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Tax Digest
Quarterly newsletter
June 2016
Editorial,
Dear readers,
We are pleased to present the June 2016 edition of EYs quarterly newsletter, Tax Digest,
which summarizes significant tax and regulatory developments during the April to June
quarter.
This newsletter is designed as a ready reckoner and covers landmark tax judgments, an
update on tax treaties and alerts on topical developments in the tax arena. The In the press
section includes published articles on various issues in the tax realm over the last quarter. It
also details key thought leadership reports and other topics of interest to tax professionals.
We hope you find this edition, both timely and insightful.
Best regards,
EY Tax Update team
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Direct tax
Verdicts
Reported decisions supported by our Litigation team
Concessional rate of tax on royalty and interest income according to India - Singapore DTAA
Significant Supreme Court rulings
T
ransaction charges paid to stock exchange for online trading facility does not constitute FTS
S
C allows tax holiday on subsidies received towards reimbursement of business running costs
T
ips received by waiters from customers is not salary income
Rulings on whether certain payments can be treated as payment of rent
Payments made for hotel room liable to tax withholding as rent
M
umbai Tribunal holds that payment by builders to tenants for alternate accommodation is not rent
Deductibility of expenditure
C
alcutta HC allows deduction for expenses incurred on development of an application software
Payment of damages for land-encroachment allowable as deduction
Whether an abusive transaction?
B
uyback transaction taxable as capital gains even if considered as dividend, tax withholding does not apply
2 Tax Digest Home | Previous | Next

Rulings on tax withholding
M
umbai Tribunal rules withholding not required for reimbursement of bank guarantee commission to parent
company
N
o tax withholding on provision for contingent interest subsequently reversed in books
Rulings on taxability of income
K
olkata Tribunal rules on taxability of subsidy as revenue in nature
C
hennai Tribunal upholds salary taxation of SARs benefits received from foreign parent of employer
C
orporate guarantee commission received by an NR parent not taxable in India
B
ombay HC upholds non-taxability of deferred consideration on transfer of shares in the absence of accrual
Other significant decisions
Untraceable creditor doesnt amount to cessation of liability
B
ombay HC allows set off of gains arising from the sale of depreciable assets against long-term capital losses
Bank ATMs eligible for increased depreciation as computer including computer software
Service tax not to be included while computing income from house property
M
adras HC rules that ITL provision notifying Cyprus as non-cooperative jurisdiction is not unconstitutional
D
elhi HC rules on maintainability of AAR application after receipt of assessment notice
Is there a PE?
Intimate relation with Indian affiliate results in a business connection, but such business connection does not
result in forming PE for foreign entity under the DTAA.
Activities carried out by foreign companys Indian subsidiary doesnt constitute a PE in India
Is there a place of effective management?
Location of parent company in India does not create PE of its foreign subsidiary in India
Some key issues on which Special Leave Petitions were dismissed by the SC
Some decisions on Royalty and FTS, also considering relevant DTAA provisions
From the Tax Gatherers desk
CBDT issues Circular clarifying protocol regarding partnership firm under India-UK DTAA
CBDT clarifies nature of share buy-back transaction undertaken prior to 1 June 2013 as capital gains
CBDT issues circulars clarifying applicability of withholding tax on certain transactions of television channels/
broadcasters
CBDT clarifies on Association of Persons (AOP) classification in EPC/ turnkey projects
CBDT issues circular on payment of interest on refund of excess taxes withheld from payment to non-resident
CBDT Committee recommends a MAT framework for Ind-AS companies

CBDT introduces form for employee investment declarations and extends due date for quarterly withholding
statements
CBDT releases report of E-Commerce Committee which recommended Equalization Levy
CBDT issues draft rules for granting foreign tax credit
CBDT issues circulars on classification of surplus from transfer of shares and securities as capital gains or business
income
Treaty updates
The 2012 DTAA between India-Indonesia came into force
India and Mauritius sign protocol amending 1982 DTAA
Protocol to DTAA between Belgium and India initialed
India signed limited DTAA with Maldives in respect of taxation of income from aircraft-operation
Tax Information Exchange Agreements (TIEA) Updates
TIEA between India and Marshall Islands signed
TIEA between India and Maldives signed
Happenings across the border
German Finance Ministry issues 10 Point Action Plan against Tax Fraud, Tax Avoidance Schemes and Money
Laundering
UK introduces large business special measures regime
Australian Parliament passes Bill for non-final 10% withholding tax on foreign resident capital gains
OECD: JITSIC network meets regarding Panama Papers
BEPS updates
OECD releases Country-by-Country reporting XML Schema and related User Guide
O
ECD releases plan to establish inclusive framework for BEPS implementation
Indirect tax
Case laws
Customs duty
High Court
Custodian of goods cannot demand warehouse charges where goods are detained by Customs Department
Non-filing of appeal against the assessed Bill of Entry will not deprive the importer of his right to file refund under
Section 27 of Customs Act, 1962

Tribunal
Assessee entitled to refund of SAD under Notification 102/2007-Cus when goods sold from SEZ to DTA
Bar of unjust enrichment not applicable in cases of refund arising out of finalization of provisional assessment
Excise duty
Supreme Court
I nput credit reversible basis suppliers invoice when goods are supplied to group company
V
alue of returnable packing material cannot be excluded from the assessable value unless there is a formal
arrangement between seller and buyer
C
ost of bullet proofing carried out on jeeps after clearance from factory shall not be added to the transaction value
T
ribunal Larger bench
N
otional loading shall not be included in case of inter-unit transfer of goods for captive consumption
CENVAT credit
S
upreme Court
The word Include in the definition of inputs should be given a wider interpretation
Tribunal
Credit not available as per Rule 7 of CCR where invoice is endorsed by a separate letter and not by way of
endorsement on the body of the invoice
Duty cannot be demanded where procedural lapse does not trigger any loss to Revenue
CENVAT credit available w.r.t various services utilized for maintenance or repairs of residential colony/township
relating to a manufacturing unit
CENVAT credit available on items used for manufacture of conveyor system, thickener, filtration system and
electrical equipment
Refund of CENVAT credit of input services used for export of services allowed even when such services were
exempt; Also held that, for refund of unutilized credit pertaining to export, when SEZ turnover was included in total
turnover (denominator), same should be included in export turnover (numerator) as well
Service Tax
Tribunal
Credit notes affecting reversal of consideration and Service tax thereon amount to sufficient evidence for crossing
hurdle of unjust enrichment
Authority for Advance rulings
Processing payments for a foreign service provider will qualify as an export of service.
Integrated testing of rolling stocks as part of a metro/monorail project would amount to commissioning of plant and
machinery for original works and accordingly be eligible for exemption under Notification No. 25/2012-ST.
Revenue sharing from educational services is taxable but fees recovered from students will be covered under the
Negative List

VAT/CST
Supreme Court
VAT will be applicable on the goods involved in the execution of works contract
High Court
VAT applicable only if there is actual transfer of right to use goods
Anti-dumping duty on import of goods would form the part of sale price for the purpose of levy of VAT
Input Tax Credit of VAT paid on purchase of DEPB scheme cannot be availed
Sale in the course import will depend on the terms and conditions of contract and actual series of transactions
Key statutory updates

Customs
Foreign Trade Policy 2015-20
Central Excise
CENVAT credit
Service Tax
VAT/CST
Regulatory
Foreign Exchange Management Act (FEMA) 1999
L
iberalization in respect of receipt of consideration for transfer of shares on a deferred basis
Foreign Institutional Investment (FII)/ Foreign Portfolio Investment (FPI) investment permitted in Credit Information
Companies (CICs)
Issuance of Foreign Exchange Management (Establishment of a branch office or a liaison office or a project office or
any other place of business) Regulations, 2016
RBI permitted foreign venture capital investors to invest in start-ups and other Indian companies
RBI amended Foreign Exchange (Compounding Proceedings) Rules, 2000
RBI initiated IT based system for effective monitoring of all import transactions
Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director
Overseas Direct Investment (ODI)
Rationalization of Form ODI
Stringent emphasis on tracking of filing of Annual Performance Report (APR) now Part II Form ODI
Raising funds from overseas parties
Modifications in issuance of Rupee Denominated Bonds (RDBs) overseas
Modifications in External Commercial Borrowing (ECB) framework

Foreign Direct Investment Policy
L
iberalization of the foreign investment limits for Asset Reconstruction Companies (ARCs)
Guidelines for FDI in e-commerce sector - 100% FDI permitted under marketplace based model of e-commerce
In the press
Compilation of alerts
Direct Tax
Indirect Tax
Regulatory
7 Tax Digest
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Base Erosion and Profit Shifting (BEPS)
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Direct tax
Verdicts!
Reported decisions supported by our as they did not satisfy the test of specialized, exclusive or
the individual requirement of members. The SC held that
Litigation team
services rendered by the BSE were similar to a facility
Concessional rate of tax on royalty and provided for transacting a business rather than a technical
interest income according to India-Singapore service. Accordingly, the transaction charges paid to the
DTAA BSE do not constitute FTS and, therefore, are not subject
to withholding tax.
In the case of Imerys Asia Pacific Pvt. Ltd. [TS-226-ITAT-
(Refer, EY Alert dated 31 March 2016)
2016(PUN)], the taxpayer entered into a know-how license
agreement with a UK company (UK Co). On the basis of the SC allows tax holiday on subsidies received
agreement, the taxpayer sub-licensed certain know-how toward reimbursement of business running
to a group company (I Co1) in India and earned royalty costs
income. Furthermore, the taxpayer granted External
Commercial Borrowing (ECB) loan to another group In the case of Meghalaya Steels v. CIT [TS-124-SC-2016],
company (I Co2) in India. The taxpayer had earned royalty the taxpayer received subsidy from the Government as
and interest income from I Co1 and I Co2, respectively, reimbursement of certain running costs incurred in the
against which taxes were withheld at concessional rates of business. The issue before the SC was whether such
10% and 15%, respectively according to India-Singapore subsidies will qualify for profit-linked incentive deduction
double tax avoidance agreement (DTAA). The tax authority under the ITL, which is available in respect of profits
denied DTAA benefits to taxpayer on royalty income on the derived from industrial undertakings set up in certain
ground that the taxpayer is a conduit company and not the industrially backward areas. The SC held that the subsidies
beneficial owner of income. received by the taxpayer had a direct nexus with the
profits of the eligible industrial undertaking of the taxpayer
The Tribunal observed that the taxpayer is an operational
and since all the subsidies were toward reimbursement
company in Singapore considering the significant quantum
of actual costs of manufacture/sale of the products of
of revenue, assets and liabilities from its various business
the taxpayer, the same were eligible for the profit-linked
activities. The Tribunal held that the taxpayer is a beneficial
deduction under the ITL.
owner of royalty income noting the facts that taxpayer was
well-equipped with expert personnel to transfer the know- Tips received by waiters from customers is not
how and, hence, was not a conduit company or company salary income
acting as an agent of UK Co. Furthermore, in respect of
interest income, the Tribunal took note of the fact that ECB In the case of ITC Ltd. v. CIT (TDS) [TS-225-SC-2016],
loan was granted to I Co2 out of taxpayers own funds and the issue before the SC was whether the tips received by
hence, it was held to be the beneficial owner of interest waiters of hotels from customers is taxable as Salary
income received from I Co2. Income or Income from Other Sources for determining
tax withholding obligation of hotels . The SC held that,
Significant Supreme Court rulings since the tips are received voluntarily from customers
and waiters had no vested right (as employees) against
Transaction charges paid to stock exchange the employer (hotel) to claim any such amount, it did
for online trading facility does not constitute not constitute salary income. The SC further noted that
FTS employer merely acted in a fiduciary capacity as a trustee
for payments that were received from customers, which,
In a batch of appeals with the lead case being that of Kotak
in turn, were disbursed to their employees for services
Securities Ltd. [Civil Appeal No. 3141 of 2016 dated 29
rendered to the customer. Accordingly, income was
March 2016], the issue before the Supreme Court (SC)
not salary income but income from other sources and
was whether transaction charges paid to Bombay Stock
consequently employer had no obligation to withhold tax
Exchange (BSE) by its members constitutes FTS subject to
on such payment made to employees.
withholding under Income tax laws (ITL). The SC ruled that
services rendered by the BSE were not technical services (Refer, EY Alert dated 28 April 2016)

Rulings on whether certain payments can not making a payment for use of any land, building etc.
The Tribunal, therefore, concluded that the whole payment
be treated as payment of rent
made by the taxpayer is nothing but in the nature of
Payments made for hotel room liable to tax compensation and, hence, taxpayer was not required to
withholding as rent withhold taxes on such payment.
In the case of Apeejay Surrendera Park Hotels Ltd. & anr, Deductibility of expenditure
Federation of Hotel and Restaurant Associations of India
and ors v. Union of India [TS-153-HC-2016(DEL)], the Calcutta HC allows deduction for expenses
issue before the Delhi High Court (HC) was whether tax incurred on development of an application
withholding was required under the ITL for payments made software
for hotel room tariff. The taxpayers filed a writ petition
In the case of Indian Aluminium Company Ltd. v. CIT
before the HC against a circular issued by the Central
[TS-185-HC-2016(CAL)], the issue before the Calcutta
Board of Direct Taxes (CBDT) wherein it was clarified that
HC was whether expenditure incurred on development
the tour operators/travel agents were required to withhold
of an application software could be allowed as revenue
taxes while making payments to hotels on behalf of foreign
expenditure. In this case, the taxpayer was engaged in
tourists, since the same constitutes rent. The HC held
manufacture of aluminum and related products, and it had
that the word rent has to be interpreted widely and not
incurred an expenditure on software development. The
confined to payments received towards a lease, sub-lease
taxpayer treated the same as deferred revenue expenditure
or tenancy or transactions of such like nature. The HC
in its books of accounts. The tax authority contended that
clarified that even where the room charges collected by
the amount spent was for the purpose of obtaining an
a hotel from its customer is not only confined to the use
asset or advantage of a permanent nature and, hence, the
of the space but also to a host of facilities and amenities,
development expenditure was capital in nature.
such payment will still fall within the ambit of rent. The
HC, therefore, held that payments made to hotels for hotel The HC noted that software developed by the taxpayer was
room tariff by tour operators/travel agents will require tax an application software for efficiently carrying out mining
withholding as rent payment under the ITL. activity and observed that application software is distinct
from system software, since it has to be constantly updated
Mumbai Tribunal holds that payment due to rapid advancements in technology and increasing
by builders to tenants for alternate complexity of the features. Relying on the rulings of Delhi
accommodation is not rent HC in the case of Asahi Safety Glass Ltd. (Delhi) [(2012)
346 ITR 329], Karnataka HC in the case of IBM India Ltd.
In the case of Sahana Dwellers Pvt. Ltd. v.. ITO [TS-127-
[(2013) 357 ITR 88], SC in the case of Empire Jute Co.
ITAT-2016(Mum)], the taxpayer was awarded a contract
Ltd. [(1980) 124 ITR 1] and Alembic Chemical Works Co.
by the Mumbai Municipal Corporation to demolish and
Ltd. [(1989) [177 ITR 377], the HC held that software
construct a new building in its place. According to the
industry is considered to be a field where advancements
terms of the contract, the taxpayer was required to provide
take place rapidly and where technology, which was once
compensation to the tenants for alternate accommodation
the state-of-theart, becomes obsolete in a short time. The
until the building was constructed. The Mumbai Tribunal
HC, therefore, concluded that it is difficult to attribute any
held that the payment made by the taxpayer does not
degree of endurability even to system software, let alone
come within the purview of rent as prescribed under the
application software and allowed the expenditure to be
tax withholding provision of the ITL, since the taxpayer is
treated as revenue in nature.

Payment of damages for land-encroachment Mauritian shareholder. As the taxpayer had not paid DDT
allowable as deduction or withheld any taxes on such payment, the taxpayer was
treated as a taxpayer-in-default.
In the case of Mundial Export Import Finance (P) Ltd.
v. CIT [TS-181-HC-2016(CAL)], the taxpayer acquired The Tribunal ruled that the amount remitted under the
a plot of land by way of lease from Calcutta Port Trust buyback transaction was taxable as capital gains and as
(CPT). However, the taxpayer also encroached adjacent the shareholder was a resident of Mauritius, such capital
land in violation of the terms and conditions of the lease gains was exempt from taxation in India under Article 13
agreement. The taxpayer, therefore paid damages to CPT of the India-Mauritius DTAA. The Tribunal held that the
in respect of the same, in addition to a proposal to grant transaction of buyback is distinguishable from that of
lease in respect of the encroached land from a future date. capital reduction and the same is not subject to DDT in
The issue before the Calcutta HC was whether the payment India. Furthermore, if a taxpayer enters into a transaction,
made as damages for the encroachment of land can be which does not violate any provision of the ITL, the
allowed as revenue expenditure. transaction cannot be termed as a colorable device merely
because it results in non-payment or reduced payment of
The Calcutta HC held that the payment made by the taxes in that year.
taxpayer was in the nature of compensation to the land
owner (CPT) for the encroachment of land and was not in (For more details refer EY Tax Alert dated 17 February
the nature of penalty. The Calcutta HC further held that 2016)
the payment was not capital in nature, since payment
Rulings on tax withholding
was compensatory for the benefit already received by the
taxpayer, for the use of the land, which had nothing to do Mumbai Tribunal rules withholding not
with a grant of lease in future. Such payment was allowed required for reimbursement of bank guarantee
as revenue expenditure under the ITL. commission to parent company
Whether an abusive transaction? In the case of Neo Sports Broadcast Pvt. Ltd. v. CIT (TDS)
[TS-218-ITAT-2016(Mum)], the issue before the Mumbai
Buyback transaction taxable as capital gains Tribunal was whether taxpayer was required to withhold
even if considered as dividend, tax withholding taxes on Bank Guarantee Commission (BGC) reimbursed
does not apply to the parent company. In this case, the taxpayer was
In the case of Goldman Sachs (India) Securities Pvt. Ltd. engaged in the business of telecasting live cricket matches.
v. ITO [TS-72-ITAT-2016(Mum)], the issue before the The parent company of the taxpayer acquired from the
Mumbai Tribunal was whether a transaction of buy-back Board of Control for Cricket in India (BCCI), the telecast
of shares was a colorable device, with the objective rights of cricket matches played in India and provided
of avoiding payment of dividend distribution tax (DDT) bank guarantee to BCCI. The parent company, thereafter,
in India. In this case, the taxpayer was a wholly owned transferred the telecast rights to the taxpayer on the
Indian subsidiary of a Mauritian parent. The taxpayer condition that 80% of the BGC paid by the parent company
had undertaken a buyback transaction and remitted the to the banks will be reimbursed by the taxpayer.
proceeds to its only shareholder in Mauritius. The tax Relying on the Madras HCs ruling in the case of Viswapriya
authority regarded such buyback as capital reduction and Financial Services (258 ITR 496), tax authority held that
the amount remitted as distribution of accumulated profit, the reimbursement of guarantee commission to the parent
which was taxed as dividend in the hands of the recipient company was in the nature of interest under the ITL and
hence, the taxpayer was required to withhold taxes on BGC
reimbursed to the parent company.

The Tribunal relied on the CBDT notification no.56 of subsidy received was revenue in nature.
2012 and held that withholding is not required on various
The Tribunal further held that prior to the amendment in
commission paid to the bank including bank guarantee
the definition of income by Finance Act, 2015 specifically
under any provisions of the ITL. The Tribunal further held
making subsidy-related to non-depreciable asset taxable, if
that in the current case no debt was incurred and the
a subsidy is regarded as revenue subsidy, it will be taxable
payment made by the taxpayer to its parent company was
as income as well as the value of subsidy will go to
reimbursement of expense and, hence, no withholding was
reduce from actual cost of depreciable assets in terms of
required under the provision of the ITL.
the provision of the ITL if specified conditions are fulfilled.
No tax withholding on provision for contingent
Chennai Tribunal upholds salary taxation of
interest subsequently reversed in books
SARs benefits received from foreign parent of
In the case of Karnataka Power Transmission Corporation employer
Ltd. v. DCIT [TS-51-HC-2016(KAR)], issue before
In the case of Soundarrajan Parthasarathy and Kummathi
the Karnataka HC was whether the taxpayer had any
Rameswar Reddy v. DCIT [TS-252-ITAT-2016(CHNY)], the
withholding obligation on the provision made in books
issue before the Chennai Tribunal was whether the Stock
for contingent interest on delayed payments to vendors,
Appreciation Rights (SARs) received by employees of an
which was reversed in subsequent years. Noting the
Indian company (I Co) from a foreign parent based in the
fact that liability was contingent in nature and the
US (US Co) was taxable in the hands of the employees
taxpayer had not claimed deduction for the provision
(taxpayers) in India. In this case, the taxpayers were non-
from its taxable income, the HC held that there was no
residents (NRs) in India and rendered services outside
withholding obligation on the taxpayer since the liability
India during the vesting period of the SARs, but were
had not crystallized in favor of payees. The HC held that
residents of India when the SARs were exercised by them.
withholding obligation applies to provision or payment
The Tribunal held that the benefits were not in the nature
of interest, which represents income in the hands of
of capital gains arising from transfer of any capital asset.
the payee and since, in the present case, no interest was
Furthermore, although the benefits were not received
payable to vendors by virtue of reversal entries, there was
directly from the employer (I Co), they were paid for
no liability to withhold tax as no income accrued to the
services rendered to I Co as compensation (in addition to
vendors.
salary income) by US Co, which was interested in I Cos
Rulings on taxability of income business. Accordingly, the Tribunal concluded that the
benefits were taxable in India as salary income in the hands
Kolkata Tribunal rules on taxability of subsidy of the employees (taxpayer) considering the fact that at
as revenue in nature the time of exercising SARs benefits, the employees were
resident in India even though they were NRs during the
In the case of Limtex Tea & Industries Ltd. v. ACIT [TS-84-
vesting period.
ITAT-2016 (Kol], the taxpayer was a company engaged in
the business of manufacturing tea. The taxpayer received (Refer, EY Alert dated 11 May 2016)
a subsidy from the Government, for quality upgrade and
Corporate guarantee commission received by
product diversification. Subsidy was granted basis 25% of
actual cost of machinery purchased by the taxpayer.
an NR parent not taxable in India
After noting that the primary object of the subsidy was to In case of Capgemini S.A. [TS-177-ITAT-2016(Mum)], the
improve quality of tea, increase volumes, diversify product Tribunal held that the corporate guarantee commission
range, improve packaging etc., the Tribunal held that the received by the taxpayer was not taxable in India under
the other income article of the India-France DTAA. The

income did not arise in India as the corporate guarantee whether credit balance in respect of an untraceable
agreement was executed outside India and both the parties creditor will amount to cessation of liability. Under the
to the corporate guarantee were situated outside India. provisions of the ITL, where a taxpayer has been allowed
Since income did not arise in India, the same was not a deduction in respect of trading liability in earlier years
taxable under the other income article of the DTAA. and during the relevant year, the taxpayer has obtained
any benefit in respect of such trading liability by way or
Bombay HC upholds non-taxability of deferred remission or cessation of such liability, then such benefit
consideration on transfer of shares in the will be taxable in the year of cessation. The Delhi HC relied
absence of accrual on the ruling in the case of Vardhman Overseas Ltd. [TS-
In the case of CIT v. Hemal Raju Shete (ITA No. 2348 of 777-HC-2011(DEL)] and held that the provision relating
2013), the issue before the Bombay HC was on taxability to cessation of liability cannot be invoked unless there was
of capital gains on the sale of shares, when a part of some material evidence on record either for cessation or
the consideration of the shares was receivable in the remission of liability by the creditor. The Delhi HC further
future, subject to occurrence of contingency. In this case explained that cessation of liability had to be cessation in
under the agreement to sell, the taxpayer and her family law, of the debt to be paid by the taxpayer to the creditor.
members (sellers) transferred shares of the company to In the present case, where creditor is not traceable, it
the purchaser against payment of consideration, payable cannot be said that the liability had ceased. The HC further
upfront. Additionally, the agreement contemplated the noted that even if the liability had ceased, the benefit was
entitlement of the sellers to additional consideration not taken by the taxpayer in respect of such trade liability
payable over a period of four years, based on the and, hence, the provision relating to cessation of liability
profitability of the company whose shares were the cannot be invoked.
subject matter of transfer. This was however, subject to Bombay HC allows set off of gains arising from
the covenant that aggregate consideration was not to a the sale of depreciable assets against long-
specified amount. The tax authority levied capital gains
term capital losses
with respect to the consideration of specified maximum
amount, rejecting the taxpayers claim to compute capital In the case of CIT v. Parrys (Eastern) Pvt. Ltd. [TS-90-
gains with respect to the amount actually due and received HC-2016(BOM)], the issue before the Bombay HC was
in the year of transfer. whether long-term capital loss could be set off against the
gains arising from the sale of depreciable assets, which
The HC held that deferred consideration, which is linked to
are transferred after three years. Under the ITL, the gains
the future performance of the company, is dependent upon
arising from the sale of depreciable assets is deemed to be
uncertain events, which is contingent and has not accrued
short term in nature and short term capital gains cannot be
in the year of execution of the agreement. No part of the
set off against long-term capital loss. Referring to the co-
deferred consideration is, therefore, chargeable to tax in
ordinate bench ruling in the case of ACE Builders (P) Ltd.
the year of execution. Furthermore, the HC also accepted
[281 ITR 210], the HC ruled that the deeming fiction in the
taxability of deferred consideration as capital gain income
case of depreciable assets is restricted only to the mode
in the respective year of accrual.
of computation of capital gains and it does not change the
(For more details refer EY Tax Alert dated 18 April 2016) character of the capital gain from that of being a long-term
capital gain. Hence, the HC allowed the set off of long-term
Other significant decisions capital loss against the sale of depreciable asset, which due
to fiction of law, is charged as short-term capital loss/gain.
Untraceable creditor doesnt amount to
cessation of liability Bank ATMs eligible for increased depreciation
as computer including computer software
In the case of CIT v. Alvares and Thomas [TS-222-HC-
2016(KAR)], the issue before the Karnataka HC was In the case of The Royal Bank of Scotland N.V. v. DDIT
[TS-205-ITAT-2016(Kol)], the issue before the Kolkata

Tribunal was whether ATMs are eligible for depreciation HC held that Section 94A is constitutionally valid and there
at the rate of 60% available for Computers including is no bar to notify a jurisdiction as an NJA merely because
Computer Software as given in Income Tax Rules, 1962. there is a DTAA in effect with such a jurisdiction.
The Tribunal noted that, the ATM machine is doing logical,
The HC further held that if the purpose of the DTAA is
arithmetic and memory functions by manipulations of
defeated due to lack of EoI, the breach is by the defaulting
electronic magnetic or optical impulses giving debit or
party (Cyprus), and in such a case, the other party (India)
credit cash and thereafter dispensing the case and giving
is not prevented from taking recourse to its domestic law
a printed receipt. The Tribunal, therefore, concluded that
to address the issue. Section 94A is not in conflict with
ATM machines are eligible for increased depreciation of
the provisions of the India-Cyprus DTAA on EoI and Mutual
60%, since computer is an integral part of ATM machine
Agreement Procedure (MAP), since it governs different
and on the basis of the information processed by the
circumstances. The HC also rejected the taxpayers
computer in the ATM machine, the mechanical functions
arguments regarding applicability of Section 94A being
of the dispensation of cash or deposit of cash is done. The
restricted to non-DTAA countries.
Tribunal relied on the Delhi Tribunals decision in the case
of DCIT vs Global Trust Bank Ltd. (TA No. 474/Del/2009) It may be noted that SC has admitted taxpayers special
and Bombay HCs decision in the case of CIT v. Saraswat leave petition (SLP) against Madras HCs verdict.
Infotech Ltd. (ITA No. 1243 of 2012).
(Refer, EY Alert dated 14 April 2016)
Service tax not to be included while computing
Delhi HC rules on maintainability of AAR
income from house property
application after receipt of assessment notice
In the case of Anil Gupta v. ACIT [TS-243-ITAT-
In the case of Hyosung Corporation v. The Authority for
2016(CHANDI)], the Chandigarh Tribunal noted that
Advance Rulings and Anr [TS-77-HC-2016(Del)], the issue
service tax is a tax levied by a service provider on the
before the Delhi HC was whether an application could be
person availing the services. The service provider collects
made to the Authority for Advance Rulings (AAR) post
the service tax from the service receiver and then remits
filing of return of income (ROI) and post receipt of notice
the same back in the government treasury. The Tribunal
from the tax authority. One of the mandatory conditions
thus concluded that there is no element of income in the
for admitting the application by the AAR is that the AAR
amount of service tax and, hence, the same is not to be
shall not admit an application where the question raised
included while computing income from house property.
in the application is already pending before any tax
Madras HC rules that ITL provision notifying authority. The HC held that where the tax authority had,
Cyprus as non-cooperative jurisdiction is not before the date of filing of the AAR application, already
unconstitutional sent a detailed questionnaire to the taxpayer, including on
the question raised in the application, it amounts to the
In the case of T. Rajkumar & others v. Union of India [TS- question being already pending before the tax authority,
197-HC-2016(Mad)], the Madras HC adjudicated on the creating a bar in admitting of the AAR application.
constitutional validity of Section 94A of the ITL in view of However, the mere fact that a standard pre-printed notice
the India-Cyprus DTAA. Section 94A grants power to the to assess the ROI is issued by the tax authority before the
Government of India to specify any country as a notified date of filing of the AAR application would not result in
jurisdictional area (NJA) with regard to the lack of effective pendency of the question raised in the application before
exchange of information (EoI) by such country. Cyprus was the tax authority.
notified as NJA in 2013, under Section 94A of the ITL. The
(For more details refer EY Tax Alert dated 22 February
2016)
14 Tax Digest
Is there a PE? held that Nortel India constituted taxpayers PE in India
as taxpayer did not have any financial/technical ability to
Intimate relation with Indian affiliate results perform the equipment contract.
in a business connection, but such business
The Delhi HC noted that Nortel India neither habitually
connection does not result in forming PE for exercised any authority to conclude contracts nor
foreign entity under the DTAA maintained any stocks of goods for delivering, on
In case of Vertex Customer Management Ltd. [TS-115- taxpayers behalf. The HC also observed that offices of
ITAT-2016(DEL)], the taxpayer was a UK-based company, Nortel India were not at taxpayers disposal and no services
which had certain contracts with overseas clients and were performed by Nortel India on taxpayers behalf.
the same were sub-contracted to its Indian subsidiary Accordingly, it dismissed the allegation that taxpayer had a
(Vertex India). Vertex India was engaged only in providing fixed place PE or service PE in India.
services to overseas customers of the taxpayer and the Furthermore, the HC stated that in order to conclude that
taxpayer assumed all the major risks from transactions. Nortel India constitutes a Dependent Agent Permanent
The taxpayer allowed Vertex India to use certain equipment Establishment (DAPE), it would be necessary for the tax
located outside India, and claimed reimbursement of authority to notice at least a few instances where contracts
expenses incurred on behalf of Vertex India. The tax had been concluded by Nortel India in India on behalf of
authority held that the taxpayer had PE in India and due other group entities. In absence of any such evidence,
to the business connection, the profit attributable to PE is the HC held Nortel India did not constitute DAPE of the
taxable in India. taxpayer in India. Also, on perusal of services contract, the
The Tribunal held that the taxpayer has business HC noted that installation, commissioning and testing were
connection in India, since it had business activities with performed by Nortel India on its own behalf and not on
Indian entity and there was real and intimate relationship behalf of taxpayer. Therefore, it was held that taxpayer did
between activities of taxpayer outside India and those not have an installation PE in India.
inside India. Moreover, HC held that the taxpayer has received only
However, the Tribunal observed that the taxpayer had the consideration for the equipment manufactured and
no right to occupy premises in India but was merely delivered overseas; hence, no part of taxpayers income
given access for purposes of works. Hence, it held that will be chargeable under the ITL, since no income portion
the disposal test was not satisfied and taxpayer did not could be attributed to operations in India.
have a fixed place PE in India in terms of India-UK DTAA.
Is there a place of effective
Moreover, since the tax authority could not provide any
evidence that expatriate employees of taxpayer were management?
present in India for providing any services, it was held that
Location of parent company in India does not
taxpayer did not have a service PE in India.
create PE of its foreign subsidiary in India
Activities carried out by foreign companys
In case of Forbes Container Line Pte. Ltd. [TS-126-ITAT-
Indian subsidiary doesnt constitute a PE in
2016(Mum)], the taxpayer was a Singapore companyv
India engaged in business of operating ships in international
In case of Nortel Networks India International Inc. [TS- traffic across Asia and the Middle East. The Mumbai
241-HC-2016(DEL)], taxpayers subsidiary, Nortel India, Tribunal held that the income earned by the taxpayer from
had negotiated and entered into three contracts with container services cannot be treated as income arising
Reliance Infocom (Reliance) for equipment supply. On the from the shipping business as the taxpayer did not own or
same date, Nortel India entered into an agreement with charter or take on lease any vessel or ship and was only
taxpayer to assign all rights and obligations to sell, supply providing container services to various clients. Therefore,
and deliver equipment to the taxpayer. The tax authority the income of the taxpayer has to be assessed under
15 Tax Digest
business income article of India-Singapore DTAA.
Furthermore, the Tribunal noted that the taxpayer

maintained its bank account and books of accounts in
Singapore. The Tribunal also took into account all the email
correspondences submitted by the taxpayer. Considering
all these factors, it was held that the effective management
and control of the company cannot be said to be in India.
The Tribunal clarified that factors such as stay of one of
the directors in India or holding of one meeting during
the year in India or the location of parent company being
India will not decide the residential status of the taxpayer.
Accordingly, the Tribunal held that income was liable to be
taxed as business income but in absence of PE no income
was taxable in India.
16 Tax Digest
Some key issues on which SLP were dismissed by the SC
Citation Particulars Ruling of HC

CIT v. Maharashtra Tax authority The taxpayer, a State electricity distribution company, entered into Bulk
State Electricity preferred an Power Transmission Agreement (BPTA) with another electricity company
appeal against for transmission of electricity and made payments for use of transmission
[TS-220-SC-2016]
Bombay HCs system from generation point to distribution point across different regions.
ruling that The tax authority contended that the payment by the taxpayer should be
payment for taxed either as rent or as FTS and hence, the taxpayer was required to
transmission/ withhold tax on the payments made toward such transmission/wheeling
wheeling charges charges.
was neither
The Bombay HC held that transmission charges cannot be termed as rent
rent nor Fees
for the reason that the payment was not made to utilize any identified
for Technical
equipment or machinery or plant, land, building, furniture. The HC also held
Services (FTS)
that, since the taxpayer did not have possessory control over the assets
used for transmission, the payments made cannot be termed as rent.
The HC further held that the payment for transmission could not be held as
FTS, since no services were being rendered to the taxpayer.
Dinesh Ranka v. CIT Tax authority The issue before the Karnataka HC was whether surrender of FAR relating to land in
preferred an favor of developer for construction of flats, amounts to transfer under the provisions
[TS-211-SC-2016] of ITL, and hence, liable to capital gains tax.
appeal against
Karnataka HC The taxpayer contented that FAR is not a capital asset, and hence, amount received
order, which upon surrender of FAR is a non-taxable capital receipt.
had held that The HC held that the right to construct additional stories on account of increase
in available floor space index is a capital asset and an assignment of the same is a
surrender of
capital receipt.
Floor Area Ratio
(FAR) relating (For details of HC ruling, refer September 2015 edition of the Tax Digest)
to land, in favor
of developer for
construction of
flats, amounts to
transfer liable to
capital gains tax.

Summarized below are some decisions on Royalty and FTS, also considering relevant DTAA provisions:
Case Law Payment Description Ruling

Capgemini Purchase of The tax authority alleged that accounting software purchased by the taxpayer
Business Shrink-wrapped from a Singapore entity amounted to purchase of right to use the software,
Services (India) software which was used for business purpose in India, and hence, the same was taxable
Ltd v. ACIT as royalty in India.
[TS-100-ITAT- The Tribunal held that taxpayer simply purchased copyrighted work embedded
2016(Mum)] in CD-ROM, which would qualify as sale of copyrighted product and not transfer
of copyright/right therein.
Tribunal extensively analyzed provisions of the Copyright Act, 1957 and stated
that taxpayers entitlement to the fair use of work/ product including making
copies for temporary purpose for protection against damage/loss even without
a license provided by the owner would not constitute infringement of any
copyright.
Furthermore, the Tribunal stated that sale of such a CD ROM/diskette is not a
license but it is a sale of a copyrighted product.
The Tribunal therefore, concluded that the purchase of shrink-wrapped
accounting software from Singapore entity does not constitute royalty under
the India-Singapore DTAA.
Datamine Sale of software In this case, the taxpayer was a UK resident company, which had a branch
International office as PE in India. The taxpayer was a distributor of datamining softwares
Ltd. [TS-130- developed by its UK group company (UK Co).
ITAT-2016 The tax authority treated revenue earned by taxpayer from sale of software to
(DEL)] end-users as royalty, which was subjected to tax accordingly.
The Tribunal accepted taxpayers contention that it had merely purchased
shrink-wrapped software or off-the-shelf software from UK Co without any right
to use copyright of such software. All intellectual property rights to products
remained with UK Co and taxpayer could not use it or pass it over to anyone
except by way of sale of software products.
The Tribunal also noted that royalty definition under India-UK DTAA do not
include consideration for use of computer software.
Furthermore, the Tribunal held that retrospective amendment to the ITL, which
included consideration for right to use a computer software within the ambit
of royalty could not be read into DTAA, as the provisions of DTAA cannot be
altered by a country unilaterally.
The Tribunal, accordingly, concluded that taxpayers revenue from software
sale will be taxable as business profits and not royalty income under India-
UK DTAA.

Gujarat Pipavav Payment for A Chinese company supplied cranes to the taxpayer and also rendered
Port Ltd. [TS- rendering installation and commissioning services, after sale services and supply of spare
172-ITAT-2016 installation and parts in relation to such cranes.
(Mum)] commissioning The Tribunal noted that all of these services were intrinsically connected to the
services / payment sale of goods (i.e., cranes in this case), and hence, same could not be treated as
for review of FTS under the India-China DTAA and would constitute part of business income.
designs
For evaluation of PE of the Chinese company, the Tribunal held that actual
number of days of employees stay in India was relevant and not the entire
contract period. As the stay was below the 183 days threshold, the Tribunal
held that payment was not taxable in absence of PE in India.
Separately, the taxpayer had engaged a US entity for rendering of engineering
services to review predetermined design and construction audit.
The Tribunal observed that the US company neither transferred any skill or
knowledge nor did it transfer any technical plan/design to the taxpayer; hence,
payment will not fall under the purview of Fees for Included Services (FIS)
under India US DTAA.
Savvis Receipt for web- During the year under consideration, the taxpayer, a US company, was
Communication hosting services engaged in providing information technology solutions, including web hosting
Corporation [TS- services to Indian entities
192-ITAT-2016 The tax authority alleged that fees received for web-hosting services was
(Mum)] taxable as royalty under the ITL as well as India-US DTAA.
The Tribunal observed that the taxpayer was providing web hosting services
with the help of sophisticated scientific equipment, which enabled rendition of
such a service. The equipment were not even used by the service recipient (i.e.,
Indian entities), and hence, one cannot say that payment was made for the use
of those equipment.
The Tribunal, therefore, concluded that as the fees for web hosting services
received by the taxpayer cannot be said to be consideration for the use of, or
right to use of, scientific equipment and hence, not taxable as royalty under
the ITL or India-US DTAA.

Interroute Receipt toward The taxpayer, a UK-based company, received a payment for allowing Indian
Communications international telecom operators to use its Virtual Voice Network (VVN), which is a standard
Limited [TS- connectivity facility facility provided by the taxpayer to various customers for connecting to third
187-ITAT-2016 party carriers through the taxpayers port.
(Mum)] The Tribunal held that the payment received by the taxpayer was toward
provision of services and not for the use of any scientific equipment or
technology and cannot be treated as royalty under Article 13 of the India-UK
DTAA.
The Tribunal further noted that the make available condition under the India
UK-DTAA was not satisfied in this case, since VVN facility could not be applied
by the service recipient without recourse to the taxpayer. Therefore, the
payment in question did not amount to FTS as well.

From the Tax Gatherers Desk
CBDT issues Circular clarifying protocol CBDT issues circulars clarifying applicability
regarding partnership firm under India-UK of withholding tax on certain transactions of
DTAA television channels/broadcasters
The CBDT issued Circular No. 2/2016 of 25 February 2016 The CBDT has issued two circulars on certain transactions
clarifying that a partnership that is a resident of either of television channels and broadcasters. The first one
India or the UK is eligible to claim benefits under the India- addresses payments by television channels/broadcasters/
UK DTAA, to the extent that the income derived by such media companies (broadcasters) to production houses
partnership is subject to tax in that country as the income for content. In respect of payments made to production
of a resident, either in its own hands or in the hands of its houses where content is developed according to
partners. specification of the broadcaster and where the copyright
in the content also gets transferred to the broadcaster,
A protocol to the India-UK DTAA had become effective in
withholding tax provisions concerning work contract in
India from 27 December 2013 (notified vide Notification
the ITL will apply.
No. 10/2014 of 10 February 2014) as per which
partnerships were excluded from the definition of the The second Circular concerns transaction of fee charged or
term person. Also, the term resident was amended retained by advertisement companies from broadcasters
to provide that in the case of a partnership, the term for canvassing/booking advertisement slots. In such
resident of the Contracting State applies only to the cases, the second Circular clarifies that the payment is not
extent that the income derived by such partnership is commission because the relationship between the parties
subject to tax in that state as the income of a resident is on a principal-to-principal basis. Therefore, there is no
either in its hands or in the hands of its partners. It requirement to withhold taxes on such transactions. This
was understood that the term person did not cover circular is also applicable to print and electronic media,
partnerships and the provisions of the DTAA did not apply since the broad nature of activities is similar.
to a partnership. However, this Circular has been issued to
(Source: Circular No. 04/2016 and 05/2016 dated 29
clarify that a partnership should qualify as person under
February 2016)
the Protocol and, hence, a partnership may claim benefits
of India UK DTAA, provided certain conditions are met.
(Source : CBDT Circular No. 2/2016 of 25 February 2016)
CBDT clarifies nature of share buy-back

transaction undertaken prior to 1 June 2013
as capital gains
The CBDT has issued a circular (Circular No. 3 of 2016,
dated 26 February 2016) which clarifies that consideration
received on buy back of shares, between the period 1 April
2000 and 31 May 2013 would be taxed as capital gains
in the hands of the recipient shareholder. Accordingly, the
consideration received on buy back of shares would not
be taxed as dividend either in the hands of the recipient
shareholder or in the hands of the distributing company so
as to be subject to a dividend distribution tax.
(Source: Circular No. 3 of 2016, dated 26 February 2016)

(Refer, EY Alert dated 27 February 2016)

CBDT clarifies on Association of Persons levy of MAT on the basis of book profit according to Ind-AS
(AOP) classification in EPC/ turnkey projects income statement, as below:
MAT pick up should be from the Profit & Loss (P&L) and same can
The CBDT has issued a clarification by way of a Circular
be subject to upward and downward adjustments, which already
in respect of classification of AOP under the ITL. This exist in current MAT provisions.
Circular lays down the criteria, on satisfaction of which,
Although, MAT pick up should be from P&L, items included
the consortium formed by unrelated parties for execution in Other Comprehensive Income (OCI) should also be picked
of large infrastructure projects, particularly Engineering, up for MAT levy at an appropriate point of time. Illustratively,
Procurement and Construction contract (EPC) and turnkey revaluation surplus/gain can be picked for MAT at the time of
projects may not be treated as an AOP for the purposes realization/disposal/retirement of the asset or investment.
of ITL. This Circular is applicable for consortiums formed On first time adoption of Ind-AS, items which are directly
between independent/unrelated parties only. transferred to retained earnings and are not reclassified to P&L
in future should be picked up for MAT in the first year of Ind-AS
(Source: Circular No. 7 of 2016, dated 7 March 2016) adoption.
(Source: MAT Ind-AS Committee report dated 28 April 2016)
CBDT issues circular on payment of interest (Refer EY Alert dated 2 May 2016)
on refund of excess taxes withheld from CBDT introduces form for employee investment
payment to NR declarations and extends due date for quarterly
The CBDT has issued a circular, which deals with the issue withholding statements
of payment of interest by the tax authority to a resident
The CBDT issued a notification modifying the Income Tax
tax deductor, on refund of excess tax deducted at source
Rules, 1962 (IT rules) by, inter alia, (i) introducing a new
(TDS), in respect of payments made to an NR. Based on
form for employees to furnish details of investments/
a ruling of SC in case of Tata Chemicals Ltd. [(2014) 43
expenditure to employer for salary withholding tax purposes;
taxmann.com 240], the circular clarifies that (a) a resident
(ii) extending due date for filing quarterly tax withholding
tax deductor is entitled to refund of any excess TDS
statements for non-government deductors and (iii) extending
deposited with interest and (b) interest is to be calculated
time limit for payment of tax withheld on immovable property
from the date of payment of such excess TDS. The tax
acquired from residents.
authority is directed not to press litigation on the above
issue in new/existing cases. (Source: Notification No 30/2016(F. No 142/29/2015-TPL)
dated 29 April 2016)
(Source: Circular No. 11/2016 dated 26 April 2016)
(Refer EY Alert dated 4 May 2016)
CBDT releases report of E-Commerce
CBDT Committee recommends a MAT
Committee which recommended Equalization
framework for Ind-AS companies
Levy
The CBDT had set up a Committee for suggesting
The CBDT released the report of the Committee on
amendments to the ITL for the purpose of levy of book
Taxation of E-Commerce (Committee), which recommended
profit based Minimum Alternate Tax (MAT) on companies
introduction of Equalization Levy (EL) to deal with specified
required to prepare financial statements according to
digital services and facilities. In the report, the Committee
framework of new Indian Accounting Standards (Ind-
had examined various tax issues arising from new business
AS), which are converged form of International Financial
models in the digital economy, particularly in India.
Reporting Standards (IFRS).
The Report suggested that: (a) EL should be imposed at a
The Committee was directed on 8 June 2015 to suggest
rate between 6% to 8% of gross payments made to NRs for
framework for MAT in view of transition to Ind-AS. The
specified digital services and facilities. (b) While the liability
Committee has suggested a three-pronged approach for

to EL is on the beneficial owners of specified income, the b) Where taxpayer desires to treat listed shares and
payer of the transaction should be obliged to deduct EL. (c) securities (held for > 12 months immediately preceding
EL should be levied as a final levy on a gross basis. (d) EL the date of transfer) as capital asset Income arising
is not a tax on income and should be outside the purview from transfer thereof would be treated as capital gains.
of the ITL. (e) As EL is not a tax on income, it should also Furthermore, taxpayers treating the investment in listed
not be covered by tax treaties. (f) An exemption should shares and securities as capital asset, will not be allowed to
be provided from income tax under the ITL in respect of adopt a different/contrary stand in subsequent years.
specified services on which EL has been paid on the lines
c) In all other cases Nature of transaction will continue
of exemption of capital gains, which has been subject to
to be decided keeping in view the earlier administrative
Securities Transaction Tax levy.
guidance by the CBDT.
CBDT issues draft rules for granting foreign The guidance laid down in this Circular will not apply to
tax credit sham transactions or bogus claims of long-term capital
The CBDT issued the draft rules for grant of foreign tax gain/short-term capital assets.
credit (FTC). The draft FTC rules provide for various In order to remove ambiguity as to whether this Circular
aspects relevant to FTC claims made by an Indian resident, could be applied to unlisted shares, the CBDT issued
including the meaning of foreign taxes, year of claiming another Instruction wherein the CBDT instructed the tax
FTC, computation mechanism, restriction on MAT credit authority to tax the income from unlisted shares under the
etc. As a measure of safeguard, the draft FTC rules also head Capital gain irrespective of the period of holding.
provide a list of mandatory documents to be furnished by However the instruction will not apply in the following
the taxpayer for claiming FTC. situations:
(Source: CBDT Press Release dated 18 April 2016) The genuineness of the transaction is questionable
The transfer of unlisted shares is related to an issue
CBDT issues circulars on classification of pertaining to lifting of corporate veil
surplus from transfer of shares and securities
The transfer of unlisted shares is made along with the
as capital gains or business income
control and management of underlying business
The CBDT issued a Circular on taxability of surplus on
(Source: Circular No. 06/2016 dated 29 February 2016 &
shares and securities either as capital gains or business
CBDT Instruction No. 225/12/2016 dated 2 May 2016)
income. The Circular instructs tax authority to consider
the following guidelines in holding whether the surplus
generated from sale of listed shares and other securities
will be treated as capital gain or business income:
a) Where taxpayer opts to treat listed shares and
securities as stock-in-trade (SIT) Income arising from
transfer of such shares and securities will be treated as
business income, irrespective of the period of holding.
23 Tax Digest
Treaty Updates and TIEA Updates
Treaty Updates
The 2012 DTAA between India-Indonesia came initialed

into force
According to a joint statement published by the Indian
On 5 February 2016, the 2012 India-Indonesia DTAA came Ministry of External Affairs on 30 March 2016, Belgium and
into force. The 2012 DTAA is effective in India from 1 April India recently initialed an amending protocol to the 1993
2017 and replaces the earlier 1987 India-Indonesia DTAA. Belgium-India DTAA.
The 2012 DTAA provides for a maximum withholding rate
(Source : IBFD)
of 10% for dividends, interests and royalties. It also includes
a Limitation of Benefits (LOB) clause allowing for domestic India signed limited DTAA with Maldives in
anti-avoidance and anti-evasion rules to override DTAA respect of taxation of income from aircraft-
benefits. operation
(Source: Notification No. 17/2016 F.No.503/4/2005-FTD-II, In 11 April 2016, Government of India (GoI) signed a limited
dated 16 March 2016) DTAA with Maldives providing relief from double taxation for
Please click here to access our global alert airline enterprises of India and Maldives by way of exemption
of income derived by airline enterprise of India from the
India and Mauritius sign protocol amending operation of aircraft in international traffic, from Maldivian
1982 DTAA tax and vice-versa, thereby, providing taxation rights to
the resident country. The agreement also provides for
India and Mauritius have recently signed a protocol (2016
Mutual Agreement Procedure for resolving any difficulties/
Protocol) amending the 1982 India-Mauritius DTAA. The
doubts arising due to the interpretation or application of the
2016 Protocol has included several provisions to enhance
agreement.
source country taxation rights, such as removal of capital
gains exemption on transfer of shares, inclusion of a service (Source: CBDT Press Release dated 11-04-2016-India-
PE provision, FTS and other income. At the same time, a Maldives TIEA)
limitation on source country taxation rights in respect of
interest income has been provided at the rate of 7.5%. An
Tax Information Exchange Agreements (TIEA)
LOB clause is also proposed to be included by the 2016 updates
Protocol. TIEA between India and Marshall Islands signed
Under capital gains taxation, the 2016 Protocol provides for
On 17 March 2016, the GoI and the Marshall Islands signed
grandfathering of shares acquired on or before 31 March
a TIEA relating to tax matters. The official text of the TIEA is
2017 such that transfer of these shares will not be subject
yet not available.
to source country taxation. Reduced taxation (at 50% of
domestic law rates) is provided for shares acquired on or (Source : IBFD)
after 1 April 2017 but sold before 31 March 2019. However,
TIEA between India and Maldives signed
such benefit in the transitory period is subject to fulfillment
of the LOB provisions. Shares sold after 31 March 2019 will On 11 April 2016, India and Maldives signed a TIEA to
be subject to full taxation in source country. enhance mutual co-operation between the two countries
by having effective EOI in tax matters. The TIEA is based
Provisions relating to EOI have been revamped in order to
on international standards of transparency and EOI,
bring them in line with existing international standards.
which covers taxes of every kind and description imposed
Additionally, an Article on Assistance in collection of taxes
by the GoI and Maldives. The TIEA enables exchange of
has been introduced.
information, including banking information, between the two
(For details, refer EY Alert dated 12 May 2016) countries for tax purposes, which will help curb tax evasion
and tax avoidance.
Protocol to DTAA between Belgium and India
(Source: CBDT Press Release dated 11-04-2016-India-
Maldives TIEA)

Happenings across the border
German Finance Ministry issues 10 Point Australian Parliament passes Bill for non-final
Action Plan against Tax Fraud, Tax Avoidance 10% withholding tax on foreign resident capital
Schemes and Money Laundering gains
Following publication of the Panama papers, Germanys On 22 February 2016, the Australian Senate passed
Finance Minister published on 11 April 2016 an Action the Tax Bill to implement the non-final 10% withholding
Plan against Tax Fraud, Tax Avoidance Schemes and tax obligation on the purchase of certain Australian real
Money Laundering 10 next steps for a fair international property from foreign residents. Broadly, and subject to
tax system and a more effective combat against money various exclusions, the 10% non-final withholding measure
laundering. According to German press information, applies to the acquisition of a capital gains tax asset from
key points of the Action Plan should be converted into a foreign resident, where the asset is taxable Australian
legislative proposals prior to the German Parliaments property, being either: (i) Taxable Australian real property,
2016 summer recess. Some key proposals of the plan (ii) An indirect Australian real property interest, or, (iii)
includes harmonizing various national and international An option or right to acquire such property or such an
black lists, monitoring automatic EOI, creating a global interest. This is subject to the market value of the asset
register for beneficial company ownership, eliminating being AU$2 million or more.
statute of limitations benefits for tax evasion offenses
Please click here to access our global alert
and strengthening of German anti-money laundering
measures etc. OECD: JITSIC network meets regarding
Please click here to access our global alert Panama Papers
A special project meeting of the Joint International Tax
UK introduces large business special
Shelter Information and Collaboration (JITSIC) Network
measures regime
was held by the Organisation for Economic Co-operation
The UKs Finance Bill 2016 introduces a special measures and Development (OECD) in Paris on 13 April 2016. Tax
regime, said to be aimed at tackling the small number of administration officials across jurisdictions participated
large businesses that engage in aggressive tax planning, in this special project meeting to deliberate on Panama
or refuse to engage with HM Revenue & Customs (HMRC) papers revelations. Participants exchanged views on the
in an open and collaborative manner. The legislation Panama Papers and explored mechanisms for co-operation
refers in its headings to large groups but potentially as necessary. OECD press release acknowledges that the
brings all UK groups, UK sub-groups, UK companies follow-up will be ensured by each tax administration, in
(which for this purpose appears to include UK PEs of non- accordance with its own domestic laws and regulations as
UK resident entities) and UK partnerships within the well as information-sharing agreements that governments
scope of the measures. have in place between them.
However, HMRCs ability to issue warning notices and Click here to read the OECD press release.
then actually apply sanctions is limited to those groups,
companies and partnerships which an HMRC officer
considers meet minimum turnover and/or balance sheet
thresholds.

BEPS updates
OECD releases Country-by-Country reporting OECD releases plan to establish inclusive

XML Schema and related User Guide framework for BEPS implementation
On 22 March 2016, OECD released the standardized On 23 February 2016, OECD agreed to a new framework
electronic format for the exchange of base erosion and that will allow all interested countries and jurisdictions to
profit shifting (BEPS) Country-by-Country (CbC) reports. join in efforts to update international tax rules for the 21st
The released material encompasses the CbC XML Schema century. The proposal for broadening participation in the
and a User Guide. The XML Schema is a commonly used OECD/G20 BEPS Project will be presented to G20 Finance
data structure for electronically holding and transmitting Ministers at their next meeting on 2627 February 2017 in
information. The User Guide explains the information Shanghai, China.
required to be included in the CbC XML Schema. With
The frameworks mandate will focus on the review of
this material, the OECD aims to facilitate a swift and
implementation of the four BEPS minimum standards,
uniform implementation of CbC reports. While the CBC
in the areas of harmful tax practices, tax treaty abuse,
XML Schema has been primarily designed for use by tax
CbC reporting requirements for transfer pricing, and
authorities, the CbC XML Schema can also be relied upon
improvements in cross-border tax dispute resolution. It will
by taxpayers for transmitting the CbC report to their tax
also ensure ongoing data gathering on the tax challenges
authorities, provided the used of the Schema is mandated
in the digital economy and to measure the impact of BEPS.
domestically.
This agreed framework constitutes an important step
Please click here to access our global alert toward the implementation of the BEPS package around
the world in the coming years, as well as for the review and
monitoring of such implementation.
26 Tax Digest
Indirect Tax
Case Laws
Customs Regulations, 2009, which also states that CCSP will

not charge any rent or demurrage on the goods seized/
High Court, Allahabad detained/confiscated by Customs Department. On a
collective reading of Section 45, terms and conditions of
Custodian of goods cannot demand warehouse charges
license and Regulations, 2009, the High Court held that
where goods are detained by Customs Department
CWC has no authority to demand warehouse charges
Customs Act, 1962 and Handling of Cargo in Customs on seized or detained goods. Therefore, it issued a writ
Area Regulations 2009; in favor of assessee of mandamus to release the goods without demanding
warehouse charges on the goods detained by the
Assessee imported heavy cut oil, which was detained
Department.
on the ground that the petitioner has mis-declared the
description of the goods in the bill of lading. Revenue Paswara Chemicals Ltd v. Union of India & Others; [TS-85-
contended that the goods imported were waste oil. After HC-2016(ALL)-CUST]
considering all aspects of the matter and the report of
the Ministry of Environment and Forest, the Additional
High Court, Delhi
Commissioner issued an order holding that the goods Non-filing of appeal against the assessed Bill of Entry
imported were not waste oil and accordingly directed the will not deprive the importer of his right to file refund
consignment to be released. The relevant show cause under Section 27 of Customs Act, 1962
notice was also dropped. The Assistant Commissioner
issued an order to the Manager, Central Warehousing Customs Act, 1962; matter remanded
Corporation (CWC), who was in-charge of the goods, Assessee imported mobile phones on which it paid both
to waive the warehousing charges in view of Handling customs duty as well as additional customs duty (CVD).
Cargo in Customs Area Regulations, 2009 (Regulations). Thereafter, assessee filed a refund claim on the ground
However, the said goods were not released and therefore, that it was liable to pay only 1% CVD in place of 6% CVD it
assessee filed the present writ petition seeking a writ of had paid. Reference was made to Notification 12/2015-
mandamus commanding release of the consignment. CE dated 1 March 2015, which provides that CVD at the
CWC contended that they were appointed as custodian rate of 1% is applicable to mobile phones provided that no
of goods under Section 45 of Customs Act, 1962. CWC CENVAT credit on input or capital goods is availed. The
is responsible for the goods until they are cleared, and decision of the Supreme Court in the case of SRF Industries
under Sections 66 and 68 of the Customs Act, 1962, the v. Commissioner of Customs, Chennai; [2015 (318) ELT
owner of the goods is liable to pay warehousing charges 607 (SC)] was also referred to by the assessee. In the said
pursuant to clearance of goods and the same cannot be case, the Supreme Court held that for quantification of
waived. CWC also argued that according to Section 148 CVD in case of an article that had been imported, it has
and Section 170 of the Indian Contract Act, 1872, CWC to be presumed that the said imported article has been
had lien on the goods till remuneration was not paid. manufactured in India and the extent of CVD exemption
has to be ascertained.
High Court perused Section 45 of the Customs Act, 1962
as well as various Supreme Court judgments to observe The refund claim was rejected by the Assistant
that demurrage charges can be levied by the custodian Commissioner on the ground that assessee has filed the
of goods under the said Section 45. However, CWC is refund of duty on bills of entry, which are already assessed.
appointed as a custodian subject to certain terms and According to the Commissioner, once the assessment
conditions of license. Clause 12 (VII) of the terms require order is passed, duty has to be assessed in terms thereof,
the custodian to not charge any rent/demurrage on goods unless such assessment order was reviewed under Section
detained by the Customs Department. Furthermore, 28 of Customs Act, 1962 or modified in an appeal.
the Customs Cargo Service Provider (CCSP) will abide Therefore, the issue before the High Court was about the
and discharge all responsibilities under Clause 6(l) of maintainability of refund claim.

The Delhi High Court evaluated Section 27 of Customs Act, the Government had an intention to refund the amount of
1962, which was amended on 8 April 2011. An important SAD paid by any importer even if the goods are procured
change in the section is that a person can now claim from SEZ, provided conditions of the notification are
refund of duty or interest as long as such duty or interest fulfilled. Moreover, in the present case the goods were
is borne by such person. Once an application is made originally imported by the assessee for use in SEZ. Such
under Section 27(1) of the said Act, it is incumbent on imports into SEZ unit are considered to be warehousing
the authority concerned to make an order under Section of goods after importation. After perusing the definition
27(2) determining if duty or interest is refundable to the of importer, the Delhi Tribunal observed that assessee
applicant. Section 27 of the Customs Act, 1962 as it now remained an importer till the goods are cleared for home
stands is not open to an authority to refuse to consider the consumption, i.e., sale to DTA.
application for refund only because no appeal has been
According to the Tribunal, the assessee was an importer of
filed against the assessment order, if any. The High Court
goods and paid VAT at the time of sales to DTA units. The
also referred to the decision in the case of Aman Medical
SAD paid has not been recovered from the DTA buyers.
Products Limited v. Commissioner of Customs, Delhi;
The conditions of Notification No. 102/2007-Cus are
[2010 (250) ELT 30] wherein it was held that an assessee
therefore, fulfilled. The Tribunal opined that the ratio laid
is entitled to maintain the refund claim notwithstanding
down in Adinath Trade Link (supra) squarely applies to the
that no appeal is filed against the assessed Bill of Entry.
present case. Accordingly, the appeal filed by the assessee
Therefore, the Court restored the refund applications and
was allowed.
directed the Assistant Commissioner (Refund) to assess
the case on merits. Precision Polyplast Pvt. Ltd. v. Commissioner of Customs;
[2016-4-TMI-276]
Micromax Informatics Limited v. Union of India; [2016-3-
TMI-431] Tribunal, Mumbai
Tribunal, Kolkata Bar of unjust enrichment not applicable in cases
of refund arising out of finalization of provisional
Assessee entitled to refund of SAD under Notification
assessment
102/2007-Cus when goods sold from SEZ to DTA
Customs Tariff Act, 1975; in favor of assessee
Customs Act, 1962; in favor of assessee
Imports of the assessee were subjected to provisional
The issue involved in the present case is whether the
assessment. On the basis of provisional assessment,
assessee is eligible to refund of Special Additional Duty
assessee deposited duty at the rate of 5%. The issue of
(SAD) under Notification No. 102/2007-CUS dated 14
valuation was settled by the Commissioner (Appeals)
September 2007, in respect of goods imported in the
where it was decided that no loading was warranted.
Special Economic Zone (SEZ) unit and subsequently
Consequently, the assessee filed a refund claim in
supplied/sold to Domestic Tariff Area (DTA) unit. The
respect of 5% revenue deposited during provisional
said notification exempts goods imported into India for
assessment. The refund was sanctioned but credited to
subsequent sale, from the whole of additional duty of
Consumer Welfare Fund by applying the doctrine of unjust
customs under Section 3(5) of Customs Act, 1962 subject
enrichment. Therefore, the issue before the Tribunal was
to the specified conditions.
about the applicability of the doctrine of unjust enrichment
The Tribunal referred to the decision in the case of Adinath with respect to the said refund.
Trade Link v. Commissioner of Customs, Kandla; [2013
The assessee contented that since refund arose out of
(293) ELT 746], wherein the assessee had supplied goods
finalization of provisional assessment, refund falls under
to DTA from SEZ unit. Refund claim of the assessee was
Section 18 of the Customs Act, 1962. The said Section
sanctioned holding that the benefit of Notification No.
18 deals with provisions of provisional assessment of
102/2007-Cus cannot be denied. The entire provisions
duty. Furthermore, the provision of unjust enrichment did
relating to refund under the said notification indicates that

not exist during the period involved in the case. Bar of interest, etc. SCNs were issued to both the companies
unjust enrichment was introduced w.e.f 13 July 2006 by alleging that the iron ore pellets were sold by the assessee
amending Section 18 of Customs Act, 1962. Referring to to the sister company and amounts recovered in the form
various other CESTAT decisions, the assessee contented of debits notes were includible in the assessable value
that doctrine of unjust enrichment will not apply to of such inputs that were cleared. Therefore, the issue in
provisional assessment. the instant case was whether transfer of iron ore pellets
to sister company was sale of goods or transfer of raw
After evaluating Section 18 of Customs Act, 1962,
material.
before and after amendment, the Tribunal observed that
at the time of provisional assessment, the bar of unjust SC distinguished between the inputs on which credit has
enrichment arising on finalization of assessment was not been taken, which were removed on sale and those which
applicable. The Tribunal also referred to the observation, were removed on transfer. If removed on sale, transaction
made by the Supreme Court in the case of Mafatlal value according to Section 4(1)(a) of the Central Excise
Industries v. Union of India; [1997 (89) ELT 247], that Act,1944 will be adopted. However, where goods are
the doctrine of unjust enrichment is not applicable in case entirely transferred to a sister unit, the value adopted will
of provisional assessment. Moreover, a similar decision be according to the invoice on the basis of which CENVAT
was taken by the Supreme Court in the assessees own credit was taken by the assesse, i.e., the invoice of the
case in civil appeal no. 3000/2007. Therefore, based supplier of the pellets to the assessee. The SC also referred
on the above, the Tribunal allowed the appeal in favor of to the circular dated 1 July 2002, which clarified that,
the assessee by holding that refund should be granted to where no sale is involved but only a transfer by one sister
assessee and not be credited Consumer Welfare Fund. unit to another, the value shown in the invoice on the basis
of which CENVAT credit was taken by the assessee should
Spicer India Limited v. Commissioner of Customs, Chennai;
be the value for the purpose of Rule 57AB of the Central
[2016-5-TMI-177-CESTAT]
Excise Rules, 1944 and Rule 3(4) of CENVAT Credit Rules,
Central Excise 2001. Furthermore, post manufacturing expenses cannot
possibly amount to a duty of excise leviable on such goods.
Supreme Court Therefore, based on the facts, transfer of iron ore pellets
to sister company was not sale of goods but only transfer
Input credit reversible basis suppliers invoice when
of raw materials procured under the Tripartite Agreement
goods are supplied to group company
between the two companies and the supplier of the said
Central Excise Act, 1944; in favor of assessee pellets.
Assessee was engaged in the manufacture of HR coils, CCE, Raigad v. Ispat Metallics Industries Ltd. and Ors.;
sheets, plates, etc., which were cleared on payment of [2016-TIOL-59-SC-CX]
excise. Adjacent to its plant, another group company
Supreme Court
(sister company) has a factory in which pig iron and molten
metals were manufactured. The principal raw material for Value of returnable packing material cannot be excluded
both these companies was iron ore pellets. The said pellets from the assessable value unless there is a formal
purchased from suppliers were carried to the assessees arrangement between seller and buyer
factory and the assessee availed credit of the duty paid
Central Excise Act, 1944; in favor of revenue
on the entire quantity so procured. As and when required
by the sister company, pellets were transferred through Assessee was engaged in manufacturing of soda ash. Sales
a conveyor, under cover of an invoice and on reversing were made in gunny bags to the buyers by the assessee.
an amount equal to the CENVAT credit availed that were The assessee claimed that according to the arrangement
so transferred. The assessee also raised debit notes on between the assessee and buyers, gunny bags can be
sister company for recovering actual expenditure by it returned by the buyers and upon such return, the value
in procuring iron ore pellets, such as bank commission, thereof will be refunded to the buyer. The issue before the

SC was whether the value of gunny bags was to be included 2001, which clarified that the duty cannot be charged
in the assessable value of the manufactured goods. on the value addition carried out outside the factory of
clearance on account of certain processes not amounting
SC referred ruling in case of Mahalakshmi Glass Works (P)
to manufacture of manufactured goods by an independent
Ltd. v. Collector of Central Excise, Bombay; [2002-TIOL-
job worker.
511-SC-CX] and Triveni Glass Ltd. v. Union of India & Ors;
[2005-TIOL-32-SC-CX-LB] wherein it was held that if an Therefore, the cost of bullet proofing will not be added to
arrangement exists between the seller and the buyer of the transaction value for the purpose of excise duty.
excisable goods for return of packing materials by the buyer,
Commissioner of Central Excise & Customs v. M/s.
carrying an obligation on the seller to return the value of
Mahindra & Mahindra Ltd.; [2016-TIOL-29-SC-CX]
packing materials to the buyer on such return, such value
is not liable to be included in the assessable value of the Tribunal, Larger Bench - Madras
finished product. Furthermore, if such an arrangement
exists, the question of actual return is not relevant. Notional loading will not be included in case of inter-
unit transfer of goods for captive consumption
However, in the instant case, since the assessee failed to
present that such an arrangement of return of the packing Central Excise Act, 1944; in favor of assessee
materials with the obligation on the part of the seller to The assessee, located in Chennai, was engaged in the
refund the value existed between the parties, the Bench was manufacture of packing material. The substantive raw
unable to hold that the law laid down in the above mentioned material for manufacturing the assessees goods was
cases will apply in the present case. Therefore, the appeals paper and paper board, which was procured from the
by the assessee stands dismissed and the value of gunny assessees another unit in Andhra Pradesh. These raw
bags was includable in the assessable value of goods. materials are stock transferred to the assessees Chennai
Tata Chemicals Ltd. v. Collector of Central Excise; unit where they were captively consumed by the assessee.
[2016-TIOL-39-SC-CX-LB] The assessee cleared its goods, i.e., packing material to
its other units namely cigarette factories on remittance of
Supreme Court excise duty on value of such goods determined in terms
of Rule 8 of the Central Excise (Determination of Price of
Cost of bullet proofing carried out on jeeps after
Excisable Goods), 2000 (Valuation Rules). SCN were issued
clearance from factory will not be added to the
alleging that assessee had contravened the provision of
transaction value
Rule 8 of the Valuation Rules by failing to compute the
Central Excise Act, 1944; in favor of assessee correct cost of production of goods cleared by it to its
another units.
The assessee was engaged in manufacturing of jeeps.
In normal course, the jeeps were manufactured by the The issue before the tribunal was whether the cost of
assessee without any bullet proofing system. However, production of the packaging material manufactured by
there was a specific requirement from police departments the Chennai unit of the assessee should be computed at
in various states for supply of jeeps with bullet proofing 115%/110% of the cost of production of the raw material
system. However, these jeeps where cleared from factory of procured from its Andhra Pradesh Unit or at the actual
the assessee without bullet proofing. After clearance from cost of such raw material, since there was only a stock
the factory, the jeeps were sent to job workers outside the transfer and not a sale of these goods by the Andhra
factory premises to make them bullet proof. The issue here Pradesh unit to the Chennai unit.
was whether the cost of bullet proofing will be added to the
Tribunal observed that the invoices were raised by
transaction value for the purpose of excise duty.
the Andhra Pradesh unit reflecting the total cost of
SC agreed with the decision of tribunal, wherein Tribunal raw materials stock transferred to the Chennai unit at
held that the cost of bullet proofing will not be added to 115%/110% of the cost of production, i.e., at value on
arrive at the transaction value. Furthermore, it relied on which excise duty was remitted. Furthermore, Rule 8
the Board Circular No. 139/08/2000-CX dated 4 January of the Valuation Rules stipulates that in case of captive

consumption, the value shall be determined at the rate Tribunal, Mumbai
of 115% / 110% of the cost of production whereas as per
Board Circular No. 692/08/2003-CX dated 13 February Credit not available according to Rule 7 of CCR where
2003, the cost of production should be computed as per invoice is endorsed by a separate letter and not by way
the Cost Accounting Standard (CAS) - 4 formula. In case of endorsement on the body of the invoice
of self-manufactured goods CAS-4 clearly stipulates that CENVAT Credit Rules; in favor of Revenue
the cost of production shall be only the material cost and
not the notional amount which was not incurred by the Assessee had availed credit on invoices wherein they
assessee. were not the consignee. Therefore, these invoices were
not in the name of the assessee and also these were not
Therefore, in case of inter-unit transfer of goods for endorsed in their favor. Revenue alleged that CENVAT
captive consumption the actual cost of production credit cannot be taken on such invoices, since it was in
determined in terms of CAS - 4 will be the cost in the hands contravention of CCR. Assessee contended that Rule 7 of
of the second unit, i.e., Chennai unit for determining the the CCR permitted availment of credit on invoices issued
cost of production of packaging material manufactured to any person involved in purchase and sale of yarn or
by it. It will not include loading of notional amount of fabrics falling under Chapter 50-55, 58 or 60, provided
15%/10% to the cost of production of raw materials, as it the said documents are endorsed in full for the entire
is solely pursuant to the mandate of Rule 8 of Valuation consignment covered under the said documents in favor
Rules and for remittance of Excise duty by the Andhra of the manufacturer. It was submitted that the invoices
Pradesh unit. were endorsed in favor of assessee by the person in whose
ITC Ltd. v. Commissioner of Central Excise & Customs; name the invoices were issued. However, the endorsement
[2016-TIOL-453- CESTAT-MAD-LB] was done by a separate letter and not on the body of the
invoices.
CENVAT credit The Tribunal held that Rule 7 (1) (e) permits availment
Supreme Court of credit if the document is endorsed in favor of the
manufacturer. In the instant case, the endorsement has
The word include in the definition of inputs should be not been done on the documents but by a separate letter.
given a wider interpretation The original documents cannot be endorsed to more than
CENVAT Credit Rules; in favor of assessee one person, however, endorsement by a separate letter
can be done to any number of people. It is not understood
The issue before the larger bench of Supreme Court as to why assessee had not got the said documents
(SC) was whether the definition of the term input in endorsed by the supplier on the body of the documents.
Rule 2(g) of the CENVAT Credit Rules, 2004 (CCR) is The Tribunal observed that the same cannot be considered
to be understood to include items beyond the six items as a mere procedural formality. Furthermore, since there is
mentioned specifically in Rule2(g). SC referred to the an easy and specific provision in the rule, not following the
decision of Employees State Insurance Corporation v. same, leads to suspicion of evasion. It was also held that
High Land Coffee Works of P.F.X. Saldanha and Sons & since the documents are in the name of another person
Anr.; [(1991) 3 SCC 617] and held that the word include with different address and without proper endorsement on
in the statutory definition is generally used to enlarge the documents it cannot be said that the goods are indeed
the meaning of the preceding words and it is by way received by the assessee. Therefore, Tribunal concluded
of extension, and not with restriction. Accordingly, the that the benefit of credit cannot be extended to the
Honorable SC held that the word include in the definition assessee.
of input should be given a wider interpretation.
Jalan Dyeing & Bleaching Mills v. CCE, Mumbai;
Ramala Sahkari Chini Mills Ltd, UP v. CCE; [2016-TIOL-20- [2016-TIOL-1218-CESTAT-MUM]
SC-CX-LB]

Tribunal, Madras Tribunal, Delhi
Duty cannot be demanded where procedural lapse does CENVAT credit available w.r.t various services utilized
not trigger any loss to Revenue for maintenance or repairs of residential colony/
township relating to a manufacturing unit
Central Excise Act, 1944 and CENVAT Credit Rules; in
favor of assessee CENVAT Credit Rules; in favor of assessee
The assessee has sold the input and at the same time The assessee was engaged in the manufacture of lead, zinc
the factory and capital goods have been let on lease. and non-ferrous metals concentrate. The manufacturing
However, it has not reversed credit in respect of stock of unit was located in a remote village adjoining the mines.
inputs, which was transferred to the lessee on the ground It had constructed residential quarters and buildings for
that Rule 10 of CENVAT Credit Rules, 2004 (CCR) was the purpose of housing employees of the manufacturing
applicable. Rule 10 of CCR provides for transfer of inputs unit. The assessee undertook maintenance and repair
to another person without any requirement of reversal of of such residential quarters and the said expenditure
credit. Adjudicating authority confirmed the demand to the was considered and added in the cost of final products
tune of CENVAT credit relatable to input transferred to the manufactured. It had also availed CENVAT credit in respect
lessee observing that Rule 10 was not applicable and such of services utilized for the maintenance or repairs of
rule was applicable only in respect of transfer of ownership residential buildings/quarters contending that the scope of
of the company along with assets and liabilities. input service is very wide and the Service tax paid on any
service, which is in relation to business should be eligible
The Tribunal held that Rule 10 of CCR will not be relevant,
for CENVAT credit. Adjudicating authority disallowed such
since there is lack of total transfer on lease. Only capital
availment of credit arguing that these services will not fall
goods and factory buildings are involved in the lease
under the ambit of input service in terms of Rule 2(l) of
agreement while the inputs have been kept out of the
CENVAT Credit Rules, 2004 (CCR).
lease transaction. Furthermore, though there is no physical
removal of such inputs, there is a sale, which will invite The Tribunal placed reliance in the case of CCE, Hyderabad
raising an invoice and which will necessitate payment of v. ITC Limited; [2012-TIOL-199-HC-AP-ST], wherein it
duty equivalent to the credit taken. Moreover, the same was held that staff colony provided by the company,
could have been availed by the lessee to take credit. being directly and intrinsically linked to its manufacturing
Therefore, whether there has been physical removal or activity could not be excluded from consideration of
not, fact remains that proper procedure has not been credit. Consequently, the services, which were crucial
followed, though credit would have been available to the for maintaining the staff colony, such as lawn mowing,
lessee. Hence, the issue is purely academic, which cannot garbage cleaning, maintenance of swimming pool,
lead to raising of a demand by the Revenue, since there is collection of household garbage, etc., necessarily had to be
no loss to the revenue. In view of this, the Tribunal allowed considered as input services falling within the ambit of
the appeal and set aside the duty demand along with Rule 2 (l) of CCR. Based on few other judicial precedents, it
penalty. was held that CENVAT credit of Service tax paid on various
services, which were utilized for maintenance of residential
Jaishree Packaging v. CCE, Chennai-I; [2016-TIOL-970-
colony/township of the assessees factories are eligible for
CESTAT-MAD]
credit.
Hindustan Zinc Ltd v. CCE, Jaipur-II; [2016-TIOL-515-

CESTAT-DEL]

Tribunal, Delhi The assessee provided software services, which were
exported. They had obtained a centralized registration
CENVAT credit available on items used for manufacture for Service tax and were also registered with STPI /SEZ.
of conveyor system, thickener, filtration system and The assessee claimed refund of CENVAT credit on the
electrical equipment credit relating to input services used in the output services
CENVAT Credit Rules; in favor of assessee exported outside India under Rule 5 of CENVAT Credit
Rules, 2004 (CCR) read with Notification No. 05/2006,
The assessee was engaged in manufacture of lead dated 14 March 2006.
and zinc concentrates. It also availed CENVAT credit
on various inputs and capital goods. The Department The Revenue rejected their refund claim on the grounds
disallowed credit claimed on inputs used for manufacture that: (a) For the period prior to 16 May 2008, services
of conveyor system, thickener, filtration system and related to development of information technology
electrical equipment on the ground that these items were software and maintenance of such software were
either used in support structure or as a part of protection specifically included as taxable service only from 16
equipment. May 2008 and assessee was engaged in provision of
software maintenance service, which was not covered
The Tribunal relied on the case of CCE v. Rajasthan under the ambit of management, maintenance, repair
Spinning & Weaving Mills Ltd; 2010 (255) ELT 481 SC service (MMRS) up to 16 May 2008 and hence, the same
wherein Supreme Court applied the user test to find out was not taxable up to 16 May 2008. (b) export turnover
whether or not particular goods could be said to be capital portion in the formula prescribed under Rule 5 of CCR,
goods, which will depend on use for which it was put into. does not include the value of exports made from SEZ;
The classification of item purchased by the assessee by however, while taking the total turnover (denominator) the
itself will not determine the eligibility of CENVAT credit. adjudicating authority computed including SEZ exports
Applying such user test Tribunal held that in the present and accordingly rejected the refund.
case, the disputed items were forming part and parcel of
overall capital goods of various descriptions and use. It also The assessee contended that service provided by them
relied on the case of Ambuja Cements Ltd; Final Order No. was taxable and they have paid Service tax on MMRS.
53714/2015 wherein it was held that M.S. plates, angles, Furthermore, they stated that even assuming that the
exhaust duct collector chutes, coal crusher, conveyor services were not taxable, refund of unutilized input
system, coal hopper, etc., are eligible for CENVAT credit. service credit ought not to be denied on the ground of
Accordingly, the Tribunal held that assessee was eligible to taxability, since otherwise it would amount to export
avail CENVAT credit on various items used for manufacture of taxes. Furthermore, if the services are not taxable
of conveyor system, thickener, filtration system and prior to 16 May 2008, it was contended that then, they
electrical equipment. are eligible for refund under Rule 5 of CCR and refund
cannot be denied on the ground of non-taxability. On the
Hindustan Zinc Ltd v. CCE, Jaipur; [2016 (3) TMI 346 second issue, the assessee contended that, since they
-CESTAT-DEL] operated from various premises across India and had
Tribunal, Madras taken a centralized registration for Service tax purposes
and all their premises were either STPI or SEZ units from
Refund of CENVAT credit of input services used for where services are predominantly exported with negligible
export of services allowed even when such services domestic sales. The formula is to be applied only for the
were exempt; also held that, for refund of unutilized activity to which the claim relates and, thus, if Revenue
credit pertaining to export, when SEZ turnover was wanted to adopt a stand that the SEZ activities had no
included in total turnover (denominator), same should relation to the claim, such turnover should have been
be included in export turnover (numerator) as well deducted from the total turnover (i.e., denominator) also.
Therefore, such partial rejection was contended before the
CENVAT Credit Rules; in favor of assessee
Tribunal.

It was held that the Revenue cannot adopt two standards, issue the Mumbai Tribunal Co-ordinate Bench in the case of
when the assessee paid Service tax under MMRS the same CCE v. Computer Land UK Ltd.; [Appeal No. ST/86492/14-
was accepted, whereas, while claiming the refund under Mum dated 13 April 2015], discussed the correct method
Rule 5 of CCR, Revenue had chosen to argue that the of computation of total turnover vis-a-vis export turnover,
said services are exempted. Placing reliance on the ratio holding that if the revenue wants to reduce the value of the
of the of various Tribunal decisions, following the same, invoices from the export turnover, the same should also be
Tribunal held that the assessee is eligible for refund under removed from the total turnover of the export. The High
Rule 5 of CCR on the input services used in the export of Court in the case of CIT & Others v. Tata Elxsi Ltd. & Others;
service; and the impugned orders are liable to be set aside [(2012) 349 ITR 98], examining deduction under Section
to that extent of rejection of refunds. Since the software 10 (A) of IT Act, dealt the identical issue of computation
maintenance service is classifiable under the category of of export turnover and total turnover similarly, when the
MMRS during the relevant period it was clearly established revenue proceeded to include the value of SEZ exports in
that the assessee have paid the Service tax on MMRS and computing the total turnover, The same should also have
availed credit. Furthermore, the assessee have paid Service been included in computing export turnover, in terms of the
tax on MMRS and duly filed the ST-3 returns and availed cited rulings, the order rejecting the refund claim by adopting
the CENVAT credit and claimed the refund under Rule 5 the wrong method of computation is not justified and liable
of CCR on that portion of the input services used in export to be set aside to that extent of restriction of the refund claim
of services during the relevant period. Placing reliance on the value of export turnover should be equal to the total
case of mPortal India Wireless Solutions Pvt. Ltd. v. CST, turnover and the value of SEZ exports should be included in
Bangalore; [2011-TIOL-928-HC-KAR-ST], the Tribunal held the export turnover (numerator).
that the assessee is eligible for refund under Rule 5 of CCR
Accordingly, when the revenue proceeded to include the
on the input services used in the export of service.
value of SEZ exports in computing the total turnover, the
With regard to computation of refund claim, basis same should also have been included in computing export
various judicial precedents it held that where the turnover. Therefore, the value of export turnover should
revenue proceeded to include the value of SEZ exports be equal to the total turnover and the value of SEZ exports
in computing the total turnover, the same should have should be included in the export turnover (numerator). In
also been included in computing export turnover. . While light of above observations, it was held that the assessee was
calculating the quantum of refund eligible according to eligible for the full refund claim.
the formula prescribed under Rule 5 of CCR, the assessee
Cognizant Technology Solutions v. CCE & ST; [2016-TIOL-
claimed the refund on the export turnover of both SEZ and
1072-CESTAT-MAD]
STPI units. For the purpose of total turnover, the assessee
have computed total turnover of both SEZ and STPI units Service tax
as the assessee was one entity. Whereas, it is seen that
the adjudicating authority while computing the value Tribunal, Mumbai
has deducted the value of SEZ exports from the export
Credit notes affecting reversal of consideration and
turnover (numerator) but retained the SEZ export turnover
Service tax thereon amount to sufficient evidence for
in the total turnover (denominator). The lower authorities
crossing hurdle of unjust enrichment
while computing the turnover deducted the value of SEZ
exports from the export turnover (numerator) and retained Finance Act, 1994; in favor of assessee
the same in the total turnover (denominator), which has
The assessee was a stock-broker and was providing services
resulted in the anomaly and the reduction in the quantum
to certain clients where brokerage rates will be lower for
of refund. The Clause 5 of the Notification No. 5/06
incentivized turnover. The assessee will charge brokerage at
dated 14 March 2006, clearly stipulated that the formula
standard rates over the course of a month and issue a credit
has to be applied only for the activity to which the claim
note after every month end to affect reduced brokerage rates
relates and it is for the entity as a whole. On an identical
based on the turnover for that month.

The Revenue contended that tax had been computed customers. The applicant will simply collect payments
and paid by self-assessment and such assessment having on behalf of the foreign entity. Therefore, by application
claimed finality, could not be challenged through a refund of Rule 3 of the POPS, the place of provision of the
claim. Furthermore, the claim for refund was not supported service will be the location of the foreign entity. Thus,
by documents that could conclusively cross the hurdle of the aforesaid services would not be liable to tax in India.
unjust enrichment. In view of the above interpretation, such a service will
qualify as an export of service by application of Rule 6A
The Tribunal observed that the fact of reversal of brokerage
of the Service Tax Rules, 1994, since the applicant will be
fees was not contended by the Revenue. The assessee
receiving consideration in convertible foreign exchange
could ascertain the reversal only after the month end and
hence, affected the same by issue of credit notes. Credit Universal Services India Pvt. Ltd. v. The Commissioner of
notes and debit notes have been in use for centuries as Service Tax, Delhi - IV [2016-TIOL-09-ARA-ST]
acknowledgement of dues and debt; these are legally
enforceable documents in commercial disputes. Merely
Authority for Advance Rulings
because it has the form and appearance of a script on paper Integrated testing of rolling stocks as part of a metro/
it cannot be said to be unreliable. Therefore, the Tribunal monorail project will amount to commissioning of plant
ordered for refund to be disbursed to the assessee. and machinery for original works and accordingly be
Edelweiss Securities Ltd. v. Commissioner of Service Tax, eligible for exemption under Notification No. 25/2012-
Mumbai - I [2016-TIOL-1214-CESTAT-MUM] ST.
Finance Act, 1994; in favor of applicant

Authority for Advance Rulings
The applicant entered contracts with Metro Rail
Processing payments for a foreign service provider will
Corporations for design, manufacture, testing, supply and
qualify as an export of service
commissioning of rolling stock for a lump sum price to
Finance Act, 1994; in favor of applicant be received on a milestone basis. The contract involved
integrated testing of the rolling stock for compatibility
Applicant proposed to provide payment processing services
with various sub-systems. The question before the AAR
to a foreign entity. The foreign entity was providing domain
was whether such integrated testing will amount to
name registration and allied services to customers located
commissioning of an original works related to metro or
in India directly through its website. The customers had an
monorail to avail benefit under Notification No. 25/2012-
option to pay in foreign currency using international credit
ST dated 20 June 2012.
cards or could alternately pay in Indian Rupees (INR) using
Indian credit cards. In cases where the customers paid in It was observed that the word commissioning has not
INR, the applicant will collect payments on behalf of the been defined in the Finance Act, 1994 and its dictionary
foreign entity and later will remit the same to the foreign meaning means to bring a machine, plant, equipment
entity without any markup. The applicant will receive etc., into operation. Rolling stocks are plant as well as
consideration against these services based on a cost plus machinery, as held by the Supreme Court in CIT v. Mir
model. Mohammad Ali [(1964) 7 SCR 846] and CIT v. Taj Mahal
Hotel [(1971) 3 SCC 550]. Therefore, the integrated
The Revenue contended that such services were in the
testing will amount to commissioning of plant and
nature of intermediary services and hence, their place of
machinery.
provision will be the location of the applicant, by application
of Rule 9 of the Place of Provision of Service Rules, 2012 Furthermore, original works inter-alia means erection,
(POPS). commission or installation of plant, machinery or
equipment or structures, whether fabricated or otherwise
It was held that such service did not amount to intermediary
[Rule 2A of the Service Tax (Determination of value)
service, since there was no involvement of the applicant
in provisioning or making available the service to the

Rules, 2006]. Therefore, the applicant will also satisfy the VAT / CST
condition of services pertaining to original works. On the
basis of the above observations, it was held that activities Supreme Court
of integrated testing of rolling stock will be eligible for
VAT will be applicable on the goods involved in the
exemption under Notification 25/2012-ST.
execution of works contract
Hyundai Rotem Company v. Commissioner of Customs,
Karnataka Sales Tax Act, 1957; in favor of assessee
Central Excise and Service Tax, Hyderabad II & another [TS-
191-AAR-2016-ST] An assessee, registered under the provisions of the
Karnataka Sales Tax Act, 1957 (Act), was appointed by the
Authority for Advance Rulings contractee for installation, erection and commissioning
Revenue sharing from educational services is taxable but of wind mill at the premises of contractee located in
fees recovered from students will be covered under the Karnataka. The assessee completed the works contract
Negative List assignment specified above.
Finance Act, 1994; in favor of applicant During the assessment, an assessing authority deducted
expenses in the nature of labor, availment of related
The applicant entered into a contract with a registered services and also, for Wind Mills according to the
society to combine their expertise for the setting up and provisions contained in Section 8 of the Act read with
operation of an educational institution. The applicant will be Entry 57 of the Fifth Schedule of the Act. The amount,
responsible for the entire infrastructural requirement of the which was left out after the deductions specified
educational institution while the society will be responsible above, was treated as total taxable turnover as the said
for the entire academic aspect and related requirements. expenditure did not qualify as expenditure toward Wind
The revenue form the institute will be received in a joint Mills. Therefore, the left out amount was considered
account and shared equally among the two parties. The as transfer of goods involved in the execution of works
question before the AAR was whether Service tax will be contract and accordingly, Sales tax was computed and
applicable on such revenue share and if yes, whether the demanded from the assessee. Such a demand was
same could be collected from the students. confirmed by the Tribunal as well.
It was observed that the unincorporated joint venture Being aggrieved, the assessee preferred a Revision Petition
(termed partnering person by the AAR) entered into by before the High Court (HC). It was held that since the term
the parties will constitute a separate person. Accordingly, Wind Mill was not defined in the Act, the HC identified
services of renting of immovable property provided by the the goods, which will fall under the head Wind Mills and
applicant to the partnering person will attract service also, covered electrical work and transformers as part of
tax. The contention of the applicant that this amounts to wind mill. However, the HC did not include foundation work
a self-service is not tenable. The consideration for renting etc., as a part of Wind Mills. The Honorable Supreme
the said property will be received according to the revenue Court held that a fundamental mistake was committed
share clause of the agreement. Furthermore, services of by the authority, which was that foundation work or
architects, engineers etc., will also be liable to service tax. installation work was considered as part of the works
Regarding the issue of levy of tax on the fees, the same will contract. However, foundation work cannot be treated as
be excluded from the purview of tax to the extent covered goods under any circumstances. Accordingly, the appeal
under the negative list in terms of Section 66D(l) of the was decided in favor of the assessee.
Finance Act, 1994. It was further held that Service tax is
payable by a person providing taxable service, therefore, in Enercon (India) Ltd. v. State of Karnataka; [2016-VIL-20-
this case, Service tax will not be payable by the students as SC]
they are not providing any service.
Choice Estates and Constructions Ltd. v. Commissioner of

Customs, Central Excise and Service Tax [TS-195-AAR-2016-
ST]

High Court, Delhi be divisible under Article 366(29-A), the value of the goods
involved in the execution of the whole transaction cannot be
VAT applicable only if there is actual transfer of right to assessed to Sales Tax. Furthermore, the HC placed reliance
use goods on the Supreme Court decision in Imagic Creative Pvt. Ltd.
Delhi Value Added Tax Act, 2004; in favor of assessee v. Commissioner of Commercial Taxes & Ors.; [2008-TIOL-
04-SC-VAT], wherein the SC unequivocally held that the
Vide an agreement between the Delhi International levy of Service tax and VAT were mutually exclusive and
Airport Limited (DIAL) and the assessee, DIAL has granted even in cases of composite contracts, Sales tax will not be
a license to the assessee for establishing, setting up, payable on the value of the entire contract irrespective of
developing, operating, maintaining and managing the the element of service provided. Furthermore, it may be
sites, which are located within or in the vicinity of the that the actual delivery of the goods is not necessary for
Indira Gandhi International Airport (IGIA), for display of effecting the transfer of the right to use the goods but the
advertisements. Access to the sites has been restricted goods must be available at the time of transfer, must be
due to its location in IGIA. The assessee has entered into deliverable and delivered at some stage. It is assumed, at
agreements with various persons including advertising the time of execution of any agreement to transfer the right
agencies, whereby the advertisement content and/or to use, that the goods are available and deliverable. If the
advertisement material is provided by the advertiser. The goods, or what is claimed to be goods by the respondents,
assessee then prints and mounts the advertisement at the are not deliverable at all by the service providers to the
sites and is remunerated for the same. The issue that arose subscribers, the question of the right to use those goods,
was whether the assessee, which is a licensee in respect of will not arise. Given this, it is not disputed that the Sites
certain advertisement display sites, was liable to pay VAT/ in question are located in a restricted area and none of the
Sales tax on revenue earned from display of advertisement advertisers have an unmitigated access to those Sites; the
even if there is no transfer of any right to use those sites. assessee affirmed that possession of the Sites is retained by
Revenue contended that, the activity qualifies as transfer DIAL. In the circumstances, it will be difficult to accept the
of right to use goods within the meaning of Section 2(1) view that the transactions entered into by the assessee with
(zc)(vi) of the DVAT Act, 2004 (DVAT) and demanded VAT the advertisers constituted transfer of the right to use the
thereon. Whereas, according to the assessee, the activities sites in question. Insofar as the challenge to the order dated
get classified as sale of space or time for advertisement 6 April 2011 passed by Revenue under Section 85 of the
as defined under Section 65(105)(zzzm) of the Finance DVAT Act is concerned, it is obvious that the aforesaid order
Act, 1994 and accordingly, the assessee has registered must be applied keeping in view the facts of each case. The
himself with the Service tax authorities. said order cannot be read to mean that in every case where
advertisements are displayed on hoardings, panels, display
High Court, Delhi (HC) referred to the terms and conditions boards, kiosks, etc., the advertisers will be liable to pay VAT
of the contracts and the judicial precedents for deciding on the amount received for display of such advertisements.
the appeal. By referring to the case of Bharat Sanchar The said decision has limited application and will be
Nigam Limited v. Union of India; [2006-TIOL-15-SC-CT-LB], applicable only in cases where it is found as a matter of fact
which inter alia requires availability of goods for delivery that there has been a transfer of right to use hoardings,
and the dominant intention of the parties, for the purpose panels, display boards, etc., which constitute goods. Clearly,
of taxability. Accordingly, the HC concluded that the the said decision cannot be applied where the necessary
sites could not qualify as goods within the meaning of concomitants of sale u/s 2(1)(zc)(vi) are absent there
provisions of Section 2(m) of the DVAT. HC observed that has been no transfer of the right to use goods and/or the
taxing a transaction of rendering service will fall outside the possession of the goods in question is retained by the owner
legislative competence of a state legislature and therefore, and not transferred to the advertisers. Therefore, by placing
even by a device of legal fiction, such transactions cannot reliance on the clauses of the License Agreement, the HC
be subjected to levy of VAT or Sales tax. Even in those opined that merely, because the advertisements of the
composite contracts, which are by legal fiction deemed to advertisers were displayed on the sites, it will not necessarily

lead to the conclusion that they had acquired the right to dealer located outside India. This clearance was allowed to
use the sites. Hence, it was held that there is no transfer of be made without payment of duty including anti-dumping
right to use goods within the meaning of Section 2(1)(zc) duty because of the location of the assessee in a SEZ.
(vi) of the DVAT and VAT is applicable only if there is actual The HC further held that the margin of dumping is the
transfer of right to use goods. difference between the normal value, namely the price in
the domestic market of the foreign exporter and the export
TIM Delhi Airport Advertising Private Limited v. Special
price at which the goods are exported to India. Therefore,
Commissioner-II, Department of Trade and Taxes and Ors;
once anti- dumping duty is levied, the same becomes part
[2016-TIOL-878-HC-DEL-VAT]
of the sale price, as otherwise the sale price of the product
High Court, Madras imported into India will be different from the sale price
of the product domestically manufactured. Therefore, in
Anti-dumping duty on import of goods will form the part view of above, the petition has been decided in favor of the
of sale price for the purpose of levy of VAT Revenue.
SEZ Act, 2005, Tamil Nadu Value Added Tax Act, 2004 and Flextronics Technologies (India) Private Limited v. The
Central Sales Tax Act, 1956; in favor of revenue
State of Tamil Nadu; [2016-TIOL-893-HC-MAD-VAT]
The assessee was located in Special Economic Zone (SEZ)
High Court, Madras
and involved in the activity of manufacture of optical
cabinets. They imported goods in relation to manufacture Input Tax Credit of VAT paid on purchase of DEPB
of optical cabinets from the dealer located outside India scheme cannot be availed
without paying any duty on import by claiming exemption
Tamil Nadu Value Added Tax Act, 2006; in favor of revenue
under Sections 7 and 26 of the SEZ Act, 2005. The
assessee sold the manufactured goods to the dealer An assessee, a registered dealer under the provision of the
located in Domestic Tariff Area on ex-works basis as Tamil Nadu Value Added Tax Act, 2006 (Act) is involved
provided in Supply Agreement. The purchasing dealer had in the activities of import and export of goods. During the
to clear the goods from SEZ by paying applicable duties assessment year 200607, the assessee purchased Duty
and taxes. The Government issued a Notification bearing Entitlement Pass Book (DEPB) scrip from the local dealer
number 125/2010-Customs dated 16 December 2010 and availed Input Tax Credit (ITC) on such purchases.
whereby anti-dumping duty was imposed on import of Revenue dismissed the availment of ITC on the ground
goods specified in the notification. It also included the that the ITC was not utilized for the purposes specified in
goods imported by the assessee. The Notification was given Section 19 of the Act and passed an order to reverse the
retrospective effect, i.e., w.e.f. 8 December 2009. same. Whereas, the Tribunal dismissed the appeal as the
purchase of DEPB was not covered by any of the Clauses of
The assessee sought a clarification from the VAT authority
Section 18(2) of the Act.
whether the component of anti-dumping duty should be
included for the purpose of computing the liability of tax Being aggrieved, the assessee filed Tax Case Revision
under the Tamil Nadu Value Added Tax Act, 2006 (TN VAT). petition before the High Court (HC). The assessee
Pending receipt of the clarification, the anti-dumping duty contended that the Tribunal has made an error in
was paid by the purchaser dealer located in Tamil Nadu. interpreting the provision of Section 19(2), which deals
Meanwhile, the TN VAT authorities issued notices for the with allowing of ITC. The assessee, further contended that
relevant period and required the assessee to pay tax along the categories mentioned in Clauses (i) to (vi) of Section
with penalty. Original as well as appellate authority decided 19(2) of the Act are only enumerative and not exhaustive.
the issue involved in favor of Revenue; hence, an appeal was
HC analyzed the provision of Section 19(1), which
filed before the Madras High Court (HC).
specifies that there shall be ITC of the amount of tax paid
The HC held that the first clearance was made by the or payable under the Act, by the registered dealer to the
assessee, when they imported the components from a seller on his purchases of taxable goods specified in the

First Schedule. In this connection, the HC observed that on such transactions by treating the same as sale in the
DEBP scrip does not form the part of First Schedule and course of import under the provision of Section 5(2) of the
hence, ITC cannot be availed on purchase of DEPB scrip. Central Sales Tax Act, 1956. Exemption claimed by the
assessee was dismissed by the Revenue and confirmed
HC held that Section 19 was conceived by the Legislature
the demand. Being aggrieved, the assessee filed an appeal
to be a complete Code in itself, since it speaks of
before the High Court (HC).Furthermore, the assessee
entitlement to tax credit, persons not entitled for
reiterated the process of transactions followed and relied
entitlement of ITC, circumstances under which ITC can
on the documents furnished in support of its contentions.
be allowed and disallowed etc. Therefore, the HC further
Revenue contended on the basis of documents furnished
held that Section 19(2) is enumerative and not exhaustive.
that the assessee has leased the equipment after the
Accordingly, the appeal was decided in favor of the
import of the same from outside India and therefore, the
revenue.
transaction cannot be said to be in the course of import
Shah Kantilal Jayantilal v. The State of Tamil Nadu; as per Section 5(2) of the CST Act. It was held by the HC
[2016-TIOL-812-HC-MAD-VAT] that after Master Lease Agreement is entered into between
the assessee and the customer, the relationship of the
High Court, Karnataka ownership of the goods to be imported is severed at the
Sale in the course import will depend on the terms and time when the goods are to be imported from the foreign
conditions of contract and actual series of transactions country, in as much as, the customer is the owner and
the assessee has made the payment on and behalf of the
Karnataka Value Added Tax Act, 2003 and Central Sales owner of the goods. Accordingly, the aforesaid position is
Tax Act, 1956; in favor of revenue until the goods have crossed the customer frontier of the
The assessee is in the business of providing goods/ country and the assessee thus has not imported goods/
equipment on lease basis. As a part of business operandi, equipment from foreign vendor but it is the end customers
to begin with, the assessee used to enter into Master purchase order occasions the sale in the course of import
Leasing Agreement (MLA) with the proposed lessee. and the same is completed after taking delivery of goods/
After signing the MLA, the lessee has to issue Purchase equipment. This is the first transaction. The second,
Order (PO) containing details of the goods to be procured. being the novation of the imported goods by issuance
According to PO, the goods are to be shipped to the of acceptance certificate and novation notice. Then only
customers by the dealer located outside India, but the the Lease Schedule agreement is inked. Therefore, it was
invoice has to be raised in the name of the assessee. The held that there did not exist any inseverable link in the
shipping authorization letter is issued by the assessee to transactions effected by the assessee and the leasing
the vendors. According to the assessee, after the goods transactions effected by the assessee are not in the course
are sold to the assessee, but shipped to the customers, of import, since there is no occasioning the movement
the invoice is raised by the vendors on the assessee, but of goods from the foreign vendor at the instance of the
the bill of entry has to be filed by the customers clearing assessee and thereby, leasing the same to end customer
the goods from customs authorities and the goods does not fall under the purview of 5(2) of the CST Act.
are taken thereafter, to the customers location. The Placing reliance on the observations of the Tribunal, HC
customer is required to furnish unconditional acceptance held that the transactions are nothing but sale falling
certificate once the customer is satisfied with the goods under Section 2(29) of the Karnataka VAT Act and the
received. Furthermore, the novation notice is also issued turnovers qualifies as taxable turnover according to
by the customers, confirming that the purchases related Section 2(34) of the KVAT Act and thus chargeable for
documents would remain with the assessee. Thereafter, VAT. Given this, it was held that the assessee is not entitled
the lease schedule is signed by the parties specifying the to exemption under Section 5(2) of the Central Sales Tax
goods under lease as per terms and conditions of Master Act, 1956.
Rental and Finance Agreement. Hewlett Packard Financial Services India Private Limited v.
The assessee claimed exemption from payment of VAT The State of Karnataka; [2016-VIL-142-KAR]

Key statutory updates
Customs Central Government exempts vessels,

exclusively carrying coastal goods, from
Notification/Circulars specified provisions of Customs Act, 1962
Customs (Fees for Rendering Services by Vessels exclusively carrying coastal goods have been
Customs Officers) Amendment Regulations, exempted from provisions of section 92, 93, 94, 95, 97
2016 notified and section 98(1) of Customs Act, 1962. The said sections
relate to bill of coastal goods, loading of coastal goods only
The said regulation is notified to amend Customs (Fees on bill being passed by proper officer, written order relating
for Rendering Services by Customs Officers) Regulations, to coastal goods etc.
1998. According to the amendment, where the working
hours in respect of clearance of cargo in Customs ports Notification No. 56/2016 dated 27 April 2016
or Customs airports, has been prescribed as 24 hours on Coastal manifest to be furnished by vessels
all days for customs clearance, no fee will be leviable in carrying exclusively coastal goods and
such locations for the services rendered by the specified
operating from berths used by vessels
category of officers.
carrying imported goods or export goods
Notification No. 46/2016-Cus dated 1 April 2016
Notification No. 57/2016 dated 27 April 2016
Registration documents not required to be
Class of goods to be deposited in Special
furnished by importers where goods do not
warehouse notified
fall within the purview of Legal Metrology Act,
2009 Notification No. 66/2016-Cus (NT) dated 14 May 2016
It has been clarified by CBEC that customs officers should The Warehoused Goods (Removal)
not insist on registration documents under Legal Metrology Regulations, 2016 notified
Act, 2009 wherever it is not required.
These rules have been issued in suppression of
F. No. 401/69/ 2016-Cus III dated 22 April 2016 Warehoused Goods (Removal) Regulations, 1963.
According to the new regulations, transportation of
Relaxation of Know Your Customer (KYC) warehoused goods will be made under a one-time lock
norms, which all authorized courier companies affixed by the proper officer or licensee or bond officer.
are required to fulfil
Notification No. 67/2016 dated 14 May 2016
It has been clarified that in cases where the proof of
present address is not available with the individual, the W
arehouse (Custody and Handling of Goods)
proof of identity collected at the time of delivery along Regulations, 2016 and the Special Warehouse
with the address recorded for the delivery purpose by the (Custody and Handling of Goods) Regulations,
courier companies will suffice for KYC verification. The 2016 issued
courier company will have to keep a record of the address
These regulations deal with the compliance requirements
where the goods are delivered and the same will be treated
of storage, transfer and removal of goods from a
as proof of address of the individual. However, courier
warehouse.
companies must show due diligence in maintaining the
records of proof of address. Notification No. 68/2016 dated 14 May 2016
Notification No. 69/2016 dated 14 May 2016
F.No.450/178/2015-CUS-IV dated 26 April 2016

Regulations relating to public, private and Anti-dumping duty (ADD) Notifications
special warehouse licensing issued
The Central Government imposes definite ADD for a
CBEC has issued Public Warehouse Licensing Regulations, period of five years on the following:
2016, Private Warehouse Licensing Regulations, 2016
Import of phenol, originating in, or exported
and Special Warehouse Licensing Regulations, 2016.
These regulations deal with requirements and procedures for
from the European Union, Singapore and
obtaining warehouse licenses. They also provide for several Korea RP
conditions to be fulfilled by the applicant, which include Notification No. 06/2016-Cus (ADD) dated 8 March 2016
providing an all risk insurance policy in favor of the President
of India and providing undertakings to pay any duties, Import of polypropylene, originating in, or
interest, penalties and indemnify the Principal Commissioner/ exported from Singapore
Commissioner of Customs from liabilities. Furthermore, the
Notification No. 07/2016-Cus (ADD) dated 8 March 2016
regulations deal with validity and surrender of licenses.
Notification No. 70/2016-Cus dated 14 May 2016

Imports of all kinds of plastic processing
Notification No. 71/2016-Cus dated 14 May 2016 machines or injection molding machines, also
Notification No. 72/2016-Cus dated 14 May 2016 known as injection presses, having clamping
force equal to or more than 40 tons, and equal
Instructions regarding affixation of one-time to or less than 3,200 tons, used for processing
lock on removal of goods from a customs station or molding of plastic materials originating
In relation to newly issued warehouse licensing regulations, in, or exported from Chinese Taipei, the
CBEC has instructed its field formations to affix a one-time- Philippines, Malaysia or Vietnam
lock and endorse the one-time-lock number on the bill of
entry when goods are removed from a customs station for
deposit into a warehouse. Import of 2-Ethyl Hexane, originating in, or
Circular No. 17/2016 dated 14 May 2016 exported from the European Union, Indonesia,
Korea RP, Malaysia, Chinese Taipei and the US
Format of triple duty bond required to be
filed under section 59 of Customs Act, 1962, Notification No. 10/2016-Cus (ADD) dated 29 March 2016
prescribed Imports of tyre curing presses also known
Section 59 of the Customs Act, 1962 was amended in the as tyre vulcanizers or rubber processing
recent budget 201617 requiring an importer to execute a machineries for tyres, excluding Six Day
triple duty bond at the customs station of import with respect Light Curing Press for curing bi-cycle tyres
to the goods to be cleared for deposit in a warehouse. The originating in, or exported from China PR
format of the bond is prescribed and will supersede the
existing bonds prescribed under Boards Circular F.No.
473/82/78 Cus VII dated 20 April 1978. Import of normal Butanol or N-Butyl Alcohol,
Circular No. 18/2016 dated 14 May 2016 originating in, or exported from the European
Union, Malaysia, Singapore, South Africa and
the US
Notification No. 13/2016-Cus (ADD) dated 13 April 2016

Import of barium carbonate originating in or hot-rolled flat products of non-alloy and other alloy steel in
exported from China PR coils of a width of 600 mm or more for a period of two years
and six months.
Notification No. 01/2016-Cus (SG) dated 29 March 2016
Imports of Synchronous Digital Hierarchy
Transmission Equipment originating in, or Foreign Trade Policy 2015-2020
exported from China PR and Israel Notification/Circulars
Introduction of definition of e-commerce in FTP 201520
Imports of Measuring Tapes originating in, Definition of e-commerce has been introduced in Chapter
or exported from Chinese Taipei, Malaysia, 9 of FTP to mean buying and selling of goods and services,
Thailand and Vietnam including digital products, conducted over digital and
electronic network. For the purpose of MEIS, e-commerce
Notification No. 16/2016-Cus (ADD) dated 2 May 2016
will mean the export of goods hosted on a website accessible
Imports of Digital Versatile Discs-Recordable through the internet to purchaser.
(DVD-R) originating in, or exported from Notification No. 02/2015-20 dated 11 April 2016
Vietnam and Thailand
Amendment in Para 3.20(b) of FTP relating to Status
Notification No. 17/2016-Cus (ADD) dated 13 May 2016 Holder
Import of Coumarin of all types originating in or The criteria for recognition as status holder has been
exported from Peoples Republic of China changed w.e.f 1 April 2016 to the exports made in the
current and previous three financial years from the existing
Notification No. 20/2016-Cus (ADD) dated 27 May 2016
criteria of current and previous two financial years. For the
Central Government has imposed provisional ADD for a gems and jewelry sectors the existing criteria of export
period of six months on the following: performance in the current and previous two will continue.
Import of Glazed/Unglazed Porcelain/Vitrified Notification No. 04/2015-2020 dated 29 April 2016

tiles in polished or unpolished finish with less Amendment in Para 5.04 (h) of FTP relating to export
than 3% water absorption, originating in, or obligation
exported from the China PR
A new Appendix 5D is being notified containing list of
Notification No. 12/2016-Cus (ADD) dated 29 March 2016 services, payments for which are received in Rupee terms
and which are to be counted for fulfilment of Export
Import of Seamless tubes, pipes and hollow
Obligation under Export Promotion Capital Goods (EPCG)
profiles of iron, alloy or non-alloy steel (other Scheme.
than cast iron and stainless steel), whether
hot finished or cold drawn or cold rolled of an Notification No. 06/2015-2020 dated 3 May 2016
external diameter not exceeding 355.6 mm or Trade Notices/Public Notices
14 OD, originating in or exported from China PR
Nine pre-shipment inspection agencies have been
Notification No. 18/2016-Cus (ADD) dated 17 May 2016 approved under the heading New PSIAs recognized in
terms of FTP 2015-20 in Appendix 2G
Safeguard Duty Notifications
Public Notice No. 02/2015-20 dated 8 April 2016
Central Government imposes safeguard duty on imports of

Procedure for implementation of Track and Trace system Revised ANF 5A, ANF 5B, ANF 5C and Appendix 5C of
for export of pharmaceutical and drug consignments has Appendices and Aayat Niryat Forms of FTP 2015-20
been amended notified
Public Notice No. 03/2015-20 dated 21 April 2016 Public Notice No. 08/2015-2020 dated 6 May 2016
List of services, payments for which are received in Procedure for declaration of intent for Electronic Data
Rupee terms and which can be counted towards Export Interchange (EDI) shipping bills simplified
obligation under EPCG Scheme, notified. Appendix 3E
Public Notice No. 09/2015-2020 dated 16 May 2016
not applicable for EPCG scheme.
Modification in IEC Trade Notice No. 58 dated 1
February 2016
Amendment of ANF 3C Application for online filing of
Regional Authorities to consider applications seeking
Grant of Status Certificate
modification in IEC, involving change in PAN, by ensuring
Amended ANF 3C is notified to include the current and that liabilities of the previous applicant are transferred
previous three years to give effect to the amendment in Para to the new applicant whos PAN will be reflecting in the
3.20 (b) of FTP modified IEC. Furthermore, applications digitally signed by
power of attorney holders/authorized signatories are to be
Trade Notice No.05/2015-20 dated 3 May 2016
entertained.
Service exports from India Scheme (SEIS) Appendix 3E
Trade Notice No. 06/2016 dated 23 May 2016
notified
S
ingle application for filing of claim under MEIS for
List of services where payment has been received in Indian
shipments from different EDI ports
Rupees, which can be treated as Deemed Foreign Exchange
according to guidelines of Reserve Bank of India, is notified. Procedure for filing of application under MEIS Scheme for

EDI Shipping Bills is simplified. Shipments from different EDI discontinued. Procedure prescribed vide this Circular will
ports will not require separate applications. Accordingly, the apply to all audit objections under Customs, Central Excise
ANF 3A has been modified. and Service tax, received after the issuance of this Circular
or past audit objections where no SCN has been issued.
Circular No. 1023/11/2016-CX dated 8 April 2016
Central Excise
MoF extends time limit for excise registration by jewelers
CBEC notifies Central Excise (Removal of Goods at
MoF extends the time limit for taking Central Excise
Concessional Rate of Duty for Manufacture of Excisable
registration of establishment by a jeweler up to 1 July 2016.
and Other Goods) Rules, 2016
The assessee jewelers may pay excise duty for the months of
These rules came into effect from 16 March 2016. March, April and May along with duty for the month of June
Furthermore, for availing the benefit under the erstwhile 2016.
Notification No. 20/2016 dated 1 March 2016 (i.e., a
manufacturer intending to avail the benefit of an exemption
notification issued under Section 5A of the Central Excise CBEC directs removal of cases from Call Book and
Act, 1944) the requirement of submission of security is adjudication where the issue is settled by SC/HC
being done away with.
CBEC directs for removal of cases from the Call Book
Notification No. 22/2016-CX (NT) dated 15 March 2016 and adjudication where the issue involved has either
been decided by SC/HC or where the Board has issued
Ministry of Finance (MoF) constitutes Sub-Committee to
new instruction or Circular clarifying the issue involved,
address compliance concerns of jewelers
subsequent to issue of order to transfer case to Call Book.
MoF constitutes a Sub-Committee of High Level Committee, Furthermore, it states that a separate direction to take
to interact with Trade & Industry in relation to imposition of such cases out of Call Book should not be awaited and this
excise duty on jewelry. Terms of reference of Sub-Committee clarification applies to Central Excise, Customs and Service
will include issues relating to compliance procedure for the tax cases.
excise duty, including records to be maintained, forms to be
filed including Form 12AA, operating procedures and any
other issue that may be relevant. MoF grants abatement on Routers
Circular No. 1021/9/2016-CX dated 21 March 2016 MoF, by amending Notification No. 49/2008-CE (N.T.) dated
24 December 2008, grants abatement of 20% on Routers
CBEC prescribes new procedure and timelines for dealing
towards MRP valuation in terms of Section 4A of the Central
with Audit Objections under CERA and CRA audits
Excise Act, 1944.
covering Central Excise, Service tax and Customs
Notification No. 25/2016-CX (NT) dated 5 May 2016
CBEC prescribes timelines for submission of replies by the
Department at various stages, i.e., issuance of half margin/ Insertion of infrastructure cess in the definition of duty
audit memo, local audit report, statement of facts, draft and accordingly infrastructure cess is not payable on
audit para and audit paragraphs. Furthermore, the Circular export of goods under Bond
specifies guidelines for quarterly co-ordination meetings,
Notification No. 42/2001-CE (N.T.) dated 26 June 2001
issuance and adjudication of SCNs and discusses how past
amended to provide for non- payment of Infrastructure
cases are to be handled. The procedure of transferring
Cess on export of manufactured goods under bond to
SCNs arising out of CAG objection to Call-Book has been
Nepal and Bhutan. Similarly, Notification No. 43/2001-
CE (N.T.) dated 26 June 2001 amended to allow the
manufacturer to procure goods without payment of duty
and infrastructure cess for use in manufacture of export

goods and their exportation out of India. Furthermore, CENVAT credit in respect of services provided by
Notification No. 19/2004-CE (N.T.) and 21/2004-CE (N.T.) Government by way of assignment of right to use
dated 6 September 2004 was amended to provide rebate of natural resources may be availed on the basis of challan
infrastructure cess. evidencing payment of Service tax by the service recipient
[as provided in Rule 9(1)(e) of CCR]. Detailed illustrations
Notification No. 26/2016-CX (NT) dated 5 May 2016
are also provided in the Circular explaining the manner in
CENVAT Credit which CENVAT credit is to be availed on Service tax paid
for services by way of assignment of right to use natural
Amendment to Rule 6(3) and Rule 7B of the CENVAT resources.
Credit Rules, 2004
Circular No. 192/02/2016-ST dated 13 April 2016
Rule 6(3)(i) of CENVAT Credit Rules, 2004 (CCR) is
amended to provide for payment of amount equal to 6% For the purpose of reversal of credit on clearance from
of value of exempted goods and 7% of value of exempted factors bagasse, aluminum/zinc dross, skimmings
services subject to maximum of sum total of opening or any such by-product or waste to be treated as
balance of input and input services credit available at the exempted goods
beginning of period to which payment relates and credit of CBEC clarifies that bagasse, aluminum/zinc dross,
input and input services taken during that period. skimmings or any such by-product or waste are non-
Rule 7B, which deals with distribution of credit on inputs by excisable but when they are cleared from the factory, it
warehouse of manufacturer is amended to allow credit of should be treated as exempted goods for the purpose of
inputs under the cover of documents specified under Rule 9. reversal of credit of input and input services, in terms of
Rule 6 of CENVAT Credit Rules, 2004. Vide the present
Notification No. 23/2016-CE (NT) dated 1 April 2016 Circular, the Board has withdrawn earlier Circulars dated
Amendment to Rule 4(7) of the CENVAT Credit Rules, 28 October 2009 and 14 February 2012 and Instruction
2004 dated 12 November 2014, which were issued instructing
officers to recover duty on such waste. This Circular has
Fifth proviso to Rule 4(7) of CCR is amended to provide that been issued in light of the Supreme Court decision in the
time limit for availing CENVAT credit within one year of the case of DSCL Sugar Ltd. [2015 (322) ELT 769 SC] wherein
date of issue of any of the documents specified in rule 9(1) it was held that bagasse is only an agricultural waste and
will not apply to cases where services are provided by the residue, which itself is not the result of any process and
Government, local authority or any other person, by way of therefore, in the absence of manufacture, the same is non-
assignment of right to use any natural resource. excisable irrespective of the amendment in Section 2(d) of
The sixth, seventh and eighth provisos to Rule 4(7) have Central Excise Act made in 2008.
been substituted with new provisos six and seven. According Circular No. 1027/15/2016-CX dated 25 April 2016
to the new sixth proviso CENVAT credit on one-time charges
(payable in full up front or in instalments) will be spread Segregation of impurities, i.e., iron, steel, rubber,
evenly over a period of three years. However, CENVAT credit plastic, dust etc., from honey grade brass scrap cannot
on any annual, monthly or periodic charges will be available be treated as removal of inputs as such
in the same year in which they are paid. CBEC clarifies that clearance of segregated foreign
Notification No 24/2016 CE (NT) dated 13 April 2016 materials namely iron, steel, rubber, plastic, dust etc.,
from honey grade brass scrap before feeding in the
Clarification on availment of CENVAT credit of Service furnace cannot be treated as removal of inputs as such
tax paid on services provided by Government by way of as envisaged under Rule 3 (5) of CCR. Therefore, such
assignment of right to use natural resources

segregated material will be cleared on payment of excise
duty at transaction value according to its appropriate
classification and rate of duty determined on merits.
Circular No. 1029/17/2016-CX dated 10 May 2016
CENVAT credit of Krishi Kalyan Cess (KKC) paid on

taxable services will be utilized only toward payment of
such cess
Rule 3 of CCR has been amended to provide for the

following:
O
utput service provider is allowed to take CENVAT
credit of KKC paid on taxable services [Insertion of
Rule 3 (1a)]
C
ENVAT credit of any duty specified in Rule 3(1)
will not be utilized for payment of KKC [Insertion of
proviso to Rule 3 (4)]
C
ENVAT credit of KKC will be utilized only toward
payment of KKC [Insertion of clause (d) to Rule 3 (7)]
Notification No. 28/2016-CE (NT) dated 26 May 2016

Service tax P
oint of taxation in case of services provided by the
Government to any business entity will be earlier of
Form ST-3 has been amended to incorporate the date on which payment is due or the date of actual
Swachh Bharat Cess details payment.
Notification No. 20/2016-ST dated 8 March 2016 C

ENVAT credit on one-time charges payable for services by
way of assignment of right to use any natural resource will
MoF amends Rule 7 of the Point of Taxation be spread evenly over a period of three years.
Rules, 2011 (POTR)
Notification No. 22/2016-ST dated 13 April 2016
Rule 7 of the POTR states that the point of taxation for Notification No. 23/2016-ST dated 13 April 2016
a services falling under the reverse charge mechanism Notification No. 24/2016-ST dated 13 April 2016
is the date of payment. This Rule has been amended by Circular No. 192/02/2016-ST dated 13 April 2016
introduction of a third proviso to cover cases where there
is a change in the liability or extent of liability of the service Services provided by the specified
receiver. The proviso states that in such cases, in case organizations in respect of a religious
the service has been provided and invoice issued before pilgrimage facilitated by the Ministry of
the date of such change, but payment has not been made External Affairs not liable to Service tax
as on such date, the point of taxation will be the date of
invoice. The Central Government is satisfied that in the period
commencing on and from 1 June 2012 and ending 19
Notification No. 21/2016-ST dated 30 March 2016 August 2014, according to a practice that was generally
prevalent, there was non-levy of Service tax on the services
MoF grants exemptions and issues
provided by specified organizations as defined in clause
clarifications with respect to services provided
(zfa) of paragraph 2 of the Notification No. 25/2012-ST
by Government or a local authority dated 20 June 2012, in respect of a religious pilgrimage
F
ollowing services provided by Government or a local facilitated by the Ministry of External Affairs of the
authority are exempt: Government of India, under a bilateral arrangement and
these services were liable to Service tax, which was not
ross amount charged for services does not exceed
G being paid according to the said practice.
INR5,000/-
In exercise of the powers conferred by Section 11C of
ines or liquidated damages payable to the
F the Central Excise Act, 1944 read with Section 83 of the
Government or the local authority for non- Finance Act, 1994, the Central Government hereby directs
performance of contracts that the Service tax payable under Section 66B on the
egistration required under any law for the time being
R above mentioned services for the said period will not be
in force required to be paid.
esting, calibration, safety check or certification

T Notification No. 25/2016-ST dated 17 May 2016
relating to protection or safety of workers, consumers
or public at large, required under any law
ight to use any natural resource assigned by the

R
Government or the local authority before 1 April
2016.

CBEC clarifies levy of Service tax in respect MoF rationalizes and clarifies levy of Krishi
of services provided by arbitral tribunal and Kalyan Cess (KKC).
members of such tribunal
ayment of KKC @0.5% on all taxable services in
P
CBEC has clarified that services provided by an arbitral terms of S.68(2)
tribunal to a business entity (turnover exceeding INR1
xemption of certain taxable services from whole of
E
million) located in the taxable territory, is taxable under
KKC
reverse charge mechanism and recipient of service is liable
to discharge service tax liability. ebate of KKC paid on all services used in providing
R
export services in terms of Rule 6A
Furthermore, any reference in Service tax law to an
arbitral tribunal necessarily includes the natural persons efund in case of specified services used in Special
R
on the arbitral tribunal, by virtue of clause (d) of Section 2 Economic Zones (SEZ)
of the Arbitration and Reconciliation Act, 1996. Services
I mposition of composition rates as applicable to
are provided by the panel of arbitrators, as comprising the
Service tax
several natural persons on the said panel, to the business
entity or to the arbitration institution approached by the K
KC accounting code has been prescribed
business entity for purposes of arbitration. Therefore,
ENVAT Credit cannot to be utilized to make payment
C
it cannot be interpreted that services provided by an
of KKC
arbitrator on the panel of arbitrators, to the arbitral
tribunal is taxable under forward charge. Notification No 27/2016 ST dated 26 May 2016
Notification No 28/2016 ST dated 26 May 2016
Circular No. 193/03/2016 dated 18 May 2016
Notification No 29/2016 ST dated 26 May 2016
MoF amends exemption to services provided Notification No 30/2016 ST dated 26 May 2016
by Government or a local authority to Notification No 31/2016 ST dated 26 May 2016
Business Entities with a turnover of up to INR1 Notification No 28/2016 CE (NT) dated 26 May 2016
Circular No. 194/04/2016-ST dated 26 May 2016
million in the previous year
The MoF, by amending Notification No. 25/2012-ST dated
20 June 2012 has inserted an Explanation to Entry 48.
It clarifies that the provisions of Entry 48 shall not be
applicable to the following services:
ervices specified in sub-clauses (i), (ii) and (iii) of

S
clause (a) of section 66D of the Finance Act, 1994;
S
ervices by way of renting of immovable property.
Notification No. 26/2016-ST dated 20 May 2016

VAT/CST opening stock is applicable only when a dealer paying tax
under the normal scheme of the Act (i.e., as per section
Andhra Pradesh 3) opts for composition scheme. It is also clarified that
such dealers while shifting from composition scheme
Post Registration Advisory visits on the basis of
under section 16(1) to the new composition scheme
sensitivity of commodities
notified under section 16(12) w.e.f. 1 April 2016 will not
Revenue has classified the dealers on the basis of be eligible to claim ITC on closing stock held by them on
products/goods in which the dealers deal in and marked 31 March 2016. It is further clarified that the applications
them on the basis of sensitivity in terms of revenue in respect of the new composition scheme are to be filed
leakage. The classification has been made to facilitate post manually in respective wards or at reception counter of
registration advisory visits on priority basis. The circular the Department, till the time an order specifically requiring
further makes it mandatory for the dealers dealing in online filing of forms is issued by the Commissioner.
hyper-sensitive goods such as electrical goods, readymade
Notification No. F3(29)/Fia(Rev-I)/2015-2016/dsvi/93
garments etc., to use electronically generated waybills to
dated 18 March 2016
enable Revenue to keep track of movement of goods and
Circular No. 1 of 2016-17 F.3(664)/Policy/VAT/2016/106-
to protect the interest of exchequer at large.
112 dated 27 April 2016
Circular No. CCTs Ref No. Enft. No.E3/421/2015 dated 14
Withdrawal of Form DS1, which was made mandatory
March 2016
for all movement of goods by registered dealers to
Online payment is to be undertaken by citizens/dealers outside Delhi
of Andhra Pradesh for Entry Tax on vehicles
The Department of Trade and Taxes for the territory of
Circular No. CCTs Ref No.CCW/CS(1)/77/2016 dated 27 Delhi had recently on 19 May 2016 notified an online Form
April 2016 Delhi Sugam-1 (DS1) for furnishing the details in respect
of any commodities/goods to be moved from Delhi to any
Delhi place outside the territory of Delhi on account of sale,
I ntroduction of Composition Scheme stock transfer or due to any other reason, whatsoever
by all the registered dealers of Delhi before the actual
Revenue has introduced Composition Scheme for every movement of such goods occurs. This was to be effective
registered dealer whose turnover during the preceding from 1 June 2016 onward.
year as well as the expected turnover during the current
year does not exceed INR5 million and who is not making However, the said notification now stands withdrawn,
any sales other than that of ready-to-eat food and non- based on feedback from stakeholders and it has now been
alcoholic beverage. Rate of tax under composition scheme decided not to implement the said notification. Therefore,
is 5% of the entire turnover. Subsequently, the Circular there will be no need of file the DS1 for moving goods
clarifies that the condition requiring payment of tax on outside Delhi.
opening stock is not applicable to those dealers who, w.e.f. Notification No. F 3(671)/Policy/VAT/2016/251-63 dated
1 April 2016, intend to shift from composition scheme 19 May 2016
under Section 16(1) to the new composition scheme Notification No. F 3(671)/Policy/VAT/2016/284-296 dated
notified under Section 16(12), as the goods held by such 27 May 2016
dealers on the transition date have already suffered VAT
at the time of purchase and also no ITC on such purchases
has been claimed by such dealers. Therefore, the field 8
of Form RH01 is irrelevant for such dealers, as they are
not required to pay tax on their opening stock held on 1
April 2016. The condition requiring payment of tax on
49 Tax Digest
Gujarat Rule 52B, Rule 53 and Rule 54 of Maharashtra
Value Added Tax (MVAT) Rules, 2005 in relation to
Addition of exempt products restrictions on set-off amended
Notification No. (GHN-35) VAT-2006-S.5(2)(1)-TH dated 31 Amended Rule 52B provides for restrictions on availment
March 2006 provides for tax exemption to goods specified in of input tax credit (ITC) in relation to purchase of mobile
the Schedule to the Notification and the extent of exemption. phones or cellular handsets and goods covered under Sr.
Currently, the Notification has been amended by adding No. 13 and 14 of the Schedule D of the MVAT Act, 2002.
motor vehicles as Entry No. 112, covered by Entry 80A of Accordingly, the set off of ITC is confined to CST paid/
Schedule II of the Gujarat Value Added Tax Act, 2003 and payable on interstate sale of above goods or MVAT paid on
other goods such as tankers, loading rickshaws etc., as purchases if the goods referred above are sold locally.
specified in Entry No. 113 of the Schedule.
Rule 53 of the MVAT Rules deals with reduction in set-off.
Amendment has been made effective from 1 April 2016. Sub-rule 11 has been inserted after Sub-rule 10 whereby
Notification No. (GHN-28)VAT-2016-S.5(2) (51)-TH dated 12 availment of ITC of MVAT paid on purchase of passenger
May 2016 motor vehicle has been confined to the output tax liability
where the motor vehicle is provided on a transfer of right
Rule 37 of the Gujarat Value Added Tax Rules, 2006 to use basis. Set off can be claimed in the period in which
amended in relation to provisional refund under Section such right to use has been transferred by the claimant
37 or Section 40 of the Gujarat Value Added Tax Act, dealer.
2003
Rule 54 dealing with non-admissibility of set-off has been
Sub-rule 5A has been added to the Rule 37 whereby, a amended to give effect to the amendment in relation to
Commissioner may grant provisional refund up to INR0.1 purchase of motor vehicles for transferring the right to
million for a full amount within thirty days from the date use and the Maharashtra Tax on Entry of Goods into Local
of submission of all documents, subject to fulfilment of Areas Act, 2002.
conditions specified in the Notification.
Notification No. VAT/1516/CR 53/Taxation-1 dated 1 April
Notification No. (GHN-34) VAR-2016(38)/TH dated 25 May 2016
2016
Introduction of Maharashtra Settlement of Arrears in
Maharashtra Disputes Act, 2016
Amendments in relation to the Composition Scheme With a view to unlock the revenue involved in litigations
with the assessee under eleven different laws that are
Section 42 of the Maharashtra Value Added Tax Act, 2002
pending before different forums, the Government of
(MVAT Act) deals with payment of VAT under Composition
Maharashtra has introduced an Amnesty Scheme in the
Scheme. Under the scheme, the dealers who are engaged
State Budget for 2016 presented on 18 March 2016.
in the business of restaurants, eating house etc., bakers,
Pursuant to the same, the Maharashtra Settlement of
retailers and dealers dealing in second-hand motor vehicles
Arrears in Dispute Act, 2016 has been passed, which has
or tractors have to pay tax at a rate specified in the
been made effective from the date of its publication in the
notification issued under the MVAT Act.
Official Gazette, i.e., 26 April 2016.
The previously issued notification No. VAT. 1505/CR-105/
Mah. Act No. XVI of 2016 dated 26 April 2016
Taxation 1 dated 1 June 2005 has been amended with
effect from 1 April 2016.
Notification No. VAT. 1516/CR 51/Taxation-1 dated 30

March 2016
50 Tax Digest
Amendment in Form 101, 103 and Form 105 Accordingly, the Government of Maharashtra has declared
an Amnesty Scheme to encourage the persons to get
Application form for Registration in Form 101 and
themselves enrolled under Profession Tax Act and to
application for cancellation of Registration Certificate in
obtain Enrolment Certificate.
Form 103 prescribed under Section 16 of the Maharashtra
Value Added Tax Act, 2002 have been substituted by the Trade Circular No. 12T of 2016 dated 6 May 2016
forms issued under the notification.
Amendments to various Acts, rules and notifications
Additionally, existing Form 105 wherein every dealer is issued there under
required to send a declaration in prescribed manner stating
To give effect to the Budget proposals for the year 2016
the name of the person or persons who shall be deemed to
17, a Bill (Legislative Assembly Bill No. XVIII of 2016) to
be the manager or managers of such dealers business for
amend the various Acts, administered by the Sales Tax
the purpose of the MVAT Act has been substituted by Form
Department has been passed by the Legislature and has
105 in new format.
received assent of the Governor on 26 April 2016. The
Notification No. VAT/ADM-2016/1B/ADM-8 dated 28 April Act (Maharashtra Act No. XV of 2016) has been published
2016 in the Maharashtra Government Gazette dated 26 April
2016. Salient features of the amendments have been
Salient features of the Maharashtra Settlement of
explained in the Trade Circular.
Arrears in Disputes Act, 2016 (Settlement Act) and its
procedural aspects Trade Circular 14T of 2016 dated 7 May 2016
The Settlement Act has been passed with a view to provide Relaxation in relation to requirement of documents as
the settlement of arrears in dispute under various Acts proof of permanent place of residence for the purpose of
administered by Maharashtra Sales Tax Department before Registration
different forums. Trade circular has been issued to specify
Revenue has relaxed stringent requirement in relation
the features of Settlement Act and its procedural aspects.
to providing proof of permanent place of residence. Vide
Trade Circular No. 10T of 2016 dated 3 May 2016 the Trade Circular, now the dealer can issue any two
documents specified in earlier trade circulars, i.e., 7T
Exemption from payment of late fee in relation to
of 2015 dated 19 May 2015 and 4T of 2016 dated 5
delay in filing of e-returns of Profession Tax by the
February 2016 respectively as a proof of permanent place
Government aided educational institutions
of residence.
Trade circular has been issued exempting late fee under
Trade Circular No. 15T of 2016 dated 9 May 2016
Section 6(3) of the Maharashtra State Tax on Profession,
Trade, Callings and Employment Act, 1975 to the D
esignation of Wednesday as Taxpayers Day
Government aided educational institutions for belated
As a part of ease of doing business initiative,
filing of e-return.
Government of Maharashtra has emphasized on an
Trade Circular No. 11T of 2016 dated 6 May 2016 taxpayer-friendly tax administration and issued a Trade
Circular No. 17T of 2016 dated 9 May 2016. Vide the
Profession Tax Enrolment Amnesty Scheme 2016
circular, the Maharashtra VAT authorities will be available
The Government has noticed that, many persons/societies/ to meet tax payers without prior appointment on every
institutions/companies have not obtained Enrolment Wednesday between 2 p.m. and 5 p.m., wherein the
Certificate but paid the Profession tax under the provisions taxpayers may address their grievances. In addition,
of the Maharashtra State Tax on Professions, Trades, Service Cell meeting of all dealers will be held on first
Callings and Employment Act, 1975 (Profession Tax Act). Saturday of third month of every quarter.
51 Tax Digest
SAP based new registration functionality goes live
Trade Circular No. 7T of 2016 dated 25 February 2016

was issued giving information about the proposed
changes in the processes of registration, filing of return,
applications for refund, requisitions for CST declarations,
audit/assessments and appeals etc. As specified in the
Circular, the SAP-based billing software will be made
available to dealers from 14 May 2016.
The procedure to download the billing software,

information as to how to use the billing software, the
changed procedure because of new SAP-based registration
have been specified in detail in Trade Circular No. 18T of
2016.
52 Tax Digest
Regulatory
Foreign Exchange Management Act (FEMA) 1999
Liberalization in respect of receipt of Issuance of Foreign Exchange Management

consideration for transfer of shares on a (Establishment of a branch office or a liaison
deferred basis office or a project office or any other place of
business) Regulations, 2016
The RBI has amended the Foreign Exchange Management
(Transfer or issue of Security by a Person Resident The RBI has replaced the erstwhile Foreign Exchange
outside India) Regulations, 2000 in respect of deferred Management (Establishment of a liaison office or a
consideration for transfer of shares of an Indian company branch office or a project office or any place of business
between residents and non-residents. In terms of the said in India) Regulations, 2000 (FEMA 22) with Foreign
amendment, up to 25% of total consideration can be paid Exchange Management (Establishment of a branch office
by the buyer on a deferred basis within a period of 18 or a liaison office or a project office or any other place
months from the date of transfer agreement under the of business) Regulations, 2016. The RBI has issued
automatic route. procedural guidelines to Authorized Dealer (AD) banks
vide A.P. (DIR Series) Circular No.69 dated 12 May 2016
In light of the above, an escrow arrangement may be made
for operationalization of the said regulations. The salient
between the buyer and the seller on mutual terms or if
provisions of the regulations as well as these procedural
the total consideration is paid by the buyer to the seller,
guidelines are highlighted hereunder:
the seller may furnish an indemnity for an amount not
more than 25% of the total consideration for a period not Powers
of the RBI in respect of approving applications
exceeding 18 months from the date of transfer agreement/ for establishment of a Liaison office (LO), Branch
payment of the full consideration. office (BO) in India has been delegated to AD banks
in addition to opening of a Project office (PO), for
It may be noted that the full consideration amount paid for
applicants whose principal business fall under sectors
the shares must be compliant with the applicable pricing
where 100% foreign direct investment (FDI) is allowed
guidelines under exchange control regulations.
in terms of Foreign Exchange Management (Transfer
Source: Notification No.FEMA.361/2016-RB dated 15 or Issue of Security by a Person resident outside India
February 2016 (FEMA 20)/FDI regulations except for the following
cases:
Foreign Institutional Investment (FII)/Foreign
Portfolio Investment (FPI) investment Where the applicant is a citizen of or is
permitted in Credit Information Companies registered/ incorporated in Pakistan;
(CICs) Where the applicant is a citizen of or is
The RBI has permitted FII/FPI investment in CICs subject to registered/incorporated in Bangladesh, Sri
below mentioned conditions: Lanka, Afghanistan, Iran, China, Hong Kong or
Macau and the application is for opening a BO,
A
single entity should directly or indirectly hold below LO or a PO in Jammu and Kashmir, North East
10% equity region and Andaman and Nicobar Islands;
Any
acquisition in excess of 1% is required to be Where principal business of the applicant falls
reported to RBI under either of the following sectors, such
FII/FPIs
investing in CICs will not seek a as, Defence, Telecom, Private Security and
representation on the Board of Directors (BOD) based Information & Broadcasting. However, in respect
upon their shareholding. of PO in the defence sector no separate approval
of Government of India will be required if the
Source: DBR.CID.BC.No.98/20.16.042/2015-16 dated 19 foreign applicant has been awarded a contract
May 2016 by/entered into an agreement with the Ministry
of Defence or Service Headquarters or Defence
Public Sector Undertakings; or

Where the applicant is a non-government AD
bank may permit the change in the name of the
organization, non-profit organization, body/ existing LO/BO only if the non-resident entity changes
agency/department of a foreign government. its name without change in ownership and the
application to this effect is supported with documents
Additionally,
the said circular now has an explicit
prescribed. Where change in name is requested on
mention of group company in addition to parent
account of acquisitions or mergers of foreign entities
company from which an ineligible applicant can obtain
involving change in ownership, the acquired entity or
a Letter of Comfort (LOC) subject to the condition that
new entity is required to apply afresh by closing the
such parent/group company satisfies the prescribed
existing entity. The approvals given to one foreign
criteria for net worth and profit. The LOC should be
entity is not transferrable to another foreign entity.
issued by the applicants parent/group company, which
undertakes to fund the operations if required. Change
in the top management or CEO/MD/CMD etc.
of the LO/BO does not require prior approval of the
Powers
for approving applications for additional LO or
RBI and only an intimation in this respect is to be filed
BO has also been delegated to AD banks. In addition to
with the AD bank.
above, AD banks are also authorized to grant approval
to BO/LO intending to shift to another city in India. In
relation to transfer of assets of LO/BO/PO,
However, no such approval required if the change is donations of old furniture, vehicles, computers and
intended within the same city and only an intimation other office items to NGOs/NPOs may be permitted by
of new address needs to be filed with the AD bank. AD bank considering the bonafides of the transaction.
A
specific provision has been inserted requiring Source: Notification No.FEMA.22(R)/RB-2016 dated 31
foreign companies to open office within six months March 2016 read with A.P. (DIR Series) Circular No. 69
from the date of approval granted by the AD bank, dated 12 May 2016
which if not opened, will be cancelled. AD bank may,
however, grant extension beyond the aforementioned
RBI permitted foreign venture capital
period for additional six months where the delay was investors to invest in start-ups and other
due to reasons beyond applicants control. However, Indian companies
any further extension of time will require prior RBI vide amendment in FEMA 20 dated 28 April 2016 has
approval of the RBI. revised schedule 6 pertaining to investment by registered
It
has been clearly specified that NBFCs engaged in foreign venture capital investor (FVCI).
construction and development sectors are permitted In terms of the said amendment, the RBI has added a
to open a LO for two years only and no further provision to define Category I Alternative Investment
extension will be granted. Fund (Cat-I AIF) as an AIF registered under Securities and
A
specific provision has been added in the regulations Exchange Board of India (AIF) Regulations, 2012, which
requiring persons from Bangladesh, Sri Lanka, raises money and invests in such funds/sectors/activities in
Afghanistan, Iran, China, Hong Kong, Macau or accordance with the said regulations.
Pakistan desiring to open LO/BO/PO to register with Previously, registered FVCV was permitted to invest only
the concerned State Police Authorities. Furthermore, in units of Venture Capital Fund (VCF) or of Cat-I AIF or
AD banks are required to mark a copy of approval units of a scheme or of a fund set up by VCF/Cat-I AIF. In
letter granted to persons from these countries to the terms of the said revised schedule, FVCI has now been
Ministry of Home Affairs (MHA) in India. permitted to invest in equity/debt-linked instruments issued
AD
banks have specifically been authorized to extend by an Indian company engaged in any of the ten sectors
fund and non-fund based facilities to BO and PO. listed by the RBI (includes Biotechnology, IT related,

Nanotechnology, Seed R&D, R&D of chemical entities in RBI amended Foreign Exchange (Compounding
Pharmaceutical sector, Dairy industry, Poultry industry, Proceedings) Rules, 2000
production of bio-fuels, hotel- cum-convention centres
with more than 3000 seating capacity and infrastructure In order to provide increased transparency and disclosure
sector) or issued by a start-up (irrespective of the sector). of compounding orders, the RBI has, vide A.P. (DIR series)
Circular no. 73 dated 26 May 2016, decided the following,
In addition to above, FVCI are permitted to transfer any subject to Foreign Exchange (Compounding Proceedings)
security/instrument by sale or otherwise to any person Rules, 2000:
resident or non-resident at a mutually accepted price
between the buyer and seller/issuer. Disclosure
of all compounding orders passed on or
after 1 June 2016 on RBI website (to be updated
Source: Notification No.FEMA.363/2016-RB dated 28 April monthly);
2016
Disclosure
of broad guidelines/basis on which
the amount imposed has been derived by the RBI
during compounding procedure. The same has to
be calculated in accordance with guidance note
summarized as under:
S.No. Type of contravention Formula for calculation
1 Reporting contraventions: Fixed amount- INR10,000 plus
FDI- Variable amount depending on

the amount of contravention:
Intimation of receipt of fund
Up to INR1m: INR 1000 per year
Intimation of issue of shares
INR1m to INR4m: INR 2500 per
Delay in filing of transfer form/recording of transfer without
year
acknowledgement
INR4m to INR10m: INR 7000
External Commercial Borrowings (ECB)-
per year
Non submission of ECB statements
INR10m to INR100m: INR
Overseas Direct Investment (ODI)- 50000 per year
Non reporting/delay in reporting of acquisition/setup of INR100m to INR1b : INR100000

subsidiaries/step down subsidiaries /changes in the shareholding per year
pattern
Above INR1b : INR 200000 per
Any other contravention other than Annual Activity Certificate (AAC)/ year
share certificate, Annual Performance Report (APR)/Annual Foreign
Liabilities and Assets (FLA) return
2 Reporting contravention by LO/BO/PO For LO/BO- Maximum up to

INR200000 ;
For PO- penalty must be
calculated on 10% of total
project cost as directed above

S.No. Type of contravention Formula for calculation
3 D
elay in submission of AAC/APR/FLA return For AAC/APR/FLA- INR 10,000
per return delayed;
For share certificate- INR
10,000 per year
4 FDI- Non-allotment of shares or allotment/refund after the stipulated 180 INR30,000 + given percentage:
days subject to other conditions
1st year : 0.30%
5 LO/BO (other than reporting contraventions) 1-2 years : 0.35%
2-3 years : 0.40%
3-4 years : 0.45%
4-5 years : 0.50%
>5 years : 0.75%
(for project offices the amount

of contravention shall be
deemed to be 10% of the cost of
project)
6 All other contraventions (except corporate guarantees) INR50,000 + given percentage:
1st year : 0.50%
1-2 years : 0.55%
2-3 years : 0.60%
3-4 years : 0.65%
4-5 years : 0.70%
> 5 years : 0.75%
7 Corporate guarantees- without Unique Identification Number (UIN)/ INR0.5m + given percentage:
permission wherever required/open ended guarantees or any other
1st year : 0.050%
contravention related to issue of corporate guarantees.
1-2 years : 0.055%
2-3 years : 0.060%
3-4 years : 0.065%
4-5 years : 0.070%
>5 years : 0.075%
In case of contravention includes

issue of guarantees for raising
loans, which are invested back
into India, the amount imposed
may be three times.
56 Tax Digest
It may be noted that the above calculation of penalty AD
banks are required to upload and download import
imposed under compounding procedure will be subject to data from IDMPS on a daily basis in order to update RBI
certain conditions prescribed as under: database on real time basis;
In
case the amount of contravention is less than AD
banks are not permitted to process the import
INR100,000, the total amount imposed should not transactions till the concerned BoE is reflected in IDMPS;
be more than the amount of simple interest @5% p.a.
AD
banks can consider closure of bills in IDPMS that
calculated on the amount of contravention and for
involve write off to the extent of 5% of invoice value in
the period of the contravention in case of reporting
cases where the amount declared in BoE varies from
contraventions and @10% p.a. in respect of all other
the actual remittance marginally due to discounts,
contraventions.
fluctuation in exchange rates, change in the amount of
In
cases where it is established that the contravenor freight, insurance, etc., subject to conditions prescribed;
has made undue gains, the amount thereof may be and
neutralized to a reasonable extent by adding the same
On
operationalization of IDPMS (date to be notified
to the compounding amount.
separately), all outstanding import remittances,
If
a party who has been compounded earlier applies irrespective of the amount involved, will be uploaded
for compounding again for similar contravention, the into the system and submission of a separate BEF
amount calculated as above may be enhanced by 50%. statement by AD bank will be discontinued.
Source: A.P. (DIR Series) Circular No. 73 dated It may be noted that AD banks are under an obligation to
26 May 2016 ensure that all import transactions and related remittances
are processed only through IDPMS from the date to be
RBI initiated IT-based system for effective notified shortly.
monitoring of all import transactions
Source: A.P. (DIR Series) Circular No. 65 dated 28 April 2016
The RBI had constituted a working group comprising
representatives of Customs, Special Economic Zone (SEZ), Acceptance of deposits by Indian companies
and Directorate General of Foreign Trade (DGFT) as well from a person resident outside India for
as selected AD banks to develop a comprehensive IT- nomination as director
based system to facilitate efficient processing of all import
The RBI has issued a circular clarifying that keeping deposits
transactions.
with an Indian company by persons resident outside India, in
Furthermore, the said working group has recommended accordance with Section 160 of the Companies Act, 2013
Import Data Processing and Monitoring System (IDPMS) is a current account (payment) transaction and, as such,
on the lines of Export Data Processing and Monitoring does not require any approval from the RBI. Furthermore,
System (EDPMS). The key features of IDPMS are detailed all refunds of such deposits, arising in the event of selection
out as under: of the person as director or getting more than 25% votes,
will be treated similarly. It may be noted that in terms of
Customs
will be required to display the AD code of
Foreign Exchange Management (Deposit) Regulations, 2016
concerned importers bank on the Bill of Entry (BoE);
(FEMA 5R), no person resident in India will accept or make
The
RBI will be entitled to receive and secure the any deposit with/from a person resident outside India unless
primary data on import transactions from customs specifically permitted in the said regulations. Furthermore,
and SEZ; according to aforesaid Section 160 of the Companies Act,
2013, a person who intends to nominate himself or any
Depending
on the specific AD code, the RBI will share
other person as a director in an Indian company is required
the said data with respective banks for expediting the
to place a deposit with the said company.
transactions;
Source: A.P. (DIR Series) Circular No. 59 dated 13 April 2016
57 Tax Digest
Overseas Direct Investment (ODI) The
burden of APR filing will lie with the Indian party/
resident individuals holding maximum stake in the
Rationalization of Form ODI JV/WOS or they may mutually agree to delegate the
onus of APR submission to a mutually chosen party/
The RBI has rationalized the existing Form ODI in order to
individual; and
make it consistent with the changes and liberalizations made
in the provisions of overseas direct investment under Foreign An
Indian party/resident individual who has set up/
Exchange Management Act, 1999 (FEMA). The key changes acquired a JV/WOS overseas will submit APR in
made in the form ODI are as under: revised Form ODI Part II to the AD bank in relation
to each JV/WOS acquired overseas by 31 December
The
RBI has introduced an entirely new reporting format
every year. The said APR will be based on the latest
in relation to reporting of overseas investment for VCF/
audited annual accounts of the JV/WOS.
AIF and monthly reporting of portfolio investment and
overseas investments by Indian listed companies and Source: A.P. (DIR Series) Circular No. 61 dated 13 April
mutual fund. AD banks may continue to report the 2016
purchase and repurchase of Employee Stock Option
Purchase (ESOP) in the existing format. Raising funds from overseas parties
Relaxation
to resident individuals from certifying Form Modifications in issuance of Rupee
ODI Part I by statutory auditor or chartered accountant. Denominated Bonds (RDBs) overseas
Self-certification by the resident individual concerned
may be sufficient. In terms of fourth Bi-monthly Monetary Policy Statement
2015, the limits for FPI in debt securities was supposed
The revised ODI forms and aforesaid instructions for to be announced in fixed rupee terms and the issuance
filling up the forms will come into effect immediately. It of RDBs was required to be within the aggregate limit
is specifically emphasized that any non-compliance with of foreign investment permitted in corporate debt, i.e.,
respect to the instruction for submission of Form ODI US$51 billion. In view of the above, the RBI has announced
will be treated as contravention of Regulation 6 (2) (vi), certain amendments such as:
Regulation 15 and Regulation 16 respectively, of the
FEMA Notification No 120/RB-2004 dated 7 July 2004 The
current limit of US$51 billion for foreign
as amended. The RBI will take a serious view on non- investment in corporate debt has been fixed in Rupee
compliance with the guidelines/instructions and initiate terms at INR2443.23 billion. Moreover, issuance of
penal action as considered necessary. Rupee denominated bonds overseas will be within this
aggregate limit of foreign investment in corporate
Source: A.P. (DIR Series) Circular No. 62 dated 13 April 2016 debt.
Stringent emphasis on tracking of filing of The
maximum amount, which can be borrowed by an
Annual Performance Report (APR) now Part II entity in a financial year under the automatic route by
Form ODI issuance RDBs will be INR50 billion and not US$750
million as specified in the A.P. (DIR Series) circular no.
The RBI has, in order to lay strict emphasis on tracking of 32 dated 30 November 2015. Proposals to raise RDBs
filings of APRs by Indian corporates, suggested following beyond INR50 billion will require prior RBI approval.
measures to the AD banks:
The
RBI, in relation to RDBs, has decided to lower
The
AD bank must confirm submission of all APRs in the minimum maturity period up to three years from
respect of all the Joint Venture(JV)/Wholly owned the prevailing five years in order to associate it with
subsidiary (WOS) by applicant before undertaking/ maturity prescription regarding foreign investment via
facilitating any ODI related transaction on behalf of the FPI in corporate bonds.
eligible applicant with its nodal office;
58 Tax Digest
Furthermore,
the RDBs can only be issued in a country under track I (foreign currency denominated with
and can only be subscribed by a resident of a country: minimum average maturity of 3/5 years), which
were earlier restricted to only track II (long-term
That is a member of Financial Action Task Force
foreign currency denominated with minimum average
(FATF) or a member of a FATF- Style Regional
maturity of 10 years). The aforementioned companies
Body;
will have a minimum average maturity period of
Whose securities market regulator is a 5 years and will also be subject to 100% hedging.
signatory to the International Organization of Therefore, infrastructure companies, NBFCs, holding
Securities Commissions (IOSCOs) Multilateral companies and CICs can now raise ECB under all the
Memorandum of Understanding (Appendix three tracks according to the ECB framework.
A Signatories) or a signatory to bilateral
Exploration,
mining and refinery sectors will now be
Memorandum of Understanding with SEBI for
deemed as infrastructure sector for the purpose of
information sharing arrangements; and
ECB, which are not included under the harmonized list
should not be a country identified in the public of infrastructure but were eligible to raise ECB under
statement of the FATF as a jurisdiction having a previous framework.
strategic Anti-Money Laundering or combating
Companies
in infrastructure sector will utilize the
the financing of terrorism deficiencies to which
ECB proceeds raised under track I for the end uses
counter measures apply or a jurisdiction that has
permitted for this track. However, NBFCs-IFCs and
not made sufficient progress in addressing the
NBFCs-AFCs will be allowed to raise ECB only for
deficiencies or has not committed to an action
financing infrastructure.
plan developed with the FATF to address the
deficiencies. Holding
companies and CICs will use ECB proceeds
only for on-lending to infrastructure Special Purpose
In addition to above, the RBI has also issued FAQs on
Vehicles (SPVs).
issuance of RDBs overseas as on 13 April 2016. All the
other provisions in respect of issuance of RDBs will remain The
companies added under track I (infrastructure
constant and the above mentioned amendments will come companies, NBFCs, holding companies and CICs)
into effect immediately. should have a Board approved risk management
policy and 100% hedging requirement, which will be
Source: A.P. (DIR Series) Circular No. 60 dated 13 April
verified by AD bank and the position is reported to RBI
2016
through ECB 2 returns.
Modifications in External Commercial In addition to above, the RBI has also made various
Borrowing (ECB) framework clarifications pertaining to A.P. (DIR Series) circular no. 32
The RBI has, in order to address the critical needs of dated 30 November 2015, which are highlighted as under:
infrastructure sector of the country, made certain The
AD bank may allow refinancing of ECB raised
amendments in the ECB framework issued vide A.P. (DIR under previous framework subject to conditions
Series) Circular No. 32 dated 30 November 2015. The key regarding all-in-cost and residual maturity;
amendments made in the revised ECB framework are as
under: The
ECB framework is not applicable to investments
made by Registered Foreign Portfolio Investors (RFPI)
Companies
in infrastructure sector, non-banking in non-convertible Debentures (NCD);
financial companies-Infrastructure Finance Companies
(NBFC-IFCs), NBFCs-Asset Finance Companies Minimum
average maturity of Foreign Currency
(NBFC-AFCs), holding companies and core investment Convertible Bonds (FCCBs)/Foreign Currency
companies (CICs) will also be eligible to raise ECB Exchangeable Bonds (FCEBs) is five years irrespective
of the amount of borrowing. Therefore, no call and put
59 Tax Digest
option can be exercised prior to five years. Moreover, an Guidelines for FDI in e-commerce sector
AD bank will not regulate any transaction in relation to 100% FDI permitted under marketplace based
FCCBs/FCEBs; model of e-commerce
NBFCs,
coming under the regulatory purview of RBI,
DIPP vide Press Note 3 has brought the much needed
may continue to raise ECBs regarding on-lending for any
clarity in respect of the FDI Policy in the e-commerce
activities including infrastructure under track III; and
sector. The salient features of the said Press Note are as
With
respect to forms of ECBs, bank loan will be read under:
as loans, as recognized lender includes foreign equity
E-commerce
has been defined to mean buying
holders/institutions other than banks.
and selling of goods and services including digital
All the other aspects and conditions of ECB framework will products over digital & electronic network. Digital and
remain same. electronic network will include network of computers,
television channels and any other internet application
Source: A.P. (DIR Series) Circular No. 56 dated 30 March
used in an automated manner such as web pages,
2016
extranets, mobiles etc.
Foreign Direct Investment Policy E-commerce
entity has been defined to mean any
Indian company or a foreign company or office, branch
Liberalization of the foreign investment limits or agency, conducting the e-commerce business.
for Asset Reconstruction Companies (ARCs)
100%
FDI under the automatic route is permitted in
DIPP vide Press Note 4 (2016 Series) has permitted 100% marketplace based model of E-commerce, which
FDI in ARCs under the automatic route. Earlier, prior Foreign is defined to mean providing of an information
Investment Promotion Board (FIPB) approval was required technology platform by an e-commerce entity on a
for infusion of FDI in ARCs beyond 49%. The salient features digital and electronic network to act as a facilitator
of the said Press Note are as under: between buyer and seller.
The
investment limit of sponsors will now be governed FDI
is not permitted in inventory based model
by the Securitisation and Reconstruction of Financial of E- commerce, which is defined to mean, an
Assets and Enforcement of Security Interest Act, 2002 e-commerce activity where inventory of goods and
(SARFAESI Act), thereby eliminating the condition of services is owned by e-commerce entity and is sold to
not holding more than 50% of the shareholding by any the consumers directly.
sponsor.
FDI
in marketplace-based model of e-commerce is
The
provision in respect of total shareholding of an permitted subject to the following conditions:
individual Foreign Institutional Investor (FII)/Foreign
Portfolio Investors (FPI), which will be below 10% of the Marketplace e-commerce entity will be permitted
total paid-up capital, will continue. to enter into transactions with sellers registered
on its platform on Business-to-business (B2B)
FIIs/FPIs
can now invest up to 100% of each tranche in basis;
the Security Receipts (SRs) issued by ARCs registered
with RBI, which were earlier allowed to invest only up to E-commerce market place entity is permitted
74% of each tranche of the said scheme. to provide other support services to sellers
in respect of warehousing, logistics, order
Source: Press Note 4 of 2016 series dated 06 May 2016 fulfilment, call center, payment collection and
other services;
60 Tax Digest
E-commerce entity providing a marketplace will Payments for sale may be facilitated by the
not exercise ownership over the inventory and e-commerce entity in conformity with the
such an ownership over the inventory will render guidelines issued by the RBI, which requires a
the business into an inventory-based model in marketplace company to maintain an escrow/
which FDI is prohibited; nodal account; and
E-commerce entity will not permit more than 25% E-commerce entities providing marketplace will
of the sales affected through its marketplace not directly or indirectly influence the sale price
from one vendor or their group companies. of the goods or services and shall maintain the
This is effectively to restrict only few buyers/ level playing field.
group companies selling products through single
Furthermore,
in terms of the said Press Note, subject
marketplace platform;
to the conditions of the FDI Policy on services sector
Goods/services made available for sale on and applicable laws/regulations, security and other
marketplace should clearly demonstrate the name, conditionalities, sale of services through e-commerce
address and contact details of the seller; will be under the automatic route.
Post sales, delivery of goods to customer, Source: Press Note 3 of 2016 series dated 29 March 2016
customer satisfaction and any warranty/guarantee
of goods/services will be the sellers obligation;
61 Tax Digest
In the press
Tax Articles
8 Mar - May
The evolving landscape Balance between fiscal deficit and promoting manufacturing
Vijay Iyer- The Economic Times Abhaya K Agarwal Moneycontrol
Overview of indirect taxes FM addresses the concerns of the FMCG sector
Uday Pimprikar - The Economic Times Aashish Kasad- Moneycontrol
Mixed bag for private equity/venture capital Subtly inching the GST way
Subramaniam Krishnan The Economic Times Suresh Nair - Taxindiaonline.com
Smart funding for Smart City initiatives Real estate sector proposals a pleasant surprise
Shrinivas Kowligi Business Today Maadhav Poddar - NDTV PROFIT
What it holds for individual tax payers Positive for financial services
Shalini Jain - Business Today Jaiman Patel - NDTV PROFIT
Infrastructure fifth support pillar Budget provides shelter for housing
Samir Kanabar Moneycontrol Rama Karmakar - The Hindu
FM could have done more for financial services Taxability of EPF, NPS and annuity purchased
Sameer Gupta Moneycontrol Amarpal Chadha - The Financial Express
Leaping union budget in leap year? India a bright spot for growth and investment, says EYs Mark
Ritika Loganey Gupta - Moneycontrol Weinberger
Mark Weinberger - The Economic Times
Progressive, rational and committed
No dispute resolution mechanism between countries a concern
Ravi Mahajan - Moneycontrol
in BEPS
International tax proposals Mark Weinberger - The Economic Times
Rajendra Nayak - Business Today
Long-term vision needed for retirement plan
Key corporate tax features Amarpal Chadha - The Economic Times
Prashant Khatore - The Economic Times
Tax holiday may not benefit start-ups much
Long-term steady growth for retail K T Chandy DNA
Paresh Parekh - Moneycontrol
Real Estate Bill to bring transparency, accountability
Impact on retail Gaurav Karnik DNA
Paresh Parekh - The Economic Times
Good news for first-time home buyers post-budget
International tax reforms a positive sign or sigh? Mrudula Patki - The Financial Express
Jayesh Sanghvi - The Economic Times
Put the onus on tax authority to demonstrate tax benefit
Neutral to life sciences sector Sudhir Kapadia - Business Standard
Hitesh Sharma Moneycontrol
Budget 2016 - whats in for Make in India
Focus on stability in tax policies Keval Doshi DNA
Hasina Chhil - The Economic Times
How to incorporate ESOPs as a reward strategy?
Proposals to boost real estate Sonu Iyer - TECHR 2016
Gaurav Karnik Moneycontrol
Draft foreign tax credit rules disappoint MNCs
Lacks lustre for telecom; offers little to cheer Raju Kumar The Financial Express
Garima Pande - The Economic Times
New disclosure norms as per ITR forms for FY16
Mixed bag for telecom industry Amarpal Chadha - The Financial Express
Bipin Sapra Moneycontrol
We would be lucky if we can grow at 7-7.5% - EY Indias DK
Indirect tax proposals aid ease of doing business Srivastava
Bipin Sapra- Moneycontrol DK Srivastava
Infrastructure back in focus Mauritius: sunrise after sunset

Avinash Narvekar - The Economic Times Sudhir Kapadia Mint
Not up to expectations from an M&A perspective New disclosure norms in income tax return forms
Amrish Shah Moneycontrol Sonu Iyer - Mint
Union Budget 2016 analysis personal taxation India-Mauritius DTAA amendment: a paradigm shift
Amarpal S. Chadha Moneycontrol Sameer Gupta - The Financial Express
Measures for real estate Amendment to India-Mauritius tax treaty: impact analysis
Ajit Krishnan - The Economic Times Narendra Rohira - Business Today

Compilation of Tax Alerts
(Click on the hyperlinks to the title to access the alerts)
Direct Tax
Sl. No. Title Date of the alert Citation/Notification/Circular

1 Flash news - Government withdraws the budget proposal 8 March 2016 FMs announcement of roll-
to tax Recognised Provident Fund contribution and back of the budget proposal.
withdrawal
2 Indian tax administration clarifies on AOP classification 9 March 2016 CBDT Circular No. 7 of 2016,
in EPC/ turnkey projects dated 7 March 2016
3 Global Tax Alert - Indian tax administration issues 12 March 2016 CBDT instruction no. 3 of
revised guidance on transfer pricing audit procedures 2016, dated 10 March 2016
4 SC rules on tax holiday eligibility on receipt of subsidies 16 March 2016 CIT v. Meghalaya Steels Ltd.
[TS-124-SC-2016]
5 CBDT notifies guidelines for onshore management of 17 March 2016 CBDT notification dt 15 March
offshore funds 2016
6 SC rules transaction charges paid to stock exchange 31 March 2016 Civil Appeal No. 3141 of 2016
for online trading facility does not constitute fees for dated 29 March 2016
technical services [CIT v. Kotak Securities Ltd.]
7 Madras High Court rules Indian tax provision notifying 14 April 2016 T Rajkumar & Others v. Union
Cyprus as non-cooperative jurisdiction is not of India
unconstitutional [TS-197-HC-2016(Mad)]
8 Bombay HC upholds non-taxability of deferred 18 April 2016 CIT v Hemal Raju Shete
consideration on transfer of shares in the absence of (ITA No. 2348 of 2013)
accrual (Hemal Raju)
9 Indian tax administration issues draft rules for granting 19 April 2016 CBDT Press Release dated 18
foreign tax credit April 2016
10 Removal of restrictions on Provident Fund withdrawal 20 April 2016 GoI withdraws Notification
dated 10 February 2016

11 Madras High Court rules waiver of principal amount of 26 April 2016 CIT v. Ramaniyam Homes Pvt.
loan used for acquiring capital assets is taxable Ltd.
[Tax Case (Appeal) No. 278 of
2014]
12 Indian administrative circular on payment of interest 28 April 2016 CBDT circular No. 11/2016
on refund of excess taxes withheld from payment to dated 26 April 2016
nonresident
13 Supreme Court rules tips received by waiters from 28 April 2016 ITC Ltd. v. CIT
customers is not salary income [TS-225-SC-2016-ITC]
14 Launch of One Employee-One EPF Account drive 2 May 2016 EPF Organisation launched
a consolidation drive for
members of EPF Scheme
15 CBDT Committee recommends MAT framework for Ind- 2 May 2016 CBDT committees
AS companies recommendations for ITL
amendments for levy of book
profit based MAT
16 CBDT introduces form for employee investment 4 May 2016 CBDT Notification No
declarations and extends due date for quarterly 30/2016(F. No 142/29/2015-
withholding statements TPL) dated 29 April 2016

17 Chennai Tribunal upholds salary taxation of SARs 11 May 2016 Soundarrajan Parthasarathy
benefits received from foreign parent of employer v. DCIT
[TS-252-ITAT-2016]
18 Protocol signed on 10 May 2016 to amend the 1982 12 May 2016 Protocol to amend the existing
India-Mauritius tax treaty India Mauritius DTAA was
signed.
19 Pune Tribunal upholds tax deductibility of MTM 19 May 2016 Cooper Corporation Pvt. Ltd.
exchange fluctuation loss on forex loan borrowed to v. DCIT
reduce interest cost and hedge export receivables [TS-265-ITAT-2016 (PUN)]
20 CBDT releases FAQs on Income Declaration Scheme 21 May 2016 CBDT Circular No. 17 of 2016
2016
21 The Income Declaration Scheme 2016 - Rules 21 May 2016 CBDT Circular No. 16 of
prescribing procedure and valuation mechanism 2016 dated 20 May 2016,
Notification
S.O. 1831(E) dated. 19 May
2016
22 Indian Tax Administration issues draft indirect transfer 24 May 2016 CBDT issues draft rules and
rules; invites comments from stakeholders forms in relation with the
indirect transfer provisions
23 Indian Equalization Levy on digital services to be 31 May 2016 Notification No. 37/2016
effective from 1 June 2016, administrative rules & 38/2016: F No.
notified 370142/12/2016-TPL, dated
27 May 2016
65 Tax Digest
Indirect Tax

1 CESTAT allows credit of Service tax on transportation, 16 March 2016 2016-VIL-180-CESTAT-CHE-CE
treating the place where property in goods is transferred [Batch of appeals]
in terms of Sale of Goods Act - as Place of removal
2 CESTAT rules that service tax is not leviable on the 17 March 2016 Magarpatta Township
element of withholding tax in case of remittance Development & Construction
to Foreign Service provider under a Net of Tax Co. Ltd. v. CCE
arrangement [Appeal No. ST/322/12-Mum]
3 AAR rules that provision of business support services 17 March 2016 Godaddy India Web Services
to US affiliate are naturally bundled and are not Pvt. Ltd.
intermediary services [2016-TIOL-08-ARA-ST]
4 Maharashtra State Budget 2016-17 - Amendments in 29 March 2016 Key indirect tax proposals/
VAT, Profession Tax, Motor Vehicle Tax and Entry Tax amendments of the
Maharashtra State Budget for
the Financial Year 2016-17
5 DGFT announces reconstitution of the Board of Trade 30 March 2016 Trade Notice No. 21/2015-
under new Foreign Trade Policy 2020 dated 23 March 2016,
issued by the Directorate
General of Foreign Trade,
Ministry of Commerce &
Industry.
6 Tribunal rules that refund of unutilized CENVAT credit is 1 April 2016 Srinivasa Hair Industries v.
admissible in case of closure of unit CCE
[Appeal No. E/497/2011]
7 CESTAT rules that Service tax is not leviable under 5 April 2016 Tech Mahindra Ltd. v. CCE
reverse charge mechanism on salary and other costs [2016-TIOL-709-CESTAT-
reimbursed by the Indian head office to its foreign branch MUM]

8 Rule 6(3) and Rule 7B of the CENVAT Credit Rules, 2004 5 April 2016 Notification No. 23/2016
amended post Union Budget 2016-17 Central Excise dated 1 April
2016
9 Tribunal rules that Service tax is not leviable on 7 April 2016 Reliance ADA Group Pvt. Ltd.
expenses reimbursed by the group companies in terms of v. Commissioner of Service
cost sharing arrangement Tax
[2016-TIOL-603-CESTAT-
MUM]
10 High Court grants stay on applicability of Service tax 7 April 2016 Levy of Service tax (forward
on provision of legal consultancy services by senior charge basis) on legal
advocates consultancy services provided
by senior advocates
11 CBEC prescribes new procedure and timelines for dealing 13 April 2016 CBEC Circular No.
with Audit Objections under CERA and CRA audits 1023/11/2016-CX dated 8
covering Central Excise, Service tax and Customs April 2016
12 Notifications and Circular issued w.r.t services provided 14 April 2016 Notifications and Circular
by Government or local authority dated 13 April 2016 issued
by MoF granting exemption
and issuing clarifications with
reference to various services
provided by Government or a
local authority
13 Kerala HC upholds the constitutional validity of levy of 3 May 2016 Kanjirappilly Amusement Park
Service tax on admission and access to entertainment and Hotels Pvt. Ltd.. v. Union
event & amusement facilities of India
[2016-TIOL-856-HC-KER-ST]
67 Tax Digest
14 Supreme Court rules that VAT is not leviable on 3 May 2016 Commissioner , Delhi Value
transactions constituting inter-state trade and sale or Added tax v. ABB Ltd.
purchase in course of import [2016-TIOL-41-SC-VAT]
15 DGFT notifies changes to MEIS and SEIS reward 9 May 2016 DGFT Public Notice No.
eligibility 06/2015-2020 and 07/2015-
2020 both dated 4 May 2016
16 AAR rules that Service tax would be levied on freight and 17 May 2016 BERCO UNDERCARRIAGES
other charges under reverse charge mechanism even if (INDIA) PVT LTD
such expenses form part of the value of imported goods [2016-TIOL-11-ARA-ST]
for levy of applicable Customs duty
17 Finance Bill 2016 enacted on 14 May 2016 after 23 May 2016 Key changes relating to
receiving the Presidents assent indirect tax provisions made
applicable from the date of
enactment of Finance Bill i.e.
14 May 2016
18 Chhattisgarh HC upholds Entry tax levy on dealers 26 May 2016 Budhwari Bazar Vyapari
carrying on business within a railway area Sangh and Ors v. The State of
Chhattisgarh and Ors.
[TS-205-HC-2016(CHAT)]
19 Government of India issues National Capital Goods Policy 31 May 2016 GoI issues the National Capital
2016 Goods Policy 2016
20 MoF invites suggestions on its proposal to provide 31 May 2016 Ministry of Finance circular F.
optional single registration and return for First stage No. 201/04/2016-CX.6 dated
dealer and Importer 23 May 2016
68 Tax Digest
21 Ministry of Finance notifies Indirect Tax Dispute 2 June 2016 Ministry of Finance
Resolution Scheme Rules, 2016 Notification No. 29/2016-CE
(NT) dated 31 May 2016
22 Ministry of Finance issues Notifications and a Circular for 2 June 2016 Ministry of Finances
Krishi Kalyan Cess Notifications No. 27/2016
ST, 28/2016 ST, 29/2016
ST, 30/2016 ST, 31/2016
- ST dated 26 May 2016
Notification No. 28/2016
CE (NT) dated 26 May 2016
Circular No. 194/04/2016
ST dated 26 May 2016
69 Tax Digest
Regulatory

1 Competition Commission of India relaxes limits for 9 March 2016 Amendments to Competition
business combinations Act, 2002 pursuant to
Notification no. S.O. 673(E),
S.O. 674 (E) and S.O. 675(E)
dated 4 March 2016
2 (M&A perspective) SEBI issues discussion paper on 23 March 2016 SEBI Discussion Paper on
Control 14 March 2016 proposing
to amend the definition of
Control prescribed under the
SEBI (Substantial Acquisition
of Shares and Takeovers)
Regulations, 2011
3 Guidelines for Foreign Direct Investment on 31 March 2016 Guidelines on FDI on

E-commerce E-commerce issued by
Department of Industrial
Policy & Promotion (DIPP)
vide Press Note 3 (2016) on
29 March 2016
4 Bombay HC rules that order sanctioning scheme of 10 April 2016 The Chief Controlling Revenue
amalgamation is chargeable to stamp duty; No rebate Authority/Superintendent
granted for stamp duty paid in other state of Stamp (Headquarters) v.
Reliance Industries Ltd.
Civil Reference No. 1 of 2007
in Writ Petition No. 1293 of
2007 in Reference Application
No. 8 of 2005
5 Draft guidelines for On tap licensing of Universal 11 May 2016 Draft regulatory framework
Banks in private sector for granting licenses to
Universal Banks on a
continuous basis released by
RBI on 5 May 2016.
6 Revised regulations and guidelines for establishment 18 May 2016 Foreign Exchange
of a branch office or a liaison office or a project office Management (Establishment
in India in India of a branch office or
a liaison office or a project
office or any other place of
business) Regulations, 2016
issued by Reserve Bank of
India

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Tax Digest

Significant Supreme Court rulings

Rulings on whether certain payments can be treated as payment of rent

Payments made for hotel room liable to tax withholding as rent

Payment of damages for land-encroachment allowable as deduction

Whether an abusive transaction?

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Other significant decisions

Untraceable creditor doesnt amount to cessation of liability

Is there a place of effective management?

From the Tax Gatherers desk

CBDT clarifies on Association of Persons (AOP) classification in EPC/ turnkey projects

CBDT Committee recommends a MAT framework for Ind-AS companies

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CBDT releases report of E-Commerce Committee which recommended Equalization Levy

CBDT issues draft rules for granting foreign tax credit

The 2012 DTAA between India-Indonesia came into force

India and Mauritius sign protocol amending 1982 DTAA

Protocol to DTAA between Belgium and India initialed

Tax Information Exchange Agreements (TIEA) Updates

TIEA between India and Marshall Islands signed

TIEA between India and Maldives signed

Happenings across the border

UK introduces large business special measures regime

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Authority for Advance rulings

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VAT applicable only if there is actual transfer of right to use goods

Key statutory updates

Foreign Trade Policy 2015-20

RBI amended Foreign Exchange (Compounding Proceedings) Rules, 2000

Overseas Direct Investment (ODI)

Rationalization of Form ODI

Raising funds from overseas parties

Modifications in issuance of Rupee Denominated Bonds (RDBs) overseas

Modifications in External Commercial Borrowing (ECB) framework

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Whats new Useful links

Goods and Service Tax

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Furthermore, the Tribunal noted that the taxpayer

Citation Particulars Ruling of HC

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Case Law Payment Description Ruling

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(Source : CBDT Circular No. 2/2016 of 25 February 2016)

CBDT clarifies nature of share buy-back

(Source: Circular No. 3 of 2016, dated 26 February 2016)

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The 2012 DTAA between India-Indonesia came initialed

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