Income Tax Due Dates for October 2014

10th October 2014 -Due date for deposit of Tax deducted/collected for the month of September, 2014

10th October 2014 - Due date for deposit of TDS for the period July 2014 to September 2014 when Assessing Officer has permitted quarterly deposit of TDS under Section 192, 194A, 194D or 194H

15 October 2014 -Quarterly statement of TDS/TCS deposited for the quarter ending September 30, 2014 (applicable in all cases of TDS/TCS except when tax is deducted by an office of the Government)

22 October 2014 -Due date for issue of TDS Certificate for tax deducted under Section 194-IA in the month of September, 2014

30 October 2014 -Quarterly TDS certificate (in respect of tax deducted for payments other than salary by a person not being an office of the Government) or quarterly TCS certificate (in respect of tax collected by any person) for the quarter ending September 30, 2014

31 October 2014 -Annual audited accounts for each approved programmes under section 35(2AA)

31 October 2014 - Copies of declaration received in Form No. 60/61 (not being received at the time of opening a bank account) during April 1, 2014 to September 30, 2014 to the concerned Director (Investigation)

31 October 2014 - Quarterly return of non-deduction of tax at source by a banking company from interest on time deposit in respect of the quarter ending September 30, 2014

31 October 2014 -Quarterly statement of tax deducted by an office of the Government for the quarter ending September 30, 2014

Regular Works For A Private Company Under Companies ACT-2013

Post incorporation requirements are obligations which companies are supposed to fulfill subsequent to incorporation. These include filing of annual returns, change of directors or secretary, change of financial year, alteration in capital, allotment of shares, transfer of shares and change of registered office.

Regular Works For A Private Company Under Companies ACT-2013:-

1. BOARD MEETING:

In case of other than Small Company and One Person Company: As per Section- 173(1) Every Company require to hold at least 4 (four) Board Meetings of director of company. The maximum gap between 2 (two) Board Meeting should not be more than 120 days. There is no minimum requirements gap requirements.

In case of Small Company and One person company: As per Section 173(5): Such companies require to hold at least 2 (two) Board meetings of Directors in every half calendar year. The gap between two Meeting should not be less than 90 (ninety) days.

2. GENERAL MEETING:

First Annual General Meeting: As per Section – 96 (1) First Proviso- First Annual General Meeting of company shall be held with in a period of 9 month from the date of closing of the first financial year of company.

Subsequent Annual General Meetings: As per Section- 96 (1) every company (except One Person Company) require to hold an Annual General Meeting of Company. Time period for holding subsequent Annual General Meeting:

Maximum gap between 2 (two) General Meeting can be 15 (fifteen) month. or

6 (six) month from the end of the closing of financial year

Whichever is earlier!

3. REGULAR E-FORMS REQUIREMENTS:

S.No. Due Date of meeting Agenda Particulars e-forms Due DateForm Filling

1 30^thJune Filing of return of deposits. If there is any deposit in company. DPT-3 30^th June

2 28-Jul Disclosure of Interest- MBP-1 Preparation of MBP-1,Resolution for adoption, preparation and filing of MGT-14 MGT-14 27-Aug

3 6-Sep Adoption of Annual Accounts and Director’s Report Resolution for adoption, preparation and filing of MGT-14 MGT-14 5-Oct

4 30-Sep Filing – Balance Sheet Preparation, certification and filing of Form 23AC 23AC(AOC-1) 30-Oct

5 30-Sep Filing- Profit & Loss Account Preparation, certification and filing of Form 23ACA 23ACA(AOC-1) 30-Oct

6 30-Oct Filing of Annual Return Preparation of Annual Return, preparation, certification and filing of Form 20B 20B(MGT-7) 30-Nov

7 30-Sep Filing of Auditor Appointment Preparation of Form ADT-1 and filing with Form GNL-2 ADT-1 14-Oct

If Last Board Meeting held on 31^st March of the previous financial year.

4. Following documents needs to be filed with ROC:

S.NO. Particulars of Documents Concerned Form Time Period

a. Board Resolution for acceptance of MBP-1 MGT-14 with in 30 days of BM

b. Board Resolution for Adoption of Annual Account MGT-14 with in 30 days of BM

c. Balance Sheet AOC-1 within 30 days of AGM

d. Profit & Loss Account AOC-1 within 30 days of AGM

e. Cash Flow Statement AOC-1 within 30 days of AGM

f. Annual Return MGT-7 With in 60 days of AGM

g. ADT-1- Appointment of Auditor GNL-2 within 15 days of AGM

5. Statutory Registers:

List of Statutory Registers which a company required to maintain as per Companies Act- 2013 given below:

Sr. No Particulars Sections

1 Register of Members in Form No. MGT-1 As per Section 88(1)(a) of CA-2013 and rule 3(1) of the Companies (Management and Administration) Rules, 2014

2 Register of debenture holders/ other securities holders in Form No. MGT-2 As per Section 88(1)(b) and (c) of CA-2013 and rule 4 of the Companies (Management and Administration) Rules, 2014

3 Register of Renewed and DuplicateShare Certificates in Form No. SH-2 As per Section 46(3) of the CA-2013 and rule 6(3)(a) of the Companies (Share Capital and Debentures) Rules, 2014

4 Register of Sweat Equity Shares in Form No. SH-3 As per Section-54 of CA-2013 and rule 8(14) of the Companies (Share Capital and Debentures) Rules, 2014

5 Register of Employee Stock Optionsin Form No. Form No. SH-6 As per Section-62(1)(b) of CA-2013, and Rule-12(10) of the Companies (Share Capital and Debentures) Rules, 2014

6 Register of shares or other securities bought-back in Form No. SH-10 As per Section-68(9) of CA-2013, and rule-17(12) of Companies (Share Capital and Debentures) Rules, 2014

7 Register of charges in Form No. CHG-7 As per Section-85 rule(10) sub-rule(1) of Companies (Registration of Charges) Rules, 2014

8 Register of loans, guarantee, securityand acquisition made by the company in Form No. MBP – 2 As per Section-186(9) and Rule 12(1) of the Companies Meetings of Board and its Powers

9 Register of investments not held in its own name by the company in Form No.MBP – 3 As per Section-187(3) and Rule 14(1) of the Companies Meetings of Board and its Powers

10 Register of contracts with related party and contracts and Bodies etc. in which directors are interested in Form No.MBP – 4 As per Section-189(1) and Rule 16(1) of the Companies Meetings of Board and its Powers

11 Register of Transfers for Equity shares, Preference Shares and Debentures as required by Section 56 of Companies Act, 2013

12 Register of Transmission as required by Section 56 of Companies Act, 2013

13 Register of Deposit as required by Section 73 and 74 and Rule 14 of the Companies (Acceptance of Deposit) Rules, 2014

14 Register of Unpaid Dividend as required by Section 124 of Companies Act, 2013

15 Register of Directors and Key Managerial Personnel as required by Section 170(1) and Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014

16 Register of Beneficial Owners as required by Section 88(3) of Companies Act, 2013

6. Minutes:

→ As per Section: 118. (1) Every company shall prepare minutes of the proceedings of:

Every general meeting of any class of shareholders or creditors, and

Every resolution passed by postal ballot and

Every meeting of its Board of Directors or of every committee of the Board,

Minutes to be prepared and signed in such manner as prescribed below as per rule -25 and kept within thirty days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered.

As per Rule 25 of the Companies (Management and Administration) Rules, 2014: A distinct minute book shall be maintained for each type of meeting namely;

General Meeting of Members

Meeting of Creditors

Meetings of Board; and

Meetings of each of the committees of the Board.

Resolution passed by Postal Ballot shall be recorded in the minute book of General Meeting as if it has been deemed to be passed in the General Meeting.

Note:

Minutes should be prepared within 30 days of conclusion of meeting.

Each page of Minutes Book shall be Initialed or signed.

Last page of every record of the proceeding of each meeting shall be Dated and signed.

Signature on Minutes: As per Rule 25(d) of the Companies (Management and Administration) Rules, 2014

Minutes of Board Meeting: By the Chairman of said meeting or by the Chairman of Succeeding (Next) meeting.

Minutes of General Meeting: By the Chairman of said meeting with in 30 (thirty) days of conclusion of general meeting Or in the event of death of that chairman with in 30 (thirty) days of conclusion of general meeting by a director duly authorised by the Board for the purpose.

Resolution passed by postal ballot: By the Chairman of the Board with in with in 30 (thirty) days If there is no chairman or in the event of death of that chairman with in 30 (thirty) days of conclusion of general meeting by a director duly authorised by the Board for the purpose.

Place to Keep Minute Book: As per Rule 25(d) of the Companies (Management and Administration) Rules, 2014: Minutes Books of both General Meeting and Board Meeting shall be

Preserved permanently.

Kept in the Custody of Company Secretary or any director duly authorized in Board Meeting.

Kept at Registered office of Company

Kept any other place if, approved by the Board.

7. Ratification of Auditor:

As per Section- 139 of Companies Act 2013 Now Auditor will be appoint for a term of 5 (Five) consecutive years. But as per First proviso of Section-139(1)- Company will ratify such appointment at every general meeting of company.

Some point required to keep in mind:

Check: At every Board Meeting check is there any change in interest of Director from the disclosure earlier given by them. If there is any change then director have to give disclosure in MBP-1 to company [Change in disclosure of interest- As per section- 184(1)] and its mandatory for company to file Board resolution for acceptance of MBP-1 in form MGT-14 with in 30 days of meeting of board of directors (As per Section- 179(3) of Companies Act- 2013).

Check: That every borrowing of Company with in Limit of Section- 180(1)(c) of Companies Act, 2013, if any time company exceed that limit, there is require to get Shareholders approval by passing of Special Resolution at General Meeting of company.

Check: That every loan of Company with in the Limit of Section- 186 of Companies Act, 2013, if any time company exceed that limit, there is require to get Shareholders approval by passing of Special Resolution at General Meeting of company.

Check: Private Limited company not borrowing from person other than its directors, condition directors will give declaration that such money is directors own money.

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com, Mob: +91-8130757966)

Extension of Due date of deposit of TDS / TCS for September 2014

The Central Board of Direct Taxes has issued an order to extend the last date of deposit of tax deducted at source/tax collected at source during the month of September, 2014 from 7th October, 2014 to 10th October, 2014 without entailing any consequential interest.

However, the due date for filing of TDS/TCS statements for the 2nd Quarter of the F.Y. 2014-15 shall remain the same.

The Press Release issued by CBDT is as follows :-

F.No. 385/10/2014-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

PRESS RELEASE

1st October, 2014

Extension of the due date of deposit of tax deducted at source/tax collected at source during the month of September, 2014.

Considering the consecutive holidays owing to the festive season and weekend during the first week in the month of October, 2014, the Central Board of Direct Taxes has issued an order to extend the last date of deposit of tax deducted at source/tax collected at source during the month of September, 2014 from 7^thOctober, 2014 to 10^th October, 2014 without entailing any consequential interest.

However, the due date for filing of TDS/TCS statements for the 2^ndQuarter of the F.Y. 2014-15 shall remain the same.

(Rekha Shukla)
Commissioner of Income Tax
(Media & Technical Policy)
Official Spokesperson, CBDT

New Tax Structure of A.Y 2015 -16: A relief for salaried class!

Dr. Rakesh Kumar Sharma

The new Indian government announced its tax rules for the current financial year. But very few announcements were made by new government which could provide relief to salaried class people. The first and the most important amendment was in the tax slab. Although there is no change in the existing tax rate yet new Government had increased the minimum limit from ₹ 2,00,000 to ₹ 2,50,000. There were no changes in the tax slab from last 2 years in tax slabs. In the past, this limit was never increased by ₹ 50000 or more amount.   So definitely, this is one of the very important announcements in new finance bill. Many Indian employees were expecting this change. Although other subsequent slabs remains the same. Following are the tax slabs of Assessment Year 2014-15 & 2015-16.

Tax Slabs 2014-15 Tax Slabs 2015-16

Income Tax Rate Income Tax Rate

Upto ₹ 2 Lacs 0 Upto Rs. 2 .50 Lacs 0

₹ 2 Lacs to Rs. 5 Lacs 10% ₹ 2.50 Lacs to Rs. 5 Lacs 10%

₹ 5 Lacs to Rs. 10 lacs 20% ₹ 5 Lacs to Rs. 10 lacs 20%

Above ₹ 10 Lacs 30% Above ₹ 10 Lacs 30%

Second important amendment is under section 80C and 80CCC. Earlier, the maximum qualifying investments for deduction from total income was ₹ 1, 00,000 (even more amount was investment in specified schemes) which was raised to ₹ 1, 50,000. So if no loan is taken by the employee to construct or renovate the house & having total salary income ₹ 5 lacs than his total taxable income will decline by Rs. 50,000 (after availing this deduction) which is 12.5 % of earlier base income.

Net change in Total tax Structure having gross income Rs.5 lacs.

Total Tax liability before budget ₹ 20600

Total Tax liability after budget ₹-10300

Net Benefit ₹ 10300

Net change in Total tax Structure having gross income Rs. 10 lacs.

Total Tax liability before budget ₹ 1,13,300

Total Tax liability after budget ₹ -97850

Net Benefit ₹ 15450

So after availing these two amendments in new finance bill the person with gross income of ₹ 5 lacs can save tax of ₹ 10300 and in that case his total tax liability will decline by 50 %. Similarly, the person who will have gross income ₹ 10 lacs during financial year 2014-15, he can save a tax of ₹ 15450. In such a case his tax liability will decline by 13.6 % as compare to tax rules in the assessment year 2014-15. If higher gross income will be there than percentage saving in tax will be less as compare to low income.

In the new finance bill, there is an important amendment under section 24(1). In this section the person can claim for deduction for the interest on loan taken for construction or renovation of house property. In this case, self-occupied property the entire amount of interest shall be considered as loss from the house property and same can be adjusted from other person’s income. So in this way, the person can minimise his taxable income as well as the tax liability. In the assessment year 2014-15, the maximum limit under this section was ₹ 1,50,000 which is now raised to ₹ 200,000 in the new finance bill of 2015-2016. This was also a very important amendment in the tax rules. This was one of the most awaited changes in the finance bill as it was consistent for past many years. This change has given great relief to all those assesses who have taken loan for construction or renovation of house property. Below tables analyse the benefit of this amendment to assessee.

With optimum tax planning, person having gross income of ₹ 5 lacs, in the assessment year 2015-16 his or her tax liability will be zero as his taxable income will be less than     ₹.2,50,000. While in previous tax rules, his tax liability will be ₹ 5150 (i..e., 10 % on 50,000 + 3% surcharge).

Net change in Total tax Structure having gross income Rs. 10 lacs.

Total Tax liability before budget ₹ 82400

Total Tax liability after budget ₹-56650

Net Benefit ₹25750

With proper tax planning and by taking the benefits of all these three important amendments, the person having gross income of ₹10 lacs can minimize his gross total income to ₹6.5 lacs from ₹ 7.5 lacs. In this way his gross total income will decline by 13.33%. While, in this case his or her net tax liability will diminish by ₹ 25,750 and percentage decrease in this shall be 31.25%.

Conclusion

The new tax rules are indeed a great tax relief for salaried class people in the new finance bill 2014-15 announced as on 10^th July, 2014 by Hon. union cabinet finance minister Mr Arun Jetly of government of India. Now, with optimum tax planning under Section 80C & 80CCC , people having income up to ₹ 5 lacs will have maximum tax relief of ₹ 10,300 (if no loan is taken for construction or renovation) otherwise ₹ 15000+ Surcharge. Whereas if income is between ₹ 5 to ₹ 10 lacs than you will have relief ranging from ₹ 10000 to ₹ 15000 + Surcharge. If assesse   also pays interest ₹ 2 Lacs or more on home loan than he can get maximum benefit of ₹ 25750.

As per new tax rule, with optimum tax planning and getting the benefit of deduction under section 24(1), assesse can minimise his net taxable income as well as net tax liability. Assesse with higher income or higher tax slab can get maximum benefits of all amendments made in new finance bill 2014-15.

Whereas, if income is between ₹ 5 to ₹ 10 lacs than you will have relief ranging from ₹ 10000 to ₹ 15000 + Surcharge. If assesse   also pays interest ₹ 2 Lacs or more on home loan than you can get maximum benefit of ₹.25750.

(Author is Assistant Professor & Tax Consultant atSchool of Behavioral Sciences & Business Studies,Thapar University , Patiala)

Once the TDS deducted, credit of the same to be given to assessees, irrespective of year to which it relates

Sadbhav Engineering Ltd. vs. Dy. CIT (ITAT Ahemdabad)

The brief facts of the case are that the assessee claimed credit for TDS of Rs.1,73,52,062/- for the AY 2006-07 and Rs.2,25,09,037/- in AY 2007- 08 which was not allowed by the AO on the ground that the income in respect of the said TDS was not shown by the assessee in view of the provisions of section 199 of the Act. The ld.CIT(A) also confirmed the same.

The AR of the assessee submitted that the issue is now covered in favour of the assessee by the decision of Hon’ble Visakhapatnam Bench of the Tribunal in ITA No.324/Vizag/2009 for AY 2006-07, dated 03/03/2011 in the case of ACIT vs. Peddu Srinivasa Rao. The ld.DR for the Revenue supported the orders of the authorities below.

We find that the Visakhapatnam Bench in the case of Peddu Srinivasa Rao(supra) has held as under:-

“8. We have carefully perused the provisions of section 199 of the Act and according to the pre-amended provisions of section 199, the credit of deduction made in accordance with the relevant provisions of this chapter and paid to the Central Government, shall be given for the amount so deducted on the production of the certificate furnished u/s 203 for the assessment made under this Act for the assessment year for which such income is assessable. But in the amended provisions the words “for the assessment year for which such income is assessable” has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-section 1, it has been stated that any deductions made in accordance with the foregoing provisions of this chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates. The pre-amended and the amended provisions of section 199 are extracted hereunder:

“Section 199: Credit for tax deducted – (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or depositor or owner of property or of unit-holder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable:

(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given.

Section 199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.

(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.”

The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal of the assessee is allowed.

SOURCE-

Sadbhav Engineering Ltd. vs. Dy. CIT (ITAT Ahemdabad), ITA Nos.610/Ahd/2008, 1834&2054/Ahd/2009, 1835&2055/Ahd/2009 and 2053/Ahd/2009, AYs –2005-06, 2006-07, 2007-08 & 2005-06 respectively, Date of Pronouncement : 19/12/2013

Download Full Text of the Judgment – Sadbhav Engineering Ltd. vs. Dy. CIT (ITAT Ahemdabad),

Transfer Pricing – Ignore safe harbour margins for TP audits

Pursuant to the Safe Harbour Rules in Rules 10TA to 10TG, the CBDT has issued a letter dated 20.12.2013 in which it has laid down important directives and clarifications on the manner in which the Safe Harbour Rules are meant to be implemented.

“In cases where an assessee has not opted for safe harbour or the option has not been found to be valid and a regular transfer pricing audit is considered necessary, such transfer pricing audit will be carried out without regard to the safe harbour rates or margins,” said a CBDT letter to chief commissioners.

Income tax Calculator for F.Y. 2013-14 / A.Y. 2014-15

Bijender Choudhary

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Download Revised modified Latest Tax Calculator for F.Y. 2013-14 / A.Y. 2014-15

S. 40A(2)(b) Loan taken from relatives cannot be compared with bank loan

The ld. Counsel of the assessee filed a copy of the decision of the ITAT, Ahmedabad ‘A’ Bench dated 09.07.10 in the case of Vipul Y. Mehta-vs- ACIT in ITA No. 869/Ahd/2010 for the assessment year 2007-08 wherein it was held that loan taken from the relatives cannot be compared with bank loan because loan from the relatives are without security, while loan from the bank is secured. In this decision, reliance was also placed in the decision of the Tribunal in the case of Omkarmal Gaurishanker –Vs- ITO reported in 92 TTJ (Ahd.) 223 wherein it was held that interest paid to relatives @24% is reasonable. It is also pertinent to note that interest paid by the assessee before us is only 18%. Keeping in view the decision of the ITAT, Ahmedabad ‘A” Bench in the case of Vipul Y. Mehta (supra), we are of the view that it is neither excessive nor unreasonable.

ITAT : ‘A’ BENCH : AHMEDABAD

I.T.A. No. 2245/AHD./2010 –

Assessment Year : 2007-2008

ACIT Vs. M/s. Raj Steel Industries

O R D E R

Per Shri T.K. Sharma, Judicial Member :

This appeal filed by the revenue is against the order dated 12.04.20 10 passed by the Learned Commissioner of Income Tax (Appeals)-XI, Ahmedabad for the assessment year 2007- 08.

2. Various grounds raised in this appeal by the revenue are as under:

“1. The Ld. Commissioner of Income tax (A)-XVI, Ahmedabad has erred in law and on facts in deleting the addition made of Rs.90,000/- on account of Godown rent.

2. The Ld. Commissioner of Income tax (A)-XVI, Ahmedabad has erred in law and on facts in deleting the addition of Rs.27,000/- made on account of weigh- bridge rent.

3. The Ld. Commissioner of Income tax (A)-XVI, Ahmedabad has erred in law and on facts in deleting the addition of Rs.5,40,251/- made U/s. 40A(2)(b) of the Act.”

3. Brief facts relating to controversy involved in ground nos. 1 and 2 are that in the assessment order, the Assessing Officer disallowed Rs.90,000/- on account of godown rent and Rs.27,000/- on account of weighbridge rent by invoking the provisions contained in section 40A(2)(b) of the I.T. Act, 1961.

4. On appeal, in the impugned order, the Ld. Learned Commissioner of Income Tax(Appeals) deleted the disallowance of godown rent by observing that it is increased due to hiring of different godown, necessitated by the four-fold increase in appellant’s turnover. Apart from this, the ld. Learned Commissioner of Income Tax(Appeals) observed that, while making the addition, the Assessing Officer has not brought on record any material that godown rent paid to Viklap P. Joisar is excessive or unreasonable as per the provisions of section 40A(2)(a) of the Act. In para 4.2 of the impugned order, the ld. Learned Commissioner of Income Tax(Appeals) deleted the disallowance of Rs.27,000/- which made by the Assessing Officer on account of increase in weighbridge rent by following the reasoning given, while deleting the disallowance of godown rent of Rs.90,000/-.

5. Aggrieved with the order of the Ld. Learned Commissioner of Income Tax(Appeals) deleting both the disallowances, the revenue is in appeal before the Tribunal.

6. At the time of hearing before us, Shri R.K.Dhanesta, ld. D.R. appeared on behalf of the revenue and pointed out that in the assessment order, the Assessing Officer has clearly mentioned that the assessee used to pay ground rent @Rs.6,000/- per month to Shri Venilal K. Kanthara up to June, 2006 and from July, 2006 to March, 2007, rent was paid to Shri Vikal Joisar @Rs.16,000/- per month. On the basis of this comparison, he took the view that there is an abnormal increase in the rent and now this has been paid to related person as mentioned in section 40A(2)(b). Therefore, he disallowed the same. He submitted that the area of the godown is the same. Only ownership has been changed. He submitted that due to change in ownership, the rent cannot be increased. Therefore, the provisions of section 40A(2)(b) are clearly attracted. Similarly, in respect of weighbridge rent also, the Assessing Officer observed that rent has been increased from Rs.6,000/- to Rs.16,000/-, due to change in ownership in the property. Therefore, disallowance was rightly made by invoking the provisions contained in section 40A(2)(b) of the I.T.Act, 1961. He submitted that before the Assessing Officer, the assessee has not furnished any evidence to indicate that increase in the godown rent is due to hiring of different godown. To sum up, he submitted that the explanation, which was submitted before the ld. Learned Commissioner of Income Tax(Appeals), was not submitted before the Assessing Officer and the ld. Learned Commissioner of Income Tax(Appeals), without affording an opportunity to the Assessing Officer, deleted both the disallowances.

7. On the other hand, Shri Tushar P. Hemani, ld. A.R. appearing on behalf of the Assessee, vehemently supported the order of the ld. Learned Commissioner of Income Tax(Appeals). The ld. Counsel of the assessee contended that in the assessment order, there is no finding that the rent paid on account of godown and weighbridge is excessive and unreasonable. Therefore, on this ground, the view taken by the ld. Learned Commissioner of Income Tax(Appeals) be upheld. Apart from this, he pointed out that before the Assessing Officer, the assessee has clearly mentioned the different addresses and the Assessing Officer erred in holding that land is the same.

8. Having heard both the sides, we have carefully gone through the orders of the authorities below as well as the statement of facts furnished before the ld. Learned Commissioner of Income Tax(Appeals). It is also pertinent to note that neither before the Assessing Officer nor before the ld. Learned Commissioner of Income Tax(Appeals), the assessee has furnished the area of the land, etc. In case, it was a different godown, the assessee ought to have stated the same clearly before the Assessing Officer. Since this was not done, the order of ld. Learned Commissioner of Income Tax(Appeals) in respect of both the disallowances is set aside and the matter is restored to the file of the Assessing Officer with the direction that the assessee should furnish old and new rent agreements in respect of godown as well as weighbridge land. The Assessing Officer will examine the same and ascertain the area of land, whether it is different, the prevailing rate of rent in the nearby land and re-adjudicate both the additions afresh, after bringing record the comparable cases and giving necessary opportunity of hearing to both the parties.

9. The facts relating to the ground no.3 are that in the assessment order, the Assessing Officer disallowed Rs.5,40,25 1/- out of interest expenses under section 40A(2)(b).

10. On appeal, in the impugned order, the ld. Learned Commissioner of Income Tax(Appeals) deleted the same observing that interest paid by the assessee @18% to the family members is neither excessive nor unreasonable.

11. Aggrieved by this, the revenue is in appeal before us.

12. We have heard both the sides. The ld. Counsel of the assessee filed a copy of the decision of the ITAT, Ahmedabad ‘A’ Bench dated 09.07.10 in the case of Vipul Y. Mehta-vs- ACIT in ITA No. 869/Ahd/2010 for the assessment year 2007-08 wherein it was held that loan taken from the relatives cannot be compared with bank loan because loan from the relatives are without security, while loan from the bank is secured. In this decision, reliance was also placed in the decision of the Tribunal in the case of Omkarmal Gaurishanker –Vs- ITO reported in 92 TTJ (Ahd.) 223 wherein it was held that interest paid to relatives @24% is reasonable. It is also pertinent to note that interest paid by the assessee before us is only 18%. Keeping in view the decision of the ITAT, Ahmedabad ‘A” Bench in the case of Vipul Y. Mehta (supra), we are of the view that it is neither excessive nor unreasonable. Therefore, we incline to uphold the order of the ld. Learned Commissioner of Income Tax(Appeals). This ground of the appeal is accordingly rejected.

13. In the result, for statistical purposes, the appeal filed by the revenue is treated as partly allowed.

The Order pronounced in the Court on 11-02-11.

-------------------

Section 80CCG Govt notifies Rajiv Gandhi Equity Savings Scheme, 2013

NOTIFICATION NO 94/2013,

Dated: December 18, 2013

S.O. 3693 (E).- In exercise of the powers conferred by sub-section (1) of section 80CCG of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:-

1. Short title, commencement and application. – (1) This Scheme may be called the Rajiv Gandhi Equity Savings Scheme, 2013.

(2) It shall come into force on the date of its publication in the Official Gazette.

(3) This Scheme shall apply for claiming deduction in the computation of total income of the assessment year relevant to a previous year beginning on or after the 1st day of April, 2013 on account of investment in eligible securities under sub-section (1) of section 80CCG of the Income-tax Act, 1961(43 of 1961).

2. Objective of the Scheme.-The objective of the Scheme is to encourage investment of savings of small investors in the domestic capital market.

3. Definitions. – In this Scheme, unless the context otherwise requires,-

(i) “Act” means the Income-tax Act, 1961 (43 of 1961);

(ii) “demat account” means an account opened with the depository participant in accordance with the guidelines laid down by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(iii) “depository” means a company as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(iv) “depository participant” means a participant as defined in clause (g) of sub- section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(v) “eligible securities” means any of the following, namely :-

(a) equity shares, on the day of purchase, falling in the list of equity declared as “BSE-100″ or ” CNX-100″ by the Bombay Stock Exchange or the National Stock Exchange, as the case may be;

(b) equity shares of public sector enterprises which are categorised as Maharatna, Navratna or Miniratna by the Central Government;

(c) Units of Exchange Traded Funds or Mutual Fund schemes or equity oriented funds, which have eligible securities specified in sub-clause (a) or sub-clause (b) as underlying securities, provided they are listed and traded on a stock exchange and settled through a depository mechanism;

(d) Follow on Public Offer of sub-clauses (a) and (b);

(e) New Fund Offers of sub-clause (c);

(f) Initial Public Offer of a public sector undertaking wherein the Government shareholding is at least fifty-one per cent. which is scheduled for getting listed in the relevant previous year and whose annual turnover is not less than four thousand crore rupees during each of the preceding three years;

(vi) “financial year” means a year commencing on the 1st day of April and ending on the 31stday of March;

(vii) “Form” means the Form appended to the Scheme; (viii) “initial year” means-

(a) the financial year in which the investor designates his demat account as Rajiv Gandhi Equity Savings Scheme account and makes investment in the eligible securities for availing deduction under the Scheme; or

(b) the financial year in which the investor makes investment in eligible securities for availing deduction under the Scheme for the first time, if the investor does not make any investment in eligible securities in the financial year in which the account is so designated;

(ix) “investment” means investment by an assessee in any of the eligible securities in accordance with the Scheme;

(x) “new retail investor” means a resident individual,-

(a) who has not opened a demat account and has not made any transactions in the derivative segment before the date of opening of a demat account or the first day of the initial year, whichever is later:

Provided that an individual who is not the first account holder of an existing joint demat account shall be deemed to have not opened a demat account for the purposes of this Scheme; or

(b) who has opened a demat account but has not made any transactions in the equity segment or the derivative segment before the date he designates his existing demat account for the purpose of availing the benefit under the Scheme or the first day of the initial year, whichever is later;

(xi) “Scheme” means the Rajiv Gandhi Equity Savings Scheme;

(xii) words and expressions used and not defined in this Scheme but defined in the Act shall have the meanings respectively assigned to them in the Act.

4. Eligibility .- The deduction under the Scheme shall be available to a new retail investor who complies with the conditions of the Scheme and whose gross total income for the financial year in which the investment is made under the Scheme is less than or equal to twelve lakh rupees.

5. Opening or designating of demat account.- A new retail investor shall -

(a) open a new demat account or designate his existing demat account for the purpose of availing the benefit under this Scheme;

(b) submit a declaration in Form A to the depository participant who shall forward the same to the depository for verifying the status of the new retail investor;

(c) furnish his permanent account number(PAN) while opening the demat account or designating the existing account as a Rajiv Gandhi Equity Savings Scheme eligible account, as the case may be.

6. Procedure for investment under the Scheme. – A new retail investor shall make investments under the Scheme in the following manner, namely:-

(a) the new retail investor may invest in one or more financial years in a block of three consecutive financial years beginning with the initial year;

(b) the new retail investor may make investment in eligible securities in one or more than one transaction during any financial year during the three consecutive financial years beginning with the initial year in which the deduction has to be claimed;

(c) the new retail investor may make any amount of investment in the demat account but the amount eligible for deduction under the Scheme shall not exceed fifty thousand rupees in a financial year;

(d) the new retail investor shall be eligible for the tax benefit under the Scheme only for three consecutive financial years beginning with the initial year, in respect of the investment made in each financial year;

(e) if the new retail investor does not invest in any financial year following the initial year, he may invest in the subsequent financial year, within the three consecutive financial years beginning with the initial year, in accordance with the Scheme;

(f) the eligible securities brought into the demat account, as declared or designated by the new retail investor shall be under a lock-in for a period of three years in accordance with the provisions of paragraph 7;

(g) the eligible securities brought into the demat account, in respect of which the assessee is eligible for deduction under the Scheme, shall be under a fixed lock-in during the first year, as per the provisions of the paragraph 7, unless the new retail investor specifies otherwise, and for such specification, the new retail investor shall submit a declaration in Form B, either in electronic or physical form, to the depository participant indicating that such securities are not to be included within the above limit of investment;

(h) the new retail investor shall be eligible for a deduction under sub-section (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities and in respect of which a declaration in Form B has not been made, subject to the maximum investment limit of fifty thousand rupees in a financial year;

(i) the new retail investor who has claimed a deduction under sub- section (1) of section 80CCG of the Act in any assessment year shall not be allowed any deduction under the Scheme for the same investment for any other assessment year;

(j) the new retail investor shall be permitted a grace period of seven trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities shall be deemed to have been acquired in the financial year itself;

(k) the new retail investor can make investments in securities other than the eligible securities covered under the Scheme and such investments shall not be subject to the conditions of the Scheme nor shall they be counted for availing the benefit under the Scheme;

(l) the deduction claimed shall be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is contravened by the new retail investor.

7. Period of holding and other conditions. – (1) The period of holding of eligible securities invested in each financial year shall be three years to be counted in the manner hereafter provided.

(2) The eligible securities shall be held for a period called the fixed lock-in period which shall commence from the date of purchase of such securities in the relevant financial year and end on the 31st day of March of the year immediately following the relevant financial year.

(3) The new retail investor shall not be permitted to sell, pledge or hypothecate any eligible security during the fixed lock-in period.

(4) The period of two years beginning immediately after the end of the fixed lock-in period shall be called the flexible lock-in period.

(5) The new retail investor shall be permitted to trade the eligible securities after the completion of the fixed lock-in period subject to the following conditions, namely:-

(a) the new retail investor shall ensure that the demat account under the Scheme is compliant for a cumulative period of a minimum of two hundred and seventy days during each of the two years of the flexible lock-in period as laid down hereunder:-

(i) the value of the investment portfolio of the eligible securities referred to in sub-clauses (ii), (iii) and (iv) shall be exclusive of value of the investment portfolio of eligible securities which are in fixed lock-in for any financial year;

(ii) the demat account shall be considered compliant for the number of days for which the value of the investment portfolio of eligible securities, is equal to or higher than the corresponding investment claimed as eligible for the purposes of deduction under section 80CCG of the Act;

(iii) in case the value of investment portfolio in the demat account decreases due to decrease in the market rate of eligible securities, then, notwithstanding the provisions of sub- clause (ii), -

(A) the demat account shall be considered compliant from the first day of the flexible lock-in period to the day when any of the eligible securities are sold;

(B) where the assessee sells the eligible securities mentioned in sub-clause (ii) from his demat account, and purchases eligible securities, the said demat account shall be compliant from the day on which the value of the investment portfolio in the account becomes -

(I) equal to the corresponding investment claimed as eligible for deduction under section 80CCG of the Act; or

(II) equal to the value of the investment portfolio under the Scheme, before such sale, whichever is less;

(iv) credit of eligible securities in the demat account exceeding the compliance requirement as per sub-clauses (ii) and (iii) shall be considered as fresh investment of the financial year in which the investment is made and shall be eligible for deduction in accordance with sub-section (1) of section 80CCG of the Act in that financial year;

(b) the balance of the investment portfolio of eligible securities in the demat account, at any point of time during the flexible lock-in period, shall not be less than the amount corresponding to the value of the securities in the fixed lock-in.

(6) The new retail investor’s demat account created under the Scheme shall, on the expiry of the period of holding of the investment relevant to the last financial year for which the deduction has been claimed, be converted automatically into an ordinary demat account.

(7) For the purpose of valuation of investment during the flexible lock-in period, the closing price as on the previous day of the date of trading shall be considered.

(8) While making the initial investments upto fifty thousand rupees, the total cost of acquisition of eligible securities shall not include brokerage charges, securities transaction tax, stamp duty, service tax and any other tax, which may appear in the contract note.

(9) Where the investment of the new retail investor undergoes a change as a result of involuntary corporate actions including demerger of companies, amalgamation and such other actions, as may be notified under sub- paragraph (11), resulting in debit or credit of securities covered under the Scheme, the deduction claimed by such investor shall not be affected.

(10) In the case of voluntary corporate actions, including buy-back resulting only in debit of securities where new retail investor has the option to exercise his choice, the same shall be considered as a sale transaction for the purpose of the Scheme.

(11) The Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall notify the involuntary corporate actions referred to in sub-paragraph (9) for the purposes specified therein.

8. Effect of failure to fulfil conditions. – (1) If the new retail investor fails to fulfill any of the provisions of the Scheme, the deduction originally allowed to him under sub-section (1) of section 80CCG of the Act for any previous year, shall be deemed to be the income of the assessee of the previous year in which he fails to comply with the provisions of the Scheme and shall be liable to tax for the assessment year relevant to such previous year.

(2) Without prejudice to the provisions of sub-paragraph(1), where the demat account is not in compliance with the conditions laid down in paragraph 7 in respect of flexible lock-in period, the deduction originally allowed to the investor under section 80CCG shall be liable to tax in the following manner, namely:-

(a) if the investment portfolio in flexible lock-in period corresponds to the investments made in only one assessment year, the deduction allowed to the investor under section 80CCG for such assessment year shall be liable to tax;

(b) if the investment portfolio in flexible lock-in period corresponds to the investment made in two assessment years, and–

(i) the value of investment portfolio of eligible securities in the demat account is equal to or more than the value of the investment portfolio of the eligible securities in respect of which the deduction was allowed for any one assessment year but is less than the aggregate value of the investment portfolio of the eligible securities in respect of which the deduction was allowed for the two assessment years for 270 days in the flexible lock-in period, the deduction allowed to the investor under section 80CCG for the other assessment year shall be liable to tax;

(ii) is not covered by sub-clause (i), the aggregate deduction allowed to the investor under section 80CCG for both the years shall be liable to tax. Explanation.-It is hereby clarified that in the case where the value of the investment portfolio of eligible securities is more than the corresponding value of such securities in respect of which deduction has been claimed in either of the two financial years, the deduction corresponding to the financial year in which the value of investment portfolio of eligible securities is less, shall be liable to tax.

(3) Where the deduction in respect of any amount as referred to in sub- paragraphs (1) and (2) has been charged to tax, the value of the investment portfolio of eligible securities for the purposes of compliance under paragraph 7 for the remaining period of flexible lock-in shall be equal to or higher than the value of the eligible securities in respect of which the deduction was originally claimed as reduced by the value of eligible securities in respect of which the deduction has been charged to tax.

9. Duties of Depository, etc.-(1) The depository shall certify the new retail investor status of the assessee at the time of designating his demat account as demat account for the purpose of the Scheme.

(2) The depository participant shall furnish an annual statement of the eligible securities invested in or traded through the demat account to the demat account holder.

10. Furnishing of consolidated statement. – (1) For every financial year, the depository shall provide a consolidated statement of details in the electronic format, as specified in Form C, on all the Rajiv Gandhi Equity Savings Scheme beneficiaries to the Director General of Income -tax (Systems) or any other person authorised by him, within a period of two months from the end of the relevant financial year.

(2) If the depository, having furnished a consolidated statement under sub- paragraph(1), discovers any omission or any wrong particulars therein, it may furnish a revised statement at any time on or before the 31st day of December of the financial year immediately following the financial year for which the consolidated statement has been furnished.

11. Form for furnishing reports. – For the purposes of paragraph 10, the Director General of Income-tax (Systems) shall determine the procedures, formats and standards for furnishing of the report in electronic format in Form C by the depositories.

12. Savings. – A new retail investor who has invested in accordance with the Rajiv Gandhi Equity Savings Scheme, 2012 shall continue to be governed by the provisions of that Scheme to the extent it is not in contravention of the provisions of this Scheme and such investor shall also be eligible for the benefit of investment made in accordance with this Scheme for the financial years 2013-14 and 2014-15.

13. Assessee to submit records. – Assessees shall be liable to submit the relevant records to the income-tax authorities for verification as and when required.

[F. No. 142/35/2012 –TPL)

(Raman Chopra)
Director (TPL-II)

Form A

[See paragraph 5(b)]

Declaration to be submitted by the investors to the depository participants for availing the benefits under the Rajiv Gandhi Equity Savings Scheme.

Name of the Investor:

(first holder)

Address of the investor:

PAN :

1. It is hereby certified that* —

(a) I do not have a demat account and I have not traded in any derivatives.

(b) I have demat account No._______ in_______ depository participant but I have not traded in any equity shares or derivatives in this account.

2. I hereby declare that I have read and understood all the terms and conditions of the Rajiv Gandhi Equity Savings Scheme.

3. It is hereby verified that I am an eligible new retail investor for availing the benefits under the Rajiv Gandhi Equity Savings Scheme.

4. I undertake to abide by all the requirements and fulfill all obligations under the Scheme, and will comply with all the terms and conditions of the Scheme.

5. I undertake to inform the Depository Participant when my gross total income exceeds twelve lakh rupees in any of the subsequent financial years for which the benefit under the Rajiv Gandhi Equity Savings Scheme is proposed to be availed of.

6. I understand that, in case I fail to comply with any condition specified in the Scheme, the benefits availed thereunder will be withdrawn and the tax shall be payable by me accordingly.

Signature of the Investor

Place:
Date:
* Tick which ever is appropriate.

Form B

[See paragraph 6(g) and (h)]

Declaration to be submitted by the new retail investors to the depository participants for not availing the benefits under the Rajiv Gandhi Equity Savings Scheme.

To
Depository participant
Address
Name of the Investor:
(first holder)
Address of the Investor:
PAN :

It is hereby informed that I have designated my demat account No.____in_____depository participant and_______following securities

(a)
(b)
(c)
(d)

credited in the aforesaid demat account on _______are not to be included as investment for the purpose of the Rajiv Gandhi Equity Savings Scheme.

Signature of the Investor:

Place:
Date:

Form C

[See paragraphs 10 and 11]

Annual report to be submitted by the depository to the Income-tax Department in Electronic Format before 31st May.

(For 80 CCG benefits of Financial Year………)

Name

PAN

DEMAT A/c No.

Date of opening A/c or date of designating a/c as RGESS

Detail of investments

Compliance Status

Year 1

Year 2

Year 3

Amount invested and eligible for deduction in the first year #

Scrips under fixed lock-in during the relevant FY

Amount invested in the second year

Scrips under fixed lock-in during the relevant FY

Amount invested in the third year

Scrips under fixed lock-in during the relevant FY

Whether A/c eligible under the RGESS

Whether A/c compliant with RGESS in respect of fixed lock-in

Whether A/c compliant with RGESS in respect of 270 days period*

Amount chargeable to tax*

*The non-compliance, if any, is determined in accordance with paragraph 8 of the Scheme.
# First year implies the financial year in which investments were made by the investor for the first time under section 80CCG.

Achievements / Initiatives Taken by CBDT to Improve Efficiency of Tax System

Achievements and Initiatives Taken by the Central Board of Direct Taxes (CBDT) Helping in Facilitating the Tax Payers, Improving the Efficiency and Equity of the Tax System and Promoting Voluntary Compliance

Following are the major highlights/achievements made by the Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance over a period of time especially during the last one year :
The Department of Revenue, Ministry of Finance, Government of India focuses on improving the efficiency and equity of the tax system and to promote voluntary compliance both in case of Direct and Indirect taxes. Here we discuss the achievements made in case of direct taxes. Overall objective is to achieve the moderate tax rates, on a broad tax base, which is not diluted by sector specific exemptions. The same is ensured by making all sectors contribute to direct taxes. Accordingly attempts have been made to weed-out exemptions (or allow them to sunset) from the legislation as well as to ensure a minimum level of tax contribution by all taxpayers through levy of Minimum Alternate Tax (MAT) on all companies and firms.
In case of non-residents, a balance has been made to allocate taxation rights between the source State and the State of residence of the non-residents on the basis of the provisions of the Income-Tax Act and the provisions of Double Taxation Avoidance Agreements (DTAAs). Advance Pricing Mechanism (APA) has been notified so as to assist taxpayers to obtain certainty on their transfer pricing matters.
Similarly, Safe Harbour Rules have been notified for the purpose of ensuring certainty in transfer price declared by the taxpayer in respect of eligible international transactions. Safe harbour means circumstances in which the Income-tax Authority shall accept the transfer price declared by the assessee. The rules have been drafted after taking inputs from stake holders.
The General Anti-Avoidance Rules (GAAR) have been incorporated to counter undesirable aggressive tax planning in a moderate tax regime and are to apply for income of the financial year 2015-16 and subsequent years.
Extensive use of technology is being made for collection of information without intrusive methods. 360 degree profiling of taxpayers and potential taxpayers is being done for gathering information regarding their sources of income and spending habits. Information technology tools are being developed for exhaustive collection of information and maintenance of database. Information collected from returns of income and other sources is collated so that specific targeted action can be taken against the tax evaders.
The scope of annual information returns has been expanded, e-payment facility through more banks has been extended, the refund banker system has been expanded and e-filing has been made mandatory for more categories of assessees. The Income-tax department is rapidly moving towards technology-based processing as would be evident from the Central Processing Cell (CPC) set-up at Bengaluru and the Central Processing Cell-TDS at Vaishali, Ghaziabad.
Following specific legislative measures have been taken over a period of time, namely:-

Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, Tax Deduction at Source (TDS) at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds Rs.50 lakhs, has been introduced. However, agricultural land is exempt from this provision.
Closely held companies, which receive funds from shareholders, are required to prove the source of money in the hands of such shareholders for the sum to be accepted as genuine credit. Also, share premium received by a company, not being a company in which the public are substantially interested (subject to certain exceptions), from a resident person in excess of the fair market value may be liable to tax.
In order to curb the practice of introducing unaccounted money provision has been made in the Income-tax Act, 1961 to tax unexplained credits, money, investment, expenditure, etc., at the maximum marginal rate i.e., 30% plus surcharge and cess as applicable (rather than at the marginal tax rate of the individual after allowing basic exemption of Rs. 2 lakhs) and that no deduction in respect of any expenditure or allowance shall be allowed in computing deemed income under the said sections of the Income-tax Act.
It is now mandatory for every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India to file a return of income giving details of the foreign assets, irrespective of the fact whether such resident taxpayer has taxable income or not.
Penalty provisions on undisclosed income found during the course of a search have been strengthened. Prosecution mechanism has also been strengthened under the Income-tax Act by – (i) providing for constitution of Special Courts for trial of offences; (ii) application of summons trial for some of the offences under the Act to expedite prosecution proceedings as the procedures in a summons trial are simpler and less time consuming; and (iii) providing for appointment of public prosecutors.
A new tax called commodities transaction tax (CTT) is levied on taxable commodities transactions entered into recognised commodity exchanges/associations. The new tax is levied @ 0.01 per cent on the seller on sale of commodity derivatives.
With a view to attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-resident investors who invest in such bonds during the period 1.07.2012 to 30.06.2015 has been reduced from 20 percent to 5 percent. The rate of tax has also been reduced on interest paid during a two year period starting 1^st June, 2013 to 31.05.2015 to a Foreign Institutional Investor (FII) or a Qualified Foreign Investor (QFI) in respect of investment in rupee denominated corporate bonds of an Indian company and Government securities.
In order to encourage repatriation of funds from overseas companies, a concessional rate of tax of 15 percent has been introduced for the period 01.04.2011 to 31.03.2014 on dividend received by an Indian company from its foreign subsidiary. Further, the Indian company shall not be liable to pay dividend distribution tax on the distribution to its shareholders of that portion of the income received from its foreign subsidiary subject to fulfilment of certain conditions.
In order to facilitate financial institutions to securitise their assets through a special purpose vehicle, Securitisation Trust has been exempted from income tax. Tax shall be levied only at the time of distribution of income by the Securitisation Trust at the rate of 30 percent in the case of companies and at the rate of 25 percent in the case of an individual or HUF. No further tax will be levied on the income received by the investors from the Securitisation Trust.
Considering the shortage of skilled manpower in the manufacturing sector and to generate employment, weighted deduction have been provided at the rate of 150 per cent of expenditure incurred on skill development in manufacturing sector in accordance with specified guidelines. Similarly weighted deduction of 150 per cent has also been provided on expenditure incurred for agri-extension project in order to facilitate growth in the agriculture sector.

While the Government has successfully implemented the above mentioned provisions as part of the taxation regime, in case of the following two legislative issues, the Government has already taken various steps and both are moving towards their finality:
(i) The Direct Taxes Code Bill, 2010
Direct Taxes Code Bill, 2010 was introduced in Lok Sabha on 30^th August, 2010 during the Monsoon Session, 2010 of the Parliament. Lok Sabha had referred the Bill to the Standing Committee on Finance for its examination/consideration. The Standing Committee submitted its report (49^th Report) to the Speaker, Lok Sabha on 9^th March, 2012. Having considered the recommendations of the Committee, a note for the Cabinet for withdrawal of DTC Bill, 2010 and introduction of DTC Bill, 2013 was sent on 20^th August, 2013 to the Cabinet Secretariat for placing it before the Cabinet. Approval of the Cabinet is awaited.
(ii) The Benami Transactions (Prohibition) Bill, 2011
The Government has introduced a new Bill, namely the Benami Transactions (Prohibition) Bill, 2011 (Bill No. 56 of 2011) in Parliament (Lok Sabha) on 18^th August, 2011. This Bill proposes to replace the existing Benami Transactions (Prohibition) Act, 1988. The Bill was referred to the Standing Committee on Finance by Lok Sabha for examination. The Report has been submitted by the Standing Committee in June, 2012. The Report is being examined in the Ministry in light of the recommendations of the Standing Committee. Amendment(s), if any, will be placed before the Parliament for its consideration.

Procedure for TDS Payment (FORM 26QB) and Generation of Form 16B

Urvi Parekh Ambbala

From June 2013, purchaser of property with value of Rs. 50 lakh and above should deduct 1% TDS at the time of making payment. Here is the guide about making payments of TDS and obtaining form 16B for the buyer and form 26QB for the seller.

I would like to run the readers through the TDS payment process and the steps to be taken to obtain Form 16B (for the deductor or buyer) and Form 26QB for the (seller or deductee):

Firstly one has to go to the site of Tin.nsdl in following link: https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

Online Payment through Challan 26QB:

Once this link is opened click on Form 26QB (Payment of TDS on sale of property). Select (0021) in case of non corporate payer and 0020 in case of corporate payer. On filling in the various details called for in that form, click on ‘Proceed’ at the bottom of the page, this will then take you to the next page, which will give you the option to select your bank. Once you select the bank, then login using the normal online process for your bank. Once the payment is made the bank will let you print challan 280 with a tick on (800), which is payment of TDS on sale of property. Take a printout of the challan and keep the same for your records and for the builder/seller if required. This is the first phase of the process.

There is also alternative mode payment if one does not have online banking registration.

One can fill in the form as above & while proceed there is option of “Subsequent payment through bank”

Choose that & it allows you to generate online receipt for Form 26QB with Ack no.

The same can be valid for 10 days from the date of generation online.

The same is to be carried at the authorized bank (list is given on the TIN.nsdl site) with cheque.

Bank will do online payment for you & generate Challan.

Generation of Form 16B:

Once this is completed one has to wait for seven days for the details to be reflected on TRACES web site – https://www.tdscpc.gov.in/.

As a first time user, you will have to register on this website as Tax Payer with your PAN card no. & Challan no as generated while payment (no need to have TAN)

Once you register whether as seller or buyer, you will be able to obtain the Form 16B or 26QB which has been approved and is reflected against your PAN in your Form 26AS. Check Form 26 AS after seven days and you will notice that the payment you had effected against TDS on sale of property is reflected in Part F of the Form 26 AS under ‘Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Buyer of Property]. This will give you details such as the TDS certificate number (generated by TRACES), name of deductee, PAN of deductee, acknowledgement number (same as above on Form 26QB), total transaction amount, transaction date, TDS deposited, date of deposit, status of booking and date of booking.

Once the payment is reflected in 26AS as above, you will have to go to the TRACES again. Login to the website & Go to ‘Download’ Tab & make application for request of Form 16B

To make a request for download, here fill in the acknowledgment number (nine digit number) & required details as asked which is reflected on Form 26AS Part F as mentioned above.

It will give application & generates an application request number.

Now, click on ‘Downloads’ tab. In the dropdown menu click on ‘requested downloads’. You can filter by way of Request no or by Date filter.

You can see you request for Form 16B as Submitted.

Within a couple of hours, the application gets processed and you will be able to view your Form 16B as Available.

Download it & it will give Zip file, save at your destination & to open it, use the password of Date of birth of Deductor. (DDMMYYYY)

Form 16B will be available in PDF format.

You can take a printout of the same for your records as well as for handing over to the seller of the property. A similar process has to be followed by the seller to obtain form 26QB.

CBDT issues clarificatory circular on Section 40(a)(ia) -TDS Disallowance

CIRCULAR No 10/DV/2013 (Departmental View)

F. No. 279/Misc./M-61/2012-ITJ (Vol.-II)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, the December 16th 2013

Subject: Circular on Section 40(a)(ia) of the Income Tax Act, 1961-reg.

It has been brought to the notice of the Board that there are conflicting interpretations by judicial authorities regarding the applicability of the provisions of section 40(a)(ia) of the Income-tax Act, 1961 (`the Act’) with regard to the amount not deductible in computing the income chargeable under the head ‘Profits and gains of business or profession”.

2. Section 40(a)(ia) of the Act reads as under:

“ any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139…’:

3. In the case of Merilyn Shipping & Transports v. Addl. CIT, it was held by Special Bench of ITAT, Vishakhapatnam, that the provisions of section 40(a)(ia) of the Act would apply only to the amount which remained payable at the end of the relevant financial year and could not be invoked to disallow the amount which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court.

3.1 The Hon’ble Calcutta High Court and Hon’ble Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Exports Syndicate and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year.

3.2 The Hon’ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter XVII-B, which are payable at any time during the year but no tax was deducted at source or if deducted was not paid within the stipulated time. There is no such condition that amount should remain payable at the end of the year.

3.3 The Hon’ble Allahabad High Court in CIT v. Vector Shipping Service (P) Ltd. has affirmed the decision of the Special Bench in Merilyn Shipping that for disallowance under section 40(a) (ia) of the Act, the amount should be payable and not which has been paid during the year. However, the decisions of the Hon’ble Gujarat and Calcutta High Courts (supra) were not brought to the attention of the Hon’ble Allahabad High Court.

3.4 In the case of ACIT, Circle 4(2), Mumbai v. Rishti Stock and Shares Pvt. Ltd. in ITA No. 112/Mum/2012, Hon’ble ITAT, Mumbai in its order dated 02-08-2013 has examined the decision of the Hon’ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the Act and concluded that the same was an ‘orbiter dicta’ while the decisions of the Hon’ble Gujarat and Calcutta High Court (supra) were ‘ratio decidendi’. The ITAT accordingly applied the view taken by the Hon’ble Gujarat and Calcutta High Court as ratio decidendi prevails over an orbiter dicta.

4. After careful examination of the issue, the Board is of the considered view that the provision of section 40(a) (ia) of the Act would cover not only the amounts which arc payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a) (ia) of the Act the term “payable” would include “amounts which are paid during the previous year”.

5. Where any High Court decides an issue contrary to the ‘Departmental View’, the `Departmental View’ thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgement to the notice of the CTC. The CTC shall examine the said judgement on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for.

6. The above clarification may be brought to the notice of all officers.

(Priyanka Singh)

Dy. Commissioner of Income Tax (OSD) (ITJ)

Computation of long-term capital Gain

When you sell an asset like a stock or mutual fund after a year – in some cases, like Gold, three years – you need to pay long term capital gains tax. Equity mutual funds where more than 65% of the holding is equity don’t have long term cap gains tax currently, and neither does stock held for over a year – in both cases, you will pay a Securities Transaction Tax on the sale.

Basically, when property is sold, depending upon the holding period, one will earn either short-term or long-term capital gains. If the property is sold after three years of owning it, the gain will be long-term, else it will be short-term.

The tax rate on long-term capital gains is 20.6% of the profit after indexation of cost. The option of paying tax at 10% without indexation is only available in the case of financial assets like mutual funds and the like; it is not available in the case of immovable property – for property, the tax has to be calculated at 20.6% post indexation.

Indexation of cost basically refers to a facility that a taxpayer can use to inflation-adjust the cost. In other words, indexation factors in inflation during the holding period by adjusting the cost of acquisition upwards thereby bringing down the tax liability of the investor.

Putting it differently, the value of the rupee say 10 years ago wasn’t the same as the value currently – essentially on account of inflation. So if you are asked to pay tax on your profits derived out of a simple arithmetic of reducing actual cost from the sale proceeds, it would be unfair. Simply because the sale proceeds are derived out of the current value of the rupee, whereas the cost you paid was based on the value of the rupee as existed 10 years ago in this case.

Therefore, the income tax department releases what is called a cost inflation index (CII) for each financial year. This is done expressly for inflation adjusting the cost. For the purposes of calculating the capital gain, the cost will be multiplied by the CII pertaining to the year of sale and divided by the CII of the year of purchase. This essentially adjusts or inflates the cost to current levels thereby reducing the amount of capital gain than what would have resulted from a simple subtraction.

In terms of an example, say a property was bought in the FY 2000-01 for Rs50 lakh. The same is being sold now for Rs2 crore. A simple arithmetic subtraction would result in a long-term capita gain of Rs1.50 crore. Now, let’s adjust for inflation and see what results.

Gains are based on the number of units sold, and each unit’s purchase price. That will not attract any tax until you sell. The investor may buy more before selling, adding to calculation complexity.

Computation of long-term capital Gain

Gains at the time of sale of long term capital assets shall be computed in the following manner: -

Full value consideration		****
(Less) Expenditure incurred wholly and exclusively in connection with such transfer/sale	****
(Less) indexed cost of acquisition	****
(Less) indexed cost of improvement	****
Gross LTCG		****
(Less) Exemption (if any) available u/s 54/54b/54d/54ec /54ed/54f/54g		****

TAX @20% shall be payable on the long term capital gain computed above and advance tax shall also be liable to be paid on such capital gain.

Note: Long-term capital gains must be all added up but in case of other assets (like houses or gold or such) you don’t get to choose between 10% unindexed and 20% indexed. There it’s only indexed (and long term applies only after three years). So if you have sold a house and some mutual funds, the calculation will take on the indexation or non-indexation benefit only for the mutual fund bits.

ARTICLE WRITTEN BY: SAGAR SEDAI (CA FINAL)

S. 271D No Penalty for acknowledging the debt in books, if there was no cash receipt by the Assessee

After hearing both the parties and on perusal of the record, it appears that the penalty is levied under Section 271-D for the violation of the provision of Section 269SS of the Act. The Tribunal in its order, after examining the entire material on record, had observed that the company made entries in the books of account for acknowledging the debt and as such there was no cash receipt on the part of the assesseecompany, and as such there could be no penalty u/s 271D for the violation of the provision of Section 269SS of the Act, in respect of book entries.

Allahabad High Court

INCOME TAX APPEAL No. – 134 of 2003

Assessment Year 1997-98

Commissioner Of Income Tax-II Kanpur

Versus

M/S Sher Cot Leather Craft Ltd. Kanpur

Order Date :- 13.12.2013

Hon’ble Dr. Satish Chandra,J. Hon’ble B. Amit Sthalekar,J.
The present appeal has been filed by the Department under Section 260-A of the Income Tax Act, 1961, against the judgment and order dated 31.5.2003, passed by the Income Tax Appellate Tribunal (Lucknow Bench) in I.T.A.No.508/Luc/2001, for the assessment year 1997-98. A Coordinate Bench of this Court on 8.12.2010 has admitted the appeal on the following substantial questions of law:-

“1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in deleting penalty under Section 271D of the Income Tax Act, 1961?

2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the assessee company did not receive any cash as the payments were managed from one Shri Asif Viquor to the creditors of the assessee company?”

Heard Sri Shambu Chopra, learned counsel for the Department and Sri Ashish Bansal, learned counsel for the assessee.

After hearing both the parties and on perusal of the record, it appears that the penalty is levied under Section 271-D for the violation of the provision of Section 269SS of the Act. The Tribunal in its order, after examining the entire material on record, had observed that the company made entries in the books of account for acknowledging the debt and as such there was no cash receipt on the part of the assesseecompany. The company did not receive any cash. No cash was involved.

When that is so, no penalty is leviable under Section 271-D of the Act. No addition is made in quantum appeal.

By considering the totality of the facts and circumstances of the case, we find no reason to interfere with the impugned order passed by the Tribunal specifically when both the appellate authorities have given concurrent findings. The same is hereby sustained along with the reasons mentioned therein.

Hence, the answer to the substantial question of law is in favour of the assessee and against the Department.

In the result, the appeal filed by the Department is dismissed

Form 15H/15G to Avoid TDS deduction

Form 15G and form 15H are used for avoiding the TDS deduction at source if deductee expects his Income to be lower then the taxable limit. In this article we are discussing important points to remember while submitting the Form 15G and Form 15H to the deductor. We have also included frequently asked questions and answers on Form 15G and Form 15H.

Form 15H :- Declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, to be made by an individual who is of the age of sixty years or more claiming certain receipts without deduction of tax.

· Form 15H can be submitted only by Individual above the age of 60 years.

· Estimated tax for the previous assessment year should be nil. That means he did not pay any tax for the previous year because his income is not coming under the taxable limit.

· You need to submit form 15H to banks if interest from one branch of a bank exceeds 10000/- in a year.

· This form should be submitted to all the deductors to whom you advanced a loan. For example you have deposit in three SBI bank branches Rs.100000 each. You must submit the Form 15H to each branch.

· Submit this form before the first receipt of your interest. It is not mandatory but it will avoid the TDS deduction. In case of the delay, the bank may deduct the TDS and issue TDS certificate at the end of the quarter.

· You need to submit for 15H if interest on loans, advances, debentures , bonds or say interest income other than interest on bank deposits exceeds Rs.5000/-.

Form 15G:- Declaration under sub-sections (1) and (1A) of section 197A of the Income-tax Act, 1961, to be made by an individual or a person (not being a company or a firm) claiming certain receipts without deduction of tax of tax.

· Form 15G can be submitted by Individual who is below the age of 60 years and by Hindu Undivided family.

· The points applicable for 15H are applicable to the Form 15G as well, except that the Form 15H is applicable only for the senior citizens.

· Form 15G should be submitted before the first receipt of interest on fixed deposits.

Difference between form 15G and 15H:-

1. Form 15G can be submitted by an individual below the Age of 60 Years while form 15H can be submitted by senior citizens i.e. individual’s above the age of 60 years.

2. Form 15G can be submitted by Hindu Undivided families but form 15H can be submitted only by Individual above the age of 60 years.

3. 15G CAN NOT BE filed by any person whose income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax.

In a nutshell we can say that anybody whose tax on estimated income is not NIL and having income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax can not file DECLARATION u/s 15G.

However, if you are eligible and also fulfill the conditions, the payer can not deduct the tax even if it is above Rs.10,000.

Note:- Maximum amount not chargeable to tax for Hindu Undivided family (HUF) and Individuals (below the age of 60 years) for A.Y. 2014-15 is Rs. 200000/- .

Senior Citizens who are eligible to file Declaration in Form 15H have no such conditions. They can submit Form 15H even if their Total Income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax (Rs. 250000) but if tax payable by them is NIL. This is clear from point 4 of the form 15H, which reads as under:-

” 4. that the tax on my estimated total income, including *income/incomes referred to in the Schedule below computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on relevant to the assessment year _____________ will be nil”

FREQUENTLY ASKED QUESTION ANSWERS ON FORM 15G AND FORM 15H

Question 1:- I am 70 years old. I invested a sum of Rs 5,00,000 in January 2004, in GOI 8 per cent savings bonds (taxable), 2003, via a leading private bank. The bonds issued were on a cumulative basis with a maturity period of six years. The total interest payable at the time of maturity is Rs 3,00,500. I have declared the income from the bonds on an accrual basis y-o-y, and have been filing tax returns since A/Y 2006/07. But the bank is not accepting Form 15H stating that the total interest payable on maturity is more than the threshold limit for senior citizens – Rs 2,40,000, and is insisting on my submitting Certificate u/s 197 from the IT office. What do I do?

Answer 1:- The bank should have deducted tax at source. It seems the bank has not provided for the accrued interest and is therefore not accepting Form 15H. You can prove that the tax on your total income of the previous year in which the interest is to be received shall be nil, even after including the cumulative interest the bank should not resort to tax deduction at source. You can submit Form 15H for deduction of tax at source for A.Y. 2010-11.

Question 2 :- I am a senior citizen having income liable for tax deduction at source in respect of my deposits with State Bank of Hyderabad. They asked me whether I would be filing declaration in Form 15G or 15H in the first week of March in respect of payments made during the year so that I am in a position to judge whether I have taxable income for the year or not and file declaration in Form 15H, if I have no taxable income. On the other hand, State Bank of India and, I understand, some other banks require form at the time of deposit itself. It may not be proper for the bank to act on such declaration made in one year for another year or for that matter act on a declaration which had become stale filed in earlier part of the year for payment towards the end of the year. What is the correct position of law?

Answer 2 :- The doubt raised by the reader is a valid one. The law itself does not provide for any date on which the declaration is required to be filed as long as it relates to the income of the year and filed during the year. Since the deduction of tax at source has to be decided on the date of each credit or payment, deduction has to be made for each such credit or payment. Where an investor is not able to file the declaration in earlier part of the year in view of the uncertainty as to the prospect of his income crossing the exemption limit, he can probably inform the bank that deduction could be deferred till the end of the year. But then, the bank would like to have the declaration at the time of payment so that the declaration may necessarily be filed before the first quarterly payment, if the interest is payable quarterly. The difficulty for the investor in ascertaining the income in advance in such cases cannot be avoided. Tax may have to be deducted and refund applied in due course in such cases.

Question 3:- It is stated that 15H form is concessional for individuals aged 60 or more as this form, unlike 15G form, does not carry the restrictive declaration to the effect that the aggregate of eligible incomes will not exceed the maximum amount which is chargeable to income tax (Item No. 4 in 15G form) :

i). Can it be interpreted, that there is no ceiling on the aggregate incomes/ amounts liable for tax deduction for senior citizens of the age of 60 or more?

ii). It should be “not exceeding the maximum exemption limit” and not “not exceeding the minimum exemption limit”.

iii). Form No. 15H in circulation at present states that the particulars of the amounts are as per the schedule below. But there is no such schedule at all. The one and only schedule is about “investments”. Of course, Form 15G carries this Schedule as “Schedule V”.

iv). Item 2 in Form 15H reads as “that my present occupation is….” At 60 and above, many have no occupations at all.

Answers 3 :

As regards the first point, the limit for tax deduction for others is inapplicable for senior citizens, but the limit for statutory deduction under Sec. 80-C, for example, is applicable.

The second point made by him is correct.

As for the third point, the omission pointed out in Form 15H, the schedule for withdrawal from NSS alone has been given, because the other schedules as in Form 15G have apparently been considered unnecessary, since there is no ceiling by way of limit for tax deduction at source, so as to require the split up of the different incomes.

The fourth point made is that the Form 15-H contemplates occupation for everyone. It is really not a defect, since a person without occupation can also fill up the column as nil.

Question 4: What should I do if I am not liable to pay tax and TDS is not required to be deducted?

Answer 4 :- To avail the benefit of deduction of tax at source at Nil/lower rate, you may submit any of the following documentation :

Certificate from the Indian tax authorities: Certificate under section 197 of the Act issued by the Assessing Officer for nil / concessional rate of TDS can be submitted by any bondholder including companies and firms. The certificate should be submitted by the deductee to the deductor.

Form 15G: If you are a resident person (other than a company, Co-operative society or a firm), you can submit Form 15G in duplicate to deductor. As per the provisions of section 197A of the Act, Form 15G can be submitted provided the tax on your estimated total income for the financial year computed in accordance with the provisions of the Act is NIL and the interest paid or payable to you does not exceed the maximum amount which is not chargeable to tax.

Form 15H: If you are a senior citizen, i.e. if you are of the age of 60 years and above at any point of time during the financial year, you can submit Form 15H even if your income exceeds Rs.250,000 p.a. for the purposes of non-deduction of tax at source if your estimated total income for the financial year computed in accordance with the provisions of the Act is NIL.

Entities exempt from tax as per CBDT Circular : For certain specified entities whose income is unconditionally exempt under section 10 of the Act and who are statutorily not required to file return of income as per section 139 of the Act, CBDT has vide Circular no.4/2002 dated July 16, 2002, granted blanket TDS exemption. Some examples of the specified entities are provident funds, gratuity funds, local authority, hospitals exempt under section 10(23C)(iiiac), educational institutions or university exempt under section 10(23C)(iiiab).

Exemption for insurance companies: Certain entities such as Life Insurance Corporation of India, General insurance Corporation of India along with its four subsidiaries or any other insurer are eligible to receive interest on securities without deduction of tax at source, if such securities are owned by them or it has full beneficial interest in the same.

Question 5:- I am an account holder in a nationalised bank and I filed Form 15H. The bank authorities refused to give acknowledgment for the same, though I have given it in duplicate. What is more is that they have deducted tax though I have no taxable income. What is the remedy for the amount already deducted and to avoid such deduction in future?

Answer 5:- Where tax has already been deducted and deposited by the bank, the only recourse for the assessee is to file a refund claim along with the return with the assessing officer and await the refund. It is possible for an assessee to seek remedy for deficiency of service in a consumer forum or to file a complaint with the Ombudsman asking for compensation for the trouble to which the reader has been put to. But then, the reader had failed to press for an acknowledgment. He should have complained about denial of acknowledgment at that stage to the concerned superior officers or should have sent it by registered post acknowledgment due for purposes of evidence for his case. In fact, it is not open to the bank official to refuse acceptance of any document sought to be served on the bank or refuse acknowledgment, where demanded.

Some of the taxpayers have complained us about the inordinate delay in getting TDS certificate to enable claim of refund in time. Such complaints received from time to time indicate the inordinate delay on the part of even banks and large corporate as regards this statutory duty to issue such certificates promptly. In the case of banks, this is again a matter on which complaint should be made to senior officers of banks in writing and on failure of response to the Ombudsman. A complaint to the TDS section of the Income-tax Department, which is expected to enforce law regarding issue of TDS certificates promptly, should be the most effective remedy, if only the TDS cell activates itself to enforce the law and the rules on those responsible for tax deduction at source for the benefit of the taxpayers.

Also Read :- Download, know, FAQ on Form 15G & 15H

Please Note - In Respect of all the Provision related to Submission of Form 15H Finance Bill 2012 has reduced the Age Limit for Senior Citizen to 60 Years from 01.07.2012
(Republished with amendments)

Buy home to reduce Income Tax burden

As the financial year comes to an end, it is time to start planning your tax saving strategies. A house can also be used to reduce the tax liability to a certain extent. Under Section 24 of the Income Tax Act, interest paid up to Rs 1.5 lakhs per annum on a home loan can be set-off from salary or business income, for a self-occupied property.

Loan for construction eligible for deduction

A loan availed for the construction of a residential property, purchase of a residential property, extension of an existing house, and major repairs and renovation of a house are eligible for tax benefits. Under Section 80C of the Income Tax Act, a home loan borrower can claim a deduction of up to Rs 1 lakh from his taxable income on repayment during the year along with specified savings instruments like provident fund.

All co-owners eligible for deduction

In case there are co-owners to a property, each of them can claim tax benefits separately , in proportion to their share holding in the property. If the share holding is not mentioned in the purchase deed, they can execute an agreement on a stamp paper, mentioning the shares in the property, and claim tax benefits separately . Co-owners can thus claim a deduction of up to Rs 1.5 lakhs per annum separately, on interest paid towards a self-occupied house, and also up to Rs 1 lakh per annum towards principal amount repaid.

Pre-EMI qualifies for benefit

The entire pre-EMI interest amount (the interest paid during the construction period ) is allowed as a deduction under Section 24 of the Income Tax Act equally over five years (20 percent of total interest paid per annum), starting from the year in which the construction is completed.

However, if one avails a loan only for a land purchase, he is not eligible for any tax benefits. In the case of a composite loan (for land and construction ) and the house construction is completed within three years, only after completion of the construction will one be eligible for the tax benefits.

(Republished with amendments)

Non-furnishing of balance sheet cannot lead to presumption that there was no cash in hand

Assessee has furnished the date-wise cash balance and each and every deposit in the bank account is shown to be out of the cash balance with the assessee. The opening cash balance as per the cash account is 9,13,080/- and the closing cash balance of the year is Rs. 12,50,983/-. The same is duly reflected in the balance sheet ended on 31st March, 2007 and 31st March, 2008 respectively. When in the electronic filing of the return there is no provision for filing of the balance sheet, then non-furnishing of the balance sheet cannot lead to the presumption that there was no cash in hand with the assessee. The assessee is a professional whose returned income is more than Rs. 18 lakhs. In view of the above, we are of the opinion that the assessee’s claim that he has an opening cash balance of 9,13,080/- cannot be disputed. The above opening cash in hand is sufficient to explain the deposit in the bank account on 3rd and 4th April, 2007. Thereafter, admittedly, withdrawal from the bank is much more than the cash deposits. In fact, the total withdrawal from the bank as per Annexure-1 of the assessment order is 44,39,000/- as against the total deposit in the bank of 26,30,000/-. The inference of the Assessing Officer that the amount withdrawn by the assessee from the bank has been utilized for household expenditure or other expenses is without any basis. The total withdrawal by the assessee is more than 44 lakhs and in the absence of any material to presume that such huge cash withdrawal has been spent by the assessee would be incorrect. Some of the withdrawals are of huge amount, say, on 4th April, 2007, the assessee withdrew 7,00,000/-, on 29th June, 2007, the assessee withdrew in cash Rs. 10,50,000/- (Rs. 4,90,000 + 5,60,000). That to presume such huge withdrawal was spent by the assessee in the absence of any evidence of its utilization would be a wrong presumption. In view of the above, we are of the opinion that the entire cash deposit in the bank is duly explained by the assessee. We, therefore, delete the addition of 8,45,000/- sustained by the learned CIT(A).

ITAT BENCH E’ , NEW DELHI

ITA No.3301/Del/2012 – Assessment Year : 2008-09

ITA No. 3475/Del/2012 – Assessment Year : 2008-09

Deputy Commissioner of Income Tax

Vs.

Shri Manish Kumar Aggarwal

ORDER

PER G.D.AGRAWAL, VP:

The appeal by the Revenue is directed against the order of learned CIT(A)-XXVII, New Delhi dated 16th March, 2012 for the AY 2008-09.

“On the facts and circumstances of the case, the ld.CIT(A) has erred in restricting the addition of Rs. 8,45,000/- u/s 68 of the Income Tax Act on account of unexplained cash credits in the assessee’s bank account as against addition of Rs.26,30,000/- made by the A.Rs. . despite the assessee offering no explanation regarding the purpose for cash withdrawals and thus not establishing a clear nexus between cash withdrawals and subsequent deposits in bank.”

3. The grounds raised by the assessee in his appeal read as under:-

“1. The learned CIT(Appeals) has erred in law and on facts in sustaining the addition of Rs.8,45,000/- on account of unexplained deposit of cash in bank on 3rd and 4th April, 2007 ignoring the opening cash in hand of Rs. 9,13,080/-.

2. The learned CIT(A) has erred on facts and in law in upholding the impugned order of the learned assessing officer which is contrary to law, equity and justice and facts and material on record, devoid of jurisdiction, arbitrary, based on conjectures and surmises, passed without application of mind, without granting proper opportunity to defend.”

4. The facts of the case are that the assessee is an individual who derives income from consultancy. For the year under consideration, the assessee filed the return of income declaring total income of Rs. 18,24,060/-. During assessment proceedings, the Assessing Officer noticed that the assessee made cash deposit of 26,30,000/- in the savings bank account with Axis Bank Limited, Mayur Vihar, New Delhi. He asked the assessee to explain the same. The assessee explained the deposit to be out of opening cash in hand as well as out of cash withdrawal from the bank. It was pointed out that though there was cash deposit during the year under consideration amounting to Rs. 26,30,000/-, but there was cash withdrawal of 44,39,000/-. The date-wise deposit and withdrawal furnished by the assessee is annexed as Annexure ‘A’ to the assessment order. However, the Assessing Officer did not accept the assessee’s explanation on the ground that “the source of cash deposit and the use of cash withdrawals are entirely different and the assessee is not able to explain exactly the nature and source of these deposits”. Accordingly, he made the addition of Rs. 26,30,000/- as unexplained credit under Section 68 of the Income-tax Act, 1961. On appeal, learned CIT(A) noticed that there was cash deposit in the bank amounting to 8,45,000/- on 3rd April, 2007 and 4th April, 2007. He was of the opinion that the withdrawal made by the assessee from the bank account was after these dates. He, therefore, took the view that there was no explanation for the cash deposits amounting to 8,45,000/- on 3rd April, 2007 & 4th April, 2007. He did not accept the assessee’s explanation of opening balance of cash in hand amounting to 9,13,080/- on the ground that the balance sheet of AY 2007-08 was not filed alongwith the return of income. Both the parties, aggrieved with the order of the learned CIT(A), are in appeal before us. The Revenue is aggrieved with the relief allowed by the learned CIT(A) while the assessee is aggrieved with the addition of Rs. 8,45,000/- sustained by the learned CIT(A).

5. We have heard the submissions of both the sides and perused the material placed before us. It is submitted by the learned counsel that the assessee has maintained regular books of account and no defect therein has been found by the Assessing Officer. That the assessee has filed the return by electronic mode (i.e. e-filing of return). That in the e-filing of the return, the assessee can furnish the details as prescribed. The assessee cannot submit either any additional information or enclose any paper suo motu. That there is no column in such return with regard to disclosing the assets including the cash in hand. Therefore, the balance sheet is not being filed by the assessee year after year since the returns are being furnished through electronic mode. He has enclosed the copy of the balance sheet in the paper book for AY 2007-08 as well as 2008-09 and has pointed out that the cash balance as on 1st April, 2007 was 9,13,080/- and as on 31st March, 2008, it was Rs. 12,50,983/-. He has also given the date-wise position of cash balance which was also enclosed by the Assessing Officer as annexure to the assessment order. From these date-wise details of cash also, it is apparent that the cash in hand as on 1st April, 2007 was 9,13,080/- and as on 31st March, 2008, it was Rs. 12,50,983/-. He, therefore, submitted that the addition sustained by the learned CIT(A) at 8,45,000/- should be deleted.

6. Learned DR, on the other hand, relied upon the order of the Assessing Officer and stated that the assessee made the deposit of Rs. 26,30,000/- for which specific source has not been explained. That the amount withdrawn by the assessee must have been spent by the assessee for household or other expenditure. He, therefore, submitted that the order of the learned CIT(A) should be reversed and that of the Assessing Officer should be restored.

7. After considering the arguments of both the sides and perusing the material placed before us, we find that the assessee has furnished the date-wise cash balance and each and every deposit in the bank account is shown to be out of the cash balance with the assessee. The opening cash balance as per the cash account is 9,13,080/- and the closing cash balance of the year is Rs. 12,50,983/-. The same is duly reflected in the balance sheet ended on 31st March, 2007 and 31st March, 2008 respectively. When in the electronic filing of the return there is no provision for filing of the balance sheet, then non-furnishing of the balance sheet cannot lead to the presumption that there was no cash in hand with the assessee. The assessee is a professional whose returned income is more than Rs. 18 lakhs. In view of the above, we are of the opinion that the assessee’s claim that he has an opening cash balance of 9,13,080/- cannot be disputed. The above opening cash in hand is sufficient to explain the deposit in the bank account on 3rd and 4th April, 2007. Thereafter, admittedly, withdrawal from the bank is much more than the cash deposits. In fact, the total withdrawal from the bank as per Annexure-1 of the assessment order is 44,39,000/- as against the total deposit in the bank of 26,30,000/-. The inference of the Assessing Officer that the amount withdrawn by the assessee from the bank has been utilized for household expenditure or other expenses is without any basis. The total withdrawal by the assessee is more than 44 lakhs and in the absence of any material to presume that such huge cash withdrawal has been spent by the assessee would be incorrect. Some of the withdrawals are of huge amount, say, on 4th April, 2007, the assessee withdrew 7,00,000/-, on 29th June, 2007, the assessee withdrew in cash Rs. 10,50,000/- (Rs. 4,90,000 + 5,60,000). That to presume such huge withdrawal was spent by the assessee in the absence of any evidence of its utilization would be a wrong presumption. In view of the above, we are of the opinion that the entire cash deposit in the bank is duly explained by the assessee. We, therefore, delete the addition of 8,45,000/- sustained by the learned CIT(A).

8. In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed.

Decision pronounced in the open Court on 13th December, 2013.

Assessee eligible for interest on cash appropriated during search

Clause (b) of Section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under Section 132 of the Act exceeds the amounts required to meet the liability under Section 132B(1) (i), the department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under Section 132(5) of the Act to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 of the Act was appropriated against the assessee’s tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 20.2.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The department denied the payment of interest to the assessee under Section 132B(4) (b), according to Mr. Arijit Prasad, learned counsel for the revenue on th ground that the refund of excess amount is governed by Section 240 of the Act and Section 132B(4) (b) of the Act has no application. But, in our view, Section 132B(4) (b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244 (A). The former deals with pre assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal.

The view of the department is not right on the plain reading of Section 132B(4) (b) of the Act as indicated above. We, accordingly, allow the appeal and set-aside the impugned order and hold that the appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4) (b) of the Act from 1.12.1990 to 4.3.1994.

REPORTABLE

SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 10601 OF 2013 [ARISING OUT OF S.L.P. (C) NO. 20381 OF 2012]

CHIRONJILAL SHARMA HUF

Versus

UNION OF INDIA AND OTHERS

J U D G M E N T
R.M. LODHA,J.
Leave granted.

2. The brief facts necessary for consideration of the issue raised in the appeal are these: In the search conducted in the house of the appellant on 31.1.1990, a cash amount of Rs. 2,35,000/- was recovered. On 31. 5. 1990, an order under Section 132(5) of the Income Tax Act, 1961 (for short “the Act”) came to be passed. The Assessing Officer calculated the tax liability and the cash seized in the search from the appellant’s house was appropriated. However, the order of the Assessing Officer was finally set-aside by the Income Tax Appellate Tribunal (for short “the Tribunal”) on 20.2.2004. The revenue accepted the order of the Tribunal. Consequently, the appellant has been refunded the amount of Rs. 2,35,000/- along with interest from 4.3.1994 (date of last of the regular assessments by the Assessing Officer) until the date of refund.

3. The appellant (assessee) claims that he is entitled to interest under Section 132B(4) (b) of the Act which was holding the field at the relevant time for the period from expiry of period of six month’s from the date of order under Section 132(5) to the date of regular assessment order. In other words, the order under Section 132(5) of the Act having been passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claims interest under Section 132B(4)(b) of the Act from 1.12.1990 to 4.3.1994.

4. Section 132 of the Act deals with search and seizure. Sub-section (5) thereof, which is relevant for the purposes of the present appeal, reads as under:

(5): Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) is seized under sub-section (1) or sub-section (1A), as a result of a search initiated or requisition made before the Ist day of July, 1995, the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Joint Commissioner)-

(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him;

(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Income Income Tax Act, 1922 (11 of 1922), or this Act;

(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-Tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;

(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets/or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized:

Provided that if, after taking into account the materials available with him, the Income Tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total amount chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly:

Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii), (iia) and (iii) or any part thereof, the Income-Tax Officer may, with the previous approval of the Chief Commissioner or Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case.”

5. Section 132B deals with the payment of interest on delayed assessment. Omitting the unnecessary part, the relevant provisions of Section 132B(4) (a) and(b) of the Act read as under:

132B: Application of retained assets

(4) (a) The Central Government shall pay simple interest at the rate of fifteen per cent per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause 3 of sub¬section (5) of that section exceeds the aggregate of the amounts required to meet the liability referred to in clause (i) of sub– section (1) of this section.

(b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order under sub-section 5 of section 132 to the date of the regular assessment or reassessment referred to in clause (i) of sub-section (1) or, as the case may be, to the date of last of such assessments or re-assessments.

5. A close look at the above provisions and, particularly, clause (b) of Section 132B(4) of the Act clearly shows that where the aggregate of the amounts retained under Section 132 of the Act exceeds the amounts required to meet the liability under Section 132B(1) (i), the department is liable to pay simple interest at the rate of fifteen percent on expiry of six months from the date of the order under Section 132(5) of the Act to the date of the regular assessment or re-assessment or the last of such assessments or reassessments, as the case may be. It is true that in the regular assessment done by the Assessing Officer, the tax liability for the relevant period was found to be higher and, accordingly, the seized cash under Section 132 of the Act was appropriated against the assessee’s tax liability but the fact of the matter is that the order of the Assessing Officer was over-turned by the Tribunal finally on 20.2.2004. As a matter of fact, the interest for the post assessment period i.e. from 4.3.1994 until refund on the excess amount has already been paid by the department to the assessee. The department denied the payment of interest to the assessee under Section 132B(4) (b), according to Mr. Arijit Prasad, learned counsel for the revenue on th ground that the refund of excess amount is governed by Section 240 of the Act and Section 132B(4) (b) of the Act has no application. But, in our view, Section 132B(4) (b) deals with pre-assessment period and there is no conflict between this provision and Section 240 or for that matter 244 (A). The former deals with pre assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal.

7. The view of the department is not right on the plain reading of Section 132B(4) (b) of the Act as indicated above.

8. We, accordingly, allow the appeal and set-aside the impugned order and hold that the appellant is entitled to the simple interest at the rate of fifteen percent per annum under Section 132B(4) (b) of the Act from 1.12.1990 to 4.3.1994.

9. The revenue shall calculate the interest payable to the assessee as above and pay the same to the appellant assessee) within two months from today.

Amount paid for supply of software which is not embedded in equipment is taxable as royalty

Reliance Infocom Ltd. (now known as Reliance Communications Ltd.) & others. vs. DDIT(IT). ITA No. 730/Mum/09, Date of Decision 06/09/2013, ITAT-Mumbai

Facts : Briefly stated, Reliance Infocomm Ltd., now known as Reliance Communications Ltd. wanted to establish wireless telecommunications network in India. As a part of that it has entered into a Wireless Network General Terms and Conditions contract and Wireless Software contract dated 3 1.07.2002 with Lucent Technologies Hindustan Pvt. Ltd. (LTHPL), an Indian company of M/s. Lucent group, USA. Wireless software Assignment and Assumption agreement dated 05.08.2002 with LTHPL and Lucent Technologies GRL LLC (LTGL) USA towards supply of software required for telecom network. When Reliance placed first supply orders for software for an amount of US$1 1,06,56,855, it made applications under section 195(2) before DDIT-2(1) Mumbai requesting payment for purchase of software without deduction of tax at source. It was Reliance’s contention that it was for purchase of software and LTGL has no PE in India and as per DTAA between India and USA, the amount paid is not taxable in India. AO after examining the details of agreements held that the assessee was getting only license to use the software and is in the nature of royalty, taxable at 20% in India under the provisions of Income tax Act 1961. Not only in the case of Lucent, Reliance also similarly placed orders with various other suppliers of telecom software in other countries and sought no deduction certificates on similar contentions. AO passed similar orders in all the cases where Reliance was to remit the monies over a period of time. After deducting tax as directed by the AO, Reliance however preferred appeals before the Ld.CIT(A) as per the then existing provisions of section 248 of the IT Act. The learned CIT(A), vide his orders, held that the amounts paid cannot be considered as royalty as Reliance purchased ‘goods’ which is a copyrighted article and so, since the seller do not have PE in India the amount is not taxable. Accordingly, he gave relief to Reliance. The Revenue is aggrieved on these orders. The lead order of the AO and CIT(A) pertains to ITA No. 837/Mum/2007 in which the AO’ order under section 195(2) dated 12.03.2003 was considered by the CIT(A) in his appeal No. CITA XXXI/DDIT (IT) 2(1)/IT – 448/02-03/06-07 dated 26.10.2006. It was admitted that the facts are more or less similar to the above appeal and main arguments were rendered in this appeal.

Held :- In view of the agreement and various judicial pronouncements the hon’ble tribunal has held that there is a distinction between a case where the software is supplied along with hardware as part of the equipment and there is no separate sale of the software and a case where the software is sold separately. In the case, where the software is an integral part of the supply of equipment, the consideration for that is not assessable as “royalty”. However, in a case where the software is sold separately, the consideration for it is assessable as “royalty”. On facts, the assessee had acquired the software independent of the equipment. It had received a license to use the copyright in the software belonging to the non-resident and the supplier continued to be the owner of the copyright and all other intellectual property rights. As there was a transfer of the right to use the copyright, the payment made by Reliance to Lucent was “for the use of or the right to use copyright” and constituted “royalty” under s. 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA.

Service tax exemption for factory canteen Needs Immediate further clarification

Notification No.14/2013 Dated 22/10/2013: Service tax exemption for factory canteen Needs Immediate further clarification:

INTRODUCTION:

CBEC issued a notification No.14/2013 dated 22 October 2013 in which exemption given from service tax for Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.” By this notification inserting a new entry 19A in the mega exemption Notification No.25/2012-Service Tax, dated the 20th June, 2012. This notification creates a lot of confusion/anomaly in the mind of assessee which needs immediate clarification from CBEC.

RELEVANT EXRACTS OF NOTIFICATION/DRAFT CIRCULARS ISSUED ON SUBJECT MATTER:

Notification No.25/2012-Service Tax, dated the 20th June, 2012

“19 Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;”

Draft circular of CBE& C Para 11 of draft circular F. No 354/127/2012-TRU dated 27-7-2012

‘Moreover, it would need to be seen whether the services provided by the employer are otherwise covered by the Negative List or exempt. For example, the services of food and catering provided by the employer in a canteen would normally fall outside the tax net unless such canteen has both the facility of air-conditioning as well as license to serve liquor (S. No. 19 of the Mega exemption)’.

Notification No. 03/2013-ST dated March 1, 2013 (Amendment of Notification 25/2012)

“19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;”

NOTIFICATION NO 14/2013 – ST., Dated: October 22, 2013

“19A. Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year.”.

Ways for providing services at canteen:

1) Services provided by canteen contractor to employees:

If the canteen contractor did not provide service to the person owning the factory, the provision of service tax was not apply. if the canteen contractor provides food to employees, it is falls under sales not under service and Vat should apply, if State law so provides.

2) Services provided by canteen contractor to employers:

In case of canteens at factory and this place is given on hire or free to the canteen contractor, In this situation the canteen contractor provides service to the employer. In this case service would be subject to service tax.

3) Services provided by Manufacturer directly to employees at factory canteen:

A Canteen at factory is maintained by a Manufacturer himself, with his own Staff, are not liable for any Service Tax, because it is operated in terms of the Contract of employment between the Employer and Employee with requirement of factories act. the service was not taxable it is falls under sales not under service and Vat should apply, if State law so provides.

CLARIFICATION REQUIRED FOR FOLLOWING DOUBT/CONFUSION/ANAMOLY:

1)New Entry 19A of notification 14/2013 provides exemption to Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 (63 of 1948), having the facility of air-conditioning or central air-heating at any time during the year. It means that Non Air conditioning canteen was already exempted under entry 19 in Notification 25/2012 dated 20.06.2012. In this notification, canteen word was not mentioned. “Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year;” here clarification required that Canteen is eating joint or mess or not. if this was not so then question arises that in new entry 19A exemption given only A.C. canteens and no exemption was for Non A.C. canteen in entry 19.Clarification essential in this regards due to non accepted this view by audit teams during the course of audit that eating joints/mess means canteen and exemption is available in absence of clear wordings.

2) Another important clarification required that “Whether Exemption given in New entry 19A to Services provided in places (factory Canteen) having the facility of air-conditioning or central air-heating at any time during the year. if it is so then outdoor caterer and manufacturer both are provided service at canteen are exempt to pay service tax due to exemption is for place (canteen).

Another view taken in this respect that since Canteen Contractor provides Outdoor catering service which chargeable to service tax under direct charge @12.36% on 60%of gross amount as per Rule 2 C of Service tax (Determination of Value) Rules, 2006, so canteen maintained by employer is only exempt from service tax and services provided by canteen outside contractor continue chargeable for service tax.

3) Another anomaly we can see in New entry 19A which provides exemption to Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948. Now Exemption given only for manufacturer who registered under factory act and not for service provider for example a large trading house or corporate office of multinational company/banks maintaining canteen in their premises are liable for service tax. this creates difference between manufacturer and service providers.

Conclusion:

Dilemma of assessee increased substantially after coming this Notification No.14/2013.Immediate clarification required for doubt/confusion/anomalies discussed above. In my personal view if canteen have a A.C or Non A.C maintained by manufacturer registered under factory act or services provided by outdoor caterer(Canteen Contractor) to manufacturer who is registered under factories act is outside the preview of service tax. If we think logically very few employers/manufacturer maintained a canteen at their own. Here question arises that Is this was Intention of Notification to exempt only those manufacturer who operate canteen them self or given exemption to services provided in places (canteen) with air conditioning/central air-heating system and registered under factories act 1948. Transparent clarification required immediate for assessee as well as the field formation officer/Audit team so litigation will not arises on this issue.

—————————-

CA. Shailendra saxena

B.COM, C.S, FCMA,FCA,DISA(ICAI)

E-mail: saxena20535@yahoo.com

In case of Part Payment Income tax paid shall first be adjusted towards interest payable

Interest payable under Section 234B and 234C become part of the demand notice issued under Section 156 and it is on this amount, i.e., the tax payable plus interest payable under Sections 234B and 234C that interest under Section 220(2) is calculated from the date mentioned in the notice of demand till the date of actual payment. Under Explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refund able is not paid to the assessee. Otherwise the Assessing Officer/Revenue can refund the principal amount and not pay the interest component under Section 244A for an unlimited period with impunity and without any sanction, which would amount to granting premium to a noncompliance of law. In the present case, the interest component was withheld for the period ranging between 9 to 13 years.

HIGH COURT OF DELHI AT NEW DELHI

INCOME TAX APPEAL NOS. 167/2012 & 168/2012

Date of decision: 6th September, 2013

INDIA TRADE PROMOTION ORGANISATION

versus

COMMISSIONER OF INCOME TAX

CORAM:

HON’BLE MR. JUSTICE SANJIV KHANNA

HON’BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL):

These appeals by India Trade Promotion Organisation under Section 260A of the Income Tax Act, 1961 (Act, for short) relate to Assessment Years 1989-90 and 1990-91. By order dated 22nd August, 2013, the following substantial questions of law were framed in these two appeals:

“Whether the Income Tax Appellate Tribunal was right in denying interest of Rs.1,60,30,495/-, which it is claimed was payable alongwith the refund?

Whether the Income Tax Appellate Tribunal was right in denying interest of Rs.41 ,1 1,644/-, which it is claimed was payable alongwith the refund?”

2. Facts relevant for adjudication of the present appeals may be noticed in brief.

ASSESSMENT YEAR 1989-90

(a) At the outset, we record that there was an earlier round of litigation resulting in order of the Income Tax Appellate Tribunal (tribunal, for short) dated 22nd June, 2007 wherein it was held that the appellant was entitled to interest under Section 244A of the Act, it being a substantive right and the same cannot be denied on the basis of a letter written to Government of India, Central Board of Direct Taxes. We observe and record that the said order dated 22nd June, 2007 has attained finality and has not been challenged by the Revenue. Thus, we are required to proceed on the basis that the appellant is entitled to interest under Section 244A of the Act and the issue raised in the question of law framed above relates to quantification of interest payable under Section 244A of the Act. We further clarify that we have not examined the effect of the letter written by the appellant to the Government of India, Central Board of Direct Taxes and whether in view of the said letter no interest was payable.

(b) After the order of the tribunal dated 22nd June, 2007, an amount of Rs.1,60,30,495/- was paid by the respondent vide order dated 11th June, 2008. The contention of the appellant is that they are entitled to interest on this amount of Rs.1,60,30,495/- from the date it was due and payable. In order to appreciate the contention, we would like to refer to the following:

(i) Pursuant to the assessment order/appellate order, the appellant became entitled to refund of taxes paid of Rs.2,06,52,845/-.

(ii) On 28th March, 1995, Rs.1,70,01,266/- was refunded.

(iii) Rs.36,51,579/- was refunded on 1st June, 1999.

(iv) Rs.1,42,04,705/- had accrued as interest under Section 244A on Rs.2,06,52,845/- upto 28th March, 1995 when part payment of Rs.1,70,01,266/- was made.

(v) Interest of Rs.18,25,790/- had accrued on balance amount of Rs.36,51,579/- from 29th March, 1995 till 1st June, 1999.

(vi) Thus in all, interest of Rs. 1,60,30,495/- had accrued and payable but was not paid when the two refunds were issued. (Rs.1 ,42,04,705/- had accrued and should have been paid on 28th March, 1995 and Rs.18,25,790/- had accrued and should have been paid on 31st May, 1999).

(vii) The interest of Rs.1 ,60,30,495/- was paid on 1 1th June, 2008.

(c) The appellant claims that they are entitled to interest on this amount,i.e., on Rs.1,42,04,705/- with effect from 1st April, 1995 to 31st may, 2008 upto the date of refund of Rs.1,42,04,705/- and interest on Rs.18,25,790/- from 1st June, 1999 upto the date of refund. Interest on the said amounts is payable under Section 244A of the Act.

(d) The contention of the Revenue is that this would amount to payment of interest on interest and this is forbidden and should not be paid.

ASSESSMENT YEAR 1990-91

(a) In this year also the question whether the appellant was entitled to interest under Section 244A of the Act was decided in the first round by the tribunal vide order dated 22nd June, 2007. We need not, therefore, decide the question whether the appellant was entitled to interest because a letter was written by them to the Central Board of Direct Taxes. The said order has become final and, therefore, we are not required to go into the said issue and examine on merits whether or not this order dated 22nd June, 2007 passed by the tribunal was justified. The question raised in the present appeal relates to quantification of interest payable under Section 244A and not whether the interest was justified or should be denied on account of the said letter.

(b) On the basis of assessment proceedings, the appellant became entitled to refund of Rs.53,01 ,570/-.

(i) On 28th March, 1995, Rs.38,12,810/- was refunded.

(ii) On 31st March, 1997, Rs.10,87,686/- was refunded.

(iii) On 19th March, 1999, Rs.4,01 ,074/- was refunded.

(iv) The appellant became entitled to interest under Section 244A of Rs.36,58,084/- upto 28th March, 1995. This interest is calculated on Rs.53,01,570/-.

(v) Interest of Rs.3,57,302/- upto 31st March, 1997 on amount of Rs. 14,88,760/- (Rs.53,01 ,570/- minus Rs.38,1 2,810/-).

(vi) Interest of Rs.96,258/- on Rs.4,01,074/- from 19th March, 1999 upto date of refund on balance amount of Rs.4,01,074/-.

3. The appellant claims that it is entitled to interest on Rs.36,58,084/- from 1st April, 1995 upto the date of refund/payment. Rs.3,57,302/- from 1st April, 1997 upto the date of refund/payment and Rs.96,258/- from 1st June, 1999 upto the date of refund/payment. Interest, it is claimed, is payable under Section 244A of the Act.

4. The contention of the Revenue is that this would amount to paying interest on interest and this would be contrary to Section 244A of the Act.

DECISION

5. At the outset, we note that there is no dispute and debate on the initial interest, which is payable and should have been paid by the Revenue when they made the refund of the taxes. The dispute has arisen as the Revenue did not pay along with the refund of taxes, the interest which had accrued and had become due and payable on the tax amount refundable. The Revenue, therefore, had made part payment of the refund by not including the interest element.

6. Secondly, it should be clarified that the interest payable on the refund stands quantified on the date when the refund was issued/granted by the respondent. The quantum or the calculation of interest does not and has not undergone a change or modification. Interest has not accrued or is not payable by the Revenue after they have made payment of the refund as interest payable under Section 244A stopped running on the said day and became quantified and an amount due and payable. In other words, it became a part of the capital or principal amount due and payable.

7. The question really is in case the Revenue does not make payment of interest element, which had accrued and had become payable on the date when the tax amount is refunded, whether they would be liable to pay interest under Section 244A on the said amount. One can casually or loosely call it as interest on interest but in reality payment of interest on the said amount occurs because of non-payment of the total amount refundable, which is due and payable to the assessee, inter alia, consisting of the tax, which had to be refunded and the interest accrued on the delayed refund of the tax. It is not uncommon and in the commercial world and even in civil suits while computing interest under Section 34 of the Code of Civil Procedure, 1908 the principal amount and the interest due are added and treated as the primary amount in the decree drawn. Interest becomes due and payable on this primary amount. In other words, interest stands capitalised. We further note that it is not a case of compounding of interest as understood except once, i.e., on the date when it is quantified, i.e., when part refund payment is made by the Revenue. Therefore, it will be wrong to call it and treat it as compounding of interest.

8. It will be now relevant to refer to the provisions of the Act relating to refund and examine whether under the Act, interest is payable. Section 244A with effect from 1st April, 1989 reads as under:-

“Interest on refunds.

244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:-

(a) where the refund is out of any tax paid under section 11 5WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted:

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

Explanation.—For the purposes of this clause, ―date of payment of tax or penalty‖ means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.

(3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 11 5WG or sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.

(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years:

Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures ―1989‖, the figures ―2006‖ had been substituted.”

9. The words used in the Section 244A are ―where refund of any amount becomes due and payable to the assessee under the Act‖, the assessee shall be entitled to receive in addition to the said amount simple interest calculated in the manner stipulated. The Legislature has not used the words ―tax paid‖ or ―the principal amount of tax paid‖. The words used by the Legislature are ―any amount‖ and ―said amount‖. The words are, therefore, much wider and broader than the tax amount, which is to be refunded. The words ―any amount‖ would include within its scope and ambit the interest element, which has accrued and is payable on the date of the refund. Thus, when the Revenue does not pay full amount of refund but part amount is paid, they will be liable to pay interest on the balance outstanding amount. The balance outstanding amount may consist of the tax paid or the interest, which is payable till the payment of the part amount and interest payable on the principal amount, which remained outstanding thereafter.

10. The Delhi High Court in the case of Commissioner of Income Tax versus Goodyear India Limited, 2001 (249) ITR 527 (Delhi) had occasion to examine the earlier provisions of refund under Sections 240 and 244 of the Act and had observed as under:-

” Section 244 deals with interest on refund where no claim is needed. Sub-section (2), inter alia, provides that where a refund is due to the assessee, “in pursuance of an order referred to in Section 240″ and the Assessing Officer does not grant the refund within the stipulated time, the Central Government is required to pay simple interest at the stipulated rate. Section 240 deals with refund on appeal, etc. This provision clearly lays down that where as a result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessed without his having to make any claim in that behalf. The crucial expressions in Section 240 are “any amount which becomes due to the assessee as a result of any order passed in any appeal or other proceedings under the Act” and the “amount becomes due to the assessee”. Section 244 refers to the liability fastened on the Central Government in case of failure to grant refund within the stipulated time in a case where refund is due to the assessee in pursuance of an order referred to in Section 240. A combined reading of both the provisions makes the position crystal clear that it is any amount which becomes due to the assessee and not necessarily the tax component. Undisputedly, a sum of Rs. 1,90,499 which qualifies for interest became payable to the assessee on the basis of an order passed under Section 240 of the Act. Merely because this was inclusive of an amount which was payable under Section 214 of the Act, that would not make the position any different. It is an amount which became due to the assessee on the basis of the appellate order. Therefore, the assessee was entitled to interest in terms of Section 244 of the Act. A similar view has been taken by the Gujarat High Court in D. J. Works v. Deputy CIT [1992]195 ITR 227and Chiman Lal S. Patel v. CIT [1994]210 ITR 419 though with different conclusions. Above being the position, we answer the question in the affirmative, in favor of the assessee and against the Revenue.”

11. In R.K. Jain and Sons versus Commissioner of Income Tax, 2005 (142) Taxman 445 (Delhi) reference was made to several judgments passed by Gujarat High Court and decision of the Supreme Court in CIT versus Narender Doshi, (2002) 245 ITR 606 and it was held that interest should be awarded on the interest component of the unpaid refund. Recently in Motor and General Finance Limited versus Commissioner of Income Tax and other cases reported in [2010] 320 ITR 88 (Delhi) reference was made to the decision of the Supreme Court in Sandvik Asia Limited versus CIT, [2006] 280 ITR 643 (SC) and Narendra Doshi (supra) and it was observed as under:-

“20. It is, thus, manifest that at both the stages, namely, while passing intimation under Section 143(1)(a) of the Act, refund along with interest under Section 244A was given of the excess TDS and advance tax. Again, after the orders of the Tribunal were passed and the refund became payable as a consequence thereof, the excess amount of tax was refunded along with interest payable thereupon under Section 244A of the Act. Thus, the calculations are not disputed, as observed by the Tribunal also.

21. When the refund of tax becomes payable as a result of orders passed in appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per Section 244 of the Act. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an amount due to the assessee on which the assessee can claim further interest. Such a situation has not happened in the present case as the amount of interest is calculated and refunded along with the refundable tax amount.”

12. Same view has been taken by Punjab and Haryana High Court in Roadm aster Industries of India Private Limited versus Commissioner of Income Tax and Another, [2010] 329 ITR 69 (P&H) and Gujarat High Court in Commissioner of Income Tax versus Hynoup Food and Oil Industries Limited, [2010] 320 ITR 365 (Guj.) and Gujarat Flourochemicals Limited versus Commissioner of Income Tax and Others, [2008] 300 ITR 328 (Guj.). The said cases refer to the principle of compensation when money, which is due and payable and refundable, is not paid.

13. Madhya Pradesh High Court had the occasion to deal with the similar issue in their decision in Commissioner of Income Tax versus HEG Limited, [2009] 310 ITR 341 (MP). The facts of the said case may be noticed. The assessee became entitled to refund along with interest under Section 244A. Referring to Section 240 of the Act, the High Court observed that the term used was ―refund of any amount becomes due to the assessee‖. The same words were also used in Section 244A. Reference was made to the decision of the Delhi High Court in Goodyear India Limited (supra) and decisions of the Supreme Court in Narender Doshi (supra) and Sandvik Asia Limited (supra). Decision of the Madras High Court in CIT versus Needle Industries Private Limited, [1998] 233 ITR 370 (Mad) reflected upon and it was held that the words or the phrase ―any amount‖ would include the amount refundable plus the interest due and payable on the tax amount refunded. Thus, in view of the express provisions of Section 244A, interest was directed to be paid by the Revenue.

14. Matter was taken by the Revenue before the Supreme Court in the case of HEG Limited and the SLP was granted and civil appeal was registered. The Supreme Court thereupon answered the question against the Revenue in the following words:-

” Therefore, this is not a case where the assessee is claiming compound interest or interest on interest as is sought to be made out in the civil appeals filed by the Department.

The next question which we are required to answer is – what is the meaning of the words ―refund of any amount becomes due to the assessee‖ in Section 244A? In the present case, as stated above, there are two components of the tax paid by the assessee for which the assessee was granted refund, namely TDS of Rs.45,73,528 and tax paid after original assessment of Rs.1,71,00,320. The Department contends that the words ―any amount‖ will not include the interest which accrued to the respondent for not refunding Rs.45,73,528 for 57 months. We see no merit in this argument. The interest component will partake of the character of the ―amount due‖ under Section 244A. It becomes an integral part of Rs.45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under Section 244A of the Income-Tax Act. Therefore, on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs.45,73,528/-. The principal amount of Rs.45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of ―amount due‖ under Section 244A. “

15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Limited (supra) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amount to payment of interest on interest. An example will clarify the situation and help us to understand what is due and payable under Section 244A of the Act. Suppose Revenue is liable to refund Rs.1 lac to an assessee with effect from 1st April, 2010, the said amount is refunded along with interest due and payable under Section 244A on 31st March, 2013, then no further interest is payable. However, if only Rs.1 lac is refunded by the Revenue on 31st March, 2013 and the interest accrued on Rs.1 lac under Section 244A is not refunded, the Revenue would be liable to pay interest on the amount due and payable but not refunded. Interest will not be due and payable on the amount refunded but only on the amount which remains unpaid, i.e, the interest element, which should have been refunded but is not paid. In another situation where part payment is made, Section 244A would be still applicable in the same manner. For example, if Rs.60,000/- was paid on 31st March, 2013, Revenue would be liable to pay interest on Rs.1 lac from 1st April, 2010 till 31st March, 2013 and thereafter on Rs.40,000/-. Further, interest payable on Rs.60,000/-, which stands paid, will be quantified on 31st March, 2013 and on this amount, i.e., interest amount quantified, Revenue would be liable to pay interest under Section 244A till payment is made.

16. The aforesaid manner of computation is not only applicable to cases where Revenue has to pay interest on refund, but is equally applied when an assessee is in default and interest is payable under Section 220(2) of the Act. Interest payable under Section 234B and 234C become part of the demand notice issued under Section 156 and it is on this amount, i.e., the tax payable plus interest payable under Sections 234B and 234C that interest under Section 220(2) is calculated from the date mentioned in the notice of demand till the date of actual payment. Under Explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee. Otherwise the Assessing Officer/Revenue can refund the principal amount and not pay the interest component under Section 244A for an unlimited period with impunity and without any sanction, which would amount to granting premium to a non¬compliance of law. In the present case, the interest component was withheld for the period ranging between 9 to 13 years.

17. In view of the aforesaid discussion, we answer the questions of law in favour of the appellant and against the Revenue. The appeals are disposed of. No costs.

S. 244A Department not obliged to pay interest on interest as same is not provided in the law

Judgment in Sandvik case (supra)has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.

As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.

Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.

SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) NO. 11406 of 2008

Commissioner of Income Tax, Gujarat

Versus

Gujarat Fluoro Chemicals

WITH

SPECIAL LEAVE PETITION (C) No.14048 OF 2012, , SPECIAL LEAVE PETITION (C) No.14050 OF 2012, , SPECIAL LEAVE PETITION (C) No.1405 1 OF 2012, , SPECIAL LEAVE PETITION (C) No.14049 OF 2012, , SPECIAL LEAVE PETITION (C) No.14768 OF 2012, , SPECIAL LEAVE PETITION (C) No.20154 OF 2012, , SPECIAL LEAVE PETITION (C) No.2185 1 OF 2012 , SPECIAL LEAVE PETITION (C) No.25727 OF 2012 , SPECIAL LEAVE PETITION (C) No.27453 OF 2012 , SPECIAL LEAVE PETITION (C) No.27454 OF 2012 , SPECIAL LEAVE PETITION (C) No.27455 OF 2012 , SPECIAL LEAVE PETITION (C) No.27456 OF 2012 , SPECIAL LEAVE PETITION (C) No.27457 OF 2012 , SPECIAL LEAVE PETITION (C) No.27458 OF 2012 , SPECIAL LEAVE PETITION (C) No.27459 OF 2012 , SPECIAL LEAVE PETITION (C) No.27460 OF 2012 , SPECIAL LEAVE PETITION (C) No.27461 OF 2012, , SPECIAL LEAVE PETITION (C) No.27462 OF 2012 , SPECIAL LEAVE PETITION (C) No.27463 OF 2012 , SPECIAL LEAVE PETITION (C) No.27677 OF 2012 , SPECIAL LEAVE PETITION (C) No.5730 OF 2013

, CIVIL APPEAL No.6301 OF 2011 , CIVIL APPEAL No.2534 OF 2012 , CIVIL APPEAL No.2535 OF 2012 , CIVIL APPEAL No.253 6 OF 2012 , CIVIL APPEAL No.2537 OF 2012 , CIVIL APPEAL No.253 9 OF 2012 , CIVIL APPEAL No.2540 OF 2012 , CIVIL APPEAL No.254 1 OF 2012 , CIVIL APPEAL No.2542 OF 2012 , CIVIL APPEAL No.2543 OF 2012 , CIVIL APPEAL No.2944 OF 2012 , CIVIL APPEAL No.2945 OF 2012 , CIVIL APPEAL No.3436 OF 2012 , CIVIL APPEAL No.3437 OF 2012 , CIVIL APPEAL No.3445 OF 2012 , CIVIL APPEAL No.3446 OF 2012 , CIVIL APPEAL No.5408 OF 2012 , CIVIL APPEAL No.7596 OF 2012 , CIVIL APPEAL No.7772 OF 2012 , CIVIL APPEAL No.2589 OF 2013 , CIVIL APPEAL No.5478 OF 2013 , CIVIL APPEAL No.4630 OF 2012 , CIVIL APPEAL No.3 825 OF 2012 , CIVIL APPEAL No.3 826 OF 2012 , CIVIL APPEAL No.72 17 OF 2011 , CIVIL APPEAL No.4335 OF 2012 , CIVIL APPEAL No.4336 OF 2012 , CIVIL APPEAL No.43 37 OF 2012 , CIVIL APPEAL No.433 8 OF 2012 , CIVIL APPEAL No.4339 OF 2012 , CIVIL APPEAL No.4340 OF 2012 , CIVIL APPEAL No.4341 OF 2012 , CIVIL APPEAL No.4342 OF 2012 , CIVIL APPEAL No.4343 OF 2012 , CIVIL APPEAL No.4344 OF 2012 , CIVIL APPEAL No.4345 OF 2012 , CIVIL APPEAL No.4346 OF 2012 , CIVIL APPEAL No.4347 OF 2012 , CIVIL APPEAL No.4348 OF 2012 , CIVIL APPEAL No.4349 OF 2012 , CIVIL APPEAL No.4350 OF 2012 , CIVIL APPEAL No.4351 OF 2012 , CIVIL APPEAL No.4352 OF 2012 , CIVIL APPEAL No.4353 OF 2012 , CIVIL APPEAL No.4354 OF 2012 , CIVIL APPEAL No.4355 OF 2012 , CIVIL APPEAL No.4356 OF 2012 , CIVIL APPEAL No.4357 OF 2012 , CIVIL APPEAL No.4358 OF 2012 , CIVIL APPEAL No.4359 OF 2012 , CIVIL APPEAL No.4360 OF 2012 , CIVIL APPEAL No.4361 OF 2012 , CIVIL APPEAL No.4362 OF 2012 , CIVIL APPEAL No.4363 OF 2012 , CIVIL APPEAL No.4364 OF 2012 , CIVIL APPEAL No.4365 OF 2012

AND WITH

CIVIL APPEAL No.4366 OF 2012

O R D E R

1. Doubting the correctness or otherwise of the decision of this Court in the case of Sandvik Asia Limited vs. Commissioner of Income Tax & Ors., (2006) 2 SCC 508, a bench of two learned Judges has referred the following question of law for our consideration and authoritative pronouncement by order dated 28.08.2012:

“The question which arises in this case is, whether interest is payable by the Revenue to the assessee if the aggregate of installments of Advance Tax OF TDS paid exceeds the assessed tax?”

2. In the aforesaid order of reference, this Court has briefly noticed the facts and the discussion in Sandvik case (supra) wherein, the main issue for consideration and determination by this Court was, whether the assessee is entitled to be compensated by the Revenue for delay in payment of the amount admittedly due to the assessee. This Court has noticed inter alia the provisions of Section 214 of the Income Tax Act, 1961 (for short ‘the Act’) and in light of the same has doubted the correctness of the decision in Sandvik case (supra).

3. In order to answer the aforesaid issue before us, we have carefully gone through the judgment of this Court in Sandvik case (supra) and the order of reference. We have also considered the submissions made by the parties to the lis.

4. We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik case (supra). The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision etc.

5. Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this Court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the Court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the Assessment Years 1977-78, 1978- 79, 1981-82, 1982-83 in a sum of Rs.40,84,906/- and interest @ 9% from 31.03.1986 to 27.03.1998 and in default, to pay the penal interest @ 15% per annum for the aforesaid period.

6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.

7. As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.

8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.

9. With the aforesaid clarification we now refer back all the matters before a Two Judge Bench of this Court to consider each case independently and take an appropriate decision one way or the other.

Ordered accordingly.

NEW DELHI, SEPTEMBER 18, 2013.

Sum paid for acquisition of clients of another company is intangible asset and eligible for depreciation

Issue- The learned Commissioner of Income Tax (Appeals)-IV, Hyderabad, failed to note that “right to access the members of the society was an Intangible asset” falling within the meaning of the definition contained intangible asset as laid down in section 32(1) (ii) of the Income Tax Act, 1961 and therefore the Appellant was entitled to claim the depreciation at Rs.99,25,284/-.

Fats :- Briefly the facts relating to the issue in dispute are, the assessee, a private limited company is engaged in the business of Micro Financial Lending Services to women in rural areas through small joint liability groups and direct micro loans. For the impugned assessment year the assessee filed its return of income on 15-11- 2006 declaring income of Rs.12,79,373/-. Initially the return was processed u/s 143(1) of the Act. Subsequently, assessee’s case was selected for scrutiny assessment. During the scrutiny assessment proceeding while examining the assessee’s statement of accounts the Assessing Officer noticed that the assessee had claimed depreciation at 25% in respect of intangible asset amounting to Rs.99,25,284 by mentioning that during the financial year relevant to the assessment year under dispute the assessee had incurred client creation cost of Rs.3,97,01,135 and written off 25% of that intangible asset amounting to Rs.99,25,284/- to the P & L A/c. In response to further query made by the Assessing Officer, the assessee submitted that the assessee acquired over one lakh clients at a cost of Rs.3.97 crores @Rs.350 per customer. It was further submitted that these were trained, motivated, credit checked and risk filtered and are a source of assured economic benefits over the next five years and in that process, the assessee capitalised the cost in the books and amortised the cost over a period of five years. It was submitted that the assessee has the capacity to control the future benefits from the customer which arises from legal rights enforceable in a court o f law. It was submitted that the customers once acquired would have business relationship with the assessee company between three to five years and the association was reasonably secured and assured and the cost was also measured reliably as those have been separately identified and paid for. It was therefore contended that the consideration paid to Swayam Krishi Sangam (SKS)towards transfer of customers was for an intangible asset eligible for depreciation.

The Assessing Officer noted that as per appendix to Rule-5 of the IT Rules any assessee would be eligible for depreciation @ 25% in respect of intangible assets of know-how, patents, copy of rights, trade marks, licenses, franchises or any other business or commercial rights of similar nature. The Assessing Officer was of the view that the intangible asset claimed to have been acquired by the assessee does not come under any of the identified assets appearing in the depreciation schedule. The Assessing Officer was also of the view that since the assessee had acquired part of the already existing business of SKS the said asset had not been created during the course of business of the assessee, hence cannot be considered to be a business or commercial rights of similar nature. The Assessing Officer observed that the amount of Rs.3,97 crores paid by the assessee for acquisition of clients who were already enrolled with SKS and participating in their finance business. The Assessing Officer further noted that subscribers were already having a participation in the finance business of SKS and had got finance assistance from that concern and were in the process of repayment of the financial facility already availed. Assessing Officer felt that the fruits of the business were being enjoyed by SKS. Whereas, the assessee had only acquired the clientele available on the rolls of SKS by making a lumpsum payment. The Assessing Officer therefore concluded that, the same could not be compared with the intangible assets mentioned in Rule 5 of the schedule as it was not amounting to an asset in the assessee’s business and could not have been said to be used in its business. Further the clientele acquired by the assessee did not have similar characteristics as that of know-how, patent etc., identified as intangible assets by the statute.

The Assessing Officer referred to the definition of ‘plant’ in section 43(3) of the Act which includes all other things except livestock, furniture and fittings and buildings. Furniture and fittings are kept under a separate head under rule 5. Thus, the only item left is livestock. The Assessing Officer was of the view that the assessee cannot be said to have purchased the clients of another concern by paying specific consideration. He observed that even if the assessee had obtained a specific number of clients by making lumpsum payment and taken them to into its business hold, it could only mean that the assessee had acquired future business rights with them, excluding the transferor concerned from the picture as they had foregone the rights of having business relationship with the existing business customers. The Assessing Officer opined that the assessee made the lumpsum payment in lieu of foregoing of future business relationship by the transferor company, hence the expenditure incurred by the assessee is of capital nature. However, the Assessing Officer was of the view that by such lumpsum payment the assessee did not bring any durable asset into existence. He observed that for claiming depreciation ownership and user are the prerequisites whereas members taken over from SKS are living beings who can default in payment at any time and therefore even though the assessee had the right of legal action, it could not be said to be the owner of such clients. The Assessing Officer also opined that mere collections of instalments in respect of the finances already made by the SKS cannot be said as amounting to user for the purpose of its business. The Assessing Officer finally concluded that as no intangible asset has come into the possession of the assessee no depreciation can be allowed. Accordingly, the Assessing Officer disallowed the depreciation claimed of Rs.99,25,284/-.

Held :- The learned departmental representative has relied upon a decision of Hon’ble Delhi High Court in case of Sharp Business Systems vs. CIT ( ITA No.492/Del/2012 dated 5-11-2012) wherein the Hon’ble Delhi High Court has held that depreciation cannot be allowed on non compete fee as it does not come within the meaning of intangible asset as provided u/s 32(1)(ii) of the Act. However, a reading of the aforesaid judgment would make it clear that the Hon’ble Delhi High court came to such a conclusion as it held that an agreement on non compete fee is purely personal. The Hon’ble High Court further held that the words similar or commercial rights have to necessarily result in an intangible asset against the entire world which can be asserted as such to qualify for depreciation u/s 32(1) (ii) of the Act. However, the facts in the present case are different. The MOU between the assessee and SKS Society cannot be said to be purely personal. On the other hand, the acquisition of rights over the assets of SKS Society including the customer base is an intangible asset against the entire World as held by the Hon’ble Delhi High Court. Therefore, the facts of the case considered in the light of the ratio laid down by various judicial precedents referred to hereinabove, in our view, the client acquisition cost paid by the assessee is towards acquiring an intangible asset and therefore eligible for depreciation u/s 32(1)(ii) of the Act. In aforesaid view of the matter, we direct the Assessing Officer to allow the assessee’s claim of depreciation. Hence, the grounds raised by the assessee are allowed.

Source- M/s SKS Micro Finance Limited Vs DCIT (ITAT Hyderabad), ITA No.435 /Hyd/2010, 1222/Hyd/2011& 1789/Hyd/11, Date of Pronouncement :-21-6-2013

Things to be done on receipt of demand notice u/s 234E Late Filing

Late filing Fee Communication

What should I do on receipt of demand notice u/s 234E Late Filing?

The default amount will have to be deposited through challan no. 281. Download conso file from TRACES for filing correction and tag the paid challan without adding any deductee records. While filing correction, fill up the fee amount in ‘Fee’ column in challan detail.

Note: There is no need to send any communication to TDSCPC separately

Late filing correction in RPUFor example: Due date of filling of TDS statement form 26Q for Quarter 4 is 15th May , however statement 26Q has been filed with the delay of two(02) days. So deductor is required to quote late filing fee of Rs. 400.00( Rs. 200.00*2) as given below:
The “column” number for quoting of “fee” form wise is as under:

Form Type	Fee Column
24Q	305
26Q	404
27Q	706
27EQ	656

All about Reverse Mortagage Scheme

Aastha Grover

The finance minister while presenting the union budget, 07-08 announced that national housing bank will introduce a scheme namely “reverse mortgage” for the senior citizens. It was to palliate their sustenance. In pursuance of this announcement some of the banks have already formulated such schemes. The plot behind this is to secure a stream of cash flows against the mortgage of a residential house without alienating the property. Senior citizens who hold house property but have dearth of funds can mortgage their property with a bank thus, monetizing the house as an asset. Lender makes periodic/lump sum payments to the borrower during the latter’s lifetime. Receiver can choose the way the payments will be made.

Senior citizens are not required to service their loan during their lifetime. On the Borrower’s death or if he leaves the house property permanently the loan is repaid along with accumulated interest through the sale of house property. Borrower/Heir can also repay or prepay the loan with accumulated interest and have the mortgage released without resorting to the sale of the property. Loan amount granted under reverse mortgage scheme is maximum up to 90 percent of the value of the property but varies from bank to bank, range being 50 -90%. Minimum amount that can be granted is three lakhs and maximum up to 1 crore in general, but this may also vary for different banks. Example of such a scheme is PNB BAGHBAN. This scheme is for those above the age of 62 years. It facilitates the senior citizens. Banks depute their officials dedicated for this work, who visit the senior citizens and do the necessary documentation. Reverse mortgage professionals ascertain the value payable by banks in the form of installments to mortgagee. The cash flows are affected by the market value of the property.

HOW IS IT DIFFERENT FROM A SIMPLE MORTGAGE

In a regular mortgage, the borrower mortgages his existing property and utilizes the amount granted by the bank for any other purpose and is required to repay the loan in the form of equated monthly installments (EMI) which would include loan and accumulated interest. The property mortgaged serves as a collateral security for the loan borrowed. However in case of reverse mortgage, the person pays EMI to the bank for the mortgaged property.

WHY IS SCHEME NOT A SUCCESS?

This scheme is an otiose in India due to some glitches. One of the reasons for its conk out In India is a custom of passing on the property to their successors/heirs. Some other reasons for its break down are that on the succession, if the inheritor fails to pay the amount due, the house is required to be sold out. Also, other better options exist which make this scheme redundant.

ALTERNATE OPTION

Alternate option to this scheme is a person may opt to sell the existing property and then use some of the proceeds to buy another property at a price lower than that of original house property and could use the balance amount for investment, so that annuity can be generated which would serve as a source of income.

HOW IS THIS SCHEME A BOON?

Benefit of reverse mortgage scheme is that even if the property is mortgaged the person still can reside in that property.

TAX TREATMENT

The following transaction of transferring a capital asset will not be regarded as a transfer and number capital gains will arise

Section 10(43) – Any amount received as a loan , either in lump sum or in installment in a transaction of reverse mortgage is exempt from tax i.e. not be treated as income of the senior citizen although loan is a capital receipt but to promote the scheme income has been exempted.

FACTORS TO BE CONSIDERED

For ascertaining the amount payable by banks under reverse mortgage are age, current interest rate, house property’s value, maximum loan limits determined by regulatory authorities, any outstanding mortgage or any other lien on the property (if any) should be considered.

House must be freehold else all existing liens will be set off against the proceeds. If there is an existing mortgage balance it can be paid off with the proceeds of reverse mortgage loan at the closing. Generally, no credit score requirements exist for this scheme.

Loan will not become due as long as one of the owner lives in the house as a primary residence. Owner is required to pay the insurance and property taxes even if opted for the scheme. In case of death or in case house property ceases to be the primary residence, successors can either choose to repay the loan or put it for sale.

SET BACKS OF REVERSE MORTGAGE

Since reverse mortgage is a loan it requires some origination and other fees to be paid which are exorbitant and the interest rate which is charged on loan is also very high as compared to interest rates which are charged on other loans.

Heirs if do not repay the loan will lose the property which they would have otherwise inherited, in case the owner no longer resides in the house property i.e. moves out for a year the loan becomes due .The taxes and insurances and other related charges will continue to be borne by the owner.

TYPES OF REVERSE MORTGAGE –

Single purpose reverse mortgage – they are the least expensive option and can be used for only one purpose as specified , the ones having low and moderate income can opt for this scheme;

Federally insured reverse mortgages – are generally more expensive than other home loans , they can be used for any purpose , opted when one plans to live in a house for a short period of time or need to borrow a small amount , they are easily available , have no medical or income requirements and can be used for any purpose;

Propriety reverse mortgages-are private Loans

THINGS TO BE TAKEN CARE OFF

Before opting for the scheme one needs to be vigilant about the insurance fee, other closing costs ; some schemes charge fixed interest rates, some charge variable interest rates which are related to market conditions,

DISALLOWANCE

Interest on reverse mortgages is not allowable as an expense unless loan is actually paid off i.e. it is allowed on actual payment basis.

OPTION TO CANCEL

The borrower has a prerogative of cancelling the scheme within the prescribed time limit. No penalty will be charged if cancellation is made within the prescribed time for any reason. It may be done by notifying the lender in writing.post the letter through a certified mail and ask for a return receipt as an acknowledgement. Keep the copies as a proof of cancellation. After cancellation lender has 20 days to return the money.

Example:-suppose MR x purchased a house property in 1974 for Rs 2 Lakhs and its fair market value as on 1.4.1981 is Rs 5 lakhs.MR X had mortgaged the property to a bank in reverse mortgage scheme and has received loan of Rs 40 Lakhs on the property. Interest thereon amounted to Rs 10 lakhs and the total loan and interest outstanding is Rs 50 Lakhs.

Case 1- MR X discharges the loan of Rs 50 Lakhs to the bank and sells the property for Rs 90 Lakhs on 1^st January 2013.

Capital gains in the hands of Mr. X in assessment year 2013-2014 shall be

Sale price 90 Lakhs

Minus cost of acquisition 5 Lakhs* 852/100

Case 2- MR X dies and his son y discharges the loan of Rs 50 Lakhs to the bank and sells the property on 1^st jan 2013 for RS 90 Lakhs. Here the case of R.M ARUNACHALAM shall apply and the capital gains in the hands of y in assessment year 2013-2014 shall be

Sale price 90 Lakhs

Cost of acquisition (-) 5 lakhs *852/100

Cost of improvement (-) 50 lakhs

Case 3-IF MR X dies and his son Y does not repay the loan to the bank, bank sells the property on 1^st jan 2013 for Rs 90 lakhs. Bank recovers the amount of Rs 50 lakhs and pays the balance 40 lakhs to MR X.

Amount taxable in the hands of MR X

Selling price 90 lakhs

-Cost of acquisition 5 lakhs *852/100

Case of RM ARUNACHALAM shall not apply since the son has not discharged the loan

Glimpse of Case of RM ARUNACHALAM (Supreme Court) referred above-in the above case

Facts of the above case are as under-

MR. David purchased a house property on 1^st jan 1985 for Rs 10 lakhs. He took a loan of Rs 8 lakhs by mortgaging the said property to Mr Alfred. Mr david died on 21^st jan 1994 and his son Mickle inherited the property from him. Mickle discharged the loan of Rs 8 lakhs to Alfred on 1^st jan 1997 and cleared the mortgage of the property. Mickle sold the property on 1^st jan 2013 for Rs 30 lakhs. For the purpose of computation of capital gains he took the cost of acquisition as 18 lakhs but the assessing officer is of the view that cost is the cost of acquisition to the previous owner that is 10 lakhs. The Supreme Court held that the assessee was justified in taking the cost to be Rs 18 lakhs. Under sec 49(1) where the assessee acquires the property from the previous owner in inheritance then the cost of acquisition to the assessee is the cost to the previous owner as increased by the cost of improvement incurred by the assessee and the previous owner. In a mortgage there is a transfer of interest in the property by the mortgager in the favour of mortgagee. When the previous owner had mortgaged his property then after his death the legal heir inherits only the mortgager’s interest in the property. By discharging the mortgage debt his heir who had inherited the property acquires the interest of the mortgagee in the property. As a result of such payment made for clearing off the mortgage, the interest of the mortgagee is acquired y the heir. The said payment is therefore regarded as cost of acquisition. Therefore, the cost of acquisition to the legal heir is the aggregate of the cost to the previous owner and the amount paid to clear the mortgage. This judgment relates to an assessment year when the concept of indexation was not there but now the amount paid to clear the mortgage debt should be regarded as cost of improvement.

CONCLUSION

This scheme has certain pros and corns. Though introduced for the benefit of senior citizens, the scheme turned out to be a flop show due to some impediments as mentioned above.

For those who choose to opt the scheme certain points should be considered, reference of which has already been given. But this scheme can serve the needy senior citizens to create a regular source of income. The worst problem with reverse mortgage is that of misuse of funds. The negative side says that the receipts are lesser in comparison to the interest that is charged. Interest charged is sky high thus amount to be repaid is also sumptuous as compared to the principal loan granted. There is a general belief that those reverse mortgage scheme holders end up in a financial crisis this is not true. Major chunk of those who exercise the scheme choose to soar their pension and the minority chooses to take the amounts in lump sum. Since senior citizens want funds gradually so Reverse Mortgage is a laudable scheme. Reverse mortgage is more of debt by its nature and the most expensive form of credit due to the high interest rate being charged. The scheme is only worthy until the house is occupied, on leaving it for more than 12months loan becomes payable. It might ultimately make the elderly homeless. And also if the senior citizens fail to pay property taxes, insurance premium or other related taxes or fail to maintain the house they are deemed to be in default the lender can then foreclose. They can either purchase at nominal rates and can thus dispose at high prices the difference being the profit which is generally very high. Therefore, Reverse Mortgage is a good option only for those senior citizens who choose to reside in the same.

Tds On Purchase Of Immovable Property Effective 1st June,2013

Rakesh Nahar, Advocate

Any person purchasing immovable property ( other than rural agricultural land) of Rs. 50 lac or more is required to deduct tax @1% from the payment made to seller. This new rule (Section 194IA of the Income Tax Act) introduced in the budget this year, is applicable from June1, 2013.

Responsibility of the Purchaser of the Immovable Property:

Step-1 – Deduct TDS

(i) Deduct tax @1% from the payment made to the seller.

(ii) Collect the permanent Account Number (PAN) of the seller and verify the same with the Original PAN card.

Step-2 Online filling of statement at www.tin.nsdl.com

(i) It is mandatory to furnish the PAN of seller as well as the purchaser while providing the information regarding the sale transaction in the online from (From No.26QB).

(ii) Please insure that there is no error in quoting the PAN or other details in filling online form 26QB.

Step-3 Depositing the tax deducted

(i) Deposit the tax deducted through e-payment only, either at the time of filling of Form 26QB or subsequent to it, e-payment can be made using electronic payment facility at any authorized bank, including self net banking facility.

(ii) In case, the payment of tax deducted is made subsequent to the filling of Form 26QB,pay tax using electronic payment facility at any authorised bank within 7 days after online filling of statement at www.tdscpc.gov.in

(iii) If there is a delay beyond 7 days in payment of tax, the statement filed online would be treated as “Invalid”. In that case Form 26QB,will need to be filed again.

Step-4 Issue of TDS Certificate

(i) Download TDS certificate from TRACES(www.tdscpc.gov.in)

Responsibility of the Seller of the Immovable Property

(i) Provide your PAN to the Purchaser for furnishing information regarding TDS to the Income Tax Department.

(ii) Verify deposit of taxes deducted by the Purchaser in your Form 26AS Annual Tax Statement.

TAN NOT REQUIRED (ONLY PAN NO TAN)

TAN of the deductor is not required for the payment and reporting of the Tax deducted under this section and PAN allocated to the deductor shall be used for payment and reporting of TDS made under this section.

To whom and what does this apply to?

All persons buying immovable property from a resident Indian have to deduct the tax.
This applies on purchase of all kinds of real estate such as Land, Building, Land along with Building/flat.
It applies to property bought in a resale and also on purchases from builders. The only exception is if you are buying agricultural land.
The seller needs to be a resident of India, and could be either individual, partnership, company or other person mentioned in tax laws.
If you are buying immovable property from a non-resident seller, the tax deduction rules are different.
Payment to non- resident sellers would continue to be governed under provisions of section 195 of the Income- tax 1961 as before.

When should the tax be deducted?

If you maintain books of accounts, the tax should be deducted at the time of paying the seller or crediting his account, whichever is earlier.
If you do not maintain books of accounts (most individual buyers would come in this category) you need to deduct the tax at the time of paying the seller.

By when and how should the tax be deposited with the Government?

The buyer needs to deposit the amount within seven days from the end of the month in which the tax is deducted. So ,if you deducted tax in August 2013,you need to deposit it with the Government by September 7. The deposit needs to be done electronically using Form 26QB. This will have details such as name, address and permanent account number (PAN) of the buyer and seller. In case the seller does not furnish his PAN, tax will have to be deducted at 20 percent.

Does the buyer need to give any certificate to the seller?

Yes, the buyer has to give tax deducted at source (TDS) certificate to the seller within 15 days from the due date for depositing the tax deducted. So, if you deduct tax in August and deposit it by September 7,you need to issue the TDS certificate by September 22. This should be issued in Form 16B which can be downloaded electronically from the Web site of the income tax Department.

If a buyer pays for the property in installments, should he deduct tax with each installment?

Yes. In such cases, tax has to be deducted at the time of payment of each installment.

Section 56 – Taxation of gift received

Sonu Aggarwal

Taxation of gift received Under Section 56(2) of income tax act 1961

As per income tax act gifts received are taxable in the hands of recipient under the head Income From Other Sources and there is no taxation for the donor. Here gift means any sum of money, Moveable property or immovable property which received without consideration or inadequate consideration.

Here property term include the following

Land and building (immovable)
Shares and securities (Securities Include debenture, bonds etc).
Jewellery (Jewellery includes ornaments made of gold, silver, platinum or any other precious metal whether or not attach any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel

Precious or semi-precious stones also include in the term of jewelry, whether it is set or not in any furniture, utensil or other article or worked or sewn into any wearing apparel

Archeological collection
Drawings
Paintings
Sculpture
Any work of art
Bullion (Gold And silver in their purest form)

There are some rules provided by income tax act 1961 for taxation on gift whether gift is taxable or not. For simplification I divided this rules in two head

1 Exempted Gift

2 Taxable Gifts

Exempted Gift

Any sum of amount received (as gift) without consideration up to Rs 50000 in one year is not taxable at anywhere.

For Example:

If one of your friend gift u Rs 40000 and another one gift u 10000 then there is no need to pay tax, but if such (gift Received) amount exceeds Rs 50000 than whole amount of money will be taxable

E.g: If one of your friend gift u Rs 40000 and another one gift u 20000 then the whole 60000 shall be taxable and recipient has to pay tax as per his slab rate

Conclusion

Any amount received as gift up to Rs 50000 in one year is not taxable in the hand of recipient. But if amount exceeds Rs 50000 than whole received amount will be taxable. There is limit provided on amount Received in one year as a gift not on amount received by per person

Gift Received from Relative

Any sum of money or kind received as gift from relatives will not be taxable at all means there is no limit specified for amount (gift) received by relative hence any amount received by relatives is not taxable

e.g If your brother gift u Rs 50, 00,000 than it will not be taxable in the hand of recipient (you).

Here Relative term include following Relatives

Your spouse
Your brother or sister
Brother or sister of your spouse
Brother or sister of either of your parents
Any of your lineal ascendants or descendants
Any lineal ascendant or descendant of your spouse
Spouse of the persons referred in above points

Gift received On occasion of the marriage of the individual

Gift received by any person (without limit) on the occasion of the marriage is tax free in the hand of individual (recipient).

For example: if your friend or relative or any other person gift u on your marriage than nothing will be taxable.

Gift received under a will or by way of inheritance

Any sum of money or any property is received under a will or by way of inheritance it is totally exempt from Gift Tax. So if any person gets a Property worth Rs 50, 00,000 and some other things worth Rs 30, 00,000 through inheritance, than he will not have to pay any tax on such gift received.

In contemplation of death of the payer

Any sum of money or any property is received in contemplation of death is also exempt from gift tax.

A gift received in contemplation of death means when men, who is ill and expects to die shortly because of his illness, give his movable property possession to another to keep as a gift in case if he will die because of that illness.

Such a gift may be resumed by the giver; and shall not take effect if he recovers from the illness during which it was made; nor if he survives the person to whom it was made

Any local authority, trust or university etc.

There is no tax liability occur when any amount received from local authority trust or university as a gift hence recipient is not liable to pay tax on such gift.

Conclusion

Any amount received up to Rs 50000 or

Immovable property received (which stamp duty value is up to Rs 50000) or

Movable property received which FMV up to Rs 50000 in one year is not taxable in the hand of recipient. But if amount and value exceeds Rs 50000 than whole received amount and property value will be taxable.

Note

Only single transaction is considered for calculating threshold limit of Rs.50000/- In the case of immovable property received as a gift. Where as in other cases (cash or movable property) all transactions in financial year are taken into consideration for calculating threshold limit of Rs.50000/-

Taxable gift

When any amount received exceeds Rs 50000 (from other than specified relatives) than whole received amount will be taxable or
Any immovable property is received without consideration if stamp duty value of such property is more than Rs.50000/- than stamp duty value of such property will be taxable.

Here Stamp Duty Value means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

For Simplification if property purchase value is 50lac but for the purpose of valuation of stamp duty it is taken by authority 65lac than in the case of gift received such property value 65 lac will be taken and tax will be charge on 65 lac value.

If any immovable property is received for a inadequate consideration, (means consideration is less than stamp duty value of property) which stamp duty value exceeding Rs.50, 000, the stamp duty value of such property as Exceeds such consideration will be chargeable.

For example if consideration paid 120000 and stamp duty value is 200000 than 80000 will be chargeable u/h other sources.

2. Movable property is received without consideration which aggregate fair market value is more than Rs.50000/- than tax will be charge on aggregate fair market value of movable property.

If movable property received for a lesser consideration, means consideration is less than the fmv but fmv exceeds by Rs.50,000, than the fmv as exceeds such consideration will be chargeable.

For example if a car of Rs 1050000 received for consideration 200000 than whole 850000 will be taxable in the hand of recipient.

(Author can be reached at sonuaggarwal08 @ gmail.com)

Sale of software does not give rise to any royalty income : HC

Delhi HC has held on 22.11.2013 in the case of DIRECTOR OF INCOME TAX Vs. INFRASOFT LTD. that by sale of software what has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income.

DElhi HC has not examined the effect of the subsequent amendment to section 9 (1)(vi) of the Act and also whether the amount received for use of software would be royalty in terms thereof for the reason that the Assessee is covered by the DTAA, the provisions of which are more beneficial.The amount received by the Assessee under the licence agreement for allowing the use of the software is not royalty under the DTAA.

Delhi HC has not agreed with the judgment of Andhra Pradesh High Court in the case of SAMSUNG ELECTRONICS CO. LTD (SUPRA) that right to make a copy of the software and storing the same in the hard disk of the designated computer and taking backup copy would amount to copyright work under section 14(1) of the Copyright Act and the payment made for the grant of the licence for the said purpose would constitute royalty.

Source – Director Of Income Tax Vs. Infrasoft Ltd. (Delhi High Court), Date of Pronouncement – 22.11.2013, Appeal No. ITA 1034/2009

Whether TRC is required in case of import of Machines?

A new sub-section (4) to section 90 has been inserted by the Finance Act, 2012 w.e.f. 01.04.2013 wherein a non-resident assessee who claims any relief under Double Taxation Avoidance Agreement [DTAA] is required to obtain a Tax Residency Certificate [TRC] from the Government of that country of which he is resident.

Section 195 of the Income tax Act, 1961 makes it obligatory on the part any person who is required to pay to non-resident any sum which is chargeable under the provisions of this Act to deduct income tax thereon at the rates in force. Chargeability of Income tax is governed by the provisions of section 4 of the Income tax Act, 1961.

As per Section 4, the income tax shall be charged for any assessment year in respect of the total income of the previous year of any person. Section 5 of the Income tax Act, 1961 deals with the scope of total income of any previous year of a person.

As per sub-section (2) of section 5 in case of non-residents the total income includes all income from whatever source derived which –

(a) Is received or is deemed to be received in India; or

(b) Accrues or arises or is deemed to accrue or arises in India

Section 7 of the Income tax Act, 1961 deals with the Income deemed to be received in India and Section 9 deals with the Income deemed to accrue or arise in India.

As per section 7 of the Income tax Act, 1961 only the annual accretion, transferred balance in recognized provident fund and certain contribution to pension scheme would be deemed to be income received in India.

As per section 9 of the Income tax Act, 1961 the following income shall be deemed to be earned in India –

(i) All incomes accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India or through the transfer of a capital asset situate in India;

As per explanation 2 of section 9(1)(i) business connection generally includes dependent agent in India who acts on behalf of non-resident

Property can be movable or immovable, tangible or intangible. Intangible property may cover “any asset or source of income”

(ii) Salary income if it is earned in India;

(iii) Salary income payable by Central Govt to citizen of India;

(iv) Dividend paid by an Indian company;

(v) Interest, Royalty and fees for technical services paid by certain persons;

From the study of the provisions of law stated above Import of Machines is not covered under deeming provisions i.e. neither under section 7 nor under section 9 of the Income tax Act, 1961.

Import of Machine may be covered under section 5 of the Income tax Act, 1961 if the profits on sale of machines are received, accrued or arouse in India. As a general rule, in case of sale of goods, profits arise at the place where the contract of sale are made or sales are effected [66 ITR 159 (SC), 21 ITR 375, 31 ITR 760, 135 ITR 762]. Further, a contract is said to be made at a place where the offer is accepted [28 ITR 184 (SC), 18 ITR 333].

Illustration

1. ABC Ltd, an Indian Company resident in India enters into an agreement for import of machine with XYZ LLC a US based company and which is resident of USA. As per the agreement ABC Ltd. gives offer for purchase of machinery by signing the agreement in India and which is accepted by XYZ LLC by signing the agreement at USA. In such a case since the offer is accepted at USA the contract is said to be made at USA and accordingly the profits will arise in USA. Hence not chargeable to tax in India;

2. In the above illustration if the offer for purchase of machinery is accepted by XYZ LLC when one of its directors visited in India and signed the agreement in India then the contract would be said to be made in India. In such a case the profit will arise in India and hence chargeable to tax in India;

3. Further, in case of illustration 1 above if the sale is effected in India i.e. ownership in goods is transferred in India then also profit will arise in India and hence chargeable to tax in India

Conclusion

Now in case if the profits on import of machine arise in India and chargeable to tax in India then as per Section 195 tax is required to be deducted at source in India. However, in case if the non-resident is a resident of that country with which India has DTAA and mostly under DTAA business profits are taxable in the country of which it is resident then in that case no tax is required to be deducted at source. However, in such a case for giving benefit of DTAA, non-resident is required to give TRC issued by the Govt of that country.

Author – CA Praveen Mittal, General Manager, Tax, India Today Group

Who is Responsible for TDS on sale of shares by NRI’s

CA Anuj Gupta

Q. We are an Indian Company and our 5% equity is held by an NRI. Under a scheme of buyback of equity shares announced by our Company, the said NRI has offered all his equity for buyback. The said shares were acquired by him in convertible foreign exchange 5 years back. Whether there is any liability on the Indian company to deduct TDS on the said buyback from NRI?

Ans. This is an common question now a days where equity in an Indian Company is held by an NRI and the simple answer to the aforesaid question is that responsibility to deduct tax at source on payment to NRI of such payment is on the Authorised Dealer (read bank through which payments are made ). Here is the reason for such conclusion.

Sec. 195 of Income Tax Act,1961 states that if a non resident is paid any sum ,which is chargeable to tax, TDS should be deducted.

Sec. 195 : Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest 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 :

The meaning of the phrase “Any person responsible for paying” used in section 195 above, has been defined in sec. 204 of Income Tax Act,1961, in the following words:-

204. For the purposes of the foregoing provisions of this Chapter and section 285, the expression “person responsible for paying” means—

(i) ……………..

(ii) ………………..

[(a) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the authorised dealer responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account maintained in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;]

(iii)………………..

[Explanation —For the purposes of this section:—

(a) “non-resident Indian” and “foreign exchange asset” shall have the meanings assigned to them in Chapter XII-A;

(b) “authorised dealer”shall have the meaning assigned to it in clause (b) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973).]

Before we proceed further , let us also understand what do we mean by “foreign exchange asset” under Chapter XII-A

Section 115C defines foreign exchange asset investment income and specified assets as follows:

(b)”foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;

(f) ‘specified asset’ means any of the following assets, namely :

(i) shares in an Indian company;

(ii) debentures issued by an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956);

(iii) deposits with an Indian company which is not a private company as defined in the Companies Act, 1956 (1 of 1956);

(iv) any security of the Central Government as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

(v) such other assets as the Central Government may specify in this behalf by notification in the Official Gazette.

So let us put section 204 (iia) in simple words:

1. in the case of any sum payable to a non-resident Indian,

2. being any sum representing consideration for the transfer by him of any foreign exchange asset,

3. which is not a short-term capital asset,

4. the authorised dealer responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account shall be person responsible for deducting TDS.

So in the present case it is pretty clear that the sum being paid is for a foreign exchange asset, which is not a short term capital asset. Hence Authorised Dealer and the not the Indian Company paying the sum to NRI on buyback of shares shall be responsible for deducting TDS u/s 195.

Online Request for refund of Excess TDS deposited

Much awaited form 26B for online request for refund of Excess TDS deposited has been enabled on TRACES. To apply online please login to TRACES

After Logging

Deductors can navigate to ‘Statement / Payments’ -> ‘Request for Refund’

Denial of additional claim for non claim of the same by filing Revised Return not justified

Issue - Whether Ld.CIT(A) is correct in denying additional claims on the ground that claims were not made by way of filing the revised return under Section 139(5) of the Income-tax Act, 1961, where the assessee did neither claim those additional claims in the Original/Revised return nor claimed before Assessing Officer but were claimed first time before the ld.CIT(A)?

Held :- That the issue is squarely covered in favour of the assessee by the decisions of Hon’ble Jurisdictional High Court.That in the case of Sam Global Securities Ltd. (supra), the facts were that in the return of income, the assessee had not claimed exemption under Section 10(35) on the dividend income from the mutual funds and the loss on sale of units as business loss. During assessment proceedings, the assessee filed the revised computation of income claiming exemption as well as business loss. However, the Assessing Officer as well as CIT(A) rejected the assessee’s claim on the ground that the assessee had not claimed it by filing of revised return under Section 139(5) within the time limit.

Source – Xerox India Limited Vs. DCIT (ITAT Delhi), ITA No.1580/Del/2010, Date of Pronouncement : 08.11.2013.

Income Tax Office to Remain Open till 8.00 P.M. Today for Manual Filing of TAR

Income Tax Offices shall remain open till 8:00 p.m on 30^th September, 2013 for the convenience of taxpayers, who wish to file Report of Audit manually for assessment year 2013-2014.

———

Official Notification is as follows :-

F-No. 225/117/2013/ITA.II
Government of India
Ministry of Finance
Department of Revenue
central Board of Direct Taxes

North-Blocky ITA.11 Division New Delhi, the 30^th September, 2013

Order

In order to facilitate assessees to comply with part (a) of CBDTs order in F.No.225/117/2013/ITA.II dated 26.09.2013, all CCsIT /DsGIT are hereby directed that all Income Tax Offices shall remain open till 8:00 p.m on 30^th September, 2013 for the convenience of taxpayers, who wish to file Report of Audit manually for assessment year 2013-2014, as per the said order.

(Richa Rastogi)

Under- Secretary to the Government of India

ITR 7 Manual or Online?

An assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A, clause (b) of sub-section (1) of section 12A, section 44AB, section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E or section 115JB of the Act, he shall furnish the same electronically.

Provided further that a person who is required to furnish any report of audit referred to in proviso to sub-rule (2) electronically, other than a person to whom clause (aaa) or clause (ab) of the first proviso is applicable, shall furnish the return, in Form as applicable to him, in the manner specified in clause (ii) or clause (iii).

Manner Specified in sub rule (3) of Rule 12 -

(3) The return of income referred to in sub-rule (1) may be furnished in any of the following manners, namely:—

(i) furnishing the return in a paper form;

(ii) furnishing the return electronically under digital signature;

(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;

(iv) furnishing a bar-coded return in a paper form:

———–

Also Read – Notification on Document Free IT Return of Trust & e-filing of audit report ( NOTIFICATION No. 42/2013 Dated- 11^th day of June, 2013

————

From the above it is clear that Assessee who are required to Furnish Audit Report under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, clause (b) of sub-section (1) of section 12A needs to file such audit report electronically. Further Assessee whoare required to furnish such Audit Reports have to file their ITR i.e. ITR 7 also Electronically in any of the following mode :-

(ii) furnishing the return electronically under digital signature;
(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;

Further we can conclude that Assessee who are although required to file ITR 7 but are not required to file Audit Report under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, clause (b) of sub-section (1) of section 12A needs not file ITR -7 Electronically. He may file the report in any of the following mode :-

(i) furnishing the return in a paper form;

(ii) furnishing the return electronically under digital signature;

(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;

(iv) furnishing a bar-coded return in a paper form:

—————————

²[Return of income and return of fringe benefits.

12. (1) The return of income required to be furnished under sub-section (1) or sub-section (3) or sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139 or clause (i) of sub-section (1) of section 142 or sub-section (1) of section 148 or section 153A ³[***] relating to the assessment year commencing ⁴[on the 1st day of April, ⁵[2013]] shall,—

⁶[(a) in the case of a person being an individual where the total income includes income chargeable to income-tax, under the head,—

(i) "Salaries" or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57; or

(ii) "Income from house property", where assessee does not own more than one house property and does not have any brought forward loss under the head; or

(iii) "Income from other sources", except winnings from lottery or income from race horses, ⁷[and does not have any loss under the head]

be in Form ⁸[SAHAJ] (ITR-1) and be verified in the manner indicated therein:]

⁹ [Provided that the provisions of this clause shall not apply to a person who,—

(I) is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has,—

(i) assets (including financial interest in any entity) located outside India; or

(ii) signing authority in any account located outside India;

(II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91; or

(III) has income not chargeable to tax, exceeding five thousand rupees. ]

(b) in the case of a person being an individual [not being an individual to whom clause (a) applies] or a Hindu undivided family where the total income does not include any income chargeable to income-tax under the head “Profits or gains of business or profession”, be in Form No. ITR-2 and be verified in the manner indicated therein;

(c) in the case of a person being an individual or a Hindu undivided family who is a partner in a firm and where income chargeable to income-tax under the head “Profits or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm, be in Form No. ITR-3 and be verified in the manner indicated therein;

¹⁰ [ (ca) in the case of a person being an individual or a Hindu undivided family deriving business income and such income is computed in accordance with special provisions referred to in section 44AD and section 44AE of the Act for computation of business income, be in Form SUGAM (ITR-4S) and be verified in the manner indicated therein: ]

¹¹ [Provided that the provisions of this clause shall not apply to a person who,—

(I) is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has,—

(i) assets (including financial interest in any entity) located outside India; or

(ii) signing authority in any account located outside India;

(II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91; or

(III) has income not chargeable to tax, exceeding five thousand rupees. ]

(d) in the case of a person being an individual or a Hindu undivided family other than the individual or Hindu undivided family referred to in clause (a) or clause (b) or clause (c) ¹²[or clause (ca)] and deriving income from a proprietory business or profession, be in Form No. ITR-4 and be verified in the manner indicated therein;

(e) in the case of a person not being an individual or a Hindu undivided family or a company or a person to which clause (g) applies, be in Form No. ITR-5 and be verified in the manner indicated therein;

(f) in the case of a company not being a company to which clause (g) applies, be in Form No. ITR-6 and be verified in the manner indicated therein;

(g) in the case of a person including a company whether or not registered under section 25 of the Companies Act, 1956 (1 of 1956), required to file a return under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139, be in Form No. ITR-7 and be verified in the manner indicated therein;

(h) ¹³ [***]

¹⁴ [ (2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form SUGAM (ITR-4S) or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 ^14a[or Form No. ITR-7] shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act: ]

¹⁵ [Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A, clause (b) of sub-section (1) of section 12A, section 44AB, section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E or section 115JB of the Act, he shall furnish the same electronically.]

(3) The return of income ¹⁶[***] referred to in sub-rule (1) may be furnished in any of the following manners, namely:—

(i) furnishing the return in a paper form;

(ii) furnishing the return electronically under digital signature;

(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V¹⁷;

(iv) furnishing a bar-coded return in a paper form:

Provided that—

¹⁸ [ (a) ¹⁹ [ a person, other than a company and a person required to furnish the return in Form ITR-7 ] if his or its total income, or the total income in respect of which he is or it is assessable under the Act during the previous year, exceeds ²⁰[five lakh rupees], shall furnish the return for the assessment year ²¹[2013-14] and subsequent assessment years in the manner specified in clause (ii) or clause (iii);

(aa) an individual or a Hindu undivided family, being a resident, ²² [ other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 ] having assets (including financial interest in any entity) located outside India or signing authority in any account located outside India and required to furnish the return in Form ITR-2 or ITR-3 or ITR-4, as the case may be, shall furnish the return for assessment year 2012-13 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);]

²³ [ ²⁴ [ (aaa)] a firm required to furnish the return in Form ITR-5 or an individual or Hindu Undivided Family (HUF) required to furnish the return in Form ITR-4 and to whom provisions of section 44AB are applicable, shall furnish the return for assessment year 2011-12 and subsequent assessment years in the manner specified in clause (ii);]

²⁵ [ (aab) a person claiming any relief of tax under section 90 or 90A or deduction of tax under section 91 of the Act, other than a person to whom clause (aaa) or clause (ab) is applicable, shall furnish the return for assessment year 2013-14 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);]

^25a [ Provided further that a person who is required to furnish any report of audit referred to in proviso to sub-rule (2) electronically, other than a person to whom clause (aaa) or clause (ab) of the first proviso is applicable, shall furnish the return, in Form as applicable to him, in the manner specified in clause (ii) or clause (iii). ]

²⁶[(ab) a company required to furnish the return in Form ITR-6 shall furnish the return for assessment year 2010-11 and subsequent assessment years in the manner specified in clause (ii);]

(b) a person required to furnish the return in Form ITR-7 shall furnish the return in the manner specified in clause (i) ²⁷[or clause (ii) or clause (iii) :].

(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns in the manners specified in clauses (ii), (iii) and (iv) of sub-rule (3). ²⁸[and the report of audit in the manner specified in proviso to sub-rule (2)]

(5) Where a return of income ²⁹[***] relates to the assessment year commencing on the 1st day of April, ³⁰[2012] or any earlier assessment year, it shall be furnished in the appropriate form as applicable in that assessment year.]

1. See also Circular Nos. 3/2007, dated 25-5-2007; 5/2007, dated 26-7-2007; Circular No. 6/2008, dated 18-7-2008; Circular No. 8/2008, dated 22-9-2008; Circular No. 3/2009, dated 21-5-2009 and Instruction No. 14/2008, dated 1-10-2008.

For details, see Taxmann’s Master Guide to Income-tax Rules.

2. Substituted by the IT (Fourth Amdt.) Rules, 2007, w.e.f. 14-5-2007. Prior to its substitution, rule 12 was amended by the IT (Seventh Amdt.) Rules, 2006, w.e.f. 24-7-2006, IT (Eleventh Amdt.) Rules, 2006, w.e.f. 19-10-2006, IT (Fifth Amdt.) Rules, 2006, w.e.f. 1-6-2006, IT (Fifth Amdt.) Rules, 2004, w.e.f. 1-4-2004, IT (Sixth Amdt.) Rules, 2003, w.e.f. 14-5-2003, IT (First Amdt.) Rules, 2003, w.e.f. 28-1-2003 [as corrected by Notification No. SO 258(E), dated 5-3-2003], IT (Thirteenth Amdt.) Rules, 2002, w.e.f. 24-6-2002, IT (Tenth Amdt.) Rules, 2001, w.e.f. 2-7-2001, IT (Thirteenth Amdt.) Rules, 1998, w.e.f. 9-9-1998, IT (Fourth Amdt.) Rules, 1998, w.e.f. 1-4-1998, IT (Eighth Amdt.) Rules, 1997, w.e.f. 27-6-1997 [as corrected by Notification No. SO 870(E), dated 15-12-1997], IT (Sixteenth Amdt.) Rules, 1995, w.e.f. 23-8-1995, IT (Fourth Amdt.) Rules, 1995, w.e.f. 1-6-1995, IT (Third Amdt.) Rules, 1994, w.e.f. 1-6-1994, IT (Eighth Amdt.) Rules, 1991, w.r.e.f. 1-4-1989, IT (Amdt.) Rules, 1981, w.e.f. 1-4-1981, IT (Second Amdt.) Rules, 1979, w.e.f. 1-4-1979, IT (Fifth Amdt.) Rules, 1976, w.e.f. 21-6-1976, IT (Amdt.) Rules, 1976, w.e.f. 1-4-1976, IT (Second Amdt.) Rules, 1972, IT (Amdt.) Rules, 1971, IT (Amdt.) Rules, 1968, IT (Second Amdt.) Rules, 1967, IT (Third Amdt.) Rules, 1964 and IT (Amdt.) Rules, 1962.

3. Words “or the return of fringe benefits required to be furnished under sub-section (1) or sub-section (2) of section 115WD” omitted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

4. Substituted for “on the 1st day of April, 2007 or any subsequent assessment year” by the IT (Sixth Amdt.) Rules, 2008, w.e.f. 1-4-2008.

5. Substituted for “2012″ by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013. Earlier, the quoted figure was substituted for “2011″ by the IT (Third Amendment) Rules, 2012, w.e.f. 1-4-2012. Prior thereto, “2011″ was substituted for “2010″ by the IT (Third Amendment) Rules, 2011, w.r.e.f. 1-4-2011 and “2010″ was substituted for “2009″ by the IT (Ninth Amendment) Rules, 2009, w.e.f. 1-4-2009.

6. Substituted by the IT (Fourth Amdt.) Rules, 2010, w.r.e.f. 1-4-2010. Prior to its substitution, clause (a) read as under :—

‘(a) in the case of a person being an individual where the total income includes income chargeable to income-tax under the head “Salaries” or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57 but does not include any other income except income by way of interest chargeable to income-tax under the head “Income from other sources”, be in Form No. ITR-1 and be verified in the manner indicated therein;’

7. Inserted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013.

8. Substituted for “SARAL-II” by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

9. Substituted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013. Prior to its substitution, said proviso, as inserted by the IT (Third Amendment) Rules, 2012, w.e.f. 1-4-2012 and subsequently amended by the IT (Seventh Amendment) Rules, 2012, w.e.f. 2-7-2012, read as under :

Provided that the provisions of this clause shall not apply to a person who is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has

(i) assets (including financial interest in any entity) located outside India; or

(ii) signing authority in any account located outside India.

10. Inserted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

11. Substituted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013. Prior to its substitution, said proviso, as inserted by the IT (Third Amendment) Rules, 2012, w.e.f. 1-4-2012 and subsequently amended by the IT (Seventh Amendment) Rules, 2012, w.e.f. 2-7-2012, read as under :

“Provided that the provisions of this clause shall not apply to a person who is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has

(i) assets (including financial interest in any entity) located outside India; or

(ii) signing authority in any account located outside India.”

12. Inserted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

13. Omitted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011. Prior to its omission, clause (h) read as under :

“(h) in the case of a person who is not required to furnish the return of income but is required to furnish the return of fringe benefits, be in Form No. ITR-8 and be verified in the manner indicated therein.”

14. Substituted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011. Prior to its substitution, sub-rule (2), as amended by the IT (Fourth Amdt.) Rules, 2010, w.r.e.f. 1-4-2010, read as under :

“(2) The return of income and return of fringe benefits required to be furnished in Form SARAL-II (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 or Form No. ITR-8 shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income or the return of fringe benefits under any of the provisions of the Act.”

14a. Inserted by the IT (Seventh Amendment) Rules, 2013, w.r.e.f. 1-4-2013.

15. Substituted by the IT (Seventh Amendment) Rules, 2013, w.r.e.f. 1-4-2013. Prior to its substitution, said proviso, as inserted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013, read as under :

” Provided that where an assessee is required to furnish a report of audit under section 44AB, 92E or 115JB of the Act, he shall furnish the same electronically .“

16. Words “or return of fringe benefits” omitted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

17. See Centralised Processing of Return Scheme, 2011.

18. Inserted by the IT (Third Amdt.) Rules, 2012, w.e.f. 1-4-2012.

19. Substituted for “an individual or a Hindu undivided family” by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013. Earlier, the quoted words were inserted by the IT (Third Amendment) Rules, 2012, w.e.f. 1-4-2012.

20. Substituted for “ten lakh rupees” by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013.

21. Inserted by the IT (Seventh Amendment) Rules, 2012, w.e.f. 2-7-2012.

22. Substituted for “2012-13″ by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013.

23. Clause (a) substituted for clauses (a) and (aa) by the IT (Sixth Amdt.) Rules, 2011, w.e.f. 1-7-2011. Prior to substitution, clauses (a) and (aa), as amended by the IT (Seventh Amdt.) Rules, 2010, w.e.f. 9-7-2010, read as follows :

“(a) a firm required to furnish the return in Form ITR-5 and to whom provisions of section 44AB are applicable shall furnish the return in the manner specified in clause (ii) or clause (iii);

(aa) an individual or HUF required to furnish the return in Form ITR-4 and to whom provisions of section 44AB are applicable shall furnish the return for assessment year 2010-11 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);”

24. Clause (a) renumbered as clause (aaa) by the IT (Third Amdt.) Rules, 2012, w.e.f. 1-4-2012.

25.Substituted by the IT (Seventh Amendment) Rules, 2013, w.e.f. 1-4-2013. Prior to its substitution, clause (aab), as inserted by the IT (Third Amendment) Rules, 2013, w.r.e.f. 1-4-2013, read as under :

“(aab) a person claiming any relief of tax under section 90 or 90A or deduction of tax under section 91 of the Act, shall furnish the return for assessment year 2013-14 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);”

25a. Proviso inserted by the IT (Seventh Amendment) Rules, 2013, w.r.e.f. 1-4-2013.

26. Inserted by the IT (Seventh Amdt.) Rules, 2010, w.e.f. 9-7-2010.

27. Inserted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013.

28. Inserted by the IT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013.

29. Words “or return of fringe benefits,” omitted by the IT (Third Amdt.) Rules, 2011, w.r.e.f. 1-4-2011.

30. Substituted for “2011″ by theIT (Third Amendment) Rules, 2013, w.e.f. 1-4-2013. Earlier, the quoted figure was substituted for “2010″ by the IT (Third Amendment) Rules, 2012, w.e.f. 1-4-2012 and prior thereto, “2010″ was substituted for “2009″ by the IT (Third Amendment) Rules, 2011, w.r.e.f. 1-4-2011; “2009″ was substituted for “2008″ by the IT (Third Amendment/Fourth Amendment) Rules, 2010, w.r.e.f. 1-4-2010 ; “2008″ was substituted for “2007″ by the IT (Ninth Amendment) Rules, 2009, w.e.f. 1-4-2009 and “2007″ was substituted for “2006″ by the IT (Sixth Amendment) Rules, 2008, w.e.f. 1-4-2008.

19 Suggestions On E-filling of Tax Audit Report and ITR

CA Nitesh More

1) Suggestions 80IE problems : Submit manual report & return to the department:

I advice to submit manual form to the department with return so that we can enjoy extension of one month for e-filling of TAR. It is my personal opinion. You use your discretion.

2) Submit 29C As Other Report With Form 3CD And It That For Is Notified In Future As Online , We Will Fill It. But It My View. Use Ur Discretion.

4) Steps To Find 10CCE10CCBBA, 10CCBC, 49C, 56F, 66, 3CA,3AD,3AE,3CE,3EAETC

STEP1: Log in as assessee & add for the relevant form say , for Form 10CCB

STEP2: Log in as ca

STEP3: Click “ Prepare & submit online form” under “E-FILE ”

STEP4: Select relevant form and proceed

5) Suggestions pan not available for related party transaction :

Do Not Disclose This Transaction In Online Form. Prepare An Excel Sheet And Attach It As Other Reports

6) Breaking news: how to reset password with new DSC instantly(screen shot) : Stepswise solutions to reset password with help of new dsc

Step1: Login as forget password.Step2: Upload valid DSC.Step3: Provide new password.

7) How to file 10CCB etc. If Assessee Have Two Or More Undertakings

Note: To Enable CAs To Fill Up This Form, I Had Prepared These Steps. This Is Not Prescribed By Departments. You Use Your Discretion And File.

STEP1: Prepare physical tax audit reports as usual i.e. Two or more tax audit reports signed by same or different CAs.

STEP2: Prepare one “online consolidated form” and upload. While preparing this forms, you will not be able to disclose many dates and other informations undertakingwise in the online form. Write all these informations in a separate sheet undertakingwise & attach it with p/L & b/S with online form. Alternatively, you can also attach scan copy of Physical forms with p/L & b/S for better disclosure of facts.

8) 29C Is Applicable For f.Y.2012-13: Assessee Claiming Deduction U/S 80IA/IB Etc May Also Have To Submit FORM 29C: Donot Forget: Assessee Other Than Co. Have To Pay Alternate Minimum Tax (Similar To Mat) & Form 29C Have To Be Filed

9) Cares While Uploading Online 3cd

CARE1: IF YOU HAVE ANY COMMENTS OR OBSERVATIONS, U CAN ATTACH IT AS ”OTHER REPORTS”.

CARE2: DO NOT FORGET TO FILE:

A) Notes Of Accounts & Schedule Of B/S & P/L As There Are Forming Part Of Financial Statements

B) Statutory Audit Report, In Case Of Company .

C) Excise Reports & Cost Audit Report , If Any

CARE 3: DO NOT FORGET TO FILE RETURN BY MENTIONING THE DATE OF FURNISHING OF REVISED FORM 3CD.

10) How To File Two Or More Physical Tax Audit Report Of Same Assessee Audited By Same/Different CAS:

STEP1: Prepare physical tax audit reports as usual i.e. Two or more tax audit reports signed by same or different CAs.

STEP2: You can upload “single xml file” only for each type of Form (report). There are six types of forms available at the time of uploading. These are FORM 3CA-3CD, FORM 3CB-3CD, FORM 3CEB, FORM6B, FORM10B, FORM 10BB, FORM 29B.

Note 1: Suppose, you have two physical FORMS 3CB-3CD. So, a consolidated online form 3CB-3CD will be prepared and efilled by any CA among those ca who signed physical tax audit report.

Note 2: Kindly note that if you have one Form 3CA-3CD, and one FORM 3CB-3CD, than each form will be uploaded separately by same or different CAs who signed physical report.

STEP3: Select who will file online form if you have two or more same form signed by different CAs among those who signed physical report.

STEP4: Prepare one “online consolidated form” and upload .

STEP5: If you have any comments or observations, you can always attach it as other report.

11) New Stepwise Process To File Revise Online 3CD?

Step1: Prepare Rectified XML As Usual

Step2: While Uploading, Select Revise Option (Enabled Yesterday)

Step3: Select Why You Are Revising Form 3cd out of the following:

A) Revision Of Accounts Of Company, After Its Adoption In Agm

B) Change Of Law

C) Change In Interpretation

D) Others

STEP4:

UPLOAD xml, IT WILL BE REVISED.

12) HOW TO UPLOAD XML PREPARED IN e-PR11/Software with ePR12

Those who have prepared their TAR in e-PR 11 with software or with e-PR11 utility but have not yet uploaded the same:

May kindly OPEN THE XML (prepared in software or e-PR11) IN PR 12 AND VALIDATE IT UNDER ePR12. SAVE THE SAME AND UPLOAD IT.

(However, in case you have reported anything against clause 30 or 31 of TAR in e-PR11, please re-enter those two clauses in e-PR12 to avoid swapping of the information for these two clauses)

13) REVISED PLANNING FOR TAR & ITR for 30th September IN VIEW OF PRESS RELEASE ON NOTIFICATIONS ISSUED YESTERDAY

FOR LOSS CASES:

EFILE TAR AS WELL AS ITR

FOR PROFIT CASES:

EFILE TAR & SUBMIT BELATED RETURN

Consequences if ITR not filed before due date i.e. if belated return filed

1. There is no penalty .

2. Losses ,if any, will not be allowed to be carried forward

3. Assessee also have to pay statutory dues U/s. 43B on or before the filing of ITR or Due Date i.e. 30.09.2013 whichever is earlier.

4. He may have to pay Interest U/s. 234A on taxes outstanding.

14) CBDT Press Release On Extension Of Time For Filing TAR/ ROI For AY 2013-14

Further to the Order dated 26.09.2013 issued u/s 119(2)(a) of the Act extending the due date for the electronic filing of the Tax Audit Report to 31.10.2013, the CBDT has issued a Press Release dated 26.09.2013 clarifying that the print copy of the Tax Audit Report as well as the Return of Income has to be filed by the prescribed due date of 30.09.2013 and that there is no extension of that time limit.

Relaxation In Requirement Of Electronic Furnishing Only

Requirement To File Report Manually Within Due Date

And File Electronically Within 31/10/2013

CBDT In Exercise Of Power Under Sec 119(2)(A)O F The It Act, 1961 Read With Sec 139 And Rule 12, Has Decided To Relax The Requirement Of Furnishing The Report Of Audit Electronically As Prescribed Under The Proviso To Sub-Rule( 2) Of Rule 12 Of The It Rules For The Assessment Year 2013-14 As Under -

(A) The Assesses, Who Are Presently Finding It Difficult To Upload The Prescribed Reports Of Audit (As Referred To Above) In The System Electronically May Also Furnish The Samemanually Before The Jurisdictional Assessing Officer Within The Prescribed Due Date.

(B) The Said Report Of Audit Should However Be Furnished Electronically On Or Before 31. 10. 2013.

Comments :-

Those Assessee Who Are Facing Difficulties In Electronic Filing Are Required To Furnish The Audit Reports Manually Before The Jurisdictional Assessing Officer Within The Prescribed Due Date And Thereafter Furnish Electronically On Or Before 31. 10. 2013.

Step1 – Furnish Manual Audit Report & Return Before The Jurisdictional Assessing Officer Within The Prescribed Due Date

Step2 - Furnish Electronically On Or Before 31. 10. 2013.

15) How To File 10ccb Etc. If Assessee Have Two Or More Undertakings

NOTE: TO ENABLE CAs TO FILL UP THIS FORM, I HAD PREPARED THESE STEPS. THIS IS NOT PRESCRIBED BY DEPARTMENTS. YOU USE YOUR DISCRETION AND FILE.

STEP1: Prepare physical tax audit reports as usual i.e. Two or more tax audit reports signed by same or different CAs.

16) Query: How to file it online FORM 29C is not available on website?

Ans: it is not mandatory to file form 29C online.

17) Donot Forget: Assessee Other Than Co. Have To Pay Alternate Minimum Tax (Similar To Mat) & Form 29 C Have To Be Filed To Ao As This Form Is Not Online

18) Steps To Find 10CCE,10CCBBA, 10CCBC, 49C, 56F, 66, 3CA,3AD,3AE,3CE,3EA ETC

STEP1: Log in as assessee & add for the relevant form say , for Form 10CCB

STEP2: Log in as CA

STEP3: Click “ Prepare & submit online form” under “E-FILE ”

STEP4: Select relevant form and proceed

19) How to file 10CCB etc. If Assessee Have Two or More Undertakings

NOTE: To Enable CAs To Fill Up This Form, I Had Prepared These Steps. This Is Not Prescribed By Departments. You Use Your Discretion And File.

STEP1: Prepare physical tax audit reports as usual i.e. Two or more tax audit reports signed by same or different CAs.

STEP2: Prepare one “online consolidated form” and upload. While preparing this forms, you will not be able to disclose many dates and other information undertaking wise in the online form. Write all these informations in a separate sheet undertaking wise & attach it with p/L & b/S with online form. Alternatively, you can also attach scan copy of Physical forms with p/L & b/S for better disclosure of facts.

Query: How to file it online FORM 29C is not available on website?

Ans: it is not mandatory to file form 29C online. So, can be filed offline to the department

20) CARES WHILE UPLOADING ONLINE 3CD

CARE1: IF YOU HAVE ANY COMMENTS OR OBSERVATIONS, U CAN ATTACH IT AS ”OTHER REPORTS”.

CARE2: DO NOT FORGET TO FILE:

A) NOTES OF ACCOUNTS & SCHEDULE OF B/S & P/L AS THERE ARE FORMING PART OF FINANCIAL STATEMENTS

B) STATUTARY AUDIT REPORT, IN CASE OF COMPANY .

C) EXCISE REPORTS & COST AUDIT REPORT , IF ANY

CARE3: DO NOT FORGET TO FILE RETURN BY MENTIONING THE DATE OF FURNISHING OF REVISED FORM 3CD.

21) How To File Two Or More Physical Tax Audit Report Of Same Assessee Audited By Same/Different CAS

STEP1: Prepare physical tax audit reports as usual i.e. Two or more tax audit reports signed by same or different CAs.

Note 1: Suppose, you have two physical FORMS 3CB-3CD. So, a consolidated online form 3CB-3CD will be prepared and efilled by any CA among those CA who signed physical tax audit report.

Note 2: Kindly note that if you have one Form 3CA-3CD, and one FORM 3CB-3CD, than each form will be uploaded separately by same or different CAs who signed physical report.

STEP3: Select who will file online form if you have two or more same form signed by different CAs among those who signed physical report.

STEP4: Prepare one “online consolidated form” and upload .

STEP5: If you have any comments or observations, you can always attach it as other report.

I-T e-filing : Reset Password using Digital Signature

CA Sandeep Kanoi

As reported by us today that Income Tax Department needs to further strengthen the security of Income Tax e-filing accounts, in our post titled “Income Tax e-filing website hacking : Need of the Hour ” department has introduced a new option to Change Password for online e-filing account. Under this option Assessee can change the password in case he forgets the same by taking the following steps :-

1. Go To Following link on e-filing website of Income Tax Department :-
https://incometaxindiaefiling.gov.in/e-Filing/Services/ForgotPassword.html
2. Enter the PAN and Captcha and press continue

3. You will be directed to a new page on which you have the option to Change Your password using your digital signature. You can select the digital Signature as Registered if you already registered the same on Income Tax e-filing website otherwise you can select the option ‘NEW DSC’ as shown in the Pic below and click the validate button :-

Here you enter your new password and reset the same. Once reset you can login into your account using your this new password.

HUF PAN incorporation date Ancestral, How to Register?

CA Sandeep Kanoi

I have discussed earlier on how to Open ITR Acknowledgment of HUF Assessee if his PAN is written as ANCESTRAL on PAN card by our post titled Incorporation date in PAN ANCESTRAL – How to know PAN, File IT return, Open ITR V”. The trick discussed in this post was as follows:-

Assessee whose date of Incorporation is written as Ancestral on PAN card, they can write date of birth as 01/01/0001 for the purpose of opening ITR-V, Registering on Income Tax website and to know the PAN. For details please Visit the Link given below:-

Incorporation date in PAN ANCESTRAL – How to know PAN, File IT return, Open ITR V

The Trick seems to be not working nowadays for most of the HUF Assessees whose Incorporation date as per PAN Card is Ancestral. It seems the main reason for that is that although on PAN card their date of incorporation is ‘ANCESTRAL’ but as per income tax records it is a specific date. The question here now is how to register such Assessee on Income Tax e-filing website?

Answer: - In such cases Assessee should call the CPC helpline on 1800 425 2229 and they will tell you the date of incorporation as records with them after asking few questions related to the Assessee. Once you have the date of incorporation you can Register HUF Assessee on Income Tax e-filing website.

Condition requiring manual filing of audit report by 30.09.2013 is ultra vires and Void

CA. Pankaj G. Shah

Condition requiring manual filing of audit report by 30.09.2013 in notification dated 26.09.2013 is ultra vires and Void

Notification issued on 26.09.2013 has mandated that the Audit report must be furnished manually to the jurisdictional Assessing Officer by 30.09.2013. However the condition in notification is contrary to the Rules which have not been consequently modified.

Rule 12(2) of Income tax Rules provides that the return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form SUGAM (ITR-4S) or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 14a[or Form No. ITR-7, shall not be accompanied by form or report of audit required to be attached with the return of income under any of the provisions of the Act

Further proviso to Rule 12(2) of Income tax Rules inter alia provides that where an assessee is required to furnish a report of audit specified under section 44AB, he shall furnish the same electronically.

As can be seen from above that the Provisions under Rules and under Notification are contrary to each other. In this regard attention is invited to the decision in case of V.K. Ashokan v. Asstt. Excise Commnr. and Ors.[2009 (4) SCALE 225] it was held that that rules framed or other terms and conditions imposed under an Act should not be contrary to the other provisions of the Act and must not be framed in contravention to the constitutional or statutory scheme. Accordingly the Notification mandating additional condition of manual filing without modifying the existing Rules is Ultra-vires, Void and invaild.

Further the Notification requiring altogether new requirement of manual filing by 30.09.2013 has been introduced on 26.09.2013 which is very short and unreasonable period and is against the principles of natural justice. In State of Orissa v. Dr. (Miss) Binapani Dei and Ors, it was held that when by reason of an action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice are required to be followed. In case of denial of principles of natural justice in a particular statute, the same may also be held ultra vires to Article 14 of the Constitution.

What for all this? There is no loss to the revenue on extending the uploading date. The requirement of manual filing with the jurisdictional A.O. has caused undue hardship, double jeopardy.

Double Standards of the Department is more noticeable from the fact that this notification will hit small and medium enterprises and common man assessee and not Larger Assessee’s as in case of Bigger Assessee’s where Domestic and International Transfer Pricing is applicable an extra two months period is granted to file Income Tax Return and Audit Reports.

(These are personal views of author and due professional advice be taken before acting on it)

(The author can be reached at pankajgshah@gmail.com)

E-Filing Of Tax Audit Report- Professionally Here We Are Standing Boss!!!!!!!!

CA Sudhir Halakhandi

The chartered accountants were eagerly waiting for the Extension of date for E-filing of audit report and every professional have the confidence that the date will certainly extended (for obvious reasons) and the critical issue was the time of announcement and the expectation was that the date will be extended a few days before the last date. The extension Notification was received on yesterday morning i.e. on 26^th Sept 2013 and barring some exception, whole the professional community was stunned to see it. What type of extension is this? It is issued disregarding the genuine demand of one of the biggest professional body of the world and further it is issued without knowing the ground realities.

See the reasons dissatisfaction- We have been provided a utility for E-filing of Tax audit report and the same was amended for 12 times since it’s introduction in period of 2 or 3 months and see every time the software required the updation and every time one or two days were wasted hence total 12 to 24 days were wasted for this faulty system of E-filing and we are just demanding for compensation of these 12 to 24 days hence one month’s extension was reasonable. This is very simple calculation and reasonable demand.

Since we have wasted lot of time due to frequent changes in the utility hence there is delay in completion of audits and a few more days are required for this purpose and this was not the individual demand but it is supported by ICAI , the professional body having more than 2 Lakhs CA Members. See the copy of statement hosted on the ICAI web site :- (I have highlighted and underlined the relevant portions)

ICAI has requested CBDT to extend the due date of e‐filing of income‐tax returns, tax audit reports and report under section 92E of the Income‐tax Act, 1961

The efforts of the members in supporting the e‐initiative the Department requiring e‐filing of almost all audit reports under the Income‐tax Act, 1961 is appreciable. ICAI is aware of the numerous issues being faced by the members with regard to registration, frequent changes in utilities, uploading of balance sheet and profit and loss and so on. The Direct Taxes Committee of ICAI is taking up these issues with appropriate authorities from time to time. It has issued “Frequently Asked Questions” prepared in consultation with the officials of Directorate of Income tax (Systems) for the guidance of members. In spite of these efforts, difficulties are being faced by the members in e‐filing the tax audit reports mainly due to continuous change in the utilities hosted on the CBDT website. Further, the difficulties being faced by the members and the assessees in Andhra Pradesh, Uttarakhand, Gujarat, Muzaffarnagar and other affected areas of Uttar Pradesh are also known to ICAI.

Considering the above factors, a request was extended to Chairperson, CBDT for extension of due date of filing income tax returns along with tax audit reports by one month from end of 30^th September, 2013. ICAI has also sought extension of due date of furnishing the report under section 92E by one month from the end of 30thNovember, 2013 for AY 2013‐14.

Even though matter is being pursued on regular basis, it is desirable that the members complete their audits on or before 30th September, 2013 so that the assessees are able to file their income tax returns on time.

Now if we have very little time to complete the rest of the audits and as we have mentioned so many times that this is “race against time” and it appears that either our representatives failed to put this valid point before the law makers strongly and properly or law makers do not want to listen the difficulties faced by the professionals at ground level created by this new and ever-changing system of E-filing of audit report.

Whatever may be the reason for this meaningless extension, this shows where this noble profession stands in the eyes of our Lawmakers and this is a big question boss!!!

If we can complete the audit up to 30^th Sept 2013 then with some more efforts and resources we can also E-file the audit reports so the extension has no meaning and in our opinion the professionals should work “round the clock” and complete the task by E-filing the audit reports instead of producing the hard copies to the department. This will show the strength and capability of this noble profession to our law makers and leaders.

————————————
-CA Sudhir Halakhandi, -CA Abhas Halakhandi
“Halakhandi”, Laxmi Market, Beawar-305901(Raj)
Cell- 9828067256, MAIL –sudhirhalakhandi@gmail.com

Income Tax e-filing website hacking : Need of the Hour

CA Sandeep Kanoi

Recently we have read on many websites that a CA student from Hyderabad has hacked Income Tax returns account of industrialist Anil Ambani and yesterday it comes to news that one more CA student from Noida has hacked the Income Tax Return Account of Bollywood bigwigs Shah Rukh Khan and Salman Khan and cricket stars Sachin Tendulkar and MS Dhoni.

The above CA students are not professional hackers but they are simply the CA students, who may not even be aware of simple hacking techniques. Now the question is if they are not hackers and they may not even be aware of simple hacking techniques then how they were able to hack the account of abovementioed Income Tax Assessees?

The modus operandi in both the cases was similar. The two had sent e-mails to the I-T department seeking change in the password of the person whose account they planned to hack into. The I-T department then did the needful, a procedure that highlights the fragility of the department and loopholes in the system followed by Income Tax Department.

In both the cases above the Investigation team has not only searched the office of CA student but also seized Computer and Server of the CA firm which may have also disturbed the work of CA Firm in which these students were pursuing there CA Articleship.

Need of the Hour :-

1. Chartered Accountants should educate there students about the violation of Information Technology Act at the start of articleship, so that their students do not try to hack or login into accounts of persons they are not authorise to.

2. CA should have an Letter of Authority from there clients regarding use of online e-filing account of clients as in most of the cases CA themselves upload and approve the Returns of their clients so that in past if any dispute arises CA can safeguard themselves.

3. Income Tax Department should further tighten up the security of Income tax E-Filing website.

4. Government should create awareness about Information Technology Act.

Although these CA students has committed a crime by violating Information Technology Act but the same is been done just out of curiosity and due to lack of awareness of the Information Technology Act. But being a citizen of India it is expected from us to be aware of the law of country so students are requested and cautioned to be more aware and vigilant.

Lets hope that department will take a lesson from the recent hacking incidents and will further tighten up the security of Income Tax e-filing accounts.

CBDT Notifies Rules For General Anti Avoidance Rules (GAAR)

Vide Notification dated 23.09.2013 issued by the CBDT, Rules 10U to 10UC have been inserted in the Income-tax Rules, 1962 to provide for the entire procedure for monitoring the General Anti Avoidance Rules (GAAR). The relevant forms have also been notified. The said Rules will come into effect on 1st April 2016.——————————

Notification No. 75/2013, Date – 23^th September, 2013

S.O. 2887(E).- In exercise of the powers conferred by sections 101 and144BA 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 (17th Amendment) Rules, 2013.

(2) They shall come into force on the 1st day of April, 2016.

2. In the Income-tax Rules, 1962, –

(a) after rule 10T, the following rules shall be inserted, namely: -

“DA. Application of General Anti Avoidance Rule

Chapter X-A not to apply in certain cases

10U. (1) The provisions of Chapter X-A shall not apply to -

(a) an arrangement where the tax benefit in the relevant assessment year arising, in aggregate, to all the parties to the arrangement does not exceed a sum of rupees three crore;

(b) a Foreign Institutional Investor, –

(i) who is an assessee under the Act;

(ii) who has not taken benefit of an agreement referred to in section 90 or section 90A as the case may be; and

(iii) who has invested in listed securities, or unlisted securities, with the prior permission of the competent authority, in accordance with the Securities and Exchange Board of India (Foreign Institutional Investor) Regulations, 1995 and such other regulations as may be applicable, in relation to such investments;

(c) a person, being a non-resident, in relation to investment made by him by way of offshore derivative instruments or otherwise, directly or indirectly , in a Foreign Institutional Investor;

(d) any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person from transfer of investments made before the 30th day of August, 2010 by such person.

(2) Without prejudice to the provisions of clause (d) of sub-rule (1), the provisions of Chapter X-A shall apply to any arrangement, irrespective of the date on which it has been entered into, in respect of the tax benefit obtained from the arrangement on or after the 1st. day of April, 2015.

(3) For the purposes of this rule, -

(i) “Foreign Institutional Investor” shall have the same meaning as assigned to it in the Explanation to section 115AD;

(ii) “off shore derivative instrument” shall have the same meaning as assigned to it in the Securities and Exchange Board of India ( Foreign Institutional Investor) Regulations, 1995 issued under Securities and Exchange Board of India Act, 1992 (15 of 1992) ;

(iii) “Securities and Exchange Board of India” shall have the same meaning as assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(iv) “tax benefit” as defined in clause (10) of section 102 and computed in accordance with Chapter X-A shall be with reference to-

(a) sub-clauses (a) to (e) of the said clause , the amount of tax; and

(b) sub-clause (f) of the said clause, the tax that would have been chargeable had the increase in loss referred to therein been the total income.

Determination of consequences of impermissible avoidance arrangement.

10UA . For the purposes of sub-section (1) of section 98, where a part of an arrangement is declared to be an impermissible avoidance arrangement, the consequences in relation to tax shall be determined with reference to such part only.

Notice, Forms for reference under section 144BA

10UB. (1)For the purposes of sub-section (1) of section 144BA, the Assessing Officer shall, before making a reference to the Commissioner, issue a notice in writing to the assessee seeking objections, if any, to the applicability of provisions of Chapter X-A in his case.

(2) The notice referred to in sub-rule (1) shall contain the following: -

(i) details of the arrangement to which the provisions of Chapter X-A-A are proposed to be applied;

(ii) the tax benefit arising under the arrangement;

(iii) the basis and reason for considering that the main purpose of the identified arrangement is to obtain tax benefit;

(iv) the basis and the reasons why the arrangement satisfies the condition provided in clause (a), (b), (c) or (d) of sub-section (1) of section 96; and

(v) the list of documents and evidence relied upon in respect of (iii) and (iv) above.

(3) The reference by the Assessing Officer to the Commissioner under sub-section (1) of section 144BA shall be in Form No.3CEG.

(4) Where the Commissioner is satisfied that the provisions of Chapter X-A are not required to be invoked with reference to an arrangement after considering –

(i) the reference received from the Assessing Officer under sub-section (1) of section 144BA; or

(ii) the reply of the assessee in response to the notice issued under sub-section (2) of section 144BA, he shall issue directions to the Assessing Officer in Form No. 3CEH.

(5) Before a reference is made by the Commissioner to the Approving Panel under sub-section (4) of section 144BA, he shall record his satisfaction regarding the applicability of the provisions of Chapter X-A in Form No. 3CEI and enclose the same with the reference.

Time limits.

10UC. (1)For the purposes of section 144BA,–

(i) no directions under sub-section (3) of section 144BA shall be issued by the Commissioner after the expiry of one month from the end of the month in which the date of compliance of the notice issued under sub-section (2) of section 144BA falls;

(ii) no reference shall be made by the Commissioner to the Approving Panel under sub-section (4) of section 144BA after the expiry of two months from the end of the month in which the final submission of the assessee in response to the notice issued under the sub- section(2) of section 144BA is received;

(iii) the Commissioner shall issue directions to the assessing officer in Form No.3CEH, -

(a) in the case referred to in clause (i) of sub-rule (4) of rule 10UB, within a period of one month from the end of month in which the reference is received by him; and

(b) in the case referred to in clause (ii) of sub-rule (4) of rule 10UB, within a period of two months from the end of month in which the final submission of the assessee in response to the notice issued under sub-section (2) of section 144BA is received by him.”;

(b) in Appendix-II, after Form No. 3CEF, the following Forms shall be inserted, namely:-

“FORM NO. 3CEG

[See sub-rule (3) of rule 10UB]

Form for making the reference to the Commissioner by the Assessing Officer u/s 144BA(1)

1	Name and address of the assessee
2	PAN
3	Status ( Individual/ Company etc)
4	Residential status
5	Assessment year(s) in respect of which the proceedings under section 144BA are proposed to be invoked a) Assessment years for which proceedings are pending (b) Other assessment years proposed to be covered
6	Factual matrix of the arrangement entered into by the assessee including details of other parties.
7	Details of tax benefit (assessment year wise) arising under the arrangement: -(i) to the assessee (ii) to all parties to the arrangement
7
8	Brief facts in respect of computation of tax benefit
9	Whether obtaining the tax benefit is the main purpose of the arrangement or part of the arrangement?
10	Whether notice under sub-rule (1) of rule 10UB has been served on the assessee , if yes date of service of the notice .
11	Summary of the reply of the assessee in response to the notice.
12	Indicate which of the following conditions is satisfied by the arrangement (along with basis of such conclusion).(a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm’s length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in manner, which are not ordinarily employed for bonafide purposes.

13	Brief reasons for seeking declaration of the arrangement as impermissible avoidance arrangement.
14	Consequences in relation to tax likely to arise if the arrangement is declared as an impermissible avoidance arrangement
15	The last date for completion of assessment or reassessment proceedings.

Date:
Name and Designation ofAssessing Officer
Place:
1. Commissioner of Income-tax

FORM NO.3CEH

[See sub-rule (4) of rule 10UB]

Form for returning the reference made under section 144BA

1	Name and address of the assessee
2	PAN
3	Status ( Individual/ Company etc)
4	Residential status
5	Assessment year(s) in respect of which the proceedings under section 144BA were proposed to be invoked.
6	Date of receipt of reference in Form No. 3CEG from the Assessing Officer.
7	The basis of finding that Chapter X-A is not applicable for assessment year (s).

Date:
Name & Designation of Commissioner
Place:
1. Assessing Officer
2. Assessee

FORM NO.3CEI

[See sub-rule (5) of rule 10UB]

Form for recording the satisfaction by the Commissioner before making a reference to the Approving Panel under sub-section (4) of section 144BA

1	Name and address of the assessee
2	PAN
3	Status ( Individual/ Company etc)
4	Residential status
5	Assessment year(s) in respect of which the proceedings under section 144BA are proposed to be invoked a) Assessment years for which proceedings are pending (b) Other assessment years proposed to be covered
6	Date of receipt of Form No.3CEG from the Assessing Officer.
7	Date of issuance of notice, setting out reasons, by the CIT to the assessee under sub-section (2) of section 144BA (copy thereof to be enclosed)
8	Date of receipt of final submission from the assessee and dates of hearing provided to the assessee (copy of final submission of the assessee to be enclosed).
9	Factual matrix of the arrangement in respect of which the reference is being made.
10	Details of tax benefit (assessment year wise) arising under the arrangement: – (i) to the assessee (ii) to all parties to the arrangement
11	Brief facts in respect of computation of tax benefit
12	Whether obtaining the tax benefit is the main purpose of the arrangement or the part of the arrangement?
13	Indicate which of the following conditions is satisfied by the arrangement (along with basis of such conclusion).(a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm’s length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in manner, which are not ordinarily employed for bonafide purposes.
14	Has the assessee been given an opportunity of being heard with regard to the findings given in columns 11, 12 and 13 ? If yes, provide the gist of the reply furnished by the assessee.
15	Detailed reasons for being satisfied that the arrangement is an impermissible avoidance arrangement.
16	Consequences in relation to tax likely to arise if arrangement is declared as an impermissible avoidance arrangement.
17	The last date for completion of assessment or reassessment proceedings.

Date:
Name and Designation of Commissioner ” .
Place:

F. No.142/19/2013-TPL

(Amit Katoch)
Under Secretary to the Government of India

Note. – The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by Income-tax (16th Amendment) Rules, 2013 vide notification number S.O. 2810 (E) dated 18-09-2013.

Tax Audit Report date Extension – No Extension in Real Sense

CA Sandeep Kanoi

CBDT has vide its order dated 26.09.2013 has extended the due date for e-filing of Tax Audit Report to 31.10.2013. The order has nowhere mentioned about the due date for e-filing of Income tax Return (ITR). It seems due date for filing of ITR are been kept same. If Assessee do not file the ITR on or before 30^th September 2013 he may have the following implications:-

He may have to pay Interest U/s. 234A on taxes outstanding.
Losses if any may not be allowed to be carried forward
Assessee also have to Pay Statutory dues U/s. 43B on or before the filing of ITR or Due Date i.e. 30.09.2013 whichever is earlier.
Those who filing there ITR on or before the due date i.e. 30.09.2013 will have to file Tax Audit Report either manually or electronically before 30.09.2013. If taxpayer has filed manually then he have to file the same electronically also on or before 31.10.2013.

CA Sudhir Halakhandi says that “The date extension notification is no relief at all , Professionals have wasted lot of time in faulty process of e-filing and now left with very little time to complete rest of the audits to produce the audit report to AO before 30-09-2013. ICAI should come forward to resolve the problem. “

As there in no print facility in Audit Report utility, now within 4 days Tax Professionals need to prepare the audit reports in manual formats ignoring, the time wasted in preparing audit report electronically, print it and submit at respective jurisdiction offices in long line of persons trying to submit it and then upload the return (ITR) and all these on or before 30th September 2013.

In True Terms for Tax Professional as evident from Order there is no extension for ITR or Tax Audit Report. The only thing is if Assesssee faces any problem in Tax Audit Report online upload he may file the Tax Audit Report First Manually by 30.09.2013 and then electronically by 31.10.2013
Order has created a lots of confusion by not specifying regarding ITR and CBDT needs to immediately clarify its stand on ITR filing.
Press Release by Ministry of Finance Dated 26.09.2013
Time for Furnishing the Report of Audit Electronically Extended till October 31, 2013.

It has come to the notice of the Central Board of Direct Taxes (CBDT) that many assessees who are required to file their income tax returns by September 30, 2013 are finding it difficult to upload the report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessment Year 2013-14. Therefore, the CBDT has decided to extend the time for furnishing the report of Audit electronically till October 31, 2013. However, the assessees are required to file the report of Audit manually with the jurisdictional Assessing Officer by the prescribed due date, i.e. September 30, 2013. The assessees are also required to file their returns of income electronically by the prescribed due date, i.e. September 30, 2013.

Tax audit report due date for e-filing extended to 31.10.2013

F.No. 225/117/2013/ITA.II

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated- 26th September, 2013

Order under Section 119 of the Income-tax Act. 1961.

CBDT in exercise of power under sec 119(2)(a) of the IT Act, 1961 read with Sec 139 and Rule 12, has decided to relax the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessment Year 2013-14 as under

(a) The assesses, who are presently finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date.

(b) The said Report of Audit should however be furnished electronically on or before 31.10.2013.
Rohit Garg
Deputy-Secretary to Government of India
Download Official Copy of The Notification
Official link to the Notification :- http://incometaxindia.gov.in/archive/BreakingNews_Order119_ITAct_26092013.pdf

Also Read Our Analysis – Tax Audit Report date Extension – No Extension in Real Sense

E-Filing of Tax Audit Report – Needs immediate Date Extension

CA Sudhir Halakhandi

Please Announce the Date Extension Immediately

The 12^th Version of the E-filing utility was introduced yesterday, the site was closed for two hours for maintenance the day before, all the software were not working for want of updation and the professionals are working very hard round the clock but this is a race “against the time”.

There are solid reasons for extension of date and practically there is no need to explain these reasons and the problems faced by the professionals this year.

Why there is so much delay in announcing the extension of date for filing of audit report?

Individually in every case one has the reasonable cause for delay in filing the audit report and causes are self explanatory as mentioned above but it will create a chaos – Section 271B read with section 273B of the Income Tax Act 1961.

It is already late hence there should be a prudent action from the concerned authorities to extend the date immediately without any further delay.

TDS Return – Challan Deposit date can pertain to immediate previous Financial Year

Circular No: NSDL/TIN/2013/020 September 24, 2013

Subject: Release of File Validation Utility (FVU) version 4.0 and 2.136 for e-TDS/TCS Statements.

All TIN Facilitation Centers (TIN-FCs) are hereby informed that the following new versions of File Validation Utility (FVU) are being released.

1. FVU version 4.0 – For Statements pertaining to FY 2010-11 onwards.

2. FVU version 2.136 – For Statements pertaining to FY 2007-08 to FY 2009-10.

These two FVU versions are mandatory with effect from October 1, 2013. Statements validated with FVU version lower than 4.0 and 2.136 will be rejected at TIN Central System from October 1, 2013.

The said FVU versions are being provided through MIS response file for updating the same in the Statement Acceptance Module (SAM) at TIN-FCs.

TDS/TCS Statements validated with FVU version 3.9 and 2.135 will be permitted to be imported in SAM till September 30, 2013 and thereafter, Statements validated with FVU version 4.0 and 2.136 will only be accepted from SAM.

The features of FVU version 4.0 and 2.136 are as below:

1. Enhancement of validations pertaining to Section 194LC: (Income by way of interest from specified company payable to non-resident)

1.1 Section code 194LC will be allowed only in the TDS Statements where category of deductor is “Company” or “Branch of Company”.

1.2 This validation is applicable for regular Statements as well as the following type of correction Statements:

a) C2 – Update deductor details (excluding TAN) and/or challan details.

b) C3 – Update deductor details (excluding TAN) and/or challan details and/or deductee details.

c) C9 – Addition of challan and its underlying deductees.

2. Incorporation of new section code 194LD: (Interest on Rupee denominated bond of Company or Government Securities)

2.1 This Section code will be applicable for Form 27Q – Regular and Correction TDS Statements pertaining to FY 2013-14 onwards.

3. Nil challans in TDS/TCS Statements will be permitted only with deductee records:

Validation as below has been incorporated:

3.1 It is mandatory that deductee records must be provided for NIL challans (i.e. Challans where in Tax deposit amount is NIL) in the TDS/TCS Statements.

3.2 The deductee records pertaining to NIL challans should mandatorily have any of the values “A”/“B”/“Y”/“S”/“T”/“Z” in the field ‘Remarks for lower or non-deduction’.

3.3 The said validation is applicable for regular Statements as well as the following type of correction Statements:

a) C3 – Addition and update of deductee details (excluding TAN) and/or challan details.

b) C9 – Addition of challan and its underlying deductees.

4. Last Token Number to be quoted in TDS/TCS Regular Statement: A new field has been incorporated in the Quarterly TDS/TCS Regular Statement for providing the 15 digit Token Number of the last accepted Statement (i.e. In case of Regular Statement ‘accepted by TIN’ or in case of Correction Statement ‘Accepted at CPC’). This field is mandatory.

5. Date of deposit of Challan: The existing validation that the date of deposit of challan should pertain to the Financial Year for which the Statement is being filed is being modified.

Revised validation is as under:

5.1 Challan Deposit date can pertain to the immediate previous Financial Year.

Example: If the TDS/TCS Statement is pertaining to FY 2013-14 then “Date of deposit” can be greater than or equal to 01/04/2012.

5.2 Future date is not permitted.

FVU version 4.0 for quarterly e-TDS/TCS statement pertaining to FY 2010-11 onwards

Key feature of FVU version 4.0

FVU for quarterly e-TDS/TCS statement pertaining to FY 2010-11 onwards

• Change in validation of Section code 194LC:

o Section code 194LC will be applicable only for deductor category (as per the statement) “Company” and “Branch of Company”.

o This validation will apply for regular and correction statements.

• Incorporation of new section code 194LD: This Section code will be applicable for:

o Regular and correction statements pertaining to FY 2013-14 and onwards.

o Statement pertaining to Form no. 27Q.

• Nil challans/transfer vouchers with deductee record: Validation as below will be applicable:

o Nil challans/transfer vouchers need to mandatorily have deductee records.

o In deductee records, flag in the remarks for lower or non-deduction should be “A”, “B”, “Y”, “S”, “T” or “Z” (as applicable).

o This validation will apply for regular and correction statements.

• Last provisional receipt number to be quoted in regular TDS/TCS statements: Deductors are require to mandatorily quote the last accepted provisional receipt number of the regular quarterly TDS/TCS statement.

• Date of deposit of Non-nil Challan: Validation for Date of deposit of non-nil challan has been relaxed. This date can pertain to immediate previous financial year of the statement.

• FVU version 3.9 and 4.0 are applicable upto September 30, 2013. Further, FVU version 4.0 would be mandatory from October 01, 2013.

Download FVU 4.0 for quarterly e-TDS/TCS statement pertaining to FY 2010-11 onwards

Revised Form for obtaining advance ruling U/s. 245Q(1)

Notification No. 76/2013, Dated- 24^th September, 2013

In exercise of the powers conferred by section 245Q 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 (18th Amendment) Rules, 2013.

(2) They shall come into force on the 1st day of April, 2015.

2. In the Income-tax Rules, 1962,-

(i) in rule 44(E), in sub-rule (1), after item (c), the following item shall be inserted, namely.-

“(d) in Form No. 34EA, in respect of an applicant referred to in sub-clause (iiia) of clause (b) of section 245N of the Act.”;

(ii) in Appendix-II, after the No. 34E, the following Form shall be inserted, namely:-

“FORM No. 34EA

[See rule 44E]

Form of application for obtaining an advance ruling under section 245Q (1) of the Income-tax Act, 1961

(PLEASE READ THE NOTES CAREFULLY BEFORE FILLING THIS FORM)

BEFORE THE AUTHORITY FOR ADVANCE RULINGS

Application No. _________ of __________

1. Full name and address of the applicant

2. Telephone, Fax No. and e-mail

3. Status (Individual/Company, etc.)

4. Resident or non-resident in India

5. Country of which he is resident (in case of non-resident in India)

6. Basis of claim for being a non-resident

7. The Commissioner having jurisdiction over the applicant (only in the case of existing assessees)

8. Permanent Account Number, if any

9. Details of the arrangement to be undertaken by the applicant on which determination or decision of the authority is required

(i) brief description of the arrangement

(ii) purpose or purposes of the arrangement

(iii) details of the other parties to the arrangement in following format

S. No.	Name of the other party(ies) to the arrangement	Whether resident in India	PAN	Role of such party in Arrangement	Relationship with other party(ies) to the arrangement	Tax benefit arising to the other party(ies), if any
(1)	(2)	(3)	(4)	(5)	(6)	(7)

10. The tax benefit which is likely to arise out of arrangement, if undertaken.

11. Assessment year or years during which the tax benefit as indicated in item No.10 is likely to arise. (give year-wise breakup)

12. Question(s) relating to the proposed arrangement on which the advance ruling is required.

13. Statement of the relevant facts having a bearing on the item No.12.

14. Statement containing the applicant’s interpretation of law or facts, as the case may be, in respect of the aforesaid arrangement.

15. List of documents or statements attached

16. Particulars of account payee demand draft accompanying the application

17. Name and address of authorised representative in India, if any.

________________
Signed
(Applicant)

Verification

I, _____________________________________________________________________ son/daughter/wife [name in full and in block letters] of _______________________ do hereby solemnly declare that to the best of my knowledge and belief what is stated above and in the annexure(s), including the documents accompanying such annexure(s), is correct and complete. I further declare that I am making this application in my capacity as ________________ and that I am competent to make this application and verify it. (designation)

I also declare that the question on which the advance ruling is required is not pending in my case before any income-tax authority, the Appellate Tribunal or any court.

Verified today the _____________ day of ______________
Place __________

__________________
Signed
(Applicant)

Notes: 1. The application shall be filled in English or Hindi in quadruplicate.

2. The number and year of receipt of the application will be filled in the office of the Authority for Advance Rulings.

3. If the space provided for answering any item in the application is found insufficient, separate enclosures may be used for the purpose. These should be signed by the applicant.

4. The application shall be accompanied by an account payee demand draft of ten thousand Indian rupees drawn in favour of Authority for Advance Rulings, payable at New Delhi. Particulars of the draft should be given in reply to item No. 16.

5. In reply to item No. 4, if the applicant is a company, association of persons or Hindu undivided family, etc., the country of residence thereof is to be given and not of the individual who is filing the application on behalf of such person.

6. In reply to item No. 5, the applicant must state whether he/it is an individual, Hindu undivided family, firm, association of persons or company.

7. For item No 6, the reply shall be given in the context of the provisions regarding ‘residence’ in India as contained in section 6 of the Income-tax Act. The position in this regard is as follows:

An individual is said to be ‘resident’ in any financial year, if he has been in India during that year:

- for a period or periods of 182 days or more; or

- for a period or periods of 60 days or more and has also been in India within the preceding four years for a period or periods of 365 days or more.

However, the period of 60 days is increased to 182 days in the case of a citizen of India or a person of Indian origin who has been outside India and comes on a visit to India, a citizen of India who leaves
India for purposes of employment outside India, or as a member of the crew of an Indian ship.

An association of persons or a Hindu undivided family is resident in India in every case except where the control and management of its affairs is situated wholly outside India.

A company is resident in India, if it is an Indian company or the control and management of its affairs is situated wholly in India.

A person who is not resident in India as above, is non-resident in India.

8. Regarding item No.12, the question(s) should be based on actual or proposed arrangements. Hypothetical questions shall not be entertained.

9. In respect of item No. 13, in Annexure I, the applicant shall state in detail the relevant facts and also disclose the nature of his business or profession and the likely date and purpose of the proposed arrangement(s). Relevant facts reflected in documents submitted along with the application shall be included in the statement of facts and not merely incorporated by reference.

10. For item No.14, in Annexure II, the applicant shall clearly state his interpretation of law or facts in respect of the question(s) on which the advance ruling has been sought.

11. The application, the verification appended thereto, the annexures to the application and the statements and documents accompanying the annexures, shall be signed,-

(a) in the case of an individual,-

(i) by the individual himself, and

(ii) where, for any unavoidable reason, it is not possible for the individual to sign the application, by any person duly authorised by him in this behalf:

Provided that in a case referred to in sub-clause (ii), the person signing the application holds a valid power of attorney from the individual to do so, which shall be attached to the application;

(b) in the case of a Hindu undivided family,-

(i) by the karta thereof, and

(ii) where, for any unavoidable reason, it is not possible for the karta to sign the application, by any other adult member of such family;

(i) by the Managing Director thereof, or where for any unavoidable reason such Managing Director is not able to sign and verify the application, or where there is no Managing Director, by any Director thereof;

(ii) where, for any unavoidable reason, it is not possible for the Managing Director or the Director to sign the application, by any person duly authorised by the company in this behalf: Provided that in the case referred to in sub-clause (ii), the person signing the application holds a valid power of attorney from the company to do so, which shall be attached to the application;

(d) in the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the application, or where there is no managing partner as such, by any partner thereof, not being a minor;

(e) in the case of an association of persons, by any member of the association or the principal officer thereof; and

(f) in the case of any other person, by that person or by some person competent to act on his behalf.

ANNEXURE I

Statement of the relevant facts having a bearing on the

question(s) on which the advance ruling is required

____________________________________

Place _____________ _______________
Date _____________

Signed
(Applicant)

ANNEXURE II

Statement containing the applicant’s interpretation of law or facts,
as the case may be, in respect of the question(s) on which advance ruling is required
____________________________________
____________________________________

Place _____________ _______________
Date _____________

Signed
(Applicant)”.

F.No.142/19/2013-TPL

(Amit Katoch)
Under Secretary to the Government of India

Tax Audit Due Date Extension – Still a Mystery

It is learnt from one of the Central Council member of ICAI that While the representations for extension of due date for tax audit reports are going on but no positive response yet been given by the Ministry of Finance or CBDT.

It is further stated by him that revenue has taken the stand that since the problems faced by members are with respect to uploading, therefore, only the date of uploading report may be extended and date of report may not get extended.

But we are yet to understand do CBDT want to extend only the due date for upload of Tax Audit Report or ITR also. Further it seems ICAI not been able to represent or strongly represents the facts before the Ministry. As issue is not only the Difficulty in furnishing tax Audit Report but also the following :-

1. First Time Introduction of Online Tax Audit Report as well as other Audit Reports.

2. Late Release of ITR and then Frequent Revision.

3. Increased workload due to first time introduction of Online Tax Audit Utilities.Lets hope good sense prevails and Government Extend the due date for Filing of Tax Audit Report as well as ITR in audit cases to address the problem faced by lakhs of taxpayers and tax Professionals.Also Read :-

Procedure to Track Non-Filers of Income-tax Returns

Instruction No. 14/2013, Dated – 23rd of September, 2013

Subject: Standard Operating Procedure for cases under Non-filers Monitoring System (‘NMS’)-regarding

The existing procedure for monitoring cases of ‘Non-Filers of IT Returns’ as identified by Director General of Income, Tax (System) has been examined by the Board. It is felt that at present, cases of non-filers are not being uniformly monitored by the Assessing Officers due to lack of consistency in approach in dealing with such cases. Therefore, in order to streamline processing of such cases and to ensure consistency in monitoring NMS cases by the Assessing Officers, the Board, hereby lays down the following Standard Operating Procedure: 1. The Assessing Officer should issue letter to the assessee within 15 days of the case being assigned in MS, seeking information about the return of income flagged in NMS. Facility to generate letter has been provided in the NMS module of i-taxnet.

2. If the letter s delivered, the Assessing Officer should capture the delivery date in the NMS module.

3. If the letter is not delivered, the Assessing Officer should issue letter to the alternate address of the assesse available in the Online Monitoring System or any other address available with the Assessing Officer through field enquiries or otherwise. All addresses used in IT Return, AIR, CIB databases have been made available to the Assessing Officer in the online monitoring System to assist the field formations in identification of current address of the taxpayer.

4. If the return is received, the assessing officer should capture the details in AST within 15 days of filing the return. If the assessee informs that paper return has already been filed which was not captured in AST, the details of return should he entered in the AST within 15 days of receiving such information. E-filed returns will he automatically pushed to NMS.

5. If no return is required to be filed in the case (non resident etc.), the Assessing Officer should mark “No return is required” and mention reason for the same in NMS which needs to be confirmed by Range head.

6. If the Assessing Officer is not able to serve the letter and identify the taxpayer, assessing officer should mark the assessee “Assessee not traceable” in NMS which needs to be confirmed by Range head.

7. In cases where the assesse has been identified and no return has been filed within 30 days of the time given in the letter, the Assessing Officer should consider initiation of proceedings u/s 142(1)/ 148 in AST.

8.The cases will be processed every week by the Directorate of Systems and will be marked as closed in MS if one of the following actions are taken for A.Yr.’s 2010-11, 2011-12 and 2012-13:

a) Details of return are available in AST

b) Notice u/s 142(1) or 148 has been issued in AST

c) “No return is required” is marked by the Assessing Officer and confirmed by Range head.

I am further directed to state that the above be brought to notice of all officers working under your jurisdiction for necessary and strict compliance.

F.No. 225/153/2013/ITA.II

(Rohit Garg)

Deputy Secretary Government of India

Arrest for Drinking cutting tea suspiciously not lawful – HC

A well-known area of Kolhapur, Rajarampuri lies just to the north-west of Shivaji University. The Ring Road runs past the Rajarampuri Police Station. At around 11 am on the morning of 22nd February 2013, the Petitioner was, or so he says, having tea at a road-side tea stall not far from the rear entrance to Shivaji University. The 4th Respondent, the Sub-Inspector from the Rajarampuri Police Station, was on patrol in the area, along with his junior officers. They asked the Petitioner what he was doing. Mr Joshi, Learned Advocate for the Petitioner, submits that the answer is one that ought to have suggested itself. Yet the police found his conduct suspicious. The Petitioner was arrested, the police invoking their powers under Section 151 of the Code of Criminal Procedure, 1973 (“CrPC”).

Held – We were unaware that the law required anyone to give an explanation for having tea, whether in the morning, noon or night. One might take tea in a variety of ways, not all of them always elegant or delicate, some of them perhaps even noisy. But we know of no way to drink tea ‘suspiciously’. The ingestion of a cup that cheers demands no explanation. And while cutting chai is permissible, now even fashionable, cutting corners with the law is not.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL WRIT PETITION NO.1627 OF

Vijay Lahu Patil

versus

The State of Maharashtra

Date : 6th September 2013

JUDGMENT : (Per G.S. Patel, J.)

1. Rule. Respondents waive service. By consent, rule made returnable forthwith and called for final disposal.

2. A well-known area of Kolhapur, Rajarampuri lies just to the north-west of Shivaji University. The Ring Road runs past the Rajarampuri Police Station. At around 11 am on the morning of 22nd February 2013, the Petitioner was, or so he says, having tea at a road-side tea stall not far from the rear entrance to Shivaji University. The 4th Respondent, the Sub-Inspector from the Rajarampuri Police Station, was on patrol in the area, along with his junior officers. They asked the Petitioner what he was doing. Mr Joshi, Learned Advocate for the Petitioner, submits that the answer is one that ought to have suggested itself. Yet the police found his conduct suspicious. The Petitioner was arrested, the police invoking their powers under Section 151 of the Code of Criminal Procedure, 1973 (“CrPC”).

3. Following the Petitioner’s arrest, the 4th Respondent made a proposal to the 2nd Respondent, the Special Executive Magistrate, that a good-behaviour bond be taken from the Petitioner under Section 116 of the CrPC. The Magistrate ordered the execution of a bond of Rs.4,000. The Petitioner complied. His statement was recorded. He was asked whether he had understood the order made under Section 111 of the CrPC. On his application, a copy of the Station Diary was made available to him.

4. The Petitioner says his arrest was at 11 o’clock in the morning, but the Station Diary puts the time of arrest at 3:30 pm. It is on this basis that he mounts his claim for damages for illegal detention, but that, in our view, is a subsidiary matter. The impugned orders under the CrPC present far more fundamental problems.

5. Mr. Saste, Learned APP, invited attention to the annexures to the Affidavit in Reply filed by the 4th Respondent to suggest that the Petitioner is a hardened criminal, habitually given to criminal activity. He has a very large number of cognizable criminal cases registered against him. The local police were, he submits, therefore justified in acting as they did and apprehending the Petitioner before he committed yet another, a matter that seemed to them imminent at the time, there being no other way of preventing the likely crime. This, after all, he says, is the very purpose of Section 151 of CrPC. Once that was done, Mr. Saste argues, proceedings under Section 107 of the CrPC, requiring security from the Petitioner for keeping the peace, were the next logical and inevitable step. There is, in Mr. Saste’s submission, no merit at all in the Petition; the impugned actions are faultless.

6. Mr. Joshi, Learned Advocate for the Petitioners, disagrees. So do we. There seems to be very little justification for the impugned orders or even for taking the view the police claim they did. Why exactly his behaviour was thought to be suspicious, we are not told. We are only told that he has a very long line of criminal cases. A list of these is annexed to the Affidavit in Reply. It shows that all the cases, some 113 of them, are under the Gambling Act, with but one invoking other provisions of the Arms Act and the Indian Penal Code. This tabulation makes for interesting reading though not, alas, to the benefit of Mr. Saste’s submissions. It shows that in a substantial number of cases, the Petitioner has been acquitted. In other cases, trials are pending. Between them, there is not a single conviction, though even that would not have been justification enough. Of the 113 cases tabulated, fully 108 are outside the jurisdiction of the Rajarampuri Police Station. In his Affidavit in Reply, the 4th Respondent claims that the other offences were committed just outside the Rajarampuri Police Station’s jurisdiction. To show that the Petitioner is a habitual offender, the 4th Respondent refers to a subsequent case (of March 2013). We do not see how this can possibly assist the Respondents. The 4th Respondent maintains that the Petitioner is a repeat offender and that his acquittals are on what the 4th Respondent calls ‘technicalities’, such as witnesses turning hostile. Mr. Joshi is justified in contending that the unavailability of witnesses or their refusal to give evidence against the accused is not a mere technicality; and, in any event, this is wholly irrelevant.

7. What is not in doubt, however, is that the only thing the Petitioner was doing in the late morning of 22nd February 2013 was having tea at a local tea-stall. The 4th Respondent says there is no ‘satisfactory explanation’ for this. This is bewildering. We were unaware that the law required anyone to give an explanation for having tea, whether in the morning, noon or night. One might take tea in a variety of ways, not all of them always elegant or delicate, some of them perhaps even noisy. But we know of no way to drink tea ‘suspiciously’. The ingestion of a cup that cheers demands no explanation. And while cutting chai is permissible, now even fashionable, cutting corners with the law is not.

8. Sections 107 and 151 of the CrPC are, in terms, preventive, not punitive. Embedded in Section 151 are conditions that must be met for its invocation. A police officer may effect an arrest without a Magistrate’s order and without a warrant only where he learns that the arrested person is imminently likely to commit a cognizable offence. He must, in addition, be satisfied that the impending crime cannot otherwise be prevented. This means that the record must reflect a subjective satisfaction as to all these requirements. Where these conditions are not met, there is a violation of a person’s fundamental rights under Articles 21 and 22 of the Constitution of India. Similarly, a Magistrate’s jurisdiction under Section 107 is to be exercised only in an emergent situation.1

9. Beyond saying that the Petitioner had no explanation for being at the tea stall, we find nothing in the 4th Respondent’s Affidavit in Reply. This, in our view, is insufficient compliance with the mandate of Section 151. The Petitioner’s past history of criminal cases is equally irrelevant, since it cannot possibly lead to any conclusion of imminent criminal activity. We note that the cases listed by the 4th Respondent go back as far as 1998. There is no subjective satisfaction noted by the 4th Respondent or the 2nd Respondent on material that lends itself to any objective test.

10. The Respondents seems also to have misunderstood the frame of Chapter VIII of the CrPC. Sections 107 to 110 allow an Executive Magistrate to issue a show cause notice to such persons and under such conditions as are set out in those sections. Before any such show cause is issued, there must be an order under Section 110, for Sections 107 to 110 all say that the show cause notice must be issued “in the manner hereinafter provided”. Then follow the sections that provide for service of the show cause notice and the summons or warrant, an enquiry and a final order under Section 117. This is, therefore, a five-step process: an order under Section 110, followed by a show cause notice under Sections 107 to 110, then the procedure under Sections 112 to 115, an enquiry under Section 116 and, finally, an order under Section 117. That an order under Section 111 is a condition precedent to the issuance of a show cause notice under Sections 107 to 110 is now well-settled.2 This is for good reason. The order under Section 111 is an important safeguard, one of a web of checks and balances, against the potential abuse of powers under Section 107 to 110. The show cause notice, to be effective, must be something more than a mere suggestion received; hence the words “in the manner hereinafter provided”. Any other interpretation ends in a logical fallacy: if the order under Section 111 is to follow the show cause notices under Sections 107 to 110, then the provisions of Setion 116 and 117 would be entirely otiose. This is evidently incorrect. Section 110 is the brake-release that sets the train of Sections 107 to 110 in motion. That train then passes through the stations of Sections 112 to 115 and the enquiry under Section 116 before reaching its terminus in Section 117.

11. Mr. Joshi is correct when he says that in the present case there is only the combined proposal under Sections 151 and 107 of the CrPC followed straightaway by the order under Section 111. No opportunity seems to have been given to the Petitioner to show cause. The entire procedure under Chapter VIII has been inverted, the cart being put very firmly before the horse.

12. Mr. Joshi is also justified in contending that the entire process is unlawful. Previous acquittals cannot be brushed aside like this. This itself is a ground for relief and, at the very least, shows a complete non-application of mind, if not a colourable exercise of power, particularly when the previous cases referred to by the Respondents are of some considerable historicity.3

13. There remains the question of the Petitioner’s claim for compensation for illegal detention. Having regard to the decision of the Supreme Court in Rajinder Singh Pathania,4 we are not inclined to grant this relief.

14. The Petition succeeds in part. Rule is made absolute in terms of prayer clause (a), which reads thus:

“(a) The Hon’ble Court may be pleased to issue an appropriate writ/direction and may be pleased to call for the records and proceedings of the initiated u/s. 151 of the Code of Criminal Procedure, 1973 against the Petitioner and after examining their validity may be pleased to quash and set aside the proceedings u/s. 151 of The Code of Criminal Procedure, 1973 against the Petitioner.”

(G.S. Patel, J.) (S.C. Dharmadhikari, J.)

————————

1 Rajinder Singh Pathania & Ors. v State (NCT of Delhi) & Ors., (2011) 13 SCC 329, paras 17 and 18

2 Dattaram Krishna Pedamkar v State of Maharashtra & Anr., 2009 (3) Mah.L.J. (Cri) 47; Vasantkumar Jivrambhai Majithia v State of Maharashtra & Anr., 2005 All MR (Cri) 2951; Riyasat Shaukat Ali Shaikh v State of Maharashtra & Anr., Criminal Writ Petition No.3039 of 2013, decision dated 3rd September 2013.

3 Abdul Razzak Nannekhan Pathan v Police Commissioner, Ahmedabad & Anr., (1989) 4 SCC 43; Ayub alias Pappukhan Nawabkhan Pathan v S.N. Sinha & Anr., (1990) 4 SCC 552; Dinesh Vitthal Patil & Anr v State of Maharashtra & Ors., 2012 All MR (Cri) 3582
4 Supra

Issue Tax refund for AY 2011-12 without further delay – CBDT

F.No. 380/112013-IT(B) .

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, the 20th September, 2013

All the CCslT (CCA)

Sir/Madam,

Subject: Central Action Plan for F.Y. 2013-14-Pending Refunds for AY 2011-12-reg.

It is seen from the data available on AST that refunds for AY 2011-12 are pending. These need to be issued at the earliest. The same had been conveyed during the last Video Conference on 23.08.2013, but the progress so far has been tardy.

2. I have been directed to request you to take necessary action and direct the Assessing Officers to issue the refunds for AY 2011-12 without further delay. I am also directed to request you to personally monitor. the progress in the above respect and send a report on the matter by 15.10.2013 with reasons for non-issue of refunds., if any.

Yours faithfully

(Anshu Prakash)

Director (IT- Budget)

CBDT may not extend the due date for filing ITR

We found following Email Circulating on various websites which claims to be forwarded by a Known member of ICAI :-

Inspite of strong representation from us as well as various Associations and ICAI, on the basis of the talk and discussion prima facie it appears that date of filing the Return of Income of 30th September, 2013 will not be extended. The main reason or hesitation is sharp fall in the collection of revenue as well as further loss by way of collection of tax deferred by one month, which is termed “Revenue Foregone”. In view of this Members are requested to go ahead with filing of Returns for which due date is 30th September, 2013.

However, it also transpires from the representation and discussion made that the date of Uploading the Tax Audit Report (3CD) is likely to be extended from 30th September to 31st October, 2013. The notification of the same may be received shortly.

All the Members are requested to see that Returns of Income are filed and Uploaded before 30th September, 2013.

Wish you all a happy, busy and hectic September ending!

Source- Unconfirmed
Editors Note – Above news seems to be a rumor in the name of a Known CA. All are requested to wait for official notification from ICAI or CBDT.

Non-Monetary Asset Transfer Is Not A Slump Sale U/s. 50B

In the light of ratio laid down as above by the Hon’ble Supreme Court and the Tribunal since there is no monetary consideration involved in transferring the manufacturing division with all its assets and liabilities to M/s. Novapan Industries Ltd. under scheme of amalgamation approved by the Hon’ble High Court of A.P. it cannot be considered to be a slump sale within the meaning ascribed under section 2(42C) of the Act so as to attract the liability of the capital gain under section 50B of the Act.

INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “A” : HYDERABAD

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SHRI SAKTIJIT DEY, JUDICIAL MEMBER

ITA.No.275/Hyd/20 13
Assessment Year 2007-2008

The ITO vs. M/s. Zinger Investments (P)

Date of Hearing : 12.06.2013
Date of pronouncement: 21.08.2013

ORDER

PER SAKTIJIT DEY, J.M.
This appeal is filed by the Revenue against the Order of the CIT(A)-IV, Hyderabad dated 10.12.20 12 for the assessment year 2007-2008.
2. Briefly the facts are that the assessee-company earlier known as M/s. GVK Novapan Industries Pvt. Ltd. is a Private Limited Company. For the impugned assessment year, the assessee filed its return of income declaring NIL income. Initially, the return was processed under section 143(1) on 05.02.2009. Subsequently, action was initiated under section 147 of the Act by issuing a notice under section 148 calling upon the assessee to submit a return of income. In response to such notice, the assessee filed a letter dated 30.12.20 10 requesting the Assessing Officer to treat the return filed originally as a return in response to the notice under section 148 of the Act. In the course of assessment proceedings, the Assessing officer noticed that during the year under dispute, the assessee had transferred its manufacturing division to M/s. Novapan Industries Limited under a scheme of amalgamation approved by the Hon’ble High Court of A.P. w.e.f. 01.04.2006. It was further noticed that as on 3 1.03.2006 the assessee-company had total assets of Rs.32 19.89 lakhs and total liabilities of Rs.2538.67 lakhs. Hence, the net worth of the assessee-company was Rs.68 1.22 lakhs. The Assessing Officer further noted that as per the scheme of amalgamation both the assets and the liabilities were transferred by the assessee company to M/s. Novapan Industries Limited. As a consideration for the transfer of the division the amalgamated company M/s. Novapan Industries Limited allotted 38 shares for every 100 shares of the amalgamated company. Besides allotment of shares, the amalgamated company M/s. Novapan Industries Limited also transferred certain investments held by it amounting to Rs.25,24,05,000/- to the assessee company. The balance-sheet of the assessee company as on 31.03.2007 shows share capital of Rs.6,28,07,500/- and reserve amount of demerger at Rs. 18,42,87,883/-.

3. The Assessing Officer on examining the above facts felt that the transfer of the manufacturing division to M/s. Novapan Industries Limited tantamount to a “slump sale” within the meaning of section 50B of the Act attracting liability of capital gains therein. The Assessing Officer referring to the definition of “Slump Sale” under section 2(42C) and the definition of “Undertaking” as in Explanation to 1 to Section 2 (1 9AA) defining demerger, was of the view that the transfer of manufacturing division by the assessee company amounted to “slump sale” and the capital gain arising therefrom has to be brought to tax under the provisions of section 50B of the Act. Though the assessee objected to the aforesaid view taken by the Assessing Officer by submitting that the manufacturing unit of the assessee was not transferred for a slump sale consideration and the same is amalgamated with M/s. Novapan Industries Limited as a part of scheme of arrangement and there was no consideration received in terms of money value, the Assessing Officer, however, did not accept such contention of the assessee by holding that the transfer of the manufacturing division by the assessee to M/s. Novapan Industries Limited is a ‘slump sale’ attracting liability under section 50B(1) of the Act and therefore, to be charged to capital gains tax. The Assessing Officer, accordingly, proceeded to determine the capital gain by adopting the sale consideration for the purpose of computing capital gain, the share capital allotted and the value of investment transferred to the assessee by the amalgamated company M/s. Novapan Industries Limited amounting to Rs.6,28,07,500/- and Rs.25,24,05,000/- respectively totalling to Rs.31,52,12,500 /- and after reducing the cost of acquisition of Rs.6,8 1,22,000/- determined long term capital gain at Rs.24,70,90,500/-. The assessee being aggrieved of the assessment order, preferred appeal before the CIT(A).

4. In the course of hearing of the appeal, it was submitted by the assessee that the assessee company as well as the transferee company were engaged in manufacturing and sale of particle boards upto 31.03.2006 and therefore, the management of the two companies felt it would be economical and effective to combine their operations. Accordingly, as per a scheme of arrangement under section 391/394 of the Companies Act, duly approved by the Hon’ble High Court of A.P. by an Order dated 27.12.2006, all the assets and liabilities of the assessee were vested with M/s. Novapan Industries Limited against which, the assessee was given investments valued at Rs.25,24,05,000/- held by M/s. Novapan Industries Limited besides allotment of 68,12,200 equity shares of Rs. 10/- each of the face value to Rs.6,81,22,000/- to the share holders of the assessee. It was submitted by the assessee that the provisions of section 50B were applicable only in the case of sale of an undertaking and not in the case of an arrangement between two companies under section 391/394 of the Companies Act, 1956. In this context, learned A.R. relied upon certain judicial precedents including the decision of Hon’ble Supreme Court in the case of CIT vs. Motors and General Stores Pvt. Ltd. 66 ITR 692 (S.C.) wherein the Hon’ble Supreme Court held that the term ‘sale’ connotes a transfer of property in goods or of the ownership in immovable property for a money consideration and the presence of money consideration is an essential element in a transaction of sale. It was further held that if the consideration was not money but some other valuable consideration, it may be an ‘exchange or barter’ but not a ‘sale’. The assessee further relied upon the decision of ITAT, Mumbai Bench in the case of Avaya Global Connection Ltd. vs. ACIT 7(3), Mumbai 26 SOT 397 wherein it was held that the expression ‘transfer’ as defined in section 2(47) of the Act include several forms of transfer and sale is only one such form of transfer. It was further held that the definition of “slump sale” under section 2(42)(C) would mean that it is only a transfer as a result of sale that can be construed as a slump sale. Therefore, any transfer of an undertaking otherwise than as a result of sale will not qualify as a slump sale. The CIT(A) on following the aforesaid decisions relied upon by the assessee allowed the appeal by holding as under:

“5.6. The judicial view is thus clear that money consideration is an essential element of sale and there being no money consideration being passed between the transferor and transferee in an arrangement u/s. 391 r.w.s. 394 of the Companies Act, a scheme of arrangement or amalgamation does not amount to a ‘sale’. It is therefore held that the transaction in the case of the appellant, being a result of a scheme of arrangement u/s. 391 r.w.s. 394 of the Companies Act was not a sale. Consequently, it did not fall within the definition of a ‘slump sale’ u/s. 2(42C), and therefore, the provisions of sec.50B did not apply to the transaction in question.”

5. Being aggrieved, the department is in appeal before us. The learned D.R. supporting the conclusion arrived at by the Assessing Officer submitted that demerger is nothing but slump sale coming within the ambit of section 2(42C) of the Act. He, therefore, contended that the Assessing Officer was correct in treating the transfer as a slump sale and bringing it to tax under the head “Capital Gain” under section SOB of the Act..

6. The learned A.R. on the other hand, at the outset, submitted that the grounds raised by the department are not on the issue in dispute as they relate to demerger only whereas, the Assessing Officer has completed the assessment by treating it as a slump sale under section SOB of the Act. Hence, the grounds cannot be entertained. He further submitted that the assessment was completed under section 143(3) read with section 147 of the Act. In the reasons recorded, the Assessing Officer has made no reference to demerger. It is also admitted by the Assessing Officer that there is no money consideration involved for transfer of the assets. It was submitted that the assessee has never claimed it as demerger. Under these circumstances, the grounds raised cannot be entertained. It was further contended by the learned A.R. that if these grounds are allowed to be adjudicated, it would amount to confirming the addition on an item in respect of which no reasons were recorded under section 148 of the Act as no addition has been made on that account.7. So far as the merit of the case is concerned, the learned A.R. submitted that the transaction cannot be treated as slump sale under section 2(42C) of the Act as the amalgamation of the assessee with M/s. Novapan Industries Limited is by operation of Law as a result of a scheme of arrangement approved by the Hon’ble High Court of A.P. in a proceeding under section 391 and 394 of the Companies Act, 1956. It was submitted that the amalgamation was not contractual. It was submitted that the scheme of amalgamation would make it clear that there was no flow of money consideration for transferring the manufacturing division to M/s. Novapan Industries Limited as the manufacturing division was merged with the M/s. Novapan Industries Limited as a going concern with the term that ‘M/s. Novapan Industries Limited shall transfer the investments appearing in its books of accounts as on 31.03.2006 to the assessee company and allot 38 equity shares at Rs. 10/- each for every 100 equity shares held in the assessee company to the shareholders’. Therefore, it is very much evident that no monetary consideration is involved in the scheme of amalgamation. In this context, the learned A.R. referred to the decision of the Hon’ble Supreme Court in the case of CIT vs. Motors & General Stores Pvt. Ltd. 66 ITR 692 (SC). He further referred to a decision of the Hon’ble Supreme Court in the case of CIT vs. R.R. Ramakrishna Pillai 66 ITR 725 wherein it was held that where a person carrying on business transfers assets to a company in consideration of allotment of shares, it would be a case of exchange, but not sale. In the light of aforesaid decision, it was submitted that since the transaction between the assessee and the M/s. Novapan Industries Ltd. does not involve any monetary consideration it cannot be considered as sale.

8. We have considered the rival submissions of the parties and perused the materials on record. We have also carefully examined the decisions relied upon by both the parties. On perusal of the assessment order, it is very much clear that the entire assessment is based on the fact that the Assessing Officer has treated the transfer of assets to M/s. Novapan Industries Ltd. as a slump sale attracting the provisions of section 50B of the Act. In this scenario, we have to confine ourselves to the issue as to whether the transfer of the manufacturing division M/s. Novapan Industries Ltd. is a ‘slump sale’ within the meaning ascribed under section 2(42C) of the Act so as to attract the provisions of section 50B of the Act. It is undisputed that under the scheme of amalgamation approved by the Hon’ble High Court of A.P. under section 391 and 394 of the Companies Act, the manufacturing division of the assessee company was transferred to M/s. Novapan Industries Ltd. with all its assets and liabilities as per the terms of the scheme of amalgamation approved by the Hon’ble High Court. The assessee in return for the transfer of the assets received the investments of Rs.25,24,05,000/- besides allotment of 38 equity shares of Rs. 10/- each to the shareholders of the assessee-company for every 100 equity shares held in the assessee company. From the aforesaid facts, it is very much clear that as per the scheme of amalgamation, there is no monetary consideration received by the assessee-company for transfer of the manufacturing division. Section 50B of the Act provides for computation of capital gains in the case of ‘slump sale’. The definition of ‘Slump Sale’ under section 2(42C) reads as under:

“Slump Sale” means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.”

9. A plain reading of the aforesaid provision makes it clear that to qualify as slump sale, two conditions have to be satisfied viz., (1) there must be transfer of one or more undertaking as a result of sale and (2) the sale should be for a lumpsum consideration without values being assigned to the individual assets and liabilities. In the case of the assessee it is not disputed that there is no monetary consideration received for transfer of the assets and liabilities of the manufacturing division to M/s. Novapan Industries Ltd. though there may be a transfer of an undertaking. In that view of the matter, it has to be examined in the light of ratio laid down by the various judicial precedents whether the transaction would assume the character of sale ? The Hon’ble Supreme Court in the case of CIT vs. Motors and General Stores Pvt. Ltd. (supra) held as under:

“Sale is a transfer of property in goods or of the ownership in immovable property for a money consideration. But, in exchange there is a reciprocal transfer of interest in immovable property, a corresponding transfer of interest in movable property being denoted by the word ‘barter’. The difference between a sale and an exchange is this that in the former the price is paid in money, whilst in the latter it is paid in goods by way of barter.

The presence of money consideration is an essential element to a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale.”

10. The same view was again expressed by the Hon’ble Supreme Court in the case of CIT vs. R.R. Ramakrishna Pillai 66 ITR 725 wherein it was held that where a person carrying on business, transfers assets to a company in consideration of allotment of shares, it would be a case of exchange but not of sale. The ITAT, Mumbai Bench in the case of Avaya Global Connect Ltd. vs. ACIT 26 SOT 397 (Mum.) after following the decision of the Hon’ble Supreme Court in the case of CIT vs. Motor General Stores Pvt. Ltd. (supra) and the decision of the Hon’ble Bombay High Court in the case of Sadanand S. Varde vs. State of Maharashtra 247 ITR 609 held as under:

“30. In the light of the principle laid down in the aforesaid judicial pronouncements, we are of the view that the transfer of TTD by assessee to ITEL consequent to scheme of amalgamation approved by Hon’ble Bombay High Court cannot said to be a sale of undertaking by the assessee. Consequently, the transfer could not be said to be as a result of sale and therefore the provisions of section 2(42C) of the Act did not apply. The provisions of section 50B were also not therefore applicable to the facts and circumstances of the present case.”

11. Therefore, considering the facts of the present case in the light of ratio laid down as above by the Hon’ble Supreme Court and the Tribunal since there is no monetary consideration involved in transferring the manufacturing division with all its assets and liabilities to M/s. Novapan Industries Ltd. under scheme of amalgamation approved by the Hon’ble High Court of A.P. it cannot be considered to be a slump sale within the meaning ascribed under section 2(42C) of the Act so as to attract the liability of the capital gain under section 50B of the Act. In the aforesaid view of the matter, we do not find any reason to interfere with the finding of the CIT(A) which is accordingly upheld.

12. In the result, grounds raised by the Revenue are dismissed and the appeal is also dismissed.

Order pronounced in the Open Court on 21.08.2013

Frequent changes in 3CD e-return schema

CBDT is constantly making changes in the 3CD e-return schema such as addition of new elements, changes in description, frequent changes in depreciation table, etc. Sometimes changes are done in the 3CD e-return software of the IT Dept. without changing the schema. However, information regarding the changes is not notified by IT Dept. in their website and therefore we will come to know about the changes only when error appears as ‘Invalid xml’ while uploading the e-return. Same problem arises even if the e-return is generated through the software of the IT Dept. Thereafter, we have to investigate and find out the changes in the e-return schema/software of IT Dept. and update the software. This process takes at least 8 hours time & till such time e-return cannot be uploaded. By the time updation is done by us, again error message may come as further changes have taken place in the schema/IT website.

In case of any changes in the TDS e-return file format, NSDL notifies in their website at least 7 to 30 days in advance before blocking the acceptance of e-returns prepared in old format. This practice helps Software developers to implement the required changes in advance and avoid inconvenience to users. However no such practice is followed by the IT department website and therefore users are facing difficulty in uploading the e-return due to frequent schema changes. A list of some changes made by CBDT in the 3CD e-return schema during the past 2 months is as follows:

Date	Changes made
10^thJuly	Identification tag of Membership No, Assessment Year
11^th July	Stock details – Format changed
12^th July	Identification tag of Depreciation changed
16^th July	Identification tag of Depreciation changed
19^th July	‘Comments’ made optional
20^th July	Payment to specified persons – new tag given for PAN and Nature of business. Payment date tag deleted
24^th July	Identification tag of Accounting Ratio changed, Depreciation – addition/deletion format changes
30^th Aug	Depreciation block item changes, Yes/No option given for more items
13^th Sep	Depreciation block identification code changed
16^th Sep	Schema Version no. changed, Depreciation block identification code changed again!

Due date extended to file ITR-V for AY 2012-13 & 2011-12 [filed during F.Y. 2012-13]

Notification for Extension of date for receipt of ITR-Vs in CPC, Bengaluru, for the cases of AY 2012-13 and 2011-12 received in e-filed in FY 2012-13.

There are many taxpayers who have uploaded their Income Tax Returns electronically (without digital signature Certificate) for A.Y. 2011-12 [filed during F.Y. 2012-13] and for ITRs of A.Y. 2012-13 [filed on or after 1.4.2012], but have either not filed the corresponding ITR-V or have filed it with the local Income-tax office. ITR-V is accepted only at the Centralized Processing Center (CPC) of the Income-tax Department at Bengaluru by ordinary or speed post. Therefore, a final opportunity is being given to such taxpayers to regularize their Income-tax returns.

All such taxpayers may mail the ITR-V, by 31^st October, 2013, by ordinary post or speed post at Post Bag No. 1, Electronic City Post Office, Bengaluru -560100 (Karnataka). Taxpayers who have filed their ITR-V with the local Income-tax office may again mail their ITR-V to the CPC by 31^st October, 2013. Those taxpayers who have earlier mailed their ITR-V, but have not received the acknowledgement e-mail from the CPC, may mail their ITR-V to the CPC again.

The ITR-V form should be mailed to the CPC only at the above address by ordinary post or speed post. Taxpayers may note that no other place or form of delivery will be accepted.

Taxpayers may also note that without acknowledgement of the ITR-V from the CPC it would not be possible for the Income-tax Department to process the Income-tax returns or issue any refunds therefrom, as these would be treated as not having been filed with the Department.

3CB/3CD E-Filing Utility – Turning Into Harassment of Professionals

CA Sudhir Halakhandi

The xml utility of E-filing of Tax audit report is under process of continuous alterations, amendments, modifications and the last in this series of is introduced on 24th Aug 2013.

Our first question is that why so many amendments, modification, alterations are required in this utility. The answer is very simple because it has so many shortcomings in it. OK, then the standard process in this respect should be “pre-launching test” and one can easily presume by going through the circumstances that this was not done seriously by makers of this utility.

When the utility was first introduced it was changed immediately after getting the feedback from the users and in that case a perfect , the new and revised utility, should be there to satisfy the all the needs of procedural aspect of the law by removing all the shortcomings experienced and reported by the professionals. But this was not done in this case. The improvement was not perfect and there are several changes in last month in the utility which is causing the harassment to the professionals.

See, here why we are calling it harassment to the professionals, there are some reasons:-

1. They are not mentioning anywhere on the e-filing site that a New utility is introduced.

2. They are not mentioning anywhere on the e-filing site that what type of changes have been introduced by replacing the existing utility.

3. The private software manufacturers are taking their own time in making corrections in their software due to sudden and frequent changes.

4. If you have prepared and filled the utility and saved it but before uploading the same a new utility is introduced, then you have to fill it again because the system is not accepting the Old utility.

See the effect of point No.3, 7 xml utilities were prepared in our office up to 23 rd Aug 2013 but the uploading is pending because it is not finally checked by us but on 24^th Aug 2013 the New utility was introduced and while uploading the XML utility we came to know this fact with a “error message” and now have to prepare and refill all the figures in new utility for all these cases.

Why this is being done –

1. No responsibility is fixed for the persons who prepared the utility for it’s shortcomings.

2. Nobody is responsible for half hearted corrections.

3. The principal of trial and error is going on for ultimate search of excellence.

4. No pre-launching test is being performed before introduction of utility.

6. There is a feeling at their level that they are the bosses hence there is no respect for the professionals and tax payer public so they have no courtesy to inform them about new introduction and type of changes.

Now the situation is that the system is not perfect and the professionals are facing difficulties in completing the task and it is clear cut case of “Extension of date” and surely they will extend it but as evidenced by their previous history, not before harassing the professionals and tax payer public . As per our predictions, they will introduce a date extension at 4 PM on 30^th Sept 2013 i.e. on the last date for it.

Now in our opinion the circumstances at present demanding an extension of date for at least 2 months and it should be declared immediately and after this declaration there should be a thorough modification of the utility and introduction of a perfect utility. Still we are testing the new utility but at present we are of the opinion that it is not the final utility and soon they will introduce a new one because still we have notices that :-

1. There is no facility in the utility to view the Form 3CB/3CB and it is not easy to view and check the form in XML.

2. The curser is still “Dancing down” here and there when we put it on a drop down Box creating irritation to the user.

3. The corrected Depreciation utility still has problems and in the Form CD in item No.14 column No.2 does not display the rate of Depreciation and instead of it , it is repeating the figures of column No.1.

————————————
-CA Sudhir Halakhandi
-CA Abhas Halakhandi
“Halakhandi”
Laxmi Market
Beawar-305901(Raj)
Cell- 9828067256
MAIL –sudhirhalakhandi@gmail.com

Unmatched TDS challans in form 26AS to be verified & corrected by 31-12-2013 : CBDT

INSTRUCTION NO 11/2013, Dated: 27 August, 2013

Subject: – Action on Unmatched Challans reflected in Form 26AS – direction of the Hon’ble Delhi HC in the case ‘Court on Its Own Motion vs. UOI & Ors in WP(C) 2659/2012 & WP(C) 5443/2012′- regarding
1. The. Hon’ble Delhi High Court vide its judgement in the case ‘Court On its Own Motion vs. UOI and Ors’ (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14.03.2013) has issued seven mandamuses for necessary action by Income-tax Department, one of which is regarding the issue of ‘Unmatched Challans’ reflected in Form 26AS where the report by the deductor in the TDS statement are not found available in the OLTAS database resulting in TDS mismatch.
2. The unmatched challans belong to two categories of TDS statements, viz.-

(i) Statements pertaining to FY 2011-12 and earlier which have been processed by jurisdictional TDS Assessing Officers [hereinafter AOs(TDS)]

(ii) Statements pertaining to FY 2012-13 onwards, now processed by CPC(TDS)

3. The Hon’ble Delhi High Court (reference: para 42 of the order), has directed that

“…with regard to unverified TDS under the heading ‘U’ in form 26AS for verification and correcting unmatched challans within a time period, which should be fixed by the Board keeping in mind the date of filing of return and processing of return by the assessing officers.”

4. In view of the above direction of the Hon’ble High Court, it has been decided by the Board that the CPC(TDS)/AOs(TDS) shall immediately issue letters to the deductors, in whose case TDS challans are unmatched, with a view to verify and correct these challans. If necessary, the deductors may be asked to file correction statements, as per the procedure laid down and necessary follow up action be taken. The task should be completed by 31st December, 2013 for FY 2012-13 in the case of CPC (TDS) and FYs 2011-12 & earlier in case of AOs (TDS).
5. This may be brought to notice of all Officers working under your jurisdiction for compliance.
6. Hindi version shall follow.

F. No. 275/0312013-IT(B)

(Anshu Prakash)

Director IT (Budget), CBDT

—————————

Also Read :- Other Instruction based on Delhi High Court decision in the case of ‘Court On its Own Motion vs. UOI and Ors’ (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14.03.2013)

No Section 14A / Rule 8D Disallowance of Interest If Income Exceeds Expenditure

Issue – During the course of assessment proceedings, Assessing Officer noticed that Assessee has made investment in shares amounting to Rs. 95,45,400/-. Assessing Officer was of the view that the investment would generate exempt income and therefore provisions of section 14A becomes applicable. He accordingly applying the formula prescribed in Rule 8D of Income Tax Rules 1962 worked out disallowance under Section 14A of Rs. 15,63,883/-.

Held – We find that CIT(A) while granting relief to the Assessee has given a finding that no nexus has been established by the A.O. with the amount incurred by the Assessee for earning the tax free income. He has further noted that in the Assessee’s case the interest income was more than interest expense and thus the Assessee was having net positive interest income and therefore the same cannot be considered for disallowance and for which he placed reliance on the decision of Kolkata Tribunal in the case of Trading Apartment Limited and the decision of Tribunal in the case Morgan Stanley India Securities Private Limited. He however considered the administrative expenses to be 0.5% of the average investments and disallowed the same.

Before us the Revenue could not bring any material on record to controvert the findings of CIT(A). We therefore find no reason to interfere the order of CIT(A). Thus this ground of the Revenue is dismissed.

INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD

(BEFORE SHRI MUKUL KR. SHRAWAT J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No. 2228/AHD/2012 (Assessment Year:2008-09)

The Income-tax Officer

Vs.

Karnavati Petrochmem Pvt. Ltd.

ORDER

Date of hearing : 12-06-2013

Date of Pronouncement : 05-07-2013

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal is filed by the Revenue against the order of CIT(A)- VIII, Ahmedabad dated 12.07.2012 for A.Y. 2008-09

2. The facts as culled out from the order of lower authorities are as under.

3. Assessee is a company engaged in the business of Finance. It electronically filed its return of income on 25.08.2008 declaring total income at Rs. NIL after set off of carry forward losses. The case was selected for scrutiny and thereafter assessment was framed under 143(3) vide order dated 25.10.2010 and the total income was assessed at Rs. 15,45,700/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) vide order dated 12.07.2012 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) the Revenue is now in appeal before us and has raised the following effective ground:-

1. The Ld. CIT(A) has erred in law and on facts in deleting disallowance of Rs. 15,63,883/- made u/s. 14A of the Act, without appreciating the fact that there was no nexus that could be established with the amounts incurred by the assessee for earning the tax free income.

4. During the course of assessment proceedings, Assessing Officer noticed that Assessee has made investment in shares amounting to Rs. 95,45,400/-. Assessing Officer was of the view that the investment would generate exempt income and therefore provisions of section 14A becomes applicable. He accordingly applying the formula prescribed in Rule 8D of Income Tax Rules 1962 worked out disallowance under Section 14A of Rs. 15,63,883/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee granted partial relief by holding as under:-

4.3 I have gone through the assessment order and the submission of the appellant. During the course of Assessment proceeding, the Assessing officer noticed that the appellant had made investment in shares amounting to Rs.95,45,400/- so that disallowance of expenses was required to be made in view of section 14A of the Act in respect of interest expenses and administrative expenses the AO has worked out the disallowance of Rs. 15,63,883/- as per Rule 8D. The appellant has submitted that he has claimed only Rs. 300 as exempt income i.e. Dividend Income and it is submitted that no direct/indirect expenditure has been incurred to earn the exempt income. The appellant has submitted that the dividend generally received through ECS and no specific expenditure incurred for collecting and depositing the said dividend in bank, therefore, no disallowance u/s 14A can be made for administrative expenses. The appellant has further submitted that he has incurred interest expenses of Rs. 1,83,02,724/- as against interest income of Rs. 1,86,81,762/- and thus it has surplus interest income of Rs. 3,79,038/- and on that ground no part of interest can be disallowed u/ 14A read with rule 8D on the basis of the decisions of Kolkatta Bench of IT AT in case of Trade Apartment Ltd and the decision of Mumbai Tribunal in case of Morgan Stanley India Securities Private Limited. The appellant has further submitted that AO has not pointed out any particular expenditure that incurred for earning exempt income and while proposing disallowance u/s 14A, AO has failed to establish a pre-requisite nexus between the expenditure disallowed and the investments made from which income earned is exempt from tax. The appellant submits that there cannot be any presumption that the borrowings were made for the purpose of making any investment, consequently, the proposed addition by the Id. Assessing Officer is uncalled for.

4.4. On the identical facts in assessee ‘s own case the Ld. ClT(A) Vlll in Appeal no. ClT(A)- VHl/lTO Wd-4(2)/657/09- 10 dated 25.01.2011 for the A. Y. 2007-08 has held in para 4.3.2 on page no. 17 as under:-

“In view of the details submissions of the appellant, it is categorically established that the interest expenditure has no direct nexus with the tax free investment. Secondly, the net interest expenditure is only Rs. 3,26,722/-.ln such a situation where appellant has net interest expenditure only of Rs. 3,26,722/- , the disallowance of gross interest is not justified. The case of Hero Cycles Ltd. (P & H) 323 ITR 22 supports this contention. In view of all the facts mentioned above the disallowance us/ 14A has calculated and submitted by the appellant above of Rs. 40769/- is confirmed. The remaining addition Rs. 494132/-is deleted.”

Therefore, in light of the above discussion, I am of the opinion that there was no nexus that could be established with the amounts incurred by the assessee for earning the tax free income. The appellant is also having net positive interest income which cannot be part for the disallowance in view of the basis of the decisions of Kolkatta Bench of IT AT in case of Trade Apartment Ltd and the decision of Mumbai Tribunal in case of Morgan Stanley India Securities Private Limited. At the same time, the appellant is incurring administrative expenses to maintain the above investments. In view of the above, the amount of Rs. Rs. 4 7940/- which is 0.5% of average Investment of Rs. 94,45,400/- is taken as the disallowance u/s14A. In view of the facts of the case and the decision in the cases (supra) and following the decision of my predecessors, the disallowance made by the A.O. u/s 14A of the I. T. Act, 1961 cannot be fully sustained. In these circumstances, the A.O. is directed to delete the disallowance made by him of Rs. 15,08,803/-and Rs.7140/- on amount of interest under section 14A of the Act. The disallowance of Rs. 4 7940/- on administrative expenses is confirmed. The ground of appellant is partly allowed.

5. Aggrieved by the order of CIT(A) the Revenue is now in appeal before us.

6. Before us, the learned D.R. relied on the order of Assessing Officer. On the other hand the learned A.R. submitted that provisions of Section 14A are applicable only when Assessee earns an income which is exempt from tax and incurs some expenditure for earning the aforesaid income. He further submitted that the Assessing Officer has to establish nexus between the expenditure incurred and the source of exempt income. In the present case, no nexus has been established by the Assessing Officer and therefore no disallowance under 14A can be made. The learned A.R. further submitted that the Assessee has received dividend of Rs. 300 which has been received through ECS and no specific expense has been incurred for collecting and depositing the dividend. He thus supported the order of CIT(A).

7. We have heard the rival submissions and perused the material on record. We find that CIT(A) while granting relief to the Assessee has given a finding that no nexus has been established by the A.O. with the amount incurred by the Assessee for earning the tax free income. He has further noted that in the Assessee’s case the interest income was more than interest expense and thus the Assessee was having net positive interest income and therefore the same cannot be considered for disallowance and for which he placed reliance on the decision of Kolkata Tribunal in the case of Trading Apartment Limited and the decision of Tribunal in the case Morgan Stanley India Securities Private Limited. He however considered the administrative expenses to be 0.5% of the average investments and disallowed the same.

8. Before us the Revenue could not bring any material on record to controvert the findings of CIT(A). We therefore find no reason to interfere the order of CIT(A). Thus this ground of the Revenue is dismissed.

9. In the result the appeal of the Revenue is dismissed.

10. Order pronounced in Open Court on 05 -07- 2013.

No Disallowance U/s. 40(a)(ia) For TDS Already Paid During The Year: HC

Honorable Allahabad High Court approves the special bench judgment in the case of Merilyn Shipping and Transport Ltd. and held that disallowance u/s. 40(a)(ia) applies only to amounts ‘payable‘ as of 31st March and not to amounts already ‘paid‘ during the year.

ISSUE- In the present case the A.O. disallowed expenses on the ground that under Section 40 (a) (ia) expenses could not be allowed as no tax was deducted at source under Chapter XVII (B).

HELD – We do not find that the revenue can take any benefit from the observations made by the Special Bench of the Tribunal in the case of Merilyn Shipping and Transport Ltd. (136 ITD 23) (SB) quoted as above to the effect Section 40 (a) (ia) was introduced in the Act by the Finance Act, 2004 with effect from 1.4.2005 with a view to augment the revenue through the mechanism of tax deduction at source. This provision was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head ‘Income from Business and Profession’ in case the assessee does not deduct TDS on such expenses. The default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible. In the present case tax was deducted as TDS from the salaries of the employees paid by M/s Mercator Lines Ltd., and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd., for M/s Vector Shipping Services, the assessee were sufficiently explained.

It is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year.

Allahabad High Court

INCOME TAX APPEAL No. – 122 of 2013

Commissioner Of Income Tax, Muzaffarnagar

Vs.

M/S Vector Shipping Services(P) Ltd.

Counsel for Appellant :- Shambhu Chopra

ORDER

Hon’ble Sunil Ambwani,J.

Hon’ble Surya Prakash Kesarwani,J.

We have heard Shri Shambhu Chopra, learned counsel for the appellant.

This income tax appeal under Section 260 (A) of the Income Tax Act, 1961 arises out of the judgment and order of the Income Tax Appellate Tribunal in ITA No.5219/Del/2012 for the assessment year 2009-10.

The department has pressed the only question of law as follows:-

“(a) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT has rightly confirmed the order of the CIT (A) and thereby deleting the disallowance of Rs.1,17,68,621/- made by the Assessing Officer under section 40 (a) (ia) of the I.T. Act, 1961 by ignoring the fact that the company M/s Mercator Lines Ltd. had performed ship management work on behalf of the assessee M/s Vector Shipping Services (P) Ltd. and there was a Memorandum of Understanding signed between both the companies and as per the definition of memorandum of understanding, it included contract also.”

In the present case the A.O. disallowed expenses on the ground that under Section 40 (a) (ia) expenses could not be allowed as no tax was deducted at source under Chapter XVII (B).

The CIT (A) reversed the findings, which have been affirmed by the Tribunal in para 7 as follows:-

“7. We have considered the submissions of both the parties and have perused the record of the case. The submissions made before ld. CIT (A), as noted earlier, have not been controverted by the Department. It is not disputed that M/s Mercator Lines Limited had deducted TDS on salaries paid by it on behalf of assessee. Under such circumstances assessee was not required to deduct TDS on reimbursement being made by it to M/s Mercator Lines Limited. Further in any view of the matter, since it is not disputed that no amount remained payable at the year end, therefore, in view of the Special Bench decision in the case of Merilyn Shipping and Transport Ltd., (136 ITD 23) (SB), addition could not be made. In this case, it was held as under:-

“Section 40 (a) (ia) was introduced in the Act, by the Finance Act, 2004 with effect from 1.4.2005 with a view to augment the revenue through the mechanism of tax deduction at source. This provision was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head ‘Income from Business and Profession’ in case the assessee does not deduct TDS on such expenses. The default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible.”

On the remaining questions the Tribunal remanded the matter to the A.O.

Shri Shambhu Chopra, learned counsel for the department states that the A.O. had recorded findings that on the services for which assessee was claiming allowance of the expenses, tax was not deducted at source and thus the expenses on salaries to the employees could not be claimed. He submits that expenses were clearly disallowable under Section 40 (a) (ia) of the Act.

We find that CIT (A) has recorded finding that the allowance was claiming for salaries on which TDS was deducted by M/s Mercator Lines Ltd. for the assessee. The circumstances in which salaries were paid by M/s Mercator Lines Ltd. were sufficiently explained and the explanation was accepted by CIT (A). The CIT (A) held:-

“In the light of the above facts and following the ratio decidende of the Hon’ble Courts (supra), it is held that firstly, the provisions of section 194C read with sec 40 (a) (ia) of the Act are not applicable to the case of the appellant.Secondly, nature of expenses incurred by the assessee do not form part of expenses disallowable under section 40 (a) (ia) of the Act. Thirdly, when such type of expenses incurred by the appellant were totally paid and not remained payable as at the end of the relevant accounting period, provisions of section 40a (ia) of the Act are not applicable. Further, the appellant has clarified all the five questions raised as above and its clarifications are found satisfactory and convincing. Thus no adverse inference could be drawn on the issues even after making intrusive inquiries in respect of the transition of business made by the appellant. Thus it is held that the AO was not justified in making addition of Rs.1,1 7,68,621/- on account of disallowance made under section 40 (a) (ia) of the I.T. Act, 1961. The same is directed to be deleted. Grounds Nos.2 & 3 are allowed.”

We do not find that the revenue can take any benefit from the observations made by the Special Bench of the Tribunal in the case of Merilyn Shipping and Transport Ltd. (136 ITD 23) (SB) quoted as above to the effect Section 40 (a) (ia) was introduced in the Act by the Finance Act, 2004 with effect from 1.4.2005 with a view to augment the revenue through the mechanism of tax deduction at source. This provision was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head ‘Income from Business and Profession’ in case the assessee does not deduct TDS on such expenses. The default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible. In the present case tax was deducted as TDS from the salaries of the employees paid by M/s Mercator Lines Ltd., and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd., for M/s Vector Shipping Services, the assessee were sufficiently explained.

We do not find that the Tribunal has committed any error in recording the finding on the facts, which were not controverted by the department and thus the question of law as framed does not arise for consideration in the appeal.

The income tax appeal is dismissed.

Order Date :- 9.7.2013

Section 14A / Rule 8D not applies to short-term investments

Some of the investments made by the assessee are short term. Since assessee is paying capital gains tax on short term investments, the provisions of Rule 8D will not apply on them. The Assessing Officer is directed to re¬compute dis-allowance u/s. 14A r.w.r. 8D after excluding short term investments. This ground of appeal of the assessee is partly allowed in the aforesaid terms.

INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : CHENNAI

[BEFORE Dr. O.K.NARAYANAN, VICE PRESIDENT AND

SHRI VIKAS AWASTHY, JUDICIAL MEMBER]

I.T.A. No. 1774/Mds/2012 – Assessment year : 2008-09

Sundaram Asset Management Co. Ltd.

Deputy Commissioner of Income Tax

Date of Hearing : 29-05-2013

Date of Pronouncement : 19-07-2013

O R D E R

PER VIKAS AWASTHY, JUDICIAL MEMBER

The appeal has been filed by the assessee against the order of the Commissioner of Income Tax(Appeals)-XII, Chennai dated 03-07-2012 relevant to the Assessment Year (AY) 2008-09.

2. The assessee is engaged in the business of asset management. For the AY. 2008-09, the assessee filed its return of income on 26-09-2008 declaring its total income as Rs. 20,86,48,690/- under normal provisions and Rs. 26,12,06,395/- u/s. 11 5JB (MAT provisions) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’). The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued to the assessee on 12-08-2009. The Assessing Officer vide assessment order dated 24-11-2010 made additions/dis-allowances in the income returned by the assessee on following counts:

i. Dis-allowance u/s. 14(a)(i) r.w.rule 8D Rs. 6,28,950/-.

ii. Dis-allowance u/s. 40(a)(i) Rs. 33,48,666/- on account of non-deduction of tax at source u/s. 195 on the payments made to M/s. Fund Quest a non-resident firm.

iii. Dis-allowance u/s. 40(a)(ib) Rs. 85,929/- in respect of Securities Transaction Tax.

iv. Capitalization of expenses on extension and renovation of building – the assessee had claimed an amount of Rs. 2,06,61,216/- on account of interior decoration, extension and renovation of the office premises as Revenue Expenditure. The Assessing Officer held the expenditure to be capital in nature and made addition of Rs. 1,85,95,094/- after allowing depreciation.

v. Dis-allowance of excess depreciation on UPS. The assessee had claimed depreciation on UPS @ 60%, as applicable to computer hardware. The Assessing Officer allowed depreciation as applicable to Plant & Machinery i.e., 15%. The Assessing Officer made addition of Rs. 18,68,338/- after dis-allowing the excess depreciation.

vi. Investment Management Fee Rs. 15,82,291/- .

vii. Dis-allowance u/s. 40(a)(ia) Rs. 16,41,14,706/- on payments made to the mutual fund distributors.

Apart from the above additions, the Assessing Officer re-computed book profit under MAT provisions u/s. 115JB and made addition of Rs. 6,28,950/- u/s. 14A and Rs. 61,50,220/- on account of Long Term Capital Gains. Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(Appeals)-Chennai. The CIT(Appeals) vide impugned order dt. 03-07-2012 dismissed and appeal of the assessee.

3. Now, the assessee has come in second appeal before the Tribunal impugning the order of the CIT(Appeals)-XII, Chennai. The grounds stated in the Appeal are as under:

1. The order of the learned Commissioner of Income-tax(Appeals) [‘CIT (Appeals)’], to the extent prejudicial to the Appellant, is contrary to law, facts, and circumstances of the case.

2. The learned CIT (A) has erred in confirming the disallowance made by the Assessing Officer (‘AO’) of Rs. 6,28,950/- by invoking the provisions of section 14A of the Income-tax Act (‘the Act’) ignoring the fact that the Appellant had not incurred any expenditure for earning dividend income.

3. The learned CIT (A) has erred in confirming the disallowance made by the AO towards payment of Rs. 33,48,666/- made to Fund quest by invoking the provisions of section 40(a)(i) of the Act and stating that the payment is in the nature of royalty failing within the ambit of provisions of section 9 of the act.

4. The learned CIT (A) has erred in upholding the order of the AO in treating the payment of Rs. 1,85,95,094/- towards renovation of existing lease building as a capital expenditure ignoring the fact that the expenditure has neither resulted in any structural change to the building nor in the creation of new capital asset.

4.1 The learned CIT (A) has erred in not following the principles laid down in the decision of the Hon’ble Chennai ITAT in the Appellant’s own case for the Assessment Year (‘AY’) – 2006-07.

5. The learned CIT (A) erred in confirming the order of AO in not treating UPS as part of computers and adding back Rs. 18,68,338/- on account of excess depreciation claim.

5.1 The learned CIT (A) erred in rejecting the alternative claim of Appellant in treating the UPS as energy saving device and claiming depreciation at the rate of 80 percent on the same.

6. The learned CIT (A) has erred in confirming the order of AO, in adding back an amount of Rs. 15,82,291/- as income of the Appellant based on Form 16A ignoring financial statements filed.

7. The learned CIT (A), has erred in upholding the order of the AO, in disallowing the commission and brokerage payments made amounting to Rs. 16,41,14,706/- to various distributors of Mutual Fund schemes by invoking provisions of section 40(a)(ia) of the Act and erred in concluding that the sum liable to Tax Deducted at Source (‘TDS’) under section 194J of the Act.

7.1 The learned CIT (A) erred in stating that distributors are involved in preparing prospectus, marketing and advertisement when no such services were actually received by the appellant.

7.2 The learned CIT (A) erred in stating that payment to distributors is not in the nature of commission or brokerage without appreciating the fact that payments made are based purely on the quantum of units sold, irrespective of level of efforts of the distributors.

7.3 The learned CIT (A) ought to have appreciated the fact that the services rendered by the distributors do not fall within the scope of definitions of professional or technical services.

7.4 The learned CIT (A) ought to have appreciated that the commission and brokerage paid fall within the ambit of provisions of section 194H that specifically excludes payments towards purchase/sale of securities.

7.5 The learned CIT (A) ought to have appreciated the fact that the action of the learned AO is in contravention to the circular No. 720 dated 30-08-1995, where the Board has clarified that the payment for any sum shall be liable to deduction of tax under only one section.

7.6 The learned CIT (A) ought to have appreciated the fact that the learned AO erred in relying on the information displayed in the website of a third party who is in the business of Register and Transfer Agent.

8. The learned CIT (A) has erred in confirming the action of AO, in computing the minimum alternate tax under section 115JB, by adding a sum of Rs. 6,28,950/- under section 14A of the Act.

9. The learned CIT (A) has erred in remanding back the issue to the AO to examine the computation of book profit without adjudicating on the issue himself.

10. On the facts and circumstances of the case, the learned CIT (A) was not justified and erred in not deleting interest levied under section 234B and 234D of the Act as the same is bad in law.

4. Shri R. Parthasarathy, Advocate with Shri Sumeet Khurana, Chartered Accountant appearing on behalf of the assessee submitted that during the relevant assessment year, the assessee had not incurred any expenses in earning dividend income. The assessee being asset management company has thorough knowledge and understanding of Mutual Funds by virtue of its business operations. The assessee had not taken any funds bearing interest, therefore, the assessee has not incurred any interest cost. The ld. Counsel for the assessee further submitted that provisions of Rule 8D will not apply to short term investments, as the capital gain arising there from is taxable. The ld. Counsel contended that the authorities below have not given any specific finding while rejecting the contentions of the assessee. The AR in support of his contentions on the issue, relied on the following decisions:

1. Maxopp Investment Ltd., Vs. CIT reported as 347 ITR 272 (Del)

2. CIT Vs. Hero Cycles Ltd., reported as 323 ITR 518 (P&H)

3. Avshesh Mercantile Pvt. Ltd., Vs. DCIT in ITA No. 5779/Mum/2006 decided on 13-06-2012.

5. The ld. Counsel on ground No. 3 of the appeal submitted that an amount of Rs. 33,48,666/- was paid to M/s. Fund Quest for the services rendered abroad. M/s. Fund Quest does not have PE in India and the services rendered by them were advisory in nature. The Assessing Officer has erred in come into the conclusion that the payment is in the nature of ‘Royalty’. The assessee had not obtained any certificate u/s. 197 of the Act as assessee had no doubt that the payment is for services and not in the nature of ‘Royalty’. Since, the said amount is not taxable in India, the provisions of Section 195 are not applicable.

6. On the fourth ground of appeal relating to repair of lease¬hold premises, the ld. Counsel for the assessee submitted that at Page 42 of the Paper Book, the details of the expenditure have been given. The expenditure relates to demolition, painting work, floor work, partition, plumbing, false ceiling, storage, molder work, electrical work and AC Ducting. The lease period of building is three years with the option to renew thereafter. As, the premises is being used for office purpose, the nature of the expenditure is Revenue. The Assessing Officer has dis-allowed an amount of Rs. 1,85,95,094/- out of the total expenditure of Rs. 2,06,61,216/-. The ld. AR in order to support his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of M/s. Sundaram BNP Paribas Asset Management Company Ltd., Vs. ACIT in ITA No. 518/Mds/2010 decided on 7th January, 2011.

7. On the fifth ground of appeal relating to depreciation on UPS at 60% as applicable to computers, the ld. Counsel submitted that UPS is integral part of the computer system, without which the computers will not be fully operational. Thus, the depreciation as applicable in the case of computers should be allowed to the assessee. To support his submissions, the Counsel relied on the following decisions:

i. DCIT Vs. Datacraft India Ltd., reported as 9 ITR (Trib) 712 (Mum-SB);

ii. Haworth (I) P. Ltd., Vs. DCIT in ITA No. 534 1/Del/2010 decided on 29-04-2011.

iii. Maca wber Engineering Systems (India) P. Ltd., Vs. ACIT reported as 19 ITR (Trib) 302 (Mum)

8. On the issue of addition made on the basis of TDS Certificates, the ld. Counsel submitted that the assessee is managing the funds of Sundaram Mutual Fund Trust. For the services rendered, assessee receives management fee from the Trust. The fee is calculated at a specific rate on the quantum of assets managed and before making the payment, the Trust deducts tax at source. Tax is deducted at source on the daily accruals of fee payable by the Trust to the assessee. Subsequently, it transpired that excess amount was credited to the assessee. The excess amount was reversed by the assessee on the basis of audit. Therefore, the difference of Rs. 15,82,291/- is the amount reversed by the assessee after audit of the accounts. This difference in the TDS has occurred on account of the amount reversed by the assessee, therefore, the excess TDS deducted by the trust has to be adjusted. The Assessing Officer has erred in coming to the conclusion that the assessee has understated the income received from the Trust. In support of his contentions, the ld. Counsel relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Sudhir Sekhri in ITA No. 438/2010 and 460/2010 decided on 15-04-2010.

9. The seventh ground of appeal relates to the TDS on the brokerage paid to the distributors of the mutual fund schemes. The ld. Counsel submitted that the commission/brokerage paid to brokers for sale of various Mutual Funds are covered under the provisions of Section 1 94H. Such commissions paid to the brokers has been specifically excluded from tax deduction. The Assessing Officer has erred in applying the provisions of Section 1 94J relating to managerial and professional services. To support his contentions, the ld. Counsel relied on the judgment of the Hon’ble Bombay High Court in the case of CIT Vs. Kotak Securities reported as 3040 ITR 333 (Bom).

10. On the issue of re-computation of book profits u/s. 11 5JB the ld. Counsel submitted that the same will not be applicable in the present case as the net profit is higher than book profits computed under MAT provisions.

11. On the other hand, Shri T.N. Betgiri, appearing on behalf of the Revenue strongly supported the order of CIT(Appeals) and prayed for the dismissal of the appeal of the assessee.

12. We have heard the submissions made by the representatives of both the sides. We have also perused the orders of the authorities below as well as the decisions cited by the ld. AR for the assessee. Our issue-wise findings on the grounds raised by the assessee are as under:

i. Ground Nos. 1 & 9 are general in nature and therefore are not taken up for adjudication.

ii. Ground No.2 is with regard to dis-allowance u/s. 14A r.w.r. 8D; The contentions of the AR is that the assessee has not incurred any expenditure to earn dividends and hence the authorities below are un-justified in making addition under the provisions of rule 14A r.w.r. 8D. We are of the considered opinion that in view of the order of the Tribunal in the case of Cheminvest Ltd., Vs. ITO reported as 124 TTJ 577 (Del) (SB) wherein it has been held that if the expenditure is incurred in relation to income which does not form part of total income it has to suffer dis¬allowance irrespective of the fact whether any income is earned by the assessee or not. Section 14A does not envisage any such exception. Thus, in view of the observations made in the Special Bench of the Tribunal, dis-allowance has to be made u/s. 14A r.w.r. 8D. It is an admitted fact that the assessee has made investments. Some of the investments made by the assessee are short term. Since assessee is paying capital gains tax on short term investments, the provisions of Rule 8D will not apply on them. The Assessing Officer is directed to re¬compute dis-allowance u/s. 14A r.w.r. 8D after excluding short term investments. This ground of appeal of the assessee is partly allowed in the aforesaid terms.

iii. The third ground in the appeal relates to dis-allowance u/s. 40(a)(ia). The assessee is into investment business. The assessee has entered into an agreement with M/s. Fund Quest (France) on 13-07-2007, to provide investment advice for the investments to be carried outside India. M/s. Fund Quest has been providing advisory services. For the services rendered, the assessee paid fee in accordance with mutual agreement. In the course of providing advisory services, M/s. Fund Quest is providing certain data of the companies which facilitates the assessee to make investment decisions. The information provided to the assessee by Fund Quest in the form of database is published information which is available in public domain. M/s. Fund Quest has merely compiled the information and transmitted the same to assessee. The authorities below termed the payments made by the assessee to M/s. Fund Quest for the services and data provided as ‘Royalty’.

We are of the considered opinion that such payments cannot be termed as ‘Royalty’ as defined under the provisions of the Act. The term ‘Royalty’ has been defined in Explanation (2) to Section-9, Sub-section-1, Clause-(vi) which is re-produced here in below:

Explanation 2.—For the purposes of this clause, “royalty” means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for—

(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;

[(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]

(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or

(vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to [(iv), (iva) and](v).

Thus, a perusal of the term of ‘Royalty’ as defined in the Act shows that it does not include any information provided in the course of advisory services. We do not agree with the findings of the CIT(Appeals) on the issue. Since, payments made to M/s. Fund Quest are not in the nature of ‘Royalty’ and the services were rendered abroad, no part of income had accrued or arisen in India. The assessee is not liable to deduct tax at source on the payments so made. The findings of the CIT(Appeals) on this issue are set aside and this ground of appeal of the assessee is allowed.

iv. The fourth ground of appeal of the assessee relates to repairs of lease-hold premises. The assessee has placed on record at Page No. 42 of the Paper Book, the nature of work carried out by the assessee in the leased office premises. The assessee has claimed the expenditure on civil work which includes demolition, painting, flooring and partition etc., amounting to Rs. 2,06,61,216/- as revenue expenditure. The authorities below have held the same to be capital expenditure. The assessee has taken office building on lease for the period of three years with an option to extend with the consent of both parties. An Explanation 1 to Section 32(1) clearly spells out that where the business or provision of the assessee is carried on in a building not owned by him, in respect of which the assessee holds a lease or other rights of occupancy, any capital expenditure is incurred by the assessee for the purpose of the business or profession on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension or improvement to the building, then the provisions of this clause shall apply as if the said structure or work is building owned by the assessee. However, the aforesaid provisions are applicable where new asset has come into existence. The assessee in support of his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of M/s. Sundaram BNP Paribas Asset Management Company Ltd., Vs. ACIT (supra), the Tribunal in the aforesaid order has held as under:

5. We have considered the rival submissions. A perusal of the break up of the expenses which have been disallowed clearly shows that the expenditures are on the interior decorations and creation of the office atmosphere. The expenditure has not resulted in any building coming into existence nor has the existing building been modified or the structure altered. As the existing building has not been altered and there is no change to its structure as a result of the expenditure incurred by the assessee, it cannot be said that the expenditure incurred by the assessee is in the capital field. Further a perusal of the expenditure clearly shows that it is in the revenue field. In the circumstances we are of the view that the expenditure on the repairs and maintenance in the form of electrical fittings, electrification, cabinet, work station, partition, cupboard, stand etc. are liable to be treated as a revenue expenditure. In the circumstances, the orders of the learned CIT(A) and the Assessing Officer are reversed on this issue and the Assessing Officer is directed to grant the assessee the claim of revenue expenditure in regard to the said expenditure. Consequently, the depreciation as allowed by the Assessing Officer on the said expenditure which has been capitalized would stand reversed.

Whether the expenditure incurred on renovation of a building is capital or revenue, is a question of fact. The same has to be decided on the facts of each case. We find that the facts of the case of the assessee are similar to the one adjudicated by the Tribunal mentioned above. The civil work relates to the interior decoration and creation of the office atmosphere. Respectfully following the decision of the co-ordinate bench of the Tribunal, this ground of appeal of the assessee is allowed and the expenditure incurred by the assessee in modifying the interiors of a building into office are held to be revenue in nature.

v. The fifth ground of appeal of the assessee relates to the issue of depreciation on UPS: The assessee has claimed depreciation on UPS @ 60% treating the same as part of computer. On the other hand, the Assessing Officer has considered the UPS at par with Plant & Machinery and restricted the depreciation to 15%. It has been repeatedly held in various decisions of the Tribunal that depreciation @ 60% has to be provided on UPS treating it to be the part of computer. This issue has been decided by the Tribunal in the case of Haworth (I) P. Ltd., (supra) and Maca wber Engineering Systems (India) P. Ltd., (supra) wherein it has been held that UPS is an integral part of the computer. This view has been consistently followed by the Tribunal in various other appeals. Accordingly, this ground of appeal of the assessee is allowed and the assessee is entitled to claim depreciation @ 60% on UPS.

vi. The sixth ground of appeal of the assessee relates to Investment Management Fee. The case of the assessee is that the difference between the TDS and actual tax has occurred as the excess amount was invoiced to M/s. Sundaram Mutual Fund Trust (herein after referred to as ‘the Trust’) for whom the assessee is managing the funds. After audit of the accounts, the excess amount invoiced was reversed by the assessee. The trust made payments on daily accrual basis to the assessee after deduction of tax. Since excess amount was invoiced to the Trust, tax was deduced on the said excess amount at the time of payments, whereas the tax liability of the assessee is on the net amount after adjustment. The CIT(Appeals) has held that the assessee is following mercantile system of accounting. As and when it raises an invoice, the same was accepted by the Trust. Thus, the income stands accrued to the assessee in the year in which the said invoice is raised and acknowledged in a particular assessment year. The income received against those invoices have to be assessed in that particular assessment year. Any subsequent re-conciliation resulting in revision or reversal entry in the subsequent assessment year will not have bearing on the income accrued in the previous year.

It is a well settled law that the assessee should not be taxed twice for the same income or taxed for the income which has not accrued to him. It is evident from records and the impugned order that certain reversal entries were made to adjust the excess payments. It is also an admitted fact that tax has been paid on such excess payments. The income which has not accrued to the assessee is not liable to be taxed. In the instant case, the assessee had raised invoices to the Trust for Rs. 85,83,43,545/- (including service tax). Whereas the amount actually accounted in the books was Rs. 85,67,61 ,254/- (including service tax). There was net different of Rs. 15,82,291/- after adjustments which Assessing Officer brought to tax. The error was discovered during audit which was rectified. By the time the excess amount was reversed, Form 1 6A was issued. However, the Trust has issued confirmation letter regarding excess accrual. It is apparent from records that tax was deducted on excess invoicing which was reversed. In our considered opinion, the addition made is unjustified. The case of the assessee is squarely covered by the judgment of the Hon’ble Delhi High Court in the case of Sudhir Sekhri (supra) wherein similar view was taken by the Hon’ble High Court in the facts of that case. This ground of appeal of the assessee is accordingly allowed.

vii. The seventh ground of appeal relates to payments made to mutual fund distributors amounting to Rs. 16,41,14,706/- dis-allowed u/s. 40(a)(ia). The assessee had not deducted tax at source on the payment of the brokerage/commission paid to the mutual fund distributors on the ground that commission and brokerage does not include any payment made directly or indirectly on securities.

The Revenue has termed the payments made to the brokers as Fees for Professional & Technical Services and held that the assessee was liable to deduct tax under the provisions of Section 194J.

The provisions regarding deduction of tax at source on commission and brokerage are contained in Section 194H of the Act. The relevant extract of the section is reproduced herein below:

194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income 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 rate of [ten] per cent :

The terms commission and brokerage and securities are defined in Explanation to Section 194H. the same are extracted herein under:

Explanation –

i) “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities”;

ii) xxxxxxxxxxxxxxxxxxxx

(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ;

(iv) where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]

Section 2(h) of the Securities Contracts (Regulation) Act, 1956 defines securities as :

“2(h) “securities” include—

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002;

(id) units or any other such instrument issued to the investors under any mutual fund scheme;

(ie) xxxxxx”

From the perusal of aforesaid provisions of Section 1 94H and the definition of ‘Securities’ as defined under Securities Contract Regulation Act, it is clearly evident that securities include Mutual Funds and the provisions of Section 1 94H excludes commission or brokerage paid on securities.

The authorities below have held that the assessee should have deducted tax on commission/brokerage u/s. 194J of the Act as the services rendered by the brokers are professional and/or technical services. ‘Professional Services’ are defined in Explanation(a) to Section 194J as under:

Explanation.—

(a) “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;

A perusal of the above definition makes it abundantly clear that services rendered by Mutual Fund brokers do not fall within the term ‘Professional Services’. The services of Mutual Fund brokers cannot be termed as technical services as well, as the brokers do not require any special qualification in the field of law, engineering, accountancy or technical consultancy. Even an ordinary graduate from humanities group can be a broker. The brokers do not provide any technical know-how either, thus services rendered by them cannot be termed as technical services.

We do not concur with the findings of CIT(Appeals) on the issue for the aforesaid reasons. Accordingly, this ground of appeal of the assessee is allowed.

viii. The next ground of appeal relates to re-computation of books profits u/s. 115JB. The ld. Counsel for the assessee has stated that since the net profit under normal computation is higher than book profits computed u/s. 115JB, therefore, this ground of appeal has become academic. The ld. DR has not controverted the statement made by the Counsel of the assessee. This ground of appeal is dismissed accordingly.

ix. The last effective ground of appeal relates to deleting of interest u/s. 234B & 234D of the Act. Since levy of interest u/s. u/s. 234B & 234D is consequential in nature, this ground of appeal of the assessee is dismissed.

Accordingly, the appeal of the assessee is partly allowed in the aforesaid terms.

Order pronounced on Friday, the 19th July, 2013 at Chennai.

E-Filing Audit Report One More Controversy: Signed Or Unsigned Financial Statements

CA Sudir Halakhandi

One more controversy is going on with respect to uploading of the financial statements i.e. “Balance sheet and profit and loss account” with Form 3CD/ 3CB and this controversy is related to the physical signatures on the “Financial statements” before uploading the same on the site. 50% of the questions received by us are related to this problem hence we are discussing the same here today.

The first option is get the signature of the client and the CA on the financial statements, get it scanned on the in PDF form and upload it. If you are doing it then there is no controversy and perfectly you are taking an uncontroversial course of action in this respect.

The second option is to prepare an unsigned PDF file and upload it and in that case scanning is not required and you can convert the word file directly in PDF. There are views that this is also a correct process and convenient also because these financial statements are uploaded with the digital signatures of the CA and approved by the assessee with the DSC. The timing of taking signature of the assessee on financial statements and then scanning it is saved. This is the second view.

We are the follower of the first option and while uploading our report we are following the same process. The first option is perfectly correct hence if you are following it then there is no need for you to give any heed to this controversy since it is perfectly OK we are following it but since here we are sharing only our practical experience with the readers with claiming any expertise hence we are not disregarding the second option totally.

The first reason for opting the second option is wastage of time in getting the signatures of the assessee on the financial statements is not a valid reason because if you have completed the audit then taking signature of the client on Financial statements are mandatory and even after that you can upload the tax audit report legally. If you want to upload the audit report and financial statements without taking the signatures on the “Financial statements” then this is not valid legally. Practically by opting the second method you are merely saving the time of taking scanned copy of the Financial statements because in any case you cannot upload the Financial statements without taking signatures on it. If you are doing it then you may be extra ordinary practical but legally not correct.

One thing may be noted here that you can also sign the Financial statements with your DSC and also get it signed by the assessee with DSC before uploading the same but submitting the Financial statements with DSC of the CA and approving it with the DSC of the assessee as per the current practice of the uploading at IT site is not alternate of signing the Financial statement. There is a system of signing the PDF file with the DSC and some software are available in this respect and in that case you will find a mark of “digitally sign” on the financial statements and this is also the correct method of uploading the financial statements.

So before taking any decision in this respect please consider the facts mentioned above and then decide the right course of action.

50 Tax Audit Problems & Solutions – Technical & Other Issues

CA NITESH MORE INDEX

TECHNICAL ISSUES

1. Steps for Filling Online Tax Audit Report

2. Software Requirements

3. Problem in Slowdown of System

4. Problem of Mismatch in Name & DOB as Per ICAI and PAN Data

5. Attachments

6. Problem of Negative Figures

7. Problem of Providing Quantitative Details

8. Problem in Entry of Large No. Of Fixed Assets

9. Problem in Viewing Stock Figures

10. Problem of Depreciation in Webtel Software

11. Problem of No Space for Commodity

12. Problem in Calculation of NP Ratio

13. Problem of Blank Fields in Saved Draft Xml File

14. Problem of Viewing Data of Xml before Uploading

15. Problem of Printing/Saving Uploaded Xml File

16. Problem of Fakepath

17. Problem in Viewing Xml File from Client’s Login

18. How to Print Uploaded Xml Files

19. Problem in Getting Activation Link/SMS for Completing Registration

20. Unable to See Xml in Assessee’s Login

21. Non Acceptance of Negative Figures in Form 29B

22. Use of Special Characters

23. Problem of Non Generation of XML

24. Problem of Swapping Of Due Date and Actual Date

OTHER ISSUES

1. No. of Tax Audit a CA can Sign? Issue of section 44AD

2. Online Filling, Date of Signing and Date of Filling

3. Can a Partner Sign On Behalf Of Other Partners?

4. Problem of Two Tax Auditors of Same Assessee

5. Can Return Be Filed After Due Date

6. Revision of Tax Audit Report Once Filed

7. Offline Filed Tax Audit Report To Be Submitted Online Again?

8. ITR 7 to Be Filed Online?

9. Mandatory E-Filling of Trust, Society

10. Responsibility of Tax Auditor for Delay in Uploading

11. Penalty for Non Furnishing of Report

12. Waiver of Penalty for Non Furnishing

13. Format of Maintenance of Records of Tax Audit

14. Communication with Previous Auditor

15. Should CA Accept Tax Audit If Undisputed Fees of Previous Auditor Not Paid

16. Tar of Pvt Ltd Company

17. Address for NRI Director in ITR

18. Pan of Relative for Unsecured Loan

19. Return Can Be Uploaded Before TAR

20. Problem of Three Tax Auditors of Same Assessee

21. Problem of Different Methods of Valuation of Stock in Two Firms

22. Approval of Tar by Assessee Is Mandatory

23. How to Show Additional Depreciation

FREQUENTLY ASKED QUESTIONS ON E-FILLING OF TAX AUDIT REPORTS – TECHNICAL ISSUES

1. STEPS FOR FILLING ONLINE TAX AUDIT REPORT

Q1. What are the steps to be followed for E-filling of Tax Audit Report?

Ans. Step 1- One Time Registration of Chartered Accountant at E-filling website

Step 2 – Login to Assessee account at e-filling website and Add CA

Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.

Step 4 – Uploading XML file at E-filling website from CA’s Login Id

Step 5 – Approval of form uploaded by CA at E-filling website from Assessee’s Login Id

Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately

2. SOFTWARE REQUIREMENTS

Q2. What are operating system and runtime environment requirement for E-filling of Tax Audit Report?

Ans. Operating System – Windows XP with Service Pack 3/ Windows 7/ Windows 8.

Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.

3. PROBLEM IN SLOWDOWN OF SYSTEM

Q3. Our system becomes very slow during working on e-utility. What should we do?

Ans. Remove all old versions of Java to improve performance. Better use Google chrome. Can also use Mozilla Firefox.

4. PROBLEM OF MISMATCH IN NAME & DOB AS PER ICAI AND PAN DATA

Q4. I am unable to register as CA as there is difference in name/date of birth as per ICAI and PAN data. What to do?

Ans. It is requested to file form 49 amendment and get data rectified in PAN immediately. Kindly also note that the day you receive a SMS that your pan amendment has been approved, you will be able to register at site whether you actually receive PAN or not.

5. ATTACHMENTS

Q5. What are the documents to be attached to Tax Audit Report?

Ans. B/S, P&L, Schedules, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

6. PROBLEM OF NEGATIVE FIGURES

Q6. System is not accepting negative figures in brackets i.e. “()”. What should we do?

Ans. Use negative sign. i.e. minus “-“

7. PROBLEM OF PROVIDING QUANTITATIVE DETAILS

Q7. Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?

Ans. Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available,

a) Write nil in online form 3CD &

b) Report why quantitative details is not provided in the following two places:

i) In paper form 3CD &

ii) Notes to accounts

c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: “Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details”

8. PROBLEM IN ENTRY OF LARGE NO. OF FIXED ASSETS

Q8. An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.

Ans. In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.

i. Assets put to use on or before 2^nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2^nd October, wherever possible.

ii. Assets put to use after 2^nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31^st March, wherever possible.

It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.

The above can be summarized in the following steps:

Step 1 – All fixed assets may be grouped into different blocks of assets.

Step 2 – Each of these groups can be further divided into 2 parts. (i) Assets put to use on or before 2^nd October (ii) assets put to use after 2^nd October (eligible for half of depreciation)

Step 3 - For assets brought on or before 2^nd October, we can argue that those assets were put to use on 2^nd October and accordingly relevant entries can be made in the online form 3CD.

Step 4 - For assets brought after 2^nd October, we can argue that those assets were put to use on 31^st March and accordingly relevant entries can be made in the online form 3CD.

Step 5 – Sale of assets for each of group should be entered in a separate row while filling online form 3CD.

Step 6 - It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.

9. PROBLEM IN VIEWING STOCK FIGURES

Q9. I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.

Ans. It is the inherent problem of the software but your xml file contains the correct data. Open the xml file in Internet Explorer and check it. You can edit xml file, however you have to adopt unceremonious way to edit the xml file for the necessary correction for the item in subsequent rows of point 28A. Therefore it is advised to fill up point 28A before filling any other point from point 7 onwards.

10. PROBLEM OF DEPRECIATION IN WEBTEL SOFTWARE

Q10. We have received demand relating to AY 2012-13, for almost for all companies for which income tax return were filled using Webtel software. The demand pertains to non-deduction of deprecation u/s32 in the return processed u/s 143(1) by CPC Bangalore, as claim by us in ITR 6. I just want to know if any other user of Webtel are also facing same problem.

Ans: The Problem Was Faced Many CA Using Webtel Software Due To Non Updation. I Suggest Submitting Revised Return or Making Rectification U/S 154.

11. PROBLEM OF NO SPACE FOR COMMODITY

Q11. In online Form 3CD, nature of business is to be mentioned i.e. Trading/Manufacturing & Retailer/ Wholesaler, but there is no space given for a particular commodity, say, cloth/ medicine/ cement. What should we do?

Ans. You can select, say, retailers & thereafter choose others (i.e. 104, 204, etc as applicable).

12. PROBLEM IN CALCULATION OF NP RATIO

Q12. If any businessman having a cloth business & also keeps photocopy machine/ agent of LIC, the income from photocopy machine / commission received from LIC is used for calculating the NP ratio. If so, then in this case GP ratio is less then NP ratio. So what to do about it?

Ans. You have to calculate NP ratio as a whole of the business for which tax audit was conducted.

13. PROBLEM OF BLANK FIELDS IN SAVED DRAFT XML FILE

Q13. When we reopen draft saved xml file, many fields which we had already entered is showing blank.

Ans. The software has some inherent errors as a result when we reopen draft saved xml file, it shows blank i.e. we have to re-enter the fields again. These fields are 7(B), 8(B), 9(A), 10, 11(D), 12(B), 21(Notes), 22(A), 22 AND 23.

14. PROBLEM OF VIEWING DATA OF XML BEFORE UPLOADING

Q14. How we can view data of XML before uploading?

Ans. You can view the xml file of tax audit report prepared in e utility of department. CA P.K. Agarwalla has prepared the screen shots of the process to view the same. The process is as follows:

Go to Programme →Microsoft Office →Microsoft Office Access 2003/2007 → New blank data base → Click blank data base → A window with file name database1.accdb will appear on the right hand side pane. → Click on create. Your new date base is saved by default in my Documents. (You may save the same to your choice folder)

A new data base is opened. Go to and click External data → Click XML file>Browse the xml file for which you want to create/view or save the data →Click OK→ Import XML→ Click OK→ Check the box “Save import steps”→ Close.

Your data base is ready, on the left hand side pane the indexes for “All Tables” do appear. By clicking any Table/ any point you can easily view and save its contents presently appearing in the XML file. Once the xml file is saved and the data base is reopened it will show the updated entries lying in the XML file. If some member finds any error in the tables he can easily make corrections opening the utility.

15. PROBLEM OF PRINTING/SAVING UPLOADED XML FILE

Q15. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans. U can save the work in middle by using “Save Draft” Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.

16. PROBLEM OF FAKEPATH

Q16. When we are uploading the 3CA and 3CD online one error is coming cannot read fake path file. I have placed the XML file in c drive fakepath folder and using Google chrome for that. Please help on the issue.

Ans. Kindly check the name of folder is “fakepath” and not as fake path, in C drive.

17. PROBLEM IN VIEWING XML FILE FROM CLIENT’S LOGIN

Q17. We uploaded form 3CD of a client. When it is viewed from the client’s login (i.e. for approving or rejecting), the dates in point no. 16(b) of form 3CD is getting interchanged (i.e. in the due dates column actual dates are seen and vice versa). But there is no mistake at our end. We have filled in the data in the income tax offline utility correctly and generated xml.

Ans. Your XML File contains the right data. Do not worry, upload it.

18. HOW TO PRINT UPLOADED XML FILES

Q18. CA has no option to print uploaded xml files. How to print?

Ans. CA has no option to print uploaded xml files. However, it can be printed from assessee’s login id, even before approval by assessee as the said xml file can be downloaded, from assessee’s login id, in the pdf format by default.

19. PROBLEM IN GETTING ACTIVATION LINK/SMS FOR COMPLETING REGISTRATION

Q19. A Chartered Accountant in practice registered himself with his DSC in the e-filing website. But he neither received any sms nor any activation link in his e-mail. When he tried again to register himself, the message was that he is already registered. But when he tried to log in, it was informed that the link is not activated. What should he do now?

Ans. Go to login page and enter your User ID i.e. ARCA(Mem. No.) e.g. ARCA300700 and enter your Password as given then click on “Resend Activation Link”. You will get a mail from the site. If it does not work then reset your Password by sending mail at validate@incometaxindia.gov.in.

20. UNABLE TO SEE XML IN ASSESSEE’S LOGIN

20. I had uploaded one Form 3CD, 10 days back and same was reflecting in my log in and I also received message for uploading. Now when I go to assessee log, same form is not available for validation. When I try to re-file from my log in I am getting massage that you are already submitted and assessee has not rejected/accepted.

Ans. Kindly Go to Work lists and approve it.

21. NON ACCEPTANCE OF NEGATIVE FIGURES IN FORM 29B

Q21. In the department utility, the point no.9 of Annexure A of Form 29B is not accepting negative figures.

Ans. Kindly Type 0, Until Such Inherent Error in Software Is Rectified By Department

22. USE OF SPECIAL CHARACTERS

Q22. Can we use special characters while typing address?

Ans. No, special characters are not allowed while typing address.

23. PROBLEM OF NON GENERATION OF XML

Q23. The department utility is opening the saved data and saving draft successfully but it does not generate XML file when we click generate XML file

Ans. First validate it and generate

24. PROBLEM OF SWAPPING OF DUE DATE AND ACTUAL DATE

Q24. I have noticed that under the Clause No. 16(b) there is an error in the utility. The columns of due date and actual date for payments as show in the utility have been reversed against the actual data being generated in the XML file. The column headers should be swapped. The same is also evident from the form being generated at the time of approval.

Ans. This is the inherent problem. Kindly do not swap the dates at the time of data entry. IT department had been communicated with such problems.

FREQUENTLY ASKED QUESTIONS ON E-FILLING OF TAX AUDIT REPORTS – OTHER ISSUES

1. NO. OF TAX AUDIT

Q1. Whether Tax Audit Report u/s 44AD etc will be counted in the specified limits of 45 Tax Audits?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, these will not be included and you can file unlimited such Tax Audit Reports

Q2. What are the limits on signing of Tax Audit Report?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008,

a) A CA can sign up to 45 Tax Audit.

b) In case of Partnership Firm, limit will be 45 / Partner.

c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF IS NOT APPLICABLE)

2. ONLINE FILLING, DATE OF SIGNING AND DATE OF FILLING

Q3. What are the Tax Audit Reports which are to be compulsorily filed online?

Q4. Should we sign Tax Audit Report on 30^th September?

Ans. As the word “before” has been used in sec. 44AB, we should not sign Tax Audit Report on 30^th September. You should sign Tax Audit Report before 30^th September, since the assessee is required to “obtain” Tax Audit Report before the due date i.e. 30^th September.

Q5. Where audit is to be conducted u/s 92E, what is the last date of filling online Tax Audit Report?

Ans. Normally, Tax Audit Report is to be submitted by 30^th September. However, for these assesses Report u/s 92E as well as Tax Audit Report can be filled by 30^th November.

3. CAN A PARTNER SIGN ON BEHALF OF OTHER PARTNERS

Q6. Please advice in case of partnership firm can only one partner sign all the reports?

Ans.

a) Clause 12 Of Part I of Schedule I of Chartered Accountants Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm

b) Sign can be either digital or physical

c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.

[Clause 12 of Part I of Schedule I of Chartered Accountants Act states that “A CA in practice will be guilty if he allows a person not being a member of the institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, any balance-sheet, P&L a/c, report or financial statements"]

4. PROBLEM OF TWO TAX AUDITORS OF SAME ASSESSEE

Q7. An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps:

a) Combine data of two B/S, P/l, tax audit report and submit as one

b) If tax audit conducted by two CAs, any CA can submit.

c) It is advised to attach physical copies of both Tax Audit Reports too, for disclosure of the fact that (i) two CAs have done Tax audit and (ii) that CA who is filling had relied on the work of other CA

5. CAN RETURN BE FILED AFTER DUE DATE

Q8. Can Income tax Return be e-filed after 30^th September? However we will file Tax Audit Report within 30^th September?

Ans. Yes, Online Tax Audit Report is to be filed by 30^th September to avoid penalty of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower. However, return may be filed later. However, such return will be treated as belated return.

6. REVISION OF TAX AUDIT REPORT ONCE FILED

Q9. Can online filed Tax Audit Report be revised?

Ans. A Tax Audit Report which has not been approved by assessee can be revised. However after it has been approved by the assessee, it should not be revised. However, there is no restriction by the utility, as of now, to upload revised xml. So we should take due care, so that correct data is uploaded in the first instance itself. However, members may kindly note that, all the xml files uploaded will be there in their domain.

7. OFFLINE FILED TAX AUDIT REPORT TO BE SUBMITTED ONLINE AGAIN?

Q10. I have uploaded 5 returns without uploading tax audit as it was required to submit offline at that time. Should we submit these again online?

Ans. No, you are not required to submit IT Return online again. However, kindly ensure that Tax audit Report is duly uploaded within due date.

8. ITR 7 TO BE FILED ONLINE?

Q11. Whether e-Filing of ITR 7 For AY 2013 – 14 mandatory or can we file paper returns also?

Ans. It Is Mandatory To Submit Online

9. MANDATORY E-FILLING OF TRUST, SOCIETY

Q12. Are All Charitable Trust and Cooperative Society’s Income Tax Return Are to E-File?

Ans: The Charitable Trusts etc. are Required To File Return Online Also.

10. RESPONSIBILITY OF TAX AUDITOR FOR DELAY IN UPLOADING

Q13. Is tax auditor responsible for delay in uploading of Tax Audit Report?

Ans. Guidance Note on Tax Audit states that normally, it is the professional duty of the CA to ensure that the audit accepted by him is completed before the due date. Hence, yes, if delay is attributable to his part.

11. PENALTY FOR NON FURNISHING OF REPORT

Q14. What are the penalties for non furnishing a Tax Audit Report?

Ans. Sec 271B states that, if any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.

12. WAIVER OF PENALTY FOR NON FURNISHING

Q15. What are the circumstances under which penalty cannot be imposed for non furnishing of Tax Audit Report?

Ans. As per section 273B, no penalty is imposable under section 271B on the assessee for the above failure if he proves that there was reasonable cause for the said failure. The onus of proving reasonable cause is on the assessee. Some of the instances where Tribunals/Courts have accepted as “reasonable cause” are as follows:

(a) Resignation of the tax auditor and consequent delay;

(b) Bona fide interpretation of the term `turnover’ based on expert advice;

(d) Labour problems such as strike, lock out for a long period, etc.;

(e) Loss of accounts because of fire, theft, etc. beyond the control of the assessee;

(f) Non-availability of accounts on account of seizure;

(g) Natural calamities, commotion, etc.

13. FORMAT OF MAINTENANCE OF RECORDS OF TAX AUDIT

Q16. What is the format for maintaining records of Tax Audit Assignments?

Ans. Record of Tax Audit Assignments

1. Name of the Member accepting the assignment

2. Membership No.

3. Financial year of audit acceptance

4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.

Sl. No.	Name of the Auditee	AY of the Auditee	Date of Appointment	Date of acceptance	Name of the firm on whose behalf the member has accepted the assignment	Date of communication with the previous auditor (applicable)
1	2	3	4	5	6	7

14. COMMUNICATION WITH PREVIOUS AUDITOR

Q17. Is communication with the previous tax auditor necessary?

Ans. Yes

15. SHOULD CA ACCEPT TAX AUDIT IF UNDISPUTED FEES OF PREVIOUS AUDITOR NOT PAID

Q18. Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, “a member of the Institute in practice shall not accept the appointment as auditor of an entity in case the undisputed audit fee of another CA for carrying out the statutory audit under the Companies Act, 1956 or various other statutes has not been paid”

16. TAR OF PVT LTD COMPANY

Q19. Whether Form 3CA or Form 3CB to use for Tax Audit Report purpose of a Pvt. Ltd. Co. having statutory Audit done by the same CA.

Ans. Form No 3CA-3CD

17. ADDRESS FOR NRI DIRECTOR IN ITR

Q20. While filling Director Details in ITR 6, only Indian Address is accepted in the form. However, one of the directors is an NRI and having foreign address. Should we fill in a local address of the Director and proceed or there is some other way out?

Ans. ITR-6 Required Residential Address. If Indian Address Available Then Give.

Particulars of MD, Directors, Secretary and Principal officer(s) who have held the office during the previous year	Name	Designation	Residential Address	PAN
S.No.

18. PAN OF RELATIVE FOR UNSECURED LOAN

Q21. Whether it is mandatory to mention Pan No of Party Related with Unsecured Loan in online 3CD Form

Ans. EFiling software is not accepting it without PAN. Hope error will be rectified soon.

19. RETURN CAN BE UPLOADED BEFORE TAR

Q22. Is there any problem in uploading Income Tax Return before filing/approval of Tax Audit forms?

Ans. Date of furnishing TAR to department is to be mentioned in ITR. So TAR is to be filed first.

20. PROBLEM OF THREE TAX AUDITORS OF SAME ASSESSEE

Q23. An Individual Has Three Businesses Audited By Same/Different Tax Auditors. How To Submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps.

a) Combine data of all B/S, P/l, tax audit report and submit as one

b) If tax audit conducted by different CAs, any CA can submit.

c) It is advised to attach physical copies of all Tax Audit Reports too, for disclosure of the fact that (i) different CAs have done Tax audit and (ii) that CA who is filling had relied on the work of all other Cas. (iii) There are three different Tax audit report whose data has been combined while submitting online TAR.

21. PROBLEM OF DIFFERENT METHODS OF VALUATION OF STOCK IN TWO FIRMS

Q24. An Individual Have 2 Firms. In One Firm, Method Of Valuation Of Closing Stock Is Cost Or Market Price Whichever Is Less. However, In Other Firm, Stock Is Valued At Market Price. How To Show It In Online Form 3cd?

Ans. It is better to mention the facts in separate sheet and attach with the online audit report.

22. APPROVAL OF TAR BY ASSESSEE IS MANDATORY

Q25. What If The Assessee Does Not Approve The Audit Report Submitted Before The Due Date

Ans. It may be presumed that no tar has been submitted by assessee

23. HOW TO SHOW ADDITIONAL DEPRECIATION

Q26. How To Show Additional Depreciation in the Online Form 3CD.

Ans. Add It with Normal Depreciation

—————-

Author can be reached at moreassociate@gmail.com
Courtesy – CA Deepak Tibrewal, CA P.K. Agarwalla & CA Raj Singhania

Transfer pricing adjustments of more then 70K crore in F.Y. 2012-13

Tax Evasion by Foreign Companies
Data on dollars transferred abroad by foreign companies in India is not centrally maintained by the government. However, with a view to prevent shifting of profits out of India and consequent erosion of the Indian tax base, selected international transactions undertaken are analysed every year in accordance with the transfer pricing provisions contained in Chapter X of the Income Tax Act, 1961. The total quantum of transfer pricing adjustments made in the last three years are as under:
Financial Year           Amount of adjustment (in Rs. Crores)
2011-12                                   23, 237
2011-12                                   44, 531
2012-13                                   70, 016
Chapter X, containing special provisions relating to avoidance of tax, was inserted in the Income Tax Act, 1961 vide the Finance Act, 2001. Section 92 (1) of the Income Tax Act, 1961 stipulate that income from an international transaction shall be computed based on the arm’s length principle. Further, income of foreign companies operating in India is taxed as per the extant provisions of Income Tax Act, 1961 and the various Double Taxation Avoidance Agreements. Some of the relevant sections of the Income Tax Act in this regard are section 9, 44BB, 44BBA, 44 BBB, 44DA, 115A etc.
This was stated by Minister of State for Finance, Shri J.D. Seelam in a written reply to a question in Lok Sabha today.

Frequently Asked Questions: Tax Audit Related Problems

CA NITESH MORE

NO. OF TAX AUDIT A CA CAN SIGN

Q1. Will Tax Audit Report u/s 44AD, 44AE, 44AF be counted in the specified limits of 45 Tax Audits? What are the limits on signing of Tax Audit Report?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008:

a) A CA can sign up to 45 Tax Audit.

b) In case of Partnership Firm, limit will be 45 / Partner.

c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF IS NOT APPLICABLE)

ONLINE FILLING, DATE OF SIGNING AND DATE OF FILLING

Q2. What are the Tax Audit Reports which are to be compulsorily filed online? Should we sign Tax Audit Report on 30^th September? Where audit is to be conducted u/s 92E & 44AB, what is the last date of filling online Tax Audit Report?

Ans. As per Notification No. 34/2013 dated 01/05/2013, & Notification No. 42/2013 dated 11/06/2013, Audit reports under Sections 10 (23C) (iv), (v), (vi) or (via), 10A, 12A (1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB are to be filed electronically. (It covers audit report u/s 44AD, 44AE, 44AF also) (FROM FY 2012-13, SEC 44AF ISNOT APPLICABLE). As the word “before” has been used in sec. 44AB, we should not sign Tax Audit Report on 30^th September. You should sign Tax Audit Report before 30^th September, since the assessee is required to “obtain” Tax Audit Report before the due date i.e. 30^th September. Where audit is to be conducted u/s 92E & 44AB, 3Oth sep. is the last date of filling online.

CAN A PARTNER SIGN ON BEHALF OF OTHER PARTNERS

Q3. Please advice in case of partnership firm can only one partner sign all the reports?

Ans.

a) Clause 12 Of Part I of Schedule I of C. A. Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm

b) Sign can be either digital or physical

c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.

PROBLEM OF TWO TAX AUDITORS OF SAME ASSESSEE

Q4. An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps:

a) Combine data of two Tax Audit Reports and submit as one

b) If tax audit conducted by two CAs, any CA can submit.

c) It is advised to attach physical copies of both Tax Audit Reports too, for disclosure of the fact.

CAN RETURN BE FILED AFTER DUE DATE

Q5. Can Income tax Return be e-filed after 30^th September? However we will file Tax Audit Report within 30^th September?

STEPS FOR FILLING ONLINE TAX AUDIT REPORT

Q6. What are the steps to be followed for E-filling of Tax Audit Report?

Ans. Step 1- One Time Registration of Chartered Accountant at E-filling website

Step 2 – Login to Assessee account at e-filling website and Add CA

Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.

Step 4 – Uploading XML file at E-filling website from CA’s Login Id

Step 5 – Approval of form uploaded by CA at E-filling website from Assessee’s Login Id

Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately

SOFTWARE REQUIREMENTS

Q7. What are operating system and runtime environment requirement for E-filling of Tax Audit Report?

Ans. Operating System – Windows XP with Service Pack 3/ Windows 7/ Windows 8.

Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.

PROBLEM IN SLOWDOWN OF SYSTEM

Q8. Our system becomes very slow during working on e-utility. What should we do?

Ans. Remove all old versions of Java to improve performance. Better use Google chrome. You can use Mozilla Firefox.

PROBLEM OF MISMATCH IN NAME & DOB AS PER ICAI AND PAN DATA

Q9. I am unable to register as CA as there is difference in name/date of birth as per ICAI and PAN data. What to do?

ATTACHMENTS

Q10. What are the documents to be attached to Tax Audit Report?

Ans. B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

PROBLEM OF NEGATIVE FIGURES

Q11. System is not accepting negative figures in brackets i.e. “()”. What should we do?

Ans. Use negative sign. i.e. minus “-“

PROBLEM OF PROVIDING QUANTITATIVE DETAILS OF INVENTORY

Q12. Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?

Ans. Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available,

a) Write nil in online form 3CD &

b) Report why quantitative details is not provided in the following two places:

i) In paper form 3CD &

ii) Notes to accounts

c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: “Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details”

PROBLEM IN ENTRY OF LARGE NO. OF FIXED ASSETS

Q13. An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.

Ans. In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.

i. Assets put to use on or before 2^nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2^nd October, wherever possible.

ii. Assets put to use after 2^nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31^st March, wherever possible.

It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.

The above can be summarized in the following steps:

Step 1 – All fixed assets may be grouped into different blocks of assets.

Step 3 - For assets brought on or before 2^nd October, we can argue that those assets were put to use on 2^nd October and accordingly relevant entries can be made in the online form 3CD.

Step 4 - For assets brought after 2^nd October, we can argue that those assets were put to use on 31^st March and accordingly relevant entries can be made in the online form 3CD.

Step 5 - It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.

PROBLEM IN VIEWING STOCK FIGURES

Q14. I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.

PROBLEM OF DEPRECIATION IN WEBTEL SOFTWARE

Q15. We have received demand relating to AY 2012-13, for almost for all companies for which income tax return were filled using Webtel software. The demand pertains to non-deduction of deprecation u/s. 32 in the return processed u/s 143(1) by CPC Bangalore, as claim by us in ITR 6. I just want to know if any other user of Webtel are also facing same problem.

Ans: The Problem Was Faced Many CA Using Webtel Software Due To Non Updation. I Suggest Submitting Revised Return or Making Rectification U/S 154.

PROBLEM OF BLANK FIELDS IN SAVED DRAFT XML FILE

Q16. When we reopen draft saved xml file, many fields which we had already entered is showing blank.

PROBLEM OF VIEWING DATA OF XML BEFORE UPLOADING

Q17. How we can view data of XML before uploading?

Ans. You can view the xml file of tax audit report prepared in e utility of department. The process is as follows:

Go to Programme → Microsoft Office → Microsoft Office Access 2003/2007 → New blank data base →Click blank data base → A window with file name database1.accdb will appear on the right hand side pane → Click on create →Your new date base is saved by default in my Documents. (You may save the same to your choice folder)

A new data base is opened. Go to and click External data → Click XML file>Browse the xml file for which you want to create/view or save the data → Click OK → Import XML → Click OK → Check the box “Save import steps”→ Close.

PROBLEM OF PRINTING/SAVING UPLOADED XML FILE

Q18. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans. You can save the work in middle by using “Save Draft” Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.

PROBLEM OF FAKEPATH

Q19. When we are uploading the 3CA and 3CD online one error is coming cannot read fake path file. I have placed the XML file in c drive fakepath folder and using Google chrome for that. Please help on the issue.

Ans. Kindly check the name of folder is “fakepath” and not as fake path, in C drive.

PROBLEM IN VIEWING XML FILE FROM CLIENT’S LOGIN

Q20. We uploaded form 3CD of a client. When it is viewed from the client’s login (i.e. for approving or rejecting), the dates in point no. 16(b) of form 3CD is getting interchanged (i.e. in the due dates column actual dates are seen and vice versa). But there is no mistake at our end. We have filled in the data in the income tax offline utility correctly and generated xml.

Ans. Your XML File contains the right data. Do not worry, upload it.

HOW TO PRINT UPLOADED XML FILES

Q21. CA has no option to print uploaded xml files. How to print?

REVISION OF TAX AUDIT REPORT ONCE FILED

Q22. Can online filed Tax Audit Report be revised?

OFFLINE FILED TAX AUDIT REPORT TO BE SUBMITTED ONLINE AGAIN?

Q23. I have uploaded 5 returns without uploading tax audit as it was required to submit offline at that time. Should we submit these again online?

Ans. No, you are not required to submit IT Return online again. However, kindly ensure that Tax audit Report is duly uploaded within due date.

RESPONSIBILITY OF TAX AUDITOR FOR DELAY IN UPLOADING

Q24. Is tax auditor responsible for delay in uploading of Tax Audit Report?

PENALTY FOR NON FURNISHING OF REPORT & WAIVER OF PENALTY FOR NON FURNISHING

Q25. What are the penalties for non furnishing a Tax Audit Report? What are the circumstances under which penalty cannot be imposed for non furnishing of Tax Audit Report?

As per section 273B, no penalty is imposable under section 271B on the assessee for the above failure if he proves that there was reasonable cause for the said failure. The onus of proving reasonable cause is on the assessee. Some of the instances where Tribunals/Courts have accepted as “reasonable cause” are as follows:

(a) Resignation of the tax auditor and consequent delay;

(b) Bona fide interpretation of the term `turnover’ based on expert advice;

(d) Labour problems such as strike, lock out for a long period, etc.;

(e) Loss of accounts because of fire, theft, etc. beyond the control of the assessee;

(f) Non-availability of accounts on account of seizure;

(g) Natural calamities, commotion, etc.

FORMAT OF MAINTENANCE OF RECORDS OF TAX AUDIT

Q26. What is the format for maintaining records of Tax Audit Assignments?

Ans. Record of Tax Audit Assignments

1. Name of the Member accepting the assignment

2. Membership No.

3. Financial year of audit acceptance

4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.

Sl. No.	Name of the Auditee	AY of the Auditee	Date of Appointment	Date of acceptance	Name of the firm on whose behalf the member has accepted the assignment	Date of communication with the previous auditor (applicable)
1	2	3	4	5	6	7

COMMUNICATION WITH PREVIOUS AUDITOR & ACCEPTANCE IF UNDISPUTED FEES OF PREVIOUS AUDITOR NOT PAID

Q27. Is communication with the previous tax auditor necessary? Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?

Ans. Yes, communication with the previous tax auditor necessary. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, “a member of the Institute in practice shall not accept the appointment as auditor of an entity in case the undisputed audit fee of another CA for carrying out the statutory audit under the Companies Act, 1956 or various other statutes has not been paid”

PROBLEM IN GETTING ACTIVATION LINK/SMS FOR COMPLETING REGISTRATION

Q28. A Chartered Accountant in practice registered himself with his DSC in the e-filing website. But he neither received any sms nor any activation link in his e-mail. When he tried again to register himself, the message was that he is already registered. But when he tried to log in, it was informed that the link is not activated. What should he do now?

Author can be reached at moreassociate@gmail.com

Courtesy – CA Deepak Tibrewal, CA P.K. Agarwalla & CA Raj Singhania

Aircraft Owned & used by Assessee for travel of its Directors exempt from wealth Tax

The use of an aircraft for commercial purposes does not necessarily entail hiring to third parties, ferrying of passengers or leasing of the aircrafts for consideration. The intention of the legislature while creating the exception by using the expression “used by the Assessee for commercial purposes” was not to restrict the meaning of the words ‘commercial purposes’ to running the same on hire or as stock in trade.

The use of an aircraft by the executives or directors of a company for the purposes connected with its business would amount to use by the Assessee for commercial purposes. In case the Assessee was using the aircrafts for transporting its directors or executives for excursion purposes or for personal purposes the same would not qualify as use of the aircraft for commercial purposes and would not be exempt from wealth tax. In the present case the ITAT has recorded that it is undisputed that the two aircrafts were used by the Assessee for its business. Since this is the undisputed factual position, the same would be exempt from wealth tax.

HIGH COURT OF DELHI AT NEW DELHI

Judgment reserved on : 03rd July, 2013

Judgment pronounced on: 1 1th July, 2013

WTA 1/2013

COMMISSIONER OF WEALTH TAX

versus

JAY PEE VENTURES LTD

CORAM:

HON’BLE MR. JUSTICE SANJIV KHANNA

HON’BLE MR. JUSTICE SANJEEV SACHDEVA

ORDER

SANJEEV SACHDEVA, J.

1. This is an appeal filed by the Revenue impugning the order dated 30th March 2012 passed by the Income Tax Appellate Tribunal whereby the appeal of the Revenue against the order of the Commissioner of Wealth Tax (appeals) dated 24.12.2010 has been dismissed.

2. The assessment year in issue is 2004 – 2005.

3. The question that arises for consideration in the

present appeal is whether the aircraft owned by the

Assessee and used for its business would be exempt from wealth tax?”

4. The Assessing Officer vide order dated 31 .03.2006 has held that the two aircrafts owned by the Assessee and used for its own business purposes were chargeable to wealth tax. The Assessing Officer while interpreting the provisions of section 2 (ea) (iv) of the Wealth Tax Act – 1957 held that aircraft being used other than for commercial purposes were chargeable to wealth tax. As per the Assessing Officer the aircraft which were either used for running the same for earning business income or held as stock in trade would be exempt from wealth tax but an aircraft used by the Assessee for its own business would not be treated as used for commercial purposes and as per the Assessing Officer aircraft used for transportation of goods of the Assessee’s own business or aircrafts used by the directors or any other executive of the company were not to be treated as used for commercial purposes and hence would be treated as an asset for wealth tax purposes. As per the Assessing Officer aircraft used by an airline would be treated as used for commercial purposes. We record and note that the Assessing Officer did not dispute or record that the aircrafts were not used for Assessee’s business.

5. Aggrieved by the order dated 31 .3.2006 of the Assessing Officer, the Assessee filed an appeal before the Commissioner Income Tax (Appeal). Relying upon the judgement of the Income Tax Appellate Tribunal, Mumbai Bench in the case of Garware Wall ropes Ltd versus additional Commissioner of income tax (2004) 89 ITD 221 (Mumbai) the Commissioner Income Tax (Appeal) held that the aircrafts owned by the Assessee were not taxable assets within the meaning of section 2 (ea) (iv) of the Wealth Tax Act.

6. Aggrieved by the said order the Revenue filed an appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide its order dated 30 March 2012 has dismissed the appeal of the Revenue as it was not in dispute that the two aircrafts were used by the Assessee for its business. Aggrieved, Revenue has filed the present appeal.

7. The learned counsel for the Revenue submitted that the Assessee was neither in the business of commercially operating the aircrafts for hire nor was holding the same as stock in trade but was using the said aircrafts for the purposes of transportation/travel of its directors and executives and as such the same were not being used for commercial purposes and were not exempt from wealth tax.

8. We find no merit in the submission of the Learned Counsel for the Revenue. Section 2 (ea)(iv) of the Wealth tax act, 1957 lays down as under:

(ea) “assets”, in relation to the assessment year commencing on the first day of April, 1993, or any subsequent assessment year means-

(iv) yachts, boats and aircrafts (other than those used by the Assessee for commercial purposes);

9. The term “commercial purposes” has not been defined by the Wealth Tax Act – 1957. The words “used by the Assessee for commercial purposes” have to be understood to mean used by the Assessee for the purposes connected with its business. When the Assessee uses the aircrafts in connection with its business as distinct from using it for personal purposes or non-business purposes, the use of the aircraft would be a use for commercial purposes and would be thus exempt from the purview of wealth tax.

10. When the directors or executives of a company use an aircraft owned by the company to travel to its various offices or to various places for meeting or business purposes connected with the operation and activities of the company, the use of the aircraft would amount to usage for commercial purposes. In the today’s need and requirement for the efficient running of businesses, the directors and executives of a company instead of taking commercial flights prefer to travel by their own aircrafts which in turn saves them time and provides them the flexibility of travelling at short notices to various destinations without having the need to plan in advance. This is a practical necessity and help business grow, expand and generate profit.

11. The use of an aircraft for commercial purposes does not necessarily entail hiring to third parties, ferrying of passengers or leasing of the aircrafts for consideration. The intention of the legislature while creating the exception by using the expression “used by the Assessee for commercial purposes” was not to restrict the meaning of the words “commercial purposes” to running the same on hire or as stock in trade.

12. The use of an aircraft by the executives or directors of a company for the purposes connected with its business would amount to use by the Assessee for commercial purposes. In case the Assessee was using the aircrafts for transporting its directors or executives for excursion purposes or for personal purposes the same would not qualify as use of the aircraft for commercial purposes and would not be exempt from wealth tax. In the present case the ITAT has recorded that it is undisputed that the two aircrafts were used by the Assessee for its business. Since this is the undisputed factual position, the same would be exempt from wealth tax.

13. Learned counsel for the appellant has submitted that the decision of the tribunal in Garware Wall Ropes Ltd (supra) has not been taken up in appeal in the revenue before the Bombay High Court and has been accepted

14. We find no infirmity in the impugned order of the Income Tax Appellate Tribunal. The appeal being devoid of merit as no substantial question of law arises for consideration and is thus dismissed with no order as to costs.

Understanding Specified Domestic Transaction Provisions

1.0 INTRODUCTION:

Transfer pricing regulations introduced in India in 2001, but till very recently covered only cross border related party transactions. Honoring the Supreme Court ruling in case of CIT vs. M/s Glaxo Smithkline Asia (P) Limited, CBDT expanded the ambit of transfer pricing to Specified Domestic Transactions w.e.f. 1st April, 2013.

Thus, The Finance Act, 2012 extended its scope to cover certain domestic transactions with related parties within India, defined as ‘Specified Domestic Transactions’ (SDT). This will principally have impact in two ways. To begin with, the pricing of the domestic transactions will need to comply with the arm’s length principle by application of one of the prescribed methods. In addition, there will be compliance and documentation obligations for such specified domestic transactions.

The provisions apply from the financial year 2012–13 onwards if the aggregate value of the transactions exceeds Rs. 5 crores in the relevant financial year.

SDT includes payments to related parties, inter-unit transfer of goods or services of profit linked tax holiday-eligible units, transactions of profit-linked tax holiday-eligible units with other parties and any other transaction that may be notified by the Central Board of Direct Taxes.

2.0 PURPOSE OF INTRODUCING DOMESTIC TRANSFER PRICING

It was realized by the government that:

Presently, there is no method prescribed to determine reasonableness of expenditure to re-compute the income in related party transactions
There is need to provide objectivity in determination of income and determination of reasonableness of expenditure in domestic related party transactions
There is need to create legally enforceable obligation on assessee to maintain proper documentation

3.0 RELEVANT SECTIONS OF INCOME TAX ACT, 1961 PERTAINING TO DOMESTIC TRANSFER PRICING REGULATIONS:

3.1 Section 92(2): Where in an international transaction [or specified domestic transaction], two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm’s length price of such benefit, service or facility, as the case may be.

3.2 Section 92(2A): Any allowance for an expenditure or interest or allocation of any cost or expense or any income in relation to the specified domestic transaction shall be computed having regard to the arm’s length price.

3.3 SECTION 92BA: MEANING OF SPECIFIED DOMESTIC TRANSACTION.

For the purposes of this section and sections 92, 92C, 92D and 92E, “specified domestic transaction” in case of an assessee means any of the following transactions, not being an international transaction, namely:—

(i) any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A;

(ii) any transaction referred to in section 80A;

(iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA;

(iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA;

(v) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable; or

(vi) any other transaction as may be prescribed,

and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of five crore rupees.

3.4 PENALTIES APPLICABLE ON NON-COMPLIANCE:

Section 271(1)(c): If adjustment is treated as concealment of income: Penalty will be 100% to 300% of the tax on adjustment
Section 271AA: Failure to maintain required set of documents: 2% of value of transactions
Section 271BA: Failure to furnish report by due date: Rs. 1,00,000
Section 271G: Failure to furnish documentation: 2% of value of transactions

4.0 DEFINITION

4.1 TAX HOLIDAY BENEFICIARIES IMPACTED BY DOMESTIC TRANSFER PRICING

Section	Nature of Undertakings covered
80IA	Undertakings engaged in Developing, operating and maintaining, developing and operating and maintaining infrastructure facilities Generation/ transmission or distribution of power Reconstruction/ revival of power generating plants
80IAB	Undertakings engaged in development of SEZ’s
80IB	Undertakings located/ engaged in Industrially backward districts as notified; Scientific research & development Refining of mineral oil/ commercial production of natural gas Operating cold chain facility for agricultural produce Processing, preservation and packing of meat/ meat products or poultry/ marine/ dairy products Operating and maintaining a hospital of specified capacity
80IC	Industrial Undertakings or enterprises established in special categories state
80ID	Industrial Undertakings engaged in development of hotels and convention centres in specified areas
80IE	Undertakings in North-eastern States
80JJA	Undertakings engaged in collection and processing of bio-degradable wastes
80JJAA	Undertakings engaged in employment of new workmen
80LA	Offshore Banking Units and International Financial Service Centres
80P	Co-operative Societies

4.2 MEANING OF RELATED PARTIES UNDER DOMESTIC TRANSFER PRICING REGULATIONS

Tax Payer	Section	Related Party
Individual	40A(2)(b)(i)	Any Relative
Company	40A(2)(b)(ii)	Any Director or his / her Relative
Firm	40A(2)(b)(ii)	Any Partner or his / her Relative
AOP	40A(2)(b)(ii)	Any Member or his / her Relative
HUF	40A(2)(b)(ii)	Any Member or his / her Relative
Any Tax Payer*	40A(2)(b)(iii)	Any individual having substantial interest in the taxpayer’s business or his / her relative
Any Tax Payer*	40A(2)(b)(iv)	A Company, firm, AOP, HUF having substantial interest in the taxpayer or any director, partner, member of such company, firm, AOP, HUF or Relative of such director, partner or member
Any Tax Payer*	40A(2)(b)(v)	A Company, firm, AOP, HUF of which director, partner, member having substantial interest in the taxpayer or any director, partner, member of such company, firm, AOP, HUF or Relative of such director, partner or member
Any Tax Payer*	40A(2)(b)(vi)	A person in which taxpayer / any director, partner, member of taxpayer / relative of such individual, director, partner or member has substantial interest

* Substantial Interest means beneficial ownership of shares with at least 20% voting right or beneficial entitlement of at least 20% of the profits

COMPLIANCE REQUIREMENTS FOR DOMESTIC TRANSFER PRICING

Current Compliance Requirements

} Section 10AA: For claiming tax deduction, CA Certificate in Form 56F needs to be filed transactions are at ALP by selecting the most appropriate method

} Section 40A: Transactions to be reported in Tax Audit Report in Form 3CD

} Section 40A(2) read with Section 92(2); Section 92(2A) and Section 92BA: Expenditure paid or to be paid to related parties will require to be at arm’s length

} Section 80IA: Declaration of Additional Compliance Requirements & Declaration of profit to be made in CA Certificate in Form 10CCB

} Section 92D: read with Rule 10D: Maintaining Contemporaneous Documentation prove that transactions are at ALP

} Section 92E: Filing audit report in Form 3CEB / any other Form may be prescribed

5.0 DUE DATE FOR FILING RETURNS

Section 92F (iv) states that specified date for filing form 3CEB shall have the same meaning as assigned to Explanation 2 below section 139(1):

Explanation 2 (aa) below Section 139, states that due date for filing return of income of the assessee who is required to furnish accountant report under section 92E is 30^th November of the assessment year.

6.0 OUR ANALYSIS:

With introduction of “Specified domestic transaction provisions”, the finance ministry is now moving towards:

} Shift of focus from generic ‘Fair Market Value’ concept to ‘Arm’s Length Price’

} Fair Market Value can established using basic market evidence

Thus, transfer pricing regulations will now applicable to all taxpayers including Individuals, Hindu Undivided Families (HUFs). Assesses will need to evaluate intra-group transactions with greater detail and will in turn also increase the administrative and compliance burden for the taxpayer in respect of such transactions. Further, if excessive or unreasonable expenses are disallowed in the hands of tax payer at time of the assessment then corresponding adjustment to the income of the recipient will not be allowed in the hands of recipient of income. Hence, it may lead to double taxation in India. Following points also needs to be kept in mind:

} Arm’s Length Price can be determined by use of six prescribed methods

} Advance Pricing Agreements NOT applicable to specified domestic transactions

} Assessing officer’s powers shifted to Transfer Pricing Officer (‘TPO’)

Since the due date for filing of the income tax return is extended to 30^th November of the assessment year, the professionals can file the income tax return as well as tax audit return by 30^th November.

NOTIFICATION NO.41/2013 [F.NO.142/42/2012-TPL]/SO 1491(E), DATED 10-6-2013 has made it mandatory for e-filing of Form 3CEB for all the assessee to whom the provisions of Transfer Pricing is applicable. The common utility file is available for download from the following website: https://incometaxindiaefiling.gov.in/e-Filing/

SDT: COMMON TRANSACTIONS BETWEEN THE RELATED PARTIES

} Purchase/lease of movable and immovable property

} Centralized Corporate Services – Strategy, Marketing, Design & Engineering, HR, accounting, finance

} Common management personnel expenses like common MD, CEO

} Use of common facilities and Infrastructure – space, equipment, etc.

} Use of brand name or trademarks (if payments are involved)

} Reimbursement of expenses

} Granting of Corporate Guarantees / Performance Guarantees by Parent Company to its subsidiaries (if payment of guarantee commission / fees are involved);

} Intra-group purchase / sell / service transactions;

} Payment made to key personnel of the group companies;

} Payment of interest on loans within the group companies

} Payment made to relatives of key personnel of the group companies

} Partition of HUF properties if value exceeds Rs. 5 crores;

} Payment of Salary, Remuneration, Interest on Partners Capital if value exceeds Rs. 5 crores;

DISCLAIMER

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

(Author, Jinesh Bhagdev, Practicing Chartered Accountant, Mumbai can be contacted at jinesh@jbhagdev.com and Co- author Mr. P D Sarang can be contacted as pdsarang@gmail.com)

Insertion of new section 194-IA.

—After section 194-I of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2013, namely :—

‘194-IA. Payment on transfer of certain immovable property other than agricultural land.—(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent. of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

Explanation.—For the purposes of this section,—

(a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2 ;

(b) "immovable property" means any land (other than agricultural land) or any building or part of a building.’.

Clause 42 of the Bill seeks to insert a new section 194-IA in the Income-tax Act relating to payment on transfer of certain immovable property other than agricultural land.

It is proposed to insert a new section 194-IA to provide that any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall deduct an amount equal to one per cent. of such sum as income-tax at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of cheque or draft or by any other mode, whichever is earlier.

It is further proposed to provide that no deduction shall be made where consideration for the transfer of an immovable property is less than fifty lakh rupees.

It is also proposed to provide an Explanation defining the expressions "agricultural land" and "immovable property".

This amendment will take effect from 1st June, 2013.

Procedure to claim Refund On Contract Cancellation with non-resident

Posted In Income Tax Case Laws | Judiciary | No Comments »

Case of the assessee is covered by sub-clause (b) of clause 2 of Circular No. 7 dated 23-10-2007 and it is also covered by clause 2(b) of Circular No. 790 dated 20.04.2000. In para 2.1 of Circular 7 dated 23-10-2007, it is clearly provided that once the amount already remitted in pursuance of a contract has been refund back to the remitted after cancellation of the contract, any income does not accrue to the nonresident. It is also provided in the circular that the amount of tax paid u/s. 195 can be refunded to the deductor with prior approval of the Chief Commissioner of Income Tax. The detailed procedure in this regard is provided in the said circular and certain pre-conditions are to be satisfied, suitable undertaking from the deductor has to be obtained before the refund can be issued. It also specifies that refund can be given only if the non-resident has not filed any return and the time limit for filing of return has already expired.I find that the submission of the Ld. Authorized Representative has merit. Once, the contract has been cancelled and the money has been received back, tax already paid for such remittance is no longer payable to the credit to the Government as per law on behalf of non resident and as per the said Circular, refund should be issued to the deductor following the specified procedure and after satisfying the conditions provided in the circular.

INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI

BEFORE SHRI R.K. GUPTA, JM, AND SHRI N. K. BILLAIYA, AM
I.T.A. No.6100/Mum/2011

Assessment Year: 2007-2008)

Income Tax Officer, (International Taxation) TDS-2, Mumbai

Vs.

M/s. Sun Pharmaceutical Industries Ltd.

Date of Hearing : 25.06. 2013

Date of Pronouncement : 10.07.2013

OR D E R
Per : R.K. Gupta, JM
This appeal filed by the Department against the order of Ld. CIT(A) -11, dated 09.06.2011 relating to the Assessment Year 2007-08.
2. The facts in the case are that assessee remitted a sum of US$ 4,00,000 to M/s. Scandinavian Health of Taiwan on 0 1-06-2006 on 0 1-06-2006 on account of consulting charges/fees. However, the assessee did not deduct tax at source u/s. 195 of the Act, therefore, AO passed an order u/s 201 and 201(1A) of the Act on 4.12.2006 and raised a total demand of Rs. 24,08,536/-. The assessee preferred appeal before the CIT(A). Thereafter, assessee moved the application before Ld. CIT(A) that since our application u/s 154 is pending before Ld. AO, therefore, this appeal may be treated as withdrawn. Accordingly, the appeal was allowed to be withdrawn by Ld. CIT(A). After that Assessing Officer rejected the application filed u/s 154 stating in his order that there is no mistake apparent on record. Assessee preferred appeal again before the CIT(A) against the order of Ld. AO. Detailed submissions were filed before the CIT(A) along with the paper books.
3. After considering the submissions and perusing the material on record Ld. CIT(A) found that the contract agreement with a Taiwan Company, Scandinavian Health Ltd.(HSL) has been cancelled. Cancellation of contract was also filed. Reliance was placed on the Board Circular No.7 of 2007 dated 23.10.2007. The CIT(A) found that since the contract has been cancelled therefore, there was no point to deduct the TDS. Accordingly, the matter was sent back to the AO to verify the contention laid down in Circular No. 7 of 2007 for a refund of tax already collected and refund the tax so collected if any to the assessee. Now the department is in appeal before the Tribunal. The Ld. DR stated that the AO was correct in holding that there is no apparent mistake in the order passed u/s 143(3) stated that certain new evidences were filed before Ld. CIT(A) and AO was not granted any opportunity.

4. On the other hand, the Ld. AR stated that the CIT(A) has allowed the appeal of the assessee subject to verification of the details and Board Circular, therefore, it is wrong to suggest that AO was not allowed any opportunity.5. After considering the order of the AO, CIT(A) and the submission of both the parties , we found no infirmity to the finding of the Ld. CIT(A). Finding of the CIT(A) are accorded in para-3 page 14 to 16.

“ 3. I have considered the facts of the case, paper books filed and examined the Circulars carefully. The assessee has also filed the copies of various invoices raised on it in pursuance to the contract by M/s. Scandinavian Health Ltd. (SHL). Assessee has also filed copy of credit note dated 19-12-2008 in pursuance of cancellation of contract with SHL and the documents showing inward remittance of US$ 7,99,980/- issued by State Bank of Nova Scotia dated 05-02-2009. Copy of original agreement as well as the copy of cancellation letter are also filed in support of the case.

3.1 In find that the case of the assessee is covered by sub-clause (b) of clause 2 of Circular No. 7 dated 23-10-2007 and it is also covered by clause 2(b) of Circular No. 790 dated 20.04.2000. In para 2.1 of Circular 7 dated 23-10-2007, it is clearly provided that once the amount already remitted in pursuance of a contract has been refund back to the remitted after cancellation of the contract, any income does not accrue to the nonresident. It is also provided in the circular that the amount of tax paid u/s. 195 can be refunded to the deductor with prior approval of the Chief Commissioner of Income Tax. The detailed procedure in this regard is provided in the said circular and certain pre-conditions are to be satisfied, suitable undertaking from the deductor has to be obtained before the refund can be issued. It also specifies that refund can be given only if the non-resident has not filed any return and the time limit for filing of return has already expired.
3.2 I find that the submission of the Ld. Authorized Representative has merit. Once, the contract has been cancelled and the money has been received back, tax already paid for such remittance is no longer payable to the credit to the Government as per law on behalf of non resident and as per the said Circular, refund should be issued to the deductor following the specified procedure and after satisfying the conditions provided in the circular.

3.3 Accordingly, it is held that no tax is payable by the nonresident assessee (SHL) in relation to transactions in pursuance of the contract with the appellant dated 06-07-2006. Accordingly, appeal of the assessee is allowed and the A. O. is directed to verify the condition laid down in Circular No.7 of 2007 for refund of tax already collected and refund the tax so collected, if any, to the assessee by following the procedure laid down in the circular and after ensuring that the conditions given therein are fully satisfied.

6. The above findings are self explanatory which does not require any interference, Ld. CIT(A) has allowed the issue in favour of assessee subject to verify the contention laid down under Board Circular and other details. Therefore, it cannot be said that AO was not allowed any opportunity as the AO has to verify the details before granting any refund of tax if any. Accordingly, we confirm the order of the CIT(A).

7. In the result, the appeal of the Department is dismissed.

Order pronounced on 10^thDay July, 2013.

Should CBDT extend the Due Date of Return Filing?

Posted In Income Tax | News |

Today is the last date for Return Filing for the Assessee Including Individual, HUF, partnership Firm Etc whose Accounts are not required to be audited under the Income Tax Act or any other law and also for a working partner of a firm whose accounts are not required to be audited under the Income Tax Act or any other law.

This Year Department has made E-Filing Compulsory For All the Individual and HUF whose Total Income Exceeds 5 Lakh. Last Year This Limit was Rs. 10 Lakh. This decrease in Limit resulted in more Rush on Income tax E-filing website which slowed down the e-filing website and people found it difficult to upload the ITR. Even as per department estimate in Peak hours E-Filing rate was 85000/- returns per hour.

Do Share your views by way of comments below the Post on the question that do you think CBDT extend the Due Date of Return Filing and if yes, why?

e-filing of Income Tax Returns got Overwhelming Response

Posted In Income Tax | News |

Overwhelming Response for e-filing from Every Corner of the Country; More than 82 Lakh Returns E-Filed till 29th July, 2013 which is More than 40% of the Returns e-filed during the Same Period Last Year; Record Peak of more than 85,000 Returns Per Hour Achieved .

The due date for filing of Income Tax Return for individuals and non-auditable cases is 31st July, 2013. There has been an overwhelming response for e-filing from every corner of the country. More than 82 lakh returns have been e-filed till 29th July, 2013 which is more than 40% of the returns e-filed during the same period last year.
On 30th July, 2013, 6.23 lakh returns were e-filed till 6:00 PM. Record peak of more than 85,000 returns per hour has been achieved.
Due to overwhelming response, some taxpayers have reported problems in accessing e-filing portal which is primarily due to network constrains of the local internet service providers. The e-filing portal has been running without any interruptions and is being continuously monitored by a dedicated team of income tax officials in Bangalore. The situation will again be reviewed by the CBDT tomorrow morning.

S. 68 Addition cannot be made in the absence of books on the basis of mere bank statement

Posted In Income Tax Case Laws | Judiciary | No Comments »

In the instant case, it is an undisputed fact that the assessee has not maintained any books of account and whatever credit entries are found by the Assessing Officer, it was from the bank accounts of the assessee in which deposits were made at different point of time. Even the passbook issued by the bank cannot be termed to be the book of the assessee as per the judgment of the Hon’ble Bombay High Court CIT vs. Bhaichand N. Gandhi (supra). Therefore, provisions of section 68 of the Act cannot be invoked on various deposits/credits found recorded in the bank account of the assessee in the absence of books of the assessee maintained for that previous year.

The ld. CIT(A) has adjudicated the issue in the light of the aforesaid judgment and has held that provisions of section 68 of the Act cannot be invoked. Besides, he has also examined the additions made by the Assessing Officer through grounds No.1 to 6 on merit also and has noted that in each and every case the assessee has furnished plausible and reasonable explanations with respect to the deposits found recorded in the bank passbook of the assessee and on merit also the ld. CIT(A) did not find any justification in the additions made by the Assessing Officer. Though we are of the view that provisions of section 68 of the Act cannot be invoked on the deposits made in the bank account of the assessee, yet we have examined the veracity of the additions made by the Assessing Officer on certain deposits by invoking the provisions of section 68 of the Act and we find that before the ld. CIT(A) the assessee has furnished reasonable and plausible explanations along with confirmation with regard to the different deposits. Since the ld. CIT(A) has adjudicated the issue on merit also in the light of the explanations and confirmations placed before him, in a proper perspective and we find no infirmity therein, we confirm the same. Accordingly, finding no merit in the Revenue’s appeal, we dismiss the same.

IN THE INCOME TAX APPELLATE TRIBUNAL

LUCKNOW BENCH “B”, LUCKNOW

BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND

SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER

ITA No.398/LKW/2012 – Assessment Year:2009-10

Income Tax Officer, Barabanki v. Shri. Kamal Kumar Mishra

C.O. No.69/LKW/2012 – Assessment Year:2009-10

Shri. Kamal Kumar Mishra v. Income Tax Officer

Department by: Smt. Ranu Biswas, D.R.

Assessee by: S/Shri. M. P. Mishra & Shailendra Mishra, Advocates

Date of hearing: 21.03.13

Date of pronouncement: 25.04.13

O R D E R

PER SUNIL KUMAR YADAV:

This appeal is preferred by the Revenue against the order of the ld. CIT(A) on various grounds, which are as under:-

1. The CIT (A) has erred in law and on facts in deleting the addition made by Assessing Officer of Rs.5,78,900/- u/s 68 of the Income Tax Act 1961. He failed in appreciate the fact that the assessee failed to prove the identity of the creditors and the genuineness of the transactions. In doing so the CTT(A) has overlooked the decisions of Manak Chandra Laxman Das vs CIT 140 ITR 151 (Alld.).

2. The CIT(A) has erred in law and on facts in deleting the addition made by Assessing Officer of Rs.7,89,333/- u/s 68 of the Income Tax Act, 1961. He failed to appreciate the fact that the assessee failed to file any evidence of the source of income of the alleged lenders. Mere confirmation letters or affidavits from the lenders do not save to prove the genuineness of the transaction. In doing so the CIT(A) has overlooked the decisions of Nanak Chandra Laxman Das vs CIT 140 ITR 151 (Alld.).

3. The CIT(A) has erred in law and on facts in deleting the addition made by Assessing Officer of Rs.5,80,500/- u/s 68 of the Income Tax Act, 1961. He failed to appreciate the fact that the assessee failed to produce any evidence to prove the identity and creditworthiness of the lender or the genuineness of the transaction. In doing so he failed to apply the decisions of Nanak Chandra Laxman Das vs CIT 140 ITR 15 I (Alld.).

4. The CIT(A) has erred in law and on facts in deleting an amount of Rs.2,80,000/- out of addition of Rs.5,60,000/- made by Assessing Officer u/s 68 of the Income Tax Act, 1961. He failed to appreciate the fact that the assessee’s explanation that this was the STRIDHAN received by his wife at the time of her marriage almost 25 years ago was unreasonable and was not supported by any evidence.

5. The CIT(A) has erred in law and on facts in deleting the addition made by Assessing Officer of Rs.1,32,600/- u/s 68 of the Income Tax Act, 1961. He failed in appreciate the fact that the assessee failed to provide any evidence of the so called opening capital available with him.

6. The CIT(A) has erred in law and on facts in deleting the addition made by Assessing Officer of Rs.87,000/- u/s 68 of the Income Tax Act, 1961. He failed let appreciate the fact that the assessee had disclosed Rs.40,000/- only as agriculture income and not Rs.1,27,000/-. Moreover the assessee has not given any explanation regarding the source of making expenses on agriculture amounting to Rs.87,000/-

2. The assessee has filed cross objection challenging the additions of `2.80 lakhs in respect of Stridhan of his wife and `78,895 on the basis of presumption, sustained by the ld. CIT(A).

3. During the course of hearing, the ld. counsel for the assessee has opted not to press the cross objection filed by the assessee, to which the Revenue has no objection. Accordingly, the cross objection filed by the assessee is dismissed being not pressed.

4. Now we are left with Revenue’s appeal, through which the order of the ld. CIT(A) is assailed on deletion of additions made under section 68 of the Income-tax Act, 1961 (hereinafter called in short “the Act”).

5. At the outset, the ld. counsel for the assessee invited our attention to the fact that the assessee is an Advocate by profession and he has not maintained any books of account for the previous year relevant to the assessment year under consideration. Whatever deposits are noticed by the Assessing Officer, these were from the bank passbooks on different dates. The Assessing Officer has invoked the provisions of section 68 of the Act for making additions of all the deposits in the bank at different dates after treating them to be unexplained cash credit. The ld. counsel for the assessee further contended that the provisions of section 68 of the Act can only be invoked where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory. In that eventuality, the said sum so credited may be charged to income-tax as the income of the assessee of that previous year. Since various deposits on different dates in the bank are not found to have been credited in the books of the assessee, provisions of section 68 of the Act cannot be invoked for making addition of the same to the income of the assessee for that impugned previous year. In support of his contention, the ld. counsel for the assessee has placed reliance upon the judgment of the Hon’ble Gauhati High Court in the case of Anand Ram Ratiani vs. CIT [1997] 223 ITR 544 (Gau.) and the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Bhaichand N. Gandhi [1982] 11 Taxman 59 (Bom.), in which it has been categorically held that passbook supplied by the bank to the assessee could not be regarded as a book of the assessee. The expression “books” used in section 68 of the Act means the books have to be books of the assessee himself, not of any other assessee. The ld. counsel for the assessee further contended on merit also that the deposits found recorded in the bank account of the assessee were duly explained before the Revenue Authorities and having convinced with the explanations, the ld. CIT(A) deleted the addition.

6. Finding force in the arguments of the ld. counsel for the assessee in the light of the aforesaid judgments, the legal position with regard to the invocation of the provisions of section 68 of the Act on the entries found /recorded in the bank passbook was confronted to the ld. D.R. and his comments were sought. Except relying upon the orders of the Assessing Officer, the ld. D.R. could not produce any judicial pronouncements in support of his contention that the provisions of section 68 of the Act can also be invoked on the credit entries found recorded in the bank account. Since this argument goes to the root of the case, we felt it necessary to adjudicate the same at the threshold. For reference, we extract the provisions of section 68 of the Act as under:-

“68. Cash credits.–Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”

7. The aforesaid provisions of section 68 of the Act can only be invoked where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory. In that eventuality, the said sum so credited may be charged to income-tax as the income of the assessee of that previous year. Meaning thereby maintenance of books of the assessee, in which credit entry so found, is a condition precedent for invoking the provisions of section 68 of the Act. Now the question arises whether the passbook issued by the bank with regard to the accounts of the assessee can be termed to be the books of the assessee for the purpose of section 68 of the Act. This issue was examined by the Hon’ble Bombay High Court in the case of CIT vs. Bhaichand N. Gandhi (supra) and while answering the question i.e. whether on the facts and circumstances of the case, the Tribunal was justified in holding that cash credit for the previous year shown in the assessee’s bank passbook issued to him by the bank, but not shown in the cash book maintained by him for that year does not fall within the ambit of section 68 of the Act and as such the sum so credited is not chargeable to income tax as the income of the assessee of that previous year, their Lordships of the Hon’ble Bombay High Court categorically held that passbook supplied by the bank to the assessee could not be regarded as book of the assessee, that is, a book maintained by the assessee or under his instruction. The relevant observations of the Hon’ble Bombay High Court are extracted hereunder:-

“In Baladin Ram v. CIT [1969] 71 ITR 427, it has been held by the Supreme Court that it is now well settled that the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year. Even under the provisions embodied in s.68 of the said Act it is only when any amount is found credited in the books of the assessee for any previous year that the section will apply and the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory.

As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent’s account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived.”

8. In the case of Anand Ram Ratiani vs. CIT (supra), the Hon’ble Gauhati High Court has also held that perusal of section 68 of the Act shows that in relation to expression “books”, the emphasis is on the word “assessee” meaning thereby that such books have to be the books of the assessee himself and not of any other assessee. In that case, the books of account of the partnership firm were not treated as those of the individual partner and accordingly the additions made in the hands of the individual partners on the basis of the books of the partnership firm was deleted.

9. In the instant case, it is an undisputed fact that the assessee has not maintained any books of account and whatever credit entries are found by the Assessing Officer, it was from the bank accounts of the assessee in which deposits were made at different point of time. Even the passbook issued by the bank cannot be termed to be the book of the assessee as per the judgment of the Hon’ble Bombay High Court CIT vs. Bhaichand N. Gandhi (supra). Therefore, provisions of section 68 of the Act cannot be invoked on various deposits/credits found recorded in the bank account of the assessee in the absence of books of the assessee maintained for that previous year.

10. The ld. CIT(A) has adjudicated the issue in the light of the aforesaid judgment and has held that provisions of section 68 of the Act cannot be invoked. Besides, he has also examined the additions made by the Assessing Officer through grounds No.1 to 6 on merit also and has noted that in each and every case the assessee has furnished plausible and reasonable explanations with respect to the deposits found recorded in the bank passbook of the assessee and on merit also the ld. CIT(A) did not find any justification in the additions made by the Assessing Officer. Though we are of the view that provisions of section 68 of the Act cannot be invoked on the deposits made in the bank account of the assessee, yet we have examined the veracity of the additions made by the Assessing Officer on certain deposits by invoking the provisions of section 68 of the Act and we find that before the ld. CIT(A) the assessee has furnished reasonable and plausible explanations along with confirmation with regard to the different deposits. Since the ld. CIT(A) has adjudicated the issue on merit also in the light of the explanations and confirmations placed before him, in a proper perspective and we find no infirmity therein, we confirm the same. Accordingly, finding no merit in the Revenue’s appeal, we dismiss the same.

11. In the result, appeal of the Revenue and Cross Objection of the assessee are dismissed.

Order pronounced in the open court on 25.4.2013.

Initiation of proceedings u/s 153C based on document seized from third party which neither mentions the name of the assessee or bears his signature is not justified

Posted In Income Tax Case Laws | Judiciary | No Comments »

This document was seized from the business premises of D. Nagarjuna Rao in course of action u/s 132 of the Act against him. In the impugned assessment order the AO has also observed that the said D. Nagarjuna Rao had admitted that entries in the seized documents were made by him in his own handwriting. While considering the objection of the assessee, the AO has also admitted the fact that neither the name of the assessees appear in the seized document nor it bears their signature. The notings made in the seized document only shows that an amount of Rs. 74,81,250/- was paid to Mr. Venkatesh towards sale consideration of the property. When the document in question was not seized from the assessee but from a third party, who admittedly has made the entries therein and furthermore when the seized document neither mentions the name of the assessee or bears his signature, then by no stretch of imagination it can be said to be belonging to the assessee. Thus, the precondition for initiating proceeding u/s 153C is not satisfied. Therefore, the initiation of proceeding u/s 153C against the assessee is without jurisdiction.

Source- M/s Shouri Constructions Vs. ACIT (ITAT – Hyderabad), ITA Nos. 2056 & 2057/Hyd/2011 , Date of Pronouncement: 28/06/2013

Income Tax Department cautioned on use of Mobile applications for Filing

Posted In Income Tax | News | No Comments »

There are Mobile applications which are not approved by the Income Tax Department. Users are advised that they may not be according to Department data structure. Filers using them are doing at their own risk.

Source- Incometaxindiaefiling.gov.in

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S.No.	Due Date of meeting	Agenda	Particulars	e-forms	Due DateForm Filling
1	30^thJune	Filing of return of deposits.	If there is any deposit in company.	DPT-3	30^th June
2	*28-Jul	Disclosure of Interest- MBP-1	Preparation of MBP-1,Resolution for adoption, preparation and filing of MGT-14	MGT-14	27-Aug
3	6-Sep	Adoption of Annual Accounts and Director’s Report	Resolution for adoption, preparation and filing of MGT-14	MGT-14	5-Oct
4	30-Sep	Filing – Balance Sheet	Preparation, certification and filing of Form 23AC	23AC(AOC-1)	30-Oct
5	30-Sep	Filing- Profit & Loss Account	Preparation, certification and filing of Form 23ACA	23ACA(AOC-1)	30-Oct
6	30-Oct	Filing of Annual Return	Preparation of Annual Return, preparation, certification and filing of Form 20B	20B(MGT-7)	30-Nov
7	30-Sep	Filing of Auditor Appointment	Preparation of Form ADT-1 and filing with Form GNL-2	ADT-1	14-Oct

S.NO.	Particulars of Documents	Concerned Form	Time Period
a.	Board Resolution for acceptance of MBP-1	MGT-14	with in 30 days of BM
b.	Board Resolution for Adoption of Annual Account	MGT-14	with in 30 days of BM
c.	Balance Sheet	AOC-1	within 30 days of AGM
d.	Profit & Loss Account	AOC-1	within 30 days of AGM
e.	Cash Flow Statement	AOC-1	within 30 days of AGM
f.	Annual Return	MGT-7	With in 60 days of AGM
g.	ADT-1- Appointment of Auditor	GNL-2	within 15 days of AGM

Sr. No	Particulars	Sections
1	Register of Members in Form No. MGT-1	As per Section 88(1)(a) of CA-2013 and rule 3(1) of the Companies (Management and Administration) Rules, 2014
2	Register of debenture holders/ other securities holders in Form No. MGT-2	As per Section 88(1)(b) and (c) of CA-2013 and rule 4 of the Companies (Management and Administration) Rules, 2014
3	Register of Renewed and DuplicateShare Certificates in Form No. SH-2	As per Section 46(3) of the CA-2013 and rule 6(3)(a) of the Companies (Share Capital and Debentures) Rules, 2014
4	Register of Sweat Equity Shares in Form No. SH-3	As per Section-54 of CA-2013 and rule 8(14) of the Companies (Share Capital and Debentures) Rules, 2014
5	Register of Employee Stock Optionsin Form No. Form No. SH-6	As per Section-62(1)(b) of CA-2013, and Rule-12(10) of the Companies (Share Capital and Debentures) Rules, 2014
6	Register of shares or other securities bought-back in Form No. SH-10	As per Section-68(9) of CA-2013, and rule-17(12) of Companies (Share Capital and Debentures) Rules, 2014
7	Register of charges in Form No. CHG-7	As per Section-85 rule(10) sub-rule(1) of Companies (Registration of Charges) Rules, 2014
8	Register of loans, guarantee, securityand acquisition made by the company in Form No. MBP – 2	As per Section-186(9) and Rule 12(1) of the Companies Meetings of Board and its Powers
9	Register of investments not held in its own name by the company in Form No.MBP – 3	As per Section-187(3) and Rule 14(1) of the Companies Meetings of Board and its Powers
10	Register of contracts with related party and contracts and Bodies etc. in which directors are interested in Form No.MBP – 4	As per Section-189(1) and Rule 16(1) of the Companies Meetings of Board and its Powers
11	Register of Transfers for Equity shares, Preference Shares and Debentures as required by	Section 56 of Companies Act, 2013
12	Register of Transmission as required by	Section 56 of Companies Act, 2013
13	Register of Deposit as required by	Section 73 and 74 and Rule 14 of the Companies (Acceptance of Deposit) Rules, 2014
14	Register of Unpaid Dividend as required by Section 124 of Companies Act, 2013
15	Register of Directors and Key Managerial Personnel as required by	Section 170(1) and Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014
16	Register of Beneficial Owners as required by Section 88(3) of Companies Act, 2013

Tax Slabs 2014-15		Tax Slabs 2015-16
Income	Tax Rate	Income	Tax Rate
Upto ₹ 2 Lacs	0	Upto Rs. 2 .50 Lacs	0
₹ 2 Lacs to Rs. 5 Lacs	10%	₹ 2.50 Lacs to Rs. 5 Lacs	10%
₹ 5 Lacs to Rs. 10 lacs	20%	₹ 5 Lacs to Rs. 10 lacs	20%
Above ₹ 10 Lacs	30%	Above ₹ 10 Lacs	30%

Total Tax liability before budget	₹ 20600
Total Tax liability after budget	₹-10300
Net Benefit	₹ 10300

Total Tax liability before budget	₹ 1,13,300
Total Tax liability after budget	₹ -97850
Net Benefit	₹ 15450

Total Tax liability before budget	₹ 82400
Total Tax liability after budget	₹-56650
Net Benefit	₹25750