APRIL 2014
IndiaTax Konnect
Editorial
Recently, the Finance Minister released the DirectTaxes Code, 2013 (DTC 2013) for pu...
DelhiTribunal rules on the issues of royalty, Service PE and
services effectively connected with PE
The taxpayer, a tax re...
3
Corporate tax
Decisions
Pre-operative interest income cannot be adjusted against
pre-operative expenses and is taxable a...
4
as and when the commission payments were made in
the subsequent year,TDS was made and remitted to the
Government account...
5
The division bench of the Supreme Court sets aside the
Order of High Court allowing ‘interest on interest’ under
Section...
6
Transfer pricing
Decisions
The MumbaiTribunal upholds use of internal CUP with
appropriate adjustments for broking trans...
7
•	 TheTribunal seconded the view of the taxpayer that even
if the advertisement expenditure was reduced from the
operati...
8
Indirect tax
Service tax - Decisions
Levy of service tax on services received and consumed
abroad
One of the issues invo...
9
The AhmedabadTribunal commented that the service tax
liability was to be discharged on the gross amount charged
by the s...
10
Custom Duty - Decisions
Utilisation of goods imported under Project Imports
Scheme
In the instant case, the taxpayer im...
11
dispensed with and instead, the dealers are now required to file
Form-9 electronically with respect to reconciliation d...
Contact us:
GirishVanvari
Co-Head ofTax
T: +91 (22) 3090 1910
E: gvanvari@kpmg.com
Hiten Kotak
Co-Head ofTax
T: +91 (22) 3...
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India Tax Konnect - April 2014

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KPMG in India Tax Konnect - April 2014 deals with recent tax developments.

This report highlights the developments on the tax and regulatory front and its implications on the way you do business in India.

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India Tax Konnect - April 2014

  1. 1. APRIL 2014 IndiaTax Konnect Editorial Recently, the Finance Minister released the DirectTaxes Code, 2013 (DTC 2013) for public discussion and comments. DTC 2013 has been revised after considering suggestions given by the Standing Committee on Finance (SCF). As per news reports, out of 190 recommendations made by SCF, 153 are proposed to be accepted wholly or in part. Some of the key recommendations accepted include exemption to taxation of income from indirect transfer for shareholders having small shareholdings (up to 5 per cent), modification of the definition of place of effective management, introduction of broad based General Anti-avoidance Rules (GAAR), etc. DTC’s fate will depend on the policies and priorities of the next government.Therefore, one would have to wait for the formation of the next government post-general election and whether DTC would be on their business agenda. However, the DTC 2013 does provide the taxpayers with valuable insights into emerging trends in the policies and thought processes of the tax collectors in India. On the international tax front, the DelhiTribunal in the case of Sumitomo Corporation held that supervisory fees for installation of equipment were in the nature of Fees forTechnical Services (FTS) and it was not effectively connected with the taxpayer’s Permanent Establishment (PE) in India.Therefore, such fees were taxable at the rate of 20 per cent under India-Japan tax treaty and were not taxable as business profits. Further, theTribunal held that the taxpayer’s Liaison Office (LO) in India was merely acting as a communication channel and was not involved in supervisory activities.Therefore, the existence of LO could not be the basis to be held as supervisory PE in India. It was also held that test of minimum period of 180 days for supervisory PE contemplated in Article 5(4) of the tax treaty should be determined for each individual site/ installation project. The DelhiTribunal in the case of JC Bamford held that the taxpayer granted to JCB India the technical know-how, patent rights and confidential information for manufacture, assembly, use and sale of licensed products.The consideration for the same was taxable as royalty. Activities of occasional visitors i.e. testing and inspection were carried out to ensure that the licensed products adhered to the global standards of quality. Such activities were required by and in the interest of the taxpayer and amounted to stewardship activities and therefore cannot constitute PE in India. However, services rendered by the taxpayer through its employees were managerial in nature. Such services resulted into service PE in India. Accordingly, fees related to the deputation services were held to be effectively connected with the service PE and therefore taxable as business income. On the transfer pricing front, the MumbaiTribunal in the case of J.P. Morgan India Private Limited confirmed the Commissioner of Income-tax (Appeals)’s order in upholding the use of Comparable Uncontrolled Price (CUP) as the most appropriate method for benchmarking the taxpayer’s brokering services, after allowing appropriate adjustments for differences in functions performed, assets employed and risks assumed in dealing with related and unrelated parties. We at KPMG in India would like to keep you informed of the developments on the tax and regulatory front and its implications on the way you do business in India.We would be delighted to receive your suggestions on ways to make this Konnect more relevant. Contents International tax 2 CorporateTax 3 Transfer Pricing 6 Indirect tax 8 Personal tax 11
  2. 2. DelhiTribunal rules on the issues of royalty, Service PE and services effectively connected with PE The taxpayer, a tax resident company of U.K., is a part of the JCB group and owns, develops and manufactures excavators, sold under the JCB brand name.The taxpayer, entered into aTechnologyTransfer Agreement (TTA) and International Personnel Assignment Agreement (IPAA) with its wholly owned subsidiary JCB India Ltd. As per theTTA, the taxpayer (Licensor) granted to JCB India (Licensee) a license to manufacture, assemble, use and sell licensed products, and for that purpose permitted the taxpayer to use its know-how, the inventions and any confidential information (‘IP Rights’). The taxpayer was required to conduct random testing of licensed products, as and when desired, for which it used to send its employees. Further, as per agreement, the taxpayer was required to provide technical assistance to the employees of the Indian company through its employees. For technical assistance, the taxpayer and Indian company entered into an International Personal Agreement.The taxpayer sent its employees who occupied key managerial positions of the Indian company. During the relevant year, the taxpayer received a sum as royalties/Fees for technical services (FTS) from JCB India, in consideration for a grant of exclusive rights to manufacture and market ‘Excavator Loader’. Based on the facts of the case, theTribunal ruled as follows: • The taxpayer granted to JCB India the technical know-how, patent rights and confidential information for manufacture, assembly, use and sale the licensed products.The consideration for it falls within the scope of ‘royalties’ as per Article 13(2) of the tax treaty. • Activities of occasional visitors i.e., testing and inspection were carried out to ensure that the licensed products adhered to the global standards of quality. Such activities were required by and in the interest of the taxpayer and amounted to stewardship activities, and therefore cannot be constitute PE in India. • Employees of the taxpayer managing the overall operations of the Indian company hence rendered managerial services. Duration of stay of such employees was more than 90 days within the period of 12 months. Accordingly, Services rendered by the taxpayers through its employees constituted Service PE, in India. • Further, fees related to the deputation services were held to be effectively connected with the service PE, and therefore taxable as business income. DDIT v. JC Bamford Excavators Limited (ITA No. 540/Del/2011, AY 2006-07] International tax Decisions Supervisory fees are taxable as FTS and not as business profits since such fees are not effectively connected with a PE in India The taxpayer, a Japanese company, was engaged in supplying equipment to various companies in India. The taxpayer established an LO in India to act as a communication channel between the Head Office (HO) of the taxpayer and the Indian companies. The taxpayer had also established three Project Offices (PO), inter alia, for supply/ installation of equipment. Under some contracts, the taxpayer was also responsible for supervising the installation of the equipment. The terms and condition of each of the contract was different and was not linked to each other. The Assessing Officer (AO), inter alia, held that the supervision fees were effectively connected to the LO and therefore, were liable to be taxed as business profits under Article 7(3) of the India-Japan tax treaty. Further, the AO held that the aggregate period of supervisory activities in India for all the projects taken together was more than 180 days, and thus the taxpayer also had a supervisory PE. The issue reached the Delhi High Court, which remanded it back again to theTribunal to determine whether the supervision fees received from the Indian Company were taxable under Article 12(2) or under Article 12(5), read with Article 7(3) (as business profit) of the tax treaty. Based on the facts of the case, theTribunal, inter alia, held as follows: • In order to apply Article 12(5) of the tax treaty, the beneficial owner of the FTS should carry on business in India, in which the fees arises through a PE and the contract in respect of which the fees are paid should be effectively connected with the PE in India. When these two conditions are satisfied, provisions of Article 7 of the tax treaty will apply. • The LO was only facilitating the communication of the HO with the Indian company and was nowhere involved in the supervisory activities. Hence, the mere existence of the LO could not be a basis for the claim that the taxpayer had a PE in India. • On the issue of the supervisory PE, theTribunal held that where there are several projects where supervision work was done, the test of minimum period of 180 days should be determined for each project individually. In the instant case, since the period of supervision activities in India under each project was less than the minimum period of 180 days, the test of supervisory PE was not satisfied. • TheTribunal held that income was taxable as FTS as per Article 12(2) of the tax treaty. Sumitomo Corporation v. DCIT [2014] 43 taxmann.com 2 (Del) 2
  3. 3. 3 Corporate tax Decisions Pre-operative interest income cannot be adjusted against pre-operative expenses and is taxable as ‘income from other sources’ The taxpayer was incorporated in 1989 with the object of manufacturing human vaccines based on the technology developed by Pasteur Merieux SerumsetVaccines (PMSV), Lyon, France. Under an agreement, dated 2 December 1988, entered into between France and India, the taxpayer received a substantial financial grant. Such grant was to be utilised for payments to PMSV for obtaining technology, equipment, technical services and personnel training for vaccine manufacturing. Indian Petrochemicals Corporation Ltd., one of the promoters of the taxpayer assumed the responsibility for project implementation and granted a loan of INR5 million. Funds of INR 178.8 million were also brought in by the promoters as share capital.These funds were invested with banks under the ‘portfolio management scheme’ under which the banks gave an assured earning guarantee.The taxpayer in its return of income for AY 1992-93 adjusted the interest income of INR 9 million against its pre-operative expenses. The AO rejected the claim for adjustment and, relying on the Supreme Court’s decision in the case ofTuticorn Alkali Chemicals and Fertilisers Ltd. v. CIT [1997] 227 ITR 172 (SC), held that the interest was separately assessable under the head ‘income from other sources’.TheTribunal relied on the decision of the Supreme Court in the case of CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) and held that the interest could not be separately brought to tax, but had to be adjusted against the pre-operative expenses relating to the project. The Delhi High Court observed that the utilisation of fund is important and not the source of fund to determine the taxability of interest income.Thus, the High Court held that the interest income of the taxpayer could not be adjusted against its pre-operative expenses and had to be taxed under ‘income from other sources’.The High Court inter alia relied on the decision of Supreme Court in the case ofTutitcorn Alkali. The High Court also distinguished the decision of Supreme Court in the case of Bokaro Steels, which had been relied upon by the taxpayer.The Court held that the facts of the case were not same with the facts of Bokaro Steels. Herein, the investment of the funds had nothing to do and was not inextricably linked with the construction of the project. Relying on the decision in the case ofTuticorin Alkali Chemicals and Fertilisers Ltd., the High Court held that it was a conscious act of investment of funds by the taxpayer and if such investment results in income, the same must be brought to tax under the residual head, even if the company has not commenced its business. CIT v. IndianVaccines Corporation Ltd. [ITA No.572/2013, dated 5 March 2014] Disallowance under Section 40(a)(i) of theAct applies only to the amount ‘payable’ at the year end The taxpayer was a manufacturer of rubber tubes, tyres and rubber products. In the assessment order for the year under consideration, the AO made certain disallowances including disallowances under Section 40(a)(i) of the Act for non-withholding of tax from payments to non-residents for professional and consultancy services.The CIT(A) deleted the disallowance made by the AO. Aggrieved by the Order of CIT(A), the tax department filed an appeal before the Chennai bench of theTribunal. The ChennaiTribunal observed that entire payment for services was made and nothing was outstanding.The question under consideration was that whether Section 40(a) (i) applies only to amounts outstanding at the end of the year or on the entire amount of expenditure.TheTribunal also observed that the Allahabad High Court in the case of CIT vs.Vector Shipping Services (P) Ltd. [TS-352- HC-2013(ALL)] had upheld the Special Bench ruling in Merilyn Shipping and Transport vs. ACIT [TS-220-ITAT-2012(VIZ)] as good law. It was held in Merilyn Shipping ruling that Section 40(a)(i) did not apply to those amounts which had already been paid by the taxpayer before the close of the relevant previous year. On the other hand, it was also observed that Calcutta High Court in the case of CIT v. Crescent Export Syndicate [TS- 199-HC-2013(CAL)] and Gujarat High Court in the case of CIT vs. Sikandarkhan N.Tunvar [TS-186-HC-2013(GUJ)] had disapproved the ratio of Merilyn Shipping andTransport.Thus, there were contradictory views of the different High Courts on the issue under consideration. Relying on the decision of Supreme Court in the case of CIT v.Vegetable Products Ltd. [1973] 88 ITR 192 (SC) theTribunal held that the view in favour of the taxpayer should be adopted, and hence disallowance under Section 40(a)(i) applied only to the amounts ‘payable’ and not to those amounts which were already ‘paid’ during the year. DCIT v. MRF Limited [I.T.A. No. 1985/Mds/2011, 4 March 2014] TDS liability under Section 194H is attracted only when commission payments are made to agents/credited to respective agent’s account, not when the amount is credited to the provision account The taxpayer was engaged in the business of manufacturing, purchase and sale of excavators, loaders, cranes, dumpers and spare parts etc. During the course of assessment proceedings for AY 2007-08, the AO observed that the taxpayer had debited a sum of INR 140 million as sales commission out of which INR 0.6 million related to year end provision made towards commission. No tax was deducted at source (TDS) from the provision amount; however,
  4. 4. 4 as and when the commission payments were made in the subsequent year,TDS was made and remitted to the Government account.The AO came to the conclusion that the taxpayer was required to withhold tax under Section 194H at the time of making provision and in the absence of such withholding, commission was not allowable under Section 40(a)(ia) of the Act.The AO accordingly disallowed the sum of INR 0.6 million. TheTribunal observed that the payment was not made to the agents as the amount was credited to the provision account and not the respective agent’s account.TheTribunal, ruling in favour of the taxpayer, held that theTDS liability under Section 194H was attracted only when commission payments were made to agents/credited to their account and not when the amount was credited to a provision account. In the facts of the case, the agents received a vested right to receive the commission only when obligations under the commission agreement were fulfilled. Hence, there would be no requirement to deduct tax at source when the amount is credited to the provision account and consequently disallowance under Section 40(a)(ia) of the Act was not triggered. DCIT v.Telco Construction Equipment Co Ltd. [ITA No.478/ Bang/2012, dated 7 March 2014] No power to theTribunal to grant stay beyond 365 days in light of third proviso to Section 254(2A) inserted by the Finance Act, 2008 In this case, the Tribunal extended the stay beyond 365 days as the taxpayer was not responsible for the delay in disposal of the appeal. The department challenged the decision of the Tribunal by way of a writ petition to the High Court on the grounds that after the insertion of the third Proviso to Section 254(2A), the Tribunal had no power to extend stay beyond 365 days even if the taxpayer was not at fault. The Delhi High Court, allowing the writ petition, held as under: • In view of the third proviso to Section 254(2A) of the Act substituted by the Finance Act, 2008 with effect from 1 October 2008, the Tribunal could not extend stay beyond the period of 365 days from the date of first order of stay; • When default and delay was due to a lapse on the part of the tax department, the Tribunal was at liberty to conclude hearings and decide appeals, if there was a likelihood that the third proviso to Section 254(2A) would come into operation; • The third proviso to Section 254(2A) does not bar or prohibit the tax department or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand and, on such a statement being made, it will be open to the Tribunal to adjourn the matter at the request of the Revenue; • The taxpayer can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the Tribunal as may be required; • Section 254(2A) does not prohibit/bar the High Court from issuing appropriate directions, including granting stay of recovery; • The constitutional validity of the provisos to Section 254(2A) of the Act had not been examined and the issue was left open. The Uttarakhand High Court in the case of Seacor Offshore Dubai LLC [TS-159-HC-2014(UTT)] had also taken a similar view. Also, the Delhi HC recently admitted Mitsubishi Corporation’s writ petition challenging the constitutional validity of third proviso to Section 254(2A) of the Act. CIT v. Maruti Suzuki (India) Limited [Writ Petition (Civil) No. 5086/2013, dated 21 February 2014] R&D related weighted deduction under Section 35(2AB) should be available even if approval in the prescribed format is signed by Nodal Officer and not by Secretary, DSIR The taxpayer, a company, was engaged in the business of manufacturing, marketing and processing of drug intermediates pharmaceuticals, chemicals and bulk drugs. The taxpayer was claiming deduction under Section 35(2AB) of the Act in respect of scientific research expenditure incurred on R&D facility. In response to a show cause notice, the taxpayer filed a copy of renewal of recognition of in- house R&D facility issued and signed by Scientist-G, DSIR, New Delhi. The AO passed an order under Section 143(3) of the Act and disallowed the deduction claimed under Section 35(2AB) of the Act on the grounds that the approval had to be issued by the Secretary, DSIR and not by the Scientist. The CIT(A) upheld the contention of the AO. The Mumbai Tribunal observed that the letter issued by DSIR was only for renewal of recognition of the in-house R&D facility. There was no formal order or approval for such in-house R&D facility in prescribed form i.e. Form 3CM. The Tribunal noted that Section 35(2AB)(4) of the Act read with Rule 6 of the Income-tax Rules, 1962 (Rules) provides the procedure for making application in Form 3CK before the prescribed authority, which was required to grant approval in Form 3CM. The Tribunal, on principle, held that deduction under Section 35(2AB) of the Act could not be denied to the taxpayer, even though the order of approval in Form 3CM was not granted by the Secretary, DSIR, but by some Nodal Officer on/or on behalf of the Secretary, DSIR, provided all other conditions for approval are fulfilled by the taxpayer. The Tribunal observed that in the present case, the taxpayer could not show whether any approval of the in-house R&D facility was issued in the prescribed form (i.e. Form 3CM) for relevant assessment year by DSIR even if it is signed by any authority like Scientist-G for on/or behalf of the Secretary, DSIR. Accordingly, the matter was restored to the file of the AO with a direction to verify whether any order for approval of in-house R&D facility had been issued by DSIR in the prescribed form (viz. Form 3CM) for the relevant assessment year, even though such order could be signed by ‘Scientist-G’. Fermet Biotech Limited v. ACIT [ITA No. 4341/Mum/2012, dated 12 February 2014]
  5. 5. 5 The division bench of the Supreme Court sets aside the Order of High Court allowing ‘interest on interest’ under Section 244A The taxpayer had entered into a technical collaboration agreement with a non-resident entity based in the USA. In 1987, the taxpayer sought permission from the tax department for a ‘No Objection Certificate’.The tax department informed the taxpayer to deduct tax at the rate of 30 per cent under Section 195 and accordingly the taxpayer paid taxes after grossing-up. Subsequently, due to the favourable amendment to Section 10(6A) of the Act, since no grossing of tax was required to be made on payment to the non-resident company under the agreement approved by the Government of India, the taxpayer claimed refund.The refund of tax was granted to the taxpayer in November 1990.The taxpayer thereafter requested for interest on theTDS refund.The taxpayer made applications seeking interest before the AO, CIT, CCIT, and thereafter to CBDT, during the period 1991 to 1993.The tax department’s key ground for rejecting the interest claim was that the tax refund had not been issued in pursuance of either an order of assessment or a penalty and, therefore, provisions of Section 244(1A) of the Act were not attracted. Allowing writ petition, the Gujarat High Court directed payment of interest at the rate of 9 per cent per annum on tax refund for the period from 1987 to 1990.The High Court relied on the Supreme Court’s ruling in Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC). Additionally, the High Court directed to make further payment of ‘running interest’ at the rate of 9 per cent per annum on the interest accrued on aforesaid amounts. The aforesaid decision of the Supreme Court was doubted by the division bench and the case was referred to the larger bench [CIT v. Gujarat Flouro Chemicals (TS-491-SC-2013)].The larger bench of the Supreme Court held that the Sandvik Asia’s ruling was misquoted and misinterpreted by the taxpayer and also by the tax department.The taxpayer and the tax department interpreted the Sandvik Asia ruling in a way that the tax department was obliged to pay interest on interest in the event of its failure to refund the interest payable within the statutory period. On the facts of the case of Sandvik Asia, it was held that since there was an inordinate delay on the part of the tax department in refunding a certain amount which included the statutory interest, the tax department was directed to pay compensation for the same and not an interest on interest.The larger bench also held that Section 244A, which was inserted with effect from 1 April 1989, covers only such interest, which is provided for under the statute and not any other interest on such statutory interest. The division bench of the Supreme Court in the instant case observed that the Gujarat HC primarily relied on the Sandvik Asia judgment and directed the Revenue to pay interest on the amounts refunded as provided for under the provisions of Section 244(1A). Hence, the division bench set aside the judgment and order passed by the High Court and remanded the matter back to the High Court for reconsideration of the writ petition filed by the respondent, keeping in view the observations made by the larger bench in CIT v. Gujarat Flouro Chemicals.The SC division bench specifically stated that the contentions of both the parties were kept open. CIT v. Gujarat Fluoro Chemicals [Civil Appeal No. 3507 of 2014, dated 26 February 2014]
  6. 6. 6 Transfer pricing Decisions The MumbaiTribunal upholds use of internal CUP with appropriate adjustments for broking transactions The taxpayer was engaged in the provision of two types of broking services, namely DeliveryVerses Payment (DVP) and Direct Custodian Settlement (DCS). It provided DVP services to its Associated Enterprises (AEs) and unrelated parties at an average brokerage rate of 0.35 per cent and 0.56 per cent respectively and DCS services at an average brokerage rate of 0.36 per cent and 0.40 per cent respectively.The taxpayer aggregated the activities and adopted the transactional net margin method (TNMM) as the most appropriate method for determining the arm’s length price (ALP).TheTransfer Pricing Officer (TPO) rejectedTNMM and held that as internal comparables were available, ALP should be computed using the CUP method. The taxpayer contended that the brokerage rates charged to AEs and third parties could not be compared due to significant differences in functions performed, assets employed, risks assumed, marketing efforts, research efforts etc.The taxpayer further contended that it incurred lower costs in providing brokering services to AEs and the difference in costs would have to be reduced from the costs incurred on unrelated transactions to arrive at the adjusted comparable brokerage rate.The taxpayer further demonstrated that for the DVP activities, the cost incurred was higher by 0.29 per cent (as a ratio of turnover), in case of transactions with unrelated parties as compared to transactions with AEs. After adjusting this additional cost difference, its transactions with AEs were at arm’s length even under CUP method. TPO observed that the only adjustment for differences to be considered was the difference in the brokerage rates for DCS transactions with AEs and unrelated parties, i.e. 0.36 per cent and 0.40 per cent respectively. Accordingly, the TPO concluded that the brokerage rate to be charged on DVP transactions should be 0.50697 per cent [i.e. 0.5633per cent x (0.36/0.40per cent)]. Adopting this adjusted rate, theTPO computed an adjustment to the DVP transactions with AEs. The CIT(A) upheld the use of CUP as the most appropriate method and allowed the adjustments for differences on account of services rendered to AEs and unrelated parties. TheTribunal confirmed the CIT(A)’s order in upholding the use of CUP as the most appropriate method with appropriate adjustments, and thereby deleted theTP adjustment on provision of broking services to AEs on the following grounds: • TNMM should not be applied when internal CUPs were available. • The taxpayer should be allowed the relief on account of differences in activities performed in case of transactions with AEs and unrelated parties. Accordingly, the adjustment for additional cost of 0.29 per cent incurred by the taxpayer in provision of services to unrelated parties had been rightly allowed by the CIT(A). • TheTPO had not pointed out any defect in the computation of the additional costs (i.e. 0.29 per cent) submitted by the taxpayer during theTP assessment proceedings. J. P. Morgan India Private Limited v. ACIT [ITA No. 670/ MUM/2006 & ITA No. 618/MUM/2006] The MumbaiTribunal deletes addition on export related advertisement reimbursement The taxpayer was engaged in the business of exporting home and personal care products and had entered into international transactions with its AEs for export of these products, and for advertising expenses paid to AEs and others.The taxpayer applied theTNMM as the most appropriate method.The TPO noted that the taxpayer had reimbursed advertisement expenditure for its two products to its AEs to the extent of 20 per cent of the advertisement expenses incurred by them.The taxpayer contended that its export business was highly profitable, largely due to the equity and market position enjoyed by its brand.These expenses were paid by the taxpayer so that the products were promoted and did not lose out in the market place, in view of the severe competitive pressure and interest of the business. However, theTPO rejected the contentions of the taxpayer stating that the taxpayer had failed to provide fixed basis on which the advertisement expenditure were to be reimbursed. Further, theTPO stated that the advertisement expenditure incurred by the taxpayer were on a principal to principal basis and the AEs were responsible for their own business. The CIT(A) held that additions were made on ad hoc basis by theTPO without adoption of prescribed methods and advertisement expense incurred by the taxpayer for the launch of two new products was the strategy to develop the business. Hence, sharing of the said advertisement expenses could not be isolated or seen as an incidental phenomenon. TheTribunal confirmed the CIT(A)’s order in deleting theTP adjustment on advertisement expenses reimbursed to the AEs on the following grounds: • Reimbursement of advertisement expenditure, though being an independent transaction, related to the export activities. • Huge export sales were made to the AEs to whom such expenses were reimbursed.
  7. 7. 7 • TheTribunal seconded the view of the taxpayer that even if the advertisement expenditure was reduced from the operating margin of export, the operating margin was much more than the operating margin of the comparables. Therefore, the operating margin of the taxpayer was held to be at ALP. Lever India Exports Limited v. ACIT [ITA No. 7089/MUM/2010 & ITA No. 7090/MUM/2010] The DelhiTribunal held that a corporate guarantee issued for theAEs benefit, which did not cost anything to the taxpayer, does not constitute international transaction. TheTribunal also rejected the notional interest adjustment on the share application money advanced to theAE Issue of corporate guarantee –The taxpayer issued a corporate guarantee to a lender bank on behalf of its AE.The taxpayer issued the corporate guarantee at nil consideration; however, based on a market quote, the taxpayer in its transfer pricing study determined the arm’s length commission for issuing such guarantee at the rate of 0.65 per cent per annum of the guaranteed amount.TheTPO determined the ALP of the guarantee commission income at 2.68 per cent plus a mark-up of 200 basis points.The DRP rejected the arguments of the taxpayer. Notional interest on share application money –The taxpayer during the relevant previous year had made payments towards share application money to its foreign subsidiaries.TheTPO noticed that the amount was not converted into equity for a long time and so treated the amount as interest-free loans extended to its AE and made adjustment for interest thereon, considering the transaction as an international transaction of ‘lending or borrowing money’ under the provisions of Section 92B of the Act.The DRP agreed with theTPO on this issue. TheTribunal held as follows: Issue of corporate guarantee • In order to be covered as an ‘international transaction’ under clause (c)1 and clause (e)2 of the Explanation to Section 92B, the transactions should be such as to have bearing on profits, incomes, losses or assets of such enterprise.The clause (c) includes transactions related to capital financing including guarantee transactions. Situations wherein a transaction has no bearing on profits, incomes, losses or assets of taxpayer, such transaction will be outside the ambit of expression ‘international transaction’. • TheTribunal observed that the Explanation to Section 92B, which was inserted with retrospective effect from 1 April 2002 vide the Finance Act, 2012, does not alter the basic character of definition of ‘international transaction’ under Section 92B and the Explanation was to be read in conjunction with the main provisions.Therefore, the precondition about impact on profits, income, losses or assets of such enterprises is a precondition embedded in Section 92B(1) itself. It was held that this precondition would not get satisfied if the impact was only ‘contingent’. The important distinction between the two categories - ‘contingent’ and ‘future’ – is that while the latter is a certainty, and only its crystallisation may take place on a future date, there is no such certainty in the former case. • For the present case, theTribunal held that it was an undisputed position that corporate guarantees issued by the taxpayer to the lender bank did not even have any impact on profits, income, losses or assets because no borrowings were resorted to by the AE from this bank. • TheTribunal observed that there could be a number of situations in which an item might fall within the description set out in the clause (c) of Explanation to Section 92B, and yet it might not constitute an international transaction because the condition precedent with regard to the ‘bearing on profit, income, losses or assets set out in Section 92B(1) might not be fulfilled.TheTribunal mentioned that the common theme of such situation would be when the taxpayer extends an assistance to the AE, which does not cost anything to the taxpayer and particularly for which the taxpayer could not have realised money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction under Section 92B (1) of the Act. • TheTribunal held that the issue of the corporate guarantees in question, which did not involve any costs to the taxpayer and did not have any bearing on profits, income, losses or assets of the taxpayer, was outside the ambit of ‘international transaction’. Notional interest on share application money • TheTribunal observed that theTPO had not made any adjustment with regard to the ALP of the capital contribution but had treated these transactions partly as interest-free loans, for the period between the dates of payment till the date on which the shares had actually been allotted, and partly as a capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries. TheTribunal held that there was no finding about the permissible time period for allotment of shares, and even if one were to assume that there was an unreasonable delay in allotment of shares, the capital contribution could have, at best, been treated as an interest free loan for such a period of ‘inordinate delay’ and not the entire period between the date of making the payment and date of allotment of shares. Further, even if the ALP determination was to be done in respect of such deemed interest free loan on allotment of shares under the CUP method, it was to be done on the basis as to what would have been the interest payable to an unrelated share applicant if, despite having made the payment of share application money, the applicant is not allotted the shares. It was not open to the revenue authorities to re-characterise the transaction unless it was found to be a sham or bogus transaction. In the present case, the subscribed share capital had indeed been allotted to the taxpayer and the transaction was thus accepted to be genuine in effect. 1 clause (c) of the Explanation to section 92B includes transactions of capital financing. 2 clause (e) of the Explanation to section 92B includes of business restructuring or reorganisation.
  8. 8. 8 Indirect tax Service tax - Decisions Levy of service tax on services received and consumed abroad One of the issues involved in this case was taxability of services received by the overseas branch offices of the taxpayer from sub-contractors located outside India under the reverse charge mechanism. The overseas branch offices of the taxpayer had availed services from sub-contractors located outside India (the contract was between overseas branch offices and the sub-contractors) for rendering services to overseas clients of the overseas branch offices. Out of the export earnings of the taxpayer (in EEFC account), the taxpayer had allocated certain earnings to overseas branches for payments to subcontractors abroad. Based on the aforesaid transaction and also, considering that the branch office (situated outside India) and head office (based in India) were separate taxable persons for the purposes of the reverse charge mechanism under service tax legislation, the BangaloreTribunal held that since the service was not being received in India but received outside India by overseas branches there would not be any service tax liability on the Indian head office. Infosys Ltd v. CST [TS-64-Tribunal-2014 (Bang)] Service tax demand on service receiver is not sustainable when service provider has already deposited service tax The issue involved was whether the recipient of ‘Transport of Goods by Road Services’ (‘GTA services’) was liable to pay service tax under the reverse charge mechanism in cases where the provider of GTA services had already deposited the service tax. The MumbaiTribunal, relying on various judicial precedents, held that once the amount of service tax which had been deposited by the provider of GTA services, had been accepted by the Revenue, it could not be demanded separately from the recipient of GTA services. Umasons Auto Compo Pvt. Ltd. v. CCE&C Aurangabad [2014-TIOL-126-CESTAT-MUM] Sharing of marketing expenses between the distributors and the manufacturers are liable to service tax The issue involved was whether the recovery of marketing expenses incurred by Authorised Service Centre (ASC) for promoting sale of cars from the manufacturer would be liable to service tax under the taxable category of Business Auxiliary Services (BAS). The DelhiTribunal held that though the sale promotion activity undertaken by the ASC had benefited both ASC and the car manufacturer and had satisfied their respective businesses’ needs; however, to the extent the ASC had recovered expenses from the car manufacturer, it should be construed as providing sales promotion services to the car manufacturer. Accordingly, the amount recovered as marketing expenses from the car manufacturer would be liable to service tax in the hands of ASC under the taxable category of BAS. Premier Motor Garage v. CCE [TS-242-Tribunal-2013-ST] Reimbursement of salary cost relating to the manpower supplied is liable to service tax The issue was whether provision of employees by the taxpayer to a third party, to work under the administrative control of the third party and getting a part of the salary reimbursed from the third party, would be liable to service tax under the taxable category of ‘Manpower Recruitment or Supply Agency’s Service’ (MSS). In the instant case, it was agreed that the third party would reimburse 75 per cent of the salary cost of the employees to the taxpayer on a monthly basis. The MumbaiTribunal inter alia observed the following: • Unlike the cases in previous judicial rulings (including, in the case ofVolkswagen India Pvt. Ltd. v. CCE [TS-187- Tribunal-2013-ST]), involving deputation of staff in group/ sister companies, the transaction in the present case was between the taxpayer and a non-group company (i.e. a third party) for provision of staff in return for a consideration • In terms of the service tax law, service tax is payable on the gross amount charged by the service provider. Accordingly, even if loss is incurred in provision of the service (viz. recovering only 75 per cent of salary cost in the instant case), service tax would be payable on the consideration received. Accordingly, the MumbaiTribunal held that the activity of provision of employees by the taxpayer was liable to service tax under the taxable category of MSS. The Sanjivani (Takli) Sahakari Sakhar Karkhana Ltd. v. CCE [TS- 44-Tribunal-2014-ST] Valuation ofWorks Contract Services at reduced rate is not mandatory In the instant case, the issue was whether the taxpayer could pay service tax on the gross amount charged for rendering Works Contract Services (WCS) at the full rate (viz. 12.36 per cent / 10.3 per cent) and avail the corresponding CENVAT credit, instead of paying service tax on the taxable value derived by applying theValuation/Composition Scheme rules provided forWCS (thereby foregoing the CENVAT credit benefit).
  9. 9. 9 The AhmedabadTribunal commented that the service tax liability was to be discharged on the gross amount charged by the service provider.Where the gross amount cannot be ascertained, theValuation rules can be applied to determine the value for discharging service tax liability. Further, the method of valuation under the Composition Scheme rules (which provides for reduced rate), to discharge service tax liability in respect ofWCS, is purely optional. Hence, considering the above, the AhmedabadTribunal held that service tax has been rightly discharged on the gross amount charged forWCS. SV Jiwani v. CCE&ST [TS-70-Tribunal-2014-ST] Central Excise - Decisions The Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 (‘the RSP Rules’) is retrospective in effect The RSP Rules was introduced with effect from 01 March 2008, as a curative provision to deal with a situation where the Retail Sale Price (RSP) is not declared or is tampered with. In this case, a question has come up as to whether the demands for the period prior to 01 March 2008 are sustainable or not as there were no machinery provisions available to determine MRP of the product, in case where the RSP is not declared. The MumbaiTribunal held that the taxable event, the rate of tax, the measure of the tax and the person liable to pay tax are separately provided for in the various provisions of the Central Excise Act, 1944 (‘the Excise Act’) and the Rules made there under. The RSP Rules apply only to a limited situation where the manufacturer fails to declare the RSP or tampers with or obliterates the RSP already declared. Therefore, the same is merely procedural and directory in nature and hence has retrospective operation. Accordingly, even with respect to the period prior to 01 March 2008, the RSP of the product can be ascertained by the assessing officer by considering the guidelines issued under the RSP Rules, 2008, using reasonable/best judgment means based on the material available and consistent with the principles and the provisions of Section 4A of the Excise Act, even if the said rules were not framed earlier and came about later. Schneider Electrical India (P) Limited and others v. CCE [2014-TIOL-337-CESTAT-MUM] Note: 1. The return prescribed in this regard is common to first stage dealer, second stage dealer and the importer [please refer Notification No. 9/2014-CX (NT) dated 28 February 2014 and 11/2014-CX (NT) dated 28 February 2014. 2. Or from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002. Notifications/Circulars/Press Releases Cenvat Credit Rules relating to ‘input service distributor’ scheme is amended As per Rule 7 of the Cenvat Credit Rules, 2004, Cenvat Credit may be distributed by an ‘input service distributor’ to various units on the basis of turnover of the units during the ‘relevant period’. In this regard the existing definition of the term ‘relevant period’ has been substituted with a new definition, as per which the ‘relevant period’ shall be: • If the assessee has turnover in the ‘financial year’ preceding to the year during which credit is to be distributed for month / quarter, the said financial year; or • If the assessee does not have turnover for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed. Notification No. 05/2014-CX (NT) dated 26 February 2014 Registration of importers – for the purpose of issuing the Cenvat Credit invoices The Central Government has amended the Cenvat Credit Rules, 2004 and Central Excise Rules, 2002, to provide for the registration of importers who issue invoices on which Cenvat Credit may be availed. In this regard, the proposed amendments are summarised as follows: • The Rule 2(ij) of the Cenvat Credit Rules, 2004, which defines the term ‘first stage dealer’ was proposed to be amended with effect from 1 March 20143 , so as to include the importer who issue invoices on which Cenvat Credit can be availed, under the category of ‘first stage dealer’. The Government has rescinded the said proposed amendment on 26 February 2014 4 . Accordingly, there would be no change in the definition of ‘first stage dealer’. • The Rule 9 of the Central Excise Rules has been amended with effect from 01 April 2014, to provide for the registration of importer who issues an invoice on which Cenvat Credit can be taken 5 . • As per the first proviso in Sub-Rule (7) of Rule 11 of the C.E Rules, 2002, the ‘first stage dealer’, selling the imported goods is required to indicate in his sales invoice, that no credit of the additional duty of customs 6 shall be admissible (under certain circumstances). The said Proviso was proposed to be deleted with effect from 01 March 20147 . However, the said proposal of deletion has been withdrawn on 26 February 20148 . Accordingly there would be no change in this provision. • The importer who issues an invoice, on which Cenvat Credit can be claimed, is now required to furnish a quarterly return to the Central Excise authorities, in the prescribed format9 . • As per sub-clauses (ii) and (iii) of Rule 9 (1) (a), Cenvat Credit may be availed on the basis of invoice issued by the importer10 . The said sub-clauses were proposed to be deleted with effect from 01 March 2014. However, the said proposal of deletion has been withdrawn on 26 February 2014. Accordingly, there would be no change in this provision Notification No. 06-CX (NT) to 11-CX (NT), all dated 26 February 2014 3 Vide Notification No. 18/2013-CX (NT) dated 31 December 2013 4 Vide Notification No. 07/2014-CX (NT) dated 26 February 2014 5 Vide Notification No. 17/2013-CX (NT), the Rule 9 of C.E Rules was proposed to be amended with effective from 01 March 2014, to provide for the registration of importer who issues an invoice on which Cenvat Credit can be taken. The said Notification has been rescinded vide Notification No. 06/2014-CX (NT) dated 26 February 2014. However vide Notification No. 8/2014-C.E (NT), the registration provision has been reinstated in the Rules with effective from 01 April 2014. 6 levied on the said goods under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) 7 Vide Notification No. 17/2013-CX (NT) dated 31 December 2013 8 Vide Notification No. 06/2014-CX (NT) dated 26 February 2014. 9 The return prescribed in this regard is common to first stage dealer, second stage dealer and the importer [please refer Notification No. 9/2014-CX (NT) dated 28 February 2014 and 11/2014-CX (NT) dated 28 February 2014. 10 Or from his depot or from the premises of the consignment agent of the said importer if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002
  10. 10. 10 Custom Duty - Decisions Utilisation of goods imported under Project Imports Scheme In the instant case, the taxpayer imported goods under Project Import Regulations, 1986, for the manufacture of transformers. The taxpayer had also undertaken various projects. The investigation conducted by the authorities revealed interalia that, in certain cases the imports under the Project Import Scheme had taken place after the transformers had been manufactured and dispatched. Accordingly, the customs authorities denied the concessional rate of duty. The taxpayer interalia contended that the contracts for the projects provided for a strict delivery schedule and a penalty if the delivery was not made on time. As it takes substantial time to import the goods under ‘project imports’, it would not be possible to deliver the transformers on time.Therefore, in order to meet the delivery schedule, the similar raw materials lying in stock were utilised, which were either duty-paid or were imported under DEEC scheme. However, the benefit of concessional rate of duty under the Project Import Regulations has been passed on to the customers even though duty paid materials were utilised. Further, the taxpayer contended that the Project Import Regulation does not prescribe one-to-one correlation condition and therefore, in the instant case, it is not mandatory to establish one-to-one correlation between the raw materials imported and the goods manufactured and supplied to a ‘specific project’. The CESTAT held that the materials imported for one unit of a specified project cannot be used elsewhere in any other unit or in any other project. If one-to-one co-relation is not maintained, fulfilling of the condition regarding usage of the imported product in a particular project cannot be established. If any goods are allowed to be imported subject to certain conditions, then such conditions are required to be fulfilled in respect of the goods imported and the liability in respect of the imported goods cannot be shifted to another set of goods imported, unless these are expressly allowed under the Customs law. Accordingly, the benefit of concessional rate of duty cannot be claimed in case the goods imported are not used for the project for which they are imported. Bharat Bijlee Limited v. Commissioner of Customs (Import) [2014-TIOL-374-CESTAT-MUM] ForeignTrade Policy - Decisions TED refund is available with respect to the clearances made prior to amendment of the ForeignTrade Policy In the instant case, prior to April 2013, the taxpayer cleared manufactured goods to an EOU unit on payment of duty. Such duty paid was subsequently claimed as terminal excise duty refund (TED refund), under the provisions of 8.3 of the Foreign Trade Policy 2009-14 (‘FTP’). However, with effect from April 2013, the relevant provisions of FTP were amended to provide that the exemption is available on clearances to EOU units and theTED refund would not be provided if exemption is available. Accordingly, the authorities denied theTED refund. The Hon’ble High Court held that a subsequent amendment made to the existing regime cannot be a reason for denying the refund of duties already paid before the said amendment and accordingly, the said refund was allowed. Kandoi Metal Powders Mfg. Co Private Limited v. UOI & Others [2014-TIOL-230-HC-DEL-EXIM] VAT Notifications/Circulars/Press Release Uttar Pradesh The due date for filing of annual return (Form 26, 26A and 26B) has been further extended from 29 January 2014 to 30 June 2014. Circular No. 1314135 dated 3 March 2014 Jammu & Kashmir With effect from 1 April 2014, the gross turnover limit in respect of registered dealers who are required to get their accounts audited by a Chartered Accountant or Cost andWorks Accountant has been increased from INR 60 lakhs to INR 1 crore. Notification No. 04/vig/PS/V/B/7459-62/CCT dated 25 February, 2014 The services provided by hotels, lodges and guest houses in the form of lodging facilities shall be exempted from the payment of tax for the period 1 April 2014 to 31 March 2015. Notification No. SRO 43 dated 28 February, 2014 Karnataka With effect from 1 April 2014, the limit for obtaining e-Sugam (way bill) has been increased from INR 20,000 to INR 25,000. Notification No. ADCOM (I&C)/DC(A3)-CR:158/2013-14 Dated 5 March, 2014 Maharashtra The limitation period for assessment of dealers who are engaged in the construction of flats, dwellings or buildings or premises and transfer them in pursuance of an agreement along with land or interest underlying the land, has been extended from 31 March 2014 to 30 September 2015. MaharashtraValue AddedTax (Amendment) Ordinance, 2014 dated 3rd March 2014 Manipur With effect from 16 March 2014,Waybills in Form 27, 28, 29 is required to be obtained electronically by all registered dealers. Manual forms already issued to the dealers prior to this Notification shall remain valid for use up to 4 months from the date of their issue. Further, after 15 July 2014 no manual/ offline Forms will be accepted byTaxation Check post. Notification no.Tax/3(40)/lMP/2005/496 dated 3rd March, 2014 Delhi With effect from 15 March 2014, the details of Invoice and Goods Receipt (GR) Note, in respect of all goods received from outside Delhi, are required to be submitted online in FormT2 by all dealers before the goods physically enter the boundary of Delhi.This is not applicable for dealers who deal exclusively in tax free goods, having specified GTO. Notification No. F.7(433)/Policy-II/VAT/2012/1332-1342 Dated 28th February, 2014 The dealers effecting inter-state sales / branch transfers are no longer required to furnish a reconciliation return to the Commissioner within three months after the end of each quarter in Form DVAT-51.Thereby, Form DVAT-51 has been
  11. 11. 11 dispensed with and instead, the dealers are now required to file Form-9 electronically with respect to reconciliation details of forms / declarations (statutory form) received / to be received under Rule 4 of the Central SalesTax (Delhi) Rules, 2005 within a period of 6 months from the end of the year it relates to. Notification No. F. 3(27)/Fin.(Rev-I)/2013-14/dsVI/291 dated March 5, 2014 and Notification No. F. 3(27)/Fin.(Rev-I)/2013-14/ dsVI/292 dated March 5, 2014 Decisions Use of stents / valves during surgical procedures such as angioplasty, not ‘sale’ forVAT liability In the instant case, the issue involved was whetherVAT would be applicable on the medical stents used during angioplasty operation in a hospital. The taxpayer at its hospital provided various medical services including medical surgery for implantation of stent / valve such as angioplasty to its patients.The Deputy Commissioner, CommercialTax, treated the valves / stents used by the taxpayer during angioplasty as purchases made from unregistered dealers and imposedVAT at the rate 12.5 per cent on its implant, on the ground that it constitutes as sale. Aggrieved by the same, the taxpayer filed aWrit petition before the Allahabad High Court. The taxpayer contended that stents formed an integral part of the medical procedure involved in Angioplasty. As such it could not be separated from the rest of the contract. However, Revenue contended that contract between the patient and the hospital was a divisible contract and sale of stent/valve was distinguishable from surgical procedure. Consequently, the hospital was thereby liable to payVAT at 12.5 per cent on the sale of stents through its use in the angioplasty procedure. The Hon’ble High Court observed that six clauses in Article 366(29-A) envisaged that State had the powers to divide the contract into two separate contracts (involving sale of goods and supply of labour or service) and tax the sale element involving the sale of goods in contracts which fell within the description of one of the six clauses of the Article. Also, it specifically observed that in the case of BSNL, with respect to hospital services, it has been held that sub-clauses of Article 366(29-A) did not cover hospital services and Article 366 (29-A) had no application unless the transaction in truth represented two distinct and separate contracts and was perceivable. Further, the High Court observed that in BSNL’s case, the Supreme Court laid down the ‘dominant nature’ test for deciding the substance of the contract. Further, the High Court held that there was no intention between the hospital and the patient for sale of stent / valve but that the contract in substance was an agreement for treatment in the form of a medical procedure. It observed that implantation of stent / valve in the heart of a patient was an intrinsic and integral element of that procedure. Based on above facts, the High Court allowed the petition and held that that mere recovery of charges towards drugs and other consumables by the hospital from the patient would not render the transaction of the implantation of a stent or valve a ‘sale’ for the purpose ofVAT levy. International Hospital Pvt Ltd. v. State Of U.P. and othersTS-49- HC-2014(ALL) Personal tax Decisions/Circulars/Notifications/ Press Releases TheTribunal holds that salary received in an Indian bank account by a non-resident, employed outside India, is not taxable Recently, the AgraTribunal in the case of Arvind Singh Chauhan held that the salary income received by a non-resident, in his Indian bank account, for services rendered outside India was not taxable in India. In its judgement, theTribunal placed reliance on the Bombay High Court ruling in the case of Avtar SinghWadhwan and the Madras High Court ruling in the case of AP Kalyankrishnan. Arvind Singh Chauhan v. ITO [2014] 42Taxmann.com 285 (Agra) Indian Government declares interest rate on Employees’ Provident Funds Scheme Indian Government has declared a rate of interest of 8.75 per cent for crediting interest on provident fund accumulations for members of the Employees’ Provident Fund Scheme for the FinancialYear (FY) 2013 - 2014. Employees having a Provident Fund account with the Employees’ Provident Fund Organisation will receive interest of 8.75 per cent on their provident fund accumulations for the FY 2013 - 14. Companies that run Private PFTrusts under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 will also be required to match the rate of interest of 8.75 per cent declared by Government of India for FY 2013-14 on provident fund accumulations of their members.
  12. 12. Contact us: GirishVanvari Co-Head ofTax T: +91 (22) 3090 1910 E: gvanvari@kpmg.com Hiten Kotak Co-Head ofTax T: +91 (22) 3090 2702 E: hiten@kpmg.com Punit Shah Co-Head ofTax T: +91 (22) 3090 2681 E: punitshah@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity“ are registered trademarks or trademarks of KPMG International. Printed in India Ahmedabad Commerce House V 9th Floor, 902 & 903 Near Vodafone House, Corporate Road, Prahlad Nagar Ahmedabad - 380 051. Tel: +91 79 4040 2200 Fax: +91 79 4040 2244 Bangalore Maruthi Info-Tech Centre 11-12/1, Inner Ring Road Koramangala, Bangalore 560 071 Tel: +91 80 3980 6000 Fax: +91 80 3980 6999 Chandigarh SCO 22-23 (Ist Floor) Sector 8C, Madhya Marg Chandigarh 160 009 Tel: +91 172 393 5777/781 Fax: +91 172 393 5780 Chennai No.10, Mahatma Gandhi Road Nungambakkam Chennai 600 034 Tel: +91 44 3914 5000 Fax: +91 44 3914 5999 Delhi Building No.10, 8th Floor DLF Cyber City, Phase II Gurgaon, Haryana 122 002 Tel: +91 124 307 4000 Fax: +91 124 254 9101 Hyderabad 8-2-618/2 Reliance Humsafar, 4th Floor Road No.11, Banjara Hills Hyderabad 500 034 Tel: +91 40 3046 5000 Fax: +91 40 3046 5299 Kochi 4/F, Palal Towers M. G. Road, Ravipuram, Kochi 682 016 Tel: +91 484 302 7000 Fax: +91 484 302 7001 Kolkata Unit No. 603 – 604 6th Floor, Tower – 1, Godrej Waterside, Sector - V, Salt Lake Kolkata - 700 091 Tel: +91 33 4403 4000 Fax: +91 33 4403 4199 Mumbai Lodha Excelus, Apollo Mills N. M. Joshi Marg Mahalaxmi, Mumbai 400 011 Tel: +91 22 3989 6000 Fax: +91 22 3983 6000 Pune 703, Godrej Castlemaine Bund Garden Pune 411 001 Tel: +91 20 3058 5764/65 Fax: +91 20 3058 5775 KPMG in India www.kpmg.com/in Latest insights and updates are now available on the KPMG India app. Scan the QR code below to download the app on your smart device. Google Play | App Store

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