Showing posts with label Misc. Show all posts
Showing posts with label Misc. Show all posts

Thursday, July 26, 2012

Whole of share capital being held by holding company as required under secti

 
IT: Whole of share capital being held by holding company as required under section 47(v) is not same thing as whole of share capital being held in name of holding company

[2012] 20 taxmann.com 201 (Bombay)
HIGH COURT OF BOMBAY

Commissioner of Income-tax

v.

Papilion Investments (P.) Ltd.*

Wednesday, July 18, 2012

Publication of Names of Accused - A Responsible Act - Not a Casual Joke AS per

 
Publication of Names of Accused - A Responsible Act - Not a Casual Joke

AS per the Service Tax (Publication of Names) Rules, 2008 , the following procedure has to be followed for publication of names of offenders:-

3. Publication of names and other particulars.- Subject to the provisions of these rules, the Central Government may cause to be published in the Official Gazette, print media, electronic media or by any other means, the names and particulars of the following persons, namely:-

(a) Persons, who have been adjudged under the provisions of the Chapter, to have contravened any of the provisions of the Chapter or the rules made thereunder, with intent to evade payment of service tax;

(b) Persons who have been adjudged to pay but has not paid any amount, payable under the provisions of section 73A of the Chapter:

4. Initiation of action and publication.-(1) If the Commissioner of Central Excise, having jurisdiction over such person, is satisfied that it is necessary or expedient in the public interest to publish the names and any other particulars as he deems fit, he shall after due verification of the facts, and the circumstances of the case, forward a proposal in the Annexure appended to these rules for such publication to the jurisdictional Chief Commissioner.

(2) The jurisdictional Chief Commissioner, on receipt of proposal referred to in sub-rule (1), shall within fifteen days from the receipt of such proposal, examine it and if he is satisfied that circumstance of the case justify such publication, may make a recommendation to the Board accordingly.

(3) On receipt of the recommendation by the Board, or on its own, the Central Government may cause publication of the name and other particulars in a manner as specified in rule 3.

So, the power to publish the names is with the Central Government and not even with the Board.

Even the premier investigative agency – CBI does not publish names of corrupt officials caught red handed!

Tuesday, August 23, 2011

Whether, to avail benefit of tonnage tax, it is necessary for ship to unde

Whether, to avail benefit of tonnage tax, it is necessary for ship to undertake voyage between international ports - NO, transportation between two domestic ports is also entitled: ITAT Third Member

CHENNAI, JULY 29, 2011: THE issues before the Third Member were - Whether, for the purpose of claiming the benefit of tonnage tax scheme under Chapter XII-C of the Act, the ship should always do its voyage between international ports; Whether the ship operated by the assessee company cannot be termed as a qualifying ship u/s 115VD on the ground that the ship operated by the assessee is rendering the same services which could be provided on land also and whether the ship transporting thermal coal from one location to another within the country, is a qualifying ship u/s 115VD of the Act. And the verdict goes in favour of the assessee.

Facts of the case

The assessee company is engaged in the business of shipping/port services. The company filed its return of income for the AY 2006-07 on a tonnage income of Rs. 76,85,246/-. The assessee opted for tonnage tax scheme and worked out the shipping income on tonnage basis as provided in section 115VG. The assessee was a co-owner of the ship "M.V.Gem of Ennore", engaged on a long term charter for transporting thermal coal for Tamil Nadu Electricity Board. The coal was transported from Haldia, Paradip and Vizag ports to Ennore and Tuticorin ports in Tamil Nadu. The assessee exercised its option for tonnage tax scheme for the ship "M.V.Gem of Ennore".

The assessing authority denied the benefit of tonnage tax scheme to the assessee in respect of its operating ship "M.V.Gem of Ennore" by holding that the ship was not a qualifying ship u/s 115VD. The basis of such a finding was that the ship operated by the assessee was transporting thermal coal from Haldia, Paradip and Vizag ports to Ennore and Tuticorin ports in Tamil Nadu, where all the ports were located within the country and well connected by road and rail on land. Therefore, the Assessing Officer held that the transport of coal between these ports can be routed through land either by road or rail transport. As it was possible to transport the coal through land by road or rail transport, the Assessing Officer held that the operating vessel was used for the provision of goods or services normally provided on land. As the transportation of coal between the above ports was possible by land routes, the assessee cannot claim the benefit of tonnage tax scheme.

In its appeal before the CIT(A), the assessee relying on the opinion of one of the Members of the Core Committee, Mr D P Sengupta, who had drafted the Tonnage Tax Scheme, argued that the AO grossly erred in considering `M.V.Gem of Ennore' to be not a qualifying ship. According to the assessee, carrying of cargo from one Indian port to another would not disentitle the assessee from returning the income of a ship under the Tonnage Tax Scheme, especially since, there was no disabling provision in Chapter XIIG of the Act. The CIT(A) allowed the appeal of the assessee and held that the core shipping activity of carrying goods from port to port was carried on by the ship operated by the assessee and only for the reason that it was possible to transport the coal between the places by means of land routes, the assessee cannot be denied the benefit of tonnage tax scheme.

On appeal to the tribunal, there was a conflict of opinion between the members and hence the matter was referred to the Third Member. The AM upheld the order of the CIT (A) holding that the ship operated by the assessee company was a qualified ship and, therefore, the assessee was entitled for the benefit of tonnage tax scheme u/s 115VG of the Act. On the other hand, the JM held that the assessing Officer was justified in holding that the ship "M. V. Gem of Ennore" was not a qualified ship for the benefit of tonnage tax scheme as envisaged under the relevant provisions of law. He held that the United Kingdom law and the Indian law on the subject cannot be considered as analogous for the purpose of interpreting the statutory provisions involved in the present appeal. The JM agreed with the view of the AO that coal can be transported between the concerned ports by land routes and, therefore, what for the assessee's ship was used was for the provision of goods or services of a kind normally provided on land and therefore it was not qualified u/s 115VD of the Act in the light of sub-clause(i) of section 115VD. He opted to allow the appeal filed by the Revenue.

After hearing the parties, the Third Member held that,

++ shipping companies are given option to pay tax as per normal provisions of computation or on the basis of presumptive tax regime described as `Tonnage Tax Scheme'. The income arising from operation of qualifying ship is determined based on the tonnage tax scheme. Normally a shipping company is to be assessed at the normal corporate tax rate. If the assessee chooses for tonnage tax scheme, it pays tax at a prescribed rate with reference to the tonnage of the ship. The actual loss or profit of the shipping company is not taken into consideration. Irrespective of the other factors, income is always computed but at a tonnage rate, de facto much lower to normal corporate tax rate. The accounting or actual income is replaced by a notional income. The business of operating a qualifying ship is treated as a separate business and income is also computed on stand-alone basis;

++ the conditions are that it must be a sea going ship; it must have a net tonnage of 15 tons or more; it must be a ship registered under the Merchant Shipping Act and it must possess a valid certificate from the Director-General of Shipping. The assessee must be a company engaged in the business of operating qualifying ship and income from the business of operating of qualifying ship would be deemed to be chargeable to tax under the head profits and gains of business or profession. The assessee has complied with the above conditions;

++ the contention of the assessing authority that the ship was excluded from the ambit of tonnage tax scheme mainly for the reason that the ship is rendering services only between Indian ports, which would have also been rendered on land by road or rail, is too far-fetched. There is no such stipulation anywhere in law. The tonnage tax scheme does not distinguish ships operating in coastal waters ad ships operating in international waters. There is no bar on the coastal shipping for the tonnage tax scheme. If the contention of the assessing authority is accepted, the income from coastal shipping would be outside the purview of tonnage tax scheme;

++ the normal activities of operating a sea going ship is to carry passengers, carry cargo, to do towage, salvage or other marine assistance or transport in connection with other services of kind necessarily provided at sea. The restriction has to be looked into in the above background. The restriction is that the vessel is not a qualifying ship for the purpose of section 115VD if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land. It is to be seen that no services can be rendered by ships on land. If that is the case wherever land routes are available one has to presume that an assessee cannot opt for sea routes and cannot claim the benefit of tonnage tax scheme. The law is not making any reference to any other alternative method available for transportation of goods and cargo from destination to destination. The law only says that an assessee company is entitled for opting for tonnage tax scheme if it is operating qualifying ship and satisfies other conditions provided therein. The law does not say that the ship should always do its voyage between international ports. The law does not say anything about the distance to be covered by ship in a single voyage. The law presumes that the benefit of tonnage tax scheme is available to all sea going ships satisfying the condition where it is operated between Indian ports or between Indian ports and foreign ports. The operation of a sea going ship does not assume any different character only for the reason that the ship is operating between two Indian ports. The character of operating a ship does not assume any other dimension only for the reason that the ship is operated between one Indian port and another foreign port. These are all matters never construed in the scheme of the Act providing the benefit of tonnage tax scheme to the assessees who are in the shipping industry and operating qualifying ships;

++ this is not an issue particular to India. World over countries are providing such incentives to shipping industry for their own economic advantage. The policy of giving such incentives to shipping industry is a matter of larger policies relating to economic priorities. If the intent of the law is interpreted in such a manner to arrive at an erratic conclusion, that interpretation must always be avoided;

++ the only provocation for the Assessing Officer to hold that the ship operated by the assessee company is not a qualifying ship is that the ship operated by the assessee is doing the same services that could be provided on land also. It is in that context that the CIT(A) has made a reference to the English law on the subject. The United Kingdom law while using the same phraseology in drafting the law in the matter of tonnage tax scheme has provided certain examples. It says what could be those items coming under the provisions provided to restrict the abuse of the tax incentive. The examples given in the English law states the examples such as business that could be provided on land or retailers, restaurants, hotels, radio stations, casinos, etc. Only for the reason that examples have been taken from English law it does not mean that it is not relevant to Indian law. The normal interpretation of the provision makes it clear that the restriction provided in sub section (i) applies only to those provisions of goods or services unrelated to the core activities of operating ship. Even though the ship operated by the assessee is transporting thermal coal from Indian ports to Indian ports, the ship is performing exactly the core function of a ship of carrying bulk cargo from port to port. There may be alternative means available for transportation of thermal coal on land route by truck or train. Theoretically speaking, even transport planes can carry coal from one destination to another destination. These kinds of extreme views are not at all called for in interpreting a beneficial provision couched in simple language. The assessing Officer is trying to bring in additional conditions which have never been contemplated in drafting the law;

++ on the facts and circumstances of the case, the TM agreed with the view of the AM to hold that the ship operated by the assessee "M.V.Gem of Ennore" transporting thermal coal from one location to another location within the country, is a qualifying ship u/s 115VD of the Act and the assessee is entitled for the benefit of tonnage tax scheme provided under Chapter XII-C of the Act


Tuesday, July 26, 2011

Interesting case of Bollywood actress.

MUMBAI: Bollywood actress Rani Mukerji believes in numerology when it comes to accepting or making payments. The amounts paid or received are mostly divisible by three, a reply by her accountant to the income tax showed.

This reply is part of the documents filed by the actor in the Bombay high court. Rani has challenged Income Tax Appellate Tribunal's addition of nine lakh rupees to her income received for her 2001 film Bas Itna Sa Khwaab Hain. HC on July 1 admitted Rani's appeal and will decide if the addition is based on presumptions.

A diary found by the income tax during a search at her residence on September 26, 2000 show two entries of Rs 9 lakhs and Rs 1 lakh for her role in the Anil Kapoor starrer `Nayak'. When the assessing officer sought an explanation, her accountant said, ``Family of Rani Mukerji believes in numerology. This must have been seen from the record that most of the payments and receipts are always divisible by 3. Thus, they accept amounts in 3, 6, 9, 12, 15, 21, 36 etc and also make payments in the same manner.''

Rani entered into contract with Surya Movies for Rs 51 lakhs for ``Nayak''. On June 7, 2000 she received a signing amount of Rs 10 lakhs. ``But as they believe in numerology they received Rs 9 lakhs and Rs 1 lakh on the same day and therefore two separate entries in the diary." The department also seized cash and jewellery during the searches. The AO held that "theory of numerology is an afterthought" and showed examples where Rani has received payments such as Rs 95000/- for ``Hello Brother' and Rs 1,51,000/- for Hadd Kar Di Aapne. The assessing officer made an addition of Rs 10 lakhs to her income received for Nayak. But the commissioner whom she appealed rejected the department plea and the tribunal also agreed with the commissioner.

In the Bas Itna Sa Khwaab Hain movie starring Abhishek Bachchan, Rani had shown Rs 27 lakh as remuneration received. The diary showed that she asked Rs 48 lakhs as remuneration and received contract amount of Rs 36 lakhs. Assessing Officer questioned why the amount was not changed in the diary if there was a reduction and added Rs 21 lakhs to her income. Commissioner of Income Tax (Appeals) in June 23, 2008 also confirmed addition of Rs 21 lakhs.

Rani's appeal before ITAT said Rose Movies Combine on May 18, 2001 had sought to reduce the remuneration to Rs 27 lakhs due to a crisis in the film industry. But ITAT's order stated there is no date mentioned in the letter and reply requesting for reduction of remuneration and `` the same has been accepted, seems totally unnatural as films stars are known to haggle for money to the last pie." It observed that when her father was so meticulous in maintaining the amounts as well as the dates ``there is no explanation why the amount of Rs 36 lakhs was not changed to Rs 27 lakhs.

ITAT added nine lakh rupees to her income but did not agree an addition of 21 lakhs. ITAT in its January 7, 2010 order said it does not agree that the remuneration should be Rs 48 lakhs because the figure of Rs 36 lakhs itself is noted in the diary against contract amount and the agreement is also of Rs 36 lakhs. Rani has challenged this in the HC.


.......
=============================================================================
Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.
=========================================================================

Thursday, July 7, 2011

Transfer of shares by a foreign company to its wholly owned Indian subsidiary no

Transfer of shares by a foreign company to its wholly owned Indian subsidiary not taxable in India

Praxair Pacific Limited (PPL ), a company incorporated in Mauritius, proposes to transfer its 74% equity stake in Jindal Praxair Oxygen Company Private Limited (JPOCPL) to its wholly owned subsidiary in India, Praxair India Private Limited (Praxair India). The consideration for the proposed transfer is stated to be determined on the basis of cost, unless a higher consideration is required under the pricing guidelines prescribed by the Reserve Bank of India as applicable for transfer of shares.
Issues before the AAR

» Whether the investment held by PPL in equity shares of JPOCPL would be considered as "capital asset" under section 2(14) of the Income-tax Act, 1961 ("ITA")?
» Whether transfer of JPOCPL from PPL to its wholly owned subsidiary Praxair India would be liable to tax in India in view of the exemption under section 47(iv) of the ITA?
Exemption under section 47(iv) of the ITA is available if the capital asset is transferred by a holding company to its wholly owned Indian subsidiary.

» Whether PPL would be entitled to the benefits of the India – Mauritius Tax Treaty ("Treaty") and whether the gain arising to PPL would be liable to tax in India having regard to the provisions of Article 13 of the Treaty?
» Whether the gains arising to PPL from the sale of equity shares of JPOCPL would be taxable in India in the absence of Permanent Establishment ("PE") of PPL in India in light of the provisions of Article 7 read with Article 5 of the Treaty?
» Whether PPL would be liable to Minimum Alternate tax under the ITA?
» Where the gains arising to PPL on account of the proposed transfer is not taxable in India under the Act or the Treaty, whether Praxair India, the transferee company, is required to withhold tax in accordance with the provisions of section 195 of the ITA?
» If the gains are not taxable in India, whether PPL is required to file any return of income of income under section 139 of the ITA? This question was not pressed by PPL.
» Whether the proposed transfer of equity shares by PPL to Praxair India attracts the transfer pricing provisions of section 92 to 92F of the ITA?
Contention of the applicant

» The shares held by PPL in JPOCPL are not held as stock-in-trade but represent investments and thus should be classified as a capital asset.
» As PPL proposes to transfer its equity shareholding in JPOCPL to Praxair India, its wholly owned subsidiary in India, the provisions of section 47(iv) of the ITA are fulfilled. Gains, if any, on the transfer of equity shares in JPOCPL would not be taxable in India.
» PPL would not be liable to tax book profits or Minimum Alternate tax under the ITA as the provisions of section 11 5JB would be applicable only to domestic companies and not to foreign companies.
» The gains from the proposed transfer of shares in JPOCPL by the Applicant would not be taxable in India as capital gains or business income in the light of the treaty.
» In case the proposed gains are not considered as capital gains but as business income, such business income will not be taxable in India since PPL does not have a PE in India.
Observations / Rulings of the AAR

» The shares in JPOCPL have been held as "Non-current assets – investment in subsidiaries" since 1995 and were never a subject matter of any transaction till date. As the shares were not held as stock in trade, the nature of the investment in these shares is held to be a "capital asset" as defined in section 2(14) of the ITA.
» As PPL proposes to transfer its equity share holding in JPOCPL to Praxair India which is its wholly owned subsidiary in India, the conditions under section 47(iv) of the ITA are fulfilled and hence the gains if any arising on transfer would not be taxable in India.
» As PPL is tax resident of Mauritius and has been issued Tax Residency Certificate by the Mauritius Revenue Authority, it would not be subjected to tax in India on the capital gains arising from the proposed transaction in India under the Treaty.
» The annual accounts of the applicant cannot be prepared in accordance with Schedule VI of the Companies Act 1956. The provision under the ITA relating to Book Profits Tax is not designed to be applicable to a foreign company which has no presence or PE in India. The AAR relied on its ruling in the case of Timken USA (AAR 836 of 2009) where it was held that under the Companies Act 1956 only such foreign companies who have established a place of business within India are required to make out a Balance Sheet and Profit and Loss account as required under the said Act.
» Sections 11 5JB of the ITA is not attracted in the case of PPL.
» The transfer pricing provisions of section 92 to 92F of the ITA would not be attracted in the absence of liability to pay tax on the capital gain.

Conclusion:-Gains from the transfer of shares by a Mauritius company to its wholly owned subsidiary in India would not be taxable in India either under the ITA. The AAR has also reiterated the benefit of the India- Mauritius tax treaty would be available to PPL as it had adequate tax residency certificate issued by the Mauritius Revenue Authority. Further, the gains from such transfer would not be subject to Minimum Alternate Tax as the provisions under the ITA governing such tax do not apply to a foreign company that has no presence or PE in India

Source: M/s. Praxair Pacific Limited (A.A.R. No. 855/2009 dated 23 July 2010)

Monday, June 27, 2011

Exemption under s 10(23C)(vi)

Exemption under s 10(23C)(vi)

Decided on: 30 March 2011

=============================================================================
Dear Friends : The emails are schedule to be posted in the blog and will sent to the group on various dates and time fixed. Instead of sending it on one day it is spread on various dates.  
=============================================================================