Govt. allows 2.5 lakh withdrawal for wedding and 25,000 withdrawal for farmers

The Govt. has decided to discontinue the legal tender character of high denomination bank notes of Rs 500 and Rs 1000. In other words, such notes will not be a legal tender from midnight of November 8, 2016. This decision is being made to curb financing of terrorism through the proceeds of Fake Indian Currency Notes and for eliminating Black Money. Key takeaways of this decision are given hereunder:

1. You can exchange old high denomination notes of Rs 500 and Rs 1000 at any of the 19 offices of the RBI or at any of the bank branches or at any Head Post Office or Sub-Post Office from 10th November onward till 30th December, 2016.The RBI will issue two new notes of Rs. 2,000 and Rs. 500.

2. You can go to any bank branch with valid identity proof for exchange of notes up to Rs. 4,000. Exchange of currency in excess of Rs. 4,000 (in denomination of Rs. 500 or Rs. 1,000) shall be allowed by way of credit of money into your Bank account only.

3. Withdrawal from ATMs shall be restricted to Rs.2,000 per day per card up to 18th November, 2016. The limit shall be raised to Rs.4,000 per day per card from 19th November, 2016.

4. You can withdraw cash against withdrawal slip or cheque subject to ceiling of Rs. 10,000 in a day within an overall limit of Rs. 20,000 in a week (including withdrawals from ATMs) up to 24th November 2016.

5. There is no restriction on any kind of payments by cheques, demand drafts, mobile wallets or debit or credit cards and electronic fund transfer.

6. The existing notes of Rs 500/1000 can be used till 11th November, 2016 for payment in any government hospitals, to purchase bus tickets at government bus stands, train tickets at railway stations, air tickets at airports, for purchase of milk, consumable goods at Govt. authorized booths, petrol or diesel or for payment at crematoria and burial grounds or to exchange foreign currency by foreign tourists.

7. In case it is not possible for you to visit the branch you may send your representative with an express mandate, i.e. a written authorisation.

8. All ATMs, Cash Deposit Machines, Cash Recycles and any other machine used for receipt and payment of cash shall be shut on 9th and 10th November, 2016.Banks and Government Treasuries will be closed on 9th November, 2016.

Click here to view Ban on High Denomination Currency and Income - tax Act

Govt. allows 49% foreign investment under automatic route in pension sector

As per the extant norms, up to 26 % FDI is permissible in pension sector through automatic route. However, FDI up to 49% is permissible in pension sector if approval from Govt. is obtained.

To attract more foreign Investment in India, the Govt. has allowed up to 49% FDI in Pension Sector under automatic route. Thus, now approval from Govt. is not required for 49% FDI in Pension Sector. However, it is subject to the condition that foreign investments should be brought in the form of equity shares or preference shares or convertible debentures or warrants of the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013. Further, an entity should obtain necessary registration from the PFRDA and comply with other requirements of the PFRDA Act, 2013 and Rules and Regulations framed there under.

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Legal charges paid to UK firm for setting-up of bank branch outside India wasn't royalty or FTS: ITAT

Facts:

a) The assessee was engaged in the banking business and paid certain legal fees to one legal firm situated in UK. The assessee had deducted and deposited 20% withholding taxes on such payment as per the agreement.

b) Subsequently, it filed an appeal before Commissioner (Appeals) and contended that the impugned payment was not liable to be taxed in India. Said contention was considered but dismissed by the Commissioner (Appeals) on the ground that no new source of income came into existence by obtaining the legal services, and hence, the impugned payment constituted 'Royalty'/'FTS' as per section 9(1)(vi)/(vii).

The ITAT held as under:

1) The impugned payments were made by assessee for creating or earning a new source of income outside India by way of establishment of new Bank Branch or acquisition of Bank.

2) Section 9 provides that royalty or FTS is deemed to accrue or arise in India if it is payable by a person who is resident, except where the fees are payable for the purposes of making or earning any income from any source outside India;

GST Council decides four-tier rate structure of 5%, 12%, 18% and 28%

The GST Council in its fourth meeting held on Nov. 3, 2016 has finalized the GST rates. The finalised rates are 5, 12, 18 and 28 percent. The sin items such as tobacco, aerated drinks, pan masala, etc., will be taxed at more than 28 percent. The rate of GST on Gold has not been decided yet. Items constituting half of the consumer price index (CPI) basket (including food grain) will be exempted from GST.

The additional cess would be levied in first five years after GST implementation to compensate States for any loss of revenue. The Corpus of Rs.50,000 Crore would be needed to pay compensation to States in the first year.

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Mere default in furnishing Form 15G/15H doesn't call for sec. 40(a)(ia) disallowance

Facts:

The issue before the ITAT was:

Whether section 40(a)(ia) could be invoked when Form 15G/15H was obtained from the deductee although not filed before proper authority?

The ITAT held as under:

1) Section 40(a)(ia) spells out that the amount cannot be allowed as deduction only in the event when tax is deductible at source and such tax has not been deducted or, after deduction has not been paid.

2) In the instant case, it was the case of the AO that the assessee was required to deduct tax in terms of the provisions of section 194A. Section 194A is further qualified by section 197A(1A) which is a non obstante clause. Section 197A(1A) provides that liability to deduct tax under section 194A ceases when a declaration (i.e., Form 15G, Form 15H, etc.) is received by a person responsible for paying income to the payee.

Trust promoting Jain Community entitled to registration if it was also working for benefit of general public

Facts:

a) The assessee-trust applied for registration in terms of section 12A.

b) The Commissioner refused such registration on the ground that the objects and activities of the trust were not charitable and were mainly for the purposes of a Jain Community and, therefore, provisions of section 13(1)(b) were attracted.

c) On appeal, the Tribunal was of the view that the Commissioner could not mix the requirements of registration of a trust with that of granting exemption under section 13.

The High Court held as under:

1) It was seen that, the Commissioner focused his attention on particular clauses of the objects of the trust to come to the conclusion that the same were for the benefit of a certain religious communities only, in the process ignoring various other objects, for e.g., the trust would engage itself in activities relating to education by maintaining and running education centers, run hostels, training centers for creating awareness in the common people and to make the education available to the public.

2) It would also engage in imparting training in computers. The trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise the trust could engage in rural development schemes.

RBI allows start-ups to raise 3 million USD through ECBs

The RBI has allowed banks to allow start-ups to raise up External Commercial Borrowings (ECBs) upto 3 million USD or equivalent during each financial year for a minimum average maturity period of 3 years. An entity recognised as a Start-up by the Central Government on date of raising ECB is eligible to raise such ECBs.

 Such borrowing should be denominated in any freely convertible currency or in Indian Rupees  (INR) or a combination thereof. The money raised can be used for any expenditure in connection with the business of company. The borrowing can be in the form of loan or nonconvertible, optionally convertible or partially convertible preference shares.

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Promoter’s a/c can be freezed if an entity doesn't pay fine for non-compliance with disclosure norms

SEBI has observed that some of the listed entities have not paid the fines levied by the stock exchanges for non-compliance with disclosure norms. In order to ensure effective enforcement of listed regulation, it has been decided to freeze the holdings of promoters and promoter group entities of companies in the manner specified below:

• In case non-compliant listed entity fails to pay fine levied by stock exchanges within time frame specified in notice issued by the exchange, the concerned stock exchange shall, upon expiry of the period, freeze holdings in other securities in the demat accounts of promoter and promoter group to the extent of liability which shall be calculated on a quarterly basis.

• In case of non-compliance for two consecutive periods, and failure to comply with the notice issued by the stock exchange within time frame, the recognized stock exchange shall forthwith intimate the depositories to freeze the entire shareholding of the promoter and promoter group in such listed entity. In addition to the freezing of shares of the non-compliant listed entities, the holdings in the demat accounts of promoter and promoter group in other securities shall also be frozen to the extent of liability which shall be calculated on a quarterly basis.

• While freezing the holdings the recognized stock exchange shall have discretion of determining which of the securities and holdings of a promoter or promoter group entity are to be frozen.

India gets taxation rights on investments routed via Korea; CBDT notifies revised India-Korea DTAA

The existing Double Taxation Avoidance Agreement (‘DTAA’) between India and Korea was signed on 19th July, 1985 and notified on 26th September 1986. A revised DTAA between India and Korea signed on 18th May 2015 during the visit of the Hon’ble PM to Seoul has entered into force on 12th September 2016, on completion of procedural requirements by both the countries. Provisions of new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

Some of the salient features of new DTAA are as under:

a) The existing DTAA provided for residence based taxation of capital gains on shares. In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

b) In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income.

No capital gain tax if capital contribution by partner is current asset and not capital asset: ITAT

Facts:

The issue before the ITAT was as under:

Whether the CIT(A) has erred in deleting the addition of Short Term Capital Gains earned by the assessee on transfer of land to the Partnership firm as their Capital Contribution, by holding that the provisions of section 45(3) was not applicable?

The ITAT held as under:

1) Section 45(3) is applicable only in respect of a capital asset. The said provision has no application in the instant case since what was transferred by the partners was a current asset and not a capital asset.

2) Section 45(3) did not come into operation for the assessment year 2008-09 by reason of conversion of the developed land and building into fixed assets by the said firm or due to revaluation by the said firm of the asset so converted during the previous year ended March 31, 2008.

3) Section 45(3) of the Act is applicable in the year of transfer by the partner of his capital asset to the partnership firm by way of capital contribution. In the instant case, the year of transfer was the financial year ended March 31, 2006. The ITO was wholly unjustified in invoking section 45(3) which had no application in the assessment year 2008-09 or for that matter in the assessment year 2006-07. - [2016] 74 taxmann.com 187 (Kolkata - Trib.)