Suggestions required at the drop of the hat: (November 18, 2008)

Direct and indirect taxes teams were ushered into the CFO’s room today. We were informed that the MD (representing the Indian Corporates) had a meeting with the Finance Minister regarding the omnipresent liquidity crunch. In India any activity done has to be looked through the tax lens. One of the representations to the minister was to request changes in direct tax as well as indirect tax front for the current year (till March 2009) satisfying the following criteria:

Minimal cash outflow with respect to taxes i.e., cash is preserved
Changes that are requested do not require the consent/approval of the parliament
(Act cannot be amended)



Bullet number 2 being the deciding criteria, it lead us to the following questions:

1) Whether rules could be changed without passing through the parliament?
2) What are the tax planning / Cash preserving avenues in those rules?

(Answered only from Direct tax standpoint)
Section 295 provided us with necessary answers. Central Board of Revenue was permitted to change the rules regarding certain items. Most important of them being depreciation. So a request could be lodged to the Minister for increase in depreciation rates. (Additional depreciation of 20% is mentioned in the act itself and hence basic depreciation needs to be altered!!!). Apart from the above we could find nothing that could be done without touching the act.

Another general suggestion was regarding adjusting of refunds receivable for various against the advance tax payable for the III quarter as nothing explicit is mentioned in the act or the rules.

All the above points were incorporated and a note was put up to the MD for his discussion with the Finance Minister.

Post the heated discussion when we reworked the advance tax payable for the III quarter based on revised profit forecasts for the year we understood that MAT had become applicable and due to heavy advance tax paid in the first 2 installments no advance tax becomes payable in the III quarter (Advance tax expecting profits as per normal provisions of the income tax was paid in the first and second installments). Our suggestions if accepted and implemented ASAP by the ministry would definitely benefit the Indian Corporates and sadly would be useless to us.