Tag Archives: Government

No re-opening pre-April 1 tax cases: Govt

In a bid to mollify harried foreign investors, Finance Minister Pranab Mukherjee today reiterated that assessments that have already been completed will not be reopened by the income tax department under the retrospective amendments proposed in the Finance Act, 2012.

Further, the minister said the department has also done away with the cascading impact of tax deducted at source (TDS) that was introduced in the Budget on sale of software.

The Central Board of Direct Taxes (CBDT) has written to all chief commissioners of income tax and director generals of international taxation clarifying that cases where assessment proceedings had been finalised before April 1, 2012 would not be opened.

“The board…directs that in case where assessment proceedings have been completed under section 143(3) of the act, before April 1, 2012, and no notice of reassessment has been issued prior to that date, then such cases shall not be reopened under section 147/148 of the Act on account of the clarificatory amendments introduced in the Finance Act, 2012,” the CBDT said in an internal communication to its officers.

The amendment is likely to impact around 10 cases that are pending at various levels, including Euro Pacific Securities Ltd, Cairn UK Holding Ltd, Unilever HPC Finance Service Inc. USA, Accenture Services Pvt Ltd, Tata

Industries Ltd and AT&T, Mcleod Russel India, SAB Miller (A&A), and Sanofi Pasteur Holding SA. The total gain for the exchequer is likely to be around Rs 15,000 crore.

“I gave a commitment in Parliament with regard to retrospective amendments that CBDT will issue a policy circular to clarify that in cases where assessment proceedings have become final before first day of April 2012, such cases shall not be reopened,” Mukherjee said at an event here.

s a reprieve to software distributors, Mukherjee announced that the income tax department will soon issue a circular to avoid multi-level taxation of software. “On the advice of (the advisory) group and Nasscom, I have approved issuance of a circular to avoid multi-level TDS on software under section 194 J (of the Income Tax Act). This will remove hardship in case of software distributors,” he said. Section 194-J of the I-T

Act deals with fees for professional and technical services and covers royalty and non-competence fees.

The issue was also flagged after a meeting last week of the advisory group relating to transfer pricing and International taxation and the NASSCOM, Mukherjee said. Som Mittal, President, NASSCOM said the move to resolve the current issues of multi-level TDS on packaged software products under ‘Section 194J’ of the IT Act was a positive step forward that provided a boost to the software industry, especially the smaller software distributors. “While we await the detailed circular, this announcement will help to alleviate industry concerns on this issue,” he said.

On the major issue of transfer pricing and international taxation, he said the advisory group constituted by the Finance Minister has held its first meeting on May 25 and the issues are expected to be taken up in due course. “The fact that we’re engaging on the issue is in itself a positive outcome,” he told The Indian Express.

The budget proposals required captive BPOs to re-compute their taxable profits based on transfer pricing guidelines, without adequate safe harbour provisions. Safe harbour provisions essentially enable the income tax authorities to accept the transfer pricing — the price at which one arm of a company, usually a multinational corporation, transfers goods or services to another division of the same organisation — returns without scrutiny.

This article was originally published on Indian Express | ENS Economic Bureau : New Delhi, Wed May 30 2012, 00:27 hrs

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RBI’s ‘massive’ intervention sparks rupee gains

The rupee strengthened on Tuesday from a near record low against the dollar after the central bank stepped in with what various dealers described as “massive” intervention, signalling an intent to defend the beleaguered domestic currency.

Some dealers said the dollar sales via state-run banks was to the tune of $400-$500 million, and continues a pattern of aggressive interventions this month as the rupee has threatened to touch a record low of 54.30 hit in December.

Traders widely believe the Reserve Bank of India is looking to defend the psychologically key level of 54, which the rupee breached early on Tuesday morning by falling to as low as 54.15 to the dollar, sparking the central bank action.

A worsening global risk environment and concerns about India’s fiscal and economic challenges have pounded the local currency, forcing the Reserve Bank of India to also adopt surprise measures such as forcing exporters to convert half of their foreign currencies in their accounts.

The RBI is offsetting the impact on rupee liquidity from its dollar sales by purchasing bonds via open market operations. On Monday it said it would buy up to 120 billion rupees in debt on Friday, its second such action in as many weeks.

“RBI will keep up the intervention though ongoing Greek impasse and broad dollar strength will keep USD/INR biased for gains,” said Radhika Rao, an economist at Forecast Pte in Singapore.

“As a backstop to alleviate liquidity strain, OMOs could become more frequent.”

The Indian rupee ended at 53.79 to the dollar, above a session high of 53.5 but below its 53.9750 close on Monday.

Analysts have doubts about whether the RBI can continue to succeed in defending the rupee in the face of steep global risk aversion and a lack of confidence in India’s fiscal standing.

A Reuters poll out on Tuesday showed respondents were split about whether the measures taken so far by the central bank would be effective in stemming the falls of the rupee.

“RBI is looking to contain any panic in INR by intervention and we expect this to go on ’til political developments in Europe see stability,” said Ashtosh Raina, head of foreign currency trading at HDFC Bank.

Despite the interventions, the RBI is mindful of liquidity, given the severe cash crunch in the banking system, which has sent repo borrowings to above 1 trillion rupees regularly since late April.

Its OMO announcement on Monday sent bond yields lower on Tuesday, with the benchmark 2021 bond yields ending down 2 basis points at 8.50 per cent.

Interest rate swaps eased as well. The 1-year settled down 1 basis points to 8.03 per cent and the 5-year fell 3 basis points to 7.45 per cent.

[Source: The
Economic Times]