June Magazine -2008

VOL.IV, PART NO.03

SAI CIRCULARS

(A MONTHLY MAGAZINE ON UPDATION OF INDIAN TAX PROVISIONS)

l

” JUNE ” 2008 ” NON - RESIDENTS (IN INDIA) ” ” SPECIAL”

SAI CIRCULARS (A Monthly Magazine on Updation Of Indian Tax Provisions) 9/14 EAST PATEL NAGAR,

(Near JayPee Sidhartha Hotel)NEW DELHI – 110008

(O) +9111-25769111 / 25753888/2757 / +919312275519

(M-Advisor) : +919811081957 E-MAILS:- [email protected] Web Site:- www.saicirculars.com

JUNE 2008

S.NO I

ÖI N D E XÖ

CA. SATISH AGARWAL Advisor to Editorial Board

PARTICULARS

PAGE NO

Important legal Obligations for the month of July, 2008 (A) Income Tax Act, 1961 (B) Central Excise Act, 1944 (C) Employees Provident Funds (EPFs) And Miscellaneous Provisions Act, 1952 (D) Miscellaneous Acts ([i] Service Tax [ii] ESI [iii] Delhi Value Added Tax (DVAT))

II

III

Recapitulation of Contains in the ‘Significant’ Courts’s / Tribunals’s and AARs’s Judgements (A) Income tax Act, 1961 (B) Service Tax

(Finance)

Act, 1994

Recapitulation of Contains in the ‘Significant Latest’ Circulars, Notifications, Instructions and the Press Releases (A) Income tax Act, 1961 (B) Service Tax (Finance) Act, 1994 (C) Central Excise Act, 1944 (D) FEMA, 1999 and RBI Act, 1934 (E) SEBI Act, 1992 (F) FDIs (Foreign Direct Investments) ‘In India’

IV

3

4&5

6&7 7&8 8 to 11

Recapitulation of Contains in the different tax provisions *Finance Act (Budget) 2008 (Part-IInd) (A) Post Finance Bill (Budget) 2008 Amendments (B) TAX Deducted at Source (C) WithHolding Tax (WHT) (D) Significant Amendments, for the Agricultural and Charitable incomes

(TDS)

11 to 13 13 14

(*Section 10 & 11)

(E) ‘Neutralising effect’ of the ‘courts’s judgements’, against the Income tax deptt. ‘Retrospectively’.

*Non-Residents (In India)

(A) Definitions (*Section 2) (B) Taxability of the Income (*Section 5,6 and 9) (C) Exempted Incomes (*Section 10) (D) Special provisions, for the Computing Incomes for the ‘Certain business’ (*Section 44B & 44DA) (E) Special provisions, for the Foreign head office’s expenditures (*Section 44C) (F) Capital gains (*Section 47) (G) Special provisions, for the Overriding effect of the tax treaties (*Section 90) (H) Special provisions, for the Tax relief, where is No DTAA (*Section 91) (I) Avoidance of the Income tax, by a transaction, resulting in transfer of Income to the Non-Resident (*Section 93) (J) General and Special rates of tax, for the ‘Certain non-business incomes’

15

16 & 17 18 & 19 19 & 20 20 20 20 21 21 & 22

(*Section 115A)

(K) Special provisions, for the Non-Resident Indians (*Section 115C to 115-I) (L) Special provisions, for the Shipping business, being carried by a Non-Resident

22 & 23 23

(*Section 172)

(M) Special provisions, for the Recovery of Tax, from the Assets of the Non-Resident (*Section 173)

2

SAI CIRCULARS JUNE- 2008

23

(I) Important legal Obligations for the month of July, 2008 S.No

Last Dates

Nature of the Obligations

Types Of Entities

(A) Income Tax Act, 1961 01

7th

Deposit

Monthly

TDS/TCS

02

14th

Filing

Quarterly

03

15th

Filing

Quarterly

04

31st

Filing

Annually

05

31st

Filing

Quarterly

Return

06

31st

Issue

Monthly

Certificate

Return (Statement) of TDS Return (Statement) of TDS Return of Income Tax and FBT

By all types of entities, for TDS/TCS collected By all types of entities, for NonResident ‘deductees’ By all types of entities, for NonResident ‘deductees’ By all types of entities , for Non – Audit cases By the banking entities for ‘non’-deduction of TDS By all types of entities, for TDS/TCS deduction and deposited.

(B) Central Excise Act, 1944 01

5th

Deposit

Monthly

Duty

By all types of units ‘except’ SSIs

02

10th

Filing

Monthly

Return

By all types of units ‘except’ SSIs

03

10th

Filing

Monthly

Return

By all types of units, for CENVAT credits availed

04

10th

Filing

Monthly

Return

By all types of units in EOUs/FTZs/SEZs By all types of units, for receipts and Consumptions of inputs out of PLA exceeding’ Rs.one (1) crore (in a year)

05

10th

Filing

Monthly

Return

06

15th

Deposit

Monthly

Duty

BY SSI units

(only)

(C) Employees Provident Funds (EPFS) And Miscellaneous Provisions Act, 1952 01

15th

Deposit

Monthly

EPF

02 03

15th 15th

Filing Filing

Monthly Monthly

Return Return

For new employees ‘joined’ (Form 5) For old employees, ‘left’ (Form 10)

04

15th

Filing

Monthly

Return

By all types of entities (Form 12 A)

(D) Miscellaneous Acts

3

By all types of entities

([i] Service Tax [ii] ESI And [iii] Delhi Value Added Tax (DVAT))

01

5th

Deposit

Monthly

Service Tax

01

21th

Deposit

Monthly

ESI-Payments

03

28th

Deposit

Monthly

Dvat-Tax

04

28th

Filing

Monthly

Dvat-Return

05

28th

Filing

Monthly

Dvat-Return

06

28th

Deposit

Quarterly

Dvat-Tax

07

28th

Filing

Quarterly

Dvat-Return

By Corporate

(only)

By all types of entities By dealers having annual turnover ‘exceeding’ Rs. five (5) crores By dealers having annual turnover ‘exceeding’ Rs. five (5) crores By dealers having annual turnover ‘exceeding’ Rs. five (5) crores By dealers having annual turnover ‘exceeding’ Rs. five (5) crores By dealers having annual turnover ‘exceeding’ Rs. five (5) crores

SAI CIRCULARS JUNE- 2008

SATISH S AGARWAL & CO. Chartered Accountants 9/14, East Patel Nagar

(Near Jaypee Siddhartha Hotel)

New Delhi-110008 Tel (off) +9111-25769111/25753888/25752757 Mob : +919811081957 Email : [email protected]

(I) (II)

*Expertises & Specialisations* Auditing/Certification under US GAAP (Regd. with PCAOB) International Taxation :Development of the longterm strategy Preparation of the documents, for the Transfer Pricing Study of the Transfer Pricing Audit of the Transfer Pricing Assessment of the Transfer Pricing Strategy, for the tax structure, by availing of the tax incentives, tax holidays and tax benefits (7) Strategy, for the optimisation of tax liability, by networking of the DTAT

(1) (2) (3) (4) (5) (6)

(Double Taxation Avoidance Treaties)

(8) Taxation and tax planning, for the non-residents and expatriates (9) Guidance, for the Advance Rulings (III)

Accounting Conversions :(1) (2) (3) (4)

(IV)

INDIAN GAAP To US GAAP INDIAN GAAP To IFRS US GAAP To Indian GAAP IFRS To Indian GAAP

Regulatory Approvals, Registrations & other matters :(1) (2) (3) (4) (5)

(V)

From From From From ROC

(Registrar of companies)

RBI (Reserve Bank of India) STPI (Software Technology park of India) FIPB (Foreign Investment promotion board) SIA (Secretariat of Industrial approvals)

(6) SEZs (Special Economic Zones) (7) 100% EOUs (100% Export Oriented units) (8) CBEC (Central Board of Excise and Customs) (9) DOT (Department of Telecommunications) (10) CST (Central Sales Tax)

Audits :(1) Statutory Audits (12) Cost reductions analysis Audits (2) Internal Audits (13) Working capital management Audits (3) Tax Audits (14) Budget analysis Audits (4) Compliances Audits (15) Financial disbursements Audits (16) Revenue and capital expenditures Audits (5) Management Audits (6) Verifications Audits (17) Systems Audits (7) Stocks Audits (18) Manpower planning Audits (8) Capital structuring Audits (19) Raw material planning Audits (20) Resources planning Audits (9) Fund flows Audits (10) TDS Audits (21) Borrowings planning Audits (11) FBT Audits

(II) Recapitulation of Contains in the ‘Significant’ Courts’s/ Tribunals’s and AARs’s Judgements (A) Income Tax Act, 1961 01

(III) *As per decided case of M/s JAMNA AUTO INDUSTRIES (YAMUNA NAGAR) Vs. CIT (ROHTAK) decided on 30.01.2008, decided by the High court Punjab and Haryana at Chandigarh.

(I) Compensation received, on ‘one time’ under ‘non-compete agreement’ ‘and/or’ under ‘restrictive convenant’ is treated as ‘capital receipt’. (II) Compensation (abovementioned) received, on ‘regular basis’, ‘to compensate’, the ‘loss of a source of income’, is treated as ‘revenue receipt’.

04

(III) Conclusion :Compensation received, is treated as ‘capital receipt’ or ‘revenue receipt, ‘depend on’ the agreement entered into between both parties. Henceforth an critical analysis of the agreement is an important, to treat the amount of the compensation received, as ‘capital’ ‘or’ ‘revenue’. (IV) *As per decided case of Mr. ROHITASAVA CHAND Vs. CIT (New Delhi) decided on 20.03.2008, decided by the High court, at New Delhi. 02

03

4

(II) *As per decided case of CIT-V (New Delhi) Vs. M/s Real Time Marketing (P) Ltd, decided on 07.04.2008, decided by the High court at New Delhi. 05

(I) A person is ‘ordinary resident’ (in India), where (a) Residing ‘minimum 9 (nine) years’, ‘out of’ 10 (ten) years ‘and’ (also) (b) Residing ‘minimum 730 (Seven hundreds thirty) days’, ‘out of’ 7 (seven) preceding years. (II) In view of the abovementioned, the person is ‘non-ordinary resident’ (in India), where (a) Residing ‘maximum 9 (nine) years’, ‘out of’ 10 (ten) years ‘and’ (also) (b) Residing ‘maximum 730 (seven hundreds thirty) days’, (seven) preceeding years. ‘out of’ 7 *Section 6 (6)

(I) ‘No unsecured loan’ is treated as ‘unexplained cash credit’ *Section 68 where assessee has discharged his liability, by explaining the sources of the unsecured loans alongwith (a) ‘Identity’ (b) ‘Capacity’ of the lender and (c) ‘Genuineness’ of the transacion.

(I) Provisions of expenses, under the head ‘gratuity’, on the ‘actuarial valuation basis’ are treated as ‘acertained liabilities’, for the purpose of computating of ‘adjusted profit’, (Minimum alternate tax) for MAT *Section 115JB (II) *As per decided case of CIT-IV (New Delhi) Vs. M/s HEWLETT PACKARD INDIA (P) LTD, decided on 31.03.2008, decided by the High court at New Delhi.

06

(I) AO (Assessing Officer) is (mandatory) required, ‘to give’ a reasonable ‘opportunity of being heard’, before ordering, for the special audit *Section 142 (2A)

(III) *As per decided case of MR. PRADIP J. MEHTA Vs. CIT (Ahemdabad) decided on 11.04.2008, decided by the Supreme court of India at New Delhi.

(II) ‘Audit report’ (in abovementioned case) is required, to be furnished, with in the specified time (Including extended time). However ‘maximum time’, for the furnishing report is 180 (one hundred eighty) days (by the CA Firm). *Section 142 (2C)

(I) Expenditures (payments) made, by the assessee, on account of the damages, for ‘breach of contract’ are allowable expenditures *Section 37 (1)

(III) *As per decided case of M/s SAHARA INDIA (FIRM) LUCKNOW Vs. CIT (Central-I) decided on 11.04.2008, decided by the Supreme court of India, at New Delhi.

07 (I) ‘No penalty’ is leviable, for the (II) ‘Infraction of law’ is different, from the concealment of the incomes, where facts breach of the ‘business contract’. Henceforth and circumstances are strongly indicated, breach of the ‘business obligations’ are that an ‘inducement’ and ‘allurement’ had treated as ‘normal incident to the business’. been made on the assessee, during the Therefore expenditures (payments) for ‘breach search and seizure of contract’ are treated ‘expended wholly *Section 271 (1) (c)S and exclusively, for the purpose of business. SAI CIRCULARS JUNE-2008

due thereon, ‘based on the verbal assurance’.

(II) Facts of the case :(a) Assessee was ‘compelled to disclose’ the certain incomes, with the ‘verbal assurance’ *Section 271 (1) (c) that ‘no penalty’ would be levied.

(abovementioned)

(III) *As per decided case of M/s SUDARSHAN SILKS & SAREES Vs. CIT (Karnataka) decided on 11.04.2008, decided by the Supreme court of India, at New Delhi.

(b) Assessee has offered the incomes, by filling of the revised return and ‘paid tax’

(B) Service Tax (Finance) Act, 1994 01

(I) ‘No penalty’ is leviable, where the service provider (including liable person) has made payment of the Service tax ‘alongwith’ interest (also) ‘before issue of the show cause notice’, for the levy of penalty *Section 78 (II) ‘No penalty’ is (also) leviable, where ‘lapse was pointed out’, by the deptt., but the Service tax ‘alongwith interest (also) has been paid’, ‘before issue of the show cause notice’, for the levy of (abovementioned) penalty. (III) ‘No penalty’ is leviable, in view of the ‘and’ (also) a board’s Section 73 (3) circular, where assessee is ‘permitted to clear’ the Service tax ‘alongwith’ interest, ‘before issue of the show cause notice’, for levy of the (abovementioned) penalty. (IV) *As per decided case of M/s TIDEWATER SHIPPING PRIVATE LIMITED Vs. Commissioner of Service tax (Banglore) decided on 12.03.2008, decided by the CESTAT, South zonal bench at Banglore.

02

(I) ‘No penalties’ are leviable, where Service provider (including liable person) had ‘genuine doubt’ with regard to their ‘Service tax liablity’ ‘and’ (also) there is ‘no ultimate revenue loss’ to the deptt. *Section 75A, 76, 77 and 78 (II) ‘No Penalties’ (abovementioned) are leviable, where service provider is ‘able to prove’, that there was ‘reasonable cause, for the failure’ *Section 80 (III) Facts of the case :(a) Service provider was receiving commission, ‘without raising bill’ to his principal, where principal was (also) ‘entitled to avail the CENVAT credit’. (b) Service provider has ‘applied, for the registration’, ‘during the amnesty scheme’ announced in July 2004. (c) Service provider has ‘paid Service tax

5

alongwith interest’ (also) ‘before issue of the show cause notice’, for levy of the (abovementioned) penalties. (IV) *As per decided case of M/s ATHUNGAL SALES CORPORATION (VADDAKKEN CHERRY) Vs. Commissioner of Central Excise (Cochin) decided on 13.02.2008, decided by CESTAT, South zonal bench at Banglore. 03

(I) ‘Service tax’ is leviable, on the ‘works (‘composite’) contracts’, from the ‘04.06.2007’ *Section 65 (105) (zzzza) (II) ‘Service tax’ is leviable, on the Erection contracts, from the ‘16.06.2005’. (III) ‘Service tax’ is leviable, on the ‘commissioning or installation’ contacts, from the ‘01.07.2003’. (IV) ‘Exemption’ (abatement) @67%, on the liability of Service tax is applicable, from the 01.03.2003 *As per Notification no. 19/2003-ST dated ‘21.08.2003’. (V) CENVAT credit is (also) available, on the ‘inputs services’ received against the ‘taxable output services’. (VI) ‘No penalties’ *Section 75,76 and 78 are leviable, ‘where law itself was not certain’, and govt. has (also) made ‘frequent changes’ in the law, ‘which has created ultimate uncertaintees’. *As per decided case of M/s Jai Prakash Industries Ltd Vs. CCE, Chandigarh, decided by the Supreme court of India at New Delhi. (VII) Facts of the case :(a) Service provider has entered into a ‘composite turnkey work contract’ (with his client), for ‘Erection, commissioning or installation’, of the ‘fire proofing work’, where the ‘fire proofing work’ is (only) liable, for the Service tax, from the ‘01.06.2007’.

(VIII) *As per decided case of M/s FIREPRO SYSTEMS PRIVATE LIMITED, decided on 13.03.2008, decided by the CESTAT, South zonal bench at Bangalore. SAI CIRCULARS JUNE-2008

(III) Recapitulation of Contains in the ‘Significant Latest’ Circulars, Notifications, Instructions and the Press Releases (A) Income Tax Act, 1961 01

PAN Vs. e-TDS return

(VI) ‘Maximum rate of the taxes’, which are to be charged, in the ‘state of its source’ (a) @5 (five) % on, the incomes, under the head ‘dividend’.

(I) ‘No TDS return’, without mentioning of PAN:- (a) For the ‘salary return’, is 95 (ninety five)% (b) For the ‘non-salary return’, is 85 (eighty five)%

(b) @10 (ten)% on the incomes, under the head (ba) ‘Interest’ and (also) (bb) Royalties

(II) Applicable, for the returns, which are to be filed, for the quarter ending on the 31.03.2008 (i.e. last date of filing of return is

(both)

15.06.2008).

(III) *As per 31.03.2008. 02

Press

release,

(c) Incomes, under the head ‘capital gains’ on the ‘sales of the shares’, are (‘only’) liable to Income tax, in the ‘state of its source’.

dated

DTAA (Double taxation avoidance agreement) with govt. of the UNION of MYANMAR (commonly

(VII) DTAA, is (also) incorporating provisions, for the (a) Exchange of the informations (b) ‘Anti-Abuse provisions’, to ensure, that the benefits of DTAA are being availed, by the genuine residents of the both states.

knowns as VARMA).

*Special features of the (abovementioned) DTAA :(I) Taxes covered :‘In India’ :- (a) Income tax (b) Surcharge

(VIII) *As per 03.04.2008.

(both)

‘In Myanmar’:- (a) Income tax (b) Profit tax (both). (II) Income tax is leviable, on the ‘business profits’, in the ‘state of its source’, where the activities of the enterprise is constituting a PE (Permanent establishment) in the ‘state of its source’. (III) PE includes :(a) A branch (b) A factory (c) A place of management (d) A sales outlet ‘etc’. (IV) Profits of (a) Construction (b) Assembly or (c) Installation project are liable to Income tax, in the ‘state of its source’, where the ‘project continues’, for the ‘minimum period of 270’ (two hundreds and seventy) days. (V) Profits of the operations of (a) Ship (b) Aircraft, are liable to Income tax, in the ‘state of its residence’ ‘and’ (also) in the ‘state of its source’ (‘both’).

02

Press

release,

dated

Guidelines, for the attribution (computation) of amount of expenditure, against the incomes, ‘not included’ in the ‘taxable incomes’ (commonly known as ‘exempted incomes’) *Rule 8C (2) (I) 100 (one hundred) % ‘attribution’ of the ‘direct expenditures’, on the ‘non-taxable incomes’. (II) ‘Proportionate’, ‘attribution’ of the ‘indirect-expenditures’ on the ‘non-taxable incomes’ i.e. expenditures, under the head ‘interest’. (III) 0.5 (half) % (‘average value of the investments’) are to ‘be attributed’ (on lum-sum basis), towards the expenditures, under the head ‘non interest’, against the ‘non-taxable incomes’. (IV) *As per Notification no. 45/2008, dated 24.03.2008.

(B) Service tax (Finance) Act, 1994 01

6

Guidelines, for the records, which are to be maintained/produced, by the exporters, for the claiming of refunds.

(ab) Description of the exported goods (ac) Number and date of the invoice

(issued by

the exporter).

(I) Services provided, by the ‘customs (ad) Details of the ‘all charges’ (collected by the agent). (to the exporters) house agent’, *Section 65 (105)(h) (b) Details of the ‘other taxable’ services (a) Invoices, (issued by the agent) specifying:(provided by the agent). (aa) Number and date of the shipping bill SAI CIRCULARS JUNE-2008

(II) Services provided, by the banking company/financial institution/NBFC/other body corporate, for the banking and other financial services *Section 65 (105) zm *Abovementioned records are to be maintained /produced, for the evidences, ‘to link’ the uses of the services, against the exported goods (only). (III) Services provided, by the commission agent, ‘located outside India’, for the sale of exported goods *Section 65 (105) (zzb) (a) Agreement/contract/any other document, for the providing services, by the commission agent (‘located outside India’). (b) ‘Declaration’ of the amount of commission paid/payable, to the (abovementioned) agent, in the ‘shipping bill’

itself. (c) Documents, evidencing of actual export of the goods. (d) ‘No refund’ of the services tax, ‘exceeding’ ‘ither’ (da) ‘Actual Service tax paid’ ‘or’ (db) ‘2 (two) % of the FOB value’ of the exported goods, ‘whichever is lower’. (e) ‘Commission’ paid/payable should ‘not be, for’ (ea) Export of the canalized items (eb) Project exports (ec) Export financed, under lines of the credit extended, by govt. of India/Exim bank (ed) Exports made, by the Indian partners, for the purpose of their equity participation, in the foreign joint venture/wholly owned (100%) subsidiary. (IV) *As per Notification no. 17/2008-Service tax, dated 01.04.2008.

(C) Central Excise Act, 1944 01

Guidelines, for the ‘fixation of the ‘special rate’, of Excise duty for the ‘purpose of ‘value additions’ and refunds. (I) ‘Replacement of the words’ (a) Existing words :To the ‘amount of duty paid’, by the manufacturer of goods, ‘other than’ the amount of duty paid, ‘by way of utilization of CENVAT credit’ (under the CENVAT Credit Rules, 2001).

(b) Amended words :To the ‘duty payable, on value additions’, under taken in the manufacture of the said goods, by the said unit. (II) ‘Rates of excise duty have been fixed’, for levying excise duty, on the ‘value additions’ (in production/manufacturing of the goods). (III) ‘Deemed duty paid’, where duty payable is ‘in excess of the actual duty paid in cash’ (other than CENVAT Credit Utilized) ‘based on the (abovementioned) rates fixed’. Henceforth ‘no penal provisions are applicable’, for the ‘short excise duty paid’. (IV) Available CENVAT Credit shall be ‘first utilized’, where goods produced (by manufacture) are eligible, for the exemption (under this notification) and ‘second balance’ shall be paid in cash (if any). (V) ‘Refund of duty’ is available, where exemption is available (to the manufacturer), by the Asst./depty (as case may be) commissioner of the Central excise duty, against the ‘excise duty paid’, through 7

‘cash and CENVAT credit’

(both).

(VI) Manufacturer is (also) permitted, ‘to take credit’, for the utilization, in the payment of excise duty, ‘in the subsequent months’, such credit shall (also) be utilized, as ‘excise duty paid in cash’. However manufacturer is permitted, to avail the (abovementioned) ‘option by applying in writing to the deptt’. Moreover the (abovementioned) option shall ‘not to be withdrawn’, during the remaining part of the financial year. (VII) ‘Penal provisions’ are applicable, where manufacturer has:(a) ‘Irregularly availed’ the credit ‘or’ (b) ‘Excessively availed’ the credit Henceforth the (abovementioned) manufacturer is (mandatory) required ‘to return’, with in the ‘specified period’. Moreover deptt. is (also) permitted, ‘to recover’ as recovery of the ‘duty of excise erroneously refunded’. (VIII) Fixation of the ‘special rate’, for levying of Central excise duty, on the ‘actual value additions’ :(a) Manufacturer is (also) permitted ‘to apply’, to the appropriate commissioner of Central excise, ‘for fixation of the (abovementioned) special rate’. (b) Manufacturer is (mandatory) required, ‘to submit’, a certificate obtained from the statutory Auditor, for the estimation of the ‘actual value addition’, based on the Audited balance sheet of the preceding financial year. (c) ‘Time limit’, for the fixation of special rate is 6 (six) months.

SAI CIRCULARS JUNE-2008

(d) Manufacturer is (also) permitted, to apply in writting, for granting of ‘provisional refund’, till the special rate is fixed. (e) ‘Revocation’ of the ‘special rate’ is (also) permitted, by the appropriate commissioner of the Central excise. (f) ‘Special rate’ is to be computed in the ratio of :‘Actual value addition’ is divided by the ÷ ‘Sale value’ [excluding excise duty, VAT and other indirect taxes (if any)]. (g) ‘Refund’ payable, shall be equivalent to the percentage of ‘total duty payable’, over the ‘special rate’. (h) ‘No refund’, exceeding the excise duty, ‘paid in cash’ (‘other than’ the CENVAT credit). (IX) Computation of the ‘actual addition’ of the goods:-

value

(a) ‘Sales value’ of goods :- ‘Excluding’ excise duty, VAT and other ‘indirect tax’ (if any)]

+ ‘Value of goods’ available as ‘closing inventory’ (commonly known as ‘closing stock’). - ‘Cost of raw’ materials and packing material ‘consumed’. - ‘Cost of fuel consumed’ (where such fuels are eligible, for input credit, under CENVAT credit rules, 2004).

- ‘Value of goods, available as ‘opening inventory’ (commonly known as ‘opening stock). (b) Computations (abovementioned) are based on the financial records of the ‘preceeding financial year’. (X) *As per Notification no. 17/2008Central excise, dated 27.03.2008, applicable from 01.04.2008.

(D) FEMA, 1999 and RBI Act, 1934

01

Liberalisation, for the investments, by the SEBI domestic (Indian) mutual funds.

overseas registered

(I) Existing provisions :(a) USD 5 (five) billions (b) USD 1 (one) billion, for the ‘overseas exchange traded funds’.

(II) Liberalised provisions :(a) USD 7 (seven) billions (b) USD 1 (one) billion, for the overseas exchange traded fund’, shall (also) ‘be continued’. (III) *As per Circular RBI/2007-2008/274, A.P (Dir Series) no. 34, dated 03.04.2008.

(E) SEBI Act, 1992 01

‘No PAN’ is mandatory :(I) Investors residing in the state Sikkim, (mandatory) are exempted from the requirement of PAN, for the purpose of (a) ‘Opening/Operating’ BO (Beneficial owner) accounts, with the depository participants (b) ‘Trading in cash market’ (c) Investment in the Mutual funds. (II) However ‘sufficient documentary evidences’ are required, to prove the ‘residency of sikkim’. Moreover mutual funds are (also) adviced ‘to ensure’, strict compliance of the applicable ‘KYC’ (Know your client) norms.

02

(III) *As per Circular no. MRD/DOP/MF/Cir08/2008, dated 03.04.2008. ‘Investment limit’, for the overseas investments by the SEBI registered, domestic (Indian) mutual funds :(I) Existing limit :USD 5 (five) billions (II) Amended limit :USD 7 (seven) billions (III) *As per SEBI/IMD/CIR 122577/08 dated 08.04.2008.

03 8

No.

(I) Fees, for submitting of the (a) ‘Offer document’ and (b) Copy of ‘public announcement’ :Offer size Fees Upto 10 (ten) crores Rs. 1 (one) Lac Upto 1000 (one thousand) crores

@ 0.125% of the ‘offer size’

Upto 5000 (five thousands) Rs.1.25 crore + crores @0.03125 ofthe offer size,‘exce eding’Rs. 1000 crores ‘More than’ 5000 thousands)crores

Rs.3 (three) crores Lum sum (II) Fees, for the submitting of the ‘draft offer document’, by the ‘merchant banker’. (a) ‘Public Issues’ :(five

Offer size Upto 10

(ten)

crores

2/ Upto 5000

(five thousands)

Revision in the filing fees and registration fees SAI CIRCULARS JUNE-2008

Fees Rs.25000 (twenty five thousands) @0.025%of the crores

Upto 25000 (Twenty five thousands) crores

Rs. 1.25 crore + @ 0.00625% ofthe Issue size ‘exceeding’ Rs. five thousands (5000) crores

‘More than’ 25000 (twenty five thousands) crores

Upto 10

Rs. 3 (three) crores Lum sum

Upto 500 crores

crores

(five hundreds)

‘More than’ 5000 crores

‘More than’ 500 hundreds) crores

(five

Rs. 5

(five)

lac

@0.125% Rs. 1.25 crore + 0.03125% in excess of 1000

(five

Rs.

3

crores-Lum

(three)

Sum

(V) Fees, for submitting of the ‘offer documents’, by the ‘venture capital funds’ is rupees 10 (ten) lacs.

Rs.25000 (twenty five thousands) @0.005%

(one)

crores

Fees

(including intending retention of the subscription)

Rs. 1

(onethousand)

thousands)

Offer size

(ten)

crores

Upto 1000 (one thousand) crores Upto 5000 (five thousands) crore

(b) ‘Righ Issues’ :-

Upto 10

(ten)

(VI) *As per Circular, SEBI/IMD/CIR No. 1/122201/08, dated 03.04.2008. 04

lacs

Introduction, of the ‘bond index’

(both by the

corporates and GOI).

(I) Bond index (abovementioned) shall have (a) Futures and (b) Options index (both)

(III) Fees, for the submitting of the ‘offer documents’, by the ‘mutual fund’ is @ 0.005% of the NFO (New fund offer) subject to ‘minimum of Rs. 1 (one) lac’ and ‘maximum of Rs. 50 (fifty) lacs’.

(II) Stock exchanges are free, ‘to adopt’ (a) Bond index computation models (available globally) or (b) ‘To develop’ their ‘own models’. (III) *As per Circular, SEBI/DNPD/-/Cir36/2008, dated 04.04.2008.

(IV) Fees, for the submitting of the ‘draft letter of offer’, by the ‘acquire of the company’ :-

(F) FDIs (Foreign Direct Investments) ‘In India’ 01

governed under the portfolio investment scheme, accordance with the schedule 2 of FEMA’s regulation 5 (2). (ba) ‘Overall limit’ is 49 (fourty nine) %, for the foreign investments, for ‘all types’ of the companies (in India) with prior approval of the Central Govt. (bb) ‘Overall limit’ is 24 (twenty four) %, for the ‘listed CICs’ (in India) ‘only’ under, ‘portfolio investment scheme’. (bc) ‘Overall limit’, is 10 (ten) %, for the ‘single FII’/entity (in India), for direct ‘and/or’ indirect (both). (bd) ‘Mandatory reporting’, to the RBI, for the acquisition exceeding 1 (one) %. (be) ‘No representation’ on the board of directors of the CICs, by the FIIs investors. (IV) *As per Press note no.1 (2008), dated 12.03.2008.

Guidelines, for the ‘Foreign investments’ in the ‘credit information companies’ (CICs).

(I) ‘Credit informations’ :(a) ‘Amounts’ and ‘nature’ of the loans/advances (b) ‘Amounts outstanding’, under the credit cards and other credit facilities (granted by a credit institution to any borrower). (c) ‘Nature of the security’ taken (d) ‘Guarantee furnished’ (e) ‘Non-fund based facility’ granted (f) ‘Credit worthiness’ of the borrowers (g) Any other matter, which the RBI may, consider as necessary, for the inclusion. (II) ‘Credit information company’ :A company formed and registered, under the Companies Act, 1956, accordance with the credit information companies (regulation) Act, 2005. (III) Policy, for the FDIs in the ‘credit information companies’ (in India) :(a) FDIs (in India) are governed, by schedule 1 of regulation 5 (1) of the FEMA

Guidelines, for the ‘foreign investments’, in the ‘commodity exchanges’.

(I) ‘Definitions’ :(a) ‘Commodity exchange’ is a ‘recognized regulation, 2000 association’, under the provisions of the (b) Foreign investments, by the (registered) forward contracts (regulation) Act, 1952, ‘to FIIs (Foreign Institutional Investors) are provide’ platform, for trading in the ‘forward contracts, in the commodities. SAI CIRCULARS JUNE-2008 (Transfer/issue

9

02

of

security,

by

a

non-resident)

‘excluding’ area utilized, for the ‘common facilities’, where ‘plots are on the developed land’. (cb) ‘Floor area’ ‘including area utilized, for the common facilities, where there are ‘built up space’. (cc) ‘Net area’ and ‘floor area’ are ‘excluding’ the area utilized, for the ‘common facilities, where are ‘combination of the both’. (d) Industrial activity includes :- (da) Manufacturing (db) Electricity (dc) Gas and water supply (dd) Post and telecommunication (de) Software publishing (df) Consultancy and supply (dg) Data processing (dh) Data base activities and distribution of electronic content(di)Other computer related activities (dj) Research and experimental development on the natural sciences and engineering(dk) Business and management consultancy activities and Architectural (dl) Engineering and other technical activities. (II) Policy, for the FDIs in the ‘industrial parks’ :* 100 (one hundred) % FDIs are permitted, under the ‘automatic route’, for ‘setting up’ and ‘establishing of the industrial parks’, subject to the certain conditions i.e. (a) ‘Minimum’ should be 10 (ten) units ‘and’ (also) ‘no single’ unit should be occupying ‘more than’ 50 (fifty) % of the ‘allocable area’. (b) ‘Minimum’ should be 66 (sixty six) % of the total allocable area for the industrial activities. (III) *As per Press note no. 3 (2008), dated 12.03.2008.

(b) ‘Recognized association’ is an association, to whom recognition has been granted by the Central govt. [*Section 6 of the forward contracts (regulation) Act, 1952].

(c) ‘Association’ is a ‘body of the individuals’ constituted, for the purpose of ‘regulating’ and ‘controlling’, of the business of sales/purchases of goods and derivatives (both). (d) ‘Forward contract’, is a contract, for the ‘delivery of goods’, which is ‘not a ready delivery contract’. (e) ‘Commodity derivatives’ are contracts, for the ‘goods’ ‘ither’ forward contracts ‘or’ ‘contract for the differences’. However does ‘not includes’ ‘contract for the securities’. (II) Policy, for the FDIs in the ‘commodity exchange’ :(a) FDIs (in India) are governed, by schedule 1 of regulation 5 (1) of the FEMA (Transfer/issue

of

security,

by

a

non-resident)

regulation, 2000 (b) Foreign investments, by the (registered) FIIs (Foreign Institutional Investors) are governed, under the portfolio investment scheme, accordance with schedule 2 of the FEMA regulation 5 (2). (ba) ‘Overall limit’ is 49 (fourty nine) %, for the foreign investments, for ‘all types’ of the companies (in India) with prior approval of the Central Govt. (bb) Investments by the (registered) FIIs :(bba) 23 (twenty three) % under the portfolio investments scheme and (bbb) 26 (twenty six) % under the FDIs scheme. (c) FIIs’s purchases are permitted, through ‘secondary market’ ‘only’ (not through primary market).(d) ‘Overall limit’ is 5 (five) %, for the ‘single’ FII/entity/person acting on the behalf of FII/entity. (III) *As per Press note no. 2 (2008) dated 12.03.2008. 03

10

04

Guidelines, for the FDIs in the ‘civil aviation sector’. (I) Definitions :(a) ‘Airport’ includes :- (aa) ‘Landing’ and ‘taking off’ area, for the air crafts. (ab) Aircraft maintenance and passenger facilities. (ac) Aerodrome [*As per section 2 (2)

Guidelines, for the ‘FDIs’ in the ‘industrial of the Aircraft Act, 1934]. parks’. (b) ‘Air transport services’ includes :(I) Definitions :(ba) Services, for the transport ‘by air’ of (a) ‘Industrial park’ is a project, where the persons, mails and other things, for any quality infrastructure facilities are kind of remuneration, for a ‘single flight’ available, in the form of :‘or’ ‘series of the flights’. (aa) Developed ‘and/or’ (ab) Built up space, (II) Policy, for the FDIs in the ‘civil aviation for the purpose of ‘industrial activity’ (only). sector’ :(b) ‘Infrastructure facilities’ includes :(a) For Airports :- (aa) 100 (one hundred) % (ba) Roads (including approach roads) (bb) Water FDIs’ , for the ‘green field projects’, under supply (bc) Sewerage (bd) Common effluent the ‘automatic route’. (ab) 100 (one hundred) % treatment facility (be) Telecom network FDIs, for the ‘existing projects, under (bf) Generation and distribution of the ‘prior approval route’, where FDIs are power (bg) Air conditioning. (c) ‘Allocable (seventy four) %. ‘exceeding’ 74 area’ includes :- (ca) ‘Net area’ SAI CIRCULARS JUNE-2008

05

(b) For Air Transport services :-(ba) 49 (fourty nine) % FDIs, for the (baa) ‘Scheduled’ Air Transport service and (bab) ‘Domestic scheduled’ passenger airlines ‘and’ (also) 100 (one hundred) % ‘investments are permitted, for the NRIs’ under the ‘automatic route’. (bb) 74 (seventy four) % FDIs’, for the (bba) ‘Non scheduled’ Air transport service and (bbb) ‘Non scheduled’ airlines, chartered airlines and cargo airlines ‘and’ (also) 100 (one hundred)% ‘inves- tments are permitted, for the NRIs’ under the ‘automatic route’. (bc) 100 (one hundred) % FDIs’ , for the (bca) Helicopter services (bcb)Seaplane services, under the ‘automatic route’. (c) Other services :(ca) 74 (seventy four) % ‘FDIs’, for the ‘ground handling services’ ‘and’ (also) 100 (one hundred) % ‘investments are permitted for the NRIs’, under the ‘automatic route’. (cb) ‘100 (one hundred) % FDIs’,for the (cba) Maintenance and repair organizations (cbb) ‘Flying training’ institutes (cbc) ‘Technical training’ institutions, under the ‘automatic route’. (III) *As per Press note no. 4 (2008), dated 12.03.2008. Guidelines, for the FDIs in the ‘petroleum and natural gas sector’. (I) Policy, for the FDIs in the ‘petroleum & natural gas sector’ :(a) 100 (one hundred) % FDIs, for the (aa)

‘Exploration’ (ab) Petroleum product ‘marketing’ (ac) Petroleum product ‘pipelines’ (ad) Natural gas/LNG ‘pipelines’ (ae) Petroleum ‘refining’ in the ‘private sector’, under the ‘automatic route’. (b) 49 (fourty nine) % FDIs, for the ‘petroleum refining’ in the ‘public sector’ (through PSU) under the ‘prior approval route’ (of FIPB).

06

(II) *As per Press note no. 5 (2008) dated 12.03.2008. Guidelines, for the FDIs in the ‘Mining of Titanium bearing minerals’ and ‘ores’. (I) Policy, for the FDIs in the ‘mining’ and ‘mineral separation’ of the ‘titanium bearing minerals and ore’ :- (a) 100 % FDIs are permitted, with prior approval of the govt., in its ‘value addition’ and ‘integrated activities’ ‘and’ (also) subject to the sectorial regulations and mines and minerals Development and Regulation Act, 1957. (b) ‘Value addition facility’, are to be set up ‘in India’ (only) ‘and’ (also) alongwith transfer of the technology. (c) ‘Disposal of the tailing’ during ‘mineral separation’ shall be carried out, in accordance with the regulations framed by the atomic energy (Radiation protection) rules, 2004. (II) ‘No FDIs’ are permitted in ‘mining’ of the ‘prescribed substances’ [*As per Notification no. S.O. 61 (E) 18.1.2006, issued by the deptt. of atomic energy].

(III)

*As per Press note no. 6 (2008), dated 12.03.2008.

*Finance Act (Budget) 2008 (Part-IInd) (A) Post Finance Bill (Budget) 2008 Amendments *Amendments, have been made in the Finance bill (budget) 2008, ‘after announcing the initial budget proposals’, (on 29th Feb, 2008 by the Finance Minister).

01

04

New Insertion *Section 10 (26AAB) ‘Exemption of Income tax, on the, incomes’ (Agricultural produce market of ‘APMC’ committees) and ‘SAMB’ (State agricultural marketing boards) have been allowed (permitted).

commencing from 1st April, 2008 and ending on 30th Sep.2008).

(I) ‘Exemption’ (abovementioned) is available, to the ‘APMC’ and ‘SAMB’, which are constituted, for the purpose of ‘regulating the marketing of agricultural produces’ (only).

02

‘Exemptions’ *Section 10A and 10B is available ‘upto 31.03.2010’, ‘for the newly’established undertakings, in the FTZ (Free trade zone) etc. and ‘for the newly’ establishhed as ‘100% EOUs’ (Export oriented undertakings).

03

11

‘Exemption’ *Section 11 (4A) is (also) available, to the ‘chambers of commerce’ (i.e. PHD, CII, FICCI etc.) Who are ‘actually’ rendering services, to their members, under the head ‘advancement of any other object of

general public utility’. It is a ‘clarrificatory in nature’, for the removing of doubts. ‘No disallowance of the expenditures’, *Section 40 (a) (ia) , where TDS have been deposited, ‘before due date of filing of the return of income’ *Section 139 (1) (I) ‘Now time period’ (Ay. 2008-2009), for the depositing of TDS is 6 (six) months, (i.e.

05

(II) ‘Abovementioned relief’ is available to the payments/provisions, for the expenditures incurred/provided, during/for the month /year as ending on ‘31st March only’. Henceforth ‘no relief’ is available, against the payments, for the expenditures which have (already) been incurred, ‘upto Feb’. (III) *Applicable from the assessment year 2005-2006 (year ending on 31.03.2005) ‘Deduction’ *Section 80-IB (9) is available ‘upto 31.03.2012’, for the ‘commencing’ of the ‘commercial production’ under the head ‘refining of the mineral oil’.

SAI CIRCULARS JUNE-2008

Seeking registration Filing returns (manually & electronically) e-payment of Tax as now mandatory under DVAT Act. Procurement of all kinds of forms from the VAT Deptt. Maintenance and filing of Statutory records under VAT Timely compliance, Audit, Assessment, Refunds under VAT

Auditing of Accounts under Income Tax Act Filing of Income Tax Returns (manually & electronically) e-payments of Taxes as now mandatory under Income Tax Act. Filling of e-TDS returns Obtaining Permanent Account Number(PAN) Service Tax matter upto defacing including registration & filling of return Choosing tax saving like, NSE, PPF, ICICI, IDBI Bonds etc. Formation of Trust or Societies Registration of Partnership Firm Copyright, Trademarks & Patents You give us your Problems And We give you Solutions

E – Mail: [email protected]

(B) TAX DEDUCTED AT SOURCE (TDS) [FOR THE FINANCIAL YEAR ENDING ON 31.3.2009- ASSESSMENT YEAR 2009-2010] S. No

1 2 3 4 5 6 7 7A 8 9 10 11 12 13 14

15 16 17

18 19 20

Under the head (Section)

Salary

Zero TDS on Payments Upto RS.

2,500

20.60%

5,000(7)

10.30%

5,000

30.90%

2,500 20,000 (6)

30.90% 2.06%

30.90%

1.03%

1.03%

5,000

10.30%

20.60%

NIL

10.30%

- N/A -

2,500 NIL

20.60% 20.60%

-N/A- N/A -

1,000

10.30%

10.30%

2,500

10.30%

10.30%

1,20,000

15.45%

- N/A-

1,20,000

20.60%

20.60%

1,20,000 20,000

10.30% 10.30%

10.30% 10.30%

1, 00,000

10.30%

10.30%

1,50,000

*Section –192

Interest [On Securities) (Resident [only]] *Section – 193 Deemed’ Dividend [Resident ‘only’] *Section – 194 read with 2(22) Interest [‘other than’ on Securities] *Section – 194(A) Winning from Lottery and Cross Puzzle *Section – 194(B) Winning from Horse Race *Section - 194(BB) Payment to Contractor *Section -194 C Payment to Sub-Contractor and for Advertisement Contract Insurance Commission *Section - 194 D Non-Resident Sports Man or Sports Association *Section-194 E NSS *Section - 194 EE Equity Linked Saving Scheme [(ELSS)] *Section - 194 F Commission and Brokerage (On Sale of Lottery Tickets [only]) *Section-194 G Commissions and Brokerage [‘Other than’ on sale of Lottery Tickets) *Section-194H Rent *Section - 194-I (i) Rent to Individual and HUF (ii) Rent to Other (Non-Individual and non-HUF) (iii) Rent for Hiring of Plant and Machin ery [to Individual/Huf and company/ firm]. Fees for Professional or Technical Services *Section–194J Compensation on Compulsory Acquisition of Immovable Property *Section – 194 LA Payments to Non Resident and NonDomestic Company [There are different ‘Specific Rates’ applicable, which are also lower than maximum rates] *Section – 195 Units Held by Offshore Fund *Section – 196B Incomes from Foreign Currency Bonds *Section – 196C Incomes of Foreign Institutional Investors (FIIs) from Securities *Section – 196D [‘not’ being dividend, short-term/Long-term capital gains].

12

2,500

Individuals (1) (includes HUFs, BOIs and AOPs) Regular Rates [applicable to the individuals] (2) 10.30%

20,000

NIL

NIL NIL NIL

(6)

Domestic (1) Companies and Firms -N/A20.60% 20.60% 20.60% 30.90%

2.06%

30.90%

51.50%

(Maximum)

(Maximum)

10.30% 10.30%

10.30% 10.30%

20.60%

20.60%

[10.30% For short term capital gain [section 111 (A)]

[10.30% For short term capital gain

SAI CIRCULARS JUNE-2008

Notes 01

(a) ‘Additional’ Surcharge is applicable @ 10% , on the Gross payments ‘Likely’ to exceed Rs.(10) Lacs, to the Individuals/Hufs and Rs. One (1) Crore to the Domestic (Indian) companies/firms (b) Surcharge is applicable @2.5% , on the Gross payments ‘likely’ to exceed, Rs. One (1) crore to the ‘non-domestic companies’ (foreign companies).

02

T.D.S, on the Incomes under the head Salary shall be deducted, as tax Payable on the ‘Taxable Salary’ (in the hands of individual Employee). TDS ‘credited’ (provision), as on 31st March, for the preparing of Annual accounts is permitted, to deposit by 3oth May (60

03

Days)’.

04

Quarterly Returns (statements) for the Payments to the ‘Resident’ are to be filed by (i) 15th July (ii) 15th Oct. (iii) 15th Jan. and (iv) 15th June (forMarch Quarter only), and

01

(I) Withholding tax rates (WHT), are (only) applicable to those countries, where India has double taxation avoidance treaty (DTAT). In most of cases ‘both’ countries (states) have ‘right to tax’. (II) Rates of WHT (in India) for the incomes, under the heads (a) Dividend (‘other than’ covered under section 115-O) (b) Interest (c) Royalty (d) Fees for technical services:-

Quarterly Return (statement) for the Payments to Non-Resident (Section 194E, 195, 196B & 196C) are to be filed by (i)14th July (ii) 14th Oct. (iii)14th Jan and (iv) 14th April. 05 Return of TDS, for the ‘last quarter’ (i.e. ending on 31.03.2009) shall be filed, on or before 15th April 2009 (Exception for filing on or before 15th June 2009 is allowed, where amount credited (only) for the preparing of Annual accounts). 06 yPayments, Per Contract and (also) further in aggregate (to the same Contractor) are ‘not to exceed’ Rs. Fifty (50) Thousands, in a Financial Year (ending on 31.03.2009). 07

Limit, for the zero Rates of TDS is rupees Ten (10) thousands, for the banks and co-operative societies, who are primarily engaged in the banking business.

(C) WithHolding Tax (WHT)

Country

Divi dend (%)

Inter est (%)

Roya lty (%)

Fees for Technical Services (%)

Australia Canada China Germany France Italy Japan Korea Malaysia Mauritius Nepal Netherlands Newzealand Philippines Poland Saudi Arabia Singapore South Africa Spain Sweden Swiss Thailand UAE UK USA

15 15/254 10 10 10 15/204 10 15/204 10 5/154 10/204 10 15 15/204 15 5 10/154 10 15 10 10 15/204 5/154 15 15/204

15 *1* 152 10-20 10 102 102 15-203 10 10 152 20 10 10 10/152 15 10 10 202 15 10/152 15 102 10-20 102 10 10/152 15 152 22.5 10 10 10/152 10 102 10 152 *5* 102 10 106 10 10/202 15 5/12.52 10 10/152 *1* 10/152 *1*

*1* 10-20 10 15-203 10 20 10 15 10 15 15 10-20 10 15 22.5 10 10 10 *5* 10 10 15 10 *1* *1*

The rates of WHT:- (a) @10% on the rental of equipment and services provided ‘alongwith’ know-how and technical services. (b) In the ‘other cases’ (except abovementioned) For ‘First’ five (5) years of the agreement:(ba) @15% where ‘payer’ is govt/specified organisation (bb) @20% where ‘payers’ are ‘other entities’. (c) For ‘subsequent’ five (5) years of the agreement:* @15%, where ‘payers’ are govt./specified organisation and (also) ‘others entities’ (both). *(2) Incomes under the head dividend/interest /fees/royalties ‘earned by’ the govts and specified institutions (i.e. RBI etc) are (also) exempted from Income tax in the ‘country of source’. *(3) (a) @15%-20% (as case may be), for the years between 1997-2007. (b) @15% , for the ‘subsequent years’. (c) @10% , for the royalty/rent on equipment. *(4) (a) @15% , where ‘minimum 10% shares’ of the company ‘paying dividend’ are ‘held by’ the entity ‘receiving dividend’ (b) @15/20/25% (as case may be) for ‘other entities’ (except abovementioned). *(5) Royalties and fees for the technical services, are taxable in the ‘country of source’ (a) @10% on the royalty/rent, ‘for the use of’ industrial/commercial/scientific ‘equipments’. (b) @20% on ‘other royalties’ (except abovementioned) and fees for the technical services. * (6) @10% , on the interest, where ‘minimum 20% shares’ of the company ‘paying interest’ are ‘held by’ the entity ‘receiving interest’.

* (1) Royalties and fees for the technical services are taxable in the ‘country of source’. 13 SAI CIRCULARS JUNE-2008

(D) Significant Amendments, for the Agricultural and Charitable incomes *Section 10 &11 01

Income earned, from the ‘saplings’ and ‘seedlings’, ‘grown in a nurshery’ (‘without’ using land) is ‘also’ treated as ‘agricultural income’ *Section 2 (1A) Henceforth the (abovementioned), ‘agricultural income is exempted’, from the eligibility of Income tax liability *Section 10 (1) (I) Applicable for the year ending on (A.Y. 2009-2010) accordingly 31.03.2009 commencing from 01.04.2008. Henceforth incomes, from the sales of ‘plants’ and ‘seeds’, grown by developing and maintaining a in ‘small nursery’ in your ‘backyard/balcony/ roof’ etc. are exempted, from the liability of Income tax. These (abovementioned) are treated as ‘agricultural’ activities ‘not as business’ activities. (II) Existing provisions, for the agricultural purpose:*Agricultural income, which has been derived, ‘by using land’, for the agricultural purpose and such ‘land is (also) located in India’. However agricultural income is ‘partially taxable’ by way of considering, for the rate purpose (only) for the ‘taxpayers’, who have ‘non-agricultural’, which is (also) liable to tax’. (III) Existing provisions, for the ‘saplings’ and ‘seedlings’, grown in a nurshery :(a) ‘Basic operation’ should ‘be on land’ (b) ‘Subsequent operation’ may ‘be in nurshery’ (c) Conclusion :‘No agricultural income’, where is ‘no basic operation on land’. (IV) Amended provisions, for the ‘saplings’ and ‘seedlings’, grown in a nurshery :‘Basic operation’ and the ‘subsequent operation’ (both) ‘may be’ ‘in nurshery’, for treating the ‘agricultural income’, and accordingly (also) ‘exempted income’. (V) ‘Now’ ‘exempted agricultural income’ is available to the assessee, who have (a) ‘No (also) (b) ‘No agricultural land’ ‘and’ conventional farming activities’.

02

14

‘No exemption’, for the ‘commercial/business activities’ *Section 11(4A) under the head ‘for the charitable purpose’ *Section 2(15). (I) Existing provisions :- * ‘Charitable purpose’ includes:(a) ‘Relief to poor’, ‘education’, ‘medical relief’

‘and’ (also) the ‘advancement of any other object’ of the ‘general public utility’. (b) ‘Advancement of any other object’ of ‘general public utility includes :Carrying of any ‘independent activity’ in the nature of (ba) Trade or (bb) Commerce or (bc) Business or (bd) Any activity of rendering, any service ‘in relation to’ any (bda) Trade or (bdb) Commerce or (bdc) Business, ‘for a consideration’. However profits of the ‘independent acvitity’ should be utilised for the chartibale purpose (only). (c) Consideration includes :(ca) Cess (cb) Fees or (cc) Any other consideration (d) ‘Application’ (utilisation) with in the year and (also) ‘retention’, for the next five (5) assessment years, out of the funds earned from the (abovementioned) activities. (II) Amended provisions :*‘Advancement of any other object of general public utility’ ‘not includes’ :* Any ‘independent activity’, ‘in the nature of’ (a) Trade or (b) Commerce or (c) Business or (d) Any activity of rendering of any service ‘in relation to any’ (da) Trade or (db) Commerce or (dc) Business. (III) ‘No amendment’ in ‘Section 11 (4A)’ *Existing provisions :Exemption *Section 11 (4A) is available, where (a) Business is ‘incidental to the attainment of the main objectives’ of the trust or institution (as case may be) ‘and’ (also). (b) ‘Separate books of accounts’ for business and non-business acitivities are to be maintained, by the trust or institution (as case may be).

(IV) Conclusion :is (a) ‘Exemption’ *Section 11 (4A) available where business/service is ‘incidental activity’ to the main object’ of the trust/institution (as case may be) ‘and’ (also) where ‘separate books of accounts’ are maintained’, i.e. incomes from the ‘sale of books’, on yoga, by the trust/institution (as case may be) who has main object/activity of the ‘free yoga classes’. (b) ‘No exemption’ *Section 11 (4A) is available, where business/service is ‘not incidental activity’, but it is ‘independent activity’.

SAI CIRCULARS JUNE-2008

(E) ‘Neutralising effect’ of the ‘Courts’s Judgements’, against the Income tax deptt., ‘Retrospectively’. 01

02

(II) ‘Definition of WDV’ [Written down value] *Section 43 (6) (b). (a) Amended provisions :*‘Actual cost’ (to the assessee) - (minus) amount ‘attributable to the revaluation’ (if any) + (plus) depreciation ‘actually allowed’ on revaluation (if any) - (minus) depreciation ‘actually provided’ (by assessee) which is ‘now’ deemed, as depreciation ‘actually allowed’, where assessee was ‘not required to compute’ his total income (for the purpose of Income tax Act) in any previous year/preceeding to previous years. (b) *Applicable from the assessment year 2003-04. Minimum Alternate Tax (MAT) Chapter XII-B (I) (a) *As per decided case of Asstt. CIT Vs. M/s BALARAMPUR CHINNI MILLS LTD, decided in 2007, decided by the ITAT at Kolkata. ‘and’ (b) *As per decided case of depty. CIT Vs. M/s DHANLAKSHMI PAPERS MILLS LTD, decided in 2007, decided by the ITAT at Chennai. (II) ‘New insertion’ *Section 115JB [Explanation 1 to the sub clause (h)].

(a) *Amended:- MAT is ‘now’ leviable, on the amount of Dividend Distribution Tax (DDT) and ‘deferred tax’ [if debited to P & L A/c]. (b) *Applicable from the AY. 2001-02. 03

Procedure for the Assessments (Chapter-XIV) (I) *As per decided case of Dr. SHASHI KANT GARG Vs. CIT decided in 2006, decided by the High court at Allahabad. (II) (a) Notice’ *Section 148 is ‘not’ (mandatory) required, ‘to be issued by’ joint commissioner/commissioner/chief commiss ioner (as case may be), ‘himself’ for the escaped income/tax assessments *Section 151 (2). Henceforth ‘AO’ is ‘now’ permitted, to issue (abovementioned) notice, and (also) satisfing the ‘requirement of satisfaction’ of the (abovementioned) commissioner. ,*Applicable from the 01.10.1998. Deduction at the source [TDS] Chapter-XVII

04 15

2007, decided by the Supreme court of India at New Delhi. (II) ‘Deemed assessee in the default, for ‘not deducting of the TDS’ *Section 201 (a) Amended provisons :‘Deemed assessee in default’, where assessee ‘fail to deposit’ TDS (Irrespective of the fact TDS has been deducted or ‘not deducted’). Henceforth assessee is still ‘deemed in default’, even if ‘not deducted the TDS’ (clarrified accordance

Computation of the business income Chapter-IV. (I) *As per decided case of M/s KANDLA PORT TRUST Vs. Asstt. CIT, decided in 2007, decided by the ITAT at Rajkot.

(I) *As per decided case of M/s HINDUSTAN COCA COLA BEVERAGE (P) LTD, decided in

with the legislative intent).

05

06

(b) *Applicable from the 1st June, 2002. Penalties Imposable Chapter-XXI (I) *As per decided case of M/s NAINUMAL HETCHAND Vs. CIT, decided in 2007, decided by the High court at New Delhi. (II) Penalties, for failure to furnish the returns/comply with the notices/ concealment of the incomes etc. *Section 271 (1) * ‘New insertion’ *Section 271 (1B) (a) Amended provisions :‘Deemed satisfaction’, for the ‘initiation of penalty’ proceeding, where ‘order of the assessment/reassessment’ is ‘itself containing direction’, for the initiation of penalty. (b) *Applicable from the 1st April, 1989. Miscellaneous Chapter-XXIII (I) *As per decided case of ITO Vs. Dr. ANAND CHABRA, decided in 2007, decided by the High court at Jodhpur. (II) ‘Presumption on book of the accounts’, documents, money, bullion, jwellery and valuable articles/things *Section 292C ‘Part-1st’ :(a) ‘Existing provisions :‘Presumed’ abovementioned ‘books of accounts etc’, are belonging to the assessee, where such (abovementioned) books etc, are found in the possession/control of the assessee, during the ‘search and seizure’ (only) *Section 132. (b) Amended provisions :‘Presumption’ (abovementioned) is applicable, during the ‘survey’ (also). *Section 133A (c) *Applicable from the 1st June 2002. ‘Part-IInd’ :(a)Amended rovisions:‘Presumption’ (abovementioned) is applicable on the ‘books etc’ delivered, to the requisitioning officer (also) *Section 132A (b) *Applicable from the 1st October, 1975.

SAI CIRCULARS JUNE-2008

* Non-Residents (In India) (A) Definitions *Section 2 01

Non-Resident *Section 2 (30) (I) A person, who is ‘not a resident’

hundred eighty two (in India).

*Section 6 (1) should be one

(in India),

Scope of the ‘taxable incomes’ *Section 5 (I) For resident (in India) :(a) ‘All’ (100%) incomes, derived from ‘whatever sources’, are liable to Income tax ‘in India’, where (a) Received ‘or’ deemed to be received ‘in India’, ‘by the assessee’ himself or ‘by other person’, on behalf of the assessee. (b) Accures/arises ‘or’ deemed to be accures/arises, to the assessee ‘in India’. (c) Accures/arises, to the assessee ‘outside India’. (II) For ‘not-ordinary resident’ (in India) *Section 6 (6) (a) ‘All’ (100%) incomes, accures/arises ‘outside India’ are ‘not liable’ to Income tax ‘In India’. (b) ‘If Abovementioned’ incomes accures/arises ‘outside India’, from a business/profession, as ‘controlled from India’, are (only) ‘liable to Income tax’ ‘in India’. (III) For non-resident (in India). ‘All’ (100%) incomes, derived from ‘whatever sources’, are liable to Income tax ‘in India’, where (a) Received ‘or’ deemed ‘in India’, by the non-resident (assessee) ‘himself’ or ‘by other person, on behalf of the non-resident (assessee) (b) Accures/arises ‘or’ deemed to be accures/arises, to the non-resident (assessee) ‘in India’. (IV) ‘Incomes received, ‘outside India’, to the non-resident/not-ordinary resident (assessee) shall ‘not deemed to be received in India’, where such incomes, have been ‘merely’ taken, in the Balance sheet, prepared ‘in India’ [*As per explanation-1 of section 5(1) & 5(2)]. (V) ‘No double taxability’ of the incomes ‘in India’, which have ‘first offered’, for the Income tax (in India) ‘on account of’ the accured/arisen or deemed to have accured/arisen (in India) and ‘second’

16

(also)

(b) ‘Maximum stay’ (in India), should be three hundreds sixty five (365) days, ‘in the preceeding’ four (4) years, ‘alongwith’ ‘maximum stay’ (in India) should be of sixty (60) days, in the respective previous year.

(B) Taxability of the incomes 01

days.

‘and’

(II) A person, who is (also) ‘not a ordinarily resident’ (in India) *Section 6 (6) (III) An individual (a) ‘Maximum stay’

(182)

*Section 5,6 and 9 at the time of its ‘actual receipts’ or ‘deemed to receipts’, by the assessee (in India) [(*As per explanation-2 of the section 5(1) & 5(2)].

02

Resident ‘In India’ *Section 6 (I) An individual [*Section 6(1)] (a) ‘Minimum stay’ (in India), should be one hundred eighty two (182) days. ‘or’ (b) ‘Minimum stay’ (in India), should be three (365) days, ‘in hundreds sixty five preceeding’ four (4) years, ‘alongwith’ ‘minimum stay’ (in India) of sixty (60) days, in the respective previous year. ‘However minimum stay’ (in India) should be of one hundred eighty two (182) days, where a ‘citizen of India’, is ‘leaving’ India, ‘for’ (c) ‘Employment’ (outside India) ‘or’ (d) Crew member of ship ‘or’ (e) Citizen of India ‘or’ POI (Person of India Origin). and AOPs *Section 6 (2) (a) ‘Resident ‘in India’, where management and control of its affairs are ‘situated in India’. (b) ‘Non-resident ‘in India’, where management and control of its affairs are ‘situated outside India’.

(II) HUF

(Hindu undivided family)

[Association of the persons]

(III) Company *Section 6 (3) (a) ‘Resident ‘in India’, where its Indian (Domestic) company (incorporated in India). (b) ‘Non-resident ‘in India’, where management and control of its affairs are ‘situated outside India’. (IV) ‘Not-ordinarily resident’ (in India) *Section 6(6) An Individual *Section 6(6) (a) (a) ‘Minimum’ nine (9) years ‘out of’ ten (10) preceeding years, the assessee should maintained, as ‘non-resident’ status (in ‘or’ India).

SAI CIRCULARS JUNE-2008

03

(b) ‘Maximum stay’ (in India), should be seven hundreds twenty nine (729) days, ‘in the preceeding seven (7) years.

(c) ‘Non-resident’ (in India), for the purpose of ‘business/profession’ ‘carried in India’, are (also) liable to Income tax (in India).

Incomes deemed to accure/arise (in India) *Section 9 (I) ‘All’ (100%) incomes are deemed to accure/arise ‘in India’, where ‘earned from’ (a) ‘Directly/indirectly’ ‘or’ ‘through/from’ any ‘business connection in India’ (b) ‘Any asset’ ‘or’ source of income ‘in India’. (c) ‘Capital asset’, as situated ‘in India’

(XI) ‘No royalty payment’, is liable to Income tax (in India) where (a) Royalty is consisting of ‘lump-sum payment’ (consideration) for imparting of information, data, documenta- tion, drawing, secret formula, process, trade mark etc. ‘outside India’ ‘and’ (also) (b) Royalty (abovementioned) should be in pursuance of an agreement made ‘before 01.04.1976’ and (c) Agreement (abovementioned) has (also) been approved by the ‘Central govt.’ (d) All (abovementioned) three (3) conditions are to be satisfied ‘together’.

(II) ‘Proportionate’ (not 100%) incomes are deemed to accure/arise (in India), where ‘partial operations’ are being carried out ‘in India’. (III) ‘No deemed to accure’/arise (in India) where operations of the ‘Non-Residents’ are ‘restricted to purchases’ (only) for the purpose of the ‘exports from India’. (IV) ‘No deemed to accure’/arise (in India) where operations of the ‘Non-Residents’ are ‘restricted to collection of news and views’ (only) for the purpose of the ‘transmissions’ to ‘outside India’. (V) ‘No deemed to accure’/arise (in India) where operations of the ‘Non-Residents’ are ‘restricted to shooting of any cinematograph film’ (only). for the purpose of ‘telecasting’ to ‘outside India’. (VI) Incomes, under the head ‘salaries’, earned (in India) for the service rendered (in India) and (also) for the rest/leave period [included ‘preceded’ and suceeded period (both)] are (also) liable to Income tax (in India). (VII) Incomes, under the head ‘salaries’, ‘paid by govt’. of India’ ‘to’ the citizen (of India) for the services rendered ‘outside India’ are (also) liable to Income tax (in India). (VIII) Incomes, under the head ‘dividend’, ‘paid by Indian (domestic) company’, to ‘outside India’ are (also) liable to Income tax (in India). (IX) Incomes, under the head ‘interest’, ‘paid by’ the (a) ‘Govt’. ‘or’ (b) ‘Resident’ (of India), [‘except for’ the purpose of business/profession, carried ‘outside India’ ‘or’ for the purpose of earning any income ‘outside India’] ‘or’ (c) ‘Non-resident’ (in India), for the purpose of ‘business/profession’ ‘carried in India’, are (also) liable to Income tax (in India).

(X) Incomes, under the head ‘royalty’, ‘paid by’ the (a) ‘Govt’. ‘or’ (b) ‘Resident’ (in India) [‘except for’ the purpose of business / profession carried ‘outside India’ ‘or’ for the purpose of earning any income ‘outside India’] ‘or’

17

(XII) ‘Royalty includes’ :- ‘Lum-sum payment’ (consideration) ‘royalty excludes’ :Payment (consideration) which are (also) as liable to Income tax (in India) under the head ‘capital gains’ *Section 45 to 55A ‘for transfer of’ the information, data, documentation, drawing, secret formula, process, trademark etc. (XIII) Incomes under the head ‘fees for the technical services’, ‘paid by’ the (a) ‘Govt’ ‘or’ (b) ‘Resident’ (in India) [‘except for’ the purpose of business/profession, carried on ‘outside India’ ‘or’ for the purpose of earning any income ‘outside India’] ‘or’ (c) ‘Non-resident’ (in India),

for the purpose of ‘business/profession’ ‘carried in India’ are (also) liable to Income tax (in India). (XIV) ‘No fees payment’, for the technical services’, is liable to Income tax (in India) where (a) Fees for the technical services are in pursuance of an agreement made ‘before 01.04.1976’ ‘and’ (also) (b) Agreement (abovementioned) has been approved by the ‘Central govt’. (c) All (abovementioned) two (2) conditions are to be satisfied ‘together’. (XV) Certain incomes shall ‘be included in’ the total incomes of the non-resident (in India) ‘irrespective of fact’ the non-resident (in India) ‘has a residence’ ‘or’ ‘place of business’ or ‘business connection’ (in India) ‘or not’, where incomes are deemed to accure/arise ‘in India’, under the followings heads:(a) ‘Interest’ *Section 9 (1) (v) (b) ‘Royalty’

*Section 9 (1) (vi)

(c) ‘Fees for the technical services’ *Section 9 (1) (vii) SAI CIRCULARS JUNE-2008

(C) Exempted Incomes 01

‘Exempted incomes’, under the head interest, on ‘certain’ saving certificates *Section 10 (4B) (I) Saving certificates, should have been issued ‘before 01.06.2002’, by the Central govt (only).

04

(II) Saving certificates, should have been subscribed in ‘convertible foreign exchange’, ‘and’ (also) ‘remitted directly from the ‘outside India’. Accordance with FERA, 1973. (III) ‘Abovementioned’ exemption is available to the NRIs (only). 02

‘Exempted receipts’, under the head travel concession/assistance, received from the employer (Central govt.) *Section 10 (5) (I) For, proceeding ‘on leave’ to any place ‘in India’.

(II) Technical ‘assistance programme’/ project should have been approved by the Central govt.

(III) ‘No exemption’, on the amount ‘exceeding the actual expenditure’.

‘Exempted incomes’, of the ‘family members’ of Non-Resident, ‘accompanying in India’, for the projects of ‘approved International organisation’ *Section 10 (9)

‘Exempted incomes’, earned/deemed earned ‘accordance with the agreement’ made between ‘govt. of India’ and ‘govt. of a foreign state’ *Section 10 (6B) (I) Agreement should have been made ‘before 01.06.2002’.

* ‘No Income tax’ is leviable ‘in India’, on the incomes, accures/arises ‘outside India’, belonging to the family members (only) ‘and’ (also) Income tax/security tax has (already) been paid to the govt. (of the foreign state).

(II) For, proceeding to any place , ‘after retirement/termination, ‘in India’.

03

*Section 10 (II) ‘No exemption’, under the head (a) Salary (b) Royalty (c) Fees for the technical services. ‘Exempted incomes’ out of the funds available ‘accordance with the agreement’ made between ‘international organisation’ and ‘govt of a foreign state’ *Section 10 (8A) & 8B (I) Received ‘in India’, as remuneration/fee in connection with the technical assistance programme/project of the ‘international organisation’.

05

(D) Special provisions, for the computing incomes, for the ‘Certain business’ *Section 44B and Section 44DA 01

Computation of incomes, from the business of ‘shipping’ *Section 44B (I) ‘No provisions’ of section 28 to 43A are applicable, on the shipping business conducted (in India), by the non-residents. (II) @7.5% (seven and a half percent) of the ‘aggregate’ of amount ‘actually/deemed’ paid/ payable, ‘for carriage of’ (a) Passengers (b) Live stocks (c) Mails (d) Goods shipped, from any port ‘in India’ and ‘outside India’ (both). (III) ‘Aggregate of amounts [paid ‘in India’ ‘and/or’ ‘outside India’ (both)] includes’ :‘All kinds’ of amount ‘directly paid/payable to the non-resident ‘or’ ‘indirectly’ paid/payable to any ‘other person’ on behalf of the nonresident, ‘for carriage of’ the certain things (abovementioned) ‘and’ (also) (a) Demurrage charge (b) Holding charge (c) Any charge of similiar in nature.

18

02

(IV) @7.5% (abovementioned) is chargeable to Income tax (in India) under the head ‘profits and gains of business or profession’. However ‘no deductions’ are allowable Henceforth incomes *Section 30 to 37 (abovementioned) are chargeable, on the ‘presumptive taxation basis’. Computation of incomes, from the business of ‘exploration’ *Section 44 BB (I) ‘No provisions’ of section 28 to 43A are applicable, on the exploration business, conducted (in India) by the non-residents. (II) @10% (ten) of the ‘aggregate’ of amount ‘actually / deemed’ paid / payable, for exploration of (a) Gases (b) Oils (c) Minerals (d) Minerals oils (III) ‘Aggregate of amounts includes’ :‘All kinds’ of amounts ‘directly’ paid/ payable to the non-resident ‘or’ ‘indirectly’ paid/payable to any ‘other person’

SAI CIRCULARS JUNE-2008

on behalf of the non-resident, for the supplying of plant and machinery, on rent/hire basis. *‘Plant and machinery includes’:(a) Ship (b) Aircraft (c) Vehicle (d) Drilling unit (e) Scientific apparatus and equipment. *‘Mineral oils includes’ :(a) ‘Petroleum’ and (b) ‘natural gas’ etc. (IV) @10% (abovementioned) is chargeable to Income tax (in India) under the head ‘profits and gains of business or profession’. However ‘no deductions’ are allowable *Section 30 to 37. Henceforth incomes (abovementioned) are chargeable, on the ‘presumptive taxation basis’. (V) Assessee has (also) ‘option to claim’ profits, (abovementioned) ‘by ‘lower than 10%’ maintaining prescribed books’ of accounts and required documents *Section 44AA and to get his ‘accounts audit’ and to ‘furnish the required report’ *Section 44AB The Assessing officer (A.O) shall have (also) ‘option to assess’ the total incomes/losses *Section 143 (3)/147 03

Computation of incomes, from the business of ‘operation of aircraft’ *Section 44 BBA (I) ‘No provisions of section 28 to 43A are applicable, on the business of ‘operation of aircraft’, by the non-residents. (II) @5% (five) of the ‘aggregate’ of amount ‘actually/deemed’ paid/payable, ‘for carriage of’ (a) Passengers (b) Live stocks (c) Mails (d) Goods (from any place ‘in India’). (III) Aggregate of amounts [paid ‘in India’ and/or ‘directly’ paid/payable to the non-resident, ‘or’ ‘indirectly’ paid/payable to any ‘other person’, on behalf of the non-resident, ‘for carriage of’ the certain things

‘outside India’ (both)]

(abovementioned).

(IV) @5% Income tax

is chargeable under the head

(abovementioned) (in India)

to

‘profits and gains of business or profession’. However ‘no deductions’ are allowable *Section 30 to 37 Henceforth incomes (abovementioned) are chargeable, on the ‘presumptive taxation basis’. Computation of incomes, from the royalties, for the technical services, of the non-residents, against the agreements executed ‘after 31st day of March 2003’ *Section 44DA (I) Non-resident, who is ‘carring’ on business (in India) ‘through’ a permanent (PE) ‘or’ ‘perform’ establishment professional service from a ‘fixed place’ of profession (in India) ‘or’ royalties/fees for technical services paid/payable, for the rights/properties/contracts which are (abovementioned) connected with the permanent establishment/fixed place of profession (as case may be) are chargeable to Income tax (in India), under the head ‘profits and gains of business or profession’, in pursuance of an agreement executed ‘after 31st day of March 2003’. (II) ‘No deductions’ *Section 30 to 37 are allowable, for the expenditures, which are ‘not wholly and exclusively’ (100%) incurred, for the purpose of (abovementioned) permanent establishment/fixed place of profession (in India). (III) ‘No deductions’ *Section 30 to 37 are allowable, for the amount paid to its head office/ other offices situated ‘outside India’. However ‘reimbursement of actual expenses’ are (always) allowable for such offices. (IV) Non-resident is (mandatory) required ‘to maintain’ prescribed books of accounts *Section 44AA and ‘to get accounts audit’ *Section 44 AB and ‘to furnish report’ alongwith return of the income *Section 139

(E) Special Provisions, for the ‘Foreign head office’s Expenditures *Section 44C 01

19

(III) 5% (five) of the ‘average adjusted total incomes’, where there are (also) ‘losses’. * ‘Average adjusted total incomes’ :(a) ‘1/3’ rd of the adjusted total incomes of immediate preceeding three (3) years ‘or’ (b) ‘1/2’ of the adjusted total incomes of (II) ‘Actual expenditures’, attributed to the immediate preceeding two (2) years, where permanent establishment (in India) ‘whichever is the non-resident is (only) assessable for two lower’. (2) years. SAI CIRCULARS JUNE-2008

are ‘No deductions’ *Section 44C allowable, as ‘head office’s expenditures’. ‘In excess of’ the ceiling :(I) 5% (five) of the ‘adjusted total incomes’ ‘or’

expenses, incurred in the office situated ‘outside India’.

(c) ‘Full’ (100%) of the adjusted total incomes of immediate preceeding one (1) year, where the non-resident is (only) asseable for one (1) year.

(b) Rents, rates, taxes, repairs and insurances of the premises used, for the office situated ‘outside India’.

(IV) ‘Adjusted total incomes’ ‘excluding’ :*Total incomes computed, in accordance with the provisions of Income tax Act 1961, but ‘without’ deducting :(a) ‘Allowances’ *Sections 32 (2)/32A/ 33/33A

(c) Salary, wages with pension, fees, bonus, commission, gratuity, perquisites, or profit in lieu of salary, paid to any employee, for managing the affairs of the office situated ‘outside India’.

(b) ‘Deductions’ *Sections 36 (1) (ix). (c) ‘Carry forward losses’ *Sections 72 (1)/73 (2)/74(1)/74 (3)/74A (d) ‘Deductions’ Chapter VI-A

(d) Travelling expenses incurred, by any employee, for managing the affairs of the office situated ‘outside India’.

*Sections 80A to 80VV

(e) All other expenses, relating to executive and general administrative, for the purposes of office situated ‘outside India’.

(V) Head office’s expenditures are ‘including’:(a) ‘All’ executive and general administrative

(F) Capital gains 01

*Section 47

Transactions, which are ‘not regarded as transfer’ *Section 47 (viia) * ‘No capital gains’ are liable to Income tax,

where ‘transfer’ of any bond or GDR [Global depository receipts] *Section 115 AC (1) ‘made outside India’, by a non-resident to another non-resident.

(G) Special Provisions, for the ‘Overridng Effect of the tax Treaties’ *Section 90 01

(I) ‘Central govt.’ (of India) may enter into an agreement with the ‘foreign govt.’ :(a) ‘For granting of the relief’, where Income tax has (already) been ‘paid in the both countries’ (‘India’ and ‘other contracting country’). (b) ‘For avoidance of the double taxation’, in the both countries (abovementioned). (c) ‘For exchange of the informations’, for the prevention of evasion/avoidance of Income tax and ‘for the investigations’ of (abovementioned) case of such evasion/avoidance of Income tax. (d) ‘For the recovery of Income tax’. (II) Assessee shall have ‘right to choose’ the provisions, which are more beneficial,

between prevailing Income tax provisions and accordance with the (abovementioned) agreement *Section 90(2) (III) ‘Foreign companies’ are ‘not permitted to adopt’ the rate of Income tax, as (domestic) applicable to the Indian companies i.e. 30%, instead of 40%/50% (as case may be) being ‘more beneficial’ to the assessee (foreign company). (IV) Central govt. (of India) will issue a ‘separate notification, for the terms’, which are ‘not de- fined’, in the Income tax Act, 1961 ‘and/or’ in the (abovementioned) agreement *Section 90(3) (in his country)

(H) Special Provisions, for the ‘Tax Relief’, Where is ‘No DTAA’ *Section 9 01

20

(I) ‘Partial relief’ (in India) to the certain foreign incomes, by way of allowing ‘tax rebate’. However (abovementioned) ‘tax rebate’ shall be ‘lower’ between ‘average tax rates’ ‘outside India’ and average tax rates ‘in India’. (II) Mandatory conditions, for availing of the (abovementioned) ‘tax rebate’ :(a) Assessee should be ‘resident of India’ (during the respective previous year). (b) Incomes should have been accured ‘outside

India’, (during the respective previous year). (c) Taxes should have been ‘paid outside India’, (during the respective previous year). (d) All (abovementioned) 3 (three) conditions are to be satisfied ‘together’ [(cumulatively). (III) ‘No set offs of the losses’ of one foreign country, against the incomes of another foreign country are permitted (in India) (* As per decided case of CIT Vs. BOMBAY BURMAH TRADING Co. LTD, decided by the highcourt at Bombay].

SAI CIRCULARS JUNE-2008

(I) Avoidance of the Income tax, by a transaction, resulting in transfer of Income to the Non-Resident 01

(I) Income tax (in India) is leviable, in the hands of transferror’, on the incomes arises out of assets, transfered (alone or in conjuction with associated operations) to the Non-Resident.

*Section 93

of the Income tax Act, 1961’. (III) ‘Transferror is not liable’, for the Income tax, where transferror is satisfying to the Assessing officer (AO) for (a) ‘No avoidance of the Income tax’.

(II) Income tax is (also) leviable, in the hands of transferror’ in the (abovementioned) case, where assets were transfered ‘before the commencement

(b) Transfer was the ‘bonafide commercial transaction’.

(J) ‘General’ and ‘special’ rates of the tax

*Section 115A

* General Rates * 01

rupees ten (10) lacs for the resident and non-resident (both). (III) *Education cess* @3 (three) % , ‘on the amount of Income tax’ (including of surcharge).

‘General’ rates of tax (for the A.Y. 2009-2010):(I) Income tax * (a) @10 (ten) % , on the incomes ‘between’ rupees 1,50,001 to 3,00,000. (b) @20 (twenty) % , on the incomes ‘between’ rupees 3,00,001 to 5,00,000. (c) @30 (thirty) % , on the incomes ‘above’ rupees 500,001

(IV) *Capital gains* (a) @15 (fifteen) % , (10% upto Ay. 200809, i.e. year ending on 31.03.2008) on the amount of ‘short term capital gains’ *Section 111A

(II) *Surcharge* @10 (ten) % , ‘surcharge’, ‘on the amount, of Income tax’, where total income is exceeding

(b) @20 (twenty) % , on the amount of ‘long term capital gains’ *Section 112

*Special Rates, for the ‘Certain Non-Business incomes’ *Section 115A 01

investments

* @20 (twenty) % , on the incomes under the heads (a) Dividend (b) Royalty and (c) Fees for the technical services * Section 115A (a) Dividend [‘except’ referred in *Section 115-O , (b) Interest income, received on the lended money/debt in the ‘foreign currency’. (c) Income on the investments, made in domestic (Indian) mutual funds/UTI, lended in the ‘foreign currency’. (d) ‘No deduction’ is permitted, for any expenditure/allowance *Section 28 to 44C and 57

02

@10 (ten) % , on the incomes, under the heads (a) ‘Income’, on the units (purchased in the ‘foreign currency’) (b) ‘Capital gain’ on the units [purchased in the ‘foreign currency’] * Section 115AB (a) ‘No deduction’ is permitted, for any expenditure/allowance *Section 28 to 44C and 57 (1) (b) ‘No deduction’ is permitted, under

03

chapter VI-A

*Section 80A to 80VV

@10 (ten) % , on the income, under the head ‘Income’ and ‘capital gain’, on the

21

‘bonds/GDRs’

(Global

purchased in the ‘foreign currency’ *Section 115AC *Incomes includes:- (a) Interest on bonds (b) Dividend [‘except’ as reffered in] *Section 115-O (c) ‘No deduction’ is permitted, for any expenditure/allowance *Section 28 to 44C and 57 (d) ‘No deduction’ is permitted, under Chapter VI-A *Section 80A to 80VV (e) ‘No (mandatory) filing’ of Income tax return *Section 139 (1) where proper TDS has (already) been deducted, under Chapter *Section 192 to 206 B XVII-B

where DDT (Dividend distribution tax) has (already) been paid].

(e) ‘No deduction’ is permitted, under Chapter VI-A *Section 80A to 80VV (f) ‘No (mandatory) filing’ of Income tax return *Section 139 (1) where proper TDS has (already) been deducted, under Chapter XVII-B *Section 192 to 206B

in

depository receipts)

04

@10 (ten) %/20 (twenty) %/30 (thirty) % , on the incomes, under the head:- ‘Income’ and ‘capital gain’ on the investments in securities (i.e. shares etc) by the FIIs [Foreign institutional investors]

(I) @10

(ten)

* Section 115AD

% , on the LTCG

(Long term capital

gains).

(II) @20 (twenty) % , on the ‘incomes

(i.e.

dividend, ‘except’ as reffered in section 115-O).

(III) @30

(thirty) capital gains).

% , on the STCG

(Short term

(IV) ‘No

deduction’ is permitted, for any expenditure/allowance *Section 28 to 44C and 57

(V) ‘No deduction’ is permitted, under chapter-VI-A *Section 80A to 80VV (VI) ‘No indexation’ benefit is permitted, for the computing of ‘cost of acquisition’ *Section 48

SAI CIRCULARS JUNE-2008

*Special Rates, for the Sportsman or Sports Association *Section 115 BBA 01

(II) ‘No deduction’ is permitted, for any expenditure/allowance in computing the (abovementioned) incomes.

(I) @10 (ten) % , on the incomes under the heads :(a) Fees, for the participation in any ‘game and/or sport’.

(III) ‘No mandatory’ filing of the return of the incomes *Section 139 (1) where (a) ‘No other incomes’, ‘except abovementioned’ and (also) (b) TDS has (already) been properly deducted * Chapter XVII-B

[‘Except’ lotteries, cross word puzzles, races, card game and other of any sort of betting of any form or nature whatsoever] *Section 115BB

(b) Receipts (incomes), from the advertisements (c) Receipts (Incomes), from the articles on any game/sport (in India) in any newspaper, magazine, journal.

(K) Special provisions, for the Non-Resident Indians 01

* Definitions *Section 115C (I) ‘Covnertible foreign exchanges’ :Which are ‘treated’, by the RBI, for the purpose of the foreign Exchange Regulation Act, 1973 and any other rule made, for the same. (II) ‘Foreign exchange assets’ :Which are ‘acquired/purchased’, by any person (including non-resident), in the ‘convertible foreign exchanges’. (III) ‘Investment incomes’ :Which are derived’ [Except reffered in Section 115-O] from a ‘foreign exchange’ assets’. (IV) ‘Long term capital gains’ :Which are liable to Income tax, under the head ‘capital gains’ and (also) which are ‘not short term capital gains’, relating to the ‘capital assets’, being the foreign exchange assets. (V) ‘Non-resident Indians’ (NRIs) :Who are ‘ither’ Indian citizen ‘or’ POIs (Persons of Indian origin) but who are definitely (100%) non-residents ‘in India’. (VI) ‘Specified assets’ :(a) ‘Shares’, in an Indian (domestic) company (b) ‘Debenture’, in an Indian (domestic) company, ‘but not in the private limited company’. (c) ‘Deposits’, in an Indian (domestic) company, ‘but not in the private limited company’. (d) ‘Securities’, issued by the Central govt. (e) ‘Other assets’, as specified and notified, by the Central govt.

02

Special provisions, for the computation of total incomes of the Non-Resident Indians (NRIs) ‘only’ *Section 115D (I) ‘No deduction’, for the expenditures/ allowances are permitted, for the purpose of computing ‘investment incomes, of the NRIs ‘only’. (II) ‘No deductions, are permitted, under Chapter-VIA *Section 80A to 80VV (III) ‘No indexation benefits’, are permitted, under the head capital gains *Section 48

22

*Section 115C to 115-I

03

Tax on the investment incomes and long term capital gains, for the Non-Resident *Section 115E Indians (NRIs) ‘only’ (I) @20 (twenty) % , on the (a) Investment incomes and (also) (b) ‘Long term’ capital gains, on the ‘non-specified assets’. (II) @10 (ten) %, on the ‘long term’ capital gains, on the ‘specified assets’.

04

Special provisions, for the ‘long-term’ capital gains, on the transfer of ‘foreign exchange assets’, for the Non-Resident Indians (NRIs) ‘only’ *Section 115F (I) ‘No capital gain tax’ *Section 45 where whole (100%) net consideration is invested, with in 6 (six) months, in any ‘specified asset’ ‘or’ in any ‘savings certificate’ *Section 10 (4B) (II) ‘Proportionate capital gains tax’, *Section 45 where partial (not 100%) net consideration is invested, with in 6 (six) months in ‘abovementioned’ ‘specified assets’/saving certificates. (III) 10/20/30% , (as case may be), where ‘abovementioned’ investments have been withdrawn, ‘before’ completing 3 (three) years. Special provisions, for ‘not filling’ of the return of incomes, for the NRIs (only) *Section 115G (I) Where the NRIs are liable to Income tax, for the (aa) Investment incomes, ‘or’ (ab) Long term capital gains ‘or’ (ac) Both ‘and’

05

(also)

(II)

TDS

has

(already)

been

accordance with chapter XVII-B

deducted,

*Section 192 to

206B

06

Special provisions, for the NRIs (only), by becoming resident (in India) from NonResident (in India) *Section 115H (I) Assessee (abovementioned) is permitted, to take benefits, as available in chapter-XII-A,by furnishing a declaration to the Assessing officer (AO) *Section 115C (f) (ii) to (v)

SAI CIRCULARS JUNE-2008

(I) NRIs (only) are permitted, ‘to chose’, not to take benefits of the Chapter-XII-A.

(II) Assessee (abovementioned) is permitted, to take benefits, ‘till’ the ‘original’ ‘foreign exchange assets’ are ‘not transferred/sold’. 07

‘Option’, for ‘not opting’, the of Chapter XII-A, for the NRIs (only) *Section 115-I

(II) NRIs (abovementioned) shall be liable to Income tax, accordance with the other provisions of the Act (other than the

benefits

special provisions of Chapter-XII-A)

(L) Special Provisions, for the Shipping Business, being carried by a Non-Resident 01

*Section 172

(I) ‘7.5%’ (seven and a half percent) of the ‘aggregate’ of amount ‘actually / deemed’ paid/ payable, ‘for carriage of’ the (a) Passengers (b) Live stocks (c) Mails (d) Goods shipped, from any port situated ‘in India’.

(a) Demurrage charge (b) Holding charge (c) Any charge of the similiar in nature. (III) ‘No port clearance’ shall be granted to the ship, by the collector of Customs, where ‘ither’ (a) Tax has ‘not’ been paid ‘or’ (b) Satisfactory arrangement has ‘not’ been made, for the making of tax payment.

(II) ‘Aggregate’ of amounts [paid ‘in India’ ‘and/or’ ‘outside India’ (both)] includes :‘All kinds’ of amount ‘directly paid/payable to the non-Resident ‘or’ ‘indirectly’ paid/payable to any ‘other person’ on behalf of the nonResident, ‘for carriage of’ the certain things (abovementioned) ‘and’ (also).

(IV) Master of the ship shall prepare and furnish, return of the full (100%) amount paid/payable, to the owner/charterer of the ship.

(M) Special Provisions, for the Recovery of Tax, from the Assets of the Non-Resident 01

*Section 173

(I) Two (2) ways of ‘collection’ and ‘recovery of tax’, are available from the non-resident assessee :(a) ‘Collection’, by way of deduction at source *Section 192 to 206B, Chapter XVII-B

(II) Liability of the ‘representatives assessee’ *Section 161 (1) and ‘recovery’, from the assets situated ‘in India’ (only) belonging to the ‘representative assessee’ is (also) available ‘in addition’ to the (abovementioned) ‘collection’ and, ‘recovery mode’ is available as, ‘directly from the non-resident’ *Section 173

(b) ‘Recovery’, from the assets, situated ‘in India’ (only), belonging to the ‘non-resident’.

INSTRUCTIONSS 01

02

03 23

Management of Sai Circulars and it’s advisors, board of editors, other associates and consultants, ‘do not accept any personal and collective responsibility’, for their views expressed on different subjects. All ‘views are their personal opinions’, on the subject matters. Therefore (abovementioned) management and persons are ‘not to be held responsible’, for execution of your ‘all’ actions, deeds and acts, ‘based on their personal opninions’. Readers are hereby advised to ‘send your subscriptions’ as per prescribed rates (Excluding above, taxes, if any applicable). ‘In absence’ of ‘further dispatches of our magazine (Sai Circulars) are to be stopped’ ‘without further individual intimation’ (Persons who have already paid, are requested to ignore it).

your friends and business associates, but are ‘not permitting to copy of our title, letterhead’s particulars, pattern and language’, our management is to ‘take legal actions against it’ (accordingly). 04

We are (also) ‘replying of yours further Questions’, ‘charges are deends on the matters and quantums’ involves in each question.

Payments of the aforesaid services are to be made, by sending a demand draft/ cheque (Local only)/direct deposit of cash/cheque in HDFC bank account number 1442000010804 maintained with East Patel nagar, New Delhi- 110008 in favour of M/s Sai Circulars, and to be dispatched ‘in advance’ at 9/14 East Patel We are officially ‘permitting’ to forward, Nagar (‘Near hotel Jaypee and opp. Hotel amarpali’) ‘photostat’ copies of our sai circulars, to New Delhi -110008. SAI CIRCULARS JUNE-2008 05

Send Subscription, for further details on the matter

R.N.I. No.DELENG/2005/15556 Postal Reg. No. DL (C)-14/1058/08-2010 (SRT

Nagar, Jhandewalan Post Office, New Delhi- 110055) SUBSCRIPTION FORM

EDITOR, M/S SAI CIRCULARS, 9/14, EAST PATEL NAGAR, (NEAR JAYPEE HOTEL), NEW DELHI – 110008 I/WE WISH TO SUBSCRIBE FOR THE SAI CIRCULARS (A MONTHLY MAGAZINE ON UPDATION OF INDIAN TAX PROVISIONS). MY/OUR PARTICULARS:(I) NAMES (OF THE DEGINATED PERSONS) …..……………………………..…..………………………………………. (II) DEGINATIONS (INCLUDING QUALIFICATIONS) ……………………………………………………………………….. (III) NAME OF ORGANISATION: …….……………..…………………………………………………………………… (IV) ADDRESS (INCLUDING PIN CODE) ………………………………..………………….........………………………….. (V) PH.: (O)……………………/………………......./..…………………. (R) …………………… (M)...…..….………… (VI) E-MAIL ADDRESS : ……………………................................................................................................ (VII) PREFERRED TAX LAWS : (A) INCOME TAX ACT (B) SERVICE TAX ACT (C) CENTRAL EXCISE ACT (D) CUSTOMS ACT (E) FEMA AND RBI ACT (F) COMPANIES ACT (G) SEBI ACT (H) CNETRAL SALES TAX ACT (I) FCRA I AM /WE ARE ENCLOSING HEREWITH A DEMAND DRAFT / CHEQUE (LOCAL ONLY) NO………………… DATED……………….OF RS.……..……………DRAWN ON (NAME AND ADDRESS OF BANK) …………………........ ………………………………. /DIRECT DEPOSIT OF CASH/CHEQUE NO……………………… IN HDFC BANK ACCOUNT NUMBER 1442000010804 MAINTAINED WITH EAST PATEL NAGAR, NEW DELHI - 110008. DATE:

(NAME & SIGNATURE)

PLACE :

Categories of subscriptions for the Magazine

Category Rates (Rs.) A. B. C.

Category A. B. C. D. E. F.

2,700/-* 7,200/-* 10,500/-*

Remarks

Periods Per Year

Effective Cost @ Rs.2700/- Per Year **

Per Block of Three Years

Effective Cost @ Rs.2400/- Per Year **

Per Block of Five Years

Effective Cost @ Rs.2100/- Per Year **

Categories Advertisement for the magazine Descriptions Rate (Per Incertion) Full Page Half Page Quarter Page Back Page Out side Back Page Inside Front Page Inside Middle Page Strips E-mails

50,000 25,000 50,000 10,000 50,000

30,000 15,000 30,000 6,000 1,000 (Per Page) 30,000

20,000 10,000 20,000 4,000 20,000

” Excluding Taxes (IF ANY APPLICABLE) ”” Including free ‘Monthly Updated’ Compact Disc (CD) on latest one year’s Circulars, Notifications, Instructions, Press Releases, Decisions by Courts/ Tribunals and Pronouncements by Authority for Advance Rullings (AARs) on Indian Tax Provisions and on our Magazines. Printed, Published by SUMAN AGARWAL and owned by M/S SAICONE HOSPITALITY (P) LTD. Printed at JAIN GLAZERS, 9479-80 GALI NO.11, MULTANI DHANDA, PAHAR GANJ, NEW DELHI-110055 Ph.: 011-51598384 and published from 9/14 EAST PATEL NAGAR (Near JayPee Hotel), NEW DELHI – 110008 Phone: 011-25769111 FAX: 011-25753888/25752757/9312275519 E-mail: [email protected] Web Sites: www.saicirculars.com EDITOR: SUMAN AGARWAL

SAI CIRCULARS-JUNE-2008