Tax planning has once again come to the fore as a subject of discussion after the Vodafone judgement. In the case of Vodafone International Holdings BV versus Union of India, the Supreme Court gave a judgment on 20th January, 2012, in which in para 67 it has been said that &ldquo; whether a transaction is used principally as a colourable device for the distribution of earnings, profits and gains, is determined by a review of all the facts and circumstances surrounding the transaction... It is in the above cases that the principle of lifting the corporate veil or the doctrine of substance over form or the concept of beneficial ownership or the concept of alter ego arises&rdquo;. Applying this test the Supreme Court concluded that &ldquo;the Offshore Transaction herein is a bonafide structured FDI investment into India which fell outside India&rsquo;s territorial tax jurisdiction and hence not taxable.

Tax planning in the context of verdict

Business Standard

The introduction of GST is now nearer than ever. The Budget 2012 should, therefore, take positive steps towards making the path of GST smoother. GST is a combination of comprehensive service tax and comprehensive goods tax. The Comprehensive service tax is expected to come in this Budget. So the next step towards that end is the introduction of comprehensive goods tax (excise tax) with a negative list of goods (not to be taxed).

What should be done for advancement of GST?

&ldquo;Occupy the Wall Street&rdquo; in the USA and similar protests in other countries in recent times show the people's perception about the economic set up that it is unjust and is skewed against the poorer class. These upheavals are no less against the the tax system also which is a key element in the economic set up . Indeed the whole world is burdened with GST, thanks to the motivation supplied by the IMF. Only exception is the USA.

'Regressivity' of VAT-GST can be remedied at great cost

Small Scale exemption for Central Excise Duty has been there for long but in 1994-budget and thereafter restrictions have been imposed on availing the exemption. The effect is if a small scale firm uses the brand name of another company, the exemption meant for small scale will not be admissible. This was done mainly to curtail the usage at that time by big firms to outsource their supplies through small scale and together muster a very huge amount of goods for further sale without paying duty at any stage.

Budget should clear the air on similarity of brand names

If you intend to import chewing gum, be prepared to pay 45% duty of customs, which is 15% more than other confectioneries. If you want to import male donkey you have to pay 25% but the female donkey can be imported for 30%.

Sukumar Mukhopadhyay

Sukumar Mukhopadhyay

Page 6 - Sukumar Mukhopadhyay

Tax planning in the context of verdict

What should be done for advancement of GST?

'Regressivity' of VAT-GST can be remedied at great cost

Budget should clear the air on similarity of brand names

Budget must not ignore reforms in customs