In absence of central govt. notification any area no being within more than eight kms. from the local limits be considered as agricultural land in India

Hon'ble High Court of Karnataka in the case of:

Commissioner of Income Tax 

vs. 

Madhukumar N. (HUF)

[2012] 23 taxmann.com 341 (Karnataka)

Facts:

The assessee is a Hindu undivided family. The case relates to the assessment year 2005-06. 

Issue:

Whether the agricultural land belonging to the family sold dated 02.03.2005 for a total consideration of Rs. 52,00,000/- resulted in long term capital gain in a sum of Rs. 48,94,784/- or not?

Contention of Assessee & Revenue:

The assessee claimed that the amount does not amount to capital gain being the sale attributable to the agricultural land and on the other hand revenue took a stand that the subjected land was located within 8 kms,of Dasarahalli City Municipal Council. 

Tribunal concluded:

The Tribunal accept assessee's contention who relied on the certificate issued by Dasanapura Gram Panchayath to the effect that the population of Adakemaranahalli village within whose limits the land was located was less than 10,000 and therefore opined that the subject land cannot be considered as one coming within the definition of capital asset under Section 2(14)(iii)(a) & (b) of the Act.

High Court has held that,-

"An agricultural land in India is not a capital asset but becomes a capital asset if it is the land located under Section 2(14)(iii)(a) & (b) of the Act, Section 2(14) (iii) (a) of the Act covers a situation where the subject agricultural land is located within the limits of municipal corporation, notified area committee, town area committee, town committee, or cantonment committee and which has a population of not less than 10,000.

10. Section 2(14)(m)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfilment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset.

11. In the present case, it is not in dispute that the subject land is not located within the limits of Dasarahalli City Municipal Council therefore, Clause (a) to section 2(14][iii] of the Act is not attracted.

12. However, though it is contended that it is located within 8 knits,, within the municipal limits of Dasarahalli City Municipal Council in the absence of any notification issued under Clause (b) to section 2(14)(iii) of the Act, it cannot be looked in as a capital asset within the meaning of Section 2(14)(iii)(b) of the Act also and therefore though the Tribunal may not have spelt out the reason as to why the subject land cannot be considered as a 'capital asset' be giving this very reason, we find the conclusion arrived at by the Tribunal is nevertheless the correct conclusion."

Thank You !

Conflict between Arbitration Clause & Court's vested power u/s. 433 (e) for winding up of Company

Existence of an arbitration clause does not oust the jurisdiction of this court to either entertain or to admit a petition for winding up

Hon'ble High Court of Andhra Pradesh in the case of: 

Integrated Broadcasting Co. (P.) Ltd. vs. Nettlink Ltd. [ 2012] 23 taxmann.com 371 (Andhra Pradesh) has held that a mere existence of Arbitration clause would not bar exercise of jurisdictional power by Court u/s. 433 (e) from entertaining winding up petition where a company is deemed to be unable to pay its debts.

High Court concluded by stating that,-

" the mere existence of an arbitration clause would not bar exercise of jurisdiction by this court under section 433(e) of the Companies Act for winding up of a company which is deemed to be unable to pay its debts. Proceedings under section 433/434 read with section 439 of the Companies Act are in a completely different jurisdiction than the one under which the remedy or relief can be sought by way of arbitration. Proceedings for winding up are not proceedings for recovery of any amount Tirlok Chand Jain v. Swastika Strips (P.) Ltd. [1991] 70 Comp Cas 197 (Punj. & Har.). The jurisdiction for ordering winding up of a company is a special jurisdiction which has been conferred on the High Courts. The object of passing such an order is that the assets of the company should be realised and debts paid expeditiously. The passing of such an order against the company has a serious consequence and, therefore, the jurisdiction has been conferred on the High Courts. The order of winding up can be passed on any of the grounds mentioned in section 433 of the Companies Act. It does not appear to be the intention of the Legislature that such a power can be conferred on an arbitrator. The petition for winding up cannot be treated as one for recovery of an amount of debt from the company William Jacks & Co. (India) Ltd. v. Saraswati Industrial Syndicate Ltd. [1986] 59 Comp. Cas. 876 (Punj. & Har.) and Hind Mercantile Corpn. (P.) Ltd. v. J.H. Rayner & Co. Ltd. [1971] 41 Comp. Cas. 548 (Mad.).

11. The jurisdiction of the company court will not be taken away by the mere existence of an arbitration clause Maruti Ltd. v. B.G. Shirke & Co. (P.) Ltd. [1981] 51 Comp. Cas. 11 (Punj. & Har.) and Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. [1999] 97 Comp. Cas. 683/22 SCL 156 (SC). The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be of the effect that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company, as such a power is conferred on, and is vested with, the court under the Companies Act - Haryana Telecom Ltd. (supra) and Prime Century City Developments (P.) Ltd. v. Ansal Buildwell Ltd. [2003] 113 Comp. Cas. 68/42 SCL 256 (Delhi). Even if an arbitration clause subsists between the parties, the High Court would have unfettered powers to entertain winding up petitions (Madhya Pradesh Iron & Steel Co. v. G.B. Springs (P.) Ltd. [2003] 117 Comp. Cas. 327/42 SCL 785 (Delhi)). In terms of the arbitration agreement, the arbitrator can always find out and adjudicate as to whether or not a company is functional and, if it was not functional, he could always find out the nature and status of its assets and can also issue directions and pass orders regarding dues and liabilities and also for taking recourse to the appropriate remedy Everest Holding Ltd. v. Shyam Kumar Shrivastava [2008] 16 SCC 774.

12. There is no conflict between the statutory relief of winding up and of the contractual right to have disputes settled by arbitration. Once a bona fide defence is shown to exist, arbitration will be the efficacious and proper remedy. Where, however, the defence is mala fide and a moonshine, arbitrable disputes would not exist and the company judge would have the power to pass appropriate orders Madhya Pradesh Iron & Steel Co. (supra). Existence of an arbitration clause does not oust the jurisdiction of this court to either entertain or to admit a petition for winding up."

Thank you !

To qualify for exemption u/s. 11 (10) (a)- claim of expenses & application of income should be confined to India

Income Tax Appellate Tribunal, Delhi 

India Brand Equity Foundation vs. Assistant Commissioner of Income Tax (E) 

Issues: 

(a) Whether the expenditure incurred outside India on events and activities held outside India could qualify for exemption under section 11(10)(a) of the Income Tax Act, 1961?

(b) Whether the amount spent by the assessee-trust in Hannover, Germany could be considered as application of the income of the trust in India for charitable purposes?

Relevant Extract:

Tribunal Held as under,-

8. We have heard both the sides, considered the material on record as well as case laws cited. It is not in dispute that amount of Rs. 1,95,26,116/- was spent for participating in Hannover Fair held in Germany and for such participation, Steering Committee under the chairmanship of Commerce Secretary was constituted and modalities of participation was decided by the Organizing Committee under the Chairmanship of Additional Secretary, Ministry of Commerce & Industry, and as stated, the entire control was with the Ministry. The roles of Indian Brand Equity Foundation and Engineering Export Promotion were decided by the Organizing Committee which was chaleked out by the Ministry IBEF and they had no free control over the event. IBEF was participating as agent for the Ministry. For the purpose of participation in fair, Ministry of Commerce & Industry directed its sponsored body Engineering Export Promotion Council to transfer Rs. 3 crores to the assessee trust for setting up Indian pavilion in the fair as a partner country. However, a sum of Rs. 1,95,26,116/- was spent for participating in Hannover Fair held in Germany and has been treated as falling in the mischief of section 11(1) by Assessing Officer whose action has been confirmed in first appeal.

9. Now, it is to be seen that the words "to the extent to the which such income is applied to such purposes in India" appearing in section 11(1)(a) of the Act only require that the charitable purposes should be confined to India on the application of the income of the trust to the execution of such purposes can be outside India, appears to us to be also opposed to the natural and grammatical meaning that can be ascribed to the words. The word "applied" is a verb used in past tense. In the provision, it is used in the transitive form because it is followed by the words "to such purposes in India". It answers three questions which would arise in the mind of the reader: apply what? applied to what? and where? The answers would then make the meaning obvious. The answer to the first question would be : apply the income of the trust. The answer to the second question will be : applied to charitable purposes. The answer to the third question will be: applied in India. Thus even grammatically speaking it seems to us that the group of words "to such purposes in India" qualifies the preceding verb "applied". It is a case of a verb being qualified by two prepositions which follow, viz., "to" and 'in'. So read, it seems clear to us that grammatically also it would be proper to understand requirement of the provision in this way, that is, that the income of the trust should be applied not only to charitable purposes, but also applied in India to such purposes. The submissions of Ld. Counsel that the words "in India" qualify only the words "such purposes" so that only the purposes are geographically confirmed to India does not appear to us to be the natural and grammatical way of construing the provision. That would break or clog the natural flow of the entire group of words "to the extent to which such income is applied to such purposes in India". The meaning sought to be attached by Ld. Counsel to the words "in India" as qualifying only the 'purposes' places a strain on the natural or grammatical interpretation of the group of words. If what Ld. Counsel contends is correct, then section 11(1)(c) may become redundant and otiose. If as he says, the income of the trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and which was created after 1.4.1952 to apply to the CBDT for a general or special order directing that the income to the extent to which it is applied to the promotion of international welfare outside India shall not be denied the exemption, nor would it be necessary for a charitable or religious trust created before the aforesaid date to seek such an order from CBDT in respect of its income which is applied to charitable or religious purposes outside India. In our opinion, therefore, the words "in India" appearing in section 11(1)(a) and the words "outside India" appearing in section 11(1)(c) of the Act qualify the verb "applied appearing in these provisions and not the words "such purposes."

10. In the light of above discussion and carefully considering the relevant provisions of law, we are of the opinion that disallowance of the amount of Rs. 1,95,26,116/-incurred by the assessee on account of amounts spent outside India for participating in Hannover Fair in Germany during the year under consideration cannot be treated as application of income of the trust to the execution of such purpose. Hence, in our view, disallowance in this regard could validly be made. Our view is fortified by the decision of the jurisdictional Delhi High Court in the case of DIT v. National Association of Software in I.T.A. No. 17/2011 etc. vide order dated 10.05.2012, in which it was observed as per paras.31 & 43 as under:

"31. We, therefore, hold that the amount of Rs. 38,29,535/- spent by the assessee-trust in Hannover, Germany cannot be considered as application of the income of the trust in India for charitable purposes. The substantial question of law is thus answered in favour of the assessee insofar as the payment of taxes under the VDIS is concerned and in favour of the Revenue insofar as the expenditure incurred outside India (Germany) is concerned.

43. We now turn to the assessment year 2006-07, I.T.A. No.518/2011 arises out of I.T.A. No. 4468/Del./2009 in the file of the Tribunal which was an appeal by the assessee. Before the Tribunal the assessee had taken only one issue in appeal, namely, whether the expenditure of Rs. 1,70,85,034/- incurred outside India on events and activities held outside India did not qualify for exemption under section 11(10)(a) of the Act. In line with our earlier decision, the substantial question of law arising from this issue is decided in favour of the Revenue and against the assessee."

Therefore, action of authorities below allowing the claim of the assessee is justified and proper. As such, while confirming the amount of disallowance, we dismiss this ground of appeal of the assessee.

Karnataka HC: Girls below 21 years needs to take consent from parents to get married

Follow the link: Karnataka HC says that, Girl below 21 years of age needs to take consent from parents in order to get married.

http://www.deccanherald.com/content/160931/girl-21-must-get-parents.html

What's your take on this decision? Supreme court's intervention is needed.

Thank you !

CA Club: At 12 crore mark, UID creates world record

CA Club: At 12 crore mark, UID creates world record: UID became the world’s largest biometric identification system on Friday, touching the 12 crore mark in Aadhaar numbers generated, which is ...

CA Club: Payment of Stamp Duty on filing of Form 5 for incr...

CA Club: Payment of Stamp Duty on filing of Form 5 for incr...: MCA Notification vide No. G.S.R. 716(E). dated 23.09.2011 was issued, in view of the order of the Hon’ble High Court of Delhi dtd. 21.04.2...

CA Club: Anti-Ragging Web-Portal launched

CA Club: Anti-Ragging Web-Portal launched: Shri Kapil Sibal, Union Minister of Human Resource Development inaugurated the Anti-Ragging Web Portal here today. The portal has been dev...

Get PAN on due submission of Verification Certificate signed by MP/ MLA/MC or Gazetted Officer

Verification Certificate under provisions of Rules 114(4) of IT Rules, 1962 of PAN (Individual / HUF

A format has been prescribed for verification certificate under provisions of Rules 114(4) of IT Rules, 1962. 


An individual / HUF PAN Applicant who files certificate of MP / MLA / MC / Gazetted officer as proof of his / her identity or address is to file the same in prescribed format only.

Check out: www.incometaxindia.gov.in

Thank You !

Face Penalty up to Rs.10,000/- for possessing Two PAN

An individual in possession with TWO PAN ! Face the consequences:

Obtaining/possessing more than one PAN is against the law and may attract a penalty upto Rs.10,000. 

Therefore it is advisable not to obtain/possess more than one PAN. If you have more than one PAN, you should surrender the unused PAN by logging into ITD website at 

www.incometaxindia.gov.in.

Follow the link : https://www.tin-nsdl.com/pan/faq-pan-general.php

Thank you !

Finance Act, 2010 - A clarification pertaining to Service Tax regarding Construction Services

Government of India

Ministry of Finance

Department of Revenue

Tax Research Unit

***

Gautam Bhattacharya

Joint Secretary, Tax Research Unit

Telephone No.011-23093027

Fax No.011-23093037

E-mail: g.bhattacharya @ nic.in

D.O.F.No.334/03/2010-TRU

New Delhi, dated 1^st July 2010

Dear Madam/ Sir,

            Subject: Issuance of notifications after enactment of the Finance Act, 2010:

            The Finance Bill 2010 was enacted on 8^th May 2010. Section 76 and 77 of the Finance Act, 2010 (14 of 2010) pertain to service tax issues. Certain new taxable services were introduced and certain changes in the scope of the existing taxable services (under section 65, with consequential changes in section 66 of the Finance Act, 1994) were made under section 76 of this Act. The provisions of section 76 (A) & (B) (except retrospective provisions relating to commercial coaching and training and renting of immovable property services) were to come into effect from a date to be notified, which is also known as appointed date. This date has been notified to be the 1^st day of July 2010 (Refer Notification No.24/2010-Service Tax dated the 22^nd June 2010).

" 2. Services provided or payments made prior to the effective date;

2.1        Vide Finance Act, 2010, eight new services were added to the list of taxable services while the scopes of nine existing services were modified. As these changes become effective from 01.07.2010, activities that are covered under taxable service categories due to above additions or modifications, would start attract service tax from this date. It is however, possible that a part or full payment of the consideration for such services provided after the appointed date has already been received prior to that date, i.e. advance payments. The examples are: where a domestic air journey performed after 1^st July 2010, but the ticket is issued on payment prior to such date or where a construction activity falls within the taxable service only after the said date but the payment (full or in part) has been made before this date. While legally tax is payable on such amounts received, it has been decided to specifically exempt service tax on that partial or full amount which is received by the service provider/ person liable to pay the tax (and not by an agent, who in turn transfers such amount to such person after this date) before 01.07.2010, pertain to a service which has become taxable on account of the provisions of the Finance Act, 2010 and is provided on or after 01.07.2010. Any amount received after 01.07.2010 by the service provider/ person liable to pay the tax would be subjected to tax. (Refer Notification No.36/2010-Service Tax dated the 28^th June 2010 as corrected vide corrigendum dated 29^th July, 2010).  

6. Construction services:

6.1        In the Finance Act, changes have been made in the construction services, both commercial construction and construction of residential complex, using ‘completion certificate’ issued by ‘competent authority’. Before the issuance of completion certificate if agreement is entered into or any payment is made for sale of complex or apartment in residential complex, service tax will be leviable on such transaction since the builder provides the construction service. Completion certificate issued by a Government authority was prescribed as demarcation by introducing an Explanation in the Finance Act. During the post budget discussions, it was pointed that practice regarding issuance of completion certificates varies from state to state. Considering the practical difficulties, the scope of the phrase ‘authority competent’ to issue completion certificate has been widened by issuing an order for removal of difficulty (Refer M.F.(D.R) Order No.1/2010 dated 22^nd June 2010). Completion certificate issued by an architect or chartered engineer or licensed surveyor can be now taken to determine the service tax liability.

6.2        After the Budget was introduced views were expressed that the tax liability on construction sector has been tightened at a time when the sector was recovering after recession. After considering the issue, abatement available for construction of industrial or commercial complex and also residential complex has been prescribed as seventy five per cent. This means now tax incidence will be the rate of service tax applied on twenty five per cent of gross value of commercial or residential complex or unit, broadly representing the service component in the construction, subject to conditions (Refer Notification 29/2010-Service Tax, dated 22^nd June 2010).  Importantly seventy five percent abatement will be applicable only if the gross value of commercial or residential complex or unit includes cost of land. Otherwise the existing rate of abatement of 67% would continue to apply.

6.3            Exemption has been provided for construction of residential complex service, when the same is rendered as part of Jawaharlal Nehru national Urban Renewal Mission (JNNURM) and Rajiv Awaas Yojana (Refer Notification No.28/2010- Service Tax, dated 22^nd June 2010). These are flagship schemes of the Government of India to provide shelter for the poor and the disadvantaged and hence taxable service of construction of complex in the context of these two development schemes have been kept out of the ambit of service tax."

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Features of Finance Bill, 2012

Important Features of Finance Bill, 2012

Direct Taxes

1. Tax Slab for Individual below 60 years of age (Male or Female) & HUF Income Tax Rate

• 0 - 2,00,000 Nil
• 2,00,001 - 5,00,000 10%
• 5,00,001 - 10,00,000 20%
• More than 10,00,000 30%

2. DTC deferred further. 

3. Proposed to introduce GST from August 2012 

4. Proposal to allow individual or HUF, a deduction of up to from savings bank account interest.

5. Proposal to allow deduction of up to 5,000 for preventive health check up. 

6. Senior citizens not having income from business proposed to be exempted from payment of advance tax. 

7. Proposal to extend weighted deduction of 200% for R&D expenditure in an in-house facility for a further period of 5 years beyond March 31, 2012. 

8. Proposal to provide weighted deduction of 150% on expenditure incurred for agri-extension services. [Sec. 35CCC]

9. Proposal to extend the sunset date for setting up power sector undertakings by 1 year for claiming 100% deduction of profits for 10 years. 

10. Turnover limit for compulsory tax audit of account is  1 crore for business assessee and 25 lakh for professional assessee. [Sec. 44AB]

11. Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery. 

12. Proposal to provide weighted deduction at 150% of expenditure (not being expenditure in the nature of cost of any land & Building) incurred on skill development in manufacturing sector. [Sec. 35CCD] 

13. Reduction in securities transaction tax by 20% on cash delivery transactions i.e. from 0.125% to 1%. 

14. Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors on investing in equity Share. 50% of investment upto ` 50,000 eligible for deduction. 3 years lock-in-period under the scheme. 

15. Presumptive taxation of SMEs to be raised from 60 lakhs to 1 crore. [Sec. 44AD] 

16. Deduction u/s 80C for Life Insurance Premium not in excess of 10% of actual capital sum assured for Policy issued on or after 1.4.2012.

17. Deduction upto 60,000 in respect of Medical Treatment of Specified disease incurred in respect of Senior Citizen (60 years or more age instead of 65 years or more). [Sec. 80DDB] 

Indirect Taxes

1. Proposal to raise service tax rate from 10% to 12%.

2. Proposal to tax all services except those in the negative list. Negative list to include pre- school & high school education, entertainment services (Cinema Industry)

3. Standard rate of excise duty proposed to be raised from 10% to 12%.

4. Excise duty on large cars also proposed to be enhanced from 22% to 24%.

5. Full exemption from basic customs duty for import of equipment for expansion or setting up of fertilizer projects upto March 31, 2015.

Thank you !

Reverse Charge Mechanism in Service Tax - new services incorporated - applicable w.e.f 01-07-2012

Reverse Charge Mechanism in service tax 

....way to harsh for a service recipient

It may not be a new concept. The service recipient has to register under service tax and have to periodically file service tax return . 

A list of newly added services have been incorporated under this reverse mechanism scheme w.e.f 01-07-2012 under partial reverse charge. The list includes the services & service tax payable in prescribed ratio by the person providing the service as well as the service recipient:  

Sl. No. 1) Service provided by insurance agent carrying on insurance business - Service provider (NIL) & Service recipient (100%);

Sl. No. 2)  Services provided by goods transport agency in connection to transport of goods by road - Service provider (NIL) & Service recipient ( 100%);

Sl. No. 3) Services provided by way of sponsorship - Service provider (NIL) & Service recipient (100%);

Sl. No. 4) Services provided by Arbitral Tribunal - Service Provider (NIL) & Service recipient (100%);

Sl. No. 5) Services provided by Individual Advocate - Service Provider (NIL) & Service recipient (100%);

Sl. No. 6) Services provided by way of support service by Government & Local Authority - Service Provider (NIL) & Service recipient (100%);

Sl. No. 7) Services provided by way of renting/hiring motor vehicle to carry passenger:

• on abated value -  Service Provider (NIL) & Service recipient (100%);
• non-abated value -  Service Provider (60%) & Service recipient (40%);

Sl. No. 8) Services provided by way of supply of manpower for any purpose - Service Provider (25%) & Service recipient (75%);

Sl. No. 9) Services provided by way "Work Contract"- Service Provider (50%) & Service recipient (50%);

Sl. No. 10) taxable services provided by anyone located in non-taxable territory& recipient of service by any person within taxable territory i.e. in case of import of services - Service Provider (NIL) & Service recipient (100%);


However, the said reverse charge is only applicable only upon fulfillment of certain conditions:-

• Sl. No. (1)- Any service provide or service recipient;
• Sl. No. (2) -   In case where the consignor or the consignee  is,— (a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948); (b)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; (c)  any co-operative society established by or under any law; (d)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; (e)  any body corporate established, by or under any law; or (f)  any partnership firm whether registered or not under any law including association of persons;
• Sl. No. (3) - It covers any service provider but the recipient of services shall be body corporate or Partnership Firm;
• Sl. No. (4) - Covers Arbitral Tribunal as Service Provider and  Service receiver shall be a business entity with a total turnover above 10 Lakh in the previous year.
• Sl. No. (5) - Service Provider shall include Individual or Firm & the service recipient shall be a business entity with a total turnover above 10 Lakh in the previous year. 
• Sl. No. (6) - Service provider be a Govt. or local authority and the service receiver a business entity
• Sl.No.(7),(8)&(9) - Service provider shall cover Individual/proprietor/Partnership Firm (may or may not be registered)/ Hindu Undivided Family and the service receiver shall be a company incorporated under the Companies Act, 1956 or could that be any business entity (registered in the capacity as a body corporate in a taxable territory)
• Sl. No. (10)- Service provider and service receiver shall cover 'any'.

Dear readers,


IF any of you are in receipt of any of the above services and is covered under specified category as service recipient, then you shall immediately get yourself registered under service tax.

Thank You !

...xxx...

TDS under various provisions - Compliance under income Tax Laws

COMPLIANCE UNDER INCOME TAX LAWS

TDS under various provisions 

           

a) Salary- (Sec-192) Compliance be made within seven days from end of the month in which TDS is deducted & in case of March provision within seven days of deduction.

Consequences of non-compliance- Interest u/s.201(1)

b) Interest (other than "Interest on securities") (Sec- 194A) -  TDS must be deducted within seven days from the end of the month in which TDS is paid before 31st March deducted & in case of provision on 31st March, it is payable on or before 31st  May.

Consequences of non-compliance- Interest u/s.201(1) & if not interest u/s.201(1), the corresponding expense is disallowed u/s.40a(ia) & in case of failure prosecution proceedings attracted.  

c) Commission or Brokerage (Sec-194H) - Compliance within seven days from the end of the month in which TDS is deducted paid before 31st March & in case of provision on 31st March, it is payable on or before 31st May.    
            

Consequences for non-compliance- Interest u/s.201(1), & if not paid before 31st March or 31st May the corresponding expense is disallowed u/s.40a (ia) & in case of failure prosecution proceedings attracted

d) Rent (Sec-194I) - Within seven days from the end of  the month in which TDS is deducted & in case of provision on 31st March, it is payable on or before 31st May. 

Consequences for Non-Compliance: Interest u/sec.201(1), & if not paid before 31st March or 31st May, the corresponding expense is disallowed u/s.40a(ia) & in case of failure prosecution proceeding attracted.

e) Payments to Contractors (Sec-194C) - Within seven days from the end of the month in which TDS is deducted & in case of provision on 31st March, it is payable on or before 31st May. 
           

Consequences for non-compliance - Interest u/sec.201(1), & if not paid before 31st March or 31st May, the corresponding expense is disallowed U/s.40a(ia) & in case of failure Prosecution proceedings attracted. 

f) Fee for Professional or Technical services (Sec-194J)- Within seven days from the end of the month in which TDS is deducted & in case of provision on 31st March, it is payable on or before 31st May.      

Consequences of non-compliance - Interest u/sec.201(1), & if not paid before 31st March or 31st May, the corresponding expense is disallowed u/sec.40a(ia) & in case of failure prosecution proceedings attracted.

g) Payment to NRI (Sec-195)- If tax is not deducted then salary & interest is disallowed u/sec.40a.

h) Quarterly of  filing E-TDS -Within 15 days from the end of each quarter except in case of March quarter for which due date is 15th June  

Consequence of non-compliance -  If not paid within due date, penalty is levied of Rs. 100/-for everyday from the due date till the date of filing quarterly return.

i) Payment of Advance Tax - before 15th june-30%, 15th sept.- 45%, before 15th Dec-75%., before 15th March-100% & if not paid Interest u/sec.234B & 234C is payable.

j) Payment of Advance Fringe Benefit Tax (FBT) - before 15th june-30%, 15th sept-45%, before 15th Dec-75%,before 15th March-100% and it not paid then interest payable u/sec.234B & 234C.                                                     

                                                                                                       

...xxx...

TDS & Newspaper Publishing Company

IN THE ITAT HYDERABAD, BENCH 'A'

Assistant Commissioner of Income Tax 

vs. 

Ushodaya Enterprises (P) Ltd.

Recently, couple of issues has been resolved by Income Tax Appellate Tribunal, Hyderabad in the case of Assistant Commissioner of Income Tax vs. Ushodaya Enterprises (P) Ltd.

Facts:

The assessee is a company carrying out business majorly in the areas of publishing of news, dairy products, electronic media (Television) manufacturing of food items etc. 

Issues: 

1) Whether the nature of payments made by the Newspaper company to various news agencies would make the assessee to deduct TDS u/s. 194C or U/s. 194J of the Income Tax Act, 1961?

It was held that, the procurement of news are done by skillful professionals like reporters. Newspaper agencies hires skillful reporters who have professional qualification as well as those who possess mental ability, presence of mind etc in order to collect news. Hence, it would be covered u/s. 194J and not 194C of the said Act.

2) Whether the assessee would be liable to deduct tax u/s. 194C on the software expenses paid by the assessee company to the producers for telecasting their programmes via television? 

The assessing officer has held the assessee as defaulter under sec-201(1) read with sec-194C of the Income Tax Act, 1961.

It was submitted by the assessee that the producers did not carry out any work as the main intention was to generate revenue on advertisement slots during programme telecast. 

Tribunal observed that in the P & L A/c. the assessee made payments on account of software expenses to ETV Telegu Television and ETV other channel division which was further sub-divided in the form of revenue share under the heads "other programmes" and "Direct purchases". The expenses on account of "revenue share" are on account of production of Televisions soaps/ programmes.

After careful observation of the agreements Tribunal came to a conclusion that the assessee associated with the producers only to get its programmes telecasted on ETV Channel and thereby the assessee gain a source in generating advertisement revenue.  Therefore, the assessee made payments to these various agencies on revenue sharing basis earned through advertisements telecasted during TV Serials or programmes. Hence, comes under the purview of Section 194C Explanation III as the nature of payment was that of "contract of work". 

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Sec- 44AD - Computing profits & gains of business on presumptive basis

Sec-44AD - Computing profits and gains of business on presumptive basis

... a deemed provision

Section 44 AD of the Income Tax Act, 1961 was meant for computing profits and gains of business of civil construction, etc.

Note, that sec-44AD is a deemed provision under the said Act.

Application and scope of the section:

The said section was brought into by the Tax Reforms Committee that has recommended this method of computing income under the head "Profits and gains of business or profession" in certain areas in order to facilitate the better tax compliance. 

(Refer CBDT Circular No. 684 dated 10th June, 1994). 

It was observed that the scheme would enable small assessee to pay tax on their income without getting involved in the system of maintenance of record. 

The scheme was introduced from Assessment Year 1994-95.

In this method of assessment, there is an option for an assessee to declare its income at minimum rate of 8% of the gross receipts, paid or payable, or a sum higher than the aforesaid sum as declared by the assessee, in the previous year.

However, the scheme is optional. Hence, an assessee can claim his income to be less than the deemed rate, i.e. @8 %, subject to fulfillment of certain conditions and proper compliances.

Compliances:

ü       Maintain the books of account and other documents as required under section 44AA

ü      Get the books of accounts audited under section 44AB

Now, at the very outset, The Finance (No. 2) Act, 2009 has expanded the scope of this section beyond the assessee who is engaged in business of civil construction, excluding Limited Liability Partnership (LLP) firm from its scope.

For the purpose of this section 44AD the scope has been widened to include ANY business except the business of plying, hiring, or leasing goods carriages referred to in sec-44AE and therefore one can take the option to assess its tax chargeable at presumptive rates with turnover of less than Rs. 40 lakh.

In view of the above, one can very well declare its income at 8% of gross receipts, as the section is now applicable to ANY business and not only confide to trading business.

Further, for the purpose of presumptive taxation under this section, the Finance Act, 2010 has amended to increase threshold limit of total turnover and gross receipts from 40 lakh rupees to sixty lakh rupees. The same is applicable w.e.f. 01-04.2011.

Therefore, the provisions of the new Section will be applicable if the following conditions are satisfied:

a)  Assessee eligible for the purpose of this Section has to be an Individual/a HUF/a Partnership Firm (not being a LLP);

b) The assessee has not claimed any deduction u/s.10A, 10AA, 10B, 10BA, and 80HH to 80RRB in the relevant Assessment Year;

c)  Total Turnover/ Gross Receipt of the Assessee in the previous year should being Rs. 60.00 lakhs.

Under the erstwhile section of sec-44AD and sec44 AF, the assessees had an option to declare the presumptive income arising from the respective business calculated at a percentage lesser than the minimum specified, subject to the condition that books of accounts u/s. 44AA should that be maintained and thereof getting the same audited u/s. 44AB.

However, under the new section which has been inserted vide Finance Act, 2010, the “eligible assessee” vide sec-44AD (5) shall be required to maintain books of accounts under the following two conditions: -

a)  if the presumptive income offered for taxation is less than 8% of the gross receipts or total turnover;

b)  if the “total income” exceeds the maximum amount not chargeable to income tax

“Total income” as generally understood means gross total income less deductions under chapter-VI A (sec-80C & 80U) of the Act, WITHOUT INCLUDING PROFITS OF ELIGIBLE BUSINESS.

Further, this provision does not require the assessee to comply with the provisions relating to advance tax.

Consequences of this special provision: 

(i)  The deduction under section 30 to 38 shall be presumed to have been already given full effect, and therefore no further deduction shall be allowed under this section;

(ii)  The WDV of the assets used in the eligible business shall be deemed to have calculated as if the eligible assessee had been allowed the deduction of the depreciation for each of such assessment years.

(iii) The salary and interest to partners are still allowable subject to the limits prescribed under section 40(b).

Conclusion:

The very objective of presumptive scheme of taxation is to enable a small contractor to file return of income without having to maintain cumbersome record.

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