Agriculture exemption

IT : Assessee could be allowed exemption under section 10(37), even if agricultural land was not cultivated by assessee himself but through hired labourer or other family member

Updated Schema

Revised Form 3CA-3CD & Form 3CB-3CD along with updated Schema is now available for e-Filing.

Madhya Pradesh High Court on Sec 234E

S. 234E: High Court grants ad-interim stay against operation of notices levying 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). A Writ Petition to challenge the validity of s. 234E has been filed in the Madhya Pradesh High Court. HELD by the High Court by an ad-interim order:

Issue notice to the respondents on interim relief. Additionally issue notice to Attorney General of India as the validity of the Central enactment is put in issue.
By way of ad interim relief, we direct the respondents not to take coercive action against the petitioner with regard to the subject matter referred to in the impugned Annexures P/2 to P/5. We are inclined to grant this order ex parte keeping in mind the orders passed by other High Courts (High Court of Kerala, High Court of Karnataka, High Court of Rajasthan, Bombay High Court and High Court of Orissa).

 

Due date of filing 44AB Audit Report extended till 30/11/2014

TDS credit has to be given to the payee despite 26AS mismatch

Upon issue of Form 16A TDS certificate, TDS credit has to be given to the payee even if there is Form 26AS mismatch or deductor is at fault for non-deposit of TDS with Govt.

U/s 204, the liability to deduct TDS is on the employer / payer. U/s 205, when tax is deductible at source, the assessee shall not be called upon to pay tax himself to the extent to which tax has been deducted from that income. This means that the assessee / deductee is entitled to credit of such amount of TDS. Even if the deductor, after deducting the TDS, does not deposit the sum with the department, the department has to recover the said amount from the deductor and cannot deny credit to the deductee (Om Prakas Gattani 242 ITR 638 (Gau) &Yashpal Sahni 293 ITR 539 (Bom) followed)

Sumit Devendra Rajani vs. ACIT (Gujarat High Court)

Amendment to LRS

.

Date: Aug 11, 2014

Liberalised Remittance Scheme for resident individuals-clarification (Corrected)

RBI/2014-15/171 A. P. (DIR Series) Circular No. 19 August 11, 2014 To     All Category - I Authorised Dealer Banks Madam / Sir, Liberalised Remittance Scheme for resident individuals-clarification Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 5 dated July 17, 2014, in terms of which it was clarified that the Scheme can also be used for acquisition of immovable property outside India. 2. In the light of the above clarification, the requirement of post facto reporting stipulated in terms of A.P. (DIR Series) Circular No.32 dated September 04, 2013, (Sr. no. 4 of Annexure to the Circular) stands withdrawn. 3. The directions contained in this Circular have been issued under Section 10 (4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (C. D. Srinivasan) Chief General Manage

Company Law Settlement Scheme (CLSS), 2014

Announcement of Company Law Settlement Scheme (CLSS), 2014 vide General Circular No. 34/2014 dated 12th August 2014 One Time Opportunity for Defaulting Companies and Its Directors

Revision in Statutory fee for filing application for Registration of Trademark

Revision in Statutory fee for filing application for Registration of Trademark

The "Ministry of Commerce, Department of Industrial Policy & Promotion" vide notification dated 1st August, 2014 has revised the Statutory Fee payable to the Trademark Registrar on making an application for registration of a Trademark (Form TM-1) to Rs. 4,000/- from existing fee of Rs. 3,500/- for every Application in Single Class.

Similarly Statutory Fee for  "Application for the expedited examination under rule 38(1) for the registration of a trade mark " has been revised to 20,000/- from existing fee of Rs. 12,500/- for every Application in Single Class.

Representation made by ICAI with respect to new formats of Form No.3CA/3CB and 3CD

Representation made by ICAI with respect to new formats of Form No.3CA/3CB and 3CD. - (11-08-2014)
The new formats of tax audit reports namely Form No.3CA, 3CB and 3CD have been notified through Notification no. 33/2014 on 25/7/2014 with immediate effect. With regard to the same, certain genuine concerns were raised by the members, which, ICAI has, through a representation dated 07.08.2014, brought to the notice of the Hon’ble Finance Minister, Revenue Secretary, and Chairman CBDT for appropriate action at their end. Also, certain preliminary observations on the new forms have been shared with them.

For the reasons mentioned in detail in the representation and summarized below, ICAI has suggested:

The new formats of tax audit reports be made effective from the Assessment Year 2015-16 and not Assessment Year 2014-15. Alternatively, the due date for furnishing tax audit reports for the Assessment Year 2014-15 may be extended to 30th November, 2014

It has also been suggested that appropriate clarification be issued with regard to the position of the tax audit reports e-filed during 01.04.2014 to 24.07.2014 relating to Assessment Year 2014-15.

Reasons given in brief:

a) The Internationally accepted Standard on Auditing-700 has not been considered.
b) The audit of 50% of the taxpayers like listed companies, PSUs, Banks, Insurance Companies have already been completed and the financial statements are published. Only, the audit reports are pending for uploading in the e-filing portal.
c) The notification has been issued just two months before the last date of furnishing tax audit report and the schema for the same is not yet made available. This will cause undue hardship to both the taxpayer and the auditors.

Direct Taxes Committee, ICAI

HC prohibits Non advocates from appearing before VAT Authorities

HC prohibits Non advocates from appearing before VAT Authorities

CA Sandeep Kanoi

Allahabad High Court in the case of Tax Lawyers Association Lko. Vs. State Of U.P. as a Interim Measure held that no person whosoever, may be permitted to advertise in the Newspaper or any leaflet, inviting assesses for the purpose of filing of return or arguing before the authority under the VAT Act. Any person, who is not a registered advocate, shall not be permitted to appear before the Authority under the VAT Act. Judgment is a blow for Professionals like Chartered Accountant, Company Secretaries, Cost Accountants etc. who are working in the filed of UP VAT.

Brief Details of the case is as follows :-

Petitioners are aggrieved by the provisions contained in Rule 73 read with Rule 79(2)(f) of the U.P. Value Added Tax Rules 2008 (for short VAT Rules) which permits outsiders to practice in the field of Law before the VAT Authorities under the VAT Act. Learned Senior Counsel invited our attention towards Section 33 of the Advocates Act 1961 which provides that only Advocates are entitled to practice before any Court or authority. Learned Senior Counsel further submits that impugned Rule is ultra vires to the Constitution in view of the provision contained in the Advocates Act 1961 since under the garb of the impugned Rule, outsiders have been permitted to appear before the authorities under the VAT Act to practice in the field of Law. Attention has been invited by learned Senior Counsel to certain leaflets which seem to be advertisement by certain persons who are not registered Advocates inviting assesses with regard to filing of return on payment of Rs.400/- and odd.

Submission is that under the garb of said Rule, persons who are not skilled lawyer or have no knowledge in the field of Law, are appearing before the authority under the VAT Act, are spoiling academic atmosphere of the profession.

Argument advanced by learned Senior Counsel, as well as pleadings on record, require consideration.

Accordingly, writ petition is admitted.

Learned Chief Standing Counsel has accepted notice on behalf of respondents. Let notice be issued to Advocate General of the State of U.P. and counter affidavit be filed within a period of three weeks. Rejoinder affidavit may be filed within one week thereafter. In case counter affidavit is not filed, the Court may proceed further and pass order in the matter keeping in view the arguments advanced by learned Senior Counsel.

List immediately after four weeks for peremptory hearing.

In the meantime, as an interim measure, we direct the respondents that no person whosoever, may be permitted to advertise in the Newspaper or any leaflet, inviting assesses for the purpose of filing of return or arguing before the authority under the VAT Act. Any person, who is not a registered advocate, shall not be permitted to appear before the Authority under the VAT Act.

Source – Tax Lawyers Association Lko. Throu General Secy. & Anr. Vs. State Of U.P.Thru. Prin. Secy. Tax & Registration U.P. Lko. & Ors (Allahabad High Court), MISC. BENCH No. – 7116 of 2014, Order Date :- 6.8.2014

NO SERVICE TAX AUDIT BY DEPARTMENT OR CAG

NO SERVICE TAX AUDIT BY DEPARTMENT OR CAG

 

In an Important judgment of the Hon’ble Delhi High Court in the case of Travelite (India) Vs. Union of India & Ors. [W.P. (C) 3774/2013, C.M. No. 7065/2013] on the Service Tax Audit issue it is held that :

 

Rule 5A(2) of the Service tax Rules is ultra vires the provisions of the Finance Act:

The Hon’ble Delhi High Court held that Rules only give effect to statute’s provisions and intent and cannot be used to create substantive rights, obligations or liabilities that are not within the contemplation of the statute. Further, the only audit within the Statute is as mentioned under Section 72A of the Finance Act, i.e. a Special Audit, when only certain circumstances are fulfilled. The Parliament thus had a clear intention to provide for only a special audit. Accordingly, Rule 5A(2) of the Service Tax Rules cannot provide for a general audit of the assessee and is ultra vires the rule making power conferred under Section 94(1) of the Finance Act.

Further, the Hon’ble Delhi High Court also held that the Service Tax Audit Manual is merely an instrument of instructions for the service tax authorities and do not have any statutory force. Therefore, Rule 5A(2) of the Service Tax Rules cannot be justified on the basis of the Service Tax Audit Manual.

 

The Instruction regarding Audit by Department is contrary to the Statue:

Further, it was held that the Instruction is also ultra vires the Finance Act since executive instructions without statutory force cannot override the law. Consequently, any notice, circular, guideline etc., contrary to statutory laws cannot be enforced since the parent statute in this regard, the Finance Act itself does not authorise a general audit of the type envisioned by the impugned Rule 5A(2) of the Service Tax Rules, and furthermore only stipulates that a Special Audit can be undertaken if the circumstances outlined in Section 72A of the Finance Act are fulfilled. The Hon’ble High Delhi Court finds that the Instruction is not only an attempt to widen the scope of the law impermissibly but also is patently contrary to the Statute. The Instruction, to the extent it provides clarifications on Rule 5A(2) of the Service Tax Rules, pertaining to Service Tax audit, is quashed.

 

It will also not be out of place to mention that recently, the Hon’ble Allahabad High Court in the case of ACL Education Centre Pvt. Ltd. & Ors. Vs. Union of India [2014-TIOL-120-HC-ALL-ST] has held that the Audit under service tax is to be conducted by Chartered Accountants/ Cost Accountants only and not by officers of the Department.

Further the Hon’ble Calcutta High Court in the case of SKP Securities Ltd. Vs. DD (RA-IDT) & Ors. [2013-TIOL-38-HC-KOL-ST] has held that no audit of private assessee can be undertaken by CAG.
CA. Vinay Mittal, Ghaziabad

CA Final results May 2014

Group	No. of Candidates appeared	No. of candidates passed	Pass %	Pass % in Nov 13
Both Group	42533	3100	7.29%	3.11%
Group- I	65792	8884	13.50%	5.67%
Group-II	65706	7004	10.66%	7.35%

RBI Monetary Policy-2014-15

Third Bi-Monthly Monetary Policy Statement, 2014-15

By Dr. Raghuram G Rajan, Governor Monetary and Liquidity Measures On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to: keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent; keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL); reduce the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.5 per cent to 22.0 per cent of their NDTL with effect from the fortnight beginning August 9, 2014; and continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL  and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

CBDT Circular on SEZ

SEZ tax holiday setback continues

By Ameya Kunte

 

 

It is learnt that CBDT has recently issued a circular which is likely to have a huge negative impact on tax holiday enjoyed by SEZ units in IT sector. The circular states that transfer of people from an existing-unit to a new SEZ unit in the first year of business will not be treated as splitting up or reconstruction of an existing business, provided such transfer does not exceed 20% of total technical manpower headcount actually engaged in software development in SEZ unit. This clarification will not only affect new SEZ unit set-ups, but will also impact tax holiday claims of past years resulting into a litigation.

 
SEZ which are considered as growth engines of the economy have suffered tax blows in the recent past. SEZs that were promised a complete tax holiday, have been hit with Minimum Alternate Tax (MAT). Contrary to the expectations of relief from Budget 2014, the Finance Minister defended MAT on SEZ citing that "removal of MAT from SEZ developers and units had no justification vis-à-vis other sectors of economy which were liable to pay MAT". FM has also stated that MAT paid is available as credit. However, almost 20% cash outflow on MAT does have significant negative impact on SEZ project's IRR. In 2014 Budget, the Government also clarified that SEZ claiming investment-linked tax benefit (u/s Sec 35AD) will not be eligible for tax holiday u/s 10AA and vice-versa, thus further curtailing tax incentive available to SEZ.
 
I think Government ought to clarify policy on SEZ scheme on an overall basis & tax is an integral part of it. Else, tax set-backs will surely continue to reduce SEZ attractiveness and drive investors out of SEZ scheme.

MEF Date extended

MEF Date of online filing for 2014-15 extended to 10/8/14 & for hard copy of acknowledgement upto 20/8/14

No Harassment Or High-Handed Behaviour With Taxpayers: New CBDT Chief

No Harassment Or High-Handed Behaviour With Taxpayers: New CBDT Chief

Shri. K. V. Chowdary, the newly appointed Chairman of the CBDT, has addressed a letter dated 01.08.2014 to the income-tax department in which he has pointed out that one of the immediate challenging task is reaching the 'not so easy' target for Revenue collection without undue harassment and high handedness. He has emphasized that the department has to improve its image and become a "friendly, professional, non adversarial and competent organization focused on Revenue collection, tax payers services and ensuring strict compliance with direct tax laws".

Mr. Chowdary has emphasized that one of the issues that requires "immediate and earnest attention" is quicker and reasonable resolution of the requests/ grievances of the taxpayers, early resolution of disputes, effective assessments analyzing all the facts and avoiding high pitched assessments, promotion of compliance, sending strong message by dealing with tax evasion and tax frauds firmly effectively and quickly, widening the tax base, etc.

CBDT on AIF

Income from Alternate Investment Fund to be taxed at 30%

Trustees of the fund will be taxed if investors are not named

  

The Finance Ministry has said that income of Alternative Investment Funds (AIF) will be taxed at the rate of 30 per cent. Such funds basically pool in money from domestic and overseas investors and invest on the basis of a pre-determined policy.

The Central Board of Direct taxes was requested to clarify whether the income of such funds would be taxable in the hands of investors (contributors to the fund) or the trustees of the fund (who will be representing investors and know as Representative Assessee).

The board said that, "In a situation where the trust deed either does not name the investors, or does not specify the beneficial interest, the entire income of the fund shall be liable to be taxed at the Maximum Marginal Rate of income tax in the hands of the trustees of such AIFs in their capacity as representative assessee."

It has also been clarified that once tax paid by the trustee, investors will not be required to pay a tax. At present, the maximum rate of income tax is 30 per cent (plus education cess at the rate of 3 per cent of tax). Experts feel that this circular gives a much needed clarity, however, there are still some areas of concern.

Ammet Patel, Tax Partner at Sudit K Parekh & Co (a leading Chartered Accountant Firm), said, "Investors will know at the time of putting the money what will be the rate of tax incidence and hence will make decision accordingly."

He said that circulars are binding on the Income Tax Department and not on the tax payers. It would have been better had the Finance Ministry clarified through amendment in Income Tax Act.

Jyoti Rai, India Head of Mauritius-based Abax Corporate Services, said that the CBDT clarification needs to be revisited, since it otherwise may have negative implication for funds industry in India.

"The industry, for long, has been relying upon the Alternative Investment Fund Ruling for determinate tax pass through status," she said.

The circular also mentioned that in cases where the beneficiaries of the fund are determined or mentioned in the trust deeds, "the tax on the whole of the income of the fund, consisting of or including profits and gains of business, would be levied on the trustees of such AIFs being representative assessee at the Maximum Marginal Rate."

The circular clarified, however, that the new norms will not operate in area falling in the jurisdiction of High Court, which has taken or takes contrary decision on the issue.

Taxing issues

·  CBDT was asked to clarify on the issue

·  Once trustees are taxed, investors will not be taxed

·  Tax experts welcome clarification, but some concerns remain

COMPARISON OF TDS AND TCS REQUIREMENTS IN OLD AND NEW FORM NO. 3CD

COMPARISON OF TDS AND TCS REQUIREMENTS
IN OLD AND NEW FORM NO. 3CD AS REQUIRED
FOR TAX AUDIT U/s 44AB OF THE INCOME TAX ACT

Now Chartered Accountants will have to verify and certify details of TDS and TCS in a very elaborative manner and will have to check TDS/TCS (returns) statements of each quarter in detail.

(1) In Old form No. 3CD:- 27(a) :- (i) complied with all TDS obligations or not as per Chapter XVII-B, 
Yes/No 
(ii) earlier there was no need to inform about non compliance of TCS provisions.

(1) In New Form No. 3CD:- 34(a):- Now section wise details of TDS and TCS are required to be given.

(2) In Old form No. 3CD:- Show amount of Tax deductible and not deducted at all

(2) In New Form No. 3CD:- Show Section wise Gross amount on which tax was required to be deducted or collected

(3) In Old form No. 3CD:- Give amount and details of shortfall in TDS deducted 

(3) In New Form No. 3CD:- (i)Give Sectionwise gross amount on which tax was deducted or collected at lesser rate.

(ii) Give sectionwise amount of TDS and TCS deducted or collected at lesser rate.

(4) In Old form No. 3CD:- Give amount and details of TDS deducted late

(4) In New form No. 3CD:- Give amount and details of Tax deducted but not paid

(5) In New Form No. 3CD:-

(i) Give section wise total amount of payments or receipts, e.g. give gross amount of interest other than interest on securities, gross payment of freight, etc., even if liable to TDS/TCS or not Sec. 192,193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194H, 194I, 194IA, 194J, 195, 206C(1), 206C(1C), 206C(1D). However disallowance U/s 192& 194IA will become applicable from A.Y. 2015-16. 
Disallowance U/s 40(a)(ia) presently covers Sec. 193, 194A, 194H, 194I, 194J, 194C, 195(40a-i).

(ii) Give Section wise gross amount on which tax was required to be deducted or collected.

(iii) Give sectionwise gross amount on which tax was deducted or collected.

(iv) Give Sectionwise gross amount on which TDS/TCS was deducted or collected at specified rate.

(v) Give sectionwise amount of TDS and TCS at specified rate.

(6) In New Form No. 3CD:- Details of TDS statement filed:-

(i) If TDS/TCS statement filed in prescribed time then no need to give information required in 34(b).

(ii) If TDS/TCS statement not filed within prescribed time then give due date of furnishing, give date of furnishing if furnished in time. 

(iii) There seems controversy in para 34(b), that, if TDS/TCS statement is not filed within prescribed time then give information Whether statement of TDS/TCS contains information about all transactions which are required to be reported. And if TDS/TCS statement filed within prescribed time then there is no need to give information that TDS/TCS statement contains all required information. If TDS statement is not filed in time then information will also have to be furnished regarding form No. 15G/15H/27C and payment to transporters, not incorporated in statement. It will be difficult for bank auditors and for voluminous payment to transporters etc.

(7) In New Form No. 3CD:- Amount of Interest payable and paid:-

34.(c) If liable to pay interest U/s 201(1A)/206C(7) on delay payment or deduction/collection of TDS/TCS give amount of such interest payable .
(ii) Also give amount of interest paid.

Complied by:-
CA RAJESH MEHTA, INDORE

Old 3CD withdrawn

Department withdraws old utility of form 3CD. Any form 3CD to be uploaded will be in new utility which will be made available.

Major changes in new 3CD

Major changes in new 3CD

1. Particulars of registration under excise, vat, iec, service tax etc to be given
2. Location(s) (address(s)) of keeping books of accounts to be given
3. Particulars of sale of Land/Building less than Stamp value to be given
4. Comparison of amount debited vis a vis amount admissible on account of various deductions to be given
5. Detailed information to be given on amount debited to P & L a/c of Capital Exp, Personal Exp. ADVERTISEMENT
6. Details on TDS deducted not deposited or not deducted u/s 40(a) Non resident
7. Name of payee whose TDS not deposited, deducted to be given u/s 40(a)(ia)
8. Amount to be profit u/s 40A(3A) to be given
9. Modavt=Cenvat
10. (28) Whether receive shares below fair value u/s 56(2)(viia)- How it is possible for CA? ???
11. Whether assessee receive security premium taxable u/s 56(2)(viib)
12. Detailed info on TDS/TCS deducted section wise to be given 
13. Late filing of TDS/TCS return 
14. Interest Payable u/s 201(1A) and 206C(7)
15. Audit under Service tax to be reported 
16. Demand/Refund raised under any other law during the PY to be reported