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| (New York, New York, February 6, 2014) – The most recent IFAC SMP Quick Poll of small- and medium-sized accounting practices (SMPs) indicated that fewer of their small business clients are burdened by economic uncertainty, perhaps suggesting a more favorable economic climate and signaling future growth in this sector. "Over the last few years, economic uncertainty has cast a shadow over SMPs and their clients," commented SMP Committee Chair Giancarlo Attolini. "Improving conditions in the small business sector, a barometer for economic growth, are a terrific sign for SMP professionals and for the economy at large. As their clients prepare for growth, SMPs will, in turn, also help propel the local economies in which they operate." When asked for input regarding the International Auditing and Assurance Standards Board's 2013 Auditor Reporting Exposure Draft, which proposed significant changes to auditor reporting, respondents were generally supportive. While only a small minority thought unlisted entities would voluntarily opt to disclose key audit matters, most agreed with the proposal to require a statement on going concern in all audit reports. The poll also shed light on the value of various services and projections for their relative growth. Accounting compilation and other non-assurance/related services proved to be the fastest growing sources of revenue for SMPs, by a significant margin, over audit and assurance. Roughly half of the respondents acknowledged the value of integrated reporting to small- and medium-sized entities (SMEs), and about half predict that within five years, SME clients will ask for assistance with integrated reporting. For additional findings and a complete summary of results, see the IFAC SMP Quick Poll, 2013 Year-End Round-Up in the SMP Committee area of the IFAC site: www.ifac.org/SMP. Due to unbalanced response rates by region, results may not be statistically representative of global or regional populations of SMPs. The year-end 2013 poll received 3,709 responses and was conducted in 17 languages from November 15 to December 31. The poll is intended to take a snapshot of key challenges and trends influencing SMPs globally. IFAC wishes to thank the many member and regional organizations that helped with translation and distribution of the poll. About the SMP Committee The SMP Committee of the International Federation of Accountants (IFAC) represents the interests of professional accountants operating in small- and medium-sized practices (SMPs). The committee develops guidance and tools and works to ensure the needs of the SMPs are considered by standard setters, regulators, and policy makers. The committee also speaks out on behalf of SMPs to raise awareness of their role and value, especially in supporting SMEs, and the importance of the small business sector overall. About IFAC IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 179 members and associates in 130 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce. | |||
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Online process of EPFO (employees provident fund organisation) at a glance
What the world really needs is more love and less paper work. – Pearl BaileyEPFO has taken a revolutionary step in year 2012 by launching its EMPLOYER E- SEVA portal which benefited the employer by way in reducing the hassles of submitting the paper return to EPFO office. The EPFO announced an online withdrawal and transfer provision for employee's provident fund (EPF) from 1 July 2013, with the aim to settle claims faster.
1.1 Major online service which can be availed by employer and employees are -A) Submission of monthly returns;
B) Requirement of submitting other forms like form 5 (applying for PF no.)/10(details of left employees) /12A, 3A and 6A is no more;
C) Facilitated online submission of transfer claim (OTCP);
D) Employees can know there claim status and their EPF balances.
1.2. Online submission of monthly return by employer – From July 2012 onwards ECR (electronic challan cum return) are submitted online which solve the purpose of both the challan as well as the return. Submission of hard copy of return to EPF department is no more required. Last date of uploading the ECR files is 15th (plus 5 days of grace period i.e. 20th) from the closer of the month.
"Closer of month" – "Clause 38 of the Employees' Provident Fund Scheme, 1952, fixes the time limit for making payment in respect of contribution to the provident fund to be 15 days from the close of the month concerned. The issue is whether "month" should be considered to be the month to which wages/ salary relates or the month in which actual disbursement?
Yes , the relevant month considered is month of payment of wages that is supported in case of Kanoi Paper & Industries Ltd,. Calcutta Vs. ACIT, Co. Circle 7(2), Calcutta. In General relevant month is considered to be the month to which wages relates.
Example wages for the month of January are paid in February then due date will be 15th of march (including grace period of 5 days i.e. 20th march) If it is violated then penalty is levied from the due date i.e. 15th not 20th.
An E- return tool has been provided by the EPF department for assisting employer in submitting/uploading return online.
1.3 Now the requirement of Submitting form 5, form 10 etc. for informing the department regarding new joiner and employees who has left is not required these information are now indulged in ECR (electronic challan cum return) file. This has made the online process more simple and transparent.
Note – The basic salary and DA on which PF is calculated is proposed to be increased from 6500 to Rs 15000 however it has received assent from finance minister but official notification is what we are waiting for.
1.4. Transfer of Pf account from one employer to another is no more a tedious task now , employee just has to login at epf website (http://memberclaims.epfoservices.in/) and lodge his request for transfer of account to other employer .
The respective employer will accordingly correct/ modify the request lodged by the employee.
Employee can also track there PF account balance by entering PF account no, EPFO office where your account is maintained, name and mobile no. at epf website (http://www.epfindia.com/MembBal.html).
Article by –
Anubhav Jain (CA Final), Kota (Rajasthan),
Email- anubhav5jain@gmail.com
Option to Opt Made LTU "Optional"
CA Arun Prakash, CA Neeru Saggu
Introduction:
The rupee may be falling, the stock markets may be volatile, the cost of living may become costlier still premium class will remain classified in all the cases. Premium class a class with premium benefits in terms of facilities and comfort. More leg space, more privacy, exciting food, more personal attention and so on. But this concept of premium class is not limited to airlines or restricted to frequent flyers only. It extends to every field including the economy as a whole and the taxpayers of our country too.
Let us discuss another way. The ABC analysis in Cost Accounting theory is not new to us where A category represented 80% value of the total inventory but may be 10-20% of the total quantum. So if this portion of inventory is being taken care to the fullest the overall control can be established.
The above theory did not remain untouched even by the Finance ministry. The revenue generating units may be in the form of direct taxes or indirect taxes got classified in 3 categories:
- Large Units 2. Medium Units 3. Small Units
So if we keep the large units as A category inventory for our economy we should not be wrong as significant portion of revenue is being generated by these units in terms of value. So what is new in it? Nothing but redefinition of these units as large taxpayer units having premium facility and an edge over medium and small units.
But what led to such classification? Do we need it at all? Why such segregation?
In the beginning of 1980s there has been recommendation from IMF that member country for strengthening the tax administration and improved statutory compliance need to establish the Large Tax Payer Units. The dominant environmental factors including globalisation, political instability and weak administrative processes have caused the demand for improved taxpayer services. The voices were raised by the taxpayers who have been struggling to reduce the high compliance cost and shield themselves against the arbitrary treatments by the tax administrators. First time in 2005 the honourable finance minister mentioned about the system of large tax payer unit (Speech Extract)"As a measure of facilitation, I propose to follow international practice and establish the large taxpayer Units. To begin with, these units will be set up in major cities. I would like to invite the large taxpayers, whether of corporate tax or income tax or excise duty or service tax, to participate in the programme and avail of the single window service."
But who can qualify as a large tax payer unit? What should be the criteria for defining the LTUs?
Criteria for LTU as an International Perspective:
If we look at the criteria's used by different countries you shall find various patterns. Some countries use single criteria for all business activities while others use different criteria's for different business activities. For example: Netherland and Denmark define the large tax payer based on the turnover. Germany considers turnover and profit for manufacturing. Ireland counts on turnover and tax. Based on the survey report of IOTA(Intra-European Organisation of Tax Administrations) the total turnover is most popular, and then tax dues are number two followed by asset value and the profit criteria at number three and four respectively. However India opted the criteria based on the tax dues.
Eligibility for Registration under LTU:
Any person, engaged in the manufacture or production of goods, or a provider of taxable service, who has paid during the financial year 2004-05 or during the financial year preceding the year of filing of application for registration under LTU,
- duties of excise of more than rupees five crores in cash or through account current; or
- service tax of more than rupees five crores in cash or through account current; or
- advance tax of more than rupees ten crores under the Income Tax Act, 1961,
and is presently assessed to income tax or corporate tax under the Income Tax Act, 1961, under certain jurisdictions of Chief Commissioner of Income Tax, Bangalore, Mumbai, Delhi and Chennai.
Legal Meaning of LTU:
LTU is a self-contained tax administration office under the Department of Revenue which acts as a single window clearance point for all matters relating to central excise, income tax/corporate tax and service tax. Entities would be able to file their excise return, direct taxes returns and service tax return at such LTUs and for all practical purposes will be assessed to all these taxes at these LTUs. Such units are equipped with modern facilities and trained manpower to assist the tax payers in all matters relating to direct and indirect tax/duty payments, filing of documents and returns, claim of rebates/refunds, settlement of disputes etc. The scheme aims at reducing tax compliance cost and delays, and bringing about uniformity in the matters of tax/duty determination. An eligible taxpayer can opt to avail of the facility of LTU scheme.
SO Called Benefits:
Single window for documents and Returns:
Single PAN based entity shall be able to file all the documents pertaining to all its geographically dispersed units at single window of LTU. All the returns whether pertaining to income tax, central excise and service tax shall be routed collectively through these LTUs.
Dedicated Client Executives:
The officers at the level of AC/DC/JC would act as dedicated client executives for assistance in all the tax matters. This shall ensure single point contact instead of interacting with different sections/officers of the LTU.
Restriction on Jurisdictional Field Officers:
With respect to any issue relating to these assesses who have opted for LTU the jurisdictional field officers will be restricted from the suo moto visit to the units or any kind of interaction. However in order to comply with the express provisions of the law where physical control or verification is a compulsory requirement the Jurisdictional Commissionerate shall act under the directives of LTU.
No Cenvat Reversal for Movement of Input/Capital Goods:
As against the existing provisions of law the manufacturing units shall have the added advantage of non reversal of cenvat credit availed against the input and capital goods if the same are moved to different units situated at diverse geographical locations. Also any excess credit available at one unit may be shifted to other eligible units in a hassle free manner.
Pending Cases to be dealt centrally:
If the cases where the show cause notices/ demand notices have been issued by jurisdictional offices but not adjudicated till the exercise of the option of LTU will stand transferred to the LTU and the officers of the same shall adjudicate the same.
Risk Based Audit:
No mandatory audits for LTU. Based on the risk assessment the taxpayer shall be identified and that too in consultation with them thereby reducing the possible inconveniences to the minimum. Boon to the corporate as they will become prepared with their team for audit without having an element of surprise at least on the visit part.
Could LTU Be A Success Story?
Concept of the LTU was a bigger reform in the field of Tax Administration with an objective to reduce compliance burden and transaction costs for large corporate, and bring in efficient tax administration thereby focussing the premium tax payers. But the question still remains whether even after 8 years could it achieve its objective? Has it yielded the desired results? Could it deliver upon its promises?
Just Think!
We personally feel that India waited too long to bring the initiative. If we look at the historical perspective the concept of LTU conceived in Latin America way back in 1970s and moved to Africa and Asia. The establishment of LTUs in India follows the precedent set in other countries including Australia, the Netherlands, New Zealand, the UK and the US, where tax administrations have been organized to cater to multiple types of taxpayers.
Option To Opt Made LTU Optional:
Option to opt made the concept of LTU optional. The late adoption followed by making the facility optional instead of compulsory became the biggest barrier to its success. Instead of a long term medication this acted just as a first aid which could not eradicate the loopholes in a complete sense. Various reform processes which are started in India do not reach to its completion stage. This is one of the examples which substantiate the fact. You will also observe that unless the initiatives are top driven they hardly succeed. Today where India is going through the higher Current Account Deficits and the real growth has reached to its bottom line there is a necessity to create a conducive business environment which can excel the economy. At this juncture there is acute necessity to provide advanced tax facilitation to the taxpayers and the policy decisions to come in consultation with these corporate to maximise the benefits for both the taxpayers as well as tax administrators. So unless all the tax payers of the similar size come under the common umbrella it shall be really difficult for the tax administrators to treat them in a particular fashion and provide them the similar benefits.
Dedicated Client Executive: Bigger Challange
Finance Ministry promised to provide client executives to the LTUs. But the fact remains that the revenue from direct and indirect taxes follow the two streams altogether different from each other. Having a single client executive with expertise in both the aspect shall pose a bigger challange for these CE's to resolve their client's problems. This again raises the concerns over the single window concept. Though we have been talking about the end results but we are not talking about the resources. Though we are talking about the facilities to be made available but we are not talking about the facilities which are available with us. The whole set up shall require an advance IT infrastructure, well trained staffs, and well managed offices to administer the concept. Has the ministry looked at these aspects? Big question mark which has restricted the concept of LTU to be famous among the CFO's.
Reduced Transaction Cost: A MYTH at Inception:
Govt has been claiming the reduced transaction costs due to implementation of LTUS. If you look at the current practices particularly for the manufacturing concerns the records are not always kept centrally so as to comply with the existing legal framework. There are requirements of physical records and verification at the respective locations itself. So migrating the voluminous data and bringing the database in the common platform shall not be an easy task even for the big corporate as this shall tantamount to additional cash outflow for the revamping of the whole IT system. Also the parallel maintenance of records at one place for the geographically dispersed locations shall be a cumbersome task requiring deployment of adequate resources and adding to the cost of the taxpayers.
Non- Integration with State Laws:
In today's context we are moving forward to GST. We are talking about allowing the state vat benefits as against the central levies in the near future. However the non integration of state compliances under LTU will again be a hindrance to the very objective of Single Window rather shall promote the concept of parallel window. The finance ministry must come up with a proposal to build certain mechanism to integrate the same so that the tax payers do not go on incurring the recurring cost over revamping or adopting the existing or new IT Systems and be penalised for opting LTU.
Reduced interference of Jurisdictional Officers:
The laws of the land where it is required to have periodical physical verification and control over various activities it shall be difficult to part with the jurisdictional offices. Also nowhere the concept of LTU's conveys that the interference from Jurisdictional offices shall be removed. Rather it claims that the same shall be under the directives of the LTU office.
Way Forward:
So what are the options available with the Finance Ministry? How this concept can maximise the benefits for the tax payers and the tax administrators? What can remove the teething problems?
Some of the measures to make the LTU effective may be suggested as below:
- The commitment for setting up LTU must be visible to the investors. In order to make it visible the govt needs to provide with all the necessary resources whether in terms of infrastructure, trained staff or the whole IT system.
- The LTU needs to be made compulsory so as to achieve the true intent and objective of its setting up. Compulsorily bringing the tax payer of a similar size to common platform shall not only ease up the policy maker's job but shall also take the compliance to the next level.
- The centralized supervision needs to be strengthened so as to cater to the requirements of corporate as well as the administrators.
- There should be continuous up gradation and reform of policies so as to keep the concept of LTU alive as an integral part of the whole system. The frequent changing business environment and the global economy demand for an agile system. The periodical reviews and improvements will prove to be of great help in achieving the agility.
- Looking at the broader perspective, in order to really make it a single window facility for the premium class taxpayers the LTU should include the state laws requirements with proper mechanism for compliance and sharing of the revenue between the centre and the state. This shall be in parlance to the upcoming GST requirement.
- Also there is need of identifying the performance indices for ensuring the effective management of LTU's and the reporting of the same. These indices shall reflect the true picture on the aspect that where India stands on the path of consolidated growth in the globe.
It is evident from the above that it has been a positive endeavour on the part of the govt to introduce the concept of Large Tax Payer Unit. However the reforms to be effective needs to carried in a holistic manner. Availability of infrastructure, trained staff, continuous up- gradation, good IT systems is the need of the hour. Without the presence of the commensurate resources the concept shall be a body without soul. The changing business environment and the economic conditions, particularly the current recessionary scenario really demands for the effective reforms. The FDI flows in India are a fraction of what our country deserves. Theoretically it has remained an attractive destination for global investments but to give it a practical shape concept like LTU can play a significant role in rebuilding the domestic and foreign investor's confidence. So let's hope that reforms become proactive instead of reactive with a harmonized tax structure benefiting both the tax payers and the tax administrators.
Personal Detail of the Author:
 Name: Arun Prakash Qualification: CA with B.com Hons E mail: arunatheight@yahoo.com |  Name: Neeru Saggu Qualification: CA with B.com Hons E mail: neer_smile@yahoo.co.in |
CBDT Issues 'Broad' Guidelines for Media Interaction
F.No.M&TP/CBDT/2013-14/55
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi Dated: 31.01.2014
Office Memorandum
Sub:- Broad Guidelines for Media Interaction
With a view to keeping the public informed of the policy initiatives and the achievements of the Department, it is imperative to have a proactive interaction with the Media. Media co-ordination is also important to improve the public perception of the Department for effective tax governance. The need of a sound media co-ordination is also felt to counter factually incorrect media reports against the Department which come up on many occasions on diverse issues and actions.
2. The office of the Official Spokesperson of the Central Board of Direct Taxes was created in the year 2006 along with a Media Centre. There is a felt need to have broad guidelines for the CBDT to achieve the following objectives:
A. To clearly delineate the purpose of interaction with the media
B. To enumerate the policy guidelines and the general framework within which the interaction with media will take place ; and
C. To lay down procedural guidelines for the officers responsible for interaction with the media.
Purpose of Media Interaction
3. The Media interaction should broadly aim at achieving the following purpose:
a. To disseminate information to the public at large about their entitlements and obligations in respect of Direct Tax Laws.
b. To highlight the steps taken for facilitating compliance to the Direct Tax Laws.
c. To keep the public posted about the important changes in tax laws and procedures.
d. To share all the significant events pertaining to the Income Tax Department.
e. To clarify the Departmental stand on news/views reported in the media which are factually incorrect.
f To communicate with public at large on any other issues that the Board may approve.
Policy Guidelines
4.1 With a view to achieve the afore-stated purpose(s), the issues to be covered in the press release/Media briefings may include:
(i) Broad trends of budget collection
(ii) Important policy initiatives taken by the Department in key areas of work.
(iii) Significant changes in Tax Laws, Rules and Procedures.
(iv) Measures taken to improve Tax payer services.
(v) The impact of measures taken for enforcement against tax defaulters.
(vi) Significant achievements at the National/Regional level.
(vii) Important National and International events having significance for the Income Tax Department.
(viii) Important Policy decisions affecting the Tax payers.
(ix) Fresh Notifications, Instructions, Circulars etc.
(x) Clarifications in respect of factually incorrect media reports.
(xi) International Tax Treaties, Double Taxation Avoidance Agreements (DTAAs), Tax Information Exchange Agreements (TIEAs) etc.
(xii) Technology Initiatives.
(xiii) New important judgments in favor of Revenue etc.
• (The above list is only illustrative and not exhaustive.)
4.2 The press releases/press briefings shall be in alignment with the views and policies of the Government.
4.3 The press brief shall be factual, objective, accurate and reliable.
4.4 Telephonic or other informal communication with media must not be made, as the authenticity and accuracy of such interactions remains unverifiable.
4.5 The CIT (Media- Coordination & Technical Policy) (M&TP, hereafter) CBDT shall be the Official Spokesperson and Media — Coordinator of the CBDT.
4.6 The Chairperson, CBDT shall be the Competent Authority at the level of CBDT and all the press releases shall be issued by the Official Spokesperson and Media-Coordinator, CBDT with the approval of the Chairperson, CBDT.
4.7 The Chairperson and the Members of the Board may participate in the Panel Discussions/Talk Shows etc. on the Television and Radio Channels to present the views of the Government. They may also hold the Press Conferences/Press Briefings, whenever so needed.
4.8 The Chairperson, CBDT shall be the Competent Authority to authorise an officer having the expertise and knowledge of the given subject to participate in the Panel Discussions/Talk Shows etc. on the Television and Radio channels and to present the views of the Government in such discussions.
Procedural Guidelines
5.1 There already exists a Media Centre at the Central Board of Direct Taxes (CBDT) with the CIT (M&TP) as the officer-in-charge. The said arrangement shall continue as it is.
5.2 The CIT(M&TP), CBDT shall be the Official Spokesperson and Media Coordinator of the CBDT.
5.3 In the absence of the CIT(M&TP), the Addl. CIT(M&TP), CBDT shall act as the Official Spokesperson and Media- Coordinator of the CBDT.
5.4 The Official Spokesperson and Media-Coordinator shall be responsible for
• Effective communication with print/electronic media.
• Compiling the information prior to putting it in public domain with due consideration of its utility and confidentiality.
5.5 The CIT(M&TP) shall be responsible for maintaining records pertaining to Press Releases, published Press Reports, News items etc.
5.6 The CIT(M&TP) shall go through the important newspapers every day and give a briefing to the Chairperson, CBDT on important issues.
5.7 The CIT (M&TP) shall issue the press releases with the approval of the Competent Authority.
5.8 The CIT (M&TP) shall regularly send the copies of the important news items pertaining to the Department to all the Members of the Board.
5.9 The CIT (M&TP) shall be responsible for coordinating and arranging the interactive sessions / interviews / briefings of the Chairperson / Member(s) of the CBDT with the Media as and when desired.
5.10 If information on any specific issue is required to be given to any section of the media, the issue shall be referred by the CIT (M&TP) to the Member concerned. The information shall be released to the Media on the basis of the inputs received from the Member/Division concerned, with the approval of the Competent Authority.
5.11 If any Officer/Division of the CBDT wants an action to be taken citing offence in respect of some Media Report/Article/TV Show/Radio Programme or any other thing appearing in Printed or Electronic media, such Officer/Division shall make a report to the CIT(M&TP) giving the complete facts and the supporting material. On receipt of such a report, the CIT(M&TP) may take up the issue, with the prior approval of the Competent Authority, with the Editor/ Producer/ other official concerned.
5.12 If any News Item/Article published in any Newspaper/Magazine/ Journal etc. is found to be factually incorrect, the CIT (M&TP), after obtaining the complete and correct facts from the Member concerned may issue, with the approval of the Competent authority, the version of the Government and may ensure that the same is duly published by the Newspaper/Magazine/Journal etc., as the case may be.
5.13 The CIT(M&TP), with the approval of the Competent Authority, shall disseminate information through media about all the major initiatives taken by the Government in the direction of Tax Payer services. Press notes in this regard, however, shall be made available to the CIT(M&TP) by the Office/Division concerned.
5.14 The CIT (M&TP) may also make, after obtaining the suitable inputs from the Office/Division concerned and with the approval of the Competent Authority, periodic reporting in the Press about the impact of the new initiatives thus taken.
5.15 The CIT (M&TP) shall, after obtaining the requisite inputs from the office /Division concerned and with the approval of the Competent Authority, issue suitable press releases regarding the major changes in tax policies, tax laws and procedures. All such important policy decisions/amendments in law and procedures affecting the taxpayers shall be brought to the notice of the CIT (M&TP) by the Office/Division concerned.
5.16 In view of the likely queries from the Media regarding the fresh Notifications/Instructions/Circulars etc., it will be desirable that the Office/Division concerned of the CBDT makes available to the CIT(M&TP) a copy of such Notification/Instruction/Circular the day the same is issued.
5.17 Issues pertaining to Search & Seizure Actions, Special Investigation, Intelligence & Criminal Investigation and other issues and actions pertaining to the Investigation Wing shall be directed by CIT(M&TP) to the Member (Inv.) The Member (Inv.) shall directly deal with the media in respect of issues pertaining to his area of work.
5.18 Whenever it is felt by any Division that it will not be possible to share information on the given subject, CIT(M&TP) shall be authorised to ask the media persons to contact the Member concerned directly.
5.19 The Members of the Board may arrange to provide inputs to the CIT (M&TP) on monthly basis for suitable Press Releases pertaining to their respective areas of work.
Procedural Guidelines for the Field offices
6.1 If there are some local press reports and electronic media reports relating to direct taxes which are of importance and significance to the Government, the CCIT (CCA) concerned shall communicate the same to the CIT (M&TP), CBDT.
Scope and Applicability
7.1 These instructions apply to both print and audio-visual/electronic media.
7.2 The instructions shall come into force with immediate effect.
(Rekha Shukia)
Commissioner of Income Tax
(Media &Technical Policy)
Disallowance U/s. 14A is to Be Made For Computing Book Profits U/s. 115JB
CIT vs. Goetze (India) Ltd (Delhi High Court)
These appeals by the Revenue relates to Assessment Year 2001-02. The respondent-assessee, as noticed above, namely, Federal-Mogul Goetze (India) Limited, had filed return of income on 31st October, 2001 declaring „nil‟income after setting for brought forward losses and depreciation. Tax payable under Section 115JB was also computed at „nil‟. The return was taken up for scrutiny assessment and assessment order under Section 143(3) dated 29th March, 2004 was passed. Total income under the normal provisions in spite of various disallowances etc. was computed at „nil‟but income taxable under Section 115JB was computed at Rs.90,40,4,412/-.
In this year, i.e., the Assessment Year 2001-02, the Assessing Officer had noticed that there was withdrawal of Rs. 1,49,55,335/- from the valuation reserve, but the amount had not been added to the profit and loss accounts filed with the income tax return for computing book profits under Section 1 15JB. The assessee had placed reliance on clause (i) of Explanation below Section 11 5JB (2) but the Assessing Officer rejected the said contention. The assessee did not succeed in the first appeal and the tribunal has observed that reliance placed on the order of the tribunal for the Assessment Year 2000-01 in ITA No. 208/Del/2005 was distinguishable as it related to the jurisdiction of the Commissioner under Section 263 of the Act. In other words, tribunal did not accept the plea of the respondent-assessee.
By order dated 16th May, 2012, the following substantial questions of law were framed in the present appeals:-
"(i) Whether the Income Tax Appellate Tribunal was right in holding that while computing book profit under Section 1 15JA (sic. Section 115JB) of the Income Tax Act, 1961, no disallowance under Section 14A was required to be made?
(ii) Whether the Income Tax Appellate Tribunal was right in deleting interest under Section 234D of the Income Tax Act, 1961?"
Learned counsel for the respondents-assessee, during the course of hearing, has fairly conceded that the first question has to be answered in favour of the Revenue and against the assessee in view of specific provisions in the Explanation 1 below Section 115JB(2) clause (f). The Assessing Officer it is stated had made an addition of Rs.88,292/- to the book profits towards expenditure incurred having nexus with dividend income, which were exempt under Section 10(33). Recording the said statement, the first question is answered in favour of the appellant-Revenue and against the respondent-assessee.
No disallowance U/s. 40(a)(i) on payment to non residents where "deduction neutrality non-discrimination" violated
DCIT vs. Gupta Overseas (ITAT Agra)
The issue is covered against the revenue by the Special Bench decision in Rajeev Sureshbahi Gajwani's case (supra) and this decision binds this division bench. The theory of differentiation vs discrimination was relevant, relevant if it was, only for the India US tax treaty, primarily on the ground of reciprocity in treatment and on the ground of India US tax treaty institutionalizing the validity of differentiation in treatment by the US on the ground of reasonableness, and it may not apply to the other tax treaties. As held by a special bench in the case of Rajeev Sureshbhai Gajwani (supra), a different treatment to the foreign enterprise per se is enough to invoke the nondiscrimination clause in the tax treaties. Finally, as opined in the UN and OECD Model Convention Commentaries, with which we are in considered agreement, deduction neutrality clause in non-discrimination provisions is designed to primarily seek parity in eligibility for deduction between payments made to the residents and non-residents. Clearly, therefore, it will be contrary to the scheme of the tax treaties in question that if appropriate tax withholding by the person making the payment is a sine qua non for business deduction so far as payments to non-residents are concerned, unless there is a similar precondition for deductibility of related expenses to the payments to residents as well, that disabling provision cannot be enforced in respect to payments made to non-residents either.
However, so far as India Spain tax treaty is concerned, a protocol clause to the treaty states that, "Notwithstanding the provisions of paragraph 4 of Article 26 (Non-discrimination) it is understood that in the case of India, payments by way of interest, royalties and fees for technical services made by an enterprise of India to a resident of Spain, shall not be allowed as a deduction for the purpose of determining the taxable profits of such enterprise unless tax has been paid or deducted at source from such payments under Indian law and in accordance with the provisions of this Convention". Therefore, even if there is legal requirement for inadmissibility of deduction unless proper taxes are deducted from payment of interest, royalties or FTS is made by the Indian enterprise to a resident of Spain, such a requirement cannot be hit by the deduction neutrality clause under Article 2 6(4). As is the settled legal position, DCIT Vs ITC Limited (82 ITD 239), in the case of a protocol is an integral part of the tax treaty and it is to be given effect in the same manner as any other substantive part of the tax treaty.
In view of the above discussion, it is clear that so far payments made to the residents of Ireland, Denmark and Austria are concerned, these are indeed protected by the deduction neutrality clauses, and any pre conditions for deductibility, which are harsher than payments made to the residents, are ineffective in law by the virtue of non-discrimination clauses in the respective tax treaties. Coming to the remaining payments, i.e. payments to the residents of Belgian, UK, Italy and Spain, learned counsel's contention is that even these payments will be eligible for deduction neutrality because of the scope of sub article (1) in non-discrimination clauses in the respective tax treaties. It is submitted that this provision is a general omnibus provision which covers all types of non-discrimination against nationals of a treaty partner country. We, however, are not inclined to accept this plea. A plain reading of this clauses shows that, in broad terms, the discrimination, which is prohibited under this clause, is nationals of the other Contracting State vis-a-vis nationals of the host State in the same circumstances and same conditions, and, therefore, for the discrimination, which is sought to be prohibited by art. 24, all that is relevant is that national of one of the Contracting State should not be discriminated against, for the reason of the nationality, in the other Contracting State. That is what was observed by a coordinate bench of this Tribunal in the case of Daimler Chrysler India Pvt Ltd Vs DCIT (120 TTJ 803). English House of Lords, in the cases of Boake Alleen Ltd. & Ors. vs. HM Revenue & Customs (2007) UKHL 25 (HL), has also followed the same approach and observed, with approval, that
"In relation to art. 24(1) of the OECD Model Convention, which prohibits discrimination between residents on grounds of nationality, the commentary says that the 'underlying question' is whether two residents are being treated differently 'solely by reason of having a different nationality' ". It is not enough to invoke this clause that national of a tax treaty partner country may ends up getting discriminated, but what is equally, if not more, important is that person should be discriminated because of such nationality. It is not even necessary that a person seeking treaty protection under this clause should be resident of any of the Contracting States, and, therefore, residential status, which is all relevant in the present context, is irrelevant for this kind of a discrimination. It is also important to bear in mind the fact that this provision refers to the comparison between nationals 'in the same circumstances and similar conditions'. The expression "in the same circumstances" would be sufficient by itself to establish that a taxpayer who is a resident of a Contracting State and one who is not a resident of that State are not in the same circumstances. The situation that we are dealing with right now is the differentiation, if at all, between the treatment given to the payments made to the residents and the non-residents. That is not a situation, in view of the fact that the differentiation is due to residential status and not the nationality, which can be dealt with by non-discrimination measures in Article 24(1). In our considered view, a differentiation in treatment due to residential status cannot be covered by the scope of Article 24(1) as such a differentiation is not due to nationality factor. As regards learned counsel's reliance on Herbalife decision by a coordinate bench, that is a case dealing with Indo US tax treaty which has a specific deduction non-discrimination provision under Article 2 6(3) of the said tax treaty. There is no corresponding provision in the treaties that we are now dealing. The assessee, therefore, derives no advantage from Herbalife decision in this context. We, therefore, reject this plea of the learned counsel. As a result, the assessee succeeds in claiming deduction neutrality so far as the payments to residents of Ireland, Denmark and Austria are concerned. To that extent, we uphold the plea of the assessee in principle.
Transfer of Immovable Property & Income Tax – A Critical Analysis
SRINIVAS RAO, ACA
Government of India has Introduce a new area for collection of Tax at source with effect from 1st June 2013 known as TDS on Transfer of Immovable Property. The intention behind the Introduction of TDS is to put check on Realty Sector and to ensure reporting of sale / purchase of Immovable property which were earlier not reported anywhere or reported at later stage i.e. after the end of the financial year in which actual transaction was taken place.Since major portion of India's population still following the Tradition of holding land/ properties as their status symbol and making sale of it only when there is urgent requirement of money. So in this arena, it is important for every individual to understand the implications of this move and how they would actually be impacted when they go to purchase or sale ofan immovable property.
What to be included
The applicability of the provisions are a significant part of the process and for this purpose it is very clear that the new tax deduction at source will have to be made for immovable property. This will then broadly include land and house property and which is also an area where a lot of investments are taking place.
What to be excluded
The term immovable property by itself ensures that various movable property like vehicles and other assets are excluded from the list. There is one more specific exclusion present in the process and this is that of agricultural land so while other types of land will be included under the definition the agricultural land would be excluded.
Value on Which TDS applicable
When the transaction value is over 50 lakh TDS shall be applicable on that. So there is a built in provision for the protection of the small individual as they will not be covered in the bracket of 50 lakhs. However another angle to the entire situation is that the prices of properties has risen so much in the last few years that even in smaller cities it is not surprising to find that the value of the property crosses the RS 50 lakh mark.
Responsible for TDS & rate of TDS
The next question that arises in the process is about the responsibility for making the TDS. In this case this has been put squarely on the shoulders of the transferee/ buyer. This means that the person who will get the ownership of the immovable property would have to fulfill the conditions. The person is the buyer who will actually make the necessary payment to the seller and then take the possession of the property. The rate at which the deduction has to be made is important because this is fixed at 1 percent but if there is no submission of the PAN then this could have to be done at 20 percent.
Compliance requirement:
Usually complying with the requirements for the tax deduction at source is very complicated and involves a lot of procedures. This involves getting the tax deduction at source number (TAN) which is like a PAN for those who are actually deducting the tax. The tax that has been deducted has to be deposited with in the specified time and then a return has to be filed.
In this case there is an online form for making the TDS payment. Details required for the form will include the PAN of both the parties, their addresses along with the address of the property and the amount of the tax. In this case there would be a situation wherein the TDS could be a one-time action because there will be people who are not normally covered under these provisions but they have to make the deduction for this purpose. The requirement for TAN has been done away with and even the return filing process has been simplified so this should provide some relief for the individual.
However for people who have never done this before it might seem to be a difficult task and they might require some professional help in completion of the process. Knowing the details and the fine print is important so that there are no mistakes that are made when it is actually completed.
Conclusion
A look at several of the conditions related to this provision will ensure that there is a properway in which the details are considered and this will also help in ensuring that the conditions related to the TDS are met and fulfilled so that there shall not be any issue arise in relation to default at the later stage.
(Author may be contacted on casrinivasrao @ hotmail.com)
Spirit of law is not to penalize assessee
TIOL-DDT 228907.02.2014
Friday
Spirit of law is not to penalize assessee
PURSUANT to the presentation of the Union Budget 2012, the JS (TRU-II) issued letter D. O. F. No 334/1/2012-TRU dated 16th March, 2012 which mentioned -
C.3 Penalty waiver for renting of immovable property service:
17. Recently, Delhi High Court while examining the issue of constitutionality of service tax on renting of immovable property service in the matter of Home Solutions Retail Vs UOI observed that 'on the question of penalty due to non-payment of tax, it is open to the Government to examine whether any waiver or exemption can be granted' [para 73] [2011-TIOL-610-HC-DEL-ST]. Subsequently, in the matter of Retailers Assn. of India Vs Union of India, Honorable apex court, had ruled on October 14, 2011 [2011-TIOL-103-SC-ST] that litigants should pay 50% of the arrears within six months in three equated installments. For the balance, solvent surety should be furnished to the satisfaction of the jurisdictional commissioner.18. Against the above backdrop, it is proposed that penalty may be waived for those taxpayers who pay the service tax due on the renting of immovable property service (as on the sixth day of March, 2012), in full along with interest within six months. Section 80A is being introduced for this purpose. Those who fail to avail the benefit will be treated as if this section did not exist.
By the Finance Act, 2012, the following sub-section was inserted in section 80 of the Finance Act, 1994 -
(2) Notwithstanding anything contained in the provisions of section 76 or section 77 or section 78, no penalty shall be imposable for failure to pay service tax payable, as on the 6th day of March, 2012, on the taxable service referred to in sub-clause (zzzz) of clause (105) of section 65, subject to the condition that the amount of service tax along with interest is paid in full within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President.
Now, the question is whether an assessee who paid the Service Tax on Renting of Immovable property along with interest any time before this sub-section was inserted will be entitled for the benefit of waiver of penalty. We came across a case recently wherein the appellant had paid the ST along with interest and penalty in the year 2010, much before the Amnesty came on to the scene. The lower authorities took a view that section 80(2) of FA, 1994 inserted w.e.f 28.05.2012 is effective from that date and any payment made prior to that date is not eligible to get the benefit.
The matter was decided by the Ahmedabad Bench of the CESTAT recently.
The Bench held -
amendment of Section 80 could be applicable to the payment made by assessee even prior to 28.05.2012, as the spirit of the law is to not to penalize the assessees who had defaulted the payment of service tax on renting immovable property, due to ratio of judgment which held field during the relevant period.
The following important judgement is available for download at itatonline.org.
Tata Teleservices (Maharashtra) Ltd vs. Ministry of Finance (Bombay High Court)
Action to recover tax before expiry of statutory period for filing appeal is high-handed & in defiance of law
Though the assessee had a statutory period of three months to file an appeal along with stay application before the CESTAT, the Asst CST directed the assessee to pay the demand within two days and threatened to take coercive action to recover the dues. The assessee filed a Writ Petition contending that the AO's action was in breach of Circular dated 01.01.2013 issued by CBEC, and the demand was premature because the assessee had the right to file an appeal within 3 months. HELD by the High Court allowing the Petition:
(i) The AO's insistence that the assessee should pay the amount is contrary to the provisions of the Finance Act which provides for a period of 3 months to file an appeal to the Tribunal. It is also contrary to the circular dated 01.01.2013 issued by the CBEC. The impugned communications, to say the least, is high handed. The statute has advisedly provided a period of three months to an assessee to file an appeal before the appellate authority and also obtain a stay. This is with a view to enable the assessee to seek proper advice and considered opinion on the adjudication order before taking a decision and then challenging the adjudication order in appeal proceedings;
(ii) In case, the Revenue is allowed to adopt coercive measures and/or if the assessee is required to pay tax determined immediately, it would lead to injustice to an assessee, as his opportunity to obtain a stay from the appellate authority would stand foreclosed. Moreover, the inherent right of an appellate authority to stay the order being appealed against would be rendered futile. In fact, this Court in Mahindra & Mahindra Limited (1959-ELT-505) had directed the Revenue to return the amounts recovered by encashing the bank guarantee of the assessee as it was done before the expiry of three months to file an appeal;
(iii) The officers of the Revenue would do well to realize that their job is much more than merely collecting the tax. They are officers of the State, administering the Finance Act, 1994 and fairness in approach to the tax payers and acting in accordance with the Rule of Law is a sine-qua-non in discharge of all its functions;
(iv) The impugned communications are not only in defiance of the CBEC circular dated 01.01.2013 but also in breach of the statutory provisions which gives a period of 3 months to enable the aggrieved party to file an appeal before the appellate authority.
Note: The same view has been taken in the context of the Income-tax Act in UTI Mutual Fund 345 ITR 71 (Bom) and MHADA (Bom). For more see A Treatise On The Law & Practice Of Stay & Recovery Of Tax Arrears On Friday, 7 February 2014 3:08 AM, "info@cliofindia.com" <info@cliofindia.com> wrote:
www.cliofindia.com info@cliofindia.com
COMPANY CASES (CC) HIGHLIGHTS
F Order against company and its director without considering role of director individually set aside : Kavita Dogra v. Director of Enforcement, Enforcement Directorate (Delhi) p. 376
F Application for validation of transfer of leasehold rights of company filed after ten years of knowledge of winding up proceedings, barred by limitation : M. Lakshmi Narayana Choudhary v. Official Liquidator, High Court, Madras (Mad) p. 380
F Where transaction not bona fide nor applicant bona fide transferee, application for validation of transfer dismissed : V. G. P. Finances Ltd. v. Official Liquidator, High Court, Madras (Mad) p. 418
F Allotment of shares without proper purpose resulting in creation of new majority, oppressive : Sunil Kumar v. Punjab Processed Foods P. Ltd. p. 440
F Circulars :
General Circulars :
Circular No. 1 of 2014, dated 15th January, 2014-Report under section 394A of the Companies Act, 1956-Taking accounts of comments/inputs from Income-tax Department and other sectoral Regulators while filing reports by RDs P. 82
SEBI Circulars :
CIR/CFD/POLICY CELL/13/2013, dated 18th November, 2013-Compliance with the provisions of equity listing agreement by listed companies-Monitoring by stock exchanges P. 94
CIR/IMD/DF/18/2013, dated 29th October, 2013-Issues pertaining to primary issuance of debt securities P. 90
CIR/MIRSD/11/2013, dated 28th October, 2013-Disclosure of investor companies on websites of stock exchanges P. 88
CIR/MRD/DSA/33/2013, dated 24th October, 2013-Listing of specified securities of small and medium enterprises on the institutional trading platform in a SME exchange without making an initial public offer P. 83
CIR/MRD/DMS/34/2013, dated 6th November, 2013-Annual system audit of stock brokers/trading members P. 93
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