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Bilateral Investment Treaty (BIT)Bilateral investment treaties?(or, BITs) are?international agreements?establishing the terms and conditions for private investment?by nationals and companies of one state in another state.? The new Indian Model BIT text will provide appropriate protection to foreign investors in India and Indian investors in the foreign country, in the light of relevant international precedents and practices, while maintaining a balance between the investor's rights and the Government obligations.?A BIT increases the comfort level and boosts the confidence of investors by assuring a level playing field and non-discrimination in all matters while providing for an independent forum for dispute settlement by arbitration. In turn, BITs help project India as a preferred foreign direct investment (FDI) destination as well as protect outbound Indian FDI.?The essential features of the model BIT include an "enterprise" based definition of investment, non-discriminatory treatment through due process, national treatment, protections against expropriation, a refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration, and limiting the power of the tribunal to awarding monetary compensation alone. The model excludes matters such as government procurement, taxation, subsidies, compulsory licenses and national security to preserve the regulatory authority for the Government.“expropriation”: The act of taking of privately owned property by a government to be used for the benefit of the public.},CBDT ups monetary limit for court appeal by I-TIn order to cut down on frivolous litigation and taxpayers grievances, the Central Board of Direct Taxes (CBDT) has issued fresh directions revising the monetary threshold for the taxman to appeal at two important legal forums – Income Tax Appellate Tribunal (ITAT) and high courts.The CBDT, which formulates policies for the income tax (I-T) department, has issued a fresh directive asking the department to go into appeal at the ITAT,?only when the tax effect in question is Rs 10 lakh (from earlier Rs 4 lakh) and Rs 20 lakh (from earlier Rs 10 lakh) if the appeal is to be filed in a high court.However, the monetary limit for filing appeals or Special Leave Petitions in the Supreme Court have been kept unchanged at Rs 25 lakh.There are four essential forums under law which a taxpayer can approach against an I-T assessment order – beginning from the Commissioner of I-T (Appeals), ITAT, high court and finally, the apex court.CessDirect Tax CodeDTC was an initiative taken by P Chidambaram as Finance Minister in 2008. It was intended to revise the Income Tax Act of 1961, the basic taxation template in India. It aims to consolidate all other direct tax legislations into one manuscript and facilitate voluntary tax compliance on part of tax payers.Direct Tax Code aims to fix discrepancies in Income Tax Act, so that Vodafone like cases, do not happen again. Under DTC:“Indirect (asset) transfers”?will be taxed in India, IF the companies involved, have at least 50 percent of their assets located in India.For example, Vodafone bought CGP investment ltd for ~55k crore rupees, because CGP owned 67% shares of Hutch-Essar India.Therefore, income tax department can demand Capital gains tax from Vodafone. (recall: Buyer pays CGT)Limitation:?what if they create three separate post box?companies each owning 30-30-30%!Double taxationA?taxation principle?referring to income?taxes?that are paid twice on the same source of earned income.?Double taxation?occurs because corporations are considered separate legal entities from their shareholders.Under the?Income Tax Act 1961 of India, there are two provisions,Section 90 is?for taxpayers who have paid the tax to a country with which India has signed DTAASection 91?provides relief to tax payers who have paid tax to a country with which India has not signed a DTAA. Thus, India gives relief to both kinds of taxpayers.India has comprehensive Double Taxation Avoidance Agreements with 88?countries. This means that there are agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country.According to a UN paper double taxation most often occurs when both the source country and the country of residence concurrently exercise their taxing right without providing full relief for the other country’s tax. Countries enter into double tax treaties to minimize the double taxation arising out of this intersection and the resulting unfairness.Easwar Panel -Income Tax Dept sets up panel to simplify tax lawThe Income Tax Department has set up a panel to help simplify the Income Tax Act, 1961, as part of the government’s move to improve the ease of doing business.The committee will be chaired by Justice R.V. Easwar, a former judge of the Delhi High Court and former president Income Tax Appellate Tribunal.Objective of the committee is to study and identify the provisions or phrases in the Act that are leading to litigation due to different interpretations, impacting the ease of doing business, and those that can be simplified.The committee is also tasked with suggesting alternatives to these provisions or phrases “to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection.Members of the committee include accountants, advocates and current and former bureaucrats from the Indian Revenue Service.Easwar panel suggests friendlier direct tax lawsA committee set up by the government to change direct tax laws has suggested several taxpayer-friendly measures to improve the ease of doing business, reduce litigation and accelerate the resolution of tax disputes.Major recommendations:It has recommended simplifying provisions related to tax deducted at source (TDS), claims of expenditure for deduction from taxable income and for tax refunds.It proposed deferring the contentious Income Computation and Disclosure Standards (ICDS) provisions and making the process of refunds faster.The committee has asked the income-tax department to desist from the practice of adjusting tax demand of a taxpayer whose tax return is under assessment against legitimate refunds due.It has also proposed deletion of a clause that allows the tax department to delay the refund due to a taxpayer beyond six months and suggested a higher interest levy for all delays in refunds.The panel also proposed that stock trading gains of up to Rs.5 lakh will be treated as capital gains and not business income, a move that could encourage more retail investments in the stock market.It also sought to provide an exemption to non-residents not having a Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN), from the applicability of TDS at a higher rate.The committee also recommended that most of the processes of the income-tax department should be conducted electronically to minimize human interface. To this effect, it suggested that processes such as filing of tax returns, rectification of mistakes, appeal, refunds and any communication regarding scrutiny including notices, questions and documents sought should be done electronically.To make it easy for small businesses, the committee recommended that the eligibility criteria under the presumptive scheme be increased to Rs.2 crore from Rs.1 crore. It also recommended launching a similar scheme for professionals. General Anti Avoidance Rules (GAAR)General Anti Avoidance Rules.Originally mentioned in Budget 2012. They were to be implemented from 1/4/2014.IT commissioner take action against business deal made outside India, to avoid taxes.He can send notice to Indian Citizen, NRI, Foreigners, to recover such money:Even if they’re living outside India.Even for retrospective deals i.e. deals happened before GAAR was implementedEven if deals protected under any Double taxation avoidance agreement treaty.Burden of proof lies with the party and not IT commissioner i.e. Company has to explain their deal is genuine.IT commissioner has to decide the case within 12 months. Aggrieved party can approach Dispute resolution Panel (DRP) => Income Tax Appellate Tribunal (ITAT) => HC and finally Supreme Court.GAAR not a completely new invention. China, Australia, Canada, New Zealand, Germany, France, S.America etc already have similar concepts.Shome Panel on GAARIT commissioner should send notices only in rare cases- where he can recover more than 3 crore rupees.GAAR should not be used for filling revenue shortfalls. Revenue shortfall occurs when government’s revenue collection is less than expected because of inflation, policy paralysis, global slowdown etc. So in such cases, GAAR should not be used for extracting more money from corporates to finance Bogus Sarkaari schemes.For retrospective cases- only recover tax dues. Don’t demand additional penalty and interest rate on such retrospective cases.Exempt the buying/selling of company shares from Capital gains tax. Better just increase the Securities Transaction Tax (STT) on buying/selling of such shares. Then, there is no litigation about “CGT evasion via post box?company”. Problem permanently solved.Don’t implement GAAR from 2014. Implement it from April 2016.GAAR to override bilateral tax treaty provisions?A day after the revision of bilateral tax treaty with Mauritius, Finance Ministry today said GAAR provisions, which are to take effect from April next year, will override the DTAA provisions in case they are abused.?GAAR, which was originally to be implemented from April 1, 2014, will now come into effect from April 1, 2017 (Assessment Year 2018-19).?It contains provision allowing the government to prospectively tax overseas deals involving local assets. There have been fears that the government may use it to target P-Notes.?Google TaxThis is essentially an indirect tax on foreign companies like Google, Facebook and Twitter for online services they provide to Indian companies that cost above Rs 1 lakh a year. The Indian government’s decision comes in the wake of ‘Operation Tulip’ by which French authorities investigated and indicted Alphabet, the parent company of search giant Google for evading back taxes of 1.6 billion Euros (US$1.8 billion).Key facts:From June 1, an equalisation levy of 6% will have to be deducted by a business entity in India which makes payments exceeding Rs 1 lakh in the aggregate in a financial year to a non-resident service provider for specified services.For now, specified services cover online advertisements, provision for digital advertising space or any other facility or service for the purpose of online advertisements.If the non-resident service provider has a permanent establishment (place of business in India) and the bill is raised by such Indian entity, then the equalisation levy will not have to be deducted by the Indian payer.Implications:This levy has come in for criticism from some quarters, as the foreign entity, will not get a foreign tax credit for such deduction in its home country. ALso, as tax is already deducted at source on the payments made to the foreign entity, imposition of an equalisation levy, it is viewed amounts to double taxation.The equalisation levy, is expected to impact the bottom lines of companies such Google, Yahoo, Facebook, Twitter and others, unless they deal with Indian business entities via their subsidiaries in t sets up 2 panels to ensure consistency in tax policiesWith a view to bring about consistency in taxation policy, Finance Ministry has set up two committees – one under Finance Minister and other under Revenue Secretary. The two committees would start functioning from April 1, 2016.The two committees are:Tax Policy Council (TPC)Tax Policy Research Unit (TPRU)TPC:It will be headed by the Union?Finance Minister?and will take important policy decisions.The TPC would have nine members – Minister of State for Finance, NITI Aayog Vice-Chairman, Commerce Minister, Chief Economic Advisor and Finance Secretary. It would also have secretaries from the department of Revenue, DEA, DIPP and Ministry of Commerce.The TPC aims to have a consistent and coherent approach to the issue of tax policy and will look at all the research findings coming from TPRU and suggest broad policy measures for taxation.TPRU:It will be headed by the Revenue Secretary and will be a multi disciplinary body.TPRU will carry out studies on various topics of fiscal and tax policies and assist the TPC in taking appropriate policy decisions.TPRU will prepare for every tax proposal an analysis of legislative intent, expected increase/decrease in tax collection and economic impact.TPRU will comprise of officers from CBDT, CBEC as well as economists, statisticians, researchers and legal experts.Taxation proposals of the two boards will be sent to the Finance Minister separately.Background:The decision to constitute these committees is based on the recommendation of the Tax Administration Reform Commission (TARC) that have in its First Report, identified handling of tax policy and related legislation as one of the areas in need of structural modifications.Right now this is handled in the CBDT and the CBEC. Independently of the two boards, the Tax Research Unit (TRU) and Tax Policy and Legislation (TPL) wings also send proposals to the union Finance Minister.To bring consistency, multidisciplinary inputs, and coherence in policy making, the TARC had recommended that a Tax Council supported by a common Tax Policy and Analysis (TPA) unit should be established to cater to needs of both direct and indirect taxes.It also had recommended that Comprising tax administrators, economists, and other specialists such as statisticians, tax law experts, operation research specialists and social researchers should be set up for both the boards.National Judicial Reference System (NJRS)The Income Tax department has activated a PAN-based online system which enables the taxman to access cases in their jurisdiction on a click, amongst a building database of over 5 lakh appeals and 1.50 lakh judgements.This facility is part of the?National Judicial Reference System (NJRS).The new measure will drastically cut down time in appeal and litigation management in the department.The system is the first of its kind in the country for comprehensive litigation management in any government department.The facility will be maintained by the National Securities Depository Limited (NSDL).The?National Judicial Reference System (NJRS)?is a project of Indian Income Tax Department to streamline its tax litigation system. It aims to be a comprehensive repository of all Appeals and Judgments related to Direct Taxes in India. NJRS will help the IT department in decongesting and streamlining the huge backlog of litigation in various courts and Tribunals related to direct tax cases.Shome panel suggestions on Tax administrationThe Tax Administration Reform Commission or TARC was a committee appointed by the Government of India for giving recommendations for reviewing the public Tax Administration system of India. Tax Administration Reform Commission (TARC) was constituted to review the application of tax policies and tax laws in India in the context of global best practices, and to recommend measures for reforms required in tax administration. The committee was headed by Parthasarathi Shome. TARC was established vide the Government of India Notification dated 21 August 2013. The term of the Commission is 18 months and works as an advisory body to the Ministry of Finance.Important recommendations made by the committee:The committee had suggested that Income Tax Return forms should also include wealth tax details.The panel had mooted that retrospective amendments to tax laws should be avoided as a principle and that the post of Revenue Secretary be abolished.It also proposed the merger of the CBDT with the CBEC.It had asked the government to widen the use of Permanent Account Number (PAN).It also pitched for a separate budget allocation to ensure time bound tax refund and a passbook scheme for TDS (Tax Deduction at Source).It proposed to cover both central excise and service tax under a single registration as both the taxes are administered by the same department and cross utilisation of credit is permitted between central excise and service tax under the CENVAT credit rules.It had also recommended that in line with international practice, a minimum of 10% of the tax administration’s budget must be spent on taxpayer services. At least 10% of the budget should be allocated and spent for ICT-based taxpayer services.Vijay Kelkar Committee (2002) Recommendations on Direct Taxes Impetus to direct tax reforms in India, came with the recommendations of the Task Force on Direct & Indirect Taxes under the chairmanship of Vijay Kelkar in 2002. The main recommendations of this task force related to the direct taxes related to increasing the income tax exemption limit, rationalization of exemptions, abolition of long term capital gains tax, abolition of wealth tax etc. Its key recommendations were as follows:Senior citizens and widows would have an exemption limit of 1,50,000/-replacement of three tier with 2 tier tax structureVodafone issueHutchison (Hongkong) own a company called CGP investment Holding ltd, (Cayman Island)CGP owns 67% shares of Hutch-Essar India.Vodafone (HQ London), tells its subsidiary in Netherland, to purchase Cayman Island Company from Hutch (Hongkong) for the price of 11 billion dollars (~55k crore rupee that time)Now Vodafone owns CGP, therefore, and thus indirectly owns Hutch-Essar India also. Because CGP owned 67% shares of Hutch Essar India.So what’s happening?A buyer (Vodafone) has (indirectly) purchased shares (of an Indian company) from a seller (Hutch).So, does Buyer (Vodafone) have to pay Capital Gains Tax, in India?IT Act 1961: Clarification (2012)We can demand Capital gains Tax, when a foreign company is sold. IF that foreign company’s value is derived from Indian Assets. (e.g. CGP valued at 55k crore, because it owned HutchEssar India’s shares).Then, for tax purpose, we’ll consider them Indian companies, and demand capital gains tax.This provision will apply to all deals from 1962 onwards (hence called “Retrospective”.)Vodafone wins transfer pricing tax dispute caseIn a major relief to British telecom major Vodafone in the transfer pricing case, the Bombay High Court on Thursday ruled in its favour, setting aside a?tax demand of Rs. 3,700 crore imposed on Vodafone India?by the income tax authorities. This is likely to benefit multinational companies such as IBM, Royal Dutch Shell and Nokia that face similar tax demands.-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Capital gains on FDI from Mauritius to be taxedIndia and Mauritius have signed a landmark?protocol to amend the Double Taxation Avoidance Agreement (DTAA) treaty.Details:The move is expected to prevent misuse of the three-decade-old pact from paying taxes, curb round tripping of funds, prevent double non-taxation, streamline investments and lift tax uncertainty.With this, India, for the first time will be allowed to?tax capital gains?(profit from the sale of property or an investment) arising out of Mauritius. The protocol can tax capital gains between April 1, 2017 and April 1, 2019 at 50% of domestic rates in India. However, investments made prior to April 1, 2017 will not be liable to capital gains tax. Further, all past share sale transactions from Mauritius would be safeguarded.Also, the benefit of 50% reduction in tax rate during the transition period from 2017 to 2019 shall be subject to Limitation of Benefits. This means a resident of Mauritius will have to pay the full rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell or conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh in the immediately preceding 12 months.Background:India and Mauritius had signed a Double Taxation Avoidance Agreement in 1983. The pact allowed only Mauritius to tax capital gains. However, the island nation generally doesn’t impose a capital gains tax. This meant that companies gaining from investments made in Indian companies via Mauritius-based entities managed to avoid paying taxes in both countries.The tax treaty made Mauritius the biggest source of foreign direct investment into India. According to data from the Department of Industrial Policy and Promotion, India received about $93.6 billion of FDI from Mauritius between April 2000 and December 2015. This is 34% of the total FDI inflows into India. Many private equity and venture capital firms also invest in India through funds registered in Mauritius.Implications:While this is a historic feat for the government, which initiated the dialogue with the island nation in 2006, analysts say, the move could affect foreign investments. Currently, Mauritius and Singapore together contribute 50% of the total FDI inflows into India.Cess In February 2016, it will introduce a 2 per cent cess on airfares for all domestic flyers except those flying to remote locations, and international travellers. This cess is meant to fund losses that airlines may incur in connecting to hinterland locations.The Central government loves cesses, partly because it doesn’t have to share the proceeds with State governments. It has been levying them for several important causes including primary education, secondary education, road development, the welfare of construction workers and beedi workers, clean energy, research and development and universalisation of telecom coverage, among several others. But good intentions often pave the road to hell, as is evident from the fact that over Rs.1.4 lakh crore of cess proceeds lie unutilised and inadequately accounted for in the government’s books. Take, for example, the case of the Secondary and Higher Education Cess paid by all income tax payers that has yielded over Rs. 64,000 crore between 2006 and 2015. Not a rupee of that has been spent, while hundreds of students now fork out more for higher education since the government has discontinued the non-National Eligibility Test fellowship. That the government has failed to even set up a fund to pool the proceeds shows the lack of planning that precludes and follows the levy of a cess. So is the case with the proposed airfare cess. The government is yet to identify routes that the cess would subsidise, or spruce up the many defunct civil airports.The government is yet to identify routes that the cess would subsidise, or spruce up the many defunct civil airports. The point of a cess is that the money it generates can only be used for the designated purpose so it can be an effective policy tool in theory. But if the money isn’t spent for the designated purpose, as the audit report of the Comptroller and Auditor General of India tabled in Parliament has shown, it just stagnates and distorts the economy further: the additional tax brings down real incomes without any accompanying gain in socio-economic indicators as targeted. Then there is the question of whether a given cess is needed at all. Most reasons cited for levying a cess, such as purposes of education, are important enough for direct budgetary allocations — as happens in the developed world. So the government can simply raise the tax rate rather than impose multiple cess levies. But with the Fourteenth Finance Commission increasing States’ share of the common pool of resources, cesses are tempting for the Centre to shore up its own finances. If it wants to keep complicating the taxation system for good intentions, the government should start disclosing a deployment plan to achieve the intended outcomes from cess collections before imposing the next such levy on citizens.Sugar cess ceiling hiked to Rs 200/qtl after President nod to BillPresident Pranab Mukherjee has given his assent to the?Sugar Cess (Amendment) Bill, 2015, raising the ceiling of the impost.Background:The bill was passed by Lok Sabha on December 15 but opposition members had joined ranks in the Rajya Sabha to oppose its consideration on December 23, the last day of the winter session.The Bill was later declared a money bill. It has now become a law after the President’s nod as it was not returned by the Upper House to the Lok Sabha within 14 days of its consideration there, as required under the rules.Highlights:The new Bill amends the Sugar Cess Act, 1982 which provides for the imposition of a cess as an excise duty on the production of sugar.The principal Act specifies the ceiling on the cess at 25 rupees per quintal under the Act. The Bill proposes to increase this ceiling to 200 rupees per quintal of sugar.The cess was proposed to be increased in order to meet the government’s expenditure on interventions to ensure payment of dues to sugarcane farmers.The rate of?sugar cess is notified by the central government?from time to time. ‘Tax elite to reduce inequality’Thomas Piketty, author of the best-selling book ‘Capital in the Twenty-First Century,’ that transformed the understanding of the history of wealth and its distribution, recently visited India.He was in Delhi to deliver a lecture on Inequality and Capitalism.He made the following suggestions to reduce inequalities in India:For India to meet its huge challenges of inequalities, the elite in the country would have to start paying more taxes.The current tax-to-GDP ratio in India is in between 10% and 11%. This is insufficient for meeting India’s huge challenges of inequalities. The aim should be to evolve the ratio toward the 30% to 50% levels now seen in the U.S. and some of the West European countries. For this to happen, the Indian elite will have to behave more responsibly than the western elite did in the 20thCompared with China:Mr. Thomas observed that Communist China has fared better than India at collecting taxes from the elite. This is evident from the stark difference in the public spending between the two countries. The public health system in India has a budget of less than 1% of GDP as compared with almost 3% in China. The Chinese Communist Party has been much more successful than the democratic and parliamentary Indian elites in mobilising resources to finance social investment and public services.His findings:Mr. Piketty’s documentation of the evolution of income and wealth over the past 300 years in the rich countries shows that from about 1914 to the 1970s there was an historical outlier in which both income inequality and the stock of wealth (relative to GDP) fell dramatically.This was on account of the political shocks and because of an increase in tax rates in the rich countries in response to the world wars.But, after 1970s both wealth and income gaps started rising toward their pre-20th-century norms. Between 1980 and 2007, 70% of the addition to gross domestic product, especially in the rich countries, went to the top 10% of the “elite” population. In contrast, the per capita incomes rose just about 1.5% a year.Indian scenario:Income and wealth concentration in India today is probably very high by international and historical standards. It is probably close to Brazil and South Africa (top 10% income share = 50-60% of total income) than to U.S. (top income share = 45-50% of total income) or Europe (top 10% income share = 30-35 %).Why so?One of the factors that explain this concentration of wealth is that inherited wealth and invested capital — in the stock market, in real estate — will grow faster than income.Way ahead:Inequality needs not just economic but also social and political strategies. In India, the preferential admission policies of caste-based quota and reservation systems in education in the long-run should be gradually transformed into rules founded on universal social criteria such as parental income or place of residence.He also cites the absence of data. Since there is no sufficient data, it is not possible to show the evolution of wealth in India. The data is needed to limit the concentration of wealth, fight corruption and assess the efficacy of India’s tax policy choices.Tax Expenditure The divergence between the statutory tax rate and effective tax rate (defined as the ratio of total tax revenue collected to the aggregate tax base) is mainly on account of tax exemptions. Tax expenditure is also termed as ‘revenue forgone’, but it does not necessarily imply that this quantum of revenue has been waived by the government.It should be interpreted as targeted incentives for the promotion of certain sectors that may not, in the absence of such incentives, have come up. Arguably, high tax expenditure can make the tax system unduly complex. Tax expenditures have been brought down significantly as a result of simplification of the tax system and improvements in tax administration in recent yearsTax Expenditure and Budgetary Policies in Housing SectorExemptions allowed for deduction of House Rent Allowance (Income tax) and various other income tax deductions and exemptions (Eg: Medical Premium).Exemptions allowed for interest payment and principal repayment for housing loans.Tax Expenditure in Union Budget 2013 :?First home loan from a bank or housing finance corporation upto Rs. 25 lakh entitled to additional deduction of interest upto Rs. 1 lakh.NB: It should be noted that due to various policies of government, the number of persons who own houses have increased. More over, the people can afford to spend on infrastructure as they don’t have to give taxes.VAT on softwareThe Karnataka High Court has declared that information technology service providing companies are?not liable to pay Value Added Tax (VAT) for software implementation process, which happens after installation of customized software.This has come as a huge relief to information technology service providing companies, such as Infosys Ltd. in Karnataka.The high court has refused to accept State’s contention that the process of implementation of software is part of customization and pre-sale activity, and without customization and without implementation, the software is not completely saleable, useable and functional.Background:Karnataka state government had contended that the process of implementation of IT software is a pre-sale activity and therefore constitutes sale. In this respect, several notices were issued by the state commercial taxes department to many companies including Infosys.A petition was filed by Infosys questioning the demand notices, issued by the Commercial Taxes Department in 2012-13, asking the company to pay several crores of rupees as additional sales tax, interest and penalty for the years 2005-09 in relation to implementation of Finacle, a universal banking solution developed and provided by Infosys, in various banks across the country.The state department had initially accepted the VAT paid by Infosys on the sale value of “packaged and customised versions of Finacle” while treating implementation process as not part of sale. However, post-2009 the department claimed that “implementation” is nothing but “value-addition to Finacle software and therefore there is sale of customised Finacle and attracts VAT.”What the court says?In substance, implementation means the customised software is integrated into several other systems so that the banks can start using the licensed software. In the process, there is no?transfer of any goods or right to use any goods; what is rendered is service and therefore, said consideration paid as service charge?is not subjected to VAT, but?subjected to service tax.The process of implementation of project starts only after installation of software (customised copyrighted Finacle), which is the goods transferred to the banks through agreement.As “implementation” is included under the definition of taxable services under the Service Tax Act by Parliament, the court has also said that the State has no power to?levy VAT treating it as transfer of property in goods or otherwise.Wealth TaxFinance Minister Arun Jaitley today abolished the wealth tax but increased the surcharge to 12 per cent on individuals earning Rs 1 crore and above annually and on firms with an annual income of Rs 10 crore or more.Moreover, the minister also introduced a surcharge of 7 per cent on companies having an income between Rs 1 crore and Rs 10 crore. The new measures will lead to tax collection of Rs 9,000 crore whereas the wealth tax could earn only Rs 1,008 crore, he said. ................
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