Finance Act 2012

Dear All,

The Finance Bill, 2012 has  been enacted and has become  Finance Act,
2012 w.e.f. 28.05.2012 ( Act No 23 of 2012 ) with president's assent
and all statutory provisions has applicable w.e.f. 28.05.2012 except
the provisions of negative list which will be applicable after
issuance of the Notifications which are expected around June 1, 2012.
In all liklihood, the other provisions may be made applicable from
July 1, 2012.

FM on IT Retrospective Amendments

Print

Press Information Bureau
Government of India
Ministry of Finance

30-May-2012 15:38 IST

Statement of Union Finance Minister, Shri Pranab Mukherjee Regarding Issues of Retrospective Amendment and Transfer Pricing

On the issue of retrospective amendment, Union Finance Minister, Shri Pranab Mukherjee has said that he had given a commitment in the Parliament with regard to retrospective amendments that CBDT will issue a policy circular to clarify that in cases where assessment proceedings have become final before first day of April, 2012; such cases shall not be reopened. Now CBDT has issued a circular in this regard, the Finance Minister has stated.

Regarding the issue of Advisory Group relating to transfer pricing and International taxation, the Finance Minister has said that he has constituted an advisory group to resolve various issues in the area of transfer pricing and International taxation. The group has held its first meeting on 25th May 2012 and on advice of group and NASSCOM, the Finance Minister has approved issue of a circular to avoid multilevel TDS on software u/s194J.This will remove hardship in case of software distributors.


*****

SS/SL

Press Information Bureau
Government of India
Ministry of Finance

30-May-2012 15:38 IST

Statement of Union Finance Minister, Shri Pranab Mukherjee Regarding Issues of Retrospective Amendment and Transfer Pricing

On the issue of retrospective amendment, Union Finance Minister, Shri Pranab Mukherjee has said that he had given a commitment in the Parliament with regard to retrospective amendments that CBDT will issue a policy circular to clarify that in cases where assessment proceedings have become final before first day of April, 2012; such cases shall not be reopened. Now CBDT has issued a circular in this regard, the Finance Minister has stated.

Regarding the issue of Advisory Group relating to transfer pricing and International taxation, the Finance Minister has said that he has constituted an advisory group to resolve various issues in the area of transfer pricing and International taxation. The group has held its first meeting on 25th May 2012 and on advice of group and NASSCOM, the Finance Minister has approved issue of a circular to avoid multilevel TDS on software u/s194J.This will remove hardship in case of software distributors.


*****

SS/SL

--

ODI Online

Overseas Direct Investments by Indian Party - Online Reporting of Overseas Direct Investment in Form ODI

A.P. (DIR Series 2011-12) Circular No. 131, dated 31-5-2012

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 36, dated February 24, 2010, wherein ADs were advised about the operationalisation of the online reporting system of Overseas Direct Investments (ODI) with effect from March 2, 2010. The system, inter alia enables online generation of the Unique Identification Number (UIN).

2. Under the online reporting system, AD Category-I banks could generate the UIN online under the automatic route. However, reporting of subsequent remittances under the automatic route as well as the approval route was to be done online in Part II of form ODI, only after receipt of the letter from the Reserve Bank confirming the UIN.

3. It has now been decided to communicate the UIN in respect of cases under the Automatic Route to the ADs/Indian Party through an auto generated e-mail to the email-id made available by the AD/Indian Party. Accordingly, with effect from June 1, 2012 (Friday), the auto generated e-mail, giving the details of UIN allotted to the JV/WOS under the automatic route, shall be treated as confirmation of allotment of UIN, and no separate letter shall be issued by the Reserve Bank to the Indian party and AD Category - I bank confirming the allotment of UIN.

4. It may also be noted that the subsequent remittances under the automatic route and remittances under the approval route are to be reported online in Part II of form ODI, only after receipt of the e-mail communication/confirmation conveying the UIN.

5. The applications in form ODI for overseas direct investment under the approval route would continue to be submitted to the Reserve Bank in physical form as hitherto, in addition to the online reporting of Part I of the Form as contemplated in A.P. (DIR Series) Circular No. 36, dated February 24, 2010.

6. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

7. The directions contained in this Circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

IT Return Processing-Instructions

Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of A.Y. 2011-12 - Steps to clear backlog - Withdrawal of Instruction No. 1/2012, dated 2-2-2012

Instruction No. 4/2012 [F. No. 225/34/2011-ITA.II], dated 25-5-2012

The Board has decided to withdraw Instruction no. 01/2012 issued on 2nd February, 2012 on the subject above with immediate effect. The following decisions have been taken in this regard:

 (i)  In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. Five thousands, the TDS claim may be accepted without verification.

(ii)  Where there is zero TDS matching, TDS credit shall be allowed only after due verification.

(iii)  Where there are TDS claims with invalid TAN, the TDS credit for such claims is not to be allowed.

(iv)  In all other cases TDS credit shall be allowed after due verification.

old instructions

Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of assessment year 2011-12 - Steps to clear backlog

Instruction No. 01/2012 [F.NO.225/34/2011-ITA.II], dated 2-2-2012

The issue of processing of returns for the Asst. Year 2011-12 and giving credit for TDS has been considered by the Board. In order to clear backlog of returns, the following decisions have been taken:

(i)  In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. One lac, the TDS claim may be accepted without verification.

(ii)  Where there is zero TDS matching, TDS credit shall be allowed only after due verification. However, in case of returns of ITR-1 and ITR-2, credit may be allowed in full, even if there is zero matching, if the total TDS claimed is Rs. Five thousand or lower.

(iii)  Where there are TDS claims with invalid TAN, TDS credit for such claims are not to be allowed.

Section 40(a) Vs Trust Income-Case Law

IT : Disallowances u/s 40(a) are not applicable to computation of income of charitable trust/institution u/s 11.

• Section 40 is applicable only when deductions under sections 30 to 38 are being made in computing the income chargeable under the head "profits and gains of business or profession" under section 28. The exception in section 40 is carved out, only for the purpose of section 28 and not for computing the exemption of income of a charitable trust under section 11. The disallowance made under section 40(a) will only go to enhance the business profit of an assessee whose income is assessable under section 28 and not otherwise. Hence, provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11 - [2012] 21 taxmann.com 321 (Mumbai - Trib.)

High Court Takes Notice of TDS Refund Harassment by Dept & Demands Answers

High Court Takes Notice of TDS Refund Harassment by Dept & Demands Answers

One Anand Parkash, FCA, addressed a letter dated 30.4.2012 to the High Court in which he set out the numerous problems being faced by the assesses across the Country owing to the faulty processing of the Income Tax Returns and non-grant of TDS credit & refunds. He claimed that because of the department's fault, the assessees were being harassed. The High Court took judicial notice of the letter, converted it into a public interest writ petition and directed the CBDT to answer each of the allegations made in the letter. In addition, the Court demanded an answer to the following issues:

CBEC on ST Rate

Circular No. 158/9/ 2012 – ST

F.No 354/69/2012- TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Tax Research Unit

Room No 146, North Block, New Delhi

Dated : 8^th May 2012

To

Chief Commissioner of Customs and Central Excise (All)

Chief Commissioner of Central Excise & Service Tax (All)

Director General of Service Tax

Director General of Central Excise Intelligence

Director General of Audit

Commissioner of Customs and Central Excise (All)

Commissioner of Central Excise and Service Tax (All)

Commissioner of Service Tax (All)

Madam/Sir,

Subject: - Clarification on Rate of Tax - regarding.

    

  

1.             The rate of service tax has been restored to 12% w.e.f. 1^st April 2012.  Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1^st April 2012 and the payments shall be after 1^st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

2.             The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28^th March 2012 has also clarified the same. Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1^st April 2012, the service tax needs to be paid @12%.

3.             The invoices issued before 1^st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan. Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.

4.             Trade Notice/Public Notice may be issued to the field formations accordingly.

5.             Please acknowledge the receipt of this circular. Hindi version to follow.

(Dr. Shobhit Jain)

OSD, TRU

Fax: 011-23093037

Cost of Collection about 0.6%

Income Tax - Cost of Collection about 0.6%

• COST of collection showed a uniform trend of about 0.6 per cent during 2006-07 to 2010-11 except 2008-09 and 2009-10, where it was 0.7 per cent.

• The direct tax collection exceeded the budget estimates in all the years over the period 2006-07 to 2010-11 except 2008-09. The extent of actual collection exceeding the budget estimates ranged from 2.2 per cent in 2009-10 to 16.7 per cent in 2007-08.

• Direct tax collection increased by 94.2 per cent from Rs. 2,30,181 crore in 2006-07 to Rs 4,46,934 crore in 2010-11 whereas total Gross Domestic Product (GDP) has increased by 90.0 per cent from Rs. 41,45,810 crore in 2006-07 to Rs. 78,75,627 crore in 2010-11 indicating a significantly higher growth rate of tax collection over five years period. During the period 2006-07 to 2010-11, the average rate of growth of direct tax collection was 23.6 per cent. The annual rate of growth ranged from 6.9 per cent in 2008-09 to 35.6 per cent in 2007-08.

• In the case of the corporate assessees, net collection increased from Rs. 1,44,318 crore in 2006-07 to Rs. 2,98,687 crore in 2010-11 at an average annual rate of growth of 26.7 per cent and in the case of non-corporate assessees, net collection increased from Rs. 75,079 crore in 2006-07 to Rs. 1,40,042 crore in 2010-11 at an average annual rate of growth of 21.6 per cent.

• Voluntary compliance by assessees (pre-assessment stage) accounted for 81.4 per cent of the gross collections in 2010-11. The collection by way of voluntary compliance in 2010-11 was higher than 2006-07 but marginally lower as compared to 2007-08 to 2009-10.

• The assessee base grew over the last five years from 313 lakhs taxpayers in 2006-07 to 335.8 lakh taxpayers in 2010-11 at average annual rate of growth of 1.8 per cent.

• The pendency of scrutiny assessments increased from 2.8 lakh in 2006-07 to 3.9 lakh in 2010-11.

• At the end of 2010-11, as much as Rs. 2.9 lakh crore remained uncollected. This comprised demand of Rs. 2.0 lakh crore of earlier years and current demand (2010-11) of Rs. 0.9 lakh crore.

• Internal Audit completed 66 per cent of the targeted audits. Only 14.9 per cent of major findings raised by Internal Audit were acted upon by the assessing officers in 2010-11. Departmental response to Internal Audit was clearly inadequate.

Source: CAG's Report No. 27 of 2011-12 (Direct Taxes)

Advisory Group-International Taxation

Press Information Bureau 
Government of India
Ministry of Finance 

03-May-2012 14:42 IST

Advisory Group for International Taxation and Transfer Pricing Constituted

An Advisory Group for International Taxation and Transfer Pricing has been constituted by Central Board of Direct Taxes , Department of Revenue, Ministry of Finance. The Group would comprise of the following members:-

i.             Revenue Secretary to the Government of India-Head of the Advisory Group

ii.           Chairman, Central Board of Direct Taxes, Department of Revenue- Member

iii.          Director General of Income-tax (International Taxation), New Delhi- Member

iv.          Joint Secretary (FT&TR-I), Department of Revenue- Member Secretary

v.            Joint Secretary (FT&TR-II), Department of Revenue- Member

vi.          Joint Secretary (TPL-I), Department of Revenue- Member

vii.         Shri Som Mittal, NASSCOM, Member

viii.       Shri P. Y. Gurav, CII, Member

ix.          Shri Dinesh Kanabar , FICCI, Member

x.            Shri Ved Jain, ASSOCHAM, Member

xi.          Shri Mahesh P. Sarda, ICAI, Member

xii.        Shri T. P. Ostwal, IFA India, Member

xiii.       Shri Mukesh Butani, ICC India, Member

CBEC on ST on Agricultural Produce Marketing Committee

Circular No. 157/8 /2012-ST

F.No.354/234/2011-TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

(Tax Research Unit)

153, North Block,

New Delhi, 27^th April, 2012

To

Chief Commissioner of Customs and Central Excise / Central Excise & Service Tax (All)

Director General of Service Tax /Central Excise Intelligence /Audit; Commissioner of Customs and Central Excise/ Central Excise and Service Tax/ Service Tax (All)

Madam/Sir,

Subject:   Services provided by the Agricultural Produce Marketing Committee (APMC) /Board-- regarding.

            Representations have been received, seeking clarification regarding the levy of service tax on certain services provided by the Agricultural Produce Marketing Committee (APMC)/Board, using the 'market fee', in the light of Notification No.14/2004-ST. The representations have been examined. 

2.         APMCs are statutory bodies created with a view to regulate agricultural produce markets. APMCs charge market fee for issuing licenses to whole sale trader-cum-commission agent, wholesale traders, commission agent, mill / factory / cold storage owners or any other buyers of agricultural produce, for an agricultural year. The amount so collected by the APMC, from the licensees, is used for providing among other things facilities like roads, drinking water, weighing machines, storage places, street lights, etc. in the market area.  These services are not provided on one-to-one basis i.e. in consideration or as an obligation to the persons who have tendered the license fee. Some of these services may be capable of being used more conspicuously by the licensees but they do not form part of any contractual obligation to any of the licensees.

3.         Reportedly some field formations are inclined to take a view that services provided by the APMCs are in the nature of Business Support Service (BSS), and hence the exemption made available for BAS in relation to agriculture vide Notification No.14/2004-ST will not be applicable. As a consequence, service tax becomes leviable on the 'market fee' popularly known as 'mandi shulk', collected by the APMC.

4.         When examined with reference to its constitution and functions, the services provided by APMC out of the 'market fee' collected from the licensees, do not appropriately fall under the category of BSS.  The distinction between BSS and BAS is explained in the instructions dated 28.02.2006 issued from F.No.334/4/2006-TRU. In the light of the above instruction, the service provided by APMC out of the market fee is not in the nature of 'outsourced service'.   It is not possible to hold that the licensees have outsourced the development and maintenance of agricultural market to the APMC, which could have been otherwise undertaken by them, solely in their business interest. Development and maintenance of agricultural market infrastructure undertaken by APMC in accordance with the statute, is for the benefit of all users, rather than an activity solely in the interest of licensees. Hence, APMC cannot be said to be rendering 'business support service' to the licensees. 'Market fee' is not in the nature of consideration for such BSS.

5.         As statutory bodies, APMCs provide basic facilities in the market area out of the 'market fee' collected from the licensees, mainly to facilitate the farmers, purchasers and others. APMCs provide a host of services to the licensees in relation to the procurement of agricultural produce, which are 'inputs' in terms of the definition given in section 65(19) of the Finance Act, 1994 itself. To that extent the meaning of 'input' is much wider in scope than the meaning assigned in rule 2(k) of Cenvat Credit Rules, 2004. Therefore, it is clarified that the services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-ST.

6.         However, any other service provided by the APMCs for a separate charge(other than 'market fee') to either the licensees or farmers or any other person, e.g. renting of shops in the market area, etc. would be liable to tax under the respective taxable heads. This Circular may be communicated to the field formations and service tax assessees, through Public Notice/Trade Notice. Hindi version to follow.

(Samar Nanda)

Under Secretary, TRU

Tel/Fax: 011-23092037

--X--

Modification of Dealers Return - Central Excise

Earlier, dealers who imported goods or purchased goods from other importers had difficulty in filing dealer returns in ACES, as the ACES application did not allow such dealers to mention their own Central Excise registration number, or the IEC Code of the importer in the column prescribed for mentioning the CE Registration number in the block "Documents based on which credit is passed on" in the dealer return . The application has now been modified, so that 1st or 2nd stage dealers who have either imported goods on their own or have purchased goods from other Importers can mention their own IEC code or the IEC Code of the importers in the prescribed column. The ACES application will verify if the IEC code is a valid one available in the database or not and in case of invalid IEC codes, the returns will be rejected. In case of rejection, the dealers can incorporate the correct IEC codes and e-file the return.