Tax Law

Tax regime in India comprises of two types of taxes- Direct Taxes & Indirect Taxes.

Direct Tax

Direct Tax is a Federal Levy. Taxes falling in this category are: Income Tax on Individuals & Corporate tax on Companies, etc. These include Income tax, Wealth tax and Interest Tax. The most significant of direct taxes is income tax, being handled by the Income Tax Department.

Income Tax Department is responsible for enforcing Double Taxation Avoidance Agreements and deals with various aspects of international taxation such as Transfer Pricing. Finance Bill 2012 seeks to grant Income Tax Department powers to combat aggressive Tax avoidance by enforcing General Anti Avoidance Rules. Income Tax Department functions under the Department of Revenue in Ministry of Finance. It is responsible for administering following direct taxation acts passed by Parliament, namely, Income Tax Act, 1961, Gift Tax Act, Expenditure Tax Act, Interest Tax Act, Various Finance Acts (Passed Every Year in Budget Session).

The levy of income tax is governed by the Income-Tax Act, 1961. This is an enormously complex legislation running into over 300 Sections with several subsections. The Act undergoes changes every year with additions and deletions brought out through a Finance Act passed by the Parliament.

The Income Tax Act, 1961 imposes a tax on income under the following five heads, namely, (i) Income from house property, (ii) Income from business and profession, (iii) Income from salaries, (iv) Income in the form of capital gains, and (v) Income from other sources.

In terms of the Income Tax Act, 1961, a person includes- Individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI), Company, Firm, Local authority, Artificial Judicial person not falling in any of the preceding categories.

The tax incidence on the income of assesses is determined by their residential status. Different rates of taxes are applicable to the income of individual and non-individuals. The general rules of taxation on income are as follows:

Resident taxpayers are taxed on their worldwide income.
Non-resident taxpayers are taxed only on income received in India or on income arising (or deemed to arise) in India.
Corporate income is taxed both at corporate level and to shareholders upon distribution as dividends.
The accounting year for tax purposes is April 1 to March 31.
Double taxation relief is offered to residents through credits under the Income Tax Act and under the tax treaties.

The income of non-individual resident assessees such as companies, partnerships etc is taxable at 35 percent (plus a surcharge of 10 percent on tax) whilst the income of non-individual non-resident assessees is taxable at the rate of 48 percent. Tax rates for individuals range between 10 percent and 30 percent depending on the tax slab in which the total income of the assessee falls.

The total income of an individual is determined on the basis of his residential status in India. For tax purposes, an individual may be resident, non-resident or not ordinarily resident. An individual is treated as resident in a year if present in India:

For 182 days during the year or
For 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are non-residents.

A resident who was not present in India for 730 days during the preceding seven years or who was non-resident in nine out of ten preceding years is treated as not ordinarily resident (NOR).

Non-residents are taxed only on income that is received in India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a non-resident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India. Non-resident Indians (NRIs) are not required to file a tax return if their income consists of only interest and dividends, provided taxes due on such income are deducted at source. It is possible for non-resident Indians to avail of these special provisions even after becoming residents by following certain procedures laid down by the Income Tax act.

The provisions of the Income Tax Act are also oriented to promoting the public purpose of economic development. Accordingly, the Act allows a ten year tax holiday for Infrastructure Projects such as development and/or operation & maintenance of roads, highways, ports, airports, rail systems, etc; power generation; development and/or operation & maintenance of Industrial parks including Special Economic Zones (SEZs). Further there is concessional rate of taxation for income from exports and tax incentives for the establishment of industries in areas notified as backward or underdeveloped.

India has executed double taxation avoidance agreements with many countries, including the UK, the USA, Cyprus, Mauritius Islands, etc. Favorable tax treatment is available under these treaties. It is quite common for foreign companies to route investments through the Mauritius Islands in order to avail of reduced withholding taxes on payments of royalty, technical service fees, interest on loans, capital gains, etc.

The Authority for Advance Rulings ('AAR'), constituted under the Income Tax Act, 1961 is authorised to determine any question of law or facts in relation to transactions which have been undertaken or are proposed to be undertaken by a non-resident. The AAR is required to make an advance ruling within a period of six months. The advance ruling of the AAR is binding on the Commissioner of Income Tax and other subordinate income tax authorities and continues to be in force unless there is a change in law or in the facts on the basis of which it was pronounced.

Central Board of Direct Taxes (CBDT): The CBDT is a statutory authority functioning under the Central Board of Revenue Act, 1963. The CBDT is headed by CBDT Chairman and also comprises six members, all of whom are Special Secretary to Government of India, namely, Member (Income Tax), Member (Legislation and Computerisation), Member (Revenue), Member (Personnel & Vigilance), Member (Investigation), Member (Audit & Judicial). The CBDT Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.

Domestic And International Corporations- Operating In Export Oriented Units, Software Technology Parks, Free Trade Zones And Special Economic Zones.

The authorities acting under the Income-tax Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to the person before deciding against him. The taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner.

Income Tax Authorities and their Powers: The Government of India has constituted a number of authorities to execute the Income Tax Act and to control the Income Tax Department efficiently. The Central Board of Direct Taxes is the supreme body in the direct tax set-up. It has to perform several statutory functions under the various acts and it is responsible for the formulation and implementation of different policies relating to direct taxes administration. The Board consists of a Chairman and six members.

Appointment of Income Tax Authorities in India: The Central Government can appoint those persons which it thinks are fit to become Income Tax Authorities. The Central Government can authorize the Board or a Director-General, a Chief Commissioner or a Commissioner or a Director to appoint income tax authorities below the ranks of an Deputy Commissioner or Assistant Commissioner, According to the rules and regulations of the Central Government controlling the conditions of such posts.

Powers of Income Tax Authorities: 1) Power relating to Discovery, Production of evidence, etc: The Assessing Officer, The Joint Commissioner, the Chief Commissioner or the Commissioner has the powers as are provided in a court under the code of Civil Procedure, 1908, when trying to suit for the following matters: (a) discovery and inspection; (b) to enforce any person for attendance, and examining him on oath; (c) issuing commissions; and (d) compelling the production of books of account and other document. 2) Power of Search and Seizure: Today it is not hidden from income tax authorities that people evade tax and keep unaccounted assets. When the prosecution fails to prevent tax evasion, the department has the to take actions like search and seizure. 3) Requisition of Books of account, etc: Where the Director or the Director-General or Commissioner or the Chief Commissioner in consequence of information in his possession, has reason to believe that (a), (b), or (c) as mentioned under section 132(1) and the book of accounts or other documents or the assets have been taken under custody by any authority or officer under any other law, then the Chief Commissioner or the Director General or Director or Commissioner can authorize any Joint Director, Deputy Director, Joint Commissioner, Assistant Commissioner, Assistant Director, or Income tax Officer to require the authority to provide sue books of account, assets or any documents to the requisitioning officer, when such officer is of the opinion that it is no longer necessary to retain the same in his custody. 4) Power to Call for Information: The Commissioner The Assessing Officer or the Joint Commissioner may for the purpose of this Act: (a) can call any firm to provide him with a return of the addresses and names of partners of the firm and their shares; (b) can ask any Hindu Undivided Family to provide him with return of the addresses and names of members of the family and the manager; (c) can ask any person who is a trustee, guardian or an agent to deliver him with return of the names of persons for or of whom he is an agent, trustee or guardian and their addresses; (d) can ask any person, dealer, agent or broker concerned in the management of stock or any commodity exchange to provide a statement of the addresses and names of all the persons to whom the Exchange or he has paid any sum related with the transfer of assets or the exchange has received any such sum with the particulars of all such payments and receipts; 5) Power of Survey: The term 'survey' is not defined by the Income Tax Act. According to the meaning of dictionary 'survey' means casting of eyes or mind over something, inspection of something, etc. An Income Tax authority can have a survey for the purpose of this Act.

Our direct tax practice, at Hello Counsel, includes assisting companies in planning and optimizing their fiscal obligations, while complying with relevant domestic and foreign regulations. We advise our clients on the regulatory compliances and coming to terms with frequent changes in tax regulations.

Indirect Tax

Indirect Tax is, both, Federal & State Levy. Indirect taxes are primarily levied on transactions relating to goods and services. These include Excise, Custom, Sales Tax, Service tax.

Central Board of Excise and Customs: Central Board of Excise and Customs (CBEC) deals with indirect taxation (central) in India, namely, Service Tax, Excise Duty & Custom Duty.

Excise duty is an indirect tax levied on a 'manufacturer' on the manufacture of dutiable goods. The liability arises upon ‘manufacture’ which may well include intermediary stages of production of final product. However, for ease of collection, duty is payable at the time of removal of goods from the factory.

The budget for the financial year 2000 streamlined the provisions relating to rates of excise duty. As a result, the then existing three rates of excise duty, namely 8 percent, 16 percent and 24 percent were converged into a uniform rate of 16 percent. This rate is called Central Value Added Tax (CENVAT). On a few items however, special excise duty is levied.

Although India does not have a typical value-added tax system, under the MODVAT (modified value added tax), a manufacturer can obtain credit for excise duty paid on capital goods and on inputs used in the manufacture of final products. The scheme is applicable to notified inputs and final products and covers most taxable commodities. Credit is also available for Additional Customs Duty (Countervailing Duty) paid on imported capital goods and inputs.

The Customs Act, 1962 provides for duties to be levied on goods imported into or exported from India. Duties of customs are levied at the rate specified under the Customs Tariff Act, 1975. The said Act inter alia specifies the various categories of import items in accordance with the international scheme of classification of goods - ‘Harmonised System of Commodity Classification’. Customs duty is leviable on imports into India and is payable when the goods are cleared. There are four slabs of basic customs duty ranging from 5 percent to 35 percent. In addition to the basic customs duty; countervailing duty and special additional customs duty are also payable on imported goods. For the protection of domestic industries, the authorities are empowered to levy protective and anti-dumping duties. Export duties are practically non-existent at present. They are levied occasionally to mop up excess profitability in international price of goods in respect of which domestic prices may be low at given time.

The Central Government levies a Sales Tax on the inter-state sale of goods. A sales tax of 4 percent is charged when the transaction is between two registered dealers whilst sales tax of 10 percent is charged in all other cases. Besides the Central Government, various State Governments also impose a tax on sales within their respective States.

Service Tax was introduced in 1994. As on the date, almost all sort of services are covered by this piece of legislation.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) hears the appeals against orders and decisions passed by the Commissioners of Customs and Excise under the Customs Act, 1962, Central Excise Act, 1944, Finance Act 94 relating to Service Tax. The Tribunal is also empowered to hear the appeals against orders passed by the designated authority with regard to Anti Dumping Duties under the Customs Tariff Act, 1975. The sanctioned strength of the Members (including President and two Vice Presidents) is 21. It has 3 benches in Delhi and 4 benches in Mumbai and one each at Kolkata, Chennai and Banglore. Each Bench consists of a Judicial Member and a Technical Member. With a view to have expeditious disposal of small cases, a Bench of Single Member deals with the matters not exceeding Rs.10 Lakhs is also constituted. Except in the matters relating to classification and valuation of goods, the Tribunal is the final Appellate Authority though a reference to the High Court can be made on a question of Law. In classification and valuation matters, the appeal against the order of the Tribunal lies only to the Hon’ble Supreme Court.

We, at Hello Counsel, provide assistance and comprehensive advice on Indirect Taxes viz., Customs Duty, Excise Duty, Sales Tax/ Value Added Tax, Entry Tax, Service Tax, Octroi Duty etc. We advise our clients in matters of taxation laws and add value to their business and transactions. Our tax legal team has a great deal of experience in varied range of tax issues, from complicated cross-border transactions to tax exemption qualification.

We represent our clients before Government Taxation Authorities, Appellate Authorities, High Courts, the Supreme Court of India and other Tribunals. We also represent our clients before the Director General of Foreign Trade, Department of Revenue, Central Board of Excise and Customs and other appropriate authorities.

Our services include;-

Assisting multinational clients on Double Taxation Avoidance Treaties (DTAA), tax holidays available to 100% Export Oriented Units, Special Economic Zones (SEZ), and Foreign Trade Zone (FTZ).
Assisting clients in matters relating to tax aspects of commercial transactions, sales, mergers and acquisitions, restructuring and reconstruction.
Advising on offshore tax issues, Value Added Tax (VAT), service tax, Customs procedures, import and export levies, valuation planning, classification, warehousing, duty entitlements etc.
Assisting clients in a wide range of issues relating to Service tax on cross-border transactions.
Assisting clients with documentation relating joint ventures, mergers, asset purchase agreements, shareholders agreements and documents relating to financing and employment.
Advising on issues relating to entry tax, excise duty implications and CENVAT
Assisting foreign companies seeking to distribute their products in India to ascertain customs, countervailing and other duties applicable on their products.
Advise on Transfer Pricing.
Advise clients Advance Tax Rulings in respect of a Transaction.
Handling Litigations with regard to excise, customs, service tax, sales tax.

Governing Legislations: Central Excise Act, 1944- Central Excise Laws (Amendment & Validation) Act, 1982; Central Sales Tax, 1956; Customs Act, 1962; Central Board of Revenue Act, 1963; Central Value Added Tax (CENVAT); Customs Tariff Act, 1975; Expenditure Tax Act; Finance Act, 2008; Finance Bill, 2012; Gift Tax Act; Income Tax Act, 1961; Income Tax Settlement Commission (Procedure) Rules, 1997; Interest Tax Act; National Tax Tribunal Act, 2005; Service Tax Act, 1994; Service Tax Rules, 1994; VAT- Delhi Value Added Tax, 2004; Various Finance Acts.

Direct Tax Court & Fora are as follows: The Central Board of Direct Taxes [CBDT] constituted under the Central Board of Revenue Act, 1963; Income-Tax Appellate Tribunal (ITAT); Directors-General of Income-tax or Chief Commissioners of Income-tax; Directors of Income-tax or Commissioners of Income-tax or Commissioner of Income-Tax (Appeals); Additional Directors of Income-tax, or Additional Commissioners of Income-tax or Additional Commissioners of Income-tax (Appeals); Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of Income-tax (Appeals); Assistant Directors of Income-tax or Assistant Commissioners of Income-tax; Income-tax Officers; The Assessing Officer; Tax Recovery Officers; Inspector of Income-tax. The Appeals from the Tax Foras lie in the High Court Of concerned State, and the Hon’ble Supreme Court Of India is the apex Court.

Indirect Tax Court & Fora are as follows: Central Board of Excise and Customs (CBEC); Customs, Excise and Service Tax Appellate Tribunal (CESTAT); Commissioners of Customs and Excise; Designated Authority with regard to Anti Dumping Duties.

We, in India, have International Tax Task Forces as well, namely, Financial Action Task Force on Money Laundering (FATF).

We have dealt and rendered opinion to our clients on issues of implementation of service taxes on services provided by consultant outside India, and on tax issues related to Permanent Establishment (PE) in India, etc.

Hello Counsel advises a number of Companies & firms on structuring of their operations to achieve tax efficiency and compliance. Amongst others, our clients include domestic & international Corporations operating in export oriented units, software technology parks, free trade zones and special economic zones (SEZ). For convenience sake we have categorised the topic in hand in the following categories.

Vital Features Of Tax Law

Custom Customs Act, 1962
Estate Duty
Excise- Central Excise Act, 1944 & State Excise- Estate Duty: Excise- Central Excise & State Excise- Classification Of Goods Under Excise & Customs Tariffs- Eligibility For Various Exemptions & Concessions- Determining Arm’s Length Price In Case Import Transactions Are Between Related Group Entities- Levy Of Anti-Dumping And Safeguards Duties Both For & Against- Availing Of Various Export Incentives Under The Foreign Trade Policy- Liability For Service Tax Under Agreements Entered With Group Or Other Service Providers- Vat Implications On The Supply Chains.
Gift Tax
Goods And Service Tax.
Income Tax
Sales Tax- Central Sales Tax, 1956
Service Tax- Goods And Service Tax
Value Added Tax [VAT]
Wealth Tax
Classification Of Goods Under Excise & Customs Tariffs
Eligibility For Various Exemptions & Concessions Under Excise & Customs Tariffs
Determining Arm’s Length Price In Case Import Transactions Are Between Related Group Entities.
Levy Of Anti-Dumping And Safeguards Duties Both For & Against
Availing Of Various Export Incentives Under The Foreign Trade Policy
Liability For Service Tax Under Agreements Entered With Group Or Other Service Providers.
Vat Implications On The Supply Chains.
Filing of Return
Filing of Advance Tax
Taxation of Companies
Taxation of Partnership Firms
Taxation of Foreign Nationals
Other Taxes/ Fees

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