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December 2016 Volume 3, Issue 10

FOCAL POINT Newsletter from Raju and Prasad Chartered Accountants

mailto:[email protected]

http://www.rajuandprasad.com/


Page 3 Raju and Prasad Chartered Accountants Page 1

Dear Reader,

Our editorial comments are on the proposed

Taxation Laws (Second Amendment Bill, 2016) and Pradhan

Mantri Garib Kalyan Yojana(PMGKY) Scheme.

This month we have covered Spices Sector in sequence to other

Agro Industries.

We wish all our readers seasons greetings, Merry Christmas &

Happy New Year.

Please give your views and also send this newsletter to your

friends.

Regards

For Raju & Prasad

Chartered Accountants

M Siva Ram Prasad

Partner


Raju and Prasad Chartered Accountants Page 2

Contents Contents ............................................................................................................................................................. 2

Editorial ............................................................................................................................................................... 3

The Taxation Laws (Second Amendment Bill, 2016) .......................................................................... 3

Industry Review ........................................................................................................................................... 6

Spices Sector ............................................................................................................................................................. 6 Spicy History ................................................................................................................................................................................................................. 6 Spices Produced in India ..................................................................................................................................................................................... 7 Prospects .......................................................................................................................................................................................................................... 9 Organic Spices ........................................................................................................................................................................................................... 12 Government Initiatives ....................................................................................................................................................................................... 13 Problems and Challenges .................................................................................................................................................................................. 14

Policy Watch ................................................................................................................................................. 16

RBI ................................................................................................................................................................................. 16 Withdrawal of the Incremental CRR ....................................................................................................................................................... 16

Indirect Tax .............................................................................................................................................................. 16 Waiver of Service Tax on card transactions up to Rs 2000 ................................................................................................... 16 Exemption of Excise Duty on Point of Sale Goods ...................................................................................................................... 16 Exemption of Excise Duty on Branded Gold Coins ..................................................................................................................... 17

Verdicts ............................................................................................................................................................ 17

Direct Taxation ....................................................................................................................................................... 17 Interest subsidy, power subsidy, etc. are not Income from Other Sources ............................................................ 17 Rate of royalty is at ALP if it is approved by RBI and Ministry of Industry ................................................................. 18 Developer constructing Airport and Bridges for Govt. agencies entitled to sec. 80-IA relief ................ 18

►►► PHOTOGRAPH OF THE MONTH ..................................................................................... 19


Page 3 Raju and Prasad Chartered Accountants Page 3

Editorial

The Taxation Laws (Second Amendment Bill, 2016)

overnment of India introduced The

Taxation Laws (Second Amendment Bill,

2016) on 27th November 2016. The proposal is

to tax persons who have not disclosed their

Income earlier or are now disclosing

unexplained income. This is in line with the

earlier announcement to come with heavy

hand on those who have not disclosed

income or wealth under Income Disclosure

Scheme (IDS) 2016.

G

Raju and Prasad Chartered Accountants


The amendment proposal also gives another

chance to declare undisclosed income under

Pradhan Mantri Garib Kalyan Yojana, 2016

(PMGKY). The proposed amendment

contemplates a tax rate of 30%, Garib Kalyan

Cess of 33% of tax and penalty of 10% of

undisclosed income which works out to about

50%. The person who declares the income

under this scheme has to deposit 25% of the

income declared in Pradhan Mantri Garib

Kalyan Deposit Scheme, 2016 for 4 years which

bears no interest to the depositor. Unlike IDS,

the scheme does not have any deadline to

declare the unexplained income unless it is

scrapped one fine day.

By this amendment there is scope to get more

unaccounted income into the tax net.

Framing in the deposit scheme wherein the

money is kept for 4 years without any interest

to the depositor reduces inflation since money

circulation to that extent is stopped.

Government/Banks will also get debt funds

free of cost. The scheme will be dispute free in

terms of levying any type of penalty since

there is no discretionary power given to tax

authorities.

In case the above scheme is not adopted,The

Taxation Laws (Second Amendment Bill, 2016)

increases the tax rate to 60% on unexplained

income which was earlier at 30%. The Bill also

amends the penalty section 271AAB to enable

levy of penalty in cases where the undisclosed

income was found by the tax authorities in the

event of Search Operations. Also, it introduces

a new section 271AAC which levies a penalty

of 10% in cases of voluntary disclosure of

unexplained income.

The demonetized currency deposits are

allowed up to 30th December, 2016. Most of

the general public have raised doubts

whether demonetized deposits also attract

taxes at higher rates.

Framing in the deposit

scheme wherein the money is

kept for 4 years without any

interest to the depositor

reduces inflation since money

circulation to that extent is

stopped.


Raju and Prasad Chartered Accountants Raju and Prasad Chartered Accountants Page 5

The analysis of the various circumstances in view of the amendment is as follows-

The deposits during the year out of

demonetized currency will take the colour of

undisclosed income if the source for such

deposits are not clearly explained.

Many people have a wrong notion that

demonetized currency deposits up to 2.50

lakhs are tax free. This may be true to some

extent in case of persons not liable to file

income tax returns such as small traders,

housewives etc. but persons who have been

regularly filing their return of income have to

substantiate that these deposits are out of

their current income or that the deposits are

out of their cash balance and earlier

withdrawals failing which the deposits will be

considered as unexplained income and taxed

at higher rates accordingly.

This is a welcome and inevitable move taken

by the government and acts as a whip on non-

compliant assesses. This also increases the

responsibility on the revenue authorities to be

more vigilant and proactive in order to

recover the taxes from the defaulters/evaders.

M SIVA RAM PRASAD

S.No Circumstances Income

Tax u/s

115BBE

Surcharge

on Tax

Cess Penalty Total

Effective

Tax Rate

1 Unexplained Income is disclosed

voluntarily in Income Tax Return

and advance tax is paid on or

before due date

60% 25% 3% NIL

77.25%

2 Unexplained Income is disclosed

voluntarily in Income Tax Return

but advance tax is not paid on or

before due date

60% 25% 3% 10% of Income

Tax

U/s.(271AAC)

83.25%

3 Income is disclosed as regular

income in Income Tax Return but

treated as unexplained by Income

Tax Authorities

60% 25% 3% 10% of Income

Tax

U/s.(271AAC)

83.25%

4 Income is admitted after search

and declared in Income Tax

Return

60% 25% 3% 30% of

Undisclosed

Income

U/s.(271AAB)

107.25%

5 Income not admitted after search

and/or not declared in Income Tax

Return

60% 25% 3% 60% of

Undisclosed

Income

U/s.(271AAB)

137.25%

Note: Other penalties, existing income tax may be levied at the discrete of tax authorities.


Raju and Prasad Chartered Accountants Raju and Prasad Chartered Accountants Page 6

Industry Review

Spices SectorSpicy History

hether it is saffron in Kashmir or pepper

in Kerala, India is known for a variety of

spices all over the country like its cultural

diversity. Spices are one of the most

remarkable ingredients of Indian cuisine.

Without them, Indian food would be as

ordinary as the others. Spices are also one of

the reasons why Indian food is becoming

popular to people across the globe.

Arthasastra during 3rd century B.C. mentioned

about various spices. Atharvanaveda and

Ayurveda talk about the medicinal uses of

spices. There are historical evidences that use

of spices was in existence in the age of Indus

W



Valley Civilisation. While Susruta-samhita and

Charaka-samhita talked about the medicinal

uses of spices, Vatsayana talked about the

aphrodisiac values of spices.

Indian history and trade is linked to spices.

History records, only Vasco da Gama’s

landing in 1498 at Kerala coast and his return

to Europe with a shipload of various spices, but

there were earlier evidences of Indian spice

trade with South Asian countries, Middle East

countries and China. Spice trade in South Asia

had competition between Portuguese, Dutch

and British. The trade forced to discover sea

routes and wars were fought ruthlessly for

occupying territories for spices.

In 15th century Europeans started the spice

trade and by 16th century British made India

as their trade capital in Asia through East India

Company replacing Dutch monopoly of spice

trade in India. British landed in India for spices

and ended up as rulers.

Spices Produced in India

Spices are in the form of fruits, flowers, leaves,

bark, seeds, roots and bulbs. There are number

of spices available but some are regularly

used in food and some are used in medicinal

preparations and aromatic preparations.



The following table shows parts of the plant which can be used as spice:

S.No Part Used as Spice Spice Number

1 Fruit Cardamom, Pepper, Chilli, Cumin, Fennel,

Celery, Aniseed, Ajwain, Caraway, Dill, Pepper

Long, Star Anise, Tamarind

13

2 Seed Fenugreek, Mustard, Pomegranate, Nutmeg,

Poppy seed

5

3 Rhizome Ginger, Turmeric, Sweet flag, Greater Galanga 4

4 Leaf Coriander, Curry leaf, Mint, Parsley, Hyssop, Bay

Leaf, Lovage, Marjoram, Basil, Allspice,

Rosemary, Sage, Savory, Thyme, Oregano,

Tarragon

16

5 Bark Cinnamon, Cassia, Tejpata, Juniper 4

6 Bulb Garlic, Mace 2

7 Rind Kokam, Camboge 2

8 Stigma Saffron 1

9 Pod Vanilla 1

10 Root Horse Radish, Asafoetida 2

11 Flower Caper, Clove 2

Total 52

Source: Spice Board of India



Pepper, “the king of spices” is commonly used

for flavoring food stuff which is grown in the

Western Ghats usually in the hilly areas and

requires an average rainfall of 200-300 cm.

Cardamom, “the queen of aromatic

spices”are mainly grown in areas where the

climatic conditions are humid, the average

rainfall required for this spice ranges from 150-

300 cm.

Some of the spices have insect repellant

properties, some are used in antimicrobial

activities, alcoholic beverages and also as

natural colouring agents. Many condiments

and oils are extracted out of these spices.

Nearly three-fourths of spices listed in ISO are

produced in India. India is the largest

producer, consumer and exporter of spices. In

recent times organized marketing with brand

names is taking place in spices, spice

powders, spice oil, spice extracts and

oleoresins, etc. and essential oils.

Saffron traditionally known as “Zafran” is one

of the world’s highest valued spice. Saffron

stigmas are graded with colour, bitterness and

aroma. The darker the colour the better it is. It

has been popularized during recent times

mainly due to spread of Kashmiri population to

major cities and also due to its rich source of

minerals such as calcium and iron. Pakistan is

the main competitor for Saffron trade.

Prospects

Most of the states in India produce spices, the

total area under cultivation is 3.12 million

hectares during 2013-14 which has increased

from 1.93 million hectares during 1990-91. The



average growth in production increased from

1.98 million metric tonnes during 1990-91 to

5.94 million metric tonnes during 2013-14 which

is around 9% per annum as per statistics of

Spice Board of India.

Table showing major spice wise area and production in India:

(Area in ‘000 Hectares, Production in ‘000 Tonnes)

Spices

2010-11 2011-12 2012-13 2013-14

Area Production Area Production Area Production Area Production

Chillies 792.1 1223.4 793.92 1448.22 762.43 1437.76 760.45 1492.53

Garlic 200.6 1057.8 171.80 898.44 228.79 1213.41 257.76 1469.05

Turmeric 195.1 992.9 201.82 1001.86 210.51 981.58 188.84 853.09

Ginger 149.1 702.0 125.37 924.42 136.87 713.79 137.99 715.10

Coriander 530.5 482.0 362.14 428.68 397.72 384.81 452.53 338.47

Tamarind 59.6 206.3 52.78 182.08 58.46 189.55 56.78 208.64

Cumin 507.8 314.2 726.40 462.65 868.36 514.57 943.80 598.49

Fenugreek 81.2 118.4 96.30 121.78 110.82 126.46 97.03 110.70

Fennel 61.8 105.4 92.45 144.11 55.74 94.70 38.26 60.13

Pepper 183.8 52.0 175.38 43.00 122.16 57.88 122.29 40.41

Ajwan 25.8 22.2 45.69 28.05 34.56 23.66 27.23 17.85

Cardamom 86.7 15.7 97.75 18.86 92.33 18.94 91.71 21.79

Nutmeg 16.1 11.4 18.41 12.14 18.89 12.73 20.11 13.46

Tejpat/

Cinnamon

2.9 5.0 4.18 5.27 2.77 5.04 2.75 5.04

Clove 2.4 1.2 2.1 1.03 2.08 1.14 2.27 1.21

Total 2940.20 5350.50 2966.49 5720.59 3102.49 5776.02 3199.80 5945.96

Source: Spice Board of India



The major spice producing states are Kerala,

Andhra Pradesh, Gujarat, Karnataka,

Tamilnadu, Maharashtra and Rajasthan. Chilli

is the major spice crop occupying about 24%

of total area under cultivation and 25% of the

total production.

Various Spices have different harvesting periods and also traded either in whole form or in powdered

form as given below:

Commodity Growing States Harvest

Period

Traded Forms Quality

Attributes

Quality

Issues

Clove Kerala,

Karnataka &

Tamilnadu

December-

April

Whole,

Cracked &

Powdered

Size, Colour,

Aroma,

Volatile Oil

Hairs,

Pesticides,

Stems

Cardamom Kerala,

Karnataka &

Tamilnadu

October-

January

Whole &

Powder

Size, Colour,

Aroma,

Volatile Oil

Pesticide,

Aroma,

Colour, Taste

Cinnamon Kerala,

Karnataka &

Tamilnadu

Post

Monsoon

Whole &

Powder

Size, Colour,

Aroma,

Volatile Oil

Mold,

Pesticide,

Ash

Chilli Andhra

Pradesh,

Maharashtra,

Karnataka

February-

April

Whole &

Powder

Size, Colour,

Aroma

Pesticide,

Insects

Fennel Gujarat,

Rajasthan,

Uttar Pradesh

December-

March

Whole Size, Colour,

Aroma,

Taste

Taste, Size,

Insects

Ajwain Rajasthan,

Gujarat

May-June Whole Size, Colour,

Aroma,

Taste

Pesticide,

Insects

Fenugreek Rajasthan,

Madhya

Pradesh,

Gujarat

February-

April

Whole Size, Colour,

Aroma,

Taste

Pesticide,

Allergens

Star Anise Arunachal

Pradesh

July-

September

Whole Size, Colour,

Aroma

Mold,

Pesticides Source: www.data.gov.in

India accounts for nearly 48 percent of volume

and 43 percent of value in global spice trade.

During 2015-16 a total of 8.34 lakh tonnes of

spices and spice products have been

exported amounting to USD 2842.83 million

which shows an increase while compared to

that of 1990-91 which was USD 130.40 million as

per statistics of FAO and Spice Board of India.

http://www.data.gov.in/



The leading importers of spices from India are

USA, China, Vietnam, UAE, Indonesia,

Malaysia and UK. While Chilli is the most

exported spice in terms of quantity which is

3.47 lakh tonnes and worth USD 605 million

during 2015-16 as per the statistics of Spice

Board of India, other spices, oils and oleoresins

are also in much demand among the exports.

Apart from being the largest exporter of spices

on the globe, India consumes approximately

90% of its spice production each year. The

spices in India are channelized to three broad

clients namely industrial sector, retail sector

and catering sector.

The spices market in India is growing in recent

years on account of increase in purchasing

power and improvement in living standards.

Rising demand for spices is also due to value

added products like spice mixes. The surge in

growth is mainly originated from growth in

chilly and garlic as a segment of spice market.

The growth in this segment has been largely

led by the domestic factors and increase in

global demand.

Organic Spices

Many people today, all over the world, show

interest in organic food since it is free from

chemical contaminants, the demand for

these products is steadily increasing. Spice

Board of India has prepared a document on

production of organic spices during 1998. It

features the organic concepts, principles,

basic standards, production guidelines,

documentation, inspection and certification.

Export of organic spices from India is gaining

ground. The country has recorded exports of

around 2636.87 MT tonnes of organic spices

during 2015-16, valued at USD 3 million as per



the statistics of Agricultural and Processed

Food Products Export Development Authority

(APEDA).

Government Initiatives

To develop and regulate the sector, Spice

Board of India was formed during 1986,

National Research Center for Spices (NRCS)

which is presently

know as Indian

Institute of Spices

Research was also

established in the

same year.

International Pepper

Exchange was

established in 1997

besides Indian

Cardamom Research

Institute (ICRI) was

established in 1978.

Saffron Production and Export Development

Agency (SPEDA) was established in 2015.

Spice Board has specific programmes for

development, it has established crop scientific

Spices Parks in the major production and

market centers in Kerala, Rajasthan, Andhra

Pradesh, Madhya Pradesh and Tamilnadu to

empower the farming community by

providing common infrastructure and

processing facilities which will in turn boost the

sector.

Codex Committee on Spices and Culinary

Herbs (CCSCH) was formed during 2014-15.

During 2015-16 Spice Board of India took an

initiative in developing the digital platform

named “e-Spice Bazaar” which caters to the

needs of spice farmers and

exporters.

Spice Producers Society

(SPS) was formed by the

Spice Board which will

function as bridge

between Board and the

growers. A special

programme for the North

Eastern States has been

setup which provides

techniques for rain harvesting and installation

of irrigation equipments.



Integrated projects by various state

departments were implemented under

Mission for Integrated Development of

Horticulture (MIDH) and Rashtriya Krishi Vikas

Yojana (RKVY) for providing training facilities to

the farmers for improving the quality of their

yield.

Problems and Challenges

Though the industry has been growing and has

a huge market demand across the globe it

faces certain challenges which are as follows:

1. Strong competition for Indian Spice

products due to stringent food safety

norms of various importing countries.

2. The constant use of pesticides, insecticides

and toxin remains is impacting the quality

of spices like any other agro produce.

3. Value added products need more

emphasis on processing technologies.

4. Like any other agricultural crop, spices also

face the pests, epidemics and vagaries of

weather.

5. Existence of strong competitors in the

global market for certain products like

cinnamon, cumin, nutmeg, clove,

cardamom, black pepper, etc.

6. Modern processing technologies,

cultivation and post-harvest techniques

need attention for a better marketing of

the product.



7. Dominance of unorganized sector which

sell in open markets and unbranded

products without quality evaluation.

8. Small land holdings hamper the farmers

from implementing good cultivation

practices, non-coverage of crop insurance

and inability for marketing.

The Government together with the private

sector involvement must overcome these

challenges to make the spices sector one of

the largest in the world.

Team at Raju and Prasad



Policy Watch

RBI Withdrawal of the Incremental CRR

RBI vide Notification No. RBI/2016-17/174

dated 7th December 2016 has withdrawn the

incremental Cash Reserve Ratio (CRR) of 100

per cent of the increase in NDTL between

September 16, 2016 and November 11, 2016.

This withdrawal shall come into effect from the

fortnight beginning from December 10, 2016.

https://www.rbi.org.in/Scripts/NotificationUser

.aspx?Id=10768&Mode=0

Indirect Tax Waiver of Service Tax on card

transactions up to Rs 2000

Ministry of Finance vide Notification No.

52/2016 dated 8th December,2016 has

exempted the services by an acquiring Bank ,

to any person in relation to settlement of an

amount up to two thousand rupees in a single

transaction through Credit Card, debit card,

charge card or other payment card service.

“Acquiring bank” means any banking

company, financial institution including non-

banking financial company or any other

person, who makes the payment to any

person who accepts such card.

http://www.cbec.gov.in/resources//htdocs-

servicetax/st-notifications/st-notifications-

2016/st52-2016.pdf

Exemption of Excise Duty on Point

of Sale Goods


35/2016- Central Excise dated 28th November

2016 has exempted the Point of Sale (POS)

devices and goods required for its

manufacture from Central Excise Duty. This

exemption shall be valid till 31st March, 2017.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10768&Mode=0

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10768&Mode=0

http://www.cbec.gov.in/resources/htdocs-servicetax/st-notifications/st-notifications-2016/st52-2016.pdf






cbec/excise/cx-act/notifications/notfns-

2016/cx-tarr2016/ce35-2016.pdf

Exemption of Excise Duty on

Branded Gold Coins


36/2016- Central Excise dated 1st December

2016 has exempted the Gold Coins of Purity

99.5% and above, silver coins of purity 99.9%

and above, bearing a brand name when

manufactured from gold and silver on which

originally duty of customs or excise has been

paid.


cbec/excise/cx-act/notifications/notfns-

2016/cx-tarr2016/ce36-2016.pdf

Verdicts

Direct Taxation

Interest subsidy, power subsidy,

etc. are not Income from Other

Sources

-vide decision of Supreme Court Vide Commissioner

of Income tax Vs Meghalaya Steels Ltd

Supreme Court Vide Commissioner of Income

tax Vs Meghalaya Steels Ltd, it was held that

the transport Subsidy, interest subsidy, power

subsidy and insurance subsidy received by the

assessee as reimbursements of manufacturing

cannot be treated as Income from other

sources and are admissible deductions u/s 80-

IB and 80-IC. It is also explained that "income

from other sources" is a residuary head of

income that can be availed only if income

does not fall under any of other four heads of

income and subsidies for reimbursement of

cost incurred in production of goods are

includible under head "profits and gains of

business or profession" and, therefore, cannot

be included under head "income from other

sources".

http://www.cbec.gov.in/resources/htdocs-cbec/excise/cx-act/notifications/notfns-2016/cx-tarr2016/ce35-2016.pdf








https://www.taxmann.com/filecontent.aspx?

Page=CASELAWS&multipage=false&id=10101

0000000167335&isxml=Y&search=&tophead=tr

ue&tophead=true

Rate of royalty is at ALP if it is

approved by RBI and Ministry of

Industry

-vide decision of Mumbai ITAT vide Assistant Commissioner of Income tax 10(2) Mumbai, V. Dow Agrosciences India (P) ltd,

Mumbai ITAT vide Assistant Commissioner of

Income tax 10(2) Mumbai, V. Dow

Agrosciences India (P) ltd, it was held that

royalties paid by assessee to its Associated

Enterprise were to be considered as arm’s

length price since the payments are in terms

of approval granted by Secretariat of

Industrial Approval (SIA) and also in terms of

Reserve Bank of India. In this case royalties

paid at rate of 8 per cent on export and 5 per

cent on domestic sales were to be considered

as at arm's length rate.

https://www.taxmann.com/fileopennew.aspx

?id=101010000000170687&mode=home&pag

e=

Developer constructing Airport and

Bridges for Govt. agencies entitled

to sec. 80-IA relief

-vide decision of High Court of Jammu & Kashmir vide Commissioner of Income tax V. TRG Industries (P) Ltd

High Court of Jammu & Kashmir vide

Commissioner of Income tax V. TRG Industries

(P) Ltd held that where assessee-company,

carrying on business of developer, entered

into valid contract with government and

government agency for constructing bridges

and developing airports and railway system,

deduction under section 80-IA should be

granted on profits and gains arising from such

contract since the assessee satisfies provisions

of section 80-IA(4)(i) applies to an enterprise

carrying business of a developer.

https://www.taxmann.com/fileopennew.aspx

?id=101010000000172123&mode=home&pag

e=

Please see next page

Disclamer Information in this Newsletter, charts, articles,

or any other statements regarding market or

any other financial information, is obtained

from the sources, which we feel reliable. We

do not warrant or guarantee the timeliness or

accuracy of the information.The reader shall

not take any decision based on the facts or

figures of the newsletter without professional

advice.

https://www.taxmann.com/filecontent.aspx?Page=CASELAWS&multipage=false&id=101010000000167335&isxml=Y&search=&tophead=true&tophead=true




https://www.taxmann.com/fileopennew.aspx?id=101010000000170687&mode=home&page=








►►► PHOTOGRAPH OF THE MONTH

A Pond Heron at Sewri Mud Flats Mumbai

- Clicked by M Siva Ram Prasad

Please visit http://www.rajuandprasad.com/newsletter.php for earlier issues

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spices sector

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