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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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CPE AND OTHER PROGRAMS - September-October 2010Date/Day Topic /Speaker Venue/Time CPE Credit

DISCLAIMER : The Bangalore Branch of ICAI is not in anyway responsible for the result of any action taken on the basisof the advertisement published in the newsletter. The members, however, bear in mind the provision of the code of ethics whileresponding to the advertisements. The views and opinions expressed or implied in the Branch Newsletter are those of the authors

and do not necessarily reflect those of Bangalore Branch of ICAI.

Note : High Tea at 5.30 pm for programmes at 6.00 pm at branch premises.

Advertisement Tariff for the Branch NewsletterColour full pageOutside back ` 30,000/-Inside front ` 24,000/-Inside back ` 24,000/-

Advt. material should reach us before 22nd of previous month.

Inside Black & WhiteFull page ` 15,000/-Half page ` 8,000/-Quarter page ` 4,000/-

Editor : CA. Shambhu Sharma H.

Sub Editor : CA. Prasad S.R.

01.09.10 Important issues in Tax Audit under Branch Premises 2 hrsWednesday Section 44AB of Income Tax Act

CA. Shruthi B N 06.00pm to 08.00pm

03.09.10 & MS Excel for Accountants : Branch Premises 6 hrs04.09.10 A programme for beginners 3 pm to 7.00 pmFriday & Delegate Fee : ` 600/-Saturday Details published in page No. 18 of August 2010 Newsletter

04.09.10 XIII Annual Badminton Tournament Karnataka State CricketSaturday Officers of the Chief Commissioner of Income Tax, Association, Badminton Court,

Bangalore V/s Chartered Accountants of the M.G. Road, BangaloreBangalore Branch Details page No. 14 09.30am to 01.00pm

08.09.10 LLP - Multi Disciplinary firms Branch Premises 2 hrsWednesday CA. Gopal Krishna Raju 06.00pm to 08.00pm

15.09.10 Audit under the Companies Act Branch Premises 2 hrsWednesday - Auditor’s Perspective: Important Issues 06.00pm to 08.00pm

CA. Vikas Kumar Oswal

15.09.10 to Campus Placements for the freshly qualified Hotel Bangalore International18.09.10 Chartered Accountants Near Shivananda Circle

Details published in page No. 16 of August 2010 Newsletter

18.09.10 One day Seminar on Transfer Pricing API Bhawan, 6 hrsSaturday Delegate Fee: ` 800/- Details page No. 18 Nearby Bangalore Branch

09.30am to 05.30pm

22.09.10 Latest Amendments in KVAT Rules Branch Premises 2 hrsWednesday CA. N. Syama Sundaran 06.00pm to 08.00pm

06.10.10 Greed & unbridled financial innovation led to an Branch Premises 2 hrsWednesday evaporation of confidence 06.00pm to 08.00pm

CA. Dinesh Agrawal

09.10.10 One Day Seminar on “Practice & Procedures Branch Premises 6 hrsSaturday before the CESTAT” 09.30am to 05.30pm

Delegate fee: ` 700/- Details page No. 18

13.10.10 Foreign Contributhion Regulation Act (FCRA) Branch Premises 2 hrsWednesday CA. Mark A D’Souza 06.00pm to 08.00pm

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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TAX UPDATES JULY 2010CA. Chythanya K.K., B.Com, FCA, LL.B, Advocate

VAT, CST, ENTRY TAX,PROFESSIONAL TAX

PARTS DIGESTED:

a) 2010-11(15) KCTJ Part 4

b) 31 VST – Part 3, 4 & 6

c) 3 GST – Part 1

Reference/Description

[2010] 3 GST 78 (Bom.) : SyntheticSuppliers v. Commissioner of SalesTax In the context of distribution ofproperty, consequent to thedissolution of a partnership firm, andits liability to sales tax under theBombay Sales Tax Act, 1959, theHon’ble High Court delivered thejudgement having regard to the IndianPartnership Act, 1932 (IPA), for thepurpose of understanding the natureof the transaction. The High Courtobserved that under the IPA, theproperty which was brought into thepartnership by the partners when it isformed or which was acquired in thecourse of business of partnership,becomes the property of thepartnership. The partners, subject toany special arrangement amongstthem, were entitled to their share uponthe dissolution of the partnership, inthe money representing the value ofthe property. Therefore upondissolution, all the partners areentitled for their respective shares inthe property of partnership as owners.Therefore, there was no question ofsale between the partners but the samewas a distribution of their ownproperty.Thus it was held that the firmis not exigible to sales tax upon

distribution of assets to its partnerson dissolution.

[2010] 3 GST 87 (Raj.) : CommercialTax Officer (Anti-Evasion) v.Marudhara Motors In the instantcase the assessee was a dealer of Tatavehicles. The manufacturer of Tatavehicles issued credit notes to theassessee on account of defective partsof vehicles being replaced by theassessee under a warranty agreemententered into between themanufacturer and the ultimatecustomer to whom such vehicles weresold by the assessee. The AssessingOfficer contented that the transactionof replacing the defective parts by theassessee on behalf of themanufacturer fell within the definitionof ‘sale’ and therefore levied tax onthe value of credit notes received bythe assessee from the manufacturer.However, the Hon’ble High Courtobserved that since the title ofproperty in the goods, i.e. the spareparts, passed from the hands of theassessee to the customer free of costand such title of property in spareparts did not pass from the assesseeto the manufacturer, replacing ofdefective parts by the assessee onbehalf of the manufacturer could notbe treated as sale in the hands of theassessee and therefore the value of thecredit notes issued by themanufacturer in favour of the assesseecould not be taxed in the hands of theassessee.Distinguishing the case ofMohammed Ekram Khan & Sons v.CTT UP (2004) 136 STC 515 SC, itwas held that there was no sale uponwarranty replacement.

INCOME TAX

PARTS DIGESTED:

a) 324 ITR – Part 5

b) 325 ITR – Part 1 to 3

c) 191 Taxman – Part 1 to 3

d) 4 ITR(Trib) – Part 1 to 4

e) 124 ITD – Part 9

f) 125 ITD – Part 1 to 3

g) 131 TTJ – Part 2 & 3

h) 42-A BCAJ – Part 4

i) CAPJ - July (2nd), 2010

Reference/Description

[2010] 325 ITR 35 (P&H) : RakeshKumar & Co. v. Union of India &Others In the instant case the Hon’bleHigh Court upheld the constitutionalvalidity of section 40(a)(ia) read withsection 200(1). The High Courtobserved that the said provision couldnot be termed to be harsh since theproviso to section 40(a)(ia) relaxedthe rigour of the said section; sinceone would get the benefit of deductioneven in the subsequent year if thededuction or the deposit was made inthe subsequent year.

[2010] 325 ITR 102 (Bom) :Hindustan Unilever Ltd. v. Dy.CIT& Another In the instant case in thecontext of capital gains exemption incases where investments have beenmade as per section 54EC, theHon’ble High Court noted that for thepurpose of determination of the periodof six months, the date of investmentwould be the date of payment and notthe date when the bond was issued orfor that matter the date mentioned inthe said bond. In the present case, theperiod of six months was due to expireon March 28, 2004. The assesseeinvested an amount of Rs.3.07 croreson March 19, 2004. A receipt wasissued on that date by the National

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Housing Bank. A debit was reflectedin the bank account of the assessee tothe extent of the sum invested onMarch 19, 2004. The certificate ofbond was issued by the NationalHousing Bank on June 9, 2004, whichrefers to the date of allotment asMarch 31, 2004. For the purposes ofthe provisions of section 54EC, thedate of the investment by the assesseemust be regarded as the date on whichpayment was made and received by theNational Housing Bank. This waswithin a period of six months from thedate of the transfer of the asset.Consequently, the provisions of section54EC were complied with by theassessee.It is reasonable and logicalto interpret so, when the assessee hasfulfilled his part of the obligation andtherefore cannot be penalized for thedelay caused by another.

[2010] 325 ITR 133 (Karn) : CIT &another v. Sagar Talkies In the instantcase the Hon’ble High Court had todetermine if the expenditure incurredby the assessee was in the nature ofcapital or revenue. The assessee hadreplaced the sound system in itstheatre and according to the HighCourt the same had not resulted in anyincreased income/revenue to theassessee. The High Court in itsexamination observed that the oldsound system was in existence forseveral years and due to use the samewas worn out. The High Court notedthat the assessee having providedcertain amenities to its customers byreplacing the old system with a bettersound system and by introducing suchsystem, the same having not increasedits income in any way, such changeof sound system could not beconsidered as capital in nature. Theassessee instead of repairing theexisting old stereo system, hadinstalled a dolby stereo system.

However this had not benefited theassessee in any way with regard to itstotal income since there was nochange in the seating capacity of thetheatre or increase in the tariff rate ofthe ticket. Therefore the saidexpenditure would be revenue innature.The Hon’ble Court has abidedby the basic principle to classifyexpenditure into either revenue orcapital which takes into accountwhether the same results in anaddition/increase in revenuegenerating capacity of the business.However by doing so, with duerespect to the Hon’ble Court,incurring of expenditure inacquisition of new assets the benefitsof which are not perceivable in thenear future has been ignored. For, inthe instant case the old system hasaltogether been replaced by a newsystem, then does that imply thatcomplete replacements to fixed assetswould not result in the incurring ofexpenditure in the nature of capital ifthe same did not result in theinstantaneous generation ofadditional income?!

[2010] 325 ITR 136 (Karn) : CIT &another v. Sri Hariram Hotels P. Ltd.In the instant case, the Hon’ble HighCourt held that the interest on amountborrowed for purchase of propertywas to be considered as a part of costof acquisition of property (i.e.included while calculating the cost ofacquisition of the asset) and the samewas deductible for the purpose ofdetermination of capital gains.

[2010] 325 ITR 231 (Karn) : CIT &another v. United Insurance Co. Ltd.In the instant case the Hon’ble HighCourt observed that the interestpayable by the assessee under section201(1A) was not in the nature ofpenalty. The case dealt with a situationwhere the respondent (being an

insurance company), pursuant to anaward made under the Motor VehiclesAct had paid compensation to victimsof motor vehicle accidents and thesaid payments consisted of thecompensation along with interest andtherefore the said interest was liableto tax deduction as per section194A(3)(ix).Further the High Courtobserved that the Tribunal had rightlydirected that the interest paid aboveRs. 50,000 was to be split and spreadover the period from the date interestwas directed to be paid till itspayment. If the spread over was givenin majority of cases, the respondentmay not incur liability to pay anyTDS. High Court went on to hold thatin the event, the respondent remittedthe TDS amount as directed by theTribunal, the Revenue was directedto hold suo motu enquiry by issuingnotice to the persons who havereceived compensation to find outtheir tax liability on the interestreceived. If it is found that there wasa tax liability on the personconcerned, the Revenue shouldcollect the tax from the personconcerned and refund the amount tothe respondent. So also, if there wasno tax liability on the personconcerned, the TDS collected shouldbe refunded to the respondent, ofcourse with interest in either case. Theaforesaid direction seems strange asit would mean that in either case, TDSremitted has to be refunded todeductor. This is not the intention ofthe law.

[2010] 325 ITR 320 (Delhi) : CIT v.H.B. Stock Holdings Ltd. (No.2) Inthe instant case the CIT(A) in anappeal from block assessment hadmade a categorical finding that theshares were being held as investment.Subsequently, notice for reassessmentwas made to bring income from sale

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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of shares to tax as business incometreating the said shares as stock-in-trade. The Hon’ble High Courtupholding the rulings of the lowerauthorities, held that the action undersection 148 was not sustainable, andobserved that it was trite law thatwhere two views were possible,proceedings under section 148 couldnot be initiated.The aforesaid rulingupholds the principle of finality in taxproceedings, which is sine qua nonespecially when the laws are alwaysopen to interpretation.

[2010] 5 taxmann.com 104 (Hyd.-ITAT) : ACIT v. Bodhtree ConsultingLtd. In the instant case the Hon’bleTribunal held that to avail deductionunder section 10B an undertaking hadto physically bring into India saleproceeds in convertible foreignexchange. The Tribunal observed asfollows:i) the amount received in theform of investment in equity shares inforeign exchange could not beconsidered to have been received in theform of convertible foreign exchange.ii) giving the permission to the assesseeto receive foreign exchange in the formof equity investment did not lead tothe conclusion that the assesseereceived the export proceeds inconvertible foreign exchange.Thejudgement captures the spirit of thesaid section which encourages exportsenriching the coffers of the economywith foreign exchange.

[2010] 4 ITR (Trib) 174(Ahmedabad) : Asst. CIT v.Karnavati Club Ltd. The instant casedealt with the classification of areceipt into either capital or revenue.The assessee received entrance feeswhich was a one-time fee charged forenrolment as members of ‘executivecentre’. The said fees were non-refundable and the same were paid to

the club in order to acquire the rightto avail of the services and facilitiesextended by the club. Only themembers were eligible to avail thesaid facilities. The Hon’ble Tribunaltherefore held that the receiptsconstituted capital receipts.

[2010] 4 ITR (Trib) 379 (Chennai):Dy. CIT v. Standard Fireworks P.Ltd. In the instant case, the assesseehad entered into a sale agreement onMay 25, 2001, for the sale of its entireland of 6.86 acres to the C company.The assessee offered capital gains invarious assessment years startingfrom 2002–03 and also paid advancetax for the assessment year 2005-06.The returns of income filed for theassessment years 2002-03 to 2004–05 were based on the sale deedsexecuted by the assessee in favour ofthe nominees of the flats constructedby C. The undivided potion of the landwas sold by the assessee throughvarious sale deeds and the dates ofsale deeds were taken as the dates oftransfer by the assessee. The AO wasof the opinion that the entire capitalgains were to be assessed in theassessment year 2002-03. The AOfound that the purchaser C hadconfirmed that possession of theproperty was handed over to theassessee on May 25, 2001, and as perthe sale agreement the entire saleproceeds of Rs.14 crores was to bepaid to the assessee during thefinancial year relevant for theassessment year 2002-03. On appeal,the assessee made an alternative pleathat in case the Tribunal was of theview that entire capital gains was tobe charged in the year underconsideration, a direction be issued tothe AO to exclude such incomealready offered by the assessee andassessed in the subsequent years:TheHon’ble Tribunal held that, by making

the alternative plea, the assessee wasneither pleading that the capital gainswere not taxable nor that it should notbe taxed in a single year. The onlyplea, which was a legal plea, was thatdue tax on the income so assessed belevied and the taxes already paid begiven credit for. It is one of the canonsof taxation that no income can betaxed twice. The direction to givecredit for taxes already paid wasnecessary for the disposal of theappeal. The question was of levyingtaxes in accordance with law and ithad nothing to do with enlarging thejurisdiction of any authority or court.The Assessing Officer should givecredit for taxes paid in later years inrespect of capital gains.This is awelcome relief for assesses whowould have wrongly paid tax in oneyear but rightly assessed in anotheryear as they may seek adjustment ofwrong tax paid against right tax due.

[2010] 125 ITD 1 (Mum.) (TM) :ITO, 9(1)–2, Mumbai v. BakerTechnical Services (P) Ltd. In theinstant case the Hon’ble Tribunal heldthat the benefit derived by an assesseefrom interest free deposit could betaken into consideration fordetermination of fair rental valueunder section 23(1)(a).Further, in thematter of effectively considering theview expressed by an earlier decisionof any Tribunal, it held that it was theduty of coordinate Bench to examineearlier decision of Tribunal and if aview had been expressed after takinginto consideration all facts andcircumstances of case, the same hadto be followed unless its correctnesswas doubtful in the opinion ofsubsequent Bench of the Tribunal.

[2010] 131 TTJ (Kol) 229 : ITO v.Vikash Behal In the instant case theassessee, co-owner of a property

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purchased in the year 1990, alongwith other co-owners entered into adevelopment agreement on 31st Oct.,2000 with a developer. Under theterms of the agreement all the co-owners were to get 32.5% of totalconstructed area from the developerand balance 67.5% was to be retainedby the developer. The assessee soldthe flat received from the developerduring the financial year 2004-05 andclaimed exemption under s. 54ECagainst the capital gain, claiming it tobe long-term capital gain. The AOhowever held that exemption unders. 54EC was not available as the flatsold was received by the assessee forwhich occupation certificate wasissued on 2nd June, 2004 bymunicipality and as building was newasset which came into existence onlyafter 2nd June, 2004, the same washeld by assessee for less than a yearand hence proceeds received on itssale resulted into short-term capitalgains. The Hon’ble Tribunal observedthat there was a transfer of land byagreement dt. 31st Oct., 2000 whichhad resulted in the conferring of therights of ownership of the developer’sshare of the land unto the developeron the date on which it was enteredinto, i.e., 31st Oct., 2000 and the samewould constitute a ‘transfer’ inrelation to developer’s share in thatcapital asset. Accordingly, capitalgains accrued to the assessee, beingowner of 1/5th equal share in suchland, in the year of such transfer, i.e.,financial year 2000-01 relevant toasst. yr. 2001-02 and therefore theassessee was entitled to claimexemption under s. 54EC.It may benoted here that the 32.5% receivedfrom the developer was only apostponement of the consideration ofthe sale of land executed in the year2000 itself. If the claim of exemption

was not on account of the transfer ofthe flat acquired but the sale of land,the aforesaid decision seems ok.However, if the capital gains havearisen from sale of flat, obviously, thegains are short term and the ITAT’sholding that the same are eligible forrelief under sec 54EC is incorrect.

[2010] 131 TTJ (Hyd)(UO) 17 : K.Srinivas Naidu v. Assist. CIT In theinstant case the Hon’ble Tribunal heldthat the payment was not disallowableunder s. 40(a)(ia) in a case where thesaid amount was not payable but waspaid. The Tribunal noted that s.40(a)(ia) applied only when theamount was payable and the tax hadnot been deducted and not merelywhere it was paid when there was nosuch liability to pay.

[2010] 131 TTJ (Mumbai) 291 :Ashapura Minichem Ltd. v. Asst.DIT (International Taxation) In theinstant case the Tribunal dealing withthe retrospective amendment, w.e.f.1st June, 1976, in s. 9 as per theFinance Act, 2010, observed thatunder the amended Explanation to s.9 (1), as it exists on the statute now, itis specifically stated that the incomeof the non-resident shall be deemedto accrue or arise in India under cl.(v) or cl. (vii) of s. 9 (1), and shall beincluded in his total income, whetheror not: (a) the non-resident has aresidence or place of business orbusiness connections in India; or (b)the non-resident has rendered servicesin India. The Tribunal re-iterated thatamended provision stating that it wasthus no longer necessary that, in orderto attract taxability in India, theservices must also be rendered inIndia. As the law stands now,utilization of these services in Indiais enough to attract its taxability inIndia. To that effect, recent

amendment in the statute has virtuallynegated the judicial precedentssupporting the proposition thatrendition of services in India is a sinequa non for its taxability in India.

[2010] 131 TTJ (Del) 309 : VedarisTechnology (P) Ltd. v. Asst. CIT Inthe instant case the Hon’ble Tribunaldealing with method of ascertainingthe comparables for the determinationof the ALP under the TNMM methodfor the purpose Transfer Pricing andhaving five comparable cases notedas follows: i) KSL being a tradingcompany engaged in business ofpurchase and sale of software was notengaged in the business ofdevelopment of software andperforming different functions wasnot a comparable case ii) Anothercompany namely TSL engaged in thebusiness of providing integratedsolutions, technical service and saleof software and hence was also not acomparable case iii) Third companynamely SS Ltd. focuses ontransportation, e-governance, CRMsolutions and customer specificprojects with all domestic sales andarea of operations being different,market conditions prevailinggeographically are different and notcomparable iv) Fourth companynamely DT Ltd. was an early entrantin the IT enabled services and was abusiness processing outsourcingindustry, having a different model wasnot a comparable caseTherefore, thereremained only one comparable caseof Soffia Ltd. and that the ALP wasto be determined on the basis of thatone comparable case.This caseupholds that even a single companycould be termed as a comparable forthe purpose of determination of theALP under the TNMM method.

[2010] 131 TTJ (Del) 329 : DelhiGymkhana Club Ltd. v. Dy. CIT In

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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the instant case in the context ofinclusion of certain income for thepurpose of section 115JB, the Hon’bleTribunal observed that the objectclause of the memorandum andarticles of association, of the assessee,empowered the management to investand deal with the moneys of the clubnot immediately required, in suchmanner as may be determined bythem from time to time. Under thesaid clause, the investment did nothave to be confined to investment byway of deposits with banks and cantake any other form or shape such asinvestment in shares, GovernmentSecurities, etc. The Tribunal held thatthe income derived from suchinvestment whether by way ofinterest, dividend or capital gain,could not be said to be outside thedoctrine of mutuality. Nowhere theactivity of assessee was found by anyof the lower authorities, as tainted bycommerciality. Further it was also anadmitted fact that the activities of theassessee-club did not come within thescope of business referred to in s.2(24)(vii). Therefore the Tribunalheld that the lower authorities haderred in bringing the income exempt,under principle of mutuality, withinthe purview of s. 115JB.

[2010] 30 CAPJ (SP)-3 (SC) : M/s.Kanchanganga Sea Foods Ltd. v.CIT In the instant case the assessee-appellant was a companyincorporated in India and wasengaged in sale and export of seafoodand for that purpose had obtainedpermit to fish in EEZ. To exploit thefishing rights, the assessee hadentered into an agreement charteringtwo fishing vessels with a non-resident company incorporated inHong Kong. In the context ofpayment to the non-resident withoutdeducting tax as stipulated under the

provisions of section 195 and thusbeing liable under section 201(1), theHon’ble Apex Court therefore heldthat the income earned by the non-resident company was chargeable totax under section 5(2) of the Act.Inthe instant case the chartered vesselswith the entire catch were broughtinto the India port, the catch werecertified for human consumption,valued, and after customs and portclearance non-resident companyreceived 85% of the catch. The ApexCourt observed that so long as thecatch was not apportioned the entirecatch was the property of the assesseeand not of the non-resident companyas the latter did not have any controlover the catch. IT is only after the non-resident company was given share ofits 85% that it came to have controlof the same. It is trite to say that toconstitute income the recipient musthave control over it. Thus the non-

resident company effectively receivedthe charter-fee in India. Therefore theApex Court held that the receipt of85% of the catch was in India and thisbeing the first receipt in the eye of lawand being in India would bechargeable to tax. The non-residentcompany having received the charterfee in the shape of 85% of fish catchin India, sale of fish and realisationof sale consideration of fish by itoutside India shall not mean that therewas no receipt in India. According tothe terms and conditions of theagreement charter gee was to be paidin terms of money i.e. US Dollar600,000/- per vessel per annum“payable by way of 85% of grossearning from the fish-sales”.Thus, theApex Court upheld the ruling of APHigh Court that TDS is required tobe made even when any income ispaid in kind.

Congratulations to Rank Holders of Bangalore BranchMay 2010 Examination

PCC MAY 2010 EXAM

SL. Reg No. Roll Name Marks Rank %NO No. Obtained

1 WRO0286612 22365 SHRUTI SODHANI 466 1 77.66

2 SRO0256262 22030 GIREESHA.T.L 401 43 66.83

IPCC MAY 2010 EXAM

SL. Reg No. Roll Name Marks Rank %NO No. Obtained

1 SRO0238362 26423 SIDDARTH.R. 497 13 71.00SUNDER RAM

2 SRO0286455 26514 PALAK BHAUWALA 494 14 70.57

3 SRO0255296 26962 SURAJ.S 461 45 65.85

FINAL(NEW) MAY 2010 EXAM

SL. Reg No. Roll Name Marks Rank %NO No. Obtained

1 SRO0190194 48358 PRIYANKA.G 480 16 60.00

2 SRO0195454 48361 ROSHAN.S 469 23 58.62

3 SRO0192995 48312 MANOJ.M.SHENOY 454 38 56.75

4 SRO0190270 48126 ANKIT BACHHAWAT 447 45 55.87

5 SRO0190322 48187 ANANTH.N 446 46 55.75

6 SRO0191623 48231 RAKESH BORDIA 444 47 55.50

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RECENT JUDICIALPRONOUNCEMENTSIN INDIRECT TAXESCA. N.R. Badrinath, Grad C.W.A., F.C.A.,CA. Madhur Harlalka, B. Com., F.C.A.

SERVICE TAX

Cenvat Credit of Service Tax

The issue in the present case waswhether credit can be availed onthe outdoor catering service. Therespondents had availed the creditof service tax paid on outdoorcatering service claiming the sameto be input service used in or inrelation to the manufacture ofexcisable goods. The credit soavailed by the respondents wasdenied by the original authoritieson the ground that the supply offood to the workers is neitherdirectly nor indirectly related tothe manufacturing of finishedgoods and accordingly issuedshow cause notice proposing tolevy service tax, interest andpenalty. However, the lowerappellate authorities allowed suchcredit applying the decision of theLarger Bench in the case of CCE,Mumbai vs. M/s. GTC IndustriesLtd 2008 (12) STR 468. However,on appeals filed by thedepartment, it was held thatrespondents have not establishednexus between the impugnedoutdoor catering service and themanufacture of finished goods.When the food items themselvesare not considered as inputs, theact of supply of such foods itemscannot be considered as inputservice. Therefore, the impugnedorders passed by lower appellateauthorities were set aside. Thedemand of service tax interest was

upheld whereas the penaltiesimposed were set asideconsidering the nature of disputeinvolved. [Commissioner ofCentral Excise, Chennai vs.Sundaram Brake Linings. 2010(19) S.T.R 172 (Tri – Chennai)]

The issue for discussion in thepresent case was whether thecredit of service tax paid on GoodsTransport Agency (GTA) servicecan be availed. The appellant wasengaged in the manufacture ofPolyester Staple Fibre and Tow andavailed credit of service tax paid onoutward freight up to the port fromwhere the goods were exported. Thesaid credit was denied by thedepartment and accordingly show-cause notice was issued for therecovery of the amount of creditalong with interest.

The appellant contended that incase of export, actual sale takesplace at the port of export onlyafter the transfer of property at theport and till then the risk andownership remains with them.However, it was held that the placeof removal for export goods is theplace where the export documentis presented to customs. AlsoBoard’s Circular No. 97/8/2007-ST states that the place of removalcan be different from the normalplace of removal and in such case,the credit of service tax paid onGTA services used fortransportation of goods up to placeof removal is admissible. Hence

the appeal was allowed. [RelianceIndustries Ltd. 2010 (19) S.T.R299 (Commr. Appl.)]

The issue involved in the presentcase was whether credit for theservice tax paid on house keepingand garden maintenance servicescan be availed. The appellants hadavailed credit of service tax paidon the above-mentioned serviceswhich was denied on the groundthat those services are not used inor in relation to the manufactureof the final products of theappellants. Penalty was alsoimposed in terms of Rule 15 of theCenvat Credit Rules, 2004.However, it was held that gardenmaintenance services are inputservices and credit on such serviceis admissible based on thedecision of the Tribunal in ISMTLtd vs. CCE, Aurangabad 2010-TIOL-27. Hence the impugnedorder was set aside and the appealwas allowed. [Rane TRW SteeringSystems Pvt Ltd vs. Commissionerof Central Excise, Trichy. 2010(19) S.T.R 251 (Tri – Chennai)]

The issue in the present caserelated to the entitlement of credit.It was held that the mere inclusionof value of an item in assessablevalue of final product does notentitle the manufacturer to takecredit. The Nexus theory andrelevance test should be fulfilledi.e. the input service must beintegrally connected with themanufacture of final product forcredit entitlement. [Commissionerof Central Excise, Chennai vs.Sundaram Brake Linings. 2010(19) S.T.R 172 (Tri – Chennai)]

The issue in the present caserelated to the Cenvat credit ofservice tax. The appellants wereengaged in providing maintenanceand repair services and

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

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commissioning and installationservice of RO systems. Theappellant had availed the credit onadvertising, security, courier,telephone and banking serviceswhich were used for providingmaintenance and repair servicesand also used in trading activity.The revenue contended that thecredit has to be partially allowedas per Rule 6 of the Cenvat CreditRules, 2004 since the appellantwas also engaged in tradingactivity which was exempted fromservice tax. However, it was heldthat since the trading activitycannot be called as a service, itcannot be considered even as anexempted service and hence Rule6 cannot be applied. Also since thetrading activity is covered underthe sales tax law, credit on inputservices attributable to suchactivity is not admissible. Hencethe matter was remanded to theOriginal Adjudicating Authoritywho shall consider the service taxpaid on input services attributableto trading activity and otherservices separately and quantify theamount to be reversed or payableby the appellant. [OrionAppliances Ltd vs. Commissionerof Service Tax, Ahmedabad. 2010(19) S.T.R 205 (Tri – Ahmedabad)]

The appellants in the present casehad executed laying of longdistance pipelines in the state ofGujarat on behalf of M/s. GujaratWater Supply and SewerageBoard (GWSSB) and had incurredliability under Commercial orIndustrial Construction Services.The Commissioner demanded theservice tax along with interest andalso imposed penalty on theground that the business ofpurchase and sale of water did notconstitute a social service, but was

covered under works contractservice. The appellant contendedthat GWSSB was not an industryand they relied on the certificateissued by the Member Secretaryof GWSSB to the effect thatGWSSB is not a commercialorganisation. The impugnedactivity was executed under workscontract for the period prior to thedate on which the works contractwas brought in to the tax net andhence the same activity could notbe taxed under commercial orindustrial construction services forthe prior period. However, it washeld that the Commissioner hasaccepted that the contract involvedwas a composite contract and whiledemanding tax on constructionservice, the Adjudicating Authorityhad vivisected the compositecontract and charged part of it toservice tax. The impugned demandis contrary to the Tribunal’sdecision in Diebold Systems (P)Ltd vs. CCE. Hence the impugnedorder was set aside and the appealwas allowed. [NagarjunaConstruction Co. Ltd. Vs.Commissioner of Central Excise,Hyderabad. 2010 (19) S.T.R 259(Tri – Bangalore)]

Valuation

The appellants in the present casewere the owners of CochinInternational Airport (CIA)providing services like storageand warehousing, cargo handling,tour operator and airport serviceand paying service tax atappropriate rates. Later it wasnoticed that the appellants had nottaken into consideration theservice charges received asroyalty, licence fee for arriving atthe taxable value for payment ofservice tax and show cause noticeswere issued demanding service

tax along with interest and penaltywhich was upheld by the lowerauthorities. The appellantscontended that they, being theowners of CIA, are not liable to taxunder airport services based on thefact that Airports Authority includesany person having the charge of themanagement of airports but does notinclude the owner. However, it washeld that the appellants providedspace for construction of tanks,facilities like runway for landingand takeoff, security servicespassenger facilities, etc. All thelicensees were required to paymunicipal rates and taxes levied bythe State or any other Authority,which indicated that the licenseeshave taken the area on lease and asper the CBEC Circular dated 17/09/2009, such charges would not besubject to service tax as the activityof letting out premises is notrendering services. Accordingly, theappeals were allowed. [CochinInternational Airport ltd. Vs.Commissioner of Service Tax,Cochin. 2010 (19) S.T.R 225 (Tri –Bangalore)]

The issue involved in the presentcase related to valuation for thepurpose of levy of service tax. Theappellants were the owners ofCochin International Airport (CIA)and were providing airport services.The appellants had excluded theincome from guest room, courtesycoach parking and surcharge on pre-paid taxi in determining the taxablevalue. Consequently, the lowerauthorities proposed to include suchincome for the purpose of valuation.The appellants contended that theyare not liable to tax under airportservices and hence such inclusionis not tenable in law. However, itwas held that the guest room chargesare collected for the occupation of

11 September2010

the guest rooms by the passengersto whom the boarding pass andtickets are issued. The courtesycoach parking services are extendedto the courtesy coaches that bringpassengers into the airport and thesurcharges on pre-paid taxi iscollected from the co-operativesocieties which operate the airporttaxi services in addition to thecharges which are charged by suchtaxi operators. The amount collectedfor these services would fall withinthe purview of services providedunder the category of airportservices and hence includible for thepurpose of determining the value fordischarging the service tax liability.The matter was remanded to thelower authorities for re-quantification of the service taxliability and also to decide upon thequantum of penalties. [CochinInternational Airport ltd. Vs.Commissioner of Service Tax,Cochin. 2010 (19) S.T.R 225 (Tri –Bangalore)]

The issue involved in the presentcase was the determination ofassessable value of the service ofphotography. The appellants wereengaged in the activity ofphotography and were dischargingthe service tax liability based on thegross amount charged minus thecost of all the materials used andcost of unexposed film, if any, sold.The appellants were availingexemption under notification No.12/03-ST which exempts fromservice tax, so much of the value ofall taxable services, as is equal tothe value of goods sold by theservice provider. The departmentcontended that the cost of thematerials used is not deductiblefrom the gross amount charged andhence the dispute. The appellantcontended that the value of

photography service shall includeonly that which relates to the serviceelement and would not include thecost of materials used in renderingthe said service. However, it washeld that use of paper and chemicalsfor printing is incidental and thedivisible of service and goodscomponents is not warranted as thecontract is not for sale of goods butproviding service. Hence value ofall materials and goods used forproviding service is includible,while the unexposed films sold areexcludible. The Tribunal hadexpressed a contrary view in thecase of Shilpa Colour vs. CCE 2207(5) STR 423 and hence the matterwas referred to the Larger Bench.[Agrawal Colour Advance PhotoSystem vs. Commissioner of CentralExcise. Bhopal. 2010 (19) S.T.R 181(Tri – Delhi)]

VALUE ADDED TAX

The issue in the present caserelated to the tax deduction atsource to be made by theregistered dealer purchasing thespecified goods in the State undersection 18-A which was introducedunder the Karnataka Value AddedTax Act, 2003 with effect from 1/4/2007. The said section prescribesthat every registered dealerpurchasing oil seeds or non-refinedoil or oil cake or scrap of iron andsteel or any other goods as may benotified by the Commissioner orCommercial Taxes for use in themanufacture or processing or anyother purpose as may be notified,shall deduct the amount of taxmentioned in the tax invoice issuedby the selling dealer and furnish acertificate in Form VAT 161 toallow the selling dealer to takecredit such tax deducted. Thisprovision resulted in injustice bothto purchasing and selling dealer in

case where tax collected from themexceeds their tax liability and theprovision for refund of excess taxcollected from the selling dealerdoes not mitigate initial injusticeof collecting excess tax than theliability. Hence it was held that theprovision is arbitrary and violativeof Article 19(1)(g) of theConstitution and is ultra vires theprovisions of the Act. [SumanEnterprises, Shimoga vs. State ofKarnataka and Another. 2010 (69)Kar. L.J.1 (HC)]

The issue in the present case wasdeduction of tax at source. Section18-A introduced with effect from1/4/2007 conferred powers on theCommissioner to bring goodsother than the goods specified inthe Karnataka Value Added TaxAct, 2003 under the purview of thesaid section. The Commissioner inexercise of the said powers issuednotification no. KSA. CR 76/2008-09 dated 28/7/2008 to bring ironand steel, hardware, timber,plywood, veneers, particle boards,laminated sheets, panel boards andsimilar articles of wood purchasedby registered dealers in State underthe provisions of section 18-A forthe deduction of tax at source. ITwas held that the said notificationissued by the Commissioner ofCommercial Taxes is violative ofArticles 14 and 19(1) (g) of theConstitution of India and ultravires the provisions Act. Hence thesaid notification was quashed.

CENTRAL EXCISE

Cenvat credit

The issue in the present case wasthe admissibility of Cenvat credit.The appellant was engaged in themanufacture of chewing gum andwere availing credit in respect ofinputs used in or in relation to the

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Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

September2010

manufacture of chewing gumincluding packing material. Therevenue claimed that the appellanthad wrongly availed credit onBoomer-tattoos and hence issuedshow cause notice denying thecredit on the ground that the tattoosare not inputs used in or in relationto the manufacture of chewinggum. The Adjudicating Authoritydisallowed the credit andconfirmed the demand. Theappellant contended that since thetattoos are used in packingmaterial, the credit can be availed.However, it was held that thechewing gums manufactured weredirectly packed into the printedaluminium foils without tattoo andthe primary objective of wrappingthe tattoo was to promote the tradeand to attract children rather thanpacking. Therefore, the tattoocannot be considered as primarypacking material used in or inrelation to the manufacture of finalproduct and consequently theappellant was not entitled to availcredit of the same. Accordingly theappeal was dismissed. [WrigleyIndia Pvt. Ltd. Vs Commissionerof Central Excise, Chandigarh.2010 (255) E.L.T 2010 (P & H)]

The issue in the present caserelated to availing of Cenvatcredit. The appellants wereengaged in the manufacture ofbrass strips, phosphor bronzestrips and copper strips. Theappellants had received brassstrips, phosphor bronze strips andcopper plate sheets in coil formand took credit of duty paid. Theappellants cleared the strips ofbrass, phosphor and copper afterundertaking the process ofdecoiling the same into strips oflesser width. The revenue deniedthe credit and raised the demandof duty along with applicable

interest and penalty. The appellantcontended that conversion of brassinto strips amounts to manufactureand also the demand was timebarred. However, it was held thatno new goods emerge in theprocess carried on by theappellant. The departmentalauthorities were fully aware of theactivities undertaken by theappellant and never raisedobjection for the credit availed bythem as reflected in monthly ER-1 returns. Therefore the impugneddemand invoking larger period isnot sustainable. Once the demandof Cenvat credit is not sustainableby reason of time barred, theinterest and penalty are also liableto be vacated. Hence the appealwas allowed. [SwastikEngineering Vs Commissioner ofCentral Excise, Bangalore. 2010(255) E.L.T 261 (Tri-Bang.)]

The issue in the present case waswhether credit can be availed inrespect of steel plates and MSchannels used in the fabrication ofchimney by treating these items ascapital goods. The assessee wasengaged in the manufacture ofyarn and had availed credit inrespect of the above-mentioneditems. A show cause notice wasissued alleging that the credit waswrongly availed as the plates andchannels cannot be considered ascapital goods since these items arenot required to be used infabrication of chimney. Therevenue preferred an appealagainst the order of the Tribunalwhich did not allow the credit butset aside the penalty levied byAssistant Commissioner.However, it was held that theplates and channels used infabrication of chimney fall withinthe ambit of capital goods. Whenthe pollution control laws make it

mandatory that all plants whichemit effluents should be equippedwith apparatus which reduce theemission, any equipment used forthe purpose should be consideredas an accessory of such plant.Hence the assessee was allowedto avail credit in respect of thesubject items and the appeal filedby the revenue was dismissed.[Commissioner of Central Excise,Jaipur Vs. Rajasthan Spinningand Weaving Mills Ltd. 2010(255) E.L.T 481 (SC)]

Demand

The appellants were engaged inthe manufacture of sulphuric acidand were availing credit of theduty paid by them. The appellantsalso supplied the said goods tofertilizer manufacturers underbond without charging duty underCT-3 certificate as per NotificationNo. 4/2006 dated 1/3/2006 andwere reversing 10% of the valueof such goods as per Rule 6 of theCenvat Credit Rules, 2004considering the goods to beexempted goods. However, laterthe appellants stopped suchreversing on the fact that the goodssupplied under CT-3 certificatecannot be considered as exemptedgoods. The revenue issued showcause notice to recover 10% of thevalue of the goods supplied to thefertilizer manufacturers, which wasdropped by the lower appellateauthority. On an appeal by therevenue, the same was confirmedwith penalty relying on thedecision of Supreme Court in thecase of Ballarpur Industries Ltd2007 (215) ELT 489 (SC).However, it was held that thesulphuric acid cleared withoutpayment of duty under the saidnotification is not exempted goodsand Rule 6 is not applicable relying

13 September2010

on the case of Vapi Vs AdvanceSurfactants India Ltd 2008 (88)RLT 275 (CESTAT-Ahmd). Henceit was held that the appellant is notrequired to reverse the said amountand the impugned order is set aside.[Dharamsi Morarji Chemical co.Ltd. Vs Commissioner of CentralExcise, Raigad. 2010 (255) E.L.T314 (Tri-Mumbai)]

Valuation

The appellants were themanufacturers of plastic items likecloth clips, tablet box, snapbutton, mosquito lamps, etc. Theappellants were served with showcause notice demanding the duty,which was confirmed by theAdjudicating Authority andimposed penalty equal to the totalamount of duty along withinterest. The appellant contendedthat they were not liable to payduty based on exemption availableunder Notification No. 5/98-CEdated 2/6/1998 and 5/99-CE dated28/2/1999. The ld. SDR arguedthat the benefits cannot be grantedto the assessee in case ofclandestine removal of excisablegoods. However, the price of theexcisable goods as indicated in therelevant invoice should be deemedto be cum-duty price under theprovisions of section 4(4)(d)(ii) ofthe Act and, accordingly, themanufacturers should be allowedto abate the duty element fromsuch price for the purpose ofdetermining the assessable valueof the goods. Therefore it was heldthat assessee’s claim under section4(4)(d)(ii)is liable to beconsidered by the lower authorityin the event of re-quantification ofthe duty. [Mahavir Plastics VsCommissioner of Central Excise,Mumbai. 2010 (255) E.L.T 241(Tri-Mumbai)]

The respondents were transferringpetroleum products from theirinstallation to their CompanyOwned Company Operated(COCO) outlet. The OriginalAuthority held that in respect ofsales made from COCO outlet, thecharges collected by them in thename of COCO charges should beadded to the assessable value andaccordingly, demanded differentialduty along with interest andpenalty. The department filed anappeal against the order of theCommissioner (Appeals) to setaside the order of the OriginalAuthority. On an appeal it was heldthat the price of the greatestaggregate quantity of the goodssold on the date of removal shouldbe adopted while paying duty at thetime of removal from the factory.The actual sale price at the laterpoint of time is not relevant fordetermining the assessable value.Since the respondent has paid theduty by adopting the transactionvalue of the greatest aggregatequantity of the goods sold atCOCO outlet, there is no furtherdifferential duty involved. Hencethe appeal filed by the departmentwas dismissed. [Commissioner ofCentral Excise, Siliguri Vs BharatPetroleum Corporation Ltd. 2010(255) E.L.T 568 (Tri-Kolkata)]

Manufacture

The appellant had entered into anagreement with M/s. UnitedSpirits Ltd, Bangalore for themanufacture of drinking waterunder the brand name M/s.McDowell No.1. The appellanthad benefit of SSI exemptionNotification No. 8/2002-CE dates1/3/2002 and 8/2003-CE dated 1/3/2003. The benefit of theNotifications was denied on theground that the appellant was

manufacturing packed drinkingwater with the brand name ofothers and duty along with interestwas demanded. The appellantcontended that they were entitledfor the benefit since M/s. UnitedSpirits Ltd was not manufacturingpacked water. The appellant alsocontended that mere purificationof water does not amount tomanufacture. However, it washeld that as per Notification No.8/2000-CE, the exemption shallnot apply to the goods bearing thebrand or trade name of others,whether or not registered. The factthat M/s. United Spirits Ltd are notinto the manufacturing process isnot relevant. Hence the appeal wasdismissed. [Virgin beverages (P)Ltd Vs Commissioner of CentralExcise, Kolkata-III. 2010 (256)E.L.T 105 (Tri-Kolkata)]

The appellants weremanufacturing cotton yarn andblended yarn and availing creditof duty paid on inputs and capitalgoods used in or in relation to themanufacture. The appellantsamong other items had availedcredit in respect of furnace oil andlubricating oil, which was drainedout after being used for a periodof time. Such drained oil was soldas waste oil without payment ofduty. The department was of theview that the waste oil ischargeable to duty andaccordingly issued show causenotice demanding the duty alongwith interest and penalty. Theappellant contended that removalof drained out lubricant oil wouldnot attract provisions of Rule 3(4)of Cenvat Credit Rules, 2002since the oil was not removed assuch and the waste oil was notsimilar to the lubricating oil used.The waste oil drained out is not a

14

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

September2010

product coming into existence asa result of manufacturing activityand hence not liable to excise duty.Hence no amount was chargeablein respect of removal of waste oiland the impugned order wastherefore set aside and the appealwas allowed. [Nahar SpinningMills Ltd. Vs Commissioner ofCentral Excise, Bhopal. 2010(256) E.L.T 92 (Tri-Delhi)]

The appellants were manufacturingexcisable goods and clearing thesame on payment of duty to theircustomers. They also clearedspares on stock transfer basis totheir depot in Pune wherein anextra amount of 4% of the value ofgoods was collected aswarehousing charges over andabove the amount of duty on suchgoods. The department was of thecontention that duty should havebeen paid on the price after

inclusion of the warehousingcharges and accordingly issuedshow cause notice demanding thedifferential duty which wasconfirmed by the AssistantCommissioner. The appellantcontended that depot can be treatedas a place of removal and in caseof inter-depot transfer subsequentsale price at the later depot wouldnot affect the assessable value.However, it was held that if no saleis taking place at the factory gate,the value of such goods has to bedetermined on the basis of the valueat which they are sold from thedepot. Therefore the impugnedorder including 4% of warehousingcharges in the assessable value wasupheld. However, the penaltyimposed was set aside. [SundaramClayton Ltd. Vs Commissioner ofCentral Excise, Chennai. 2010(256) E.L.T 144 (Tri-Chennai)]

SICASA, Bangalore Branchof SIRC of ICAI

Quiz & Elocution Competition

Winners of Elocutioncompetition -

1) Sanjana Hegde (SRO 0231255)

2) Ritesh Soni(SRO 0222330)

3) Narasimhan E.(SRO 0226408)

4) Shanthan S.M. (SRO 0192145)

Winners of Quiz competition -

1) Ritesh Soni (SRO 0222330)

2) Narasimhan E. (SRO 0226408)

CongratulationsCA. N. Rangachary has beenappointed as a Chairman ofCentral Depository Services(India) Limited.

CongratulationsMs. Shruthi Sodhani, BangaloreIst Rank in ProfessionalCompetence Examinationheld in May 2010

Important Announcement for students of ProfessionalEducation (Course-II) to commence their articleshipStudents who have initially registered for ProfessionalEducation (Course – II) and passed one of the groups inProfessional Education (Examination – II) cancommence their articled training on successfulcompletion of Information Technology Training (ITT)

For details contact: 30563541/542/543,Website: www.icai-bangalore .org

XIII Annual Badminton TournamentOfficers of the Chief Commissioner of

Income Tax, BangaloreV/s

Chartered Accountants of theBangalore Branch

on Saturday, September 4, 2010at Karnataka State Cricket Association,

Badminton Court, M. Chinnaswamy Stadium,M.G. Road, Bangalore – 560 001

Inauguration Time: 09.30 AMSri. G. Rajeswara RaoDirector General of Income Tax, Bangalore

Valedictory & Prize Distribution Time: 1.00 PMSri. Agrawall M. L.Chief Commissioner of Income Tax-I, Bangalore

CA. Shambhu Sharma H CA. K. BabuChairman Secretary

CA. Vinay MruthyunjayaCo–ordinator

Note : To participate please contact Ms. Ramya on3056 3501 / 500 / e-mail: bangalore@icai.org

15 September2010

Introduction:

Reserve Bank of Indiaconstituted a Working Group onBenchmark Prime Lending Rate(BPLR) in pursuance of theannouncement made in the AnnualPolicy Statement 2009-10 to reviewthe BPLR system and suggestchanges to make credit pricing moretransparent.

The major recommendations ofthe working group were:

a) The concern regarding the BPLRsystem lacks transparency andbanks resort to sub-BPLR lending.The BPLR regime needs amodification or to be replacedwith a new system. The banks onaccount of competition lend theirportfolio at rates which did notmake much commercial sense.

b) After examining the variousavailable possible options, theviews of various stakeholdersfrom industry associations, thegeneral public and internationalbest practices, there was a meritin introducing Base Rate lendingsystem which will replace theruling BPLR lending system.

c) The proposed Base Rate willinclude all those cost elementswhich can be clearly identifiedand are common acrossborrowers.

d) The actual lending rates to becharged to borrowers would be theBase Rate plus other specificcosts/charges.

BANKS TO SHIFT LENDING RATEFROM BENCHMARK PRIMELENDING RATE TO BASE RATECA. Suresha Balachandran, FCA

e) In order that the banks’ lendingrates respond to the Reserve Bankof India’s policy rates, the banksmay review and announce theirBase Rate at least once in acalendar quarter with the approvalof their Boards. The Base Ratealongside actual minimum andmaximum lending rates may beplaced in the public domain.

f) The Base Rate could also serve asthe reference benchmark rate forfloating rate loan products, apartfrom the other external market-based benchmark rates.

g) For greater transparency in loanpricing, the banks should continueto provide the information onlending rates to the Reserve Bankof India and it should continuegive information on Base Rate.

Results of the recommendationsfrom Working Group on BPLR:

As a result of recommendations fromthe Working Group on BPLR and innview of the inherent weakness in theBPLR system of lending, the ReserveBank of India effective July 1st, 2010has directed the banks to lend usingthe new Base Rate and they have todo away with the Benchmark PrimeLending Rate (BPLR).

What is Benchmark Prime LendingRate (BPLR)?

Until now banks were free to fix theirlending rate known as BenchmarkPrime Lending Rate (BPLR) with theapproval of their respective Board ofDirectors. Banks were free to decide

BPLR but their interest rates needed tohave a reference to the BPLR so fixed.

Lending rate under BPLR regime:

In the BPLR regime, the banks couldlend at a rate above the BPLR and evenbelow that for their elite customers.The discounted rates are not allowedin the base rate regime as the RBI hasmade it clear that the banks can notlend below the base rate.

Base Rate:

As per the recommendations of theWorking Group on BPLR the bankshave to mandatorily follow the BaseRate system of lending. The BaseRate is based on a formula that factorsbank’s cost of deposits, operatingcosts, for example expenses ofrunning its branches, banks cost offunds, administrative costs etc., andmore importantly profit margin.Therefore, the base rate can differfrom one bank to the other becauseof the above said factors.

Lending rate in Base Rate regime:

The lending rates for a credit linechargeable to a borrower would be BaseRate plus product specific costs, creditrisk premium, tenor premium andassociated borrower specific charges.

Advantage of Base Rate overBPLR:

The Base Rate will help borrowers tocompare interest rates offered by abank with other banks and allows oneto know how the banks arrive at theinterest rates for loans. It facilitates theborrowers to take an informed decisionand increases bargaining power. TheBase Rate will be more transparentwhen compared to the BPLR.

What are we achieving byintroducing Base Rate system oflending?

The minimum rate, below whichbanks can not lend with effect from1st July, 2010 is basically aimed at

16

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

September2010

bringing equality between different classes of borrowersand to discourage the banks in lending below the baserate to a selected few borrowers.

What banks can do?

However, the banks in order to honour the existing loanagreements which are signed with their customers cangive option to continue with the BPLR till the facilityoffered falls for the renewal or review. Further, if thecustomers want to shift to the base rate they are allowedto do so on their existing facilities.

Sources: RBI Press releases and Report of the WorkingGroup on Benchmark Prime Lending Rate.

Adv

t.

PKF Sridhar & Santhanam, hasvacancies for Article Assistants in itsBangalore office.

Interested students may send theirprofile to

PKF Sridhar & SanthanamG1, EBONY#7, Hosur RoadLangford TownBangalore 560025

Or e-mail the resume tobangalore@pkfindia.in

Or contact us at080-22110512

Adv

t.

FURNISHED C.A.’s OFFICEAVAILABLE FOR RENT

A Well furnished 650 SFT First Floor OfficeSpace at Journalist’s Colony, (off. J.C. Road),Bangalore is available on rent. This office has2 cabins, reception area, workstations, oneunfurnished room, one room for storage andpantry with attached washroom and waterfacilities. Location is nearer to Multi storiedcar parking and has facilities of Banks,Stationery / Xerox shops and restaurants nearby.

Office was used by a Chartered Accountantfor the last 30 years successfully and hasfallen vacant on their relocation to a largeroffice.

Interested CA’s may contact:

e-mail: aishwaryanitya08@gmail.com

or sms Name and Telephone Nos to9343203616 or telephone on 080 – 26614906

Adv

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INVESTMENT BANKING COURSEA u s t a l G r o u p

WWW.AUSTALGROUP.NET/EDUCATION

LIVE CLASSROOM TRAINING

COMPREHENSIVE FINANCIAL MODELING AND VALUATION

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Class Format

All 8 sessions (4 hours each) are tailored for personalizedinstruction using the case study approach. Each studentfollows the banker teaching the class and builds the financialmodels along with him.

Course Materials

INTRODUCTION AND FINANCIAL STATEMENT ANALYSIS

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INTEGRATED CASH FLOW MODELING

COMPLETE LBO MODELING

MERGER (ACQUISITION) MODELING

INVESTMENT BANKING PROCESS AND BESTPRACTICES, INTERVIEW SKILLS AND RESUME REVISION

For More Information:

Please email us at info@austalgroup.net or sign upon our website at www.austalgroup.net/education.Please visit our website to view all our offerings.

Announcement to MembersCertification Course on International Taxation;and Certification Course on IFRS is likely to bestarted in the month of October 2010 atBangalore, on getting stipulated minimumregistrations.

For further details contact : Mr. N.S. JagadishKumar, Asst. Secretary at 3056 3541 orMr. K.R. Kulkarni, Section Officer at 3056 3542

17 September2010

PCC/IPCC - 1st September to 9th September 2010

Business & Corporate Laws CA. S. Srikanth

Advanced Accounting CA. K. Shanmughanathan

Income Tax CA. K. Sudarshan

Costing & FM CA. Gopala Krishna Raju

PCC / IPCC AND FINAL PRE-EXAM CRASH COURSE FOR NOVEMBER 2010 EXAMFINAL - 14th September to 29th September 2010

Advanced Accounting CA. G. Sai Mukundan

Corporate Law CA. S. Srikanth

MAFA Yet to be Confirmed

Income Tax CA. Suresh T. G.

Cost Management CA. K. Hariharan

Indirect Taxes CA. A.S. Harihara Kumar

Mgmt Info & Control Sys Mr. B.V.N. Rajeshwar

Quantitative Techniques Mrs. Malathy Sundararajan

The Fee for the Pre Exam Crash Course is as follows &can be paid through cash:

Final: IPCC and PCC :Both Groups ` 1500/-, All the Subjects ` 1000/-,I Group only ` 750/-, Single Subject : ` 300/-II Group only ` 1000/-,Single Subject ` 500/-

To register please contact: Mrs. Roopashree

(080-30563513 / blrregistrations@icai.org)

Duration:November 2010 to March 2011(78 Sessions)Timings: 8.30am to 1.30pm(only on Saturdays)Course Fee: `̀̀̀̀ 20,000/-Course Contents:

• Corporate Finance• Strategic Cost Management• Financial Reporting and

Analysis

• Financial Services

• Concepts and Practice ofAutomated Information Systems

• Corparate Bussiness Laws

For Whom: The course is open forMembers & Non members who arecurrently working in the field ofFinance/Accounts Applicants for thiscourse should have at least 2 yearsexperience in the finance function.Knowledge of accounting terms,

pr inciples and procedures areessential as the course will coverareas that are comparitivelyadvanced in nature.

We request you to pass on thisinformation to your Clients:Finance/ Accounts Executives toavail the benefits of this course.

For details contact Branch onTel. 080 30563500/511/512e-mail: blrprogrammes@icai.org

5-Sep-10 - Payment of Central Excise Duty for the month of August 2010.- Payment of Service Tax for the month of August 2010. (in case of persons other than individual,

proprietor & partnership firms)7-Sep-10 - Payment of TDS deducted & TCS Collected, in the month of August 2010.10-Sep-10 - Filing of monthy returns of Central Excise for the month of August 2010.15-Sep-10 - Payment of Second Installment of Advance Tax in case of Companies

- Payment of First Installment of Advance Tax in case of Non-corporate assessees- Filing of VAT 120 under KVAT Laws for the month of August 2010.- Payment of Provident Fund for the month of August 2010.

20-Sep-10 - Filing of VAT 100 under KVAT Laws for the month of August 2010.- Payment of Professional Tax for the month of August, 2010.

21-Sep-10 - Payment of Employee State Insurance for the month of August 2010.25-Sep-10 - Filing of Monthly returns of Provident Fund for the month of August 2010.30-Sep-10 - Filing of Income tax return(for Non-Corporate Audit Cases & Corporate assesses) for the A.Y. 2010-11.

Important Dates to remember during the month of September 2010

AN APPEAL TO THE MEMBERS

XVIII Batch of Course inCorporate in Accounting, Finance & Business Laws

18

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

September2010

6 HRS

CPE

One Day Seminar on Transfer Pricing on Saturday, 18th September 2010 between 09.30 AM and 05.30 PM

at API Bhawan, Near Bangalore Branch, ICAI

Time Topics Speakers

9.30 AM to 10.00 AM Inaugural & Key note address CA. H. Padamchand Khincha,Bangalore

10.00 AM to 11.00 AM Introduction to Transfer Pricing CA. D. Devaraj, BangaloreProvisions - Associated Enterprises& International Transactions

11.00 AM to 11.15 AM Tea Break

11.15 AM to 12.30 PM Methodologies with Practical issues CA. K.K. Chythanya, Bangalore

12.30 PM to 01.30 PM Dispute Resolution Panel - Law & Procedure CA. G.S. Prashanth, Bangalore

01.30 PM to 02.30 PM Lunch Break

02.30 PM to 04.00 PM Landmark Decisions on Transfer Pricing CA. Sriram Seshadri, Chennai

04.00 PM to 04.15 PM Tea Break

04.15 PM to 05.30 PM Selection of Comparables & CA. Rishi Harlalka, BangaloreDocumentation - Practical issues withspecial reference to software industry

Delegate Fee: `̀̀̀̀ 800/-(Cash/Cheque in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore)

Restricted to300 delegates

One day Seminar on“Practice and Procedures before the CESTAT”

organized by The Central Indirect Taxes Committee of ICAI

Hosted by Bangalore Branch of SIRC of ICAI

on Saturday, 9th October, 2010 between 09.30 AM and 5.30 PM at Branch PremisesTopics Speakers

Drafting of Appeal, Stay petition & Misc. Applications before CESTAT Mr. B.N. Gururaj

Representation before CESTAT including written submission Mr. K.S. Naveen Kumar

CESTAT Rules and Submission of additional evidence / additional grounds CA. Anand N

Mock Tribunal by practising CAs & Advocates:Mr. K.S. Naveen Kumar, CA. Anand N, CA. B.G. Chidanand Urs,

CA. Rajesh Kumar T.R, Mr. R. Dakshina Murthy, Mr. Anirudha R.J. Nayak, Mr. Ashok Deshpande

Delegate Fees: `̀̀̀̀ 700/-(Cash/Cheque in favour of “Bangalore Branch of SIRC of ICAI” payable at Bangalore)

For Registrations for above Seminars & for further details please contact:Mrs. Roopashree, Tel: 080-30563513

Email: blrregistrations@icai.org, Website: www.icai-bangalore.org

6 HRS

CPE

Restricted to200 delegates

19 September2010

20

Bangalore Branch of SIRCof the Institute of Chartered Accountants of India

September2010