Section 271(1)(c), read with section 145, of the Income-tax Act, 1961 - Penalty For concealment of income (Estimation of income)

IT : Where no return had been filed by assessee and income was assessed on estimate basis by revenue, no penalty could be levied for concealment of income
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[2015] 55 taxmann.com 258 (Gujarat)
HIGH COURT OF GUJARAT
Income-tax Officer
v.
Bombaywala Readymade Stores*
K.S. JHAVERI AND K.J. THAKER, JJ.
TAX APPEAL NO.152 OF 2005
NOVEMBER  3, 2014
Section 271(1)(c), read with section 145, of the Income-tax Act, 1961 - Penalty - For concealment of income (Estimation of income) - During search excess stock was found on physical verification as against book stock worked out as on date of search - Assessee did not file return of income for relevant year in which search had been conducted - Assessing Officer completed assessment for relevant assessment year on basis of materials available with him - Penalty proceedings were initiated for concealing particulars of income - Whether since no income had been filed by assessee and income was assessed on estimate basis by revenue, no penalty under section 271(1)(c) could be levied for concealment of income - Held, yes [Para 6] [In favour of assessee]
K.M. Parikh, Advocate for the Appellant. J.P. Shah and Manish J. Shah, Advocates for the Respondent.

Assessee was willing to pursue remedy as provided in section 260A

IT : Where assessee was willing to pursue remedy as provided in section 260A, coercive proceedings against assessee would be kept in abeyance for a period of two weeks on condition that assessee satisfied 1/3rd of balance liability
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[2015] 55 taxmann.com 177 (Kerala)
HIGH COURT OF KERALA
Thomas George Muthoot
v.
Assistant Commissioner of Income Tax, Circle-I, Thiruvalla*
P.R. RAMACHANDRA MENON, J.
W.P. (C) NO. 27987 OF 2014 (W)
NOVEMBER  6, 2014
Section 260A of the Income-tax Act, 1961 - High Court - Appeal to (Coercive proceedings kept in abeyance) - Assessment years 2006-07 and 2007-08 - Whether where assessee was willing to pursue remedy as provided in section 260A, coercive proceedings against assessee would be kept in abeyance for a period of two weeks on condition that assessee satisfied 1/3rd of balance liability - Held, yes [Para 7] [In favour of assessee]

Section 28(i), read with section 153A, of the Income-tax Act, 1961

IT : Where assessee's claim regarding land development expenses was rightly allowed by Assessing Officer in original return and there was no material to deviate from earlier findings, ad hoc disallowance was not justified in assessment during search
IT : Where seized sale deed revealed that assessee had purchased a residential plot and there was no evidence to establish that said investment was out of past savings, addition as unexplained investment was justified
IT : Where assessee purchased agricultural land through cash payment of Rs.4.8 lakhs as assesse had not bank account where said land was situated, section 40A(3) could not be invoked to disallow said cash payments
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[2015] 55 taxmann.com 256 (Jodhpur - Trib.)
IN THE ITAT JODHPUR BENCH
Smt. Jiya Devi Sharma
v.
Assistant Commissioner of Income-tax*
HARI OM MARATHA, JUDICIAL MEMBER
AND N.K. SAINI, ACCOUNTANT MEMBER
I.T. APPEAL NOS. 211 & 212 (JD.) OF 2013
[ASSESSMENT YEARS 2008-09 & 2009-10]
SEPTEMBER  20, 2013
I. Section 28(i), read with section 153A, of the Income-tax Act, 1961 - Business loss/deduction - Allowable as (Land development expenses) - Assessment years 2008-09 & 2009-10 - Whether, where assessee's claim regarding land development expenses was rightly allowed by Assessing Officer in original return and there was no material to deviate from earlier finding, ad hoc disallowance was not justified in assessment during search by invoking section 153A - Held, yes [Para 3.3] [In favour of assessee]
II. Section 69, read with section 153A of the Income-tax Act, 1961 - Unexplained investments (Construction expenses) - Assessment years 2008-09 & 2009-10 - Search was conducted in assessee premises and a sale deed was seized - As per sale deed, assessee had purchased a residential plot and but same was not shown in books of account - Assessee claimed that said investment was out of her past savings although there was no evidence of same - Whether addition as unexplained investment under section 69 was sustainable - Held, yes [Para 4.2] [In favour of revenue]
III. Section 40A(3) of the Income-tax Act, 1961, read with Rule 6DD of the Income-Tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits (Rule 6DD/Exceptions) - Assessment years 2008-09 & 2009-10 - Whether where assessee purchased agricultural land through cash payments of Rs. 4.8 lakhs, as assessee had no bank account where said land was situated, section 40A(3) could not be invoked to disallow said cash payments made by assessee - Held, yes [Para 5.3] [In favour of assessee]

Where Tribunal arbitrarily reduced quantum of penalty for not depositing taxes before filing return

IT : Where Tribunal arbitrarily reduced quantum of penalty for not depositing taxes before filing return without assigning any tangible reason, matter was to be remanded to reconsider same
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[2015] 55 taxmann.com 280 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Kudos Chemie Ltd.
v.
Commissioner of Income-tax, Chandigarh*
RAJIVE BHALLA AND B.S. WALIA, JJ.
IT APPEAL NO. 134 OF 2014†
JANUARY  16, 2015
Section 221, read with sections 140A and 220, of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable when tax in default (Quantum of penalty) - Assessment years 2008-09 and 2009-10 - Whether where Tribunal rightly held that assessee was liable to pay penalty for not depositing taxes before filing return but while doing so, arbitrarily and without assigning any reason reduced penalty, matter was to be remanded to reconsider same - Held, yes [Para 8] [In favour of revenue/Matter remanded]

Section 65(55b), read with sections 73, 75 and 76, of the Finance Act, 1994 - Taxable services

Service Tax : Where service tax itself was not leviable, assessee cannot be asked to pay interest and penalty merely because he has paid non-payable service tax
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[2015] 55 taxmann.com 242 (Madras)
HIGH COURT OF MADRAS
Commissioner of Central Excise, Tirunelveli
v.
Sundaram Textiles Ltd.*
A. SELVAM AND G. CHOCKALINGAM, JJ.
C.M.A. (M.D.) NOS. 1129 & 1515 OF 2008†
M.P. (M.D) NO. 1 OF 2008
DECEMBER  16, 2013
Section 65(55b), read with sections 73, 75 and 76, of the Finance Act, 1994 - Taxable services - Intellectual Property services - Period 1999 to 15-8-2002 - Assessee received IPR/patent services from a Japanese company and, on department's insistence, paid service tax thereon - Department raised notice demanding interest and penalty as well - Assessee argued that since, prior to 16-8-2002, service itself was not taxable and there was no reverse charge provision, service tax was not payable and consequently, interest and penalty could not be demanded - HELD : Amendment to Service Tax Rules providing for liability of service recipient under reverse charge came into effect only on 16-8-2002; hence, during relevant period, there was no liability to pay service tax - Since assessee was not liable to pay Service Tax, he was also not liable to pay penalty as well as interest - Hence, demand was set aside [Paras 6 to 8] [In favour of assessee]

Section 148 of the Income-tax Act, 1961 - Income escaping assessment

IT: Where order disposing of objection raised by petitioner was beyond reasons recorded for reopening of assessment, Assessing Officer was to be directed to dispose of objections of petitioner to notice, afresh keeping in mind reasons recorded for issuing notice under section 148
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[2015] 54 taxmann.com 327 (Bombay)
HIGH COURT OF BOMBAY
Pransukhlal Bros.
v.
Income-tax Officer-16(3)(1)*
M. S. SANKLECHA AND N. M. JAMDAR, JJ.
WRIT PETITION LODGING NO. 2124 OF 2014
AUGUST  20, 2014
Section 148 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for (Objection to notice) - Assessment year 2007-08 - Whether where order disposing of objection raised by petitioner was beyond reasons recorded for reopening of assessment, Assessing Officer was to be directed to dispose of objections of petitioner to notice afresh keeping in mind reasons recorded for issuing notice under section 148 - Held, yes [Para 9][Matter remanded]

Assessee was entitled for deduction towards commission and brokerage

IT : Where statement recorded under section 132(4) had been retracted and revenue did not press into service any other supporting material, assessee was entitled for deduction towards commission and brokerage
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[2015] 55 taxmann.com 176 (Andhra Pradesh)
HIGH COURT OF ANDHRA PRADESH
Commissioner of Income-tax, Karnataka
v.
Shri Ramdas Motor Transport Ltd.*
L. NARASIMHA REDDY AND T. SUNIL CHOWDARY, JJ.
REFERRED CASE NO. 64 OF 2002
OCTOBER  24, 2014
Section 132, read with section 37(1) of the Income-tax Act, 1961 - Search and seizure (Statement under section 132(4)) - Assessment year 1984-85 - Assessing Officer relied upon a statement recorded under section 132(4) from managing director of assessee company, disallowed deduction towards commission and brokerage on sale of automobile parts - Whether Explanation to section 132(4) is retrospective in nature - Held, yes - Whether since statement recorded under section 132(4) had been retracted and revenue did not press into service any other supporting material, assessee was entitled for deduction towards commission and brokerage - Held, yes [Para 22] [In favour of assessee]

Central Government was to be directed to order investigation into affairs of respondent-company

CL: Where respondent-company had not furnished information in respect of its affairs, to Chartered Accountants appointed by Court which it was reasonably expected to furnish, Central Government was to be directed to order investigation into affairs of respondent-company
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[2015] 55 taxmann.com 238 (Madras)
HIGH COURT OF MADRAS
T. Kannan
v.
Shapre Infotech India Ltd.
R. SUDHAKAR, J.
COMPANY PETITION NO. 198 OF 2007
APRIL  30, 2014
Section 213 of the Companies Act, 2013/Section 237 of the Companies Act, 1956 read with rule 11 of the Companies (Court) Rules, 1959 - Investigation of Company's affairs in other cases - Petitioner shareholders had subscribed to shares in respondent-company based on assurance that they would get good returns on their shares and that their shares would also be listed on other stock exchanges - However, petitioners alleged that from beginning they had not received notice from respondent-company regarding convening of Annual General Meetings or Extraordinary General Meetings and were also not informed of any major activities of company like amalgamation, listing and de-listing of shares - Hence, court appointed chartered accountants to look into affairs of company to understand seriousness of allegations made by petitioners - However, respondents did not comply with directions given by Court to furnish relevant particulars to chartered accountants - Whether, conduct of business of respondent-company was oppressive to its members and non-cooperation of respondent-company with chartered accountants, despite series of orders of Court, clearly showed that respondents intended to thwart attempts of Court to do substantial justice to either parties - Held, yes - Whether facts, as presented, clearly made out a case for Court to direct Central Government to order investigation into affairs of respondent-company, more particularly in view of fact that respondent-company had not furnished information in respect of its affairs, which it was reasonably expected to furnish - Held, yes [Para 15]

Supreme Court sets aside High Court judgment denying exemption u/s 10(23C) by quoting non-existing passage from Supreme Court judgment

IT : Supreme Court sets aside High Court judgment denying exemption u/s 10(23C) by quoting non-existing passage from Supreme Court judgment
• The High Court did not apply its mind independently. What has been copied is one paragraph from the Supreme Court's judgment in Aditanar Educational Institution v. ACIT [1997] 90 Taxman 528 (SC) followed by a paragraph of faulty reasoning by the Assessing Officer and the said faulty reasoning of the Assessing Officer has been wrongly said to be the law laid down by the Apex Court
• The Uttarakhand High Court has erred by quoting a non existent passage from an applicable Supreme Court judgment, namely, case of Aditanar Educational Institution (supra) and quoting a portion of a property tax judgment by Supreme Court which expressly stated that rulings arising out of the Income tax Act would not be applicable. Quite apart from this, it also went on to further quote from a portion of the property tax judgment which was rendered in the context of whether an educational society is supported wholly or in part by voluntary contributions, something which is completely unrelated to section 10(23C)(iiiad)
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[2015] 55 taxmann.com 255 (SC)
SUPREME COURT OF INDIA
Queen's Educational Society
v.
Commissioner of Income-tax
T.S. THAKUR AND R.F. NARIMAN, JJ.
CIVIL APPEAL NOS. 5167 & 5168 OF 2008
8962 OF 2010, 909 OF 2011 AND 2919 TO 2923 OF 2015
MARCH  16, 2015

__._,_.___

Section 115JA, read with section 147, of the Income-tax Act, 1961 - Minimum alternate tax

IT: Where Assessing Officer allowed assessee's claim for set off of loss of company amalgamated with it against its book profits while determining MAT liability, he could not initiate reassessment proceedings subsequently merely on basis of change of opinion that aforesaid loss was wrongly set off
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[2015] 55 taxmann.com 59 (Bombay)
HIGH COURT OF BOMBAY
Crompton Greaves Ltd.
v.
Assistant Commissioner of Income-tax, Circle 6(2)*
M.S. SANKLECHA AND M.S. SONAK, JJ.
WRIT PETITION NO. 224 OF 2007
DECEMBER  22, 2014
Section 115JA, read with section 147, of the Income-tax Act, 1961 - Minimum alternate tax (In case of amalgamation) - Assessment year 1999-2000 - Whether where in course of assessment under section 143(3), Assessing Officer considered all relevant materials disclosed by assessee and thereafter allowed assessee's claim for set off of loss of company amalgamated with it against its book profits while determining MAT liability, in absence of any failure on assessee's part to disclose truly and fully all material facts necessary for assessment, Assessing Officer could not initiate reassessment proceedings after expiry of four years from end of relevant year merely on basis of change of opinion that aforesaid loss was wrongly set off - Held, yes [Para 10] [In favour of assessee]

Increase in conversion charges paid to its sister concern, part of such conversion charges was disallowed under section 40A(2)

IT : Where assessee could not give satisfactory reason for increase in conversion charges paid to its sister concern, part of such conversion charges was disallowed under section 40A(2)
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[2015] 54 taxmann.com 411 (Calcutta)
HIGH COURT OF CALCUTTA
Prakash Engineering Works
v.
Commissioner of Income-tax*
SOUMITRA PAL AND DEBANGSU BASAK, JJ.
IT APPEAL NO. 59 OF 2004†
SEPTEMBER  18, 2014
Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments (Conversion charges) - During relevant assessment year assessee paid conversion charges to a company in which it was having substantial interest - Assessing Officer disallowed payments being excessive/unreasonable - Assessee could not explain that conversion charges paid was equal to market price - Whether disallowance of conversion charges was justified - Held, yes [Para 8] [In favour of revenue]
Soumitra Mukherjee, H.B. Dubey, Mukesh Mishra and P. Dudhuria, Advs. for the Appearing Parties.

Will appoint GST panel head after more talks: FM

At a meeting on Friday, the empowered committee on the goods and services tax (GST), comprising the Union finance minister and finance ministers of states, failed to arrive at a decision on appointing a new chairman, as many members were absent.

The agenda of Friday’s meeting was to appoint a replacement for Abdul Rahim Rather, the last chairman of the committee and former Jammu & Kashmir finance minister. State finance ministers present at the meeting told the media they had “unanimously” chosen to let Finance Minister Arun Jaitley decide on a new chairman.

Jaitley, however, said he would defer the move, opting to first consult state finance ministers who weren’t present at Friday’s meeting. “A number of state finance ministers are busy with their state Budgets. That is why they could not make it. We need to consult them, too. By consensus, we will have the new chairman of the empowered committee in the next few days,” he said.

States that have either presented their Budgets this past week or are about to in the coming days include Maharashtra, Uttarakhand, Haryana, and Karnataka.

Revenue Secretary Shaktikanta Das said before taking at a decision on a new chairman, either another meeting would be held soon or Jaitley could consult the members absent on Friday separately. “That is a matter of detail, which I cannot speak about at the moment,” he said.

Jaitley said parliamentary discussions on the Constitution amendment Bill for GST would be held in the second half of the Budget session, starting April 20.

On the mines and coal Bills being passed in the first half of the Budget Session, Jaitley said that the government was happy with the progress on this front. ,“Today the first part of the Parliament session has ended. It has been a session that gives us an immense amount of satisfaction. We had the Budget proposals, which were approved. Additionally, three major pieces of legislation --- on insurance, mining and coal - have all been approved by Parliament,” he said. “Therefore, there will now be a lot of investment coming into the insurance sector. There will be completely non-discretionary and non-discriminatory allocation of coal and mining blocks. Industry will get the minerals and coal it needs. And, mines- and coal-bearing states will get the revenue they need.”Source:http://www.business-standard.com/

New policy for listing start-ups in 3-4 months

The Securities and Exchange Board of India (Sebi) is taking a number of steps to put in place a policy for start-ups and e-commerce companies to list in India. The markets regulator had held several meetings in Mumbai and Bengaluru in this regard, Sebi chief UK Sinha said on Friday.

“We want our companies to list in India rather than being forced to list abroad…In December, we had a meeting with 40-50 people in Bengaluru; we tried to understand their requirements….This was followed by a recent discussion with Sebi’s primary market advisory committee…I have invited them to Mumbai on March 27; we’ll have a discussion,” he said while speaking on the sidelines of a conference on real estate investment trusts, organised by Sebi.

Reportedly, many Indian start-ups and e-commerce companies, including Flipkart, are considering listing abroad. In a response to an earlier query by Business Standard, Flipkart, however, denied any such plan.

“It appears a certain set of rules will have to be carved out for them (start-ups and e-commerce companies) because they have a very specific business model….we’ll float a consultation paper and we hope in the next three-four months, we’ll have a policy in place. We want them to get listed here,” Sinha said.

On the Gujarat International Finance Tec-City (GIFT), Sinha said a number of regulatory issues were being addressed, Sinha said. “GIFT has been announced in the Budget and the timeframe has also been given, effective April 1. We’re in constant touch with RBI (Reserve bank of India). Sebi and RBI will come out with formulations before April 1,” he said, adding a number of issues were being resolved, including the jurisdiction and application of the Foreign Exchange Management Act (Fema). The Act places restrictions on foreign transactions involving foreign exchange as well as securities.

“There are challenges... How do you treat this territory? Is it an Indian territory or a foreign territory in technical terms? Will Fema be applicable or not? All those things are there. We’re in the (discussion) process. I’m not in a position to disclose the final outcome, except that it will be out by April 1,” he said.

REGULATORY AGENDA
LISTING OF START-UPS AND E-COMMERCE COMPANIES
Sebi recently met with start-ups in Bengaluru
Primary market advisory committee discussed issues they face
Consultation paper soon, rules may be put in place in 3-4 months time
WOMEN DIRECTORS
Regulations now require at least one woman on every company board
Sebi says will take action if companies don't appoint them
IRONING OUT GIFT REGULATIONS
Some problems related to jurisdiction, application of FEMA
In discussions with RBI, should be ironed out by April 1
SEBI-FMC MERGER
Only some procedural issues remaining
Sebi has made some suggestions on the same to the government
Working on smooth transition to new regulatory framework

The announced merger of the Forward Markets Commission with Sebi would be carried out soon, he said, adding Sebi had offered some procedural suggestions in this regard.

Sinha said action would be taken against companies that didn’t have even one women director on their boards, as required by recent regulations. “If people do not follow it willingly, it will have consequences. And, the consequences will be according to law; these could be very serious. I find it very shameful that in this country, 8,000-9,000 listed companies can’t find even one woman competent enough to be on their boards,” he said.Source:http://www.business-standard.com/

Sebi chief UK Sinha calls for ‘fair’ play

Securities and Exchange Board of India (Sebi) chairman UK Sinha on Friday expressed disappointment over Indian companies’ inability to appoint even one woman director on their boards and warned of serious consequences against those failing to abide by the rule.
“I find it very shameful that this country, (with) about 8,000-9,000 listed companies, cannot find even one woman who is competent enough to be on their board. Any requirement, including the requirement of a woman director, is something which has to be enforced. If people do not follow it willingly, then it will have consequences as per law and it can be very serious,” Sinha told reporters on the sidelines of Sebi’s second International Research Conference.
Data compiled by Prime Database show that many large-cap and PSU companies are still to appoint at least one woman director on their boards as required by the guidelines.
Securities and Exchange Board of India, Sebi, UK Sinha, woman director, women director on boards, NSE
As many as 451 listed companies from National Stock Exchange (NSE) are still to meet the March 31 deadline to appoint at least one woman director to meet the Corporate Governance Code introduced by Sebi about a year ago.
At least 27 public sector undertakings are yet to meet this guideline as also large-cap companies like L&T, Hero MotoCorp, and all the three listed Adani group firms. PSUs that have so far failed to comply with the rule include Oil Natural Gas Corp (ONGC), National Thermal Power Corp (NTPC), NMDC, Container and  Corp. PSU lenders like Punjab National Bank (PNB), Indian Bank and Oriental Bank are also yet to  appoint women directors.
Among other things, Sinha said Sebi would announce guidelines for the development of the Gujarat International Finance Tec-City (GIFT), an international financial service centre, before April 1. The Sebi board will meet on Sunday to discuss and finalise GIFT-City regulations and finance minister Arun Jaitley will make the key note address.
“We are in constant touch with RBI, and the RBI and Sebi will come out with (GIFT City) formulations before April 1. There are challenges on how you treat the territory — whether Indian or foreign. Will Fema apply or not?” Sinha said.
The market regulator is also in the process of formulating easier rules for initial public offerings (IPOs) of start-up companies and aims to notify draft regulations in 3-4 months. Sinha told reporters that Sebi recently met about 50 people in Bengaluru to understand their requirements and highlighted that these companies have very niche and specific business models for which a certain set of rules have to be developed.
“We want our companies to list in India rather than being forced to do so in another country. We had a discussion with the primary market advisory committee (PMAC). We hope that, within 3-4 months, we will have our policy in place,” Sinha added.
Sebi is also engaged in a dialogue with the Reserve Bank of India on formulating new rules on wilful defaulters, Sinha said. “Tackling willful defaulters has various dimensions. We are in dialogue with RBI and hope to come out with our policy very soon,” Sinha said.Source:http://www.financialexpress.com/

Over 94% of outstanding tax hard to recover: CAG Report

 Over 94 per cent of the country's uncollected tax demand of Rs 5.75 lakh crore is difficult to recover, the Comptroller and Auditor General of India has said. The CAG, in an audit report on direct taxes tabled in Parliament on Friday, also hauled up the Income Tax Settlement Commission and the income-tax department for their slow functioning and inability to enforce collection and recovery of outstanding demand.

The audit report said the uncollected tax demand had risen 18 per cent to Rs 5.75 lakh crore in 2013-14 from Rs 4.86 lakh crore in the previous year.

"We have noticed considerable delay at various stages on the part of commission and income-tax department as a number of applications filed prior to June 2007 are still pending with the commission for disposal," the CAG report said. "Besides, I-T department took considerable time in submission of required reports to the commission and giving effect to the orders of commission," the report said.

Out of the total outstanding tax demands, Rs 2.18 lakh crore was locked up in appeals with the I-T commissioner, Rs 1.80 lakh crore in litigations with higher courts, it said. The issue of rise in uncollected tax demands has been cited as an example of aggressive tax practices largely aimed at showing higher tax collections to meet budgeted targets.Source:http://economictimes.indiatimes.com/

Section 158BB, read with section 68, of the Income-tax Act, 1961

IT: Where all items of cash credits alleged against assessees were reflected in books of account, an exercise under section 158BB by Assessing Officer was not justified
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[2015] 55 taxmann.com 20 (Andhra Pradesh)
HIGH COURT OF ANDHRA PRADESH
Commissioner of Income-tax, Ap-I, Hyderabad
v.
Tharmandal Builders (P.) Ltd.*
L. NARASIMHA REDDY AND CHALLA KODANDA RAM, JJ.
ITTA. NO. 106 OF 2001†
JULY  1, 2014
Section 158BB, read with section 68, of the Income-tax Act, 1961 - Block assessments in case of search and seizure - Computation of undisclosed income (Undisclosed income) - Whether, where all items of cash credits alleged against assessees were reflected in books of account, block assessment under section 158BB by Assessing Officer was not justified - Held, yes [Para 5] [In favour of assessee]

Section 144C, read with section 254, of the Income-tax Act, 1961 - Transfer pricing

IT/ILT : Order of remand based by Tribunal without considering assessee's objection relating to non-compliance of section 144C by authorities below was to be set aside with a direction for de novo consideration
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[2015] 55 taxmann.com 160 (Madras)
HIGH COURT OF MADRAS
India Trimmings (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Co. Circle -IV(2)*
R. SUDHAKAR AND R. KARUPPIAH, JJ.
T.C.(A) NOS. 932 & 875 OF 2014†
DECEMBER  16, 2014
Section 144C, read with section 254, of the Income-tax Act, 1961 - Transfer pricing - Reference to DRP - Assessment year 2007-08 - Whether where Tribunal in course of appellate proceedings, did not consider assessee's objection in relation to non-compliance of provisions of section 144C by authorities below and passed an ex parte non-speaking order of remand, order so passed was to be set aside and, matter was to be remanded back for disposal afresh on merits - Held, yes [Paras 16 and 17] [Matter remanded]

Disallowance should not be made under section 36(1)(iii), if loans had been advanced by assessee

March 13, 2015[2015] 55 taxmann.com 82 (Indore - Trib.)
IT : Disallowance should not be made under section 36(1)(iii), if loans had been advanced by assessee due to commercial expediency to sister concerns
IT : In view of Explanation 2(b) to section 147 Assessing Officer can take action under section 147 in a case where return has been processed under section 143(1) on basis of material which is available in return or along with return with Assessing Officer
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[2015] 55 taxmann.com 82 (Indore - Trib.)
IN THE ITAT INDORE BENCH
Agrawal Indotex Ltd.
v.
Assistant Commissioner of Income-tax, Circle 2(1), Indore*
P.K. BANSAL, ACCOUNTANT MEMBER
AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER
IT APPEAL NO. 693 (IND.) OF 2013
[ASSESSMENT YEAR 2010-11]
SEPTEMBER  19, 2014
I. Section 36(1)(iii), read with section 147, of the Income-tax Act, 1961 - Interest on borrowed capital (Loans and advances to subsidiary) - Assessment year 2010-11 - Assessee had given advances to its subsidiary company out of cash credit account of assessee maintained by bank - Assessee had also given corporate guarantee to bank due to commercial expediency on behalf of subsidiary - Thereafter, said subsidiary had become sick company - Whether interest on borrowed capital was allowable - Held, yes [Para 25] [In favour of assessee]
II. Section 147, read with section 143(1), of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts (Section 143(1) v. section 147) - Assessment year 2010-11 - Whether material which is available with Assessing Officer even along with return at time of processing of return can be basis for 'reason to believe' as in view of clause (b) of explanation 2 to section 147, it can be deemed that income chargeable to tax has escaped assessment - Held, yes - Whether requirement of new material or fresh tangible material coming in possession of Assessing Officer as a prerequisite condition for reassessment is applicable only where he had made an assessment earlier - Held, yes - Whether in view of Explanation 2(b) to section 147 Assessing Officer can take action under section 147 in a case where return has been processed under section 143(1) on basis of material which is available in return or along with return with Assessing Officer - Held, yes [Paras 13, 14 and 21] [In favour of revenue]

Winding up petition wasn't maintainable when debt was seriously disputed by respondent-Company

CL: Winding up petition wasn't maintainable when debt was seriously disputed by respondent-Company
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[2015] 55 taxmann.com 121 (Andhra Pradesh)
HIGH COURT OF ANDHRA PRADESH
Ajit Exports
v.
MBS Impex (P.) Ltd.
C.V. NAGARJUNA REDDY, J.
C.P. NO. 180 OF 2011
FEBRUARY  12, 2014
Section 271 of the Companies Act, 2013/ Section 433, read with section 434 of the Companies Act, 1956 - Winding up - Circumstances in which a company may be wound up - Petitioner manufactured jewellery at request of respondent and exported same to customer based on memorandum of understanding between parties - Petitioner contended that it had manufactured jewellery out of its own gold - However, respondent conteneded that jewellery was manufactured from gold supplied by it - Memorandum of understanding was bereft of essential terms such as quantity of jewellery that was agreed to be exported and whether jewellery had to be manufactured from out of gold supplied by respondent or out of petitioner's own gold - Whether in absence of a clear understanding between parties stipulating that petitioner will manufacture jewellery from out of its own gold or at least any contemporaneous correspondence between parties unequivocally proving claim of petitioner, Court could not have held that denial of debt by respondent was not bona fide - Held, yes - Whether since debt claimed by petitioner was seriously disputed by respondent company, winding up petition was not to be admitted - Held, yes [Paras 6 & 8]
V.S. Raju for the Petitioner. S. Ravi, Senior Counsel and J. Prabhakar for the Respondent.

Section 87 of the Finance Act, 1994 read with section 11 of the Central Excise Act, 1944

March 13, 2015[2015] 55 taxmann.com 74 (Gujarat)
Service Tax : Prima facie, when demand of tax is yet to be adjudicated, it cannot be said as tax payable, for which recovery powers of section 87 may be available
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[2015] 55 taxmann.com 74 (Gujarat)
HIGH COURT OF GUJARAT
Constant Engineering (P.) Ltd.
v.
Additional Commissioner of Service Tax*
JAYANT PATEL AND S.H. VORA, JJ.
SPECIAL CIVIL APPLICATION NO. 17912 OF 2014
JANUARY  28, 2015
Section 87 of the Finance Act, 1994 read with section 11 of the Central Excise Act, 1944 and section 142 of the Customs Act, 1962 - Recovery - Of sums due to Government - During pendency of adjudication of show-cause notice, department initiated recovery proceedings by way of garnishee proceedings against assessee's customers and bankers - Assessee argued that recovery cannot be initiated during pendency of adjudication - Department argued that assessee had accepted demand - Assessee argued that it had not accepted demand - HELD : Prima facie, when demand of tax is yet to be adjudicated, it cannot be said as tax payable, for which resort to section 87 may be available - However, on facts, department was directed to complete adjudication within specified time, future recoveries were stayed and on consent from both parties, question on applicability of section 87 was directed to remain unconcluded [Paras 3 to 10] [Partly in favour of assessee]

Delhi government approves amendment to VAT Act

The government has also decided to call a two-day Assembly Session on March 24-25 for tabling Vote on Account for the first three months of the next financial year.
In a major relief to city's traders, Delhi government on Friday approved the amendment to VAT (Value Added Tax) Act to allow the carry forward of Input Tax credit for traders.

The government has also decided to call a two-day Assembly Session on March 24-25 for tabling Vote on Account for the first three months of the next financial year even as the budget will be presented in the month of June.

The decisions were taken in a cabinet meeting presided over by Deputy Chief Minister Manish Sisodia at the Delhi Secretariat here. In the meeting, the cabinet approved the amendment to VAT (Value Added Tax) Act to allow the carry forward of Input Tax credit for traders.

According to government, traders were forced to claim refund, if any before the end of each financial year on March 31, on the Input Tax paid by them. This was a cumbersome process and traders faced the apprehension of lapse of any refund amount in case they failed to claim the reimbursement.

"The latest amendment, on being passed by the state assembly, will allow the traders to carry forward their credit for the successive financial years," Sisodia told reporters here.

"We have also decided to call a two-day Assembly Session on March 24 and 25 for the passage of the Vote on Account for the first three months of the next financial year, till the budget will be presented in the state assembly," he said. Source :http://www.dnaindia.com/

Cairn India gets Rs 20,495 cr tax notice from I-T Department

The Reserve Bank of India (RBI) is looking to incentivise banks to make them more proactive in forming joint lenders’ forums (JLFs) and implement corrective action plans (CAP), sources said.
The central bank feels that banks need to be faster in pre-empting stress. “Even though banks decide on a CAP, they are unable to implement it as many lenders in the consortium do not get necessary approvals from their boards,” said a source.
Though details of how banks are going to be incentivised were not available immediately, it is understood that the central bank is much concerned about the inordinate delays in CAP implementation.
RBI mandates that banks have to arrive at a CAP within 45 days from the formation of a JLF. Banks are required to form a JLF when repayment in an account is overdue by 61 days. Such an account is called a special mention account (SMA-2). However, bankers pointed out that since bank boards do not meet very often and it takes time to prepare the CAP report to submit to the board, the entire process gets delayed.
In December, SBI chairman Arundhati Bhattacharya had said that banks are, at times, unable to convince their boards that the decision taken at a JLF meeting is the right way forward. “It is about the board being convinced that this is the right way and, then, taking a view based on the risk appetite,” she said.
For large banks like Bank of Baroda and Punjab National Bank, the boards meet once a month. However, the frequency also depends on the amount of new business that the bank has generated during the period and needs board approval.
According to a senior banker at a public sector bank, the time to arrive at a CAP, though revised to 45 days from 30 days earlier, is insufficient as every bank has to prepare a detailed report on the JLF proposal and submit it to the board.
“Bank boards do not always agree to what has been agreed upon by the lenders’ forum and it takes longer to convince the merit of the proposal to the board,” he had told FE. Last year, RBI had asked banks to classify loans according to its repayment overdues. Owing to that, JLFs were formed to find CAP for stressed loans.Source:http://www.financialexpress.com/

Amendments in Whistle Blowers Protection Act

Amendments in Whistle Blowers Protection Act

The Whistle Blowers Protection Bill, 2011 was passed by the Lok Sabha on the 27th of December, 2011 and was transmitted to the Rajya Sabha. Subsequently, it was noticed that some of the provisions in the Bill needed a relook with a view to strengthening the safeguards against disclosures which may prejudicially affect the sovereignty and integrity of the country, security of the State, etc. Accordingly, notices for certain official amendments were given to Rajya Sabha Secretariat from time to time. The Bill was finally taken up for consideration and passing on 21st February, 2014. However, as the Bill was taken up on the last day of the last Session of the 15th Lok Sabha, the official amendments which had been given notice of, were not moved during consideration and passing of the Bill on the said date. The Bill was passed by the Rajya Sabha without any amendments (i.e., in the same form as passed by the Lok Sabha) on 21st February, 2014. The Bill has received the assent of the President on 9th May, 2014 and has become the Whistle Blowers Protection Act, 2011 (No. 17 of 2014). In view of this, the Whistle Blowers Protection Act, 2011 requires some amendments (aimed at safeguarding against disclosures affecting sovereignty and integrity of India, Security of the State, etc), before it is brought into force. A draft Note for the Cabinet has been referred to the Ministry of Law and Justice (Legislative Department) with a request to provide a draft of the amendment Bill in this regard. This was stated by the Minister of State for Personnel, Public Grievances and Pensions and Minister of State in Prime Minister’s office Dr. Jitendra Singh in a written reply to a question by Dr. Pradeep Kumar Balmuchu in the Rajya Sabha today

Telenor, Tata Tele merger talks reach final stages

The Tata group and Norway’s Telenor Group are likely to merge their wireless telephony operations in India, with Telenor running the day-to-day business of the merged entity. Considering the valuations of both companies, the Tata group will end up with a minority stake in the merged entity.

According to a person with direct knowledge of the talks, the final contours of the transaction are being discussed by the senior officials of Telenor and Tata Sons in London this week.

The person said both the companies were waiting for the Indian government to come out with its merger and acquisition policy after the ongoing telecom spectrum auction, before making an announcement in this regard.

When contacted, a Tata Sons spokesperson said: “We do not comment on such matters.” A Telenor spokesperson said: “As a principle, Telenor Group never comments on rumours and speculation.”


The Tatas have invested Rs 26,000 crore in Tata Teleservices’ equity; the company has debt of Rs 24,000 crore. The Tata group has sought the government’s permission to buy back NTT DOCOMO’s 26.5 per cent stake in Tata Teleservices for Rs 7,200 crore, at Rs 58 a share. Tata Sons had engaged Price Waterhouse to value its stake in Tata Teleservices and according to a report by Price Waterhouse, the fair value of Tata Teleservices shares stood at Rs 23.34 apiece. The source quoted earlier said the merger with Telenor would take place at about this valuation.

Currently, the issue of the buyback is pending with the finance ministry.

In India, Telenor has permits for mobile services in seven of the 22 telecom service areas; as of now, it operates across six —Andhra Pradesh, Bihar, Gujarat, Maharashtra, Uttar Pradesh (East) and Uttar Pradesh (West). The company posted an annual operating profit of Rs 855 crore for 2014, while revenue rose 36 per cent to Rs 4,070 crore from Rs 3,001 crore in 2013.

For the quarter ended December 2014, the company’s operating loss more than doubled to Rs 276 crore, compared with Rs 132 crore in the corresponding quarter of the previous year, while revenue rose 38 per cent to Rs 1,151 crore. The company added 2.3 million subscribers during the quarter, with an overall base of 36.6 million at the end of 2014.

EPFO declares average interest of 8.67% in 3 years to FY15

The Employees’ Provident Fund Organisation (EPFO) gave an average interest of 8.67 per cent to its account holders in three years up to 2014-15.

The rate of interest during 2014-15 has been declared at 8.75 per cent, 8.75 per cent in 2013-14 and 8.50 per cent during 2012-13, Labour Minister Bandaru Dattatreya said in the Parliament today.

In the current financial year up to December 2014, EPFO invested a total of 3.59 lakh crore in various schemes, he added.

Similarly, EPFO invested Rs. 3.25 lakh crore in 2013-14, Rs. 3.77 lakh crore in 2012-13 and Rs. 2.37 lakh crore in 2011-12, the Minister said.

“The government prescribes investment pattern for investments of EPFO corpus. Presently, EPFO is following pattern of investment, 2013 notified by Ministry of Labour & Employment on November 21, 2013,” Dattatreya said in a written reply to the Lok Sabha.

He said the Central Board of Trustees (CBT) and Employees Provident Fund (EPF) in a meeting held in February this year relaxed investment guidelines with an objective to increase the earnings of the fund without compromising with safety and security of the fund.

CA was held guilty of professional misconduct by Disciplinary Committee

CA Act : Where a CA was held guilty of professional misconduct by Disciplinary Committee of CA institute without hearing him when he sought adjournment on medical grounds, matter was to be readjudicated
■■■
[2015] 55 taxmann.com 31 (Delhi)
HIGH COURT OF DELHI
Naresh Tharad
v.
Institute of Chartered Accountants of India
VIBHU BAKHRU, J.
W.P.(C) NO. 4284 OF 2012
CM NOS. 8890 & 12079 OF 2012
JANUARY  20, 2015
Section 21, read with section 22, of the Chartered Accountants Act, 1949 and rule 18 of the Chartered Accountants (Procedure of Investigation of Professional and other Misconduct and Conduct of Cases) Rules, 2007 - Disciplinary Directorate - A complaint in respect of alleged misconduct on part of petitioner was received from Institute of Chartered Accountants of India (ICAI) - Petitioner was called upon for personal hearing before Disciplinary Committee - Petitioner requested for an adjournment on medical grounds - However, hearing was concluded in absence of petitioner and petitioner was held to be guilty of professional misconduct - Whether it would be necessary for Disciplinary Committee to atleast grant one adjournment on account of non appearance of concerned member - Held, yes - Whether since entire procedure was compressed in a single hearing, matter was to be remanded to Disciplinary Committee to afford petitioner an opportunity to be heard - Held, yes [Paras 13 and 22]

Section 54 of the Uttar Pradesh Value Added Tax Act, 2008 - Offences and penalties

CST & VAT : Uttar Pradesh VAT - Where Tribunal had not considered whether goods in question was taxable and further, demand notices were served on assessee company instead of receiver appointed by High Court, issue of imposition of penalty was to be reconsidered
■■■
[2015] 54 taxmann.com 276 (Allahabad)
HIGH COURT OF ALLAHABAD
Anupam Sugar Industries
v.
Commissioner of Commercial Tax, U.P.*
B. AMIT STHALEKAR, J.
TRADE TAX REVISION NOS. 101 TO 103 OF 2014
NOVEMBER  14, 2014
Section 54 of the Uttar Pradesh Value Added Tax Act, 2008 - Offences and penalties - Sales tax/VAT - Loan taken by assessee's molasses unit being declared NPA by bank, High Court appointed receiver and assessee's accounts were stopped - On other hand, penalty was imposed for failure to pay tax demand on production of molasses - Assessee's case was that molasses unit being taken over by receiver, proper notice was not served, that molasses itself would not be taxable, and that financial constraint was faced since bank stopped operation of account - Further, Tribunal had not considered whether goods in question were taxable - Whether, matter required readjudication - Held, yes [Paras 10 and 11] [In favour of assessee/Matter remanded]

Budget proposals that could change the fortunes of real estate companies

The real estate industry was hoping for sops in the Budget. However, those hopes did not fructify with few references to the industry. There are only two changes that directly affected the real estate industry. The net effect could be negative in the short run, while being healthy in the long run.

First, there are tax clarifications for Real Estate Investment Trusts (REIT), which should considerably ease the prospects for raising money and listing these instruments. REITs are popular in many places. These are structured like mutual funds, except that they are focussed purely on real estate assets.

Some REITs look for capital gains by buying, developing and selling land. Other REITs generate rental income by building and leasing out assets. The sponsors (meaning the institutions or individuals floating the scheme) of REITs split them into units, which are sold to the general public. The REIT may then be listed and traded like a mutual fund or ETF. This allows individual and households to take exposure to real estate without the need to make a large, lumpy investment.

Therefore, REITs are an alternate financing route for the real estate industry, which can directly tap individual and household savings. That leads to lower costs for realtors, who must otherwise raise money at extremely high interest rates.

The Budget clarifies a couple of key points pertaining to tax treatment. There is pass-through status for rental income, which means that a REIT can pass on rental income to the unit-holders, who will be individually liable for the taxes they pay. This pass-through will make it easier for REITs to take over, or develop commercial property, and lease it out.

The sponsors of a REIT have to pay capital gains only at the point of time when they sell units at listing, much as in the case of a normal Initial Public Offer for shares.

Overseas institutions are quite used to REITs and they would look at both the REITs with income streams, and also at the potential for capital gains. Obviously, the rental yield is comparable to available interest rates and it can be assessed for risk, etc. The capital gains REITs would be riskier plays but they would capture rising land prices.

The second measure that directly impacts the real estate industry is the stipulation that real estate transactions cannot involve cash payments of above Rs 20,000. This is part of a whole series of new measures designed to curb the use of black money. There are multiple other measures in the Budget, which would also drive "black" out of circulation.

Unfortunately, real estate is the industry most obviously and directly fuelled by black money. In most parts of India, the "black" or cash component of a land deal amounts to a minimum of 25-30 per cent of the total price. Often it is as high as 50 per cent.

Cynically speaking, given endemic corruption across the real estate industry and in land registry departments, it is unlikely that the Rs 20,000 limit on cash will be enforceable in the long run. But this rule may mean that the cash component of most real estate deals will drop, at least until people find ways to safely get around the limits. On a short-term basis, this could mean the industry sees somewhat fewer transactions and probably, a moderating of prices.

The reaction to these developments have been negative so far. The CNX Realty Index has seen losses through the last month and also net losses post-Budget. The next positive signals could be rate cuts from the Reserve Bank of India, which fuel demand for mortgages, or a generalised pickup in activity.Source:http://www.business-standard.com/

RBI advises PSBs feeling capital constraints to focus on less risky assets

After the government applied efficiency norms to infuse equity in public sector banks (PSBs), the Reserve Bank of India has advised PSBs feeling capital constraints to restructure businesses to have assets which need less capital.

“They (PSBs) have to figure out ways of raising capital from the market or any other methods, including additional tier-I and tier-II instruments. There is also (an) element of balance sheet re-sizing or reallocation of risk assets in such a way that within available capital they can still grow. They have to find out strategies for doing it,” RBI deputy governor R Gandhi said on the sidelines of an event organised by credit information bureau CIBIL.

Responding to queries on the government's decision, Gandhi said there are a variety of strategies that PSBs can follow to handle the required capital. So it is not the case that only enhanced or additional capital alone is the solution. Banks can rejig their portfolios in such a way that they have less risky assets that need less capital, he said.

Of the Rs 11,200 crore provided for investing in equity of PSBs in 2015-16, the government has decided to infuse Rs 6,990 crore in nine state-owned banks based on efficiency parameters — return on equity and return on assets. The Budget for 2015-16 has a lower provision of Rs 7,940 crore. Gandhi said banks will have to find other methods of raising capital and not just rely on the government.

He also had a message for those who had failed to make it to the list. Making capital available for efficient banks is one aspect of giving an incentive for better performance. Those who didn't make the cut would have to pull up their socks and become profitable, he said.

Asked if they could have been given a transitory period, Gandhi said, these banks have more than required capital. Going forward, based on their own business expansion plans, they should also take care of the balance sheet strength, he said.

On consolidation of PSBs, Gandhi said it is for the respective bank board managements to decide. Based on their assessment of the situation they should take a decision.Source:http://www.business-standard.com/

RBI extends all-in-cost ceiling for external commercial borrowings till March end

The Reserve Bank today extended the all-in-cost ceiling for external commercial borrowings to March-end, 2015.

"On a review, it has been decided that the all-in-cost ceiling...will continue to be applicable till March 31, 2015 and is subject to review thereafter," the Reserve Bank of India (RBI) said in a notification.

The all-in-cost ceiling for ECBs with average maturity of three and up to five years is at 6 months London interbank offer rate (Libor) plus 350 basis points (3.5 per cent).

For ECB of more than five years, it is 6 months Libor plus 500 basis points (5 per cent).

The all-in-cost ceiling limit had expired in December. The ceilings have been extended time to time since 2011 considering the global financial markets situation.

The all-in cost involves every cost in a financial transaction. It can be used to explain the total fees and interest included in a financial transaction such as a loan.

By comparing all-in costs, investors and borrowers can more easily compare net gain potential.

Also, in a separate notification, RBI extended the all-in-cost ceiling regarding trade credits for imports into India till March 31, 2015.

The ceilings for trade credits for imports for a maturity period from one year to five year is 6 months Libor plus 350 basis points.Source:http://articles.economictimes.indiatimes.com/

Scrap export duty, reiterate ore exporters

The Goa mineral ore exporters association (GMOEA) on Tuesday reiterated its demand to scrap export duty on iron ore.

Disappointed with no relief in the Union budget, ore exporters felt the industry needs an impetus to gain momentum.

"Withdrawal of duty would make exports from Goa viable," said association's executive director S Sridhar, adding, "Both -- Centre and state stand to gain if it is abolished for low grade ores or even reduced to a nominal rate 'across the board' for all grades.''

"The state will be able to successfully auction its ore stocks and generate the much-needed revenue. Further, it will generate avenues for stakeholders like truck owners and barge owners. It will be a win-win situation for all," Sridhar added.

GMOEA said the export duty was initially introduced as a measure to conserve high grade ores for domestic consumption. Later, during the China boom, it was used as an avenue for revenue generation.

"In the current scenario where the prices of low grade ores have collapsed drastically, the export duty has not generated any revenue either for the state or the central government," Sridhar added.Source:http://timesofindia.indiatimes.com/

Gold deposit scheme, REITs can monetise 1% of GDP

The proposed gold deposit scheme and REITs can release as much as one percent of GDP for productive investments, says a report. "Savings in non-productive physical assets, primarily property, gold is 17 percent of GDP, a well-run gold monetisation and REITs scheme can recycle one percent of GDP, which can revive the savings rate in the financial and help fund investments," JM Financial said in a report. REITs have market size potential of USD 50 billion with a return profile of 13-14 percent pre-tax, it added. The report also said gold monetisation scheme can ease pressure on imports. The country has an estimated 20,000 tonnes of gold stock. The gold monetisation scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. Noting that as much as 30 percent of the physical stock of gold can come into the market and get monetised over the next three years, the report said even if only 5 percent of the total gold stock comes under the scheme over the next three years it will circulate gold to the tune of USD 15 billion or Rs 93,000 crore per annum. This is roughly half of the annual gold demand or 0.8 percent of GDP. It also said allowing banks and other dealers to monetise the metal will open up an avenue to transform the physical asset in a financial asset and free up resources. As per the report, REITs have market size potential of USD 50 billion with a return profile of 13-14 percent pre-tax. The provision in the Budget of exemption of sponsor units from capital gains puts REITs at parity with IPO listing. While some uncertainties remain about the direct holding structure, the report cited transaction costs and time taken for acquisition makes the direct holding structure at a disadvantage vs other structures. But it noted that this can pave the way for REIT formation enabling companies to recycle capital in high RoE residential space or reduce debt. In a report, the SBI's research wing has said the gold deposit scheme can fetch Rs 1 lakh crore. Describing the gold deposit scheme as a "game changer" SBI research said, "The proposed gold deposit scheme on a conservative basis can bring in the monetary value at least Rs one trillion". In Budget offers multiple measures to monetise gold, including the gold monetisation scheme, a sovereign gold bond and develop an Indian gold coin. Giving a fillip to investments in realty and infra sectors, it rationalises capital gain tax regime by providing partial pass through to them for the sponsors of newly-created business structures REITs and INViTs. Read more at: http://www.moneycontrol.com

Budget has a strong focus on innovation and R&D

The Union Budget for 2015-16 is a far-sighted and inclusive budget that reflects positive messages and incentives that will carry forward the government’s momentum in growing India’s economy by raising its international profile as being more investment-friendly, business-friendly, fairer and transparent. The finance minister’s budgetary announcements have evoked a sense of optimism among the citizens and the industry along with the hope that we can look forward to lower inflation, a stronger rupee and a GDP of 7.4% by the end of 2015. The growth rate for the economy in 2015-2016 is expected to be around 8-8.5% with double-digit growth expected soon.
Besides reforms to taxation schemes for the corporate sector, education and skill building, this budget called out for greater investment and revitalisation of the PPP model. There is a strong and welcome focus on building and boosting infrastructure, driving manufacturing through the Prime Minister’s visionary ‘Make in India’ policy, and support of R&D and innovation through innovative schemes.
The finance minister showed a roadmap on the expectations from the corporate and IT sectors for simplification of tax regimes. We welcome the forward-thinking changes in taxation starting with the reduction in corporate tax from 30% to 25% over the next four years and the rationalisation of custom duty.
Digital India, Broadband & Smart Cities
The commitment made by the government towards infrastructure was evident in the increase in infrastructure by R70,000 crore. The budget focused on innovation, R&D and scientific research and allotted R150 crore towards these areas. The year 2015-16 will see the speeding up of National Optical Fibre Network (NOFN) reimbursement to states and an additional fund of R1,200 crore was allotted towards the Delhi-Mumbai Infrastructure Corridor (DMIC). These are important milestones for the realisation of the Prime Minister’s ‘Digital India’ vision.
Dispute resolution on contracts has been the bane of public private partnership. Industry welcomes the focus on procurement law, the proposal to introduce a Public Contracts (resolution of disputes) Bill to streamline institutional arrangement for resolution of disputes.
Cisco remains committed to be India’s leading enabler of ICT, broadband and smart cities through its range of innovative, scalable, high-value technology offerings, solutions and services. We look forward to playing the role of partner and providing impetus to drive ‘Digital India’.
2015-16 will see the start of transformation of Visakhapatnam as the first of India’s 100 Smart Cities. Cisco is playing a leading role in enabling Smart Cities in India including our work in providing ICT master planning to 4 cities in DMIC.
Start-ups
The allotment of R1,000 crore for the development and promotion of start-ups, particularly in the IT and technology sectors, is encouraging for start-ups to develop IP and innovate patentable technologies. This budget shows the government’s stand on supporting innovation and technology start-up growth as a driver of employment and growth opportunities in India. Schemes like Self-Employed Talent Utilisation (SETU) will go a long way to encourage young innovative entrepreneurs in the technology start-up sector. Cisco applauds start-up growth initiatives that turn youth from job seekers to job creators thus transforming India into an innovation-driven nation.
In India, the innovation and start-up environment has grown tremendously in the last few years and we believe we can play a role in triggering the start-up growth in the country through our initiatives such as the India Innovation Fund, which has an allocation of $40 million for start-up innovations.
Skills Development and Education
The financial commitment to employability and the creation of jobs was clear with the announcement of initiatives such as the National Skills Mission (for rural youth) and the establishment of National Skills Council. Strongly emphasising on upgrading and developing people’s skills through vocational education and training, the government’s National Policy on Skill Development has set a target for providing skills to 500 million people by 2022.

Union Budget 2015: Unchanged steel import duty unfortunate

A sincere attempt was made to meet the expectation of delivering a Budget for 2015-16 with growth orientation blended with fiscal prudence. It is comforting to see the print of fiscal deficit of 4.1% and 3.9% for 2014-15 and 2015-16, respectively, with a clear road map to achieve 3% over 3 years. There are several laudable initiatives: Implementation of GST by April 2016, intention to reduce corporate taxes to 25% over 4 years, deferral of GAAR by 2 years with prospective application, abolition of wealth tax, cutting subsidy leakages, measures to curb black money, etc. It will pave the way for good governance and ease of doing business. The government deserves full credit in containing fiscal deficit except the minor slip in 2015-16.
The government emphasised the importance of reviving manufacturing via ‘Make in India’. As the core sectors of economy are currently beset with challenges,  participation by the private sector in fresh investments is estimated to take some time. It is expected that the government will increase the outlays in the Budget on short gestation infrastructure projects. As an incremental amount of R1,86,000 crore is to be shared with the states, out of total additional tax revenues of R1,98,000 crore, the central government’s ability to commit large outlays on the Plan expenditure is constrained.
Private sector’s participation through an appropriate PPP model is the need of the hour to create a world-class, viable and sustainable infrastructure. The Budget stated that the PPP mode of will be revisited and revitalised. The government should expeditiously take up to correct the imbalance in sharing of risks in the current PPP infrastructure model. The execution of the plug-and-play model should not be delayed and should be extended to the stalled projects.