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Charitable Purpose
Sec2(15): Definitions‐ Charitable purpose – Publication of books, booklets as reference material by the
public as well as the professionals in respect of bank audit, tax audit etc. cannot be construed as
commercial activities hence approval under section 80G(5) cannot be denied (S.80G(5)).
[Source: DIT v. The Chartered Accountants Study Circle (2012) 70 DTR 219(Mad) (High Court)]
Sec2(15):Definitions – Charitable Purpose – Expression “education” – Coaching class by open university
or distance education cannot be construed as “education” for charitable purpose. (S. 11, 12A)
[Source: Dy. DIT v. Kuttukaran Foundation (2012) 51 SOT 175 (Cochin) (Trib)]
Deemed Dividend
Sec 2(22) (e): Definitions‐dividend‐deemed dividend‐Loan to partnership‐ Since the
partnership firm which has purchased the shares through its partners though not
registered share holder, being beneficial owner is to be treated as share holder and
loan advanced by company to such partnership is liable to tax as deemed dividend.
The Assessing Officer has held that loan received by partnership firm from Bharti Enterprises (P) Ltd.
should be treated as deemed dividend as two partners hold more than 10 percentage shares in Bharti
Enterprises (P) Ltd. CIT (A) and Tribunal decided the issue in favour of assessee. On appeal, the High
Court following the Judgment in National Travel services (2012) 249 CTR 540 (Delhi) held the issue in
favour of revenue holding that partnership firm is to be treated as the share holder and it is not necessary
that it has to be “registered shareholder”. The question was answered in favour of revenue. As regards the
accumulated profits the matter is set aside to the Tribunal by giving a reasonable opportunity to both the
parties. (A.Y. 2004‐05)
[Source: CIT v. Bharati Overseas Trading Co. (2012) 249 CTR 554 (Delhi) (High Court)]
Sec2(22)(e): Definitions- Dividend Deemed- Unsecured loans from other Company-
Provisions of section 2(22)(e) cannot be invoked if the assessee does not possess the
prescribed voting rights in that company
Sec2(22)(e) cannot be invoked in respect of the unsecured loans taken by the assessee from the other
company if the assessee does not possess the prescribed voting rights in that company; shareholding of
the common shareholder or director cannot be taken into consideration for the purpose. (AY 1994‐95,
1996‐97 & 1997‐98)
[Source: CIT v. Gopal Clothing Co. Ltd. (2012) 71 DTR 358 (Delhi)(High Court)]
Issue No. 42: June, 2012 Page 5 of 28
Income Deemed to accrue or arise in India
A subsidiary created for Indian business is a PE of the foreign parent
The applicant, a Singapore company, entered into an agreement with an Indian group subsidiary company
for the performance of shipment transport services within & outside India. The agreement was on a
principal to principal basis. The applicant claimed that as it had no office, equipment, employee or agent
in India and did not carry out operations in India, it did not have a PE in India and no part of the receipts
from outbound and inbound consignments was taxable in India. HELD by the AAR:
(i) A “permanent establishment” is something which enables a non-resident to carry on a part of its
whole business in a particular country. The Aramex group could not have done business in India without
a presence in India. This presence in India can be achieved through an independent entity or through a
subsidiary. If the entity is an independent & uncontrolled entity, then there is no PE if the requirements in
Article 5(2) of the DTAC are not satisfied. However, if a 100% subsidiary is created for the purpose of
attending to the business of the group, the subsidiary must be taken to be a PE of the group in India
applying common sense.
(ii) As the subsidiary has a fixed place of business in India and the business of the applicant is carried on
through it, the definition in Article 5(1) is satisfied. The subsidiary is also a PE under Article 5(8) because
it habitually secures orders in India wholly for the Aramex group and concludes contracts for the group.
The exception in Article 5(10) that the fact that a subsidiary carries on business shall not of itself
constitute that company a PE of the foreign company does not apply because it is not a case of the
subsidiary carrying on “its business” in India but it is a case of the entire group carrying on business in
India through the subsidiary. Also, the fact that the agreement refers to the subsidiary as “independent”
and “non-exclusive” is not relevant because it is a mere camouflage to screen the fact that the subsidiary
is really a PE of the applicant’s group in India.
[Source: In Re Aramex International Logistics Pvt Ltd (AAR) A.A.R. No. 1061 of 2011]
Sec9(1)(iv): Income deemed to accrue or arise in India‐ Reimbursement‐Fact that
third party invoices are paid does not necessarily show “reimbursement”
The subsidiary constituted a dependent agent PE (DAPE) of the assessee because de facto the assessee
was carrying on the contract work on behalf of the subsidiary and if we pierce the veil of the assignment
contract and go to the root, there is interlacing of activities and interlocking of funds between the assessee
and the subsidiary in executing the dredging contract. There is a relationship of agency and a PE is
created. (A.Y. 2003‐04).
[Source: Van Oord ACZ Marine Contractors BV v. ADIT (Chennai)(Trib.)]
Sec9(1)(vi):Income deemed to accrue or arise in India –Royalty ‐ Despite
retrospective law By Finance Act 2012, “Royalty” is not taxable as DTAA prevails.
(S. 40(a)(ia). 195)
The assessee, a Mauritius company, made payment to Panamsat, USA, for hire of a “transponder
satellite”. The AO held that the said hire charges constituted “royalty” and that the assessee ought to have
Issue No. 42: June, 2012 Page 6 of 28
deducted TDS u/s 195 and that as it had not done so, the amount was to be disallowed u/s 40(a)(ia).
Before the Tribunal, the department argued that though as per Asia Satellite Telecommunications Co.
Ltd. (2011) 332 ITR 340 (Delhi)(High Court), the hire charges were not assessable as “royalty”, this
verdict was no longer good law in view of the amendment to s. 9(1)(vi) by the Finance Act 2012 w..e.f.
1.4.1976 to provide that such hire charges shall be assessable as “royalty”. Held by the Tribunal:
(i) In Asia Satellite Telecommunications Co. Ltd. v. DCIT (2011) 332 ITR 340 (Delhi)(High Court) it
was held that in order to constitute “royalty”, the payer must have the right to control the equipment. A
payment for a standard service would not constitute “royalty” merely because equipment was used to
render that service. A similar view was taken in Skycell Communications Ltd v.Dy. CIT (2001) 251
ITR 53 (Mad.)(High Court). In De Beers India Minerals (www.itatonline.org)(Kar.) & Guy Carpenter &
Co. Ltd. (Delhi)(High Court) it was held that to “make available” technical knowledge, mere provisions
of service was not enough and the payer had to be enabled to perform services himself. The department’s
argument that the amendments by the Finance Act, 2012 changes the position is not acceptable
because there is no change in the DTAA between India and USA and the DTAA prevails where it is
favourable to the assessee;
(ii) Even otherwise as the payment is made from one non‐resident to another non‐resident outside India
on the basis of contract executed outside India, s. 195 will not apply as held in Vodafone International
Holdings B.V. v. UOI (2012) 341 ITR 1 (SC). As s. 195 did not apply, no disallowance can be made u/s
40(a)(i);
(iii) Further, as prior to the insertion of s. 40(a)(ia) in AY 2004‐05, payments to a resident did not require
TDS, under the non‐discrimination clause in the DTAA, the disallowance u/s 40(a)(i) in the case of nonresidents
cannot be made as held in Herbalife International India (P) Ltd (2006) 101 ITD 450
(Delhi)(Trib.), Central Bank of India & Millennium Infocom Technologies Ltd v. ACIT (2008) 21 SOT
152 (Delhi)(Trib). (A.Y. 2002‐03)
[Source: B4U International Holdings Ltd v. DCIT (Trib)(Mum)]
Sec9(1)(vi):Income deemed to accrue or arise in India –Royalty –Information
through internet‐DTAA India‐Singapore‐ Subscription received by Indian subscriber
would be royalty. (Sec195, Art 12)
The applicant is a Singaporean company engaged in providing social media monitoring services for a
company, brand or product. It is a platform for users to hear and engage with their customers brand
ambassadors etc. across the internet. The applicant offered services on charging a subscription. The
clients who subscribed can log into its website to search on what is being spoken about various brands
and so on. The applicant raised the two question before the Authority;
(a) Whether the amount received by offering subscription based services is taxable in India?
(b) Whether tax is required to be deducted from such amount by the subscribers who are resident in
India?
Authority for Advance Rulings held that the applicant being engaged in providing social media
monitoring service by generating reports with analytics on the basis of the inputs given by the
clientswhich amounts to business of gathering, collating and making available or imparting information
concerning industrial and commercial knowledge, experience and skill and therefore, the subscription
Issue No. 42: June, 2012 Page 7 of 28
received by it form the Indian subscribers would be royalty in terms of clause (iv) of Explanation 2 to
section 9(1)(vi) as well as para12 of the India –Singapore DTAA, consequently tax is required to
bededucted in terms of section 195 from the payment made to it by the subscribers who are resident
inIndia.
[Source: Thoughtbuzz (P) Ltd. (2012) 250 CTR 1 / 71 DTR 105 (AAR)]
Sec 9(1)(vi): Income deemed to accrue or arise in India‐ Royalty‐ Deduction at
source‐ DTAA‐India‐ Canada‐ Rendering of services is not “supply of knowledge or
information” to be “royalty”. (S. 40 (ia), 195, art. 12)
The assessee was engaged as a consultant by Essar Oil Ltd to provide consultancy services in connection
with sale of its energy business. As the consultancy required high level technical and industry knowledge,
the assessee engaged KPMG LLP, USA & KPMG Consulting LP, Canada for rendering professional
services and paid Rs. 20 lakhs &Rs. 13 lakhs respectively. The AO held that the said fees constituted
“royalty” u/s 9(1)(vi) & Article 12 and as there was no TDS, the amount was to be disallowed u/s
40(a)(i). This was reversed by the CIT(A). On appeal by the department, held dismissing the appeal:
The professional services rendered does not fall in the definition of “royalty” in Article 12 of the DTAA.
It was purely a professional service for consultancy which were rendered outside India and not for supply
of scientific, technical, industrial or commercial knowledge or information. Thus, there was no liability to
deduct TDS and consequently no disallowance u/s 40(ia) can be made. (A.Y. 2001‐02)
[Source: KPMG India Pvt. Ltd v. DCIT (Mum.)(Trib).]
Income not includable in Total Income and disallowance u/s 14A
Sec14A: Business expenditure‐Disallowance‐Exempt income ‐ Firm‐ Partner
‐Interest‐Disallowance cannot made if there is no tax‐free income. [S. 10(2A,
36(I)(iii)]
The assessee, a partner in a firm, borrowed funds and advanced it to the firm on terms that the firm would
pay interest if it made a profit. For one year, the firm paid interest which was offered as income by the
assessee while for the second year it did not pay interest as it made a loss. The assessee claimed the
interest paid on the borrowing as a deduction u/s 36(1)(iii). The AO disallowed the claim on the ground
that as the borrowings had been invested in the firm and the income from the firm was exempt u/s
10(2A), the interest expenditure was not allowable u/s 14A. This was reversed by the CIT (A). On appeal,
the Tribunal upheld the CIT(A) on the ground that as there was no exemption claimed u/s 10(2A) by the
assessee and there was no tax‐free income, s. 14A could not apply. The department filed an appeal in the
High Court in which it argued that as the profits derived by the assessee from the firm was exempt u/s
10(2A), the interest on the borrowed funds used to invest in the firm was disallowable u/s 14A. The court
dismissing the appeal, held :
In so far as Question (A) is concerned, on facts we find that there is no (tax‐free) profit for the relevant
assessment year. Hence the question as framed would not arise.
[Source: CIT v. Delite Enterprises (Bom.)( High Court)]
Issue No. 42: June, 2012 Page 8 of 28
Sec14A: Business expenditure‐Disallowance‐Exempt income ‐ Firm‐ Partner –
Depreciation ‐ Disallowance applies to partner’s share of profits. Depreciation is not
“expenditure” & cannot be disallowed u/s 14A. (S.10(2A), 28(v), 32 )
(i) When s. 10(2A) speaks of its exclusion from the total income it means the total income of the person
whose case is under consideration i.e. the partner. As the share income is excluded from his total income,
s. 14A would apply and any expenditure incurred to earn the share income will have to be disallowed
(Dhamasingh M. Popat v. ACIT(2010 )127 TTJ 61 (Mum) approved; SudhirKapadia& Hitesh Gajaria
reversed);
(ii) However, s. 14A applies only to “expenditure” incurred by the assessee. Depreciation u/s 32 is an
“allowance” and not “expenditure” and so cannot be disallowed u/s 14A (Hoshang D. Nanavati approved)
(A.Y. 2006‐07)
[Source: Vishnu AnantMahajan v. ACIT (SB)(Ahd)(Trib)]
House Property
Sec22:Income from house property – Business income‐ Builder‐Property dealer‐Stock in trade‐Unsold
flats being house property rental income should be assessed as income from house property and not
as business income (S. 28(i) )
[Source: Azimganj Estate (P) Ltd. v. CIT (2012) 206 Taxman 308 (Cal.)(High Court)]
Profit & Gain from Business & Profession
Sec28(i):Business income‐ Business loss‐Amalgamation‐Advances to employees‐ Security
deposit‐Advances to employees by amalgamating company which could not be recovered allowable as
business loss. Security deposit for obtaining lease of business premises is not allowable as a business loss.
[Source: CIT v. Triveni Engineering and Industries Ltd. (2012) 343 ITR 245 / 250 CTR 277 (Delhi)(High Court)]
Sec37(1): Business expenditure ‐ Tax levied in foreign countries ‐ Taxes levied in
foreign countries on profits and gains are deductible[Sec40(a)(ii)]
The assessee paid tax in Belgium and claimed this amount as deduction. The Assessing Officer held that
the term “tax” under section 40(a)(ii) is not limited to tax levied under Indian Income‐tax, but is wide
enough to include all taxes which are levied on profits of business, accordingly he disallowed the amount.
On appeal the commissioner (Appeals) allowed the claim.On appeal to the Tribunal by revenue, the court
referred the judgment of Mumbai Tribunal in South Asia Shipping co ITA no 123 of 1976, which was up
held by Bombay High Court in ITA no 123 of 1976 .The Tribunal also noted that in case ofTata Sons Ltd
ITA no .89 of 1989, the department’s reference application were rejected . The Tribunalheld that the taxes
levied in foreign countries on profits and gains or otherwise are deductible undersection 37(1), such taxes
are not hit by section 40(a)(ii). (A.Ys 2003-04, 2004-05)
[Source: Mastek Ltd v. DCIT 300 (2012) 44-A BCAJ -May –P.32 (Ahd.)(Trib.)]
Issue No. 42: June, 2012 Page 9 of 28
Sec40(a)(ia): Amounts not deductible – Deduction at source ‐ Work contract‐
Printing and supply of diaries, catalogues, etc., material used by the assessee,
procured from other parties does not amount to work contract u/s 194C
Printing and supply of diaries, catalogues and folders by printers as per the requirements of the assessee
by using materials procured from other parties did not amount to works contract within the meaning of
Section 194C and, therefore assessee was not obliged to deduct tax at source from the payments made to
the said printers and consequently, the payment could not be disallowed under section 40(a)(ia). (AY
2007‐08)
[Source: DCIT v. Eastern Medikit Ltd. (2012) 71 DTR 241 / 146 TTJ 551 (Delhi)(Trib.)]
Sec40(a)(ia): Consultancy fees, if not taxable as “fees for technical services”, is not
taxable as “other income”
The assessee paid consultancy fees to a Singapore company on which tax was not deducted at source. The
AO held that the said consultancy fees were assessable as “fees for technical services” u/s 9(1)(vii) and
that the failure to deduct TDS meant that the amount had to be disallowed u/s 40(a)(ia). This was reversed
by the CIT (A). On appeal by the department to the Tribunal, HELD dismissing the appeal:
(i) While the consultancy fees may constitute “fees for technical services” u/s 9(1)(vii), it does not fall
within the ambit of that term in the India-Singapore DTAA because it does not “make available any
technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the
services to apply the technology contained therein”. The services were simply consultancy services
which did not involve any transfer of technology and so were not assessable as “fees for technical
services” (Guy Carpenter (Del) & De Beers (Kar) followed);
(ii) The department’s argument that if the sum is not assessable as “fees for technical services”, it is
assessable as “other income” Article 23 of the DTAA is not acceptable because that Article applies only
to “items of income which are not expressly mentioned in the foregoing Articles of this Agreement”.
Article 23 does not apply to items of income which can be classified under Articles 6-22 whether or
not taxable under these articles. Therefore, income from consultancy services, which cannot be
taxed under articles 7, 12 or 14 because the conditions laid down therein are not satisfied, cannot be
taxed under article 23 either.
[Source: DCIT vs. Andaman Sea Food Pvt Ltd (ITAT Kolkata)]
Capital Gain
Sec50: Capital gains ‐ Depreciable assets ‐ Plant and machinery ‐ Plant and
machinery which was not in use and no depreciation was claimed and assets were
held for more than 36 moths assets were to be treated as long term capital gains (S.
2(11), 2(29B), 45)
The assessee had sold the plant and machinery in the assessment year 2006‐07 and claimed the same as
assessable as long term capital gain. The plant and machinery was acquired partly in the financial year
1997‐98 and partly in the year 1998‐99. The assessee contended that as the plant and machinery was not
Issue No. 42: June, 2012 Page 10 of 28
in use, the assessee had not claimed depreciation. The Assessing Officer held that the section 50 is
applicable hence assessable as short term capital gain. The Commissioner (Appeal) also confirmed the
order of Assessing Officer. On appeal to the Tribunal, the Tribunal held that section 50 did not apply and
plant and machinery which was not in use had to be regarded as long term capital gain. On appeal by
revenue the Court held that once Tribunal had recorded a finding of fact that plant and machinery, which
is covered by section 50, would be a depreciable asset and not one on which no depreciation was ever
claimed, then such assets, which were not depreciable, could not ever be assessed under section 50. Since
assessee held assets as defined under section 2 (28A) and capital gain arising on transfer is required to be
assessed as long term capital gain. (A.Y. 2006‐07)
[Source: CIT v. Santosh Structural & Alloys Ltd. (2012) 206 Taxman 616 / 72 DTR 65 (P&H)(High Court)]
Sec50: Capital gains ‐ Block of assets ‐Short term capital gain on sale of plant and machinery of one
unit cannot be assessed if the assessee has one more unit where the rate of tax is the same.
[Source: CIT v. Ansal Properties & Infrastructure Ltd. (2012) 207 Taxman 61 (Delhi)(High Court)]
Undisclosed Income/Investment
Sec68: Cash Credits – Gift – None of the donors being available at the addresses
given in their returns or PAN cards ‐ addition is held to be justified.
Where none of the donors being available at the addresses given in their returns or PAN cards, AO was
justified in making addition of alleged gifts under section 68 for failure of assessee to produce the donors
though assessee produced their acknowledgements, PAN cards, IT returns, Bank Passbooks, etc. (A.Y.
2002‐03)
[Source:PrakashchandraSinghvi (HUF) v. ITO (2012) 146 TTJ 121 (Ahd.)(Trib.)]
Sec69: Unexplained Investments – unaccounted income – Statement‐In the absence of
evidence, mere statement of DGM of company surrendering deficit for cash, is not a
ground to sustain addition. [S.132 (4)]
Detection of shortage in cash ipso facto does not lead to inference of earning unaccounted income and,
therefore, in absence of any evidence of undisclosed income, mere statement of Director cum DGM
(finance) of the assessee company surrendering the deficit of cash for taxation during the survey
proceedings cannot be a ground for sustaining the addition. (A.Y. 2007‐08)
[Source: DCIT v. Eastern Medikit Ltd. (2012) 71 DTR 241 (Delhi)(Trib.)]
Sec69A: Unexplained money ‐Jewellery – HUF‐Reasonable amount of jewellery may
be accepted as accumulated and explained and additions cannot be made.
Assessee HUF neither furnished item‐wise details of the jewellery owned by it nor adduced any reliable
evidence to show that it was the owner and in possession of the jewellery on 31st March 2005,as it had
filed the WT Return before an incompetent AO and produced an undated valuation report, it could not be
Issue No. 42: June, 2012 Page 11 of 28
accepted that the whole of the jewellery was acquired by it from the deceased father of the Karta and,
therefore, provisions of Section 69A are attracted to the sale proceeds of the jewellery and it is not
assessable as capital gains; however, it would be reasonable to accept that jewellery was received
bytheassessee from the deceased and accumulated on other occasions and thus, only the
remainingjewellery to be treated unaccounted. (A.Y. 2006-07)
[Source: Naveen Bansal (HUF) v. ITO (2012) 146TTJ 207 (Delhi) (Trib.)]
Assessment Procedure
Sec119:Income‐tax authorities‐ Instructions to subordinate authorities‐ Waiver of interests –Due to
financial difficulties there was delay in payment of advance tax, interest levied under section 234B,
and 234C cannot be waived. (S. 234B, 234C)
[Source: De Souza Hotels (P.) Ltd. v. Chief CIT (2012) 207 Taxman 84 (Bom.)(High court)]
Sec132B: Income-tax authorities – Powers - Search and seizure - Application of
seized or requisitioned assets – Pendency of penalty proceedings - Expression
“penalty levied” in S.132B(1) should be read as penalty to be levied in a proceeding
u/s 271(1)(c) Expression “penalty levied” in S. 132 B(1) should be read as penalty to be levied in a
proceeding underSection 271(1)(c); S.132B(1) therefore entitles the I.T. department to retain the seized
gold in questionwith them until penalty is levied and apply the same towards the liability so determined,
provided theassessee is in default or deemed to be in default. (A.Ys. 2003-04 to 2009-10)
[Source: SreeBalaji Refinery v. Dy.CIT (2012) 71 DTR 297 (Ker.)(High Court)]
Sec147: Reassessment‐Full and true disclosure‐Notice after expiry of 4 Yrs.
Reassessment - Income escaping assessment - Since the first two conditions are not pleaded by the
Respondents, it is the submission of the Petitioner that the notice is wholly unwarranted and invalid since
there is no allegation whatsoever that the Petitioner has failed to disclose all material facts necessary for
assessment - long term capital gains have been wrongly claimed by the assessee which have been
wrongly considered for the set off of the Unit of Kundaim which has resulted in escapement of income - it
is necessary for the Assessing Officer to first observe whether there is a failure to disclose fully and truly
all material facts necessary for assessment and having observed that there is such a failure to proceed
under Section 147 - There is a well known difference between a wrong claim made by an assessee after
disclosing all the true and material facts and a wrong claim made by the assessee by withholding the
material facts fully and truly - the Writ Petition is allowed.
[Source: Titanor Components Ltd. Vs ACIT, CIT and UOI - (Bombay High Court ) Income Tax- TMI- 204715- HC]
Sec147: Reassessment - Full and true disclosure - Notice after expiry of four years -
Reassessment is not permissible notwithstanding subsequent decision of Court or
retrospective amendment. (A.Y.2005-06)
Issue No. 42: June, 2012 Page 12 of 28
On the facts the Assessing Officer reopened the assessment on the ground that set off of brought forward
unabsorbed depreciation loss was allowed against the income from other sources and capital gains, which
is not in accordance with law as explained by special bench in the case of Times Guarantee Ltd and while
giving effect to the order of Tribunal no addition was made while computing the income under section
115JB on account of provision for diminution in the value of investment charged to P&L account as the
law is amended by Finance Act . 2009 with retrospective effect from the Assessment year 2001-02.The
Objection raised by the assessee was rejected by the Assessing Officer. The assessee filed the writ
petition . The Court held that there being full and true disclosure by assessee reopening of assessment
beyond four years was not permissible not withstanding subsequent decision of Court or retrospective
amendment. (A.Y. 2005-06).
[Source: Voltas Ltd. v. ACIT (2012) 70 DTR 433 (Bom.)(High Court)]
Sec147: Reassessment-Deduction at source - Software - Change of opinion -Assessing
Officer has applied his mind as regards applicability of section 9(1) (vii), hence
reassessment held to be bad in law. (S. 9(I)(vii), 195)
The assessee made payment towards software consultancy services to a foreign company,
withoutdeduction of tax at source. In the course of original assessment proceedings the assessee explained
that
payment made for consultancy services outside India were not chargeable under Act as per section 9
(1)(vii) , hence not liable for deduction of tax at source, which was accepted by the Assessing Officer.
TheAssessing Officer thereafter reopened the completed assessment on the ground that the assessee
hadneither any sale of software outside India nor earned any income from outside India and consumed
allsoftware in house and therefore consultancy charges paid to foreign company was to be disallowed.
Onwrit petition challenging the reassessment, the court held that the Assessing Officer during the
original assessment proceedings had gone in to and examined applicability of section 9 (1) (vii) and
thereafter did not invoke section 9(1) (vii), therefore it being a change of opinion, reassessment is
bad in law. The court also held that even otherwise since it was found that Assessing Officer had
incorrectly recorded reasons by presuming that payments were made to Artech Software
Information Systems LLC, where as the said transaction was in respect of software purchase from
Micrografx, and assessee had given all details in respect of same, it could be said that the Assessing
Officer had proceeded on wrong factual basis also, therefore, reopening proceedings was to be
quashed. (A.Y. 2003-04)
[Source: ArtechInfoystems (P) Ltd. v. CIT (2012) 206 Taxman 432 (Delhi)(High Court)]
Sec147: Reassessment – Reason to believe – Non submission of schedules to the
balance sheet along with its income and expenditure account and balance sheet, does
not form reasonable belief for reassessment.
The fact that the assessee, a charitable trust, has not submitted the schedules to the balance sheet along
with its income and expenditure account and balance sheet or that it earned substantial rental income or
that it earned income from sale of books and a printing press or that two societies are donating a fraction
of their profits to the corpus of the assessee- trust did not constitute reason to believe that some taxable
Issue No. 42: June, 2012 Page 13 of 28
income had escaped assessment, moreso and therefore, initiation of reassessment proceedings as well as
the assessment proceedings made under section 147 r.w.s. 143(3) in furtherance thereto were not valid.
(A.Y. 1999-2000)
[Source: BharatiVidyapeeth v. ACIT (2012) 146 TTJ 238 / 70 DTR 375 (Pune)(Trib.)
ACIT v BharatiVidyapeeth (2012) 146 TTJ 238 / 70 DTR 375 (Pune)(Trib.)]
Sec148: Reassessment – Notice - After expiry of four years – Material and
information provided by Investigation Wing to the AO on basis on which reasons
recorded and assessment reopened, Issue of notice is held to be valid
Material and information provided by Investigation Wing to the AO, on the basis of which he recorded
reasons and reopened the assessment, throw considerable doubt on the veracity, correctness, completeness
and truth of particulars furnished by the assessee at the time of the original assessment and therefore
notice issued by AO under Section 148 was valid. (A.Y.2004-05)
[Source: Money Growth Investment & Consultants (P) Ltd. v. ITO (2012) 71 DTR 317 (Delhi)(High Court)]
Sec158BE:Block assessment - Time limit - Panchnama- A panchnama which does not record a search
does not extend limitation period, hence order held to be invalid.
[Source: ACIT v. Shree Ram Lime Products Ltd. (SB)(Jodhpur)(Trib.) www.itatonline.org.]
Tax Deduction at Source
Sec194H: Deduction at source – Commission - Brokerage - Sale of milk and milk
products – Agents - TDS is not deductible on sale of milk and milk products at
concessionaires
Held that sale of milk and milk products by assessee dairy to concessionaries/agents who hold the same
from the booths owned by the assessee was on principal to principal basis and therefore assessee dairy
was not liable to deduct tax at source under section 194H from the payments made to concessionaires.
Appeal of revenue was dismissed. (A.Ys. 2004-05 & 2005-06)
Issue No. 42: June, 2012 Page 14 of 28
[Source: CIT v. Mother Dairy India Ltd. (2012) 70 DTR 223 (Delhi)(High Court)]
Sec201: Deduction at source – Failure to deduct or pay LimitationFor initiating
proceedings under section 201, issuance of notice beyond reasonable time period of 4
years, barred by limitation
Even if no period of limitation is mentioned or prescribed, the statutory power must be exercised within
reasonable period. Therefore, notice under section 201 and 201(1A) issued beyond the reasonable period
of four years were barred by limitation. (A.Y. 1996-97)
[Source: CIT v. SatlujJalVidyut Nigam Pvt. Ltd. (2012) 71 DTR 145 (HP) (High Court]
Sec206AA: Require tofurnish Permanent Account Number-Deduction at source-PAN
law read down to not apply to assessee below taxable income - (S. 139A, Article, 226
Constitution of India)
Held upholding the challenge: U/s 139A, only persons whose income is chargeable to tax are required to
obtain a PAN. However, s.206AA compels even persons without a taxable income to obtain a PAN to
avoid TDS. This creates difficulty for poor and illiterate persons who make small investments and
discourages them to invest money. S. 206AA runs counter to s. 139A and is discriminatory. Though the
Legislature’s intention is to bring maximum persons under the income-tax net, it may not insist that even
persons whose income is below the taxable limit have to compulsorily obtain a PAN. If any tax avoidance
is detected, that can be taken care of by penal provisions. Accordingly, s.206AA is read down as being
inapplicable to persons whose income is less than the taxable limit. Banks & financial institutions should
not insist upon PAN from such small investors. It continues to apply to persons whose income is above
the taxable limit.
[Source: A KowsalyaBai v. UOI (Karn.)(High Court)]
Collection and Recovery
Sec226: Collection and recovery- Modes of recovery - Garnishee proceedings -
Assessee can approach the Assessing Officer against garnishee proceedings and
request for withdrawal, writ is not the remedy
Against the garnishee proceedings the assessee filed a writ petition on the ground that once the money is
recovered under garnishee order the revocation of the notice will be of no consequences. The court held
that such a presumption is without any legal base because of the reasons that with the withdrawal of the
notice of garnishing, the action taken in furtherance of garnishing order falls down and possession of the
property is required to be restored to the assessee and if the Assessing Officer by exercising power under
sub –clause (vii) of sub section (3) of section 226 of the said Act obtains money from the payee of the
assessee, he has been given power to withdraw the notice and it cannot be interpreted to mean that notice
can be withdrawn only before giving effect to the garnishing order and receiving the money by the
Assessing Officer. Otherwise the words at any time or from time to time will be of no consequence in sub
clause (vii) of sub section (3) of the said Act. The Court held that the assessee is free to challenge the
Issue No. 42: June, 2012 Page 15 of 28
order of non – revocation of the garnishee order under sub clause (vii) of sub section (3) of section 226.
Commissioner was directed to hear the appeal expeditiously.
[Source: Central Coal Fields Ltd v. CIT (2012) 249 CTR 523 (Jharkhand)(High Court)]
Appeal & Appellate Tribunal
Sec249: Appeal – Commissioner (Appeals) - Form of appeal and limitation –
Payment of tax due on returned income mandatory, however no time limit is
prescribed for the same
Only requirement of Section 249(4) is payment of tax due on returned income. There is no such time limit
is prescribed for payment of such taxes. If an appeal has been filed has been filed after making payment,
it cannot be said that the requirement of section 249(4) has been complied with. (A.Y. 1996-97)
[Source: ITO v. AnkushFinstock Ltd. (2012) 136 ITD 168 (Ahd.)(Trib.)]
Sec254(1):Appellate Tribunal –Orders - Binding precedent -Tribunal cannot come to conclusion
contrary to its earlier order where facts are same or alternatively, can refer the matter to larger
bench.
[Source: A CIT v. Chandragiri Construction Co. (2012) 136 ITD 133 (TM )(Cochin)(Trib.)]
Penalty and Tax Administration
Assessee entitled to raise claims not made in ROI before appellate authorities
It is well settled that an assessee is entitled to raise not merely additional legal submissions before the
appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities
have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be
said that they have no jurisdiction to consider the same. That they may choose not to exercise their
jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the
existence of jurisdiction. Goetze was confined to a case where the claim was made only before the AO
and not before the appellate authorities. The Court did not lay down that a claim not made before the
AO cannot be made before the appellate authorities. The jurisdiction of the appellate authorities to
entertain such a claim has not been negated by the Supreme Court in this judgment. On facts, there was
nothing to show that the claim entertained by the CIT (A)/ ITAT was improper (Jai Parabolic 306 ITR
42 (Del) referred).
[Source: ITA No. 3908 of 2010]
Sec234A: Interest – Default in furnishing return of income - Charge - Assessment order - Interest,
though mandatory, is not payable if Assessing Officer does not direct it to be charged in assessment order
(S. 234B & 234C)
[Source: CIT v. Awadh Hotels (P) Ltd (Allah) (High Court)]
Penalty under section 271(1)(c)
Penalty under section 271(1)(c) - explanation versus bona-fide explanation versus proper disclosure - held
that:-assessee claimed deduction for Rs. 33.63 crores in its Profit and loss account towards the amount
Issue No. 42: June, 2012 Page 16 of 28
paid to NOPL for use and occupation of the property. The claim was made on actual payment and the
assessee did offer the explanation in support of the claim. If the claim had been not been genuine or the
assessee had not offered any explanation, the case would have been covered in clause (A) of Expl. 1
itself. The Assessing Officer was not convinced with the claim and disallowed the deduction. It shows
that the assessee offered an explanation about the claim of deduction but could not satisfy the Assessing
Officer as to its allowability. First condition is that the assessee offers an explanation, which he is not able
to substantiate or prove. It divulges that condition (i) is satisfied in this case.
Penalty under section 271(1)(c) - bona fide explanation - held that:- A claim shall lack bona fide if the
facts are manufactured to give a colour of genuineness to the deduction; or if there is not even a far-flung
possibility of forming a legally sustainable opinion about the deduction either because of the facts
prevailing in a particular case or because no judicial precedent in favour of allowability of such deduction
or if an issue is still virgin and had not received attention of the Courts so far, then simple and plain
interpretation of the provision leaves no chance to a reasonably prudent person to form an opinion that
such a deduction is allowable. These are only some of the instances in which a claim for deduction shall
be short of bona fide. - by no standard the claim of the assessee for deduction of Rs. 33.63 crores can be
categorized as not bona fide in any manner.
Penalty under section 271(1)(c) - proper disclosure - held that:- when the disclosure made by the assessee
in its Profit and loss account and by way of Note in the Balance sheet is considered in the backdrop of
ongoing litigation of the assessee with the Department for last three years on the same point, no hesitation
in coming to the conclusion that the assessee made a proper disclosure of the facts material to this claim.
As per majority view, we hold that on the facts and circumstances of the case penalty u/s. 271(1)( c) of
the Act is not leviable.
[Source: Narangs International Hotels (P.) Ltd. vs. DCIT - 2012 (6) TMI 648 (Tri)]
Issue No. 42: June, 2012 Page 17 of 28
INDIRECT TAX
Service Tax
 Case Laws
When provider of service had paid service tax, no service tax would be collected from
service recipient
It was contended that for the self same service provided by the transporter and that was received by the
respondent, tax was collected from the transporter on such service and that has gone into the treasury. The
notice issued proposed double taxation of the same service.Bench held that When the transporter is same
and recipient is respondent and there is no contradiction that tax was collected from the transporter, double
taxation on the same transaction is inconceivable under the present provisions of Finance Act, 1994.
[Source: Comm. of Central Excise, Kanpur v. Om Tea Company,[2012] 22taxmann.com405 (NewDelhi-CESTAT)]
Cenvat Credit of Service Tax
Document for availing credit- Assessee made a debit entry I Cenvat Account and utilized it for payment of
Excise duty- Debit entry in Cenvat Credit account is a proof of payment of service tax by the assessee for
inward transport of goods- Debit entry was made on the basis of Lorry Receipt provided all the required
information- No infirmity in impugned order- Appeal dismissed- Rule 9(1) of Cenvat Credit Rules, 2004.
[Source: Comm. of C. Ex., Jaipur-II v Rajsthan Spinning & Weaving Mills Ltd., 2012 (26) STR 466 (Tri- Del.)]
Cenvat Credit of Courier Services
Cenvat Credit of Service Tax- Input Services- courier service and premium of insurance in respect of carsuch
service are related to activity of business- Cenvat credit available.
[Source: Commr. of C. Ex., Raipur v Topworth Steels Pvt. Ltd., 2012 (26) STR 420 (Tri- Del.)]
 Notification/Circular
Continuous Application of Education Cess
Vide Circular No. 160/11/2012-ST, dated:-29th June, 2012 doubt regarding applicability of
provisions relating to education cess and secondary and higher education cess as the concerned
Acts make reference to section 66 of the Finance Act, 1994, which shall cease to have effect
from July 1, 2012.
It has been clarified that according to Removal of Difficulties Order No. 2/2012 dated
29.06.2012 any reference to section 66 of the Finance Act, 1994 shall be construed as reference
to the newly re-enacted provision i.e. section 66B of the same Act.
[Source: Circular No. 160/11/2012-ST, dated:-29th June]
Exemption to Railways from Service Tax
The Central Government, has exempted (i) Service of transportation of passengers, with or without
accompanied belongings, by railways in --(A) first class; or (B) an air conditioned coach and (ii) Services by
Issue No. 42: June, 2012 Page 18 of 28
way of transportation of goods by railways from the whole of service tax leviable thereon under section 66B
of the said Act, with effect from the date of publication of this notification in the Official Gazette, upto and
including the 30th day of September, 2012.
[Source: Notification No. 43/2012-ST, dated 2-7-2012]
Central Excise/Customs
 Case Laws
Prosecution of Director of Company
Offence of evasion of Excise Duty allegedly committed by company- Complainant-Department has to make
specific factual allegations that person concerned was Director of company, and how and in what manner he
was in-charge of and responsible for day-to-day conduct of business of company- In the alternative, it has to
be alleged and proved that impugned offence was committed with his consent/connivance or neglect
attributable to him- if complaint does not make such allegations and at pre-charge evidence stage, such
evidence is not led, charge/complaint under Sections 9AA(1) and 9AA(2) of Central Excise Act, 1944 is not
sustainable- On facts, simple re-production of language of Section 9AA(1) ibid in complaint found to be
insufficient, and plea that initial onus for making out a prima facie case against accused was discharged by
Complainant-Department, and onus to adduce evidence that accused-director was not in-charge or
responsible for conduct of company had shifted to him, rejected.
[Source: T. R. Bhagat v Director General of Central Excise, 2012(280) ELT 499 (Del.)]
Issue No. 42: June, 2012 Page 19 of 28
Refund of Excise Duty Though Exempt Paid Wrongly
Duty paid fuel supplied for foreign bound flights exempt from payment of excise duty under exemption
Notification dated 26-06-2011- Being a question of fact which would require examination of bulky
materials, petitioner’s case should be r-examined by the revisional authority. If on availability of evidence
on record, it is established that petitioner has fulfilled the mandatory and substantive requirement of Rules
and the notification, its refund claim should not be defeated on the ground of some procedural infraction or
the documents not being supplied in the original at the outset- If petitioner establishes before revisional
authority that the excise duty though exempt was paid wrongly, its refund claim should be granted.
[Source: Indian Oil Corporation Ltd. v Union of India, 2012(280) ELT 507 (Guj)]
Availment on Inputs Used in Exempted Final Goods
Cenvat Credit- Availment on inputs used in exempted final goods- Reversal of such credit amounts to not
taking of credit, and there is no liability to pay duty- it was more so as transaction prior to 2002 were
covered by retrospective effect to Rule 57 CCC of erstwhile Central Excise Rules, 1944.
[Source: Commissioner of C. Ex., Mangalore v Hindustan Petroleum Corporation Ltd. 2012(280) ELT 510 (Kar.)]
Cenvat Credit of Accident Group Insurance Policy
Cenvat Credit- Input service- Accident Group Insurance Policy- Treatable as business activity of factory-
Impugned order holding services relating to payment of premium as Input services, calls for no interference-
Rules 2(1) and 14 of Cenvat Credit Rules, 2004.
[Source: Commissioner of C. Ex., Tirupati v Nutrine Confectionery Co. Ltd 2012(280) ELT 516 (Tri.- Bang.)]
Interest on wrongly availed Cenvat Credit
Wrongly availed Cenvat Credit reversed without utilization- Interest liability does not arise- Section 11AB
of Central Excise Act, 1944 has to be read down mean that interest liability arises when wrongly availed
credit has been utilized.
[Source: Pearl Insulations Pvt. Ltd. V Commissioner of C. Ex., Bangalore, 2012(280) ELT 559 (Tri.- Bang.)]
Issue No. 42: June, 2012 Page 20 of 28
COMPANY LAW UPDATES
 Circular/ Notification/ Guidance
Extension of time in filing of Annual Return by Limited Liability Partnerships (LLPs)
In continuation of the Ministry’s Circular no 13/2012 dated 06.06.2012 on the subject cited above, it is
stated that the time for filing the Annual Return by LLPs (i.e. Form 11) has been further extended upto 31st
July, 2012 which was earlier extended upto 30th June 2012. In order to have better understanding of the
circular, it is clarified that the time limit of 60 days shall be now read as 122 days (replacing the earlier time
limit of 90 days) for filing of Form 11 by LLPs in respect of the financial year ending on 31.03.2012. This
circular is effective from 30.06.2012.
[Source: General Circular No. 15 dated 29th June, 2012 read with General Circular No. 13/2012 dated 06th June, 2012]
Filing of Cost Audit Report (Form‐I) and Compliance Report (Form‐A) in the eXtensible
Business Reporting Language (XBRL) mode
Incontinuation of MCA’s General Circular No.8/2012 dated 10th May, 2012, it has been decided that filing
of Cost Audit Reports and Compliance Reports with the Central Government in the XBRL mode shall be
allowed after 31st July, 2012.
[Source: General Circular dated 29thJune, 2012]
Imposing fees on certain e-forms filed with ROC, RD or MCA (HQ) under MCA-21 where
at present no fee is prescribed
The Ministry of Corporate Affairs has decided that fees shall be applicable on the following forms at the
rates indicated in the table below:-
S.N. Form No. Particulars of the Form Applicable Fee
1. Form 1 of Investor
Education protection
Fund Rule
Statement of amounts credited to
Investor Education and Protection Fund
As per Schedule X to the
Act
2. Form 23B Information by statutory auditor to the
Registrar of companies Act, 1956 pursuant
to section 224(1)(a) of the Companies Act,
1956
As per Schedule X to
the Act
3. Form 24A
Application to RD
(a) For Appointment of Auditors
under section 224(3)
(b) Others
As per Companies (Fee
on Application) Rules,
1999
Issue No. 42: June, 2012 Page 21 of 28
4. Form 36 Receiver’s or manager’s abstract of
receipts and payments (charge related
form)
As per Schedule X to
the Act
5. Form 61
Application to RoC-
(a) Compounding of Offences u/s 621A
(b) Application for extension of Annual
General Meeting upto 3
months u/s 166 of the Act
(c) Application for extension of time for
preparation of Annual
Accounts upto 18 months u/s 220 of
the Act.
(d) Others
(a) As per Companies
(Fee on Application)
Rules, 1999
(b) -Do-
(c) -Do-
(d) -Do-
6. Form 62
Form for submission of misc. documents
under the below mentioned
rules:
(a) Form 154 of the companies
(Court) Rules, 1959
(b) Form 157 of the companies
(Court) Rules, 1959
(c) Form 158 of the Companies
(Court) Rules, 1959
As per Schedule X to
the Act
7. Form 65
Application to the Central Govt (HQ)-
(a) Application pursuant to rule 2 of the
Companies (Application for Extension of
Time or Exemption under Subsection (8)
of Section 58A) Rules, 1979.
(b) Information and explanation on
reservations and qualification contained in
the cost audit report by a
company
(c) Others
(a) as per Companies
(Fee on Application)
Rules, 1999
(b) Nil
(c) as per Companies
(Fee on Application)
Rules, 1999
This circular will come into effect from 22nd July, 2012.
[Source: General Circular No. 14/2012 dated 21stJune, 2012]
The Limited Liability Partnership (Amendment) Rules, 2012
Ministry of Corporate Affairs has decided to amend the Limited Liability Partnership Rules, 2009 and these
rules may be called as the Limited Liability Partnership (Amendment) Rules, 2012. These rules are effective
from 11thJune, 2012.[Source: Notification No. G.S.R (E) dated 05th June, 2012]
Issue No. 42: June, 2012 Page 22 of 28
Amendment of DIN-1
Ministry of Corporate Affairs has decided to amend Companies (Director Identification Number) Rules,
2006 and these rules may be called as the Companies Director Identification Number (Second Amendment)
Rules, 2012. These rules are effective from 11thJune, 2012.
[Source: Notification No. G.S.R (E) dated 05th June, 2012]
Cost Accounting Records and Cost Audit – general clarifications
Ministry of Corporate Affairs has so far issued following circulars in connection with the cost accounting
records, cost audit, appointment of cost auditors etc:
1. General Circular No. 15/2011 dated 11th April, 2011
2. Master Circular No. 2/2011 dated 11th November, 2011
3. General Circular No. 67/2011 dated 30th November, 2011
4. General Circular No. 68/2011 dated 30th November, 2011
5. General Circular No. 8/2012 dated 10th May, 2012
6. General Circular No. 11/2012 dated 25th May, 2012
It is hereby clarified that all these circulars [including the present circular] are applicable in respect of all the
Cost Accounting Records Rules notified in 2011 and the industry specific Cost Audit Orders issued so far;
to the extent these are relevant and applicable.
[Source: General Circular No. 12/2012 dated 04thJune, 2012]
 Case Laws
Section 394of the Companies Act, 1956
The Hon’ble High Court of Gujarat held that pendency of any proceedings, if any, by the Income Tax
Department cannot be ground not to sanction the scheme of amalgamation. Even if there are any
proceedings, the said proceedings cannot come in the way of sanction of the scheme. The issue and
allotment of shares on premium or otherwise is in the sole domain of the board of directors of the Company.
Furthermore, even the action of the company in forfeiting the shares cannot be said to be against the
provisions of Companies Act, 1956. In case of default in payment of call money, it is open for the board of
directors of the Company to forfeit the shares of the concerned shareholder. In any case, such aspects would
not affect Scheme of amalgamation.
[Source:Aangi Shares & Services (P) Ltd. [2012] 113 SCL 515/22 taxman.com 17 (Gujarat)]
Issue No. 42: June, 2012 Page 23 of 28
RBI& SEBI UPDATES
 Circular
Foreign Investment in India - Sector Specific conditions
The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry,
Government of India has been updating/notifying the FDI policy through issue of Consolidated FDI Policy
Circular. Accordingly, Government has notified the latest FDI policy changes vide FDI Policy Circular 1 of
2012 dated April 10, 2012. In order to bring uniformity in the sectoral classification position for FDI as
notified under the Consolidated FDI Policy Circular with the FEMA Regulation, the revised position on
Annex A and Annex B of Schedule 1 to Notification No. FEMA 20/2000-RB dated 3rd May 2000, has been
suitably revised.
[Source:RBI/2011-12/626 A.P. (DIR Series) Circular No. 137 dated 28thJune, 2012]
External Commercial Borrowings (ECB) – Rationalisation of Form-83
It has been decided to rationalize the Form-83 submitted to the Reserve Bank for obtaining Loan
Registration Number (LRN) to reflect the liberalization and rationalization measures that have been carried
out over a period of time. Accordingly, borrowers desirous of obtaining Loan Registration Number (LRN)
with effect from July 01, 2012 may submit Form-83 in the revised format.
[Source:RBI/2011-12/620 A. P. (DIR Series) Circular No. 136 dated 26thJune, 2012]
Foreign investment in India by SEBI registered FIIs in Government securities and SEBI
registered FIIs and QFIs in infrastructure debt
Government Securities
The limit of USD 15 billion for FII investment in Government securities stands enhanced with immediate
effect by USD 5 billion to USD 20 billion. It has also been decided to rationalize the conditions governing
the investments under this scheme by making the residual maturity of the instrument at the time of first
purchase by FIIs and SEBI registered eligible non- resident investors in IDFs and foreign Central Banks to
be at least three years for a sublimit of USD 10 billion.
Infrastructure Debt
The conditions for the limit of USD 22 billion including the sub-limit of USD 5 billion with one year lockin/
residual maturity requirement and USD 10 billion for non-resident investment in IDFs (which are all
within the overall limit of USD 25 billion for investment in infrastructure corporate bonds) have been
changed as under:
i. The lock-in period for investments under this limit has been uniformly reduced to one year; and
ii. The residual maturity of the instrument at the time of first purchase by an FII/ eligible IDF investor
would be at least fifteen months.
Issue No. 42: June, 2012 Page 24 of 28
Further, as a measure of relaxation, QFIs can now invest in those MF schemes that hold at least 25 per cent
of their assets (either in debt or equity or both) in the infrastructure sector under the current USD 3 billion
sub-limit for investment in mutual funds related to infrastructure. This relaxation would be subject to
review.
[Source:RBI/2011-12/618 A. P. (DIR Series) Circular No. 135 dated 25thJune, 2012]
External Commercial Borrowings (ECB) – Repayment of Rupee loans
It has been decided to allow Indian companies to avail of ECBs for repayment of Rupee loan(s) availed of
from the domestic banking system and / or for fresh Rupee capital expenditure, under the approval route,
subject to them satisfying the following conditions:-
i. Only companies in the manufacturing and infrastructure sector will be eligible to avail of such
ECBs;
ii. Such companies shall be a consistent foreign exchange earner during the past three financial years;
iii. Such companies are not in the default list/caution list of the Reserve Bank of India; and
iv. Such ECBs shall only be utilized for repayment of the Rupee loan(s) availed of for 'capital
expenditure' incurred earlier and are still outstanding in the books of the domestic banking system
and / or for fresh Rupee capital expenditure.
The overall ceiling for such ECBs above shall be USD 10 (ten) billion. The maximum permissible ECB
that can be availed of by an individual company will be limited to 50 per cent of the average annual
export earnings realisedduring the past three financial years. The ECBs will be allowed to companies
based on the foreign exchange earnings and its ability to service the ECB. The companies should draw
down the entire facility within a month after taking the Loan Registration Number (LRN) from the Reserve
Bank.
[Source:RBI/2011-12/617 A. P. (DIR Series) Circular No. 134 dated 25thJune, 2012]
Annual return on Foreign Liabilities and Assets Reporting by Indian Companies –
Revised format
The Annual Return on Foreign Liabilities and Assets (FLA) which is required to be submitted directly by all
the Indian companies which have received FDI and/or made FDI abroad (i.e. overseas investment) in the
previous year(s) including the current year, by July 15 of every year has now been revised.
[Source: RBI/2011-12/613 A.P. (DIR Series) Circular No.133 dated 20th June, 2012]
Issue No. 42: June, 2012 Page 25 of 28
CORPORATE FINANCE
 Latest News
Merger & Acquisition
Suzlon Energy sells China manufacturing unit for $60M
Suzlon Group, which controls wind-turbine maker Suzlon Energy, said on Saturday it will sell stake in
its China manufacturing unit to China Power New Energy Development Co. Ltd. for 3.4 billion rupees.
Suzlon, the world's fifth-largest wind turbine maker by cumulative installed capacity, will sell the unit
with the majority of its assets and liabilities. Suzlon Group established its marketing operations in
China in 2005, followed by a wholly-owned manufacturing facility in 2006. The company has till date
installed over 900 megawatts of wind capacity in China.
[Source :Vccircle, 23 June 2012]
Yatra acquires online hotels aggregator Travelguru from Travelocity
Online travel portal Yatra.com has acquired Travelguru, the Indian arm of US travel services
provider Travelocity, to become the largest provider of hotel bookings in the country.
The acquisition will help company double revenue growth in the next 12 months by expanding market
share as Travelguru is the country's largest hotel distribution network with access to more than 6,500
hotels in India and 72,000 hotels worldwide. Yatra.com's revenue in 2011-12 was about 3,500 crore.
[Source: The Economic Times, 2nd July 2012]
Panasonic exiting Nippo Batteries, to raise stake in Panasonic Carbon
Japanese major Panasonic Corporation, which holds a near 30 per cent stake in Nippo Batteries Co.
Ltd, is exiting from the joint venture by selling its stake to the Indian promoter of the company. Nippo
Batteries said that its Managing Director Mr. P.Dwaraknath Reddy would acquire from Panasonic
Corporation 11,47,125 shares forming 30.59 per cent of the equity capital, its entire stake. The
acquisition would be through block deal at market price prevailing on the date of transfer
[Source : Hindu Business Line, 5th June 2012]
Rating company CRISIL to buy UK-based analytics firm Coalition for $44.8M
Rating company Crisil Ltd has agreed to acquire UK-based analytics firm Coalition Development Ltd ,
along with its subsidiaries, for about £29 million (Rs. 250 crore). The deal is an all-cash transaction and
will add to the earnings per share (EPS) of Crisil from the first year.
[Source: Livemint, 1st June 2012]
Issue No. 42: June, 2012 Page 26 of 28
Private Equity
Fidelity leads $6.3M investment round in MineralTree
Fidelity Growth Partners India has led a $6.3 financing round for Boston-based MineralTree, which
provides cloud-based secure payments services for small- and medium-sized enterprises (SMEs).
MineralTree's payment-plus-cash-management solution is intended to meets the needs of companies
with annual revenues of $500,000 to $50 million. The funding will be used to enhance the company's
service platform and, accelerate partnerships with banks and improve distribution to customers.
[Source: Asian Venture capital Journal, 26th June 2012]
Samara Capital invests $32M in Monte Carlo Fashions
Mumbai-based private equity fund Samara Capital has invested Rs 175 crore to acquire 20 per cent
stake in Monte Carlo Fashions Ltd, an apparel manufacturing and retailing company. The funding will
be used to meet working capital requirements and Capex needs.Monte Carlo Fashions is a part of the
Punjab-based Nahar Group. Last year, the group's flagship OswalWoollen Mills hived off this premium
apparel brand into a separate entity to unlock the value of the brand through IPO and private placement.
Monte Carlo was valued at Rs 850 crore when it was hived off from the parent
[Source : Reuters, 9th June 2012]
AMP Capital invests $29M in Shalivahana Green Energy
The Hyderabad based Shalivahana Green Energy develops, owns and operates a portfolio of power
generation assets across the agri-waste, hydro and wind sectors. It has an operating capacity of 80 mega
watt (MW) with another 45 MW to be commissioned in the next six months. AMP Capital Asian Fund
has acquired 34% stake in Shalivahana Green Energy for $29 million.
[Source : Hindu Business line, 6th June 2012]
Warburg Pincus acquiring majority stake in Future Capital
US private equity giant Warburg Pincus will expand its presence in the country's financial services
sector by buying a majority stake in Future Capital, the troubled finance arm of one of India's Future
Group. The $40 billion buyout firm is likely to pay `165-170 per share to, a premium to Friday's closing
price of Rs.138. The deal will help Pantaloon Retail, the group's listed flagship company, which holds
the majority stake in Future group, to cut debt and improve cash flows
[Source: The Economic Times, 3rd June 2012]
Issue No. 42: June, 2012 Page 27 of 28
Venture capital
Sequoia Capital invests in Citrus Payment Solutions
Sequoia Capital has invested in Mumbai based - Citrus Payment Solutions Private Limited, offering
payment solutions. The amount of investment is undisclosed.Founded in 2011 by Jitendra Gupta, Citrus
Payments provide online bank payment and cards payments solutions for internet retailersinIndia.The
Citrus Payment Gateway platform provides a superior, secure and cutting edge to process online
payments for a host of service providers. The company also offers Email invoicing solutions.
[Source: Dealcurry.com, 8th June 2012]
Komli Media raises $39M from Norwest Venture Partners, Nexus, Helion
Komli Media, India's biggest online media technology platform for advertising, has raised $39 million,
or Rs 214 crore, in the biggest round of fundraising by an internet company.Norwest Venture
Partners led the latest round with participation from existing investors- Nexus Venture Partners, Helion
Venture Partners and Draper Fisher Jurvetson- along with one new investor, Western Technology
Investment.
[Source: The Economic times, 12 June 2012]
Kids-related services firm Mycity4kids.com raises angel funding from YourNest
Angel Fund
Gurgaon-based startup Mycity4Kids has raised an undisclosed angel funding from YourNest Angel
Fund, an early-stage venture capital firm. IT is estimated to be around Rs 3-5 crore, given the
investment strategy of the sector-agnostic fund.
[Source : Reuters, 21st June 2012]
VinodKhosla’sSunBorne Energy raises $5M VC funding
VinodKhosla-backed Sun Borne Energy Holdings LLC has raised $5 million (Rs 28.4
crore).Massachusetts-based SunBorne Energy, which was incorporated in 2008, operates in the solar
energy spectrum. In India, the company's business model is based on utility scale projects. SunBorne
has successfully bid for several solar projects awarded by Gujarat (15 MW), Rajasthan (Phalodi),
Andhra Pradesh and Karnataka (10 MW). It has drawn up massive expansion plans in the solar energy
segment and aims to build over 1 GW of power in 5-7 years, underlining the enormous potential of the
nascent solar power sector in India. SunBorne plans to commission more than 200 MW of capacity by
2014.

Investment banking - alert for march12

Investment banking

Signal Hill Forms Indian I-banking Arm, To Focus on Tech & Education

US-based Signal Hill Capital Group LLC has started an investment banking advisory firm in India. Headquartered in Bangalore, the I-bank will focus on advising clients on IT, technology and education sectors.

March 01, 2012, Source : Moneycontrol

Venture Capital

Lok Capital, Proparco Invest $5M In IFMR Rural Channels & Services

Lok Capital, a venture capital firm focused on bottom-of-the-pyramid (BoP) market, and Proparco, the private sector investment arm of the French development body Agence Française de Développement (AFD), have invested $5 million (Rs 26 crore) in IFMR Rural Channels & Services. The KGFS portfolio includes loan products (group loans, retailer loans, asset-backed loans, micro enterprise and emergency loans), insurance (accident, life, livestock), pensions, savings, remittances and investment products. IFMR has 110 branches across Tamil Nadu, Uttarakhand and Orissa, and caters to around 200,000 customers.

March 20 ,2012, Source: Vccircle

Accel Partners Invests $2.8M In Cloud Firm Enterprise Nube

Bangalore-based Cloud services company Enterprise Nube Services Pvt Ltd has raised $2.8 million (Rs 15 crore) from venture capital firm Accel Partners. As part of the deal, Mahendran Balachandran from Accel will join the board of Enterprise Nube.

March 29 , 2012, Source:

Traffic Tracker Birds Eye Systems Gets Funding From CIIE

Mumbai-based tech startup Birds Eye Systems Pvt Ltd, a company specialising in traffic info systems and mobile apps development, has raised Rs 0.15 crore ($29,914) in funding from the Centre for Innovation, Incubation and Entrepreneurship (CIIE).

March 06, 2012, Source: The Economic times

Private equity

VenturEast, Zephyr Peacock Invest $6M In e2E RAIL

VenturEast Proactive Fund and Zephyr Peacock have invested $6 million or Rs 30 crore in Bangalore-based e2E RAIL, a rail services company primarily focusing on signalling, track and electrification sectors. The two private equity funds also plan to invest another $6 million in the subsequent years. The funding will be used by e2E to ramp up its global presence, training facilities and working capital capacity

March  30, 2012  Source: Pluggd.in

India Venture Advisors Invests $8M In TCML

Piramal Group-promoted private equity fund India Venture Advisors has invested Rs 40 crore($8 million) in Tulsi Castings and Machining Ltd, for an undisclosed stake. TCML is a manufacturer of ductile iron castings with facilities at Sangli, Maharashtra. The company has production capacity of 4,000 MT per month and has around 700 employees on board. It caters to agricultural equipment and heavy commercial vehicles segments, and also exports its products to the UK and the USA. 

March 30 ,2012, Source: Newspolitan

Ambit Pragma Invests Rs 7Cr More In Spear Logistics

Private equity investor Ambit Pragma Ventures has invested Rs 7 crore ($1.7 million) more in Pune-based contract logistics company Spear Logistics Pvt Ltd, one of its portfolio firms. The money will be utilised to implement the company’s expansion plans. Founded in 2001, Spear Logistics has a team of more than 1,800 employees and runs 75 warehouses spanning 2,000,000 sq. ft., along with supporting infrastructure. The company leases its warehouses to clients and currently operates in cities like Mumbai, Pune, Hyderabad, Ahmedabad, Bangalore, Chennai, Coimbatore, Kochi, Nasik, New Delhi and Kolkata.

March  28, 2012, Source: Reuters

GEF, IFC To Invest $11.5M In Kalki Communication

International Finance Corporation (IFC) and a fund managed by Global Environment Fund (GEF) are looking to invest $4.5 million in energy efficiency firm Kalki Communication Technologies Pvt Ltd. Kalki Communication is a technology company providing products, services and solutions which monitor, manage and optimise energy generation and transmission assets for public utilities and industrial clients across the world.

March  26, 2012 Source: Reuters

Reliance Equity Advisors To Invest $20M In Appliance Maker Butterfly

The deal will mark a milestone in the turnaround for the Chennai-based firm which came out of debt restructuring in 2008 is now seeing over 100 per cent growth in topline year-on-year. utterfly Gandhimathi entered Board for Industrial and Financial Reconstruction (BIFR) in 2003 and came out in 2008

March 14,2012 Source : Vccircle

 

Merger And Acquisitions

Mahindra Satyam & Tech Mahindra In $1.4B Merger

Three years after acquiring a strategic stake in Satyam Computers (now Mahindra Satyam), IT services firm Tech Mahindra is merging what was once the country’s fourth largest IT company, with itself in a deal valued at $1.4 billion. The merger will create the fifth largest software services exporter by market cap, revenues and headcount.

March 21 2012, Source:Livemint

Public-listed NBFC Oscar Buys 48.8% In Religare Voyages

Oscar Investments Ltd has acquired 11.2 million shares of Religare Voyages Ltd, comprising 48.80 per cent of the total current paid-up capital of the firm for an undisclosed amount. Religare Voyages is in aviation business with presence in charters, training and engineering support. loss-making Religare Voyages had net worth of Rs 281 crore and reserves & surplus of Rs 250 crore even on small revenues for the year ended March 31, 2011. Bulk of its value could be derived from its investments whose value stood at Rs 285 crore in the last financial year.

March 22 2012, source:Reuters

L&T Finance Acquires Indo Pacific Housing Finance

L&T Finance Holdings Ltd, the financial services arm of the engineering conglomerate Larsen and Toubro, has acquired Indo Pacific Housing Finance Ltd (IPHFL) (formerly known as AIG Home Finance India Ltd), a Delhi-based housing finance firm, according to the company’s announcement to the stock exchanges on Monday. IPHFL, which entered the retail finance market in 2007, had a loan book of Rs 193.5 crore in FY2011-12. Currently, it has 34 branches spread across southern and western India and L&T Finance Holdings plans to widen its presence further – both geographically and by customer segments

March 13 2012, Source:Financial express

L&T Finance Acquires Fidelity’s MF Biz

L&T Finance Ltd, a subsidiary of L&T Finance Holdings Ltd, has acquired Rs 8,881 crore AUM of Fidelity’s Indian mutual fund business . Fidelity AMC had a market share of 1.3 per cent and an average AUM of RS 8,881 crore for the quarter ended December 2011 with around 68 per cent of its assets being equity oriented.

March 27,2012 Source:Business Standard

 

Varroc Group Acquires Visteon’s Auto Lighting Biz For $92M

Aurangabad-based privately held auto component maker Varroc Group is acquiring automotive lighting business of NYSE-listed Visteon Corporation for $92 million in cash. The transaction, which is subject to regulatory reviews and other conditions, is expected to be completed in the third quarter of 2012,. he unit had revenues of $531 million in 2011 with operations in Europe, North America and Asia.

March 13 2012 Source:The Economic times

Investment Banking - Alert

M & A

Suzlon Energy sells China manufacturing unit for $60M

Suzlon Group, which controls wind-turbine maker Suzlon Energy, said on Saturday it will sell stake in its China manufacturing unit to China Power New Energy Development Co. Ltd. for 3.4 billion rupees. Suzlon, the world's fifth-largest wind turbine maker by cumulative installed capacity, will sell the unit with the majority of its assets and liabilities. Suzlon Group established its marketing operations in China in 2005, followed by a wholly-owned manufacturing facility in 2006. The company has till date installed over 900 megawatts of wind capacity in China.

23 June 2012, source : Vccircle

Yatra acquires online hotels aggregator Travelguru from Travelocity

 Online travel portal Yatra.com has acquired Travelguru, the Indian arm of US travel services provider Travelocity, to become the largest provider of hotel bookings in the country.

The acquisition will help company double revenue growth in the next 12 months by expanding market share as Travelguru is the country's largest hotel distribution network with access to more than 6,500 hotels in India and 72,000 hotels worldwide. Yatra.com's revenue in 2011-12 was about 3,500 crore.

2^nd July 2012 Source: The economic times

Panasonic exiting Nippo Batteries, to raise stake in Panasonic Carbon

Japanese major Panasonic Corporation, which holds a near 30 per cent stake in Nippo Batteries Co. Ltd, is exiting from the joint venture by selling its stake to the Indian promoter of the company. Nippo Batteries said that its Managing Director Mr. P.Dwaraknath Reddy would acquire from Panasonic Corporation 11,47,125 shares forming 30.59 per cent of the equity capital, its entire stake. The acquisition would be through block deal at market price prevailing on the date of transfer

5^th June 2012, Source : Hindu Business Line

Rating company CRISIL to buy UK-based analytics firm Coalition for $44.8M

Rating company Crisil Ltd has agreed to acquire UK-based analytics firm Coalition Development Ltd , along with its subsidiaries, for about £29 million (Rs. 250 crore). The deal is an all-cash transaction and will add to the earnings per share (EPS) of Crisil from the first year. 

1^st June 2012, Source:Livemint

Private equity

Fidelity leads $6.3M investment round in MineralTree

Fidelity Growth Partners India has led a $6.3 financing round for Boston-based MineralTree, which provides cloud-based secure payments services for small- and medium-sized enterprises (SMEs). MineralTree's payment-plus-cash-management solution is intended to meets the needs of companies with annual revenues of $500,000 to $50 million. The funding will be used to enhance the company's service platform and, accelerate partnerships with banks and improve distribution to customers.

26^th June 2012, Source: Asian Venture capital Journal

Samara Capital invests $32M in Monte Carlo Fashions

Mumbai-based private equity fund Samara Capital has invested Rs 175 crore to acquire 20 per cent stake in Monte Carlo Fashions Ltd, an apparel manufacturing and retailing company. The funding will be used to meet working capital requirements and Capex needs. Monte Carlo Fashions is a part of the Punjab-based Nahar Group. Last year, the group's flagship Oswal Woollen Mills hived off this premium apparel brand into a separate entity to unlock the value of the brand through IPO and private placement. Monte Carlo was valued at Rs 850 crore when it was hived off from the parent

9^th June Source : Reuters

AMP Capital invests $29M in Shalivahana Green Energy

The Hyderabad based Shalivahana Green Energy develops, owns and operates a portfolio of power generation assets across the agri-waste, hydro and wind sectors. It has an operating capacity of 80 mega watt (MW) with another 45 MW to be commissioned in the next six months. AMP Capital Asian Fund has acquired 34% stake in Shalivahana Green Energy for $29 million.

6^th June 2012, Source : Hindu Business line

Warburg Pincus acquiring majority stake in Future Capital

US private equity giant Warburg Pincus will expand its presence in the country's financial services sector by buying a majority stake in Future Capital, the troubled finance arm of one of India's Future Group. The $40 billion buyout firm is likely to pay `165-170 per share to, a premium to Friday's closing price of `138. The deal will help Pantaloon Retail, the group's listed flagship company, which holds the majority stake in Future group, to cut debt and improve cash flows 

3^rd June 2012, Source: The Economic Times

Venture capital

Sequoia Capital invests in Citrus Payment Solutions

Sequoia Capital has invested in Mumbai based - Citrus Payment Solutions Private Limited, offering payment solutions. The amount of investment is undisclosed. Founded in 2011 by Jitendra Gupta, Citrus Payments provide online bank payment and cards payments solutions for internet retailersin India.The Citrus Payment Gateway platform provides a superior, secure and cutting edge to process online payments for a host of service providers. The company also offers Email invoicing solutions.

8^th June 2012, Source: Dealcurry.com

Komli Media raises $39M from Norwest Venture Partners, Nexus, Helion

Komli Media, India's biggest online media technology platform for advertising, has raised $39 million, or Rs 214 crore, in the biggest round of fundraising by an internet company. Norwest Venture Partners led the latest round with participation from existing investors- Nexus Venture Partners, Helion Venture Partners and Draper Fisher Jurvetson- along with one new investor, Western Technology Investment.

12 June 2012, Source: The Economic times

Kids-related services firm Mycity4kids.com raises angel funding from YourNest Angel Fund 

Gurgaon-based startup Mycity4Kids has raised an undisclosed angel funding from YourNest Angel Fund, an early-stage venture capital firm. IT is estimated to be around Rs 3-5 crore, given the investment strategy of the sector-agnostic fund.

21^st June source : Reuters

Vinod Khosla’s SunBorne Energy raises $5M VC funding

Vinod Khosla-backed Sun Borne Energy Holdings LLC has raised $5 million (Rs 28.4 crore). Massachusetts-based SunBorne Energy, which was incorporated in 2008, operates in the solar energy spectrum. In India, the company's business model is based on utility scale projects. SunBorne has successfully bid for several solar projects awarded by Gujarat (15 MW), Rajasthan (Phalodi), Andhra Pradesh and Karnataka (10 MW). It has drawn up massive expansion plans in the solar energy segment and aims to build over 1 GW of power in 5-7 years, underlining the enormous potential of the nascent solar power sector in India. SunBorne plans to commission more than 200 MW of capacity by 2014.

25^th June 2012, Source: Reuters