Sunday, July 6, 2014

Update in Direct Tax Laws # 8

No of days of forced stay in India cannot be counted while determining the Residential Status.  Thus, where the Government Agencies illegally impounded the passport of the assessee and because of which his stay in India exceeded 182 days, he cannot be treated as ‘Resident’. i.e The number of days for which his passport was impounded is to be excluded while counting the period of STAY. [Suresh Nanda Vs ACIT] [2014] [45 Taxmann.com 269] [Delhi – Tribunal]

Tuesday, July 1, 2014

CENVAT credit is available on expenditure incurred towards after sale services


Update in Indirect Tax Laws # 7: Service Tax Paid towards expenses on after sales service is eligible for credit as input service as the same is covered in the definition of input service as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. [Com Vs Mahindra & Mahindra Ltd] [34 STR J 217] [RK Jain] [2014] [Mumbai-HC]

Monday, June 30, 2014

CENVAT Credit on Sales Commission Service is not available.


Update in Indirect Tax Laws # 6: CENVAT Credit on Sales Commission Service is not available.

Thus, where the assessee incurred expenditure towards ‘Sales Commission Service’, held that CENVAT Credit on the same is not available to the assessee. [Astik Dyestuff Pvt Ltd Vs CCEX] [2014] [34 STR 814] [Gujarat HC]; In this Judgment they affirmed the judgment given in earlier case of ‘CCEX Vs Cadila Healthcare Ltd] [2013] [30 STR 3] [Gujarat HC]. Readers may note that a contrary judgment was given by the P&H HC in ‘CCEX Vs Ambica Overseas’ [2012] [25 STR 348];

Sunday, June 29, 2014

Yuvraj Singh gets Service Tax Demand Notice


Update in Indirect Tax Laws # 5:

Yuvraj Singh gets service tax notice: The Central Excise Department had issued a show cause notice to cricketer Yuvraj Singh, seeking payment of service tax to the tune of Rs 46.60 lakhs on his income from promotional activity. The tax demand was raised on the payment of Rs 4.14 Crores which Yuvraj Singh received from Sahara Adventure Sports for carrying out promotional activity, as clarified by the Central Excise Officials. However, he had already paid Rs 36 lakhs as service tax and the balance is to be paid as per the terms of the said notice. [Source: Page J181 Volume 34: Part 5 of STR – RK Jain] [Next Batch for CA Final IDT - Nov 2014 attempt starts on 11th Aug 2014]

Friday, June 20, 2014

Update in Indirect Tax Laws # 4:

Whether a composite contract for ‘Manufacture, Supply and Installation of Lifts in a Building’ amounts to ‘Contract of Sale’ or ‘Works Contract’?
It was held that it amounts to ‘Contract of Sale’ and not a ‘Works Contract’ as skill and labour employed for converting main components into end product was only incidental. Thus, the decision of the Supreme Court in ‘State of AP Vs Kone Elevators’ [2005] [181 ELT 156] was overruled by the 5 member bench of the Supreme Court in ‘Kone Elevator India Pvt Ltd Vs State of Tamilnadu’ [2014] [34 STR 641] [SC].

Thursday, June 19, 2014

Updates in Direct Tax Laws - 3


The Guiding Factor as to the taxability under the head ‘Salaries’ Vs ‘Fees For Technical Services’ – Expatriate Taxation Regarding:

The question is whether the services rendered by the overseas entity will be taxable under Fees For Technical Services in the hands of the overseas entity or whether they are taxable as ‘Salaries’ in the hands of the non-resident employees?

Held that, where the Indian entity only had the right to terminate the secondment, without the right to terminate the original employment, overseas entity was the real employer of seconded employees. Reimbursement of salary was to be regarded as FTS [Fees for Technical Services] as they rendered quality control services till the necessary skills were acquired by the resident employee group. [Centrica India Offshore P Ltd Vs CIT] [2014] [44 Taxmann.com 300] [Delhi]

Wednesday, June 18, 2014

Updates on Direct Tax Laws-2

Whether Transfer Pricing Regulations apply to Guarantee Transactions given by an entity to its Associated Enterprise post amendment of Sec 92B by the Finance Act, 2012:
It all depends on various facts and one of the main factors to be considered is whether the AE had taken any loan based on the ‘Corporate Guarantee’ given by the other entity. If the answer is ‘Yes’, then it falls within the ambit of TP Provisions. [Four Soft (P) Ltd] [Hyd Tribunal – ITA Number 1901/Hyd / 2011]
On the other hand, where the AE had not taken any loan based on the ‘Corporate Guarantee’ extended by the other enterprise, then it does not fall under the scope of TP Provisions even after the amendment of Sec 92B by the Finance Act, 2012. [Bharti Airtel Ltd Vs Addl CIT] [2014] [43 Taxmann.com 150] [Delhi-Tribunal]
Where TP provisions are applicable, CUP method is to be used to benchmark the same.