19 Jul, 2008, 0107 hrs IST, ET Bureau
MUMBAI: Cash in the money market is likely to get even more scarce in the coming days. Banks will now have to place an additional part of deposits with the RBI starting July 19, when the revised norms on cash reserve requirements come into force. This is at a time, when banks have been borrowing close to Rs 30,000 crore from the Reserve Bank of India (RBI) on a daily basis. The RBI hiked the cash reserve ratio (proportion of deposits which banks have to park with RBI as cash) to 8.75% in June, besides making it costlier for banks to borrow from its daily cash window. As a result, funds worth almost Rs 16,000 crore would be seen moving out of the banking system. Starting next week, banks have to park Rs 8.75 for every Rs 100 worth of deposit they gather. That apart, banks have to pay 8.5% to the central bank as interest on their daily borrowings from RBI’s cash window, thus making it costlier for them to manage their cash flows. While the CRR hike itself will take out Rs 8,000 crore from the system next week, RBI would also be issuing bonds worth Rs 10,000 crore, bring cash conditions under further pressure. Treasury managers foresee banks to be borrowing up to Rs 45,000 crore from the central bank at the daily repo window next week while borrowing rates in the inter-bank call money market are expected to rise to 9.5%. IDBI Gilts head of treasury SS Raghavan said, "While all signals seem to be hinting at another 50-bps hike in the cash reserve requirements in the forthcoming policy review, there will be some respite, with Rs 30,000 crore of the loan waiver amount reaching banks, following the policy." A good stock of treasury bills issued in April is maturing in July. It was anticipated that fund proceeds of these bills would ease the cash crunch in the banking system. A senior trader with a leading bond house pointed out had most treasury officials were hoping that these funds would provide some respite to the liquidity crisis. However, the central bank simultaneously announced a series of bonds sold through the market stabilisation route to essentially suck out these funds. The banking system has been experiencing tight cash conditions since the past one month. On one hand, inflows in the foreign exchange market have been dwindling off, at a time when there were fund outflows owing to corporate tax payments in mid-June.
Saturday, July 19, 2008
Cash to get scarce in coming days
Norms for reducing carbon emissions soon
Date:Jul 19, 2008;
Section:Corporate & Economy;
Page Number:15
NEW DELHI: The government is working on an exhaustive set of norms, which would include tax concessions for the industry, to reduce carbon emissions. The ministry of science & technology would submit a report on norms for reduction of carbon emissions to PM’s Council on Climate Change in November this year. “The norms would include tax concessions and legislative framework to motivate India Inc to effectively undertake carbon emissions’ reduction programme,” said minister of science and technology Kapil Sibal.
ECB norms may be eased for core companies
ECB norms may be eased for core cos
19 Jul, 2008, 1752 hrs IST, ET Bureau
NEW DELHI: The government is likely to make it easier for infrastructure companies to borrow from abroad – a key requirement for sustaining the economy’s rapid expansion. The high-level coordination committee on external commercial borrowings (ECBs) is expected to meet soon and the focus would be on enabling infrastructure companies to access funds cheaper and faster. Allowing infrastructure companies to bring home more funds may also help in containing inflation if its impact on liquidity is strictly checked, finance ministry officials feel. A stronger rupee may help the government in reducing the import bill as higher dollar inflows can enhance rupee’s purchasing power. At 11.91%, wholesale prices-based inflation is hovering close to 12%. “In a situation like this, encouraging inflows would help ease inflation. Infrastructure companies should not be deprived of long-term funds. Easing of ECB norms should happen logically. Sooner or later, the high-level co-ordination committee on ECB would meet,” a government source said. The forthcoming meeting of the panel, which comprises officials from the finance ministry, capital market regulator Sebi and RBI, is set to discuss the issue. The source said that government suggests policy and the RBI considers it and decides the quantum of relaxation. “It is the RBI which decides the number,” sources added. Government sources had recently told ET that using exchange rate as an inflation-management tool involves a cost and a cost-benefit analysis has to be made. “We have to decide whether for the economy as a whole it is better to push the rupee up, and at what cost and who bears the cost. Yes, if the Rupee appreciates we will have more fiscal space. There is a view in our economy that there is no direct or significant pass through from the exchange rate to the prices. Also, that while there might be a pass through from exchange rate to prices while the rupee is weakening, there is not much pass through when the rupee is strengthening. That’s a question we have to consider. Impact of exchange rate on inflation is asymmetric as between appreciation and depreciation. We have to pay a cost to manage exchange rate. Its a free market”, a top source had recently said. The government and the regulators had tightened the norms last August when copious capital inflows were adding muscle to rupee, hurting exports and enhancing local money supply. They imposed a tight cap of $20 mn on that part of a company’s ECB that could be brought back to India. This restriction was relaxed to some extent in May by allowing infrastructure companies to bring home $100 mn and $50 mn for others, subject to RBI approval. The government also allowed corporate houses in the services sector such as hotels, hospitals and software companies to raise low-cost funds abroad for importing capital goods. These entities are allowed to borrow up to $100 mn from abroad, subject to central bank’s permission.
Taxability of VRS compensation
Terminal benefits cannot be brought within the scope of “amount received” under Section 10(10C), which was introduced to make voluntary retirement attractive.
T. C. A. Ramanujam
Section 10(10C) of the Income-Tax Act, 1961 exempts payments received by a salaried employee from the employer under a Voluntary Retirement Scheme up to Rs 5 lakh. The law requires that the scheme should be framed in accordance with the guidelines prescribed in Rule 2 BA of the I-T Act. No relief is available if the scheme is not approved prior to the date of voluntary retirement. Subsequent approval will not entitle a retired employee to claim exemption. TO READ MORE CLICK ...BUSINESS LINE
No Form-16 needed in I-T return
No Form-16 needed in I-T return
19 Jul 2008, 0316 hrs IST,TNN ,ECONOMIC TIMES
NEW DELHI: While filing tax return this year, you need not attach Form-16 with the form. In a statement on Friday, Central Board of Direct Taxes (CBDT) said that annexures and certificates like Form-16, relating to tax deducted at source are not required for income tax returns filing. "No annexures, TDS/TCS certificates are required to be annexed to the returns of income." an official statement said. A senior CBDT official said that all informations regarding TDS are recorded in the PAN (permanent account number) data of a tax payer. He said the department collects data on TDS from various sources and keep it in the PAN data banks of tax payers. Therefore, he said, the tax payers should just provide the TDS informations in the specified column in the return form. If the figure provided in the return is not matched with the data collected in PAN, then the department would ask the tax payer to furnish the Form-16. The credit for TDS and tax collected at source (TCS) will be allowed on the basis of details furnished in the relevant schedules of the return forms. Assessing officer will not disallow claim in this regard (return against excess tax paid) only on the ground that the TDS/TCS certificates have not been filed along with the return of income, the statement said. Also, to enable tax-payers to file returns in the electronic mode, the new return forms have been made annexure-less, except ITR-7, which is the returns for trusts. The electronic return filed with electronic signature will be treated at par with a physical sign. In case of tax return filed without electronic signature, the department said, the tax payers will get an acknowledgement, which will have return receipt number. A tax official said the tax payer should send the acknowledgement to the department. He said only after receiving the acknowledgement form the tax payer, the assessing officer can assess return filed in the electronic form. The department also said a tax payer can make electronic payment of taxes from the account of any other person.
Tax can be paid online from another person’s a/c :
Publication:Economic Times Delhi;
Date:Jul 19, 2008;
Section:EFM;
Page Number:7
IN A NUTSHELL
Tax can be paid online from another person’s a/c :
CBDT • NEW DELHI: The government on Friday clarified it will allow a taxpayer to make electronic payment of taxes from the bank account of any other person as well. The idea is to facilitate electronic payment of taxes by different categories of taxpayers. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the taxpayer on whose behalf the payment is to be made. It will not be necessary for the assessee to make payment of taxes from his own account in an authorised bank, the Central Board of Direct Taxes said.
Dell’s Indian subsidiary gets tax breather •
NEW DELHI: In a major relief to the Indian arm of the global IT major Dell International, the Authority for Advance Ruling on Friday said that the fees paid by it to an American company for using telecom bandwidth will not be taxed in India. The relief would be subjected to the existence of a permanent establishment of the overseas telecom company in India, the Authority clarified in a ruling.
TDS certificate not needed with tax return
Publication:Economic Times Delhi;
Date:Jul 19, 2008;
Section:EFM;
Page Number:7
IN A NUTSHELL
• NEW DELHI: The government on Friday said annexures and certificates relating to tax deducted at source like Form-16 are not required to be submitted along with income tax returns. “No annexures, TDS/TCS certificates are required to be annexed to the returns of income. Wherever, documents are attached with the return, the receiving official is required to detach and return to the tax payers all such annexures,” the Central Board of Direct Taxes said in a statement. It said that original documents and certificates may be produced by assessees as and when called for by the assessing officer.
Deductibility of political donations
Contributions that are more than what is permissible under the Companies Act cannot be deducted under Section 80GGB of the I-T Act.
In the article ‘Bringing political donations to book’ (Business Line, June 28), the author has expressed the view that “the bottom line therefore is while a company would fall foul of the company law if it breaches the 5 per cent norm, it can get away under the income-tax law and the claim of entire contribution would be allowed in computing its taxable income.” There could be another view on this.Section 293A
Section 293 of the Companies Act, operative from May 24, 1985, permits donations to political parties with certain riders. The important ones are: TO READ MORE CLICK........
Reverse Mortgages
According to the Budget 2007, the National Housing Bank
(NHB) will introduce a novel product for senior
citizens : a “Reverse Mortgage” under which a senior
citizen who is the owner of a house can avail a monthly
stream of income against the mortgage of his/her house
while remaining the owner and occupying the house
throughout his/her lifetime, without repaying pr servicing
the loan.
What is a reverse mortgage ?
A reverse mortgage enables older home owners (senior
citizens) to convert part of the equity in their homes into
tax-free income without having to sell the home, give up
title, or take on a new monthly mortgage payment.
The reverse mortgage is aptly named because the
payment stream is “reversed.” Instead of making
monthly payments to a lender, as with a regular
mortgage, a lender makes payments to you.
In India the actual process of reverse mortgage has not
yet started . But based on general practices followed
in other countries, some common questions asked by
consumers about reverse mortgages are being given
below :
What are common payment plan options?
You can choose to receive the money from a reverse
mortgage
• all at once as a lump sum,
• fixed monthly payments either for a set term or for
as long as you live in the home,
• as a line of credit,
• or a combination of these.
The most popular option is the line of credit, which allows
you to draw on the loan proceeds at any time.
Does unused balance in the Line of Credit Option
has a growth feature? Does that mean I'm earning
interest?
No, you're not earning interest like you do with a savings
account. The growth factor takes into consideration that
your home has appreciated in value over the past 12
months and that you are one year older.
How much money will I get?
No matter which reverse mortgage product you choose,
the amount of funds you are eligible to receive depends
on your age (or the age of the youngest spouse in the
case of couples), appraised home value, current interest
rates, and the lending limit in your area. In general, the
older you are and the more valuable your home (and the
less you owe on your home), the more money you can
get.
Does my home qualify?
Eligible property types include single-family homes, 2-4
unit properties; own constructed homes and flats in
housing societies.
How can I use the proceeds from a Reverse
Mortgage?
The proceeds from a reverse mortgage can be used for
anything, whether its to supplement retirement income
to cover daily living expenses, repair or modify your
home, pay for health care, pay off existing debts, buy a
new car or take a "dream" vacation, cover property taxes
etc.
Are there any special requirements to get a reverse
mortgage?
As long as you own a home, and Senior Citizen, and have
enough equity in your home, you can get a reverse
mortgage. There are no special incomes or medical
requirements.
What if I have an existing mortgage?
You may qualify for a reverse mortgage even if you still
owe money on an existing mortgage. However, the
reverse mortgage must be in a first lien position, so any
existing indebtedness must be paid off. You can pay off
the existing mortgage with a reverse mortgage, money
from your savings, or assistance from a family member or
friend.
For example, let's say you owe Rs.10,00,000/- on an
existing mortgage. Based on your age, home value, and
interest rates, you qualify for Rs.15,00,000/- under the
reverse mortgage program. Under this scenario, you will
be able to pay off ALL the existing mortgage and still have
Rs.5,00,000/- left over to use as you wish.
If, however, you only qualify for Rs.8,00,000/- then you
would need to come up with Rs.2,00,000 from your own
savings to get the reverse mortgage. Even then, all the
money from the reverse mortgage will have been used to
pay off the existing mortgage. On the other hand, you
won't have a monthly mortgage payment anymore.
If you find yourself in a deficit situation where you don't
have enough money to pay off the existing mortgage, you
may use funds from a grant or gift from a family member
or friend to cover the gap, but you cannot incur a new
debt obligation (i.e., loan).
When do I pay back my loan?
No monthly payments are due on a reverse mortgage
while it is outstanding. The loan is repaid when you cease
to occupy your home as a principal residence, whether
you (the last remaining spouse, in cases of couples) pass
away, sell the home, or permanently move out. The
amount owed can never exceed the value of your home.
Furthermore, if the home is sold and the sales proceeds
exceed the amount owed on the reverse mortgage, the
excess money goes to you or your legal heir.
Under what circumstances should I not consider a
Reverse Mortgage?
Because of the upfront costs associated with a reverse
mortgage, if you intend to leave your home within 2-3
years, there may be other less expensive options to
consider, such as home equity loans. Also, if you want to
leave your home to your children, then you should
consider other options, because in many cases, the home
is sold to pay back a reverse mortgage.
ITAT DECISION
DCIT, circle, Bulandshahr v. Allied construction {105 ITD
1 (Delhi-SB)}
The firm received interest on FDR placed with the bank.
The FDR was placed out of surplus business fund of the
firm. Further, the FDR was pledged with the bank for
availing loan for the business purpose. Hence, the firm
offered interest income as business income. Dept did not
accept the contention of the assessee and taxed it as
income from other sources. The tribunal also endorsed
the view of Department in as much as the source of
interest income was FDR with bank which is different
from business receipt. It was further decided that taking
FDR and pledging them for business loan are two
different transactions. Hence, Interest income on FDR
was considered as income from other sources.
Issue: Re-opening Proceedings
S.K. Jain v. Deputy commissioner of gift Tax Spl. Range,
Bhilai{105ITD205(Nag)}
In this case, the department collected some information
at the back of the assessee and used it for reopening of
gift tax assessment proceedings. The Tribunal decided
that department has right to re-open the case even if the
information is collected through illegal means by them. It
was decided that truth of affair and not manner of getting
material is to be taken note of in case of reopening the
cases.
Issue: Capital receipt.
JCIT, Spl Range-1 v. Kwality Café & Restaurant (P) Ltd
{105 ITD 169 (Chd)}
In this case, the company sold its right to use trade mark
and manufacturing facilities. The company offered capital
gain on surrender of trade mark as long term capital gain
and certain portion of consideration as capital receipt not
liable for taxation . It took the view that it lost income
earning apparatus. The Department taxed it as a revenue
receipts. However, the Tribunal accepted assessee's
contention and held that loosing a source of income in the
case of a person, who is not in a business of buying and
selling of business, would amount to transfer of a capital
assets and compensation received therefore clearly falls
within the ambit of a capital receipt.
Issue: Deduction u/s80HHC
Brook Crompton Greaves Ltd., v. ITO Ward 1,
Ahmednagar {105 ITD 146(Pune)}
The Tribunal decided that unabsorbed depreciation / loss
of earlier years need to be reduced from the income of
current year to determine the business income for
computation of deduction u/s 80HHC.
It was also decided that CIT (A) has power to enhance the
income on the issue which was not the subject matter of
appeal before him if the A.O. has overlooked any aspect
relating to the assessment. Therefore, one needs to be
careful before filing appeal to CIT (A) since it will open
entire case even the issue is not agitated before CIT (A).
Issue: Deduction u/s 35D
LIC Housing Finance Ltd., v.DCIT Spl. Range 36, Mumbai
{105 ITD 86(Mum)}
It was decided that if company wants to claim deduction
for preliminary expenses after it commence business; it
can be claimed only by industrial undertaking and that
too, after fulfilling condition of extension of undertaking
or setting up of new undertaking. Therefore, one has to
be careful while claiming deduction u/s35D i.e. public
issue expenses, expenses for increase of authorized
capital.
Issue: Allowability of Expenses u/s37 (1) & MAT
u/s 115JA
IBM Ltd., v. CIT (Appeals)-I {105 ITD 1(Bang)}
In this case it was decided that liability to pay warrant is
not contingent liability. It arises no sooner sales are
effected and therefore, it is to be allowed in the year of
sale of products.
As regards purchase of application software, it was
decided that purchase of application software in the
course of business, which merely enabled to carry on
business operation efficiently and smoothly even though
it gives enduring benefit, would be considered as revenue
expenditure.
The tribunal held that in case provision for doubtful debts
are made in the books, the deduction thereto would be
available in the computation of book profit for the
provision of MAT in view of the fact that such provisions
are not made for meeting and liability, it simply reduce
the assets. Hence, such provisions are deductible for
computation of book profits under the provisions of MAT.
Issue: Un-explained cash credit u/s 68.
Davinder Singh v. ACIT Circle-III, Ferozepur {104 ITD
325 (ASR)}
In this case, it was decided that if any credit found unexplained
by the assessee, the same would be hit by the
provisions of section 68 of the Act. It is not necessary that
only cash receipt on credit side ought to be considered. It
was held that it covers all credits loan, trade credits and
also other receipts be that of cash or kind. Therefore, one
need to be careful while showing creditors which are not
verifiable, the same may be subjected to tax u/s 68 of the
Act.
Issue: Statement recorded u/s 132(4).
Ms. Aishwarya K. Rai v. DCIT, Central circle2, Mumbai
{104 ITD 166(MUM) (TM) }
In this case, if any person makes any disclosure on the
day of search u/s132 (4) of the Act and thereafter during
the post search operation, he makes statement u/s131
denying the confession made earlier , the disclose will not
have any evidentiary value in the assessment . The A.O.
must have conclusive evidence , other than the mere
disclosure , that assessee has undisclosed income. This
judgment will come to rescue in those case where
department merely extract disclosure and makes
addition solely on the basis thereof.