TDS on Salary Income for Financial Year 2013-14

---

This is to inform that the CBDT has issued a detailed circular in the context of Tax Deduction at Source on Salary Income vide Circular 8 of 2013 dated October 10, 2013.

The Circular, inter alia, provides guidelines on the following:

You are advised to refer to Section 200(3) of the Act, read with Rule 31A, which reads as follows:

• Computation of Income in context of salaried employees
• The manner of deduction of tax at source, including the rates of TDS
• Due dates for deposit of Tax Deducted at Source
• Due dates for filing of Tax Deducted at Source
• Issuance of Form 16 to the employees

S. 220: After rejecting stay application AO must give reasonable time before taking steps for coercive recovery

Sony India Pvt. Ltd vs. ACIT (Delhi High Court)

Having said that this is a case in which technically no fault could be found with the assessing officer, we feel that there was there was an element of impropriety in his action in issuing the garnishee order under section 226(3) on 17.2.2014, the very day on which he rejected the stay application filed by the petitioner under section 220(3). It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. That opportunity was not afforded by the assessing officer in the

S. 147: Court can examine existence but not adequacy of reasons. AO is only required to provide material on which he relies to reopen the assessment

Acorus Unitech Wireless Pvt. Ltd vs. ACIT (Delhi High Court)

(ii) The law only requires that the information or material on which the AO records his or her satisfaction is communicated to the asseseee, without mandating the disclosure of any specific document. While the 2G Spectrum Report has not been supplied in this case on grounds of confidentiality, the reasons recorded have been communicated and do provide – independent of the 2G Report– details of the new and tangible information that support the AO’s opinion. These facts are capable of justifying the satisfaction recorded on their own terms, as discussed above. In this context, there is no legal proposition that mandates the disclosure of any additional document. This is not the say that the AO may in all cases refuse to disclose documents relied upon by him on account of confidentiality, but rather, that fact must be judged on the basis of whether other tangible and specific information is available so as to justify the conclusion irrespective of the contents of the document sought to be kept confidential.

S. 142(2A): AO need not examine books of account before directing special audit. Q whether accounts are “complex” has to decided by AO & Court can interfere sparingly

AT&T Communication Services India (P) Ltd vs. CIT (Delhi High Court)

(ii) The question whether the accounts and the related documents and records available with the A.O. present complexity is essentially to be decided by the A.O. and in this area the power of the court to intrude should necessarily be used sparingly. It is the A.O. who has to complete the assessment. It is he who has to understand and appreciate the accounts. If he finds that the accounts are complex, the court normally will not interfere under Article 226. The power of the court to control the discretion of the A.O. in this field is limited only to examine whether his discretion to refer the accounts for special audit was exercised objectively

Delhi Tribunal rules on transfer pricing aspects of intra group financing transactions (Bharti Airtel)

The Delhi Income-tax Appellate Tribunal (Tribunal), in a ruling in the case of M/s. Bharti Airtel Limited (Taxpayer) has adjudicated on transfer pricing (TP) issues arising from the issuance of a corporate guarantee, loans to associated enterprise (AEs) and contribution to share capital. The Taxpayer, an Indian company, provided a guarantee to a third party bank on behalf of its foreign subsidiary for which the Taxpayer did not charge a fee. The Taxpayer contended as it did not incur any costs in providing the guarantee, there was no requirement for it to charge a fee to the subsidiary under the transfer pricing provisions. During audit proceedings, the Transfer Pricing Officer (TPO) imputed an arm’s length guarantee fee by applying the Comparable Uncontrolled Price (CUP) method and considered the commission charged by independent banks as a benchmark. The Tribunal, considering the facts of the case, held that the corporate guarantee provided by the Taxpayer, which does not involve cost to the Taxpayer, does not have a bearing on profits, incomes, losses or assets of the Taxpayer and hence the transaction does not fall within the definition of “international transaction” as provided in the Indian Tax Law (ITL). The Tribunal accordingly ruled that under the facts of the case, transfer pricing provisions do not apply to the provision of the guarantee and therefore the TP adjustment imputing an arm’s length guarantee fee is not warranted.

SB of Mumbai Tribunal rules on approach to selection of comparable data (Maersk Global)

Tax Alert which summarizes a recent decision of the Special Bench of the Mumbai Income-tax Appellate Tribunal (SB) in the case of Maersk Global Centres (India) Private Limited [Taxpayer] for financial year ended 31 March 2008 reported in TS-74-ITAT-2014 (Mum)-TP. The Taxpayer is a provider of information technology enabled services (ITeS) such as transaction processing, data entry and information technology (IT) services such as process support/ optimization and technical support services to its Associated Enterprises (AEs). The Taxpayer’s transfer pricing (TP) documentation supported that its international transactions were at arm’s length using the Transactional Net Margin Method (TNMM). The Transfer Pricing Officer (TPO) rejected the TP documentation and made an adjustment by treating the activities of the Taxpayer to be in the nature of Knowledge Process Outsourcing (KPO) services instead of Business Process Outsourcing (BPO) services.

Mumbai ITAT rules on taxability of allotment of “additional shares” to existing shareholders under the Gift Tax provision (Sudhir Menon HUF)

Tax alert which summarizes a recent ruling of the Mumbai Income Tax Appellate Authority (ITAT) in the case of Sudhir Menon [HUF] (Taxpayer) on whether allotment of “additional” shares, on the basis of existing shareholding and at a value less than the fair value, results in taxation under the Gift Tax provision of the Indian Tax Law (ITL).

Whether when assessee fails to prove that its income was below taxable threshold, AO can make estimation on basis of average of income declared in preceding and in succeeding AYs - YES: ITAT

THE issue before the Bench is - Whether when assessee fails to prove that its income was below taxable threshold, the AO can make estimation on the basis of average of income declared in the preceding and in the succeeding AYs. And the answer is YES.

Facts of the case

Few Points on Rule 10 of Transfer Pricing.

In India a new transfer pricing regime has been introduced this year by the Finance Act 2001. Earlier a limited provision (Section 92) existed in the Income tax Act, which provided for making adjustment to the income of a resident taxpayer from a transaction with a non resident if the Assessing Officer was of the view that the income from such a transaction was understated in the hands of the resident due to the close connection between the two. No other rules or obligations about maintenance of documents about such

Can a Foreign Citizen be a Director of the Indian Company?

Directors of companies have official duties and legal responsibilities relating to company administration. He leads, manages, or supervises an organization, program, or project appointed. Directors act on the basis of resolutions made at director’s meetings, and derive their powers from the corporate legislation and from the company’s articles of association.

To be a Director of the Indian Company there are no statutory limitations as to nationality or residence, etc. Thus a foreign citizen can also be a director of the Indian Company. It would be likely to include these in a

CBDT clarification on export of computer software in relation to Sec 10A, 10AA, 10B

CBDT INSTRUCTION NO 3/2014, Dated: March 14, 2014

Issues relating to export of computer software- Direct tax benefits- Clarification-reg

A clarificatory Circular No. 01/2013 dated 17.01.2013 was issued by CBDT to address various contentious issues leading to tax disputes in cases of entities engaged in export of computer software which are availing tax-benefits under sections 10A, 10AA and 10B of the Income-tax Act, 1961.

2. Thereafter, Instruction No.17/2013 was issued on 19.11.2013 to the field authorities advising them to follow the aforesaid Circular in letter and spirit so that the cases which are covered by the above instruction

HAPPY HOLI

Few Points on Income from Capital Gain.

1.    Chargeability u/s 45

Profits or gains arising from the transfer of a capital asset is chargeable to tax in the year in which transfer take place under the head "Capital Gains".

Definitions

Transfer: Sec. 2(47): Transfer in relation to a capital asset includes sale, Exchange, or relinquishment of the asset or extinguishment of any rights therein or the compulsory acquisition thereof under any law or conversion of the asset by the owner in stock-in-trade of a business carried on by him or the maturity or redemption of a zero coupon bond.

How to save capital gains tax on sale of property

Anna Covaco is trying to sell her ancestral property - a piece of land worth nearly Rs 10 crores in today's market. Being a senior citizen, she has put her son John in-charge to dispose off the asset. To be eligible for tax exemption , John was advised that he needs to invest in another property within a year. Still confused, he has approached a financial advisor to help him out with the nitty-gritties .

Is your return from stocks capital gains or business income?

It depends on the assessing officer's interpretation. To be on the safe side, have a separate trading account

You have just filed your income tax returns. You have ensured all the profits you have made from your equity investments have been accounted for and paid the 15 per cent short-term capital gains tax for all investments held for less than one year. Still, how come the income tax department has sent a notice asking you to pay tax on your "business income".

Few Points on Income from Other Source.

All those incomes which are not exempt and are to be taxed and are at the same time not covered in any of the four heads of income namely salary, house property, capital gains and business and profession is included in the head of income from other sources. The income included here is taxable on cash or mercantile basis whichever method assessee follows. There are certain incomes, which are specifically mentioned in section 56 of the income tax act to be included in the head of income from other sources, but there are various other incomes, which are not specified in section 56 of the income tax act but are still included in the income from other sources. The following income shall be chargeable to income tax under the head "Income from other sources", namely: -

VAT on Works Contract in Rajasthan and Complicacies in tax computation

Introduction
Works contract is a contract for carrying out some work for a lump sum consideration. The transfer of property in the goods involved in the execution of the works contract is taxable as deemed sale under State VAT Act. The value of works contract is composed off ‘Material Value’, ‘Labour Value’, ‘incidental services’ and ‘profit margin’. The tax under vat is levied on the value of goods in which property is transferred or say tax is levied only on the ‘Material Value’ component of the works contract. The Material

Amendment in DTAA between India and UK.

TO Read the notification please click the link below:

http://www.caalley.com/itax14/itNot10.pdf

CBDT Extends Due Date For Paying Advance-tax To 18.03.2014

The final instalment of Advance tax for Financial Year 2013-14 is required to be paid on or before 15th March, 2014 by the tax payers who are liable to pay advance tax. These taxpayers can make payments in the designated branches of the authorized banks, electronically or physically, as per law. The banks are open for half day on 15th March, 2014, being a Saturday. Accordingly, to facilitate payment of this instalment of Advance tax for the Financial Year 2013-14, the Central Board of Direct taxes (CBDT) has issued an order to extend the time limit to make such payments of Advance Tax, from 15th March, 2014 to 18th March, 2014. Taxpayers, therefore, can now pay their advance tax instalment by 18th March, 2014 without entailing any consequential interest for deferment

TDS RATE CHART FINANCIAL YEAR 2014-15 (ASSESSMENT YEAR 15-16)

The posting had been move to another website.  Please click the link below to get the access of the same. 


https://taxofindia.wordpress.com/2015/11/26/tds-rate-chart-financial-year-2014-15-assessment-year-15-16/

Ratio Analysis Techniques

Ratio Analysis: It is concerned with the calculation of relationships, which after proper identification & interpretation may provide information about the operations and state of affairs of a business enterprise. The analysis is used to provide indicators of past performance in terms of critical success factors of a business. This assistance in decision-making

Income Tax E Filing Common Problems.

The posting had been move to another website. Please click the link below to get the access of the same 


https://taxofindia.wordpress.com/2015/11/26/income-tax-e-filing-common-problems/ 

A Treatise on Income tax Assessment in Real Estate Cases

Please click the link below to generate the full report.



http://www.incometaxindiapr.gov.in/incometaxindiacr/contents/reports/Real-estate.pdf

Relieved after filing your income tax return? Challenges may still await you

The Tax return filing for most of us is like the toughest exam, it brings nervousness and trouble and when completed, there is a sigh of relief!
We often consider filing of the tax return is the end of the whole story. There is misconception that once the tax return has been filed, work is over until the next tax return filing deadline. This is what even Gaurav thought when he filed his tax return for the year 2011-12.

Company can follow cash system of accounting for tax purposes

A company, followed, the mercantile system of accounting in accordance with s. 209(3) of the Companies Act, 1956, according to which the profits were Rs. 7.48 crores. However, for income tax purposes, it followed the cash system of accounting according to which the profits were Rs. 4.76 crores and offered that sum to tax. The Assessing Officer rejected the claim on the ground that u/s 209(3) of the Co’s Act, a company is obliged to follow the mercantile system and that is its’ “regular method” for purposes of s. 145. However, the CIT (A) upheld the assessee’s claim. On appeal by the department,

Few points on Service Tax- Reverse Charge Mechanism.

Ø  Service tax payable by service receiver directly to government in place of paying to service provider.

Ø  Hence Service receiver require to register under service tax for kind of services he received.

Ø  There is no exemption limit of Rs. 10 Lakh.  Thus,  services received under small amount required to be paid.

Ø  Point of Taxation – date of payment to service provider (rule 7). However, in case invoice not paid till 6 months, then date of completion of service (rule 3)

Ø  Cenvat credit available except for rent a cab service.

Avoid Penalty by filing return of income/ Income Tax Returns before 31st March

Individuals are required to file their return of income/ income tax returns before 31st July for financial year 2009-10, in case their total income before allowing the deductions and exemptions exceeds the basic limit under the Income Tax Provision. There may be the case, wherein due some very legitimate reason, some of us would have not filed the return of income/ Income Tax within this due date and unnecessarily may become the victim of penalty by IT Department. There is still a second chance for these individuals; they can still avoid the penalty, if they file their return of income/ Income tax returns within this March 2011.

Whether, for purpose of depreciation, wind electric generators are to be treated at par with wind mill - NO: ITAT

THE issues before the Bench are - Whether wind electric generators, for the purpose of depreciation, can be treated at par with Wind Mill; Whether wind electric generators are ancillary or an integral part of Wind mill; Whether is it required to see the rate of wear and tear for the rate of depreciation and Whether Functional Test is required to check for granting higher rate of depreciation. And the verdict goes in favour of the Revenue.

Facts of the case

Sole proprietorship - Most common form of Business

As the title of this write up suggests A sole proprietorship is still the oldest and the most common type of business in India. You may find lots of proprietorship businesses near you place.

In general terms A “Sole Proprietorship” business means a business that is owned by only ONE person. You can operate a sole proprietorship under your own name, or under another name you've chosen. We may also call it a one man Army.

How to obtain duplicate E TDS return provisional receipt.

In case if Account Office needs duplicate copy of Provisional Receipt Number, AO is required to send request letter to NSDL.

How to Save Taxes on Capital Gains arising on sale of house or flat

An estimate shows that the present 1.1 billion India’s population would touch 1.5 billion by 2030, thus edging out China as the most populous country in the world. Coupled with the significant rise in the working population and dependency ratio below 50per cent, it is expected it would generate higher personal savings and stronger investments, resulting boosting the growth of real estate.
Indian real estate boom has been partly backed by the revolution brought about by private banks in the Home Loans business as it has proved to be the most lucrative segment for the Indian banking industry as well.

Whether return of fund received by assessee from Central Govt towards equity but no shares allotted and interest was paid on same, can be construed as business expenditure - YES: Delhi HC

THE issues before the Bench are - Whether the return of the fund received by the assessee from the Central Govt towards equity but no shares were allotted and interest was paid on same, can be construed as business expenditure and Whether the nomenclature of the amount paid as compensation, return or interest can affect its allowability. And the verdict goes against the Revenue.

CBDT clarifies on tax withholding obligation in respect of payments made to non-resident

The Central Board of Direct Taxes (CBDT), the apex administrative authority for direct taxes in India, has issued Instruction No. 2/2014 [Instruction] to the Indian Tax Authority on the issue of whether tax withholding is required on the whole sum being remitted to a non-resident (NR) or only with reference to the portion of remittance representing the sum chargeable to tax in India under the Indian Tax Laws (ITL). In light of certain judicial developments in India, the CBDT has directed the Tax Authority to determine the appropriate portion of payments which is chargeable to tax in India and, accordingly, a payer can be treated as a defaulter for not withholding tax only in respect of such portion of the payment which is chargeable to tax in India under the ITL.

This Tax Alert summarizes the above Instruction issued by the CBDT.

The Instruction to the Indian Tax Authority is a welcome development for payers/tax deductors. This Instruction clarifies that withholding tax liability of the payer is with reference to the sum chargeable to tax under the provisions of the ITL. Furthermore, the consequences of default proceedings for non-withholding under the ITL would be limited only to such tax liability. Accordingly, a payer cannot be treated as an assessee-in-default for non-withholding from payments which are not chargeable to tax under the ITL. This clarification is in line with the SC decision in the case of GE. Furthermore, in respect of remittances where only a portion may be chargeable to tax in India (for e.g., a portion of composite contract or capital gains income), payer may determine its withholding tax liability with reference to the chargeable portion of the remittance, if the payer is fairly certain about such determination. However, considering the consequences of tax withholding default, the payer may prefer to be cautious and may continue to approach the Tax Authority where determination of chargeability or portion of the chargeable sum is not fairly certain

UNDERSTANDING CENVAT AND POINT OF TAXATION RULES UNDER SERVICE TAX

Following points are relevant in respect of CENVAT  :

01.  No credit of service tax available for Jammu & Kashmir.

02.  For Capital Goods CENVAT can be claim 50% for first year and balance 50% in next year, if there was no claim of depreciation. Rule 4(2)(a).

03.  SSI units can avail 100% claim of CENVAT in first year on assets acquired after 1-4-2010.

Source of Fund for claiming exemption u/s 54 – Tax on Capital Gains

As per Section 54 of the Income Tax Act, 1961 the capital gain arises from the transfer of a long-term capital asset (being buildings or lands appurtenant thereto,) and being a residential house, the income of which is chargeable under the head “Income from house property” shall be exempt to the extent such capital gain is invested in the purchase of another residential HP and according to section 54F, any long-term capital gain, arising to an individual or HUF, from the transfer of any capital assets, other than residential house property, shall be exempt in full, if the entire net sales consideration is invested in purchase of one residential house.

Is the amount taxable received after surrender of Tenancy Right ?

---

The tenancy right is a capital assets and surrender of tenancy right for Rs. 80 Lacs would yield Long Term Capital Gain (LTCG).

The benefit of 10% tax rate without indexation is available only on transfer of listed securities or unit or zero coupon bonds. The benefit is not available to LTCG arising from transfer of tenancy right or any other capital assets.

The important question that remains here is about the tax-ability of such amount.

Tax-ability, tax saving options & other implication would depend upon multiple factors and documents. Apparently, it appears that the amount would be taxable in the hands of the firm as the tenancy right belongs to firm.

Whether where assessee's intention is to earn long-term income from investment made out of own funds and Revenue has accepted same in preceding years, gains from same investment can be treated as business income - NO: ITAT

THE issues before the Bench are - Whether the gain arising to the assessee on sale and purchase of shares through PMS is to be considered as business income – Whether where the intention of the assessee was with long term goal of earning income from the investment and investment was made out of own funds and the revenue has accepted the investment in the preceding years, the gain on the same cannot be considered as business income. And the verdict goes against the Revenue.

UNDERSTANDING EXEPMTIONS OF INCOME TAX WITH LATEST CASE LAWS:

Incomes falling under the category of section 10 of the Income tax act,  1961 are not taxable as they are exempted.  Everybody will love that all income they earned must be fall under category of section 10, however this is not the actual case.  Given below some of the summary of section 10A case laws judgments, which will help us in better understanding and best utilization of the exemption section.

Filing of Tax Return by NRI

Non-Resident Indian (NRI) is an Indian living outside India. The Term NRI, generally, means a non-resident who is either an Indian Citizen residing outside India and includes Foreign Citizen of Indian origin residing outside India.

Whether expenditure incurred by assessee company on foreign studies of Director's son working as employee and furnishing bond to work for longer period after studies are over, is business expenditure u/s 37 - YES: HC

THE issues before the Bench are - Whether the expenditure incurred by the assessee company on foreign studies of its Director's son working as an employee and furnishing bond to work for longer period after studies are over, is allowable as per provisions of Sec 37; Whether such expenditure is allowable even if higher studies are pursued in a different subject from that of the business of the assessee and Whether the burden of showing that expenditure is incurred wholly and exclusively for the purpose of business u/s 37(1) is on the assessee. And the verdict goes in favour of the assessee.

How is Tax Calculated on Salary?

Income earned by an individual can be broadly classified under 5 distinct heads and taxed according to the Income tax rules governing them. The 5 heads of income are:

• Salary Income
• Income from house property
• Business or Professional Income
• Capital Gains
• Other Income

International Student Tax Treaty Benefits - United States India Tax Treaty Article 21(2) - United States China J1 Tax Exemption - F1 J1 visa taxes tax treaty benefits - Tax Treaty Form 1040NR Form 1040NR EZ United States Japan Germany Canada France UK etc.

Tax Treaty benefits for International Students who are Non Resident Aliens, in F1, J1 visas, based on IRS Publication 901.

Non Resident Aliens can claim the Tax Treaty benefits in Form 1040NR-EZ or Form 1040NR.

CBDT Instruction On TDS Obligation U/s 195 On Payment To Non-Residents

The CBDT has issued Instruction No. 02/2014 dated 26.02.2014 in which it has referred to the judgements of the Supreme Court inTransmission Corp of A. P. 299 ITR 587 and GE India Technology Pvt. Ltd 327 ITR 456 on the issue of deduction of tax at source u/s 195 while making payments to non-residents. The CBDT has directed AOs u/s 119 that in a case where the assessee fails to deduct TDS u/s 195, the AO cannot treat the whole sum remitted to the non-resident as being chargeable to tax but he has to determine the appropriate proportion of the sum chargeable to tax as mentioned in s. 195(1) for treating the assessee as being in default u/s 201

Transfer Pricing: Companies in ITES cannot be classified into low-end BPO services and high-end KPO services for comparability analysis but have to be classified based on the functions performed. Comparables with abnormal profit margins cannot be discarded per se but must be examined to determine whether the high margins are due to normal business conditions or not

Maersk Global Centres (India) Pvt. Ltd vs. ACIT (ITAT Mumbai Special Bench)

The Special Bench had to consider two issues: Whether, for determining the ALP under TNMM, (i) a company performing (high-end) KPO functions is comparable with a company providing (low-end) back office support services, given that both are in the “ITES” sector? & (ii) companies earning abnormally high profit margin have to be discarded from the list of comparables? HELD by the Special Bench:

High Court lays down zero-tolerance policy over adjournments. Threatens to dismiss appeals, hear them ex-parte or and/or impose costs if counsel are not prepared

Thermax Babcock & Wilcox Ltd vs. CIT (Bombay High Court)

(i) We have noted that the Final Hearing Board consists of all Appeals of 2002. First two matters have been adjourned by us only because the Department or the Advocate for Appellant sought accommodation. They did not have either papers or were not ready with the case. Such state of affairs will not be tolerated hereafter. In the event, the Counsel engaged by the Department is absent without a justifiable or reasonable cause, we will invariably impose costs and to be paid by the Counsel personally. Equally, we would proceed in his absence. In the event, the Appellant or his Advocate is absent, we will proceed to dismiss the Appeal for non prosecution. Thereafter, no application for restoration of the Appeal will be considered unless the Appellant makes out a sufficient cause for absence

Last time tax planning for salaried employees

Generally speaking, the salaried employees like any other tax payer can make investments for the purpose of section 80C or section 80D or any other section of Income-tax Act by 31st of March 2014. Hence, they will be entitled to tax deduction if they make the investment any time up to 31st March 2014. If the employer issues a letter to the employees to give the proof of the investments maximum by middle of February or else he will not allow the tax deduction claim, this type of attitude I personally feel is not correct but also let me clarify that under the Income-tax Law there is no legal duty cast on the employer to receive the proof of the payments for the purposes of section 80C etc. by 31st March. The individual employer depending upon his

Residential Status - How to determine.

The answer is very simple, and depends on how many days you spend out of India. The entire question arises only when it comes to tax payment. Whether your income is taxable in this country or in another country? From a taxation point of view, you can either be a Resident or a Non Resident.

What happen in case you has not filed your tax return till 31.03.2014.

In an effort to meet the revenue targets, the Income Tax ( IT) department will be sending letters to 2.3 million assessees who have not filed returns. It has already issued letters to 2.45 million individuals. Therefore, if you haven’t filed taxes for the financial year 2012- 13 ( Fin.Year 2013), you still have time in hand. The Income Tax department will accept returns till the end of the assessment year, that is, till March 31, 2014.

Reassessment u/s 147 - Whether Revenue is on sound legal footing if it denies to share 2G Spectrum Investigation Report on ground of confidentiality - YES: Delhi HC

THE issues before the Bench are - Whether the issuance of a notice and the communication and furnishing of reasons thereof, go hand-in-hand; Whether two notices or proceedings can remain pending against the same assessee in respect of the same AY at the same time; Whether non disclosure of the internal date on which the reasons were prepared by the Revenue can vitiate the reassessment proceedings; Whether the mere fact that a letter conveying the decision taken in the order sheet was entered before the reasons recorded for the fresh notice, this mode prejudices the assessee or violates any procedural mandate u/s 147 and Whether the Revenue

Live Webcast on Service Tax- Taxability vs Non-taxability

on March 6th, 2014 from 6.00 pm. to 8:00 p.m.

Dear Member, Tax laws in India are becoming more and more complex and more so in the case of indirect taxes. Frequent changes in taxation through Finance Acts, Notifications and Circulars are one of the significant features of indirect tax laws. Considering these increasing complexities and frequent changes, Indirect Taxes Committee of ICAI has decided to organise webcast on monthly basis during the year with a view to update the members

S.92C: Avoidance of tax-Transfer pricing-Arms’ length price-TNMM under Rule 10B(1)(e) contemplates ALP determination with reference to the relevant factors (cost, assets, sales etc.) of the assessee and not those of the AE or third party. Assessee’s study report cannot be discarded without showing how it is wrong. Finding that assessee is a risk bearing entity should be based on tangible material. [S.92CA]

The assessee, a wholly owned subsidiary in India of Li & Fung (South Asia) Ltd., Mauritius, was set
up as a captive offshore sourcing provider. It entered into an agreement with Li & Fung (Trading),
Hong Kong, an associated enterprise, for rendering “sourcing support services” for the supply of high
volume & time sensitive consumer goods. The assessee was entitled to receive cost plus a markup of
5% for the services rendered to the AE. The assessee claimed that it was a low risk captive sourcing
service provider performing limited functions with minimal risk. It adopted the TNMM and computed
the PLI at operating profit margin/total cost. Since the operating profit margin at 5.17% exceeded the

Taxation on foreign exchange assets: How is it calculated?

There is a concessional rate of taxation for Non Residents under the Income Tax Act and this is applicable for the purpose of specific income that is earned by such a person. It is very important to look at the exact nature of the income and the various details that come along with this income because of the fact that it will make the position clear as to who is covered and the kind of taxation that this would face. The key term for

How to plan you tax? 4 things to know

Extract maximum tax benefit by planning at the beginning of the year.

Most employee rush to do tax saving investments on the 11th hour, however to extract maximum benefit one must plan their taxes at the beginning of the year. There are many allowances that can help in lowering tax outgo, some common ones and some not so common ones. Some of the uncommon ones that help you take higher net take-home.

MAT Adjustments – Provision for bad debts and advances

In the case of Steel Authority of India Ltd. vs. Deputy Commissioner of Income-tax (76ITD69) it was claimed by the assessing officer that the provision for doubtful debts, loans, advances etc., was in the nature of provision and not ascertained liabilities and hence called for adjustment as per clause (c) below Explanation to Sub-section (1) to Section 115J of the Income-tax Act. It was contended on behalf of the assessee before the CIT (Appeals) that the provisions for bad and doubtful debts is made against the

Whether when assessee is public limited company, recovery of tax dues cannot be initiated against Directors and no proceedings u/s 179 can be initiated - YES: HC

THE issues before the Bench are - Whether when the assessee is a public limited company, recovery of tax dues cannot be initiated against Directors and no proceedings u/s 179 can be initiated and Whether it is necessary for the Revenue to establish that such recovery cannot be made against the company and then alone it can reach the directors who were responsible for conduct of the business during the previous year in relation to which liability existed. And the answers go against the Revenue.

Karnataka HC rules that share of profits of a partner from a partnership firm having exempt income is also exempt in the hands of the partner

This Tax Alert summarizes a recent ruling of the Karnataka High Court (HC) in the case of Vidya Investments and Trading Company Pvt. Ltd.(Taxpayer) on the issue whether share of profits received by a partner in income of partnership firm (on which firm did not suffer tax owing to exemption) will be exempt in the assessment of the partner.

In terms of current scheme of taxation of firm and partner in the Indian tax laws (ITL), a partnership firm as a separate assessable entity pays tax on its total income at entity level and partner of the firm is exempt in respect of share of profits received from the FIRM.

E TDS RETURN TIME EXTENDTED UPTO MARCH 31, 2014

CBDT has extended last date for filing TDS/TCS statement to 31 March 2014. This extension for Financial year 2012-13( 2nd to 4th quarter) and Financial year 2013-14(1st to 3rd quarter). CBDT issued a circular no. 7/2014 dated 4 March 2014 regarding this extension. Full circular is as under.

Things to do before you say good-bye to FY14

As we are approaching towards the end of this financial year, there are certain things we should do before the year comes to an end. This article discusses all those things for the benefit of our readers.
Making investments in eligible items:

Restriction on Contribution to political party Companies Act 2013

Politics in India goes hand in hand with business, and business men are always looking for various favors from the political party which forms the government. This is not a one sided affair, even the political parties are hungry for some pre-election support for the corporates. With the lok sabha election nearing the first half of bargain would be at its peek.

RBI Extended withdrawal of old Banknotes issued prior to 2005 to 01.01.2015

---

Reserve Bank of India's Principal Chief General Manager has been issued a notification No. RBI/2013-14/509 DCM(Plg) No.G- 19/3880/10.27.00/2013-14 dated 03.03.2014 regarding withdral of all old series of Banknotes issued prior to 2005 which is as under:

RBI/2013-14/509
DCM(Plg) No.G- 19/3880/10.27.00/2013-14

March 03, 2014

The Chairman / Managing Director/ Chief Executive Officer
All Scheduled Commercial Banks
Primary(Urban) Co-operative Banks/RRBs

Whether assessment can be reopened when issue of non-receipt of forex within a period of 6 months from end of AY was not subject matter of original assessment - YES: HC

THE issues before the Bench are - Whether the assessment can be reopened when the issue of non receipt of convertible foreign exchange within a period of 6 months from the end of the assessment year was not the subject matter of original assessment; Whether when the issue whether the assessee has declared its book profits after reducing the amount of deductions u/s 10AA was not considered during the original proceedings, the assessment can be reopened and Whether there is any bar on reopening of an assessment even if there has been no failure to make full and true disclosure necessary for assessment within the period of 4 years from the end of the relevant AY. And the verdict goes against the assessee.

NRI's guide to renting out property in India

Property is a favourite Indian asset class and one of the main reasons for this is its ability to generate regular cashflows through rent. In this column, we will look at the various aspects involved when an NRI rents out a property in India. The definition of NRI for the purposes of repatriation will be that of the FEMA and for the purposes of income tax will be that prescribed in the Income Tax Act

How to bring in unaccounted money parked overseas

Higher tax regime and stringent foreign exchange restrictions in the past encouraged many Indian residents to park a part of their wealth abroad. For bringing this money back, India has entered into Tax Information Exchange Agreements (TIEAs) with a number of tax havens.
Let's examine their efficacy in bringing back the existing money abroad, particularly from Switzerland where a majority of the Indian money is believed to be hidden.

Getting posted abroad? Know the tax implications

So you spent all your growing up years rooted to your motherland and now, when you've got wings, you fly to greener pastures overseas. Good going! The only hitch, the taxman wants to make sure you pay your dues to your homeland.
In this column, we will look at what happens when you are posted abroad on a short stint through your company and how your salary and allowances would be taxed

Whether deposits in PPF Account are immune from attachment for recovery of tax dues - YES: HC

THE issues before the Bench are - Whether deposits in PPF Account are immune from attachment for recovery of tax dues and Whether Rule 10 of Schedule II of the I-T Act exempts all such properties from attachment or sale. And the verdict goes in favour of the assessee.

Facts of the case

New CSR policy – A brief overview on the mandated

India is the first country to mandate expenditure on CSR activities through a statutory provision. Though in India, many corporate are traditionally engaged in doing CSR activities voluntarily, the new CSR policy a provisions in the new Companies Bill 2013, will put formal and greater responsibility on all companies to set out clear framework and process to ensure strict compliance.

Short note on section 87A.

A new section by Finance bill 2013 has been introduced for Income Tax Deduction of Rs. 2000/- for Assessment Year 2014-15. This rebate can be availed Tax payer/Assessee under section 87A. It is necessary to read clauses 19 and 20 of the bill to make it more clear-
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.

Whether when assessee-trust that runs a school for children of non-residents, excludes poor children from its ambit, can still claim to be charitable - NO: HC

THE issues before the Bench are - Whether when the assessee-trust that runs a school for children of non-residents, excludes poor children from its ambit, can still claim to be charitable; Whether there is any live link between the nomenclature of the body and its main activities and Whethe the Revenue is right in making inquiries before rejecting the application filed under Sec 12A. And the answers go against the assessee.

Facts of the case

CPC (TDS) brings to you the feature of PAN Verification through TRACES

communication : 01/03/2014


Dear Deductor,

Greetings from Team CPC(TDS)!

In our continuous endeavor to enhance end-user functionalities, we are glad to bring to you the convenience of online facility of PAN Verification on TRACES. With this feature, you will be able to validate the PANs with confidence for the purpose of recording and reporting your transactions in the TDS statements correctly.

India Taxes- Due Date Alert for the month March 2014

No	Due Date	Related to	Compliance to be made
1	05.3.2014	Service Tax	Payment of Service Tax for the Month of February 2014
2	07.3.2014	TDS/TCS (Income Tax)	·        Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of February 2014. ·        Deposit TDS from Salaries  deducted during the month of February 2014 •   Deposit TCS for collections made under section 206C including sale of scrap during the month of February 2014, if any •    Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of February 2014, if any
3	20.3.2014	VAT	Payment of VAT & filing of monthly return for the month of February 2014
4	20.3.2014	STPI	Filing of Softex Form for the month ended February 2014
5	31.3.2014	Service Tax	Payment of Service Tax for the Month of March 2014
6	15.03.2014	Income Tax	Payment of Last instalment of advance tax (100%) for corporate

Deadline for filing ITR-V extended

February, 28th 2014

The Central Board of Direct Taxes (CBDT) has extended the deadline for filing ITR-V forms for assessment years 2009-10, 2010-11 and 2011-12 till 31 March 2014 for returns e-filed with refund claims. Though the deadline for submitting ITR-V forms for the above assessment years was extended on earlier occasions also, it has been reported that some electronically filed returns with refund claim still remain pending with the income-tax department due to non-submission of ITR-V within the prescribed

CSR RULES NOTIFIED.

Sub : Section 135 (Corporate Social Responsibility) of the Companies Act 2013, Schedule VII of the said Act and the Rules thereon have been notified by MCA and made applicable from 01.04.2014.

We would like to inform you that the provisions of Section 135 (Corporate Social Responsibility) of the Companies Act, 2013, Schedule VII of the said Act and the Rules thereon have been notified by the Ministry of Corporate Affairs (MCA) and are made applicable from 1^st April, 2014.
The related following documents have been uploaded on ICAI website under the Link "Documents under the Companies Act 2013” as well as "ICAI Knowledge Gateway” for your reference and kind information please.

1. Notification for applicability of the provisions of the Section 135
2. Notification for amendment of Schedule VII and
3. Companies (Corporate Social Responsibility Policy) Rules, 2014

Whether when assessee has responded to Sec 158BC notice & participated in proceedings, can later challenge jurisdiction of block assessment merely because search warrant was not issued in his name - NO: HC

THE issues before the Bench are - Whether the assessment made based on the materials seized in the course of the search operation of two other persons sharing the same premises with the assessee, can be considered as assessment made u/s 158BD of the Income Tax Act; Whether when the assessee has responded to the notice issued u/s 158BC, filed its return and participated in the assessment proceedings, can later challenge the jurisdiction of the block assessment merely because the search warrant u/s 132 was not issued in his name; Whether reference to Section 143(3) notice read with proceedings u/s 158BC does not make the

Entire law on taxability of “composite” contracts for supply of offshore & onshore supply & services under Act & DTAA explained

POSCO Engineering & Construction Co Ltd vs. ADIT (ITAT Delhi)

(i) The first question which requires to be decided is whether it is a case of composite contract? In our considered opinion, the AO was initially not correct in holding that the contract was a composite one devoid of any bifurcation towards onshore and offshore supplies and services, which stand was subsequently altered to the correct position. We, therefore, hold that it is

Expenditure on foreign education of employee (son of director) is deductible if there is business nexus

Kostub Investment Ltd vs. CIT (Delhi High Court)

Whilst there may be some grain of truth that there might be a tendency in business concerns to claim deductions under Section 37, and foist personal expenditure, such a tendency itself cannot result in an unspoken bias against claims for funding higher education abroad of the employees of the concern.

High Court alarmed at shoddy record-keeping by dept and allegations of tampering. S. 147 reopening quashed

BBC World News Limited vs. ADIT (Delhi High Court)

We have examined the original record but did not find the proceedings or order sheets relating to original proceedings on record. This is a serious lapse, and it is apparent that the proceeding sheets in the respondents‟ custody and charge, have been removed. The record belongs to the respondents and was in their custody and charge. It was/is their duty and obligation to maintain the

High Court irked at abuse of law to settle personal vendetta between top-level IRS officers

Pradyot K. Misra vs. ACIT (Delhi High Court)

The respondents have to act in accordance with law and not under any pressure. The AO, being a responsible officer should not be party or pressurised by someone to personal vendetta. Being statutory officers they have to act independently and in accordance with law

S. 234E: High Court grants interim stay on enforcement of notices for levy of fee for failure to file TDS statement

Adithya Bizorp Solutions India Pvt. Ltd vs. UOI (Karnataka High Court)

S. 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day’s delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). The constitutional validity of s. 234E has been challenged in the Karnataka High Court. Vide an interim order dated 19.02.2014 the High Court held as

How is an NRI’s foreign salary taxed?

Many non-resident Indians (NRIs) want to keep their earnings in India, though they may be earning abroad. In case of an NRI, only income accruing in India or received in India or deemed to accrue in India is taxable in India, unlike in the case of a resident, whose worldwide income is taxable in India. Therefore, for an NRI who earns abroad, it is very important to ensure that her salary is not received directly in India, so that it is

Form 15CA and Form 15CB – old AND new changes

The CBDT has issued Twelfth Amendment Rules on August 5, 2013 vide Notification No. 58/2013 whereby it amended Rule 37BB and prescribed new Forms 15CA and 15CB. However, within a couple of weeks, the CBDT issued one more amendment to Rule 37BB in suppression of earlier notification (amendment rules).

No requirementf form 15 cb/ca for transfer of gifts from relatives to NRI

As per the latest amendment in the provisions of income tax act, 1961, 15CA/CB is applicable only if a person is responsible for paying to a non-resident, any interest or salary or any other sum chargeable to tax. Also no CA Certificate is required in Form 15CB and no furnishing of Form 15CA to the Income Tax

Whether when CIT(A) has given detailed findings about project bieng 'foreign' in nature, Sec 80HHB benefits can be diallowed by a mere cryptic order passed by Tribunal - NO: HC

THE issues before the Bench are - Whether when the CIT(A) has given detailed findings about the project bieng 'foreign' in nature, Sec 80HHB benefits can be diallowed by a mere cryptic order passed by the Tribunal and Whether such project work can be categorised as a mere repair and maintenance work. And the verdict favours the assessee.

Facts of the case

Whether Sec 10A benefits are available in case a partnership firm gets converted into a company with partners becoming shareholders and dissolution of firm involves no transfer of assets - YES: HC

issue before the Bench is - Whether Sec 10A benefits are available in case a partnership firm gets converted into a company with partners becoming shareholders and dissolution of firm involves no transfer of assets. And the verdict favours the assessee.

Facts of the case

The assessee is engaged in the business of exporting software having its Unit at Software Technology Park. The assessee-Company had filed return of income claiming 100% exemption

S. 254(2A): The Tribunal has no power to extend stay of demand beyond 365 days even if the assessee is not at fault. If dept seeks an adjournment, ITAT may either refuse it or dept should undertake not to recover the demand

CIT vs. Maruti Suzuki (India) Limited (Delhi High Court)

(i) In view of the third proviso to s. 254(2A) of the Act substituted by Finance Act, 2008 with effect from 1st October, 2008, the Tribunal cannot extend stay beyond the period of 365 days from the date of first order of stay

S. 80-IB(10): Limit on extent of commercial area imposed by clause (d) of s. 80IB (10) inserted w.e.f. 1.4.2005 does not apply to projects approved before that date

ITO vs. M/s Yash Developers (ITAT Mumbai)

In the assessee’s own case for the same project relating to AYs 2005-06 and 2006-07, which falls after the insertion of clause (d) to s. 80IB(10), the Tribunal held that the assessee is eligible for deduction u/s 80IB(10) in respect of the housing project. Not only this, in Manan Corporation 214 Taxmann 373 (Guj) it was held that the condition of limiting commercial

Transfer Pricing provisions do not apply if the AE is assessed in India & there is no chance of shifting of profits outside India or erosion of tax base

IJM (India) Infrastructure Ltd vs. ACIT (ITAT Hyderabad)

(iv) The object behind enactment of transfer pricing regulations is to prevent shifting of profits outside India as is brought out by Morgan Stanley 292 ITR 416 (SC) & Circular No. 14 to the Finance Act 2001. In the present case, there is no possibility of shifting of profits outside India or erosion of country’s tax base because the PE profits of the AE are assessable to tax in India. Therefore, the transactions with the AEs are outside the purview of the transfer pricing regulations