Whether when assessee fails to maintain separate accounts for taxable and non-taxable income, no wrong can be found with CIT invoking revisionary powers to disallow interest expenditure incurred on account of non-taxable income - YES: HC

THE issue before the Bench is - Whether when assessee fails to maintain separate accounts for taxable and non-taxable income, no wrong can be found with the CIT invoking revisionary powers to disallow interest expenditure incurred on account of non-taxable income. And the verdict goes in favour of Revenue.

Facts of the case

Assessee earned a sum of Rs.2,85,08,419/- on account of dividend which was not taxable. The assessee earned interest amounting to a sum of Rs.2,68,75,491/-. The assessee paid interest amounting to a sum of Rs.4,49,02,775/-. No expenditure with respect to the non-taxable income was shown. Out of the interest paid by the assessee, a sum of Rs.1,33,51,132/- was s

Significant Ruling by Mumbai Tribunal on use of filters for service companies

 

In an important ruling in the case of Capgemini India Private Limited (“CIPL”), the Mumbai Bench of the Tribunal has laid out important principles concerning benchmarking under the Transaction Net Margin Method (“TNMM”).

Brief facts

CIPL, a captive software development service provider to its associated enterprises had annual revenue of INR 5 billion in financial year 2006-07. It benchmarked its transactions using TNMM and identified four comparable companies including technology giants such as Infosys Technologies Limited (annual revenue of 130 billion) and Wipro Limited (annual revenue of
INR 100 billion). The Transfer Pricing Officer (“TPO”) added two more comparables during the audit proceedings and determined the Arms Length Price (“ALP”), which resulted in a Transfer Pricing adjustment. Further, the TPO rejected exclusion of one‑time Employee Stock Option Plan (“ESOP”) expenditure that was claimed as inoperative costs in computing the taxpayer’s margins. It also did not grant adjustment for differences in working capital levels. The Dispute Resolution Panel (“DRP”) rejected the taxpayer’s objections against the TPO’s order and did not also consider the additional comparables furnished by the taxpayer during the proceedings.

UNDERSTANDING TRANSFER PRICING WITH LATEST CASE LAWS

To read the complete article, click here

http://taxbymanish.blogspot.com/2011/08/understanding-transfer-pricing-with.html

S. 9(1)(vii): Services rendered by machines is not “fees for technical services”

Siemens Limited vs. CIT (ITAT Mumbai)

The assessee made payment to a laboratory in Germany for carrying out certain tests on circuit breakers manufactured by the assessee and to certify that the said circuit breakers met with international standards. The assessee claimed that as the said tests were carried out by sophisticated machines without human intervention, the services did not constitute “fees for technical services” as defined in s. 9(1)(vii) of the Act. The AO & CIT(A) rejected the claim on the ground that the services were “technical” in nature and that even assuming human intervention was necessary, the same was present in the form of humans observing the process, preparing the report, issuance of certificate and monitoring the machines. On appeal by the assessee to the Tribunal, HELD allowing the appeal:

Save Tax Via HUF

To read the complete article, click the link below:

http://taxbymanish.blogspot.in/2011/10/tax-planning-from-huf.html

 

Revenue Recognition

Revenue means gross inflow of cash, receivable or other consideration arising in the course of ordinary activities of an enterprise such as:

• Sale of goods;
• Rendering the services;
• Use of the enterprise resources by others yielding interest, dividends and royalties.

In other words, revenue is charge made to customers or clients for

1. Goods Supplied.
2. Rendering Services.

However, revenues from sale or rendering services should be recognized at the time of the sale or rendering of the services. If, at the time of rendering of services or sale there is significant uncertainty in ultimate collection of the revenues, then the revenue’s recognition is postponed and in such cases

Whether income of a Trust involved in mixed activities of religious and charitable nature warrants invocation of Sec 13(1)(b) - NO: ITAT

THE issue before the Bench is - Whether income of a Trust involved in mixed activities of religious and charitable nature warrants invocation of Sec 13(1)(b). And the verdict favours the assessee.

Facts of the case

The assessee is a registered trust under Ss 12A and 80G of the Act and had filed ROI with ‘Nil’ income. The AO observed that the objects of trusts included advancement of religious as well as charitable activities. The AO referred to the observations made in Tribunal decision in case of Ghulam Mohidin Trust in the decision of Landmark group and was of the view that since the assessee trust was a mixed trust it was hit by the provisions u/s 13(1)(b) of the Act. Thus, the AO assessed the income at Rs. 8,15,58,623/-. On the contrary the assessee relied on the High

Important Clarification for Salaried Employee regarding Saving of Tax

Dear Tax payee and salaried employee in this month of March-2013 more confuse that how and where the invest month for saving Tax and takes tax benefit under Chapter VIA during the assessment year 2013-14. The salaried Employee and Tax payee that what are the Tax free perquisites for Salaried Employee who deducted Tax as TDS from his monthly salary, so we suggest them all Tax Free Perquisites are as follows:
1. Medical Facility or Medical Reimbursement:

• Medical Facility :- The value of any medical treatment provided to an employee or any member of his family in a hospital, dispensary or a nursing home maintained by the employee shall be a tax free perquisite.
• Medical Reimbursement : Any sum paid by the employer in respect of any expenditure incurred by the employee on his medical treatment or treatment of any member of his family subject to maximum of Rs. 15,000 in the previous year.

2. Recreational Facilities : Any recreational facility provided to a group of employees (not being restricted to a select few employees) by the employer is not taxable.

3. Training of Employees: Any expenditure incurred by the employer, for providing training to the employees or by way of payment of fees of refresher courses attended by the employees.

An overview of Shelf Companies or an aged corporation

To begin with an overview of shelf companies or an aged corporation, a Shelf Company or an aged corporation is a company or a corporation having no present activity. Such companies are pre-fabricated; unused corporations probably put on “shelf” to “age” and have been set-up with the sole purpose of meeting client’s specific needs. Such companies have never conducted any business operations having no assets and liabilities and have been set-up exclusively for being sold. It can be sold to a person or a group of persons wishing to start a company but reluctant to undergo the procedures of creating a new one.
Going ahead with a snippet or an overview of shelf companies or an aged corporation, since registration of company in India takes about two weeks time, Shelf Companies are a very swift way of getting business doing and running with least of business set-up formalities. New Directors can be appointed within a day and a bank account can be immediately opened to start trading without delay.
Frequent reasons for buying a shelf company are:

• Save in time for the steps involved in the creation of a new company

• Showing company’s prolonged existence in order to attract consumers or investors

• Gaining effortless availability to corporate credit

• Gain opportunity to bid on contracts instantaneously

Whether Section 54F benefits are available against capital gains computed as per the deeming fiction u/s 50 - NO: ITAT

THE issue before the Bench is - Whether Section 54F benefits are not available on capital gains computed as per the deeming fiction u/s 50. And the verdict goes in favour of the assessee.

Facts of the case

The assessee is a Member of Parliament (MP) and a film actor owning M/s. Babbar Visuals. During the A.Y. under consideration the assessee had sold a plot of land in Lonavala which was purchased in the year 1984. The assessee computed capital gains after deducting indexed cost

HAPPY WOMEN DAY

An Overview of Small Scale Industries

The Micro, Small and Medium Enterprises Act, 2006 as defined by RBI is:
a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
I. A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
II. A small enterprise is an enterprise where the investment in plant and machinery is more than Rs.

Whether an intimation, which mentions that refund due to an assessee stands adjusted against tax demand raised in subsequent year, can be construed as prior intimation of proposed action u/s 245 - NO: HC

THE issues before the Bench are - Whether an intimation, which mentions that refund due to an assessee stands adjusted against the tax demand, can be construed as prior intimation of the proposed action u/s 245 of the Act; Whether a stay order can be claimed on the basis of favourable order passed by CIT(A) in assessee's own case, although the same has been challenged by the Department before the Tribunal and Whether assessee is entitled to a stay against the assessment order on the basis of Circular No. 530, when the assessee has failed to discharge the tax demand payable in monthly installments. Assessee's writ partly allowed.

Facts of the case

Assessment Year 2007-08

The assessee company is an export oriented unit and had claimed deduction u/s 10(B), which was disallowed by the AO. On appeal, the CIT(A) partly allowed the claim, and accordingly, the

BUDGET 2013 – EK DHOKHA

 

 

Dear Friends,

The Budget 2013 is a fraud to the common and innocent people of India.  I had already provided you the major highlights of Budget 2013 on the same date of the budget within 2 hours. The link of the same is given below:

http://taxbymanish.blogspot.in/2013/02/major-highlights-of-india-union-budget.html

For me the budget first looks more than a neutral as it had contains few incentives . but now as we are getting deeper and deeper and found that the incentives provided are nothing but

Service Tax Return ST 3 July 12 to Sept 12 due date extended

CBEC extends the date of e-filing of the new Service Tax Return (ST-3) for the period from 1st July 2012 to 30th September 2012, from 25th March, 2013 to 15th April, 2013.
The electronic version of the ST 3 Return is under development and is expected to be available on ACES around 20th March, 2013.
The exact date of the availability of the new ST 3 return in ACES for the period April-June, 2012 and for the period October, 2012 – March, 2013 will be announced later.
Official Notification in regard to above is expected in a day or two.

Company change of name

According to Sec 21 of the Indian Companies Act of 1956, a company change of name can only be done with the consent and approval of the Central Government and the majority shareholders of the company by way of special resolution. It must be made in writing and must be made through a special resolution. The change of name can be on company’s own motion or on the direction of a

Whether an authority which has been established to promote development of 'urban area’ and vested with powers to hold, acquire, dispose of property or frame schemes, can be considered as 'Municipality' within Sec 2(14) - YES: HC

THE issues before the Bench are - Whether an urban area developed by Haryana Urban Development Authority forms part of the Municipality - Whether land acquired by notification issued under the Land Acquisition Act, which falls within 5 kms of Haryana Urban Development Authority, can be considered as capital asset; Whether an authority which has been established to promote and secure the development of all or, any of the areas comprised in an ‘urban area’ and vested with all powers to hold, acquire, dispose of property or frame schemes, can be considered as 'Municipality' within Section 2(14) of the Act; Whether the expression 'Municipality' in Section 2(14) of the Income Tax Act is restricted to a Municipality constituted under the relevant Municipal Laws and cannot include any other area known by any other name; Whether local authority in terms of Section 3 (31) of the General Clauses Act means a 'Municipality' - Whether the nature of land whether it is agriculture or not is not relevant, if the

Whether an intimation, which mentions that refund due to an assessee stands adjusted against tax demand raised in subsequent year, can be construed as prior intimation of proposed action u/s 245 - NO: HC

THE issues before the Bench are - Whether an intimation, which mentions that refund due to an assessee stands adjusted against the tax demand, can be construed as prior intimation of the proposed action u/s 245 of the Act; Whether a stay order can be claimed on the basis of favourable order passed by CIT(A) in assessee's own case, although the same has been challenged by the Department before the Tribunal and Whether assessee is entitled to a stay against the assessment order on the basis of Circular No. 530, when the assessee has failed to discharge the tax demand payable in monthly installments. Assessee's writ partly allowed.

Facts of the case

Things That Needs To Be Taken Care of Before Becoming An NRI

In this article, we have tried to cover those points which are required to be followed by an individual, while becoming an NRI which could have saved them from lots of worries and paperwork.

Things to Complete Before You Become an NRI and Leave India

• Give power of attorney to someone in India – There can be many things which require your presence in India after you have become an NRI, like if you want to make any real estate transaction or want to operate your bank account etc. It’s always a good idea to have a bit of foresight and see if you might want to prepare a power of attorney. Power of attorney is a legal way of giving power to someone to act on your behalf. Just choose some trusted family person or a friend. You can also make a power of attorney which expires at some stipulated time.

What we do for Error 'Invalid details' in Step–2 of Registration of PAN?

Particulars in Part 1 and Part 2 of Step-2 of registration form are required to be exactly the same as reported in the TDS statement. Please enter challan details and unique PAN-Amount combination as reported in the regular statement. However, if challan details and the unique PAN-amount combination reported in the regular statement have been modified in the correction statement, then specify modified particulars of challan details and unique PAN-amount combination.

Challan Identification Number (CIN) – This gets generated on payment of tax through Bank Challan. It consists of:

• BSR Code
• Date of Payment
• Challan Serial Number

Book Identification Number (BIN) / Transfer Voucher Details – This gets generated on filing of Form 24G by Pay & Accounts Officer (PAO) / District Treasury Officer (DTO) / Cheque Drawing & Disbursing Officer (CDDO). It consists of:

• Form 24G Receipt Number
• Date of Transfer voucher
• DDO Serial Number

Please enter a challan with at least three distinct valid PAN-amount combinations corresponding to the statement mentioned above. If there is no such challan, mention a challan with at least two valid PAN-amount combinations. If there is no such challan, mention a challan with at least one valid PAN-amount combination. If you do not have any such challan, mention a challan with no valid PAN-amount combination and also select the checkbox (no valid PAN deductees row) in the PAN Details section in Part 2 where you are supposed to enter the unique PAN-amount combinations.

Registration process requires you to input 'Token Number' of your regular statement
Following could be the reasons for getting 'Invalid details' message in Part 1 and / or Part 2 in registration Step-2:

• You might have not entered Token Number of your regular statement
• Challan details entered are not as mentioned in above
• Incorrect unique PAN-amount combination

TDS Needs To Be Deducted On Payment to NRI

In case of NRI (Non-Residents of India), TDS i.e; tax deduction at source is explained as per sec 195 which says any person responsible for paying the same to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries” shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :

For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in

BUDGET 2013 HIDDEN BOMB - SECTION 43CA & 56

There is an introduction of section 43CA and also amendment in section 56 where land & building transferred for inadequate consideration required to be taxed both in the hands of the buyer & seller. 

This section will create a problem for individuals buyers who had already booked their flats and waiting for completion of the construction so they can get the registration and  possission.

The only way out right now is that get the registration of the flat on or before March 31, 2013.



 

Excise – Sub-Section 7A to Section 11A – Loopholes Inbuilt

Introduction:-

Section 11A of the Central Excise Act, 1944 prescribes the issuance of show cause notice and other related provisions. In this section, sub-section 7A is inserted by Budget, 2013 to cover the cases of recurring nature where the show cause notices are issued on the exactly same grounds and allegations from time to time to the same assessees. This piece of article is about if and buts involved in this new section.

The history:-

If proceedings are invoked against the assessees on a particular issue, these are being invoked for the

TDS RATE CHART FINANCIAL YEAR 2013-14 (ASSESSMENT YEAR 14-15)

 

TAXBYMANISH

The Rate Chart for the Financial Year 2013-14 i.e. Assessment Year 2014-15 is tabulated below.

Sl. No.	Section Of Act	Nature of Payment in brief	Cut Off Amount		Rate %
					HUF/IND	Others
1	192	Salaries			Average Rate
2	193	Interest on debentures		5000	10	10
3	194	Deemed dividend		-	10	10
4	194A	Interest other than Int on securities (by Bank)		10000	10	10
4A	194A	Interest other than Int. on securities (By others)		5000	10	10

Additional Deduction under new Section 80EE on Housing Loan Interest w.e.f. 01.04.2014.

A new section 80EE insert by Finance Bill, 2013 in order to promote affordable housing to first time home loan buyers by allowing deduction in respect of interest on loan taken for purchase of first residential house. The said section 80EE is proposed to be inserted with effect from 1.4.2014 which is as under:

'80EE. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.

(2) The deduction under sub-section (1) shall not exceed one lakh rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2014 and in a case where the interest payable for the previous year relevant to the said assessment year is less than one lakh rupees, the balance amount shall be allowed in the assessment

HRA or Rent Allowance Deductions for All Employees

All Employees have not their own house and such they are living on rented accommodation. Those Employees who do not get her personal accommodation and they have house rent allowance from their employer, enjoy a special tax deduction on the rent paid by them. This deduction is allowed under section 80GG of the Income Tax Act in which an individual can avail 25% deduction on the rent amount. However, the limit is restricted to Rs 2000 per month and has not changed for many years, which is now expected to change this year.

Moreover, under the Income Tax Act 1961, there exist 2 dissimilar sets of tax treatments with reference to rent free lodging provided by the employer. While a Government employee only pays the license fee, non government sector employees who get rent-free lodging from their employees are taxed heavily at 7.5-15% of the salary. There is a necessity to maintain uniformity in taxes and a new system needs to be introduced offering equal rights to employees without discrimination.

Standard exemption should continue as in the past and should be given to all employees who are salaried, while the transport allowance deduction should increase.
 

New Section 87A for Tax Rebate of Rs. 2000 w.e.f. 1.04.2014.

Finance Bill, 2013 has been introduced new section 87A for Income Tax Deduction of Rs. 2000/- for Assessment Year 2014-15. This rebate can be availed Taxpayee/Assessee under section 87A. For more clarity it is necessary to read clauses 19 and 20 of the bill as given below :-

Clauses 19 and 20 of the Bill seek to amend section 87 and insert a new section 87A in the Income-tax Act relating to rebate of income-tax in case of certain individuals.

The proposed new section 87A seeks to provide that an assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under Chapter VIII of the Income-tax Act) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent. of such income-tax or an amount of two thousand rupees, whichever is less.

Consequential amendments have been proposed in section 87, so as to provide reference to proposed new section 87A.

These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

Consequences of Non-Filing of Income Tax Return by NRI

The procedure of filing returns is same as that of a resident Indian. NRI with gross total income exceeding Rs 10 lakh must file the returns electronically and send ITR-V within 120 days of filing return. If individuals file their returns after the last date of filing Return of Income, they will be charged interest at the rate of 1% per month of delay. Further, if such a return is filed after one year from the end of the tax year concerned, apart from the interest, they will also be liable for a penalty of Rs 5,000. The due date of filing the return of income by a NRI is July 31st. However, if the NRI is a working partner of a firm whose accounts are required to be audited, then the due date is September 30.

All the NRI are required to file income tax return if they satisfy either of these conditions:

• The taxable income in India during the previous year was above the basic exemption limit
• Have earned short-term or long term capital gains from sale of certain investments and assets, even if the gains are less than the basic exemption limit.

Due Date of Filing Income Tax Return for an NRI - The due date of filing income tax return for the financial year 2012-13 is 31st July 2013.

The last date to file returns for the financial year is July 31st. However following must be considered:

• In case if tax payable is nil that is all tax has been deducted at source, individual can still file tax return within 2 years from the end of the financial year without any penalties.
• In case if tax payable is nil, individual can still file belated returns within 2 years from the end of financial year but he/she will be charged an interest of 1% per month for every month of delay starting from the due date of filing return till the time returns under section 234A is filed by the individual.

• In case if individual do not file his/her tax returns at all, then he/she may be charged a penalty of Rs 5,000 for every year of delay under section 271F.

There are several other consequences like individual cannot revise a return that was filed late and may also lose out on interest receivable on refund for the period of delayed filing.

TDS Rates Changes in Budget- 2013

Tax Deduction at Source (TDS) rates for Income under head "Salary" for the financial year 2013-14.

Part II of the First Schedule to the Bill specifies the rates at which income-tax is to be deducted at source during the financial year 2013-14 from income other than “Salaries”. In view of the proposed amendment to section 115A, it is proposed to provide that the income by way of royalty or fees for technical services shall be taxable at a uniform rate of twenty-five per cent; if such income has been received by the non-resident (not being a company) or a foreign company under an agreement entered on or after 1st day of April, 1976. Subject to these modifications, the rates of deduction are the same, as those specified in Part II of the First Schedule to the Finance Act, 2012 for the purposes of deduction of income-tax at source during the financial year 2012- 13.

The amount of tax so deducted shall be increased by a surcharge in the case of—

(i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees;

(ii) every company other than a domestic company at the rate of two per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees but does not exceed ten crore rupees;

(iii) every company other than a domestic company at the rate of five per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds ten crore rupees.

 

A family settlement does not result in a “transfer” and compensation received to equalize inequalities in family settlement is not taxable as “income”

CIT vs. Ashwani Chopra (P&H High Court)

There was a dispute between two groups of a family. During the pendency of litigation, the parties agreed to divide the assets and businesses of the family into two lots i.e. lot-1 containing the Jalandhar and Ambala units and lot-2 containing the Delhi and Jaipur units. In terms of such settlement, lot-1 fell to the share of Group ‘A’ and lot-2 fell to the share of Group ‘B’ with the condition of payment of Rs.24 crores. A dispute regarding the date of split of the said amount was pending. The AO assessed the said sum in the hands of the assessee. This was reversed by the CIT(A)

Records under Service Tax

Records are required to be maintained by every business entity under various Acts as prescribed. Under Service Tax also records are required to be possessed under the Service Tax Rules, 1994. Maintenance of records keeps a track about the Company functioning or activities conducted under it.
In this article we will provide you with the details of records to be maintained under the service Tax.
Following are the records required to be maintained for the purpose of service tax –
1. Records including the computerized data as maintained by an assessee as per the various laws in

Direct Tax but indirect Amendments

OUR thanks to FM for giving a relief of Rs.2000/- to the tax payers whose income is in between Rs.2,20,000/- and Rs.5,00,000/-. This budget seems to be more towards welfare angle than finance angle.

ADDITIONAL DEPRECIATION:

With an intention to promote Socio-Economic Growth, provisions to grant an incentive for acquisition and installation of new plant or machinery by manufacturing companies is proposed in the recent Finance Bill 2013. It is proposed to insert a new section 32AC in the Income Tax Act to provide for granting a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the cost of such assets exceeds Rs.100 Crores. This is applicable to manufacturing companies engaged in manufacture of an article and invests a sum of more than Rs.100 crores in new assets (Plant and Machinery) during the period beginning from 1 st April, 2013 and ending on 31 st March, 2015 (for 2 years).

In respect of FY 2014-15 (AY 2015-16) the deduction claimed for the investment is reduced by

FM addresses issue of bailability - 7 offences made non-bailable under indirect taxes

THE Offences under the Customs Act and the Central Excise Act were treated as non-bailable till October, 2011 when the Apex Court in the case of Om Prakash (2011-TIOL-95-SC-CX-LB) held that the offences under both these acts are bailable. This led to serious erosion of the enforcement ability of the Revenue Machinery. In the Budget 2012 an attempt was made to correct and even garner more than adequate powers. The attempt failed because certain provisions of bail, similar to those of preventive laws, were designed to be incorporated in the tax laws. A leading BJP mascot in the Rajya Sabha had flayed the provisions and termed them as similar to that of POTA and TADA. This finally lead to guillotining the proposal at the time of passage of the Bill.

Having learnt the lesson the present Finance Minister, who is a very good match for all the legal eagles in the Opposition, has moved proposals to make some offences non-bailable which are selective, and aimed at taking a pot shot at organised evasion. For example, collecting but not depositing service tax is a glaring example of hurting the Treasury. It will be indeed a tough ball game for the Opposition leaders to get the Finance Minster exercise his scissors again. Indeed,

Whether principle of consistency fails when certain benefits, not legally available to assessee, were allowed in the past - YES: ITAT

THE issues before the Bench are - Whether even if the investment in plant and machinery exceeds Rs one crore, the assessee can claim to be treated as SSI merely because it was treated so in the past; Whether merely because the assessee was erroneously allowed certain benefits in the past, such allowance vests any right in the assessee to claim the same in the next AY; Whether the principle of consistency fails when certain benefits, not legally available to the assessee, were allowed in the past and Whether the doctrine of res judicata is not applicable in the case of administration of tax laws. And the answers go against the assessee.

Facts of the case

The assessee company, a small scale undertaking, had claimed deduction u/s 80IB. The assessment was completed u/s 143(3), allowing the deduction. Subsequently, the CIT observed that the value of plant & machinery of the assessee company was more than Rs one crore, and the same was not a small scale undertaking u/s 11B of Industries (Development and Regulation) Act, 1951. The CIT observed that us/80IB(14)(g) of the Act the conditions for being small scale undertaking should be satisfied on the last day of the previous year. Thus, invoking powers us/ 263, the CIT directed the AO to reassess the income and allowance of deduction applying ratio laid down us/ 80IB(14)(g) of the Act. Assessee stated that the said conditions were required to be fulfilled only for the first year of claim of deduction. Reliance in this regards was placed on Tribunal's decision in the case of Tata Communication Internet Services Ltd. Also, the assessee contended that the said issue was debatable and thus the original assessment by AO could not be considered as erroneous and prejudicial to the Revenue relying on the Supreme Court decision in case of Malabar Industrial Co. In appeal the assessee argued that the status of small scale undertaking was available till the time the unit was registered as a small scale unit. Further as per the consistency principle the assessee pleaded that since the deduction had been allowed for past A.Y. from 2001-02 to A.Y. 2005-06 where the value of plant & machinery was above Rs one crore, the deduction u/s 80IB could not be denied in the A.Y. under consideration.

On appeal, the Tribunal held that,

++ we find that as per provisions of section 11B of the Industries (Development and Regulation) Act, 1951, an undertaking to be regarded as small scale industrial undertaking therein must not have investment in plant and machinery exceeding Rs. 1 crore. Thus, in our considered view, the assessee’s undertaking cannot be regarded as small scale industrial undertaking for the year under consideration u/s 11B of the Industries (Development and Regulation) Act, 1951. Moreover, we find that there is no requirement as per the above provisions of section 80IB(14)(g) to have a certificate or otherwise for being regarded as small scale industrial undertaking u/s 80IB of the Act;

++ we find that the conditions regarding assessee’s industrial undertaking being a small scale industrial undertaking is of fact relevant to each year and the same can change on making of further investment in plant and machinery in subsequent year by the assessee or by sale of plant and machinery used in the undertaking by the assessee in the subsequent year. Therefore, merely because of allowance of deduction in an earlier year in which the assessee satisfied the conditions of being a small scale industrial undertaking, it cannot be held that the assessee must be allowed deduction in subsequent eligible years irrespective of the fact whether the assessee remains a small scale industrial undertaking in the subsequent years or not when the condition for allowability of deduction is that the assessee should be a small scale industrial undertaking;

++ therefore, in our considered view, the above decisions of the Bombay High Court are not applicable for deciding the issue under consideration………….. the assessee can be allowed deduction on the satisfaction of conditions envisaged in the law and not merely because it was erroneously allowed any deduction in the earlier years. It is a settled position that res judicata is not applicable in administration of tax laws. No vested right can be held to be created in favour of the assessee merely because of allowance of deduction in earlier years which was not legally entitled to, was allowed.

E-version of Service tax Return to be available by 1st week of March 2013

As assessees are already aware that vide Notification No. 1/13-ST last date of submitting of return for period July-September, 2012 has been fixed on 25^th March, 2013. A revised paper version has also been made available with the Notification.

Since rule 7(3) of the Service Tax Rules 1994, makes is mandatory that all returns have to be filed electronically, But when Assessees are visiting to the web site of aces.gov.in, they are not finding electronic version of the return related to the Period July-September, 2012. So they are confused what to do? I am getting a number of queries in this regard.

I think it is appropriate to highlight a certain portion of the Instruction No. F. No. 137/98/2006-CX-4 (Part-I) dated: 22nd February 2013 issued by Central Board of Excise & Customs for the common masses:-

“It must however be borne in mind that in terms of rule 7(3) of the Service Tax Rules 1994, all returns have to be filed electronically. The revised Form ST-3 is expected to be available on ACES by the first week of March. However in the event of any delay, the last date will be suitably extended and adequate time given so that no inconvenience is caused to the assessees. The assessees are advised to access the ACES website wherein updates will be given.”

Therefore, as per the instruction assessees are advised not to be panicked that they would not get enough time to file return.

 

 

Finance Ministry Clarification Regarding Tax Residency Certificate (TRC)

Concerns on Language of DTAA To be Addressed When Finance Bill is Taken up for Consideration
Press Release dated 01.03.2013 issued by the Ministry of Finance
Concern has been expressed regarding the clause in the Finance Bill that amends section 90 of the Income-tax Act that deals with Double Taxation Avoidance Agreements. Sub-section (4) of section 90 was introduced last year by Finance Act, 2012. That sub-section requires an assessee to produce a Tax Residency Certificate (TRC) in order to claim the benefit under DTAA.

CBDT Notification Regarding Format of “Certificate of Tax Residency” For DTAA

S. 90 (4) of the Act, as inserted by the Finance Act 2013 w.e.f 1.4.2012 provides that an assessee, not being a resident, to whom an agreement referred to in sub-section (1) of s. 90 applies, shall not be entitled to claim any relief under a Double Taxation Avoidance Agreement unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory. A similar provision has been inserted in sub-section (4) of s. 90A of the Act. Pursuant therto, the CBDT has issued Notification dated 17.09.2012 to insert Rule 21BA and Forms 10FA and 10FB specifying the manner in which the aforesaid Certificate of Tax Residency should be obtained.

[TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (ii)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
[CENTRAL BOARD OF DIRECT TAXES]
Notification
New Delhi, the 17th day of September, 2012
INCOME-TAX
S.O. 2188(E).- In exercise of the powers conferred by section 90 and 90A read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1). These rules may be called the Income-tax (12th Amendment) Rules, 2012.
(2). They shall come into force on the 1st day of April, 2013.

2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules), -

(a) after rule 21AA, the following rule shall be inserted, namely.-

“Certificate for claiming relief under an agreement referred to in section 90 and 90A.

21AB (1) The certificate referred to in sub-section (4) of section 90 and subsection (4) of section 90A to be obtained by an assessee, not being a resident in India, from the Government of the country or the specified territory shall contain the following particulars, namely:
(i) Name of the assessee;
(ii) Status (individual, company, firm etc.) of the assessee;
(iii) Nationality (in case of individual);
(iv) Country or specified territory of incorporation or registration (in case of others);
(v) Assessee’s tax identification number in the country or specified territory of residence or in case no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory;
(vi) Residential status for the purposes of tax;
(vii) Period for which the certificate is applicable; and
(viii) Address of the applicant for the period for which the certificate is applicable;

(2) The certificate referred to in sub-rule (1) shall be duly verified by the Government of the country or the specified territory of which the assessee, referred to in sub-rule (1), claims to be a resident for the purposes of tax.

(3) An assessee, being a resident in India, shall, for obtaining a certificate of residence for the purposes of an agreement referred to in section 90 and section 90A, make an application in Form No. 10FA to the Assessing Officer.

(4) The Assessing Officer on receipt of an application referred to in sub-rule (3) and being satisfied in this behalf, shall issue a certificate of residence in respect of the assessee in Form No. 10FB.”;

(b) in Appendix-II, after the Form No. 10F, the following Forms shall be inserted, namely:
“FORM No. 10FA

[See rule 21AB (3)]

Application for Certificate of residence for the purposes of an agreement under section 90 and 90A of the Income Tax Act, 1961.

To
The Assessing Officer,
___________________,
___________________,
___________________.

Sir,

I request that a certificate of residence in Form No.10FB be granted in my case/in the case of _______________________________ [for person other than individual].
2. The relevant details in this regard are as under: -

(i) Full Name and address of the applicant
_________________________
_________________________
(ii) Status
(State whether individual, Hindu undivided family, firm, body of individuals, company etc.)
_________________________
(iii) Nationality (in case of individual). __________________________
(iv) Country of incorporation/ registration (in case of others).
__________________________
(v) Address of the applicant during the period for which TRC is desired. __________________________
(vi) Email ID
__________________________
(vii) PAN/ TAN No. (if applicable)
__________________________
(viii) Basis on which the status of being resident in India is claimed.
__________________________
(ix) Period for which the residence certificate is applicable.
__________________________
(x) Purpose of obtaining Tax
Residency Certificate (must
be specified)
__________________________
(xi) Any other detail
__________________________
3. The following document in support are enclosed: -

(1) ___________________________________.
(2) ___________________________________.
(3) ___________________________________.

VERIFICATION

I, __________ [full name in block letters] ___ son/daughter of __________________________, in the capacity of ____________ [designation for person other than individual], verify that to the best of my knowledge and belief, the information given in this form is correct and complete and that the other particulars shown therein are truly stated.

Verified today the _____________day of ____________.

Place Signature of the Applicant
Name___________________

FORM No. 10FB
[See rule 21AB (4)]

Certificate of residence for the purposes of section 90 and 90A

1. Name of the Person __________________________
2. Status __________________________
3. Permanent Account Number __________________________
4. Address of the person during the
period of Tax Residency Certificate.
__________________________
__________________________
__________________________
__________________________

Certificate

It is hereby certified that the above mentioned person is a resident of India for the purposes of Income-tax Act, 1961.

This certificate is valid for the period ___________
Issued on the ______ day of ______, _________.
Name of the Assessing Officer
Designation ____________
Seal____________________”.
[Notification No.39/ F.No.142 /13/2012–SO (TPL)]
(ASHISH KUMAR)
Director (TPL-I)

Note. – The principal rules were published vide Notification No. S.O.969 (E), dated the 26th March, 1962 and last amended by Income-tax (11th Amendment) Rules, 2012 vide Notification S.O. No.37/2012 dated 12-09-2012.

Tax Alert - February 2013

Direct Tax

Supreme Court

Payment of advance tax does not amount to disclosure of income in case of non filing of return of income

The taxpayer, a firm, had not filed its the return of income (“ROI”) for the assessment year (“AY”) 1995-96 but had paid advance tax for the year. The assessing officer (“AO”) held that the taxpayer had not disclosed its income pertaining to the AY 1995-96 in view of the non filing of the ROI. The taxpayer objected on the ground that it had paid advance tax and therefore, the income cannot be considered as undisclosed. The AO rejected the contention of the taxpayer and proceeded to compute the undisclosed income of the taxpayer under chapter XIV-B of the Income-tax Act, 1961 (“the Act”).

On appeal before the Income Tax Appellate Tribunal (“ITAT”), the ITAT ruled in favour of the taxpayer. The High Court (“HC”) affirmed the view of the ITAT. The Revenue Authorities appealed before the Supreme Court (“SC”). The question before the SC was whether payment of advance tax would tantamount to disclosure of income for the purpose of application of chapter XIV-B of the Act.

The SC held that payment of advance tax is based on estimated income and is not the final ‘total income’, and hence cannot indicate the intention of an assessee to disclose its income. It was held that for income to be considered as disclosed income, it should be disclosed by way of filling of ROI. Since no ROI was filed by the taxpayer, the SC upheld the action of the AO.

ACIT v A R Enterprises (Civil Appeal No 2688, 3127, 3848 of 2006, 2580 of 2010, 270 and 271 of 2013) (SC)

Budget 2013 – Changes in Service tax

THE rate of Service Tax (i.e. 12.36%) has been retained. However, changes are proposed by way of introduction of 2 new services in Negative List, withdrawal of Service tax exemption in certain cases, change in taxable value for high end flats, one time Amnesty scheme etc.

In the following paragraphs the author has made an attempt to capture these proposed changes.

A. CHANGES IN ABATEMENTS (effective from 1 March 2013)

At present taxable portion for service tax purpose is prescribed as 25% uniformly for constructions where value of land is included in the amount charged from the service recipient.

Going forward, in the case of 'construction of complex, building or civil structure, or a part thereof, intended for sale to a buyer, wholly or partly except where the entire consideration is

Budget hikes surcharge on Dividend Distribution Tax

THE Union Finance Minister, Mr P Chidambaram, today presented his eighth Budget, wherein it is mentioned that Section 115-O of the Income-tax Act provides for taxation of distributed profits of a domestic company. It provides that any amount declared, distributed or paid by way of dividends, whether out of current or accumulated profits, shall be liable to be taxed at the rate of 15%. The tax is known as Dividend Distribution Tax (DDT), which is exempt in the hands of recipients.
Section 115BBD of Income Tax Act provides for taxation of gross dividends received by an Indian company from a specified foreign company (in which it has shareholding of 26% or more) at the rate of 15%. Section 115-O provides that the tax base for DDT (i.e. the dividend payable in case of a company) is to be reduced by an amount of dividend received from its subsidiary if such subsidiary has paid the DDT which is payable on such dividend. This ensured removal of cascading effect of DDT in a multi-tier structure where dividend received by a domestic company from its subsidiary (which is also a domestic company) is distributed to its shareholders.
In order to remove the cascading effect, it is proposed to amend section 115-O in respect of dividends received by a domestic company from a similarly placed foreign subsidiary ( i.e. the foreign company in which domestic company holds more than fifty percent of equity share capital). It is proposed that where the tax on dividends received from the foreign subsidiary is payable under section 115BBD by the holding domestic company then, any dividend distributed by the holding company in the same year, to the extent of such dividends, shall not be subject to Dividend Distribution Tax under section 115-O of the Income-tax Act. This amendment will take effect from 1st June, 2013.
It is also proposed to increase the surcharge levied at present @ 5 under section 115-O to 10%.

Provisions of Section 50C proposed for Movable Property also: Section 43CA introduced

It is proposed to provide by inserting a new section 43CA that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head “Profits and gains of business of profession”.

It is also proposed to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement. These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

Currently, when a capital asset, being immovable property, is transferred for a consideration which is less than the value adopted, assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, then such value (stamp duty value) is taken as full value of consideration under section 50C of the Income-tax Act. These provisions do not apply to transfer of immovable property, held by the transferor as stock-in-trade

TRU Circular on Service Tax amendment - FA 2013-14

 

As you are aware that, in this year’s Union Budget no major amendments have been carried out in Service Tax Law. The circular explaining the amendments is given below:

Government of India

Ministry of Finance

Service Tax Case Law Update - February 2013

1. Services:

 

Cargo Handling Service:

 

1.1  Beena Pradeep vs. GOI 2013 (29) STR 225 (Ker.)

 

The High Court in this case held as under;

• The activity of group packing in rough form just for easy loading into containers or ships, of goods taken by shipping companies in loose form for transport of the same to destination is

Revised ST-3 form- Instructions

F. No. 137/98/2006-CX-4 ( Part-I)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

(Service Tax Wing)

Room No 263A North Block,

New Delhi, 22nd February 2013

To

All Chief Commissioners of Central Excise / Customs and Central Excise

Directors General of Service Tax /Central Excise Intelligence /Audit/Systems;

All Commissioners of Central Excise/ Customs and Central Excise

All Commissioners of Service Tax

Commissioners LTU Mumbai/Delhi

All Additional Directors General Systems

Madam/Sir,

Subject: Revised Form ST 3

Attention is invited to this office letter dated 28^th September 2012 issued from F. No 137//22/2012-Service Tax ( copy of which can be accessed at www.cbec.gov.in) , wherein it was informed , inter alia, that in the ST- 3 return which was due by 25-10-2012, assessees had to provide data only for the period 1-4-2012 to 30-6-2012 . It was also informed therein that data for the period 1-7-2012 to 30-9-2012 would have to be furnished in a return in a revised format and that the revised format of the return and the last date for filing it would be indicated separately.

2. Data for the remaining portion of the half year ( i.e 1-7-2012 to 30-9-2012 ) can now be furnished by the assessees in the revised Form ST3 , which has been notified vide notification 1/2013 –Service Tax dated 22- 2-2013 . Since ordinarily this would have