timings Venue Speakers Co-ordinators Fees CPE

23rd Art of Living and 10.00 a.m. Hotel Sankalp Eminant Speaker 300/- For 3September, Communication Skill to (Now ZAIKA), 1st Non CA 2012 1.00 p.m. Floor, Maxus Mall, Members

With Lunch 150FT Road,with Family Bhayander

West, Thane-401101

6.00 p.m. Eminent Speaker CA Ramanand Gupta ` 3

06th MVAT Issues related to 6.00 p.m. ITT Centre, Eminent Speaker CA Kishor Vaishnav ` 200/- 3October Builders to Mira Road (E) 98921943822012 9.00 p.m.

October2012

Form 704

`

CA Nitesh Kothari `9833860870

ICAI UPDATES

Announcement for GMCS-I CourseThe General Management & Communication Skills (GMCS) Course, presently being organized for 15 days for the CA studentsshall be organized twice during the period of articled training as under:

(I) GMCS-I (15 days) - during 1st year of articled training

(ii) GMCS-II (15 days) - after completion of 18 months of training but before completion of articled training

In view of the above, students, who have registered for Articled Training on or after 1st May, 2012 are required to undergoGMCS-I Course during the 1st year of articled training.

The eligible students are required to register for GMCS-I Course at the respective Regional Council and Branch, since it is aregulatory requirement and part of the articled training.

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter05

September 2012

DIRECT TAX

— Compiled by Haresh P. Kenia |e-mail: hpkenia@mtnl.net.in | 9821351838

1. Clarification regarding reopening of completedassessments [207 Taxman (ST.) 129]The CBDT vide letter [F.No.500/111/2009-FTD-1(PT)] dated29.05.2012 clarifies and directs that in case where assessmentproceedings have been completed u/s 143(3) of the Income TaxAct before the 1st day of April, 2012, and no notice forreassessment has been issued prior to that date, then suchcases shall not be reopened u/s 147/148 of the Income Tax Acton account of retrospective clarificatory amendments made inthe Finance Act, 2012 in section 2(14), section 2(47), section 9and section 195 of the Income Tax Act. It is also clarified thatassessment or any other order which stand validated due tosaid clarificatory amendments in the Finance Act, 2012 wouldbe enforced.

2. No deduction of TDS in respect of specified payment u/s197A(1F) [207 Taxman (ST.) 161]The central government hereby notifies that no deduction of taxshall be made u/s 194J i.e. payment by made person(hereinafter referred to as transferee) for acquisition of asoftware from another person, being resident (hereinafter referto as transferor) provided the following conditions are satisfied.The notification comes in effect from 01.07.2012.

Conditions:i. The software is acquired in a subsequent transfer and the

transferor has transferred the software without anymodification.

ii. Tax has been deducted-a. Under section 194J on payment for any previous transfer

of such software orb. Under section 195 on payment for any previous transferof such software from a non-resident and

iii. The transferee obtains a declaration from the transferor thatthe tax has been deducted either under sub-clause (a) or (b) ofclause (ii) along with the Permanent Account Number of thetransferor.

3. CBDT instruction to Subordinate Authorities-Authorizat ion to AO’s in certain cases torectify/reconcile disputed arrear demand [207 Taxman(ST.) 171]The CBDT vide circular No-4 of 2012 dated 20.06.2012issued the certain clarification to avoid the genuine hardshipto certain class of cases and authorized the AssessingOfficer to make the appropriate correction in respectof disputed arrear demand irrespective of the fact thatperiod of limitation for 4 years u/s 154(7) of the Act haselapsed.The Board has been appraised that in certain casesthe assessee has disputed the figures of arrear demand shownas outstanding against them in the records of Assessingofficer. The Assessing Officer has shown their inability tocorrect or rectify the same on the ground of period oflimitation of 4 years u/s 154(7) of the Income Tax Act.In addition to this, the Assessing officer has uploadedsuch arrear demand on the Financial Accounting System (FAS)portal of Centralized Processing Centre (CPC), Bangalore whichhas resulted into adjustment of refunds against the arreardemand.

LAWUPDATES

Such adjustment has been disputed by the assessee either onthe ground that it has been already paid or eliminated inappeals. Such arrear of demand has also not rectified due toaforesaid period of limitation.

In view of the above CBDT has issued the following clarification-a) In the category of cases where based on the figure of arrear

demand uploaded by the Assessing Officer but disputed by theassessee, the Centralized Processing Centre (CPC), Bengaluruhas already adjusted any refund arising out of processing ofreturn, the jurisdictional Assessing Officer shall verify the claimof the assessee on merits. After due verification of any suchclaim on merits, the Assessing officer shall issue refund of theexcess amount, if any, so adjusted by CPC due to inaccuratefigures of arrear demand uploaded by the Assessing Officer. TheAssessing officer, in appropriate cases, will also uploadamended figure of arrear demand on Financial AccountingSystem (FAS) portal of Centralized Processing Centre (CPC),Bengaluru wherever there is balance outstanding arreardemand still remaining after aforesaid correction/reconciliation.

b) In other cases, where the assessee disputes and requests forcorrection of the figures of arrear demand, whether uploadedon CPC or not uploaded and still lying in the records of theAssessing officer, the jurisdictional Assessing Officer shall verifythe claim of the assessee on merits and after due verification ofsuch claim, will make suitable correction in the figure of arreardemand in his records and upload the correct figure of arreardemand on CPC portal.It has been specifically clarified that these instructions willapply only to cases where the figures of arrear demand is to bereconciled/ corrected- whether such arrear demand has beenuploaded by the Assessing Officer on to Financial AccountingSystem (FAS) of CPC or it is still in the records of the AssessingOfficer.

4. DTAA between India and Nepal[207 Taxman (ST.) 173]The central government vide notification No- 20/2012 [F. No.503/03/2005-FTD-II] dated 12.06.2012 notifies theagreement between the government of the republic of Indiaand the government of Nepal for the avoidance of doubletaxation and the prevention of fiscal evasion with respect totaxes on income. The agreement shall be given effect to in theUnion of India with effect from 01.04.2013.

5. DTAA between India and Norway [207 Taxman (ST.)194]The central government vide notification No. 24/2012 [F. No.505/3A/81-FTD-I] dated 19.06.2012 directs that all theprovisions relating to agreement between government ofRepublic of India and the government of the Kingdom of Norwayfor the avoidance of double taxation and the prevention of fiscalevasion with respect to taxes on income and on capital.

6. Press release regarding mandatory e-filing of IncomeTax Returns [208 Taxman (ST.) 1]The CBDT vide press release No. 402/92/2006-MC dated02.07.2012 clarified that the following entities does notmandatorily required to e-file their return of income for theAssessment Year 2012-13 with digital signature and such taxpayer can also transmit the data in the return electronically andthereafter submit the verification of income in Form ITR-V. Suchperson can e-file return of income without digital signature.The entities are as under-a) An individual or HUF whose total income is exceeding

Rs.10lacs.b) An individual or HUF being a resident, having asset

(including financial interest in any entity) locatedoutside India or signing authority in any account located

outside India and required to furnish the return in FormITR- 2 or ITR-3 or ITR-4.

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter06

September 2012

(cont)...DIRECT TAX LAW7. Draft guidelines regarding implementation of General

Anti Avoidance Rules (GAAR). [208 Taxman (ST.) 3]The CBDT vide press release dated 28.06.2012 issued the draftguidelines regarding implementation of General Anti AvoidanceRules in terms of section 101 of the Income Tax Act. The detailsof the guidelines are available in above magazine.

8. Amendment in Rule 12 and substitution of Forms ITR-5 and ITR-6 [208 Taxman (ST.) 20]The CBDT vide notification 25/2012 [F. No. 142/31/2011-TPL]/S.O. 1453(E) dated 02.07.2012 gives income tax (SeventhSchedule) Rules, 2012. It amends Rule 12 and substitute formITR-5 and ITR-6. It also makes an amendment in proviso toclause (a) and clause (ca) to sub-rule (1) of Rule 12 in order toclarify that the amendment relating to disclosure of assets(including financial interest in any entity) located outside Indiaand signing authority located outside India applies to residentother than not ordinarily resident in India within the meaning ofsection 6(6) of the Income Tax Act. The proviso to clause (a) andclause (ca) deals with the sahaj (ITR-1) and sugam (ITR-4S)repectively. The similar amendment is also made in proviso (aa)of sub-rule (3) of Rule 12 of Income Tax Rules. The proviso (aa)deals with the requirement of compulsory e-filing of return eitherwith digital signature or transmitting data electronically andsubmitting the verification form in ITR-V.

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1) Expenditure on fully convertible debentures deductible[DELHI HIGH COURT] CIT v. HAVELLS INDIA LTD.(Date of Decision: 21/05/2012) ITA No.55/2012, ITANo.57/2012

It is well settled that expenditure incurred in connectionwith the issue of debentures or obtaining loan isrevenue expenditure. Reference in this connectionmay be made to the leading judgment of the Supremecourt in India Cements Ltd. v. CIT, (1966) 60 ITR 52.The question before the SC was whether it is a debentureissue or an issue of share capital involving thestrengthening of the capital base of the company. Althoughprima facie it appears that there are sufficient facts toindicate that what was contemplated was an issue of sharesto the Mauritius Company under the Investor Agreementwhich would result in strengthening of the assessee’scapital base, having regard to the judgments cited onbehalf of the assessee, in which it has been held that despiteindications to the effect that the debentures are to beconverted in the near future into equity shares, theexpenditure incurred should be allowed as revenueexpenditure on the basis of the factual position obtaining atthe time of the debenture issue. The following cases havebeen cited on behalf of the assessee in support of the viewthat even in such a situation the expenditure is allowable asrevenue expenditure.

(i) CIT v. East India Hotels Ltd., (2001) 252 ITR 860 (Cal.)

(ii) CIT v. ITC Hotels Ltd., (2011) 334 ITR 109 (Kar.)

(iii) CIT v. South India Corporation (Agencies) Ltd., (2007)290 ITR 217 (Mad)

(iv) CIT v. First Leasing Co. of India Ltd., (2008) 304 ITR 67(Mad.)

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2) No Reassessment U/s 147/148 for Legal Error/Illegalityin the Original Assessment Order (DELHI HIGHCOURT)

Munjal Showa Ltd. v DCIT (Date of Decision:14/05/2012)(W.P.(C) 4753/2011)

Whether the AO has power to issue a notice U/s 148for reopening of assessment U/s 147 on the basis ofreason to believe that income has escaped fromassessment at the time of original assessment due to awrong claim of capital expenditure as revenueexpenditure?

The assessee had filed and furnished all detailsand particulars relating to the royalty payment includingagreements, calculation and the approval before the Ld.AO during assessment proceedings. There was no failure onthe part of the assessee to furnish true and correctall material facts. The facts were available before andwere within the knowledge of the AO. The new AO as perthe reasons recorded on the basis of the same facts,has observed that royalty payment should havebeen disallowed as it was capital in nature. This is aquestion of legal inference or interpretation which has beendrawn from the same material facts on record. Therefore,

CA Hemant R. Shah / 9869011148Email: gatu_1968@yahoo.co.in

RECENT HIGH COURT DECISIONS

RECENT CASE LAWS & OTHER DEVELOPMENTS/ AMENDMENTS

STORY TIME...

— Compiled by Ravi Jain9892359049 | 2000.jainravi@gmail.com

WISDOM STORY...

One evening a Swamiji of Sri Ramakrishna Mutt was addressing theparticipants of an MNC company on the concept of work culture.

One of the participants asked the following question to the Swamiji:I am a senior manager of Materials Department and I joined anorganization 25 years ago as an Engineer Trainee and over the last25 years I have gone through every experience in the organizationand I am now the senior manager looking after the materialfunction independently.

During the initial part of my career, the job was very challengingand interesting. Every day was exciting and I looked forward toeach day with lot of interest. However, all those exciting days are gone since I do not find my job any more interesting because thereis nothing new in my job.

As I have seen and handled every conceivable situation there is nomore challenges in my work. I am now feeling bored because I amdoing a routine job.

However, Swamiji, I am living in the same house for over fortyyears, I am the son for the same parents for over forty five years, Iam the father for the same children for the past ten years and thehusband for the same lady for the past twenty years.

In these personal roles I do not feel bored and the passage of timehas not taken away the zeal from me. Please tell me why I am boredof the routine in the office and not in the house?

the executive the question: Please tell me for whom does your wifeand the mother of children cook ?

The executive replied that obviously my wife cooks for all of us -thefamily. Then the Swamiji said that because the wife 'Serves' othersand because of this service mindedness, she is not feeling tired orbored. Similarly, when you are at Home you are not perceiving yourrole as the necessary work.

But in an office, we 'Work' and not 'Serve'.

Anything we consider, as service will not make us feel bored. That isdifference between Serving and Working.

He asked the executive to consider his work as service and notmerely a work....

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter07

September 2012

(cont)...RECENT CASE LAWS & OTHER DEVELOPMENTS/AMENDMENTS

the case falls in the category of change of opinion asat the time of original proceedings, the AO examinedand gone into the question of royalty. Even if there was anylegal error or illegality, the same cannot be rectified andbe made the subject matter of reassessment proceedingsU/s 147/148 of the Act. The re-assessment order is alsoquashed.

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3) Director Of Income-Tax (Exemption) V. GoregaonSports Club (MUMBAI HIGH COURT) [IT APPEAL NO. 6301OF 2010] (14/02/2012)

Providing sports facilities to general public withoutrestriction to any caste, creed, religion or professioneligible for exemption U/s 11:

This Court had the occasion to consider similar issues in aJudgment delivered in the case of DIT (Exemption)v.Chembur Gymkhana [Income Tax Appeal No. 5568of 2010, dated 13/02/2012]. This Court, following thelaw laid down by the Supreme Court, has held that thefact that the membership of the club is open to a section ofthe community would not detract from the fact that the clubhas been constituted for the advancement of anyother object of general public utility. The Club is notformed for the benefit of an individual or a group ofindividuals as such. However, while affirming that theobject of the Club falls within the purview of Section 2(15),this Court had remanded the proceedings back to theAO to determine whether as regards the application of thefunds, the requirements of Section 11 have been dulyfulfilled. In the present case also the AO did not have anoccasion to consider the application of the funds withreference to provisions of Section 11, since he had come tothe conclusion that the Assessee does not fulfillthe charitable purpose as defined in Section 2(15).

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4) COMMISSIONER OF SERVICE TAX, BANGALORE VsMASTER KLEEN (KARNATAKA HIGH COURT) (Date ofpronouncement 08/09/2011)

No Penalty payable if the Assesee pays Service Tax &Interest before issue of Show Cause Notice:

The material on record discloses that the assessee on beingpointed out by the authorities for not paying the service tax,has paid the service tax with interest even before the issueof show cause notice. Sub-section (3) of Section 73 of theFinance Act, 1994, categorically states that if tax andinterest is paid and the same is informed to the authorities,then the authorities shall not serve any notice calling uponthe authorities to pay penalty.

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5) DIT vs. Sedco Forex International Drilling Inc(Uttarakhand High Court)

Tax on employees’ salary is a “non-monetary”perquisite exempt U/s 10(10CC)

The assessee-employer entered into agreements with theemployees pursuant to which it agreed to bear the incometax payable by the employees on their salary. The Hon. HighCourt held that such tax payment was “income in the natureof a perquisite, not provided for by way of monetarypayment, within the meaning of clause (2) of section 17”and therefore exempt in the hands of the employees.

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RECENT TRIBUNAL DECISIONS

1) Networking Equipments Eligible for Depreciation @60% (ITAT Delhi)

i) DCIT v. Microsoft Corporation India P. Ltd. [ITANo.1665/Del/2011] A.Y.2003-04

ii) Microsoft Corporation India P. Ltd. v. DCIT [CONo.152/Del/2011]A.Y.2003-04

ITAT in assessee’s own case vide Order dated 19/11/2010allowed depreciation @ 60% on ITG networking equipmentby observing as under:

“16. From the above note, it is clear that the aboveequipment primarily include the routers, switches,modems, etc. which are in the nature of input and outputsupport devices which performs the functions includingcommunication and control and, thus, they are computerhardware when they are used along with computer andwhen their functions are integrated with ‘computer’. Suchdevices used as part of the computer in its functions and,thus, it can be termed as `computer’ only, therefore,eligible for depreciation @ 60%. We find no infirmity in theclaim of the assessee of depreciation @ 60% of ITGnetworking equipments.”

Since the issue is squarely covered by the decision of ITAT inthe assessee’s own case as also by the decision of Hon’bleDelhi High court in the case of BSES Yamuna Powers Ltd.,the Tribunal did not find any infirmity in the order of CIT(A)deleting the addition on account of difference indepreciation. The Assessing Officer is directed to allowdepreciation on ITG Networking Equipments and cablesetc. @ 60%.

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2) I.T.O. Vs. Mark Construction (ITAT KOLKATA) ITANo.602/Kol/2011

C . O . N o . 2 8 / Ko l / 2 0 1 1 ( A . Y. 2 0 0 7 - 0 8 ) D a t e o fPronouncement: 11/05/2012

If Profit is disclosed U/s 44AD then there can be nodisallowance U/s 40(a)(ia):

In the case of CIT vs Surendra Paul [242 CTR 61 (P&H)] theHon’ble Punjab and Haryana High Court has held that onceunder the special provision of section 44AD of the IT Act,exemption from maintenance of books of accounts havebeen provided and the presumptive tax at 8% of the grossreceipts itself is the basis for determining the taxableincome, the assessee was not under obligation to explainthe individual entry of cash deposits in the bank unless suchentries had no nexus with the gross receipts. In the presentcase though from the details filed by assessee the AOobserved that no TDS has been recovered, since theassessee has disclosed the profits more than 8% of thegross receipts and there is no dispute in respect of the grossreceipts, the addition made by ld. CIT(A) U/s 40(a)(ia) ofthe Act is not sustainable. The Appeal filed by the Revenuewas dismissed.

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3) Onward eServices Ltd. Vs ACIT [ITAT, MUMBAI](09/05/2012)

I TA N o . 9 7 / M u m / 2 0 1 0 – A . Y. 2 0 0 5 - 0 6 & I TANo.2974/Mum/2010 – A.Y. 2007-08

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter08

September 2012

When the assessee reimburses interest payments to parentcompany for availing loans under its borrowing facilitygiven by the bank, no TDS obligation arises U/s 194A.

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4) Income Tax Officer Vs. Sh. Naresh Kumar [ITAT–Delhi]ITA No. 1300/Del/2012] (A.Y.2008-09) [Date ofPronouncement 21/05/2012]

Amendment in section 40(a)(ia) is remedial, curative innature and has retrospective effect:

Only grievance of the Revenue is that the amendmentbrought in the Income Tax Act U/s 40(a)(ia) was onlyeffective from 01/04/2010 and not retrospective in nature.The Tribunal said that it has been held in number of casesthat the amendment in section 40(a)(ia) is remedial andcurative in nature and has retrospective effect. In this case,admittedly, the TDS deducted was deposited before thedate of the filing of the Return and under such situation,there cannot be any disallowance U/s 40(a)(ia) therebyupheld the view taken by Ld. CIT (Appeals).

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5) ACIT vs. GE Plastics India Ltd (ITAT Ahmedabad)

Non-Compete Rights are an “Intangible Asset” eligiblefor Depreciation:

The assessee paid Rs. 4.55 crores to obtain a non-competecovenant from another company for a period of 10 yearsand claimed that the expenditure had resulted in an“intangible asset” U/s 32(1)(ii) on which depreciation wasallowable. The AO rejected the claim though the CIT (A)allowed it. Before the Tribunal, the Department relied onSrivatsan Surveyors (P) Ltd. vs. ITO 125 TTJ 286(Chennai) where it was held that a non-compete right is a‘right in persona’ and not a ‘right in rem’ and so depreciationwas not allowable.

The AO had taken the objection that a non-compete right isnot an “intangible asset” U/s 32(1)(ii) on the grounds that

(a)it is not “any other business or commercial right of asimilar nature” and

(b)it is not capable of transfer like other intangible assets

However, the said grounds were not accepted on followingobservations:

(I) the right of absence of competition or the ‘non-competeright’ is an asset which is capable of beingtransferred and is of a similar nature as the otheritems referred to. This is shown by the fact that the rightwas transferred by the assessee at the time of itsamalgamation and

(ii)the expenditure resulted in the acquisition of anunrivaled and non-competed business territory for

10 years which brought advantages inthe capital field.

Though in Srivatsan Surveyors 125 TTJ 286 (Chennai), itwas held that a restrictive covenant is a “right in persona”and not a “right in rem”, a contrary view was taken in ITOvs. Medicorp Technologies India Ltd 30 SOT 506(Chennai). When two views are possible, the viewfavourable to the assessee should be followed held inCIT vs. Vegetable Products Ltd. 88 ITR 192 (SC).

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6) Sushila Suresh Malge vs. ACIT (ITAT Mumbai)

AO hauled up for repeatedly disregarding ITAT’s directions &directed to pay costs

Pursuant to a search U/s 132, the assessee’s statement wasrecorded U/s 132(4) in which he offered Rs.1.50 Cr. asundisclosed Income. This was modified/ retractedsubsequently by stating that the admission was only to theextent of the evidence found during the course of searchoperation. Despite the retraction, the AO passed an OrderU/s 158BC in which he determined the total undisclosedIncome at Rs.1.50 Cr. In the first round of Appeal, theTribunal remanded the matter to the AO to make a freshassessment on the basis of the evidence found in the searchand not only on the basis of the retracted/ modifiedstatement. The AO passed a fresh Assessment Order inwhich he again determined the total undisclosed income atRs.1.50 Cr. on the basis of the Statement U/s 132(4). In thesecond round, the Tribunal again remanded the matterback to the AO for framing a fresh assessment afterimposing costs of Rs.5000/- upon the AO. The AO onceagain repeated the conclusions drawn in the earlier Ordersand determined the Income at the same figure of Rs.1.50Cr. on the basis of the Statement U/s 132(4). The Hon.Mumbai Tribunal held in the third round that:

i) It is very sad that the AO without following theprinciples of natural justice and inspite of clearfindings of the ITAT in the Order dated 18/06/2010 hasrepeated the same Orders as was done originally way backin 1998. Inspite of levying cost of Rs.5000/- on AO, thereis no change in the attitude of the Revenue withreference to the assessee. By taking up the assessment atthe fag end of the time barring period and by denyingnatural justice and not considering the evidence onrecord, the assessee was forced to file Appeals before theITAT unnecessarily by incurring heavy cost of not onlyAppeal fees but also engaging Counsels to defend the case.There should be an end to this sorry state of affairs;

(ii)The matter is again remanded to the AO to complete theassessment only on the basis of incriminating material, ifany, and not only on the basis of the Statement U/s 132(4).If the AO repeats the same order without examiningthe material on record, the Order will be quashedwithout any further consideration. The AO should paycosts of Rs. 35000/- to the assessee for making him comeagain in appellate proceedings. The Revenue shall decidewhether these amounts should be recovered from theofficer(s) concerned. As the orders are being approvedby a senior officer in the rank of CIT, it is sincerely hopedthat the CIT also monitors these assessments andapplies his mind while granting the approvals.

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7) Kotak Mahindra Capital Co. Ltd vs. ACIT (ITATMumbai Special Bench)

Right to set-off capital loss is a “vested right” notaffected by subsequent amendment

In A.Y.2003-04, the assessee earned Short Term Capital Gains(STCG) of Rs.2.21 crores and set it off against the LongTerm Capital Loss (LTCL) relating to A.Y.2001-02. Section74 was amended w.e.f. A.Y.2003-04 to provide that broughtforward LTCL could only be set-off against LTCG and notagainst STCG. The assessee claimed, relying on Shah Sadiq166 ITR 102 (SC) that the amendment to section 74 w.e.f.AY 2003-04 did not affect the assessee’s vested right in A.Y.2001-02 to have the LTCL set-off against the STCG. The AO& CIT(A) relied on Reliance Jute Industries 120 ITR 921

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The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter09

September 2012

(SC) where it was held that the assessment for oneAssessment Year cannot be affected by the law in force inanother Assessment Year and that the law prevailing inA.Y.2003-04 alone had to be considered. On appeal to theTribunal, the issue was referred to a Special Bench. It washeld by the Special Bench that right to set-off capital loss isa “vested right” and the same is not affected by anysubsequent amendment and therefore the assessee isentitled to set off LTCL of A.Y.2001-02 against the STCG ofA.Y.2003-04.

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8) Yahoo India Private Limited (Formerly known asYahoo Web Services India Pvt. Ltd.) Vs. DCIT[ I T A T – M U M B A I ] ( D a t e o f p r o n o u n c e m e n t03/08/2012)

[ITA No. 6181/Mum/2011 – A.Y.2004-05]

No TDS deductible on payment for banneradvertisement to Yahoo Inc. USA

Assessee company is a fully owned subsidiary of Yahoo. Inc.USA which is engaged in the business of providingconsumer services such as search engine, content andinformation on wide spectrum of topics, e-mail, chat etc.During the course of assessment proceedings, it wasnoticed by the A.O. that the assessee has made a paymentof Rs.34,86,947/- to Yahoo Holdings (Hong Kong) Ltd.being cost of services/research material/advertisementmedia. Since the assessee company did not deduct tax atsource from the payment remitted to Yahoo Holdings (HongKong) Ltd., the deduction claimed by the assessee onaccount of the said payment was disallowed by the A.O. byinvoking the provisions of section 40(a) of the Act whichwas upheld by the ld. CIT(A).

However, on second Appeal before the Tribunal vide Orderdt. 24/06/2011, the Tribunal held that the payment madeby the assessee to a foreign company for the servicesrendered by it for uploading and display of the banneradvertisement on its portal was in the nature of businessprofit and not royalty and such payment was not chargeableto tax in India as the recipient has no PE in India and,therefore, the assessee was not liable to deduct tax atsource from the payment for such services and the samecannot be disallowed U/s 40(a)(i) for non-deduction ofTDS.

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OTHER RECENT DEVELOPMENTS/AMENDMENTS

1) CBDT launches Internship Programme in Foreign Tax

The CBDT has launched an Internship Programme in theForeign Tax & Tax Research Division. The objective of theProgramme is to enable the Department to criticallyanalyze various aspects of International Taxation, TransferPricing, Advance Pricing Agreements etc. on the basis ofrefreshing ideas from the field of academics. Applicationsare invited from eligible candidates. A stipend is payable.The terms and conditions are stated in the Circular Dated28/03/2012.

Source – http://www.irsofficersonline.gov.in/

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2) Unit in SEZ, EPZ, FTZ & 100% EOU exempt from mandatorycost audit Cost Accounting Records and Cost Audit –clarif ications about coverage of certain sectorsthereunder: General Circular No. 11/2012, dated25/05/2012

In partial modification of para (b) (iii) of the GeneralCircular No. 67/2011, dated 30/11/2011, it has beendecided to extend exemption from mandatory cost audit toall units located in the specified Zones such as SpecialEconomic Zones (SEZs), Export Processing Zones (EPZs)and Free Trade Zones (FTZs) and also to the 100% ExportOriented Units (EOUs), subject to the following:

(a)Exemption from mandatory cost audit will be availableonly to those units of a company that are either locatedin the specified Zones or qualify as 100% EOUs and notto all other units of the same company.

(b)There will be no exemption from maintenance of costaccounting records and filing of compliance report withthe MCA in compliance with the applicable CostAccounting Records Rules.

(c) In case any regulatory Body seeks cost data in respect ofexempted units of any industry, then all relevant units ofsuch industry would be subject to cost audit inaccordance with the provisions of applicableRules/Orders.

(d)The DTA (Domestic Tariff Area) sales in all suchexempted units for each year shall not exceed thepermissible limits as per the policy in force. In case theirDTA sales for any year exceeds the permissible limits,then the exemption from cost audit available to the unitshall stand withdrawn and the unit would be subject tocost audit in accordance with the provisions ofapplicable Rules/Orders starting with the year in whichexemption stood withdrawn and for every subsequentyear thereafter.

(e)If any such exempted unit either relocates outside thespecified Zones or lose 100% EOU status, then themandatory cost audit would become applicable from theyear in which such change has taken place and for everysubsequent year thereafter.

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3) Adjustment Of Refunds Against Arrears: CBDTCircular

The CBDT has issued an important Circular No.4 of 2012dated 20/06/2012 on the procedure to be followed by theAO in respect of the adjustment of refunds against arrearsdemands.

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4) Amendments in Service Tax – w.e.f. 28/05/2012

The Hon’ble President has given her assent to the FinanceBill, 2012 and got enacted as Finance Act (No.23 of2012) on 28th May, 2012. Following is the summary ofvarious statutory provisions which have been madeapplicable w.e.f. 28/05/2012.

Furthermore, Section 65 (Definition of Taxable Service),65A (Classification of Taxable Service), 66 (ChargingSection of Service Tax) and 66A (Charging Section ofService Tax on Services received from outside India-Importof Services) shall continue to remain in force till rescindedby notification.

Applicable w.e.f. 28th May 2012

I) Inserted: Sub-clause (H) in new Section 67A->Toprovide the date of determination of rate of service tax,value of taxable service and rate of exchange.

ii) Amended: Sub-clause (I) in Section 68->To insert aproviso in sub-section (2), for the purpose ofempowering the Central Government to notify theservices and the extent of service tax payable.

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The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter10

September 2012

iii)Section 72A->To provide for a special audit to becarried out by a Chartered Accountant or CostAccountant nominated by a Commissioner. Where theservice tax assessee has failed to declare or determinethe value of taxable service or has availed or utilizedcredit of duty or tax beyond the normal limit or bymeans of collusion or willful mis-statement or he ishaving operations spread out in multiple locations.

It is further proposed to provide that the CharteredAccountant or as the case may be the Cost Accountantshall submit the report to the Commissioner oncompletion of the audit and such audit may be orderedeven though such accounts had been audited under anyother law for the time being in force.

Before initiating proceedings on the basis of the Report,a reasonable opportunity of being heard shall be givento the Service Tax Assessee so audited.

iv)Amended->Sub-clause(K) Section 73->Provisionregarding Recovery of Service Tax not levied or paidor short levied or short paid or erroneously refundedwhere one year limit extended to 18 months is madeapplicable.

v) Section 73(1A)->To provide that where a notice ornotices have been served under sub-section (1), serviceof a statement or details of service tax not levied, ornot paid or short levied or short paid or erroneouslyrefunded on the person chargeable with service tax shallbe deemed to be service of notice on such person if thegrounds relied upon are the same.

vi)Amended->Sub-clause (L) in Section 80->Toprovide for the penalty waiver on the service tax payableon service of renting of immovable property as on the06/03/2012, subject to the condition that the servicetax and interest are paid in full within a period of sixmonths.

vii)Amended-> Sub-clause(M) in Section 83->Tomake certain provisions of the Central Excise Act

applicable to the service tax->Section 12E, 14, 15, 31,32, 32A to 32P (both inclusive),33A, 34A, 35EE, 35Fsubstituted.

viii)Amended-> Sub-clause(N) in Section 85->Toprovide for the period of filing Appeal before theCommissioner (Appeals) as two months extendable byone month from the date of receipt of decision or Orderof the adjudicating authority.

ix)Amended-> Sub-clause (O) in Section 86->Toprovide for the period of limitation for filing appealbefore the Tribunal as four months from the date ofreceipt of order by the Committee of ChiefCommissioners or Committee of Commissioners.

x) Section 86(1)->Provisions regarding Appeals toAppellate Tribunal by assessee where time limitapplicable 3 months.

xi)Amended-> Sub-clause (P) in Section 88->Tosubstitute the word ‘duty’ with the word ‘tax’.

xii)Amended-> Sub-clause (Q) in Section 89-> Tomake evasion of payment of service tax knowinglycommitted a punishable offence.

xiii)Amended-> Sub-clause (R) in Section 93(A)-> Toprovide for rebate of service tax on taxable servicesused for export of goods after the stage ofmanufacture,processing or removal.

xiv)Inserted-> Sub-clause (S) in Section 93(B)-

>To provide that all the Rules made U/s 94 andapplicable to taxable services shall also be applicable toservices other than taxable services in so far as they arerelevant to the determination of any tax liability, refund,credit of service tax or duties paid on inputs, andinputservices or for carrying out of the provisions ofChapter V of the Finance Act,1994.

xv)Amended->Sub-clause (T) of Section 94(2)->Toomit clause (ee), to amend clause (hhh) and to insertnew clause (i) and (j) in relation to Power to make Rulesw.r.t place of provision of taxable service Rules,Compounding of offences and Settlement Commission.

xvi)Amended->Sub-clause (U) of Section 95->Toempower Central Government to issue Orders forremoval of difficulty in case of certain provisionsinserted by the proposed legislation in this chapter.

xvii)Amended->Sub-clause (V) of Section 96C(2)->To substitute clause (e) thereof to provide foradmissibility of credit of duty or tax in terms of rulesmade in this regard.

xviii)Inserted->Sub-clause (W) in Section 97 and98->To extend service tax exemption retrospectively in

certain cases relating to management, etc., of roadsfrom 16/06/2005 to 26/07/2009 AND relating tomanagement, etc., of non-commercial Governmentbuildings from 16/06/2005 to 26/07/2009.

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5) Clar i f i cat ion regard ing reopening of completedassessments on account of clarificatory amendmentsintroduced by the Finance Act, 2012, in Section 2 clause(14), Section 2 clause (47), Section 9 and Section 195 withretrospective effect: (Letter [F.No.500/111/2009-FTD-1(Pt.)], dated 29/05/2012)

1. The Finance Act, 2012 has introduced certain clarificatoryamendments in section 2 clause (14), Section 2 clause(47), Section 9 and Section 195, of the Income Tax Act,1961 (“Act”), with retrospective effect from 01/04/1962 or01/04/1976, whereby meaning of various terms used inthese sections have been clarified in order to remove anydoubt regarding their interpretations.

2. These amendments have been introduced retrospectivelyin order to clarify the legislative intent and state theposition of law from the date of coming into effect of thesesections in the Act.

3. Doubts have been raised in various quarters about theimplication of these amendments on the assessments thathave already been completed and attained finality.

4. The Board, after due consideration, hereby directs that incase where assessment proceedings have been completedunder section 143(3) of the Act, before 01/04/2012, and noNotice for reassessment has been issued prior to that date;then such cases shall not be reopened under section147/148 of the Act on account of the abovementionedclarificatory amendments introduced by the Finance Act,2012.

However, assessment or any other Order which stand validateddue to the said clarificatory amendments in the Finance Act,2012 would of course be enforced.

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(cont)...RECENT CASE LAWS & OTHER DEVELOPMENTS/AMENDMENTS

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter September 2012

GLIMPSES ATDATED 04th AUG to 9th SEP, 2012

INFORMATION SYSTEM AUDIT COURSE

GLIMPSES ATDATED 01st AUG to 9th AUG, 2012

INTENSIVE COURSE ON MVAT, C.S.T. & ALLIED LAWS

(L-R): CA Bharat Gosar, Speaker, CA Durgesh Kabra, Chairman, CA Shweta Jain, Chairperson,Vasai Br., WIRC, CA Haresh Mehta, Committee Member, Vasai Br.

WIRC,

(L-R): CA Pramod Dhamankar, Past Chairman, Vasai Br., CA Kiran Garkar, Speaker, CA Haresh Mehta, Committee Member, Vasai Br.

CA Lalit Bajaj, memento to CA Durgesh Kabra,Chairman, WIRC,in presence of CA Bharat Gosar.

Past Chairman, Vasai Br., presenting

Participantsat MVAT,C.S.T. andAllied Laws CA Dilip Phadke CA Bharat Gosar CA Kiran Garkar

CA Deepak Thakkar CA Rajat Talati

Speakers

Speakers

(L-R): CA Pramod Dhamankar, Past Chairman, Vasai Br.Member, Vasai Br., Mr. Vivek Pandit, MLA,& Mr. Vinayak Nikam, Leader of Opposition-VVMC

CA Haresh Mehta, Committee

CA Haresh Mehta, Committee Member, Vasai Br.,welcoming Mr. Vivek Pandit, MLA

CA Sunil Kothari, (Vasai Br. Member), felicitating CA Kiran Garkar, Speaker

CA V. Vishwanathan (Vasai Br. Member), felicitating CA Bharat Gosar, Speaker

CA Unmesh Narvekar addressing alongwith CA Lalit Bajaj, Past Chairman, Vasai Br., Mrs. Srabani Kapoor, Sr. Faculty, ICAI,CA Shweta Jain, Chairperson, Vasai Br., Mr. Avinash Gokhale, Speaker, CA Pramod Dhamankar, Past Chairman, Vasai Br.,

(L-R):CA Shweta Jain, Chairperson, Vasai Br.,welcoming Mr. Avinash Gokhale, Speaker.

CA Lalit Bajaj, Past Chairman, Vasai Br.,presenting a memento to Mrs. Srabani Kapoor, Sr. Faculty, ICAI.

Mr. Avinash Gokhale, Speaker receiving a memento from CA Pramod Dhamankar,Past Chairman, Vasai Br.,

Mr. AvinashGokhale

Speakers

Participants at Information System Audit Course

11

Mr. Prashant Mali

CA. Hemant Joshi felicitating Uday Chendvankar, Corporator VVMC

(Vasai Br. Member),

The Institute of Chartered Accountants of India Vasai Branch of WIRC Newsletter12

September 2012

Editor: CA. Shweta Jain Published by Vasai Branch of Western IndiaRegional Council of The Institute of Chartered Accountants of India andprinted at Finesse Graphics and Prints Pvt. Ltd., 309, Parvati Ind. Est.,Sun Mill Compound, Lower Parel, Mumbai 400 013. Tel. : 40364600

The views and opinions expressed or implied are those of the authors orcontribution and do not necessarily reflect those of Vasai Branch.Unsolicited articles and transparencies are sent in at the owner's riskand the publisher accepts no liability for loss or damage. Material in thispublication may not be reproduced, whether in part or in whole, withoutthe consent of Vasai Branch.

DISCLAIMER: The Vasai branch is not in any way responsible for theresult of any action taken on the basis of the advertisement published inthe Newsletter. The members, however, may bear in mind the provisionof the Code of Ethics while responding to the advertisements.

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GLIMPSES AT DATED 25th AUG, 2012 LECTURE MEETING ON SME LISTING

CA R. D. Lukad, , welcoming Mr. (Vasai Br. Member) Ravi Tyagi, Chief Guest

CA Purshotam Soni ,memento to Mr. Swapnil Mahajan, Speaker

(Vasai Br. Member) presenting a

CA Atul Mehta presenting a memento to CA Manish Jain, Speaker

(Vasai Br. Member),

CA K. B. Kothari (Vasai Br. Member), bouquet to Mr. Swapnil Mahajan, Speaker

presenting a

CA Rakesh Soni, (Vasai Br. Member), bouquet to CA Manish Jain, Speaker

presenting a

Participants at Lecture Meeting on SME Listing

(L-R): CA Lalit Bajaj, Past Chairman, Vasai Br., Mr. Ravi Tyagi, Chief Guest, CA Shweta Jain, Chairperson, Vasai Br.,CA Amar Kakaria, Co-ordinatorMr. Swapnil Mahajan, Speaker and

Chief Guest

Mr. Ravi Tyagi

CA Manish Jain

Mr. Swapnil Mahajan

Speakers