Saturday, April 19, 2014

How to File Rectification request on receipt of Demand Notice Due to Mis matching of Income Tax


CBDT has released a Press note(given at end) on 18.04.2014 and desires to taxpayer file correct data of tax deduction and payment in Income Tax return.The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. 

Such mistakes include 
  • quoting of invalid/incorrect TAN; 
  • quoting of only one TAN against more than one TAN tax credit; 
  • furnishing information in wrong TDS Schedules in the Return Form; 
  • furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. 
As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. 

How to file online rectification request ,procedure is given hereunder for your ready reference. 

Rectification Request

Rectification request can be filed u/s 154 of the Income Tax Act by the taxpayer in case of any mistake apparent from the record.

Prerequisite to file Rectification request

  1. The Income Tax Return for the Assessment Year should have been processed in CPC, Bangalore.
  2. An Intimation under Section 143(1) OR an order under Section 154 passed by CPC, Bangalore for the e-Filed Income Tax return should be available with the taxpayer.
  3. For Electronic returns filed and processed at CPC, only online rectifications will be considered.
  4. If the refund arising out of return processed at CPC is adjusted against the demand of other Assessment Years and then the assessee is challenging the demand itself, in that case
    • Rectification application has to be filed for the demand year, if the demand was raised by CPC then online application has to be filed
    • for the demand raised by the Field Assessing Officer, the application has to be filed before him.
  5. No rectification has to be filed for giving credit to taxes paid after raising the demand.To file your Rectification, you should be a registered user in e-Filing application.

Step By Step Guide How to file rectification at Income Tax e filing Site 

To file your Rectification, you should be a registered user in e-Filing application. Below listed are the steps to file Rectification:

Step 1 - LOGIN to e-Filing application and GO TO --> My Account --> Rectification request.

Step 2 - Select the Assessment Year for which Rectification is to be e-Filed, enter Latest Communication Reference Number (as mentioned in the CPC Order  )

Step 3 - Click 'Submit'.



Step 4 - Select the 'Rectification Request type'

Step 5-− On selecting the option 'Taxpayer Correcting Data for Tax Credit mismatch only', three check boxes, TCS, TDS, IT, are displayed. You may select the check-box for which data needs to be corrected. User can add a maximum of 10 entries for each of the selections.No upload of any ITR is required.



Step 6- On selecting the option 'Taxpayer is correcting the Data in Rectification' − select the reason for seeking rectification, Schedules being changed, Donation and Capital gain details (if  applicable), upload XML and Digital Signature Certificate (DSC), if available and applicable. You can select a maximum of 4 reasons 




7 - On selecting the option,'No further Data Correction required. Reprocess the case' − check-boxes to select- Tax Credit mismatch, Gender mismatch( Only for Individuals), Tax/ Interest mismatch are displayed. User can select the check-box for which re-processing is required. No upload of an ITR is required.

Step 8 - Click the 'Submit' button.

Step 9 - On successful submission, following message is displayed.


Step-10 You can check status of rectification request online through your account login .Further you can withdraw rectification  request ,if you have filed it incorrectly or if it is no more required.

--------------------------------------------------------------------------
CBDT optimist on Standard Operating Procedure; Urges taxpayers to file rectification request for TDS mismatches April 18, 2014


SECTION 139D OF THE INCOME-TAX ACT, 1961 - FILING OF RETURN IN ELECTRONIC FORM - EXTENSION OF FACILITY TO TAXPAYERS TO VERIFY IF DEMAND IN THEIR CASE IS DUE TO TAX CREDIT MISMATCH ON ACCOUNT OF INCORRECT FURNISHING OF SPECIFIED PARTICULARS AND SUBMIT RECTIFICATION REQUESTS WITH CORRECT PARTICULARS OF TDS/TAX CLAIMS FOR CORRECTION OF THESE DEMANDS

PRESS NOTE NO.402/92/2006-MC, DATED 17-4-2014

Detailed instructions have been issued by the CBDT to all the assessing officers laying down a Standard Operating Procedure (SOP) for verification and correction of demand by the AOs. As per this SOP, the taxpayers can get their outstanding tax demand reduced/deleted by applying for rectification along with the requisite documentary evidence of tax/demand already paid. The SOP also makes special provisions for dealing with the tax demand upto Rs. 1,00,000/- in the case of Individuals and HUFs in order to accommodate certain extraordinary situations. The SOP is expected to mitigate the long standing grievances of taxpayers by way of reduction/deletion of tax demands.

The CBDT has further noted that many taxpayers are committing mistakes while furnishing their tax credit claims in the return of income. Such mistakes include quoting of invalid/incorrect TAN; quoting of only one TAN against more than one TAN tax credit; furnishing information in wrong TDS Schedules in the Return Form; furnishing wrong challan particulars in respect of Advance tax, Self-assessment tax payments etc. As a result of these mistakes, the tax credit cannot be allowed to the taxpayers while processing returns despite the tax credit being there in 26AS statement. The CBDT, therefore, desires the taxpayers to verify if the demand in their case is due to tax credit mismatch on account of such incorrect particulars and submit rectification requests with correct particulars of TDS/tax claims for correction of these demands. The rectification requests have to be submitted to the jurisdictional assessing officer in case the return was processed by such officer, or the taxpayer is informed by CPC, Bangalore that such rectification is to be carried out by Jurisdictional assessing officer. In all other cases of processing by CPC, Bangalore, an online rectification request can be made by logging into e-filing website http://incometaxindiaefiling.gov.in as per the procedure given in detail in its Help Menu.

Friday, April 18, 2014

Audit can be done by CS CMA also-Direct Tax Code 2013-ICAI Express concerns


As the members are aware, the Direct Taxes Code, 2013 has proposed to widen the scope of the definition “Accountant” to include other professionals as well. It is a fact that various provisions in the Income-tax Act, 1961 under which chartered accountants have been given the responsibilities to undertake audit and certification of accounts of various entities have the emphasis on “audit” of the relevant accounts which is the exclusive domain of Chartered Accountants. 

The Council of ICAI is aware that the proposed change is a cause of major concern to the entire profession. In this regard, ICAI has through a representation to Ministry of Finance, placed on record its concern not only for the profession, but for the country as a whole since issuance of audit certificates by persons having limited knowledge of audit of accounts will not only be professionally incorrect and but will raise many concerns including causing huge revenue leakages. 

A meeting in this regard was held with Mr. Rajiv Takru, Revenue Secretary and Mr. R.K.Tewari, Chairman, CBDT on 16.4.2014, wherein CA. K. Raghu, President, ICAI and CA. Manoj Fadnis, Vice President, ICAI emphasized on the fact that there is a very significant difference in the area of expertise of other professionals vis-a-vis Chartered Accountants. 

Members be assured that the Council of ICAI is equally concerned and will not leave any stone unturned to save the profession and the nation.

As  per New direct tax code 2013 following person can conduct tax audit under Income Tax

320(2) “accountant” means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act, and shall include-
 (i) a company secretary within the meaning of the Company Secretaries Act, 1980 ;
(ii) a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 ; or
(iii) any person having such qualifications as the Board may prescribe, for the purposes specified in this behalf. 

Thursday, April 17, 2014

Interest on Loan for Immovable Property income under House Property-Business-Capital Gain


Introduction

Currently, we are passing through the scenario of recession in the real estate sector. Many people have made investment in properties like house, plots, land etc. by forecasting that the return will be high as yield in past. However, the return is very less as compared to forecast. Many of them have borrowed fund from banks, NBFC’s, other sources on which interest is required to be paid. Now what shall be the treatment of interest paid?

The Objective of the analysis is the treatment of interest paid on acquisition of immovable property, as the interest is governed by various heads and sections depending upon the use and treatment of the property. How the interest cost is treated differently under different situations is discussed in this article.

CA. Aadish A. Jain (Email: caaadish@gmail.com)

Income House Property

Section 22 of Income-tax Act, 1961 (the Act) requires “The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as assessee may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income tax, shall be chargeable to income-tax under the head "Income from house property". 

Here, the words “property consisting of building or land appurtenant thereto” is under scope of Section 22 of the Act. All other types of property are excluded from scope of Section 22 of the Act. This means, income from letting of vacant plot not appurtenant to any building is not chargeable under Section 22 of the Act.

Even though the business of assessee is letting of house property, income earned by assessee out of business of letting of house property is taxable under the head income from house property.

Moreover, it will also not make any difference if the property is stock in trade for assessee. Meaning, if the assessee is engaged in the business of purchase and development of property, any income derived by the assessee from vacant house property which is not sold, shall be taxable under the head income from house property.

Annual Value of house property is computed with reference to provisions of Section 23 of the Act.

Section 24 of the Act provides that income under the head 'house property' shall be computed after making the following deductions, namely:

(a) Standard deduction i.e. Sum equal to 30% of annual value as determined as per Section 23,

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital.

Section 24(b) lays down the word interest payable on acquisition, construction, repair, renovation or reconstruction of property. Any property which is covered by provision of Section 22 if acquired, constructed, repaired, renovated or reconstructed with borrowed fund, then the interest shall be governed by Section 24(b). Moreover, if the fund is borrowed for acquisition of land and building is constructed with own capital, then the interest on borrowing of land is allowable as deduction subject to proviso to Section 24(b).

This means, under the head ‘income from house property’, interest in respect of only immovable property consisting of building or land appurtenant thereto is allowable, which is not used by assessee

Profit and Gain from Business and Professions

Section 36(1)(iii) provides for deduction of amount paid as interest in respect of capital borrowed for the purpose of business or profession. 

Before the insertion of the proviso to Section 36(1)(iii), interest paid in respect of capital borrowed for business and profession can be claimed as deduction. The same was settled by various decisions e.g. 

  • CIT vs. Associated Fibre & Rubber Industries (P.) Ltd. [1999] 102 Taxman 700 (SC)
  • Dy. CIT vs. Core Health Care Ltd. [2008] 167 Taxman 206 (SC)
  • Jt. CIT vs. United Phosphorus Ltd. [2008] 167 Taxman 261 (SC)

However, with effect from 01-04-2004 following proviso has been inserted to Section 36(1)(iii) which 
is as under:

“Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.”

The objective behind the insertion of the proviso is to make the Section more clear and clarify all the doubts behind this. However, the proviso has the possibility of different meanings of various words in it.

i. “Asset” - Proviso says ‘interest paid in respect of capital borrowed from acquisition’ of an asset. Definition of asset is neither given in the Act or Section. In general terms, asset means all the assets including current asset, investment and fixed assets.

ii. “Capitalisation” - The word 'Capitalisation'  has also not been defined in the Act. In general terms, 'Capitalisation' means expense is not treated as revenue shall be shown in balance sheet.

Proviso nowhere talks of capitalisation of interest cost incurred in respect of capital borrowed for acquisition of an asset. It only says that interest shall not be allowable in respect of capital borrowed for extension of existing business or profession for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use.

Moreover, Explanations 8 to Section 43(1) only says that the actual cost of asset shall not include the cost of interest on acquisition of asset as so much of amount as relatable to period after such asset is first put to use.Explanations only talk of non-addition of cost of interest on acquisition after the date asset is put to use. It never talks of capitalisation cost of interest relating to the period before asset is first put to use.

In case where assessee has acquired immovable property consisting of building and land appurtenant thereto and if the same is not used by assessee during the concerned financial year then in that case property is treated as house property and same shall be governed by provision of Section 22 to Section 25 because Section 22 clearly covers the property which is consisting of land and building and other than such portion which assessee may occupy for the purpose of business and profession.

Here, one has to also consider proviso to Section 36(1)(iii) i.e. whether such property is acquired for extension of existing business or not. Moreover, one has to also consider situation where assessee is engaged
in business of purchase and development of property and income is earned by assessee out of vacant house property, and what shall be the treatment of interest paid for acquisition of property. The same shall be allowable under the head 'house property' or profit and gain from business and profession?

Capital Gain

Section 48 specifies the mode of computation of Capital Gain. As per Section 48, 

“The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :-
(i) expenditure incurred wholly and exclusively in connection with such transfer,
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:”

The expression ‘expenditure incurred wholly and exclusively in connection with transfer’ means expenditure necessary to effect the transfer. 

Cost of acquisition of an asset is the value for which it was acquired by the assessee. All the expenses incurred for acquiring title to property are includible in cost of asset. The expression “cost of acquisition” has not been defined in Section 48;  while Section 55(2) defines it only in particular cases.

Now the question arises ‘whether Interest on amount borrowed for acquisition of capital asset is includible in cost of acquisition or not’?

As held by the various Courts that interest incurred for acquisition capital asset shall form part of cost of asset. For example:

1. CIT vs. Sri Hariram Hotels (P) Ltd. 188 Taxman 178 (Kar.)

“The Tribunal is justified in granting the relief to the assessee since the property has been purchased out of the loan borrowed from the Directors and any interest paid thereon is to be included while calculating the cost of acquisition of the asset.”

2. CIT vs. Raja Gopala Rao (2001) 252 ITR 459 (Mad)

“4. Here, there can be no doubt that the cost of acquisition to the assessee was not merely the amount that he had paid to the vendors but also the cost of the borrowing made by him for the purpose of paying the vendor and obtaining the sale deed.Without the money borrowed, the assessee would not have been in a position to buy the property. Payment of consideration for the sale indisputably having been made with the borrowed funds, the borrowing directly related to the acquisition and, interest paid thereon would form part of the cost of acquisition.”

So, in case where the assessee had acquired immovable property consisting building and land appurtenant thereto out of borrowed fund for business and profession and the same is not used by the assessee for his business and profession, then in that case interest in respect of such borrowing can be capitalised.

One has to consider the allowability of same interest cost under the head of income, e.g. income from house property or income from other  sources. Meaning, whether interest is allowable under the head Income from house property/Income from other sources or shall be added to cost of asset of both? Whether double deduction of interest is allowable under both heads?

In a recent judgment, the Chennai Tribunal in the case of ACIT vs. C. Ramabrahmam (2012) 27 taxmann.com 104 (Chennai – Trib.), interest on housing loan which was claimed as a deduction under Section 24(b) (while computing income from house property) was also deducted by the assessee under Section 48 (as cost of acquisition while computing capital gains from sale of such house property). Such treatment was upheld by the Tribunal.

Tribunal allowed the claim for deduction in respect of housing interest under both the provisions. While concluding so, it observed as under:

  • - Deduction under Section 24(b) and computation under Section 48 are covered by different heads of income;
  • - Both these provisions do not exclude the operation of other; 
  • - Section 24(b) is claimed only when income is offered under the head ‘house property’,whereas the cost of the same asset is taken into consideration when the property is sold and capital gains are computed under Section 48; and
  • - Interest on housing loan is expenditure in acquiring the asset.
However, the Apex Court in the case of Escorts Ltd & Another vs. Union of India (1993) 199 ITR 43 (SC) gave its observations on possibility of claiming double deductions under the Income-tax statute:

“In our view, there was no difficulty at all in the interpretation of the provisions. The mere fact that, a baseless claim was raised by some over-enthusiastic assessee who sought a double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to attribute any ambiguity or doubt as to the true scope of the provisions as they stood earlier…..
…A double deduction cannot be a matter of inference; it must be provided for in clear and express language regard being had to its unusual nature and its serious impact on the revenues of the State.”

[Headnote in Escorts Limited case]

“There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing. If such double deduction is intended, it will be clearly expressed.

In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit assessee two deductions.”

The Karnataka High Court in the case of CIT vs. Maithreyi Pai (1985) 152 ITR 247 (Kar) observed as under:

“Mr. Bhat, however, submitted that section 48 should be examined independently without reference to Section 57. Section 48 provides for deducting from the full value of consideration received the cost of acquisition of the capital  asset and the cost of improvements, if any. The interest paid on borrowings for the acquisition of a capital asset must fall for deduction under
Section 48. But, if the same sum is already the subject-matter of deduction under other heads like those under Section 57, we cannot understand how it could find place again for the purpose of computation under Section 48. No assessee under the scheme of the I.T. Act could be allowed deduction of the same amount is
already allowed under twice over. We are firmly of the opinion that if an amount is already allowed under Section 57 while computing the income of the assessee, the same cannot be allowed as deduction for the purpose of computing the “capital gains” under Section 48. “ 

Income from other sources

Section 57(iii) reads as ‘any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income.’ This means, any expenditure incurred wholly and exclusively for the purpose of making or earning such income, then such expenditure shall be allowable subject to condition that the expenditure is not of capital nature. For the purpose of claiming deduction under this clause, it is not necessary that expenditure should result in earning of income as held by decision of CIT vs. Rajendra Prasad Moody 115 ITR 519 (SC).

Income from letting of vacant plot or income from letting of machineries, plant or furniture belonging to assessee and building, where letting of building is not separable form letting of machineries, plant or furniture, then in that case, income from renting of such property is covered under the head income from other source if the same is not a business of the assessee. In case where assessee has acquired such vacant plot of land or building which is integrated with plant and machineries out of borrowed fund, then in that case whether interest incurred on acquisition of such property shall be allowable or not? One has to see the objective of the assessee behind the acquisition and actual circumstances. Whether the same was acquired by the assessee for value increment of earning rent income? One has to also consider whether interest cost can be added to cost of asset or not (double deduction)? If the same was acquired for earning income then interest shall be allowable otherwise shall be added to cost of asset. One has to also consider the Explanation 8 to Section 43(1). 

Case Study 

Assessee presently in the business of trading has purchased property consisting of factory building and land appurtenant for the expansion of existing business. The same is purchased by assessee out of borrowed capital from various parties. However, the assessee is not able to use the same due to reason of receipt of higher business contract in trading business. As the assessee is not able to utilise the purchased factory building, assessee had let out the building and land appurtenant there to other party. Assessee is paying interest regularly to the parties from whom fund has been borrowed. 


Questions:

1) Source under which such income is taxable? 

As per Section 22, annual value of property consisting of building or land appurtenant thereto of which assess is owner other than such portion of property as assessee may occupy for purpose of any business and profession as carried on by assessee the profit of which are chargeable to income tax,shall be taxable under head income from house property. Hence, shall be taxable under the head Income from house property which shall be computed as per the provisions of Section 23 and Section 24.

2) Whether interest paid for acquisition of property is allowable u/s 36(1)(iii) or not ?
 
As per Section 36(1)(iii), deduction shall be allowed in respect of interest paid on capital borrowed for the purpose of business and profession. Before 01- 04-2004 interest paid for business purpose shall be allowed as deduction. However, with effect from 01-04-2004 due to insertion of proviso to section 36(1)(iii), Deduction shall not be allowed in respect of interest paid on capital borrowed for extension of existing business for any period beginning from the date of acquisition till date when such asset is put to use, shall not be allowable as deduction. 

The same is supported by decision of Nahar Poly Films Ltd vs. CIT (2011) 41 (1) (P&H). Hence, Interest paid shall not be allowed as deduction under Section 36(1)(iii).

3) Whether interest cost can be capitalised to the cost of building and land? 

As per Section 48(ii), cost of acquisition of an asset is the value for which in was acquired by assessee. All the expenses incurred for acquiring title to property are includible in cost of asset. As held by the various Supreme Court decisions, interest incurred for acquisition of capital asset shall form part of cost of asset. However, one has also to consider the double deduction i.e. allowability under the head income from house property as well as addition to cost of asset. One has also to consider Explanation 8 to Section 43(1) i.e. non addition of interest cost to capital asset after the date when asset is first put to use.

4) What shall be the treatment of interest in Property that is fuly vacant?

Tax under the head income from house property is not a tax upon rent of Property. It is tax on inherent capacity of building to yield the income. Annual Value shall be computed as per the provisions of Section 23. As the property is vacant during the whole year, and same is covered by Section 23(1) Gross Annual value shall be arrived at Nil. Even though the Gross annual value is Nil, Interest paid on acquisition shall not be denied. It shall be allowable under Section 24(b). Hence, even though property remain vacant during the entire year, interest paid shall be allowable under head income from house property.

5) What shall be the answer to the above question if the property was only land?

Section 22 covers only building or land appurtenant thereto of which assessee is owner. Here, the property is only land. Property only consisting of only land is not covered under house property.

Hence, income shall be chargeable under the head income from other source or Profit and gain from business profession. 

Section 57(iii) allows that any expenditure incurred (Other than capital expenditure) wholly and exclusively expanded for the purpose of making or earning income. Here, one has to consider the objective and circumstances of acquisition of land and circumstances whether the same was acquired for the purpose of renting or investment or for business purpose. If the land was acquired only with the objective of renting purpose, then interest shall be allowable as deduction against rent income from land. If the same was acquired as investment then interest cost should be capitalised to cost of land.

However, if acquired for business purpose i.e. for using in business or as stock-in-trade for land and property developers/Purchasers, then same shall be allowable as deduction. However, if the same is acquired for using in business, but not used due to some circumstances, then interest shall be added to cost of land. One has to also consider explanation to Section 43(1).

6) In the original case, if assessee has borrowed amount not specifically for the acquisition of property and at that time capital balance of capital account of the assessee was less than that of cost of property. After two years, assessee’s capital balance and interest free fund is in excess of that cost of property by bringing more interest free amount and profit from business. Moreover on application side assessee has not advance any interest free loan for other purpose. Is it necessary for assessee to claim the same under house property?

Here, at a time of acquisition of property, assessee capital balance is less than that of cost of property. But after two years assessee’s capital balance is in excess to that of cost of asset. At a time of acquisition of property generally it can be said that assessee has borrowed amount for acquisition of property.

Hence, interest paid can be allowed under Section 24b. In case where assessee by bringing amount through interest free loan profit from business, after two years, the assessee may claim the interest paid under Section 36(1)(iii) because assessee may opt that the capital balance is utilised for acquisition of property which in not used by assessee. If amount is borrowed for other purpose and utilised for business purpose, then in that case, interest so paid shall be allowed as deduction under Section 36(1)(iii). It is not necessary to establish a nexus between fund borrowed and utilised.

7) What shall be the treatment of interest paid if assessee is using such property for the purpose of storage goods?

Here, the objective of the assessee for acquisition of property is for extension of existing business. To claim expenditure under Section 36(1)(iii) it is the only condition that asset should be used for business purpose. Hence, interest paid shall be allowable under Section 36(1)(iii).

By CA. Aadish A. Jain (Email: caaadish@gmail.com)

Tuesday, April 15, 2014

when Gift is taxable ? when gift is Exempted ?


When Gift is it taxable 

  • Gifts received by an individual or Hindu Undivided Family (HUF) are taxable as per the Income Tax Act, 1961 but there are a few exceptions as mentioned below. It is included under the head “Income from other sources” under Section 56(2)(viii) 
  • Gifts are taxable in the hands of recipient and there is no taxation for the donor. 

Cases for taxation 

  • Any cash gift (including gifts by cheque or drafts) received, exceeding Rs. 50,000/- 
  • Any movable property received without consideration or at a lesser consideration than its fair market value, the aggregate fair value of which is more than Rs.50,000/- 
  • Any immovable property received without consideration and its stamp duty value is more than Rs.50,000/- 
  • Any immovable property received for a consideration which is less than the stamp duty value of the property by an amount 
  • which is more than Rs. 50,000/-, the difference between the stamp duty value & the consideration shall be chargeable to tax 

Frequency 

  • In the case of immoveable property, a single transaction is considered for calculating the limit of Rs.50,000/- 
  • In other cases , all transaction in a financial year will be considered for calculation of the ceiling limit of Rs. 50,000/- 

Exempted Gifts 

The following receipts/gifts are exempted even if they are without or inadequate consideration - 

  1. From any relative; or 
  2. On the occasion of marriage of an individual; or 
  3. Under a will or by way of inheritance; or 
  4.  In contemplation of the death of the payer or donor, as the case may be; or 
  5.  From a local authority; or 
  6. From any fund, foundation, university, other educational institution, hospital, medical institution, any trust or institution referred to in Section 10 (23C) 


Note: 

  • Relative means spouse, brother or sister of assessee or spouse, brother or sister of either of the parents, any lineal ascendant or descendant of the assessee or spouse. 
  • For HUF relative means members of HUF
  • Property means immoveable property being land or building or both; shares & securities; jewellery; archeological collections; drawing, paintings, sculptures; any work of art and bullion. 
  • In few case clubbing provisions are also applicable so also read clubbing provision under Income Tax

Weapon of mass destruction called “as may be  prescribed”! read and get 25% off Companies Act 2013


Substantive law is the ‘legislated law’ that defines the principles for a particular enactment. This is done by State Assemblies for states and Parliament for the Country. Procedural law is the "machinery" for enforcing the principles set under Substantive law. “Act” is the substantive law. “Rules” made there under is the procedural law. 

Passing a new ‘Act’ or changing an existing ‘Act’ is a laborious process. However making Rules is an executive action by concerned department. Therefore it is relatively easy and less time consuming. While change in principles may be required rarely, change in the method of execution has to suit changing dynamic situations. 

Appreciating this fact, while legislating FEMA, a small set of principles only were enacted in the form of Substantive Law and concerned departments were empowered to make rules as may be appropriate to implement the principles set under FEMA. 
-------------------------------------------------
Heavy discount on companies Act & Rules Book
List Price:Rs. 1495.00/-
Price:Rs. 1196.00/-
Get additional Discount of Rs 75/- use code COM5881733
For the Title
Promo
Code
Promo
Amount
Combo
Link
Companies Act, 2013 and Rules & Forms - With Concise Commentary & Referencer
COM5881733
75


This was highly appreciated and all stakeholders cherished such a move. Thereafter, many new Acts followed this route. Here and there some ill effects were observed where in the rules showed inconsistency with the substantive law. In some cases, concerned departments rectified the rules, while in some other cases rectification happened after courts ordered to do so. 

Under much awaited Companies Act, 2013 also serious effort was made to define principles only in the Act and almost every section of the Companies Act has created an enabling sentence for executive action “as may be prescribed”. It was expected that MCA is now empowered to play much better and dynamic role in responding to the needs of the corporate world and its stakeholders. 

But MCA using this power of making rules as a weapon of mass destruction was unexpected! 

Unfortunately this power used against the professionals who are supposed to be the corporate advisors and facilitators in implementing the new Companies Act, 2013. Irony? Much worse than that… 

Ensuring compliance with law is the fundamental duty of the executive wing of democracy. For this, ithas to make rules and put in the mechanism to oversee the Compliance across the territory.

Advising, monitoring, prosecuting and punishing deviation cannot be entirely done by the State, given with the huge number of businesses in the country. 

That was the reason why professional bodies like ICSI, ICAI and ICAI (Cost Accountants) were established under the Acts of Parliament. These bodies were given with the mandate of creating professionals across the country for advising on legal, financial and cost norms and laws in force from time to time. Recognitions were given under various statutes for these bodies as a facilitation.

However the way new rules concerning KMPs are framed in complete deviation with the draft rules and the
deceitful implementation of these rules ‐ are giving an impression that the executive wing is set to defeat the legislative intentions of the substantive law i.e. the Companies Act 2013 by using the enormous power delegated by the Act to the executive wing.

ICSI is not a private institute. It was formed under an Act of Parliament for enhancing corporate governance in the country. With that intention the appointment of Company Secretary and certain certifications were made mandatory. It has got a complimentary role to play with MCA. Making ICSI ineffective is clearly going against the legislative intent.

Normally, like in case of Service Tax/compulsory e filing of tax returns, new requirements are made mandatory for a smaller group of assesses/entities to start with and slowly it will be broad based. However in case of corporate governance it is going other way round. Initially the applicability was for a large section of corporate and slowly the scope is reduced to just 3% of the companies!

Every government department is making compliance more and more stringent and efficient. The Companies Act, 2013 also intended it to be so. It is evident from the fact that many concessions which existed for Private Companies are removed, punishments for non compliance was made very stringent and executive wing is empowered enormously for the proper administration of the Act.However, in contradiction, impact of these rules is cutting off the requirement of compliance officers itself from the corporate houses.

It is said that some of the officers of MCA were quoting the poor quality of CS certification as a reason for removing of certification requirement and secretarial audit requirement. This is like cutting the nose off for avoiding cold. We have been experiencing lots of problems because of high instability in the MCA e‐filing system. More than half of last year was eclipsed with inefficient running of MCA e‐filing system. That could be a good reason for  returning to physical filing mode. But, observe, no one demanded for that – everyone demanded restoring stability in MCA e‐filing system. Further it is matter of everyone’s knowledge that many corporate frauds go undiscovered because of audit inefficiencies.Whether anyone has demanded  removing audit requirement itself because of this inefficiency? When a problem is observed in a system, measures for rectification must be called for, not the removal of the system itself. 

MCA officials were heard saying that ‘they are not there to ensure job for anyone’. Who has asked for creation of ICSI? Who has asked for enhancement of corporate governance? Who mandated ICSI to propagate the course and develop Company Secretaries across the country? These are all in line with the legislative intent. A Government Department cannot go against the legislative intent and actions, jeopardizing the governance monitoring system as well as the lives of people who were developed for that purpose. If we see the statement with this context, we can only observe arrogance and not prudence. 

There was also a rumour about the unrest between MCA officials and ICSI Council causing this overnight change in the notification. We trust that both MCA officials and ICSI Council members have got maturity enough not to play around with law in retaliation with each other. Wisdom shall prevail. Any kind of conflict can be resolved if common good is kept in focus always. This is the duty of everyone, including ICSI Council and MCA.

There are other kind of rumours blaming lobbyists in the sister profession. However, in today’s world everyone understands that any new weapon invented or abetted will boomerang one day or the other.

Four and a half lakh people – members and students of ICSI ‐ can find alternate ways for leading their life. In India no one is depending up on the Government. It’s just a matter of time. However, the cost of losing a great system developed and managed with enormous commitment and sacrifices of thousands of individuals will be too huge. Rebuilding this system is a herculean task and loss to the nation. Better everyone concerned realize this soon.

By ICSI Mysore Chapter

Proposed New Roadmap for Implementation of Ind AS converged with IFRS


For convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRSs), a Press Release (No.2/2010) laying down roadmap for application of converged Indian Accounting Standards (Ind AS) by companies (other than Banking companies, Insurance companies and Non-Banking Finance Companies) was issued on 22nd January, 2010. Further, a Press Release (No.3/2010) related to the roadmap for the application of the converged Indian Accounting Standards (Ind AS) by the Banking Companies, Insurance companies and Non- Banking Finance Companies was issued on 31st March, 2010. Subsequently, in response to the requests seeking clarifications on the roadmaps, a Press Release (No. 4/2010) containing a consolidated statement on clarification of roadmap was issued on May 04, 2010. However, the Ind AS placed on  the website of the MCA could not be implemented due to various reasons from 1st April, 2011 as per the aforesaid roadmaps issued.

A revised roadmap for implementation of Indian Accounting Standards (Ind AS)  finalised by the Council of the ICAI, at its last meeting, held on March 20-22, 2014, as follows, has been submitted to the Ministry of Corporate Affairs for its consideration: 


1. As stated in earlier roadmaps for achieving convergence, there shall be two separate sets of Accounting Standards notified under the Companies Act, 1956. First set would comprise the Indian Accounting Standards (Ind AS) converged with the IFRSs which shall be applicable for preparation of consolidated financial statements as defined in the Companies Act, 2013, of the specified class of companies. The second set would comprise the existing notified Accounting Standards (AS) and shall be applicable for preparation of individual financial statements of the companies preparing consolidated financial statements as per Ind AS and for financial statements of other companies.

2. The first set of Accounting Standards i.e. converged Indian Accounting Standards (Ind AS) shall be applied to the following specified class of companies for preparing their first Indian Accounting Standards (Ind AS) consolidated financial statements for the accounting period beginning on or after April 1, 2016, with comparatives for the year ending 31st March 2016 or thereafter:

  • (a) Whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India; or
  • (b) Companies other than those covered in (a) above, having net worth of Rs. 500 crore or more
  • (c) Holding, subsidiary, joint venture or associate companies of companies covered under (a) or (b) above.

3. Companies to which Indian Accounting Standards (Ind AS) are applicable shall prepare their first set of consolidated financial statements in accordance with the Indian Accounting Standards (Ind AS) effective at the end of its first Ind AS reporting period unless otherwise specified, i.e., companies preparing consolidated financial statements for the accounting period beginning on or after April 1, 2016 shall be required to apply the Ind AS effective for financial year ending on 31st March 2017.

4. Calculation of net worth 

For the purpose of calculation of qualifying net worth of companies, the following rules shall apply:

  • (a) The net worth shall be calculated as per the stand alone audited balance sheet of the company falling under any of the categories covered under 2 above as at 31st March 2014 or the first balance sheet for accounting periods which end after that date.
  • (b) The net worth shall be calculated as the paid-up Share Capital plus Reserves and Surplus less Revaluation Reserve.
  • (c) For companies which are not in existence on 31st March 2014 or an existing company meets the criteria for the first time after 31st March, 2014, the net worth shall be calculated on the basis of the first balance sheet ending after that date.

5. Voluntary Adoption

  • (a) Companies not mandatorily required to follow Indian Accounting Standards (Ind AS) shall have the option to apply the Indian Accounting Standards (Ind AS) voluntarily for their consolidated financial statements provided they prepare consolidated financial statements under the Indian Accounting Standards (Ind AS) consistently thereafter.
  • (b) The option to apply the Indian Accounting Standards (Ind AS) voluntarily, once exercised, therefore, shall be irrevocable. Such companies would not be required to prepare another consolidated financial statements in accordance with existing Accounting Standards (AS).


6. Discontinuing use of the first set of Accounting Standards (i.e. the Indian Accounting Standards)Once a company starts following the first set of Accounting Standards for consolidated financial statements, i.e., the Indian Accounting Standards (Ind AS) on the basis of the eligibility criteria, it shall be required to follow such Accounting standards for all the subsequent Consolidated Financial Statements even if any of the eligibility criteria does not subsequently apply to it.

7. The roadmap for banks, NBFCs and Insurance Companies will be decided in consultation with RBI and IRDA.

Sunday, April 13, 2014

Applicability of the Companies Act, 2013 to Auditor’s Report to FY 2014-15 and Onwards:Clarification


The Ministry of Corporate Affairs, on 26th March 2014 notified a majority of the remaining sections of the Companies Act, 2013, including sections 139 to 148, relating to audits and auditors. The Act was stated to be effective from 1st April, 2014.

Accordingly, queries are being raised by a number of members as to whether any auditor’s report of a company being signed on or after 01st April, 2014 would be in accordance with the requirements of section 143 of the Companies Act, 2013.

In this context, it may be noted that the Ministry of Corporate Affairs (MCA) has, on 04th April 2014, vide its General Circular No. 08/2014, clarified that the financial statements (and documents required to be attached thereto), auditor’s report and Board’s report in respect of financial years that commenced earlier than 01st April, 2014 shall be governed by the relevant provisions/Schedules/rules of the Companies Act 1956.

This MCA Circular can be seen at URL 


Therefore, it is clear from MCA’s aforesaid General Circular that the auditor’s report of a company pertaining to any financial year commencing on or before 31st march 2014, would be in accordance with the requirements of the Companies Act, 1956 even if that financial year ends after 01st April 2014. For example, where the financial year of a company is 01st January 2014 to 31st December 2014, the statutory auditor’s report signed therefor would be in accordance with the requirements of the Companies Act, 1956.

As a corollary to MCA’s General Circular, it appears that the provisions of the 2013 Act would apply only to the financial years commencing on or after 01st April 2014. Thus, for example, the statutory auditor’s report signed in respect of the financial year of the company ended 31st March 2015 would need to be issued in accordance with the provisions of the Companies Act, 2013.


Issued by Auditing & Assurance Standards Board Of ICAI

Saturday, April 12, 2014

Important points to file Form 24Q-TDS on Salary-Q4 TDS statements for FY 2013-14


As esteemed stakeholder of CPC(TDS), it may be noted that the due date for filing 24Q quarterly TDS statement for 4th quarter of FY 2013-14 is approaching fast. You are advised to file TDS statements well before due date (15th May, 2014).

It is also requested to refer to Circular 8 of 2013 dated October 10, 2013 in the context of Tax Deduction at Source on Salary Income for Computation of Income and Manner of deduction of tax at source.

In addition, please make note of the following key facts before filing the quarterly TDS statement:

Correct Reporting:

  • Cancellation of TDS statement and deductee row is no longer permissible. Accordingly, it is very important to report correct and valid particulars (TAN of the deductor, Category (Government / Non-Government) of the deductor, PAN of the deductees and other particulars of deduction of tax) in the quarterly TDS statement.
  • Validate PAN and name of fresh deductees from TRACES before quoting it in TDS statement. TAN-PAN Master can be downloaded from TRACES and be used to file statement to avoid quoting of incorrect and invalid PANs.
  • Quote correct and valid lower rate TDS certificate in TDS statement wherever the TDS has been deducted at lower rate on the basis of certificate issued by the Assessing Officer. Please raise Flag “A” in the statement for such instances.
  • TDS statement must be filed by quoting challan(s) validated by CSI (Challan Status Inquiry) File and using correct Challan Identification Number (CIN)/ Book-entry Identification Number(BIN).


Complete Reporting:
Message :One More information for all of You that TDSMAN software for etds returns is now available with discount for simpletaxindia readers and further you can also download trail version and file returns free for total 30 entries.


  • Please also complete Annexure II for all employees who work or have worked for any period of time during the current financial year, including Annexure I for TDS details. TDS Certificates will not be generated for deductees, for whom Annexure II has not been completed.
  • For employees who are employed with more than one employer/ different branch offices, during the financial year, employee should declare previous salary and TDS details, if any, with the current employer and the same should be considered by the current employer while deducting TDS on salary. If taxes have been deducted by previous employer(s)/ branch(es), CPC(TDS) will issue Form 16 Part A to respective employer(s)/ branch(es) during the Financial Year. Part B is to be issued by the employer(s)/ branch(es).
  • Completeness of statement will ensure that a C5, C3 or C9 correction can be avoided. It may be noted that CPC (TDS) does not encourage C9 corrections by addition of a new challan and underlying deductees.


Mandatory Downloading of TDS Certificates from TRACES:

  • On the basis of information submitted by the deductor, CPC(TDS) will issue TDS Certificates that can be correct depending on correct and complete reporting by deductors.
  • Your attention is invited to CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012 on the Issuance of certificate for Tax Deducted at Source in Form 16/16A as per IT Rules 1962. It is now mandatory for all deductors to issue TDS certificates after generating and downloading the same from TRACES.
  • Please note that under the provisions of section 203 of the Income Tax Act, 1961 read with rule 31A, Certificate of tax deducted at source is to be furnished within fifteen (15) days from the due date for furnishing the statement of tax deducted at source.
  • You can refer to our e-Tutorial to download TDS Certificates.

Please submit the statement within due date to avoid Late filing fee, which, being statutory in nature, cannot be waived. It is therefore, suggested to take appropriate action with respect to the above while filing TDS statements.

Thursday, April 10, 2014

Important points for filing Q4 TDS statements for Financial Year 2013-14


CPC (TDS) is reaching out to you to ensure that the best practices are followed for filing of your Q4 TDS statements. The emphasis is on timely, correct and complete reporting for taxes deducted at source, to ensure that the deductees are able to correctly claim TDS Credits and for generating correct TDS Certificates. As the due date for filing quarterly TDS statement for 4th quarter is approaching close, you are requested to take note of following important information before submitting TDS statements.


  • In accordance with Central Government Account (Receipts and Payments) Rules, 1983, Government dues are deemed to have been paid on the date on which the cheque or draft tendered to the bank, was cleared and entered in the receipt scroll.
  • Rule 125 of Income Tax Rules, 1962 provisions for Electronic Payment of Tax by way of internet banking facility, for a Company and a Person to whom provisions of section 44AB of the Act are applicable.


Timely Filing:



Correct Reporting:

  • Please use your correct contact details, including Contact Number and email IDs in TDS Statements.
  • It is very important to report correct and valid particulars in respect to deductor and deductees. Please report the TAN of the deductor, Category (Government / Non-Government) of the deductor, PAN of the deductees and other particulars of deduction of tax correctly in the quarterly TDS statement.
  • Please make use of TAN-PAN Master from TRACES to Validate PAN and name of deductees before quoting it in TDS statement. Please note that there are restrictions for correction of PAN.
  • Quote correct and valid lower rate TDS certificate in TDS statement wherever the TDS has been deducted at Lower/Nil rate on the basis of certificate issued by the Assessing Officer. Please raise Flag “A”/ “B”, as appropriate, and quote valid and correct Certificate Numbers.
  • TDS statement must be filed by quoting challan(s) using correct Challan Identification Number (CIN), validated by CSI (Challan Status Inquiry) File and correct Book Identification Number (BIN), as appropriate.
  • Please maintain your correct Contact details in your Registration profile at TRACES.


Complete Reporting:

  • Please ensure completeness of your TDS statement by including all your deductees. Please note that the obligation to report each transaction correctly in the relevant quarter is on the deductor and non-compliance amounts to incorrect verification of completeness of TDS statement.
  • Completeness of statement will ensure that a C5, C3 or C9 correction can be avoided. It may be noted that CPC (TDS) does not encourage C9 corrections by addition of a new challan and underlying deductees.
  • Please also complete Annexure II (in case of 24Q) for all deductees employed for any period of time during the current financial year, including Annexure I for TDS details.


Downloading TDS Certificates from TRACES:

  • On the basis of information submitted by the deductor, CPC(TDS) will issue TDS Certificates that can be correct depending on correct and complete reporting by deductors.
  • Your attention is invited to CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012 on the Issuance of certificate for Tax Deducted at Source in Form 16/16A as per IT Rules 1962. It is now mandatory for all deductors to issue TDS certificates after generating and downloading the same from TRACES.
  • Please note that under the provisions of section 203 of the Income Tax Act, 1961 read with rule 31A, Certificate of tax deducted at source is to be furnished within fifteen (15) days from the due date for furnishing the statement of tax deducted at source.

Changes In Public Provident Fund Scheme (PPF) scheme amendment rules 2014


NOTIFICATION NO. GSR 225(E) [F.NO.2/7/2012-NS-II]DATED 13-3-2014
In exercise of the powers conferred by section 3 of the Public Provident Fund Act, 1968 (23 of 1968), the Central Government hereby makes the following rules further to amend the Public Provident Fund Scheme 1968, namely:—
1. (1) These rules may be called the Public Provident Fund Scheme (Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In Public Provident Fund Scheme in paragraph 4, for sub-paragraph (1), (2), (3) and (4) the following shall be substituted, namely:—
"4. (1) Every individual desirous of subscribing to Fund under the Scheme for the first time either on his own or on behalf of a minor of whom he is the guardian shall apply to the Accounts Office in Form A form, together with the amount of initial subscription which shall be minimum of Rs.100.
(2) On receipt of an application under sub-paragraph (1), the Accounts Office shall open an account in the name of the subscriber and issue a passbook to him, wherein all amount of deposits, withdrawals, loans and repayment thereof together with interest due shall be entered over the signature of the Accounts Officer with the date stamp.
Provided that in case of Post Offices working on Core Banking solution platform, a statement of account shall be issued in place of passbook at the discretion of account holder.
(3) The subscriber shall deposit his subscription with the Accounts Office with challan in Form B, or as near thereto as possible and the counterfoil of the challan shall be returned to the depositor by the Accounts Office, duly evidenced by receipt. And in case of deposits made by cheque or draft or pay order, the Accounts Office may issue a paper token to the depositor pending realization of the proceeds.
(4) Every subscription shall be made in cash or crossed cheque or draft or pay order in favour of the Accounts Office at the place at which that office is situated.
Provided that where the Account office is working on Core Banking platform, every subscription shall be made either by cash, cheque, draft, pay orders or any electronic mode in any Account office working on Core Banking Solution Platform."

Date of Clearance of cheque shall be date of Deposit in Post office RD account


Post office recurring Deposit rules has been amended vide notification dated 13/03/2014.As per new rules Date of Clearance of cheque shall be treated  date of Deposit in Post office RD account .Further new rules has been framed for non deposit of instalments in RD account and regularisation of such irregular accounts.


POST OFFICE RECURRING DEPOSIT (AMENDMENT) RULES, 2014 - AMENDMENT IN RULE 6
NOTIFICATION NO. GSR 221(E) [F.NO.2/7/2012-NS-II]DATED 13-3-2014
In exercise of the powers conferred by Section 15 of the Government Savings Bank Act, 1873 (5 of 1873), the Central Government hereby makes the following rules further to amend the Post Office Recurring Deposit Rules, 1981, namely:—
1. (1) These rules may be called the Post Office Recurring Deposit (Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Post Office Recurring Deposit Rules, 1981,
(i) in rule 6, for sub-rule (4), the following sub-rule shall be substituted, namely:—
 "(4) Where a deposit is made by means of a cheque, pay order or demand draft, the date of its clearance into the Post Office Savings Bank shall be deemed to be the date of deposit."
(ii) in Rule 7, for sub-rule (2), the following sub-rule shall be substituted, namely:—sub-rule (2) of Rule 7 shall be substituted by the followings:—
 "(2) If there are more than four defaults, the account shall be treated as discontinued and revival of the account shall be permitted only within a period of two months from the month of fifth default and in case a depositor fails to deposit next monthly deposit within the time prescribed in sub-rule (3) of rule 6, a default fee at the rate of five paise for every five rupee per defaulted deposits shall also be paid along with regular monthly deposit.
 (3) An account, in which all defaulted deposits are deposited with prescribed default fee and prescribed time as specified in sub-rule (2) shall not be treated as discontinued:
 Provided that notwithstanding anything contained in sub-rule (1), sub-rule (2) in the case of personal of Defence Services (excluding Civilian Defence Employees).
(i) if there are not more than seven defaults in the monthly deposits, the depositor may, at his option, extend the maturity period of the account by as many months as the number of defaults and deposit the defaulted deposits during the extended period.
(ii) If there are more than seven defaults in the monthly deposits, the account shall be treated as discontinued and the revival of the account shall be permitted only within a period of two months from the month of eighth default, subject to payment of default fee and defaulted deposits."