The only section pertaining to the issue of debentures is section 71 (read with Rule 18 of Companies Share Capital and Debentures Rules,2014). I would like to share the some of important issues I came across while studying this section and corresponding rule. According to Section 2(12) Companies Act,1956 " debenture" includes debenture stock, bonds and […]
NEW DELHI, MAR 11, 2015: THE issue before the Bench is - Whether mere acceptance of proof of commission payments, agreements between the parties and affidavits, by the AO, will debar him from questioning whether expenses claimed u/s 37 are allowable. NO is the verdict of the Apex Court.
Facts of the case
The assessee company is engaged in the business of manufacturing and sale of beer and other alcoholic beverages. Certain States like Kerala and Tamil Nadu had established marketing corporations which were the exclusive wholesalers of alcoholic beverages for the concerned State whereby all manufacturers had to compulsorily sell their products to the State Corporations which, in turn, would sell the liquor so purchased, to the retailers. For such purpose, the manufacturers of beverages containing alcohol had to engage services of agents who would co-ordinate with the retailers and State Corporations to ensure continuous supply of goods to the ultimate consumers. Accordingly, the assessee had engaged agents namely, M/s. R.J. Associates and Golden Enterprises, and claimed deduction u/s 37 on the commission payments being made to them. The claim made of assessee was however disallowed by the AO and later on such disallowance was confirmed by the CIT(A) in first appellate proceedings. On appeal, the Tribunal reversed the order of CIT(A) and took the view that the assessee was entitled to deduction, as such expenditure was made for business purposes. The said view was however reversed by the jurisdictional High Court on further appeal by holding that the assessee had failed to discharge its burden u/s 37, in the reference made to it u/s 256(2).
Having heard the parties, the Supreme Court held that,
++ it is seen that the High Court while hearing the Reference made u/s 256(2) had set aside the order of the Tribunal. Undoubtedly, in the exercise of its Reference Jurisdiction the High Court was not right in setting aside the order of the Tribunal. However, reading through the order of the High Court, it is found that the error is one of form and not of substance inasmuch as the question arising in the Reference has been specifically answered. A reading of the questions initially framed and subsequently reframed by the High Court show that what was done by the High Court is to retain some questions, as initially framed, while discarding the rest. Some of the questions discarded by the High Court were actually more proximate to the question of perversity of the findings of fact recorded by the Tribunal, than the questions retained. From a reading of the order of the High Court, it is clear that the High Court had examined the entitlement of assessee to disallowance by accepting the agreements executed by the assessee with the commission agents. The question that was posed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the AO to go into the question whether the expenses claimed would still be allowable u/s 37. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. vs. CIT and Lachminarayan Madan Lal vs. CIT, wherein it was observed that:
["....The mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the ITO to hold that the payment was made exclusively and wholly for the purpose of assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the ITO to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible u/s 37...."]
++ there were certain Government Circulars which regulated, if not prohibited, liaisoning with the government corporations by the manufacturers for the purpose of obtaining supply orders. It is noted that in the present case, the true effect of the Government Circulars along with the agreements between the assessee and the commission agents and the details of payments made by the assessee to the commission agents as well as the affidavits filed by the husbands of the partners of M/s. R.J. Associates (to whom commission were paid), had been considered by the jurisdictional High Court. The statement of the Managing Director of Tamil Nadu State Marketing Corporation Ltd., to whom summons were issued u/s 131, to the effect that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd. was also taken into account. The basis of the doubts regarding the very existence of R.J. Associates, as entertained by the AO, was also weighed by the High Court to determine the entitlement of the assessee for deduction u/s 37. In performing the said exercise, the High Court did not disturb or reverse the primary facts as found by the Tribunal. Rather, the exercise performed is one of the correct legal inferences that should be drawn on the facts already recorded by the Tribunal. The questions reframed were to the said effect. The legal inference that should be drawn from the primary facts, as consistently held by this Court, is eminently a question of law. No question of perversity was required to be framed or gone into to answer the issues arising. In fact, as already held by this Court, the questions relatable to perversity were consciously discarded by the High Court. This Court, therefore, cannot find any fault with the questions reframed by the High Court or the answers provided.
(See 2015-TIOL-12-SC-IT)
CPC (TDS) follow up: Online Correction facility not availed after sending "Intermediate Communication for Short Payments" in course of processing of Original Quarterly TDS Statements As per the records of CPC (TDS), an Intermediate communication was sent to TDS deductors intimating Short Payment errors in the Original TDS Statements filed by deductors during January 1 […] |
CPC (TDS) reminds to avail online Correction facility
CPC (TDS) follow up: Online Correction facility not availed after sending "Intermediate Communication for Short Payments" in course of processing of Original Quarterly TDS Statements
As per the records of CPC (TDS), an Intermediate communication was sent to TDS deductors intimating Short Payment errors in the Original TDS Statements filed by deductors during January 1 – February 10, 2015 and they were requested to use Online Correction facility at TRACES for closure of the above within a week of receipt of above communication.
However, after the above was communicated to deductors, no actions was taken using Online Correction functionality (without Digital Signatures) to correct above errors by some of the deductors.
There may be a possibility that the above communication could not reach to deductors due to incorrect email/ Mobile number provided and they are been requested to correctly report the same in your TDS Statements.
You are also requested to submit a Correction Statement, without any further loss of time, to close the Short Payment Defaults in your Original TDS Statement(s).
Please note that
Please note that
- This further significance towards ensuring non-intrusive TDS Compliance, since, Short Payment Defaults ought to be closed at the time of submitting requests to download Consolidated Files or TDS Certificates from the web portal TRACES.
- The onus for closure of Short Payment Defaults lies on the deductor submitting the TDS Statements.
Your attention is also drawn to the essence of above communication and the advantages of taking actions with Online Correction feature:
- You would have preliminary information of potential Short Payments, before the Original Statement is completely processed for Defaults and Intimations are generated
- The central point in the process is identification of errors in challans and facilitating their corrections before CPC (TDS) computes defaults in TDS statements
- Correction of above defaults using Online Correction can be submitted within 7 days of receipt of the Intermediate Communication, before computation of Defaults for the referenced TDS statements
- The above actions Above action will facilitate avoidance of multiple Correction Statement filing later, after the defaults are identified CPC (TDS) and Intimations have been sent.
What Action to be taken on receipt of Intermediate communication:
- Please take note of the Intermediate communication from CPC (TDS) and submit Online Correction for potential defaults in TDS statement within the stipulated time frame.
- Only "Online Correction" facility can be used for correction of above Short Payments and PANs
- To avail the facility, you are requested to Login to TRACES and navigate to Defaults tab to locate Request for Correction from the drop-down menu.
- The action requires to be completed within 7 days of receipt of the Intermediate Communication.
- See more at: CPC (TDS) reminds to avail online Correction facility
PFA
For closure of Short Payment Defaults arising due to Unmatched Challans quoted in TDS Statements, CPC(TDS) has further enhanced the Online Correction facility at TRACES, providing with the feature of Move Deductees from Unmatched Challans to any other Unconsumed OLTAS Challan. |
Reserve Bank has been receiving representations pointing out difficulties in complying with the requirement of furnishing two documents as activity proof while opening accounts of sole proprietary firms in certain cases. It is possible that in some types of activities there is genuine difficulty in procuring two such documents.
Bank may open accounts of proprietary concerns with one documents as activity proof
RBI/2014-15/498
DBR.AML.BC.No.77/14.01.001/2014-15
DBR.AML.BC.No.77/14.01.001/2014-15
March 13, 2015
The Chairperson/CEOs of all Scheduled Commercial Banks
Regional Rural Banks/ Local Area Banks / All India Financial Institutions
Regional Rural Banks/ Local Area Banks / All India Financial Institutions
Dear Madam/Sir,
Know your Customer (KYC) guidelines – accounts of proprietary concerns
Please refer to paragraph 2.5(h) of our Master Circular no. DBOD.AML.BC.No.22/14.01.001/2014-15 dated July 1, 2014 on KYC norms and our circular DBOD. AML.BC. No. 80/14.01.001/2009-10 dated March 26, 2010, prescribing norms for opening a bank account in respect of a sole proprietary firm and subsequent circulars dated August 31, 2010 and April 17, 2012 further relaxing the documents required for the same.
2. Reserve Bank has been receiving representations pointing out difficulties in complying with the requirement of furnishing two documents as activity proof while opening accounts of sole proprietary firms in certain cases. It is possible that in some types of activities there is genuine difficulty in procuring two such documents. The matter has, therefore, been reviewed with a view to ease the process of opening bank accounts of proprietary concerns in such cases. The default rule is that any two documents, out of those listed in paragraph 2.5 (h) of the Master Circular, should be provided as activity proof by a proprietary concern. However, in cases where the banks are satisfied that it is not possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity proof. In such cases, the banks, however, would have to undertake contact point verification, collect such information as would be required to establish the existence of such firm, confirm, clarify and satisfy themselves that the business activity has been verified from the address of the proprietary concern.
3. It is also clarified here that the list of registering authorities indicated in paragraph 2.5 (h) of the Master circular is only illustrative and therefore includes license/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute, as one of the documents to prove the activity of the proprietary concern.
4. Banks may revise their KYC policy in the light of the above instructions and ensure strict adherence to the same.
5. Please advise your Principal Officer to acknowledge receipt of this circular letter.
Yours faithfully,
(Lily Vadera)
Chief General Manager
Chief General Manager
CENVAT rules state that when the capitals goods are used by manufacturer, the taxes paid on the same are allowed as input credit and if the goods as final product are not chargeable to duty then credit is not allowed. Manufacturing industries are working to manufacture the product for the consumption of the consumer requires lot of machines and capital goods for the transportation as well as other purposes.
Credit of Capital Goods not owned by manufacturer during receipt at factory
CA Manish Garg
CENVAT rules state that when the capitals goods are used by manufacturer, the taxes paid on the same are allowed as input credit and if the goods as final product are not chargeable to duty then credit is not allowed. Manufacturing industries are working to manufacture the product for the consumption of the consumer requires lot of machines and capital goods for the transportation as well as other purposes. This high amount of duty imposed upon them is allowed as credit to reduce the cascading effect of taxation.Rule 3 of the CENVAT Credit states that a manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of duties , paid on any input or capital goods received in the factory of manufacture of final product. But the ownership of the goods matters; it does not mean that the manufacturer only safe keeping the capital goods on the behalf of other is eligible for the credit but if the goods belongs to manufacturer not owned by him at the time of receipt is still eligible for CENVAT Credit.
This above matter has also been argued at New Delhi CESTAT- in the case of M/s Indian Oil Corporation Ltd Vs CCE & ST, where stay has been given regarding pre-deposit of the Cenvat Credit demand, interest thereon and penalty thereon as there is no requirement that capital goods, at time of receipt, must be owned by manufacturer or that same would cease to be capital goods, if they are installed in factory and become fixed to earth; hence, credit cannot be denied on ground that they are not owned by assessee at time of receipt or after installation, they become fixed to earth.
Further if put some light on the definition of capital goods, pipes and tubes, pollution control equipment refractories, and storage tanks are required to be installed and after installation, the same put together constitute a manufacturing plant, which is a fixed to earth structure but still the CENVAT of pipes and tubes are allowed.
The words used in Rule 2(a) are "used in the factory of manufacturer of the final product" not "used in the manufacture of final product". Therefore, once any item received in the factory as "capital goods" in terms of Rule 2(a) of the Cenvat Credit Rules, and is used in the factory, the manufacturer would be entitled to Cenvat Credit of excise duty paid in respect of the same.
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