Taxation of Corporations & Commodities

MASTER OF BUSINESS LAWS

National Law School of India University

Bangalore

November, 2016

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Agenda
• Overview of the Syllabus
• Constitutional aspects of tax
• Tax structure, types of taxes and reasons for study
• Few important case laws
• Basic concepts and aspects of income tax law
• Overview of Wealth Tax Act
NEW UPDATES
• Indirect Taxes: Overview of GST and its Constitutional Aspects – a Brief
introduction
• Direct Taxes: Overview of BM (UFIA) & IoT Act, 2015
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Article 265 of Indian Constitution
No taxes
shall be
levied or collected
except by
authority
of law
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Constitution of India:
Definitions under Part XIX - Miscellaneous
Article 366(6) “corporation tax” means any tax on income, so far as that tax is payable by companies and is a tax in the case
of which the following conditions are fulfilled
(a) that it is not chargeable in respect of agricultural income;
(b) that no deduction in respect of the tax paid by companies is, by any enactments which may apply to the tax, authorised to be made from
dividends payable by the companies to individuals;
(c) that no provision exists for taking the tax so paid into account in computing for the purposes of Indian income-tax the total income of
individuals receiving such dividends, or in computing the Indian income-tax payable by, or refundable to, such individuals.
Article 366(28) “taxation” includes the imposition of any tax or impost, whether general or local or special, and “tax” shall be
construed accordingly.
Article 366 (29) “tax on income” includes a tax in the nature of an excess profits tax.
Article 366(29A) “tax on the sale or purchase of goods” includes
(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable
consideration;
(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments;
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other
valuable consideration;
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other
valuable consideration;
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human
consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable
consideration;
and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the
transfer, delivery or supply and a purchase STRICTLY
of those goods by the person to whom such transfer, delivery or supply is made.
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New terms inserted after 2016 Amendment
• Article 366 (12A) “goods and services tax” means any tax on supply
of goods, or services or both except taxes on the supply of the
alcoholic liquor for human consumption.

• Article 366 (26A) “Services” means anything other than goods.

• Article 366(26B) “State” with reference to Articles 246A, 268, 269,

269A and Article 279A includes a Union territory with Legislature.

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 Notes
Indian Constitution – Schedule (Art-246) 7th  Doctrine of Pith & Substance
 Article 248 - Residuary Powers of legislation vests with Parliament
Allocation of taxing power
Impact of 101st Amendment,
List 1 (Union/Central) 2016
Insertion of New Article 248A
Inserted Entry-84 & Omitted 92 & 92C
• 82. Taxes on income other than agricultural income. (e.g. Income-tax Act, 1961)
• 83. Duties of customs including export duties. (e.g. Customs Act, 1962)
• 84. Duties of excise on tobacco and other goods manufactured or produced in India except—(a) alcoholic liquors for human consumption; (b) opium, Indian
hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this
entry. (e.g. Central Excise Act, 1944)
• 85. Corporation tax.
• 86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies. (e.g. Wealth Tax Act, 1956)
• 87. Estate duty in respect of property other than agricultural land.
• 88. Duties in respect of succession to property other than agricultural land.
• 89. Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights.
• 90. Taxes other than stamp duties on transactions in stock exchanges and futures markets.
• 91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures,
proxies and receipts.
• 92. Taxes on the sale or purchase of newspapers and on advertisements published therein.
• 92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.
• 92B. Taxes on the consignments of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the
course of inter-State trade or commerce.
• 92C. Taxes on Services (e.g. Finance Act, 1994) [Entry 92C is not notified*]
• 96. Fees in respect of any of the matters in this List, but not including fees taken in any court.
• 97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists. (Residuary List)
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 List III (Concurrent List – Central and/or State)
Indian Constitution – 7th Schedule (Art-246)  No specific Entry on taxes is mentioned in List III
NOTE: Comptroller and Auditor General of India (CAG)
compiles & audits accounts of Union & the States.

List II (State)
Impact of 101st
• 46. Taxes on agricultural income.
Amendment, 2016
• 47. Duties in respect of succession to agricultural land. Inserted new Entries-54 & 62 &
• 48. Estate duty in respect of agricultural land. Omitted 52 & 55
• 49. Taxes on lands and buildings.
• 50. Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.
• 51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured
or produced elsewhere in India:— (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but not including
medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
• 52. Taxes on the entry of goods into a local area for consumption, use or sale therein.
• 53. Taxes on the consumption or sale of electricity.
• 54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.
• 55. Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television.
• 56. Taxes on goods and passengers carried by road or on inland waterways.
• 57. Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III.
• 58. Taxes on animals and boats.
• 59. Tolls.
• 60. Taxes on professions, trades, callings and employments.
• 61. Capitation taxes.
• 62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
• 63. Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty.

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 List III (Concurrent List – Central and/or State)
Indian Constitution – Few aspects  No specific Entry on taxes is mentioned in List III except - Entry
35 (vehicles) & Entry 44 (stamps)
Notes
• 110 & 119. Definition of “Money Bills”.—(1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all
or any of the following matters, namely:—
• (a) the imposition, abolition, remission, alteration or regulation of any tax;
• (b) the regulation of the borrowing of money or the giving of any guarantee by the Government of India/State, or the amendment of the law with respect to any
financial obligations undertaken or to be undertaken by the Government of India/State;
• (c) the custody of the Consolidated Fund or the Contingency Fund of India/the State, the payment of moneys into or the withdrawal of moneys from any such Fund;
• (d) the appropriation of moneys out of the Consolidated Fund of India/the State;
• (e) the declaring of any expenditure to be expenditure charged on the Consolidated Fund of the India/ State, or the increasing of the amount of any such expenditure;
• (f) the receipt of money on account of the Consolidated Fund of India/the State or the public account of India/the State or the custody or issue of such money; or
• (g) any matter incidental to any of the matters specified in sub-clauses (a) to (f).
• (2) A Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment
of fees for licences or fees for services rendered, or by reason that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local
authority or body for local purposes.
• (3) If any question arises whether a Bill introduced in the Legislature of a State which has a Legislative Council is a Money Bill or not, the decision of the Speaker of the
Legislative Assembly of such State thereon shall be final. [In case of Union Legislature the decision of the Speaker of the House of People thereon final]
• (4) There shall be endorsed on every Money Bill when it is transmitted to the Council of States/Legislative Council under article 109/article 198, and when it is presented
under article 111 (and presented to the President for assent)/ the Governor for assent under article 200, the certificate of the Speaker of the House of the
People/Legislative Assembly signed by him that it is a Money Bill.
• 112. Annual financial statement.—(1) The President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the
estimated receipts and expenditure of the Government of India for that year, in this Part referred to as the "annual financial statement''.
• 301. Freedom of trade, commerce and intercourse.—Subject to the other provisions of this Part XIII (Trade, Commerce and Intercourse within the territory of India),
trade, commerce and intercourse throughout the territory of India shall be free.
• 304. Restrictions on trade, commerce and intercourse among States.—Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law—
• (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so,
however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of
trade, commerce or intercourse with or within that State as may be required in the public interest; Provided that no Bill or amendment for the purposes of clause (b)
shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
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Constitution – Immunities, Principles & Sharing
Tax Immunities
• Exemption of Union property from State
taxation (Article-285)
• Exemption from taxes on electricity. (Article-
297)
• Exemption from taxation by States in respect of
water or electricity in certain cases (Article-
288)
• Exemption of property and income of State
from Union Taxation (Article-289)
• NOTE: Supreme Court held that Centre can levy
customs duty on goods imported or exported
or an excise duty on goods produced or
manufactured by a State Govt. irrespective of
whether or not it is used for purposes of trade
or business (In re Sea Customs Act AIR 1963 SC
1760.
• The Immunities that Centre/States enjoy from
each other powers of taxation does not extend
to a corporation or a Govt. company in which
State has a substantial interest since these
entities have their own personality.
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Notes: Article 19(1) (g) confers fundamental rights but Article 301 confers
justiciable right & not fundamental & Article 19(1)(g) confines to Citizens .
Broad Principles
• A tax cannot be levied outside the specific tax
entries enumerated in the 3 lists
• It is possible for a legislature to levy a tax not
only prospectively even retrospectively (update
Dr.Shome Committee report – Vodafone case)
• A tax entry authorises the making of a law not
only to levy tax but to do all incidental as well
as ancillary things that are necessary for the
levy of a tax e.g. ITAT.
• While levying tax it is competent for legislature
to device machinery for its effective collection,
to determine the procedure for assessing the
tax liability and to device necessary provisions
for preventing its evasion.
Impact of 101st
Amendment, 2016
GST
Insertion of Articles 248A,
279A (GSTC)
Article 301 extends to all individuals.
Tax Sharing
• Centre –State tax sharing devise is provided in form of
Finance Commission. All revenues accruing to States
from their taxes is used by them, but all taxes leviable
by Centre are not meant for its exclusive use & required
to share some of the taxes with the States.
• Taxes levied and collected by Centre and used by it as a
whole e.g. Customs, corporation tax, capital gains tax,
surcharges on taxes in Points i & iii below.
• Point i - Taxes levied and collected by Centre but the
net proceeds of which have to be compulsorily shared
by it with States (Article 270) e.g. taxes on non-
agricultural income (excluding corporation tax) . % of
this revenue must be handed overt to States as may be
prescribed by order of President under Financial
Commission recommendations.
• Point ii - Taxes levied and collected by Centre but a
portion of the net proceeds of which may be assigned
by it to States by its own law from the Consolidated
Fund of India (Article 272) e.g. the Central excise (other
than medicinal & toilet preparations).
•Point iii - Taxes levied and collected by Centre, the whole
belongs to States e.g. duties of succession & estate duty
on property other than agricultural land. (Article 269)
Nothing prevents Centre from levy ‘surcharge’ which
need not be apportioned among States (Article 271)
• Taxes levied by Centre but collected and utilised by
States such as stamp duties (Article 268); e.g. CST Act .
9
Indian Constitution
Article 51 - Promotion of international peace and security.
The State shall endeavour to —
(a) promote international peace and security;
(b) maintain just and honorable relations between nations;
(c) foster respect for international law and treaty
obligations in the dealings of organized peoples with
one another; and
(d) encourage settlement of international disputes by
arbitration.
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 Direct Indirect
Taxes Taxes
Income-tax Act, 1961 Central Excise Act, 1944 Current Tax Regime
India
(OVERVIEW)
Wealth-Tax Act, 1957* Central Sales Tax, 1957

International Taxation • Companies Act, 2013 (earlier 1956 Act)

(decisions of AAR – Direct Taxes) Customs Act, 1961 • Partnership Act, 1932
DTAA, TIEA, BEPS • Limited Liability Partnership Act, 2008
• Special Economic Zone Act, 2005
E.g. Transfer Pricing (goods, • MSME Act, 2006
services & ipr), WTH rates, etc., Finance Act, 1994 • SEBI Act, 1992, FEMA Act, 1999
(Service Tax)** • Prevention of Money Laundering Act, 2002
• Payment and Settlement Systems Act, 2007
Black Money (Undisclosed • …….
• …..
Foreign Income and Assets and Value Added tax laws (in each • National Tax Tribunal Act, 2005 (Supreme Court
Imposition of Tax Act, 2015 States)*** of India held this Act as unconstitutional [Sep
(NEW LAW) 2014]) [Madras Bar Association - Refer (2014)
International Taxation 368 ITR 42 (SC)]

Direct Taxes Code Bill, 2013 (decisions of AAR – Indirect Taxes)

(Ongoing discussion) E.g. Export & Import of goods,
services & ipr, Sector-wise pattern Tax Administration
* From April 1, 2016 onwards there is no charging Section for levy of
wealth tax ; (BUT surcharge 2% on income 1 Cr or more for individuals & 10 Cr Goods and Services Tax (to subsume all above taxes) Tax Management
or more for Companies) Constitution (101st) Amendment Act, 2016 Tax Avoidance
**New regime from 2012 onwards (Negative List) (Ongoing discussion/implementation – GSTC & GSTN) Tax Planning
*** White Paper by ECoSFMs, 2005 (by replacing the Sales tax STRICTLY
laws) CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY Tax Evasion 11
 Direct Indirect
Taxes Taxes Tax
Central Board for Excise, Authorities
Central Board For
Customs and Service Taxes
Direct Taxes (CBDT)
(CBEC/CBEC&S)

Appellate Tribunal (ITAT) Appellate Tribunal (CESTAT)

Settlement Commission (SC) Settlement Commission (SC)

 Dr. Parthasarathy Shome
Committee Report -TARC
Advance Ruling Authority Advance Ruling Authority  Eswar Committee Report
(AAR) (AAR)  ECoSFM
 GST Council

Ombudsman Ombudsman
?s of law (tax)
Supreme Court
Committee of Disputes High Courts & its Benches
Disputes Resolution Panel (DRP) –
Transfer Pricing
(States)
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Tax Return Preparers Scheme (TRPS)
Tax Structure & Governance: Administration*
Direct & Indirect Taxes: Differences
CBDT and CBEC were established on April 1, 1964. Before they were set up, the Central Board of Revenue (CBR) administered all central taxes.

Source: 1st Report TARC, 30/5/2014; GoI STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 13
Source: 1st Report TARC, 2014; GoI STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 14
Taxes can be classified and analyzed on the basis of
• Features
• Direct and indirect
• Forms
• Tax on income, capital (wealth tax; possessing the capital), parting with wealth during ones life time (gift tax),
bequeathing wealth after death (estate duty)
• Tax on manufacture or production of goods (excise duty), importing goods from abroad (customs duty)
• Character
• Regressive (e.g. match box, groceries, etc.,), proportional (e.g. flat rate of 20% of taxable income) and progressive
(e.g. graduated rates of tax slab system)
• Degressive, (mix of progressive tax and proportional tax. The rate increases to a limit. thereafter, uniform rate. Rate
does not increase in the same proportion as the increase in income. Higher income make less sacrifice than the
lower income category) SISMONDI'S RULES OF TAXATION: every tax should fall upon the revenue and not upon the
capital; taxation should never touch what is necessary for the existence of the contributor, and taxation should not
put to flight the capital it tries to strike at.
• Canons
• Ability, certainty, convenience, economy, productivity, elasticity and simplicity (refer Public Finance – Text books)
• Jurisdiction
• Source (India: Schedular on character and global in nature), Status (Nationality; Citizenship, Residence of in the
Country and Domicile of person; u/s 2(31)- Person) : International Taxation- relevancy and emphasis.
Ref: Central Board of Revenue Act, 1963 (Divides taxes)
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Case laws

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 Jindal Stainless Ltd. & Anr vs State Of Haryana & Ors
Supreme Court of India - 13 April, 2006

• Tax is levied as a part of common burden. The basis of a tax is the

ability or the capacity of the taxpayer to pay. The principle behind the
levy of a tax is the principle of ability or capacity.
• In the case of a tax, there is no identification of a specific benefit and
even if such identification is there, it is not capable of direct
measurement. In the case of a tax, a particular advantage, if it exists
at all, is incidental to the States' action. It is assessed on certain
elements of business, such as, manufacture, purchase, sale,
consumption, use, capital etc.

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 Jindal Stainless Ltd & Anr v State of Haryana & Others (Entry Tax)
[Articles 301 – 307] Supreme Court (Date of Decision 11th Nov, 2016)
• Power to tax: An essential & inherent attribute of Sovereignty. “Tax”, “duty”, “cess” or “fee” constituting a class denotes to
various kinds of imposts by State in its sovereign power of taxation to raise revenue for the State. This power is subject to
constitutional limitations. This power, according to some constitutional authorities, is to the public what necessity is to the
individual. Right to tax or levy impost must be in accordance with the provisions of the Constitution. Economic unity is a desired
goal, economic equilibrium and prosperity is also the goal. Development on parity is one of the commitments.
• Blackwell on Tax Titles as cited in Tata Iron & Steel Co. Ltd. v State of Bihar [AIR 1991 Patna 75, 81] says, ‘Taxes are defined to be
burdens or charges imposed by the legislative power upon persons or property to raise money for public purposes.’
• A tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not
produced within the taxing state. States are well within their right to design their fiscal legislations to ensure that the tax burden
on goods imported from other States and goods produced within the State fall equally.
• Upheld constitutionality of Entry Tax levied from other States [Entry 52 List II]
• Taxes to be non-discriminatory & Tax Freedom not absolute. [The word ‘Free’ used in Article 301 under Part XIII does not mean
“free from taxation”]; Article 304 : The word ‘and’ can mean ‘or’ as well as ‘and’ depending upon the context in which the law
enacted by the legislature uses the same. [textual and contextual interpretation ]
• Compensatory tax theory (equated with regulatory taxes) in Automobile Transport case (7 Judges) and Jindal case, Atiabari are
rejected. [pre-1995 decisions held that an exaction to reimburse/recompense the State the cost of an existing facility made
available to the traders or the cost of a specific facility planned to be provided to the traders is compensatory tax. (as exception
to Article 301 – whether fee/tax - “some connection” - tests - discussed ]
• Whether States’ entry tax laws basis of Guidelines issued by this Bench - Referred to regular Judges Bench (including meaning of
‘local area’)
• Reference made to the new GST law: The taxing entry for the levy of Entry tax (Entry 52 of List II of the Seventh Schedule),which
lies at the core of the dispute in the present reference, stands deleted as part of a constitutional process by which several taxes
are being subsumed under the GST (moving towards economic unity). Yet, the reference has to be answered, not the least of the
reasons for which is the determination of past liabilities and entitlements.

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 Shabina Abraham & others v Collector of CE &C
(2015) 10 SCC 770
In this case, Supreme Court held that, tax laws are made by
the living to tax the living, unlike Income Tax Act as per
Sections 159 and 168, Central Excise Act does not have
separate machinery to proceed against dead person to assess
them to tax. It has been clarified that Legal Representative is
not liable to pay duty and other sums assessed against
deceased assessee under the Central Excise law.

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Reasons for studying Tax Law in general and Income-tax law in particular
• Reasons for studying Tax Law in general
• Taxes finance government expenditure
• First function of the taxing system
• Promoting stability and growth
• Tax equity
• Horizontal equity; similar burdens on people in like circumstances
• Vertical equity; differential burdens for people in unlike circumstances
• Redistribution of income or wealth [Part IV (DPSP) of Indian Constitution]
• Providing incentives to achieve higher production
• Administrative feasibility.
• Prof Andrews, Harvard Law School
• Inter-disciplinary and Multi-disciplinary Approach to Tax Law
• Income-tax
• Persuasive influence and its administration is fair index of socio-political morality
• Statutory, detail, quality of reasoning; rich in study
• Draftsman view point and techniques
• Many related subjects; superb vantage point; survey of relations
• Prof KC Gopalakrishna, Harvard Law School, NLSIU

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 Whitney v Commissioners Of Inland Revenue
(1926) 10 Tax Cas 88
Lord Dunedin stated …Now, there are three stages in the imposition
of a tax :

• There is the declaration of liability, that is the part of the statute which
determines what persons in respect of what property are liable.
• Next, there is the assessment. Liability does not, depend on assessment.
That, 'ex hypothesi' has already been fixed. But assessment particularises
the exact sum which a person liable has to pay.
• Lastly, come the methods of recovery, if the person taxed does not
voluntarily pay.

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 Cape Brandy Syndicate v IR
[1921] 1 KB 64
The dictum of Rowlett J. as quoted with approval by
Viscount Simon …which has become locus classics can be
aptly applied to the facts of the case. Following the
illuminating words were used by the learned Judge: In a
taxing act one has to look merely at what is clearly said.
There is no room for any intendment. There is no equity
about a tax. There is no presumption as to a tax. Nothing is
to be read in, nothing is to be implied.

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 Govind Saran Ganga Saran v Commr Of Sales Tax and Ors
AIR 1985 SC 1041
The Components which enter into the Concept of a Tax. The components which enter into
the concept of a tax are well known.

1. The first is the character of the imposition known by its nature which prescribes the taxable event
attracting the levy.
2. The second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the
tax
3. The third is the rate at which the tax is imposed.
4. The fourth is the measure or value to which the rate will be applied for computing the tax liability.

• If these components are not clearly and definitely ascertainable it is difficult to say that the
levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining
any of those components of the levy will be fatal to its validity.
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 Matthews v The Chicory Marketing Board (Victoria) (1938) 60 CLR 263
(9 August 1938) High Court of Australia referred in
Commissioner HR & CE v Lakshmendra (1954) SCI
Meaning of tax

• Marketing of Primary Products Act

• It is a compulsory exaction of money by a public authority for public purposes,
enforceable by law, and is not a payment for services rendered (Lower Mainland
Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd (1933) A.C.
168, at p. 175).
• Customs and excise duties are essentially indirect taxes. They are regarded as additions of
definite amounts to the prices at which the goods upon which they are imposed are, in the
ordinary course of business, sold by persons who have paid the duties. The distinction between
such taxes and other taxes may be illustrated in the following way: a customs duty or an excise
duty is paid in respect of a particular article: the amount of the tax necessarily bears a relation
to the quantity or value of the article in question: it is either a specific duty (per article or per
quantity of commodity) or an ad valorem duty: to each article in respect of which such a duty
has been paid it would be possible to attach a label stating "Duty paid, 5s."—or whatever the
amount might be…

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 Spences Hotel Pvt. Ltd. And Anr vs State Of West Bengal And Ors
1991 (2) SCC 154

• A taxing statute will be struck down as violative of Art. 14 if there is no reasonable basis behind the classification made
by it, or, if the game class of property, similarly situated, is subjected to unequal taxation.
• Whether a particular tax is discriminatory or not must necessarily be considered in light of the nature and incidence of
that particular tax and cannot be judged by what has been held in the context of other taxes except the general
propositions. The precedents relating to property taxes such was as land tax, building tax, plantation tax, and even
income tax or a service tax will not be of direct relevance to a luxury tax, as it is neither a property tax, nor an income tax
but a tax on the provision for luxury. In case of tax on provision for luxury different aspects peculiar to the tax have to be
borne in mind…
• What exactly is meant by equality in taxation may, have to be looked at from different angles in different kinds of taxes.
• The ability or capacity to pay has no doubt been regarded as the test in determining the justness or equality of
taxation. It is the goal towards which the system has been, as it must be, steadily working.
• Taxation will not be discriminatory if, within the sphere of its operation, it affects alike all persons similarly situated. It,
however, does not prohibit special legislation, or legislation that is limited either in the objects to which it is directed, or
by the territory within which it is to operate.
• also refer: Godfrey Phillips(I)Ltd.& Anr vs State Of U.P.& Ors 20 January, 2005 Supreme Court (5 Judges)

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Few cases touching definition of “income”
• In analysing the decision of the Privy Council in the case of Shaw Wallace &
Co., Braund J., who has delivered the leading judgment, has pointed out as
follows (p. 573 of 14 ITR)
“ ...in order to be income, it must be something which 'comes in'
(1) periodically, (2) as a return, (3) with some sort of regularity or expected
regularity, and (4) from a definite source. It appears to me to be beyond
argument that a series of payments may be made periodically and with
regularity or with expected regularity, notwithstanding that they do not have
their origin in business activity, investment or enforceable obligation. That such
a payment is something which 'comes in' and in that sense may in the proper
circumstance be 'income' in the wide sense in which that expression was
explained by Lord Macnaghten in Tennant v Smith [1892] AC 150 at p. 164
(HL), is, I think, equally beyond doubt.
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 29
• In Raghuvanshi Mills Ltd. v CIT p. 489 ; 23 Comp Cas (Ins.), the Supreme Court, has pointed out that the remarks of the
Judicial Committee in CIT v Shaw Wallace & Co., , limiting income to "a periodical monetary return 'coming in' with some
sort of regularity, or expected regularity, from definite sources" must be read with reference to the particular facts of that
case. In Dooars Tea Co. Ltd. v Commr. of Agrl. LT. , the Supreme Court has pointed out that it is necessary to bear in mind
that the word "income" as used in the Indian I.T. Act, 1922, is a word of elastic import and its extent and sweep are not
controlled or limited by the use of the words "profits and gains" and they have pointed out that the diverse forms which
income may assume cannot exhaustively be enumerated,…
What is taxed under the Indian Income-tax Act is income from every source (barring the exceptions provided in the Act
itself) and even a voluntary payment, which can be regarded as having an origin, which a practical man can regard as a real
source of income, will fall in the category of "income", which is taxable under the Act".
• "If one analyses that definition, it is clear that the Privy Council laid down that in order that a receipt by an assessee should
constitute income, it must satisfy the following ingredients :
• (1) it must be a periodical monetary return which, in my opinion, must mean a return for labour and/or skill and/or capital;
• (2) coming in with regularity, or expected regularity ;
• (3) from a definite source ;
• (4) excluding a receipt "in the nature of a mere windfall", i.e., not a windfall in regard only to the extent or quantum of what is received".

(1) Whether, alimony received by the assessee under Section 25 of the Hindu Marriage Act, 1955, on nullity of marriage, is
income in her hands and liable to tax ?
• In the negative and in favour of the assessee. (capital receipt)

(2) Whether, on the facts and in the circumstances of the case, the alimony of Rs. 750 per month received by the assessee
from her ex-husband on the nullity of marriage is income in her hands liable to tax?
• In the affirmative and against the assessee. (revenue receipt)(Refer in the case of Princess Maheshwari Devi of Pratapgarh v CIT on 15 July, 1982, Bom
HC)
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 30
 Kone Elevator India Pvt. Ltd v State of TN
(2014) 7 SCC 1 [Constitutional Bench - 5 Judges]
• Principles - “contract for sale of goods” and “works contract”
(a) the works contract is an indivisible contract but, by legal fiction, is divided into two parts, one for
sale of goods, and the other for supply of labour and services; it is only if there are clearly two
contracts, one for supply of goods only and a second one for supply of labour and service only, that
they can be treated separately and not as a composite contract.
(b) the concept of “dominant nature test” or, for that matter, the “degree of intention test” or
“overwhelming component test” for treating a contract as a works contract is not applicable.
(c) the term “works contract” as used in Article 366(29A) of the Constitution takes in its sweep all
genre of works contract and is not to be narrowly construed to cover one species of contract to
provide for labour and service alone.
(d) once the characteristics of works contract are met with in a contract entered into between the
parties, any additional obligation incorporated in the contract would not change the nature of the
contract.
• (Also Refer State of A.P v Kone Elevators (India) Ltd (2005) 3 SCC 389)

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 31

 Kone Elevator India Pvt. Ltd v. State of T. N and Ors
WRIT PETITION (C) NO. 232 OF 2005
Supreme Court of India, 5 Judges Bench, May 6th, 2014
• Important principles on distinction between “contract for sale of goods” and “works contract” explained. (Appx. 219
Pages Judgment) (TN,UP, AP, Gujarat, Orissa, Karnataka, Maharashtra & Rajasthan) (Doctrine of Predominant Intention
Test, Dominant Nature Test; overwhelming component test; referred to the aforesaid decision only to point out that the
“dominant nature test”, degree of labour or service test, relating to the works contract that gets covered under Article
366(29A) of the Constitution has been held therein to be not applicable. Associated Cement Companies Ltd. v.
Commissioner of Customs (2004 SC)
• Whether a contract for manufacture, supply and installation of lifts (Bombay Lifts Act, 1939, the Bombay Lifts Rules, 1958
and Bombay Lifts (Amendment) Rules, 2010) in a building is a contract for “sale of goods” or a “works contract”?
• Sale of Goods: The entire sale consideration would be taxable under the sales tax or VAT enactments of the State legislatures. (the
principle of “deliverable state” as used in Section 21 of the Sale of Goods Act, 1930 would be attracted and, therefore, such a
contract would be a pure contract for sale of goods)
• Works Contracts (not term of art): the consideration payable or paid for the labour and service element would have to be excluded
from the total consideration received and sales tax or VAT would be charged on the balance amount.
• Referred: The State of Punjab v. M/s. Associated Hotels of India Ltd (Constitutional Bench) referred Halsbury’s Laws of
England 3rd Ed., Vol. 34, 6-7.
• “Nevertheless, the distinction between the 2 rests on a clear principle. A contract of sale is one whose main object is the transfer
of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work
undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is
whether or not the work and labour bestowed and in anything that can properly become the subject of sale; neither the ownership
of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters
may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one
for work and labour or one for the sale ofSTRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY
a chattel.” 32
• State of Gujarat (Commissioner of Sales Tax, Ahmedabad) v. M/s. Variety Body Builders (1976) 3 SCC 500, this
Court, after referring to the passage from Halsbury’s Laws of England, Third Edition, Volume 34, page 6, ruled
thus: -
• “47. It can be treated as well settled that there is no standard formula by which one can distinguish a contract of sale from a
contract for work and labour. There may be many common features in both the contracts, some neutral in particular context, and
yet certain clinching terms in a given case may fortify a conclusion one way or the other. It will depend upon the facts and
circumstances of each case. The question is not always easy and has for all time vexed jurists all over.”
• Whether manufacture, supply and erection/installation of LIFTS would fall within the concept of ‘Sale’ or
‘Works Contract’, analyzing the various tests in the forefront and thereafter apply them to the contract
concerned, may not be an appropriate approach in the peculiar facts of this case.
• the proper course would be to first analyze what exactly is the contract between the Petitioner and the
Purchaser and under the terms of the ‘Contract’ what is the element of works/service involved in order to
hold that it is a ‘Works Contract’. (CRUTIAL ASPECT: Terms of the Contract : In/divisible , Composite…)
• found that what the Petitioner has agreed under the Contract, is only to supply its branded LIFT in the premises of the Purchaser & it
has to necessarily assemble different parts in the premises (preparatory work) of the Purchaser and thereby, fulfill its contract of
supply of the LIFT/ELEVATOR in a working condition.
• DECISION: It will have to be held that the manufacture, supply and installation of LIFTS/ELEVATORS comes
under the definition of ‘Sale’ and not ‘Works Contract’ in this matter & reversed the Judgment State of A.P. v.
Kone Elevators (2005) 3 SCC 389.

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 33

Case Law

• Vodafone

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 34

 Vodafone International Holdings vs UOI& Anr
WRIT PETITION NO.1325 OF 2010 BOM HC (Sep 2010)

the principles which should govern the interpretation of Section 195 of the Income Tax Act, 1961 can be formulated as follows
i. Section 195(1) provides for a tentative deduction VBC 146 wp1325.10 of income-tax, subject to a regular assessment;
ii. Section 195 postulates two requirements: Firstly, there is a person responsible for paying to a non resident, any interest or other sum. Secondly, the interest
or other sum must be chargeable under the provisions of the Act, other than under the head of salaries;
iii. The obligation to deduct tax arises where the sum payable to a non-resident is chargeable to tax under the provisions of the Act. For the obligation to deduct
to arise, the entire sum payable need not be income chargeable under the Act. If the sum payable to a non-resident represents income or if income is hidden
or otherwise embedded in it, tax is required to be deducted on the sum. The obligation of the assessee in that event is to deduct tax under Section 195
limited to the appropriate portion of income chargeable under the Act;
iv. The liability to deduct tax arises if the tax is assessable in India. If the tax is not assessable in India, there is no question of TDS being deducted by an assessee;
v. The general principle of fiscal legislation is that given a sufficient territorial connection or nexus between the person sought to be charged and the country
seeking to tax him, income tax may extend to that person. The connection can be based on the residence of the person or a business connection within the
territory of a taxing State or a situation within the State of the money or property from which the taxable income is derived;
vi. TDS provisions which are in the nature of machinery provisions constitute an integrated Code under the Act of 1961 together with charging provisions. Hence,
those provisions are not independent of the charging provisions which determine assessability to tax;
vii. Whether a payment made by a foreign company in foreign currency abroad can be deemed to accrue or arise in India, would depend upon an examination of
the facts and circumstances of each case. In Eli Lily the payment made abroad by the foreign company was for the rendition of service in India and no work
was found to have been performed for the foreign company. Such a payment was held to fall within the ambit of Section 192(1) read with Section 9(1)(ii). The
Indian company was liable to deduct tax on the aggregate salary received by the expatriates including payments made by the foreign company;
viii. Parliament, while imposing a liability to deduct tax has designedly imposed it on a person responsible for paying interest or any other sum to a non resident.
Parliament has not restricted the obligation to deduct tax on a resident and the Court will not imply a restriction not imposed by legislation. Section 195
embodies a machinery that would render tax collection effective and must be construed to effectuate the charge of tax. There is no limitation of extra
territoriality involved though Parliament is cognisant of the fact that the provisions of the law can be enforced within the territory to which the Act extends.
ix. Johan Steyn, "Contract Law: Fulfilling the Reasonable Expectations of Honest Men" (1997) 113 LQR 433, at 433-434
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 35
Continued Vodafone case…
Tax planning versus colorable devices;
the following principles are now firmly embedded in our jurisprudence :
i) A transaction or arrangement which is permissible under law which has the effect of reducing the tax burden
of an assessee does not incur the wrath of the law;
ii) Citizens and business entities are entitled to structure or plan their affairs with circumspection and
within the framework of law with a view to reduce the incidence of tax;
iii) A transaction which is sham or which is a colourable device cannot be countenanced. A transaction
which is sham or a colourable device is one in which the parties while ostensibly seeking to clothe the
transaction with a legal form, actually engage in a different transaction altogether. A transaction which serves
no business purpose other than the avoidance of tax is not a legitimate business transaction and in the
application of fiscal legislation can be disregarded. Such transactions involve only a pretense and a facade to
avoid compliance with tax obligations;
iv) Absent a case of a transaction which is sham or a colourable device, an assessee is entitled to
structure business through the instrument of genuine legal frameworks. An act which is otherwise valid in
law cannot be disregarded merely on the basis of some underlying motive resulting in some economic
detriment or prejudice. In interpreting a fiscal statute it is not the economic result sought to be obtained by
making the provision which is of relevance and the duty of the Court is to follow the plain and unambiguous
language of the statute.
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 36
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 37
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 38
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 39
Basic Concepts & Aspects in Income Tax law

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 40

 Income – important aspects
• Regular and definite source; Temporary and Permanent Income; lump sum receipts and instalments, real v fictional,
Forms of income (cash, kind), Receipt v accrual
• Revenue receipt v Capital receipt
• Illegal income for tax purposes no distinction [TA Qureshi v CIT (2006) 157 Taxman 514 (SC)], devaluation of currency –
taxable, income includes loss.
• Same income cannot be taxed twice (unless)
• Diversion by overriding title v Application
• Income never reaches the assesse, who even if he was to collect it, does so, not as part of his income , but for and on behalf of the person to whom
it is payable.

• Can’t make taxable profit out of himself or surplus arising to a mutual concern for mutual benefit of members, raising
contribution to common fund; identity between contributors as a class and the participants of the benefits and surplus
of the class exists – NOT INCOME. CIT v Cement Allocation & Co-ordination org (1999) 236 ITR 553 (SC)
• Relief or reimbursement, personal gifts [Section 56(2)] – NOT INCOME
• Double taxation can be generally arises due to the imposition of comparable taxes in two (or more) States on the same
– taxpayers, subject matter, periods, same authorities (in domestic law situation), taxes (taxable events) : effects on
exchange of goods and services and movements of capital, technology and persons
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 41
 Section 2 (25A) of Income-tax Act

Financial
Assessee
“India” means
Year • Territory of India as per Article 1 of Constitution
Previous • Its territorial waters, seabed and subsoil
Year underlying such waters
(FY/PY) • Continental shelf
• Exclusive economic zone or
Assessment • Any other maritime zone referred to in Territorial
Year (AY) Waters, Continental Shelf, Exclusive Economic
Zone and other Maritime Zone Act, 1976 and
• The air space above its territory and
• Territorial waters

Territory of India- shall comprise (a) territories of

States; (b) the Union territories specified in the First
Schedule; and (c) such other territories as may be
acquired.
Income-tax
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 42
Residential Status`` Residential status of Company (in any PY) (Section 6(3))
Company is resident in India, if
1. It is Indian Company
2. Control & Management of its affairs is situated wholly in India
3. W.e.f. 1st Apr, 2016 – place of effective management (POEM –
Individual place where key management and commercial decisions that
are necessary for the conduct of the business of an entity as a
whole are, in substance made) is in India

Non Resident RESIDENCY TESTS

Resident
(NR) TEST 1: Basic Tests: “Resident & Ordinary Resident - ROR”
1. Is in India in the PY for a period/s in all 182 days or more during the PY, OR
2. Is in India having within the 4 years preceding that year has been in India
for a period/s amounting to 365 days or more for a period/s amounting in
Ordinary Not Ordinary
Resident Resident all to 60 days or more in that year.
(ROR) (RNOR) Test 2: Additional Test: “Resident but Not Ordinary Resident - RNOR”
1. Has been non-resident in India in 9 out of 10 PYs years preceding that year,
OR has during the 7 PYs preceding that year been in India for a period/s
amounting in all to, 729 days or less.

NOTE:
1. If above stated both 2 Tests are not met, then status is “Non-Resident”
2. CONFIDENTIAL
STRICTLY ResidentialAND
Status of Firm,
FOR INTERNAL AOP,ONLY
PURPOSES BOI is either Resident or Non-resident.
43
Taxability (Section 9)
Resident OR Resident but not Non Resident (NR)
Tax incidence – Scenarios* Resident & Ordinary Ordinary Resident
resident (ROR) (RNOR)
Income received OR deemed to be received
OR accruing or arising in India OR deemed to
YES YES YES
accrue or arise in India (whether accrued in or
outside India)
Income received and accrued outside India
from a business controlled or a profession set YES YES NO
up in India
Income received and accrued outside India
from a business controlled or a profession set YES NO NO
up outside India
Income earned and received outside India NO NO NO

NOTE: *Subject to Double Tax Avoidance Treaty/Agreement ; Double Taxation Relief

Section 9A – Certain activities not to constitute business connection in India (eligible investment fund)
Business Connection: concludes contracts, maintains stocks, secure orders in India – control.
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 44
 • Tax Rates (Slab & Flat)
• Fringe Benefit tax (FBT)*
• Dividend Distribution Tax (DDT) Taxes levied as per
• Securities Transaction Tax (STT) Section 3 of Income-tax Act
• Minimum Alternative Tax (MAT) - Zero Tax Companies (deemed to be total income) under each Finance Act
• Alternative Minimum Tax (AMT)
• Tonnage Tax (Shipping Companies)
• Presumptive basis – business and profession (44AD)
Section 2 (31) "person“
• Commodity Transaction Tax (CTT) (abolished) includes,––
Heads of Income
• Bank Cash Transaction Tax (BCCT) (abolished) (i) an individual,
(ii) a HUF, (Section 14)
Heads of Income (Section 14) (iii) a company, • Salaries
(iv) a firm,
Not Part of Total Income
(v) an AOPs or BOIs, whether • Income from House Property
Receipts, Expenditure Chapter III ( Sections 10-13B) incorporated or not, • Profits and gains from business or
• Capital and revenue Deductions in computing Total (vi) a local authority, and profession
Benefits Income: Chapter 6A (Sections 80-80U (vii) every AJP, not falling
within any preceding sub- • Capital Gains (STCG & LTCG)
• Deductions, Exclusions, etc., clauses; • Income from other sources
Ref: Deemed person
Accounting
• Cash, Mercantile
• Advance tax [Sections 207-219)
• Tax Deduction at Source (TDS) [Sections 190-206AA]
* From 2010 onwards there is no levy of FBT • Tax Collection at Source (TCS) [Sections 206C-206CB]
CESS
Education Cess on income-tax =2%
Secondary and Higher Education Cess on income-tax = 1% STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 45
EQUALISATION LEVY (Chapter VIII – Finance Act, 2016)
returns and assessment: income-tax
• Methods for Filing of Returns with the jurisdictional tax officer for relevant
assessment year/s (AY/s) quoting the PAN (to be done before the “Due date” as per
prescribed Forms (Manual filing, Mandatory filing electronic-form with or without
digital signature)
• Regular [Section 139(1)]
• Loss [Section 139(3)]
• Belated [Section 139(4)]
• Revised [Section 139(5)]
• Types of Assessment
• Self/Regular [Section 140 A]
• Best Judgement [Section 144] (ex-parte)
• Mandatory or discretionary
• Income escaping [Section 147]
• Search/Requisition [Section 153A]
• Block [Section 158BC] (undisclosed)
• Adhoc, scrutiny [Section 143(3)], Survey (133A), HNI/LTU, Provisional, Protective, Representative.

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 46

returns and assessment: income-tax
• Methods for Filing of Returns with the jurisdictional tax officer for relevant
assessment year/s (AY/s) quoting the PAN (to be done before the “Due date” as per
prescribed Forms (Manual filing, Mandatory filing electronic-form with or without
digital signature)
• Regular [Section 139(1)]
• Loss [Section 139(3)]
• Belated [Section 139(4)]
• Revised [Section 139(5)]
• Types of Assessment
• Self/Regular [Section 140 A]
• Best Judgement [Section 144] (ex-parte)
• Mandatory or discretionary
• Income escaping [Section 147]
• Search/Requisition [Section 153A]
• Block [Section 158BC] (undisclosed)
• Adhoc, scrutiny [Section 143(3)], Survey (133A), HNI/LTU, Provisional, Protective, Representative.

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 47

Offences: As per Chapter 22 of the Income Tax Act regarding offences and Prosecutions are as follows:
• Contravention of order made under sub-S. (3) of S. 132 (S. 275A ) • Power of Principal Commissioner or Commissioner to grant immunity from
prosecution. S. 278AB
• Failure to comply with the provisions of clause (iib) of sub-S. (1) of S. 132
(S. 275B) • Offences by companies S. 278B
• Removal, concealment, transfer or delivery of property to thwart tax recovery• Offences by Hindu undivided families S. 278C
S. 276
• Presumption as to assets, books of account, etc., in certain cases S. 278D
• Failure to comply with the provisions of sub-S.s (1) and (3) of S. 178 (S. 276A)
• Presumption as to culpable mental state S. 278E
• Failure to comply with the provisions of S. 269AB or S. 269-I (S. 276AA)
• Prosecution to be at instance of Principal Chief Commissioner or Chief
• Failure to comply with the provisions of S.s 269UC, 269UE and 269UL (S. 276AB) Commissioner or Principal Commissioner or Commissioner S. 279
• Failure to pay tax to the credit of Central Government under Chapter XII-D or• Certain offences to be non-cognizable S. 279A
XVII-B (S.276B)
• Proof of entries in records or documents S. 279
• Failure to pay the tax collected at source S. 276BB
• Disclosure of particulars by public servants S. 280
• Wilful attempt to evade tax, etc. S. 276C
• Special Courts S. 280A
• Failure to furnish returns of income S. 276CC
• Offences triable by Special Court S. 280B
• Failure to furnish return of income in search cases S. 276CCC
• Trial of offences as summons case S. 280C
• Failure to produce accounts and documents S. 276D
• Application of Code of Criminal Procedure, 1973 to proceedings before Special
• Failure to comply with the provisions of S. 269SS (S. 276DD) Court. S. 280D
• Failure to comply with the provisions of S. 269T (S. 276E)
• False statement in verification, etc. S. 277
• Falsification of books of account or document, etc. S. 277A
• Abetment of false return, etc. S. 278
• Punishment for second and subsequent offences S. 278A
• Punishment not to be imposed in certain cases S. 278AA

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 48

Penalties: As per Chapter 21 of Income Tax the Penalties imposable are as follows:
• Failure to furnish information regarding securities, etc. (S.270) • Penalty for failure to furnish information or document under S. 92D (S.271G)
• Failure to furnish returns, comply with notices, concealment of income, etc.• Penalty for failure to furnish information or document under S. 285A (S.271GA)
(S.271)
• Penalty for failure to furnish statements, etc. S.271H
• Failure to keep, maintain or retain books of account, documents, etc. S.271A
• Penalty for failure to furnish information or furnishing inaccurate information
• Penalty for failure to keep and maintain information and document, etc., in under S. 195 (S.271-I)
respect of certain transactions S.271AA
• Failure to give notice of discontinuance S.272
• Penalty where search has been initiated S.271AAA
• Penalty for failure to answer questions, sign statements, furnish information,
• Penalty where search has been initiated S.271AAB returns or statements, allow inspections, etc. S.272A
• Failure to get accounts audited S.271B • Penalty for failure to comply with the provisions of S. 133B S.272AA
• Penalty for failure to furnish report under S. 92E (S.271BA ) • Penalty for failure to comply with the provisions of S. 139A S.272B
• Failure to subscribe to the eligible issue of capital S.271BB • Penalty for failure to comply with the provisions of S. 203A (S.272BB)
• Penalty for failure to deduct tax at source S.271C • Penalty for failure to comply with the provisions of S. 206CA (S.272BBB)
• Penalty for failure to collect tax at source S.271CA • False estimate of, or failure to pay, advance tax S.273
• Penalty for failure to comply with the provisions of S. 269SS (S.271D) • Power to reduce or waive penalty, etc., in certain cases S.273A
• Penalty for failure to comply with the provisions of S. 269T (S.271E) • Power of Principal Commissioner or Commissioner to grant immunity from penalty
S.273AA
• Penalty for failure to furnish return of income S.271F
• Penalty not to be imposed in certain cases S.273B
• Penalty for failure to furnish statement of financial transaction or reportable
account S.271FA • There is also bar of limitation for imposing penalties under S.275.
• Penalty for furnishing inaccurate statement of financial transaction or reportable
account S.271FAA
• Penalty for failure to furnish statement or information or document by an eligible
investment fund S.271FAB
• Penalty for failure to furnish return of fringe benefits S.271FB

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 49

Wealth Tax Act

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 50

 KEY
• Type: Central Govt. levy & direct Tax - non-
DEFINITIONS
productive assets
“Assets”, “Net Wealth””
• Levy : 1% on net wealth exceeds 30 lakhs
• Exemptions in respect of certain assets (Section 5)
• Act does not apply in certain cases (Section 45) Charge of Wealth-tax
and assets subject to
charge

Registered Valuers

Wealth-tax Act
1956*

assessment

Payment and recovery

Special provision for avoiding

repetitive appeals

* W.e.f from April, 2016 not applicable

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 51

The Goods and Services Tax
“Indirect Taxes”
GST in India
Overview

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 52

Journey of GST & going on… (role of States…)
• Idea of moving towards the GST was first mooted by the then Union Finance Minister in his Budget for 2006-07.
• A Model Roadmap for Goods and Services tax in India by ECoSFMs in Apr, 2008
• GST Reforms and Inter-Governmental Considerations in India by Dept. of Economic Affairs, MoF, GoI in Mar, 2009
• First Discussion Paper on Goods and Services Tax in India, ECoSFMs Nov, 2009
• Report of Task Force – 13th Finance Commission by Task Force by 13th FC, Dec 2009
• Comments of Dept. of Revenue on First Discussion paper by Revenue Dept. in Jan, 2010
• Constitution (115th Amendment) Bill, 2011 by Central Govt. in Mar, 2011
• Dr. Kelkar Committee Report, 2012 on Fiscal Consolidation
• Report on the Constitution 115th Amendment Bill, 2011 by Parliamentary Standing Committee on Finance in Aug, 2013
• Constitution (122nd Amendment) Bill, 2014 by Central Govt. in Dec 2014.
• Report of the Revenue Neutral Rate and Structure of Rates for the Goods and Service Tax by Committee headed by the
Chief Economic Advisor in Dec, 2015
• Reports of the Joint Committee on Business Process for GST and GST Payment Process, GST Registration, GST Refund and
GST return by ECOSFMs in 2015.
• 13th and 14th Finance Commission Reports
• Main views & reports - RBI, NIPFP, Planning Commission, NITI Aayog, TARC
• Constitution (101st Amendment) Act, 2016 by Govt. in Sep 2016.

STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 53

Bye Bye Multiple Taxes: to be Subsumed into GST Central GST
1. Service Tax
2. Central Excise Duty
• Special Additional Duty of Customs 3. Additional Excise Duty
4. Excise Duty under MTP Act
• Countervailing Duty (CVD) 5. Special Additional Duty of
Customs
• Entertainment Tax GST (ongoing status) 6. Additional Customs Duty (CVD)
7. Central Surcharges and Cesses
• Lottery Tax • CENTRAL GST (CGST)
• STATE GST (SGST State GST
• Central Sales Tax (CST) • INTEGRATED GST (IGST) 1. VAT/Sales Tax
2. Luxury Tax
• Central Excise Duty • Local Levies 3. Entry Tax (all forms)

• State Vat • Cess 4. Purchase Tax

5. Entertainment tax (other than

• Additional Excise Duty 6.

local body), Amusement Tax
Taxes on lottery, betting &

• Service Tax 7.
gambling
Taxes on Advertisements

• Purchase Tax 8.
9.
Octroi & Entry Tax
State Cesses and Surcharges
• Octroi and Entry Tax
Others: Professional tax, Property tax,
Waste tax (cess-BBMP)

NOTE: Single Tax to replace multiple levies, right from manufacture/supplier to consumer.
STRICTLY CONFIDENTIAL AND FOR INTERNAL PURPOSES ONLY 54
 As per the FAQ’s published by Govt.
What is GST
It is a destination based tax on consumption of goods and services. It is proposed to be levied at all
stages right from manufacture up to final consumption with credit of taxes paid at previous stages
available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by
the final consumer.
What is IGST
Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-
State supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the
course of inter-State trade or commerce shall be levied and collected by the Government of India and
such tax shall be apportioned between the Union and the States in the manner as may be provided by
Parliament by law on the recommendations of the Goods and Services Tax Council.
Concept of “destination based tax on consumption”
The tax would accrue to the taxing authority which has jurisdiction over the place of consumption
which is also termed as place of supply.
“Taxable Event” (TE) under GST & Reverse Charge Mechanism (RCM)
Supply of goods and/or services. CGST & SGST will be levied on intra-state supplies while IGST will be
levied on inter-state supplies. The Charging section is section 7 (1) of CGST/SGST Act and Section 4(1) of
the IGST Act. Reverse Charge Mechanism applicable to goods and services.

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 Key Influence
• Finance Minister
• Revenue Secretary
• Chairman, Finance Commission (13th & 14th FC)
• Tax Administrative Reforms Commission
• Empowered Committee for State Financial Ministers (ECoSFMs)
• Chief Economic Advisor to Prime Minister Office (PMO)
• NITI Aayog (replaced Planning Commission) • Exemptions list
•
• National Council of Applied Economic Research (NCAER) No. of Tax rates & slabs
• Nil rates
• National Institute for Public Finance and Policy (NIPFP) •
• Peak rates (RNR)
Compensation to States
• Conflict b/w States
• Disputes Mechanism
• Enforcement Cascaders
• Revenue levy’ right
• Revenue neutrality
• Revenue sharing/asseesses
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 Year Direct Indirect

KEY TO GST (Tax-GDP

ratio)
Taxes Taxes

2007-08 6.30 11.06

 One Nation Tax Market as a Nation is made, where tax are paid 2012-13 5.53 11.10

 Step toward ending tax terrorism 2014-15 5.55 10.85

 India 3 tier federal Structure (Union Govt., State Govts. and 2015-16 5.47

Urban/Rural Local Bodies

Why GST:
• Levy of CST “Example Review”
• Multiple State levies Evaluation of Direct Taxes
CBDT 1st time released
• Cascading of taxes Granular statistics of returns filed
• Double taxation as both goods and services by assesses for AY 2012-13
• Non-integration of VAT and Service Tax Corporate less than 2% but
account >60% of total tax liability
• No Cenvat after manufacturing Stage • Individuals -2.89 cr
• Companies – 5.81 Lakhs
• HUF – 8.40 L
• Firms – 8.59 L
• AOP/BOI – 17.492

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GST Design
• Destination Based Consumption Tax
• “Supply” & “Place of Supply” will be key factor to trigger
applicability of this tax
Proposed Threshold
• Impact on • Transactions < 1.5 Cr – State Admn
• Services – Central Admn

• Manufacturing States Proposed Rates

• NIL 0% (foodgrains)
• LOW 5% (edible oil, tea)
• Consuming States • Standard I 15% (computer)
• Standard II 18% (soaps, oil)

• Sector wise approach/ Entrepreneurship (Start Up) • High/Peak 28% (White Goods – TV)
Gold, Services (Ongoing)

• Goods approach (proposed – ongoing)

• Services approach (yet to propose)

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 Constitutional Aspects
Goods and Services Tax
Constitution (101st Amendment) Act, 2016

GST = Goods and Services Tax

GSTC = Goods and Services Tax Council Shared Sovereignty
Co-operative Federalism
*Constitution Amendment effective dated: 8th September, 2016
*Notification of the GSTC dated: 15th September, 2016

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 Article 248A
(1) Notwithstanding anything contained in Articles 246 and 254,
Parliament, and, subject to Clause (2), the Legislature of every
State, have power to make laws with respect to goods and services
tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to
goods and services tax where the supply of goods, or of services, or
both takes place in the course of inter-State trade or commerce.
Explanation.—The provisions of this Article, shall, in respect of
goods and services tax referred to in Article 279A(5), take effect
from the date recommended by the Goods and Services Tax Council
(“GSTC”).
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 The Goods and Services Tax Council [“GSTC”] - Article 279A
(1) The President shall, within 60 days from the date of commencement of the Constitution (101st Amendment)
Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council (“GSTC”).
(2) The GSTC shall consist of the following members, namely:—
(a) the Union Finance Minister - Chairperson
(b) the Union Minister of State in charge of Revenue or Finance - Member
(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government - Members
(3) The Members of the GSTC referred to in Clause 2(c) shall, as soon as may be, choose one amongst themselves
to be the Vice-Chairperson of the Council for such period as they may decide.
(4) The GSTC shall make recommendations to the Union and the States on—
(a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the GST
(b) the goods and services that may be subjected to, or exempted from the GST
(c) model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-State trade or commerce under
Article 269A and the principles that govern the place of supply
(d) the threshold limit of turnover below which goods and services may be exempted from GST
(e) the rates including floor rates with bands of GST
(f) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster
(g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
(h) any other matter relating to the GST, as the Council may decide
(5) The GSTC shall recommend the date onSTRICTLY
whichCONFIDENTIAL
the GST beAND
levied
FOR on petroleum
INTERNAL crude,
PURPOSES ONLY high speed diesel, motor spirit (commonly
61 known
as petrol), natural gas and aviation turbine fuel.
(6) While discharging the functions conferred by this Article, the GSTC shall be guided by the
need for a harmonised structure of GST and for the development of a harmonised national
market for goods and services.
(7) One-half of the total number of Members of the GSTC shall constitute the quorum at its
meetings.
(8) The GSTC shall determine the procedure in the performance of its functions.
(9) Every decision of the GSTC shall be taken at a meeting, by a majority of not less than three-
fourths of the weighted votes of the members present and voting, in accordance with the
following principles, namely:—
(a) the vote of the Central Government shall have a weightage of one third of the total votes cast, and
(b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total
votes cast, in that meeting.
(10) No act or proceedings of the GSTC shall be invalid merely by reason of—
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the Council; or
(c) any procedural irregularity of the Council not affecting the merits of the case.
(11) The GSTC shall establish a mechanism to adjudicate any dispute —
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on one side and one or more other States on the
other side; or
(c) between two or more States, arising out of the recommendations of the Council or implementation
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 New meanings under Article 366
• Article 366 (12A) “goods and services tax” means any tax on supply
of goods, or services or both except taxes on the supply of the
alcoholic liquor for human consumption.

• Article 366 (26A) “Services” means anything other than goods.

• Article 366(26B) “State” with reference to Articles 246A, 268, 269,

269A and Article 279A includes a Union territory with Legislature.

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 Schedule 7 of Constitution (r/w Article 246)
In the Seventh Schedule to the Constitution
 In List I—Union List
ENTRY 84. Duties of excise on the following goods manufactured or produced
in India, namely: (a) petroleum crude; (b) high speed diesel; (c) motor spirit
(commonly known as petrol); (d) natural gas; (e) aviation turbine fuel; and (f)
tobacco and tobacco products. [Current Entries 92 and 92C shall be omitted]
 In List II—State List
ENTRY 54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas, aviation turbine fuel and alcoholic
liquor for human consumption, but not including sale in the course of inter-
State trade or commerce or sale in the course of international trade or
commerce of such goods. [Current Entry 52 & Entry 55 shall be omitted]
ENTRY 62. Taxes on entertainments and amusements to the extent levied and
collected by a Panchayat or a Municipality or a Regional Council or a District
Council.
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THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND
ASSETS) AND IMPOSITION OF TAX ACT, 2015
BM (UFIA) & IoT Act
Overview

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Preamble

An Act to make provisions to deal with the problem of the

Black money that is undisclosed foreign income and assets,
the procedure for dealing with such income and assets and
to provide for imposition of tax on any undisclosed foreign
income and asset held outside India and for matters
connected therewith or incidental thereto.

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Overview
• Assent of the President - 26th May, 2015
• Extends to the whole of India
• In force on the 1st day of April, 2016.
• Save as otherwise provided in this Act
• Income Tax Act provisions will apply (E.g.: Tax Authorities u/s 116).
• Appeal -Tribunal (60 days), HC (SQL – 120 days later Sufficient Cause), SC (HC certifies as fit case)
• Notwithstanding any appeal preferred to the High Court or the Supreme Court, the tax shall be paid in
accordance with the assessment made under this Act
• Tax Recovery Officer (TRO)
• Penalty: sum equal to 3 times the tax computed, 10 lakhs

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 THANK YOU

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Side notes for references only

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 Significant Changes Proposed
Direct Taxes Code, 2013 – A Summary
• Draft Direct Taxes Code (DTC) along with a concept paper released - 12th August, 2009
• economically efficient, effective and equitable direct tax system; facilitate voluntary compliance and reduce scope for disputes /
litigation.
• Revised discussion paper released - 15th June, 2010
• the DTC Bill, 2010 introduced in Lok Sabha - 30th Aug, 2010. The Bill referred to Standing Committee on Finance (SCF) on 9th Sep,
2010.
• The SCF presented report to Speaker, Lok Sabha - Mar, 2012. (Part 1&2)
• Kelkar Committee in its report on ‘Road Map for Fiscal Consolidation’ submitted to the Government in Sep, 2012
• DTC Bill, 2010 should be comprehensively reviewed before enacted into law for implementation.”
• DTC Bill, 2010 was introduced in Parliament, amendments were carried out in Income-tax Act, 1961 & Wealth-tax Act,
1957 through Finance Acts, 2011, 2012 & 2013.
• Out of 190 recommendations made by SCF, 153 are proposed to be accepted wholly or with partial modifications.
• DTC, 2013 (Appx. 342 Pages)
• 21 Chapters
• 325 Sections
• E.g. Section 320 – Definitions/Interpretation - Total 272 Sub-Sections from “Absolute value” to “Zero Coupon Bond” words are defined.
• 23 Schedules
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 Few recommendations of the SCF proposed to be accepted

(i) Simplicity and comprehensibility of both structure and content thereby making the statute more user friendly.
(ii) Ensuring tax buoyancy by tapping high capacity/income and evasion prone segments.
(iii) Re-orienting departmental resources towards high-capacity as well as avoidance/evasion prone categories/sectors.
(iv) Modernisation and computerisation of all tax operations; equipping the department with men and material to carry out the tasks
assigned.
(v) Moderation in tax rates for individual taxpayers with emphasis on voluntary compliance.
(vi) Deductions for individual taxpayers to be focused on long term needs like social security.
(vii) The age for senior citizens may be relaxed from 65 years to 60 years.
(viii) Area base incentives may be considered on investment linked basis. However, the general principle should be that all incomes and
profits are to be taxed and exemptions, if any, should be treated as a dynamic variable, by ensuring that each exemption serves an
economic purpose.
(ix) Smooth transition to investment linked incentives with focused coverage.
(x) Maintaining uniformity in ‘grandfathering’ provisions so that the available benefits for different categories under the existing Income-
tax Act are phased out in a uniform and non-discriminatory manner ensuring smooth transition to DTC provisions.

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