RBI allows exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship

RBI/2011-12/403 A.P. (DIR Series) Circular No.81 February 21, 2012

Export of Goods and Services – 
Receipt of advance payment for export of goodsInvolving shipment (manufacture and ship) beyond one year

Attention of Authorised Dealer Category – I (AD Category I) banks is invited to the sub-regulation (2) of Regulation 16 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, notified videNotification No.FEMA.23/RB-2000, dated 3rd May 2000, as amended from time to time, in terms of which prior approval of the Reserve Bank is required to be obtained by an exporter for receipt of advance where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment.

2. With a view to liberalizing the procedure, it has been decided to permit AD Category- I banks to allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship andwhere the ‘export agreement’ provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to the following conditions:-

Enhancement of limit for foreign remittances

RBI/2007-08/ 146 A. P. (DIR Series) Circular No.9     Dated: September 26, 2007

Liberalised Remittance Scheme for Resident Individuals- Enhancement of limit from USD 100,000 to USD 200,000

1. Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A. P. (DIR Series) Circular No. 51 dated May 8, 2007 on the Liberalised Remittance Scheme for Resident Individuals (the Scheme). 

2. With a view to further liberalize the Scheme it has been decided, in consultation with the Government of India, to enhance the existing limit of USD 100,000 per financial year to USD 200,000 per financial year (April – March) with immediate effect. Accordingly, AD Category – I banks may now allow remittance up to USD 200,000, per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both.

Release of Foreign Exchange for Visits Abroad – Currency Component

RBI/2009-10/446 A.P. (DIR Series) Circular No. 50 A.P. (FL Series) Circular No. 7, May 4, 2010

Release of Foreign Exchange for Visits Abroad – Currency Component

Attention of  Authorised Persons in foreign exchange is invited to A.P.(DIR Series) Circular No. 19 dated October 30, 2000 and A.P. (DIR Series) Circular No.11 [A.P. (F.L. Series) Circular No.1] dated November 13, 2001, in terms of which Authorised  Dealers and Full Fledged Money Changers are permitted to sell foreign exchange in the form of foreign currency notes and coins, up to USD 2,000 or its equivalent, to the travellers proceeding to countries other than Iraq, Libya, Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States. The existing limits have been reviewed and it has been decided to increase this ceiling, with immediate effect, to USD 3,000 (US Dollar Three thousand only) to the travellers proceeding to these countries, without the prior permission from the Reserve Bank. Authorised Dealers and Full Fledged Money Changers may accordingly sell foreign exchange in the form of foreign currency notes and coins, up to USD 3,000 or its equivalent, out of the overall foreign exchange released.

Increase in limit to USD 5000 for foreign exchange remittance towards imports without any documentation formalities

RBI/2011-12/404
A.P. (DIR Series) Circular No. 82

February 21, 2012

To

All Authorised Dealers in Foreign Exchange

Madam / Sir,

Release of Foreign Exchange for Imports – Further Liberalisation

Attention of all the Authorised Dealers (ADs) in foreign exchange is invited to the A.P.(DIR Series) Circular No. 106 dated June 19, 2003 in terms of which applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent towards imports into India must be made in Form A-1.

2. Based on suggestions received from the various stake holders, the said limit has been reviewed and it has been decided as a measure of liberalization to raise the above limit for foreign exchange remittance towards imports without any documentation formalities, from USD 500 or its equivalent to USD 5000 or its equivalent, with immediate effect.

3. It is clarified that the ADs need not obtain any document, including Form  A-1, except a simple letter from the applicant containing the basic information viz., the name and the address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance, as long as the exchange being purchased is for a current account transaction (and is not  included in the Schedules I and II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000, as amended from time to time, the amount does not exceed USD 5000 or its equivalent and the payment is made by a cheque drawn on the applicant’s bank account or by a Demand Draft.

Foriegn law firms can not practice in India

Foreign Lawyers cannot practice law in India but are entitled to visit India for short periods to advice on foreign law & conduct international commercial arbitration

A Writ Petition was filed claiming that Foreign Law Firms and foreign lawyers were practising the profession of law in India in contravention of the Advocates Act and that they should be restricted from having any legal practice either on the litigation side or in the field of non-litigation and commercial transactions within the territory of India. HELD by the HighCourt:

INTERNATIONAL TAXATION-ARTICLE

RULE OF RESIDENCE
Resident status for Individual means:
a)In case of citizen of India who leaves India for employment outside India or as member of crew of Indian ship if he is in India for 182 days or more during previous year
b)In case of citizen of India who being outside India comes on visit to India if he is in India for 182 days or more during previous year
c)In any other case , if he is India for 182 days or more or is In India for 60 days or more in current PY and for 365 days or more in preceding 4 PYs

Penalty-Shares Trading

(Anoop Jain HUF, ITAT Delhi, delevered on 3-2-2012)

A. On disallowance of Interest for Shares Trading

Facts of the case: A.Y.06-07

The assessee claimed deduction of interest out of his speculative income taxable @30%. AO asked him to prove that interest has been paid to earn speculative income and not earn short term capital gain taxable @10%. However since assessee could not offer any documentary proof to substantiate the same, AO treated the same as towards STCG and disallowed interest resulting addl tax @ 20% on interest component. Now AO seeks to impose penalty and CIT(A) confirmed the order

CBDT-Instructions – Handing Over Of Charge

Instruction No. 09/2011 Dated 25-8-2011
It has come to the notice of the Board that at the time of transfer of an officer/official,detailed Handing Over Note indicating the confidential records and documents, including documents relating to survey and search and seizure, pending important and time bound matters such as audit objections, appeals, revision matters, approvals for retaining impounded/seized documents, reopening of assessments, pending search and survey
assessments etc. is not given to the successor. In the absence of a proper handing over of records, important documents get misplaced and even lost in some cases.

INPUT TAX CREDIT (SECTION 13,14, RULE 18 TO 26, FORM 7,8)

Only taxable person can claim ITC
Note: Registered person or casual trader can not claim ITC

ITC is available only against Input tax on taxable goods
Issue: What if goods no longer remain taxable ?
Note: As per Rule 21(4), if some goods are lying as input or output in the stock of a taxable, and such goods become tax free from a particular date, no ITC shall be admissible to taxable person on sale of goods lying in the stock or on using the the goods as input for making such tax free goods
Further as per Rule 21(6), where ITC has already been availed of by a taxable person against the purchase of goods which are used in mfg. tax free goods or are disposed off otherwise than by way of sale, ITC already availed shall be reversed. If as a result of reversal there is –ve ITC, it shall become payable forthwith.
There is no restriction in VAT law that ITC shall be available only against goods mentioned in registraiton certificate only.

WORKS CONTRACT

ARTICLE 265

NO TAX CAN BE LEVIED OR COLLECTED EXCEPT BY AUTHORITY

OF LAW

Power of Parliament and legislature to make laws (Art 246)

•        Parliament has exclusive power to make laws on matters enumerated

  in List I of Seventh Schedule (Union List)

Instructions under section 253 for filing of appeals

INSTRUCTION NO. 08/2011 [F NO. 279/MISC./M- 43/2011-ITJ], DATED 11-8-2011
With a view to streamline the process of filing appeals to ITAT and in suppression of the existing Instructions on the subject in general, and Instruction No. 1274 dated 10-8-1979, Instruction No. 1353 dated 9-9-1980, Instruction No. 1387 dated 3-3-1981, Instruction No. 1493 dated 18-11-1982, Instruction No. 1570 dated 4-7-1984, Instruction No. 1894 dated 16-6-1992, and Instruction No. 1921 dated 23-1-1995, in particular, the following Instructions are issued herewith for compliance by all concerned:

RICE EXPORTS

Vide Notification No. 97 (RE-2010) dated 21-2-12 amending Chapter 10 of Schedule 2

Minimum Export Price of Basmati Rice has been reduced to US$ 700 per MT.  Earlier it was US$ 900 or Rs. 41,400/- per MT FOB. MEP is expressed only in terms of US dollar.

(ii)  Export is now permitted through all EDI ports.  Earlier it was allowed only through six ports.

In earlier news, HC had stayed ban on rice exports:

The Delhi High Court on Wednesday extended the stay on export of non-basmati rice after several firms appealed in the court to be made party to the suit, challenging the licences to 82 exporters by the government,alleging lack of transparency in quota allocation process. A Bench of Justice S K Kaul and Justice Rajiv Shakdhar while extending the stay on the export today, allowed the plea of other rice firms, including All India Grain Exporters Association, to raise their objections by making them party to the Kannu Aditya Ltd suit and listed the matter for further hearing on September 7.

The Bench also directed the Director General of Foreign Trade to scrutinise the applications of exporters to whom the Centre has allocated the quota for export of non-basmati rice.

On July 19, the ministry had notified the decision to allow non-basmati rice exports, lifting a ban imposed in April 2008 to control high food prices. The ministry allocated the quota on first-come-first serve basis and the letter of intent was invited through e-mail. However, only two days (July 21-22) were given to make applications for exports.

Following this, Kannu Aditya Ltd, a rice exporting firm, moved the court, alleging that there was no transparency in the process adopted by the government in granting the export licences.

Hearing the petition, the high court on July 26 directed the ministry of commerce not to proceed with its plan to grant licences for export of non-basmati rice.

RTI: Students have right to inspect answer sheets

The Ho’ble Supreme Court  held that students have the right to inspect and photocopy their answer sheets after their evaluation under the Right To Information (RTI) Act. The apex court bench of Justice R.V. Raveendran and Justice A.K. Patnaik allowed the disclosure of the answer sheets of the examination conducted by boards, universities, institutions and public service commissions, when it upheld the Calcutta High Court judgment that permitted the students to inspect their answer sheets.

 The apex court pronounced its verdict saying that evaluated answer sheets come under the definition of “information” and reiterated the duty of the public authority under the transparency law to allow maximum disclosure as envisaged by the RTI Act. The case reached the apex court from high court which by its March 28, 2008, judgment permitted a student, Pritam Rooj, to inspect his answer sheets. Rooj was a student of mathematics in the Presidency College. In 2006, when he sat for the first part of degree examination he secured 52 percent marks. In the second year he got 208 out of 400 marks and got just 28 marks out of 100 in fifth papers. Upon seeking re-evaluation, his marks increased by four in the fifth paper.

He contended that his poor marks stood in the way of his getting admission in post-graduation course and applied to inspect his mark sheet under the RTI law which was rejected. The university said that the answer sheets of an examinee cannot be shared. The high court over-ruled it. The order was challenged in apex court by the Central Board of Secondary Education (CBSE) and the West Bengal Board of Secondary Education, among others.

KYC Norms for Chartered Accountants

All the members of Institute of Chartered Accountants of India (ICAI), who are in practice,  are hereby informed that the Council has formulated the following Know Your Client Norms (KYC norms)  at it’s 307th Meeting held on 13^th July, 2011, which shall be recommendatory in nature, and apply only in case of attest function.

KNOW YOUR CLIENT (KYC) NORMS

The financial services industry globally is required to obtain information of their clients and comply Know Your Client Norms (KYC norms).

Keeping in mind the highest standards of Chartered Accountancy profession in India, the Council of ICAI thought it necessary to recommend such norms to be observed by the members of the profession who are in practice.

In light of this background, the Council of ICAI approved the following KYC Norms. However, these norms are recommendatory in nature and every Chartered Accountant carrying out attest function is encouraged to follow them.

Video Confrencing for AGMs of Listed Companies

The Ministry of Corporate Affairs has recognized participation by shareholders in the Annual General Meetings under the Companies Act, 1956 for all companies through video conference. Vide Circular dated 06.06.2011 issued by the Ministry, it is proposed to be mandatory for all listed companies for financial year 2012-2013 and onwards.

This information was given by the Minister of State in the Ministry of Corporate Affairs Shri R.P.N. Singh in reply to a written question in the Lok Sabha today whether the Government has any proposal to make Video Conferencing mandatory in Annual General Meetings (AGMs) of listed companies to facilitate the stakeholders to participate in the meetings 

International Private Leased Circuit charges are liable to service tax under Business Support Servicess

Because If service provider is Indian , then he gets covered under definition of  Telegraph Authority and hence under Telecommunication Service. However International Service provider can not be telegraph authority . Hence CBEC has clarified that if BPO/MNCs or other person is availaing such service then under reverse charge (i.e. import of service ) it will get covered under Business Support Servicve. 

Air passengers prohibited to carry rice in baggage from India

US Department of Agriculture, Animal, Plant & Health Inspection Service(USDA-APHIS) has notified new phytosanitary regulation for entry of rice from countries Including India where khapra beetle is known to occur. This will also apply to consignment throgh courier and mail. Hence non commercial consignment of rice prohibited from 30-07-2011
Customs 34/2011 dtd 03-08-2011

Section 43B :When tax, duty paid in advance under merchantile system

In Paharpur Cooling Towers Ltd v CIT (High Court of Calcutta) I.T.A. No. 2 of 2004 Decided on: 15 July 2011, High Court held that:

 It was never the intention of the legislature to deprive an assessee of the benefit of deduction of tax, duty etc. actually paid by him during the previous year, although in advance, according to the method of accounting followed by him. If we accept the reasoning given by the Tribunal, an advance payer of tax, duty etc. payable in accordance with the method of accounting followed by him will not be entitled to get the benefit even in the next year when liability to pay would accrue in accordance with the method of accounting followed by him because the benefit of Section 43B is given on the basis of actual payment made in the previous year. We, thus, find that the Tribunal below committed substantial error of law in denying the benefit of Section 43B (a) of the Act to the appellant only on the ground that the tax was paid in advance in accordance with the mercantile system of accounting.

TELECOM COMPANIES WILL PAY SERVICE TAX ON SALE OF SIM CARDS: SUPREME COURT

The Supreme Court has held that telecom operators will have to pay service tax on the sale of SIM cards as these transactions entail their processing and activation for providing cellphone services.
Upholding the judgement of the Kerala high court, a bench of justices Mukundakam Sharma and A R Dave said the sale of SIM cards was part of the activation and processing fee, on which the telecom firms pay service tax.

ANTI TAX AVOIDANCE MEASURES

Westminister’s Law

“Avoidance of tax is not evasion and carries no ignominy” has been held in famous English decision IRC Vs. Duke of Westminister and famously known as Westminister’s law. It further said “Every citizen has legal right to dispose of his capital and income so as to attract upon himself the least amount of tax……. Given a document of transaction is genuine the court can not go beyond it to some underlying substance”

Analysis of Mcdowell’s Case

However the Mcdowell’s case upheld by Supreme Cout in 1985 did not find favour with tax planning resulting tax avoidance.Justice Ranganatha Mishra however in this case stated tax planning is legitimate provided it is with in framework of law, colourable devices can not be part of tax planning and it is wrong to promote avoidance of tax by resorting to dubious methods” In this judgement certain facts were misstaed by Justice Chinnappa Reddy like it was said that westminister principle is not applicable now even in England.

However just three years later English law upheld the validity of westminister principle in 1988 in “Craven v. White” and then again in 2001 in Mac Niven v. West Morland Investments Ltd.

Impact of opening LLP route for Chartered Accountants

Recent Changes

Pre-amendmend Legal Position

As per section 2(7)(c) of the Companies Act 1956, the Central Government may by notification, notify that a Body Corporate, will not be recognized as Body Corporate for the purpose of the Companies Act 1956.

The text of section is given below:
s. 2(7)  “body corporate” or “corporation” includes a company incorporated outside India but does not include—
(a)  a corporation sole ;
(b)  a co-operative society registered under any law relating to co-operative societies ; and
(c)  any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;

On the other hand, Section 226 (3) of the Companies Act 1956 provides for the disqualification for appointment of auditor of a company and as per clause (a) of this sub section, a body corporate cannot be appointed as Auditor

Notifications by MCA

MCA vide its notification dated 23-5-2011, has, in exercise of its powers under 2(7)(c) of the Companies Act 1956,notified that LLP, which is  a Body Corporate as per the Limited Liability Partnership Act 2008, shall not be treated as Body Corporate, for the purpose of section 226(3)(a) of the Companies Act 1956,

Thus MCA by its aforesaid notification has taken LLP out of the purview of the Body Corporate under this sub section and therefore, LLP can be appointed as the Auditor of the company.

Further MCA vide its circular no No 10/2011 dated 04/04/2011 has allowed CA/CS/CWA to practice under LLP in partnership with other fellow members of same institute and in case of CS, also with members of such recognized profession as may be prescribed.

DIRECTOR IDENTIFICATION NUMBER: RECENT CHANGES AT A GLANCE

1. MCA vide circular 5/2011 dated 4-3-11, provided that DIN application can be digitally signed by the applicant or Practicing CA/CS/ICWA or CS in Full time employment. Scanned documents required to be submitted along e-form and physical submission of documents dispensed with.           If din is signed by applicant the din shall be allotted after one or two days but if application is signed by professional din shall be immediately allotted. If false information is furnished, penal action shall be taken including professional misconduct against professional along cancellation of DIN.

2. There after vide notification dated 26-3-2011, it was mentioned that photo, proof of ID, proof of residence, verification by applicant in prescribed format shall be scanned and enclosed. It further notified the matter mentioned in circular dated 4-3-11 and further mentioned that defects shall be notified through mail and on web site and if defect is not rectified in 15 days, DIN shall be cancelled. DIN 4 to be signed by practicing CA/CS/ICWA only NO cost for DIN-4
3. There after vide circular 11/2011 dated 7-4-2011, PAN made mandatory for Indian nationals and passport made mandatory for foreign nationals and all DIN holders required to furnish PAN till 31-5-2011 if they had not earlier furnished PAN.

4.    Vide circular 32/2011 dated 31-5-2011,  furnishing of Din for PAN information extended to 30-9-2011 failing which DIN to be diabled along heavy penalty.

5. Later vide notification dated 2-6-2011 made effective from 12-6-2011, the digital sign by director dispensed with and signing by practicing CA/CS/ICWA or CS in full time employment made mandatory. For DIN-4 also full time employee CS allowed to sign DIN-4 beside PCA/PCS/PICWA

Exemption from filing ITR for Total Income up to Rs. 5 lacs

Notification dated 23-6-2011 for AY 2011-12 and Notification 9/2012 dtd 17-2-2012 for AY  2012-13

- Only Individual assessees have been exempted
- Exemption is available only for assessment year 2011-12 & 2012-13. It is not available for ITRs of AY 2010-11 which   are filed during 2011-12
- Exemption is available for total income equal to or less than rs. 5 lacs. Hence Gross total Income can exceed Rs. 5,00,000 in such cases.
- Further exemption is available only if assessee has following income only:
    a) Salary Income
    b) Saving Bank Account Interest up to Rs. 10,000
- Where assessee is having exempt income also say receipts from LIC or dividend income or interest from post office saving account (declared taxable recently) whether the exemption shall be available is not certain.

20% SURCHARGE TO BE DEPOSITED IN PMIDF (NOTIFICATION 20-6-11)

DIFFCULT WAYS OF DOING EASY THINGS

                        The state government of Punjab appears to have mastered the art of finding difficult ways of doing easy things. Gone are the days when administrators used to think not only twice but also used to invite comments by issuing draft notifications. Order of the day is first issue ordinance, then convert it into law and if people make hue and cry about it then just quash it or make it optional.

                        Continuing its vendetta with dealers in Punjab, the excise and taxation department has come out with another notification adding some more burden to already crippling trade and industry of Punjab. The notification effective from 20-06-2011, requires additional tax under section 8B under Punjab Vat Act, 2005 popularly known as surcharge @ 10%, to be bifurcated in ratio 0f 80:20, out of which 80% shall go to vat department and 20% shall go to Punjab Municipal Infrastructure Development Fund, which is a fund altogether different from Punjab Municipal Fund and Punjab Infrastructure Development Fund. This fund finds its genesis from Punjab Municipal Infrastructure Development Fund Act 2011 created on 11-04-2011 for a period of 10 years with annual commitment to contribute 200 crore.

E-DATA ENTRY OF TRANSACTIONS (NOTIFICATION 5-5-11)

                             In another move to devastate the already crippling trade and industry in state of Punjab, a public notice has been promulgated by the purists in excise and taxation department. The notification mandates that all the dealers making transactions with in state of Punjab for value exceeding more than 2 lakhs through single bill shall compulsorily upload the information on the website of Punjab government before the goods leave the premises of a dealer. In respect of deals in commodities of iron and steel, cotton bales and yarn, edible oils, timber, marble and tiles every transaction exceeding Rs. 20,000 is required to be uploaded.

                        This notification is applicable from 01-06-2011.

Comprehensive analysis of section 44AD

Context of the Section: The family of provisions on presumptive taxation applicable to residents originated as under:

Insertion by Finance Act 1994 wef. 01-04-1994 i.e. A.Y. 1994-95:

44AD: Presumptive taxation of civil construction (8% of Gross Receipts)
44AE: Presumptive Taxation of Transport Business

WEF ASSESSMENT YEAR	Presumptive Income for month or part of month during which owned
	Heavy Goods Vehicles	Others
1994-95	2000	1800
2003-04	3500	3150
2011-12	5000	4500

There after in Finance Act 1997, w.e.f. 01-04-1998, i.e. A.Y, 1998-99 another section in row was inserted

44AF: Presumptive taxation of retail business (5% of total Turnover)
Recent Changes made:

Now by virtue of Finance Act 2009, section 44AD has been substituted with new avatar to encompass entire range of businesses wef  AY 2011-12. In this new era, while section 44AE still holds the ground, section 44AF has been put to rest w.e.f. AY 2011-12.

ICAI MEMBERSHIP FEE REVISED WEF 01-04-2011 (NOTIFICATION DATED 25-02-2011)

PARTICULARS OF FEE	REVISED FEE
MEMBERSHIP FEE -ENTRANCE FEE - FELLOW ADMISSION FEE	1200 1800
ANNUAL MEMBER SHIP FEE -AASOCIATE FEE - FELLOW FEE	800 2200
COP FEE	2000
RESTORATION FEE	1200

FEE FOR SENIOR CITIZENS i.e. Age of 65 Years or more on 01-04-2011

PARTICULARS OF FEE	REVISED FEE
Annual membership Fee -         Associate fee -         Fellow fee	600 1600
COP FEE	1500