Donations to Trusts / Institutions where Directors, their relatives hold position or are interested

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RBI/2013-14/205
UBD.BPD.(PCB).Cir. No. 7/09.72.000//2013-14

August 30, 2013

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

Donations to Trusts and Institutions where Directors, their relatives hold position or are interested

Please refer to our Circular UBD (PCB)/BPD/Cir.43/09.72.00/2004-05 dated April 11, 2005, in terms of which Urban Co-operative Banks (UCBs) were advised that the normal donations to be made during a year should be restricted to a ceiling of 1% of the published profits of the bank for the previous year and such normal donations, together with those that may be made to National Funds and other funds recognized /sponsored by the Central /State Government, during a year, should not exceed 2% of the published profits of the bank for the previous year.

2. It has been brought to our notice that some of the UCBs have made contributions which are in the nature of donations to the Trusts for charitable or benevolent objective or for any exhibition in which the directors or relatives are interested. In view of this, UCBs are, with immediate effect, prohibited from giving donations to Trusts and Institutions, where directors, and/or their relatives hold position or are interested, even within the permissible ceiling of 1% of the published profits of the bank for the previous year.

3. The terms ‘relative’ and “interest, as used above, shall have the meaning as indicated in the Annex.

 

Annex

Definition of terms “relative” and “interest”

1. “relative”

The ‘relative’ of a director of the bank shall mean any relative of a director of the bank as indicated hereunder:

A person shall be deemed to be relative of another, if and only if, :-

a) they are members of a Hindu Undivided Family; or
b) they are husband and wife; or
c) the one is related to the other in the manner indicated below :

List of relatives

1. Father
2. Mother (including step-mother)
3. Son (including step-son)
4. Son’s wife
5. Daughter (including step-daughter)
6. Daughter’s husband.
7. Brother (including step-brother)
8. Brother’s wife
9. Sister (including step-sister)
10. Sister’s husband

2. “interest”

Trust in which directors /relatives of directors hold positions as Trustees, or are beneficiaries or involved in any capacity in the working of the trust, which is likely to influence the independence of the director(s).

Presidents gives Assent to Companies Act, 2013

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COMPANIES ACT, 2013 (ACT NO.18 OF 2013) HAS BEEN ASSENTED BY PRESIDENT OF INDIA

Madras HC explains principles when repairs is current and when non current

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HIGH COURT OF JUDICATURE AT MADRAS

Dated : 24.07.2013

Tax Case (Appeal) Nos.140 to 143 of 2013

489 to 491 of 2012 and 319 of 2013

and connected MPs

Tax Case (Appeal).No.140/2013:-

M/s.Super Spinning Mills Ltd.

-vs-

The Assistant Commissioner of Income-tax

 

The question as to whether the expenditure incurred on replacement of machinery is revenue or capital expenditure, particularly in the nature of replacements of parts, thus rests on the nature of expenditure incurred, vis-a-vis the benefit that the assessee derives. The ratio deductible from the decisions referred to above are:

(i) To decide the applicability of Section 31(i), the test is not whether the expenditure is revenue or capital in nature, but whether the expenditure is “current repairs”. The basic test is to find out whether expenditure is incurred to “preserve and maintain” an already existing asset and the expenditure must not be to bring a new asset into existence or to obtain a new advantage vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)

(ii) Under Section 31(i), the deduction admissible is only for current repairs. Therefore, the question as to whether the expenditure incurred by the assessee conceptually is revenue or capital in nature is not relevant for deciding the question whether such expenditure comes within the etymological meaning of the expression “current repairs”. In other words, even if the expenditure is revenue in nature, it may not fall in the connotation of “current repairs” [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)

(iii) A new asset or new/different advantage cannot amount to `current repairs’. – 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)

(iv) Repair implies existence of a part of the machine which has malfunctioned, thereby requiring repair to that machinery, plant etc. Replacement cannot be a current repair, for, “replacement” and “current repair” do not go hand in hand . If one is to hold otherwise, it would only make Section 31(i) wholly redundant and absurd. Thus, replacement expenditure cannot be said to be `current repairs’ vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) and 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)

(v) Expenditure is deductible under section 37 only if it (a) is not deductible under sections 30-36, (b) is of a revenue nature, (c) is incurred during the current accounting year and (d) is incurred wholly and exclusively for the purpose of the business. – 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited);

(vi) Expenditure is of a capital nature when it amounts to an enduring advantage for the business and repair is different from bringing a new asset for the business. Further, bringing into existence a new asset or an enduring benefit for the assessee amounts to capital expenditure vide Lakshmiji Sugar Mills (P) Co. v. CIT (AIR 1972 SC 159) referred in 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited).

(vii) Therefore, whether an expenditure is revenue or capital in nature would depend on the facts of each case. – [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)

Aircraft Owned & used by Assessee for travel of its Directors exempt from wealth Tax

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HIGH COURT OF DELHI AT NEW DELHI

Judgment reserved on : 03rd July, 2013

Judgment pronounced on: 1 1th July, 2013

WTA 1/2013

COMMISSIONER OF WEALTH TAX

versus

JAY PEE VENTURES LTD

 

The use of an aircraft for commercial purposes does not necessarily entail hiring to third parties, ferrying of passengers or leasing of the aircrafts for consideration. The intention of the legislature while creating the exception by using the expression “used by the Assessee for commercial purposes” was not to restrict the meaning of the words ‘commercial purposes’ to running the same on hire or as stock in trade.

TDS not deductible on service tax portion – Rajasthan HC

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HIGH COURT OF JUDICATURE FOR RAJASTHAN

BENCH AT JAIPUR

D.B. INCOME TAX APPEAL NO.235/2011,

D.B. INCOME TAX APPEAL NO.222/2011,

D.B. INCOME TAX APPEAL NO.238/2011,

D.B. INCOME TAX APPEAL NO.239/2011

Commissioner of Income Tax (TDS)

Versus

M/s. Rajasthan Urban Infrastructure

Date of Pronouncement : 01.07.2013

 

The assessee, Rajasthan Urban Infrastructure Development Project(in short ‘RUIDP’), is a project of Government of Rajasthan for the Infrastructure Development and Civic Amenities in the specified areas/cities in the State of Rajasthan. The project is financially assisted by the Loan from the Asian Development Bank through the Government of India. The project is working under the Urban Development Department of the Government of Rajasthan. The accounts are maintained on cash basis of accounting and also audited by the Chartered Accountant as per the requirement of the Asian Development Bank and also audited by the Department of Accountant General of Rajasthan. The RUIDP appoint the technical and project consultants on open tender basis and the limited companies as well as corporate consulting firms of repute are selected and appointed as per the laid down procedure. The assessee deduct the incometax at source from the payments made by it and deposit the same as per the relevant provisions of the Income Tax Act and the return for the same is filed in due time. It appears that main consultants are charging the service tax at the prevailing rates on the amount of fee payable as per the agreement and the same is paid by the assessee/RUIDP. The tax is deducted on fees and other payments of expenses as being part of contract, however, no TDS has been deduced on service tax in view of the term of contract.

The dispute relates to a point as to whether TDS is to be deducted on the amount payable on account of service tax or not? The Tribunal has considered the agreement and recorded a finding that as per the term of contract, the amount of service tax was to be paid separately, therefore, the same was not subject to TDS.

On Appeal Honurable High Court has held as follows :-

We have considered the provisions of Section 194J of the Income Tax Act, in the light of Circulars dated 28.04.2008 and 30.06.2008. The words, “any sum paid”, used in Section 194J of the Act, relate to fees for professional services, or fees for technical services. As per the terms of agreement, the amount of service tax was to be paid separately and was not included in the fees for professional services or fees for technical services. In these circumstances, we are satisfied that the orders passed by the Appellate Authority as well as the Appellate Tribunal, are in accordance with the provisions of Section 194J of the Income Tax Act. The service tax was to be paid separately or not, is purely a question of fact and as per the agreement entered in the present case, it was to be paid separately and there is a finding of fact in this regard, recorded by the Appellate Authority as well as the Appellate Tribunal also. Even if the Circular dated 28.04.2008, is held to be not applicable in the present case, we find that the orders passed by both the authorities below, are in accordance with the provisions of Section 194J of the Income Tax Act, looking to the facts and circumstances of the present case.