Tuesday, February 4, 2014

[aaykarbhavan] JUdgement and Information

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CA. VMV SUBBA RAO PFA-Service Tax - Transportation of Milk Products exempted - not Milk from 1.3.2013 - Not Really! -- Best Wishes CA. V.M.V.SUBBA RAO Chartered Accountant Door No.24-2-1885, I Floor, Flat No.5, Siddivi
To Me
Jan 29 at 11:31 PM

PFA-Service Tax - Transportation of Milk Products exempted - not Milk from 1.3.2013 - Not Really!


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Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
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Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
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Tribunal cannot adjudicate upon jurisdiction when issue about jurisdiction not been raised before Assessing Authority

Posted In Income Tax Case Laws | Judiciary | No Comments »
CIT v. All India Children Care & Educational Development Society (Allahabad High Court), IT APPEAL NO. 89 OF 2003, Date of Order : 30.05.2013
Issue-Whether the question of jurisdiction of the Assessing Authority not raised before,  could be raised for the first time in second appeal before the Tribunal?
Respondent in the present case submits that there is a illegal assumption of jurisdiction as the officer who made assessment had no jurisdiction at all to make the assessment. Opportunity was given by the Tribunal to the department to produce the transfer order transferring the case from office of Income Tax Officer, Azamgarh to Joint Commissioner of Income Tax (Asstt.), Varanasi but no such order was produced. In any case, no opportunity of hearing before passing of the transfer order was given.
The answer to the question posed by the respondent is pure and simple. The scheme of the Act shows that no appeal in regard to the place of assessment is contemplated under the Act. Under Section 124, a question as to the place of assessment, when it arises is determined by the Commissioner, by the Commissioners if more than one Commissioner is involved and then by the Board.
The contention that no opportunity of hearing was given before transferring raised for the first time before the Tribunal could not be substantiated by producing any evidence. The assessee was the appellant before the Tribunal and it was for him to establish that before transferring the cases, no opportunity of hearing was given and in which he failed. Mere raising the argument which requires determination of fact in absence of any supporting material is liable to be ignored.
In view of the above, we answer all the five substantial questions of law in favour of the department and against the assessee by holding that the question of jurisdiction of the Assessing Authority in view of Section 124 of the Act could not have been raised by the assessee before the Tribunal and the Tribunal is not the competent authority to adjudicate upon when it was not raised in terms of Section 124 before the Assessing Authority.

Download Full Text of the Judgment 

IT: Approval of Commissioner to suggestions given by audit party could not be taken as substantial compliance under section 151 for reopening of assessment after expiry of four years from end of relevant assessment year
■■■
[2013] 35 taxmann.com 338 (Gujarat)
HIGH COURT OF GUJARAT
Adani Ports And Special Economic Zone Ltd.
v.
Deputy Commissioner of Income-tax*
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
SPECIAL CIVIL APPLICATION NO. 17184 OF 2012
MAY  7, 2013 
Section 151, read with section 148, of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice [Conditions precedent] - Assessment year 2005-06 - Whether proviso to section 151(1) requires that no notice for reopening of assessment shall be issued after expiry of four years from end of relevant assessment year, unless Chief Commissioner or Commissioner is satisfied on reasons recorded by Assessing Officer, that it is a fit case for issue of such notice - Held, yes - Certain aspects of matter in case of assessee were brought to notice by audit party and suggestions with respect to remedial measures were also made by them - Whether, where Commissioner approved suggestions made by audit party, such approval could not be seen as substantial compliance of section 151(1) where notice for reopening was issued after period of four years from end of relevant assessment year - Held, yes [Paras 9,10 & 11] [In favour of assessee]
FACTS
 
■  After completion of scrutiny assessment, notice was issued by the Assessing Officer for reopening of assessment beyond the period of four years from the end of relevant assessment year on ground that excess depreciation was allowed to the assessee in the relevant assessment year.
■  The assessee filed the writ petition against the notice and contended that since the Assessing Officer had not obtained approval from the Chief Commissioner or the Commissioner before issuing of such notice, same was invalid. Also, notice for reopening was issued at the instance of the Audit Party.
■  On the other hand, the revenue contended that the suggestions of the audit party with respect to the remedial measure were perused and approved by the Commissioner. Therefore, such action of the Commissioner should be taken as substantial compliance of the requirement of section 151.
HELD
 
■  Sub-section (1) of Section 151; as can be seen, requires that in a case where the assessment under section 143(3) or section 147 has been made for a particular assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issuance of such notice. Proviso to sub-section (1) requires that no such notice, after the expiry of period of four years from the end of relevant assessment year, shall be issued unless the Chief Commissioner or the Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. [Para 8]
■  The present being a case of issuance of notice after four years from the end of relevant assessment year, and therefore, proviso to sub-section (1) of Section 151 would apply. In such a case, irrespective of the level of Assessing Officer issuing notice for reopening a pre condition of the Chief Commissioner or the Commissioner being satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issuance of such notice must be satisfied. This additional safe guard not only involves the application of mind on the part of the Chief Commissioner or the Commissioner but his satisfaction, which would be based on the reasons recorded by the Assessing Officer, and such satisfaction should be that it is a fit case for issuance of the notice. [Para 9]
■  Admittedly, in the present case, these requirements have not been fulfilled. What the Revenue however argues is that when the Commissioner had perused the suggestions of the audit party, the same should be seen as substantial compliance of such a requirement. [Para 10]
■  Such a contention cannot be accepted. Sub-section (1) of Section 151 is an important procedural safeguard against arbitrary exercise of power of issuing a notice for reopening of assessment previously framed after scrutiny. Proviso to sub-section (1) of Section 151 is applicable, where such notice is issued after expiry of four years from the end of relevant assessment year. In such a case, the requirement of satisfaction to be recorded is that of the Chief Commissioner or Commissioner. Such requirement cannot be seen as technical. Compliance of such requirement is therefore, necessary before issuance of notice under section 148. [Para 11]
■  Under such circumstances, impugned notice is quashed. [Para 12]
CASES REFERRED TO
 
B.S. Soparkar for the Petitioner. Mrs. Mauna M. Bhatt for the Respondent.
ORDER
 
Akil Kureshi, J. - Heard learned counsel for the parties for final disposal of the petition.
Petitioner has challenged a notice dated 21st March 2012 [Annexure "A" to the petition] issued by the respondent-Assessing Officer under Section 148 of the Income-tax Act, 1961 ["Act" for short]. The petition arises in the following background.
2. The petitioner is a company registered under the Companies Act, 1956. For the Assessment Year 2005-06, the petitioner had filed its return of income on 30th October 2005 declaring its total income at "NIL". Such return was accompanied by documents, such as Tax Audit report under section 44AB of the Act, etc.
Such return was taken by the Assessing Officer in scrutiny. He framed scrutiny assessment under section 143 (3) of the Act on 2nd April 2007. It is this scrutiny assessment which the respondent desires to reopen beyond the period of four years from the end of relevant assessment year.
3. At the request of the petition, respondent supplied the reasons recorded by him for issuing such a notice. Such reasons read as under :-
"It is also noticed that during the previous year the assessee company has purchased one Ship/Tug called "MV Dolphin" valued at Rs. 20,66,76,400/- and Rs. 5,16,69,100/- [@ 25% on Rs. 206676400/-]. On verification of the invoice bill and Customs Bill of entry no. 468 dated 11-11-2004. It has revealed that bill of entry was presented to Customs authority on 11-11-2004 for clearance of Tug and the relevant customs duty was debited in the DFCLC Lie No. 0810042703 dated 12.10.2004. This clearly indicates that the assessee company got custody to Tug in November 2004 and thereafter, it was put to use for business. Thus, the assessee was eligible to get 50% depreciation [12.5%] on Tug which was cleared from Customs authority in November 2004. This has resulted in excess allowance of depreciation of Rs. 25834550/- [50% of 51669100/-]."
4. Upon receipt of the reasons, the petitioner under a communication dated 8th November 2012, raised detailed objections before the Assessing Officer. Such objections were, however, dismissed by an order dated 19th November 2012. Hence, this petition.
5. Learned counsel for the petitioner raised following contentions :
(i)  that there was no failure on the part of the assessee to declare truly and fully all material facts. The notice for reopening issued beyond the period of four years from the end of the relevant assessment year was therefore without jurisdiction;
(ii)  The Assessing Officer was acting under the directions of the audit party. The notice for reopening was issued at the instance of audit party, and therefore also, the same was bad in law;
(iii)  He lastly contended that in terms of proviso to sub-section (1) of Section 151 of the Act, the Assessing Officer had not obtained approval from the Chief Commissioner or Commissioner before issuing the notice, and therefore also, notice was invalid.
6. On the other hand, learned counsel Ms. Mauna Bhatt appearing for the Department opposed the petition and raid the following contentions :
(i)  There was no true and full disclosure on the part of the petitioner with respect to purchase of the Ship/Tug called "M.V Dolphin" particularly in context of the petitioner's claim for full depreciation of Rs. 5,16,69,100/- @ 25% of the total value.
(ii)  She pointed out that from the Invoice bills from the Customs Department, it was revealed that the bill of entry was presented on 11th November 2004 for the clearance of Tug and the relevant customs duty was debited on 12th October 2004, which would indicate that the petitioner got the custody of Tug only in the month of November 2004 and that therefore, full depreciation @ 25% could not have been claimed during the year under consideration. She submitted that these facts were not emerging from the return or other documents produced during the course of assessment. The Assessing Officer having independently examined the issue was convinced that the assessment was required to be reopened. Merely because certain aspects of the matters were brought to his notice by the audit party would not per se mean that he was acting under the directions of the audit party.
(iii)  The suggestions of the audit party with respect to the remedial measures that could be taken, was perused and approved by the Commissioner. It was thereupon that the Assessing Officer, after recording his reasons, issued a notice for reopening. She, therefore, submitted that the foundational grounds for issuing the notice for reopening being common, the action of the Commissioner in approving the proposal for reopening the assessment should be seen as substantial compliance of the requirement of Section 151 (1) of the Act.
7. In the present case, we are inclined to decide only the question of necessary approval to be obtained for issuance of notice. Section 151 (1) of the Act pertains to sanction for issuance of notice and reads as under :-
"151. Sanction for issue of notice - (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice.
Provided that after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of relevant assessment year, under the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice."
8. Sub-section (1) of Section 151; as can be seen, requires that in a case where the assessment under section 143 (3) or section 147 has been made for a particular assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issuance of such notice. Proviso to sub-section (1) requires that no such notice, after the expiry of period of four years from the end of relevant assessment year, shall be issued unless the Chief Commissioner or the Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.
9. The present being a case of issuance of notice after four years from the end of relevant assessment year, and therefore, proviso to sub-section (1) of Section 151 would apply. In such a case, irrespective of the level of Assessing Officer issuing notice for reopening, a pre-condition of the Chief Commissioner or the Commissioner being satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issuance of such notice must be satisfied. This additional safe-guard not only involves the application of mind on the part of the Chief Commissioner or the Commissioner but his satisfaction, which would be based on the reasons recorded by the Assessing Officer, and such satisfaction should be that it is a fit case for issuance of the notice.
10. Admittedly, in the present case, these requirements have not been fulfilled. What the Revenue however argues is that when the Commissioner had perused the suggestions of the audit party, the same should be seen as substantial compliance of such a requirement.
11. We are afraid, such a contention cannot be accepted. Sub-section (1) of Section 151 of the Act is an important procedural safeguard against arbitrary exercise of power of issuing a notice for reopening of assessment previously framed after scrutiny. Proviso to sub-section (1) of Section 151 is applicable, where such notice is issued after expiry of four years from the end of relevant assessment year. In such a case, the requirement of satisfaction to be recorded is that of the Chief Commissioner or Commissioner. Such requirement cannot be seen as technical. Compliance of such requirement is therefore, necessary before issuance of notice under section 148 of the Act. Delhi High Court in case of CIT v. SPL's Sidhartha Ltd. [2012] 345 ITR 223/204 Taxman 115 (Mag.) 17 taxmann.com 138 (Delhi) held and observed as under :-
"Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now well-settled. In Sheo Narain Jaiswal v. Income-tax Officer [1989] 176 ITR 352 (Patna), it was held :
"Where the Assessing Officer does not himself exercise his jurisdiction under section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non-satisfaction of the condition precedent."
12. Under the circumstances, only on this ground, impugned notice dated 21st March 2012 is quashed. We express no opinion on the other two contentions of the petitioner.
Petition stands disposed of accordingly.
--
Regards,

Pawan Singla , LLB
M. No. 9825829075

Clarification regarding availment of CENVAT credit of tax dues paid under VCES, 2013

Posted In Service Tax | Articles | 2 Comments »
A clarification was sought as to whether the first installment of tax dues paid (Minimum 50% of tax dues) under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES or the Scheme) would be available as Cenvat Credit immediately after payment or only after payment of tax dues in full and receipt of acknowledgement of discharge certificate in form VCES-3.
Background:
The Stated question was clarified in the past under Question no. 22 in FAQs on VCES issued by CBEC as under:
(a) Whether the tax dues amount paid under VCES would be eligible as CENVAT credit to the recipient of service under a supplementary invoice?
(b) Whether CENVAT credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism?
Clarification: Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013 ("the VCES Rules"), prescribes that CENVAT credit cannot be utilized for payment of tax dues under the Scheme. Except this condition, all issues relating to admissibility of CENVAT credit are to be determined in terms of the provisions of the CENVAT Credit Rules.
As regards admissibility of CENVAT credit in situations covered under part (a) and (b), attention is invited to Rule 9(1)(bb) and 9(1)(e) respectively of the CENVAT Credit Rules.
Now, another clarification issued with rider:
The CBEC has issued Circular No. 176/2/2014-ST dated January 20, 2014 ("the Circular") clarifying that:
  • Cenvat credit shall only be available after payment of entire service tax dues and obtaining discharge certificate in form VCES 3 since the declaration made under the Scheme becomes conclusive only on issuance of acknowledgement of discharge under Section 107(7) of the Finance Act, 2013.
  • Further, the Circular has also directed the Chief Commissioners to issue Form VCES 3 within stipulated period of seven working days from the date of furnishing the details of payment of tax dues along with interest (if any) by the declarant as provided under Rule 7 of the VCES Rules.
——————————–
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Mobile: +91 9810604563
E-mail: bimaljain@hotmail.com

Importance of Economic Literacy for Finance Professionals

Posted In Finance | Articles | 8 Comments »
Surbhi Singhal
Finance and economics share an inseparable bond since ages. Yet we finance professionals, or to-be finance professionals of different fields such as CA, CS, CMA commit the sin of keeping ourselves separate from economics, yet claiming to be true holders of ultimate knowledge in the field of finance. By means of this article, I intend to convince the readers of the importance that economics holds in our lives as citizens, employees, service providers, consumers, investors, and more importantly as finance professionals!
The basic principles of economics form the core of some of the important topics that we deal in day in and day out as a part of our professional lives or as a part of the curriculum as students. Let me give you some examples. The foreign exchange rates of different currencies are determined by the forces of demand and supply and occasional intervention by the Central Bank. Demand and supply is a detailed economic concept and so is the working of a central bank. Similarly, the various types of taxes that are imposed, or amendments that are made to the same or even the changes in tax rates that are brought about is a result of the country's fiscal policy. If we understand the country's fiscal deficit and related topics, perhaps we can better comprehend the logic behind such changes. The rise or fall in interest rates by the RBI in its monetary policy review is an effort to balance the level of inflation and growth of the economy by controlling the money supply. Next time we help a client raise loan from a bank, we must understand the larger context in which the bank operates, which might help us negotiate a better deal. As students, we learn the concept of opportunity cost in Management Accounting. The same is again also a part of economics. There are numerous examples of such connection between economics and finance. To know the larger picture of the context in which we stand as service providers, it becomes essential to hold economic literacy. Once a finance professional's economic knowledge is sound, he will be able to deal with his clients with much greater confidence and zeal!
Professionals such as Chartered Accountants are looked up to as complete business solution providers. And we all know well that the success or failure of a business depends largely on the general economic prospects of the country. The economy of the country has so much power so as to even endanger the solvency of a running business. The general understanding of the economy of our nation will help us know which business are set to prosper in the long run and which ones carry a huge risk from day one. Not only this, it will give us better ideas of running business which can be used to provide consultancy to various business owners.
Further, the understanding of economics will place us in the larger context of the country and the world and tell us what place we hold in the business around the world and also what role we are supposed to play in development of the same. Needless to say we can better manage our own investments and finances as well!
Now, even more importantly, not only as finance people, but also as citizens of the country, we carry a right as well as a duty to be well-versed with the strengths and weaknesses of our economy, so as to be able to contribute to the same by becoming informed voters.
Having got the importance of economic literacy, now let me address the question of how to accomplish this task. Before that, I would like to clarify that though economics seems tough but it isn't so. Further, we are in an added advantage, belonging to the world of finance and carrying an understanding of the same.
We must endeavour to first build an understanding of the basic concepts which form a part of everyday news and analysis so as to keep abreast of ongoing changes in the economy. This can be done by means of engaging in the economic news and getting hold of new terms by use of the internet where various topics of relevance can be found explained in really simple language and by the use of visuals and videos. Websites like www.investopedia.com or even www.youtube.com can come in handy. Next, we should start regular reading on the topics we begin to understand so as to give ourselves a practical view of the same. One must also refer to financial and economic newspapers and channels such as The Economic Times and CNBC TV18. Annual budgets must be studied in detail. Once we step into this field, we will soon gather up more and more ideas on how to gain knowledge. More importantly, we will develop a habit of looking for economic news and knowledge as a part of the regular routine. Such knowledge must then be developed and nourished over time.
From today itself, as I decide to brush up my knowledge in economics, I hope you would too!
Note: Comments and views are welcome.

Transfer Pricing Law in India

Tarun Gulati
Earlier, India was isolated from the world markets and it went global only in 1991 with the change in policies for Foreign Trade, foreign direct investments, etc. This move towards globalization brought in new requirement for changes in the taxation and other laws as the MNC's started investing in India and acquisition of business houses was getting inevitable. There were many transactions taking place between the same group companies and the transfer price between them started playing a major role in impacting the profits and losses of Indian companies. Amendment in taxation laws for such transactions then became the need of hour so that the tax planning can be kept under check and the Indian economy is not made to suffer and especially for the tax evasions if any on transactions between the companies under same banner. Indian Tax Authorities than first introduced the Transfer Pricing Regulations (TPR) through the Finance Act, 2001 and made it effective from the Financial year ending March 2002. These provisions were set to be governed by the Income Tax Act, 1961 and were based on the Transfer Pricing guidelines of Organization for Economic Co-Operation and Development.
Transfer pricing Laws have been enumerated under Sections 92 to 92F of the Indian Income Tax Act and cover intra-group cross-border transactions. Rules and regulations prescribe that income arising from International Transactions or Specified Domestic Transactions between Associated Enterprises (AE), should be computed having regard to the arm's-length price.
International transaction means a transaction between two (or more) AE involving the sale, purchase or lease of tangible or intangible property or provision of services or cost-sharing agreements, lending/ borrowing of money or any other transaction having a bearing on the profits, income, losses or assets of such enterprises.
The relationship of AE is defined to cover direct/ indirect participation in the management, control or capital of an enterprise by another enterprise. It also covers situations in which the same person participates in the management, control or capital of both the enterprises.
The term 'arm's-length price' is defined to mean a price that is applied or is proposed to be applied to transactions between persons other than Associated Enterprises in uncontrolled conditions. The following methods prescribed as per the Act for the determination of the arm's-length price:
  • Comparable uncontrolled price (CUP) method.
  • Resale price method (RPM).
  • Cost plus method (CPM).
  • Profit split method (PSM).
  • Transactional net margin method (TNMM)
  • Such other methods as may be prescribed
It has been notified that the 'other method' for determination of the arm's-length price in relation to an international transaction shall be any method which takes into account the price which has been charged for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. No particular method has been accorded priority and the most appropriate method for the transaction would need to be determined having regard to the nature  and class of transaction or associated persons and functions performed by such persons, as well as other relevant factors.
Until Financial Year 2011-12, transfer pricing regulations were not applicable to domestic transactions. Finance Act 2012 has extended the application of transfer pricing regulations to domestic transactions christened as 'Specified Domestic Transactions', being the following transactions with certain related domestic parties, provided the aggregate value of such transactions exceeds INR 5 crore :
  • Any expenditure with respect to which deduction is claimed while computing profits and gains of business or profession.
  • Any transaction related to businesses eligible for profit-linked tax incentives, for example, infrastructure facilities (Section 80-IA) and SEZ units (section 10AA)
  • Any other transactions as may be specified
This amendment will be applicable for FY 2012-13 and subsequent years.
Taxpayers are required to maintain a set of information/ documents relating to International Transactions undertaken with AEs. Rule prescribes detailed information and documentation that has to be maintained by the taxpayer. Such requirements can broadly be divided into two parts.
The first part includes information on ownership structure of the taxpayer, group profile, business overview of the taxpayer and AEs, prescribed details (nature, terms, quantity, value, etc.) of international transactions. The rule also requires the taxpayer to document a comprehensive transfer pricing study.
The second part of the rule requires that adequate documentation be maintained that substantiates the information/ analysis/ studies documented under the first part of the rule and it also contains a recommended list of such supporting documents, including government publications, reports, studies, technical publications/ market research studies undertaken by reputable institutions, price publications, relevant agreements, contracts, and correspondence.
Taxpayers having aggregate international transactions below the prescribed threshold of INR 1 crore and Specified Domestic Transactions below the threshold of INR 5 crore are relieved from maintaining the prescribed documentation. However, it is imperative that the documentation maintained should be adequate to substantiate the arm's-length price of the international transactions or specified domestic transactions.
Companies to whom transfer pricing regulations are applicable are currently required to file their tax returns on or before 30 November following the close of the relevant tax year. The prescribed documents must be maintained for a period of nine years from the end of the relevant tax year, and must be updated annually on an ongoing basis.
It is imperative to obtain an Independent Accountant's Report in respect of all international transactions between AEs and the same has to be submitted by the due date of the tax return filing (i.e. on or before 30 November). The form of the report has been prescribed and it requires the accountant to give an opinion on the proper maintenance of prescribed documents and information by the taxpayer.

Issue of Discharge Certificate under VCES and availment of CENVAT credit – Clarification

Circular No. 176/2/2014 – ST, dated the 20th January, 2014
Subject: Clarification regarding issue of Discharge Certificate under VCES and availment of CENVAT credit – regarding.
         Trade and Industry has sought clarification as to whether the first installment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as Cenvat Credit immediately after payment or Cenvat credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.
2.       The issue has been examined. As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.
3.     It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to Question no. 22 on FAQs issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.
4.      Chief Commissioners are also advised that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.
F. No. B1/19/2013-TRU (Pt)
Yours sincerely,
(S. Jayaprahasam)
Technical Officer, TRU

Jail Term for two engineers of Income Tax Valuation Department

THREE YEARS RIGOROUS IMPRISONMENT WITH FINE OF Rs. 50,000/- EACH TO THEN EXECUTIVE ENGINEER AND THEN ASSISTANT ENGINEER BOTH OF VALUATION DEPARTMENT OF INCOME TAX IN A BRIBERY CASE
The Special Judge for CBI cases, Thiruvananthapuram(Kerala) has convicted Sh. R. Kennadi, then Executive Engineer and Sh. P.V. Suresh Kumar, then Assistant Engineer(both of CPWD) working in the Valuation Department of Income Tax, Trivandrum and sentenced them to undergo three years Rigorous Imprisonment with fine of Rs. 50,000/- each in a bribery case.
CBI had registered a case against Shri R.V. Suresh Kumar, Assistant Engineer, CPWD & Shri R Kennadi, Executive Engineer, CPWD who were working as Assistant Engineer (Valuation) and Executive Engineer (Valuation) in Valuation Department of Income Tax, Trivandrum(Kerala) during the year 2008 on the allegations that while doing the valuation of the Complainant's residence at Jagathy, Trivandrum, they demanded bribe of Rs.One Lakh from him for not showing exorbitant rates in the valuation reports. The complainant preferred a complaint to CBI. CBI laid a trap and both the accused were caught red-handed while demanding & accepting the bribe from the complainant on 29.09.2008. The accused persons were arrested.
            After completion of the investigation, CBI filed charge sheet against both the accused. The Special Judge for CBI cases, Thiruvananthapuram found both the accused guilty of all the offences with which they were charge sheeted and convicted them.
CBI Press Release
New Delhi , 20.01.2014

FII Position Limits in Exchange Traded Interest Rate Futures (IRF)

Posted In SEBI | Notifications | No Comments »
CIRCULAR No. CIR/MRD/DRMNP/2/2014 January 20, 2014
Sub: FII Position Limits in Exchange Traded Interest Rate Futures (IRF)
1. SEBI in consultation with RBI, vide circular CIR/MRD/DRMNP/35/2013 dated December 5, 2013 prescribed the framework for Stock Exchanges to launch cash settled Interest Rate Futures on 10-year G-sec.
2. In the said circular, the following position limits were prescribed for FIIs:
"The gross open positions of the FII across all contracts shall not exceed 10% of the  total open interest or INR 600 crores, whichever is higher.
Additional restriction: The total gross short (sold) position of each FII in IRF shall not exceed its long position in the government securities and in Interest Rate Futures, at any point in time. The total gross long (bought) position in cash and IRF markets taken together for all FIIs shall not exceed the aggregate permissible limit for investment in government securities for FIIs.
FIIs shall ensure compliance with the above limits. Stringent action shall be taken against FII in case of violation of the limits."
3. SEBI vide circulars dated April 1, 2013 and July 18, 2012 has put in place mechanism for monitoring and enforcing limits of FIIs in Government Securities and corporate bonds by directing depositories to disseminate information regarding the total FII investment values in Government and corporate bonds. It has been decided in consultation with RBI that this monitoring mechanism shall also incorporate monitoring of gross long positions of FIIs in IRF as mentioned in Paragraph '2′ above. The mechanism shall be as follows:
a. Stock exchanges shall provide information regarding aggregate gross long position in IRF of all FIIs taken together at end of the day to the depositories NSDL and CDSL and shall also publish the same on their website.
b. NSDL and CDSL shall aggregate the gross long position of FIIs in IRF in each exchange and add it with investment of FIIs in Government Debt for monitoring adherence to the regulatory limit prescribed in paragraph 13 (d) of the SEBI Circular on IRF dated Dec 5, 2013 / paragraph 4.2 of the RBI directions on IRF dated Dec 5, 2013 and shall jointly publish/disseminate the same on their website, on daily basis.
c. As and when the total of cash and IRF of all FIIs as determined in sub¬paragraph b above reaches 85% of the permissible limit, NSDL and CDSL shall inform RBI (CGM-in-Charge, Foreign Exchange Department), SEBI and Stock Exchanges.
d. Once 90% of limit is utilized, NSDL and CDSL shall inform RBI, SEBI and Stock Exchanges about the same. Stock Exchanges shall notify the same to the market and thereafter FIIs shall not further increase their long position in IRF till the time the overall long position of FIIs in cash and IRF comes below 85% of existing permissible limit.
4. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
5. The circular shall come into force from the date of the circular. 6. This circular is available on SEBI website at www.sebi.gov.in., under the category "Circulars".
Yours faithfully,
Shashi Kumar
General Manager
Division of Risk Management and New Products
Market Regulation Department
shashikumarv@sebi.gov.in

Regarding exemption to materials imported into India against Advance Authorisation

Notification No.  01/2014-Customs
New Delhi, the 17th January, 2014
G.S.R. 28 (E).— In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts materials imported into India against an Advance Authorisation issued in terms of paragraph 4.1.3 of the Foreign Trade Policy meant for export of a prohibited item in terms of paragraph 4.4.1 (b) of the Handbook of Procedures Volume 1 (hereinafter referred to as the said authorisation) from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 to 1975) and from the whole of the additional duty, safeguard duty and anti-dumping duty leviable thereon, respectively, under section 3, 8B and 9A of the said Customs Tariff Act, subject to the following conditions, namely :-
(i)             that the said authorisation, issued by the Regional Authority,  is produced before the proper officer of customs at the time of clearance for debit;
(ii)            that the said authorisation bears the name and address of the importer, the description and other specifications of the imported material and the description, quantity and value of exports of the resultant product;
 (iii)           that the imported material corresponds to the description and other specifications, where applicable, mentioned in the said authorisation and the value and quantity thereof are within the limits specified in the said authorization;
(iv)          that the export is made subject to pre-import condition under notified Standard Input Output Norms (SION) or under prior fixation of norms in terms of Para 4.4.2 of Handbook of Procedures Volume 1;
(v)           that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, binding himself to pay on demand an amount equal to the duty leviable, but for the exemption contained herein, on the imported materials in respect of which the conditions specified in this notification are not complied with, together with interest at the rate of fifteen percent. per annum from the date of clearance of the said materials:
(vi)          that the imports under the said authorisation and  the subsequent exports for fulfilling the export obligation are undertaken only through the seaports or airports or Inland Container Depots or Land Customs Stations which are specified in the Table below:-
Table 
S. No. EDI- enabled Port/ ICD/LCS
Located at
1.
 Seaport Bedi (including Rozi-Jamnagar), Chennai, Cochin, Dahej, Kakinada, Kandla, Kolkata, Krishnapatnam, Ennore (Tamilnadu), Karaikal (Union territory of Puducherry), Magdalla, Mangalore, Marmagoa, Mumbai, Mundhra, Nagapattinam, Nhava Sheva, Paradeep, Pipavav,  Tuticorin, Visakhapatnam
2.
 Airport Ahmedabad, Bangalore, Chennai, Cochin, Coimbatore,  Delhi, Hyderabad, Indore, Jaipur, Kolkata, Mumbai, Trivandrum, Visakhapatnam
3.
 Inland Container Depot Agra, Ahmedabad,  Bangalore, Bhilwara, Bhiwadi, Bhusawal, Chettipalayam (Tamilnadu), Chheharata (Amritsar), Coimbatore, Dadri,  Daulatabad (Maliwada), Delhi, Dighi (Pune), Durgapur (Export Promotion Industrial Park), Faridabad, Garhi Harsaru, Gauhati, Hyderabad, Irugur Village (Tamilnadu), Irungattukottai (SIPCOT Industrial Park, Kattrambakkam Village, Sriperumbudur Taluk), Jaipur, Jallandhar, Jodhpur, Kanpur, Karur, Kattupalli Kota,  Loni (District Ghaziabad), Ludhiana, Mandideep (District Raisen), Marripalem Village (in Edlapadu Taluk of District Guntur), Miraj, Moradabad, Nagpur, Nasik, Patli (Gurgaon), Pithampur (Indore), Raipur, Rewari, Talegaon (District Pune), Tirupur,  Tuticorin, Vadodara, Waluj (Aurangabad)
4.
 Land Customs Station Jogbani,  Petrapole,  Raxaul
 (vii)         that the export obligation as specified in the said authorisation (both in value and quantity terms) is discharged within ninety days from the date of clearance of imported materials by exporting the resultant product (specified in the said authorization),-
a)      which is manufactured in India using the material imported against the said authorisation; and
b)      in respect of which the facility under rule 18 (rebate of duty paid on materials used in manufacture) or sub-rule (2) of rule 19 of the Central Excise Rules, 2002 has not been availed;
(viii)        that the Authorization Holder fulfills the export obligation, including the stipulated value addition;
(ix)          that nothing contained in the provisions of Para 4.28 of Handbook of Procedures Volume 1 shall be applicable in relation to the said authorization;
(x)           that at the time of export the authorisation holder gives an undertaking to the effect that the resultant product, being exported against the said authorization, which is otherwise prohibited for export, has been manufactured from the material already imported under the said authorisation and the said undertaking contains the details of the imports and exports made under the said authorisation;
(xi)          that the said authorization shall not be transferred and the imported material shall be subject to actual user condition and shall not be sold or transferred for any purpose, or by any means, including job work;
(xii)         that the importer produces evidence of discharge of the export obligation to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, within a period of sixty days of the expiry of period allowed for fulfillment of export obligation, or within such extended period as the said Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, may allow.
2. Where the materials are found defective or unfit for use, the said materials may be re-exported back to the foreign supplier within thirty days from the date of clearance of the said material or such extended period, not exceeding a further period of thirty days, as the Commissioner of Customs may allow:
            Provided that at the time of re-export the materials are identified to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, as the materials which were imported.
Explanation. – For the purpose of this notification, -
(i)  "Foreign Trade Policy" means the Foreign Trade Policy 2009-2014 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification of the Government of India in the Ministry of Commerce and Industry, Department of Commerce No. 1 (RE – 2012) /2009-2014 dated the 5th June, 2012 as amended from time to time;
(ii) "Handbook of Procedures Volume 1" means the Handbook of Procedures Volume 1, 2009-14, published in the Gazette of India, Extraordinary, Part I, Section 1 vide public notice of the Government of India in the Ministry of Commerce and Industry, Department of Commerce, No.01 (RE – 2012)/2009-2014, dated the 5th June, 2012 as amended from time to time;
(iii) "Manufacture" has the same meaning as assigned to it in paragraph 9.36 of the Foreign Trade Policy;
(iv)  "Materials" means raw materials, consumables, fuel and packaging materials required for manufacturing of the resultant product;
(v)        "Regional Authority" means the Director General of Foreign Trade appointed under section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant an authorisation including a duty credit scrip under the said Act.
[F.No.605/27/2013-DBK]
  (Sanjay Kumar)
Under Secretary to the Government of India


Facilities for Persons Resident outside India – Clarification

RBI/2013-14/454
A.P. (DIR Series) Circular No.96
January 20, 2014
To
All Category – I Authorised Dealer Banks
Madam / Sir,
Facilities for Persons Resident outside India – Clarification
Attention of Authorized Dealers Category – I (AD Category- I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000] and A.P. (DIR Series) Circular No.45 dated October 22, 2012 in terms of which Foreign Institutional Investors (FIIs) are allowed to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date subject to conditions specified therein.
2. We have been receiving references from market participants as to whether, along similar lines, it is possible for FIIs and other foreign investors to effect remittances on cash /TOM /spot basis to a bank other than the designated AD Category -I custodian bank. In this connection it is clarified that a foreign investor is free to remit funds through any bank of its choice for any transaction permitted under FEMA, 1999 or the Regulations / Directions framed thereunder. The funds thus remitted can be transferred to the designated AD Category -I custodian bank through the banking channel. Note should, however, be taken that KYC in respect of the remitter, wherever required, is a joint responsibility of the bank that has received the remittance as well as the bank that ultimately receives the proceeds of the remittance. While the first bank will be privy to the details of the remitter and the purpose of the remittance, the second bank, will have access to complete information from the recipient's perspective. Besides, the remittance receiving bank is required to issue FIRC to the bank receiving the proceeds to establish the fact the funds had been remitted in foreign currency.
3. All other conditions in our A.P. (DIR Series) circular No.45 dated October 22, 2012 apply mutatis mutandis.
4. AD Category – I bank may bring the contents of this circular to the notice of their constituents and customers.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager in Charge

ITAT MUMBAI - Income Tax
Penalty u/s 271(1)(c) - Held that:- As per section 271(1)(B) - When any amount is added or disallowed then only a direction would suffice for the levy of penalty u/s. 271(1)(c) of the Act - But in the instant case, in respect of the additional income neither any amount is added nor disallowed by the AO , whatever has been returned by the assessee is assessed to tax except an addition of Rs. 90,000/- which was subsequently deleted by the Ld. CIT(A) - Decided in favour of assessee. 

Penalty u/s 271(1)(c) for A.Y. 2000-01 to 2005-06 - Held that:- Following Prem Arora Vs DCIT - ITAT DELHI] - The concealment of income has to be seen with reference to additional income brought to tax over and above income returned by the assessee in response to notice issued u/s. 153A - For the purpose of imposition of penalty u/s. 271(1)(c) resulting as a result of search assessments made u/s. 153A, the original return of income filed u/s. 139 cannot be considered - in case of search initiated after 1.6.2003 a return of income is always filed on issue of notice u/s. 153A - The penalty u/s. 271(1)(c) is imposable when there is variation in assessed and return income. If there is no variation, there will be no concealment. When there is no concealment, question of levy of penalty u/s. 271(1)(c) will not arise. This is settled position of law - Where returned income filed under section 153A is accepted by the AO, there will be no concealment of income and, consequently, penalty u/s. 271(1)(c) cannot be imposed - Decided in favour of assessee.

--
Regards,

New Drawback Rates notified for several exported products

Posted In Custom Duty | Articles, Notifications | No Comments »
The Central Government has amended the Notification No. 98/2013-Customs (N.T.) dated September 14, 2013 vide Notification No. 05/2014 – Customs (N.T.) dated January 21, 2014 ("the Notification"), to provide new drawback rates for several Products exported out of India. The Notification shall come into force on January 25, 2014.
In this context, please find link below of the Notification:
Duty Drawback is governed by Section 74 to 76 of the Customs Act, 1962 and Notifications issued there under read with the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 ("the DBK Rules"). Duty Drawback rates are of following types:-
  • All Industry Rates ("AIR") are fixed by the Directorate of Drawback, Dept. of Revenue, Ministry of Finance, and Govt. of India for standard products under Rule 3 of the DBK Rules. These rates are periodically revised.
  • Brand Rate is fixed under Rule 6 of the DBK Rules for special types of products on the application made by the manufacturer within stipulated time.
  • Special Brand Rates – Where AIR is less than four-fifth of the duties or taxes paid on the materials or components or input services used in the production or manufacture of the said goods. Special Brand Rate can be are fixed under Rule 7 of the DBK Rules on an application made by the exporter.
 ———-
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Mobile: +91 9810604563

No. 19024/1/2009-E.IV
Government of India
Ministry of Finance
Department of Expenditure
Dated : September 16, 2010
OFFICE MEMORANDUM
Subject : Guidelines on Travel on Tours/LTC.
This Department is receiving repeated references seeking clarifications with regard to purchase of Air tickets through authorized agents and relaxation for travel by Airlines other than Indian Airlines. The following guidelines may be noted for compliance :
1. On Official Tours :
(i) For travel by Airlines other than Air India because of operational or other reasons or on account of non-availability of Air India flights, individual cases for relation to be referred to M/o Civil Aviation, as stated in this Ministry's OM No. 19024/1/2009-E.IV dated 13.07.2009.
(ii) Air Tickets may be purchased directly from Airlines (at Booking counters/Website of Airlines) or by utilizing the services of Authorized Travel Agents viz. M/s Balmer Lawrie & Company, M/s Ashok Travels & Tours.
2. LTC :
(i) Travel by Air India only.
(ii) In Economy class only, irrespective of entitlement.
(iii) LTC-80 ticket of Air India only to be purchased.
(iv) Air Tickets may be purchased directly from Airlines (at Booking counters/Website of Airlines) or by utilizing the services of Authorized Travel Agents viz. M/S Balmer Lawrie & Company, M/S Ashok Travels & Tours and IRCTC (to the extent IRCTC is authorised as per DoP&T OM NO. 31011/6/2002-Estt. (A) dt. 02.12.09).
3. LTC for J&K :
(i) Relaxation to travel by Private Airlines to visit J&K while availing LTC is availing to all the categories of Govt. employee, including those entitled to travel by Air [DoP&T OMs No. 31011/2/2003-Estt.(A-IV) dated 18.06.10 and 05.08.10 refer].
(ii) For purchase of Air Tickets, however, the procedure as given under para 2 (iv) above should be followed.
4. All Ministries/Department of Govt. of India are requested to strictly adhere to these instructions.
(Karan Singh)
Under Secretary to the Govt. of India

Draft ICAI Code of Professional Ethics- 2014

As you are kindly aware, Ethical Standards Board of ICAI is constantly engaged in formulation of ethical standards for the members. But equally so, it has always endeared to reach out to members with new methods and strategies to ensure not only that members are well aware about the latest updates on ethics, but also to encourage the compliance with ethics to an ideal level .
Against this backdrop, I am delighted to announce one such update in ethics – the proposed replacement of ICAI Code of Ethics, 2009 with the "ICAI Code of Professional Ethics, 2014". The proposed Code will have 'Divisions' as its units. The proposed ICAI Code of Professional Ethics, 2014 will be divided as under:-
Division I: The Chartered Accountants Act, 1949
Division II: The First Schedule to the Chartered Accountants Act, 1949
Division III: The Second Schedule to the Chartered Accountants Act, 1949
Division IV: The Chartered Accountants Regulations, 1988
Division V: Rules framed under the Chartered Accountants Act, 1949
Division VI: Guidelines
It has been our earnest endeavour to make Code of Ethics of members really comprehensive , with most of the basic information relevant to members available at one place, and to present a connect between the glorious past of the profession , its progressive present and a magnificent future . The Draft Code may be assessed at ICAI Website at the following link http://www.icai.org/new_post.html?post_id=958&c_id=50. We will be pleased to get your feedback /suggestions on the same, which may be sent at ashishswaroop@icai.in and esb@icai.in

Time limit for completion of assessment or reassessment where reference is made to Transfer Pricing Officer

Posted In Income Tax | Articles | No Comments »
1 Sections 153 and 153B of the Income-tax Act, inter alia, provide the time limit for completion of assessment and reassessment of income by the Assessing Officer. Time limits have been provided for completion of assessment or reassessment under sections 143(3), 147, 153A, 153C etc. of the Income-tax Act. These time limits get extended if a reference is made under section 92CA of the Income-tax Act to the Transfer Pricing Officer (TPO) during the course of assessment/reassessment proceedings. These time limits are either from the end of financial year in which notice for initiation of the proceeding was served or from the end of the assessment year to which the proceedings relate.
2 Vide Finance Act, 2012 the period of limitation as provided in sections 153 and 153B of the Income-tax Act was extended by three months. In all the cases where reference under section 92CA of the Income-tax Act was made to the Transfer Pricing Officer the period of limitation was extended to one year from the existing 9 months. Similar amendments were made in other parts of section 153 and section 153B of the Income-tax Act wherever reference of section 92CA was made.
3 As a result of insertion of 3rd proviso in sub-section (1) of section 153 an anomaly arose. In a case relating to assessment year 2009-10, where a reference was made under section 92CA of the Income-tax Act and the TPO passed the order before 01.07.2012, it could not get covered by the 3rd proviso which was inserted vide Finance Act 2012. Further, it could not get covered by 2nd proviso either. Therefore, it found a place only in 153(1) (a) as per which the time limit would be two years from the end of assessment year i.e. upto 31.03.2012. Therefore, it did not get the benefit of one extra year as was intended. Further, before amendments vide Finance Act 2012 this case would have been covered under 2nd proviso and the time limit for completion would have been 31-12-2012 (33 months). Thus, with the insertion of 3rd proviso vide Finance Act 2012 the time limit got reduced from 31-12-2012 to 31-03-2012. This was not the intent of the legislature.
4 In view of the above, the provisions of 3rd proviso to sub-section (1) of section 153 of the Income-tax Act have been amended to provide that in case the assessment year in which the income was first assessable is the assessment year commencing on the 1st day of April, 2009 or any subsequent assessment year and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA of the Income-tax Act is made, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words 'two years', the words "three years" had been substituted."
5 Similar amendments have been made in sub-section (2), sub-section (2A) of section 153 and section 153B of the Income-tax Act where similar anomaly arose due to amendments carried out vide Finance Act, 2012 in the said sections.
6 Applicability: - The amendments take effect retrospectively from 1st July, 2012.

Time to be excluded in computing period of limitation for completion of assessments and reassessments

Section 153 of the Income-tax Act, inter-alia, provides the time limit for completion of assessment and reassessment of income by the Assessing Officer. Explanation to section 153 provides that certain periods specified therein shall be excluded while computing the period of limitation for the purposes of the said section. Under the provisions of clause (iii) of Explanation 1 to section 153 of the Income-tax Act, prior to its amendment by the Act, the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assesee is required to furnish a report of such audit, is excluded in computing the period of limitation for the purposes of assessment or reassessment. However, it did not provide for exclusion of time in case the direction of the Assessing Officer as aforesaid is set aside by the court.
2 Accordingly clause (iii) of Explanation 1 to section 153 has been amended to provide that the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish report of such audit under that sub-section; or where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Commissioner, shall be excluded in computing the period of limitation for the purposes of section 153.
3 Similarly, clause (viii) of Explanation I to section 153 of the Income-tax Act, before its amendment by the Act, provided for exclusion of the period commencing from the date on which a reference for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information so requested is received by the Commissioner or a period of one year, whichever is less, in computing the period of limitation for the purposes of section 153. At times more than one reference for exchange of information is made in one case and the replies from the foreign Competent Authorities are also received in parts. In such cases, there will always be a dispute for counting the period of exclusion i.e. whether it should be from the date of first reference for exchange of information made or from the date of last reference. Similar dispute may also arise with regard to the date on which the information so requested is received.
4 With a view to clarify the above situation, the aforesaid clause (viii) of Explanation 1 to section 153 has been amended to provide that the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A of the Income-tax Act and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less, shall be excluded in computing the period of limitation for the purposes of section 153.
5 Similar amendments have also been made in Explanation to section 153B of the Income-tax Act relating to time limit for completion of search assessment.
6 Applicability: - These amendments take effect from 1st June, 2013.


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