Just like before every Friday movie release, every actors feels goose bumps or before any big cricket finals, players are having sleepless night, Finance Ministers are hard put to prejudge and predict the outcome of budget speech. Will it click? Will the chemistry work? This is in spite of the 25 years of economic liberalization, covering trade, expenditure, tax policies, infrastructure to mention a few. The forthcoming budget will be no exception.

Some challenges before Finance Minister

First is the issue of fiscal consolidation versus growth. The Finance Minister had presented a new fiscal road map entailing a fiscal deficit of 3.9 per cent this year and declining to 3.5 per cent in the coming year. Given that private investment is subdued and hesitant, should the fiscal road map for next year be recalibrated to, say, 3.7 per cent or 3.8 per cent? The resultant extra resources (to the tune of Rs.28,000-Rs.42,000 crore) can be used to support public outlays in infrastructure.

Second, is increasing NPAs. Current estimates on non-performing assets (NPAs) of banks vary widely and while Rs.3.36 lakh crore (by September 2015) is the proximate figure, the more likely number is Rs.5 lakh crore. The impending NPAs could make this higher.

Third, on #tax reforms, hopefully the GST (Goods and Services Tax) legislation can be enacted sooner than later. Its compelling economic rationale needs no reiteration.

Investor confidence in India has shaken due to the shadows of retrospective taxation and damage control by other means like accepting arbitration awards, not appealing against court decisions, seeking alternative dispute redressal mechanisms have failed to dispel investor uncertainties which needs to be addressed upfront.

On corporate taxes, the issue of whether to reduce them to 25 per cent in one go or calibrate them over four years or accelerate the pace of calibration and getting rid of exemption is a difficult balancing act.

Finally, the issue of public-private partnerships. PPPs need to be reinvigorated by accepting the recommendations of the Kelkar committee. Equally, the recommendations of TRAI (Telecom Regulatory Authority of India) for a PPP model to ensure broadband connectivity to cover all the 2,50,000 panchayats deserves priority.

Few Expectations from Budget on #tax front

• #Corporate tax rate should decrease and tax exemptions should be rationalized
• In order to encourage startups, some #tax exemptions or incentives be announced
• 206AA not to be triggered if DTAA provides lower tax rate
• #DTAA benefit should be allowed on basis of self-declaration instead of TRC
• Interest should be allowed on refund of excess payment of self-assessment tax
• Clarity on #taxability of Joint Development Agreements
• Clarity on taxability of secondment agreements
• Rate of Service-tax and its threshold limit likely to be increased
• Separate provisions required for E-Commerce transactions
• Credit of Swachh Bharat Cess should be allowed
• Need to rationalize Customs Duty Structures
• There should be some clarity on the accumulated balance of EC & SHEC

Please share your valuable update.

 I am the senior partner in EzyBiz India Consulting LLP which is based in New Delhi, India. For any queries relating to Taxation, Regulatory, Legal or Assurance kindly drop a mail @ anil@ezybizindia.in or contact@ezybizindia.inand we would be happy to assist.

Some important judicial pronouncements February 2016

a) Brokerage paid to the third party has nothing to do with the rental income paid by the tenant brokerage not deductible in computing income from house property.
Cenvat of Goods/ Service used in construction of rented property allowed. [Nirlon Ltd. vs. Commissioner of Central Excise,Mumbai].

b) Proceedings under rule declared unconstitutional by HC in invalid. [Vipul-S Plasticrafts P. Ltd. vs. Commissioner of Central Excise].

c) Supply Of Goods to Indian Navy not must to claim excise exemption. [CCEx vs. M/s Wartsila (I) Pvt. Ltd].

d) Manufacture of rosin and turpentine without aid of power , seeking retrospective exemption is not a constitutional right - HC. [Mangalam Organics Limited vs Union of India - 2016 (2) TMI 529 - Delhi High Court].

e) The petitioner is admittedly not a foreign company : Since the petitioner is not an eligible assessee in terms of section 144C(15)(b), no draft order can be passed in the case of the petitioner u/s 144C(1) - HC. [Honda Cars India Limited (Formerly – M/s. Honda Siel Cars India Limited vs Deputy Commissioner of Income Tax & Another - 2016 (2) TMI 527 - Delhi High Court].

CBDT has directed that the time limit of six months is to be strictly followed by the Assessing Officer while disposing off the applications filed by the assessee/deductor/collector under section 154 of Income Tax Act, 1961 Vide Instruction No. 01/2016 dated 15.02.2016

The CBDT has directed Assessing Officers to pass rectification orders in writing and serve a copy on the assesseee and not just make an entry on the AST system. CBDT's Instruction No. 02/2016 dated 15.02.2016

MCA: Draft Companies (Accounting Standards) Amendment Rules, 2016 and Companies (Indian Accounting Standards) Ammendment Rules, 2016 placed at MCA Website for public comments latest by 01/03/2016.

CBEC: Service Tax and Central Excise (Furnishing of Annual Information Return) Rules, 2016 has been introduced w.e.f. 01-04-2016 vide Notification No. 04/2016-ST dated 15-02-2016 read with ‘Section 15A-Obligation to Furnish Information Return’ of the Central Excise Act, 1944.

Chennai ITAT upholds Sec 271(1)(c) penalty levy on an assessee (a NBFC) for providing incorrect treatment to ‘cash collateral’ offered to bank, holds it a case of furnishing inaccurate particulars of income for AY 2007-08; 

Holds that assessee’s false claim supported by Chartered Accountant’s opinion cannot absolve assessee from Sec 271(1)(c) penalty, relies on co-ordinate bench ruling in Rattha Cidadines Boulevard Chennai (P) Ltd.;  

Assessee in present case sold portion of ‘loan receivables’ to a Bank on Bilateral Buy Out basis and offered ‘cash collateral’ @ 2% of receivables, AO added such cash collateral  to assessee’s income and initiated penalty proceedings;  

Rejects assessee’s stand that cash collateral (which was utilized by Bank to cover loan realization deficiency)  was in the nature of retention money and hence cannot be recognized as income until retention period was over; Observes that while assessee claimed realization deficiency as Bad debts, income of 2% was not considered in P&L A/c, opines that “these are incorrect treatment given by the assessee company and have no sanction of law and also not supported by any Accounting standard.”:ITAT

The Central Board of Direct Taxes (#CBDT) has laid down operational guidelines for e-assessments of select non-corporate taxpayers to be undertaken as a pilot in five metros.

It has now specified the format and standards for ensuring secured transmission of electronic communication between the taxpayer and the Income-Tax Department.

The move comes three months after the CBDT announced its intent use ‘electronic mail’-based communication for assessment.

It had then announced that a pilot project would be launched in five “non-corporate charges” at Delhi, Mumbai, Bengaluru, Ahmedabad and Chennai.

Initially, 100 cases would be identified for e-hearing in each of these five regions and a major part of the assessment would be done electronically, the CBDT had then decided. Only cases taken up for scrutiny were to be covered under the pilot.

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

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

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

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

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

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

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

Thanks & Regards

Anil

+91-9899217778

1. Sec 68: No addition where parties have sufficient bank balance while giving loans. [ITO vs. Rekha Bansal (ITAT Delhi), I.T.A.No.4455/Del/2013 & C.O. No. 43 / Del/ 2014, AY 2009-10].
2. Subsidy to set up a new unit or to expand an existing unit is capital receipts, purpose test will prevail. [M/s. Shivalik Prints Limited vs. ACIT (ITAT Delhi), ITA No.4698/Del./2011]
3. Interest subsidy for repayment of loan acquired for acquisition of capital assets, is capital receipts. [DCIT vs. M/s J.K. Cement Ltd. (ITAT Lucknow), ITA No.499/LKW/2010, ITA No.247 / LKW/2011, ITA No.180/LKW/2012, ITA No.570/LKW/2012 & ITA No.668/LKW/2014
4. Expenditure incurred by the assessee on issue of Foreign Currency Convertible Bonds (FCCB) is revenue expenditure allowable under section 37(1) of the I.T. Act. - Tribunal. (Gati Limited vs Income Tax Officer, Ward – 2 (2) Hyderabad - 2016 (2) TMI 404 – ITAT HYDERABAD)
5. Today 15.02.2016 is last day for issue of quarterly TDS certificate for the quarter ending in December, 2015 by government deductors.
6. Today 15.02.2016 is the due date for e-payment of PF for the month of January, 2016 (No grace period of 5 days available).