SOME ISSUES PERTAINING TO C FORMS UNDER CST ACT 1956

PrintPDF

Under CST Act 1956 there are lot of Forms and declarations which help in saving CST on the interstate transactions. C form is an important and foremost common among dealers registered under CST Act 1956 engaged in interstate sales or purchases.

Although the CST Act 1956 is on the verge of its end with the advent of GST knocking at the doors waiting to change the whole picture of Indirect taxation in India. But still I feel inclined to discuss some issues relating to C forms under CST Act since due to the pendency of assessments under VAT and CST Acts many dealers have been facing problems in getting and producing the C forms for finalization of their assessments. Some important issues relating to the C forms are discussed as below for the benefit of dealers all around India:

What is C form: As per section 8(1) (b) of CST Act 1956 sales tax on interstate sales is 2% or state rate whichever is lower, if the sale is to a registered dealer and goods are covered in the registration certificate of the purchasing dealer. Otherwise the tax applicable is the state rate applicable on the goods sold.

If the selling dealer pays CST @ 2% i.e @ concessional rate then he has to produce proof to his sales tax assessing authorities that the purchasing dealer is eligible to get these goods at concessional rate. Otherwise the selling dealer will be asked to pay balance tax payable plus penalty as applicable. Therefore section 8(4)(a) provides that concessional rate is applicable only if purchasing dealer submits a declaration in prescribed form C.

Where from to get the C forms: The blank C forms are issued by the sales tax authorities to the purchasing dealer who has made interstate purchases on concessional rate of CST. A dealer is entitled to obtain blank C forms from the sales tax authorities. If the registration is wrong, authorities can amend or cancel the same. However, as long as his registration is in force, blank C forms must be issued to him- Colourgraphs v. STO-(1993) 88 STC 347 (Ker HC).

Similarly it was held in Quality Enterprises v. ADCTO(2002) 127 STC 504 (Mad HC) that issue of blank C forms cannot be denied on the ground that transaction of dealer is taxable only as local purchases. Once a dealer pays necessary charges for C forms, the blank C forms must be issued. If he misuses C forms, he is liable to penalties contemplated in the Act.

However the CST rules may provide for non issue of blank C forms to a defaulting dealer in which case no blank forms may be issued. Similar rule was upheld as valid in S.N.E (India) P Ltd v. CST (2003) 131 STC 417 (Del HC DB).

Number of Transactions per C forms: One declaration in C form can cover all transactions in one quarter, irrespective of total amount/value of transactions during the quarter. (Quarter means period of three months). If a transaction covers more than one quarter, separate C form is required to be issued for each quarter.

Original, Duplicate and Counterfoil copy of C forms:The C form has been prescribed in three parts Original, Duplicate and Counterfoil. All three parts are identical in contents.
Section 8(4) of and Rule 12(1) do not specify which part of C form should be produced before the assessing authority.

Hence, in Manganese Ore (India)Ltd. v. CST MP (1991)TC (MP HC DB), it has been held that filing of copy marked Duplicate is enough compliance of the law and concessional sales tax rate will be available even if copy marked Original is not produced.

However, if CST rules as ammended by states require submission of original copy, then only that copy will have to be submitted.

Therefore one need to check the relevant CST state rules if any, ammended to this effect before furnishing the duplicate copy of C form.

If the buyer sends both the copies of C form marked as Orginal and Duplicate to seller and if both are lost, then the following procedure should be followed:

If duly completed C form is lost when it was in the custody of purchasing dealer or when the form was in transit to selling dealer, the purchasing dealer will have to furnish Indemnity Bond to sales tax authorities from whom the blank C form was obtained. If the duly completed C form is lost by the seller, then he has to submit indemnity bond to sales tax authorities of his state. The prescribed form of Indemnity bond is in Form G.

If C form is lost(both original and Duplicate copies), the purchasing dealer can issue duplicate declaration in C form with clear declaration in red ink that this is a duplicate declaration being submitted. Details of earlier lost certificate number and of selling dealer has to be given.

It may be noted that there is no provision to submit certified Xerox copy of earlier certificate and Xerox copy is not acceptable- J N Jetiwa v. state of maharashtra- (1995) 11 MTJ 491 (Mah Trib).

Selling dealer is not liable for false declaration by buyer: The purchasing dealer can issue C form for purchase of only those goods which are mentioned in his registration certificate, for other goods no C form can be issued by the buyer, if the buyer so issues C form for goods not mentioned in his R.C. then it will be misuse of C form and the penalty can be imposed on buyer.

But the selling dealer has only the obligation to satisfy himself that the purchasing dealer is a registered dealer for this he can rely upon the representation made by the buyer in the C form. If the purchaser misapplies the goods, the penalty can be imposed on the buyer, but selling dealer, who has relied upon C form issued to him, cannot be held liable.

Selling dealer is not required to hold an enquiry with regard to purpose for which the materials have been purchased by purchasing dealer. Once he furnishes necessary declaration forms from purchasing dealer, nothing more is required to be done.- K G Industries v. STO (1999) 113 STC 49 (MP HC).

Duly filled C form should be issued to seller: Sometimes, C form is obtained in advance and particulars of invoice etc. are filled in later. This is not legally correct, as section 8(4)(a) uses the words ‘to whom goods are sold’. Thus, duly completed C form should be obtained only after sale. Otherwise C form can be rejected.- Salem Magnesite v. State of Tamil Nadu (1999) 116 STC 110 (Mad HC DB)

Issue/receipt of C form against goods used in works contract: Goods used in executing works contract are deemed to be sold and there is sale of material used in the execution of works contract. Hence C form can be issued for materials used in works contract, if the goods are included in the registration certificate of the dealer- United Ltd. v. CTO (1991) 83 STC 207(AP HC)

No C form for rejected goods: It was held in Lakshmi and co. v. State of Kerala ( 2001) 121 STC 423 (Ker HC DB) F form can be issued only in case of completed transactions and not in case of rejection goods. Decision in this case of F forms should also be applicable on C forms. The reason is if goods are rejected, buyer cannot issue a certificate that the goods are for manufacture or for resale.

Declaration in C form cannot be rejected for minor defects: In Rajsthan Pipes v. CTO (2004) 138 STC 383 (Cal HC), it was held that benefit cannot be denied on ground of omission like date of registration and minor variation in amount.

The authorities should allow ractification of defects in declarations: If there are minor defects in the C form submitted (e.g. challan no., date etc. not mentioned, or name of dealer is mis-spelt), the officer should give reasonable opportunity to the dealer to remove the defects- Anil Kumar Dutta v. Addl Member (1967) 20 STC 528 (Cal)

In State of Orrisa v. Orissa Polish Works (1970) 26 STC 480 (Ori HC), it was held that C form should be returned to the selling dealer for ractification. Selling dealer should be allowed reasonable opportunity for this purpose.

When to submit the C form with the authorities by the seller: As per rule 12(7) C form can be submitted to the assessing authority within three months after the end of period to which it relates. STO can allow further time for submission of the form, if there is sufficient cause for not submitting the form in time.

C form can be submitted even at appellate stage if sufficient cause shown: I have already earlier written an article on this topic reffering the judgement of Punjab and Haryana High court in R S Cotton Mills v. State of Punjab wherein it was decided that C or D forms could be filled even after the filling of the return or at the appellate stage and same could be taken cognizance of.

Hence the C forms can be submitted even after the filling of annual statement i.e. at the time of assessment or afterwards and the same can be taken cognizance of since no loss is caused to the revenue by not filling the C forms along with annual statement.

C forms generally should be submitted before the first assessing authority. After the assessment, appellate authority can allow submission of C forms if sufficient cause is shown for not submitting the C form before the assessing authority. This is because the appellate authority has powers of reassessment. Appeal in taxation matters is different from power of appellate court in civil matters. The appellate authority is in nature of revising authority. He can revise every process which led to the ultimate computation or assessment- State of AP vHyderabad Asbestos Cement Products 94 STC 410.

It is advisable that the dealer should maintain proper record of follow up and efforts made with buyer to obtain C forms to prove that he made all possible attempts to obtain C forms within time. In such case it will help proving the sufficient cause for not submitting the C form within time and appellate authority will accept the C forms at appellate stage if obtained after assessment.

If sufficient cause is shown for late submission of C forms, the assessment can be reopened as it was held in Dtate of Tamilnadu v. Arulmurugan and co.- (1982) 51 STC 381(Mad HC DB)

Annual Tax Saving Tips : Especially for salaried employees

PrintPDF

Ideally everyone should plan their tax saving from April onwards but often people tend to forget this matter after submission of their investment declarations to their employers.

Often, they only get activated in the month of January to March, when they are actually required to submit the actual investment proof. But till that time the market gets flooded with investment options asking for a sum of 50-60 thousand with temptation of “Tax saving” & more often than not, we follow one of them without going into much detail, because due to short of time our mind often listens to one phrase i.e “tax saver”. Here are some useful tips that can be followed :

Tip 1 : The best would be a Systematic Investment Plan (SIP). But if we don’t follow SIP, then we should have at least two savings account. One operative & the other silent. We should try to put a regular monthly amount into the silent account so that when it actually matters, i.e. the months on January-March, when we are actually required to submit the investment proofs to our employer, we don’t run out of money, resulting revised declaration & paying un-wanted tax.

Tip 2 : If we are not able to understand any option then go for 5 year tax saver bank Fixed Deposit or National Savings Certificate.

Tip 3 : If we have FDs lying in bank, we should not only look for the maturity or interest income. We must ensure to get the TDS form 16A every year from bank so that we can get benefit from the TDS deducted by the bank, at the time of Income Tax Return.

Tip 4 : House Rent Allowance Tax benefit can be availed even if we pay rent to our parents, if the house is in their name.

Tip 5 : Home loan benefit under joint ownership with spouse. Tax benefit for interest paid on such joint home loan can be Rs. 150000/- each for both.

Often we have multiple credit cards & we are using it often for EMI payment or purchases.

Tip 6 : We should ensure that the usage of one Credit Card should not increase Rs. 2Lacs per financial year. We can plan our usage in other Credit cards. Often it leads to IT notices based on the report submitted by Credit Card Agencies’ AIR return & we will feel harassed in actual disposal of these notices.

Annual Tax Statement (Form 26AS)

PrintPDF

Annual Tax Statement (Form 26AS) is a statement, which is created financial year wise on the basis of TDS/TCS returns filed by the Deductor/Collector and tax deposited in the bank.

Form 26AS includes details of:
a) All tax deducted at source (TDS) covered in Part A;
b) All tax collected at source (TCS) covered in Part B; and
c) All advance tax/self assessment tax/regular assessment tax etc., deposited in the bank by the taxpayers (PAN holders) covered in Part C.

d) Details of paid refund received during the A.Y.

Kindly note that in PART A/B (Details of Tax deducted/collected at source), the "Status of Booking (P/F/U)" indicates the following:-

Provisional (P) - Only for TDS/TCS affected by Government deductors. Provisional tax credit is effected on the basis of TDS/TCS returns filed only. On verification of the payment details by the Pay & Accounts officer (PAO), status will change to Final (F).

Unmatched (U) - Deductors have not deposited the taxes or have furnished incorrect particulars of tax payment. Final credit will be reflected only when the payment details in the bank match with the details of deposit in the TDS/TCS return.

Final (F) - In case of non-Government deductors, payment details of TDS/TCS deposited in bank by the deductor have matched with the payment details mentioned in the TDS/TCS return filed by the deductor.

In case of Government deductors, details of TDS/TCS booked in Government account have been verified by the Pay and Accounts Officer (PAO).

In PART C, Details of Tax Paid (Other than TDS or TCS) related to Securities Transaction Tax and Banking Cash Transaction Tax are not displayed.

Form 26AS will help you to verify the credits for taxes deducted from the income received and the advance tax/ self assessment tax deposited by you at the bank.

Possible reasons for mismatch/missing entry in Part A/B (Details of TDS or TCS) are as follow:-

· Deductor/collector has not filed quarterly TDS/TCS return.

· Deductor /collector has not quoted or has wrongly quoted your PAN in the TDS/TCS return.

· You have not provided PAN or have provided wrong PAN to the deductor/collector .

· The TDS/TCS return filed by the deductor/collector is rejected in the system.

In case of entries with Status of Booking "U" (Unmatched)

· Deductor has wrongly quoted the challan details in the return against which your TDS/TCS was deposited.

· Deductor has provided correct challan details in TDS/TCS return but bank has made error while digitising challan details.

Possible reasons for mismatch/missing entry in "Part C" Details of tax paid (other than TDS or TCS) are as follow:-

The Bank

· has digitized incorrect PAN in Challan.

· has not uploaded the digitized challan.

· has made error in digitising amount/major head while digitizing the Challan data

· has made error in digitising CIN details in the Challan data

You

· have mentioned wrong A.Y. in the challan which will result in updation of Form 26AS for wrong A.Y.

· have quoted incorrect PAN in the tax payment challan

CIN consists of the BSR code of the bank branch where you deposited the tax, date on which you deposited tax and the challan serial number which have been stamped on the counter foil of the challan given to you.

Note :-

You can verify following at TIN web-site (www.tin-nsdl.com)

1. Status of the Challan through which tax deposited by you in the bank by clicking on link 'Challan Status Enquiry'.

2. The Status of return uploaded by deductor/collector by clicking on link "Quarterly Statement Status".

Clarification on Submission of Audit Report under Regulation 55A

PrintPDF

Clarification on Submission of Audit Report under Regulation 55A

CIRCULAR

CIR/MRD/DP/ 30 /2010

September 06, 2010

To

All Stock Exchanges and Depositories

Dear Sir/Madam,

Sub: Clarification on submission of Audit report under Regulation 55A of SEBI (Depositories and Participants) Regulations, 1996

Please refer to regulation 55A of the SEBI (Depositories and Participants) Regulations, 1996, the Circular No. D&CC/FITTC/CIR-16/2002 dated December 31, 2002 and the Circular No. SEBI/MRD/Policy/Cir-13/2004 dated March 3, 2004.

2. The aforementioned regulation and circulars necessitate every issuer to submit audit report on a quarterly basis to the stock exchanges audited by a qualified chartered accountant or a practicing company secretary, for the purpose of reconciliation of share capital held in depositories and in physical form with the issued / listed capital.

3. SEBI has received representations for changing the term ‘Secretarial Audit’ as it encompasses a wider area pertaining to examination of corporate and secretarial records of the company and cannot be restricted to merely audit for reconciliation of share capital.

4. Upon examination, it has been decided to modify the terminology ‘Secretarial Audit’ as mentioned in the circular No. D&CC/FITTC/Cir-16/2002 dated December 31, 2002 to ‘Reconciliation of Share Capital Audit’. SEBI Circular No. D&CC/FITTC/Cir-16/2002 dated December 31, 2002 stands amended to the extent as above.

5. The Stock Exchanges are advised to:

5.1. make necessary amendments, if required, to the relevant bye-laws/rules and regulations/circulars for the implementation of the above decision immediately.

5.2. bring the provisions of this circular to the notice of the Issuers of the Exchange and also to disseminate the same on the website.

6. The Depositories are advised to:

6.1 make necessary amendments, if required, to the relevant byelaws/rules and regulations/circulars for the implementation of the above decision immediately.

6.2 bring the provisions of this circular to the notice of the Registrar and Share Transfer Agents and also to disseminate the same on the website.

7. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 19 of the Depositories Act, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

DTC: Loan waiver under tax net

PrintPDF

orporates going in for debt restructuring may face rough weather on the income-tax front when the Direct Taxes Code (DTC) comes into play from April 1, 2012.

This is because the DTC provides that loans waived by lenders will be treated as income in the hands of the borrowers and taxed accordingly.

It may then not matter whether the loan was utilised for acquisition of capital asset or for revenue expenditure purposes, say some tax experts.

The DTC Bill seeks to directly bring within the scope of income the amount of remission or cessation of any liability by way of loan, deposit, advance or credit.

This could affect corporate debt restructuring (CDR) activities in the country. Many tax experts are of the view that the clause concerned is quite broad and vague, which could lead to litigation.

This provision could create issues for debt restructuring activities.

CDR packages may not always involve waiver of loan repayments, but there could be cases where loans are rescheduled or partial waiver is agreed.

The Code proposes to treat such remission (of loan, deposit, advance or credit) as income for tax purposes. However, the same may require reconsideration in light of genuine debt and financial restructuring exercises to mitigate undue hardships.

Annual Filing 2010

PrintPDF Click on link below :

Important Notice by ministry of corporate affairs- Annual Filing 2010

House Rent allowance under the Income Tax Act

PrintPDF

House rent allowance, or HRA, is a major component of your salary. This is given by an employer to an employee to meet the cost of renting a home. As a salariedemployee you can claim a tax exemptionon such an amount. But there are certain conditions that you need to understand to claim such exemptions.

How is the exemption on HRA calculated?

The tax exemption on HRA is computed as the minimum of following three conditions:

i) Actual HRA as per you pay slip;

ii) 40%/ 50% of your basic salary;

iii) The rent amount minus 10% of the salary

If you stay in a metro — Mumbai, Kolkata, Delhi or Chennai — your HRA would be 50% of your salary. In other cities/towns, it would be 40% of salary. For example, if your salary is Rs 40,000 and you live in Mumbai, HRA would be Rs 20,000 (50% of the salary). Let’s assume that you a pay a rent of Rs 15,000. The amount of rent paid minus 10% of the salary is Rs 11,000. The least of these is Rs 11,000, which would be taken as the HRA exemption. Hence the balance (i.e., rent minus HRA exemption) Rs 4,000 will be taxed.

When can you claim exemption on HRA?

You can claim exemption on rent given to parents. For example, you live with your parents and pay them rent. This would technically make your parents the landlords. In such an case, one of your parents should declare the rent paid by you in his/her personal income tax return to prevent litigation in future. However, you cannot claim exemption on rent paid to your spouse. Tax experts say that the relationship between a husband and wife is not commercial in nature and they are supposed to stay together.

You should provide your employer with accurate rent information so that the company can credit you with the eligible amount of relief before deducting tax at source. Another alternative is that you can also claim such exemption when you file the tax return and seek a refund.

If you receive HRA for the period during which you were not occupying a rentalaccommodation, then you can’t claim any tax exemption. In all cases it is advisable for you to maintain rent receipts as they are the only proof for rent payments.

Is your landlord an NRI?

According to Section 195, all Indian income of an NRI is subject to TDS. This rule applies to rent too. Any resident Indian is subjected to TDS for rents of over Rs 1.80 lakh per annum. But if you have rented a house from an NRI landlord, the onus is on you to deduct tax at source and pay it to the government. The TDS is a flat 30.9%.

When can you enjoy the twin benefits of home loan and HRA?

If you have taken a home loan to buy a house, say, in Mumbai, but you reside in another city, you can get tax benefits on your housing loan.

If you have bought a house but stay in a rental accommodation in the same city because your house is not ready for possession, you are entitled to tax benefits on HRA.You can claim tax benefits on the home loan only if your home is ready to live in during that financial year. Once the construction on your home is complete for possession, the HRA benefit stops.

However, if you have bought a house by taking a home loan and stay in a rentedaccommodation after giving you house on rent, you will be entitled to all the tax benefits mentioned above.

Rent-free accommodation vs HRA

The government had announced the new perquisite rules in December 2009, which are effective retrospectively from April 1, 2009. The value of the perquisite determined in case of furnished accommodation is 10% per annum of the cost of furniture if owned by the employer. In case of hotel accommodation, the perquisite value is to be determined as 24% of the salary paid or payable or actual hotel charges paid by the employer, whichever is lower, for the period during which such accommodation is provided to the employee.

So under the new rules, should one opt for rent-free accommodation or claimexemption on HRA? You should take a decision keeping in view your requirements, salary level, perquisite value and the tax impact.