Hewlett-Packard

1, Temple Complex, Shiv Mandir, Tilak Bridge, New Delhi 110001

Mar2015

ASAP & ASSOCIATES

CHARTERED ACCOUNTANTS

Deepika Garg

(CA- FINAL)

COMPILED BY

INDEX 1. TDS/INCOME TAX ………………………………………………..……………………………………….…5

2. SERVICE TAX…………………………………………………………………..…………………….….9

3. DVAT..................................................................................................... 11

4. MISC......................................................................................................13

Warm greetings!

The prime motive of this newsletter is to keep you updated with the day-to-day changes in the Direct and Indirect Tax scenario. We try to consolidate and refer to amendments and notifications taking effect during the last 15 days. Tax laws have to be interpreted in each context and can have different implications in different circumstances. You are advised to approach us for formal professional advice before you intend to act on any issues. This information may not be exhaustive nor may the interpretation given here be conclusive. ASAP shall not be responsible for any action taken without formal consultancy.

TAX UPDATES

Over the years, TDS has become a big area of consultancy and compliance. You can find numerous individuals who may not even be business entities getting taste of TDS compliance blues. This specially arises where assessee is required to deduct and deposit tax as buyer of property. In case of business entities the number of defaults have been surpassing the total number of compliance formalities in a year. It has therefore become imminent that organizations train themselves to the requirement of law. A. Interesting cases for TDS U/S 195-

Foreign Remittance from India

Peculiar Cases where Courts held Assessee Liable for Deduction of TDS u/s 195

Withholding taxes u/s 195 in respect of transactions with Non-Residents has always been a bone of contention between Assessee and tax authorities. Though liability for deduction of TDS is clear in respect of some transactions like royalties, fees for technical services, interest etc., however there are few interesting transactions where courts/tribunals have held assessee liable for deduction of TDS. Some of such instances are listed below:

a. Prepayment Discount liable for TDS:

Pre-payment discount given by assessee to foreign buyers in absence of any mention in purchase contract that assessee was obliged to give said discount, was in nature of interest and tax was deductible at source under section 195 (DCIT v. Kothari Food and Fragrances) 2015 (1) TMI 356 - ITAT LUCKNOW.

b.) Usance Charges:Usance charges paid to non-resident on import purchase by assessee would be considered as

'interest' income (ACIT v. BhavaniEnterprises) 2015 (3) TMI 545 - ITAT PANAJI

Usance Interest: 'Usance interest' paid to non-residents by Indian company for availing credit under irrevocable letter of credit for delayed payments for purchase of raw materials is interest under section 2(28A), being an income deemed to have accrued or arisen in India undersection 9(1)(v)(b) (Uniflex Cables Ltd. V. DCIT) 2012 (4) TMI 190 - ITAT MUMBAI

Access to Database: where assessee, in order to carry out market research for its clients, made payment of fee to specialist agencies located abroad for allowing access to record of online

TDS/ Income tax

consumers maintained by them, in view of order passed by jurisdictional High Court in case of CIT (International) v. Wipro Ltd. 2011 (10) TMI 473 - KARNATAKA HIGH COURT , payment in question was to be regarded as 'royalty' taxable in India and, thus, assessee was liable to deduct tax at source while making said payment ITO v. Cross Tab Marketing Services (P.) Ltd. 2014 (9) TMI 193 - ITAT BANGALORE

Marketing Survey: Payment to a foreign company for marketing survey and identifying potential foreign customers for assessee's product were only consultancy services taxable in India and, hence, assessee was bound to deduct tax under section 195. English Indian Clays Ltd.v. ACIT 2013 (11) TMI 1368 - ITAT COCHIN

Reimbursement of audit fee to parent company: Tax was required to be deducted at source on share of ISO audit expenses paid to foreign parent company, as element of income was embedded in receipt of auditor. SPX India (P.) Ltd. V. CIT(A) 2014 (1) TMI 939 - ITAT DELHI

Issue of Shares: Where non-resident-company provided technology/know-how in form of capital contribution, tax was required to be deducted at source on issue of shares. There was no transfer of capital asset, and joint venture agreement allowed assessee only right to use know-how, issue of shares for

same constituted royalty, liable for TDS u/s 195. BIOCON Biopharmaceuticals (P.) Ltd. V. ITO 2015 (3) TMI 684 - ITAT BANGALORE

Sale of Indian Property by NRI: Where seller of Indian property was NRI according to address given in sale deed, assessee-purchaser ought to have made TDS under section 195on sale consideration payable to NRI seller, failing which he was to be treated as assessee-in-default under section 201(1). If NRI purchaser fails to take recourse to section 195(2), he would be required under section 195(1) to deduct tax on entire sale consideration payable to NRI seller and not only on capital gain arising on transaction. Syed Aslam Hashmi v. ITO 2012 (10) TMI 293 - ITAT BANGALORE

Sale of Indian Property by NRI: Where assessee purchased a property jointly owned by co-owners, in view of fact that one of co-owners of property was a non-resident, assessee was required to deduct tax at source under section 195 to extent sale-consideration was paid to said co-owner (R. Prakash V. ITO 2015 (3) TMI 682 - ITAT BANGALORE)

Downloading software: Payment made by assessee to non-residents for downloading their licenced software amounted to payment of royalty and, thus, assessee was liable to deduct tax at source while making said

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payment. (Cosmic Circuits (P.) Ltd. V. ITO 2015 (3) TMI 683 - ITAT BANGALORE)

Purchase of Software: Assessee was held liable to deduct TDS on payment made to non-resident for purchase of software because same would constitute 'royalty' under section 9. CIT v. P.S.I. Data System Ltd. 2012 (8) TMI 151 - KARNATAKA HIGH COURT

Use of Database: Payment made by assessee to a non-resident in order to obtain licence to use database maintained by it, is to be regarded as royalty CIT v. Infosys Technologies Ltd.2011 (10) TMI 370 - KARNATAKA HIGH COURT

Adjustments between NRs for work done in India liable for TDS: Where, assessee a tax resident of Thailand, was engaged in execution of hydroelectric-power project of NTPC as a sub-contractor of another Thailand based company ITDL, in view of fact that ITDL provided certain machinery on hire to assessee, tax was required to be deducted at source while making payment of hire charges even though said payment was not made in cash and it was merely adjusted from amount due to assessee on account of execution of contract work. Right Tunneling Co. Ltd. V. ADIT 2014 (9) TMI 312 - ITAT DELHI

Transponder Fees: Payment of fees for use of satellite transponder service by assessee to US company taxable as 'royalty', under article 12 of India-US DTAA. Viacom 18 Media (P.) Ltd.v. ADIT 2014 (4) TMI 737 - ITAT MUMBAI

Transponder Fees: Transponder fee paid by assessee-company to foreign company was covered by definition of ‘royalty’ that was chargeable to tax under provisions of section 9(1)(vi), assessee should have deducted tax at source ACIT v. Sanskar Info. T.V.P. Ltd. 2008 (6) TMI 378 - ITAT MUMBAI

Preventive repairs: Assessee availed services of repairs of its machinery from non-residents which included assistance for preventive maintenance - Assessee made payment of repair charges without deducting tax at source since services in question were not mere repairs but were towards preventive maintenance, it was to be concluded that German company was providing technical assistance and services, and, thus, payments made for said services amounted to 'fee for technical services' . In view of above, assessee was liable to deduct tax at source while making payments to non-resident. Bosch Ltd. v. ITO 2012 (12) TMI 694 - ITAT BANGALORE

Advisory Services: Payment by assessee to French company in consideration of receiving services in nature of

assistance, professional and administrative consultation is fee for technical services liable to TDS under section 195. Mersen India (P.) Ltd., In re 2012 (4) TMI 351 - AUTHORITY FOR ADVANCE RULINGS

Testing Charges: Where applicant a tax resident of Hong Kong provided inspection, verification, testing and certification (IVTC) services to Indian customers, payment received/receivable by applicant in relation to said services would be chargeable to tax in India as 'fees for technical services' under section 9(1)(vii)(b) and liable for deduction of TDS u/s 195. XYZ Ltd. In re 2012 (3) TMI 242 - AUTHORITY FOR ADVANCE RULINGS

Data Processing: Assessee-company was engaged in business of providing consultancy services in respect of setting-up of power projects in India and abroad - It had entered into an agreement with a German company for obtaining information which had been used for finalizing its design or removing defects in its power project’s design - It had paid licence fees and data processing charges to German company. HELD, payments made for data processing were for specialized services which were in nature of technical services undersection 9(1)(vii), and liable for TDS. Dr. Hutarew and Partner (India) (P.) Ltd. V. ITO 2008 (9) TMI 414 - ITAT DELHI-C

Access to Portal: Payments made by Indian agent/subscriber to applicant for providing a password to access and use internet based Air Cargo portal hosted from Singapore are in nature of royalties and fees for technical services and taxable under article 12 of DTAA as also under section 9 and subject to deduction of tax at source. Cargo Community Network (P.) Ltd., In re 2007 (1) TMI 108 - AUTHORITY FOR ADVANCE RULINGS

B. Loan received by private companies from members, directors or their relatives before 01.04.2014 is not deposits.

Amounts received by private companies from their members, directors or their relatives before 1st April, 2014 – Clarification regarding applicability of Companies (Acceptance of Deposits) Rules, 2014 .

Stakeholders have sought clarifications as to whether amounts received by private companies from their members, directors or their relatives prior to 1st April, 2014 shall be considered as deposits under the Companies Act, 2013 as such amounts were not treated as ‘deposits’ under section 58A of the

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Companies Act, 1956 and rules made thereunder.

The matter has been examined in consultation with RBI and it is clarified that such amounts received by private companies prior to 1st April, 2014 shall not be treated as ‘deposits’ under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition that relevant private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the financial statement.

Any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall, however, be in accordance with the provisions of Companies Act, 2013 and rules made thereunder.

This issues with the approval of the competent authority.

C.Various important due dates for month of March 2015.

(i) Due datefor deposit of TDS for month ended March 2015 for making e-payment: 30-April- 2015.

(II) Due Date of Issuing TDS Certificates:

In case of Non Salary- within Fifteen days from the due date for furnishing the statement of TDS

In Case of Salary – By 31st May of the financial year immediately following the financial year in which the income was paid and tax deducted.

A. Extended Time for CENVAT credit

Change w.e.f. 1 September, 2014:

Vide Notification No. 21/2014-CE(NT) dated 11.07.2014, the following proviso was inserted for the first time to fix time limit to avail CENVAT credit-

Accordingly CENVAT credit was not available after six months from the date of issue of invoice by service provider.

This proviso was effective from 1.09.2014. Earlier, there was no time limit on availment of CENVAT credit.

It may be noted that CENVAT credit with respect to invoices / challans / bills which were dated prior to 01.09.2014 was also subjected to such time restriction.

For example, if CENVAT credit was not taken for a bill dated 01.07.2014, such credit could be availed only till 31st December 2014.

Change w.e.f. 1st March, 2015- W.e.f. 1st March 2015, time limit for availment of CENVAT Credit has been extended to one year from the date of invoice. This implies that CENVAT credit on inputs and input services which could be earlier availed within the period of six months from the date of invoice can now (w.e.f. 1.3.2015) be availed within a period of one year from the date of invoice .

The amendment has been made vide Notification No. 6/2015-CE(NT) dated 1.3.2015 w.e.f. 1.3.2015 wherein the words 'six months' have been substituted by words 'one year' in third proviso of Rule 4(1) of Cenvat Credit Rules, 2004.

Impact of Change-

The amendment w.e.f. 1.3.2015 of allowing time limit of one year instead of six months shall render the earlier amendment redundant.

SERVICE TAX

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SERVICE TAX

Further, those who could not claim CENVAT credit of invoices issued prior to September, 2014 can now do so as the time limit has been raised from six months to one year. Thus, on all eligible invoices of last one year CENVAT credit be availed.

There would be many instances where the assessees received input services but could not take registration on account of initial exemption. In such cases, it may be advisable that the assessee takes registration and files periodical returns wherein credit is duly availed.

B. Outdoor Catering –A Judgement PERFECT VENDING (INDIA) PVT. LTD. Versus COMMR. OF SERVICE TAX, CHENNAI 2015 (3) TMI 1011 - CESTAT CHENNAI In this case the applicant is engaged in the business of manufacture and sale of coffee and tea vending machines as well as supply of tea and coffee in their customer’s premises. The applicant entered into an agreement with the client on the following terms and conditions :-

1. The applicant will supply coffee/tea of good quality as approved by the client on all working days as indicated by the authorized person from the client. 2. The timing of supply of tea/coffee will be indicated to the applicant and subsequently changes as per the requirement form time to time. 3. The applicant will be solely responsible for the maintenance/cleanliness and tidiness of the vending machine installed for the purpose of supplying of coffee/tea. It is also requested by the applicant to appoint a pantry boy in order to maintain the machines in good conditions. The gross monthly salary all inclusive of 5,830/- for a period of one year (which includes ESI/PF/Bonus, Gratuity, insurance etc.). The labour cost will be added along with the monthly bills. 4. The applicant will personally visit client’s premises regularly to ensure that the arrangements are working to the satisfaction of the representatives of the client. 5. Cash transactions by any of your employees with our employees are strictly forbidden and in any case the client will not be responsible for the same.On perusal of the said agreement, prima facie, it was found

that the applicant is not simply selling tea/coffee to the client but also providing services in addition to that

Thus this case clearly falls under the purview of outdoor catering service and is thus liable to be taxed under service tax net.Thus there are agreements in which place, material and even utensils are provided by the service receiver and the service provider brings some material and uses the said place, material etc and provides the service. These kinds of agreements will fall under the category of outdoor catering service and are liable to be taxed.This is just for your reference. It does not constitute our professional advice or recommendation.

C. Various important due dates for month of March 2015.

I. Due date in case of other than

individual & partnership firmfor deposit of Service Tax for month ended March 2015 for making e-payment: 31-March -2015.

(ii) Due date for filing of Half Yearly Service Tax return (October to March): 25-April -2014

A. Authorized as Spl. OHA for hearing the objections with respect to 2A-2B mismatch of 2012-13. (Circular No 29 Dated 20 Mar- 2015)

Sh. Biju Raj E, Assistant Commissioner (Ward-206) is hereby authorised as Spl.OHAsfor hearing the objections with respect to 2A-2B mismatch of 2012-13 in respect of Wards 201& 206 in place of Sh. Srirangam Sai, Assistant Commissioner since transferred out of thisdepartment.

B. Various important due dates for the

month of March 2015. 1. Due date for deposit of DVAT TDS

for month ended March 2015: 15-April -2015.

2. Due date for deposit of DVAT & CST for month/quarter ended march 2015: 21-April -2015.

3. Due date for issuing of DVAT TDS certificates for the month ended March 2015:22-April -2015.

DVAT

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A. Mandatory Documents for Import Export of Goods w.e.f. 01.04.2015.

Vide N/N 114, dated 12th Mar’15, DGFT has prescribed following documents(only three in number) which shall be mandatory for the import/export of goods:

For Export:

Billof Lading/Airway Bill ; Commercial Invoice cum Packing

List (Separate Commercial Invoice and Packing List would also be accepted

Shipping Bill/Bill of Export

For Import:

Bill of Lading/Airway Bil Commercial Invoice cum Packing

List (Separate Commercial Invoice and Packing List would also be accepted)

Bill of Entry.

The aforesaid notification shall be applicable w.e.f. 1st Apr’15 & the same has been given hereunder for ease of reference.

It is a welcome move made by the govt. in order to attain the objective of 'ease of business'

B. Various Important Due dates for the month of March 2015.

Due date Applicable Form

Obligation

15/04/2015 Electronic Challan cum Return (ECR)

E-Payment of PF for March(Cheque to be cleared by 20th)

21/04/2015 ESI Challan

Payment of ESI of march

MISCLLENAEOUS

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