VCES Circular-ST Case Law

Circular No. 176/2/2014 - ST

F. No. B1/19/2013-TRU (Pt)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Tax Research Unit

*****

 New Delhi, dated the 20^th January, 2014

To,

Chief Commissioners of Central Excise and Customs (All),

Director General (Service Tax), Director General (Systems),

Director General (Central Excise Intelligence), Director General (Audit),

Commissioners of Service Tax (All),

Commissioners of Central Excise (All),

Commissioners of Central Excise and Customs (All)

Madam/Sir,

Subject: Clarification regarding issue of Discharge Certificate under VCES and availment of CENVAT credit - regarding.

          Trade and Industry has sought clarification as to whether the first installment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as Cenvat Credit immediately after payment or Cenvat credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.

2.       The issue has been examined. As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.

3.     It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.

4.      Chief Commissioners are also advised that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.

Yours sincerely,

(S. Jayaprahasam)

Technical Officer, TRU

Tel: 011-2309 2037

Service recipient is required to reimburse Service Tax paid by the Service provider

We are sharing with you an important judgement of the Hon'ble Allahabad High Court  in the case of M/s Bhagwati Security Services (Regd.) Versus Union of India [2013 (11) TMI 649] on the following issue:

Issue:

Whether the service provider can get the reimbursement of service tax already paid by him, from the service recipient?

Facts of the case:

M/S. Bhagwati Security Services (Regd.), the Petitioner ("the Assessee" or "the Company") was providing security services under the service Agreement ("the Agreement") to BSNL. The Company deposited service tax to the Department on the basis of demand raised by the authorities. Thereafter, the Company applied for reimbursement of service tax from BSNL, which was denied on the ground that the same was not provided in the Agreement. The Company filed petition in the High Court.

Held:

The Hon'ble High Court after going through the Agreement and other legal provisions of the Finance Act and rules thereof held that:

§  Service tax is statutory liability. It is a tax which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with Government treasury within the prescribed time.

§  Thus, essentially the statute is being imposing the tax upon the person to whom service is being provided and the service provider is merely a collecting agency.

§  BSNL (i.e. service recipient) directed to make reimbursement of service tax to the petitioner without further delay.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

  

HIGH COURT OF JUDICATURE AT ALLAHABAD

Court No. – 33

Case :- WRIT TAX No. - 870 of 2007

Petitioner :- M/S Bhagwati Security Services (Regd.)

Respondent :- Union Of India & Others

Petitioner Counsel :- Virendra Kumar,Virendra Singh

Respondent Counsel :- A.S.G.I.,A. Nigam,S.C.,S.Chopra.,Subodh Kumar,Suneel Rai,Sunil Rai 

Hon'ble Sushil Harkauli,J. 

Hon'ble Naheed Ara Moonis,J.

 
Heard learned counsel for the petitioner and the learned counsel appearing on behalf of

the respondent No.2, and seen the record.There is an agreement between the petitioner and the respondent no.2 i.e.B.S.N.L., under which the petitioner was required to provide security services to the respondent no.2. under agreement between the two parties. The agreement contained the terms of payment.Subsequently service tax was demanded from the petitioner which has been deposited by the petitioner . The petitioner applied before the respondent no.2 for reimbursement of the service tax, which request has been denied by the respondent no.2 by the impugned order. 
Only reason given for denying the reimbursement of the service tax is that the same was not contemplated in the service agreement. Having gone through the agreement and the provisions of the relevant statute, we find that service tax is statutory liability. It is a tax which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with government treasury within the prescribed time.Thus essentially the statute is being imposing the tax upon the person to whom service is being provided, and the service provider is merely a collecting agency. In that view of the matter, the writ petition is allowed. The respondent no.2 is directed to make reimbursement of service tax to the petitioner without further delay. 
Order Date :- 16.1.2013 

Naim 

CBDT on Sec 197

CBDT Directs Assessing Officers To Respect Citizens Charter In TDS matters

The CBDT has issued Instruction No. 1/2014 dated 15.01.2014 to the Chief Commissioners stating that though the Citizens Charter prescribes a time limit of one month for a decision u/s 197 on application for no deduction of tax or deduction of tax at lower rate, there is considerable delay in issuing the lower/non deduction certificate. The CBDT has directed that the commitment to tax payers as per the Citizens Charter must be scrupulously adhered to by the Assessing Officers and all applications for lower or no deduction of tax at source filed u/s 197 of the Income-tax Act, 1961 must be disposed of within the stipulated time frame. 

S. 272B Penalty is Rs. 10000 per deductor and not per wrong PAN

The assessing officer had imposed penalty of Rs. 10,000/- in each case where PAN Number was not provided by the deductee. There were in all 30706 cases in which the PAN Number was missing or was incorrectly stated. The assessing officer, accordingly, imposed penalty of Rs. 10,000/- in each case. Thus, penalty of Rs.30,70,60,000/- was imposed. Board in the letter dated 5.8.2008 vide No.275/24/2007-IT(B) has clarified that penalty of Rs. 10,000/- under Section 272B is linked to the person, i.e., the deductor who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. Therefore, regardless of the number of defaults in each return, maximum penalty of Rs. 10,000/- can be imposed on the deductor. Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs. 10,000/-. This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs. 10,000/-.

HIGH COURT OF DELHI AT NEW DELHI

ITA 314/2013

COMMISSIONER OF INCOME TAX-TDS

versus

DHTC LOGISTICS LTD.

ORDER

26.07.2013

1. There are two reasons why we feel the present appeal should not be entertained.

2. Firstly, the assessing officer in the penalty order under Section 272B has not specifically referred to any default or failure by the respondent-assessee mentioning PAN Number even when the said particulars and details were available. The stand taken by the respondent was that the PAN Numbers were not furnished by the Truck owners and, therefore, they were not quoted by them or PAN Numbers as informed were quoted. In case, the PAN Numbers are not furnished by the deductees, the respondent- assessee cannot be penalized under Section 272B. Section 139A also imposes the obligation on the deductees to furnish PAN Number to the deductor.

3. Secondly, the stand taken by the revenue is contrary to the stand taken by Central Board of Direct Taxes. The assessing officer had imposed penalty of Rs. 10,000/- in each case where PAN Number was not provided by the deductee. There were in all 30706 cases in which the PAN Number was missing or was incorrectly stated. The assessing officer, accordingly, imposed penalty of Rs. 10,000/- in each case. Thus, penalty of Rs.30,70,60,000/- was imposed. Board in the letter dated 5.8.2008 vide No.275/24/2007-IT(B) has clarified that penalty of Rs. 10,000/- under Section 272B is linked to the person, i.e., the deductor who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. Therefore, regardless of the number of defaults in each return, maximum penalty of Rs. 10,000/- can be imposed on the deductor. Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs. 10,000/-. This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs. 10,000/-.

4. We clarify that we have not examined in this appeal, question and issue that if a deductee has made a representation to the deductor and inspite of the said representation, proper details and particulars are not correctly mentioned/recorded by the deductor, whether penalty under Section 272B can be imposed, as a separate case.

5.In view of the aforesaid position, we do not think any substantial question of law arises for consideration.

The appeal is dismissed.

CBEC on Implementation of decision of Hon'ble Supreme Court in case of M/s Fiat India ltd

CBEC issues clarifications on application of SC decision in Fiat India Ltd to determine transaction value; Mere sale of goods below manufacturing cost and profit, not sole basis to reject transaction value; Valuation a matter under self - assessment procedure, but excise officer can conduct verification of valuation during audits; Aspects like loss percentage on sale, period / reasons for such loss making price must be considered while applying Fiat ratio; Cost auditing of unit / summoning of costing data should be done, only where investigation at Commissioner level; Calculations of manufacturing cost may be carried out using CAS-4 standards; Circular clarifies that extended period of limitation, for period prior to judgment date, shall not apply where show cause notice issued on grounds of Fiat judgment alone; However, any sale post Fiat ruling, where circumstances similar to Fiat case exist, then such transaction value would amount to wilful mis-statement of assessable value : CBEC Circular.

No TDS on Service Tax if shown separately

The CBDT has issued Circular No. 1/2014 dated 13.01.2014 pointing out that the Rajasthan High Court has taken the view in CIT(TDS) vs. Rajashthan Urban Infrastructure (copy attached) that if as per the terms of the agreement between the payer and the payee, the amount of service-tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service-tax component u/s 194J of the Act. Pursuant thereto, the CBDT has decided in exercise of powers u/s 119 that wherever the terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

 

 

No TDS on Service Tax if shown separately

CIRCULAR NO. 1/2014 [, DATED 13-1-2014

Subject: TDS under Chapter XVII-B of the Income-tax Act, 1961 on service tax component comprised in thepayments made to residents - clarification regarding

The Board had issued a CircularNo.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component. Representations/letters has been received seeking clarification whether such principle can be extended to other provisions of the Act also.

2. Attention of CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated 1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

3. The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

4. This circular may be brought to the notice of all officer for compliance

F.NO.275/59/2012-IT(B)]

Amendment to ST Mega Exemption Notification

Service Tax :
Central Govt extends service tax exemption to sponsorship of national sports events; Amends Mega Exemption Notification No. 25/2012 - ST

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Notification No.01/2014 Service dated January 10, 2014 

Names of Audit Firms approved for appointment as Statutory Central Auditors in 25 Public Sector Banks for the year 2013-14

Sr.No Auditors appointed for 2013-14     1. Allahabad Bank, Kolkata 1 M/s N K Bhargava & Co., New Delhi 2 M/s Raghu Nath Rai & Co., New Delhi 3 M/s Khandelwal  Kakani & Co., Indore 4 M/s Batliboi & Purohit , Mumbai 5 M/s Sarath & Associates, Hyderabad 2. Andhra Bank, Hyderabad 1 M/s Umamaheswara Rao & Co., Hyderabad 2 M/s R Subramanian and  Company , Chennai 3 M/s Patro & Co., Bhubaneshwar 4 M/s C R Sagdeo & Co., Nagpur 5 M/s  Nag & Associates, Dankuni 3. Bank of Baroda, Mumbai 1 M/s S K Mittal & Co., New Delhi 3 M/s Ray & Ray, Kolkata  4 M/s N B S & Co, Mumbai 5 M/s Laxminiwas Neeth & Co., Hyderabad 5 M/s K A S G & Co, Dhanbad 6 M/s Khandelwal Jain & Co., Mumbai 4. Bank of India, Mumbai 1 M/s S R B & Associates, Bhubaneshwar 2 M/s Isaac & Suresh, Thiruvananthapuram 3 M/s M M  Nissim & Co., Mumbai 4 M/s  J P Kapur & Uberai, New Delhi 5 M/s D Singh & Co., New Delhi 6 M/s A N D R O S & Co., New Delhi 5. Bank of Maharashtra, Pune 1 M/s Kirtane & Pandit , Pune 2 M/s J C Bhalla & Co, New  Delhi 3 M/s G Basu & Co, Kolkata 4 M/s Singh Ray Mishra & Co, Bhubaneshwar 6. Canara Bank , Bangalore 1 M/s Loonker & Co., Mumbai 2 M/s P Chopra & Co., Karnal 3 M/s A R Das & Associates, Kolkata 4 M/s S C Vasudeva & Co., New Delhi 5 M/s Vinay Kumar & Co., Allahabad 6 M/s Ford Rhodes Parks & Co., Mumbai 7. Central Bank of India, Mumbai 1 M/s Kumar Chopra & Associates, New Delhi 2 M/s P K Subramaniam & Co, Raichur 3 M/s Doogar & Associates, New Delhi 4 M/s N Sarkar & Co., Kolkata 5 M/s N Chaudhuri & Co., Kolkata 6 M/s B N Misra & Co., Bhubaneshwar 8. Corporation Bank, Mangalore 1 M/s Suresh Chandra & Associates, New Delhi 2 M/s B K Ramadhyani & Co., Bangalore 3 M/s Nripendra & Co., Kanpur 4 M/s G M J & Co., Mumbai 5 Manohar Chowdhry & Associates, Chennai 9. Dena Bank, Mumbai 1 M/s S N Dhawan & Co, New Delhi 2 M/s S C Ajmera & Co., Udaipur 3 M/s Anand & Ponnappan, Chennai 4 M/s  A P A S & Co., Raipur 10. Indian Bank,Chennai 1 M/s Sharp & Tannan, Mumbai 2 M/s Bhattacharya  Das & Co, Kolkata 3 M/s Deoki Bijay & Co, Kolkata 4 M/s  S P Puri & Co., New Delhi 5 M/s C K Prusty & Associates, Bhubaneshwar 11. Indian Overseas Bank, Chennai 1 M/s Badari Madhusudhan & Srinivasan, Bangalore  2 M/s B Thiagarajan & Co, Chennai  3 M/s Sankar & Moorthy, Thiruvananthapuram 4 M/s P R Mehra & Co, New Delhi 5 M/s Dass Khanna & Co, Ludhiana 12. Oriental Bank of Commerce, New Delhi 1 M/s Jain Kapila Associates, New Delhi 2 M/s P L Tandon & Co., Kanpur 3 M/s Shah & Taparia, Mumbai 4 M/s Bansal R Kumar & Associates, New Delhi 5 M/s R S Sipayya & Co., New Delhi 13. Punjab & Sind Bank, New Delhi 1 M/s R M Lall & Co., Lucknow 2 M/s O P Tulsyan & Co., New Delhi 3 M/s B K Shroff & Co., Kolkata 4 M/s R Kothari & Co., Kolkata   14. Punjab National  Bank, New Delhi 1 M/s Borkar & Muzumdar, Mumbai 2 M/s G S Madhava Rao & Co., Hyderabad 3 M/s Phillipos & Co, Bangalore 4 M/s K N Gutgutia & Co, Kolkata 5 M/s C V K & Associates, Mumbai 6 M/s Ramesh Kapoor & Co, Srinagar 15. Syndicate Bank 1 M/s Chandiok & Guliani, New Delhi 2 M/s J N Sharma & Co, Kanpur 3 M/s Ramanlal G Shah & Co, Ahmedabad 4 M/s Sambhu N De & Co, Kolkata 5 M/s K N Goyal & Co, New Delhi   16. UCO Bank, Kolkata 1 M/s SBA  Associates, Kolkata 2 M/s Ved & Co, Ghaziabad 3 M/s Dass Gupta & Assocites,  New Delhi 4 M/s Gupta Sharma & Associates, Jammu 5 M/s A Kayes & Co., Kolkata   17. Union Bank of India, Mumbai 1 M/s Price Patt & Co., Chennai 2 M/s  S G C O & Co., Mumbai 3 M/s Jindal & Co., New Delhi 4 M/s Shah Gupta & Co., Mumbai 5 M/s V Rohatgi & Co., Ranchi 6 M/s J Gupta & Co., Kolkata     18. United Bank of India, Kolkata 1 M/s Dinesh Mehta & Co, New Delhi 2 M/s Ramamoorthy (N) & Co., Hyderabad 3 M/s S P M R & Associates., New Delhi 4 M/s P C Bindal & Co., Jammu       19. Vijaya Bank, Bangalore 1 M/s Mukund M Chitale & Co., Mumbai 2 M/s Karra & Co., Chennai 3 M/s N C Mittal & Co., New Delhi 4 M/s K P M C & Associates, Ghaziabad 20. State Bank of India 1 M/s Singhi & Co, Kolkata 2 M/s SCM Associates, Bhubaneshwar 3 M/s S N Nanda & Co, New Delhi 4 M/s Prakash & Santosh , Kanpur 5 M/s K B Sharma & Co, Jammu 6 M/s ADD & Associates, Kolkata 7 M/s V P Aditya & Co, Kanpur 8 M/s S Venkatram & Co, Chennai 9 M/s S Jaykishan, Kolkata 10 M/s T R Chadha & Co, New Delhi 11 M/s Dhamija Sukhija & Co, Srinagar 12 M/s Sriramamurthy & Co, Visakhapatnam 13 M/s S R R K Sharma Assocaites, Bangalore 14 M/s Mehra Goel & Co., New Delhi 21. State Bank of Bikaner & Jaipur, Jaipur 1 M/s Agarwal Anil & Co, New Delhi 2 M/s M K Aggarwal & Co, New Delhi 3 M/s Chaturvedi & Co, Kolkata 4 M/s Uberai Sood & Kapoor, New Delhi 5 M/s P S D & Associates, Jaipur   22. State Bank of Hyderabad, Hyderabad 1 M/s Rao & Narayan, Hyderabad 2 M/s S Mann & Co, New Delhi 3 M/s Elias George & Co, Kochi 4 M/s Khanna & Annadhanam, New Delhi 5 M/s Sharma Goel & Co, New Delhi 6 M/s SRI Associates, Kolkata 23. State Bank of Mysore, Bangalore 1 M/s B L Ajmera & Co., Jaipur 2 M/s M K P S & Associates. Bhubaneshwar 3 M/s Maharaj N R Suresh and Co., Chennai 4 M/s Bubber Jindal & Co, New Delhi 24. State Bank of Patiala, Patiala 1 M/s Abhijit Dutta & Associates, Kolkata  2 M/s Rawla & Co, New Delhi 3 M/s Sreedhar Suresh & Rajagopalan, Chennai 4 M/s Patel Mohan Ramesh & Co, Bangalore 25. State Bank of Travancore, Thiruvananthapuram 1 M/s G K Rao & Co, Hyderabad 2 M/s Abraham & Jose, Thrissur 3 M/s R G N Price & Co Chennai 4 M/s Kumar Vijay Gupta & Co., New Delhi

No CA Attestation-DSC

Dear Members,

Chartered Accountant (CA)  is not allowed to attest documents acceptable as proof of identity and proof of address for issuance of Digital Signature Certificate (DSC) wef 15^th Jan,2014- SEE NOTIFICATION.

Amendments to CENVAT CREDIT Rules

Dear Members,

The CBEC has as amended the Cenvat Credit Rules, 2004 vide Notification No. 01/2014-CE(NT) dated 08.01.2014 in relation to cenvat credit on removal/writing off of inputs and capital goods under Rule 3. Also, the date for payment of duty on removal of inputs/capital goods under the said rule has now been inserted as Explanation to Rule 3(5C).

Sec 234E-HC Interim Stay Order

High Court grants interim stay on levy of fee for failure to file TDS statement Narath Mapila LP School vs. UOI (Kerala High Court) S. 234E: High Court grants interim stay on levy of fee for failure to file TDS statement S. 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day's delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). The constitutional validity of s. 234E has been challenged in the Kerala High Court. Vide an interim order dated 18.12.2013, the High Court has admitted the Petition and granted a stay of proceedings for a period of two months.

VCES Clarifications-11-12-2013

F. No. B1/19/2013-TRU (Pt.)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

(Tax Research Unit)

***

New Delhi the 11th December, 2013

 To,

All Chief Commissioners of Central Excise/Service Tax

Director General Service Tax

All Commissioners of Central Excise/Service Tax

Madam/Sir,

Sub: The Service Tax Voluntary Compliance Encouragement Scheme – issues for clarification – reg

            The undersigned is directed to state that the  Board has issued clarifications on issues concerning various aspects of the VCES, vide circulars dated 13.05.2013, 8.08.2013 and 25.11.2013. A FAQ has also been issued on VCES.  However, certain instances have come to notice, as mentioned below, that the declarants under the VCES are still facing difficulties.

2.         In one instance, the Designated Authority has asked a declarant, who has "tax dues" only for a part of the period covered by the Scheme, to furnish an undertaking that he had no unpaid "tax dues" for the remaining period covered by the Scheme. However, the Scheme does not envisage furnishing of any such undertaking. A declarant may have tax dues only for a part period covered by the Scheme. In terms of the Scheme a declaration of tax dues has to be made in Form VCES-I, which includes an undertaking that the information given in the declaration is correct and complete. Therefore, the Designated Authority should not ask for any other undertaking or declaration beyond what has been prescribed in the Scheme or Rules made there under.

3.         In another instance, the Designated Authority has objected to the payment of the first tranche of 50%, payable by 31.12.2013, in installments. It is clarified that the Scheme only prescribes that the declarant would pay a minimum amount of 50% of the tax dues by 31.12.2013. Rest of the payment may be made by 30.6.2014, without any interest, and any amount remaining unpaid on 30.6.2014 shall be paid by 31.12.2014, with interest for the period of delay beyond 30.6.2014. There is no bar to pay these amounts in installments. For example a declarant may pay the 50% amount that he is required to pay by 31.12.2013 in more than one installment. Therefore, payment of 50% "tax dues" in lump-sum may not be insisted to.

4.         In some instances, it has been observed that the Designated Authority has raised frivolous/unnecessary queries as regards the veracity and the manner of calculation of tax dues. While the designated authority may cause arithmetical check as regards the correctness of computation of tax dues, the Scheme does not envisage investigation by the designated authority into the veracity of declaration. Only if the Commissioner has reason to believe that the declaration filed by the declarant is substantially false he may, for reasons to be recorded in writing, serve notice on the declarant requiring him to show cause why he should not pay the tax dues not paid or short-paid. 

Yours faithfully,

(S.Jayaprahasam)

Technical Officer (TRU)

Tel. No.: 2309 5547.

CAG Report on Trusts

Trusts evading taxes - Income Tax Department casual - CAG Fumes 

IN its Report No. 20 of 2013 submitted top Parliament, the CAG has come down heavily on the Income Tax Department for its laxity in dealing with Trusts - not all that charitable. It is a mandatory requirement for charitable trusts/Institutions (Trusts) to get registration under Act for claiming exemption. The CAG scrutinized 90,000 cases in which the Income Tax Department (ITD) granted registration and observed several mistakes, some of which are:

ITD granted registrations/approvals/notifications to the 799 Trusts without verifying necessary documents such as copy of the Trust Deed, proper clauses in the Trust Deed, audited accounts etc. ITD granted approvals/registrations/notifications in 457 cases in which there was no dissolution clause in the Trust Deed. ITD granted registrations/approvals/notifications to 73 Trusts having no PAN which is in contravention of the provisions of Act. ITD granted approvals /registrations In 60 cases Involving tax effect of 87.33 crore irregularly to Trusts whose objects were not charitable in nature. There was no correlation in granting or rejecting approvals/registrations among different authorities. ITD did not take action to cancel registration in three cases Involving tax effect of Rs. 4.94 crore. ITD granted registration/exemption in 161cases irregularly involving revenue impact oft 24.23 crore with retrospective effect contravening provisions contained in Act. There was a delay of more than 6 months to 24 months beyond stipulated period in granting approvals/registrations/notifications in 594 cases. The delay on the part of ITD resulted in deemed approval, to Trusts which were otherwise not eligible. ITD allowed irregular exemptions involving tax effect of 8.88 crore to 53 Trusts without granting registrations /approvals/notifications. ITD allowed exemptions In 72 cases Irregularly Involving tax effect of Rs. 8.88 crore despite rejection of registrations/approvals by the competent authority. ITD allowed exemptions in 9 cases irregularly u/s 10(23C) (iiia)/(iiiad) involving tax effect of 2.39 crore though the gross receipt exceeded one crore. ITD granted exemptions in 117 cases irregularly without submission of audit reports with the returns.

Credit Card-NPA

Date: Dec 20, 2013 Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Credit Card Accounts RBI/2013-14/414 DBOD.No.BP.BC.78/21.04.048/2013-14 December 20, 2013 The Chairman and Managing Director/ Chief Executive Officer of All Scheduled Commercial Banks Dear Sir, Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Credit Card Accounts Please refer to paragraph 2.1 of the Master Circular dated July 01, 2013 on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, wherein definitions of non-performing assets (NPAs) have been indicated. 2. In credit card accounts, the amount spent is billed to the card users through a monthly statement with a definite due date for repayment. Banks give an option to the card users to pay either the full amount or a fraction of it, i.e., minimum amount due, on the due date and roll-over the balance amount to the subsequent months' billing cycle. 3. It has come to our notice that there are divergent practices being followed by banks with regard to asset classification status of credit card accounts if minimum amount due is not paid on the specified due date. While some banks reckon the due date specified in the statement for payment of minimum amount due to determine the over-due status, some banks reckon the subsequent billing date to determine the over-due status of the minimum amount due. In order to bring in consistency and induce transparency, it is advised that a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the next statement date. The gap between two statements should not be more than a month. 4. Banks should follow this uniform method of determining over-due status for credit card accounts while reporting to credit information companies and for the purpose of levying of penal charges, viz. late payment charges, etc., if any. Yours faithfully, (Chandan Sinha) Principal Chief General Manager

CBDT on Safe Harbour Rules

Transfer Pricing: CBDT Issues Important Directives On Safe Harbour Rules

Pursuant to the Safe Harbour Rules in Rules 10TA to 10TG, the CBDT has issued a letter dated 20.12.2013 in which it has laid down important directives and clarifications on the manner in which the Safe Harbour Rules are meant to be implemented. The directives and clarifications are as follows:

 (i) AOs should carefully verify and provide to the CBDT in writing the details of all Form 3CEFA received by them relating to Safe Harbour Options;

(ii) There should be no confusion between Safe Harbour Option filed in paper format in Form 3CEFA and the Form 3CEB (detailing international transactions) which is filed electronically. The AO has to examine the form and decide within 2 months of the end of the month in which the option is filed as to whether to accept the Safe Harbour option or to make a reference to the TPO. If no action is action, the Safe Harbour option will be considered as having been accepted and it will remain valid for 5 years;

(iii) If there are minor defects in Form 3CEFA, the AO has to provide an opportunity to the taxpayer to rectify the same. However, the statutory time limit of 2 months provided in Rule 10TE (14)(i) cannot be exceeded;

(iv) The AO has to verify the eligibility of the assessee and the international transactions. Under Rule 10TF, the Safe Harbour Rules will not apply to a country notified in s. 94A (e.g. Cyprus);

(v) If the taxpayer has opted for Safe Harbour but has reported rates or margins less than the Safe Harbour rates or margins, the income has to be computed on the basis of the Safe Harbour rates or margins;

(vi) The Safe Harbour rates or margins are not a benchmark for cases not covered by the Safe Harbour Rules. In such cases, a regular transfer pricing audit should be carried out without regard to the Safe Harbour rates or margins.