BEPS- Base Erosion and Profit Shifting
CA Hitesh Arora
(A) Concept
What is BEPS
- BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.
- BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNE's).
- In an increasingly interconnected world, national tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, leaving gaps that can be exploited to generate double non-taxation. This undermines the fairness and integrity of tax systems.
- How BEPS Arise
- The major reason for BEPS is Globalization. The free movement of capital and labour, the shift of manufacturing bases from high-cost to low-cost locations, the gradual removal of trade barriers, technological and telecommunication developments, and the ever-increasing importance of managing risks and of developing, protecting and exploiting intellectual property, have had an important impact on the way cross-border activities take place.
- Globalization has boosted trade and increased foreign direct investments in many countries. Hence it supports growth, creates jobs, fosters innovation, and has lifted millions out of poverty. As the economy became more globally integrated, so did corporations. Multi-national enterprises (MNE) now represent a large proportion of global GDP.
- Globalization has resulted in a shift from country-specific operating models to global models based on matrix management organizations and integrated supply chains that centralize several functions at a regional or global level.
- Moreover, the growing importance of the service component of the economy, and of digital products that often can be delivered over the Internet, has made it much easier for businesses to locate many productive activities in geographic locations that are distant from the physical location of their customers.
- These developments have opened up opportunities for MNEs to greatly minimize their tax burden.
(B) Disadvantages
Major disadvantages of BEPS are;
(a) Loss to Exchequers/Governments:
- Less revenue and a higher cost to ensure compliance.
- Integrity of the tax system is hampered
- In developing countries, the lack of tax revenue leads to critical under-funding of public investment and economic growth is hampered.
(b) Individual taxpayers are harmed:
- When tax rules permit businesses to reduce their tax burden by shifting their income away from jurisdictions where income producing activities are conducted, other taxpayers in that jurisdiction bear a greater share of the burden.
(c) Businesses are harmed:
- MNEs may face significant reputational risk if their ETR is viewed as being too low.
- Corporations operating only in domestic markets may face difficulty competing with MNEs that have the ability to shift their profits across borders to avoid or reduce tax.
Fair competition is harmed by the distortions induced by BEPS.
(C) Action Plan
- Action Plan has been formulated by OECD. First draft has been launched in 2014.
- Fundamental changes are needed to effectively prevent double non-taxation, as well as cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it.
- An action plan containing 15 plans have been prepared.
- An overview of the same is depicted in the table on next slides.
Deductions/Allowances/Perquisites applicable for Salaried Individual for FY 2014-15
Sk. Md. Asif Ali
Finance Act 2014 has introduced various changes in Income Tax Act,1961 and some of those related to deduction and exemptions available to Salaried Individual taxpayers, which includes Amendments in Section80C, Section 80CCD, Section 80CCE and in Section 24 related to Interest deduction. Here I have compiled attached in Excel file Comprehensive list of Deductions , Tax free Allowances and Perquisites highlighting important Amendments for Salaried Individual applicable for Assessment Year 2015-16 / Financial year 2014-15 :-Brief introduction
Section 80C
The limit of Investment under Section 80C is increased from 1 lacs rupees to 1.50 lacs. Following is the wording of the amendments
"In section 80C of the Income-tax Act, in sub-section (1), for the words "one lakh rupees", the words "one hundred and fifty thousand rupees" shall be substituted"
Section 80CCD
Tax Benefits extended to Private Sector Employees. The date of joining condition for the service on or after 1.1.2004 not applicable to the employees in private sector for the purposes of deduction under
the said section. The limit under this section has been fixed at Rs. 1 Lakh.
Following is the wording of the amendments
"In section 80CCD of the Income-tax Act, in subsection (1)–– (i) for the words, figures and letters "Where an assessee, being an individual employed by the Central Government or any other employer on or after the 1st day of January, 2004", the words, figures and letters "Where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004 or, being an individual employed by any other employer" shall be substituted;
(ii) after sub-section (1), the following sub-section shall be inserted, namely:–
"(1A) The amount of deduction under sub-section (1) shall not exceed one hundred thousand rupees."."
Section 80CCE
Consequently limit of deduction under section 80C, 80CCC & 80CCD is increased to Rs. 1.50 lacs. Following is the wording of the amendments
"In section 80CCE of the Income-tax Act, for the words "one lakh rupees", the words "one hundred and fifty thousand rupees" shall be substituted"
For Individual availing Home loan will be benefited more by increased in limit of Deduction of Interest increased to Rs. 2 lacs instead of Rs. 1.5 lacs earlier
2nd Proviso to Section 24
Following is the wording of amendments
"Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees two lakh rupees."
Deferment in date of effect of procedure for export of certified organic products
PUBLIC NOTICE NO. 77 (RE-2013)/2009-2014,
Dated: December 1, 2014
Sub: Deferment in the date of effect of the procedure for export of certified organic products of Public Notice No. 73 dated 18.11.2014.
In exercise of the powers conferred under Paragraph 2.4 of the Foreign Trade Policy, 2009-14, as amended from time to time, Director General of Foreign Trade hereby makes the following amendment in Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014:
2. The procedure for export of certified organic products notified vide Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 became effective from the date of issue of public notice i.e. 18.11.2014.
3. Now it has been decided to grant some transition time to make the Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 effective. Accordingly, the procedure notified vide Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 would come into effect from 18/12/2014
4. Effect of this Public Notice:
Procedure for export of Certified Organic Products notified vide Public Notice No. 73 (RE-2013)/2009-2014 dated 18.11.2014 would come into effect from 18/12/2014.
[F.No. 01/91/180/190/AM 15/Export Cell]
(Pravir Kumar)
Director General of Foreign Trade
Director General of Foreign Trade
Modification to Offer for Sale (OFS) of Shares through stock exchange mechanism
CIRCULAR No. CIR/MRD/DP/ 31 /2014 ,
Dated- December 01, 2014
Sub: Modification to Offer for Sale (OFS) of Shares through stock exchange mechanism
1. Comprehensive guidelines on sale of shares through Offer for Sale mechanism were issued vide circular no CIR/MRD/DP/18/2012 dated July 18, 2012. These guidelines have been modified vide circulars dated CIR/MRD/DP/04/2013 dated January 25, 2013, CIR/MRD/DP/17/2013 dated May 30, 2013 and CIR/MRD/DP/ 24 /2014 dated August 08, 2014.
2. To make it easier for retail investors to participate in OFS, it has been decided that seller may give an option to retail investors to place their bid at cut-off price in addition to placing price bids. In order to do so, following conditions shall be applicable:
2.1. Where option for bidding at cut-off price is given,
2.1.1. Sellers shall mandatorily announce floor price latest by 5 pm on T-1 day to stock exchange.
2.1.2. Exchanges will decide upon the quantity of shares eligible to be considered as retail bids, based upon the floor price declared by the seller
2.1.3. there shall be no indicative price for the retail portion of OFS
2.2. Retail investors may enter a price bid or opt for bidding at cut-off price.
2.3. Margin for bids placed at cut-off price shall be at the floor price and for price bids at the value of the bid.
2.4. Allocation to retail investors shall be made based on the cut-off price determined in the non-retail category.
2.5. Seller may offer discount to retail investors on the said cut off price.
2.6. Retail bids below the cut-off price shall be rejected. Retail bids at cut-off price shall be allocated on proportionate basis in case of over subscription.
2.7. Any unsubscribed portion of retail category after allotment shall be eligible for allocation in the non-retail category.
3. In partial modification to earlier circular, in respect of bids in the retail category, clearing corporation shall collect margin to the extent of 100% of order value in cash or cash equivalents. Pay-in and pay-out for retail bids shall take place as per normal secondary market transactions.
4. Para 5 and para 6 of OFS circular dated July 18, 2012 and para 3.8 & 3.12 of OFS circular dated August 08, 2014 stand accordingly modified. All other conditions for sale of shares through OFS framework contained in the circulars CIR/MRD/DP/18/2012 dated July 18, 2012, CIR/MRD/DP/04/2013 dated January 25, 2013, CIR/MRD/DP/17/2013 dated May 30, 2013 and dated August 08, 2014 remain unchanged.
5. Stock Exchanges are advised to:
5.1. take necessary steps and put in place necessary systems for implementation of above.
5.2. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.
5.3. bring the provisions of this circular to the notice of the member brokers of
the stock exchange to also to disseminate the same on their website.
the stock exchange to also to disseminate the same on their website.
6. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Yours faithfully,
Maninder Cheema
Deputy General Manager
Email: maninderc@sebi.gov.in
Maninder Cheema
Deputy General Manager
Email: maninderc@sebi.gov.in
S. 254: ITAT cannot decline to admit additional ground of appeal on the ground that it would in any case be answered against the appellant on merits
In the light of authoritative pronouncement in National Thermal Power Limited Company V/s. CIT 229 ITR 383 and which was binding on the Tribunal, in terms of Article 141 of the Constitution of India, we do not see how the Tribunal could have disallowed the Assessee from raising this ground. It may be that the Tribunal is inclined not to grant the request of the Assessee because eventually the ground may have to be answered against the Assessee on merits. However, that is a totally irrelevant consideration. We are on the power of the Tribunal to permit raising of such ground and which may or may not be arising from the order of the First Appellate Authority. In the instant case, that issue is specifically taken up before the Assessing Officer. That the Commissioner may or may not have rendered any view on it as the First Appellate Authority, does not mean that the Tribunal was precluded in law from considering the same after it was specifically raised by the Assessee before it. This approach of the Tribunal and being contrary to the express language of the statute and interpreted in a binding judgment of the Hon'ble Supreme Court that we are of the opinion that the Tribunal's order cannot be sustained in law.
S. 9(1)(vi): Broadcast or live coverage does not have a "copyright" & is consequently not assessable as "royalty" for purposes of TDS
(i) A live T.V coverage of any event is a communication of visual images to the public and would fall within the definition of the word "broadcast" in Section 2(dd). That apart we note that Section 13 does not contemplate broadcast as a work in which "copyright" subsists as the said Section contemplates "copyright" to subsist in literary, dramatic, musical and artistic work, cinematograph films and sound recording. Similar is the provision of Section 14 of the Copyright Act which stipulates the exclusive right to do certain acts. A reading of Section 14 would reveal that „copyright‟ means exclusive right to reproduce, issue copies, translate, adapt etc. of a work which is already existing.
(ii) Adverting to the facts of this case we note that the assessee was engaged in the business of conducting horse races and derived income from betting, commission, entry fee etc. and had made payment to other centres whose races were displayed in Delhi. It is not known whether such races had any commentary or analysis of the event simultaneously. It is not the case of the Revenue that the live broadcast recorded for rebroadcast purposes. Having held that the broadcast/live telecast is not a work within the definition of 2(y) of the Copyright Act and also that broadcast/ live telecast doesn't fall within the ambit of Section 13 of the Copyright Act, it would suffice to state that a live telecast/broadcast would have no "copyright". This issue is well settled in view of the position of law as laid down by this Court in ESPN Star Sports vs. Global Broadcast News Ltd. & Ors. reported as 2012 2 RAF 430 (Delhi),, wherein this Court after analysing the provisions of the Copyright Act was of the view that legislature itself by terming broadcast rights as those akin to "copyright" clearly brought out the distinction between two rights in Copyright Act, 1957. According to the Court, it was a clear manifestation of legislative intent to treat copyright and broadcasting reproduction rights as distinct and separate rights. It also held that the amendment of the Act in 1994 not only extended such rights to all broadcasting organizations but also clearly crystallized the nature of such rights. The Court did not accept the contention of the respondent that the two rights are not mutually exclusive by holding that the two rights though akin are nevertheless separate and distinct.
(iii) In view of the aforesaid position of law which brought out a distinction between a copyright and broadcast right, suffice would it be to state that the broadcast or the live coverage does not have a "copyright". The aforesaid would meet the submission of Mr.Sawhney that the word "Copyright" would encompass all categories of work including musical, dramatic, etc. and also his submission that the Copyright Act acknowledges the broadcast right as a right similar to "copyright". In view of the conclusion of this Court in ESPN Star Sports case, such a submission need to be rejected (DIT vs. Neo Sports Broadcast (P) Ltd. 133 ITD 468 (Mumbai) approved)
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