No “Minimum Alternate Tax” for Companies without local base

According to the recent verdict of Authority for Advance Ruling Minimum alternate Tax (MAT) is not payable by foreign Companies not having a permanent establishment in India.

Minimum alternate Tax (MAT) is a levy typically aimed at collecting tax from Companies enjoying exemptions. Minimum alternate Tax under 115JB of the Income Tax Act was incorporated with the specific purpose of bringing under the tax net companies that avoid paying tax by taking advantage of the various incentives offered by the Government.

The AAR’s verdict, dated July 23, 2010, was on an application filed by Mauritius-based Praxair Pacific. The foreign company asked AAR to clarify whether it is liable to pay MAT under Section 115 JB of the Income-Tax Act, on account of the transfer of shares to its Indian subsidiaries. The Mauritius company was proposing to transfer 74% of its shareholding in Indian subsidiary Jindal Praxair to its wholly-owned Indian subsidiary Praxair India.


The AAR clarified that Praxair Pacific is not liable to pay MAT in India. AAR contention is based on Section 115 JB of Income-Tax Act which is not applicable to foreign companies. The AAR pointed out that amendments in Section 115 JB brought in by the 2002 Finance Bill had clarified that MAT is applicable only to domestic companies. The AAR further said that Section 115 JB of Income-Tax Act is not designed to be applicable to a foreign company who has no presence or permanent establishment in India.

RESTRICTION ON IMPORT OF TELECOM DEVICES

The Indian Government has restricted the import of Multichannel GSM/CDMA receivers, transmitters and transreceivers capable of receiving or transmitting or both in two or more frequencies simultaneously. (Ministry of Commerce and Industry, Notification no. 53/2009-2014) Now, only the actual user i.e. manufacturer of the telecom equipments shall be able to import those devices against the license issued by the government. The intermediary assemblers, traders and unauthenticated manufacturers shall no longer be able to import those devices.

NEW RUPEE SYMBOL

Indian Rupee is soon going to have distinct identity like Euro, Pound, Dollar and Yen. The Indian cabinet has approved the new symbol of Indian Rupee. The new symbol is the blend of Devenagri Script “Ra” and Roman script “R”.

This new Rupee symbol has been designed by a Post Graduate student of the Department of Design at Indian Institute of Technology (IIT), Guwahati. The new symbol can easily be incorporated in the existing software system, typewriters and computer keyboards.

However, there is no immediate plan to introduce the symbol in new currency.

File IT Returns with Digital Signature

The Central Board of Direct Taxes (CBDT) has amended the Rules relating to electronic filing of income tax returns vide Notification No.49/2010 dated 9th July 2010. The amended Rules will apply with effect from the date of notification in the official gazette.

As per the amended Rules, it is now mandatory for all companies to file income tax return electronically in Form No.ITR-6 with digital signature. Earlier, companies could file their electronic returns with or without digital signature.

Further, now all individuals and Hindu Undivided Families (HUFs), who are required to get their accounts audited under section 44AB of the Income Tax Act 1961, are also required to file their income tax return in Form No.ITR-4 electronically with or without digital signature. Earlier, this condition was applicable only to companies and partnership firms.

Accounts are required to be audited under the income tax law, if turnover or gross receipts from business exceeds Rs.40 lakh (Rs.60 lakh from assessment year 2011-12 onwards), or if turnover or gross receipts from profession exceeds Rs.10 lakh (Rs.15 lakh from assessment year 2011- 12 onwards).

New Taxable Services

Central Board of Excise & Custom (“CBEC”) has notified 8 new taxable Services w.e.f. 1.7.2010 vide Notification No.24/2010-Service Tax dated 22.6.2010.

The following are the new taxable Services introduced w.e.f. from 1.7.2010.

1. Games of chance (zzzzn)

2. Health services (zzzzo)

3. Maintenance of medical records (zzzzp)

4. Promotion of a ‘brand’ of goods, services, events, business entity etc. (zzzzq)

5. Commercial use or exploitation of any event organized by a person or organization (zzzzr)

6. Electricity Exchange Service (zzzzs)

7. Copyrights on Cinematographic films and sound recording (zzzzt)

8. Providing of preferential location or external / internal development of complexes (zzzzu)


Click here to see the full notification.

FDI in multi Brand retail in India: A good or Bad move?

The government on Tuesday took the first step towards opening up the multi-brand retail sector for foreign direct investment (FDI) by releasing a discussion paper on the issue. The discussion paper is available at the website of Department of Industrial Policy & Promotion. The proposed 100 per cent FDI in multi brand retail, however, seems to be in consistency with the UPA government’s emphasis on technology up-gradation and flow of investments into the retail sector

FDI in Multi-Brand retailing is prohibited in India. FDI in Single- Brand Retailing is permitted to the extent of 51%. The discussion paper, which will be open for comments from stakeholders until July 31, does not suggest an upper limit on foreign investment in multi-brand retail. According to this discussion paper, the foreign companies in multi brands will also have to follow stringent rules on Job reservations for local youth, local sourcing requirements and make mandatory investments in local supply chain.

It is widely acknowledged that FDI can have some positive results on the economy, triggering a series of reactions that in the long run can lead to greater efficiency and improvement of living standards, apart from greater integration into the global economy. This will improve the quality of merchandise as well as improve the product availability and lower prices. Moreover, it will be a win-win situation for the customers. It can also be harnessed, to boost exports out of India through Clear Clauses of Investments in Sourcing & Exports out of India.

It has been observed by the big-wigs of retail sector that there is an urgent need to encourage foreign investment in this sector and if the policy process is strategically done, it can create a synergy between the small retailer and the larger retail chains.

Earlier attempts to open up retail trade have met with stiff resistance. A major concern is that it would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Another concern raised by the people opposing FDI in retail trade is that the Indian retail sector is still under-developed and in a nascent stage and it is allowed to grow and consolidate first, before opening this sector to foreign investors end.

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The opinions expressed herein are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal advice or opinion.