GN on Tax Audit-2013

Guidance Note on Tax Audit u/s 44AB of the Income-tax Act, 1961- Revised 2013 Edition. - (09-07-2013)

The result of ICAI final exam held in May, 2013 and (CPT) held in June, 2013

The result of ICAI final exam held in May, 2013 and (CPT) held in June, 2013 are likely to be declared on 16-07-2013 around 2.00 P.M.

The result of [ISA] assessment test held on 22-06-2013

The result of [ISA] assessment test held on 22-06-2013 is likely to be declared on 16-07-2013 around 2.00 P.M.

Income tax department has released Income Tax Return (ITR ) 7

Income tax department has released Income Tax Return (ITR ) 7 as applicable for persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) for e-filing of returns for assessment year 2013-14 of financial year 2012-13.

EXEMPTION TO SPECIAL ECONOMIC ZONE FROM SERVICE TAX

EXEMPTION TO SPECIAL ECONOMIC ZONE FROM SERVICE TAX

By: Mr. M. GOVINDARAJAN

In exercise of the powers conferred by Section 93(1) of the Finance Act, 1994 read with Section 95(3) of Finance Act, 2004 and Section 140(3) of Finance Act 2007 and in supersession of Notification No. 40/2012-Service tax, dated 20.06.2012 the Government by Notification No. 12/2013-Service tax, dated 01.07.2013 gave exemption to the services on which service tax is leviable under Section 66B of the Finance Act, 1994, received by a Unit located in a Special Economic Zone ('SEZ' for short) and Developer of SEZ ('Developer' for short) and used for the authorized operation from the whole of the service tax, education cess and secondary and higher education cess levied thereon. This notification came into effect from 01.07.2013. The exemption is provided as detailed below: The exemption shall be provided by way of refund of service tax paid on the specified services received by the SEZ Unit or the Developer and used for the authorized operations; Where the specified services received by the SEZ or the developer are used exclusively for the authorized operations, there is an option not to pay the service tax ab initio, subject to the conditions and procedures. Instead of availing exemption or claiming refund the SEZ unit is having the option to avail CENVAT credit on the specified services in accordance with the CENVAT credit Rules, 2004. Conditions The following are the conditions prescribed in this Notification are as follows: The SEZ unit or the developer is to get an approval of the Approval Committee of the list of services required for authorized operations; The ab initio exemption shall be allowed subject to the following procedure and conditions: A declaration shall be furnished in Form A1 verified by the specified officer of the SEZ along with the list of specified services; On receipt of the declaration the 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 – A2; The SEZ unit or the Developer has to provide a copy of the said authorization to the provider of specified services; On the basis of the authorization the service provider shall provide the specified services to the SEZ unit or the Developer without payment of service tax; The SEZ unit or the Developer has to file Quarterly report in Form A3 furnishing the details of specified services received by it without payment of duty; An undertaking in Form A1 is to be furnished that in case the specified services on which exemption has been claimed are not exclusively used for authorized operation or were found 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 and ceases along with interest as applicable on delayed payment of service tax; The refund of service tax on the specified services that are not exclusively used for authorized operation or the specified services on which ab-initio exemption is admissible but not claimed, shall be allowed subject to the following procedure and conditions: The service tax paid on the specified services common authorized to the authorized operation in SEZ and DTA units (Domestic Tariff Area) shall be distributed amongst the SEZ unit or the developer and DTA in the manner as prescribed in Rule 7 of CENVAT Credit Rules; For the purpose of distribution the turnover shall be taken during the relevant period; The eligibility of refund is of the service tax paid on- The specified service on which ab-initio exemption is admissible but not claimed; and The amount distributed to it. The claim for refund is to be made to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, in Form A4; The amount indicated in the invoice, bill or, as the case may be, challan, on the basis of which 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 change shall have been paid under the provisions of the Act; The claim for refund shall be made within one year from the end of the month in which actual payment of service tax was made to the service provider or such extended period as the Authority shall permit; Only one claim of refund is to be made for every quarter; If already not registered, before filing a claim for refund under this Notification, an application for registration shall be made; If more than one SEZ unit registered under a common service tax registration, a common refund may be claimed at the option of the assessee. The units shall maintain proper account of receipt and use of the specified services, on which exemption or refund is claimed for authorized operations. Erroneous refund Where any sum of service tax paid on specified services is erroneously refunded for any reason whatsoever, such service tax refunded shall be recoverable under the provisions of the said Act and the rules made there under, as if the recovery of service tax is erroneously refunded.

Not to enforce demand if intimation u/s 143(1)

CBDT – Not to enforce demand if intimation u/s 143(1) undelivered for returns processed prior to 31-03-2010 instruction no.4/2013 dated 05-07-2013 [honorable delhi high court vide judgment in case of court on its own motion v/s UOI].

SA-700 on tax audit report u/s 44AB

SA-700 on tax audit report u/s 44AB of the Income Tax Act, not applicable for reports filed up to 31st March, 2014.

Section 43(5)(e) of the Income Tax Act

Conditions to be fulfilled to be notified as a recognised association u/s 43(5)(e) of the Income Tax Act, for derivative transactions [notification no. 51/2013, dated july 4, 2013 S.O. 2017(E)].

CBDT instructions no.3

CBDT instructions no.3 dated 05-07-2013 issued regarding procedure to be followed in receipt and disposal of rectification application u/s 154 of the Income Tax Act.

Circular on Writing of Arrears of Excise,Customs & ST

Circular No.  971/5 /2013

F.No.296/10/2009-CX-9(Pt.)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Customs & Excise

New Delhi, the 29th May, 2013

To

            All Chief Commissioners

            All Directors General

           

Sub:     Writing off of arrears of Central Excise duty, Customs duty and Service Tax - Constitution of Committees to advise the authority for writing off of arrears-reg.

Sir,

I am directed to refer to the Circular No. 946/07/2011 dated 01.06.2011 issued from this file number on the subject and to say that certain amendments have been made in the Delegation of Financial Power Rules, 1978 vide S.O. 3624 dated 14.12.2012. A copy of the said notification is enclosed.

2.         With this amendment, the authorities competent to write-off the arrears of Central Excise and the Commissioner of Service Tax are also delegated powers to write-off the arrears of Service Tax as well. Consequently, the constitution of the Committees for examining the proposals for write-off of irrecoverable arrears and recommending deserving cases to the authority competent to order such write-off, also requires modification.  Hence, para 4 & 5 of the Circular No. 946/07/2011 be substituted by the following:-

"4.        The constitution of the Committees and the powers to write off, delegated to the competent authorities are as under:-

S. No.	Competent Authority	Constitution of the Committee	Powers delegated
1.	Chief Commissioner of  Customs & Central Excise/ Central Excise/ Customs	Committee of two Chief Commissioners of  Customs & Central Excise/ Central Excise/ Customs and the Chief Commissioner (TAR)	(a) Full powers for abandonment of irrecoverable amounts of fines and penalties imposed under the Customs Act, 1962, the Central Excise Act, 1944, the Gold Control Act, 1968 and the Finance Act, 1994; and  (b) To write off irrecoverable amounts of Customs or Central Excise duty or Service Tax upto Rs. 15 lakhs subject to a report to the Board.
2.	Commissioner of  Customs & Central Excise / Commissioner of Customs / Commissioner of Central Excise/ Commissioner of Service Tax	Committee of two Commissioners of  Customs & Central Excise/ Central Excise/ Customs/ Service Tax and one Commissioner (TAR) nominated by CC(TAR))	(a) Full powers for abandonment of irrecoverable amounts of fines and penalties imposed under the Customs Act, 1962, the Central Excise Act, 1944, the Gold Control Act, 1968 and the Finance Act, 1994; and   (b) To write off irrecoverable amounts of Customs or Central Excise duty or Service Tax upto Rs. 10 lakhs subject to a report to the Chief Commissioner.

5.         As regards write off of interest amount, it is clarified that once duty/ tax involved is written off, the interest due thereon would get automatically written off.  It is also clarified that the duty/ tax involved in the case would determine the level of authority/Committee competent to write off the amount involved."

Click here for : Notification  |   Circular No. 946/07/2011 dated 01.06.2011

Yours faithfully,

(Surendra Singh)

Under Secretary to the Govt. of India

Tel: 2309 2413

ICAI cannot be deemed to be pursuing commercial activities by

CBDT Instructions On S. 143(1) Intimations And S. 154 Rectifications

July 5th, 2013

The CBDT has issued Instruction No. 03/2013 dated 05.07.2013 with regard to the the directive issued by the Delhi High Court in Court on Its Own Motion vs. UOI 352 ITR 273 on the procedure to be followed on the receipt and disposal of rectification applications filed u/s 154 of the Act. The CBDT has set out a detailed procedure on where applications should be received, the maintenance of registers and their disposal.
 The CBDT has also issued Instruction No. 04/2013 dated 05.07.2013 with regard to the directive issued by the Delhi High Court in Court on Its Own Motion vs. UOI 352 ITR 273 that the demand should not be enforced in cases where no intimation u/s 143(1) was sent by the field authorities in respect of returns which were processed prior to 31.03.2010.

ICAI cannot be deemed to be pursuing commercial activities by coaching classes

ICAI cannot be deemed to be pursuing commercial activities by taking coaching classes or campus placements for a fee exemption under 10(23C)(iv) cannot be denied to ICAI on account of fees received by it for providing coaching classes and campus placement for its students. [ ICAI v/s Director General of Income-tax (exemptions) [2013] 35 taxmann.com 140 (Delhi)].

For exemption under sec 54F

For exemption under sec 54F, deposit in capital gains A/c scheme by due date of filing ITR under sec 139(4). [CIT, Rohtak v/s Shri J S Chawla, HC, Punjab and Haryana].

Kerala HC on ST on AC Restuarants

Kerala HC rules service tax on AC restaurants invalid

The Kerala High Court on Wednesday held that the Centre's decision to impose service tax on food and beverages supplied by air-conditioned restaurants with licences to serve alcoholic beverages in the 2011-12 budget was beyond the legislative competence of Parliament.

Justice A.M. Shaffique passed the verdict while allowing a batch of writ petitions filed by Kerala Bar Hotels Association and certain bar hoteliers.

The service tax was imposed on air-conditioned restaurants with licence to serve alcoholic beverages in the 2011-12 Union Budget. A service tax of 12.36 per cent applicable on 30 per cent of the bill had been imposed on such restaurants, which came into effect on April 1 last year.

The petitioners contended that Article 366 Section 29 (f) of the Constitution defined supply of food and drinks in hotels as 'deemed sales' and empowered the State governments to collect sales tax on the total value of sales. Therefore, the Centre has no authority or power to collect such service tax.

The court observed that the every purpose of incorporating the definition of tax on sale or purchase of goods in Article 366 was to empower the State government to impose tax on the supply, whether it was by way of or as part of any service of goods either being food or any other article for human consumption or any drink, intoxicating or not.

The Constitution permitted sale of goods during service as taxable. Necessarily, service formed part of sale of goods. Therefore, the State government alone has the legislative competence to enact a law imposing a tax on service elements forming part of sales of goods, the court ruled.

The court also ordered that if the petitioners had made any payments on the basis of the impugned clauses, they were entitled to seek refund of the amount.

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ICAI clarified regarding deferment of SCA norms

ICAI clarified regarding deferment of SCA norms (Regarding DISA Requirement) of PSB’s by one year i.e. the norms will be effective from the year 2014-15 and bank audit fees increase clarification.

Books of account pre-requisites to tax unexplained cash credit

Books of account pre-requisites to tax unexplained cash credit, no additions for deposit in bank account in absence of books.[ CIT(A) – ITO vs kamal kumar mishra [2013] 33 taxmann.com 610 (Lucknow - Tribunal)].

Service tax department has issued notification

Service tax department has issued notification no. 12/2013-ST dated 01-07-2013 along with forms A-1, A-2, A-3 and A-4 regarding exemption on services provided to SEZ authorised operations.

Central board of direct tax withdraws circular

Central board of direct tax withdraws circular no.2 dated 26-03-2013 on profit split method (PSM) for transfer pricing, circular no. 05/2013 of 29-06-2013.

No penalty under section 76 was leviable if service tax was paid belatedly

No penalty under section 76 was leviable if service tax was paid belatedly with interest prior to issue of show cause notice – [professional couriers vs commissioner of customs, central excise & service tax[2013] 34 taxmann.com 120 (Bangalore - CESTAT)].

Breather for IT firms as CBDT withdraws controversial tax circular

Breather for IT firms as CBDT withdraws controversial tax circular

In a major relief to the IT industry, the Central Board of Direct Taxes (CBDT) today announced the withdrawal of a controversial circular that could have adversely impacted the tax spend for this industry.

The CBDT also modified another circular relating to taxation of R&D centres that also has a crucial role in software development.

The circular (No 2 of 2013) that has been withdrawn related to the adoption of Profit Split Method (PSM) as a preferred mode for computation of tax liability. The decisions were taken following representation from the industry for clarity on two circulars concerning global taxation of transfer pricing.

Tax experts hailed the latest announcements stating that compliance cost will come down and chances of double taxation may be reduced.

"The rescinding of Circular No. 2 is very good news for the industry. This is a positive move and would certainly improve the sentiments of foreign investors who were shying away from investing in R&D in India," said Vijay Iyer, National Transfer Pricing Leader, Ernst & Young India

Safe harbour rules

The Finance Ministry also said that CBDT would soon issue safe harbour rules. Such a move would bring further certainty in assessment of development centres that are engaged in providing contract R&D services.

Safe harbour rules have been defined as circumstances in which the income-tax authorities shall accept the transfer price declared by the assessee.

The Income Tax Department by withdrawing Circular No 2 has made sure that profit-split method, which could lead to higher taxation, will not be the preferred mode.

Besides this method, there are five other methods for computing tax liability under the transfer pricing rules. These include resale price method, cost plus method, comparable uncontrolled price method and transactional net margin method.