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DTRTI NEWSLETTER Issue No.68/Chennai September 20, 2019
TRAINING NETWORK RELATED NEWS
A match of table tennis during the DTRTI Sports Meet (DSM) conducted for the
participants of the 60 days Induction course for DR Inspectors
Online chess tournament was conducted during the DTRTI Sports Meet (DSM) and the
final game being projected live on screen for the other participants to watch
CONTENTS Training network related news
Officer for the week – Shri D.C. Patwari, IRS, DGIT
Topic for the week – Aggressive Tax Planning Schemes
Learn the subject through a puzzle-PGBP-Expenses not deductible
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OFFICER FOR THE WEEK
Shri D.C. Patwari is an
IRS officer of 1986
Batch. His educational
qualifications are
M.Com. (Accounts) &
M.Com. (Financial
Mgmt.).
Later, he also did MBA in Public
Policy from IIM, Ahmedabad. He worked in
different capacities in Mumbai, Rajkot,
Ahmedabad, Baroda and Jaipur. Presently,
he is posted as DGIT (Inv.), Chennai with
additional charge of Kerala.
While working in Mumbai as
ACIT/DCIT, he handled Securities Scam
cases of Harshad Mehta group. He also
worked in Corporate charges in Mumbai in
different capacities and also Central charges
in Mumbai and Ahmedabad for 7 years.
His last posting in Mumbai was as
PCIT-2, Mumbai where he created the
history by doubling the budget collection
from Rs.25,500 crores to Rs.52,300 crores in
just 2 years. This was the highest ever
collection of any PCIT charge in the country.
Here, he personally found out many new
issues in bank cases and recovered the
demands created.
He has also authored a book on
“Options and Futures in an Indian
Perspective” which was first published by
JAICO in 2000 even before these
instruments were introduced in India.
Three editions and several reprints of this
book have been published so far. He has
been a regular speaker at NADT, DTRTI-
Mumbai and Ahmedabad on various topics
like Capital Market, Analysis of Financial
Statements, Framing quality assessments,
detecting corporate frauds & Examination of
witness etc.
Five posers for the officer
1. What are the 3 important leadership
principles you followed which
contributed to your success?
Ans. The three important leadership
principles that I followed are:
i) Delegation of non-core activities and
trusting subordinates which has
reduced undue work pressure and
also helped developing Team.
ii) Trying to create win-win situation in
anything I do, so that everyone
supported.
iii) Sharing the credit of success with
Team and accepting the failure as my
own. This has helped in building
credibility and wider acceptability.
2. What would you say has been your
greatest accomplishment & failure &
what did you learn from them?
Ans. My greatest accomplishment in the
department was increasing the budget
collection of PCIT-2, Mumbai charge
from Rs.25,500 crores to Rs.52,300
crores (Highest in the country) in just
two years by taking innovative steps,
finding new issues and firmly dealing
with large tax payers. This has given
me confidence that I can handle any
situation in the department at ease.
As regards failure, I can recount my
efforts during IDS 2016 in Mumbai
that I conducted many meetings and
seminars to convince assessees to
come forward and avail IDS 2016 but
till 20th August 2016, there were
hardly few who came forward. The
Scheme was staring at a big failure.
3
..
Then, we realized that unless survey and
other actions are not taken, assessees will
not avail this Scheme. After, we started
effective surveys, large number of
declarations came and Scheme became a
big success.
3. What are your suggestions for
developing next generation of
leadership in the department?
Ans. Suggestions for developing next
generation of leadership:
i) We should be firm but humble in our
approach.
ii) Core competence and specialisation
should be encouraged.
iii) Various targets should be set based on
participation of field so that they will
develop responsibility.
iv) Should develop the feeling of tax
compliance among citizens.
v) We should always focus on our core
agenda – “To collect the due taxes for
the Govt. without any fear or favour”
4. What should be the vision for the
department for the next 5 years?
Ans. Vision of Department for next 5
years:
“A highly professional and sensitive
department committed to collect due
taxes with complete transparency. We
are fully digital and follow “ease of
doing business” principle of Govt. Tax
Payer will feel proud to be associated
with our department and each of their
interaction will be pleasant”
5. What qualities do you think will
make an officer successful in the
Department?
Ans. Qualities for a successful officer:-
i) Committed to work
ii) Unbiased in approach
iii) Desire to uplift image of the
Department
iv) Perseverance and hard working
v) Self motivated
vi) Specialised knowledge in related
activity
vii) Keep work-life balance
viii) Ready to take up any challenge and
assignment
ix) Decision maker
x) Integrity and responsibility
A match of Carroms during the DSM for the of DR ITI course
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TOPIC FOR THE WEEK Aggressive Tax Planning Schemes
Compiled and provided by Shri M.S. Nethrapal, IRS, Addl.CIT (continued from the last week)
e. Further, the Tribunal did consider
that ‘Trustee-2’ would not have acted in an
unlawful manner or exposed its liability in
respect of actions to be taken for the
Transaction. However, noting that there
was no risk of either, the Tribunal was of
the view that the key decisions relating to
the sale were taken in UK, and not by the
Mauritius directors of ‘Trustee-2’. The
Trusts had shifted residencies over three
jurisdictions in a single financial year. The
Tribunal also stressed on the fact that
‘Trustee-2’ was well aware that it had a
limited role in the management of the
Trusts and was engaged merely to claim
residency in Mauritius. Therefore,
‘Trustee-2’ was only appointed to take
benefit of the Treaty and was not involved
in the independent effective management
of the trusts.
f. ‘Different persons’ issue: The
Tribunal dismissed the hypothetical
‘snapshot’ argument dealing with
residency of a trust across multiple
jurisdictions in a single tax year. However,
the Tribunal briefly touched upon the
argument of taxation of trust versus the
trustee, as the former is taxed as per
Mauritius law and the latter as per UK law.
The issue revolved around whether the
Treaty can be used in a circumstance
where different entities are being taxed in
Mauritius and UK albeit in respect of the
same income. The Tribunal was of the
view that the focus of the Treaty was to tax
streams of income, and did not
differentiate based on the identity of the
person liable to tax.
There are innumerable cases on similar
lines and the same clearly shows that the
place of effective management is where
the actual decision making is done.
36. Apart from the above Judicial
precedents some of the other factors to
consider while looking into the Place of
Effective Management are given below:
a. Actual conduct is of relevance and
implicit in the evaluation of POEM, i.e. to
say, what analysis of POEM has always
emphasized is the ‘reality’, ‘actual state of
affairs’. The ‘puppet directors / dummy
directors’ have always been disregarded.
Not only the OECD and UN MCs, but also
the supreme court has emphasized that it
is not the power or the capacity to manage
and control, but the actual control and
management that is relevant, or, in other
words, not the de jure C&M but the de facto
C&M which is relevant. Refer also the
following extracts from SC ruling in the
case of Vodafone:
“Where the subsidiary’s executive directors’
competencies are transferred to other
persons/ bodies or where the subsidiary’s
executive directors’ decision making has
become fully subordinate to the Holding
Company with the consequence that the
subsidiary’s executive directors are no more
than puppets then the turning point in
respect of the subsidiary’s place of residence
comes about.”
b. Proper documentation to be
maintained for agenda, discussion,
records, appraisal- It is important to
examine the trail of documents in the form
of agenda papers or in the form of
proposals leading to preparation of agenda ..
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papers for the Board meetings. It is
possible that, the preparation may not be
in the same jurisdiction in which the
directors normally meet. It is also possible
that professional advice may have been
sought in the preparation of proposals or
agenda papers. What is of greater
relevance is the record of debate by the
Board of Directors (BOD) before
arriving at a positive or negative
conclusion on a matter involving policy
decision. The better the quality of the
debate, the better are the chances to
establish that the decision making was
at the place of BOD meeting.
c. When a company has a BOD
comprised of persons who have strong
knowledge and understanding of the
subject which is being debated or
evaluated, it is a strong prima facie
evidence that the de facto management is
by the BOD – particularly in a case where
the agenda papers and minutes offer a
support that there was in-depth discussion
on the views and proposals which were
put forth before the BOD.
d. Independence of Directors Apart
from being competent, the BOD may need
to be independent too. Independence of
directors is a free state of mind. In absence
of any evidence to the contrary, a BOD
acting in a fiduciary capacity would be
regarded as acting independent and not
under parental/ shareholders’ influence.
So long as the BOD is competent and
independent, it is not relevant that the
BOD seeks opinion or views of the
professionals or the advisors or the
employees of the company. Seeking
advice for decision making is different
compared to surrendering oneself to
the decisions which are ‘dictated’.
e. Video Conferencing and Circular
Resolutions- In case of Board or
Committee Meetings held through video
conferencing, it may become imperative to
identify the place where the Board
Meeting held depending on the relevant
corporate laws of the jurisdiction to which
the entity is subject to.
All the above factors are necessary to
consider to actually evaluating the
place of effective management of the
company. The above guidance would
act as a good starting point for handling
dual residency arrangements pre 2017.
Post 2017, CBDT has provided a
detailed guidance on Place of Effective
Management through a detailed
circular and the above factors are also
in line with the above circular and the
same may be followed in those.
(to be continued)
..
சீபம்ந சி்பொடு ீங்குந் னி
ீபம்ந யுமைனொப ்ப ொலி் – கு் 195
இின குணதத்வப ்ன் ப ொ்கம ்
ப ொ்ொ், அவப ்பருமநயுந், புகழுந்
அ்பொழுதத ீங்கிவிடுந்.
Reputation and respect will be lost
when an affable person speaks
worthless words.
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LEARN THE SUBJECT THROUGH A PUZZLE
CROSSWORD ON PGBP – EXPENSES NOT DEDUCTIBLE
1 2
3 4
5
6
7 8 9
10
11
12
13
14
15
16 17
..
ACROSS:
3. Expenditure incurred on
advertisement in any souvenir, brochure,
tract, pamphlet or the like published by a
_______________ not allowed as deduction
(Section 37(2B)) (9, 5)
6. Any sum paid on account of _________
tax shall not be allowed as deduction
(Section 40(a)(ii)) (6)
7. Any payment to a provident or
other fund established for the __________ of
employees of the assessee, unless the
assessee has made effective arrangements
for TDS from any payments made from the
fund which are chargeable to tax under the
head "Salaries" (Section 40(a)(iv)) (7)
8. 30% of any sum payable to a
______________ on which tax is deductible at
source under Chapter XVII-B is disallowed,
where such tax has not been deducted or
after deduction, not paid on or before the
due date of filing of return specified u/s
139(1). (Section 40(a)(ia)) (8)
10. Any amount paid by way of royalty,
_____________, service fee, privilege fee,
service charge or any other fee or charge,
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..
by whatever name called, which is levied
exclusively on; or which is appropriated,
directly or indirectly, from, a State
Government undertaking by the State
Government. (Section 40(a)(iib)) (7, 3)
12. In the case of any firm assessable
as such, deduction shall not be allowed in
respect of any payment of salary, bonus,
_______________ or remuneration to any
partner who is not a working partner
(Section 40(b)(i)) (10)
13. ___________ payable outside India or
in India to a Non-Resident without TDS
shall not allowed as a deduction (Section
40(a)(iii)) (6)
15. Any sum paid on account of
__________ tax shall not be allowed as
deduction (Section 40(a)(iia)) (6)
16. Deduction shall not be allowed in
respect of any payment of __________ to any
working partner, if it exceeds the amount
calculated at the rate of twelve per cent
simple interest per annum (Section
40(b)(iv)) (8)
17. ____________________ means an
individual who is actively engaged in
conducting the affairs of the business or
profession of the firm of which he is a
partner (7, 7)
DOWN:
1. Interest, Royalty, fees for technical
services or other sum chargeable to tax
which is payable outside India or in India
to a ______________ or Foreign Company on
which tax is deductible at source under
chapter VII-B and such tax has not been
deducted or after deduction, not paid on or
before the due date of filing of return
specified u/s 139(1) are not deductible
(Section 40(a)(i) – 100% disallowance)
(3, 8)
2. Any consideration paid or payable
to a non-resident for a _______________ on
which equalisation levy is deductible
under the provisions of Chapter VIII of the
Finance Act, 2016, and such levy has not
been deducted or after deduction, has not
been paid on or before the due date
specified in sub-section (1) of section 139
(Section 40(a)(ib)) (9, 7)
4. Any sum paid on account of
__________________ tax under Chapter XIIH
shall not be allowed as deduction (Section
40(a)(ic)) (6, 7)
5. Where an individual is a partner in
a firm on behalf, or for the benefit, of any
other person in a __________________ capacity
and interest paid by the firm to the person
shall be taken into account for deduction
(14)
8. Deduction shall not be allowed in
respect of any payment of ________________ or
interest to any working partner, which is
not authorised by, or is not in accordance
with, the terms of the partnership deed
(Section 40(b)(ii)) and the payment
should relate after the date of such
partnership deed (Section 40(b)(iii))
(12)
9. Tax of the employee paid by the
Employer on ______________ not provided by
way of monetary payment shall not be
allowed as deduction (Section 40(a)(v))
(11)
11. Deduction shall not be allowed in
respect of any payment of remuneration to
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..
any working partner, provided the
payment to all the partners during the
previous year exceeds the aggregate
amount on the first Rs.3,00,000 of
________________ or in the case of loss,
Rs.1,50,000 or 90% of ___________________
whichever is more and on the balance of
___________________ @ 60% (Section
40(b)(v)) (4, 6)
14. Where an individual is a _____________
of an association of persons of body of
individuals other than a company or a co-
operative society, any payment of interest,
salary, bonus, commission or
remuneration, made by such association
or body to him shall not be allowed as
deduction (Section 40(ba)) (6)
Please e-mail your answers to [email protected]
And the first correct entry will be rewarded. Answers will follow in the next issue.
Enclosed संलग्न
Further information अधधक जानकारी
Concerned official संबंधधत कममचारी
Office Note कायामलय धिप्पणी
Annexure अनुलग् नक
–
Copy of the letter referred to the above is
enclosed herewith. उपयुमक्त संदधभमत पत्र की प्रधतधलधप इसके साथ संलग्न है l
Please contact the DDO for further
information regarding the bill. धबल के संबंध में अधधक जानकारी के धलए कृपया आहरण
एवं संधवतरण अधधकारी से संपकम करें l
The concerned official may please be
informed accordingly. कृपया संबंधधत कममचारी को तदनुसार सूधचत धकया जाए l
I fully agree with the office note. मैं कायामलय धिप्पणी से पूणमतः सहमत हूँl
Please put up the letter alongwith its
Annexures. कृपया पत्र को इसके अनुलग् नको ंके साथ प्रसु्तत करें l
Final match of the badminton tournament held as part of DTRTI Sports Meet (DSM)
during the Induction Course for DR Inspectors
Published by: Team DTRTI, Chennai