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20 January 2017

CCI imposes penalty on bidders for cartelisation in tenders of Indian Railways

The Competition Commission of India (CCI) has imposed penalties on three firms for bid rigging of tenders floated by Indian Railways for procurement of Brushless DC fans in the year 2013.

A final order has been passed by CCI in a case taken up suo moto under Section 19 of the Competition Act, 2002 (‘the Act’) based on the information received from Central Bureau of Investigation, New Delhi. 

CCI has held that the firms had shared the market by way of allocation of tenders of Indian Railways for Brushless DC fans amongst themselves under an agreement/ arrangement and indulged in bid rigging/ collusive bidding in contravention of the provisions of Section 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. The anti-competitive conduct of the firms has been established based on exchange of rates to be quoted in upcoming tenders amongst the errant firms, numerous calls amongst the key persons of these firms before and during the period of the tenders and admission by one of the firms which confirmed and revealed the existence and modus operandi of the cartel. 

Accordingly, a penalty of Rs. 2.09 crores, Rs. 62.37 lakhs and Rs. 20.01 lakhs and was imposed on the firms M/s Western Electric and Trading Company, M/s Pyramid Electronics and M/s R. Kanwar Electricals respectively in terms of proviso to Section 27 (b) of the Act. While imposing penalty, Commission took into consideration all the relevant factors including the duration of the cartel, volume of the tender affected by the cartel and value thereof and decided to impose penalty on M/s Pyramid Electronics and M/s Western Electric and Trading Company calculated at 1.0 time of their profit respectively in the year 2012-13 and on M/s R. Kanwar Electricals at the rate of 3 percent of its turnover for the year 2012-13. 

Additionally, considering the totality of facts and circumstances of the case, penalty was also imposed on persons-in charge of the three firms i.e., Shri Sandeep Goyal of M/s Pyramid Electronics, Shri Ashish Jain of M/s R. Kanwar Electricals and Shri Ramesh Parchani of M/s Western Electric and Trading Company at the rate of 10 percent of the average of their income for the last three preceding financial years. 

CCI had received an application under Section 46 of the Act read with Regulation 5 of the Competition Commission of India (Lesser Penalty) Regulations, 2009 from M/s Pyramid Electronics. This application was received when the investigation in the matter was in progress and the report from the DG was pending. 

Considering the co-operation extended by M/s Pyramid Electronics in conjunction with the value addition provided by it in establishing the existence of cartel and the stage at which it had approached CCI, it was granted 75 percent reduction in the penalty than would otherwise have been imposed, had it not cooperated with the Commission. Accordingly, the penalty imposed on M/s Pyramid Electronics was reduced to Rs. 15.59 lakhs and penalty imposed on Shri Sandeep Goyal was reduced to Rs. 11,648 only.

CCI imposes penalties on cement companies for bid-rigging

The Competition Commission of India (‘CCI’) has imposed penalties on 7 cement companies for bid rigging of a tender floated by the Director, Supplies & Disposals, Haryana, in the year 2012, for procurement of cement to be supplied to Government Departments/ Boards/ Corporations in the State of Haryana. 

A final order has been passed by CCI pursuant to a reference filed under Section 19(1)(b) of the Competition Act, 2002 (‘the Act’) by the Director, Supplies & Disposals, Haryana. 

CCI has held that the cement companies, through their impugned conduct, have engaged in bid-rigging, in contravention of the provisions of Section 3(3)(d) read with Section 3(1) of the Act, which eliminated and lessened competition and manipulated the bidding process in respect of the impugned tender. The bid-rigging has been established from quoting of unusually higher rates in the impugned tender (than rates quoted in tenders of previous years), determining different basic prices for supply of cement at the same destination through reverse calculation, quoting of quantities in the impugned tender such that the total bid quantity almost equalled the total tendered quantity, quoting of rates for the districts in a manner that all cement companies acquired L1 status at some of the destination(s) etc. The anti-competitive conduct was re-affirmed through SMS exchanged and calls made amongst the officials of the cement companies. 

Accordingly, penalty of Rs. 18.44 crore, Rs. 68.30 crore, Rs. 38.02 crore, Rs. 9.26 crore, Rs. 29.84 crore, Rs. 35.32 crore and Rs. 6.55 crore has been imposed upon Shree Cement Limited, UltraTech Cement Limited, Jaiprakash Associates Limited, J.K. Cement Limited, Ambuja Cements Limited, ACC Limited and J.K. Lakshmi Cement Limited. The penalty has been levied @ 0.3% of the average turnover of the cement companies of preceding three years. While imposing penalties, Commission took note of potential delay which would have occurred in the execution of public infrastructure projects due to cancellation of the impugned tender. At the same time, due consideration was given to factors such as peculiarity of the tender process which created uncertainty in procurement, total size of the impugned tender and competition compliance programmes put in place by some companies while determining the quantum of penalty. 

The cement companies have been directed to cease and desist from indulging in the acts/ conduct which have been held to be in contravention of the provisions of the Act. 

A copy the CCI’s order passed in Ref. Case No. 05 of 2013 has been uploaded on the website of CCI at www.cci.gov.in.

9 January 2017

VAT update

With a view to grant an opportunity to the defaulters, before the Department starts a rigorous drive against returns’ defaulters in the month of March 2017, the Government of Maharashtra issued notification No. VAT 1516/CR 178/Taxn-1, Dated 28th December 2016. By virtue of this notification, a limited period opportunity is being given for the returns defaulters to upload returns for the period prior to 01/04/2016 without payment of late fee or on payment of partial late fee.

Sr. No
Phase
Return Filed during the period
Late fee payable
1
Phase I
1st January 2017 to
31st January 2017
No late fee payable
2
Phase II
1st February 2017 to 
28th February 2017
Rs. 2000/- payable per return

INCOME TAX JUDGEMENTS

  • The Supreme Court in the case of Jean Knit Pvt. Ltd. vs DCIT held that a Writ Petition to challenge the issue of reopening notice u/s. 148 is maintainable as per law laid down in Calcutta Discount Co. Ltd. and Another vs ITO in 41 ITR 191. The Supreme Court further held that the law laid down in Chabil Dass Agarwal in 357 ITR 357 deals with the maintainability of Writ to challenge the assessment order and does not apply to a challenge to the reassessment notice (itatonline.org).
  • The Mumbai High Court in the case of CIT vs Asian Paint (India) Ltd. reported in 243 Taxman 348 held that expenditure incurred by Assessee Company on corporate advertisement to maintain its corporate image which resulted in increased sale of products, was to be allowed as revenue expenditure.
  • The Madras High Court in the case of CIT vs. Smt Jayalalitha Ammal. reported in 242 Taxman 449 held that where addition of undisclosed income was made on the basis of mere statement given by her son under section132 (4) which was not corroborated by any material evidence, neither such statement would be a conclusive evidence nor any addition could be made.
  • The Rajasthan High court in the case of Pr. Commissioner of Income Tax vs. Vijay Shanthi Educational Trust. reported in 243 Taxman 212 held that where assessee an educational trust claiming depreciation on capital assets for which capital expenditure had already been allowed, the assessee was entitled to depreciation. The High Court followed its earlier decision in the case of CIT vs. Krishi Upaj Mandi Samithi (388 ITR 605).
  • The Madras high court in the case of Holy Cross Primary School v/s CBDT Reported in 388 ITR 162 has held that payment of salary to priests and nuns of catholic institutions ultimately deposited the sum to the congregation or Dioceses which had benefit of exemption from tax and therefore no tax was required to be deducted from the salary so paid at source.
  • The Punjab and Haryana High Court in the case of VMT Spinning Co. Ltd. v/s CIT reported in 389 ITR 326 has held that the Tribunal has powers to admit additional grounds before tribunal where such quations arise from facts already on record of assessment proceedings and further the tribunal can adjudicate such matters.
  • The Bangalore tribunal in the case of ABB FZ-LLC v/s ITO reported in 75 Taxmann.com 83 has held that in the absence of specific article for fee from technical services (FTS), the income from services rendered in normal course of business is to be classifed as business income.
  • The Mumbai Tribunal in the case of Hatkesh Co-op. Hsg. Soc. Ltd reported in 243 Taxman 213 held that in respect of transfer fees and TDR premium received by co-operative housing society from its members, principle of mutuality would apply.
  • The Mumbai Tribunal in the case of Rajiv B Shah vs. ITO reported in 159 ITD 964 (SMC) held that the assessee cannot be denied deduction u/s. 54F if the assessee makes investment in residential house within the time limit prescribed u/s. 54F but is unable to get the title of the flat registered in his name or is unable to get the possession of the flat due to default of the builder.
  • The Mumbai Tribunal in the case of ITO vs. Vikram A Pradhan in Appeal No. 2212/Mum/2012 dated 24th August 2016 held that amounts shown in Balance Sheet cannot be deemed to be cases of “cessation of liability” only because they are outstanding for several years. The AO has to establish with evidence that there has been a cessation with regard to the outstanding creditors.
  • The Mumbai Tribunal in the case of Aditya Birla Minacs Worldwide Ltd. vs ACIT in Appeal No. 4549/Mum/2014 dated 2nd August 2016 held that tax is not required to be deducted u/s. 94I on reimbursement of rent and parking charges and therefore amount so reimbursed cannot be disallowed u/s. 40(a)(ia). In the said case the assessee reimbursed rent and parking charges amounting to Rs.71.49 lakhs to its holding company PSI Data Systems Ltd. The holding company had entered into a rent agreement with M/s. Golf Links. The Tribunal followed the decision of its Coordinate Bench in the case of Prime Broking Co. (I) Ltd. vs ACIT (ITA No. 6627/Mum/2010 dated 19th October 2012). The Tribunal further observed that the return of income of the holding company for the year under consideration has been accepted. Since the payment received from the assessee towards rent has been offered in the return of income filed by the holding company, the provisions of section 40(a)(ia) cannot be applied to the case of the assessee as per the second proviso thereto, which is held to be retrospective by the Delhi High Court in the case of Ansal Land Mark Township (P.) Ltd. (377 ITR 635)(Del.)
  • The Mumbai Tribunal in the case of ACIT v/s Liva Healthcare Ltd reported in 161 ITD 63 held that expenses incurred towards free samples distributed to physicians will be allowable only if free samples of pharmaceutical products are distributed to physicians/ doctors at initial stage of introduction to test efficacy of products and same are incurred wholly and exclusively for purposes of business. It is further stated that if free samples were granted post-introduction of pharmaceutical products in market when its end use stood established, it would be hit by Explanation to section 37 and shall not be allowable as deduction.
  • The Mumbai Tribunal in the case of Amritlal T. Shah v/s ITO reported in 182 TTJ 525 held that when assessee and his family members having sold their shareholding in a company to another company at a mutually agreed price in excess of NAV per share as part of the arrangement to facilitate restructuring of shareholding pattern of these companies, the entire transaction of sale of shares is a genuine and bonafide transaction, and therefore the capital gain is to be computed by taking the actual sale consideration of the shares and not the price based on NAV per share as full value of consideration. More so the Revenue has accepted the capital gains based on the same sale consideration in case of one of the member of the family and has also accepted the purchase of shares in the hands of the purchaser company at the same price.
  • The Mumbai Tribunal in the case of CIT vs. Sunil Vishambharnath Tiwari reported in 388 ITR 630 held that disallowance u/s. 40(a)(ia) cannot be treated separately but it is to be added to gross total income which is eligible for deduction u/s. 80IB(10). In the said case the assessee was eligible for deduction u/s. 80IB(10). The AO made certain disallowances u/s. 40(a)(ia) of the Act on account of non-deduction of tax at source and did not allow deduction u/s. 80IB(10) in respect of the increased income of the project.
  • The Chennai Tribunal in the case of P. K. Rajasekar v/s ITO reported in 161 ITD 189 held that where assessee claimed that there was a wrong credit entry by payer client in the form 26AS of the assessee, the AO should examine the genuineness of the transaction and not merely make addition on the basis of form 26AS.
  • The Pune Tribunal in the case of Suresh Babulal Shah (HUF) v/s DCIT reported in 161 ITD 514 held that where assessee had continuously shown shares as investment in the balance sheet, it would be entitled to treat gains arising on purchase and sale of shares as capital gains even though the holding period of the shares was short and the volume and frequency of the transactions was high.
  • The Mumbai Tribunal in the case of DCIT v/s Mahendra Brothers Exports (P.) Ltd reported in 161 ITD 772 held that where assessee earned dividend and claimed the same as exempt and the AO noticed that assessee had a common pool of funds, he partly disallowed interest expenses by applying section 14A r.w.r. 8D(2)(ii), it could be presumed that investments had been made out of surplus funds and therefore, no disallowance of interest can be made u/s 14A of the Act.

Central Board of Excise & Customs (CBEC) has initiated the process of migration of its existing Central Excise/Service Tax assessees to GST

Central Board of Excise & Customs (CBEC) has initiated the process of migration of its existing CENTRAL EXCISE/SERVICE TAX assessees to GST with effect from 9th January, 2017.

As part of its efforts to ensure implementation of GST by 1st April, 2017, CBEC has taken steps to ensure that its existing taxpayers are migrated to GST in a simple, user-friendly and smooth manner. Once the existing registered Taxpayers (both Central Excise as well as Service Tax) login to CBEC’s Web Portal www.aces.gov.in, a facility will be given in a secure manner to access the provisional login ID and password given by Goods and Services Tax Network (GSTN). Thereafter, using the same, they can log in to GST Portal (www.gst.gov.in) to fill the required fields and submit scanned documents.

However, if they have already initiated the process of migration to GST as a VAT asssessee under STATE COMMERCIAL TAX department, no further action is necessary. PAN is mandatory for migration to GST. Hence, if the existing Central Excise/Service Tax Registration Code does not have PAN, then PAN has to be obtained from Income Tax Department and the Registration details have to be updated in the ACES Portal www.aces.gov.in

CBEC has made available a 24x7 HELPDESK (TOLL-FREE NO 1800-1200-232, EMAIL:cbecmitra.helpdesk@icegate.gov.in) for the purpose of assisting existing CENTRAL EXCISE/SERVICE TAX assessees. GSTN also has a HELP DESK number: 0124-4688999 and GSTN email address is: help@gst.gov.in A Step-by-Step Taxpayers User guide for Migration is available at www.aces.gov.in and at www.cbec.gov.in

CBEC is also sending Emails/recorded telephonic messages to all registered CENTRAL EXCISE / SERVICE TAX assessees requesting them to migrate to GST. Outreach programmes such as Awareness Workshops/ Training for CENTRAL EXCISE/SERVICE TAX assessees are being organized all over India at the Commissionerates and Divisional offices of CBEC.

All existing CENTRAL EXCISE/SERVICE TAX assessees are requested to migrate as early as possible, latest by 31st January, 2017.

Direct Tax and Indirect tax collection figures for the period April 2016 to December 2016

Direct Taxes grow by 12.01% and Indirect Taxes grow by 25% over the corresponding period last year i.e. April-December 2015. The details in this regard are as follows:

Direct Taxes
The figures for Direct Tax collections up to December, 2016 show that net collections are at Rs. 5.53 lakh crore which is 12.01% more than the net collections for the corresponding period last year. This collection is 65.3% of the total Budget Estimates of Direct Taxes for F.Y. 2016-17. 

As regards the growth rates for Corporate Income Tax (CIT) and Personal Income Tax (PIT), in terms of gross revenue collections, the growth rate under CIT is 10.7% while that under PIT (including STT) is 21.7%. However, after adjusting for refunds, the net growth in CIT collections is 4.4% while that in PIT collections is 24.6%. Refunds amounting to Rs.1,26,371 crore have been issued during April-December, 2016, which is 30.5% higher than the refunds issued during the corresponding period last year.

After accounting for the third instalment of advance tax received in December, 2016, the collections under advance tax stand at Rs.2.82 lakh crore, which is 14.4% higher than the figures for the corresponding period of last year. CIT advance tax is growing at 10.6% while PIT advance tax has registered a growth of 38.2%.


Indirect Taxes
The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to December 2016 show that net revenue collections are at Rs 6.30 lakh crore, which is 25% more than the net collections for the corresponding period last year. Till December 2016, about 81% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.

As regards Central Excise, net tax collections stood at Rs. 2.79 lakh crore during April-December, 2016 as compared to Rs.1.95 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 43%.

Net Tax collections on account of Service Tax during April-December, 2016 stood at Rs. 1.83 lakh crore as compared to Rs.1.48 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 23.9%.

Net Tax collections on account of Customs during April-December 2016 stood at Rs. 1.67 lakh crore as compared to Rs. 1.60 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 4.1%.

During December 2016, the net indirect tax (with ARM) grew at the rate of 14.2% compared to corresponding month last year. The growth rate in net collection for Customs, Central Excise and Service Tax was -6.3%, 31.6% and 12.4% respectively during the month of December, 2016, compared to the corresponding month last year. The de-growth in customs collections appear to be on account of a decline of gold imports by about 46% (in volume terms) in December 2016 over December 2015.

Income-tax Rules amended to provide that bank shall obtain and link PAN or Form No. 60 (where PAN is not available) in all existing bank accounts (other than BSBDA) by 28.02.2017.

Income-tax Rules have been amended to provide that bank shall obtain and link PAN or Form No. 60 (where PAN is not available) in all existing bank accounts (other than BSBDA) by 28.02.2017, if not already done. In this connection, it may be mentioned that RBI vide circular dated 15.12.2016 has mandated that no withdrawal shall be allowed from the accounts having substantial credit balance/deposits if PAN or Form No.60 is not provided in respect of such accounts. Therefore, persons who are having bank account but have not submitted PAN or Form No.60 are advised to submit the PAN or Form No. 60 to the bank by 28.2.2017.

The banks and post offices have also been mandated to submit information in respect of cash deposits from 1.4.2016 to 8.11.2016 in accounts where the cash deposits during the period 9.11.2016 to 30.12.2016 exceeds the specified limits.

It has also been provided that person who is required to obtain PAN or Form No.60 shall record the PAN/Form.No.60 in all the documents and quote the same in all the reports submitted to the Income-tax Department.

The notification amending the relevant rules is available on the official website of the Income-tax Department i.e. www.incometaxindia.gov.in