TIOL-DDT 2847 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26988"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2016.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="270" height="231" hspace="5" border="0" align="right" ></a><strong><font color="#663399" size="3">TIOL-DDT 2847</font><br> 17 05 2016<br> Tuesday</strong></font> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Interpretation of Statute - Proviso ought to be given normal and natural meaning keeping in mind context, object and reasons for its enactment and incorporation: SC </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> interpreting the Laws, do you go by the meaning of the words or the context, object and reasons for its enactment? Our Babus who are adept in poor drafting of laws, once again got relief from the highest court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this very interesting case, the appellants are the mega Oil Companies of India like Indo Burma Petroleum Corporation Ltd, Hindustan Petroleum Corporation Limited, Indian Oil Corporation Limited and Bharat Petroleum Corporation Limited. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 01.06.2006 rates of Petrol and High Speed Diesel were increased by Rs.4/- and Rs.2/- respectively from the midnight of 5/6th June, 2006. This increase in rates would have resulted in ad valorem increase in Value Added Tax (VAT) at the rate of 0.66 paise per litre of Petrol and 0.22 paise per litre of High Speed Diesel. With a view to grant some relief in the price rise to the customers, the Government of National Capital Territory of Delhi inserted a proviso to the definition "<em>Sale Price</em>" in Section 2(1)(zd) of the Act. </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided that an amount equal to increase in the prices of petrol and diesel (including the duties and levies charged thereon by the Central Government) taking effect from the 6th June 2006 shall not form part of the sale price of petrol and diesel….: </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By 16.02.2007, the prices were rolled back to the pre 06.06.2006 rates, but the Oil companies continued to avail the exemption. According to them, the benefit in terms of the proviso in question was to the extent of VAT chargeable and payable in respect of the amount of increase and the benefit so quantified must be made available regardless of any variation or decrease in the rates of Petrol and High Speed Diesel. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For example, if the price before the increase in rates is taken to be x and the price were to be x+4 as a result of increase w.e.f. 06.06.2006, the benefit of VAT payable in respect of the element of increase i.e. 4 must be available even if upon partial roll back the price were to be x+1 or upon full roll back the price were to be x itself. If the logic is accepted, upon full roll back, according to the Oil Companies, the VAT would be payable on x-4. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us substitute a number for x. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Suppose the price of petrol was Rs. 60 on 1.6.2006. On 6.6.2006, the price was enhanced to Rs.64. The Government of Delhi exempted this Rs. 4 from the price for VAT. On 30.11.2016, the price of petrol was reduced to Rs. 62 and later from 16.2.2007, it was further reduced to Rs.60, the original price with which we started. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">According to the Oil Companies, they continued to get the exemption of Rs. 4 from the price even after the price was reduced to Rs. 62 and then to Rs. 60 or for that matter even if it was further reduced to Rs. 58. That is how they understood the proviso and that seems to be how it was drafted. But obviously that was not what the Delhi Government meant - it was only a drafting confusion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court last week held that<em> the the proviso ought to be given normal and natural meaning keeping in mind the context, object and reasons for its enactment and incorporation. The idea was to protect the interest of the consumers by giving exemption in respect of enhanced ad valorem VAT payable on account of increase in prices of diesel and petrol from 06.06.2006</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For more details, please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=27015" target="_blank">Breaking News</a></strong>. </font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f1"></a>FTP - Procedure for Declaration of Intent on EDI and Non EDI shipping bills for claiming rewards under MEIS </font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has amended Paragraph 3.14(a) of the Handbook of Procedures 2015-20.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The amended para reads as:</font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Paragraph 3.14 : Procedure for Declaration of Intent on EDI and Non EDI shipping bills for claiming rewards under MEIS including export of goods through courier or foreign post offices using e-Commerce </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) (i) EDI Shipping Bills: Marking/ ticking of “Y' (for Yes) in “Reward” column of shipping bills against each item, which is mandatory, would be sufficient to declare intent to claim rewards under the scheme. In case the exporter does not intend to claim the benefit of reward under Chapter 3 of FTP exporter shall tick “N' (for No). Such marking/ticking shall be required even for export shipments under any of the schemes of Chapter 4 (including drawback), Chapter 5 or Chapter 6 of FTP </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) Non-EDI Shipping Bills: In the case of non-EDI Shipping Bills, Export shipments would need the following declaration on the Shipping Bills in order to be eligible for claiming rewards under MEIS: "<em><strong>We intend to claim rewards under Merchandise Exports From India Scheme (MEIS)</strong></em>". Such declaration shall be required even for export shipments under any of the schemes of Chapter 4 (including drawback), Chapter 5 or Chapter 6 of FTP. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The procedure for declaration of intent in Paragraph 3.14(a) of the Handbook of Procedures 2015-20 for EDI is simplified. The marking of tick in pursuance of the earlier Public Notice No.47, dated 8th December 2015 shall be treated as declaration of intent in case of EDI shipping bills. The marking of tick in the appropriate tick boxes are mandatory in EDI shipping bills. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTk4ODU=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 09/2015-20., Dated May 16 2016 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600"><a name="f2"></a>Publicity campaigns for The Income Declaration Scheme 2016 & The Direct Tax Dispute Resolution Scheme 2016 </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Income Declaration Scheme, 2016 incorporated as Chapter IX of the Finance Act, 2016 and The Direct Tax Dispute Resolution Scheme 2016 incorporated as Chapter X of the Finance Act, 2016 are to come into force on the 1st of June, 2016. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to ensure that the schemes are given sufficient publicity and wide newspaper & audio-visual media coverage in the regional language, CBDT wants the Principal Chief Commissioners of Income Tax to give adequate time towards coordinating the campaign with their respective PIB offices at local level. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board suggests that the Principal CCsIT / CCsIT should plan outreach programs with trade and market associations in their jurisdictions to educate them about the features of and the benefits that can be availed under the schemes. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTk4ODY=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT Letter., Dated May 16 2016 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600"> <a name="f3"></a>Exchange of Information requests to British Virgin Islands (BVI)- CBDT Instructions </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BRITISH</strong> Virgin Islands (BVI) is one of the most important jurisdictions for India from the point of Exchange of Information (EOI) relationship. Over the past few years, India has sent several EOI requests to BVI under the India-BVI Tax Information Exchange Agreement (TIEA). A lot of requests are likely to be made to the BVI in near future in view of the investigations being carried out in the Panama Papers. Even though the EOI Cell of India has been making continuous efforts to improve the efficiency and efficacy of the information exchange process with BVI, a large number of deficiencies are being observed in the EOI requests sent by field officers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board informs the field about some important features of investments in BVI: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">Procedure for incorporating a company in the BVI: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any person who wishes to form a registered company in BVI must do so through a licensed Registration Agent (RA). The agent is required (amongst other things) to obtain client due diligence (CDD also sometimes referred to as "know your client" or KYC) to comply with the regulations. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are more than 100 registered agents in BVI who provide company management business services like formation of companies, providing registered agent and registered offices, providing directors or officers and nominee shareholder licenses. The Financial Service Commission of BVI grants licenses to these RA to carry out these services for BVI companies as well as for companies incorporated or registered in a jurisdiction outside the Virgin Islands. One of the most popular service providers is Portcullis Group which has operations in BVI, Singapore, Cayman Islands, Hong Kong, Mauritius etc. The concerned BVI entity of the group is Portcullis Trust Net (BVI) Limited. Another service provider is Fidelity Corporate Services. As stated above, there are more than 100 such service providers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The RA must properly identify and know the client and the beneficial owner( s) of the new company as per the requirement of law and the conditions of the Company Management License. Therefore, before the RA proceed with a new incorporation for any first-time client, they need to receive a few documents, such as, certified copy of passport, proof of address, etc., that identify and characterize the clients. Upon receipt of the due diligence information and payment of requisite fees, RA prepares and files the Memorandum and Articles of Association and other mandatory documents required to register a BVI Business Company. The initial company formation paperwork is prepared and signed on client's behalf by the RA and there is no need for the client to sign any incorporation documents for a Business Company. In order to comply with the minimum domestic presence requirements in the BVI, RA provides a Registered Address and Registered Agent service for the client's new company. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">Shareholding of BVI Companies: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Companies in BVI are not required to state their authorized capital. They need to simply state the number of shares they will issue but not the monetary value of the capital. Thus, a company may issue its shares at a "<em>market value</em>", or at a value that its first owners deem fit, depending on the capitalization requirements of the company. Thus, a company with the same 50,000 shares may raise substantially different amounts of capital from its would-be shareholders, depending on its capitalization needs and plans of the shareholders. Consequently, there are no requirements to have any amount of paid-up capital, or to pay it in by a certain deadline. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The details of shareholders of the company are not publically available. The law in BVI only requires that the shareholder information (Register of Shareholders) must be kept on file with the Registered Agent, where it is confidential and accessible only by the members of the company. However, the law also allows for the shareholder information to be filed with the Registry of Companies as an option - if the shareholders so want. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A very important feature to keep confidentiality about shareholding is <em>"keeping shares registered in the name of nominee and not in the name of actual owner"</em>. For example, Indian resident X having a company ABC in the BVI can make person Y and Z as the shareholders of the company ABC. Person Y and Z can either be individual or corporate entity. There are few companies who provide these types of shareholders services. Some subsidiary companies of Portcullis Trust Net (BVI) Limited which provide shareholding and directorship services are Execorp Limited, Shrecorp Limited etc. In such cases, there may an agreement/correspondence between actual owner/beneficial owner and nominee shareholders. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"style="background-color:#FFFF00" span="span">Directors of BVI Companies: </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the BVI, Business Companies need to have a minimum of one director, either a private individual or a corporate entity, which may be resident of BVI or any other jurisdiction. If director is not a resident in BVI, the BVI authorities may not be in a position to provide information of the director. Therefore, in such situation field authorities should make separate EOI request to the country where the director is resident. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT wants the field formations to understand the intricacies while making a request for information relating to a BVI company. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTk4ODc=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DoR (Foreign Tax & Tax Research Division) F.No.500/12/2013-FT&TR-III., Dated May 12 2016 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600"><a name="f4"></a>Where Tax Evasion is not a Crime - Into that Haven...</font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<em><strong>TAX</strong> evasion is not a crime in our country as is a practice in many other countries as well.</em>", said Multilateral Affairs Minister of Panama Maria Luisa Navarro in New Delhi yesterday. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<em>Panama is not a tax haven, our citizens and foreign nationals staying and doing business in Panama or buying and selling a house in our country have to pay income tax up to 35 per cent; Any income by a Panama national or foreigner from a business based in Panama has to pay income tax and also sales tax. But if the income of that particular firm is from outside Panama jurisdiction, then there is no income tax,</em>" she added. </font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p> <p><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@tiol.in" target="_blank"><strong>vijaywrite@tiol.in</strong></a></font></p> </body> </html>