Taxation Laws in India: Understanding Direct and Indirect Taxation, Essays (university) of Tax Legislation and Financial Law

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PROPOSED COURSE

MANUAL

TAXATION LAW

(B.A, LL.B)

Course Instructor

Mr. Kinshuk Jha

Ms. Ashrita Kotha

Part I

Course Title Taxation Law

Course Code

Corse Duration One semester

Level Fourth year of B.A,LL.B

Medium of Instruction English

Pre-requisites Nil

Pre-cursors Nil

Equivalent courses Nil

Exclusive courses Nil

Course Intended learning outcomes

Course objective

By the end of the course

students

should be able to:

Teaching and

Learning

Activities

Assessment

Tasks/ Activities

Analytically and critically

describe and explain the

substantive principles of

direct and indirect

taxation pertaining to the

topics to be covered in the

syllabus.

Analyse and critically

evaluate:

 issues and concerns

in the fields of

direct and indirect

taxation

Weighta

ge

Weighta

ge

Reading of relevant

cases and other

material and

research.

Students will

acquire knowledge

of the scheme of

direct and indirect

taxation pertaining

to the topics to be

covered in the

syllabus.

Students will

be

encouraged to

participate in class

discussion to

develop their

analytical and

critical skills.

Lectures

Students will be

given guidance

on their reading and

research for their

lectures and

tutorials.

End-of-course

closed book, timed

examination

(50% of marks)

Tutorials (25% of

marks for

attendance,

presentation and

participation)

Assignment/s(25%

of marks for case

reviews/case

studies, etc.)

Students’ ability to

describe and

explain the main

substantive rules of

direct and indirect

taxation on topics

covered in the

syllabus will be

tested on all three

assessment

parameters.

End-of-course

examination

+Tutorials

 the operation of the

principles of

corporate taxation

and taxation of

commodities

 the practical

implications of the

taxation principles

on international

trade and commerce

 the practical

implications of the

taxation principles

and their social

contexts.

Apply the principles of

corporate taxation to solve

legal problems by:

 researching issues

of corporate

taxation

 analysing and

innovating to

resolve problems

concerning issues of

corporate taxation.

 communicating

their solutions orally

and in writing

clearly, coherently

and accurately in

their own words and

in plain language

Weighta

ge

Students will, by

responding to

questions and

performing

exercises, develop

their analytical and

critical capabilities

to discuss important

issues of taxation on

corporations and

commodities.

Students will be

introduced to issues

and concerns and

aspects of the

operation of the

principles of direct

and indirect

taxation.

Preparation for

tutorials

Students will

research on the

issues of direct and

indirect taxes,

corporate taxation

and international

taxation.

Tutorials

Students will give

presentations on

selected topics in

which they will

+Assignments

Students’ ability to

analyse and

critically evaluate

will be tested by all

three assessment

tasks/activities to

determine their

ability to apply the

legal principles to a

given factual

situation.

End-of-course

examination

Students’ ability to

apply the principles

of law to given

situations and

resolve problems

will be examined.

Tutorials

Students will be

required to make

presentations on

problems and

questions allotted

to them and all

students will be

required to

participate and

contribute to

tutorial discussions

whether they are

making a

presentation

research, analyse

and resolve

problems, and

communicate

solutions orally will

be tested.

subject matter, thorough

understanding of issues; ability to

synthesize ideas, rules and principles

and critical and analytical ability.

A 5 60 to 64.75 Good : Good understanding of the

subject matter, ability to identify issues

and provide balanced solutions to

problems and good critical and

analytical skills.

B+ 4 55 to 59.75 (^) Adequate : Adequate knowledge of the

subject matter to go to the next level of

study.

B 3 50 to 54.75 Marginal : Limited knowledge of the

subject matter and irrelevant use of

materials and, poor critical and

analytical skills.

F 0.0 Below 50 Failure: Poor comprehension of the

subject matter; poor critical and

analytical skills and marginal use of the

relevant materials. Will require

repeating the course.

Tutorials

To encourage participation, students would be expected to contribute in deciding

the content, format, and methodology of tutorial classes. Decided thus, tutorial

exercises will be distributed from time to time.

Student Participation

Students are required to prepare for lectures and tutorials and to participate in

them. Their participation will be assessed and graded.

Cases and other Reading Material

Corporate Tax Planning and Business Tax Procedures, 2013 Ed, Taxmann by Dr.

Vinod Kr. Singhania and Dr. Monica shall be used as the main text book for this

coursework. Communication regarding relevant chapters/reading material and

specific cases to be studied for each week’s lecture will be sent to students in

advance.

Plagiarism

Any idea, sentence or paragraph that the students cull out from the internet must

be credited with the original source. Paraphrasing or directly quoting from a web

source in the exam, presentation or essays, would require disclosure of the source.

The university has strict rules with consequences for students involved in

plagiarism.

This is an issue of academic integrity on which no compromise shall be

made.

Part III KEYWORD SYLLABUS

Direct and Indirect taxation, Taxable entities, Tax planning, Avoidance and

Evasion, Types of companies for tax purposes; Tax incidence, Tax planning in

respect to new businesses, Tax planning in respect to nonresident, Restructuring

of business, Amalgamation, Demerger, Double taxation avoidance agreements,

Transfer pricing, Authority for Advanced Ruling

Part IV DETAILED SYLLABUS

Introduction to General Principles of taxation- tax planning- avoidance-

evasion

Key features of direct and indirect taxes, canons of taxation

Constitutional provisions with respect to taxation laws

Corporate taxation in India- Concept of company- Indian company- Foreign

Company- Industrial Company- Investment Company- Widely held

company- closely held company

Key concepts of the Income Tax and Wealth Tax

Residential Status and tax incidence- incidence of tax

Concepts of Previous Year and Assessment Year, Assessment Procedure

Concept of Residential status

Tax planning with reference to new business- nature and form of new business- tax

planning with reference to financial management decisions- tax planning with

reference to managerial decisions

Restructuring Business and Amalgamation- Merger- Conversion of Sole Proprietary

Business or Firm into Company- Slump Sale- Transfer of Assets between Holding

and Subsidiary Companies- Conversion of Company into Limited Liability

PERSPECTIVE, Isaac William Martin, Ajay K. Mehrotra, Monica Prasad, eds., New

York: Cambridge University Press, 2009; Indiana Legal Studies Research Paper

No. 147. Available at SSRN: http://ssrn.com/abstract=

Mankiw, N. Gregory and Weinzierl, Matthew and Yagan, Danny, Optimal Taxation

in Theory and Practice (June 11, 2009). Harvard Business School BGIE Unit

Working Paper No. 09-140. Available at SSRN: http://ssrn.com/abstract=

or http://dx.doi.org/10.2139/ssrn.

Thomas Sowell, “Trickle Down” Theory and “Tax Cuts for the Rich ”,

http://www.tsowell.com/images/Hoover%20Proof.pdf

Malloy, Robin Paul, Adam Smith in the Courts of the United States (May 1, 2010).

Loyola Law Review, Vol. 56, No. 3, p. 33, 2010. Available at SSRN: http://ssrn.com/

abstract=

Bandyopadhyay, Sankha Nath, The Problem with Tax: Planning, Avoidance or

Evasion? (July 8, 2012). Available at SSRN: http://ssrn.com/abstract=2102282 or

http://dx.doi.org/10.2139/ssrn.

Slemrod, Joel B. and Yitzhaki, Shlomo , Tax Avoidance, Evasion, and Administration

(January 2000). NBER Working Paper No. w7473. Available at SSRN:

http://ssrn.com/abstract=

Infanti, Anthony C. and Crawford, Bridget J., Critical Tax Theory: An Introduction

(January 1, 2009). CRITICAL TAX THEORY: AN INTRODUCTION, Cambridge

University Press, 2009; U. of Pittsburgh Legal Studies Research Paper No. 2009-

4. Available at SSRN: http://ssrn.com/abstract=

Vann, Richard J., 'Liable to Tax' and Company Residence under Tax Treaties

(November 23, 2010). RESIDENCE OF COMPANIES UNDER TAX TREATIES AND

EC LAW, EC AND INTERNATIONAL TAX LAW SERIES, Vol. 5, pp. 197-271, G.

Maisto, ed., IBFD: The Netherlands, 2009; Sydney Law School Research Paper No.

10/131. Available at SSRN: http://ssrn.com/abstract=

Shaviro, Daniel, The Forgotten Henry Simons (November 27, 2012). NYU Law and

Economics Research Paper No. 12-39, read pp. 30-47. Available at SSRN:

http://ssrn.com/abstract=

or http://dx.doi.org/10.2139/ssrn.

Cockfield, Arthur J., Introduction: The Last Battleground of Globalization (August

23, 2010). GLOBALIZATION AND ITS TAX DISCONTENTS: TAX POLICY AND

INTERNATIONAL INVESTMENTS, Arthur J. Cockfield, ed., pp. 3-17, University of

Toronto Press, 2010. Available at SSRN: http://ssrn.com/abstract=

Nguyen, Xuan-Thao and Maine, Jeffrey A., The History of Intellectual Property

Taxation: Promoting Innovation and Other Intellectual Property Goals? (July 12,

2011). Southern Methodist University Law Review, Vol. 64, 2011. Available at

SSRN: http://ssrn.com/abstract=

Gupta, Sayantan, Cross-Border Mergers and Acquisitions: Addressing the Taxation

Issues from an Indian Perspective (December 4, 2008). Corporate Professionals

Today, CPT, Vol. 13. No. 6, p. 525, 2008. Available at SSRN:

http://ssrn.com/abstract=

Goutam, Swapneshwar, Concept of Slump Sale & Taxation Issues in India

(November 28, 2010). Available at SSRN: http://ssrn.com/abstract=1716182 or

http://dx.doi.org/10.2139/ssrn.

Chaturvedi, Nishant and Sharma, Priyesh and Makkar, Karandeep, Applicability of

Minimum Alternate Tax in India (February 11, 2011). Available at SSRN:

http://ssrn.com/abstract=

or http://dx.doi.org/10.2139/ssrn.

Raju, Dr. K. D., Intellectual Property Taxation in India: Need for a Comprehensive

Policy and Law (July 21, 2008). Available at SSRN:

http://ssrn.com/abstract=1166546 or http://dx.doi.org/10.2139/ssrn.

Thacker, Sunil, A Study of the Indian Tax System - Part I and II (October 17, 2008).

Tax Notes International, Vol. 52, No. 2, 2008. Available at SSRN:

http://ssrn.com/abstract=

Jha, Raghbendra, Indirect Tax Reform and Fiscal Federalism in India (July 18,

2013). Available at SSRN: http://ssrn.com/abstract=2295255 or

http://dx.doi.org/10.2139/ssrn.

Anand, Manoj, Doctrine of Unjust Enrichment and Refunds Under Central Excise

Law. The Management Accountant, Vol. 30, No. 2, pp. 147-149, February 1995.

Available at SSRN: http://ssrn.com/abstract=

Dahal, Rajib, Basic Concepts and Features of Goods and Service Tax in India (May

25, 2010). Available at SSRN: http://ssrn.com/abstract=1615472 or

http://dx.doi.org/10.2139/ssrn.

Singh, Nirvikar and Srinivasan, T. N., Federalism and Economic Development in

India: An Assessment (November 6, 2006). Available at SSRN:

http://ssrn.com/abstract=950309 or http://dx.doi.org/10.2139/ssrn.

Jain, Tarun, Investments Through DTAA Route in India and Strategic Tax Planning

(July 20, 2011). Institute of Business Laws Newsletter, No. 2, August 2011.

Available at SSRN: http://ssrn.com/abstract=

VanderWolk, Jefferson P., The New World of Tax Information Exchange (February

18, 2010). Asia-Pacific Journal of Taxation, Vol. 13, No. 2, Autumn/Winter 2009.

Available at SSRN: http://ssrn.com/abstract=

Göx, Robert F. and Schiller, Ulf, An Economic Perspective on Transfer Pricing

(February 1, 2006). Available at SSRN: http://ssrn.com/abstract=885480 or

http://dx.doi.org/10.2139/ssrn.

Dean, Molly and Feucht, Frederick J. and Smith, Murphy, International Transfer

Pricing Issues and Strategies for the Global Firm. Available at SSRN:

http://ssrn.com/abstract=

Baistrocchi, Eduardo A., The Use and Interpretation of Tax Treaties in the

Emerging World: Theory and Implications (September 24, 2008). British Tax

Review, No. 4, 2008. Available at SSRN: http://ssrn.com/abstract=

Statutory References-

Indian Companies Act, 1956

Limited Liability Partnership Act, 2008

Income Tax Act, 1961

of Schedule VII of the Constitution of India to levy tax on all income other

than agricultural income (subject to Section 10(1)). The Income Tax Law

comprises of the Income Tax Act 1961, Income Tax Rules 1962,

Notifications and Circulars issued by Central Board of Direct Taxes

(CBDT), Annual Finance Acts and Judicial pronouncements by Supreme

Court and High Courts.

 Key concepts and principles of the Income Tax, Tax base and Concept of

Income, case laws:

(C. I. T. v. Shaw Wallace, 59 I.A. 206), (Emil Webber v. C. I. T., 200 ITR 483

(SC))

(Minister of Finance v. Smith, 1927 A.C. 193)

(Godhra Electric Company v. C. I. T., (1997) 4 SCC 530) (Poona Electric

Supply v. C. I. T., 57 ITR 521)

 Fully and partly exempted Income

 Incidence of Income, Tax Incentives

 Choice of Accounting Method, Assessment Function

 Collection Function

 Structure of Income Tax Administration

 Offences under I.T Act

 Taxpayer’s rights and remedies

Week 4 Income Tax and Wealth Tax: Key concepts

 Residential Status and Incidence of tax

 Concepts of previous year and assessment year

 Assessment Procedure

 Taxable Income - Computation

 Tax Liability- Computation

 Key concepts and principles of Wealth Tax Act, 1957

Week 5 Corporate Tax in India

Company whether Indian or foreign is liable to taxation, under the Income

Tax Act, 1961. Corporation tax is a tax which is levied on the incomes of

registered companies and corporations.

 Concept of a company [Sec 2(17)]

 Indian Company[Sec. 2(26)]

 Domestic Company Foreign Company, Industrial Company

 Company in which Public are substantially interested[Sec. 2(18)]

 Investment Company

 Widely held Company

 Closely held Company

 Residential status and Tax Incidence [Sec. 6(3)] and [Sec. 5]

Week 6 and 7 Capital Gains Taxation

 Concept of Capital Gains and Loss on Capital

 Capital and Revenue receipts

 Long Term Capital Gains

 Short Term Capital Gains

 Computation exercises

 Exemptions under Section 54

Week 8 Tax Planning/Avoidance/Evasion- Concept in Brief, Tax Planning in

Respect of Non Resident

 Residential status

 Income taxable in the hands of Non-resident in India

 Income deemed to accrue or arise in India [Sec. 9]

 Case study of Vodafone International Holdings B.V. v. Union of India & Anr.,

(2012) 6 SCC 613, in the light of sections 5(2), 9(1) and 195 of the Income

Tax act, 1961. (Taxation of capital gains under Section 9 (1) (i) for an

overseas sale related to Indian assets)

Week 9 Double Taxation Avoidance Agreements

Double taxation is the levying of tax by two or more jurisdictions on the

same declared income (in the case of income taxes), asset (in the case of

capital taxes), or financial transaction (in the case of sales taxes). This

double liability is often mitigated by tax treaties between countries. In

India, the provisions related to DTAA are laid in Sec. 90, 90A and 91 of the

Income Tax Act, 1961

 Legal status of DTAA

 Broad Features of DTAA

 UN and OECD Model Conventions

 Methods for elimination of Double Taxation

 Non –Discrimination Provision

 Misuse of DTAA

Week 10 Transfer Pricing: Key concepts

Increasing participation of multi-national groups in economic activities in

India has given rise to new and complex issues emerging from transactions

entered into between two or more enterprises belonging to the same

group. Hence, there was a need to introduce a uniform and internationally

accepted mechanism of determining reasonable, fair and equitable profits

and tax in India in the case of such multinational enterprises. Accordingly,

the Finance Act, 2001 introduced law of transfer pricing in India through

sections 92A to 92F of the Indian Income tax Act, 1961 which guides

computation of the transfer price and suggests detailed documentation

 Valuation of Goods [Sec 14, Customs Tariff Act, 1975]

 Duty Drawback [Sec 74, 75 Customs Tariff Act, 1975]

Week 14 Objects and structure of Central Excise

Excise is a duty on goods indigenously manufactured. The taxable event for

Central Excise is ‘manufacture’. It is an indirect tax because even though it

is levied on the manufacturer, the manufacturer passes the burden of

taxation on to the consumer of the goods by including the tax in

the price of the goods. Central Excise is levied in India through the

Central Excise Act, 1944 (“the CE Act”). Central Excise is levied by the

Union under Entry 84 of List I of the Seventh Schedule.

 CENVAT, Goods , Salability of Goods, Read Union of India v. Delhi Cloth and

General Mills

 Taxable event, Read Empire Industries v. Union of India, 20 ELT 179

 Concept of Manufacture, Read Union of India v. Delhi Cloth and General

Mills, 1 ELT 199

 Concept of manufacturer

 Central Excise Tariff

 Valuation of excisable goods

Week 15 Objects and structure of VAT, the advent of GST in India:

Introduction, key concepts

Value-added Tax is a system of taxation that seeks to avoid the cascading

effect of taxation. For instance, excise is imposed on the manufacture of

goods, and such goods are used as raw materials in another industry, and

excise is imposed again on the finished goods. In the second stage, excise

duty is not only being imposed on the goods, but also on the excise duty

used in manufacture of raw materials. In a value-added tax system, a

manufacturer is given credit for the tax paid on the inputs for her industry,

and avoids a tax on tax.

To conclude the unit of Indirect taxes, Goods and Services Tax (GST) will

be discussed. This is a system of indirect taxes to be implemented in India,

the decision on which is pending. It will replace all indirect taxes levied on

goods and services by the Indian Central and State governments. It is

aimed at being comprehensive for most goods and services, thus avoiding

multiple layers of taxation that currently exist in India.

 Modified Value Added Tax

 MODVAT procedures

 Varieties of VAT

 Methods of computation of VAT (Addition, Subtraction, Tax Credit or

Invoice)

 Principles of VAT

 Advantages of VAT system

 Problems in introducing VAT in federal countries like India

 The position in other federal countries

 Positive and Negative aspects of the present MODVAT scheme

 Background of GST

 Probable Implications