Coaching institute cannot be treated ®istered as a charitable institution

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ITAT COCHIN BENCH

M Star Charitable Society

v.

Commissioner of Income-tax, Kottayam

IT APPEAL NO. 605 (COCH.) OF 2011

DECEMBER 14, 2012

 

From the above judgment of the Apex Court it would be abundantly clear that there should be a systematic instruction to the students by way of normal schooling. Mere coaching classes may provide some kind of knowledge to the students. But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of “education” as provided in section 2(15) of the Act. As the Apex Court observed, one may acquire knowledge in the course of travelling; during the course of reading newspaper; etc. But that kind of knowledge cannot fall within the term “education” as provided in section 2(15) of the Act. There should be a normal schooling by way of regular and systematic instruction.

It is further seen that the Gujarat High Court also had an occasion to consider identical issue in the case of Saurashtra Education Foundation v. CIT [2005] 273 ITR 139 (Guj). The Gujarat High Court found that all kinds of education would not fall within the meaning of section 2(15) of the Act. The training, instruction, etc. would result in grant of a diploma or degree by a university or a governmental agency. In the case before us, admittedly, the taxpayer is conducting coaching classes. Therefore, it cannot be treated as a charitable institution as provided in section 2(15) of the Act. This Tribunal is of the opinion that the taxpayer is not eligible for registration u/s 12AA of the Act. Accordingly, the order of the lower authority is confirmed.

Dearness Allowance payable to CG Employees increased to 80% wef 01.01.2013

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Government issued order enhancing the Dearness Allowance payable to Central Government Employees with effect from 1.1.2013 from the existing 72% to 80%.

No. 1(2)/2013-E-II (B)

Government of India Ministry of Finance

Department of Expenditure

North Block, New Delhi,

Dated: 25th April, 2013.

OFFICE MEMORANDUM
Subject: Payment of Dearness Allowance to Central Government employees – Revised Rates effective from 1.1.2013.

The undersigned is directed to refer to this Ministry’s Office Memorandum No. 1(8)/2012-E-II (B) dated 28th September, 2012 on the subject mentioned above and to say that the President is pleased to decide that the Dearness Allowance payable to Central Government employees shall be enhanced from the existing rate of 72% to 80% with effect from 1st Jan, 2013.

2 The provisions contained in paras 3, 4 and 5 of this Ministry’s O.M. No. 1 (3)/2008-E-II(B) dated 29th August, 2008 shall continue to be applicable while regulating Dearness Allowance under these orders.

3 The additional instalment of Dearness Allowance payable under these orders shall be paid in cash to all Central Government employees.

4 These orders shall also apply to the civilian employees paid from the Defence Services Estimates and the expenditure will be chargeable to the relevant head of the Defence Services Estimates. In regard to Armed Forces personnel and Railway employees separate orders will be issued by the Ministry of Defence and Ministry of Railways, respectively.

5 In so far as the persons serving in the Indian Audit and Accounts Department are concerned, these orders issue in consultation with the Comptroller and Auditor General of India

Advances written off not allowable unless the same were for the purpose of business

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ITAT AHMEDABAD BENCH ‘D’

Mitsu Ltd.

v.

Assistant Commissioner of Income-tax

IT Appeal Nos. 3088 & 3119 (Ahd.) of 2003
[ASSESSMENT YEAR 2000-01]

Date of Pronouncement- 23.01.2013

 

The AO has noted that during the course of assessment proceedings, the assessee-company had vide a letter dated 4/3/2002 voluntarily offered for taxation by disallowing a sum of Rs. 15,54,260/-. In view of the said voluntary offer, the impugned amount was added back to the income of the assessee. When the matter was carried before the first appellate authority, it was held that the impugned amount was offered for taxation and it was not a case of mistaken impression of law, therefore, in the absence of any other material, the action of the AO was upheld. The explanation of the assessee was that the said amount was paid for supply of materials/services. As per the said explanation, the assessee could not avail the services. The assessee was also not in a position to recover the advances. This explanation of the assessee was not supported by any cogent evidence. Merely writing of an amount do not by itself qualifies for deduction unless and until it is proved beyond doubt that the expenditure/claim wholly and exclusively for the purpose of the business. The case of CIT v. Abdul Razak & Co. [1981] 136 ITR 825 was decided by the Hon’ble Court on the facts of the case because in that case the assessee was engaged in the business of Commission Agency. The assessee has advanced the amount to the principle which was written off. On those facts, the Hon’ble Court has held that the written off of the amount was allowable as a business loss. On the contrary, the assessee has not placed any supporting evidence through which it could be established that the said write off was for the purpose of the business. Rather, assessee himself had offered the said amount for tax during the course of assessment proceeding, hence the view taken by the Revenue Authorities for this disallowance is hereby confirmed. This ground is dismissed.

Interest on refund could not be denied / delayed unless same is due to assessee’s failure to submit details

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ITAT DELHI BENCH ‘E’

Metso Minerals (I) (P.) Ltd.

v.

Deputy Commissioner of Income-tax

IT Appeal Nos. 3785 & 3786 (Delhi) of 2011
[ASSESSMENT YEARS 1994-95 & 1995-96]

Date of Pronouncement- 23.11.2012

 

In this case the assessee’s contention for interest under section 244A was not accepted by the Assessing Officer. The Assessing Officer observed that according to section 244A(2), if the proceedings resulting in refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable. The Assessing Officer held that from the records it is seen that the above condition was directly applicable to the assessee’s case. He observed that the assessee-company was not able to produce the original documents and these were procured by the assessee-company much later to assessment proceedings. Accordingly, the Assessing Officer held that no interest under section 244A was to be granted.

The proceedings before the Assessing Officer, the learned Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal is a continuous process. In the facts and circumstances of the present case there is no cogent basis to hold that the assessment proceedings got delayed due to the assessee’s failure to submit the details before the Assessing Officer and learned Commissioner of Income-tax (Appeals).

Under the circumstances, we hold that the assessee should be granted interest on refund also from the date of payment of tax to the date of the Income-tax Appellate Tribunal order.

Reimbursement of expenses cannot be treated as fees for technical services

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ITAT ALLAHABAD BENCH

Obeetee (P.) Ltd.

v.

Additional Commissioner of Income-tax

IT APPEAL NO. 249 (All.) OF 2011
[ASSESSMENT YEAR 2005-06]

Date of Pronouncement – 23.11.2012

 

In this case Payment was made for reimbursement of the permission granted to the assessee for using trade mark ‘Wool, New Zealand’. Such payment cannot be said to be fee for technical services. Even otherwise also, in the light of the detailed discussions made in paragraph nos. 13, 14 and 15 of this order, such reimbursement of expenses are not subject to TDS. Accordingly, no disallowance is warranted. The addition of Rs. 2,88,135/- is deleted. 

Software developed as per customer’s specifications are liable to service tax

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CESTAT, MUMBAI BENCH

3i Infotech Ltd.

v.

Commissioner of Service Tax, Mumbai-II

Order Nos. S/78/2013/CSTB/C-I & A/29/2013/CSTB/C-I
Application No. ST/STAY/828 OF 2012
Appeal No. ST/232 OF 2012

Date of Pronouncement- 14.01.2013

 

From the impugned order, it does not come out clearly how the service tax liability has been computed. If the appellant has purchased from third parties and sold the same on payment of VAT and also supplied hardware on payment of VAT, the same would not be liable to service tax. The liability to service tax would arise only in respect of software which the appellant has developed as per customer’s specifications and supplied to their customers. Therefore, there is a need to go through the agreements entered into with the clients, bills raised for the services rendered and the goods supplied and the payments made towards service tax liability under the category of “information technology service”. Only after going through all these documents, correct service tax determination can be done. Accordingly, we remand the matter back to the adjudicating authority to consider the matter fresh after taking into account all the documentary evidences which the appellant would submit in support of their claim that they have discharged the service tax liability correctly. The appellant is directed to cooperate with the department and produce all the documentary evidences by way of sales invoices, contracts/agreements entered into with the clients and other necessary documents, and payment of service tax made in respect of the services rendered by them etc.

Partnership Firm cannot claim deduction U/s 80IA

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ITAT CHENNAI BENCH ‘B’

Eshwarnath Constructions

v.

Assistant Commissioner of Income-tax

IT Appeal No. 185 (Mds.) of 2012
[ASSESSMENT YEAR 2008-09]

Date of Pronouncement -15.01.2013

 

A perusal of the statutory provisions makes it clear that it does not provide a blanket deduction i.e. in order to succeed in a claim of deduction; the concerned assessee has to derive profits and gains from any business referred to in sub-section (4). Further, sub-section (4) prescribes applicability of clause i.e. the case in which the deduction provision would apply. It is in this sub-section that the legislature has enumerated the nature of the undertakings, their activities in contributing raising of infrastructure. Further, in the explanation attached to the sub-section, the legislature has also entrusted the meaning of the infrastructure facilities. In our opinion, an assessee while claiming deduction has to satisfy all conditions in sub-section (4)(1)(a) or (b) or (c). It is mandatory for the assessee to first satisfy sub-section clause (i)(a), then (b) then (c), then proviso and so on. In case the concerned assessee fails in any one of the clauses, even if it satisfies the other part of the sub-section, the claim has to be rejected. Now we proceed to decide as to whether the assessee firm satisfies sub-section (4)(i) of the “Act” or not. For the said sub-section, a reading of the provision makes it unambiguous that the concerned claimant has to be an enterprises carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and it has to be owned by a consortium of such company or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Admittedly, the assessee is a partnership firm. As we notice from the relevant statutory provision, the enterprise in the nature of firm nowhere finds mention in the mandate of the legislature.

It is a trite preposition of law while interpreting a statute and more so a fiscal statute, neither the judicial forum concerned can insert its own words nor it can take away any from the statute. As it is seen, the earlier portion of the statutory provision prescribes a company registered in India or a consortium of such companies or by an authority or corporation or any other body established or constituted and so on. In our view, the latter part is liable to be read in the light of the earlier part by following the principles of ejusdem generis. The vehement contention of the assessee is that it is also a body established or constituted under a Central Act as it is governed by Partnership Act, cannot be accepted for the reason that under the provisions of Partnership Act a firm is not created i.e. it is not a creation of statute, but it is a body of individual regulated by the statute namely Partnership Act. Hence, we hold that the assessee fails to satisfy the applicability clause of the provision as envisaged under section 80IA(4)(i) of the “Act”.

Sec. 54EC exemption for investment of Rs. 50 Lach each in 2 Financial Years but within 6 M from transfer date

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ITAT CHENNAI BENCH ‘D’

Smt. SriramIndubal

v.

Income-tax Officer, Business Ward

IT Appeal NO. 1950 (MDS.) OF 2012
[ASSESSMENT YEAR 2008-09]

Date of Pronouncement – 31.01.2013

 

Assessee eligible for S. 54EC benefit of Rs. 50 Lakh each made in two different financial years but within six months from transfer of capital asset

The first condition mentioned in Section 54EC(1) is that the investment has to be made within a period of six months from the date of transfer of capital asset. Since the date of transfer in the given is 18.2.2008, six months period will elapse on 17.8.2008. Assessee had purchased REC Bonds worth of Rs. 50 lakhs on 27.2.2008 and Bonds of NHAI for Rs. 50 lakhs on 30.6.2008. Both these purchases were within the six months’ period. Only question that arises is whether proviso to Section 54EC(1) would limit the claim of exemption to Rs. 50 lakhs. Said proviso mentions that investment on which an assessee could claim exemption under Section 54EC(1) shall not exceed Rs. 50 lakhs during a financial year. So, the exemption provision has to be construed not transaction-wise but, financial year-wise. No doubt, Explanatory Memorandum does say that limitation has been placed with a view to ensure equitable distribution of benefits among the prospective investors. Relevant Explanatory Memorandum is reproduced for brevity:-

“The quantum of investible bonds issued by NHAI and REC being limited, it was felt necessary to ensure that the benefit was available to all the investors. For this purpose, it was necessary to ensure that the limited number of bonds available for subscription is also available for small investors. Therefore, with a view to ensure equitable distribution of benefits amongst prospective investors, the government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long-term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after the 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year.”

Last sentence of the Explanatory Memorandum clearly states that the exemption for investment cannot exceed Rs. 50 lakhs in a financial year. Therefore, if the assessee is able to keep the six months’ limit from the date of transfer of capital asset, but, still able to place investment of Rs. 50 lakhs each in two different financial years, we cannot say that the restrictive proviso will limit the claim to Rs. 50 lakhs only. Since assessee here had placed Rs. 50 lakhs in two different financial years but within six months period from the date of transfer of capital asset, assessee was definitely eligible to claim exemption upto Rs. 1 Crore. The same view has been taken by Ahmedabad Bench of this Tribunal in the case of AspiGinwala& Others (supra). We are, therefore, of the opinion that the assessee has to succeed in this appeal. Claim of the assessee for exemption upto Rs. 1 Crore has to be allowed in accordance with Section 54EC of the Act.

No additions for mere violation of RBI’s norms on valuation of shares sold by non-resident to resident

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ITAT DELHI BENCH ‘H’

Zeppelin Mobile System GmbH

v.

Additional Director of Income-tax

IT Appeal No. 5179 (Delhi) of 2010
[ASSESSMENT YEAR 2007-08]

Date of Pronouncement – 12.04.2013

 

Undoubtedly, the RBI Guidelines are Guidelines for the banks, issued for FEMA purposes. Clause 2.3 (supra) of these Guidelines refers to Regulation 10B (2) of the Foreign Exchange Management (Approval or Issue of Security By a Person Resident Outside India) Regulations, 2000. The very opening paragraph of these Guidelines (APB-III) shows that they are addressed to ‘Authorised Dealer (AD) Banks’. Thus, the duty to examine the compliance or otherwise of these Guidelines lies squarely within the purview of the ‘Authorised Dealer Banks’ and not the Income-tax Authorities. If the assessee, in the view of the Income-tax Authorities, had committed any violation of these Guidelines, the appropriate course open to them was to bring it to the notice of the banks. No further. Then, since the Guidelines have been issued for FEMA purposes, it is the FEMA Authorities who are competent to take appropriate action against the assessee on breach of the Guidelines. Rather, it is seen that no objection whatsoever has been raised by the RBI to the rate of Rs. 390/- per share, as maintained by the assessee and the RBI has accorded its approval. Had the alleged difference between the rates existed, thereby constituting a violation of the RBI Guidelines by the assessee, such violation would obviously have been taken care of and the approval would not have been accorded. On merits also, Sintex Industries Ltd., to whom the shares were sold by the assessee, has not denied such rate of Rs. 390/-per share. Rather, such rate stands admitted in the Memorandum of Understanding (supra) between the assessee and Sintex Industries Ltd. Nothing adverse or detrimental to the assessee’s case has been brought on record by the authorities below.

It is also pertinent to note that though the MoU (supra) has been discussed in the assessment order, neither the said document, nor the Remittance Certificate has been adverted to by the DRP. The Certificate of Remittance has also, as per the stamp borne on the copy of the assessee’s paper book filed before the DRP, been shown to have been filed before the DRP.

In view of the above, finding the grievance of the assessee to be justified, we accept it as such.

If effective management of company situated in Netherlands it can claim benefit under India – Netherlands treaty

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HIGH COURT OF GUJARAT

Director of Income-tax (International Taxation)

v.

Mitsutor Shipping Agency (P.) Ltd.

TAX APPEAL NO. 12 OF 2012

JULY 4, 2012

 

From the material documents allowed to be produced, the assessee could satisfy the Commissioner (Appeals) that the place of effective management of its enterprises was situated at Netherlands and thus, the requirement of condition in Article 8A of DTA agreement was met with. The Tribunal has rightly confirmed the decision of the Appellate Commissioner holding the assessee to be eligible for benefits of DTAA.

Delayed or Non payment of TDS- Department to initiate action against TDS defaulters

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The Income Tax department has decided to crack the whip on big companies and organisations that do not remit TDS money even after deducting it from their workers’ salaries. The Central Board of Direct Taxes (CBDT), the controlling and administrative authority of the department, has asked all I-T ranges to identify such cases where revenue implication is large and initiate prosecution in competent courts.

The action will be taken under Section 276B of the I-T Act which deals with “failure to pay tax to the credit of central government (I-T department)” and punishment under the said provision carries a rigorous imprisonment varying from three months to seven years of jail along with a fine.

The department has detected some big cases of non- compliance in depositing tax stipulated under the TDS (Tax Deducted at Source) category. The department has taken this violation seriously and I-T authorities have been asked to initiate prosecution in cases of high revenue and blatant violation of TDS remittance laws.

A case is that of the Kingfisher airlines where the I-T had asked the carrier to deposit around Rs 185 crore as TDS deducted from its employees’ wages. The Supreme Court had refused a relief to the grounded airline and asked it to deposit the due taxes under TDS.
Some very flagrant violations have been detected by the income tax investigations and intelligence units across various ranges and keeping in mind the huge amount of revenue involved, the department has now decided to initiate strict measure, the I-T official said, adding almost 50 such cases are now being sent to the courts.
In some cases, the affected parties have been asking for compounding the fine after notices for payment of taxes were sent to them. Jurisdictional chief commissioners are empowered to take a decision on these requests.
The department is plugging each and every source of revenue to achieve the Rs 5.65 lakh crore revenue mop up target under the direct taxes category for this fiscal which will end on March 31.

CCITs to list & track quality scrutiny assessments made during FY 2012-13 -CBDT

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COMPILATION OF QUALITY SCRUTINY ASSESSMENT CASES COMPLETED DURING FINANCIAL YEAR 2012-13

LETTER [F.NO. 225/65/2013/ITA-II], DATED 11-4-2013

I am directed to draw your kind attention towards Board’s decision to review the Quality of assessments completed by the Assessing Officers during financial year 2012-13 in each CCIT/DGIT charge. The same finds mention in clause 2(k) of “Guidelines for Scrutiny Selection” [File No. 225/97/2012/ITA-II] for Financial Year 2012-13, dated 23-8-2012 read with clarification dated 20-9-2012.

2. All the CCsIT/DGsIT charges are therefore requested to ensure that a compilation of at least 50 quality assessments passed in their respective charges is made in respect of scrutiny assessments completed during financial year 2012-13, clearly bring out the quality of work done and the resultant revenue impact. The compilation should be made in the format enclosed as Annexure to this letter.

3. I am further directed to request that all CCsIT/DGsIT may send their compilation as per annexed format alongwith copies of all the orders to the concerned CCIT (CCA) who in turn would send the above analysis to their respective Zonal Member by 30th April, 2013 after due consolidation. A copy of the consolidated compilation should also be sent to Member (IT) without enclosing hard copies of assessment orders.

4. Para 2(1) of Board’s letter dated 20-9-2012 mentions that quality orders compiled through above process would form source material for quality assessment work to be incorporated in forthcoming issue of ‘Let us Share’, In this regard, I am further directed to request that a copy of compilation alongwith all assessment orders may also be sent to respective Appraisal Committees constituted for ‘Let us Share’ by DGIT(Admin.).

Consideration for live telecast of an event is not royalty as no copyright in live events

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ITAT MUMBAI BENCH ‘L’

Deputy Director of Income-tax, (International Taxation)

v.

Nimbus Communications Ltd.

IT Appeal Nos. 1598 & 2270 (Mum.) of 2011
[ASSESSMENT YEAR 2009-10]

NOVEMBER 23, 2012

 

Tribunal referred to a book titled Law of Copyright and Industrial Designs by P. Narayanan wherein it was stated in paragraph No. 17.02 that a cinematograph film depicting live events like sporting events, horse race, etc. cannot infringe any copyright because there is no copyright in live events. The Tribunal held that there is thus no copyrights in the live events and depicting the same cannot infringe any copyright. The Tribunal also referred to the proposed Direct Tax Code Bill wherein “live coverage of any event” is proposed to be included in the definition of “royalty’ and held that if “live coverage” had been a part of copyright of any work as was sought to be contended on behalf of the Revenue, then there was no need to classify live coverage as a separate item. It was held by the Tribunal that the definition of royalty under the Income-tax Act, 1961 thus does not include any consideration for live coverage of any event which is now sought to be included in the definition of royalty by the Direct Tax Code, 2010. The Tribunal, therefore, held that any consideration for live broadcasting cannot be considered as royalty for the transfer of copyright so as to fall within the domine of Explanation 2 to section 9(1)(vi). Respectfully following the said decision of the coordinate bench of this Tribunal rendered in the case of Neo Sports Broadcast (P.) Ltd (supra), we uphold the impugned order of the learned CIT (Appeals) holding that the amount paid by the assessee for live coverage of cricket matches to NSI is not taxable in the hands of NSI and the assessee was not required to deduct tax at source from the said amount. The appeal of the Revenue is accordingly dismissed.

Non-Compete Fee not eligible for depreciation or amortization

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Gujarat Glass Private Limited Vs. Asst. Commissioner of Income Tax (ITAT Mumbai, ITA No. 4842/Mum/2004, Date of Pronouncement: 05-04-2013

When we take into consideration DR’s argument that in accordance with the decision of Delhi ITAT in the case of Sharp Business System (supra), non compete fee is not eligible for depreciation, we must accept that the order of the coordinate Bench is not only very detailed and well speaking, we must say that the coordinate Bench very logically explained the expression, ‘any other business or commercial rights of similar nature’. When we read the relevant portion of the provision, the initial part, i.e. knowhow, patents, copyrights, trademarks, license, franchises, has been disjointed by the conjunction ‘or. When we read the relevant clause, it reads as knowhow, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature. The use of the disjunction ‘or’ has a very relevant role, because, the legislature accepts the difference and distinction of intangibles and rights. It is because of this reason, various decision have placed the doctrine of ejusdem generis to explain the genus. The legislature has used ‘or’ in the provision for explaining the distinction of application of like nature with that of the unlike nature, which is an accepted principle i.e. doctrine of ejusdem generis. It is important to point out that even when we read the Third Member decision in the case of Paper Products Limited vs Add. CIT referred to in the original order of the ITAT, In our view, taking note of the word ‘or’, used as a disjunction is essential to carve out a meaningful genus.

The Senior Counsel argued at length, whether such non compete right constitute is a right in rem or otherwise, is a matter to be decided by an appropriate higher judicial forum. In the instant proceedings, we cannot import the decision of Hon’ble Supreme Court of India in the case of Smifs (supra), wherein the Hon’ble Apex Court held that goodwill was an intangible asset and eligible for depreciation. It is important to observe that the Hon’ble Apex Court was seized with the issue of goodwill only.

The assessee does not satisfy, the payment made to acquire non compete right, being an asset, as per the second part of clause (ii) to section 32(1), and is, therefore, not eligible for depreciation as per law.

We, therefore, sustain the order of the CIT(A) on this issue and consequentially sustain the order of the AO, wherein the AO had disallowed the depreciation, as claimed at Rs. 18,00,00,000/-, which, in our opinion is as per law.

S. 269SS not applies to cash loan taken by Partner from firm

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HIGH COURT OF MADRAS

Commissioner of Income-tax

v.

V. Sivakumar

Tax Case (Appeal) No. 279 of 2010

Date of Pronouncement – 11.02.2013

 

Issue - The assessee had taken the amounts from four firms which were found to be in cash and the Assessing Officer has considered these payments were in violation of Section 269SS of the Act. Stand of assessee is that the amounts were taken in his capacity as partner and it cannot be taken as an independent transaction and there is no violation of Section 269SS of the Act.

Held - Referring to R.M. Chidambaram Pillai (supra); Kum. A.B. Shanti (supra); Lokhpat Film Exchange (Cinema) (supra), Tribunal held that there is no separate identity for the partnership firm and that the partner is entitled to use the funds of the firm and that the assessee acted bonafide and that there was a reasonable cause within the meaning of Section 273B of the Act. We do not find any error or legal infirmity in the order of the Tribunal warranting interference. The substantial question of law raised in this appeal is answered in favour of the assessee and the Tax Case (Appeal) stands dismissed. No costs.

Procedure for updating demographic and contact details in TAN registration

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Update of TAN registration details is allowed on successful logging to TAN account.

For updating the TAN registration details click on “Update Profile”.

Under ‘update profile’ user can update demographic and contact details including e-mail ID (s)

On successful update of TAN registration details, an alert e-mail is sent intimating updates have been successfully processed at TIN.

Subsequent of e-mail ID (s) update (if any), the same should be verified, for TAN account to be active.

Update of e-mail ID (s)

• On update of e-mail ID, an e-mail containing the link is sent at updated e-mail ID for verification of the updated e-mail ID.
• Click on the link and provide TAN and TAN registration no.
• On successful validation of TAN and TAN registration no., e-mail ID will be considered as verified.
• If all the verified e-mail ID’s are updated, then the TAN account will be deactivated, i.e., user will not be allowed to request for any file. However, user will be allowed to update the profile on login to TAN account, in case incorrect e-mail was updated.
• If the TAN account is deactivated on account of update of e-mail ID, then the same can be activated by clicking the link received at the updated e-mail ID and verification of TAN and TAN registration no.

Update of mobile no.

• On update of mobile no.,
  • An SMS containing six character verification code is sent at the updated mobile no. and
  • An e-mail containing link for verification of mobile no., is sent at registered e-mail ID (s)
• Click on the link and provide TAN, TAN registration no. and six character verification code (received by SMS) for verifying the updated mobile no.

S. 194J Payment for Modeling to film actress Katrina Kaif not liable to TDS

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Income Tax Appellate Tribunal, Mumbai

Kodak India (P.) Ltd.

v.

Deputy Commissioner of Income-tax

Income Tax Appeal No. 9080 (Mum.) of 2010
[Assessment Year 2009-10]

Date of Pronouncement – 20.02.2013

 

The case of the assessee is that the assessee being an actor-model rendered modelling services for marketing the products of the assessee-payer of the fee. The services since not rendered for production of cinematographic film, the impugned payments are outside the scope of section 194J of the Act. Taking analogy that the “stunt actor” is not an actor, the modelling actor is also not an actor. The definitions and notifications ought not to be extended to cover the modelling services of this kind. These modelling services are not notified by the Central Board of Direct Taxes for the reasons better known to them. Therefore, the fee received directly by the Matrix India-a front company, on behalf of the Ms. Katrina Kaif, who modelled for marketing of the camera-products of the assessee-Kodak, does not constitutes professional services as the said modelling/acting is not done in relation to production of cinematographic film and she is not an actor for this purpose of section 194J of the Act.

On the other hand, the case of the Revenue is that the payments made by the assessee to Ms. Katrina Kaif should have been done after making TDS in accordance with the provisions of section 194J of the Act and as per the provisions of section 194C of the Act as the impugned payments made constitute fee for professional services for the modelling service, which is a profession by itself. As per the Departmental representative, modelling is done in the capacity of an actor-the film artist.

Held - The provisions of Explanation (a) to section 194J of the Act and Notifications issued by the Board in this regard suggest that the services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or notified sports professionals or other notified professions for the purpose of section 44AA of the Act which includes the film artist as listed in the rules, who are engaged in production of cinematographic film, constitute “fees for professional service” (FPS) for the purposes of section 194J of the Act. It is also a settled position vide the decisions cited above that the list of film artist cannot be extended to include other category of stunt actors, although they are engaged in the production of cinematographic film. It is also the decision of the Tribunal in other case that the photographer-cameraman, who of course figure in the list of film artist, cannot be covered by the above list when such cameraman is not engaged in skills, i.e., acting skill in films, modelling skills for display of merchandise, singing skills, etc., and such person can make earning out of such skills. It is not that the total earning of that person in lieu of services rendered which must attract the provisions of section 194J of the Act. The expressions “services rendered” used in the said Explanation assume significance and therefore, the taxable receipts under section 194J of the Act are services-specific and not person specific. In the instant case, the payments are payable for the services of modelling and it is unconnected with the production of cinematographic film. While “modelling” is aimed at display of merchandise, the “acting” is defined as “to act in play or film” (www.freedictionary.com), i.e., to portray a role authored by a story-writer with different purposes and objects and certainly not to displace merchandise to boost the sales of a manufacturer or a trader of the product or services. Therefore, the impugned payments made by the assessee to Matrix India on behalf of Ms. Katrina Kaif did not attract the provisions of section 194J of the Act.

Carrying IPL matches is not a Charitable Activity

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ITAT CHENNAI BENCH ‘B’

Tamil Nadu Cricket Association

v.

Director of Income-tax (Exemptions)

Income Tax Appeal No. 396 (Mds.) of 2012

Date of pronouncement – 22.02.2013

 

In addition to the regular cricket matches, the assessee is conducting commercially oriented matches like Indian Premier League (IPL). Players of IPL teams are selected by sponsors to play under their brand names. Players are selected through auctions. Players choose that sponsor which offers the highest amount of money. IPL Matches are played with hype and celebration so as to create more and more revenue out of sale of telecast rights. All these activities when read together, one has to come to a finding that the entire activities of the Association is poised towards generating huge amount of income through the game of cricket.

Instead of promoting and developing the game of cricket in Tamil Nadu and Puducherry, the assessee is in fact carrying on the activities of promoting and developing cricket as an entertainment. The price of tickets sold to the public is so high that tickets are as good as highly priced market products.

In these circumstances, the learned officer explained that the assessee has shifted from its earlier activities of general public utility to commercial activities of generating income and revenue.

This change of character proves that the activities of the assessee carried on at present are not in accordance with the objects proclaimed in its Memorandum of Association. The earlier objects for which the assessee was formed into a society were charitable in nature inasmuch as it focused on the promotion and development of the game of cricket as an object of public utility in the State of Tamil Nadu and in the Union Territory of Puducherry. There was the intention of participating the public in the development of the game of cricket, but now it is not so. The public are not participating in the development of the game. They are only spectators to view the costly matches played in the stadium. Therefore, the second condition provided in section 12AA(3) is satisfied in the present case. The first condition is also satisfied inasmuch as the present activities carried on by the assessee are not genuinely for the benefit of public.

Therefore, the learned officer submitted that in the facts and circumstances of the case, the Director of Income-tax (Exemptions) is justified in cancelling the registration to the assessee under section 12AA(3) of the Income-tax Act, 1961.

There cannot be a conflict between the first proviso inserted under section 2(15) and the conditions laid down in section 12AA(3) for cancelling the registration. If there is a conflict between the two, the law stated in the proviso will be defeated. So also, the law stated in section 12AA(3) will be defeated. Therefore, when the assessee is hit by the proviso to section 2(15), its consequential reflection is automatic on section 12AA(3), which prima facie establishes that the activities carried on by the assessee are not genuine, inasmuch as it is not for advancement of any object of public utility. The two conditions laid down in section 12AA(3) cannot be read and understood in disregard of the proviso to section 2(15).

Therefore, the two conditions stated in section 12AA(3) have reference to the de facto nature of the activities carried on by the assessee. The assessee was given registration under section 12AA on the ground that it is a charitable institution inasmuch as it is engaged in the advancement of an object of general public utility in the form of developing and promoting the game of cricket in Tamil Nadu and Puducherry. But, now it is seen that its activities are oriented towards generating income and revenue by converting the sport of cricket into a celebrated industry. It means, the present activities carried on by the assessee are not genuine, when compared to the objects stated at the time of getting registration under section 12AA of the Act. It is not the physical factor as to whether the assessee is conducting cricket matches or not, which is the issue to be looked into. It is the purpose for which those physical activities are carried out. There is no case, as far as physical activities are concerned, that the game conducted by the assessee is not genuine. It becomes not genuine when we look into the objects for which the association is formed and registered under section 12AA of the Act.

Likewise, it is further seen that the object of the assessee was to carry on an activity for advancement of an object of general public utility by promoting the cricket game. But, it has deviated from the stated objective by carrying out the game of cricket as an entertainment industry, generating huge revenue.

Therefore, in the facts and circumstances of the case, we are of the considered opinion that the case of the assessee is covered by both the limbs stated in section 12AA(3) of the Act. We uphold the order of the Director of Income-tax (Exemptions) passed under section 12AA(3) of the Income-tax Act, 1961. The registration of the assessee granted under section 12AA has been rightly cancelled.

Due Dated Extended for bar-coding on Primary level packaging on export consignment

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Public Notice No. 54 (RE-2012)/2009-2014, New Delhi, Dated the 5^th April, 2013

Sub: Deferment in the date of effect for implementation of bar-coding on Primary level packaging on export consignment of pharmaceuticals and drugs for tracing and tracking purpose.

In exercise of the powers conferred under Paragraph 2.4 of the Foreign Trade Policy, 2009-14, as amended from time to time, Director General of Foreign Trade hereby makes following amendments in Public Notice No. 59(RE-2010)/2009-14 dated 30.06.2011 read with Public Notice No. 10 (RE-2010)/2009-2014 dated 11.07.2012:

2. The date of effect for implementation of bar coding on Primary Level packaging as mentioned at serial number 2(i) a of Public Notice No. 59(RE-2010)/2009-14 dated 30.06.2011 will now come into effect from 1^st July, 2014.

3. Effect of this Public Notice:

Earlier the requirement of affixing barcodes on Primary Level packaging was to take effect from 01.07.2013. Now this date has been deferred to 01.07.2014.

Non CTS cheques Valid till 31.07.2013, Banks not to demand PDC

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RBI/2012-13/444
DPSS.CO.CHD.No. 1622/04.07.05/2012-13

March 18, 2013

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks/Local Area Banks
Madam / Dear Sir

Standardization and Enhancement of Security Features in Cheque Forms/Migrating to CTS 2010 standards

A reference is invited to our circular DPSS.CO.CHD.No. 955/04.07.05/2012-13 dated December 14, 2012. On a review of the progress made by banks so far in migration to CTS-2010 standard cheques and in consultation with a few banks and Indian Banks Association, it has been decided to put in place the following arrangements for clearing of residual non-CTS-2010 standard cheques beyond the cutoff date of March 31, 2013.

1. All cheques issued by banks (including DDs / POs issued by banks) with effect from the date of this circular shall necessarily conform to CTS-2010 standard.
2. Banks shall not charge their savings bank account customers for issuance of CTS-2010 standard cheques when they are issued for the first time. However, banks may continue to follow their existing policy regarding cheque book issuance for additional issuance of cheques, in adherence to their accepted Fair Practices Code.
3. All residual non-CTS-2010 cheques with customers will continue to be valid and accepted in all clearing houses [including the Cheque Truncation System (CTS) centers] for another four months up to July 31, 2013, subject to a review in June 2013.
4. Cheque issuing banks shall make all efforts to withdraw the non-CTS-2010 Standard cheques in circulation before the extended timeline of July 31, 2013 by creating awareness among customers through SMS alerts, letters, display boards in branches/ATMs, log-on message in internet banking, notification on the web-site etc.
5. A progress report in this regard to be submitted to this department in the format prescribed in the annex, enabling monitoring of the progress made by banks in respect of migration to CTS-2010 standard cheques.
6. In addition, the bank-wise volume of inward clearing instruments processed in the Cheque Processing Centers will be monitored with respect to the CTS-2010 / non-CTS-2010 standard cheques presented on them.
7. No fresh Post Dated Cheques (PDC)/Equated Monthly Installment (EMI) cheques (either in old format or new CTS-2010 format) shall be accepted by lending banks in locations where the facility of ECS/RECS (Debit) is available. Lending banks shall make all efforts to convert existing PDCs in such locations into ECS/RECS (Debit) by obtaining fresh mandates from the borrowers.

2. The above instructions are issued under section 18 of the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

3. Please acknowledge receipt and confirm compliance.

How to Know Status of Service Tax & Excise payment Challan

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Challan Status Enquiry for Assessee-
Using this feature, assessee can track online the status of their challans deposited in banks.
a) CIN based view :
On entering Challan Identification Number (CIN i.e. details such as BSR Code of Collecting Branch, Challan Tender Date & Challan Serial No.) and amount (optional),the assessee can view the following details:

• BSR Code
• Date of Deposit
• Challan Serial Number
• Major Head Code with description
• Assessee code
• Name of Assessee
• Received by NSDL on (i.e. date of receipt by NSDL)
• Confirmation that the amount entered is correct (if amount is entered)

Challan Status Enquiry for Banks
Using this features, tax collecting branches and the focal point branches can track online the status of their challans deposited in banks as follows :
a) Collecting Bank Branch :
On providing the branch scroll date and the major head code – description, the tax collecting branch can access the following details:

• Scroll Number
• Scroll Date
• Major Head Code – Description
• Total Amount
• Number of Challans

Further, for each Collecting Branch Scroll Date, following information can be accessed:

• Challan Serial Number
• Challan Tender Date
• Assessee Code
• Name of Assessee
• Amount
• Date of receipt by NSDL

b) Focal Point Bank Branch :
On providing the focal scroll date and the major head code-description, the focal branch can view the following details:

• Focal Branch Scroll Number
• Scroll Date
• Major Head Code – Description
• Total Amount
• Number of Branches
• Number of Challans

Further, for each Focal Branch Scroll Number, following information can be accessed:

• BSR Code
• Branch Scroll Number
• Branch Scroll Date
• Total Amount
• Number of Challans
• Date of receipt by NSDL

No penalty if wrong claim is due to mistake/ wrong advice of CA

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO.1332 OF 2011

The Commissioner of Income Tax-I, Mumbai

V/s.

Somany Evergree Knits Ltd

CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ.

DATED : 21ST MARCH, 2013

 

Tribunal by the impugned order records a finding that in the profit and loss account filed along with the return of income, the respondent-assessee has clearly described the loss as the loss on sale of its garment unit assets. This loss was added to the net loss in the computation of the total income. Thus, there was complete disclosure. The Tribunal further records that the above loss was claimed by the respondent-assessee as a revenue expenditure as the Chartered Accountant did not advice them correctly as to the legal position. However, during the assessment proceedings, the mistake was noticed and corrected by the respondent-assessee. On the above facts, the Tribunal concluded the claim for deduction made by the respondent-assessee was on account of a bonafide mistake and in such circumstances, the levying of penalty was not justified. 

Changes in Service tax Exemption Provisions WEF 01.04.2013

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Exemptions

(A) The following exemptions are being rationalized:

* Rationalization of exemption limit prescribed for charitable organizations, providing service towards any other object of general public utility. So far, the limit was 25 Lakh Rupees per annum. Now, they will be covered by the threshold exemption.

* Exemption provided to restaurants other than those having (i) air-conditioning and (ii) license to serve liquor, is being rationalized; condition regarding ‘license to serve liquor’ is being omitted. Therefore, with effect from 1st April, 2013, service tax will be leviable on taxable service provided in restaurants with air-conditioning or central air heating in any part of the establishment at any time during the year.

* Rationalization of exemption to transport of goods by road and rail/vessel.

(B) The following exemptions are being withdrawn:

* Services provided by an educational institution by way of renting of immovable property.

* Temporary transfer or permitting the use or enjoyment of a copyright relating to cinematographic films was fully exempt so far; now, this exemption will be restricted to exhibition of cinematograph films in a cinema hall or a cinema theatre.

* Services by way of vehicle parking to general public.

* Services provided to Government, a local authority or a governmental authority, by way of repair or maintenance of aircraft.

(C) To give effect to the above changes following changes are being made w.e.f April 1, 2013 in the exemption notification number 25/2012-ST dated June 20, 2012:

(i) Exemption by way of auxiliary educational services and renting of immovable property by (and not to) specified educational institutes under S. No 9 will not be available;

(ii) The benefit of exemption under S. No 15 of the notification in relation to copyrights for cinematograph films will now be available only to films exhibited in a cinema hall or theatre. This will allow service providers to pass on input tax credits to taxable end-users;

(iii) Exemption under S. No 19 will now be available only to non air-conditioned (non-centrally air-heated) restaurants; the dual requirement earlier that it should also have a license to serve alcohol is being done away with;

(iv) The exemptions available to transportation of goods by railway and vessel under S. No 20 and services provided by a goods transportation agency (GTA) under S. No.21 are being harmonized. Thus exemption to transportation of petroleum and petroleum products, postal mails or mail bags and household effects by railways and vessels will not be available while the benefit of transportation of agricultural produce, foodstuffs, relief materials for specified purposes, chemical fertilizers and oilcakes, registered newspapers or magazines and defence equipments will be available to GTAs;

(v) The exemptions under S. No 24 for vehicle parking to general public and S. No 25 for repair or maintenance of government aircrafts are being withdrawn; and

(vi) The definition of “charitable activities” is being changed by deleting the portion listed in sub-clause (v) of clause (k). Thus the benefit to charities providing services for advancement of “any other object of general public utility” up to Rs. 25 Lakh will not be available. However the threshold exemption will continue to be available up to Rs. 10 lakh.

Trust Registration valid for sec. 25 Companies formed with charitable objects

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ITAT CHENNAI BENCH ‘A’

Social Pedia Knowledge Foundation

v.

Director of Income-tax (Exemptions)

IT APPEAL NO. 1910 (MDS.) OF 2012

JANUARY 24, 2013

 

In the instant case, a perusal of the object clause of the company shows that it has been incorporated with the aim of providing education, facilitate social and economic empowerment, economic development programs, literacy programs, training programs for villagers and downtrodden people. How these objects are to be achieved should be left to the assessee. The fact that the assessee has been incorporated under section 25 of the Companies Act, 1956 show that it has been formed for promoting charity or any other useful object and intends to apply its profits, if any or other income in promoting its objects. In other words, it’s a non-profit earning organization.

In our considered view, the Director of Income Tax (Exemptions) merely on assumption has rejected the application of the assessee for registration under section 12AA. The impugned order of Director of Income Tax (Exemptions) is set aside. The Director of Income Tax (Exemptions) is directed to grant registration to the assessee under section 12AA.

S. 145A Value of inventory must include amount of excise duty paid on it

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ITAT MUMBAI BENCH ‘K’

Petro Araldite (P.) Ltd.

v.

Deputy Commissioner of Income-tax

Income Tax Appeal No. 6217 (Mum.) of 2012
[A. Y. 2008-09]

Date of Pronouncement – 18.01.2013

 

During the course of assessment proceedings it was observed by AO that the assessee was following ‘exclusive method’ of valuing the cost of its inventory by not increasing it with the amount of excise duty paid thereon, although as per section 145A purchases and inventories are required to be grossed up to include to duty element. That is how an addition of Rs. 1,25,91,360/- was made.

After considering the rival submissions and perusing the relevant material on record it is observed that section 145A came to be inserted by the Finance (No.2) Act, 1995 w.e.f. 1.4.1999 providing for the valuation of purchase and sale of goods and inventory in accordance with the method of accounting regularly employed by the assessee and further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Pursuant to insertion of section 145A it has now become mandatory to value inventory on ‘inclusive’ and not ‘exclusive’ method which was followed by the assessee. Under the section, not only purchase and sale of goods but also the inventory is required to be valued as inclusive of the amount of tax, duty or fee etc. Further, such duty is to be included not only in the value of closing stock but also the opening stock. The Hon’ble jurisdictional High Court in the case of CIT v. Mahalaxmi Glass Works (P.) Ltd. [2009] 318 ITR 116 (Bom) has held that where unutilized Modvat credit is adjusted in the closing stock, similar adjustment should also be made to the opening stock as well. The Hon’ble Delhi High Court in the case of CIT v. Mahavir Alluminium Ltd. [2008] 297 ITR 77 has also canvassed similar view. Respectfully following the above precedents, we set aside the impugned order on this issue and direct the AO to decide it as per law. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in this regard.