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Taxindianonline.com has pointed out a joyous outcome of the CBEC draconian circular. The lawyers (on both sides) are reaping in a windfall. Multiple Writ Petitons have been filed in most cities and the lawyers do not have to say anything to get a stay order and charge fees in lakhs. The assessees' have spent about Rs. 300 crores while the department has spent about Rs. 60 crores so far.

Now, this is the kind of new year's gift I would like to receive :) Jai Ho CBEC!

Who has benefitted from this Draconian Circular?

IN the Andhra Pradesh High Court alone, about 50 writ petitions have been filed against this Circular and the threatened recovery, and many more writs are on their way. A consultant who is not even a lawyer told me, "the Board has given a new year gift; I am hiring lawyers to file writs on behalf of my clients and making some good money - unexpected windfall!" Some lawyers have already earned a few lakhs of rupees without even opening their mouths in the Courts.

Even the Standing Counsels of the CBEC are doing fine. They have all become rich suddenly. A rough estimate shows that the CBEC must be spending about Rs. 60 Crores to defend these writs and the assessees must be spending around Rs. 300 Crores. This Circular has generated 360 Crores of business - and with the Government not getting a single paisa!

The Board should seriously consider withdrawing this Circular immediately to end this farce gracefully before it is struck down by a Court.

http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=16807

[The evidence gathered so far clearly indicates that PwC has advised Nokia and they were aware of the tax evaded and accounting practices. PwC are the auditors for Nokia and they may face prosecution from Income-Tax department]

PWC, of "Satyam" Fame, seems to be in the news again for all the wrong reasons. What is damming is the statement that:

"The evidence gathered so far clearly indicates that PwC has advised Nokia and they were aware of the tax evaded and accounting practices. PwC are the auditors for Nokia and they may face prosecution from Income-Tax department"

There is a provision in the Act (I forget the section) which says that even CAs and advisers who abet tax evasion can be punished. So, this may be a test case for that.

CHENNAI: The role of the Indian arm of audit firm PricewaterhouseCoopers in relation to the alleged tax defaults by handset maker Nokia India is being probed by the taxman.

A senior income-tax official, who wished anonymity, told ET that PwC would be called for questioning soon.

"The evidence gathered so far clearly indicates that PwC has advised Nokia and they were aware of the tax evaded and accounting practices. PwC are the auditors for Nokia and they may face prosecution from Income-Tax department," the official said.

"PwC was filing all the audit reports. All the communication between the two parties was through a Gmail account and not the official account," the official said.

Taxmen raided Nokia India's factory near Chennai, the Finnish company's top producer anywhere, as also its offices last week.

The Indian arm of PwC, PW and Company, said, "In the matter of the Nokia case, IT Department has called us as they are seeking our inputs on this. We will extend full cooperation to them on this matter."

Nokia couldn't not be reached for comment.

The tax department has alleged that Nokia changed its accounting policy and was also in the process of re-organising the existing business model to bypass certain direct and indirect tax liabilities.

Earlier Nokia India was one company. Now it has filed before the state and Centre for two companies. So one would be Nokia India and the other would be Nokia Sales (which would cater only to sales).

Taxmen reckon the arrangement would have worked this way: the company would have made handsets in India and sold them directly to the parent company in Finland. The parent company Nokia Corp would have then sold the same handsets in India through their sales company.

"This is a great disadvantage and loss for India," the tax official said. The department has also said that Nokia has not made tax payment for software supplies.

"They have not paid money for six years now. Remittances were made in dollar terms. Tax will be collected on the exchange rate today. Apart from that there would be a penalty for default," said the official, indicating the amount to be around Rs 3,000 crore.

http://economictimes.indiatimes.com/news/news-by-industry/telecom/pricewaterhousecoopers-faces-income-tax-heat-for-role-in-nokia-tax-issue/articleshow/18007309.cms

Respected Profesionals,

Here are two important judgements:

No S. 43B Disallowance For Interest Payable To Non-Scheduled Banks: Upendra T. Kapadia (Bombay High Court)

Section 43B of the Act is applicable only in respect of any amount paid as interest to a scheduled bank. A scheduled bank as defined in Explanation 4 to Section 43B of the Act. The Shree Mahalaxmi Co. op. Bank Ltd. Is not mentioned in the second schedule to the Reserve Bank of India Act, 1934 nor covered by any other Banks mentioned to the Explanation to Section 11(5)(iii) of the Act. Consequently, the Tribunal was correct in its conclusion that non payment of interest amount to a co-operative bank would not attract the provisions of Section 43B of the Act

http://tax2.me/no-s-43b-disallowance-for-interest-payable-to-non-scheduled-banks-upendra-t-kapadia-bombay-high-court/

Advertisement Expenditure Of Brand Owned By Another: Khambata Family Trust (Gujarat High Court)

The assessee procured usage rights for brand "Rasna" for a valuable consideration and incurred advertisement expenses in respect of products manufactured by it under such brand name. No part of the said expenditure was expended for any purpose other than for the assessee's business. Under the circumstances, merely because by virtue of such advertisements the brand value of Rasna is enhanced and other manufacturers of the brand are also indirectly benefited, it cannot be said that the expenditure incurred by the assessee is not wholly and exclusively for its own business. It cannot be gainsaid that when any user of a brand name advertises its product, as a necessary corollary the brand value is likely to increase, thereby benefiting the owner of such brand name. If the owner of the brand name has licensed such brand to other manufacturers, it is quite possible that such other manufacturers may also be benefited on account of such advertisements as the advertisements may enhance the value of the brand as a whole. In fact, such incidental benefits are bound to accrue to the owner of the brand as well as other users of the brand name when any of the users of such brand name advertises its products. However, merely because some other persons are incidentally benefited from the advertisements issued by the assessee, the same would not change the character of the expenses from being wholly and exclusively for the purpose of its business

http://tax2.me/advertisement-expenditure-of-brand-owned-by-another-khambata-family-trust-gujarat-high-court/