HE Income tax department yesterday published a list of 18 names of persons and companies who are tax defaulters of more than Rs. 10 crores. The Department wants these defaulters to pay the taxes immediately. As per the list, all the defaulters are either not traceable or do not have assets. The very first name in the list is of a company, which SEBI found not traceable in 2005 – that too after investigation for five years. And this missing company owes Rs. 75 crores. Maybe the Government hopes that the company will see this information in the Department’s website hidden in an obscure corner and will feel ashamed and rush to the nearest bank to pay off this Rs. 75 Crores. There is also a dead man in the list of the Department. Of course they hope to collect the tax due of Rs. 38 crores from his son.
List of Defaulters
Incomes, which are deemed to accrue or arise in India – CBDT Clarification
AS per Section 9(1)(i) of the Income Tax Act, the following incomes shall be deemed to accrue or arise in India:-
all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India .
The Finance Act, 2012 inserted Explanation 5 to clause (i) of sub-section (1) of section 9.
This explanation reads as under:-
Explanation 5: For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.
It seems several doubts were raised about this new explanation.
1. the purpose of introduction of Explanation 5 was to clarify the legislative intent regarding the taxation of income accruing or arising through transfer of a capital asset situate in India.
2. the Explanation applies to the transactions not resulting in any transfer, directly or indirectly of assets situated in India.
1. the amendment of section 9(1)(i) was to reiterate the legislative intent in respect of taxability of gains having economic nexus with India irrespective of the mode of realisation of such gains.
2. Thus, the amendment sought to clarify the source rule of taxation in respect of income arising from indirect transfer of assets situated in India as explicitly mentioned in the Explanatory Memorandum.
3. Viewed in this context, Explanation 5 would be applicable in relation to deeming any income arising outside India from any transaction in respect of any share or interest in a foreign company or entity, which has the effect of transferring, directly or indirectly, the underlying assets located in India, as income accruing or arising in India.
4. Declaration of dividend by such a foreign company outside India does not have the effect of transfer of any underlying assets located in India.
Board emphatically states that the dividends declared and paid by a foreign company outside India in respect of shares which derive their value substantially from assets situated in India would not be deemed to be income accruing or arising in India by virtue of the provisions of Explanation 5 to section 9 (1) (i) of the Act.
Though the amendment was to retrospectively nullify the Supreme Court judgement in the Vodafone case, many feared that it may affect several others in a different way, where dividends will get taxed.
Board has now clarified the issue.
CBDT Circular No. 4/2015 Dated: March 26, 2015
Making lucrative business out of designing and selling ways to avoid tax
THE British Public Accounts Committee Chairman has come down heavily on the Big Four and other agencies cheating the tax department.
She says that the Committee was able to shine a light on the unacceptable practices and sheer lengths that some companies go to in order to avoid paying the appropriate amount of tax on the profits they make from their activity here in the UK.
She did not mince words or names when she said,
“Our hearings with companies such as Google, Starbucks and Amazon have exposed the artificial structures and complex transactions used to move profits out of the UK into low tax jurisdictions.
Our hearings with the ‘big 4’ accountancy firms and promoters of marketed avoidance schemes have exposed a tax avoidance industry, comprising many large accountancy firms, tax advisers and lawyers, all of whom are making lucrative business out of designing and selling ways for their clients to avoid tax.
Some of these firms, for example PwC from whom we took evidence, appear to be selling these schemes on an industrial scale.”
Interesting quotes from the eminently readable report:
We remain concerned that HMRC’s relationship with these large accountancy firms is too cosy, and it needs to get much tougher in challenging the advice they give to their clients.
We do not believe there are enough prosecutions for tax evasion to act as an effective deterrent to those who break the law. As it stands, tax avoidance – and even evasion – can be a risk worth taking.
HMRC needs to show that it comes down hard on tax cheats and change the perception that it is far too tolerant of these companies and individuals – in contrast to its treatment of small businesses and the majority of the public who pay their taxes.
For as long as the United Kingdom has such a complex tax code, opportunities for aggressive tax avoidance and evasion will continue to be exploited.
The complexity of tax law and the constraints on HMRC’s resources mean that it is fighting an uphill battle against those who are determined to cheat the tax system.
Two more Benches of AAR
GOVERNMENT has notified the creation of two additional benches of the Authority for Advance Rulings (Income Tax) including one at National Capital Region (NCR) and one new bench at Mumbai, with effect from 20th March 2015.
Department of Revenue Notification No. 1/2015., Dated: March 20, 2015
Government wants Indirect Tax Ombudsman at Mumbai
IT looks like there are not enough candidates for selection to the post of Indirect Tax Ombudsman at Mumbai. Now the Government has expanded the selection zone to officers of other departments. And it has been circulated to all Ministries in the Government of India. Maybe a Chief Post Master General can now land up as the Indirect Tax Ombudsman at Mumbai.
Revenue Department F.No.A-12026/5/2015-Ad.I., Dated: March 25, 2015
Special Clearing operations on March 30 and 31, 2015 – RBI instructions
WITH a view to facilitate accounting of all the Government transactions for the current financial year (2014-2015) by March 31, 2015, RBI has decided to conduct special clearing at all clearing houses across the country on March 30 and 31, 2015.
All member banks of the Clearing House are required to keep their inward clearing processing infrastructure open during the Special Clearing hours and maintain sufficient balance in their clearing settlement account to meet settlement obligations arising out of the Special Clearing.
RBI/2014-15/517 – DPSS.CO.CHD.No./1776/03.01.02/2014-2015., Dated: March 26, 2015
ASSOCHAM wants Banks to be available during year end
ASSOCHAM Secretary General says,
March 28 is holiday on account of Ram Nawami followed by Sunday. Then the banks open on March 30 for a day for public and would be out of reach for the general public on March 31 and April 1 due to annual closing. On April 2, the banks along with government offices remain shut because of Mahavir Jayanti to be followed by Good Friday on April 3. On the following day, banks work for a couple of hours on Saturday to be followed by Sunday on April 6. So, virtually from March 28 till April 6, the banking transactions are going to be affected.
He wants the RBI to step in and advise the banks to make some arrangements.
On the one hand, the government wants the economy to be captured in a formal financial architecture, on the other ”this financial architecture is used to long holidays. Now this is not the vibrant business and economic environment which can make India a financial hub.
While the ATMs would remain operational, there is a different kind of problems. A large number of ATMs do not work properly. Besides, they are not even well spread. There would be a cluster of ATMs and then you may not find them for kilometers at a stretch even in big cities.
Besides, there is a limit of cash withdrawals. For all practical purposes,the ATMs at best are doing only the cash vending jobs. What about rest of the banking transactions like cheque clearances, letters of credit for the exporters/importers, salary disbursals? The week of holidays from March 28 is going to be a difficult for businesses.
Apart from banks, a string of holidays would also affect operations at the cargo stations of the airlines, customs at the port. As it is, our exports are in a state of disarray with 15 percent de-growth in February. These holidays would certainly tell upon the export figures for March and April.
We need to somehow get out of this long stretches of holidays, which though may be good for holiday sellers and tour operators. But that is only a limited positive against a big balance tilted in favour of negatives.
Company Law – Registrar s of Companies appointed as adjudicating officers
THE Government has appointed 24 Registrars of Companies in various States as adjudicating officers for the purposes of the Companies Act, 2013