CIT can't revise order of AO because he loses his jurisdiction due to a circular issued by CBDT subsequently
IT : Income tax Officer having valid jurisdiction at time of issuance of notice under section 143(2), subsequent disqualification would not scrap his jurisdiction of making assessment
Check List for Making Form 15CA and 15CB by Professionals
CA Pratik Anand
Nowadays Form 15CA and 15CB are of a lot importance. We professional atleast have to issue one Form 15CB every day and form 15CA is also to be made by the professional on behalf of the client.Form 15CA is a Declaration of Remitter and is used as a tool for collecting information in respect of payments which are chargeable to tax in the hands of recipient non-resident. This is starting of an effective Information Processing System which may be utilized by the Income tax Department to independently track the foreign remittances and their nature to determine tax liability. In the modern times, the system for selection of cases into scrutiny have reduced drastically and without scrutiny there was no check to ensure that taxable foreign remittances have been made after deduction of tax or not. Therefore, the remittance channel i.e. Banks have been directed to obtain Form 15CA and 15CB before making any remittance. Authorised Dealers/ Banks are now becoming more vigilant in ensuring that such Forms are received by them before remittance is effected since now as per revised Rule 37BB a duty is casted on them to furnish Form 15CA received from remitter, to an income-tax authority for the purposes of any proceedings under the Income-tax Act and also the revised FEMA Guidelines issued in July'2014 cast duty on the banks to ascertain the Tax Liability in each case of remittance. As per the revised RBI Guidelines, The RBI in this regard will not issue any guidelines with respect to deduction of tax at source on foreign remittances. Therefore the Banks are urging the remitters to provide such Form 15CA and 15CB even in case of Import purchases.
Here is an attempt to make a comprehensive check list/procedure for effecive furnishing of Form 15CA and 15CB.
REQUIREMENTS FOR MAKING FORM 15CA and 15CB
Step 1: Ascertain whether Form 15CA and CB are actually required to be made.
As per Income Tax (Fourteenth Amendment) Rules, 2013, No reporting in Form 15CA and 15CB is to be made in case of the following nature of foreign remittances w.e.f 01.10.2013
SPECIFIED LIST
| Sl.No. | Purpose code as per RBI | Nature of Payment |
| 1 | S0001 | Indian investment abroad -in equity capital (shares) |
| 2 | S0002 | Indian investment abroad -in debt securities |
| 3 | S0003 | Indian investment abroad -in branches and wholly owned subsidiaries |
| 4 | S0004 | Indian investment abroad -in subsidiaries and associates |
| 5 | S0005 | Indian investment abroad -in real estate |
| 6 | S0011 | Loans extended to Non-Residents |
| 7 | S0202 | Payment- for operating expenses of Indian shipping companies operating abroad. |
| 8 | S0208 | Operating expenses of Indian Airlines companies operating abroad |
| 9 | S0212 | Booking of passages abroad -Airlines companies |
| 10 | S0301 | Remittance towards business travel. |
| 11 | S0302 | Travel under basic travel quota (BTQ) |
| 12 | S0303 | Travel for pilgrimage |
| 13 | S0304 | Travel for medical treatment |
| 14 | S0305 | Travel for education (including fees, hostel expenses etc.) |
| 15 | S0401 | Postal services |
| 16 | S0501 | Construction of projects abroad by Indian companies including import of goods at project site |
| 17 | S0602 | Freight insurance – relating to import and export of goods |
| 18 | S1011 | Payments for maintenance of offices abroad |
| 19 | S1201 | Maintenance of Indian embassies abroad |
| 20 | S1 202 | Remittances by foreign embassies in India |
| 21 | S1301 | Remittance by non-residents towards family maintenance and-savings |
| 22 | S1302 | Remittance towards personal gifts and donations |
| 23 | S1303 | Remittance towards donations to religious and charitable institutions abroad |
| 24 | S1304 | Remittance towards grants and donations to other Governments and charitable institutions established by the Governments. |
| 25 | S1305 | Contributions or donations by the Government to international institutions |
| 26 | S1306 | Remittance towards payment or refund of taxes. |
| 27 | S1501 | Refunds or rebates or reduction in invoice value on account of exports |
| 28 | S1503 | Payments by residents for international bidding". |
Therefore no Form 15CA and 15CB are required in the abovementioned 28 nature of foreign remittances.
Step 2:Once it is ascertained that Form 15CA and 15CB have to be made then one should ascertain the part of Form 15CA to be filled by the assessee, by reading the following extracts of Amended Rule 37BB;
Rule 37BB. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or salary or any other sum chargeable to tax under the provisions of the Act, shall furnish the following, namely:
(i) the information in Part A of Form No.15CA, if the amount of payment does not exceed fifty thousand rupees and the aggregate of such payments made during the financial year does not exceed two lakh fifty thousand rupees;
(ii) the information in Part B of Form No.15CA for payments other than the payments referred in clause (i)
Step 3: Information to be required from the client
A Details of Remitter
1. Name of the Remitter
2. Address of the Remitter
3. PAN of the Remitter
4. Principal Place of Business of the Remitter
5. E-Mail Address and Phone No. Of Remitter
6. Status of the Remitter (Firm/Company/Other)
B. Details of Remittee
1. Name and Status of the Remittee
2. Address of the Remittee
3. Country of the Remittee (Country to Which Remittance Is Made)
4. Principal Place of the Business of the Remittee
C. Details of the Remittance
1. Country to Which Remittance Is Made
2. Currency in Which Remittance Is Made
3. Amount of Remittance in Indian Currency
4. Proposed Date of Remittance
5. Nature of Remittance as Per Agreement (Invoice Copy to Be Asked From Client)
D Bank Details of the Remitter
1. Name of Bank of the Remitter
2. Name of Branch of the Bank
3. BSR Code of the Bank
E. Others
1. Father's Name of the Signing Person
2. Designation Of The Signing Person
F a. Form 10f Duly Filled By the Authorised Person Of The Remittee.
b. Tax Residency Certificate From The Remittee (Tax Registration Of The Country In Which Remittee Is Registered)
c. Certificate That The Remittee Does Not Have Any Permanent Establishment In India. This Is Mandatory If The Income Is A Business Income And Not Chargeable To Tax As Per DTAA If There Is No P.E In India.
This Is Required If Any Benefit Under DTAA Is Taken, Whether By Way Of Lower Rate Of Deduction Of Tax At Source Or No Deduction Of Tax At Source As Per DTAA. Hope you find the above information relevant and useful in your daily practise.
(The author is a CA in practice at Delhi and can be contacted at: E-mail: capratikanand@gmail.com, Mobile: +91-9953199493)
Issue of Shares by Private Limited Companies under Cpmpanies Act, 2013
CS Shashikant Sharma
As per section 23 of the Companies Act, 2013 ("the Act") a private company may issue securities-i. by way of rights issue or bonus issue or
ii. through private placement
In case of private company either it can issue shares to its existing shareholders by way of rights issue or by way of giving them bonus shares or it can issue securities through private placements.
PRIVATE PLACEMENT – Part II of Chapter III, Section 42 of the Act.
"private placement" means any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in section 42 of the Act.
The offer of securities or invitation to subscribe securities, shall be made to not more than two hundred persons in the aggregate in a financial year (excluding qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option as per provisions of clause (b) of sub-section (1) of section 62). This restriction would be reckoned individually for each kind of security that is equity share, preference share or debenture (i.e. 200 for equity shares, 200 for preference shares and 200 for debentures) – Rule 14(2) (b).
The value of such offer or invitation per person shall be with an investment size of not less than twenty thousand rupees of face value of the securities – Rule 14(2) (c).
The provisions of clauses (b) and (c) of sub-rule (2) of Rule 14 shall not be applicable to-
- non-banking financial companies
- housing finance companies
The payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received – Rule 14(2)(d).
A private placement offer letter shall be accompanied by an application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in electronic mode, within thirty days of recording the names of such persons in accordance with sub-section (7) of section 42 of the Act.
No person other than the person so addressed in the application form shall be allowed to apply through such application form and any application not conforming to this condition shall be treated as invalid.
The offer should be previously approved by the shareholders of the company, by a Special Resolution, for each of the Offers or Invitations.
In case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year.
The explanatory statement annexed to the notice for the general meeting the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed.
No fresh offer or invitation shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or withdrawn or abandoned by the company – Section 42(3). For example of a company issuing equity shares then it cannot issue preference shares or debentures until procedure of equity shares is completed.
Company shall allot its securities within sixty days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent per annum from the expiry of the sixtieth day – Section 42(6).
No company offering securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an offer – Section 42(8).
The company shall maintain a complete record of private placement offers in Form PAS-5 and also file alongwith private placement offer letter in Form PAS-4 with ROC within a period of thirty days of circulation of the private placement offer letter.
A return of allotment of securities under section 42 shall be filed with the ROC within thirty days of allotment in Form PAS-3.
Contravention of Section 42 of the Act attracts penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is higher, and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty Section 42(10).
RIGHTS ISSUE OF SHARES:
As per section 62 of the Act Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered—
- to its existing shareholders.
- to employees under a scheme of employees' stock option, subject to special resolution passed by company.
- to any persons, if it is authorised by a special resolution, whether or not those persons include the persons referred to in clause (a) or clause (b), either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer.
ISSUE OF SHARES ON PREFERENTIAL BASIS:
A company may, if authorized by a special resolution passed in a general meeting, issue shares in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62. Such issue on preferential basis should also comply with conditions laid down in section 42 of the Act (private placement). A valuation report of registered valuer determining the price of shares also mandatory.
ISSUE OF SWEAT EQUITY SHARES:
A company may issue sweat equity shares of a class of shares already issued to its directors or employees by passing a special resolution – Section 54 of the Act.
CONVERSION OF LOANS OR DEBENTURES INTO SHARES:
A private company may convert loans raised by the company or debentures issued by the company into shares by passing of special resolution if there is such a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company – Section 62(3).
ISSUE OF BONUS SHARES:
A company may issue fully paid-up bonus shares to its members, in any manner whatsoever, out of—
- its free reserves;
- the securities premium account; or
- the capital redemption reserve account:
Under the 1956 Act a private limited company could issue shares by passing a board resolution but this is not the case under 2013 Act. Under 2013 Act a private limited company can issue shares only using the methods prescribed in the Act.
(Author may be contacted at csshashikant.sharma@gmail.com)
Ministry's Removal of Difficulties Order – More of a hindrance than a help
CS Vinita Nair
Debolina Banerjee
The Ministry is leaving no stone unturned to leave matters pertaining to related party and transactions lucid. But is it so is the biggest question. On 24th July, 2014 MCA vide its Companies (Removal of Difficulties) Sixth Order, 2014 (Present Order) amended clause (iv) of Section 2(76) of Companies Act, 2013(Act, 2013). The Present Order is certain to create large amount of outcry among all the companies.
It seems that the Ministry is determined to issue weekly clarifications regarding related parties. MCA firstly issued Companies (Removal of Difficulties) Fifth Order, 2014 dated 9th July, 2014 amending clause (v) of Section 2(76) of Act, 2013 by replacing 'and' with 'or'. This was followed with clarifications on matters relating to related party transactions vide General Circular no. 30/2014 dated 17th July, 2014. Thereafter, MCA further amended the definition of related party by amending Companies (Specification of definition details) Rules, 2014[4] vide notification dated 17th July, 2014 which came into force from the date of its publication in the official gazette.
Section 2 (76) (iv) of the Act, 2013 has been amended to insert words 'or his relative'. The amended rule post amendment will stand as under:
2(76) (iv) Related Party: a private company in which a director or manager or his relative is a member or director;
This is done with an intent to expand the purview of related parties while dealing with private companies. Earlier Section 297 of Companies Act, 1956 (Act, 1956) restricted the scope of related parties to a private company of which the director is a member or director. However, under the Act, 2013 there has been an inclusion of manager appointed in such private company and now vide Ministry's Present Order relatives of a director or manager of a private company where such relatives is a member or director have also been added.
MCA had issued a draft notification on 24th June, 2014 on the inapplicability/ partial/modified applicability of certain provisions of Act, 2013 to the Private Companies in exercise of powers under section 462 of Act, 2013. Public comments were invited on the same by 1st July, 2014. The same was to be placed before both the houses of parliament. The notification altogether exempted private companies from the applicability of Section 188.
However, the draft notification obtained from Rajya Sabha office has slight modification in terms of applicability of Section 188. The entire exemption from applicability of Section 188 was replaced with exemption only from applicability of second proviso of Section 188 (1) of Act, 2013. This means that if the related party is a member of the Company, then he shall not be disentitled from voting on such resolutions at the general meeting.
MCA without realizing the extent of compliance required in case of related party transaction has simply expanded the scope of definition. This means any company entering into a transaction with a private limited company in which relatives of director or manager is a member or director will be a related party transaction. This means it will require prior approval of the Audit committee, wherever applicable. Further, if the transaction is not in the ordinary course of business and not being done on arms length basis, the same will require approval by Board. Further, if such transaction exceeds the limits specified under Rule 15 of Companies (Meetings of Board and its Powers) Rules, 2014, prior approval of shareholders will also be required.
The Present Order will lead to everything but removal of any difficulty!
[The above post is contributed by CS Vinita Nair and Debolina Banerjee at Vinod Kothari & Co. They can be contacted at vinita@vinodkothari.com and mt@vinodkothari.com respectively]
MCA issues clarification on transitional period for resolutions passed under the Companies Act, 1956
Background
One of the contentious issues while implementing corporate decisions is the validity of the resolutions passed under the provisions of the Companies Act, 1956 ("1956 Act") post implementation of the provisions of the Companies Act, 2013 ("2013 Act").
First Phase of 98 sections of 2013 Act were notified on September 12, 2013. On February 27, 2014 Section 135 and schedule VII dealing with CSR was notified. Further on March 26, 2014 further 196 sections of 2013 Act were notified.
The above notifications of provisions of the 2013 Act, from time to time, raised doubts as to the fate of resolutions passed under 1956 Act and transactions initiated before notification of the new provisions.
MCA Circular
MCA on July 23, 2014 vide General Circular No 32/2014 clarified that resolutions passed under the relevant provisions of 1956 Act during the period from September 1, 2013 to March 31, 2014 can be implemented in accordance with the provisions of 1956 Act notwithstanding the repeal of the said provisions, provided implementation of the resolutions commenced before April 1, 2014. This transitional arrangement will be available upto expiry of one year from the passing of the resolution or six months from the commencement of the corresponding provision in 2013 Act, whichever is later. Further any amendment of the resolution must be in accordance with the relevant provision of the New Act.
Our Analysis
Various scenario and the clarified position are captured below :
| Resolution Status | Clarified Position |
| Resolution passed before 01-Sep-2013 and not implemented as on date | Invalid. New resolution to be passed under 2013 Act |
| Resolution passed during 01-Sep-2013 and 31-Mar-14 and implementation commenced pre 01-04-14 | Valid until expiry of 1 year from passing of the resolution or 6 months from the commencement of the corresponding provision in 2013 Act, whichever is later |
| Resolution passed during 01-Sep-2013 and 31-Mar-14 but implementation did not commenced pre 01-04-14 | Invalid. New resolution to be passed under 2013 Act |
However, wherever 2013 Act and / or rules or circulars issued thereunder contain express provision for ratification of any resolution passed under 1956 Act, the same shall apply regardless of the MCA Circular. For Eg. ratification of borrowing limits earlier approved under section 292 needs to be ratified under section.
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About Pantomath Group: Pantomath group consists of a team of professionals led by the Group Founder, Mr. Mahavir Lunawat, who is a Fellow Member of The Institute of Company Secretaries of India, CFA, PGDSL and a Law Graduate and who has had stints with top notch corporates viz. ITC Ltd., Reliance Industries Ltd., and PwC. Our diversified team comprises professionals being MBA, CFA,CS, Lawyer and others. Pantomath group provides a one-stop-shop offering integrated business, legal and financial solutions to varied sections of society including SMEs and large corporate enterprises.
Availability of Cenvat Credit on Freight Outward Upto Place Of Removal
Now, the question – is weather CENVAT Credit on freight outward upto place of removal is admissible to the manufacturers of excisable goods in India? CENVAT Credit scheme is available to manufacturers of excisable goods which are falling under Central Excise Tariff Act, 1985. Now, according to erstwhile MODVAT scheme of 2002 now, CENVAT Credit Rule, 2004 which allows manufacturers to take credit on Inputs, Capital goods and Input services.
Indian Lagislature has given wider benefit to the manufacturers to taken credit on inputs, capital goods and input services used in manufacturing process for every taxpayer in India. According to CENVAT Credit Rules, 2004 credit on input services is available for not only for services used at pre-manufacturing stage but on post manufacturing also. As per Rule 2(l) of CENVAT Credit Rules, 2004 Credit on service tax paid on outward transportation upto place of removal is available to the manufacturer. For this purpose, relevant definition is reproduced below:
"Rule 2(l) – "Input Service" means any service, -
(i.) used by a provider of output service for providing an output service; or
(ii.) used by a manufacturer, weather directly or indirectly, in or in relation to manufacture of final products and clearance of final products upto place of removal,
and includes services used in relation to modernization, renovation and repairs of factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto place of removal, procurement of inputs, accounting auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto place of removal;"
On perusal of the above definition it is crystal clear that credit on freight outward upto place of removal is available to the manufacturers. But now question arises as to what/where should be the 'place of removal' for the manufacturer, weather it should be factory gate or upto the destination of the customers, as this has not been defined in the CENVAT Credit Rules, 2004. 'Place of Removal' has been defined under section 4(C) of Central Excise Act, 1944 as under:
"(C) "place of removal" means –
(i) a factory or any other place or premises of production or manufacture of the excisable goods ;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;
from where such goods are removed;"
It is clear from the above definition of place of removal can be factory or any other place or depot, premises of consignment agent or any other place or premises from where the goods are to be sold which clearly includes customers premises or depot from where the goods are sold. As the place of removal is not defined in CENVAT Credit Rules, 2004 but Rule 2(t) of CCR, 2004 says that words and expressions used in these rules and not defined but defined in the Excise Act or Finance Act shall have the meanings respectively assigned to them in those acts.
The Circular No. 97/8/2007 dated 23.08.2007 dwells in detail on the issue of upto what stage a manufacturer/consignor is eligible to taken credit on service tax paid on freight outwards by road upto place of removal on FOR basis. This issue has been examined in length in the case of Gujarat Ambuja Cement Ltd. Vs CCE, Ludhaina and in the case of Ultratech Cement Ltd. Vs CCE, Bhavnagar. The said circular proceeds to clarify that the eligibility for the manufacturer to take credit on service tax paid on outward transportation would depend upon the above definition of place of removal as per Central Excise Act, 1944. However the circular states that,
"there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because in terms of the sale contract /agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods (in terms of the definition as under section 2 of the Central Excise Act, 1944 as also in terms of the provisions under the Sale of Goods Act, 1930) occurred at the said place.
However, analyses of each above point are attempted below:
Point No. 1: the ownership of the goods and the property in the goods remained with the seller till the goods were finally delivered to the seller and that too in a acceptable condition at the door steps/warehouse/godown of the customer. The expression of sale has been defined in section 2(h) of Central Excise Act 1944 as sale and purchase means any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deffered payment or other valuable consideration. This implies that property in the goods changes with every change in possession of goods. This in addition also implies that unless the possession is made over to the purchaser or his agent, the seller remains the owner of the goods.
Point No. 2: the seller bore the risk of damage or loss of goods during transit to the destination of the purchaser. For this purpose the seller has to take a comprehensive transit insurance policy so that risk at the event of damage or loss can be minimised. Any party purchasing insurance however, have sufficient interest in the goods in question as the damage ot loss in transit has to borne by him. The seller has the sufficient interest as he retains the title of the goods. Even if the title passes on to buyer the seller who has the security interest in the goods still has an insurable interest and can insure the goods. Every business who sells the goods usually maintains adequate insurance cover on all the goods sold atleast until it is assured that the buyer will pay for the goods.
Point No. 3: In goods transport agency service transport of goods by road, it has been provided in law that person who pays freight or who's liability is to pay freight is liable to pay service tax as well if the consignor or consignee falls in category such as a factory, a company, a corporation, a society, a cooperative society, a registered dealer of excisable goods, a body corporate or a partnership firm. If the GTA pays the service tax on freight credit of service tax paid is always available and can utilize credit against the payment of duty. The price of goods negotiated by the parties becomes the transaction value on which duty (CENVAT) has been paid. If the freight amount is separately shown ad is included in value on which duty has been paid by the manufacturer than credit on duty is automatically available. Therefore, freight charges on goods become integral part of price of goods.
Therefore, in the light of the above discussion it appears that the admissibility of credit of service tax on tax paid on services of GTA upto place of removal is not as simple as it appears and cannot be discussed in full length in the present article. There are plethora of issues which need to be given full consideration before final answers on this issue can be obtained.
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Ajit Singh Butalia,Assistant Manager – Indirect Taxation,
Triveni Engineering And Industries Limited.
Section 269SS/ 269T not applies to book entries not involving cash transactions
In the instant case, the transaction in question, was not cash transaction. It was merely book entries. The CIT(A) has called Remand Record from the AO, who vide report dated 05.01.1999, confirmed that the transaction in question, by mentioning that no cash was involved. There was only adjustment entries. When that it so, then there is no violation of Section 269SS/269T of the Act. No addition is made in quantum appeal.
Allahabad High Court)
INCOME TAX APPEAL No. – 242 of 2005 [Assessment Year - 1994-95]
Appellant :- The Commissioner Of Income Tax Respondent :- M/S Saurabh Enterprises
Counsel for Appellant :- S.C.
Counsel for Respondent :- A. Bansal,S.K. Garg
Hon'ble Dr. Satish Chandra, J.
Hon'ble B. Amit Sthalekar, J.
The present appeal has been filed by the Department under Section 260A of the Income Tax Act, 1961, against the judgment and order dated 27.01.2005, passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A. No. 493/Alld/99, for the assessment year 1994- 95.
The brief facts of the case are that in the instant case, the AO found that there was violation of Section 269SS/269T of the Act. So, he levied the penalties under Sections 271 -D and 271 -E of the Act. The same were cancelled by the CIT(A) and the Tribunal also upholds the same. Being aggrieved, the Department has filed the present appeal.
With this background, heard Sri Dhananjay Awasthi, learned counsel for the Department and Sri Ashish Bansal, learned counsel for the assessee.
After hearing both the parties and on perusal of the record, it appears that in the instant case, the transaction in question, was not cash transaction. It was merely book entries. The CIT(A) has called Remand Record from the AO, who vide report dated 05.01.1999, confirmed that the transaction in question, by mentioning that no cash was involved. There was only adjustment entries.
When that it so, then there is no violation of Section 269SS/269T of the Act. No addition is made in quantum appeal.
By considering the totality of the facts and circumstances of the case, we find no reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with the reasons mentioned therein.
In the result, the appeal filed by the Department is dismissed, at the admission stage.
Costing Methods/Cost Management in Turkey-Series 1
The Indian government under the UPA II has abolished the Cost Audit and Costing methods for various industries under ( Cost Record and Audit ) Rules -2014 . In my research I went in deep into the different countries, developed as well as emerging economies over the span of last 10 years I find the development/growth & increased demand of Cost Management and improvement related to that across industries and business. I will share the research details in phased manner so that India could understand that what 'OPPORTUNITY LOSS' we would be facing during the next couple of years.
In the developed and emerging economies cost management has gained more importance due to the domestic and global competition getting severer by globalization, decreasing profit margins, increasing input prices due the tightening energy sources, economic crises etc. Therefore, companies which were operating in developing countries have also begun to implement cost and management accounting practices which were first adopted by companies operating in developed countries. In my research I have found that through adoption and efficient use of Cost Management and Costing methods economies and industrial revolution has taken new shapes and sizes.
Among the developing economies I will not be giving the old examples of China rather I will discuss about Turkey. Turkey economy faced one of the similar banking crises like U.S during pre-2001. Throughout the 1980s and 1990s, Turkey relied heavily on foreign investment for economic growth and there was huge burden of fiscal deficit. During the 1990s, economic growth fluctuated between -5.5% and 9.3% and the Turkey's government ran large budget deficits, up to 7% of GDP in 1997. Interest rates on government debt exceeded the inflation rate, on average, by more than 30 percentage points. In short the economy was in the worst phase. But after 2001 getting funds from IMF and efficient use of business strategies and economic growth policies the economy made a turn around. The manufacturing back bone made a turnaround through the implementation of Cost Management methods and its various accounting aspects.
Turkish accounting profession has been in progress since the establishment of Turkish Republic. As a result of industrialization, the need for accounting profession emerged. This was also the prime reason behind adoption and implementation of Cost Management methods. Academics and Journals were flooded with the research papers on adoption of cost methods and practices depicting the growth model for their industries and economies.
Moving ahead, after conducting information from 40 industrial companies in Egypt its being found that Cost Accounting and Cost Management was being used more for external (pricing) purposes than for internal (performance) purposes. Now they have even adopted Activity Based costing for improving their cost profitability and increasing export. 12 years before in one of the research by an media institute it was found that Turkey around 51 companies out of the largest 500 industrial enterprise showed that
(1) 29.5 percent of the respondents utilize process costing, followed by activity-based costing (25.5 percent) and job costing (23.5 percent),
(2) direct materials cost has the largest portion in manufacturing costs, followed by manufacturing overhead and direct labor costs,
(3) the most widely used overhead allocation base is units produced (30 percent), followed by direct labor hours (23 percent), direct machine hours (15 percent),
(4) the most frequently used management accounting practices are cost-volume-profit analysis (72.6 percent), strategic profitability analysis (47.1 percent), flexible budgeting (45.1 percent), and customer profitability analysis (45.1 percent)
(5) Currently this statistical is present 100% in every costing method alternatively among the largest 500 companies in Turkey.
The effect of adoption of cost management and costing methods by Turkey are as follows:
- Turkey received foreign investment inflows of only US$18m 33 years ago when it started to host foreign investors. Now, the cumulative value of foreign investments has surged to US$138.3b.
- Despite the global economic crisis and the political and social issues that have afflicted neighboring regions, Turkey exported more goods in 2012 than ever before. Total exports
valued at US$152.6b were supplied to 241 countries and regions worldwide.
Better pricing and improved margins helped the Turkey industries to become competitive through judicious mix of Costing Methods and Process.
Companies have succeeded in their endeavors to reduce cost, focusing on operational efficiency, has turned pricing into an important issue for Turkish companies in achieving their sustainable growth targets as regional and global player. In my research I found out the historical use of Costing Methods in various industries in Turkey. Today that same number has grown by many folds. In 2002 when turkey started adopting cost management followed with comparison to UK & Ireland we find that overhead allocation being used to calculate the product cost are as follows:
During the same time another research was conducted by an institute to find the level of adoption of cost management and costing methods by the various industries in Turkey. In that research it was found through statistical mean derivation that there was a huge implementation of cost methods. The importance of management accounting practices that are utilized in the business organizations in Turkey was measured on a scale of 1 (unimportant) to 5 (very important).
It's quite surprising that the India being such an broad economy followed with a plan of GDP growth of 9% in the coming few years has dropped Cost Audit and Costing methods. Indian economy is quite running on the same tracks of Turkey's economic crisis and this point of time it has been decided that by removing the Cost Management and Costing Methods it would be fruitful for the economy to grow. Industry might think that removing Costing Methods would help them to price their products better. But the biggest hurdle going forward will be intense competition of global markets. We all know that US and European markets are trying hard to come out of the recession. Now their manufacturing has started picking up but to gather momentum into the same they need to exploit markets and resources like India and other developing economies. Now if they start dumping their goods in India as these economies use Cost Management and methods as bible to their product manufacturing. Now the questions comes who Indian companies would sustain this dumping process of goods. If we Indian find cheap goods coming to India compared to domestic manufactured products would you not opt for the foreign brands? Global trade is required but not at the cost of domestic industries.Cost Audit have been marked that sharing of technical cost related details and hence leakage of valuable information. Now just tell me that if there is no cost audit then how companies would be able to analyze their competitiveness and face the Technology related extension of their products and services from the market over the long term. How government will be able to stop dumping of goods by global competitors. How the FICCI,CII, ASSOCHAM,AMCHAM and other business houses would be able to present report of their respective trade and industries competiveness. How these houses would justify their cost of production with global standards. If, globally Costing methods and Cost Management is being adopted and practiced, in that context, India where the same have been abolished- how the Industry houses would justify the prices.
Now being a journalist I find that is the abolishment of Cost Audit and Costing Methods by UPAII is the master of plans of some dangerous foul play for the Indian economy. Is this abolishment is to attract the inflow of capital to Indian market to their own markets like US and Europe. By making the Indian industry weak through intense price competition with global products, asking Indian manufactures to close their shops in India and open manufacturing hub in US and Europe and route the inflow of capital back into their own economy (US & Europe). Well tell me how many war tanks you would buy every year compared to how many foot wear the Indian population buys (Said by Mr. Vijendra Sharma). Are we planning to close the domestic industries and make Indian economy a fragmented economy in the long term? While writing this I came across questions by my wife where I was asked that if you're Costing Methods are so powerful then why not the inflation coming down. Well with costing methods inflation is around 10% zone without that it would have been more than 20%. What we are trying to make India understand is that without Cost Management the condition of India would be like US where US companies manufacture products and in China and sell in US itself.
A special thank to Mr. Amit Apte, Mr.Sanjay Bharghav & Mr. Vijendra Sharma for their inputs support & inspiration.
—
Indraneel Sen Gupta
Global Macro Economic Researcher and Business Strategist
Master of Economics, MBA in International Business Management, ICWAI (Final)/CWM Final/Journalist
neel19414@gmail.com
2014-TIOL-1301-CESTAT-AHM
IN THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD
WEST ZONAL BENCH, AHMEDABAD
Appeal No.ST/12059/2014
Application Nos.ST/COD/13411/2014, ST/Stay/13412/2014
Application Nos.ST/COD/13411/2014, ST/Stay/13412/2014
Arising out of Order-in-Appeal No.AHM-SVTAX-000-APP-293-13-14 Dated: 24.12.13
Passed by the Commr (Appeals) C Excise & Customs, Ahmedabad
Passed by the Commr (Appeals) C Excise & Customs, Ahmedabad
Date of Hearing: 16.7.2014
Date of Decision: 16.7.2014
Date of Decision: 16.7.2014
M/s SENIOR DIVISIONAL COMMERCIAL MANAGER
DIVISIONAL OFFICE
DIVISIONAL OFFICE
Vs
COMMISSIONER OF SERVICE TAX, AHMEDABAD
Appellant Rep by: Shri Mukesh N Pandit, Adv.
Respondent Rep by: Shri G P Thomas, AR
Respondent Rep by: Shri G P Thomas, AR
CORAM: M V Ravindran, Member (J)
H K Thakur, Member (T)
H K Thakur, Member (T)
ST - COD - statute does not provide any condonation of delay by the first appellate authority beyond 30 days – appeal rightly rejected by Commissioner (A) on the ground that delay of 5 months & 18 days cannot be condoned by him inasmuch he only has the power to condone a delay of a maximum period of one month - law settled by apex court in the case of Singh Enterprises - Appeal dismissed: CESTAT [para 3]
Appeal dismissed
Case law Cited -
Singh Enterprises - 2007-TIOL-231-SC-CX...Para 3...followed
ORDER NO.A/11368/2014
Per: M V Ravindran:
This application is for condonation of delay and stay petition and appeal are filed against impugned OIA No. AHM-SVTAX-000-APP-293-13-14 dated 24.12.2013.
2. After hearing both sides, we find that the issue lies in a narrow compass. Accordingly, we take up the appeal itself for disposal. On perusal of the impugned order, we find that the first appellate authority has dismissed the appeal filed by the appellant before him by recording as under:-
"6. Before taking the stay application and main appeal, I have to decide first the application of condonation of delay. The appellant has filed a Misc. Application for condonation of delay of 228 days, as the appeal was filed on 15.03.2013 against the impugned order dated 16.7.2012 issued on 20.07.2012, which was received by the appellant on 26.07.2012, giving interalia the reason for the delay. As per the provisions of Section 85 (3A) of the Finance Act, 1994, an appeal is required to be presented within two months from the date of receipt of the impugned order before the Commissioner, Central Excise (Appeals), after the amendment which took place by the Finance Act, 2012, made effective from 28.05.2012. I find that the impugned order dated 16.07.2012 issued on 20.07.2012 was received by the appellant on 26.7.2012 and accordingly an appeal was required to be presented on 15.03.2013, which resulted into delay of 5 months and 18 days. For the said delay, the appellant has given the reasons as mentioned at Para -4/ Page 2 of the said application. I find that the Proviso to Section 85 (3A) of the Finance Act, 1994 which is relevant in the present case, is reproduced as under for ease of reference."Provided that the Commissioner of Central Excise (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of two months, allow it to be presented within a further period of one month"Accordingly, the Commissioner, Central Excise (Appeals) can condone the delay of maximum one month if sufficient cause has been shown by the appellant. As period of delay in filing appeal in the present case is 5 months and 18 days, hence it is beyond the powers vested to me under the statute (Proviso to Section 85(3A) of the Finance Act, 1994) under which a maximum period of one month of delay can be condoned by the Appellate Authority. Reliance is also placed on the following judgments.M.R. Tobacco Limited vs. UOI - 2007 (213) ELT A115 (S.C.)Navinon Limited vs. UOI - 2006 (205)ELT 71 (Bom H.C.)I therefore, do not find any reason to condone the delay in filing the same and thus, hold the appeal filed by the appellant as time barred."
3. In our considered view, the first appellate authority was correct in stating the law as to that he has no power to condone the delay of more than 30 days in filing appeal before him. It is clear that statute does not provide any condonation of delay by the first appellate authority beyond 30 days. We find that this is the law which has been settled by the Apex Court in the case of Singh Enterprises - 2008 (221) ELT 163 (S.C.) = 2007-TIOL-231-SC-CX.
4. In view of the foregoing, we do not find any reason to interfere in the impugned order. Accordingly, application for condonation of delay, stay petition and appeal are dismissed.
(Dictated and pronounced in the Court)
2014-TIOL-1304-CESTAT-DEL
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
PRINCIPAL BENCH, NEW DELHI
Appeal No.ST/268/2009-CU(DB)
Arising out of Order-in-Appeal No.70/CE/Appl/Jal/08 Dated: 19.3.2009
Passed by The Commissioner of Central Excise (Appeals), Chandigarh
Passed by The Commissioner of Central Excise (Appeals), Chandigarh
Date of Hearing: 20.6.2014
Date of Decision: 20.6.2014
Date of Decision: 20.6.2014
M/s RAGHU EXPORTS (INDIA) PVT LTD
Vs
COMMISSIONER OF CENRAL EXCISE, LUDHIANA
Appellant Rep by: None
Respondent Rep by: Shri Amresh Jain, DR
Respondent Rep by: Shri Amresh Jain, DR
CORAM: G Raghuram, President
Rakesh Kumar, Member (T)
Rakesh Kumar, Member (T)
CENVAT – Rule 2(l) of CCR, 2004 - For procuring export orders, appellant availing the service of overseas commission agents to whom the commission was being paid for procuring export orders and on this commission, they had paid service tax as service recipient under Reverse Charge Mechanism – service of procuring export orders /sales orders through overseas agent is certainly a service which has nexus with the manufacturing business of the Appellant - tax paid is an Input Service and is admissible as credit: High Court [ para 6]
Appeal allowed
Case Law Cited -
Metro Shoes Pvt. Ltd. Vs . CCE - 2008-TIOL-417-CESTAT-MUM...Para 6…relied upon
Commissioner Vs . Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST ...Para 6…relied upon
FINAL ORDER NO.52642/2014
Per: Rakesh Kumar:
The facts leading to filing of this appeal are, in brief, as under:
2. The appellant are engaged in the manufacture of excisable goods and are availing cenvat credit facility. The goods manufactured are mainly exported. For procuring export orders, they were availing the service of overseas commission agents to whom the commission was being paid for procuring export orders and on this commission, they had paid service tax as service recipient under Reverse Charge Mechanism during the period January, 2007 to December, 2007 and in respect of this service tax of Rs.2,44,783/-, they had taken Cenvat credit by treating the service procured from the Overseas Commission Agent as their input service. The department being of the view that the Business Auxiliary Service of procuring export orders received from the Commission Agents is not covered under the definition of "input service", issued a show cause notice dated 11.02.2008 for recovery of the Cenvat credit along with interest and also for imposition of penalty on the appellant. The show cause notice was adjudicated by the jurisdictional Asstt. Commissioner vide order-in-original dated 18.02.2008 by which the above mentioned Cenvat credit demand was confirmed along with interest and penalty of Rs.10,000/- was imposed on the appellant under Rule 15 of the Cenvat Credit Rules, 2004. On appeal being filed to the Commissioner (Appeals) against this order, the same was dismissed vide order-in-appeal dated 20.03.2009 against which this appeal has been filed.
3. None appeared for the respondent.
4. Heard Shri Amresh Jain, the learned DR, who defended the impugned order by reiterating the findings of the Commissioner (Appeals).
5. We have considered the submissions of the ld. DR and have gone through the records of this case.
6. During the period of dispute, the inclusive portion of definition of "input service" covered "services of advertisement or sales promotion" and also "activities relating to business". The Tribunal in the case of Metro Shoes Pvt. Ltd. Vs. CCE reported in 2008 (10)STR 382 (T-Mum.)= 2008-TIOL-417-CESTAT-MUM has held that the credit of service tax paid on the commission paid to the commission agent for procuring sales orders is admissible, as the service provided by the Commission Agents for procuring sales orders is covered by the definition of 'input service'. The Hon'ble Bombay High Court in the case of Commissioner Vs. Ultratech Cement Ltd. reported in 2010 (260) ELT 369 = 2010-TIOL-745-HC-MUM-ST (Bombay) has held that the definition of 'input service' as given in Rule 2 (1) of the Cenvat Credit Rules, 2004 covers not only the services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes all the services required in or in relation to the manufacturing business of the manufacturer. The service of procuring export orders /sales orders through overseas agent is certainly a service which has nexus with the manufacturing business of the Appellant and hence, in our view, the same would be covered by the definition of 'input service'. In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.
(Operative portion already pronounced in the open court.)
Regards,
Pawan Singla , LLB
M. No. 9825829075
__._,_.___
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