Regn. No. MH/MR/South-107/2012-14, to                                                                      Post at Patrika...
CHAIRMANS COMMUNIQUEDear All,                        "Leadership is the process of keeping your vision and values before y...
CHAIRMANS COMMUNIQUE (contd.) Small steps towards brand building and visibility of Institute included a press conference o...
FROM THE EDITOR                   Dear Readers,                           “Vision without action is a day dream,          ...
EDITORIAL ADVISORY BOARD                                                                 CONTENTS EDITOR                  ...
LEGAL WORLD                                                                                                               ...
LEGAL WORLD                                                                                                    Circulars &...
LEGAL WORLDCirculars, Notifications & Legal Updates     their objects is to carry on the profession of Chartered          ...
CORPORATE GOVERNANCE                 Appointment and Cessation of Auditors                              S. G. Gokhale, Adv...
CORPORATE GOVERNANCEAppointment and Cessation of Auditors	     (ii)	 The first Auditors appointed by the Board of         ...
UNION BUDGET 2012-13          DIRECT TAXES: UNION BUDGET 2012-13                                          CA Rajkumar S. A...
UNION BUDGET 2012-13Direct Taxes                                                                         •	 Relief given f...
UNION BUDGET 2012-13 Indirect Taxes Budget Highlights - 2012-13                                                 CS V. S. D...
UNION BUDGET 2012-13Indirect Taxes       provision applies only if assessee has excess Cenvat            •	 Differential e...
UNION BUDGET 2012-13           SERVICE TAX KEY ASPECTS                                                           CA Rajesh...
UNION BUDGET 2012-13Service Taxo	 Transmission or distribution of electricity by an                         (Whether or no...
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
Presentation by CA. Sudha G. Bhushan on Cross Border Transactions
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Presentation by CA. Sudha G. Bhushan on Cross Border Transactions

  1. 1. Regn. No. MH/MR/South-107/2012-14, to Post at Patrika Channel, Sorting Office, Mumbai - 400 001 Registered with the Registrar of NewspaperAnnual Subscription ` 250/- New Delhi under Regn. No. 39907/82Single Copy ` 25/- Posted and Printed on 20th & 21st of every month VOL. XXIX No. 3 MARCH, 2012A MONTHLY JOURNAL FOR CORPORATE EXECUTIVES & PROFESSIONALS ... 2012-13 Go Green This Journal is printed on recycled environmental friendly paper.
  2. 2. CHAIRMANS COMMUNIQUEDear All, "Leadership is the process of keeping your vision and values before you and aligning your life to be congruent with them.” – Stephen CoveyIt was an exciting month to begin with. On witnessingthe enthusiasm of peer young friends, guidance byelderly seniors and participation of one and all,my hopes and desires soar greater heights. Yes, Iam equally aware of the challenges - be it relatingto infrastructure or servicing galloping number ofstudents or brand buiding framework at regionallevel. I am reminded of the saying, “uneasy lies thehead that wears the crown”.Well... challenges are gallore but I firmly believe,challenges and opportunities go hand in hand.Immediately after the WIRC Executive Committeeassumed charge effective 19th January this year,we took stock of the situation and firmed up actionplan for the year 2012. Let me share broadly someof the new activities / initiatives of WIRC so far thisyear. To begin with, a high profile program at BSE International Conventional Hall was a motivation booster formembers, students, organisers, convenors and WIRO-staff. The program was graced inter alia by M/s. Ananta Barua, Executive Director, SEBI, P K Malhotra, Acting Presiding Officer, SAT, Ashish Chauhan, Dy. CEO, BSE. Interaction with M/s. Nesar Ahmad, President, S N Ananthasubramanian, Vice President, and N K Jain, Secretary & CEO, ICSI was added attraction. Quality backgrounder circulated to participants was appreciated by one and all. We are thankful to BSE for supporting and hosting this program. We have increased theprofessional development programs – both in quality and numbers. Study circle meeting started at Borivali receivedoverwhelming response. Study circles are now being conducted at 7 locations, viz. WIRO, Dadar, Andheri, Malad,Borivali, Bhayander and Ghatkopar.Republic day celebration coupled with blood donationcamp and free health check-up (ECG, sugar, BP andgeneral) emphasizes our focus on ‘health, sports & culture’initiatives.One of the significant milestone we achieved wasrevamping ‘Focus’ – from "few pages" to "more than 50pages" Journal for corporate executives & professionals.The new ‘Focus’ with various value added features is beingwell appreciated. Complements to the Focus editorial team Careerled by Mr. Amit Kumar Jain for putting thoughts intoaction. I appeal members to contribute columns and alsohelp us secure sponsorships/ advertisements so that thequality and content can be improved on a sustained basis.Increasing number of students served with dedication and attention resulted in ‘zero waiting list’ for SIP / EDP.Three new centres have been opened under the Public Private Partnership (PPP) model at Mumbai, Raipur and Vapi.PPP centres are also proposed to be used as extended centres for exam forms, CC collection etc. Of course, theseinitiatives need to be broad based and much more need to be accomplished in students’ servicing areas.
  3. 3. CHAIRMANS COMMUNIQUE (contd.) Small steps towards brand building and visibility of Institute included a press conference organised by WIRC, which was addressed by the President, Vice President, Secretary & CEO, ICSI and the undersigned. ‘FOCUS’ Further, select WIRC programs were covered by business dailies. We need to work a lot more in this direction! On a general note, the regulatory landscape continues being dynamic and evolving. We witnessed important changes in combination norms of newly set in anti-trust law. Finally, regulations were amended exempting group mergers from CCI scrutiny – great relief to corporates! On taxation front, some of the important rulings were pronounced including that on taxation of indirect transfers (Vodafone case), slump sale with negative networth and advance ruling on taxation of buy back of shares of a wholly- owned subsidiary by holding company. And finally, the Union Budget was presented, ’ with various provisions – prospective and retrospective! Some of the proposed provisions like general anti avoidance rules, taxation of indirect transfer of shares, negative list for service tax and the like are likely to have far reaching impact on Indian economy. I am sure, by the time you would be reading this, you would have analysed the impact of budget and ensuing challenges and opportunities. We will continue to be in touch over more and more updates and developments. Meanwhile, do write at: career cschairman.wirc@gmail.com Your suggestions and inputs would help achieve the overall objectives towards our theme of the year 2012 – “Educate, Empower & Execute”. Best Wishes, Sincerely Mahavir Lunawat Chairman - ICSI-WIRC March 16, 2012 i March, 2012
  4. 4. FROM THE EDITOR Dear Readers, “Vision without action is a day dream, Action without vision is a nightmare” Q uite humbly I would like to acknowledge that we have started our journey quite courageously with a just sense of integrity. Holding the Office of Editor of Monthly Journal of largest Regional Council under the dynamic leadership of our young, vibrant and inspiring Chairman, Mr. Mahavir Lunawat, is really enthralling. Keeping the trust and confidence reposed on us, we are making all efforts to enrich you with meaningful contents. After coming out with the first issue and overwhelming response from our members and guest columnists across the region, the responsibilities get enhanced with the expectations. This time we have prepared a bouquet of topics like New Opportunities in KPO industry etc. to indicate the new avenues available for our members to explore. To enhance the well established visibility of our profession we have also started presenting FOCUS to different regulators like CLB, ROC, Sales tax Department, Income Tax Department, Service Tax Department, Excise & Custom etc in all the States of the Western Region. FOCUS indeed is a knowledge bank which is growing day by day to enhance the Academic treasure of the readers and can also be considered as an effective medium for the companies / placement agencies which are looking for Company Secretaries in Employment, as it hit directly to the target group of people across the region alongwith brand building exercise. To increase the placement opportunities and its wider publicity, I urge the members to give more advertisements for vacancies of Company Secretaries in FOCUS. It is not only a monthly journal but also a voice of WIRC covering news and announcements and all concerned information of the entire region, and together we can make it stronger and appealing. Budget for the year 2012 is out now. Budget is always considered as a topic which touches every individual whether professional or not and we tried our best to present separate analysis of Direct and Indirect taxes and Impact of budget on the overall economy. CS Amit Kumar Jain “Would you like me to give you a formula for success? It’s quite simple, really. Double your rate of failure. You are thinking of failure as the enemy of success. But it isn’t at all. You can be discour- aged by failure or you can learn from it, So go ahead and make mistakes. Make all you can. Because,ii remember thats where you will find success.” - Thomas J. Watson March, 2012
  5. 5. EDITORIAL ADVISORY BOARD CONTENTS EDITOR : CS AMIT KUMAR JAIN MESSAGES Chairmans Communique MEMBERS : CS B RengaNAthan From the Editor CS Dr. D. K. Jain CS Hemant Pandya LEGAL WORLD CS Kaushik Jhaveri 1 Case Laws CS M. G. Subramaniam 2 Circulars and Notifications CS N. Hariharan CS Rajkumar Adukia 3 Legal updates CS R. Kalidas CORPORATE governance CS S. D. Israni 4 Appointment and Cessation of Auditors CS Suresh Vishwanathan CS Yogesh Chande union budget 2012-13 6 Direct Taxes EX-Officio : CS MAHAVIR LUNAWAT 8 Indirect Taxes MEMBERS CS ragini chokshi 10 Service Tax WIRC of ICSI Premises, 14 Outlook on Economy No.13, 56 & 57, SEBI LAW & Capital market Jolly Maker Chambers No.2, Nariman Point, Mumbai - 400 021. 16 Offer for sale by promoters through stock exchange mechanism Tel. No.: 22047604 / 22047580 18 Structured Products - An innovative instrument Email: wiro@icsi.edu; sudipto.pal@icsi.edu CORPORATE law Monthly TARIFF for advertisement 20 Regularisation of Share Capital in a Company in Focus OTHER EMERGING AREAS Type Size Employment Non 23 India and the KPO Industry EmploymentInside Front Cover Page 18 x 18 20,000 30,000 SOFT & COMMUNICATION SKILLSBack Inner Cover Page 18 x 18 17,500 25,000 26 Listening SkillsFull Page (Colour) 18 x 18 15,000 20,000Half Page (Colour) 12 x 18 10,000 12,000 DATES TO REMEMBERHalf Page (B&W) 12 x 18 8,000 10,000 27 Compliance CalendarQuarter Page (Colour) 12 x 9 5,000 7,000 32 PDC CalendarPrinciple Sponsorship* 18 x 18 1,00,000Annual Contract : (1) Out of 12 issues you have to remit only NEWS & EVENTS10 issue charges, i.e. 2 issues will be free. (2) *For Principle 33 News & Events at WIRC and ChaptersSponsorship: Out of 12 issues you have to remit only 9 issuecharges (i.e. 3 issues will be free) – INR 9,00,000. HEALTH TIPS OF THE MONTH 38 Hypertension and Kidney DiseaseHalf Yearly Contract : (1) Out of 6 issues you have to remitonly 5 issue charges, i.e. 1 issue will be free. (2)* For principle OTHERSSponsorship: Out of 6 issues you have to remit only 5 issue 40 Media Coveragecharges, i.e. 1 issue will be free. 41 MiscellaneousTerm of Payment : Advance Payment in favour of ‘WIRC ofICSI’ by way of a Cheque /Demand Draft payable at Mumbaialongwith your release order / advertisement material. Disclaimer The ICSI is not in any way responsible for the result of any action taken on the basis of the advertisement published in the journal. iii March, 2012
  6. 6. LEGAL WORLD Case Laws CASE LAWS AT A GLANCE CS Ajay Kumar, Practising Company Secretary, Mumbai1. AMALGAMATION THERE IS NO QUORUM – SECTION 186 A Petition was filed by Petitioner i.e., transferee Where impractability for holding extraordinary general company, seeking an order for amalgamation and meeting arises in a company having just two members, a declaration to effect that it was binding on both one of whom is not available as his whereabouts have transferee company and transferor company and also become unknown, even one member is competent to on their respective shareholders and creditors. Reply call extraordinary general meeting and the Petitioner is affidavit was filed by Regional Director, Ministry of entitled to a direction of the Company Law Board for Corporate Affairs, pursuant to section 394A. Official calling the meeting in terms of section 186 – RANJEET Liquidator also submitted his reply affidavit wherein KUMAR MISHRA V. CHINNMASTIKA ESTATES it was stated that Transferee Company would continue (P.) LTD. [2011] 101 CLA 441 (CLB) to exist and there would be no dissolution of company consequent to sanction of scheme. 4. CAN MERE AVERMENT OF HOLDING SHARES In such circumstances, it was only WITHOUT PROOF SHOWING PAYMENT Transferor Company which was being HAVING BEEN MADE OF ALL CALLS dissolved and amalgamated with IN RESPECT OF SHARES OFFERED BY Petitioner. On facts, Petition seeking COMPANY ENTITLED PETITIONER TO sanction of scheme of amalgamation FILE PETITION UNDER SECTION 397/398 was to be allowed with a direction to – SECTION 399 READ WITH SECTION Petitioner that it would comply with all 397/398 statutory requirements in accordance One must be a member of the company and with law. - NITIN LIFE SCIENCES have a right to apply under section 397/398 LTD. V. NITIN PHARMACEUTICALS in order to maintain a Petition under section (P.) LTD. [2011] 108 SCL 67/11 335(HP) 399. A Petitioner fails to establish that he was2. REGISTRATION OF CHARGES a member of the company as required under Petitioners were directors of company section 399, the Petition filed by him is liable “R” which had sold its machinery to to be dismissed, and a mere averment of complainant/ Respondent Company holding certain shares in the Petition without and sought financial assistance under filing any evidence would be nothing but a hire purchase scheme. A complaint was misleading statement constituting abuse of filed by Complainant Company alleging the process of Law. – SAMEER GOEL V. that there was default in payment of hire charges and NIJINOY TRADING (P.) LTD. [2011] 101 CLA 428 Complainant Company invoked arbitration clause (CLB) and obtained arbitration award, but while executing 5. SCHEME FILED BY MAJORITY OF SHAREHOLDER award, it found that machinery was hypothecated with WHERE CLAIMS OF SECURED CREDITORS IDBI which had first charges over machinery. It was alleged that Petitioners had fraudulently represented STAND SATISFIED OR ADJUDICATED – CAN and deceived company that there was no charge over PETITION FOR REVIVAL BE CONTESTED ON machinery and chartered accountant issued a no lien GROUND OF NON- FOLLOWING MANDATED certificate. Petitioner filed instant Petition for quashing PROCEEDINGS IN SECTION 391/394 AND NOT proceedings before Chief Metropolitan Magistrate DIRECTING SEPARATE MEETING TO BE HELD – stating that under sections 125 and 126 charges were SECTION 391/394 already notified and complainant was deemed to A scheme for revival of a sick company in liquidation is have noticed such charges. Questions as to whether filed by majority of shareholders themselves, and claims complainant had knowledge of previous charge and of secured creditors stand satisfied or adjudicated by whether Petitioner had fraudulent intention for cheating official liquidator, the Petition for revival cannot be were matters for trial and, therefore, proceedings contested on the ground that the procedure mandated in were not to be interfered with and Petition was to be sections 391 and 394 has not followed and meeting have dismissed. M A SHIVAKUMARAN V. SUNDARAM FINANCE LTD. [2011] 108 SCL 112/247 (MAD.) not been directed to be held, because such meetings are unnecessary in such a case. – DABRIWALA STEELS3. IMPRACTABILITY OF HOLDING – PETITION TO & ENGINEERING CO. LTD. (IN LIQUIDATION), IN COMPANY LAW BOARD FOR DIRECTION TO RE., [2011] 101 CLA 62 (P & H) ORDER MEETING TO BE CALLED EVEN THOUGH“The successful always has a number of projects planned, to which he looks forward.Anyone of them could change the course of his life overnight.” - Mark Caine 1 March, 2012
  7. 7. LEGAL WORLD Circulars & Notifications Circulars & Notifications CS Piyush Bindal, Practising Company Secretary, BhopalSERVICE TAX conditions imposed by DGFT in the above notification with immediate effect.1. Toll in the nature of ‘user charge’ or ‘access fee’ paid by roads users — regarding. 3. It is also requested to provide the details of all the Circular No. 152/3 /2012-ST consignments of export of Cotton handed over to Customs for export as of 2400 hrs. on 04-03-2012. This Source: www.servicetax.gov.in report is required positively by 07-03-2012.1. A representation has been received by the Board, 2. Ban on export of Cotton (Tariff Code 5201 and 5203)- seeking clarification regarding leviability of service regarding tax on toll fee (hereinafter referred as ‘toll’) paid Circular No. 07/2012-Customs by users, for using the roads. The representation has Source: www.cbec.gov.in been examined. 1. Attention is invited to Board’s Circular No. 6/2012-Cus2. Service tax is not leviable on toll paid by the users of dated 06-03-2012 regarding imposition of ban on export roads, including those roads constructed by a Special of Cotton (TH 5201 and 5203) vide DGFT Notification Purpose Vehicle (SPV) created under an agreement No.102 (RE-2010)/2009-14 dated 05.03.2012. between National Highway Authority of India (NHAI) or a State Authority and the concessionaire (Public 2. In this regard DGFT has issued another Circular No. Private Partnership Model, Build-Own/Operate- 58(RE-2010)/2009-14 dated 09-03-2012 to clarify that the Transfer arrangement). ‘Tolls’ is a matter enumerated consignments of Cotton for which ‘Let Export Orders’ (serial number 59) in List-II (State List), in the Seventh have been issued by Customs authorities till 2400 hrs. Schedule of the Constitution of India and the same is not on Sunday, 04-03-2012 will be outside the purview covered by any of the taxable services at present. Tolls of the Notification No.102 (RE-2010)/2009-14 dated collected under the PPP model by the SPV is collection 05.03.2012. on own account and not on behalf of the person who has 3. Accordingly, Board desires that the field formations made the land available for construction of the road. shall allow the export of consignments of Cotton (TH3. However, if the SPV engages an independent entity 5201 and 5203) for which ‘Let Export Orders’ have to collect toll from users on its behalf and a part of toll already been issued till 2400 hrs. on 04-03-2012. collection is retained by that independent entity as 3. Ban on export of Cotton (Tariff Code 5201 and 5203) - commission or is compensated in any other manner, regarding service tax liability arises on such commission or Circular No. 08/2012-Customs charges, under the Business Auxiliary Service [section Source: www.cbec.gov.in 65(105) (zzb) read with section 65(19) of the Finance Act, 1. Attention is invited to Board’s Circular No. 06/2012- 1994]. Cus dated 06-03-2012 and DGFT RE Notification No.1024. Further, an SPV formed as a result of agreement between (RE-2010)/2009-14 dated 5th March, 2012 amending NHAI or State Authority and the concessionaire under Notification no. 74(RE-2010)/2009-14 dated 12-09-2011 the BOT arrangement, cannot be considered as an imposing ban on export of cotton (Tariff code 5201 and agent of the NHAI. Renting, leasing or licensing of 5203). vacant land by the NHAI or State Authority to an SPV 2. DGFT vide Notification no. 106(RE-2010)/2009-14 dated for construction of road and such construction do not 12th March, 2012 has withdrawn the earlier Notification attract service tax. No. 102 imposing ban and now the export of CottonCUSTOMS is free subject to the condition “prior registration of1. 1. Ban on export of Cotton (Tariff Code 5201 and Contract with DGFT”. 5203) - regarding 3. Considering the sensitivity of the issue the Board desires Circular No.6/2012-Customs that the field formations should strictly monitor the conditions imposed by DGFT in the above notification Source: www.cbec.gov.in with immediate effect.1. Attention is invited to DGFT RE Notification No.102 (RE-2010)/2009-14 dated 5th March, 2012 amending CORPORATE LAW Notification no. 74(RE-2010)/2009-14 dated 12-09-2011 1. Allotment of Director’s Identification Number (DIN) imposing ban on export of cotton (Tariff code 5201 and under Companies Act, 1956. 5203). Accordingly – General Circular No. 4/2012 (i) Export of cotton [ITC(HS) Codes 5201 & 5203] has Source: www.mca.gov.in been prohibited till further orders. In continuation of General Circular Nos. 32/2011 dated (ii) Transitional arrangements will not be applicable 31.05.2011, 66/2011 dated 04.10.2011 and 70/2011 dated for the export of cotton. 15/12/2011 on the subject cited above, The time for filing form DIN-4 by DIN holders for furnishing PAN (iii) Export against registration certificates already and to update PAN details has been extended upto issued will also not be allowed. 30.04.20122. Considering the sensitivity of the issue the Board desires that the field formations should strictly monitor the 2. Registration of Companies or LLPs which have one of “When you follow your bliss...doors will open where you would not have thought there would be doors; and where there wouldn’t be a door for anyone else.” - Joseph Campbell 2 March, 2012
  8. 8. LEGAL WORLDCirculars, Notifications & Legal Updates their objects is to carry on the profession of Chartered shall incorporate the same only on production of in- Accountant, Cost Accountant, Architect, Company principle approval/NOC from the concerned regulator/ Secretary etc. professional Institutes. General Circular No. 2/2012 2. Further, in this connection, it is also stated that where Source: www.mca.gov.in one of the objects is to carry on the business/profession At the time of incorporation of companies where one of Architecture, then the concerned Registrar of of the objects is to carry on the business of Banking, Companies/Registrar of LLP shall incorporate the same Insurance or to practice the profession of Chartered only on production of in-principle approval/NOC from Accountancy, Cost Accountancy & Company the concerned regulator. Secretaries, then the concerned Registrar of Companies 3. This issues with the approval of CAM. LEGAL UPDATES Saagar Madan, Legal Practitioner, MumbaiAMENDMENT TO SEBI (MUTUAL FUND) for refund and upon processing of the same the refundREGULATIONS, 1996. request shall be approved or rejected.Key Highlights • The refund of MCA21 fees is available in the following• Amendment relating to Advertisement Code: cases: a) Advertisement Code shall be amended and made ♦ Multiple Payments of Form 1, Form 5; principle based as far as possible. ♦ Incorrect Payments; and b) AMCs shall be responsible for the accuracy, ♦ Excess Payment truthfulness, fairness of the advertisement THE MINISTRY OF CORPORATE AFFAIRS ALLOWS c) The definition of advertisement shall be broadened FILING OF CONFLICTING RETURNS BY CONTESTING to include all forms of communication that may PARTIES influence investment decisions of any investor. Key Highlights• Amendment relating to Investment Valuation Norms • It is allowed in some specific cases wherein it appears (i.e. to provide fair valuation of securities / assets of that either there was lack of consent of the removed/ Mutual Fund schemes) changed director or due process of Law was not a) AMC shall insure fair treatment to all investors. followed. b) In case debt and money market securities are not • The company is required to mandatorily file the traded on a particular valuation day then valuation attachment relating to cause of cessation along with through amortization basis shall be restricted to Form 32 with the ROC concerned irrespective of the securities having residual maturity of up to 60 days ground of cessation. (currently 91 days), provided such valuation shall • Any Director is aggrieved with his cessation in the be reflective of the realizable value/ fair value of company; he may file complaint in the Investor the securities Complaint Form. On receipt of complaint, the ROCCOMPANY LAW BOARD REGULATIONS, 1991, concerned will examine the complaint and mark the“Regulation 30 substituted”: company as having management dispute.Key Highlights: RAILWAYS EXTEND ADVANCE RESERVATION• The record of a pending case shall be open, as of right, to PERIOD TO 120 DAYS the inspection and supply of the certified copies thereof • The Ministry of Railways has decided to increase the to the parties or their authorized representatives, on advance reservation period for booking reserved train making an application in writing and on payment of a tickets from existing 90 days to 120 days on experimental fee of fifty rupees per day for inspection of documents basis (excluding the date of journey) w.e.f. March 10, of a case and ten rupees per page for supply of certified 2012. copies of order or any other document respectively. THE TELECOM REGULATORY AUTHORITY OF INDIA• A person, who is not a party to the proceedings, has, ACT, 1997 NOTIFIES MOBILE NUMBER PORTABILITY however, no right to inspect or to obtain certified copies REGULATIONS, 2009 of the records of a pending case except with the consent Key Highlights of the party who has filed the case or under the orders of the Bench. • Mobile Number Portability has been launched all over the country on 20th January 2011.• After receipt of an application, the inspection shall be allowed within a period of two working days and • All Cellular Mobile Telephone Service Providers and certified copies shall be supplied within a period of Unified Access Service Providers, acting as Donor three working days respectively. Operator, not to entertain any request from the subscriber for cancellation or withdrawal of portingTHE MINISTRY OF CORPORATE AFFAIRS HAS request and not to reject a porting request except onDECIDED TO REFUND THE STATUTORY FEES PAID the grounds mentioned under regulation 12 of theFOR CERTAIN SERVICES regulations.Key Highlights: • The service providers may issue necessary instructions• For refund of fees wrongly paid by the stakeholder to all the concerned officials within Forty eight hours while availing various services at MCA 21 new refund and submit compliance report of this Direction to the e-Form needs to be filed by the stakeholder applying Authority within seven days.Pity the man who inherits a million and isn’t a millionaire. Here’s what would be pitiful,if your income grew and you didn’t. 3 March, 2012
  9. 9. CORPORATE GOVERNANCE Appointment and Cessation of Auditors S. G. Gokhale, Advocate & Legal Advisor, Mumbai This Article summarizes and analyses the provisions of the Companies Act, 1956, on the above subject and highlights some of the misgivings prevailing at various levels.1. APPOINTMENT (C) By Central Government(A) By Board of Directors In the event the Auditors are not appointed / (i) The first Auditors of the Company are required to reappointed at the AGM the Central Government be appointed by the Board of Directors within one may appoint a person to fill the vacancy. There is an month of the date of registration of the Company obligation cast on the Company of giving notice to the and the Auditors so appointed hold the office until Central Government on arising such a situation. (Sec. the conclusion of first annual general meeting 224(3) &(4)). (AGM). (Sec. 224 (5)). There does not appear any provision in the Act to deal (ii) In the event of a casual vacancy in the office of the with the situation, if the first Auditors are not appointed Auditors (other than the casual vacancy caused or casual vacancy is not filled, either by the Board of by resignation) the Board of Directors can fill such Directors or by the Company in general meeting as the vacancy and the Auditors appointed to fill the case may be. casual vacancy hold the office till the conclusion of 2. CESSATIONS the next AGM. (Sec. 224 (6)). (A) By Disqualification The possibility of arising casual vacancy (other By incurring the disqualification and thereby vacating than on resignation), appears to be on account of the office, the Auditors cease to hold the office. (Sec. death of the Auditors or incurring disqualification 226(5)). and thereby vacating the office as contemplated (B) By Resignation under Sec. 226(5). The Auditors can resign from the Office at any time at The resignation by the Auditors (whether the their sweet will. There is no specific provision providing first Auditor or subsequent Auditors) is viewed for resignation. However, it is implied authority of every differently in as much as the matter is expected person. The reference to the resignation is found in Sec. to be taken up at the general meeting where the 224(6) dealing with the situation of vacancy caused by issues resulting into resignation can come up for the resignation. discussions. This is one of the ways of having (C) On expiry of the term superintendence of the general body over the The Auditors, appointed by any mode of appointment management. hold the office till the conclusion of the next AGM.(B) By General Body. Therefore, the Auditors can be said to be ceasing to (i) As a general rule, the Auditors are to be appointed hold the office with the conclusion of next AGM. If they by the General Body at the AGM. (Sec. 224(1)),except are reappointed at the said AGM, a fresh term of office the situations mentioned in (A) above. commences. (ii) If the Board of Directors fails to appoint the first Sec. 225 provides for the special procedure either Auditors, they can be appointed by the Company for appointment of Auditors at the AGM other than in the general meeting. (proviso (b) to Sec. 224 (5)). retiring Auditors or providing for that retiring Auditors (iii) The Company can at the general meeting appoint shall not be reappointed. This provision implies that the first Auditors on removing the first Auditors the continuity in the office of the Auditors should be appointed by the Board of Directors (proviso (a)to ensured as far as possible and it should not be left to the Sec.224 (5)). sweet will of the management of the Company. It also ensures that the Auditors cannot impose themselves on (iv) In the event of a casual vacancy arising in the office the Company forever. of the Auditors by resignation, the same is to be filled by the Company in general meeting. (Sec. (D) By Removal 224(6)). (i) The Auditors can be removed from the office before The general meetings referred to in (ii), (iii) & (iv) the expiry of the term by the Company in general above are not necessarily AGMs and to that extent meeting after obtaining previous approval of the the same are exception to the general rule stated in Central Government. (Sec. 224(7)). This is subject to (i) above which is warranted by the circumstances. exception as per (ii) below. “The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather in a lack of will.” - Vincent T. Lombardi 4 March, 2012
  10. 10. CORPORATE GOVERNANCEAppointment and Cessation of Auditors (ii) The first Auditors appointed by the Board of Directors can be removed by the Company at a general meeting. (proviso (a) to Sec.224 (5)). There is hardly any case where the authority under Sec. 224(7) of granting approval for removal is exercised by the Central Government. The said authority is delegated to the Regional Director. There do not appear any guidelines or procedure laid down by the Central Government for consideration of an application for approval for removal of the Auditors. It is pertinent to note that the provisions relating to the removal of Auditors are at variance with the general principle of Law that appointing authority has an implied authority to remove. Though the Auditors are appointed by the Company (whether by the Board or the General Body) they can be removed only with the previous approval by the Government. The only exception is of first Auditors appointed by the Board who can be removed at general meeting. In this case also the authority to remove is vested with the next higher authority. is misnomer in as much as upon expiry of the term The said provisions are with a view to ensure the there is no question of resignation. The Companies are independence of the Auditors having regard to the often found reporting that Auditors have “resigned” object and purpose of an Audit. when in fact it is a case of not reappointing the Auditors at the AGM on account of their unwillingness for3. MISGIVINGS reappointment. In most cases the Companies and the Auditors are found to be partners forever. However, there are situations (B) The change in Auditors pursuant to Sec. 225 is often where separations do take place. The separations are loosely construed as removal, when the removal has the essentially attributable to the frictions and discords. specific connotation under the Act. There may be hardly a case of smooth and cordial (C) The clause 9 of The First Schedule to the Chartered separation. In many cases, the separation culminates in Accountants Act, 1949 provides to the effect that non disciplinary proceedings by the ICAI against incoming ascertainment by the newly appointed Auditors from the Auditors at the instance of outgoing Auditors. Company the compliance of Sec. 225 of the Companies Some of the misgivings about the separation found to be Act 1956 amounts to professional misconduct on the prevailing at various levels are noted below. part of newly appointed Auditors. In practice, it is(A) Before appointment of the Auditors, the Company noticed that the said clause is sought to be applied to is required to obtain a written confirmation from the newly appointed Auditors in all situations, when in fact Auditors about their eligibility and willingness. Many Sec.225 applies to a limited area as discussed above. times it is decided by the Auditors not to continue in (D) Even if the Auditors do give formal resignation letter, office for the next term onwards. The correct procedure they feel that they are removed, having regard to the for this is to convey to the Company the un-willingness background/reasons for resignation. The managements for re-appointment. However, in practice it is noticed also do feel that they have removed the Auditors that resignation letter is given after signing the Auditor’s by obtaining resignation. There is no reason for the report. If the resignation is construed as effective on the forthright Auditors to decline to resign if asked for. Once date of signing Auditor’s report it would be a case of the resignation in plain terms is given there ought not to casual vacancy in as much as there is a time gap between be any murmuring about it. It is open to the Companies date of signing of Auditors Report and date of AGM. to take recourse either to Sec. 225 or Sec. 224 (7) in which There does not appear any bar even to fill the casual situation the Auditors have adequate opportunity of vacancy at the AGM, but the nature of appointment has representation or putting forth their views. This would to be clarified in the annual report. If the resignation is be better option for the Auditors to face in the public not construed as effective from date of signing Auditor’s interest. report but effective after conclusion of AGM, the same“The great successful men of the world have used their imagination, they think ahead and create their mental picture in all its details, filling in here, adding a little there, altering this a bit and that a bit,but steadily building - steadily building.” - Robert Collier 5 March, 2012
  11. 11. UNION BUDGET 2012-13 DIRECT TAXES: UNION BUDGET 2012-13 CA Rajkumar S. Adukia, Mumbai The Union Budget 10AAwhose total income before profit linked deductions 2012-13 was presented exceeds 20 lacs. by the Finance Minister • 1% TDS on Sale of Immovable Property (other than in the wake of a agricultural land) challenging business environment and • TDS u/s 194J @ 10% introduced from 1-7-2012 on weak global economic remuneration to non executive director conditions. 2011-12 • W.e.f 1-7-2012, TCS @1% on Cash Sale>2lacs of jewellery was described as the and bullion irrespective of the fact whether buyer is a “year of recovery, manufacturer, trader or purchase is for personal use interrupted.” With a somber global outlook, • TDS @ 1% on Sale of minerals (coal, lignite, iron ore) sustained slowdown in Indian GDP growth, • Share premium exceeding fair market value to be treated high inflation, elevated as income u/s 56(2).deficits and low investor confidence, the current year has Other Changes:been testing for the Indian economy. The good news is that,while the GDP achieved of 6.9% was low as compared to • Proposed to amend section 68 of the Income Tax Act tothat of previous years, comparatively it still put India in the provide that the nature and source of any sum credited,top five economies of the world. as share capital, share premium etc., in the books of a closely held company shall be treated as explained onlyThe announced advance pricing agreement may help if the source of funds is also explained by the assesseetransfer pricing decisions and the USD 1 bn VC fund focused company in the hands of the resident shareholder.on MSME is good for entrepreneurship. • New section 271AB for Penalty on undisclosed incomeThe ‘GST’ which is now expected to be operational by found during the course of search (w.e.f 1-7-2012)August 2012. We hope that this timeline is met as it wouldcertainly help address the multiple taxation issue faced by • Prosecution Provisions rationalizedthe Industry currently. Corporate tax not being tinkered a) Special Courts to be constitutedwith is the source of joy for private industry in general. b) On tax evasion up to 25 lacs, imprisonment from 3DIRECT TAXES months to 2 yearsTax Rates for AY 2013-14 for Individual/HUF/AOP, BOI,Artificial Juridical Person Up to 200000 NIL 2000001 to 500000 10% 5000001 to 1000000 20% Above 1000000 30%Exemption limit Senior citizen (age of sixty years or more Rs. 250000 but less than eighty years) Senior citizen (age of eighty + years) Rs. 500000Surcharge NIL for all assesses except in respect of companies.Tax Base widened• AMT (Alternate Minimum Tax) @ 18.5% introduced for all assesses claiming profit linked deduction under Chapter VI-A under heading “Deduction in respect of certain Incomes” and SEZ units under section “You just can’t beat the person who won’t give up.” - Babe Ruth 6 March, 2012
  12. 12. UNION BUDGET 2012-13Direct Taxes • Relief given for Long Term Capital gain on transfer of residential house if invested in SME. • 50% deduction for Investment in Rajiv Gandhi Equity Scheme up to Rs. 50000 for retail investors having annual income less than 10 lacs. • STT Rates on delivery based transactions reduced from .125% to 0.10% • Extension of sun set date for tax holiday for power sector enhanced by one year u/s 80IA. • Additional deduction of Rs 5000 allowed for Preventive Health Check up u/s 80D. • Deduction for saving account Interest up to Rs. 10000 (Sec 80TTA) is allowed. • TDS provisions have been modified. section 201 being amended to provide that payer shall not be assessee in default if: - payee has filed return u/s 139 - payee has taken such sum in computation of income c) On tax evasion above 25 lacs, imprisonment from 6 - has paid tax due on income declared in return and months to 7 years. certificate form chartered accountant is furnished by (Earlier threshold limit was 1 lakh (fixed in 1976) payer and and minimum imprisonment was 3M to 3 years) • Time limit for passing order u/s 201 enhanced from 4 (Applicable w.e.f. 1-7-2012) years to six years where TDS return is not filed u/s 201.• Transfer pricing regulations to be applied to domestic • 80-G Benefit to be applicable for donation exceeding transactions between related parties u/s 40A, 10AA, Rs. 10000 only if payment not made in cash. 80A, sections where reference made to 80 IA, if aggregate amount of all such domestic transactions exceeds Rs. 5 • General Anti Avoidance Rule (GAAR) made applicable crores. (w.e.f. AY 2013-14). to Impermissible avoidance arrangements where• U/s 115A, interest income of nonresident from purpose is to obtain tax benefit. Infrastructure Company reduced from 20% to 5%. Also Fiscal deficit remains a concern TDS rate in such cases reduced to 5% u/s 194LC The Union Budget FY2012-13, on the whole, was on expected• Non resident non citizen sports person u/s 115BBA lines. It is neither populist nor reformist and adopted a brought in parity with non resident non citizen middle path. It harmonized and raised the indirect taxes entertainer under DTAA. rates and gave marginal relief to individual tax payers. Fiscal deficit for 2012-13 is likely to slip to 5.5 per cent of GDP,• Dividend received from any subsidiary in multi tier higher than the government’s estimate. Bold expenditure corporate structure to be reduced for paying DDT. reform measures like petroleum price deregulation would• Threshold limit of tax audit increased from 60 lakhs have brought lasting fiscal gains and made the deficit rupees to one crore rupees in the Case of persons carrying reduction path more credible. The budget’s reliance on an on business and from 15 lakhs rupees to 25 five lakhs optimistic growth projection and enhanced taxes to bring rupees in the case of persons carrying on profession. the fiscal deficit down make it a bit shaky. The projected higher borrowings will limit the reduction in interest rates.• Advance Tax for Senior Citizen Exempted. The Union Budget 2012 is a balanced one and has put forth• Wealth Tax Exemption to residential house allotted by many provisions to improve macroeconomic environment company (salary upto 10 lacs p.a) and strengthen domestic growth drivers.“The world ain’t all sunshine and rainbows. It’s a very mean and nasty place and I don’t care how tough you are it will beat you to your kneesand keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain’t about how hard ya hit. It’s abouthow hard you can get hit and keep moving forward.” - Rocky Balboa 7 March, 2012
  13. 13. UNION BUDGET 2012-13 Indirect Taxes Budget Highlights - 2012-13 CS V. S. Datey, NashikBudget 2012-13 and Finance Bill, 2012 was presented before limit. Any intimation to Superintendent is not required.Parliament on 16th March 2012. Self-adjustment of excess credit is not allowed onProvisions relating to increase in standard rate of excise duty account of reasons like interpretation of law, taxability,from 10% to 12% has become effective from 17-3-2012 (i.e. classification, valuation or applicability of any exemptionmidnight of 16th March 2012). notification.Service tax rate will be 12% (from present 10%) w.e.f. • Whenever there is change in effective rate of service1-4-2012. tax or service tax is taxed for the first time, the date ofChanges in Cenvat Credit Rules, Point of Taxation Rules and payment shall be date of credit in bank account (RuleService Tax Rules will become effective from 1-4-2012. Other 2A of Point of Taxation Rules] This is to avoid the ‘taxchanges will become effective after enactment of Finance planning’ of getting pre-dated cheques to show receiptAct, 2012. of payment earlier. Of course, now, cheque is valid only for three months and hence this planning cannot beChanges relating to negative list on service tax will become indefinite]effective from a date to be notified after enactment of FinanceAct, 2012. • Service tax payable on receipt basis by all individual and partnership firms (including LLP) upto turnoverThe changes are summarised below. of ` 50 lakhs, if turnover of taxable services in respect1. Service Tax of previous year (of the total entity and not individual• Negative list of services - At present, service tax is unit) was below ` 50 lakhs [Fourth proviso to Rule 6(1) payable on specified 117 taxable services. Now, serviced of Service Tax Rules inserted w.e.f. 1-4-2012] tax will be payable on all taxable services, except those • No penalty if service tax and interest on renting of specified in the negative list and excluding those for immovable property is paid within six months from date which exemption has been granted. The provision will of enactment of Finance Act, 2012. be effective from date to be notified after enactment of • One year time limit for issuance of show cause notice Finance Act, 2012. for demand of service tax being increased to 18 months• Service tax rate increased from 10% to 12% w.e.f. 1-4- [proposed amendment to section 73(1)] 2012. Thus, total rate will be 12.3% w.e.f. 1-4-2012. • It is provided that while giving follow up notices on same• Service tax on works contract serviced payable @ 4.80% grounds, the grounds as given in earlier notice need not plus 3% education cess w.e.f. 1-4-2012 be repeated. Only tax due and reference to earlier notice• Service tax on air transport payable @ 12% on 40%, is sufficient [proposed section 73(1A)] subject to condition of non-availment of Cenvat credit • Provision for compounding of offences [proposed on inputs or capital goods [This means Cenvat credit of amendment to section 94(2)] input service is available] (Notification No. 6/2012-ST 2. Cenvat Credit Rules dated 17-3-2012]. • All the amendments are effective from 1-4-2012, except• Service tax on repairs of roads has been exempted with otherwise specified. retrospective effect from 16-6-2005 [proposed insertion of section 97 to Finance Act, 1994 vide Finance Bill, 2012] • Following services are excluded from definition of ‘input service’ only so far as they relate to a motor vehicle,• Management, maintenance or repair of non-commercial which is not a capital goods – (a) Renting of a cab (b) Government building exempted w.e.f. 16-6-2005 till the Supply of tangible goods. However, these services will new provision relating to negative list of services comes be eligible as ‘input services’ if used for provision of into effect [proposed insertion of section 98 to Finance taxable services for which Cenvat credit of motor vehicle Act, 1994 vide Finance Bill, 2012] is available as capital goods [rule 2(l) clause (B) amended• Textile dyeing units can form an association or registered w.e.f. 1-4-2012] cooperative society which is engaged in treatment and • Following services are excluded from definition of ‘input recycling of effluents. The project is set up with financial service’, except when used by (a) a manufacturer of a assistance from Government. Services provided by motor vehicle in respect of a motor vehicle manufactured such association or registered cooperative society to by him or (b) provided by general insurance company its members are exempt from service tax – Notification [as specified in section 65(105) of the Finance Act], No. 42/2011-ST dated 25-7-2011 (The words ‘registered in respect of a motor vehicle insured or reinsured by cooperative society’ have been added w.e.f. 17-3-2012). him - (a) General Insurance Services (b) Motor vehicle This notification is being given retrospective effect from related service (earlier termed as Authorised Service 16-6-2005, vide clause 145 of Finance Bill, 2012. Station service) [rule 2(l) clause (BA) inserted w.e.f. 1-4-• Service tax on rail transport of goods (other than in 2012]. Note - There seems to be clear drafting mistake. containers) deferred till 1-7-2012. Till 1-4-2012, general insurance services were allowable• Invoice can be issued within 30 days [present limit 14 in all cases except where used for motor vehicle related days] Banking company or Financial Institution can services. Now, they are not eligible except in aforesaid issue invoice within 45 days [Rule 4A of Service Tax cases. This does not seem to be intention at all. Rules amended] • Rule 5 of Central Excise Rules amended to provide• Adjustment of service tax under rule 6(4B) of Service Tax simplified method for refund of unutilised Cenvat credit Rules of excess tax paid can be without any monetary on account of exports [It should be clarified that refund “Don’t give up. There are too many nay-sayers out there who will try to discourage you. Don’t listen to them. The only one who can make you give up is yourself.” 8 March, 2012
  14. 14. UNION BUDGET 2012-13Indirect Taxes provision applies only if assessee has excess Cenvat • Differential excise duty is not payable on duty paid credit. Otherwise, department is likely to take a view goods lying at depot or branches that in case of all exports, assessee cannot utilise Cenvat • Merit goods were subject to 5% duty. This rate has been credit for DTA sales and must go for refund procedure increased to 6%. only]. • Rate of 1% imposed on 130 items in 2011 Budget has been• Cenvat Credit allowable on excise duty paid on motor increased to 2% w.e.f. 17-3-2012 (if assessee does not avail vehicles (except under heading Nos. 8702, 8702, 8704, Cenvat credit). However, in case of coal, fertilisers all 8711 and their chassis) to manufacturers. The excluded goods falling under chapter 31 (except those clearly not chapter heads are relating to motor vehicles for transport to be used as fertilisers), articles of jewellery and mobile of 10 or more persons (including driver), motor cars, handsets and cellular phones (under heading 8517), the station wagons, tor vehicles for transport of goods and rate of duty will continue to be 1%, if assessee does not motor cycles. avail Cenvat credit.• The Cenvat credit of excise duty paid motor vehicles • Excise duty on branded readymade garments, made- covered under headings 8702, 8703, 8704 and 8711 up articles and textiles will be payable @ 12% on ‘tariff and their chassis is available only to specified service value’. The tariff value will be 30% of Retail Sale Price providers e.g. Courier, Tour operator, Rent-a-cab scheme (RSP) w.e.f. 17-3-2012 [At present, it is payable @ 10% operator, Cargo Handling Agency, Goods Transport on 45% of RSP] [Notification No. 20/2001-CE(NT) dated agency, Outdoor caterer and Pandal or shamiana 30-4-2001 amended]. Thus, effective rate will be 3.6% of contractor as per earlier provisions RSP plus education cess i.e. total 3.708%.• In effect, Cenvat credit is available only in respect of • In case of readymade garments, provision for return excise duty paid on tractors, special purpose motor of goods for rectification simplified [Notification No. vehicles, work trucks, bicycles, baby carriages and 31/2011-CE amended] trailers and parts and accessories of all motor vehicles to • Excise duty introduced on unbranded gold jewellery. the manufacturers. Duty is payable on 30% of transaction value as ‘tariff• Removal of capital goods after use as second hand or value’. SSI exemption will be available, considering the scrap - ‘Amount’ payable on basis of Cenvat credit taken ‘tariff value’ for calculating the limit of ` 4.50 crores as reduced @ 2.5% per quarter or on transaction value, [proviso to para 2(vii) of SSI exemption Notification No. whichever is higher [Rule 3(5A) as amended w.e.f. 17-3- 8/2003-CE(NT) dated 1-3-2003 as amended w.e.f. 17-3- 2012] 2012.• The ‘amount’ payable under rule 6(3) [where assessee • Excise duty is not payable on articles of jewellery is manufacturer of excisable as well as exempt goods or manufactured from previous metal or old jewellery provider of taxable as well as exempt services] has been supplied by the retail customer [Notification No. increased from 5% to 6% w.e.f. 1-4-2012. 9/2012-CE(NT) dated 17-3-2012] [The wording• Restriction of 20% on Cenvat credit on insurance of notification is incorrect. The notification can be company removed [Rule 6(3C) omitted w.e.f. 1-4-2012] interpreted to mean that in case of such jewellery, excise• Cenvat Credit of special additional duty (SAD) of 4% duty is payable on full value including value of material can be transferred from one unit to other unit of same supplied by customer. manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. • There is full exemption on all unbranded articles of 1-4-2012] precious metals (which is not ‘gold jewellery’)• Interest is not payable on wrongly taken Cenvat credit • Duty on branded as well as unbranded silver jewelley if it was not utilised [Rule 14 amended] (very sensible has been exempted. amendment indeed) • Return under CE (Removal of Goods at Concessional• Inputs or capital goods need not be brought in the Rate of Duty for manufacture of Excisable Goods) to be premises of service provider [Even otherwise, this was filed on quarterly basis. not a practical provision. Further, the word ‘premises’ 4. Customs were never defined. Thus, any place where assessee • While calculating customs duty, the education cess (2%) is providing service would be ‘premises’ of service and SAHE cess (1%) would be payable only once i.e. provider]. after basic customs duty and CVD but before Special• Input Service Provider to distribute credit on following CVD [w.e.f. 17-3-2012] basis - (a) Credit of service tax attributable to wholly • Duty free allowance under Baggage Rules has been exempted goods or exempted services shall not be increased from ` 25,000 to ` 35,000 for adult passengers distributed (b) In case of service tax attributable to a of Indian origin and from ` 10,000 to ` 15,000 for children particular unit - directly to that unit (c) In case of common upto 10 years of age [change w.e.f. 17-3-2012] input services - on basis of turnover of each unit [Rule 7 of Cenvat Credit Rules overhauled] • Cenvat Credit of special additional duty (SAD) of 4% can be transferred from one unit to other unit of same• Cenvat Credit Reversal not required if exempted taxable manufacturer [Rule 10A of Cenvat Credit Rules w.e.f. service provided to SEZ - retrospective amendment 1-4-2012] w.e.f. 16-6-2005 [clause 144 of Finance Bill, 2012]] • Importer of specified goods has to submit declaration3. Central Excise where goods will be sold for first time after import and• Standard Central Excise duty rate (except in case of VAT registration number [change w.e.f. 1-5-2012] petroleum products) has been increased from 10% to • Provision is being made for ‘air freight station’ (like ICD 12% from 17-3-2012 (i.e. midnight of 16th March 2012) or CFS) (to be effective after enactment of Finance Bill, [Notification No. 18/2003-CE dated 17-2-2012]. 2012]“When I am asked to pay a price, I ask myself, “Is this end result really worth what I must give up to obtain it?Will I in the end be truly happier…truly stronger…truly a better individual?”When the answer is an unqualified YES, then I willingly pay the price.” - Thomas D. Willhite 9 March, 2012
  15. 15. UNION BUDGET 2012-13 SERVICE TAX KEY ASPECTS CA Rajesh R Agrawal, PuneThe salient aspects of UNION BUDGET, 2012 on Service Tax SR# Service Existing Proposed CENVAT Creditis spelt out below. The Government of India in the Union Taxable Taxable ApplicabilityBudget 2012 has made significant changes in the Service Tax portion portionProvisions including that of CENVAT Credit Rules, 2004. (%) (%)Rate Changes w.e.f. 1st April 2012: 4 Accommodation 50 60 Credits on input in a hotel etc. services allowed SR # Particulars (Scheme) Present Proposed Rate Rate 5 Railways: goods 30 30 All credits will be allowed 1 Normal 10 % 12 % 6 Railways: New Levy 30 All credits will be passengers allowed 2 Works Contract Composition 4% 4.8% Scheme Taxation of services: Introduction of Negative List of Services (effective from a 3 Purchase & Sale of foreign Increase of 20% under currency various slabs date to be notified after the enactment of the Finance Bill 2012). 4 Service in respect of Promotion & ` 6,000 ` 7,000 The Government have prescribed a detailed “Draft Guidance marketing for lottery ` 9,000 ` 11,000 Paper- GPA” for better understanding of the new provisions with questions and answers, which has been published with 5 CENVAT Reversal for exempted 5% 6% Circular issued. services under Rule 6(3) of CCR, 2004 A switch over shall be given effect by insertion of proposed new sections, 65B, 66B, 66C, 66D, 66E and 66F Chapter V 6 Life Insurance Service 1.50% 3% on 1st year of the Finance Act, 1994 and ceasing of sections 65, 65A, 66, (not entirely for risk cover) Gross premium and 66A but these ceasing sections will remain relevant in 1.50% on respect of services provided prior to the coming into force of Subsequent Year premium the new provisions The charging section will now be contained in section 7 Air transport of passengers Dual rate structure has been 66B and levies taxes on all services, other than those in changed to standard rate of the negative list, provided or agreed to be provided in the 12% with abatement of 60% taxable territory by one person to another. in all classes The word “service” which has been now defined in clauseSpecific Abatements Proposed: (44) of the new section 65B will also cover “declared services“The Government is proposing increase in taxable portion of in section 66E.value with liberalization in input tax credits following the What is to be taxed under Service Tax has to be determined byprinciple of neutrality of taxes. looking into negative list & declared services, which is a bigChanges proposed to be introduced in the abatements along shift in the way services are proposed to be taxed in future.with the Negative List: This means that if any activity satisfies the characteristics ofThe existing and new abatements shall be as follows: - service, it will be taxable, unless specified in the Negative list. SR# Service Existing Proposed CENVAT Credit Negative list of services proposed to include: Taxable Taxable Applicability o Trading of goods, portion portion (%) (%) o Any process amounting to manufacture or production of goods (Whether under the Centralized Act or any State 1 Convention centre 60 70 All credits (except Act), or Mandap with on inputs of chapter catering 1 to 22 i.e. foods and o Sale of space or time slots for advertisements other than advertisement-broadcast by Radio or Television. beverages) 2 Pandal or 70 70 This would include sale of space for advertisements in Shamiana with Bill Boards, Public Places, Buildings, Conveyances, Cell catering Phones, Automated Teller Machines, Internet etc. 3 Coastal shipping 75 50 No credits at present o Admission to entertainment events or access to amusement facilities, “Accept the challenges, so you may feel the exhilaration of victory.” - George S. Patton 10 March, 2012
  16. 16. UNION BUDGET 2012-13Service Taxo Transmission or distribution of electricity by an (Whether or not intoxicating) is supplied in any manner electricity transmission or distribution utility, as a part of the activity.o Pre-school and higher education including education as It is expected that present exemption Notifications will a part of an approved vocational education course, be rescinded / modified / merged to limit the exemptiono Services by way of renting for residential purposes, Notification.o All modes of transportation by rail (such as Metro, Point of Taxation Rules, 2011 (w.e.f. from 1 April 2012): Mono-Rail etc.) other than first class and air-conditioned o Continuous supply of service amended to include any coaches (including Metered Cabs, Radio Taxis or Auto service provided or to be provided on a recurrent basis, Rickshaws etc.), for a period exceeding three months with the obligationo Transport by Road (except a Goods Transport Agency for payment periodically or from time to time Or Courier Agency), o Rule 6, in respect of continuous supply of serviceo Toll charges, omitted and merged with Rules 3, 4 and 5 which deal with situations covering a change in the effective rate ofo Services by the Government or A Local Authority tax and taxation of new services. excluding certain specified services o Rule 2A inserted to define the date of payment as theo Services by the RBI earlier of the dates on which the payment is entered ino By a foreign Diplomatic Mission located in India the books of accounts or credited to the bank account of the person liable to pay tax except in certain specifiedo Specified services in relation to Agriculture caseso Betting, Gambling or Lotteries, o A new Rule 8A inserted as a residual rule, to ascertaino Service by way of extending deposits or loans in so far the point of taxation by way of best judgment where the as consideration is by way of interest/ discount and sale taxpayer is unable to submit the details regarding the and purchase of foreign currency between banks and date of payment or date of invoice or both.o Funeral, burial, crematorium or mortuary services Place of Provision of Services Rules, 2012: including transportation of the deceased. o The Government have released “Place of Provision ofProposed Declared Services (Deeming Provision): Services Rules, 2012” for Comments and feedback forTo remove ambiguity, certain activities have been specifically the time being, which is covered by “Draft Guidancedefined by description as services and referred as Declared Paper-B (GPB).Services under Section 66E, namely: - o The said new rules would replace the existing Exporto Renting of Immovable Property, of Services Rules, 2005 and the Taxation of Services (Provided from Outside India and Received in India)o Construction of a Complex, Building or Civil Structure, Rules, 2006. including those intended for sale to a buyer, o Criteria to determine the place of provision of serviceo Temporary transfer or permitting the use or enjoyment proposed to be classified under the following heads: - of any intellectual property right, a. Location of the service receivero Development, design, programming, customization, adaptation, upgrading, enhancement or implementation b. Place of performance of services (primarily involving of information technology software (Sale of packaged services related to any goods) or canned software is proposed to be treated as sale of goods), c. Location of immovable propertyo Agreeing to the obligation to refrain from an act, or to d. Place the where event is held (in the case of event tolerate an act or a situation, or to do an act, related services)o Transfer of goods by way of hiring, leasing, licensing o Where both the service provider as well as the or in any such manner without transfer of right to use recipient are located within the taxable territory then such goods (This entry would cover only activities notwithstanding any of the above criteria, the place of representing the financing transaction in relation to provision of service is to be the location of the recipient delivery of goods on hire purchase or on installment and of service not actual delivery), o Special Rules proposed in respect of the followingo Activities in relation to delivery of goods on hire services: - purchase or any system of payment by installments, a. Services provided by a banking company, or ao Service portion in the execution of a Works Contract and financial institution, or a non-banking financial company, to account holderso Portion in an activity wherein goods, being food or any other article of human consumption or any drink b. Telecommunication services provided to subscribers"There are three ingredients in the good life: learning, earning and yearning.” - Christopher Morley 11 March, 2012

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