PART I CIRCULARS NOTIFICATIONS PRESS RELEASES

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PART I: CIRCULARS/ NOTIFICATIONS/ PRESS RELEASES


A.        INCOME TAX ACT


1.        Introduction of UTN shelved


The government is considering to shelve the introduction of the Unique Transaction
Number (UTN) which tax payers need to quote along with Permanent Account Number
(PAN) when tax is deducted/ collected at source. The introduction of UTN, was
scheduled to be implemented from January 2010 and the process of filing tax returns
remains the same as earlier.


2.        Surety for loan by foreign arm to attract tax


An Indian company that provides a Bank Guarantee (BG) against a loan taken by a
subsidiary abroad will now have to pay tax in India for standing guarantee for its
associates, irrespective of whether or not it has received a commission for the BG.


3.        Govt mulls two-rate personal tax structure


In Budget 2010-11, the Finance Ministry is considering a reduction in the number of
personal income tax rates from the current three to two. At present, there are three rates
- 10, 20 and 30%. The Finance Ministry is looking to simplify the number of rates
without sacrificing revenues.


4.        Corporates to adjust FBT with Q4 advance tax


The central Board of Direct Taxes (CBDT) has taken an in-principle decision to allow
corporates to adjust the fringe benefit taxes (FBT) deposited in fisrt quarter of the
financial year 2009-10 against their advance tax liability for the fourth quarter.

TaxCon India (Fortnightly Update No 144)                                      Comp/ D: / My Documents/ Updates/144th
January 8, 2010

(Disclaimer: This is for private circulation only. Every effort has been made to provide the correct information for the facility of our
clients. Specific advice/clarification should be obtained in case there is any doubt relating to the aforesaid)
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5.        DTC likely in coming budget


The finance ministry has made a detailed presentation to the Prime Minister on the
Direct Tax Codes (DTC) and is proposed to introduce in the forthcoming budget.


C.        RBI/ FEMA REGULATIONS


1.         JVs with overseas firms to get foreign tag


In order to further streamline the foreign direct investment (FDI) policy, the government
is going to classify a 50:50 joint venture (JV) between a domestic firm and an overseas
entity as foreign company. Accordingly, all foreign partners having JV with Indian firm,
will have to divest atleast 0.5% in favour of the Indian partner to retain the status of an
Indian-owned company. The clarification in this regard is expected soon from DIPP.


2.        Automatic FDI route to close for sensitive sectors


In order to Keen to enhance national security, the government plans a new entry route
restrictions on foreign direct investment (FDI) beyond 49% in eight specified “sensitive”
sectors, including airports, seaports, pharma, petroleum refining and gas pipelines. In all
these sectors, 100% FDI through the automatic route is permitted now. Once a stricter
policy is in place, proposals to expand FDI beyond 49% in these sectors would have to
be vetted by the Foreign Investment Promotion Board (FIPB).




TaxCon India (Fortnightly Update No 144)                                      Comp/ D: / My Documents/ Updates/144th
January 8, 2010

(Disclaimer: This is for private circulation only. Every effort has been made to provide the correct information for the facility of our
clients. Specific advice/clarification should be obtained in case there is any doubt relating to the aforesaid)
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II:        RECENT CASE LAWS


A.        INCOME TAX


1.        CIT v Maggronic Devices (P) ltd


It was held that when the assessee company has purchased plant in the form of technical
documents including designs, drawings etc, and the title in the documents stood
transferred to assessee on payment to foreign company, then the payment could not be
termed as royalty so as to attract TDS.



2.        DCIT v. Angel Broking Ltd.


It was held that the payment made by a member to its stock exchange for VSAT/Lease
line/BOLT/Demat charges is not fee for technical services u/s194J and therefore not
liable to deduct tax (TDS). It was further clarified that fees collected in this regard is
nothing but fee paid for use of facilities provided by the stock exchange which is
available for use by any member. Satellite based trading enables trading member to
trade on exchange from their place of work across the country and its the facility
provided to its members, such payment cannot be said to be nature of fees for any
technical services rendered.


B.        OTHERS


1.        Management cannot deny gratuity


The supreme court has ruled that gratuity is a statutory right of employees which cannot
be denied to the employee on the ground that they are being given provident fund and
pension benefits. It was further held that no establishment can deny gratuity benefit to
an employee, as the statutory provision enacted by Parliament cannot be "defeated" by
introduction of any "contract or instrument".
TaxCon India (Fortnightly Update No 144)                                      Comp/ D: / My Documents/ Updates/144th
January 8, 2010

(Disclaimer: This is for private circulation only. Every effort has been made to provide the correct information for the facility of our
clients. Specific advice/clarification should be obtained in case there is any doubt relating to the aforesaid)
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