CORPORATE AND PROFESSIONAL UPDATES 2ND OCT 2018

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Direct Tax:

  • ITAT Indore held that profit from sale of land with well thought business project is business income.Smt. Anita Singh Vs ACIT (ITAT Indore)
  • ITAT Chandigarh held that 100% deduction under section 80IC allowable on substantial expansion of eligible unit.  Friends Alloys VsAsstt. CIT (ITAT Chandigarh)
  • Gujarat High court held that tax cannot be levied on gain from sale of agricultural land based on intention of buyer to use the land for business purpose.  Principal CIT Vs Heenaben Bhadresh Mehta (Gujarat High Court)
  • ITAT Jaipur held that interest on income tax refund not eligible for deduction under section 80IE. M/s. OMIL JSC (JV) Kameng Kota. Vs Dy. CIT (ITAT Jaipur)

INDIRECT TAX

  • GST Offline utility of Form GSTR-10 (Final Return) is now available in the download section of GST portal. The excel based offline utility is designed to help taxpayers to prepare their Form GSTR-10 offline.
  • CBIC extends Mandatory RFID sealing due date to 01.11.2018. References have been received regarding Circular 19/2018-Customs dated 18th June 2018 seeking a postponement in the date for mandatory RFID sealing in case of movement of goods under warehousing bond.
  • GST Council set up a committee of seven state finance ministers to examine the legality and recommend the methodology for levying an ‘additional tax’ to raise revenue for floods-ravaged Kerala.

FAQ on GST Audit:

  • Query: What is the legal recourse available in respect of a person who is liable to pay tax but has failed to obtain registration?
  • Answer:Section 47 of MGL provides that in such a case, the proper officer can assess the tax liability and pass an order to his best judgment for the relevant tax periods. However, such an order must be passed within a period of five years from the due date of filing of the annual return for the financial year to which non-payment of tax relates.

RBI UPDATES

  • RBI issued draft directions for the prohibition of abuse in the fixed income markets, stating, among other things, that market participants, either acting independently or in collusion, shall not undertake any action with the intention to manipulate the process of calculation of a benchmark rate or reference rate.
  • The Reserve Bank of India has issued notification regarding Co-origination of loans by Banks and NBFCs for lending to priority sector.

MCA UPDATES

  • MCA has A High Level Committee on CSR (HLC-2018) to review the existing framework and guide and formulate the roadmap for a coherent policy on Corporate Social Responsibility ( CSR).

KEY DUE DATES 

  • GSTR-3B (SEP 2018)-OCT 20th, 2018
  • GSTR-5 (SEP 2018)-OCT 20th, 2018
  • GSTR-4 (JULY-SEP, 2018)-OCT 18th, 2018
  • GSTR-5A (SEP 2018)-OCT 20th, 2018
  • Quarterly return for registered persons with aggregate turnover up to Rs. 1.50 Crores- GSTR-1 (JULY- SEP, 2018)-OCT 31ST, 2018.
  • Quarterly return for registered persons with aggregate turnover more than Rs. 1.50 Crores- GSTR-1-(SEP 2018)-OCT 31ST 2018

Disclaimer:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. The author is a Chartered Accountant and the Chief Gardener & Founder Director of Rajput Jain & Associates , a leading Tax & Investment Planning Advisory Service Provider. His blog can be found at http://carajput.com/blog/For any query you can write to info@carajput.com. Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 09811322785/4 9555 5555 480)

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KEY CHANGES IN NEW ITR FORMS 3,4,5,6 AND 7

Key changes in new ITR Forms 3, 4, 5, 6 and 7

Untitled7CBDT has notified ITR Forms 1, 2 and 4S for the Assessment Year 2015-16 vide Notification No. 41/2015, Dated 15-04-2015. However, after representations received from various stakeholders, the CBDT came out with simplified version of ITR forms 1, 2, 2A and 4S.

Now the CBDT has notified the remaining ITR forms, Forms 3, 4, 5, 6 and 7 vide Notification No. 61/2015.

Different forms are prescribed for different taxpayers. The following table gives an overview of the return formsapplicable to different taxpayers.

ITR Form Taxpayer
ITR-3 This form shall be used by an individual or HUF:■  Who is a partner in a firm; and

■  If his income chargeable to tax under the head ‘Profits or gains from business or profession’ does not include any income except income by way of any interest, salary, bonus, commission or remuneration due to, or received by him from such firm.

ITR-4 This form is relevant for an individual or HUF who is carrying on a proprietary business or profession.
ITR-5 This ITR form can be used by a firm, LLP, AOP, BOI, artificial juridical person, cooperative society or local authority. However, a person who is required to file return in ITR 7 shall not use this form.
ITR-6 This form shall be used by a company, other than a company claiming exemption under section 11, to file its return of income.
ITR-7 Applicable to a persons including companies who are required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D) (i.e., trusts, political parties, institutions, colleges, etc.)

Key changes in ITR forms are as follows:

Details of all bank accounts held by assessee [ITR 3, 4, 5, 6, 7]

Under new ITR form, an assessee is required to furnish details of all bank accounts held by him in India at any time during the previous year. However immunity has been provided to the taxpayer from furnishing details about the bank accounts which have become dormant.

The ‘dormant’ account shall be those current and saving bank accounts which have not been operational for more than 3 years.

Details to be reported in respect of each bank account held in India by assessee are same as earlier i.e.

  (a) IFSC Code of the Bank

  (b) Name of the Bank

  (c) Account Number

  (d) Nature of the bank account, i.e., current account or saving account

Date of Formation of HUF [ITR 4]

HUF is required to report date of its formation in new ITR Form.

Aadhaar Number and passport number  [ITR 3, 4]

Aadhaar number and passport number are required to be given in new ITR forms (if assessee has obtained the same).

Reporting of amount that has remained unutilized in capital gains account [ITR 3, 4, 5, 6]

If assessee is unable to roll over the investment in new capital asset within the specified time period so as to avail of the exemptions under section 54, 54B, etc., he can deposit the sum in capital gains account scheme.

In that case, exemption to be granted to assessee shall be aggregate of actual investment in new capital asset and amount deposited in capital gains account scheme before due date of filing of return of income.

The amount so deposited in the capital gains account scheme should be utilized for investment in specified asset within specified time-limit, otherwise the unutilized amount shall be chargeable to tax in the previous year in which the time-limit expires. The unutilized amount would be taxable as short-term capital gain/long-term capital gain, depending upon the nature of original capital gain.

In ITR forms, requisite details are required to be provided in respect of amount so deposited in capital gains account scheme.

The details which are required to be provided if amount is deposited in capital gains account scheme are as follows:

  (a) Previous year in which asset is transferred

  (b) Section under which exemption is claimed

  (c) Year in which new asset is acquired

  (d) Amount utilized out of capital gains account scheme to acquire new asset

  (e) Amount that has remained unutilized in capital gains account scheme or amount which is not used for making investment in specified new asset

Details about the foreign assets and foreign income [ITR 3, 4, 5, 6, 7]

The ITR forms seek more details about the foreign assets and income from any source outside India. Schedule FA is substituted which requires assessee to provide detailed information about such foreign assets and income. The additional disclosures in the new ITR form shall be as under:

(1) Foreign Bank Account:  (a) Status of account holder (i.e., Owner/Beneficial Owner/Beneficiary)  (b) Date of opening of such bank account;  (c) Interest accrued in the account; and  (d) Details about the interest offered to tax in the return.

(2) Financial Interest in a foreign entity:  (a) Nature of financial interest (direct, beneficial ownership or beneficiary) in such entity;  (b) Date since such interest is held;  (c) Income accrued from such interest;  (d) Nature of income; and  (e) Details about the income offered to tax in this return.

(3) Foreign Immovable Property or any other capital asset:  (a) Whether ownership in such asset is direct or beneficial or as beneficiary;  (b) Date of acquisition of such asset;  (c) Income derived from such asset;  (d) Nature of income; and  (e) Details about the income offered to tax in this return

(4) Signing authority in any foreign account:  (a) Whether income accrued in such account is taxable in assessee’s hands; and (b) If yes then furnish details about the income offered to tax in this return

(5) Trustee or Beneficiary or Settlor in a foreign trust:  (a) Date since the position of trustee or beneficiary or settlor held in foreign trust;  (b) Whether income derived from the trust is taxable in assessee’s hands; and  (c) If yes, details about the income offered to tax in this return

(6) Any other income derived from any source outside India:  (a) Country Name and Code;  (b) Name and address of the person from whom income is derived;  (c) Amount of income derived;  (d) Nature of income;  (e) Whether income is taxable in assessee’s hands; and  (f) If yes, details about the income offered to tax in this return.

Reporting of deemed let-out house property [ITR 3, 4, 5, 6, 7]

If assessee owns more than one house, one house can be claimed by him as self-occupied while all other houses shall be deemed to be let out. Assessee shall be required to select a check-box in the ITR Form to indicate whether a house owned by him shall be deemed to be let-out.

Concessional tax rate in case of sale of listed securities (other than unit) [ITR 3, 4, 5, 6]

As per the existing proviso to Section 112, if tax payable on long-term capital gains arising on transfer of a capital asset, being listed securities or units or zero coupon bonds, exceeds 10% per cent of the amount of capital gains before allowing for indexation adjustment, then such excess shall be ignored.

The Finance (No. 2) Act, 2014 amended the said proviso to provide that the concessional rate of tax of ten per cent shall be available only for long-term capital gain arising from transfer of listed securities (other than unit) and zero coupon bonds.

Therefore, consequential amendment is made to ITR forms in accordance with the amendment.

Now Long term capital gain from sale of MF is includable in this scheduled only if sale is on or before 10-07-2014

Agricultural income [ITR 3, 4, 5, 6]

The Schedule EI in ITR forms requires assessee to provide following figures separately:

  (a) Gross agricultural receipts

  (b) Expenditure incurred on agriculture

  (c) Unabsorbed agricultural loss of previous eight assessment years

  (d) Net agricultural income for the year.

Details of change in partners/members [ITR 5]

A new column has been inserted to require the assessee to furnish the details of change in the partners/members of the firm/AOP/BOI, as the case may be, during the previous year. Following details shall be furnished in the table newly inserted in Part A – General:

  (a) Name of the partner or member

  (b) Status as to whether admitted or retired

  (c) Date of admission or retirement

  (d) Percentage of share (if determinate)

Details of interest rate and remuneration payable to partners/members [ITR 5]

New ITR 5 requires disclosures of rate of interest and remuneration paid/payable to the partners or members in firm/AOP/BOI or settlor/trustee/beneficiary in the trust, as the case may be.

Detail of Salary/remuneration paid to partners/members [ITR 5]

New ITR Forms requires separate disclosures of salary or remuneration paid or payable to the partners during the year.

Bifurcation of interest paid to resident and non-resident [ITR 5]

New ITR 5 requires separate disclosure of interest paid:

  (a) Outside India or paid in India to a Non Resident

  (b) Paid in India or paid to a resident

All interest payments shall be bifurcated to indicate how much interest has been paid to:

  (a) The partners; and

  (b) Others

Return filed pursuant to order of CBDT under Section 119  [ITR 3, 4, 5, 6, 7]

For avoiding genuine hardship, by general or special order, the Board may authorize any tax authority other than CIT (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief after the expiry of the period specified under the Act.

If assessee is filing return of income pursuant to an order of CBDT under Section 119(2)(b), it shall tick the check-box [ under Section 119(2)(b)] introduced in the new ITR forms.

Generally CBDT extends date of filing of return under Section 119 in cases of natural calamities or when taxpayer faces genuine hardship in certain circumstances. Recently, the due date of filing of return for J&K taxpayers was extended by the CBDT due to devastation caused by flood in J&K.

Expenditure on CSR activities [ITR 6]

An Explanation was inserted in section 37(1) by Finance (No. 2) Act, 2014 to clarify that any expenditure incurred by an assessee on the activities relating to corporate social responsibility (CSR) referred to in section 135 of the Companies Act, 2013 shall not be allowed to be deducted as same could not be considered to be incurred for the purposes of the business or profession.

Thus, ITR 6 has been revised to provide for reporting of expenditure on CSR activities if the same is debited to profit and loss account.

Deduction under section 32AC [ITR 6]

Any company engaged in business of manufacture or production of any article or thing is entitled to claim allowance under Section 32AC for investment in new plant and machinery. Now a particular field is provided in new return form under ‘Schedule BP’ for reporting of investment allowance under Section 32AC.

Alternate Minimum Tax [ITR 4, 5, 7]

The existing provisions of section 115JC provides that alternate minimum tax (‘AMT’) shall be payable at the rate of 18.5% on adjusted total income. Further, the adjusted total income was computed by including only profit linked deductions (i.e., deductions claimed under Part C of Chapter VI-A and deductions claimed under section 10AA) in total income.

However, with a view to include investment linked deduction in adjusted total income, Section 115JC was amended by Finance (No.2) Act, 2014 to provide that total income shall be increased by the deduction claimed under section 35AD for purpose of computation of adjusted total income.

Accordingly, the return forms have been revised to include Section 35AD deduction for computation of adjusted total income.

Foreign portfolio investors/Foreign Institutional investors [ITR 5, 6]

Foreign Institutional Investor (FII) and Foreign Portfolio Investor (FPI) are required to furnish their SEBI registration number in the new return Form.

Verification [ITR 3, 4, 5, 6, 7]

Where return is being furnished under section 92CD, assessee shall provide an additional declaration that the critical assumptions specified in the agreement have been satisfied and all the terms and conditions of the agreement have been complied with.

Securities held by FIIs [ITR 3, 4, 5, 6]

Section 2(14) of the Act was amended by the Finance (No. 2) Act, 2014 to provide that securities held by FIIs shall be deemed as ‘Capital Assets’. The amendment was made to end the controversy of categorization of income of FIIs as business income or capital gains.

Consequential changes have been made in ITR forms in this regard.

Sale of units of business trust [ITR- 3, 4, 5, 6]

The Finance (No. 2) Act, 2014 introduced a new Chapter XII-FA in the I-T Act to provide for special provisions relating to business trust. The special taxation regime contains provisions for taxability of income in the hands of business trusts and the income distributed to its unit holders.

Consequential amendment is made to Section 10(38) to provide that long-term capital gain arising from transfer of unit of a business trust on which securities transaction tax (STT) is paid shall be exempt from tax.

Similarly, Section 111A has been amended to provide that short-term capital gain arising from transfer of unit of a business trust on which STT is paid shall be chargeable to tax at reduced rate of 15%.

Necessary changes have been made in this regard in the ITR forms.

Details of income taxable under DTAA [ITR 3, 4, 5, 6]

If capital gain or residuary income of assessee is taxable as per provisions of the DTAA entered into between India and a foreign country, of which the assessee is a resident, following details shall be furnished in the return:

  (a) Name of the Country and Code

  (b) Relevant Article of the DTAA

  (c) Rate of tax under DTAA (applicable in case of residuary income)

  (d) Confirmation if TRC has been obtained

  (e) Corresponding section of the Act which prescribe the rate of tax (applicable in case of residuary income)

  (f) Amount of income

Further, the special tax rate on capital gain or residuary income and tax on such income as per DTAA shall be disclosed separately in Schedule SI.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE SOCIAL RESPONSIBILITY (CSR) NORMS AS PER NEW INDIAN COMPANIES ACT 2013

CORPORATE SOCIAL RESPONSIBILITY (CSR) NORMS AS PER NEW INDIAN COMPANIES ACT 2013

6Corporate Social Responsibility (CSR), a term widely use for defining the responsibilities of corporate world towards the society & environment. Although the term is not new in this Corporate world but its scope & meaning has undergone major changes from treating it as a mere charity in comparison with the responsibilities/duties of the Corporate towards the outer world.

There are many big entities who have been actively engaged in the CSR activities but unfortunately the number is relatively less. In order to encourage more entities to participate in the process of development of the society via- CSR, the Government of India has actually implemented the concept of CSR in the new Companies Act 2013, On 27th February, 2014, the Government of India has notified the rules for CSR spending u/s 135 of the New Companies Act 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014 effective from 1st April 2014. Turning the CSR from voluntary activities to the mandated responsibilities, also governed by the bundle of regulations as follows:

Eligibility Criteria:

Company (includes foreign company with branches or project in India) having:

  • Minimum net worth of rupees 500 Crore.
  • Turnover up to “1000 Crore”
  • Having a net profit of at least ‘5crore’.

During any financial year, are covered by this provision

Brief on CSR Activities as prescribed under Schedule VII of CA, 2013

  • Objective to efface the daily life segments including poverty, malnutrition and hunger while enhancing the standard of living and promoting the facets of better health care and sanitation.
  • Initiative to promote the different segments of education including special education and programs to enhance the vocation skills for all ages like children, women, elderly and conducting other livelihood enhancement projects.
  • Aim to bring the uniformity in respect of different sections of the society to promote gender equality and other facilities for senior citizens and developing hostels for women and orphans and taking initiative for empowering women and lowering inequalities faced by socially and economically backward groups.
  • Elevate the segment of flora and fauna to bring the ecological balance and environmental sustainability in respect of animal welfare, conservation of natural resources and ago forestry while maintaining the quality of air, water and soil.
  • Enhancement of Craftsmanship while protecting art and culture and measures to restore sites of historical importance and national heritage and promoting the works of art and setting up of public libraries.
  • Steps to bring worthy to the part of war windows, armed force veterans and their departments.
  • Sports programs and training sessions to enhance the level of rural sports, nationally recognized sports, Paralympics sports and Olympics sports.
  • Favoring to Prime Minister’s National Relief Fund and contribution to other fund set up by the central government to promote socio-economic development and welfare of the schedule castes and Schedule Tribes and for supporting backward classes, minorities and women.
  • To uplift the technology of incubator that’s comes under academic institutions and which are approved by the Central Government.
  • Introducing varied projects for Rural Development.

Composition of CSR Committee

The Company should constitute a Corporate Social Responsibility Committee as follows:

  • The Committee shall consist of minimum 3 (three) including 1 (one) Independent Director, however in case of Private Company or the Company, which is not required to appoint Independent Director on board, or Foreign Company the committee can be formulated with (2) two directors.
  • The CSR Policy shall be formulated in accordance with Schedule VII and the CSR Committee will be responsible for framing the policy, finalizing the amount to be spent on CSR, monitoring & implementation of the Scheme.
  • If Company ceases to fulfill the eligibility criteria for three consecutive years, then the company is not required to comply until the company will meet the eligibility criteria once again.

The CSR Rules provides the manner in which CSR committee shall formulate, monitor the policy and manner of understanding for CSR activities.

Under the rules, the Government has also fixed a threshold limit of 2% of the “Average’ Net Profits of the block of previous three years on CSR activities and if Company fails to spend such amount, disclosures are to be made for the same. But an exemption has been given to the Companies that do not satisfy the above threshold for three consecutive years.

The below activities doesn’t include under the CSR activities of the Company.

  • Business run in the normal course.
  • Outside the territory of the India or abroad.
  • For the welfare of the employees and their families.
  • Political party contribution of any amount directly and indirectly as defined u/s 182 of the Act.

The above CSR activities shall be undertaken by the Company, as per its stated CSR policy, in consonance with the new or ongoing projects excluding activities undertaken in pursuance of its normal course of business. The Board of Directors may decide to undertake its CSR activities approved by the CSR Committee, through a registered trust or a registered society.

Yearly Compliances:-

  • The Annual Report of the Company shall include a comprehensive Report on CSR in the format as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014, containing particulars on Overview of CSR Policy, Composition of the Committee, Avg. Net Profit, prescribed expenditure and details of its spending, reason in case of failure etc.
  • The disclosure on CSR in Board Report should also be available on the Company’s Website.
  • The activities included in the CSR Policy and the prescribed expenditure being undertaken/ spent shall be ensured by the Board, in the respective manner.

This means all the Companies falling in the aforesaid criteria needs to ensure CSR compliance but it is debatable to say that the same is for welfare of the society or the companies are doing it just to avoid penalties. CSR stands to support the Company’s Vision as well as directions to what Organization stands for and will sustain its clients. An ISO 26000 is the accepted worldwide standard for Corporate Social Responsibility (CSR).

CSR term has been revaluated with an aim to embrace responsibility for the Company’s actions and encourage a positive impact through its activities on the environment, consumers, conscience, corporate citizenship, social performance, employees, communities and all stakeholders.

CSR can also be termed as Corporate Organizations to behave responsibly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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