Some points on which industry was expecting clarification are as under:

3G Business: Clarity on admissibility of  Spectrum fees

Recommendation: Specific amendment in Section 32 and Appendix I to the IT Rules to clarify that the 3G spectrum fee payment qualifies as ?Intangible asset?.

3G Business: Treatment of interest cost incurred on capital borrowed for the purpose of acquisition of 3G Spectrum

Recommendation: Specific amendment to proviso to Section 36(1)(iii) to provide for capitalization of interest cost incurred on capital borrowed for the purpose of acquisition of 3G spectrum, upto the date of commencement of provision of 3G services.

3G Business: Clarity on treatment of foreign exchange fluctuation on ECB?s arising on account of increase/reduction in liability incurred for payment of 3G spectrum fee or acquiring assets in India.

Recommendation: Specific amendment in the IT Act in section 43A with respect to deductibility / taxability of foreign exchange fluctuation on ECB?s arising on account of increase/reduction in liability incurred for payment of 3G spectrum fee or acquiring assets in India.

Prepaid issue

Recommendation: Discount offered to prepaid distributors should not be liable to TDS ? alternatively a new reduced  TDS rate say 1% can be prescribed for such discount.

Expenditure disallowed u/s 40A(i)(a)

Recommendation: Amend the provisions to the effect that No disallowance should be there under section 40A(i)(a) in case of payment of tax by the recipient of income

Time frame for disposal of appeals by Commissioner of Income Tax (Appeals)

Recommendation: On lines similar to DRP provisions, the Commissioner (Appeals) should be required to dispose off the appeal in time bound manner by amending provisions of section 250(6A).

Requirement of PAN/ Form 60/61

Recommendation: The requirement of quoting the PAN number at the time of taking a mobile connection, as per the Rule 114 B of the Income Tax Act has become redundant and should be dropped.

Section 80-IA – to companies undergoing reorganisation after 31 March 2007

Recommendation: For the new licences issued after 31st March 2005, this period should be extended upto 01.04.2011.

Tax Holiday benefits in case of mergers/ amalgamations

Recommendation: Tax holiday benefits in case of mergers/ amalgamations should be continued and the provision should suitably be amended to provide that the benefit of the tax holiday would continue to be available to the undertaking as it would have been available had the amalgamation or demerger not taken place. Alternatively, Government could bring in the effective provisions to prevent misuse instead of doing away with the provisions altogether.

Infrastructure status for telecom Industry

Recommendation: Under New DTC, Telecom be classified as Infrastructure & benefits extended to the sector be available to this industry as well.

Indirect Taxes

Service Tax – Point of Taxation Rules

  • Point of Taxation Rules announced and made effective from 1 April 2011.
  • These rules determine the point in time when the services shall be deemed to be provided for payment of service tax. General rule for this purpose would be earliest of the following dates:

–   Date on which service is provided or to be provided

–   Date of invoice

–   Date of payment

  • The above would require changes in the information technology system within 30 days for all business streams, other than for amount collected through pre-paid / recharge coupons.  This change in IT systems appears to be very difficult, in which event, non-compliance would occur on payment of service tax effective 1 April 2011.
  • These Rules should be deferred until introduction of GST, for want of time required for automation of information technology systems and possible re-engineering required again at the time of introduction of GST.