Budget 14- Cancellation of registration of the trust or institution in certain cases
The existing provisions of section 12AA of the Act provide that the registration once granted to a trust or institution shall remain in force till it is cancelled by the Commissioner. The Commissioner can cancel the registration under two circumstances:
(a) the activities of a trust or institution are not genuine, or;
(b) the activities are not being carried out in accordance with the objects of the trust or institution.
Only if either or both the above conditions are met, would the Commissioner be empowered to cancel the registration, and not otherwise. Therefore, the powers of Commissioner to cancel registration are severely restricted. There have been cases where trusts, particularly in the year in which they have substantial income claimed to be exempt under other provisions of the Act, deliberately violate provisions of section 13 by investing in prohibited mode etc. Similarly, there have been cases where the income is not properly applied for charitable purposes or has been diverted for benefit of certain interested persons. Due to restrictive interpretation of the powers of the Commissioner under section 12AA, registration of such trusts or institutions continues to be in force and these institutions continue to enjoy the beneficial regime of exemption.
Whereas under section 10(23C), which also allows similar benefits of exemption to a fund, Institution, University etc, the power of withdrawal of approval is vested with the prescribed authority if such authority is satisfied that such entity has not applied income or made investment in accordance with provisions of section 10(23C) or the activities of such entity are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved.
Therefore, in order to rationalise the provisions relating to cancellation of registration of a trust, it is proposed to amend section 12AA of the Act to provide that where a trust or an institution has been granted registration, and subsequently it is noticed that its activities are being carried out in such a manner that,—
(i) its income does not enure for the benefit of general public;
(ii) it is for benefit of any particular religious community or caste (in case it is established after commencement of the Act);
(iii) any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or
(iv) its funds are invested in prohibited modes,
then the Principal Commissioner or the Commissioner may cancel the registration if such trust or institution does not prove that there was a reasonable cause for the activities to be carried out in the above manner.
This amendment will take effect from 1st October, 2014.
Karniti: Taxpayers please note recent changes in Income Tax Return
CA Umesh Sharma
Keeping conversation between Lord Krishna and Arjuna as the foundation, we will learn certain basic financial and tax matter in KARNITI series of articles. Let us try to get answers to our questions in a bit different and joyful manner. The character of Arjuna will be played by the common man or tax payer and the character of Lord Shri Krishna the Expert for giving solutions to all problems. This is a small attempt to get answers to our queries related to tax matters in simple manner. There is no intention of hurting anyone's religious feeling and this is a small attempt of knowledge sharing in a simple way.Arjuna (Fictional Character): Krishna, June Month is coming to end. Now, it's time to file Income Tax Returns for the year 2013-14. The due date for filing the income tax returns is 30th September for the taxpayers who are Company or to whom Tax Audit under Income Tax is applicable and for others like salaried persons, etc. the due date for filing is 31st July. That's why; new changes are brought in various Forms of Income Tax returns.
Krishna (Fictional Character): Arjuna, all taxpayers should file income tax returns before due date. As per status and income of the taxpayers, government has defined the types of Income Tax Returns. In this year government made various changes in the forms due to amendments in laws or for what of more information for tax payers.
Arjuna: Krishna, Please tell in detail the changes that took place in Income Tax Returns?
Krishna: Arjuna the major changes in Income Tax Returns are as under:
- All taxpayers filing E-Returns will have to compulsorily update correct mobile number and E- Mail ID's. Otherwise there will be login issues before uploading of return on income tax Depts Website.
- Now onwards Income Tax Refund will be issued directly in the bank account of the taxpayer through ECS only, cheques are discontinued. Therefore at most care should be taken while mentioning Bank Account Number and IFSC Code in the income tax returns.
- From this year while claiming TDS in Income Tax return facility has been given to carry forward the TDS of previous year and brought forward TDS to next year. Due to this reconciliation of TDS claimed on Income and total available TDS as per Form 26 can be made. Tax payers which follow cash system of accounting will be benefited, like Doctors, Advocates, CAs and other professionals.
- As per newly inserted Section 87A if annual income of the taxpayer is up to Rs. 5,00,000/- then Tax relief of maximum of Rs. 2,000/- is given. For claiming this relief separate space has been inserted in the return.
- As per newly inserted Section 80EE if taxpayer has purchased house up to Rs. 40 Lakh and taken housing loan of Rs. 25 Lakh then taxpayer can claim deduction of interest up to Rs. 1 Lakh. For claiming this deduction separate space has been inserted in the return.
- If income of the taxpayer is more than Rs. 1 crore then surcharge of 10% is applicable. For this separate space has been inserted in the return.
- All salaries taxpayers will now have to give now separate details of LTA (Leave Travel Allowance) and HRA (House Rent Allowance) and other allowances separately. This will help Govt. to track proper claim of such deductions, recent HRA and LTA fallacious claimed by some MPs and Govt. taxpayers may have forced for such changes.
- From this year the details of short and long term capital gain will have to be given in three parts viz. a) sale of plot / flat b) sale of STT paid shares and mutual funds c) sale of other assets. Further in case of sale of land or building Stamp Duty Value will have to be mentioned. Further if taxpayer is availing exemption under capital gains then value of newly purchased asset, date of acquisition of the asset and if invested in capital gain account then its details will have to be mentioned.
- Corporate or LLP assessee will have to mention Corporate Identification Number or LLP Identification Number. Further Director or Designated Partner Identification Number will have to be mentioned. This will help in cross check of information with other legal departments by income tax dept or visa a versa.
- If assessee carrying on business is taking deduction of bad debts of more than Rs. 1 Lakh of single person, then his PAN will have to be mentioned.
- As per newly inserted section 43 CA if, taxpayer have sold other than capital assets below stamp duty value (eg. builders / developers) then the difference between the two will be considered as deemed income of the assessee and tax will have to be paid on it. For this separate space has been inserted in the return.
- If there is more than one owner of the house then, while mentioning details in the schedule of Income from House Property the percentage of co ownership will have to be given.
- From this year e-filing of wealth tax return is compulsory and in this return the details of all wealth whether taxable or not, will have to be given in depth.
Arjuna: Krishna, What one should learn from these upcoming changes?
Krishna: Arjuna, Today computerization has increased tremendously in functioning of Tax departments. Due to which now all tax departments exchange information of taxpayers with each other. Therefore taxpayers should give correct information to all the departments without hiding and should pay appropriate tax as per laws. As one lie leads to other lie. If in one department, wrong / incorrect information is given then in other department information will have to give in same manner. All knows the Result of telling lie. Filing correct return is the responsibility of all the citizens. If returns are not filed then due to computerization on the basis of PAN of the taxpayer, information of TDS, big transactions of Banks, etc. is received by the Income tax department and they can catch hold. Now Department will immediately inform taxpayer on mobile and email. Further the notices sent through email are legally valid. Therefore taxpayer cannot find escape route of non-receipt of notice and hence compliance of law will increase.
Dear Taxguru lovers, your comments are very precious, please spare few seconds for it. Thanks.
Amendment in Notification No.12/2013 – Exemption on services provided to SEZ authorised operations
Notification No. 7/2014-Service Tax – Dated- 11th July, 2014
G.S.R…….(E).–In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), read with sub-section (3) of section 95 of Finance (No.2), Act, 2004 (23 of 2004) and sub-section (3) of section 140 of the Finance Act, 2007 (22 of 2007), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.12/2013-Service Tax, dated the 1st July,2013, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 448 (E), dated the 1st July, 2013, namely:-
In the said notification,–
(i) in paragraph 3, in sub-paragraph (II),–
(A) in clause (b), after the words, letter and figure "in Form A-2", the words, letter and figure "within fifteen working days from the date of submission of Form A-1" shall be inserted;
(B) after clause (b), the following clause shall be inserted, namely:-
"(ba) the authorisation referred to in clause (b) shall be valid from the date of verification of Form A-1 by the Specified Officer of the SEZ:
Provided that if the Form A-1 is not submitted by the SEZ Unit or the Developer to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction, as the case may be, within fifteen days of its verification by the Specified Officer of the SEZ, the authorisation shall be valid from the date on which it is submitted;";
(C) for clause (c), the following clause shall be substituted, namely:-
"(c) the SEZ Unit or the Developer shall provide a copy of the said authorisation to the provider of specified services, where such provider is the person liable to pay service tax and on the basis of the said authorisation, the
service provider may provide specified services to the SEZ Unit or the Developer without payment of service tax:
Provided that pending issuance of said authorisation, the provider of specified services may, on the basis of Form A-1, provide such specified services, without payment of service tax, and the SEZ Unit or the Developer shall provide a copy of authorisation to the service provider immediately on receipt of such authorisation:
Provided further that if the SEZ Unit or the Developer does not provide a copy of the said authorisation to the provider of specified services within a period of three months from the date when such specified services were deemed to have been provided in terms of the Point of Taxation Rules, 2011, the service provider shall pay service tax on specified services so provided in terms of the first proviso.";
(D) in clause (e), the following Explanation shall be inserted, namely:-
"Explanation.– For the purposes of this notification, a service shall be treated as used exclusively for the authorised operations if the service is received by the SEZ Unit or the Developer under an invoice in the name of such Unit or the Developer and the service is used only for furtherance of authorised operations in the SEZ.";
(ii) in Form A-1, in Table II, for sub-heading of column(4), the following shall be substituted, namely:-
"Service Tax Registration No. (Not applicable if specified service is covered under full reverse charge)";
(iii) in Form A-2,-
(a) in item B, in the Table, for sub-heading of column(4), the following sub-heading shall be substituted, namely:-
"Service Tax Registration No. (Not applicable if specified service is covered under full reverse charge)";
(b) after item B, the following item shall be inserted, namely:-
"C: The authorisation is valid with effect from …………….
[refer condition at S.No.3(II)(ba)]";
(iv) in Form A-3, in the TABLE, for column heading of column (4), the following column heading shall be substituted namely:-
"Service Tax Registration No. (Not applicable if specified service is covered under full reverse charge)". .
[F.No. 334/15/ 2014-TRU]
(Akshay Joshi)
Under Secretary to the Government of India
Further Amendment in Exemption from Service Tax/Refund of Tax Paid by SEZ –Developers/Units after Final Budget 2014-15
Before discussing Notification No. 7/2014 –Service Tax dated 11-07-2014 came in response to Budget Speech of Shri Arun Jaitley, finance minster under Prime minister ship of Shri Narendra Modiiji. I would like to bring to your attention previous position for exemption from Service Tax/Refund of tax paid by Special Economic Zones – Developers/Units.
Central Board of Excise and Customs, Ministry of Finance has rescinded Notification No. 40/2012-ST dated 20th June 2012 and introduced new Notification No. 12/2013-ST dated 01-07-2013.
1. As per this Notification where the specified services received by the SEZ unit or the Developer are used exclusively for the authorized operations, the person liable to pay service tax has the option not to pay the service tax ab-initio, subject to certain conditions and procedures as stated in my earlier article titled – "Amendment in Exemption from Service Tax/Refund of Tax Paid by SEZ –Developers/Units" published in www.taxguru.in website on 25-07-2013. However certain important points I am bringing here,
a) The SEZ Unit or the Developer shall get an approval by The Approval Committee of the list of the services as are required for the authorized operations (referred to as the specified services) on which the SEZ Unit or Developer wish to claim exemption from service tax.
b) The SEZ Unit or the Developer shall furnish a declaration in Form A-1, verified by the Specified Officer of the SEZ, along with the list of specified services in terms of abovementioned condition a) ;
c) On the basis of declaration made in Form A-1, an authorization shall be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be to the SEZ unit or the Developer in Form A-2;
d) The SEZ Unit or the Developer shall provide a copy of said authorization to the provider of specified services. On the basis of the said authorization, the service provider shall provide the specified services to the SEZ unit or the Developer without payment of service tax;
e) The SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a quarterly statement, in Form A-3, furnishing the details of specified services received by it without payment of service tax;
f) The SEZ Unit or the Developer shall furnish an undertaking, in Form A-1, that in case the specified services on which exemption has been claimed are not exclusively used for authorized operation or were found not to have been used exclusively for authorized operation, it shall pay to the government an amount that is claimed by way of exemption from service tax along with interest as applicable on delayed payment of service tax under the provisions of the said Act read with the rules made there under.
- The refund of service tax on i) the specified services that are not exclusively used for authorized operation, or ii) the specified services on which ab-initio exemption is admissible but not claimed, shall be allowed subject to the certain procedures and conditions as mentioned by me in my earlier article. However I am bringing to your notice following important conditions:
a) The SEZ Unit or the Developer who is registered as an assessee under the Central Excise Act, 1944 (1of 1944) or the rules made there under, or the said Service Tax Act, 1994 or the rules made there under, shall file the claim for refund to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, in Form A-4.
b) The amount indicated in the invoice, bill or, as the case may be, challan, on the basis of which this refund is being claimed, including the service tax payable thereon shall have been paid to the person liable to pay the service tax thereon, or as the case may be, the amount of service tax payable under reverse charge shall have been paid under the provisions of the said Act.
c) The claim for refund shall be filed within one year from the end of the month in which actual payment of service tax was made by such Developer or SEZ unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit.
d) The SEZ unit or the Developer shall submit only one claim of refund under this notification for every quarter:
3 i) The service tax paid on the specified services that are common to the authorized operation in an SEZ and the operation in domestic tariff area [DTA unit(s)] shall be distributed amongst the SEZ Unit or the Developer and the DTA unit(s) in the manner as prescribed in Rule 7 of the Cenvat Credit Rules. For the purpose of distribution, the turnover of the SEZ Unit or the Developer shall be taken as the turnover of authorized operation during the relevant period.
ii) After distribution of service tax paid on the specified services that are common to the authorized operation in an SEZ and the operation in DTA units as mentioned in '3 i)', SEZ Unit or the Developer can claim refund relating to SEZ as per procedures and conditions mentioned in point no 2..
iii) After distribution mentioned in '3 i)' DTA units can claim CENVAT credit as per CENVAT credit Rules, 2004.
Please refer my detailed comments and other important points relating to this notification in my earlier article.
As per new notification no 15/2013- Service tax dated 21st November, 2013,
The SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a quarterly statement in Form A-3, furnishing the details of specified services received by it without payment of service tax by 30th of the month following the particular quarter.
My comments: Now as per this notification when the SEZ Unit or the Developer has to file a quarterly statement in Form A-3 i.e. time limit of filing a quarterly statement in Form A-3 is specified, which previously was not specified in earlier Notification No. 12/2013-ST dated 01-07-13.
Everyone was having great expectation from the interim budget of new finance minister Shri Arun Jaitley as he has delivered budget in a very short duration from coming into the power that too under the prime minster ship of iron man Shri Narendra Modiji to see whether direction of the budget will take us to "Acche din ayenge" or not as promised by Modiji during election campaign.
As per Notification No. 7/2014- Service tax following are important points i.e. followings are amendment to Notification No. 12/2013-Service Tax, dated the 1St July 2013:
i) A) On the basis of declaration made in Form A-1, an authorization shall be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be to the SEZ unit or the Developer in Form A-2. Previously no time limit was prescribed for issuing form A-2 by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise. Now as per this notification Form A-2 has to be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise within fifteen working days from the date of submission of Form A-1.
My Comments: Hence now government has made Deputy Commissioner of Central Excise or Assistant Commissioner of central Excise accountable by specifying the time limit of issuing form A-2 i.e. in simpler terms hardship of the SEZ unit/Developer will reduce.
B) The authorization in Form A-2 shall be valid from the date of verification of Form A-1 by the Specified Officer of The SEZ;
Provided that if Form A-1 is not submitted by the SEZ Unit or the Developer to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction, as the case may be, within fifteen days of its verification by the Specified Officer of the SEZ, the authorization shall be valid from the date on which it is submitted.
My Comments: Hence if the SEZ Unit or Developer submits A-1 form to the Assistant Commissioner of central Excise or Deputy Commissioner of Central Excise having jurisdiction, within fifteen days of its verification by the Specified officer of the SEZ, the authorization shall be valid from the date of verification of Form A-1 by the Specified officer of the SEZ. Therefore if the SEZ Unit or the Developer submits form A-1 after fifteen days then as the delay in submitting the same is from the SEZ unit or the Developer and not from the department side hence the authorization shall be valid from the date on which A-1 form is submitted.
C) The SEZ Unit or the Developer shall provide a copy of the said authorization to the provider of specified services, where such provider is the person liable to pay service tax and on the basis of the said authorization, the service provider may provide specified services to the SEZ Unit or the Developer without payment of service tax:
My Comments: The SEZ Unit or the Developer shall provide a copy of the said authorization to the provider of specified services, where service tax is payable by the service provider i.e. not the case in which service tax is payable by the service receiver under reverse charge mechanism, then the service provider based on the said authorization shall provide specified services to the SEZ Unit or the Developer without payment of service tax.
Provided that pending issuance of said authorization, the provider of specified services may, on the basis of Form A-1, provide such specified services, without payment of service tax, and the SEZ Unit or the Developer shall provide a copy of authorization to the service provider immediately on receipt of such authorization:
My Comments: If the said authorization in form A-2 is not issued then also the provider of specified service may on the basis of Form A-1, provide such specified services, without payment of service tax only based on the condition that the SEZ Unit or The Developer shall provide a copy of authorization in form A-2 immediately on receipt of the said authorization to the service provider.
Provided further that if the SEZ Unit or the Developer does not provide a copy of the said authorization to the provider of specified services within a period of three months from the date when such specified services were deemed to have been provided in terms of the Point of Taxation Rules, 2011, the service provider shall pay service tax on specified services so provided in terms of the first proviso.
My Comments: The service provider has to pay service tax if the SEZ Unit or the Developer does not provide a copy of the said authorization to the provider of service tax within a period of three months from the date when such specified services were deemed to have been provided in terms of the Point of Taxation Rules, 2011. Here in my view as now within fifteen working days Form A-2 has to be issued by the jurisdictional Deputy Commissioner of Central excise or Assistant Commissioner of Central Excise, therefore if the SEZ Unit or the Developer does not give the said authorization within three months then fault will be of the SEZ Unit or The Developer provided department will adhere to the timelines fixed by the said notification.
iii) a) In Form A-2, in item B, in the table, for sub-heading of column (4), under sub-heading Service Tax Registration no. of the service provider has to be mentioned. But if specified service is covered under full reverse charge then Service Tax Registration No. column is not applicable.
b) In Form A-2, after item B, now the following item shall be inserted,
"C: The authorization is valid with effect from …………
Here date is to be captured as per point i) B).
iv) in Form A-3, in the TABLE, for column heading of column 4) Service tax registration no. of service provider has to be mentioned but if specified service is covered under full reverse charge then Service tax registration no. is not applicable.
I also wanted to touch upon one killer provisions introduced in this budget;
Changes in Interest rates in late payment of service tax as per Notification No. 12/2014 –Service Tax dated 11-07-2014 w.e.f 01st day of October 2014.
| Period of Delay | Rate of Simple Interest |
| Up to Six months | 18 percent |
| More than six months and up to one year | 18 percent for first six months of delay and 24 percent for the delay beyond six months |
| More than one year | 18 percent for first six months of delay, 24 percent for the delay beyond six months and up to one year and 30 per cent for any delay beyond one year |
Conclusion: As per this budget on one hand as per Notification No. 7/2014-Service Tax dated 11th July 2014, by inserting time limit of fifteen working days under which Form A-2 has to be issued by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise,, government wants to make officers of Service tax department accountable hence one can rightly conclude that "Acche din ayenge" because by imposition time limit on the department cases of corruption can be reduced.
But on another hand as per Notification No. 12/2014- Service Tax dated 11-07-2014 w.e.f. 1st day of October, 2014, by imposing slab wise interest rate which can go as high as 30 percent beyond one year, government has crossed all the limits of tolerance as credit card companies are also not charging such high interest rates hence one can say that for businessmen "Acche din ayenge" as promised by Modiji is doubtful.
However one has to not lose hope but best thing is to keep faith in the Government because at least it is visible that this government as per this interim budget wants to perform and therefore they have given most importance to infrastructure development & achieving higher growth by bringing inflation to lower level, lesser fiscal deficit and managing current account deficit.
———–
CA Jinesh GadaGeneral Manager Accounts – HBS Realtors Pvt Ltd
B.Com., A.C.A., I.S.A, M.B.A.
e-mail: cajineshgada@gmail.com
Construction of house without permission of Municipality doesn't disentitle one to sec. 54F relief
IT : Where AO rejected assessee's claim for deduction under section 54F in respect of amount invested in construction of building on ground that permission from Executive Engineer, Municipality had not been obtained before construction of building, in view of fact that assessee had in fact constructed house which was evident from copy of certificate of valuation by Municipal Engineer, impugned order rejecting assessee's claim was to be set aside
Budget 2014- Taxability of Anonymous donations under section 115BBC
Anonymous donations under section 115BBC
The existing provisions of section 115BBC of the Act provide for levy of tax at the rate of 30 per cent. in case of certain assessees, being university, hospital, charitable organisation, etc. on the amount of aggregate anonymous donations exceeding five per cent of the total donations received by the assessee or one lakh rupees, whichever is higher.
Due to the mechanism of aggregation of tax provided in section 115BBC, while tax at the rate of 30 per cent is levied on the amount of anonymous donations exceeding the threshold, the remaining tax is chargeable on total income after reducing the full amount of anonymous donations. The proper way of computation is to reduce the income by the amount which has been taxed at the rate of 30 per cent.
Therefore, it is proposed to amend section 115BBC to provide that the income-tax payable shall be the aggregate of the amount of income-tax calculated at the rate of thirty per cent on the aggregate of anonymous donations received in excess of five per cent of the total donations received by the assessee or one lakh rupees, whichever is higher, and the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the aggregate of the anonymous donations which is in excess of the five per cent of the total donations received by the assessee or one lakh rupees, as the case may be.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.
Budget 2014- Rationalisation of Definition of International Transaction
The existing provisions of section 92B of the Act define 'International transaction' as a transaction in the nature of purchase, sale, lease, provision of services, etc. between two or more associated enterprises, either or both of whom are non-residents.
Sub-section (2) of the said section extends the scope of the definition of international transaction by providing that a transaction entered into with an unrelated person shall be deemed to be a transaction with an associated enterprise, if there exists a prior agreement in relation to the transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between the other person and the associated enterprise. The sub-section as presently worded has led to a doubt whether or not, for the transaction to be treated as an international transaction, the unrelated person should also be a non-resident.
Therefore, it is proposed to amend section 92B of the Act to provide that where, in respect of a transaction entered into by an enterprise with a person other than an associated enterprise, there exists a prior agreement in relation to the relevant transaction between the other person and the associated enterprise or, where the terms of the relevant transaction are determined in substance between such other person and the associated enterprise, and either the enterprise or the associated enterprise or both of them are non-resident, then such transaction shall be deemed to be an international transaction entered into between two associated enterprises, whether or not such other person is a non-resident.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.
Levy of Penalty U/s. 271G by Transfer Pricing Officers
The existing provisions of section 271 G of the Act provide that if any person who has entered into an international transaction or specified domestic transaction fails to furnish any such document or information as required by sub-section (3) of section 92D, then such person shall be liable to a penalty which may be levied by the Assessing Officer or the Commissioner (Appeals).
Section 92CA provides that an Assessing Officer may make reference to a Transfer Pricing Officer (TPO) for determination of arm's length price (ALP). TPO has been defined in the said section to mean a Joint Commissioner or Deputy Commissioner or Assistant Commissioner who is authorised by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D. The determination of arm's length price in several cases is done by the TPO.
It is, therefore, proposed to amend section 271 G of the Act to include TPO, as referred to in Section 92CA, as an authority competent to levy the penalty under section 271G in addition to the Assessing Officer and the Commissioner (Appeals).
This amendment will take effect from 1st October, 2014.
Applicability to earlier years of registration granted to a trust or institution
The existing provisions of section 12A of the Act provide that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively.
Non-application of registration for the period prior to the year of registration causes genuine hardship to charitable organisations. Due to absence of registration, tax liability gets attached even though they may otherwise be eligible for exemption and fulfil other substantive conditions. The power of condonation of delay in seeking registration is not available under the section.
In order to provide relief to such trusts and remove hardship in genuine cases, it is proposed to amend section 12 A of the Act to provide that in case where a trust or institution has been granted registration under section 12AA of the Act, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted.
Further, it is proposed that no action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year.
However, the above benefits would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled.
These amendments will take effect from 1st October, 2014.
Budget 2014- Amount spent on CSR not allowable as deduction
Corporate Social Responsibility (CSR)
Under the Companies Act, 2013 certain companies (which have net worth of Rs. 500 crore or more, or turnover of Rs.1000 crore or more, or a net profit of Rs.5 crore or more during any financial year) are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). Under the existing provisions of the Act expenditure incurred wholly and exclusively for the purposes of the business is only allowed as a deduction for computing taxable business income.
CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purposes of carrying on business. As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing the taxable income of the company. Moreover, the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure.
The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditures cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and hence shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfillment of conditions, if any, specified therein.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years
Budget 2014 – Changes in Provisions Related to Tax Deduction at Source (TDS)
Under Chapter XVII-B of the Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. The person deducting tax ('the deductor') is required to file a quarterly statement of tax deduction at source (TDS) containing the prescribed details of deduction of tax made during the quarter by the prescribed due date.
Currently, a deductor is allowed to file correction statement for rectification/updation of the information furnished in the original TDS statement as per the Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013 notified vide Notification No.03/2013 dated 15th January, 2013. However, there does not exist any express provision in the Act for enabling a deductor to file correction statement.
In order to bring clarity in the matter relating to filing of correction statement, it is proposed to amend section 200 of the Act to allow the deductor to file correction statements. Consequently, it is also proposed to amend provisions of section 200A of the Act for enabling processing of correction statement filed.
The existing provisions of section 201(1) of the Act provide for passing of an order deeming a payer as assessee in default if he does not deduct or does not pay or after deduction fails to pay the whole or part of the tax as per the provisions of Chapter XVII-B of the Act. Section 201(3) of the Act provides for time limit for passing of order under section 201(1) of the Act for deeming a payer as assessee in default for failure to deduct tax from payments made to a resident. Clause (i) of section 201(3) of the Act provides that no order under section 201(1) of the Act shall be passed after expiry of two years from the end of the financial year in which the TDS statement has been filed. Currently, the processing of TDS statement is done in the computerised environment and mainly focuses on the transactions reported in the TDS statement filed by the deductor. Therefore, there is no rationale for not treating the deductor as assessee in default in respect of the TDS default after two years only on the basis that the deductor has filed TDS statement as TDS defaults are generally in respect of the transaction not reported in the TDS statement. It is, therefore, proposed to omit clause (i) of sub-section (3) of section 201of the Act which provides time limit of two years for passing order under section 201(1) of the Act for cases in which TDS statement have been filed.
Currently, clause (ii) of section 201(3) of the Act provides a time limit of six years from the end of the financial year in which payment/credit is made for passing of order under section 201(1) of the Act for cases in which TDS statement has not been filed. However, notice under section 148 of the Act may be issued for reassessment up to 6 years from the end of the assessment year for which the income has escaped assessment. Therefore, section 148 of the Act allows reopening of cases of one more preceding previous year than specified under section 201 (3)(ii) of the Act. Due to this, order under section 201(1) of the Act cannot be passed in respect of defaults relating to TDS which comes to the notice during search/reassessment proceeding in respect of previous year which is not covered under section 201 (3)(ii) of the Act but covered under section 148 of the Act. In order to align the time limit provided under section 201 (3)(ii) and section 148 of the Act, it is proposed that time limit provided under section 201 (3)(ii) of the Act for passing order under section 201(1) of the Act shall be extended by one more year.
The existing provisions of section 271 H of the Act provides for levy of penalty for failure to furnish TDS/TCS statements in certain cases or furnishing of incorrect information in TDS/TCS statements. The existing provisions of section 271 H of the Act do not specify the authority which would be competent to levy the penalty under the said section. Therefore, provisions of section 271H are proposed to be amended to provide that the penalty under section 271 H of the Act shall be levied by the Assessing officer.
These amendments will take effect from 1st October, 2014.
Budget 2014- Presumptive income amount increased to Rs. 7500 for Business of Plying, Hiring or Leasing Goods Carriages
Business of Plying, Hiring or Leasing Goods Carriages
The existing provisions of section 44AE of the Act provides for presumptive taxation in the case of an assessee who is engaged in the business of plying, hiring or leasing goods carriages and not owning more than ten goods carriages at any time during the previous year. Income from the said business is calculated as under:
| Type of Goods carriage | Amount of presumptive income |
| Heavy goods vehicle (HGV) | Rs.5,000 for every month (or part of a month) during which the goods carriage is owned by the taxpayer. |
| Vehicle other than HGV | Rs. 4,500 for every month (or part of a month) during which the goods carriage is owned by the taxpayer. |
The amount of presumptive income was revised by the Finance (No.2) Act, 2009. Further, the existing provisions make a distinction between HGV and vehicle other than HGV for specifying the amount of presumptive income.
Considering the erosion in the real values of the amount of specified presumptive income due to inflation over the years and also in order to simplify this presumptive taxation scheme, it is proposed to provide for a uniform amount of presumptive income of Rs.7,500 for every month (or part of a month) for all types of goods carriage without any distinction between HGV and vehicle other than HGV.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.
Budget 2014 – Govt. may notify Income Computation and Disclosure Standards
Income Computation and Disclosure Standards
Section 145 of the Act provides that the method of accounting for computation of income under the heads "Profits and gains of business or profession" and "Income from other sources" can either be the cash or mercantile system of accounting. The Finance Act, 1995 empowered the Central Government to notify Accounting Standards (AS) for any class of assessees or for any class of income. Since the introduction of these provisions, only two Accounting Standards relating to disclosure of accounting policies and disclosure of prior period and extraordinary items and changes in accounting policies have been notified.
The Central Board of Direct Taxes (CBDT) had constituted an Accounting Standard Committee in 2010. The Committee has submitted its Final Report in August, 2012. The Committee recommended that the AS notified under the Act should be made applicable only to the computation of taxable income and a taxpayer should not be required to maintain books of account on the basis of AS notified under the Act. The Final Report of the Committee was placed in public domain for inviting comments from stakeholders and general public. After examining the comments/suggestions, the Committee inter alia recommended that the provisions of section 145 of the Act may be suitably amended to clarify that the notified AS are not meant for maintenance of books of account but are to be followed for computation of income.
In order to clarify that the standards notified under section 145(2) of the Act are to be followed for computation of income and disclosure of information by any class of assessees or for any class of income, it is proposed to provide that the Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of or in respect of any class of income. It is further proposed to provide that the Assessing Officer may make an assessment in the manner provided in section 144 of the Act, if the income has not been computed in accordance with the standards notified under section 145(2) of the Act.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.
Budget 2014- Transfer of Government Security by one non-resident to another non-resident
Transfer of Government Security by one non-resident to another non-resident
The existing provision contained in section 47 of the Act provides that certain transactions shall not be considered as transfer for the purpose of charging of capital gains.
With a view to facilitate listing and trading of Government securities outside India, it is proposed to insert clause (viib) in the said section so as to provide that any transfer of a capital asset, being a Government Security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident shall not be considered as transfer for the purpose of charging capital gains.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years
Budget 2014 – Capital gains arising from transfer of an asset by way of compulsory acquisition
The existing provisions contained in section 45 provide for charging of any profits or gains arising from transfer of a capital asset. Sub-section (5) of the said section provides for dealing with capital gains arising from transfer by way of compulsory acquisition where the compensation is enhanced or further enhanced by the court, Tribunal or any other authority. Clause (b) of the said sub-section provides that where the amount of compensation is enhanced or further enhanced by the court it shall be deemed to be the income chargeable of the previous year in which such amount is received by the assessee.
There is uncertainty about the year in which the amount of compensation received in pursuance of an interim order of the court is to be charged to tax, due to court orders.
Accordingly, it is proposed to provide that the amount of compensation received in pursuance of an interim order of the court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' in the previous year in which the final order of such court, Tribunal or other authority is made.
This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.
Budget 2014 – Speculative transaction in respect of commodity derivatives
The existing provisions contained in clause (5) of section 43 define the term speculative transaction. The proviso to the said clause (5) excludes certain category of transactions as speculative transactions. Finance Act, 2013 made a provision for levy of commodities transaction tax on commodity derivatives in respect of commodities other than agricultural commodities. As a consequence to the levy of commodities transaction tax, clause (e) was inserted in the proviso to clause (5) of section 43 of the Act to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognised association shall not be considered as speculative transaction. Vide Circular No. 3 dated 24-01 -2014 explaining the provisions of the Finance Act, 2013, it was clarified that the eligible transaction shall include only those transactions in commodity derivatives which are liable to commodities transaction tax.
Accordingly, it is proposed to amend clause (e) of the proviso to the said clause (5) so as to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognised association and chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 shall not be considered to be a speculative transaction.
This amendment will take effect retrospectively from 1st April, 2014 and will accordingly apply, in relation to the assessment year 2014-15 and subsequent assessment years.
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