Withdrawal from Provident Fund before Completion of 5 years taxable?

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Withdrawal from Provident Fund (PF) Account before Completion of Five years taxable?

Withdrawal of Provident Fund may attract Income Tax. The Income Tax Department recently told EPFO (Employees Provident Fund Organisation) to deduct Tax (TDS) from the withdrawal amount, if the withdrawal happened before completing five years of subscription. Tax officials have cited a rule in the 1961 Income-Tax Act that taxes PF withdrawals by employees before completing five years of contributions into the EPF is taxable.

In most cases, the accumulated PF balance is withdrawn at the time of retirement, and therefore, not taxable in the hands of the individual. However, in certain cases like change in employment, an individual may even withdraw the PF balance earlier. The point one needs to remember is that the amount received from such PF is not exempt from tax in all cases. Only under the circumstances listed below will the amount withdrawn from PF be eligible for such exemption from tax.

• If the employee has rendered continuous service with the employer for five years or more. Again, if the balance includes amount transferred from the individual’s PF account maintained by previous employer(s), then the years of continuous service rendered to the former employer(s) would be included for the purpose of computing the five-year period.

• If the employee has not rendered continuous service of five years, but the service is terminated by reason of the employee’s ill health or discontinuance of the employer’s business or reasons beyond the control of the employee, the amount will be tax-exempt.

• Another tax-exempt case is when, on the cessation of the employment, the employee finds another job and the the accumulated PF balance is transferred to his individual PF account maintained by the new employer.

In short, where the PF amount is withdrawn before five years of continuous service, it may be taxable in the hands of the individual as if the fund was not recognised from the start of the contributions. In such a case, payment received by the individual in respect of the employer’s contribution along with the interest accrual thereon is taxed as “salary”. Interest on the employee’s contribution is taxable as “other income”. Payment received in respect of the employee’s own contribution is exempt from tax (to the extent not claimed as a deduction earlier).

I-T provisions provide that the trustees of a recognised PF or any person authorised by the regulations of the fund to make the payment of the accumulated balance to the employee should deduct tax at source while paying the amount. Further, the person liable to deduct tax has to issue the certificate of tax deducted at source (Form 16) within the specified time frame to the employee depicting the details of taxes withheld from the accumulated PF balance and also comply with other salary-related compliance necessities. So the next time you think of withdrawing your PF, you must as an individual also assess whether the same is taxable or exempt.

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I worked with a private company for four and years and nine months. I have given a provident fund (PF) withdrawal request to my ex-employer. Will the PF amount be taxable?
We understand that the PF maintained by your former employer was a recognized PF. As per the provisions in the Income-tax Act, if the employee has rendered continuous service with his employer for five years or more, then the withdrawal of accumulated balance from such PF is not taxable at the time of termination.
Since the period of your services with the ex-employer is four and a half years which is less than five years, you shall be liable to tax on the amount withdrawn from your PF. In addition to the normal tax payable by you, you will be required to pay all the tax concessions availed by you so far on account of contribution to such recognized PF. Further, the total employer’s contribution plus interest thereon, which was not taxed earlier, shall be taxable as profits in lieu of salary.
However, if the accumulated balance in your PF account is transferred to your recognized PF account maintained by the new employer, no tax liability shall arise due to such transfer.

SEBI requires all DPs to make available basic services Demat Account

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Facility for a Basic Services Demat Account (BSDA)

1. SEBI has received several suggestions and representations with respect to cost of demat accounts especially from small individual investors. Since holding of demat account is beneficial to individual investors, SEBI initiated extensive consultations with all the stakeholders to address the concerns and suggestions.

2. Further, the SEBI Board had taken decisions to extend the reach of IPOs for the benefit of retail investors. With a view to achieve wider financial inclusion, encourage holding of demat accounts and to reduce the cost of maintaining securities in demat accounts for retail individual investors, it has been decided that all depository participants (DPs) shall make available a “Basic Services Demat Account” (BSDA) with limited services and reduced costs. The details are provided in the circular dated August 27, 2012.

3. The salient features of the BSDA are as follows:

a. Eligibility Criteria:

All the individuals who have or propose to have only one demat account where they are the sole or first holder shall be eligible to have a BSDA provided that the value of securities held in the demat account does not exceed Rupees Two Lakhs at any point of time. An individual can have only one BSDA in his/her name across all depositories.

 

Facility for a Basic Services Demat Account (BSDA)

CIRCULAR no. MRD/DP/22/2012, dated 27-8-2012

1. The SEBI Board had taken decisions to extend the reach of IPOs for the benefit of retail investors. With a view to achieve wider financial inclusion, encourage holding of demat accounts and to reduce the cost of maintaining securities in demat accounts for retail individual investors, it has been decided that all depository participants (DPs) shall make available a “Basic Services Demat Account” (BSDA) with limited services as per terms specified herein.

2. Eligibility : Individuals shall be eligible to opt for BSDA subject to the following conditions-

a. All the individuals who have or propose to have only one demat account where they are the sole or first holder.

b. Individuals having any other demat account/s where they are not the first holder shall be eligible for BSDA in respect of the single demat account where they are sole or first holder.

c. The individual shall have only one BSDA in his/her name across all depositories.

d. Value of securities held in the demat account shall not exceed Rupees Two Lakhs at any point of time.

3. Option to open BSDA : The DP shall give option:

a. To open BSDA to all eligible individuals who open a demat account after the date of applicability of this circular;

b. To all the existing eligible individuals to convert their demat account into BSDA on the date of the next billing cycle based on value of holding of securities in the account as on the last day of previous billing cycle.

4. Charges :

a. The charge structure may be on a slab basis as indicated below:

i. No Annual Maintenance Charges (AMC) shall be levied, if the value of holding is upto Rs. 50,000.

ii. For the value of holding from Rs. 50,001 to Rs. 200,000, AMC not exceeding Rs 100 may be charged.

b. The value of holding shall be determined by the DPs on the basis of the daily closing price or NAV of the securities or units of mutual funds, as the case may be. Where such price is not available the last traded price may be taken into account and for unlisted securities other than units of mutual funds, face value may be taken in to account.

c. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non- BSDA) from that date onwards.

d. The DPs shall reassess the eligibility of the BOs at the end of every billing cycle and give option to the BOs who are eligible to opt for BSDA.

5. Services for Basic Services Demat Accounts :

a. Transaction statements :

i. Transaction statements shall be sent to the BO at the end of each quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter.

ii. If there are no transactions and no security balance in an account, then no further transaction statement needs to be provided.

iii. Transaction statement shall be required to be provided for the quarter in which the account became a zero balance account.

b. Holding Statement :

i. One annual physical statement of holding shall be sent to the stated address of the BO in respect of accounts with no transaction and nil balance.

ii. One annual statement of holding shall be sent in respect of remaining accounts in physical or electronic form as opted for by the BO.

c. Charges for statements : Electronic statements shall be provided free of cost. In case of physical statements, the DP shall provide at least two statements free of cost during the billing cycle. Additional physical statement may be charged at a fee not exceeding Rs. 25/- per statement.

d. All BOs opting for the facility of BSDA, shall register their mobile number for availing the SMS alert facility for debit transactions.

e. At least Two Delivery Instruction Slips (DIS) shall be issued at the time of account opening.

f. All other conditions as applicable to regular demat accounts, other than the ones mentioned in this circular shall continue to apply to basic services demat account.

6. Rationalisation of services with respect to regular accounts.

In partial modification of the earlier directions, the following rationalisation measures shall be available for regular demat accounts:

a. Accounts with zero balance and nil transactions during the year : The DPs shall send one physical statement of holding annually to such BOs and shall resume sending the transaction statement as and when there is a transaction in the account.

b. Accounts which become zero balance during the year : For such accounts, no transaction statement may be sent for the duration when the balance remains nil. However, an annual statement of holding shall be sent to the BO.

c. Accounts with credit balance : For accounts with credit balance but no transactions during the year, one statement of holding for the year shall be sent to the BO.

7. The circular shall be applicable with effect from October 01, 2012.

8. The Depositories are advised to:-

(a) make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately, as may be applicable/necessary ;

(b) bring the provisions of this circular to the notice of their DPs and also to disseminate the same on their website; and

(c) communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report.

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

Companies need Central Govt approval to pay over 10% of net profit to directors

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Registered companies in India can’t pay more than 10% of net profit as remuneration to board-level directors overall without the government’s approval, the Ministry of Corporate Affairs said today.

The total remuneration to be paid to all the board level directors including the CEO of a company, having more than one whole time director or manager, is up to 10% of the net profit, Minister of State for Corporate Affairs R P N Singh said in a reply to the Rajya Sabha.

The Companies Act prescribes ceilings on the remuneration of CEOs (Chief Executive Officers), subject to various conditions, he said.

On whether some companies are paying more than the prescribed ceiling to their CEOs and to provide details of such companies and the action taken against them, he said companies may pay more than the prescribed ceiling to their CEOs holding board-level positions with the approval of the central government.
According to the relevant section of the Companies Act, the total remuneration paid to a board-level CEO of a company having only one whole-time director or a manager is up to five% of the net profit, the minister said.
He further said that in case of companies having inadequate profit or making losses, the remuneration is determined as per the relevant schedule of the Companies Act.

TDS U/s.194I not applicable on parking & landing charges paid by airlines

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HIGH COURT OF MADRAS

Commissioner of Income-tax

v.

Singapore Airlines Ltd.

TAX CASE APPEAL NOS. 15 TO 20 OF 2006

JULY 13, 2012

 

Given the definition of ‘lease or tenancy’ and the definition of ‘rent’ as appearing in Section 194 I Explanation, unless the payment is with reference to the use of any specified land or a building, payment made for availing of the services as in the nature landing or parking, as available in the present case before us, cannot be construed as ‘rent’. It is difficult to accept the case of the Revenue that a mere touchdown on the land surface would bring the case of the assessee that there is a lease or an agreement or arrangement answering the character of lease that the charges would fall within the meaning of ‘rent’, as appearing in Section 194-I Explanation. It is no doubt true that in the decision reported in [2006] 287 ITR 281 (United Airlines v. CIT), the Delhi High Court pointed out that an aircraft on coming into an airport and on touching the surface of the airfield, the use of the land immediately beings. So too, on parking of the aircraft, there is a use of the land. But by this alone, one cannot come to the conclusion that the use of the land leads to an inference of the existence of a lease or an arrangement in the nature of lease. By the very nature of things, as a means of transport, an aircraft has to touch down for disembarking the passengers and the goods before it takes off; for this facility to be offered, the Airport Authority charges a price. Given the complexity in landing and take-off, unlike in the case of vehicles on road, the Airport Authority has to provide navigational facilities and the charges thus made are calculated based on certain criteria like the weight of the aircraft. Thus in so charging for the facility, we do not find, there is any scope of importing the concept of ‘rent’ as defined under Section 194-I Explanation.

With great respect we find it difficult to accept the view of the Delhi High Court holding that the payment would fit in with the definition of ‘rent’ and the use of the land on a touchdown of the air field would amount to a use of land for the purpose of treating the charges as rent under Section 194-I Explanation of the Income Tax Act.

As rightly pointed out by the learned Senior Counsel appearing for the assessee, the payment contemplated under the Explanation is for the use of the land under a lease, sub-lease or tenancy. This means, what is contemplated under the said definition is a systematic use of land specified for a consideration under an arrangement which carries the characteristics of lease or tenancy. Going by the logic of the said provisions, we feel that a mere use of the land for landing and payment charged, which is not for the use of the land, but for maintenance of the various services, including the technical services involving navigation, would not automatically bring the transaction and the charges within the meaning of either lease or sub-lease or tenancy or any other agreement or arrangement of a nature of lease or tenancy and rent. As far as the runway usage by an aircraft is concerned, it could be no different from the analogy of a road used by any vehicle or any other form of transport. If the use of tarmac could be characterised as use of land, so too the use of a road would be a use of land. We do not think that for the purpose of treating the payment as rent, such use would fall under the expression “use of land”. Thus, going by the nature of services offered by the Airport Authority of India for landing and parking charges thus collected from the assessee herein, we do not find any ground to accept that the payment would fit in with the definition of ‘rent’ as given under Section 194-I of the Income Tax Act.

Additional depreciation cannot be limited to 50% by condition of usage of asset for 180 days

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IN THE ITAT DELHI BENCH ‘B’

Deputy Commissioner of Income-tax, Circle 3(1), New Delhi

v.

Cosmo Films Ltd.

IT APPEAL NOS. 2508 & 2831 (DELHI) OF 2007, 1449

& 1548 (DELHI) OF 2008, 4010 & 4040 (DELHI) OF 2009

AND 934 & 935 (DELHI) OF 2011

[ASSESSMENT YEARS 2004-05 TO 2006-07]

AUGUST 5, 2011

 

Section 32(1)(iia) inserted by Finance (No. 2) Act, 2002 with effect from 1.4.2003. In speech of Finance Minister, this clause was inserted to provide incentives for fresh investment in industrial sector. This clause was intended to give impetus to new investment in setting up a new industrial unit or for expanding the installed capacity of existing units by at least 25%. Thereafter these provisions were amended by the Finance (No. 2) Act of 2004 w.e.f. 1.4.2005 and provided that in the case of any machinery or plant which has been acquired after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to 15% of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 32(1). This additional allowance u/s 32(1)(iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed towards encouraging industrialization by allowing additional benefit to the setting up new industrial undertakings making or for expansion of the industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new investments in setting up and expanding the units. The proviso to section 32(1)(iia) restricts the benefit in respect of following :-

“Provided that no deduction shall be allowed in respect of—

(A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or

(B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or

(C) any office appliances or road transport vehicles; or

(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;”

Thus, this incentive in the form of additional sum of depreciation is not available to any plant or machinery which has been used either within India or outside India by any other person or such machinery and plant are installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house or any office appliances or road transport vehicles, or any machinery or plant, the whole of the actual cost of which is allowable as deduction (where by way of depreciation or otherwise) in computing the total income under the head “Profits and gains of business or profession” of any one previous year. Thus, the intention was not to deny the benefit to the assets who have acquired or installed new machinery or plant. The second proviso to section 32(1)(ii) restricts the allowances only to 50% where the assets have been acquired and put to use for a period less than 180 days in the year of acquisition. This restriction is only on the basis of period of use. There is no restriction that balance of one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization and in view of the decision of Hon’ble Supreme Court in the case of Bajaj Tempo Ltd. (supra), the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant & machinery in the year of acquisition. In section 32(1)(iia), the expression used is “shall be allowed”. Thus, the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant and machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. We allow ground no. 2 of the assessee’s appeal.

Section 54F exemption available on Residential house constructed on agricultural land

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IN THE ITAT JAIPUR BENCH ‘A’

Assistant Commissioner of Income-tax

v.

Om Prakash Goyal

IT APPEAL NO. 647 (JP) OF 2011

[ASSESSMENT YEAR 2008-09]

FEBRUARY 2, 2012

 

The Commissioner (Appeals) considered the fact that there is no bar to purchase agricultural land on which house was to be constructed. The fact is that subject to the provisions of sub-section (4) of section 54F, where, in the case of an assessee being an individual or a HUF, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereinafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, found that assessee has purchased a plot of land and has constructed a house on the same, then taking into consideration the case of Addl. CIT v. Narendra Mohan Uniyal [2009] 34 SOT 152 (Delhi) and taking into consideration the decision of Hon’ble Rajasthan High Court in case of CIT v. Vishnu Trading & Investment Co. [2003] 259 ITR 724 and also the decision in case of Shyam Sunder Mukhija v. ITO [1991] 38 ITD 125 (JP) found that assessee is eligible for exemption under section 54F. The Assessing Officer’s contention was that land purchased by assessee was agricultural land, moreover, the property was not registered in his name. However, after taking into consideration the provisions of section 54F the Commissioner (Appeals) found that the only condition for claiming exemption under section 54F is that the asset transferred is long-term capital asset, not being a residential house. The assessee has not transferred a residential house but a long-term capital asset. This is an undisputed fact and the Assessing Officer has not doubted this fact. Second condition is that residential house is purchased within one year before or two years after the date of transfer of original asset. This condition is not applicable on the assessee as assessee has not purchased any new house either one year before or two years after the transaction. Third condition is construction of the house should be completed within three years from the date of transfer and this condition was satisfied as explained by Commissioner (Appeals). The Board Circular No. 667 dated 18-10-1993 was also taken into consideration by Commissioner (Appeals) whereby it was clarified that for the purpose of computing exemption under section 54 or 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. These conditions were found satisfied by the Commissioner (Appeals) and, therefore, he has allowed the exemption to the assessee. The copy of valuation report which was obtained on 17-3-2011 showed that the house was constructed by assessee and the valuation of the construction is Rs. 16,29,600. It means, the exemption claimed by assessee which was at Rs. 1,20,50,000 only. This consideration was paid for the purchase of plot and Rs. 16,29,600 was also invested in construction of house of which the assessee has not claimed any deduction for the reason known to him. However, it is seen that house was constructed and, therefore, Commissioner (Appeals) has allowed the exemption to the assessee to the tune of Rs. 1,20,50,000. Since all conditions for claiming exemption under section 54F have been found satisfied, therefore, it will be futile exercise if the matter is sent back to the file of Assessing Officer. All the details are placed on record from which it is established that assessee purchased a plot of land and then constructed the house on it. The house constructed on agricultural land or on other hand does not matter, but the fact that house should be constructed and from the report it is very much clear that a residential house was constructed as this fact has been mentioned by valuer in his valuation report. In view of these facts and circumstances, the Commissioner (Appeals) was justified in allowing the claim of the house. Accordingly, the order of Commissioner (Appeals) is confirmed.

No TDS deductible on delayed payment of Purchase Bills U/s. 194A

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IN THE ITAT HYDERABAD BENCH ‘A’

Sri Venkatesh Paper Agencies (Hyd.) (P.) Ltd.

v.

Deputy Commissioner of Income-tax, Circle-3(1), Hyderabad

IT APPEAL NO. 636 (HYD.) OF 2011

[ASSESSMENT YEAR 2005-06]

JUNE 22, 2012

 

It is not disputed that the interest paid is not for any loan or debt incurred by the assessee but for the delay in payment of bills for purchases effected from company. Therefore, it has to be seen as to whether such payment is in the nature of interest as envisaged under section 2(28A). As seen from the order of the ITAT Ahmedabad Bench in the case of ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302 the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A). The payment made by the assessee in the present appeal being of similar nature also cannot be termed as interest as defined under section 2(28A). Even without entering into the controversy as to whether the payment made on overdue bills will come within the ambit of interest as defined in section 2(28A), the assessee is also bound to succeed on its alternative argument that the entire payment having been made during the previous year relevant to the assessment year under dispute no disallowance could be made under section 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23. In the afore said view of the matter, the disallowance made under section 40(a)(ia) cannot be sustained. Therefore, the Assessing Officer is to be directed to delete the same.

Gift by company to subsidiary are dubious & not tax neutral – AAR

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AUTHORITY FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI

Orient Green Power Pte. Ltd., In re

JUSTICE P.K. BALASUBRAMANYAN, CHAIRMAN

A.A.R. NO. 973 OF 2010

AUGUST 14, 2012

In the context of section 47(i) and (iii), this gift referred to therein, is a gift by an individual or a Joint Hindu Family or a Human Agency. Section 47(iii) speaks of ‘any transfer of a capital asset under a gift, or will or an irrecoverable trust’. Execution of a will involves a human agency. Cannot the expression gift take its colour from a will with which it is juxtaposed, especially in the background of clause (i) of section 47 and clause (ii) which earlier existed. A gift by a corporation to another corporation (though a subsidiary or an associate enterprise, which is always claimed to be independent for tax purposes) is a strange transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. This is all the more so since section 47(iv) and section 47(v) specifically provide for covering cases of transfer of capital assets by the parent company to the subsidiary and by the subsidiary to the holding company and the other sub-clauses deal with amalgamation, demerger and reorganization of business and so on. As I see it, it is possible to say that a gift of shares held in a company by one company to another company would not fall under section 47(iii) of the Act. Senior counsel sought to counter this approach by pointing out that clauses (iv) and (v) deal with transfers for consideration whereas clause (iii) deals with transfers without consideration and that there was no warrant for whittling down the sweep of clause (iii) of section 47.Since I am declining a ruling in this case, it is not necessary to pursue this aspect further.

Banks permitted to allow premature withdrawal of deposit by surviving joint depositor on death of other

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RBI/2012-13/168
DBOD No. Leg. BC. 37/09.07.005/2012-13

August 16, 2012

All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir

Premature Repayment of Term/Fixed Deposits in banks with “Either or Survivor” or “Former or Survivor” mandate – Clarification

Please refer to para 4 of our circular DBOD No. Leg BC 46 /09.07.005/2011-12 dated November 4, 2011 whereby we had advised that in case joint depositors of term/fixed deposits with “Either or Survivor” or “Former or Survivor” mandate intend to allow premature withdrawal of their deposits by one of the joint depositors on the death of the other, it would be open for banks to allow the same, provided they have taken a specific joint mandate from the depositors for the said purpose. In this regard you may also refer to Para 3 of our circular DBOD.No.Leg.BC.95/09.07.005/2004-05 dated June 9, 2005 in terms of which, banks were advised to incorporate a clause in the account opening form itself to the effect that in the event of death of the depositor, premature termination of term deposits would be allowed subject to the conditions which they may specify therein. Banks were also advised to give wide publicity to the above and provide guidance to deposit account holders in this regard.

2. It is reiterated that in case of term deposits with “Either or Survivor” or “Former or Survivor” mandate, banks are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other, only if, there is a joint mandate from the joint depositors to this effect.

3. It has come to our notice that many of the banks have neither incorporated such a clause in the account opening form nor have they taken adequate measures to make the customers aware of the facility of such mandate, thereby putting the “surviving“ deposit account holders(s) to unnecessary inconvenience. Banks are, therefore, advised to invariably incorporate the aforesaid clause in the account opening form and also inform their existing as well as future term deposit holders about the availability of such an option.

4. The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit. If such a mandate is obtained, banks can allow premature withdrawal of term/fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder. It is also reiterated that such premature withdrawal would not attract any penal charge.

5. The clarification provided in this circular would supersede para 3 of circular DBOD.No.Leg.95/09.07.005/2004-05 dated June 9, 2005.

RBI advises Urban Co-operative Banks to offer a ‘Basic Savings Bank Deposit Account’

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RBI/2012-13/169
UBD.BPD.Cir.No. 5/13.01.000//2012-13

August 17, 2012

The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir/Madam,

Financial Inclusion- Access to Banking
Services – Basic Savings Bank Deposit Account

Please refer to paragraphs 88 and 89 of Monetary Policy Statement for the year 2012-13 announced on April 17, 2012.

2. The Urban Co-operative Banks were advised in November 2005 to make available a basic banking ‘no-frills’ account either with ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population. With a view to doing away with the stigma associated with the nomenclature ‘no-frills’ account and making the basic banking facilities available in a more uniform manner across banking system, it has been decided to modify the guidelines on opening of basic banking ‘no-frills’ accounts. Accordingly, in supersession of instructions contained in circular No.UBD.BPD.Cir.No.19/ 13.01.000/2005-06 dated November 24, 2005 on Financial Inclusion, Urban Co-operative Banks are advised to offer a ‘Basic Savings Bank Deposit Account’ which will offer following minimum common facilities to all their customers:

1. The ‘Basic Savings Bank Deposit Account’ should be considered a normal banking service available to all.
2. This account shall not have the requirement of any minimum balance.
3. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments;
4. While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and
5. Facility of ATM card or ATM-cum-Debit Card;

3. The above facilities will be provided without any charges. Further, no charge will be levied for non-operation/activation of in-operative ‘Basic Savings Bank Deposit Account’.

4. The Urban Co-operative Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and transparent basis and applied in a non-discriminatory manner.

5. The ‘Basic Savings Bank Deposit Account’ would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated as a ‘Small Account’ and would be subject to conditions stipulated for such accounts as indicated in paragraph 2.6 (iii) of Master Circular UBD.BPD. (PCB).MC.No. 16/12.05.001/2012-13 dated July 2, 2012 on Know Your Customer (KYC) Norms/Anti-Money Laundering (AML) Measures/Combating of Financing of Terrorism (CFT) / Obligations of banks under Prevention of Money Laundering Act (PMLA), 2002.

6. Holders of ‘Basic Savings Bank Deposit Account’ will not be eligible for opening any other savings bank deposit account in that bank. If a customer has any other existing savings bank deposit account in that bank, he/she will be required to close it within 30 days from the date of opening a ‘Basic Savings Bank Deposit Account’.

7. The existing basic banking ‘no-frills’ accounts should be converted to ‘Basic Savings Bank Deposit Account’ as per the instructions contained in para 2 above.

Banks to allow saving account without requirement of minimum balance

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RBI/2012-13/164
DBOD.No. Leg. BC.35/09.07.005/2012-13

August 10, 2012

All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir,

Financial Inclusion- Access to Banking Services –Basic Savings Bank Deposit Account

Please refer to paragraphs 88 and 89 of Monetary Policy Statement for the year 2012-13 announced on April 17, 2012.

2. Banks were advised in November 2005 to make available a basic banking ‘no-frills’ account either with ‘nil’ or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population. With a view to doing away with the stigma associated with the nomenclature ‘no-frills’ account and making the basic banking facilities available in a more uniform manner across banking system, it has been decided to modify the guidelines on opening of basic banking ‘no-frills’ accounts. Accordingly, in supersession of instructions contained in circular DBOD.No.Leg.BC. 44/09.07.005/2005-06 dated November 11, 2005 on Financial Inclusion, banks are advised to offer a ‘Basic Savings Bank Deposit Account’ which will offer following minimum common facilities to all their customers:

i. The ‘Basic Savings Bank Deposit Account’ should be considered a normal banking service available to all.

ii. This account shall not have the requirement of any minimum balance.

iii. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments;

iv. While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and

v. Facility of ATM card or ATM-cum-Debit Card;

3. The above facilities will be provided without any charges. Further, no charge will be levied for non-operation/activation of in-operative ‘Basic Savings Bank Deposit Account’.

4. Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and transparent basis and applied in a non-discriminatory manner.

5. The ‘Basic Savings Bank Deposit Account’ would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated as a ‘Small Account’ and would be subject to conditions stipulated for such accounts as indicated in paragraph 2.7 of Master Circular DBOD. AML. BC. No. 11/14.01.001/2012-13 dated July 02, 2012 on ‘KYC norms/AML standards/Combating of Financing of Terrorism (CFT) /Obligation of banks under PMLA, 2002’.

6. Holders of ‘Basic Savings Bank Deposit Account’ will not be eligible for opening any other savings bank deposit account in that bank. If a customer has any other existing savings bank deposit account in that bank, he/she will be required to close it within 30 days from the date of opening a ‘Basic Savings Bank Deposit Account’.

7. The existing basic banking ‘no-frills’ accounts should be converted to ‘Basic Savings Bank Deposit Account’ as per the instructions contained in para 2 above.

No tds deductible on payment for banner advertisement to Yahoo Inc. USA

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INCOME TAX APPELLATE TRIBUNAL, MUMBAI

ITA No. 6181/Mum/2011 – Assessment Year : 2004-05

Yahoo India Private Limited

(Formerly known as Yahoo Web Services India Private Limited).

Vs.

Deputy Commissioner of Income Tax

Date of pronouncement 03-8-2012

Assessee company is a fully owned subsidiary of Yahoo. Inc. USA which is engaged in the business of providing consumer services such as search engine, content and information on wide spectrum of topics, e-mail, chat etc. During the course of assessment proceedings, it was noticed by the A.O. that the assessee has made a payment of Rs. 34,86,947/- to Yahoo Holdings (Hong Kong) Ltd. being cost of services/research material/advertisement media. Since the assessee company did not deduct tax at source from the payment remitted to Yahoo Holdings (Hong Kong) Ltd., the deduction claimed by the assessee on account of the said payment was disallowed by the A.O. by invoking the provisions of section 40(a) of the Act which was upheld by the ld. CIT(A). However, on second appeal before the Tribunal vide order dtd. 24-6-2011 (supra) , the Tribunal held that the payment made by assessee to a foreign company for the services rendered by it for uploading and display of the banner advertisement on its portal was in the nature of business profit and not royalty and such payment was not chargeable to tax in India as the recipient has no PE in India and, therefore, assessee was not liable to deduct tax at source from the payment for such services and the same cannot be disallowed by invoking the provisions of section 40(a)(i) for non-deduction of tax

Interest from Partnership firm needs to be offered for tax on accrual basis

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INCOME TAX APPELLATE TRIBUNAL, MUMBAI

ITA No. 2430/Mum/2011 – Assessment Year 2005-06

Smt. Gita Yogendra Divecha,

Vs.

Income Tax Officer – 16(1) (1),

Date of pronouncement: 01-08-2012

Accrual of income is a well-known concept of taxation jurisprudence. It is a fact that assessee is following the Mercantile system of accounting and as per the established principles of that system, whatever accrues to an assessee in a particular AY has to be offered for taxation for that particular year. In our opinion the concept of real income or no real income can never be a concept which can work if it is at variance with the statutory provisions. Under section 5 of the Act the moment there is an accrual of income by way of interest income, it has to be inevitably offered to tax and even if it is not so offered, it is the duty of the income tax authorities to bring it to tax. In other words the accrual of income must be real. What really accrues to the assessee has to be found out and what accrues must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together, but once the accrual takes place on the conduct of the parties subsequent to the year of closing, an income which has accrued cannot be made as no income. In the case under consideration interest of Rs.6.5 Lacs had accrued to the assessee partner as per the provisions of agreement entered into between the assessee partner and the firm. It is also a fact that the assessee had claimed to have received Rs.10.6 lakhs from the firm during the AY. under consideration. In these circumstances, mere filing of a loss return for trading activities by the firm, cannot be a basis for not offering the accrued interest to the assessee for taxation.

Section 44AC covers only expenditure the benefit of which derived both by Head Office & Branch

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INCOME TAX APPELLATE TRIBUNAL, MUMBAI

ITA No.6891/Mum/2007 – (Assessment Year: 2004-05)

ITA No.551/Mum/2010 – (Assessment Year: 2005-06)

ITA No.4191/Mum/2010 -(Assessment Year: 2006-07)

Shinhan Bank (Erstwhile Chohung Bank)

Vs

The Deputy Director of Income-tax (International Taxation)

ITA No.7421/Mum/2007 – (Assessment Year: 2004-05)

ITA No.4576/Mum/2010 – (Aassessment Year: 2006-07)

The Deputy Director of Income-tax (International Taxation)

Vs

Shinhan Bank (Erstwhile Chohung Bank)

Date of Pronouncement: 27.06.2012

It was held that what is covered u/s.44C is the expenditure that is common in nature meaning thereby that the benefit of the said expenditure is derived both by the Head Office and the Branch. It was held that payment of salary made in the case of the assessee was to expatriate employees who were working actually with the assessee in India though the payment was made to them by the Head Office outside India. It was held that the expenditure incurred on such payment thus was incurred exclusively for the branch in India and the same was not covered within the purview of sec.44C.

24X7 Customs clearance WEF September 1st 2012

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PMO facilitates round the clock Customs operations at Major Seaports and Airports

One of the major constraints for international trade has been the non-availability of customs clearance and other facilities at airports and seaports round the clock, seven days a week. This means that import and export cargo, delivered at a time when clearance facilities are unavailable, have to wait till clearance facilities are open to move on to their destination. At airports and ports, which in any case normally operate round the clock, cargo piles up awaiting clearances.
In order to remove this bottleneck, it has now been agreed that customs clearances will now be available at identified sea-ports and airports 24×7 in order to facilitate trade services.
The four airports where this 24×7 facility would be available are Delhi, Bangalore, Chennai, and Mumbai. The four ports where this facility would be available are Chennai, Kolkata, Kandla and JNPT, Mumbai.
The 24×7 operations would begin on a pilot basis with customs operations along with all other complementary services. Along with customs clearances, other government agencies such as the concerned port/airport authority, drug controller, FSSAI (Food Safety and Standards Authority of India), quarantine, etc., and private players such as custodians, CHAs (Customs House Agents), banks, transporters, etc., shall also have to work 24×7 to synchronize with the extended work hours. This would be initially for four months after which efforts would be made to expand similar operations at other locations.
The 24×7 operations would be available for certain categories of imports and exports. For imports, the category “No Assessment No Examination” will be covered. This would account for 70% of imports. For exports, the 24×7 facility could be extended to those exports not claiming benefits.
For smooth operationalisation of 24×7, the Commissioner of Customs concerned at these locations shall hold meetings with all stakeholders. Such additional staff that is required to start these operations shall be redeployed from existing resources. Secretary, Commerce and the Director General, Foreign Trade shall also hold meetings with other support agencies to facilitate and ensure 24×7 operations. A notice in this regard shall issue by 10.8.2012, with 24×7 operations to commence after two weeks from that date, on 25.8.2012.
The Department of Revenue shall assess the pilot and propose expansion of coverage if it is required.

Employees’ contribution towards PF & ESI – Allowed if paid before due date of filing return

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INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA Nos.2777 to 2781/Del./2010

(Assessment Years: 1999-00, 2000-01, 2001-02, 2003-04, 2004-05)

ACIT Vs. M/s. Shakti Bhog Foods Pvt. Ltd.

As soon as employees’ contribution towards PF or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as ‘income’ at the hands of the assessee. It clearly follows there from that If the assessee does not deposit this contribution with PF/ESI authorities, it will be taxed as Income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of s. 36(1)(va). Sec. 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from Income insofar as employees’ contribution is concerned. Deletion of the second proviso has been treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the first proviso. If the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Acts permit the employer to make the deposit with some delays, subject to the aforesaid sequences. Insofar as the IT Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed. CIT vs.Vinay Cement Ltd., (2007) 213 CTR (SC) 268, CIT vs. Dharmendra Sharma (2007) 213 CTR (Del) 609: (2008) 297 ITR 320 (Del) and CIT vs. P.M. Electronics Ltd. (2008) 220 CTR (Del) 635 : (2008) 15 DTR (Del) 258 followed.

In view of the decision, the deduction of payment of employees’ contribution towards provident fund and ESI cannot be disallowed under section 43B, if paid before the due date of filing the return. In view of this fact, this ground of appeal of the revenue is dismissed.

Taxability of interest on Income Tax Refund

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IN THE HIGH COURT OF DELHI AT NEW DELHI

DECIDED ON: 27.07.2012 ITA 1208/2011

Commissioner of Income Tax-I V

versus

M/s Delhi State Industrial & Infrastructure Development Corporation Ltd.

Unless there is an exact indication in the Income Tax Act itself, that interest payable on income tax refund amounts fulfill the basic character as income (defined under Section 2(24) of the Income Tax Act) cannot be ignored. It is no doubt true that this amount cannot be treated as interest income since the assessee did not earn it through conscious choice or voluntarily, nor was it engaged in the activity of investing its amount and earning interest. However, the basic characteristic of income being what it is, the amount received towards statutory interest has to be subject to tax under the head income from other sources.

TDS not deductible by Individual & HUF if Turnover not exceeded Tax Audit Limit in preceding Financial year

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HIGH COURT OF GUJARAT

Harshadbhai Naranbhai Bagadia

v.

Assistant Commissioner of Income-tax

SPECIAL CIVIL APPLICATION NO. 12243 OF 2009

JULY 16, 2012

Sub-section (2) of Section 194C under ordinary circumstances does not cover an individual or Hindu Undivided family for the liability of deducting tax at source on the payments credited or made to the sub-contractor. However, proviso brings such individual or HUF within the fold of sub-section (2) if in the financial year immediately preceding the financial year during which such sum is credited or paid, such individual or HUF was covered by clause (a) or clause (b) of Section 44AB. Therefore, to insist that an individual or HUF should deduct tax at source under sub-section (2) of Section 194C on payments made to a sub-contractor, it must be established that in the financial year immediately preceding the financial year in which such sum is paid or credited, total sales, gross receipts or turnover of such individual or HUF from profession or business exceeded the limits provided in Section 44AB of the Act and the accounts were thus compulsorily auditable.

14. In the present case, admittedly such condition was not satisfied in the preceding financial year. The AO however interpreted that liability to deduct tax at source would arise even if the case of the assessee fell under clauses (a) or (b) of Section 44AB in the current financial year. We do not see how such interpretation is possible. Firstly, proviso to sub-section (2) of Section 194C clearly refers to financial year immediately preceding the financial year in which sum is credited or paid to the sub-contractor. Statutory provisions do not permit any ambiguity.

Even otherwise the interpretation put forth by the Revenue would lead to anomalous situation. The assessee as an individual or HUF may be required to make the payments to a sub-contractor on the first date of the financial year or at any rate in the early part of the financial year. At that stage, the assessee would obviously not be in position to foresee whether total sales, gross receipts or turnover would exceed statutory limits and his accounts would be therefore required to be audited under Section 44AB of the Act. In such a situation, the assessee could not be expected to deduct tax at source. If out of abundant caution, he did deduct the tax at that stage, the recipient of the payment would legitimately object to any such deduction. Moreover, eventually during the financial year under consideration, if the assessee’s total sales, gross receipts or turnover did not exceed statutory limits, the entire exercise of deduction of tax at source would be unauthorized. On the other hand, if the assessee did not deduct the tax and by the year end, found that his total sale, gross receipts or turnover had exceed the limit, he would be liable to be declared a defaulter with grave consequences of such payments though actually made, being discarded for deduction under Section 40(a)(ia) of the Act. Surely, the statute never intended to bring about such strange results. It is precisely for this reason that the liability of an individual or HUF to deduct tax at source upon the payments being made to the sub-contractor, is made relatable to his gross receipts, sales or total turnover of the financial year immediately preceding the year when such payment is made or credited.

In the result, we are of the opinion that the Assessing Officer’s reason to believe that the income chargeable to tax in case of the assessee has escaped assessment is without any foundation and lacks validity

Reopening U/s. 147 on mere Audit Opinion is not valid

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HIGH COURT OF BOMBAY

WRIT PETITION NO. 430 OF 2012

ICICI Home Finance Co. Ltd.

versus

1. The Assistant Commissioner of Income Tax

2. The Union of India

DATE : 20th July, 2012.

The power to reopen a completed assessment under Section 147 of the Act has been bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. In fact, the Supreme Court in the matter of India Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi, reported in 119 ITR page 996 has held that whether an assessment has escaped assessment or not must be determined by the Assessing Officer himself. The Assessing Officer cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. In the present facts, it would be noticed that the reasons for which the assessment for the assessment year 2006­2007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted.

in the present facts one would have to examine the contention of the Petitioner that the impugned notice is without jurisdiction as the self same facts were not only before the Assessing Officer but he had also viewed the very issues on which the assessment is sought to be reopened. So far as, the issue in respect of provisions claimed as deduction for arriving at taxable profit aggregating to Rs.52.87 crores is concerned, the same was not only dislcosed in the notes to account filed with the return of Income but also in response to specific queries raised during the assessment proceeding. It was reiterated at the hearing that on the aforesaid account of provision, the tax had already been paid in the earlier years and the amounts were merely written back in this year to the extent they were in excess of the provisions required. So far as, failure to deduct TDS on advertisement and sales promotion are concerned leading to disallowance of the entire amount of Rs.22.48 crores under Section 40(a)(ia) the same was also subject to scrutiny by the Assessing Officer during the assessment proceedings. In fact, the clause 17(f) of the tax audit report submitted alongwith return of income clearly brings out the fact that where tax has not been deducted, then the entire amount of payment has been offered for disallowance under Section 40(a)(ia). In fact, by letters dated 10.11.2008 and 26.12.2008 in response to specific queries of the Assessing Officer during assessment proceedings the petitioner had pointed out alongwith details the expenses in respect of which the tax had not been deducted and which were offered to tax. So far as, the reason to reopen the assessment on the ground that the petitioner had declared short term capital gains of Rs.3.63 crores in respect of income earned out of investments had to be taxed/classified as business Income is concerned, it is not disputed before us that the treatment given was consistent with the earlier year practice and accepted by the Respondent. Further, it is not disputed before us that the short term capital gains have been assessed to the maximum marginal rate and even if considered as business income, the tax effect would be the same. Consequently, there could be no reasonable basis to have a belief that there is any escapement of Income.

Therefore, in view of the above, we are of the view that the impugned notice is without jurisdiction and the impugned order dealing with the objection of the Petitioner is non speaking order in as much as it does not deal with any of the objections raised by the Petitioner in its objections.

SEBI – Activation of ISIN in case of additional issue of shares/ securities

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Activation of ISIN in case of additional issue of shares/ securities

CIRCULAR no. MRD/DP/21/2012, dated 2-8-2012

1. Please refer to SEBI Circular No. SEBI/MRD/DEP/Cir-2/06 dated January 19, 2006.

2. In addition to the above circular, it has now been decided that in case of IPO for debt securities the ISINs shall be activated only on the date of commencement of trading on the stock exchange.

3. Further, in order to curtail the transfer of additional issue of shares/securities viz. further public offerings, rights issue, preferential allotment and bonus issue of the listed company, prior to receipt of final listing/trading approval, it has been decided that the depositories shall devise a mechanism so that such new securities created shall be frozen till the time final listing/ trading permission is granted by the exchange.

4. In order to achieve the above, the Depositories are advised to allot such additional shares/securities under a new temporary ISIN which shall be kept frozen. Upon receipt of the final listing/ trading permission from the exchange for such additional shares/ securities, the shares/securities credited in the new temporary ISIN shall be debited and the same would get credited in the preexisting ISIN for the said security. Thereafter, the additional securities shall be available for trading.

5. The exchanges are advised to provide the details to the depositories whenever final listing/trading permission is given to securities.

6. The Depositories are advised to:-

(a) make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately, as may be applicable/necessary ;

(b) bring the provisions of this circular to the notice of their DPs and also to disseminate the same on their website; and

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

E-filing optional for representative of non-residents & private discretionary trusts

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Relaxation from compulsory e-filing of return of income for assessment year 2012-13 – for representative assessees of non-residents and in the case of private discretionary trusts
Circular No. 6/2012 [F.No.133/44/2012-SO (TPL)], dated 3-8-2012
Rule 12 of the Income-tax Rules, 1962 mandates that an individual or Hindu undivided family, if his or its total income or the total income in respect of which he is or it is assessable under the Act, during the previous year, exceeds ten lakh rupees, shall furnish the return electronically for the assessment year 2012-13 and subsequent assessment years.
2. It has been brought to the notice of the Board that the agents of non-residents, within the meaning of section 160(1)(i) of the Income -tax Act, are facing difficulties in electronically furnishing the returns of non-residents. This is because there may be more than one agent of the non-resident in India for different transactions or a person in India may be an agent of more than one non-resident. Such situations are not covered by the existing e-filing software which functions on the principle of one assessee-one PAN-one return.
3. It has also been brought to the notice of the Board that ‘private discretionary trusts’ having total income exceeding ten lakh rupees are facing problems in filing their return of income electronically in cases where they are filing their return in the status of an individual. This is because status of a private discretionary trust has been held in law as that of an ‘individual’. The existing e-filing software does not accept the return of a private discretionary trust in the status of an ‘individual’.
4. Accordingly it has been decided by the Board that:
(i) it will not be mandatory for agents of non-residents, within the meaning of section 160(1)(i) of the Income-tax Act, if his or its total income exceeds ten lakh rupees, to electronically furnish the return of income of non-residents for assessment year 2012-13;
(ii) it will not be mandatory for ‘private discretionary trusts’, if its total income exceeds ten lakh rupees, to electronically furnish the return of income for assessment year 2012-13.

Free Sample, Gift, Cash to Doctors not allowable – CBDT

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Inadmissibility of expenses incurred in providing freebees to Medical Practitioner by pharmaceutical and allied health sector Industry

CIRCULAR NO. 5/2012 [F. NO. 225/142/2012-ITA.II], DATED 1-8-2012

It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries are providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the ‘Council’) which is a regulatory body constituted under the Medical Council Act, 1956.

2. The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries.

3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose which is either an offence or prohibited by law.

Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assessee which has provided aforesaid freebees and claimed it as a deductable expense in its accounts against income.

4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action.

This may be brought to the notice of all the officers of the charge for necessary action.

Due Date for eform 23 AC & 23ACA for F.Y. 2011-2012 extended

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General Circular No 21/2012, Dated 02/08/2012

Sub: Filling of Balance Sheet and Profit and Loss Account by companies in Non ­XBRL for accounting year commencing on or after 01.04.2011.

Notification no. S.0-447 (E) dated 28.02.2011 on revised schedule VI is effective from 1^st April 2011. The current year filing is based on revised schedule VI is due for filing. The revised form 23AC & ACA is under finalization and will be notified shortly on the MCA website.

All companies who are required to file non XBRL eform 23 AC & ACA as per revised schedule VI be allowed to file their financial statement without any additional fee/penalty upto 15^th September 2012 or with in 30 days from the date of their AGM, which ever is later.

Form 23B can be filed without additional fees up to 12th August, 2012

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General Circular No. 22/2012, Dated the 3rd Aug, 2012
Sub : Imposing fees on certain e-forms filed with ROC, RD or MCA(HQ) under MCA-21 where at present no fee is prescribed.
I am directed to refer to the Ministry’s General Circular no. 14/2012 dated 21st June 2012 & General Circular no. 19/2012 dated 27th July 2012 and to say that fees on Form 23B (Information by statutory auditor to the Registrar) has been further deferred for one week and shall now be applicable from 12th August, 2012.

Sending order at correct address by registered post is deemed to be duly served unless assessee proves otherwise

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CESTAT, NEW DELHI BENCH

Greenview Land & Building Con. Ltd.

v.

CCE, Chandigarh-II

FINAL ORDER NO. 59/A/475/12-CUS

STAY ORDER NO. ST/S/710/12-CUS.

ST/STAY NO. 953/2012

ST/A NO. 431/2012

MAY 30, 2012

We are guided by the judgment of Hon’ble High Court of Punjab & Haryana in the case of CCE v. Mohan bottling Co (P.) Ltd. 2010 (255) ELT 321 where it was held that it is for the assessee to rebut presumption of service by cogent evidence that in fact order was never served upon him. Order of Larger Bench of the Tribunal passed on 28.8.2006 in favour of the respondent was reversed. Larger Bench of Tribunal in that case had held that dispatch of adjudication order by speed post/registered post would not amount to a valid service in the absence of proof of actual delivery of speed post.Thus according to judgment of Hon’ble High Court of Punjab & Haryana in Mohan Bottling Co (P.) Ltd.’s case (supra), it can safely be said that sending the order at correct address by registered post is a sufficient compliance of section 37-C of Central Excise Act, 1944 and it is for the assessee to rebut the presumption of service by cogent evidence that in fact order was never served upon him. The appellant in the present appeal in hand failed to discharge its burden of proof, we are able to notice this is a case of service on any authorized person, nor the case of closure of factory nor the case of rebuttal of presumption of by appellant. Thus both stay application and appeal fail to succeed. Accordingly both are dismissed.

Roads inside & within boundary wall of premises are part of factory buildings

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HIGH COURT OF RAJASTHAN

Commissioner of Income-tax, Jaipur

v.

Sunshine Glass Indus (P.) Ltd.

D.B. IT REFERENCE NO. 12 OF 1984

OCTOBER 28, 2010

In Hukamchand Mills Ltd. v. CIT [1978] 114 ITR 870 (Bom.), the roads laid out within factory premises were regarded as part of factory buildings and were entitled to depreciation. In the case of CIT v. Lucas TVS Ltd. [1977] 110 begin_of_the_skype_highlighting FREE [1977] 110 end_of_the_skype_highlighting ITR 346 (Mad.), the word ‘building’ was held to include roads laid in the proximity of factory for the purpose of providing access to factory and other buildings within compound and they were entitled to depreciation. The aforesaid view taken by the High Courts was correct because roads constructed inside and medium boundary wall of premises, be it a building or factory, are meant to augment utilization thereof. Such roads are eventually intended to augment utilization of building/factory by providing access thereto. In view of above, the impugned order of the Tribunal allowing assessee’s claim for depreciation was to be upheld.

AAR is a court & its ruling should be first challenged before HC

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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) No. 31543 of 2011

Columbia Sportswear Company … Petitioner Versus

Director of Income Tax, Bangalore … Respondent

WITH SPECIAL LEAVE PETITION (C) No. 3318 of 2011,

SPECIAL LEAVE PETITION (C) No. 13760 of 2011,

SC held that We do not think that we can hold that an advance ruling of the Authority can only be challenged under Article 136 of the Constitution before this Court and not under Articles 226 and/or 227 of the Constitution before the High Court. In L. Chandra Kumar v. Union of India and Others (supra), a Constitution Bench of this Court has held that the power vested in the High Courts to exercise judicial superintendence over the decisions of all courts and tribunals within their respective jurisdictions is part of the basic structure of the Constitution. Therefore, to hold that an advance ruling of the authority should not be permitted to be challenged before the High Court under Articles 226 and/or 227 of the Constitution would be to negate a part of the basic structure of the Constitution. Nonetheless, we do understand the apprehension of the Authority that a writ petition may remain pending in the High Court for years, first before a learned Single Judge and thereafter in Letters Patent Appeal before the Division Bench and as a result the object of Chapter XIX-B of the Act which is to enable an applicant to get an advance ruling in respect of a transaction expeditiously would be defeated. We are, thus, of the opinion that when an advance ruling of the Authority is challenged before the High Court under Articles 226 and/or 227 of the Constitution, the same should be heard directly by a Division Bench of the High Court and decided as expeditiously as possible.

The only other question which we have to consider is whether we should entertain this petition under Article 136 of the Constitution or ask the petitioner to approach the High Court under Articles 226 and/or 227 of the Constitution. Article 136 of the Constitution itself states that this Court may, “in its discretion”, grant special leave to appeal from any order passed or made by any court or tribunal in the territory of India. The words “in its discretion” in Article 136 of the Constitution makes the exercise of the power of this Court in Article 136 discretionary. Hence, even if good grounds are made out in a Special Leave Petition under Article 136 for challenge to an advance ruling given by the Authority, this Court may still, in its discretion, refuse to grant special leave on the ground that the challenge to the advance ruling of the authority can also be made to the High Court under Articles 226 and/or 227 of the Constitution on the self same grounds. In fact, in Sirpur Paper Mills Ltd. v. Commissioner of Wealth Tax, Hyderabad [AIR 1970 SC 1520] it has been observed that this Court does not encourage an aggrieved party to appeal directly to this Court against the order of a Tribunal exercising judicial functions unless it appears to the Court that a question of principle of great importance arises. Unless, therefore, a Special Leave Petition raises substantial questions of general importance or a similar question is already pending before this Court for decision, this Court does not entertain a Special Leave Petition directly against an order of the tribunal.

Losses not claimed in original Return, cannot be claimed by filing revised return

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IN THE ITAT BANGALORE BENCH ‘A’

Karnataka Forest Development Corp. Ltd.

v.

Commissioner of Income-tax

I T APPEAL NO. 81(BANG.) OF 2011

[ASSESSMENT YEAR 2004-05]

MARCH 30, 2012

Undisputedly, the assessee has filed original return under sub-section (1) of section 139. In the said return of income, the assessee has not claimed the loss. Sub-section (5) provides that where the assessee discovers any omission or a wrong statement, then he can file a revised return. Where the wrong statement or omission results in the claim of loss, when the return filed under section 139(5) is to be considered or not, is to be now seen. Whether omission of such a claim of loss in the original return of income is bona fide or not is also to be seen. From the revised return of income, it is noticed that the assessee has not only claimed the loss of the relevant assessment year, i.e., 2004-05 to be carried forward but has also claimed the loss of the assessment year 2003-04 to be carried forward. Thus, it is to be presumed that the assessee was having the knowledge of the loss for the assessment year 2003-04 which was to be carried forward and claimed in the assessment year 2004-05. Therefore, when it filed the return under section 139(1), it should have taken this loss into consideration and should have filed the return under section 139(3). Having filed the original return of income under section 139(1), the assessee cannot later on file the revised return of income claiming the loss on the ground that it was discovered subsequently. This argument of the assessee is not acceptable. In view of the same, the findings of the Commissioner (Appeals) were to be agreed with that when the assessee was claiming the loss for the relevant assessment year and also claiming the loss to be carried forward of the loss of 2003-04 and 2004-05, respectively, then the assessee was required to file the return under section 139(3) and, therefore, the revised return filed under section 139(5) could not be accepted and had to be treated as null and void.  

MCA extends due date to file Form No. 5 INV to 31st August 2012

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GENERAL CIRCULAR NO. 20/2012 , Dated: 01.08.2012

As per the Circular No. 17/2012 dated the 23rd July, 2012, the Companies are required to file one Form 5 INV each year for furnishing complete information on unpaid/unclaimed amounts lying with companies as on the date of Annual General Meeting of that year, in pursuance of Investor Education and Protection Fund (uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules 2012, published in the Gazette of India Part II section 3 sub section (i) vide Notification No. G.5.R. 352 (E) dated the 10th May, 2012. However, it has come to the notice of the Ministry that some companies have filed multiple Form No. 5 INV in respect of unpaid/unclaimed amounts lying with them instead of filing one form. To remove this anomaly and for better understanding of the issue, it is clarified:

(a) Any Company, which has filed multiple Form 5 INV while uploading the information for the year 2010-11 on or before the date of issue of this circular, should again file Form 5 INV (single) and upload the details of investors in excel template. This process should be completed by 31′ August, 2012.

(b) All Companies, which have not yet filed Form No. 5 INV are allowed to file Form No. 5 INV along with details of investors in excel template upto 31′ August, 2012.

No Addition u/s 68 for share application money received in bank if assessee establishes identity of share applicants

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INCOME TAX APPELLATE TRIBUNAL DELHI

ITA No.2059 /Del/2011 – Assessment year: 2006-07

Income-tax Officer

V/s

M/s Golden Home Furnishing Pvt. Ltd.

Date of pronouncement: 28-06-2012

Indisputably, certain discrepancies crept in while furnishing the information requisitioned by the AO from the assessee in respect of the aforesaid amount of Rs. 10 lacs from M/s Melco Sales Pvt. Ltd. and Rs. 5 lacs from M/s Poonam Corporation Ltd. towards share application money vis-à-vis information obtained by the AO from the aforesaid two companies u/s 133(6) of the Act. After examining the relevant details and documents including bank statements of the assessee and share applicants, the ld. CIT(A) concluded that in view of the evidences on record, the mismatch as observed by the AO is duly explained by the entries in the bank statement of the assessee as well as the share applicant and the assessee discharged its onus by establishing the identity of the share applicants, the genuineness of the transaction as well as the credit worthiness of the investors. Accordingly, the ld. CIT(A) deleted both the additions. The ld. DR did not place before us any material, controverting the aforesaid findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter. In the absence of any basis, we are not inclined to interfere. Therefore, ground nos.1 & 2 in the appeal are dismissed.