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As you may be aware Service tax on Banking and other financial services was imposed w.e.f.16-07-2001. The taxation of services has also undergone a paradigm shift from positive list to negative list in the year 2012. Post implementation of taxation of services based on negative list, service tax compliance has now become an integral part of the banking Sector. Being auditors, it's our responsibility to ensure that provisions of a particular law are duly complied with. While conducting an audit it sometimes becomes difficult to look into all the aspects of various laws. For example, Service Tax compliance while conducting an audit may pose to be a bit difficult area.
Indirect Taxes Committee of ICAI has revised its publication on "Compliances of Service Tax in Banking Sector" in order to help the auditors in complying with service tax law. The publication contains a detailed Questionnaire for Service Tax Audit of Banks, answering which will ensure compliance with various service tax regulations. In addition to questionnaire there are annexure(s) wherein information can be asked for from the banks and appendix which help as ready references of law while conducting an audit.
The publication can be download or online purchase from the Indirect Taxes Committee website www.idtc.icai.org or access at below link:
Proposes listing of 'professionally managed' start-ups with relaxation in disclosures & lock-in period requirements |
SEBI releases discussion paper on new platform for capital raising by start-ups in the areas of 'software product development, e-commerce, new-age companies having innovative business model, etc.'; SEBI recognizes mushrooming of start-ups ecosystem, acknowledges that many of these cos. planning to list overseas due to absence of better price discovery in India; Hence, SEBI proposes allowing capital raising by start-ups on its Institutional Trading Platform (ITP), albeit with relaxation & modification of existing regulatory framework; Rs. 10 lakhs proposed as minimum application size, minimum number of allottees in such issues to be 500 and minimum trading lot on platform to be Rs. 5 lakhs; Cos. seeking to raise funds on ITP should be 'professionally managed' with no person (individually or with persons acting in concert) holding more than 25% of pre-issue share capital; Proposes lock-in period of 6 months for pre-issue capital; Proposes relaxation and extension of definition of QIB to include certain categories of NBFCs and AIFs; Disclosure requirements relating to fund raising objective, group companies reporting, product advertisements sought to be toned down; Seeks comments from stakeholders by April 20, 2015: SEBI |
Procedure for use of digital signature on records and invoices- CBEC invite commentsby CA Sandeep Kanoi |
Kind attention is drawn to Hon'ble Finance Minister's Budget Speech on the facility of maintenance of records in electronic form and authentication of records by Digital Signature for Central Excise assesses. Sub rule (4), (5) in Rule 10 and sub-rule (8), (9) in Rule 11 of Central Excise Rules, 2002 have been inserted vide Notification No. 8/2015-CE (N.T.) dated 01.03.2015 to initiate the implementation of the said facility.
Procedure for use of digital signature on records and invoices- CBEC invite comments
F. No.224/44/2014-CX.6
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE & CUSTOMS
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE & CUSTOMS
Dated : March 27, 2015
To
Members/ Representatives of the Trade,
Principal Chief/ Chief Commissioners of Central Excise (All) and
Principal Chief/ Chief Commissioners of Central Excise and Service Tax (All)
Sub: Procedure for use of digital signature on records and invoices-reg.
Kind attention is drawn to Hon'ble Finance Minister's Budget Speech on the facility of maintenance of records in electronic form and authentication of records by Digital Signature for Central Excise assesses. Sub rule (4), (5) in Rule 10 and sub-rule (8), (9) in Rule 11 of Central Excise Rules, 2002 have been inserted vide Notification No. 8/2015-CE (N.T.) dated 01.03.2015 to initiate the implementation of the said facility.
2. Central Board of Excise and Customs (Board) has been empowered in these rules to specify the conditions, safeguards and procedures for issue of invoices and preserving records in electronic form and authentication of records and invoices by digital signatures.
3. Board now proposes to prescribe the procedure for verification of digitally signed invoices and documents. A draft Notification and Circular proposed to be issued in this regard, is enclosed. It is requested that feedback may be provided by the departmental officers and the Members of Trade on the proposed procedure by 22nd April, 2015 on the email id: rohan.choudhary@nic.in.
(ROHAN)
Under Secretary (CX.6)
Under Secretary (CX.6)
Encl.: Draft Notification & Circular
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI
NOTIFICATION NO
/2015-CE(N.T.), Dated: March, 2015
In exercise of powers conferred by sub rule (5) of rule 10 and sub rule (9) of rule 11 of the Central Excise Rules, 2001, (hereinafter referred to as the said rules) the Central Board of Excise and Customs hereby specifies the following conditions, safeguards and procedures for issue of invoices and preserving records in electronic form and authentication of records and invoices by digital signatures:-
1. All assesses proposing to use digital signature shall use class 2 or class 3 Digital Signature Certificate duly issued by the licensed Certifying Authority in India.2. (i) Assesses proposing to use digital signatures shall intimate the following details to the jurisdictional Deputy/ Assistant Commissioner at least 15 days in advance with copy to the jurisdictional Superintendent:-a) name, e-mail id, office address and designation of the person authorized to use the digital signature certificate,b) Name of the Certifying Authority,c) Date of issue of Digital Certificate and validity of the digital signature with a copy of certificate issued by the certifying authority along with complete address of the Certifying Authority,Provided that in case of any change in the details submitted to the jurisdictional Deputy/ Assistant Commissioner, complete details shall be submitted afresh within 15 days of such change.(ii) Assessees already using digital signature shall intimate the above details within 15 days of issue of the notification.
3. Every assesse/ taxpayer opting to maintain records in electronic form, who has more than one factory, shall maintain separate electronic records for each factory.
4. All assesses/ taxpayers opting to maintain records in electronic form, on request by a Central Excise officer, shall produce the specified electronic records and invoices through email or on specified storage device in an electronically readable format for verification of the authenticity of the document. The request for records and invoices shall be specified in the letter or e-mail by the Central Excise officer.
5. A Central Excise Officer, during an enquiry or investigation, may direct an assessee to furnish printouts of the electronic records and invoices during an investigation and may resume the documents and invoices under Section 14 of the Central Excise Act, 1944 after verifying the correctness of the same in electronic format. The print outs of such electronic records shall be signed by the assesse or any other person authorized by the assesse in this regard, if so requested by the Central Excise officer.
6. Every assessee/ taxpayer opting to maintain records in electronic form shall ensure that appropriate backup of electronic records is maintained and preserved.
[F. No. 224/44/2015-CX.6]
(Rohan)
Under Secretary to the Government of India
Under Secretary to the Government of India
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
CIRCULAR NO
…..2015-CX, Dated: March, 2015
To
Principal Chief Commissioners / Chief Commissioners of Central Excise (All), Principal Chief Commissioners/Chief Commissioners of Central Excise & Service Tax (All).
Sub: Instructions regarding maintenance of Records in Electronic Form and authentication of records by Digital Signature–reg.
Kind attention is invited to sub-rule (5) of rule 10 of Central Excise Rules, 2002, inserted vide Notification No. 8/2015-CE (N.T.) dated 01.03.2015. As per the provisions of this sub-rule, the assesses may opt to maintain records in electronic form and authenticate the same by digital signatures subject to conditions, safeguards and procedures prescribed by the Board. Attention is also invited to sub-rule (9) of rule 11 of CER, 2002, inserted by the same notification. As per the provisions of this rule, the assesses may exercise the option to issue invoices authenticated by digital signatures. Subsequently, Board vide Notification No. C.E.- (N.T.) dated March, 2015 has prescribed conditions, safeguards and procedures for preserving records in electronic form and authentication of records by digital signatures. Now procedures are hereby prescribed for verification of digitally signed invoices and documents.
2. Digitally signed invoices and documents shall be verified by the following procedure:
a) The process for verifying digitally signed documents or invoices requires a computer system with internet connection. Digitally signed invoices or documents either in PDF format or the hard copy of invoices and documents may contain a web link where the documents or invoices are stored by the assessee, which can be accessed using the web link for verification. Assessee shall either provide access to the website of the company for verification or forward the digitally signed invoice or document on requisition by the Central Excise officer for verification.b) The contents of a digitally signed document or invoice can be verified as follows:i) Automatic pop-up of message once a digitally signed invoice is opened for the first time: Whenever a document/ invoice containing a valid digital signature is opened in a pdf format, a pop up will automatically appear on the computer screen to validate the digital signature of the person who has signed the document. Till the time a signature has not been validated, the message will indicate "validity unknown" with a "?" stamp. This pop up will not appear where the sender creates only an image of the digital signature instead of digitally signing the invoice or document. Such an invoice or document will not be a valid digitally signed invoice or document.ii) Document modification history: Once the signature box on digitally signed invoice or document is clicked, a window bearing title 'signature validation status' will appear to provide document modification history. This window will provide the information as to whether the document has been modified or not post signing of the document.iii) Access to key information from the signature panel and acceptance of signer post verification of necessary particulars: The next step is to click "show signers' certificate" option. By doing so, various tabs will provide key information about the signer, validity and authenticity of the digital signature certificate, details about the agency that has issued digital certificate, details about the certificate granted to such issuing agency etc.After verifying various particulars (the name of the holder of the digital signature, the validity of the signature and details of issuance of the document) and being satisfied with the authenticity of the document, the recipient of the invoice/ document may add the certificate in question to its list of trusted certificates by clicking the "trust" tab on the menu. By clicking 'Add to trusted identities' the signer gets added as a trusted source and the process of verification is thus complete.
3. Difficulty, if any, in implementation of the procedure may please be brought to the notice of the Board. Hindi version would follow.
F.No. 224/44/2014-CX.6
(Rohan)
Under Secretary to the Government of India
Under Secretary to the Government of India
14% Service Tax rate not with effect from 1st April 2015by CA Sandeep Kanoi |
It has come to the notice of this office that though the new Service Tax rate of 14% has not yet been given effect, some of the service tax providers have started billing & recovering the amount of Service Tax at the rate of 14% from their customers. This practice is not only completely illegal but amounts to collecting consideration from the general public which is not so required to be collected as Service Tax.
14% Service Tax rate not with effect from 1st April 2015
OFFICE OF THE COMMISSIONER
CUSTOMS, CENTRAL EXCISE AND SERVICE TAX
KNDRIYA UTPAD SHULKH BHAWAN, TElANGKHEDI ROAD
CIVIL LINES, NAGPUR-440001
CUSTOMS, CENTRAL EXCISE AND SERVICE TAX
KNDRIYA UTPAD SHULKH BHAWAN, TElANGKHEDI ROAD
CIVIL LINES, NAGPUR-440001
It is brought to the notice of the Public that the new Service Tax rate of 14% has been proposed In the Finance Bill, 2015 by the Hon'ble Finance Minister on 28-02-2015. The new Service Tax rate 14% is not effective immediately and shall come into effect only from a date to be notified later. The existing rate of Service Tax is 12.36% (Inclusive Cesses)
It has come to the notice of this office that though the new Service Tax rate of 14% has not yet been given effect, some of the service tax providers have started billing & recovering the amount of Service Tax at the rate of 14% from their customers. This practice is not only completely illegal but amounts to collecting consideration from the general public which is not so required to be collected as Service Tax.
It is therefore appealed to, bring anysuch instance to the notice of Customs, Central Excise & Service Tax Department. The details of the nominated officers of the Department for Vidarbha Region for this purpose are, as under
| Name S/Shri | A.V.Deshmukh | P.A.Thakur | A.B.Chakrovorty |
| Designation | Assistant Commissioner | ||
| Commissionerate | Nagpur-I | Nagpur-II | Wardha |
| Office Phone No. | 0712-2560596 | ||
| Mobile No. | 9527544868 | 9822624258 | 9890223720 |
HELP US TO HELP YOU.
(Ashish Chandan)
Commissioner
Commissioner
Private MoU between JV partners can't be enforced through Sec 397/398 petition |
CLB dismisses petition filed by a JV partner u/s 397, 398 & 402 of Cos. Act, 1956, alleging non-payment of share transfer consideration as per an MoU; Relies on SC rulings in Incable Net (Andhra) Ltd. & Ors. v. AP Aksh Broadband Ltd. & Ors. and Chatterjee Petrochem (India) Pvt. Ltd. v. Haldia Petrochemicals Ltd. & Ors, to hold that failure of one of the parties to a private agreement to abide by its commitment can only be remedied in a civil suit and not in a petition under section 397 of Companies Act; Observes that petitioners concealed facts & documents and sought relief against one of the respondent (i.e. SBI) without disclosing to CLB that another application is filed under Recovery of Debts Due to Banks and Financial Institutions Act, 1993, an information which was 'vital' and 'material', and ought to have been disclosed; On petitioners' allegations relating to further allotment by respondent group without taking its consent, peruses its written statements, states that petitioners had nowhere sought allotment of proportionate shares in their favour but only sought declaration to the effect that allotment was void, which clearly shows petitioners' were disinterested in subscribing shares:Mumbai CLB |
| The ruling was delivered by Shri Ashok Kumar Tripathi, Member (Judicial), CLB, Mumbai. Advocates Satish Agrawal, M.S. Bhardwaj and V.P. Varma appeared on behalf of petitioners while respondents were represented by Advocates Tahseen Naz, Tejas Sanghrajka and Prashant Kumar. |
Treatment of Amount Paid towards Purchase of Software under Income Tax Act, 1961by CA Sandeep Kanoi |
The question as to whether the expenditure incurred towards purchase of computer software should be treated as revenue or capital in nature. Law has been well settled since 2012, still there different treatments in industry to treat the same as revenue or capital. So through this Article, I am trying to conclude whether the amount [
Treatment of Amount Paid towards Purchase of Software under Income Tax Act, 1961
The question as to whether the expenditure incurred towards purchase of computer software should be treated as revenue or capital in nature. Law has been well settled since 2012, still there different treatments in industry to treat the same as revenue or capital. So through this Article, I am trying to conclude whether the amount paid towards purchase of software should be treated as capital or revenue. Only the relevant text of sections is reproduced here for reader's reference.
Explanation 4 inserted by Finance Act, 2012 in section 9(1)(vi) states as follows:
"Royalty means consideration for the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software(including granting of a license) irrespective of the medium through which such right is transferred."
As per Section 194J
Any person, not being an individual or HUF, who is responsible for paying to a resident any sum by way of
- Royalty
Shall, at the time of credit of such sum or at the time of payment, whichever is earlier, shall deduct an amount equal to 10% by way of TDS. Deduction shall be made where the amount of such sum or aggregate of the amounts of such sums during the financial year exceed Rs 30,000/-.
However individual or HUF are required to deduct TDS if they were covered by provisions of section 44AB during the immediately preceding financial year.
As per Section 195
Any person responsible for paying to a non-resident or to a foreign company any sum by way of
- Royalty
Shall, at the time of credit of such sum or at the time of payment, whichever is earlier, shall deduct TDS thereon at the rates in force
Analysis
- Royalty includes payment received for transfer of all or any right to use computer software.
- Royalty includes payment received for transfer or granting of license for computer software.
- On purchase of software from a resident TDS shall be deducted @10% under section 194J.
- On purchase of software from a non-resident TDS shall be deducted under section 195 at the rates in force. (i.e. @ 25% as provided in section 115A or if relevant DTAA provides lower rate than that rate shall apply instead of 25%)
As per Section 40(a)(ia)
Where any sum is payable to a resident on which TDS is deductible
- Such TDS has not been deducted.
- After deduction, has not been paid on or before the due date specified in section 139(1).
Then 30% of any such sum shall be disallowed in computing the income of that previous year.
As per Section 40(a)(i)
Where any sum is payable to a non-resident by way of royalty on which TDS is deductible
- Such TDS has not been deducted.
- After deduction, has not been paid on or before the due date specified in section 139(1).
Then any such sum shall be disallowed in computing the income of that previous year.
Below illustration will further clarify the above provisions:
Illustration 1: XYZ Limited purchases software from a resident in India for Rs 1 Lakh.
As the amount paid by XYZ Limited is Royalty, hence TDS is deductible @ 10% under section 194J i.e. Rs.10, 000/-
Illustration 2: XYZ Limited imports software from a company in U.S.A. for Rs 1 Lakh.
As the amount paid by XYZ Limited is Royalty, hence TDS is deductible under section 195 @ 25% as provided in section 115A or rate provided in DTAA whichever is lower.
Illustration 3: XYZ Limited purchases software from a resident in India for Rs 1 Lakh during the A.Y 2015-16. XYZ Limited pays Rs 1 Lakh without deduction of TDS.
Now Rs 30,000 shall be disallowed in the hands of XYZ Limited as per the provisions of section 40(a)(ia) while computing the income of A.Y 2015-16, as TDS of Rs 10,000 was deductible under section 194J and XYZ Limited fails to deduct such TDS.
Illustration 4: XYZ Limited imports software from a company in U.S.A. for Rs 1 Lakh during the A.Y 2015-16. XYZ Limited pays Rs 1 Lakh without deduction of TDS.
Now Rs 1 Lakh shall be disallowed in the hands of XYZ Limited as per the provisions of section 40(a)(i) while computing the income of A.Y 2015-16, as TDS was deductible under section 195 and XYZ Limited fails to deduct such TDS.
CONCLUSION:
However, it is worth to note that rates of depreciation given in Income Tax Rules provide that computers including computer software are eligible for depreciation @ 60%. But explanation 4 inserted by Finance Act, 2012 to the definition of royalty under section 9 clarifies that payment made towards purchase of computer software is royalty. Income Tax Rules cannot override the Income Tax Act. Thus, amount paid to obtain computer software shall not be added to the block of assets of computer.
Therefore, to conclude with amount paid for purchase of computer software is royalty and shall be allowed as deduction under section 37(1) as revenue expenditure subject to the provisions of section 40(a)(i) and section 40(a)(ia).
(Submitted by – Tarun Kumar (B.Com, CA-Final) Mobile: +91-888-282-8112 Email-ID: tktarun786@gmail.com)
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