CORPORATE AND PROFESSIONAL UPDATE MAY 21, 2016

Professional Update For the Day:

Untitled5DIRECT TAX: 

Income Tax: Disallowance of profit in sale of agriculture land – whether transaction in property by assessee company should not be treated as business activity – Held that – There is no enabling provision in the income-tax law prescribing that even if the assessee s income is exempt by a provision, then it can be forcibly brought into the tax net by assuming the assessee s activity to be adventure in the nature of trade. – ( The ACIT, Circular, Alwar Versus M/s. Focal Point Builders and Promoters Pvt. Ltd. ) – 2016 (5) TMI 635 – ITAT MUMBAI.

Income Tax: Addition u/s 41 – conversion of unsecured loan from the sister as gift by book entry – in the earlier years, interest paid to sister was claimed as deduction – whether remission / cessation of liability u/s 41(1) – Held that – There was no remission of liability u/s 41(1) of the Act, because the gift was genuinely made by Smt. Kiranben Gandhi and accepted by the assessee out of natural love and affection and there was no business consideration  ( Shri Shailesh C. Modi Versus Income Tax Officer, Ward – 1 (1) (4) , Surat)-  2016 (5) TMI 637 – ITAT AHMEDABAD. 

INDIRECT TAX :
VAT : Department of Trade & Taxes has extended the last date of filling of online/hard copy of fourth quarter return for the year of 2015-16 in DVAT Form-16, DVAT Form-17, and DVAT Form 48 along with required Annexure /enclosures to 23/05/2016 vide Circular No. 5 of 2016-17 dated 16.05.2016 . However, the tax due shall continue to be paid in the usual manner as per the provisions section 3(4)  of the Delhi value Added Tax Act, 2004.

VAT & CST : Department of Trade & Taxes has issued a Circular on Grant of registration under DVAT & CST vide circular No. 6 of 2016-17 dated 17.05.2016.The department of trade and taxes has developed a mobile application DVATMsewa to provide various services to the traders.One of the services to be provided with this app is registration of delars under DVAT Act,2004 and CST Act, 1956

Key dates :

Today (21.05.16) is the last date for e-payment of DVAT & CST for the month of April, 2016.

Issue of TDS Certificate in case of payment/credit made in April for purchase of property u/s 194Iain Form 16B: 22/05/2016

Issue of DVAT Certificate for deduction made in April: 22/05/2016

Payment of ESI of April: 21/05/2016

No one gets a sudden rise, not even the sun. It takes time to rise to the peak of success. Just keep your efforts going and be positive. 

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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. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. 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)

CORPORATE AND PROFESSIONAL UPDATE MAY 14, 2016

Professional Update For the Day:

29

Direct Tax:

CBDT has granted relaxation of time for submitting Form ITR-V to be filed electronically without attesting digital signature for the Asst. Years from 2009-10 to 2014-2015 through Electronic Verification Code (EVC) till 31 AUG 2016.

Primary agricultural credit society can claim deduction u/s 80P. [ The Chirakkal service Co-Operative Bank Ltd vs. CIT (Kerala HC)].

Big B’ in Tax trouble; Apex Court nods to reopening of his tax case of 2001[2016] 69 taxmann.com 170 (SC) Commissioner of Income-tax, Mumbai v. Amitabh Bachchan

CBDT has not revised due dates for filing of TCS returns

Tax returns for A.Y.s 2009-10 to 2014-15 filled electronically under time limit of Sec.139, to be verified through ITR V Form by 31.08.16.CBDT Circular no.13/2016.

The government has gained the right to tax capital gains arising in Mauritius from sale of shares acquired on or after April 1, 2017.

Exercise of S. 263 on expenses claim withdrawn by assessee valid. [Commissioner Of Income Tax vs.Amitabh Bachchan (SC)].

IT: Depreciation in respect of electrical installations, elevators, DG sets installed in the building let-out by the assessee which is receiving rental income from the said building allowed – M/s IBC Knowledge Park Pvt. Ltd. Vs. CIT & DCIT, Bangalore (2016 (5) TMI 372 – Karnataka High Court)

Exercise of Sec. 263 on expenses claim withdrawn by assessee valid. [Commissioner of Income Tax vs.Amitabh Bachchan (SC)].

IT: Penalty U/s 271(1)(c) – penalty proceedings are distinguished and separate and assessee can raise fresh plea in the penalty proceedings which has been done in this case – Sudhir Awasthi Vs. ITO, W-5(2), Jaipur (2016 (5) TMI 367 – ITAT Jaipur)

The Income declaration scheme 2016 and the direct tax dispute resolution scheme 2016 expected to come into force on 01.06.16.CBDT press release of 12.05.16.

Sec. 40 (a) (i) is discriminatory and not applicable to Indo-US DTAA. [CIT vs. Herbalife International India Pvt. Ltd (Delhi HC)].

Section 94-A(1) is constitutional valid.[Madras High Court T. Rajkumar and Others vs. UOI and Ors. (Madras HC)].

Indirect Tax:

ST: Advertising agency service on commission basis – Model (1) Placement of advertisement in traditional media on behalf of the advertiser – Modes (2) Buying and selling of advertisement inventory in non-traditional media on its own account – In both Models there is no service tax liability – M/s AKQA Media India Pvt. Ltd. Vs. CST, Mumbai (2016 (5) TMI 456 – AAR)

VAT & ST: The contracts of construction of glass curtain wall executed by the Applicant would not constitute contracts for construction of buildings mentioned in Para A of the Notification dated 8 MAR 2000 issued for the purpose of section 6A(1) of the Works Contract Act – M/s Permasteelisa Vs. ACST & DCST(2016 (5) TMI 497 – Bombay High Court)

DTAA: After successful renegotiating tax treaty with Mauritius, the GoI is looking to rework the double taxation avoidance pact with Singapore to plug the leakage.

Service Tax wrongly paid on the manufacturing activity is allowed to be adjusted against excise duty. [Hyva India Pvt. Ltd. vs. Comm of Central Excise, Customs and Service Tax, Bangalore-I (2016) 68 taxmann.com 383 (CESTAT)].

ST: Import of internet connectivity services – The server placed outside India are meant for internet connectivity services and can’t be considered as hiring of simple physical space for placing servers – prima facie case is in favor of assessee – M/s HT Media Ltd. Vs. CST, Delhi (2016 (5) TMI 377 – CESTAT New Delhi)

VAT & ST: Detention of goods in transit – detention order passed u/s 70A of the GVAT Act suffers from the breach of principles of natural justice as well as lack of application of mind and therefore stands vitiated – Jay Ambey Traders Vs. State of Gujarat (2016 (5) TMI 435 – Gujarat High Court)

DVAT Regd dealers to display certificate of registration at principal place and certified copy at other places of business in Delhi. DVAT circular no: 4 of 2016-17.

VAT on diesel reduced to 16.75% from 18% in Delhi

Excise & Customs : Before initiating garnishee proceedings for recovery of dues of assessee from assessee’s debtor under Section 11(2), revenue must first of all adjudicate what sums are due to Government[2016] 69 taxmann.com 37 (Bombay)  Sikkim Ferroys Alloys Ltd. v. Office of the Assistant Commissioner of Central Excise

Changes in VAT rate schedules w.e.f 10.05.2016. VAT rates on sweets and namkeen, marble, footwear, e-rickshaws reduced to 5%. DVAT Notification dated 09.05.2016.

Govt. amended Mauritius Treaty to bring LTCG, STCG & Derivatives Income to tax at par with the Domestic Tax w.e.f. 01.04.2019. No tax till March 31, 2017. From 01.04.17 to 31.03.2019, LTCG is exempt, STCG to be taxed @ 7.50% & Derivatives Income to be taxed @15%.

Company Law:

MCA has notified The Companies (Registration Offices and Fees) Amendment Rules, 2016. The Ministry has amended Forms GNL-1 and GNL-4 which shall be compatible with the latest V2 platform designed by the MCA.

Other Update :

Rajya Sabha passes the insolvency and bankruptcy bill and the finance bill 2016 on wednesday, 11th May, 2016.

Get ICAI now mobile app for latest ICAI updates. Available on android, iOS, windows and blackberry 10. To download please visit: – http://www.icai.org/mobile.

FEMA (exports of goods and services) regulations, 2015. Notification no. RBI/2015-16/395A.P. (DIR series) Circular No.68 [(1)/23(R)] dated may 12, 2016.

CAs to submit PAN nos. to ICAI at http://icai.org/new_post.html?post_id=12138. For DSC latest by 14th May, 2016.

Key Dates:

Deposit of DVAT TDS for April in Form DVAT-20: 15/05/2016

TDS/TCS return for March Quarter by all Deductors/Collectors Including Govt. on the Form 24Q,26Q,27Q and 27EQ:– 15/05/2016

Advance information for 2nd fortnight of May of functions with booking cost > Rs. 1 Lakh in Banquet Halls,Hotels etc. in Delhi : 12/05/2016

E-Payment of PF for April(No grace of 5 days): 15/05/2016

15.05.16 (Sunday) is last day to file TDS/TCS returns for Q4 of F.Y. 2015-16. TDS statements to be filed in 31 days from F.Y. 16-17.

 

The chief danger in life is that you may take too many precautions.      -Alfred Adler

Deep relationship is not built by forcing others to understand you but by giving them, the confidence that you will never misunderstand them.

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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. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. 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)

Levy of Service Tax on Services Provided By Government or Local Authority to Business Entities

Levy of Service Tax on Services Provided By Government or Local Authority to Business Entities

www.carajput.com;Service Tax Update

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CIRCULAR NO.192/02/2016-STDATED 13-4-2016 : Any service provided by Government or a local authority to a business entity has been made taxable w.e.f 1st April 2016. Post Budget 2016, representations have been received from several quarters including business and industry associations in respect of various aspects pertaining to the taxation of such services. Accordingly, the following clarifications are issued:—

Sl. No. Issue Clarification
1. Services provided by Government or a local authority to another Government or a local authority. Such services have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended byNotification No. 22/2016-ST dated 13-4-2016 [ENTRY 54 REFERS].

However, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994.

 

2. Services provided by Government or a local authority to an individual who may be carrying out a profession or business. 1. Services by way of grant of passport, visa, driving license, birth or death certificates have been exemptedvide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 55 REFERS].2. Further, for services provided upto a taxable value of Rs 5000/-, Sl. No. 5 below may please be seen.

 

3. Service Tax on taxes, cesses or duties. Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property tax.
4. Service Tax on fines and penalties. 1. It is clarified that fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax.
2. Fines and liquidated damages payable to Government or a local authority for non-performance of contract entered into with Government or local authority have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 57 REFERS].
5. Services provided in lieu of fee charged by Government or a local authority. It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and the amount charged for performing such activities is liable to Service Tax.

It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service in return (i.e., as a quid pro quo for the service received), it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called.

 

It is also clarified that Service Tax is leviable on any payment, in lieu of any permission or license granted by the Government or a local authority.

 

2. However, services provided by the Government or a local authority by way of:
(i) registration required under the law;

 

(ii) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law,
have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 58 REFERS].
3. Further, services provided by Government or a local authority where the gross amount charged for such service does not exceed Rs 5000/- have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 56 REFERS].

However, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994. Further, in case of continuous service, the exemption shall be applicable where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year.

4. It is also clarified that Circular No.  89/7/2006-Service Tax dated 18-12-2006 & and Reference Code 999.01/23.8.07 in Circular No. 96/7/2007-ST dated 23-8-2007 issued in the pre-negative list regime are no longer applicable.
6. Services in the nature of allocation of natural resources by Government or a local authority to individual farmers. Services by way of allocation of natural resources to an individual farmer for the purposes of agriculture have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 59 REFERS].

Such allocations/auctions to categories of persons other than individual farmers would be leviable to Service Tax.

 

7. Services in the nature of change of land use, commercial building approval, utility services provided by Government or a local authority. Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are already exempt under Notification No. 25/2012-ST dated 20-6-2012.

The said services when provided by Government or a local authority have also been exempted from Service Tax vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 39 REFERS].

 

8. Services provided by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution. Such services have been exempted vide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 60 REFERS].
9. Whether Service Tax is payable on yearly installments due after 1-4-2016 in respect of spectrum assigned before 1-4-2016. Service Tax is payable on such installments in view of rule 7 of Point of Taxation Rules, 2011 as amended byvide Notification No. 24/2016-ST dated 13-4-2016.

However, the same have been specifically exemptedvide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 61 REFERS].

 

The exemption shall apply only to Service Tax payable on one time charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable.

10. When does the liability to pay Service Tax arise upon assignment of right to use natural resource where the payment of auction price is made in 10 (or any number of) yearly (or periodic) instalments under deferred payment option for rights assigned after 1-4-2016. Rule 7 of the Point of Taxation Rules, 2011 has been amended vide Notification No. 24/2016-ST dated 13-4-2016 to provide that in case of services provided by Government or a local authority to any business entity, the point of taxation shall be the earlier of the dates on which:
(a) any payment, part or full, in respect of such service becomes due, as indicated in the invoice, bill, challan, or any other document issued by Government or a local authority demanding such payment; or
(b) such payment is made.
Thus, the point of taxation in case of the services of the assignment of right to use natural resources by the Government to a business entity shall be the date on which any payment, including deferred payments, in respect of such assignment becomes due or when such payment is made, whichever is earlier.

Therefore, if the assignee/allottee opts for full upfront payment then Service Tax would be payable on the full value upfront. However, if the assignee opts for part upfront and remainder under deferred payment option, then Service Tax would be payable as and when the payments are due or made, whichever is earlier.

 

11. How to determine the date on which payment in respect of any service provided by Government or a local authority becomes due for determination of point of taxation (Sl. No. 10 refers)? The date on which such payment becomes due shall be determined on the basis of invoice, bill, challan, or any other document issued by the Government or a local authority demanding such payment [Point of Taxation Rules, 2011 as amended by Notification No. 24/2016-ST dated 13-4-2016 refers].

For instance, Notice Inviting Applications (NIA) dated January 9, 2015 issued vide File No. 1000/16/2014-W.F./Auction for auction of right to use spectrum and letter dated March 29, 2015 issued vide File No. 1000 /23 / 2014 -W.F. /Auction by Department of Telecommunications to successful bidders of spectrum indicate the dates on which the payments in respect thereof become due. These may be accessed at http://www.dot.gov.in/sites/default/files/u8/NIA_January_2015.pdf and http://www.dot.gov.in/sites/default/files/u8/PaymentMethodologyAndPaymentDetails.pdf respectively.

12. Whether Service Tax is leviable on spectrum user charges and license fee payable after 1-4-2016 for the year 2015-16. Service Tax is payable on such payments in view of rule 7 of Point of Taxation Rules, 2011 as amended by Notification No. 24/2016-ST dated 13-4-2016. However, the same have been specifically exemptedvide Notification No. 25/2012-ST dated 20-6-2012 as amended by Notification No. 22/2016-ST dated 13-4-2016 [ENTRY 62 REFERS].
13. Whether Service Tax is payable on the interest charged by Government or a local authority where the payment for assignment of natural resources is allowed to be made under deferred payment option. Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 has been amended videNotification No. 23/2016-ST dated 13-4-2016 so as to provide that interest chargeable on deferred payment in case of any service provided by Government or a local authority to a business entity, where payment for such service is allowed to be deferred on payment of interest, shall be included in the value of the taxable service.
14. When and how will the allottee of the right to use natural resource be entitled to take CENVAT Credit of Service Tax paid for such assignment of right. The CENVAT Credit Rules, 2004 have been amendedvide Notification No. 24/2016 C.E. (N.T.) dated 13-4-2016. Consequently, the CENVAT Credit of the Service Tax on one time charges (whether paid upfront or in installments) paid in a year, may be allowed to be taken evenly over a period of 3 (three) years. [Rule 4(7) of CENVAT Credit Rules, 2004 as amended refers]. Detailed illustrations explaining how the CENVAT Credit is to be availed, are given in para 2 below.
  However, the Service Tax paid on spectrum user charges, license fee, transfer fee charged by the Government on trading of spectrum would be available in the year in which the same is paid. Likewise, Service Tax paid on royalty in respect of natural resources and any periodic payments shall be available as credit in the year in which the same is paid. The existing eighth proviso in sub-rule (7) of rule 4 of CENVAT Credit Rules, 2004 is being omitted because the same is superfluous.
  Amendments have also been made in CENVAT Credit Rules, 2004 so as to allow CENVAT credit to be taken on the basis of the documents specified in sub-rule (1) of rule 9 of CENVAT Credit Rules, 2004 even after the period of 1 year from the date of issue of such a document in case of services provided by the Government or a local authority or any other person by way of assignment of right to use any natural resource [Fifth Proviso to sub-rule (7) of Rule 4 of CENVAT Credit Rules, 2004].
15. On basis of which documents can CENVAT Credit be availed in respect of services provided by Government or a local authority. CENVAT Credit may be availed on the basis of challan evidencing payment of Service Tax by the Service recipient [Clause (e) of sub-rule (1) of rule 9 of CENVAT Credit Rules, 2004, refers].

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. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. 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)