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Tax Amicus: July 2014

Legal status of clarifications given by the Central Board of Excise and Customs (CBEC or Board) through its Budget 2014 instructions is the topic of discussion this month. According to the first article this month, these clarifications, though beneficial to the assessees, have not been supported by specific statutory backing and hence there may be a case for the Board to revisit its practices and powers under which it issues such instructions.

Tax treatment of foreign exchange fluctuation loss arising on revaluation of External Commercial Borrowings (ECB) for assets acquired in India is discussed in another article. The author answers the question as to whether such loss can be capitalised with the cost of assets or can be claimed as revenue loss.

This issue of Tax Amicus covers important changes (both proposed and which have come into effect from 11-7-2014) brought out in the Union Budget 2014 by Finance (No. 2) Bill, 2014. On the indirect tax side, the changes include amendments in stay and pre-deposit provisions in respect of appeals before Commissioner (Appeals) and CESTAT; deeming of price less than manufacturing cost and profit as transaction value; mandatory electronic payment of Central Excise and Service tax and various amendments in Cenvat credit Rules and Service tax provisions.

Changes in the Income Tax provisions, like incentives to real estate sector including the proposed REITs; extension in benefit of investment allowance and sunset clause for undertaking in power sector; disallowance of CSR expenses under Section 37(1); and proposed changes in Section 92B (2) so as to expand the scope of definition of international transaction to include transactions with unrelated residents (‘domestic transaction’), are also covered here. This issue brings to readers summary of several important orders passed by High Courts and Tribunals on Central Excise, Customs, Service tax, VAT and Income Tax.

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