What is a vote on account?

The Congress-led UPA government is seeking vote-on-account in the budget session of Parliament that began on Thursday. Since this will be the final session before coming Lok Sabha elections to be held in April-May, the regular budget for fiscal 2009-10 will be left for the new government. Vote-on-account to meet government's expenditure till the new government takes over will be met from Consolidated Fund of India.

1)     What is a vote-on-account?

It is literally a vote on the accounts of the Government of India. No money can be spent by the government without the Parliament approving it; so after the government presents the accounts of expenditure and income, the Parliament approves it. Only after this does the government gets to spend the money. Generally, a vote-on-account is sought for three months, to be replaced by the regular budget.

2)     So why is the Government presenting a vote-on-account?

In the normal course of budget-making and passing, the Budget is presented on February 28, after which there is a discussion and the details are scrutinized by a Parliamentary committee. It is usually by the middle of May when the actual Budget gets approved and passed. This will be in the middle of the elections, or may even be after a new government is sworn in, depending upon the election schedule. So, since the retiring government can't get the Budget passed, it is getting a vote-on-account. This is also known as an Interim Budget sometimes.

The full budgeting is done from April 1 to March 31. So, the sanction that the government gets from Parliament for spending expires on March 31. But the new Budget gets passed only in mid-May. So, after the Budget is presented on February 28, the government moves a vote-on-account which gets it Parliament's sanction to spend money for another two months or so.

Citing that they have the responsibility to protect the interests of their minority shareholders, public-sector banks have sought the right to appeal in tribunals and high courts in income tax cases.

In many instances, banks are not satisfied with the orders of the income tax commissioners (appeals) in cases of disputes over the assessment of the income tax of banks. Then, the banks are required to appeal to the income tax appellate tribunal.

Also, in many cases, the Committee on Disputes does not permit banks to pursue the case before the appellate tribunal or high court. This refusal leaves no scope for judicial pronouncement in the case. All government-owned entities have to mandatorily take permission from the committee, if they decide to resort to litigation against government departments, failing which the tribunal or high court will not entertain the matter.

The IBA has approached the government to permit banks to file appeals before tribunals since there is provision for the same in the Income Tax Act. The association further suggested that representatives of public sector entities, including banks, should be nominated on the Committee on Disputes to facilitate amicable resolution of disputes referred to it

Resident taxpayers are now required to disclose in their income tax
returns all incomes derived in treaty countries and where such income
may be taxed.

Such foreign source incomes have to be included in the total income
chargeable to tax in India, but the Indian resident would be allowed to
avail himself relief of double taxation through the `elimination
method' or any other method specified in the DTAA (Double Taxation
Avoidance Agreements), according to a CBDT notification issued here.

A DTAA seeks to eliminate double taxation through exemption method
(also known as elimination) or credit method. In credit method, the
residence country grants credit for taxes paid by its resident in the
source country. In exemption method, the residence country exempts the
income that has arisen in the source country.

The new company law proposes to remove the time limit for claiming
dividend. The Companies Bill 2008 – recently cleared by the Cabinet and
to be placed before Parliament soon – has removed the 7 year ceiling up
to which unclaimed dividend remains safe in the government's treasury
after which the investor's claim lapses.

Unclaimed dividend of investors is transferred to the Investor
Education and Protection Fund (IEPF). The fund, which is maintained by
the ministry of corporate affairs, allows claims only for seven years
from the date of declaration of dividend. This limit is now proposed to
be removed. This would mean that the rights of the investors to claim
their unpaid dividend amounts credited to IEPF do not pass away even
after 7 years.

With a view to liberalizing the procedure further, RBI has decided to
raise the limit of USD 100,000 for advance remittance for all
admissible current account transactions for import of services without
bank guarantee to USD 500,000 or its equivalent.

Where the amount of advance exceeds USD 500,000 or its equivalent, a
guarantee from a bank of international repute situated outside India,
or a guarantee from an Authorized Dealer (AD) Category – I bank in
India, if such a guarantee is issued against the counter-guarantee of a
bank of international repute situated outside India, should be obtained
from the overseas beneficiary.

AD Category – I banks should also follow-up to ensure that the
beneficiary of the advance remittance fulfils his obligation under the
contract or agreement with the remitter in India, failing which, the
amount should be repatriated to India.

Foreign companies without a permanent establishment (PE) in India and
providing research facilities to Indian firms for developing new drugs
are exempt from paying tax in the country. Further, unless there is a
transfer of technology or know-how to the recipient of the service, it
cannot be classified as technical services, the Authority for Advanced
Rulings (Income Tax) has said.

The AAR's decision comes in the case of a Canadian company Anapharm
Inc, which conducts bio-analytical tests on drugs, manufactured by
Sandoz Pvt Ltd and Ranbaxy Research Laboratories.

The AAR has ruled that fees received for undertaking such tests should
be considered as business income, but since it does not have a PE in
India, it is not liable to pay tax in the country under the Indo-
Canadian DTAA.

The Securities and Exchange Board of India (SEBI) is all set to take
the Application Supported by Blocked Amount (ASBA) concept — where
money does not leave the applicant's account when he applies for shares
in public issues — to the next level.

After having success in the public issue of 20 Microns where nearly 10%
of the retail bids came through ASBA, the market regulator wants to
extend the facility to other types of issuances, including rights
issues. Merchant bankers and registrars, who are handling rights
issues, say that SEBI has asked them to incorporate ASBA in the
forthcoming issues.

Following the introduction of currency futures, exchange-traded
interest rate derivatives may soon make their debut. A committee of RBI
and SEBI is working on the final guidelines, which is expected to be
disclosed by the end of January 2009.

An interest rate future is a standardised contract traded on an
exchange to buy or sell an underlying asset (rupee interest rate in
this case) at a certain date in future at a specified price on
Thursday. The product is used to hedge volatility in the Indian
interest rate.

The RBI committee had suggested that since banks constitute the single
most dominant segment of the country's financial sector, they should
also be allowed to contract interest rate futures. This would help not
only to hedge interest rate risk in their financial statements, but
also take trading positions subject to regulations.

It had also suggested that interest rate futures should be exempted
from the securities transactions tax.

The Delhi I-T Tribunal has held that where the entire income of an
assessee is subject to deduction of tax at source, and the payee has
not deducted tax at source as per provisions of the I-T Act, the
assessee would not be liable to pay interest on advance tax under
section 234-B for non-payment of advance tax.

The assessee, a non-resident, was engaged in execution of a contract
and the entire income received by the assessee was subject to deduction
of tax at source. The AO calculated the tax payable by the assessee and
levied interest under section 234-B of the Act for non payment of
advance tax. The tribunal held that while estimating current tax
liability for the relevant financial year the assessee shall take into
account the credit which might be available to it by way of tax
deductible at source, as the word used while calculating advance tax
liability is 'deductible' and not 'actually deducted'. Hence, the
assessee was not required to pay advance tax to the extent of tax
deductible at source and accordingly, will not be liable to pay
interest under section 234-B for non-payment of advance tax.

The Companies Bill 2008, which was cleared by the Cabinet, last week,
is expected to come into effect latest by the end of 2009.

Companies in the SME segment can look forward to a more liberalised and
less cumbersome regulatory regime in the new Act. The new Act is all
about self-regulation with accountability. Companies will also be
allowed to conduct Board meetings and annual general meetings through
the electronic mode (video conferencing).

Companies will not be required to provide complete details on the
financials of their subsidiaries in their annual reports. In the years
to come, it will pave the way for scrapping the practice of printing
annual reports and instead, posting them on their Web site.

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Enter your vote today!  A new poll has been created for the
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So much is being done against the TATA samll car plant but the TATAs
have still not withdrawn their commitment to Bengal. Is it high time
they did that??


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