Regarding exemption to preschool coaching and training

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Regarding exemption to preschool coaching and training

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India

Ministry of Finance

(Department of Revenue)

New Delhi, the 25th April, 2011

Notification No.33/2011 – Service Tax

G.S.R. (E) - In exercise of the power conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government on being satisfied that it is necessary in the public interest so to do, hereby exempt,-

(i) any preschool coaching and training;

(ii) any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law for the time being in force;

when provided by any commercial coaching or training centre from the whole of the service tax leviable thereon under section 66 of the Finance Act, 1994.

2. This notification shall come into force on the 1^st day of May, 2011.

Deduction u/s. 80C of the Income-tax Act, 1961 – CBDT notifies annuity plan of the TATA AIG Life Insurance Company

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Section 80C of the Income-tax Act, 1961 – Deductions – In respect of insurance premium, etc. – Notified plan under section 80C(2)(xii) – Corrigendum to Notification No. 80/2010, dated 19-10-2010

CORRIGENDUM NOTIFICATION NO. 20/2011 [F.NO. 178/04/2009-IT(A-I)], DATED 21-4-2011

In the notification of the Government of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number 80/2010, dated the 19th October, 2010, to be published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), in paragraph 1 for “annuity plan of the ICICI Prudential Life Insurance Company Limited”, read “annuity plan of the TATA AIG Life Insurance Company.”

Budget 2011- Service Tax- Govt Appoints the 1st day of May 2011 as the day for Finance Act, 2011 ( 8 of 2011) to come into force

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Appoints the 1^st day of May 2011 as the day for Finance Act, 2011 ( 8 of 2011) to come into force

NOTIFICATION NO

29/2011 – Service Tax, dated 25-04-2011

In exercise of the powers conferred by clauses (A) and (B) of section 71of the Finance Act, 2011 ( 8 of 2011), the Central Government hereby appoints the 1st day of May 2011, as the date on which the provisions of the said Act shall come into force.

Supreme court laying down the line of distinction between Stock transfer and Inter state sales for Central Sales Tax

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M/S. Hyderabad Engineering vs State Of A.P. on 4 March, 2011 (Supreme Court of India)

Background

• While inter-state sales are subject to CST; intra-state sales are governed by respective State VAT legislation’s.
• Stock transfers to a branch outside the State is not subject to either VAT or CST. However, VAT credit on inputs is required to be reversed (as per the State VAT laws).
• However, dispute lies where some stock transfers are considered by VAT authorities as inter-state sales and proceed to recover tax thereon from the seller.
• High courts have been giving divergent views on the issues which has now been settled by Supreme court in ‘Hyderabad Engineering Industries’. Now armed with latest decision from Supreme court, VAT department would be up in arms against the dealers. Brief facts alongwith analysis of decision is discussed in subsequent slides

Supreme Court in case of ‘A’ – Facts of the case

• A has manufacturing facility in Andhra Pradesh and a branch in Delhi.
• A entered into a ‘Sales Agreement’ with B in Delhi wherein A proposed to sell the goods on wholesale to B while B to further sell in retail. While B was granted the exclusive rights to sell A’s products, distribution to other bulk buyers and government was retained by A. B places its monthly intents for supply of goods.
• Based on these, the supplies are made by A to its branch from where sales are made to B in Delhi. No Tax paid on transfer from AP to Delhi considering it as stock transfer
• However, Sales tax department had a different view and considered the same as Inter-state sales, subjecting the same to CST
• A, after not getting relief from lower authorities, filed an appeal before Supreme court

Legal position – Section 3 of Central Sales Tax

Section 3. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Sales Tax officer’s contentions

“from a factual description of the mode of transactions, it is evident that the inter-state sales effected by the assessee have been camouflaged as branch transfers with a view to evade tax legitimation due to the state on these transactions”

Basic issue for consideration

With a view to find out whether a particular transaction is inter-state sale or not, it is essential to see whether there was movement of goods from one state to another as a result of prior contract of sale or purchase.

Supreme court – Analysis & Observations

Matter reached Supreme court who observed as follows.

• There are 2 cases of central sales – (1) where sale resulted in movement of goods from one state to another (2) where sale results during movement of goods from one state to another.
• The case needs to be analysed in Situation (1). Supreme court observed that in such a case, there must be an obligation between the parties to transport the goods outside the state. Such obligation could be through written contract or oral contract or inferable from circumstantial evidence.[Para 16]
• Though, Supreme court agreed with the fact that there lies a difference between ‘agreement to sell’ and ‘sale’ wherein the former converts into latter, when there is satisfaction of conditions provided therein, it went ahead with analysing the terms of the original agreement.
• Clause 8 of the agreement was important on which decision was relied. The same obligated A to make delivery of products either to B or in any of its godowns (i.e. A’s) at the option of B
• Supreme court placed its reliance on various of its erstwhile decisions and held in favour of the department

Supreme court – Conclusion

Finally, the Supreme court concluded by observing that following scenarios are covered under “inter-state sales”

• “Sale” or “agreement to sell” occasions movement of goods from one state to another (irrespective of whether such movement has been provided in the agreement) or
• Order placed before HO or branch resulted in movement of goods from one state to another (irrespective of state where property in goods passes)

Thus, it is not necessary that sale must precede movement of goods or the fact of movement of goods is mentioned in the agreement [Para 32]

Thus, even an agreement to sell can now result in classification of such transfers as “inter-state sales” and not “branch transfer”

Supreme Court – Significant observations

Further Supreme court also provided following important observations with respect to facts of instant case

• Where there is a positive case of inter-state sales, even if the dealer had procured F-Forms, the same would still be of no use and he may need to prove that the facts are otherwise. [Para 18]
• Where the agreement was entered with another unit or movement of goods was at the instance of another unit of same company does not make any material difference [Para 31]
• Branches & head office constitute one single entity. Who bills or collects from the customer does not matter [Para 31]
• Even if no firm orders have been provided, the fact that ‘forecasts’ have been provided by the buyer in the beginning would take the colour of ‘indents’ or ‘firm orders’ [Para 42]
• Even where purchases are made to government departments (who are bulk buyers) would not take it out of the purview of Inter state sales [Para 43]

Though the above decision can be distinguishable from others as in the instant case, buyer of goods was having an agency for the various states wherein it had the sole selling rights. Nevertheless, it can be taken as a big weapon by VAT authorities who may try to caught dealers undertaking such transactions.

A lot of dealers may have been maintaining supply chains by introducing branches, which can be potential exposure

• Where entire sales are being made by the branch to some particular dealers
• Where after effecting transfers to branch, the goods are sold to specific parties and stock balance goes to ‘Nil’
• Where no significant staff is being maintained at branch
• Where indents are being sent by the buyers directly to HO based on which transfers are made to branch

Prior period expenses not to be deducted while computing book profit for the purposes of section 115JA

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Shree Bhagawathy Textiles Ltd. v. Asstt. CIT-ITA No. 74/2010-Kerala High Court Judgment

The assessee disclosed a book profit of Rs. 78,43,643 and accepting the same the assessing officer completed the assessment on 30 per cent of the book profit i.e., fixing the income at Rs. 23,53,093. However, later the assessing officer noticed that the profit and loss account prepared by the assessee under Parts II and III of Schedule VI of the Companies Act dislcosed a profit of Rs. 1,01,37,664, wherefrom the assessee had made a deduction of Rs. 23,29,726 towards prior period expenses which is impermissible under the statute and this mistake was rectified in proceedings initiated under section 154 of the Act by disallowing deduction claimed by the assessee from the profit available under the profit and loss account above-referred.

Held : What is clear from the above is that the assessing officer should start with the profit available in the profit and loss account prepared in terms of Parts II and III of Schedule VI of the Companies Act. The profit under the said profit and loss account admittedly is Rs. 1,01,37,664. The way assessee has claimed deduction based on the profit and loss appropriation account is detailed in the order of the CIT(A). What is clear from the said order is that the assessee made a further deduction from the profit available under profit and loss account prepared under the Companies Act. Obviously unless the deduction made by the assessee is permissible in terms of clauses (i) to (ix) of Explanation to section 115JA above stated, the same is inadmissible. Assessee has no case that the prior period expenses is an item that could be deducted from the profit in terms of any of the clauses covered by Explanation to section 115JA. So much so, the claim is not a deduction allowable from the profit taken from the profit and loss account prepared under the Companies Act. When the deduction is admittedly not admissible under the provisions of the Act, assessee wants to bank on the technicality that the deduction, though wrongly allowed in the assessment based on the wrong claim mae by the assessee, cannot be revised in rectification proceedings under section 154. The assessing officer has to start assessment by adopting the profit available in the profit and loss account prepared in terms of Parts II and III of Schedule VI of the Companies Act. If the assessee has made a claim of deduction from this profit not enumerated in the clauses (i) to (ix) covered by Explanation to section 115JA, the assessment so completed based on the profit taken from the profit and loss account appropriation account submitted by the assesseee happens to be an apparent mistake which could having satisfied on the factual mistake committed by the assessing officer in the original assesment, rightly upheld the revised assessment issued under section 154 by reversing their earlier order.

Clarification Regarding service of documents by e-mode instead of Under Posting Certificate – MCA permits service of documents through e-mail

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Finally, as a move to relieve the Corporate of huge financial burden of sending physical documents such as notices etc. by Registered Post instead of Under Posting Certificates after it being discontinued by the Postal Authorities, the Ministry of Corporate Affairs has come up with a Green Initiative of permitting the service of documents upon the Shareholders through e-mail or other permissible electronic modes instead of physical mode. The move is not only a Green Initiative but also a big boon for the corporate incurring huge financial expenditures on the printing and dispatch of documents from time to time and a directional approach towards the IT revolution.

The ministry has utilized the provisions of Section 2, 4, 5 and 81 of the Information Technology Act 2000 which provides for an overriding effect to the provisions of the IT Act and calls for adequate compliance of law in case the requisite information which otherwise would have been made available in writing, typewritten or printed form, if such information is made available in electronic form. Similarity the authenticity of digital signatures has been provided for herein.

The notification further provides that the company has to take consent from members for sending the notice / documents to them through email and has to provide a forum for registering and changing the email from time to time. Others who do not opt for electronic mode of information or whose email is not registered would be served information in the manner as provided in section 53 of the Companies Act, 1956.

______________________________

Circular No. 17/2011;

NO 17/95/2011 CL-V

Government of India

Ministry of Corporate Affairs

Dated: 21.04.2011

All the Regional Directors,

All the Registrar of Companies/ Official Liquidators

Subject: -Green Initiatives in the Corporate Governance –Clarification regarding service of documents by e-mode instead of Under Posting Certificate (UPC).

Sir,

The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate Governance” by allowing paperless compliances by the Companies after considering sections 2, 4, 5, and 81 of the Information Technology Act, 2000 for legal validity of compliances under Companies Act through electronic mode.

Section 53 of the Companies Act, 1956 provides service of documents under ‘Certificate of posting’ as one of the accepted mode of service. Whereas the Department of posts has recently discontinued the postal facility under ‘Certificate of posting’ vide their letter dated 23.02.201 1. The Information Technology Act, 2000 also permits service of documents etc., in electronic mode.

Keeping in view of above, it is hereby clarified that a company would have complied with Section 53 of the Companies Act, if the service of document has been made through electronic mode provided the company has obtained e-mail addresses of its members for sending the notice/documents through e- mail by giving an advance opportunity to every shareholders to register their e- mail address and changes therein from time to time with the company.

In cases where any member has not registered his e-mail address with the company, the service of document etc will be effected by other modes of service as provided under section 53 of the Companies Act, 1956.

Yours faithfully,

(Kamna harma)

Assistant Director

Copy to: All concerned.

New Companies Bill to be taken up in monsoon session

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The new Companies Bill, which seeks to replace a 50-year-old Act, will come up for consideration and passage in the Monsoon Session of Parliament. “The Companies Bill will come in for discussion in Parliament in the Monsoon Session,” the Corporate Affairs Minister, Mr Murli Deora, told reporters on the sidelines of a FICCI event here today.

The new Companies Bill, which was tabled in the backdrop of the Rs 14,000-crore Satyam fraud, promises greater shareholder democracy and stricter corporate governance norms.

The Bill proposes to introduce the concept of class action suits for the first time in India, which would empower investors to sue a company for “oppression and mismanagement’’ and claim damages.

Among other things, it also proposes to tighten the laws for raising money from the public.

The Bill also seeks to prohibit insider trading by company directors or key managerial personnel by treating such activities as a criminal offence.