I.  Today's Topline News:   

1. DTC Bill to be introduced in Monsoon Session: Pranab Mukherjee  (Click for detail)

2. SC Upholds Taxmans Powers to Issue Summons  (Click for detail)

3. New Duty Drawback Scheme to be Easier  (Click for detail)

4. Information Systems Audit (ISA) Course - June, 2012 Application Form  (Click for detail)

II.  Analysis of Circular No. 158/9/2012–ST Dated 08.05.2012:  

Up to 31.03.2012, if the following 8 services provided by individuals or proprietary firms or partnership firms then these services shall be deemed to have been provided on the date on which payment is received:

1.  Consulting Engineer's Services [Section 65(105)(g)]
2.  Architect’s Services[section 65(105)(p)] 
3.  Interior Decorator’s Services [Section 65(105)(q)
4. Practicing Chartered Accountant’s Services[Section 65(105)(s)] 
5. Practicing Cost Accountant’s Services[Section 65(105)(t)
6. Practicing Company Secretary’s Services[Section 65(105)(u)]
7. Scientific or Technical Consultancy Services [Section 65(105)(za)
8. Legal Consultancy Services [Section 65(105)(zzzzm)]

From the combined reading of Rule 5B of Service Tax Rules, 1994 and Rule 7 of Point of Taxation rules, 2011 we can say that in respect of above 8 services rate of service tax shall be taken of the date on which payment is received irrespective of date of issue of invoice or completion of services.

WEF 01.04.2012 rate of service tax has been increased from 10% to 12% now the question was that, in respect of invoice issued up to 31.03.2012, which rate of services tax to be taken and same has been clarified by department on the basis of above provisions.

Department has clarified that, in respect of invoices raised up to 31.03.2012 by individuals or proprietary firms or partnership firms providing above 8 specified services, rate of service tax shall be 12%.

(Please click here for detail)

II.  Useful Case laws:

1.   Black & Veatch Consulting Pvt. Ltd. Vs. CIT, ITA No. 1237 OF 2011, Date of Decision: 09/04/2012, High Court of Bombay

Issue:

Whether brought forward unabsorbed depreciation and losses of the unit the Income which is not eligible for deduction under Section 10A of the Act cannot be set off against the current profit of the eligible unit for computing the deduction under Section 10A of the IT Act.”

Held:

Section 10A is a provision which is in the nature of a deduction and not an exemption. Section 10A under which a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive Assessment Years is to be allowed from the total income of the assessee. The deduction under Section 10A, in our view, has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of Section 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in Sections 80C to 80U.There is no any specific statutory provision in this regard. So brought forward unabsorbed depreciation and losses shall not be set off against the current profit of the eligible unit for computing the deduction under Section 10A of the IT Act.” 

(Please click here for judgment)

2.  A Vs Director of Income-tax, A.A.R. No. P of 2010, Date of judgment: 22/03/2012, AAR

Facts of the Case:

‘A’ (Mauritius) which holds 25.06% of shares in the applicant and incorporated on 6.4.2001 in Mauritius, proposes to accept the offer of buy-back. It acquired the shares in the applicant during the period 2001 to 2005 for Rs.280 per share on the first occasion and Rs 320 per share on the subsequent occasions. It is in that context that the applicant approached this Authority for Advance Ruling as to whether the capital gains that may arise, is chargeable to tax in India in the context of the Double Taxation Avoidance Convention between India and Mauritius and whether it will have the obligation to withhold tax in terms of Sec 195 of the Indian Income-tax Act.

HELD by the AAR:

Though the Applicant was making regular profits, it did not declare any dividends after the introduction of s. 115-O and allowed its reserves to grow. This was only to avoid paying DDT. The buy-back was a “colourable device” devised to avoid tax on distributed profits u/s 115-O because while it would result in repatriation of funds to the Mauritius company, that would constitute “capital gains” in the hands of the recipient, and not be assessable to tax in India under Article 13 of the India-Mauritius DTAA. The fact that the other major shareholders did not accept the buy-back was significant. A buy-back results in a release of accumulated profits which is assessable as “dividend”. The exemption to treat the buy-back proceeds as capital gains is only in respect of a genuine buy-back of shares. As the transaction is colorable, it is not a transaction in the eye of law and has to be ignored and the arrangement has to be treated as a distribution of profits by a company to its shareholders which is assessable as dividend in the hands of the recipient.

(Please click here for  judgment)

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