Thursday, February 28, 2013

ICL , BL, ICAI et al Post-budget Write-ups !


Update>

Livemint

http://www.livemint.com/budget2013?gclid=CLvT-M2V4rUCFYwa6wodwEoAvg

ICL

Budget 2013: Direct Tax Proposals - Introduction

<> On the mentioned Budget Proposal to mandating TDS of 1% on certain transactions in ‘immovable property’,- earlier proposed in the last Budget but later dropped like a hot potato,- has been sought to be reintroduced; albeit with some modification(s). In one’s perspective, however, it has obviously been so done yet again, mindlessly, without the very much needed/desired home work.

For an appreciation of the remark, what ought not to be over sighted is the still live/ continuing provision for tax exemption of capital gains- e.g. section 54 and 54 EC (subject to cor4rdction, if one is making a mistake in believing so). Should a taxpayer opt to, or intend opting for, such exemption, by complying with the stipulated conditions within the specified time frame, then he gets an extended time (2/3 years) for being taxed/to pay tax. The other inter-related/connected provisions, which require to have been correspondingly changed are noted to have been left untouched, To be focused on is, besides the saving section 197, section 199 , (rwr 37BA there under).

If one were to go by the latest public announcement, the DTC Bill has the prospects of being introduced in the Parliament for enactment before long. According to the last seen text of the Bill, the above referred present scheme of tax exemption is slated to undergo a significant change. For deliberation on the subject TDS, one might have to wait to know how it is going to be covered in the ‘simplified code’.

Turning to experts wishing to share more thoughts!

SG

Budget 2013-14 – Analysis of Income Tax Provisions

Re. Item 16,new section 194IA, mandating TDS of 1% on certain transactions in ‘immovable property’,earlier proposed in the last Budget but later dropped like a hot potato,has been sought to be reintroduced; albeit with some modification(s).In one’s perspective, however,it has obviously been so done mindlessly, without the very much needed/desired home work.
For an appreciation of,- ‘why to say so’, as one sees it (experts may correct, if wrong) what ought not to be oversighted is the very much live/ continuig provision for tax exemption of capital gains- e.g. section 54,54 EC. Should a taxpayer opts to, or intends opting for, such exemption,by complying with the stipulated conditions, then he gets an extended time (2/3 years) for taxation. The other inter-related/connected provision requiring to remain focussed on is, besides the saving section 197,section 199 (rwr thereunder). It is noted,as of now, there has been not even any indication of correspondingly warranted canges in those provisions.
If one were to go by the latest public announcement, the DTC Bill has the prospects of being introduced in the Parliament for enactment before long. According to the last seen text of the Bill, the above referred extant scheme of tax exemption is slated to undergo a significant change. For any further deliberationn on the subject TDS, it is anyone’s guess what will be its new avatar thereunder, hence left clueless.
Over to experts,who are supposed to be better equipped and enlightened, for more thoghts and useful sharing of views.


Taxmann

Finance Bill 2013 - Tax Impact Legally Analyzed
Taxmann brings you the legal analysis of tax impact of substantially all the clauses of the Finance Bill 2013. For detailed analyses visit www.taxmann.com or click on the following links:
1) Tax Residency Certificate - No More Conclusively Sufficient (Read More)
2) Re-incarnated GAAR proposed to be effective from 01-04-2016 (Read More)
3) Second innings for Investment allowance; bouncer of disallowance for State owned undertakings (Read More)
4) Dividend sprouts from 'Buy-back' of unlisted shares; AAR ruling in RST's case confirmed (Read More)
5) Liability in case of 'buy-back' shifted from shareholders to company (Read More)
6) Affordable houses to costs less with additional deduction for interest paid on housing loans (Read More)
7) Yet another attempt to impose TDS on transfer of immovable property (Read More)
8) Term 'tax' given wide interpretation when it's recoverable from director or partner of Co. or LLP (Read More)
9) Old is not 'Gold' anymore; Royalty and FTS taxable at flat rate of 25%, irrespective of date of agreement (Read More)
10) One more loophole plugged in provisions of deemed gift under Sec. 56 (Read More)
11) Seized assets are no longer available for adjustment towards advance tax liability (Read More)
12) AO gets additional time for assessment if 'special audit' directed by him is set aside by the Court (Read More)
13) Only blue collared employees can bring fortune to their employer of additional deductions. (Read More)
14) Return of income filed without payment of self-assessment tax to be treated as defective return (Read More)
15) EPFO given additional time to decide the fate of pending applications seeking exemptions (Read More)
16) Approval of JCIT for assessment is not sacrosanct if CIT's approval is taken, proviso clarifies (Read More)
17) Deduction may be available soon for Medical Insurances under State Govt. Health Scheme (Read More)
18) Relaxation on cap of 10% of sum assured to enable disabled persons to claim Sec. 80C benefit (Read More)
19) Compulsory higher penalty if AIR not furnished even after expiry of notice period (Read More)
20) Income distributed by securitization trust not taxable in hands of recipients (Read More)
21) Reduction in STT rates and additional levy of Commodity Transaction Tax (Read More)
22) Contribution to National Children Funds would fetch 100% deduction (Read More)
23) Rationalization of tax on income distributed by Mutual Funds (Read More)
24) Exemption extended to 'Investor Protection Fund' set-up by Depository (Read More)
25) 'Venture Capital' entities re-defined (Read More)



ICAI
Union Budget 2013-14 – ICAI Perspective

TOI

timesofindia.indiatimes.com/articleshow1/18757479.cms
6 hours ago ... An assurance from Centre on the tax treaty with Mauritius soothed investors and resulted in a steady late session on Friday with the sensex ...

Fii | EconomicTimes.Indiatimes.com 



ICL

Budget 2013: Taxation as a Solution to a Governance Problem

<to comment



Tax fears of foreign investors allayed

"He stated that this merely means that certain treaties MAY HAVE two conditions -- a condition of residency and BENEFICIAL OWNERSHIP . As far as residency is concerned, TRC would be acceptable and for beneficial ownership it will be a question of fact and law. "

Poser; Has the FM been fair enough or be rightly regarded to have been 'responsible' in making such a statement before the august house, if regard be had to what the treaties in force precisely say  or do not say, -on the 'condition' spoken of by him ?
So far as one could recall or know, none of the treaties as of now(to double check with experts) contain any such 'condition'  of 'beneficial ownership', much less any explicit one, - as seem to be implied by the FM.
Even granting for a moment that there be in anyone or more of the treaties which speak of suchb a condition, that, in any case, is an aspect which would be required to be acted upon only with the treaty partner, through 'mutual agreement procedure' as provided for in the treatyb itself; certainly not a matter 'of law and facts',  so as to , in the vent of a conflict', be regarded to be amenable to any recourse to litigation, especially in domestic courts.

Cross Refer> Taxman Published Articles* on the TREATY IMPLICATIONS, etc. !  

* (2008) 13 CPT  pg. 514, (2009) 176 TAXMAN 129, etc.

<> Since noted, the quoted statement is reported to have been made by the FM by way of clarifying the government's stance/philosophy, not in the Budget speech, but in his post-budget speech!
Be that as it may, it is after all a public statement made by the concerned responsible Minister, hence cannot simply be ignored or taken lightly as of no significance or consequence.
In case, in all or anyone or more of, the treaties, there is no such 'condition of beneficial ownership', that too in unequivocal and indisputable terms, then it is NOT, according to the very scheme of things, so also as per the categorical view taken by the SC, a matter which could be regarded to be open to any debate or dispute, or even adjudication by domestic  court , on a unilateral basis, as if it is a question of "fact and law".
On the contrary, in case of any conflicting stance, the treaty partners would require to have it settled amicably by having recourse to the only treaty provision,  known as "MAP'.

cross refer>

itatonline
Finance Ministry Clarification Regarding Tax Residency Certificate (TRC)

(Click Here To Read More)

An Add-on>

@Gopal
Reaction:
On the points of doubt /reservation raised, one wonders whether even the FM and / or his coterie would have any satisfactory answer or solution to offer !.
Be that as it should, In the current Budget, wrt the changes proposed with the stated aim of rationalising the applicable ROT, it reads:
“147. Another case is the DISTRIBUTION OF PROFITS by a subsidiary to a foreign parent company in the form of royalty…..”
No one concerned, whatever be the individual’s level of ingenuity or faculty to understand, would not have failed to abruptly realise the wisdom, or lack of it, of the draftsman’, if not of the FM, in construing the very concept of ‘royalty’. The point is, it has come to be given such a violent twist as to offend the thus far obtaining common understanding thereof; even assuming that were dictated by the often claimed human faculty of ‘common sense’.
To dilate: One would have thought that ‘royalty’, basically an item of ‘expenditure’, – in accounting or legal or any other known parlance, or sense of the concept,, – could be, howsoever remotely, or with any of the ‘imaginative initiatives’- so generously attributed to the chief architect (FM) in certain quarters , read BSR’s article in Business Line – “Budget steers clear of populism” – be so contemptuously dubbed or sinfully decried as a ‘DISTRIBUTION OF PROFITS’.
For another view but with a different stroke (rooted in self-same ‘imaginary initiative’ or individual perspective), whatever one wishes to call it, refer indiacorpblog -” Budget 2013: Taxation as a Solution to a Governance Problem”
(leaving open to the enlightened Readers, to reflect and edit – add / modify)

NOTE: Intended reference was to BSR’s article titled -Booster shot for economy, wherein the FM has been copiously  commended for his exemplary ingenuity in “a judicious blend of well-conceived incentives and imaginative initiatives.”



SG

As reported elsewhere, in his post-budget speech, besides the condition of ‘residency’, the FM has made a mention of another condition; that is, of “beneficial ownership”.
That reads, – “He stated that this merely means that certain treaties MAY HAVE two conditions — a condition of residency and BENEFICIAL OWNERSHIP . As far as residency is concerned, TRC would be acceptable and for beneficial ownership it will be a question of fact and law. ”
(Highlights supplied)
To one’s memory or knowledge, none of the treaties as of now (to double check with experts) contain any such ‘condition’ of ‘beneficial ownership’, much less any explicit one, – as seem to be implied by the FM.
On the premise that, in all, or anyone or more of, the treaties, there is no such ‘condition of beneficial ownership’, that too in unequivocal and indisputable terms, then it is NOT, according to the very scheme of things, so also as per the categorical view taken by the SC, a matter which could be regarded to be open to any debate or dispute, or even adjudication by domestic court , on a unilateral basis, as if it were a question of “fact and law”.
On the contrary, in case of any conflicting stance on any such treaty related or connected issues, the treaty partners would, strictly speaking, require to have it settled amicably by having recourse to the only treaty provision, known as “MAP’.
The applicable OECD Guidelines, besides case law and published articles in public domain (e.g. (2008) 13 CPT pg. 514, (2009) 176 TAXMAN pg. 129) may be noted to throw sufficient light on the foregoing aspects.






Putting Railways on profit track 
Budget targets hinge on growth 
Boost to infrastructure  
Yet another missed opportunity 

<previous


TAXATION & ACCOUNTS

Betting big on corporate, service taxes  

 

 






Tuesday, February 26, 2013

rBI guidelines, not sacrosanct for IT ; AT Realty v Special provisiions of IT Act


Union Budget is coming and everyone has its expectations. The National Real Estate Development Council (NAREDCO) has demanded provisions for including cost of land and building construction in capital expenditure in the Budget 2013.
NAREDCO said section 35AD sub-section (5) (ac) & (5) (ad) of Income Tax Act stipulates that deduction of capital expenditure incurred wholly and exclusively for developing and building a housing project under a scheme for slum development or rehabilitation or affordable housing framed by Central or State govt. and notified in accordance with the guidelines prescribed is allowed.  It added that definition of capital expenditure does not include does not include land cost and building construction cost or any other significant investment in the project. As result developer of slum redevelopment/rehabilitation and affordable housing does not get any major advantage as far as the income tax concession is concerned.  NAREDCO  therefore suggested that cost of land and building construction cost should be made part of capital expenditure to incentives developer to undertake construction of social housing.

<> The purport or import, much less the nature, of the grouse/complaint of the NAREDCO and the suggestion made are, to say the least, quite confusing; in any case, not readily understood. For, it prima facie offends the belief and clear understanding of even anyone having an elementary knowledge of such matters. To the best of one’s knowledge and belief, the referred costs, if incurred by developer in the course of his carrying on the business of construction and sale, are always treated as costs of the ’stock-in-trade’, hence been allowed to be deducted, according to the ‘method of accounting’ consistently followed. That, as one imagines, has been the accepted legal position, de hors / without the referred new provisions of the IT Act. If NAREDCO were, in its perspective, to have had in mind anything else, that has not been made clear.

May be, accounting and tax experts will be better equipped to clarify the obviously disturbing doubts.

Cross refer S 35 AD @ http://www.lawzonline.com/bareacts/income-tax-act/section35AD-income-tax-act.htm

jaabaali.com/2013/01/national-real-estate-development-c...
Jan 26, 2013 ... National Real Estate Development Council (NAREDCO) had given their suggestions mainly on the following issues: 1. Real Estate (Regulation ...

Monday, February 25, 2013

SG S 54 F for house property abroad; S 54 B and/vs 54 F - A debate !


1. It is observed that, the assessee (appellant)’s pleadings for supporting the claim for tax exemption under section 54B have been rejected mainly on, besides others, the ground that “we are not inclined to think that the finding of fact rendered under section 54B is perverse”. The finding is that the subject farm land had not been proved to meet with requirement of user for ‘agricultural purposes’.
On this aspect, attention may be drawn to the expert commentary in Palkhivala’s leading text book on income-tax and case law cited- ref. page 109 of the ninth edition, vol.1; also briefly dealt with in page 127 of published article – 153 Taxman 126 (Mag).
It calls for a special noting, -the controversies with differing hues and shades have been repeatedly taken to courts, but judicial views are mutually varying, hence left with no scope for a definitive conclusion.

2. As to the dispute stemmed on the concept of ‘appurtenant’ as embodied in the enactment, in the absence of any special definition n the Act, one has to necessarily look for guidance in the material galore in public domain
@links e.g. –
>What is APPURTENANCE? – Black’s Law Dictionary ;
>appurtenances legal definition of appurtenances. appurtenances …

So much so, litigation of this kind can only be expected to go on and on, forever.

Even so, as always, over to the enlightened readers, at best for a further academic study.

  • Sunday, February 24, 2013

    BL New Banks ; ICL RBI moves to allow, BANKS for Realty - 'ring fencing', so on

    TOP-up

    BL

    http://www.thehindubusinessline.com/multimedia/dynamic/01793/xBL18_IF_Bank_downs_1793697b.jpg.pagespeed.ic.9p0wuifLOS.jpgFrom debt recovery tribunals to waivers to asset reconstruction companies to debt restructuring, practically every solution in the book has been tried to tame bad loans. And yet they continue to rise. NS Vageesh looks at the genesis of the problem and the way forward. »

    Property prices cool, but home rents heat up

    http://www.thehindubusinessline.com/multimedia/dynamic/01793/xBl18_pg1_table_NET_1793846b.jpg.pagespeed.ic.p50Q32zjxl.jpgProperty prices have cooled down significantly in the last one year. So, has this led to a lower rental bill for tenants? No, rents in most cities have increased in the last 12 months, with some localities even witnessing hikes of up to 20 per cent. »

    How NBFCs rein in their bad debts

    The economic slowdown has meant that non-performing loans of both deposit-taking and non-deposit-taking Non-Banking Financial Companies (NBFCs) have shot up over the past two years. But discipl... »




    The borrower’s perspective

    The regulatory environment has impacted cash flows and ability to service debt »


    Top-up>
    http://taxguru.in/rbi/rbis-master-circular-dated-172011-customer-service-banks.html
    <>
    Impromptu

    After a lapse of nearly 2 years, because of the increasingly disparaging personal experience with banks, to be precise with so called PSBs/ branches in locations like Mumbai, and having been pushed almost to own wits’ end, one was obliged / perforce driven to have a relook at the longish master circular from the RBI.

    Of course, the RBI, as the apex bank, more so as the regulatory authority with direct responsibility and exclusive control, has been, as a matter of routine, issuing such circulars or directives, etc., from time to time, stressing unequivocally, among others, why the most important aspect of all, for banks to ensure, is the so- dubbed ‘customer satisfaction’. Whatever that means or was intended to mean, as any other ideology, has only remained on paper. What has been persistently happening in the field is just the contrary. Mostly, at the end of the day, a majority of customers/account holders are left a helpless and highly dissatisfied lot, being faced with an overwhelmingly suppressed and miserable feeling, verging on growing mistrust and unsatisfactory service of the highest order. What else can be the root cause- except the wanting of wish and will to monitor !

    No need to specially add, -it is high time that the RBI, so also the concerned managements, pull up their socks, take a serious note of the increasing deterioration in the quality of service, and come out, on a war footing, with truly effective remedial measures. Failing which, there is no gainsaying that, the banking sector is bound to jump on the bandwagon, for joining the other one, in a way connected and related, commonly known for its notoriety, i.e. the realty sector, which admittedly has continued to remain for long an extremely 'unorganised', ‘unregulated’ sector, with the RBI pushed to a mere figurehead.



    <previous
    Setting up a new bank? Pause and proceed

    Ref. "The ‘feel good’ in business circles, especially considering that the RBI has allowed applications from quarters that were speculated to be possibly excluded, is clearly visible and understandable. The fact that the RBI has indicated a meaningful timeline and evaluation process is equally welcome"

    Reaction: The impression given that applications for licences have been,- "allowed" , so far as one knows, does not seem to be factually correct; at best a speculation.

    The write-up could have been more specific on, what exactly are the 'quarters' referred to!

    Random thoughts:
    In the write-up no focussed mention has been made of the ‘realty sector’, unwittingly or otherwise.  None concerned, directly or indirectly, could afford to be oblivious of the idea of 'owner-financing' that has been slowly but notably catching up and gaining momentum in very recent times in the realty sector. 
    The newly mooted banking stream , in the interests of all concerned, especially to protect  the interests of the PSBs, and in turn it’s stakeholders, so also the buyers’ community,  needs to be implemented and licences  granted, with the main focus on those sectors such as 'realty sector' , which for long, on their own admission,  have remained highly 'unregulated’ , hence with inherent ‘risk potentials’ confronting the nation’s economy as a whole.

    For an insightful study of the concept of 'self-financing', the following may be read >



    1. What is Self-financing? definition and meaning

      www.investorwords.com/11044/self_financing.html
      Definition of self-financing: nounthe process in which a company finances a project or ...the company is completely self-financing ... Popular 'Banking' Terms ...
    2. What is Self-financed? definition and meaning

      www.investorwords.com/11043/self_financed.html
      Definition of self-financed: adjectiveUsagethe project is completely self-financedthe project ... the project is completely self-financed ... Popular 'Banking' Terms ...
    3. What Does Owner Financing Mean? | eHow.com

      www.ehow.com › Real Estate & Investment
      This means that the owner is acting like a bank by lending the purchaser all or a portion... but you can always request not to pay points on a self-financed property. ... Owner financing is a term used to describe owner participation in financing a ...
    4. Debt Financing Vs. Equity Financing

      www.buzzle.com/articles/debt-financing-vs-equity-financing.html
      There are three alternatives for financing a business, namely, self financing, equity financing and ... Debt financing means when a business owner, in order to raise finance, borrows money from some other source, such as a bank. ... or in accordance with the terms and conditions set between him and the business owner.

    The mooted idea , though prima facie made to appear a straightforward one, with an objectively well-thought-out outlook, a reading of the revealations of certain not so obvious, if not hidden, facets of the new scheme  have been brought to focus through an analysis in-depth in the write-up @the link below: 

    The point calling for a special noting is that, after all, just as most of the other SEBI formulated rules, the subject rules riddled with glaring complexities and impediments rendering , in the ultimate analysis, the norms for approval a highly subjective exercise.

    RBI Guidelines for Licensing of New Private Sector Banks
    <> It is recalled, PC, the FM in his initial public announcement of such a proposal indicated to the effect that the novel idea  should enable the realty sector to have its financing needs met by an exclusive wing of banking sector, divorced from the extant banking system. Be that as it may, the RBI’s follow-up move, if properly designed, implemented and gone ahead, with a sincerity of its laudable purpose, in a common man’s perspective, should help the PSBCs in being insulated to a great extent from the worrisome ‘risks’ and the resultant ‘NPAs’ thus far faced by them.

    No need to specially say, - Over to concerned experts for matured thoughts and suggestions. 

    Key Note:

    Reflecting for a moment, the newly announced scheme, seems to have a close semblance of the other already extant so-called 'self-financing' schemes. May be, is traceable to the ideally mooted concept of, employees-owned-managed companies, experimented not in the very distant past. There is no knowing why, and what exactly were the reasons,for it not having been successfully pursued !