TAX LAW UPDATES- By Kumar Gaurav

CBDT permits issue of TDS certificate for non-salary (Form 16A) income with digital signature

2011-05-21T23:55:00.000+05:30

CBDT has recently vide Circular No. 3/2011 [F.No. 275/34/2011-IT(B)] (Circular) dated 13 May 2011 permitted issue of certificate for tax deducted at source (TDS certificate) with digital signature for TDS from income other than salary income (non-salary TDS) in Form 16A.

The extent rules provide an option to persons withholding tax (deductors) to issue TDS certificate with digital signature only for TDS from salary income (in Form 16). Non-salary TDS certificates in Form 16A are required to be issued in hard copy format with authentication by manual signature. The Circular now extends the option of digital signature to Form 16A also. The deductors exercising this option need to download Form 16A from the Tax Information Network (TIN) website.

The new facility is available for issue of Form 16A for financial year (FY) 2010-11 onwards. The Circular states that companies and deductors carrying on banking business will need to mandatorily issue Form 16A downloaded from the TIN website from FY 2011¬12.

New validation for quarterly e-TDS/TCS statement pertaining to FY 2010-11 and onwards. Amended file format and FVU version 3.1 & 2.130 released (March 18, 2011)

2011-03-18T22:03:00.000+05:30

Key features of File Validation Utility (FVU) version 3.1

• FVU 3.1 will be applicable for quarterly TDS/TCS statements pertaining to FY 2010-11 onwards and will be mandatory w.e.f April 01, 2011.
• Mandatory to quote Mobile No. in quarterly TDS/TCS statements for deductor category other than Central govt. and State Govt.
• Provision to quote the deduction under section 80CCF in salary details (applicable for 24Q Q4).
• Total deduction under chapter VI A to include:
o Deduction under section 80CCE
o Deduction under section 80CCF
o Deduction under other sections of chapter VI A
• ‘Surcharge’ amount in salary details (provided annually in Annexure II -- 24Q Q4) should be less than or equal to ‘Total Taxable Income’.
• ‘Education cess’ amount in salary details (provided annually in Annexure II -- 24Q Q4) should be less than or equal to ‘Total Taxable Income’.
• ‘Net Income tax payable’ amount in salary details (provided annually in Annexure II -- 24Q Q4) should be less than or equal to ‘Total Taxable Income’.
• Highlight transaction where tax has not been deducted as threshold limit is not exceeded (as per the provisions of Income Tax Act). in the first quarter (s) but in subsequent quarter has exceeded the threshold limit.
• Guidelines for reporting such transactions is as below:

Guidelines for reporting TDS transactions where amount paid to deductee has not exceeded the threshold limit in the first quarter but in subsequent quarters has exceeded threshold limit (as issued by the Directorate of Income Tax – Systems)

1) Flag “Y” should be selected in the field of ‘Reason for non deduction/ lower deduction’ to highlight transactions where TDS is not deducted as the threshold for deducting tax has not exceeded.
2) If threshold flag is provided then rate of deduction should be ‘0.0000’ and tax deducted/ deposited (deductee) amount should be ‘0.00’.
3) Threshold flag is can be quoted only against the following section codes in corresponding challan details:
193,194, 194A, 194B, 194BB, 194C, 194D, 194EE, 194G, 194H, 194I, 194J, 194LA
4) Example:
• In case there is no deduction of tax in the first two quarters of a F.Y., where the prescribed rate of deduction as per Income Tax Rules is 10%, the deductor should report those transactions in the respective quarterly TDS statements with zero rate of deduction (‘0.0000’), zero tax deducted/ deposited (‘0.00’) and amount paid in the respective quarters with threshold flag.

• In the third quarter the threshold limit exceeds, the deductor will mention the prescribed rate of deduction, the amount paid in the third quarter, tax deducted/ deposited (deductee) on the total amount paid till that quarter. The same is represented as follows:

PAN Rate of deduction Amount paid (Rs.) Amount deducted (Rs.) Amount deposited (Rs.) Reason for non deduction /lower deduction
Q1
PAN1 0 1,00,000 0 0 Threshold flag Y present
Q2
PAN1 0 1,00,000 0 0 Threshold flag Y present
Q3
PAN1 30% 1,00,000 30,000 30,000 No flag present

• For validating e-TDS/TCS statement (regular and correction) for FY 2010-11 and onwards refer the table below:

FVU version of e-TDS/TCS Regular statement submitted FVU version applicable for e-TDS/TCS Correction statement
FVU version 2.128 FVU version 3.1
FVU version 3.0 FVU version 3.1
FVU version 3.1 FVU version 3.1

Acceptance of e-TDS/TCS statements in Pen Drive

2011-03-18T21:58:00.000+05:30

Acceptance of e-TDS/TCS statements in Pen Drive:

1. Submission of e-TDS/TCS statement has been enabled in Pen Drive in addition to the existing option of CD.
2. Deductors /Collectors are advised to check the feasibility of acceptance of statement in pen drive with TIN Facilitation centers before submission.
3. The Pen Drive / CD may contain details of multiple e-TDS/TCS statements.
4. The computer media (CD/Pen Drive) will be return after acceptance of statements

Source : www.tin-nsdl.com

Due date for filing income tax returns for A.Y. 2010-11 / Financial Year 2009-10 extended from 30/9/2010 to 15/10/2010

2010-09-27T18:17:00.002+05:30

Order under Section 119 of the Income Tax Act, 1961

On consideration of the reports of disturbance of general life caused due to floods and heavy rains, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the due date of filing of returns of income for the Assessment Year 2010-11 from 30-09-2010 to 15th October 2010. Accordingly the due date for Tax Audit report u/s 44AB of the Income Tax Act is also extended to 15th October 2010.

(Ajay Goyal)

Director (ITA. II)

Receipt number to be quoted in Form 16/ 16A

2010-08-19T00:08:00.000+05:30

Receipt number to be quoted in Form 16/16A will be generated by TIN. Receipt number will be generated for the quarterly TDS/TCS statements pertaining to FY 2010-11 and onwards uploaded to TIN. Receipt number generated will be of eight digits (alphabets) and will be applicable only for statements pertaining to FY 2010-11 and onwards. Eight digit receipt number can be obtained by viewing the status of the quarterly TDS/TCS statement at under Quarterly Statement Status feature available at TIN website (www.tin-nsdl.com).

Receipt number provided by TIN is in addition to the provisional receipt number provided on acceptance/upload of quarterly TDS/TCS statement. Provisional receipt number will be referred as Token no for the statements pertaining to FY 2010-11 and onwards.

S. 14A, Rule 8D & Daga Capital: Judgement Pronounced

2010-08-12T23:20:00.000+05:30

The Bombay High Court today (12.8.2010) pronounced judgement in Godrej & Boyce vs. DCIT, the lead matter challenging the judgement of the Special Bench of the Tribunal in ITO vs. Daga Capital 117 ITD 169 on the applicability of s. 14A & Rule 8D.

The core aspects of the judgement are the following:

(a) The argument that s. 14A does not apply to shares and units because (i) the income there from is not “tax-free” in view of the ‘dividend distribution tax’ paid by the payer & (ii) the potentiality of taxable income arising on sale thereof is not acceptable because the dividend distribution tax is paid by the company u/s 115-O on its own account and not on behalf of the shareholder;

(b) Section 14A(2) & (3) are constitutionally valid;

(c) Rule 8D is NOT ultra vires s. 14A;

(d) As Rule Rule 8D was introduced w.e.f. 24.3.2008, it is prospective and applies for AY 2008-09 and onwards;

(e) For assessment years where Rule 8D is not applicable, the AO has to apply s. 14A on a “reasonable basis”;

(f) On facts, the matter was remanded to the AO for reconsideration in the light of the law laid down.

S. 14A, Rule 8D & Daga Capital: Hearing concluded, Judgement awaited!

2010-08-04T22:39:00.000+05:30

After extensive hearing spread over several days, the Bombay High Court today (4.8.2010) reserved judgement in Godrej & Boyce vs. DCIT, the lead matter challenging the judgement of the Special Bench of the Tribunal in ITO vs. Daga Capital 117 ITD 169 on the applicability of s. 14A & Rule 8D.

The core arguments, inter alia, of the assessee were the following:

(a) That s. 14A does not apply to shares and units because (i) the income there from is not “tax-free” in view of the ‘dividend distribution tax’ paid by the payer & (ii) the potentiality of taxable income arising on sale thereof;

(b) Rule 8D is not retrospective because (i) s. 14A (2) was enacted w.e.f. 1.4.2007 and (ii) it is substantive law and not procedural law;

(c) If Rule 8D is not retrospective, then for the earlier years, the term “expenditure in relation to” in s.14A has to be confined to expenditure which has a nexus / proximate connection with the tax-free income and not all expenditure;

(d) The application of Rule 8D is not automatic. It can be invoked only where the AO shows that he is not satisfied with the correctness of the assessee’s claim and the reasons for his non-satisfaction cannot be addressed by an adjustment in figures;

(e) Rule 8D is unconstitutional as it makes an arbitrary and unreasonable disallowance and imposes undue burden on the assessee.

Fee for software is not royalty & TDS u/s 195 not required

2010-08-04T22:34:00.000+05:30

The assessee applied to the AO for a NOC u/s 195(2) for remittance of a fee to IXOS Software, Singapore, to acquire software. The assessee claimed that the fee was commercial profits and not taxable in the hands of the recipient under Article 7 of the India-Singapore DTAA as the recipient did not have a PE in India. The AO & CIT (A) took the view that as the software was a “copyright” / “secret process” and the assessee had merely acquired a ‘non-exclusive & non-transferable’ license to use the software and as the Singapore Company continued to be the owner of the software, the fee constituted “royalty” under s. 9(1)(vi) of the Act and Article 12 of the DTAA and that it was chargeable to tax in India. On appeal by the assessee, HELD allowing the appeal:

The effect of the judgements in Tata Consultancy Services vs. State of AP 271 ITR 401 (SC), Samsung Electronics Co 94 ITD 91 (Bang), Motorola Inc 95 ITD 269 (SB) & Dassault Systems 229 CTR 105 (AAR) is that the primary condition for coming within the definition of ‘royalty’ is that the payment must be received as consideration for the use of or right to use any copyright of a literary, artistic or scientific work etc. A ‘right to use the copyright’ is totally different from the ‘right to use the programme embedded in a CD’. In acquiring a ready made off-the-shelf computer programme, no right was granted to the assessee to utilize the copyright of the computer programme. The assessee had merely purchased a copy of the copyrighted article, namely, a computer programme which is called ‘software’. Computer software when put into a media and sold becomes goods like any other audio cassette or painting on canvas or book. Accordingly, the amount paid by the assessee towards purchase of the software cannot be treated as payment of “royalty” so as to be taxable in India under Article 12 of the DTAA and the assessee was not liable to deduct tax at source.
Kansai Nerolac Software TDS

Income Tax Return Filing last date extended to 4th August 2010

2010-07-31T20:32:00.000+05:30

Press Release

The Central Board of Direct Taxes (CBDT) has decided to extend the due date of filing of income tax returns to 4th August 2010 for taxpayers for whom the due date ends today, which is 31st July 2010. All paper returns or e-returns filed on or before 4th August 2010 will be considered as filed within the due date.

The decision was taken in view of some technical snags in the e-filing computer system, and inclement weather at various locations, due to which taxpayers have reported difficulties in filing or uploading income tax returns.

Mandatory for all Companies to File I-T Returns Electronically with Digital Signature

2010-07-13T21:25:00.000+05:30

The Central Board of Direct Taxes (CBDT) has amended the Rules relating to electronic filing of income tax returns vide Notification No.49/2010 dated 9th July 2010. The amended Rules will apply with effect from the date of notification in the official gazette.

As per the amended Rules, it is now mandatory for all companies to file income tax return electronically in Form No.ITR-6 with digital signature. Earlier, companies could file their electronic returns with or without digital signature.

Further, now all individuals and Hindu Undivided Families (HUFs), who are required to get their accounts audited under section 44AB of the Income Tax Act 1961, are also required to file their income tax return in Form No.ITR-4 electronically with or without digital signature. Earlier, this condition was applicable only to companies and partnership firms.

Accounts are required to be audited under the income tax law, if turnover or gross receipts from business exceeds Rs.40 lakh (Rs.60 lakh from assessment year 2011-12 onwards), or if turnover or gross receipts from profession exceeds Rs.10 lakh (Rs.15 lakh from assessment year 2011-12 onwards).

Routers and switches should be classified as part of computers and will be eligible for depreciation @ 60%

2010-07-13T21:06:00.000+05:30

In a recent decision Special Bench (SB) of the Mumbai Income Tax Appellate Tribunal in the case of Datacraft India Ltd. (Taxpayer) [ITA No.7462 & 754/ Mum/ 2007]on the issue of whether routers and switches can be classified as computer entitled to depreciation at 60% or have to be classified as general plant and machinery entitled to depreciation at 25%, under the provisions of the Indian Tax Laws (ITL) held that the definition of computer should not be restricted to the central processing unit (CPU) of computer

, but should also extend to all the input and output devices which support computer in the receipt of input and outflow of output to and from computer. In view of the broader definition given to computers, routers and switches, which form part and parcel of computer, also qualify for depreciation at 60%.

Background and facts

The Taxpayer is engaged in the business of data communication, design, development, purchase and sale of networking products, their maintenance and installation etc.

For tax years 2001-2002 and 2002-2003, the Taxpayer claimed depreciation on routers and switches at the rate of 60% by classifying them as ‘computers’.

The Tax Authority rejected Taxpayer’s contention and held that routers and switches, being equipments which are used as networking tools, would fall under the general category of ‘plant and machinery’ and the rate of depreciation applicable would be 25%.

On appeal by the Taxpayer against the Tax Authority’s order, the first appellate authority ruled in favor of the Taxpayer and held that routers and switches, being an indispensable part of computer just like keyboard or mouse or printer, should form part of computer.

The Tax Authority preferred further appeal before the second appellate authority (Tribunal). Special Bench (SB) was constituted to decide on the issue of classification of routers and switches as ‘computer’ or ‘plant and machinery’ for the purposes of depreciation allowance.

Tax Authority’s contentions

Routers are nothing but telecommunication device meant for transmitting data from one computer to another or from one network to another and, hence, are not computers.

Definition of computer, given in the Information Technology Act, 2000 (Info Tech Act), cannot be considered for the purpose of granting depreciation under the ITL, as the scheme of both the laws is entirely different.

Oxford dictionary defines computer functions to mean performance of logic, arithmetic, data storage, communication and control functions. Since routers do not perform such processing functions, they cannot be treated as computer.

Taxpayer’s contentions

Meaning of computer should not be restricted to processing device alone. It should also mean the essential input/output devices which facilitate the operation of computer.

Routers and switches are input/output devices and are attached to computer. They have no independent utility and have to work necessarily with computer and are considered as integral part of computer.

SB decision

Upholding the contentions of the Taxpayer, the SB held as follows:

In the absence of specific definition of the term in the ITL, it is understood as per common parlance and commercial parlance tests. Test of predominant function and usage is applied in understanding such undefined terms. In common sense, computer is popularly understood to mean any electronic or other high speed data processing device which performs ‘logical, arithmetic and memory functions on data’ and includes all input and output devices which are connected to it.

The scope, purpose and substance of Info Tech Act are quite different from the context of the provisions of the ITL. However, the meaning of the term ‘computer’ as given in Info Tech Act matches with common parlance meanings. Such a meaning can, hence, be considered as an aid in understanding the term ‘computer’ for ITL purposes.

Routers can best be equated with a hardware device that routes data from a local area network to another network connection. A router acts like a coin sorting machine, allowing only authorized machines to connect to other computer systems.

The main function of routers is to receive data from one computer and make it available to another computer for further processing and viewing. As a result, routers have an essential function of supporting commercial organization to facilitate the flow of data from one computer to another for processing or storage.

Switches are shorter version of routers and perform functions which are similar to routers within a limited sphere.

Like computer hardware, a router in itself is not a computer as it neither performs any logical, arithmetic or intermediary functions on data nor does it manipulate or process data. However, routers and switches can be classified as computer hardware when they are used along with a computer and their functions are integrated with a computer.

The SB compared the CPU of computer akin to the human brain and observed that as the brain alone is not considered as the body; the CPU alone cannot be described as a computer. All devices such as keyboard, mouse etc. would also form part of computer.

[2] The SB also commented on the decisions of the Kolkata Tribunal in the case of Samiran Majumdar [280 ITR 74] , relied by the Taxpayer, and the Mumbai Tribunal in the case of Routermania Technologies (P) Ltd. [3] [16 SOT 384], relied by the Tax Authority. The SB observed that the decision of the Kolkata Tribunal, holding printer and scanner are depreciable as ‘computers’, was a better view of the matter than the view of the Mumbai Tribunal. The Mumbai Tribunal had taken a narrower view and held that routers which did not perform logical, arithmetical or memory functions by manipulation of electronic impulses etc. are not computers.

The SB, however, clarified that machines or equipments such as television set, mobile phones etc., which take assistance of computer functions, are not computers.

Comments

A Special Bench is generally constituted when there are conflicting decisions of the Tribunals or the matter pending for adjudication is of considerable importance. It is also a well-settled convention to consider the Special Bench’s decision as binding on the division benches of the Tribunal.

The present decision should assist in addressing the principle that predominant function of the routers and switches determines its classification. On application of functional test, any ancillary and supplemental components of a computer which is essential in the working of computer would form part of computer.

View Tax Ledger-Form26AS without regn with NSDL

2010-06-29T21:08:00.000+05:30

Procedure for efiling of Central Excise and Service Tax

2010-03-29T10:48:00.000+05:30

Procedure for electronic filing of Central Excise and Service Tax returns and for electronic payment of excise duty and service tax

Circular No. 919/09/2010-CX, dated 23-3-2010

Attention is invited to Circular No. 791/24/2004 dated 01.06.2004 and No. 52/1/2003 dated 11.03.2004 (modified by Circular No. 71/1/2004-ST dated 02.01.2004) prescribing the procedure for electronic filing of Central Excise and Service Tax returns. Attention is also invited to Notification No. 04/2010-Central Excise (NT) and No. 01/2010-ST both dated 19.02.2010 providing for mandatory electronic filing of Excise and Service Tax returns and payment of excise duty and service tax by all the assessees who have paid central excise duty or service tax of Rs. 10 Lakhs or more (including payment by utilisation of Cenvat credit) in the previous financial year.

2. DG (Systems) has prepared comprehensive instructions outlining the procedure for electronic filing of excise and service tax return and electronic payment of taxes under ACES. The same is enclosed. The said instructions outline the registration process for new assessees, existing assessees, non–assessees and for Large Taxpayers Unit assessees, steps for preparing and filing of return, using of XML Schema for filing dealers’ return, procedure for obtaining acknowledgement of E-filed return, procedure for E-payment etc. It is requested to sensitise concerned officers and trade and industry regarding the instructions.

3. As a large number of taxpayers would be required to file Excise and Service Tax return and to pay the taxes electronically, it is requested that trade and industry may be provided all assistance so as to help them in adopting the new procedure.

4. Field formations and trade/industry/service provider may also please be informed suitably.

5. Hindi version will follow.
Enclosure

Procedure for Electronic filing of Central Excise and

Service Tax returns and Electronic Payment of Taxes

In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central Excise, service Tax and large Tax Payer Units (LTUs) as on 23rd December, 2009. ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central Excise and Service Tax for capturing returns and registration details of the assessees and hence, in supercession of the CBEC Circular No.791/24/2004-CX. dated 1.6.2004 and CBEC Circular No. ST 52/1/2003 dated 11.03.2003, this revised circular is being issued.

II. Modules

The ACES application has interface for:

* Central Excise Assessees
* Service Tax Assessees
* Central Excise Departmental Officers and
* Service Tax Departmental Officers.

It has automated the major processes of Central Excise and Service Tax – registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions. It is divided into the following modules:

1. Access Control of Users (ACL)
2. Registration (REGN): Registration of assessees of Central Excise & Service Tax including on-line amendment.
3. Returns (RET): Electronic filing of Central Excise & Service Tax Returns
4. CLI: Electronic filing of claims, intimations and permissions by assessees and their processing by the departmental officers
5. Refund (REF): Electronic filing of Refund Claims and their processing
6. Provisional Assessment (PRA): Electronic filing of request for provisional assessment and its processing by the departmental officers.
7. Assessee Running Account
8. Dispute Settlement Resolution (DSR): Show Cause Notices, Personal Hearing Memos, Adjudication Orders, Appellate and related processes.
9. Audit Module
10. Export Module for processing export related documents

III. Benefits to the Assessees

1. Reduce Physical Interface with the Department

2. Save Time

3. Reduce Paper Work

4. Online Registration and Amendment of Registration Details

5. Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request

6. System-generated E-Acknowledgement

7. Online tracking of the status of selected documents

8. Online view facility to see selected documents

9. Internal messaging system on business-related matters

IV. Registration Process:

To transact business on ACES a user has to first register himself/herself with ACES through a process called ‘Registration with ACES’. This registration is not a statutory registration as envisaged in Acts/Rules governing Central Excise and Service Tax but helps the application in recognizing the bonafide users. Described below are steps for taking registration by a new assessee, existing assessee, non-assessee and a Large Tax Payer Unit (LTU).

(a) New Assessee

1. The user needs to log onto the system, through internet at http://www.aces.gov.in

2. He/she chooses the Central Excise/Service Tax button from the panel appearing on the left of the webpage.

3. Clicks the button “New Users Click here to Register with ACES” in the Log-in screen that appears after clicking Central Excise/Service Tax button.

4. Fills in and submits the form “Registration with ACES”, by furnishing a self-chosen user ID and e-mail ID. User ID, once chosen is final and cannot be changed by the assessee in future.

5. The system will check for availability of the chosen User ID and then generate a password and send it by e-mail, mentioned by him/her in the Form.

6. ACES provides assistance of ‘Know your location code’ for choosing correct jurisdictional office.

7. The user then re-logs-in and proceeds with the statutory registration with Central Excise/Service Tax, by filling-in the appropriate Form namely A-1, A-2 or ST-1 etc. by clicking the “Reg” link in the Menu bar that appears on the top of the screen. For security reasons, the password should be changed immediately.

8. The system instantaneously generates an acknowledgement number after which the registration request goes to the jurisdictional Assistant or Deputy Commissioner (AC/DC). Depending on the instructions in force, assessees may be required to submit certain documents to the department for verification. After due processing, the AC/DC, in case of Central Excise and Superintendent /Commissioner (for centralized registration only), in case of Service Tax, generates Registration Certificate (RC) and a message to this effect is sent to the assessees electronically. The assessee can view this and take a print-out of this.

9. Depending on the option chosen by the assessee, the signed copy of the RC can be sent by post or can be collected by assessee in person.

10. While submitting registration form, if the assessee makes a mistake in choosing a wrong jurisdiction (Commissionerate/Division/ Range), ACES provides a facility to the AC/DC to forward the application to the correct jurisdictional officer to issue registration and a message to this effect is sent to the assessee for information.

11. The registration number will be same as the current 15-digit format with minor change such as

For-PAN based Assessees

1-10 digits – PAN of the Assessee

11-12 digits–EM (Excise Manufacturer), ED (Excise Dealer), SD (Service Tax)

13-15–Systems generated alphanumeric serial number

For non-PAN based assessees

1-4 digits TEMP

5-10 Systems generated alpha numeric number

11-12 EM (Excise Manufacturer) or ED (Excise Dealer), SD (Service Tax)

13-15–Systems generated alphanumeric serial number

(b) Existing Assessee

1. The existing assessees will not have to take fresh registrations. They will have to only register with the ACES application. This can be done in the following manner :

* ACES application will automatically send mails to the e-mail IDs of the assessee, as available in the existing registration data base, indicating a TPIN number, and password. The mail will contain a hyperlink to the website.
* Assessee clicks on the hyperlink and is taken to ACES application
* Assessee submits the form after filling the requisite information including the password provided in the e-mail, a new User ID and new password. User ID, once chosen is final and cannot be changed by the assessee in future.
* On successful registration with ACES, the assessee can transact business through ACES.

1. Existing assessees should note that they should register with ACES by following the procedure at (1) above and they should not register with ACES through the direct method, meant for new assessees, as discussed under (a) above. They should also not fill-in registration forms again as it will lead to allotment of new registration numbers by the system.
2. Assessees should ensure that their contact details in the department’s registration data base are updated to include their valid and current e-mail ids, otherwise they will not receive any such mail. Those assessees who have not yet furnished their email IDs to the department or even after furnishing the ID have not received the TPIN mail from ACES are advised to contact the jurisdictional Range Officers or LTU Client Executives and furnish their email IDs in writing. The officer will thereafter incorporate the email ID in the ACES registration database of the assessee and arrange to send the TPIN mail to the assessee’s email ID.

(c) Non-Assessee

1. This category of registration is given in ACES to any individual, firm or company which requires to transact with the Central Excise or Service Tax Department, though not an assessee such as (a) merchant exporter, (b) co-noticee, (c) refund applicant, (d) persons who have failed to obtain CE/ST registration as required under the law and against whom the Department has initiated proceedings and (e) persons who are required to tender any payment under CE/ST Act /Rules. The Non-assessees are not required to file any tax returns.
2. Where such persons desire to seek non-assessee registration they follow same steps as in case of new assessee except that while choosing the registration form in step (vii) they have to choose and fill in the Non-assessee form.
3. In case the assessee is taking such registration for claiming any refund or rebate it is mandatory to furnish his/her valid PAN.
4. A Non-assessee registration can also be done by the designated officer of the Commissionerate, on behalf of the non-assessee.

(d) Large Tax Payer Unit (LTU) Assessee/Client

1. The consent form will have to be submitted manually by the New LTU assessees to the jurisdictional LTU office which will be processed off line
2. The approved consent form will be uploaded by the competent officer of the Group LTU (GLTU) into ACES
3. Any new unit of an existing LTU, which applies for registration with ACES will be automatically attached with the LTU Commissionerate based upon PAN details in the registration form
4. As soon as the new or existing unit is attached with the LTU Commissionerate, a suitable intimation will be automatically sent by the ACES to the existing jurisdictional Commissionerate and the pending items of work will be transferred to the LTU Commissionerate
5. For existing LTU assessees, the process of registration is same as explained in Sub Para (b) above.

IMPORTANT:

i. The user ID once selected will be permanent and cannot be changed. However, it is desirable to frequently change passwords

ii. The User ID should be of 6-12 alphanumeric characters, no special character such as !@#$%*&( )+ or spaces except underscore ‘-‘ shall be allowed.

iii. New assessee seeking registrations in Central Excise and Service Tax will also submit to the jurisdictional Range officer, a printout of the application form submitted online duly signed by the authorized signatory along with required documents.

iv. Assessees should note that the e-mail ID is furnished to the department in writing, and they will be responsible for all communications to and from this email ID. Currently, ACES provides for communication to one email ID only. After registration with the ACES, assessees, on their own, can modify their registration details online, including their e-mail ID.

v. In the interest of security and data protection, assessees are advised to change their passwords regularly and not to share it with unauthorized persons. In case of any dispute, the person whose user ID and Password has been used to access the application will be held liable for the action and any other consequences.

V. E-filing of Returns

The assesses can electronically file statutory returns of Central Excise and Service Tax by choosing one of the two facilities being offered by the department at present: (a) they can file it online, or (b) download the off-line return utilities which can be filled-in off-line and uploaded to the system through the internet.

a. Steps for preparing and filing returns

(i) Returns can be prepared and filed on line by selecting the ‘File Return’ option under RET module after logging into the ACES.

(ii) All validations are thrown up during the preparation of the return in this mode and the status of the return filed using the online mode is instantaneously shown by ACES.

(iii) Returns can also be prepared and filed off-line. Assessee downloads the Offline return preparation utility available at http://www.aces.gov.in (Under Download)

(iv) Prepares the return offline using this utility. The return preparation utility contains preliminary validations which are thrown up by the utility from time to time.

(v) Assessee logs in using the User ID and password.

(vi) Selects RET from the main menu and uploads the return. Instructions for using the offline utilities are given in detail in the Help section, under ‘Download’ link and assessees are advised to follow them.

(vii) Returns uploaded through this procedure are validated by the ACES before acceptance into the system which may take up to one business day. Assessee can track the status of the return by selecting the appropriate option in the RET sub menu. The status will appear as “uploaded” meaning under process by ACES, “Filed” meaning successfully accepted by the system or “Rejected” meaning the ACES has rejected the return due to validation error. The rejected returns can be resubmitted after corrections.

(viii) Once the Central Excise returns are filed online in ACES or uploaded to the system using the off-line utility, the same can not be modified or cancelled by the assessee. The Service Tax returns, however, can be modified once as per rules up to 90 days from the date of filing the initial return.

(ix) Self-assessed CE returns, after scrutiny by the competent officer, may result into modification. Both the ‘Original’ and the ‘Reviewed’ return can be viewed by the assessee online.

b. Using XML Schema for filing Dealers Return

Currently, the ACES Application allows on-line filing of Quarterly Returns by the Registered Dealers accessing the site www.aces.gov.in by using the excel utility. Some assesses who use their own software application in their offices find the process of manual entry of data in the excel format of Returns as a time consuming and avoidable exercise. A new feature of XML schema has now been introduced. Now using the schema, assessees, after making necessary modifications in their own software application, can generate their return from their application. Below mentioned steps elaborate the process to prepare, validate and upload the Dealer’s Return.

Steps to prepare the XML

Step 1: ACES application accepts the return in XML format. Prepare the Dealer return XML and validate it against the schema ACES_DLR.xsd provided.

Step 2: Login to the ACES application and upload the XML for processing. XML will be again validated against same XSD again before processing.

XML File only will be considered valid if it satisfies the requirements of the schema (predefined XSD) with which it has been associated. These requirements typically include such constraints as:

Elements and attributes that must/may be included, and their permitted structure

The structure as specified by regular expression syntax

Instructions for using the schema are given in detail in the Help section, under ‘Download’ link. Assessees are advised to follow them.

c. Filing of Returns and other documents through the ACES Certified Facilitation Centres (CFCs)

Very soon, CBEC will be setting up ACES Certified Facilitation Centres (CFCs) with the help of professional bodies like Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants of India (ICWAI) etc. These CFCc will provide a host of services to the assessees such as digitization of paper documents like returns etc. and uploading the same to ACES. Assessees requiring the services of the CFCs may be required to pay service fees to the CFCs. CBEC will approve the maximum rates at which CFCs can charge their customers for the services rendered by them. For this purpose, assessees are required to write to the department authorizing one of the CFCs, from the approved list, to work in ACES on their behalf. They have to furnish the name and other details of the CFCs, including the registration No issued by the ICAI/ICWAI etc. At any given time, one assessee can authorize one CFC, while one CFC can provide services to more than one assessee throughout India. In case the assessee wants to withdraw the authorization, it can do so by intimating the department. However, an assessee will be held liable for all actions of omission or commission of the CFC, during the period they are authorized by him/her to work in ACES.

d. Validation of the entries made while filling return

1. At the time of making entry in the electronic format of the relevant return, the software does some preliminary validation for ensuring correctness of data, either concurrently or at the time of saving / submitting the return. This validation process is automated. The user is prompted by the application software to correct the particulars entered wherever required. In respect of certain entries, although the application alerts the assessee about any entry found erroneous or inconsistent, as per the automated validation process, the assessee is still allowed to proceed further to complete data entry of the return and finally submit it electronically. But in some cases the assessees are not allowed to proceed further unless the error indicated is corrected.

1. A return filed electronically is subject to automatic verification process by the application and defective returns are marked to the departmental officer for review and correction. While reviewing the return the officer may seek some clarification from the assessee, call for some information, records or documents which should be furnished by the assessee. In case of review and correction of returns by the departmental officers, assesses will receive a message from the application and they can log in to the application to view the reviewed returns online.

1. Returns, captured off-line using the Downloadable utility and uploaded later on, are further subjected to certain validation checks. Processing of uploaded returns, using the off-line versions, is done at the end of one business day and the status can be viewed by the assessees under the ‘VIEW STATUS’ link under ‘RET’ module. Status is described as ‘UPLOADED’, ‘FILED’ or ‘REJECTED’ and they denote as follows:

* UPLOADED denotes that return is uploaded and under processing (assessees are advised to view the status after the end of a business day).
* FILED denotes that uploaded return is accepted by system.
* REJECTED denotes that return is rejected due to errors. (The assessees are required to correct the return and upload it again.)

1. There is no provision in ACES application to allow assessees to make corrections to the returns filed by them. Once the return is accepted by the system as successfully ‘filed’, no modification can be made by the assessee. However, if the return is rejected, the assessee can correct the errors and upload it again. The assessees are, therefore, advised to take utmost care while fill-in in the returns. They may, however, bring it to the notice of the departmental officers.

e. Acknowledgement of E-Filing of the return

In the case of a Central Excise or service Tax return filed on-line, ACES application software acknowledges it by displaying an Acknowledgement message. A unique document reference number is generated which consist of 15-digit registration number of the assessee, name of the return filed, the period for which return is filed etc. This is also automatically communicated to the email id of the assessee by the application. In the case of an uploaded Central Excise return, using offline utility, similar acknowledgement is generated and sent after the acceptance of the return by the system as a valid return i.e. when the status changes to ‘FILED’.

f. Class of Assessees for whom e-filing of returns and e-payment is mandatory with effect from 1st April, 2010:

1. In terms of Notification No 04/2010-Central Excise (N.T.) dated the 19th February, 2010, an assessee, who has paid total duty of rupees ten lakhs or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year, is required to file the monthly or quarterly return, as the case may be, electronically, under sub-rule (1) of Rule 12 of the Central Excise Rules, 2002 and deposit the duty electronically through internet banking under sub-rule (1) of Rule 8 of the Central Excise Rules, 2002.

1. Similarly, in terms of Notification No. 01/2010 – Service Tax dated the 19th February, 2010, an assessee who has paid a total Service Tax of rupees ten lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year, is required to file the return electronically under sub-rule (2) of Rule 7 of the Service Tax Rules, 1994 and deposit the service Tax liable to be paid by him electronically, through internet banking under sub-rule (2) of Rule 6 of the Service Tax Rules, 1994.

1. The earlier facility of e-filing on the website (http://exciseandservicetax.nic.in), as provided in the CBEC Circular No.791/24/2004-CX. Dated 1.6.2004 is no more available and the assessees are required to file their returns online or by uploading the downloadable off-line return utilities to the new ACES website (http://www.aces.gov.in). Data structure for writing programmes to cull out the required return data (currently available for Dealer return) from the assessees’s computers in XML format has also been provided. Such schema for ER 2 and ER 1 returns will be published in due course. For complete details and instructions, assessees can visit the aforesaid website. Assessees who are required to or opted to file returns electronically but are unable to file electronically, for any technical difficulty in filing the returns, on account of difficulties at the department’s end viz. server/application is down or due to some defect in the software, should file their returns manually within the due date.

g. e-payment

1. For e-payment, assessees should open a net banking account with one of the authorized banks (currently there are 28 banks, list of which is available on the EASIEST (Electronic Accounting System in Excise and service Tax) website of CBEC, maintained by NSDL (https://cbec.nsdl.com/EST/). Payment through ICICI Bank, HDFC Bank and Axis Bank can be done by assesses for select Commissionerates only, list of which is published in the aforesaid EASIEST website. Payment through all other authorized banks can be made for all Commissionerates.

1. For effecting payment, assessees can access the ACES website (http://www.aces.gov.in/) and click on the e-payment link that will take them to the EASIEST portal (https://cbec.nsdl.com/EST/) or they can directly visit the EASIEST portal.

1. Procedure for e-Payment:

1.
1. To pay Excise Duty and Service Tax online, the assessee has to enter the 15 digit Assessee Code allotted by the department under erstwhile SACER/SAPS or the current application ACES.
2. There will be an online check on the validity of the Assessee Code entered.
3. If the Assessee code is valid, then corresponding assessee details like name, address, Commissionerate Code etc. as present in the Assessee Code Master will be displayed.
4. Based on the Assessee Code, the duty / tax i.e. Central Excise duty or Service Tax to be paid will be automatically selected.
5. The assessee is required to select the type of duty / tax to be paid by clicking on Select Accounting Codes for Excise or Select Accounting Codes for Service Tax, depending on the type of duty / tax to be paid.
6. At a time the assessee can select up to six Accounting Codes.
7. The assessee should also select the bank through which payment is to be made.
8. On submission of data entered, a confirmation screen will be displayed. If the taxpayer confirms the data entered in the screen, it will be directed to the net-banking site of the bank selected.
9. The taxpayer will login to the net-banking site with the user id/ password, provided by the bank for net-banking purpose, and will enter payment details at the bank site.
10. On successful payment, a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment made.

h. Responsibility of the Assessee

1. It is the legal responsibility of the assessees, who are required to file returns, to file it within the due date as prescribed under law. The electronic filing of returns is mandatory for select class of Central Excise and Service Tax assessees, as mentioned in Notification No 04/2010-Central Excise (N.T.) dated the 19th February, 2010, and Notification No. 01/2010 – Service Tax dated the 19th February, 2010 respectively. Other assessees can also use ACES and file their returns electronically. It may, however, be noted that merely uploading the returns will not be considered as returns having been filed with the department. A return will be considered as filed, when the same is successfully accepted by the application as ‘Filed’ and the relevant date for determining the date of filing of return will be the date of uploading of such successfully ‘filed’ returns. In case a return is ‘rejected’ by the application, the date of uploading of the rejected return will not be considered as the date of filing, rather the date of uploading of the successfully ‘filed’, return (after the assessee carries out necessary corrections and uploads it again) will be considered as the actual date of filing.

1. In case the assessee experiences any difficulty in transacting in ACES such as filing of return, the assessees may lodge a complaint with the ACES Service Desk or the department by e-mail and/or by telephone, details of which are given below and obtain a ticket no. as an acknowledgement from the department. However, mere lodging of complaints with the ACES service desk will not be a valid ground to justify late filing of returns. If the difficulty is not on account of problems at the assessee’s end, and can be clearly attributed to the department’s IT infrastructure such as problems in accessing CBEC’s ACES application due to server, network or application being down, proportionate time will be deducted from the date of uploading of successfully ‘filed’ returns to ascertain the actual date and time of filing of the return. Since the department maintains logs of such technical failures, in case of any dispute, the decision of the department will be final.

VI. Digital Signatures

The ACES application is designed to accept digitally signed documents. However, in the beginning this functionality is not going to be activated. Pending its activation the electronic returns will be filed into ACES without digital signatures. Hence, wherever the returns are submitted through ACES there will not be any requirement to submit signed hard copy separately.

VII. System Requirements for ACES

To use ACES following systems requirements are recommended:

* Processor: Intel Pentium III and higher
* RAM: 256 MB and higher
* HDD: 80 GB and more
* Web Browser: IE 6.0 and above, Netscape 6.2 and above
* MS Excel 2003 and above for using offline utilities
* Sound Card, Speakers/Headphones, Colour Monitor for using Learning Management Systems ( LMS)

VIII. Help for Assessees

CBEC has set up a Service Desk with National toll-free No. 1800 425 4251, which can be accessed by between 9 AM to 7 PM on all working days (Monday to Friday). Besides, e-mails can be sent to aces.servicedesk@icegate.gov.in. All the calls/e-mails will be issued a unique ticket number, which will be attended to by the Service Desk agents for appropriate response.

A Learning Management Software (LMS) has been provided on the ACES website, which is a multimedia-based self-learning online tutorial guiding the aseesees in a step-by-step processes to use ACES. The downloadable version of Learning Management Software is also provided on the website. Besides, User Manuals, Frequently Asked Questions (FAQs), Power Point Presentation, and a Brochure have also been provided on the website to help the assessees use ACES.

Corrigendum in Notification from CBDT

2010-03-26T10:57:00.000+05:30

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART –II,
SECTION 3, SUB-SECTION (ii)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXES

CORRIGENDUM
New Delhi, the 23rd March, 2010.
INCOME-TAX

S.O._____(E) In the notification of Government of India, Ministry of Finance,
Department of Revenue (Central Board of Direct taxes), number 9/2010 dated 18-02-
2010 bearing S.O. 424(E) and published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (ii), dated 18th February, 2010 –
(i) at page 31 of the Gazette Notification, in fourth line of clause (i) of sub-rule (3),
for “Form No.27B”, read “Form No. 27A”;
(ii) at page 32 of the Gazette Notification, in eighth line of Rule 37A, for “shall
send within fourteen days from the end of the quarter”, read “shall send on or
before the 15th July, the 15th October, the 15th January in respect of the first
three quarters of the financial year and on or before the 15th June following the
last quarter of the financial year”; and
(iii) At page 32 of the Gazette Notification, in Rule 37A, the proviso shall be
omitted.
2. The other contents of the Gazette Notification shall remain unchanged.
Notification No. 18/2010/F.No.142/27/2009-SO(TPL)

(M.RAJAN)
Under Secretary

Taxable HRA calculator

2010-02-27T14:09:00.004+05:30

Adjustment of “Advance Tax in respect of Fringe Benefits” forAssessment Year 2010-11 against “Advance Tax”

2010-01-30T14:53:00.002+05:30

CIRCULAR NO. 2/2010.
Dated 29/01/2010
F. N0.385/05/2010-IT (B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Sub: Adjustment of “Advance Tax in respect of Fringe Benefits” for
Assessment Year 2010-11 against “Advance Tax” – matter regarding.
……….
The Finance Act, 2005 introduced a levy namely Fringe Benefit Tax (FBT)
on the value of certain fringe benefits as contained in Chapter XII H (Sections 115
W to 115 WL) of Income Tax Act, 1961. By the Finance (No. 2) Act, 2009 a new
Section 115 WM was inserted to abolish the FBT with effect from Assessment
Year (A.Y.) 2010-11. Consequently, benefits given to employees are taxed as
perquisites in the hands of employees in terms of amendments to Clause 2 of
Section 17 of Income Tax Act, 1961. However, during the current Financial Year
2009-10 some assessees have paid “advance tax in respect of fringe benefits” for
Assessment Year 2010-11. In such cases the Board has decided that any
installment of “advance tax paid in respect of fringe benefits” for A.Y. 2010-11
shall be treated as Advance Tax paid by assessee concerned for A.Y. 2010-11.
The assessee can adjust such sum against its advance tax obligation in respect of
income for A.Y. 2010-11 or in case of loss etc claim such payment as refund as
advance tax paid in A.Y. 2010-11.
2. This circular may be brought to the notice of all officers in the field for
compliance.

GST may not meet 01.04.10 deadline

2010-01-29T10:14:00.002+05:30

The Planning Commission today said that the proposed Goods and Services Tax (GST) is likely to miss the deadline of April 1, but it could be introduced in the next fiscal only. “Well, we were hoping that it (GST) will come from April 1, but it does not appear that it will be so,” Planning Commission Member B K Chaturvedi told PTI.He, however, said the proposed indirect tax regime, aimed at doing away with most of the indirect taxes at the Centre and the States-levels, is likely to be implemented from the next financial year.

“Most likely it (GST) may come up from the next financial year,” he said.

Many states like Madhya Pradesh, Tamil Nadu, Rajasthan and Gujarat are calling for delaying the introduction of GST against the schedule of April 1, 2010.

Date for filing ITR V extended

2010-01-28T11:01:00.000+05:30

Date for filing ITR-V form extended

Central Board of Direct Taxes has decided to extend the time limit for filing ITR-V
form relating to income-tax returns filed electronically (without digital signature) on
or after 1st April 2009, up to 31st March 2010 or within a period of 120 days from
the date of uploading of the electronic return data, whichever is later. The ITR-V
form should continue to be sent by ordinary post to Post Bag No.1, Electronic City
Post Office, Bengaluru – 560100 (Karnataka). However, in cases where email
acknowledgement for ITR-V form is not received by the taxpayer from the CPC
Bengaluru, the taxpayer may send another duly signed ITR-V form by speed post to
Centralized Processing Centre, Electronic City Post Office, Bengaluru, Karnataka –
560100.
This has been done in relaxation of the stipulation in Circular No. 3/2009 dated
21.05.2009 which allows taxpayers who file their income tax returns in electronic
form without digital signature to submit their ITR-V form duly verified and signed,
within a period of 30 days thereafter to Post Bag No.1, Electronic City Post Office,
Bengaluru, Karnataka-560100, by ordinary post.
The relaxation has been made following requests from taxpayers that, as a one-time
measure, the time limit for filing of ITR-V form may be extended to 31st March 2010
and that alternative modes of submission of ITR-V form may also be provided in
cases where an ITR-V form has not been received at CPC, Bengaluru by ordinary
post.
BSC/BY/GN-16/10

Govt Said that UTN no. is scrapped which was to come on 01.01.10

2010-01-08T11:22:00.000+05:30

The government has decided to shelve the introduction of the Unique Transaction Number (UTN) which tax payers need to quote along with Permanent Account Number (PAN) when tax is deducted/collected at source. The scheme was to have come into force from the New Year.

However, the finance ministry has not ruled out the possibility of introducing a new identity number like UTN from the next fiscal, in addition to the PAN to ensure prompt verification and granting of tax credits to tax payers.

“The introduction of UTN, which was scheduled to be implemented from January 2010, has been shelved in all probability . The process of filing tax returns remains the same as earlier,” a finance ministry official said.

A similar arrangement of having a new identity number is under contemplation but it would only happen from the next fiscal, the official said.

The government had earlier said the system of allotting UTN is expected to become operational by January 1, 2010.

The move to introduce UTN had invited concerns from tax payers as it would have brought in a slew of formalities for the tax payers, through their respective collectors and deductors, to avail the new number and file their returns on time.

The decision to shelve the UTN has been taken keeping in mind the approaching end of the fiscal year. Moreover , the exercise to have a new identity number like PAN is huge and it would have brought a lot of complications for tax payers, the finance ministry official said.

The Central Board of Direct Taxes (CBDT) had deferred UTN’s introduction to June 30 this year saying, “taxpayers filing their income tax returns for assessment year 2009-10 or any other earlier assessment year, may continue to file their returns without mentioning the Unique Transaction Number (UTN).”

The CBDT in a circular earlier said the new number (UTN) is mandatory for filing tax returns due to certain lacunae like individuals having more than one PAN.

The income-tax department was also in touch with the National Securities Depository (NSDL) regarding future steps to be taken for “putting in place” a new system for UTN.

Disallowance under S. 14A read with rule 8D can be made only if there is actual nexus between tax-free income and expenditure

2009-11-09T10:07:00.000+05:30

ITA No. 331 of 2009 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
ITA No. 331 of 2009 (O&M)
Date of decision: November 4, 2009
Commissioner of Income Tax-II ...Appellant
Versus
M/s Hero Cycles Ltd. ...Respondent
CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE GURDEV SINGH
Present: Mr. Rajesh Sethi, Advocate, for the revenue.
ORDER
1. The revenue has preferred this appeal under Section 260A of
Income Tax Act, 1961 (for short, “the Act”) for the assessment year 2004-
05 against the order of Income Tax Appellate Tribunal, Chandigarh Bench
'B', passed in ITA No. 247/Chandi/2008 on 4.7.2008, proposing to raise
following substantial question of law:-
“(i) Whether on the facts and in law, the Hon'ble ITAT was
legally justified in deleting the disallowance of Rs.
3,48,04,375/- under Section 14A of the Income-tax Act,
1961 by ignoring the evidence relied on by the Assessing
Officer and holding that a clear nexus has not been
established that the interest bearing funds have been
vested for investments generating tax free dividend
income.”
2. The assessee is engaged in manufacturing of cycles and parts of

ITA No. 331 of 2009 2
two-wheelers in multiple units. It earned dividend income, which is
exempted under Section 10 (34) and (35). The Assessing Officer made an
inquiry whether any expenditure was incurred for earning this income and
as a result of the said inquiry addition was made by way of disallowance
under Section 14A (3), which was partly upheld by the CIT (A). The
Tribunal held that there was no nexus with the expenditure incurred and the
income generated. The finding recorded are as under:-
“We have perused the same and find that the plea of the
assessee that the entire investments have been made out of the
dividend proceeds, sale proceeds, debenture redemption etc., is
borne out of record. In fact the CIT (Appeals) has also come to
a categorical finding that in so far as other units are concerned,
none of their funds have been utilized to make the investments
in question. One aspect which is evident that the interest
income earned by the main unit, Ludhiana, exceeds the
expenditure by way of interest incurred by it, thus obviating the
application of Section 14A of the Act. Even with regard to the
funds of the main unit, Ludhiana the funds flow position
explained shows that only the non-interest bearing funds have
been utilized for making the investments. At pages 3 to 6 of
the paper book are placed the details of the Bank accounts,
wherein the amount of dividend, sale proceeds of shares,
debenture redemption etc. have been received and later on
invested in the investments in question. Such funds are
ostensibly without any burden of interest expenditure. Thus, on
facts we do not find any evidence to show that the assessee has

ITA No. 331 of 2009 3
incurred interest expenditure in relation to earning to the tax
exempt income in question. We find that all the details in
question were produced before the Assessing Officer and the
CIT (Appeals) also. The entire evidence in this regard, which
is submitted before the lower authorities have been compiled in
the paper book, to which we have already adverted to in the
earlier part of the order. Therefore, merely because the
assessee has incurred interest expenditure on funds borrowed in
the main unit, Ludhiana, it would not ipso-facto invite the
disallowance under Section 14A, unless there is evidence to
show that such interest bearing funds have been invested in the
investments which have generated the 'tax exempt dividend
income.' As noted earlier, there is no nexus established by the
Revenue in this regard and therefore, on a mere presumption,
the provisions of Section 14A cannot be applied. Thus, we find
that the CIT (Appeals) erred in part sustaining the addition. In
fact, in the absence of such nexus, the entire addition made was
required to be deleted. We accordingly hold so.”
We have heard learned counsel for the revenue.
3. Learned counsel for the appellant relies upon Section 14A (2)
and Rule 8D (1) (b) to submit that even where the assessee claimed that no
expenditure had been incurred, the correctness of such claim could be gone
into by the Assessing Officer and in the present case, the claim of the
assessee that no expenditure was incurred was found to be not acceptable by
the Assessing Officer and thus disallowance was justified. We are unable to
accept the submission.

ITA No. 331 of 2009 4
4. In view of finding reproduced above, it is clear that the
expenditure on interest was set off against the income from interest and the
investment in the share and funds were out of the dividend proceeds. In
view of this finding of fact, disallowance under Section 14A was not
sustainable. Whether, in a given situation, any expenditure was incurred
which was to be disallowed, is a question of fact. The contention of the
revenue that directly or indirectly some expenditure is always incurred
which must be disallowed under Section 14A and the impact of expenditure
so incurred cannot be allowed to be set off against the business income
which may nullify the mandate of Section 14A, cannot be accepted.
Disallowance under Section 14A requires finding of incurring of
expenditure where it is found that for earning exempted income no
expenditure has been incurred, disallowance under Section 14A cannot
stand. In the present case finding on this aspect, against the revenue, is not
shown to be perverse. Consequently, disallowance is not permissible. We
have taken this view earlier also in ITA No. 504 of 2008 (Commissioner of
Income Tax Chandigarh II vs. M/s Winsome Textile Industries Limited,
Chandigarh), decided on 25.8.2009, wherein it was observed as under:-
“6. Contention raised on behalf of the revenue is that even if
the assessee had made investment in shares out of its own
funds, the assessee had taken loans on which interest was paid
and all the money available with the assessee was in common
kitty, as held by this Court in CIT v. Abhishek Industries
Limited, (2006) 286 ITR 1 and therefore, disallowance under
section 14A was justified.
7. We do not find any merit in this submission. Judgment of

ITA No. 331 of 2009 5
this Court in Abhishek Industries (supra) was on the issue of
allowability of interest paid on loans given to sister concerns,
without interest. It was held that deduction for interest was
permissible when loan was taken for business purpose and not
for diverting the same to sister concern without having nexus
with the business. Observations made therein have to be read
in that context. In the present case, admittedly, the assessee did
not make any claim for exemption. In such a situation, Section
14A could have no application.”
5. In view of the above, we are of the opinion that no substantial
question of law arise.
6. The appeal is dismissed.
(ADARSH KUMAR GOEL)
JUDGE
November 4, 2009 (GURDEV SINGH )
prem JUDGE

ITA No. 331 of 2009 6

Taxability of Gifts in kind in excess of Rs.50000

2009-10-13T12:16:00.000+05:30

No.402/92/2006-MC (21 of 2009)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
**************************************************
New Delhi dated the 30th September 2009
PRESS RELEASE
The Income Tax Act 1961 (the Act) has been amended with effect from 1st October 2009
to provide that any gift-in-kind, being an immovable property or any other property, the value of
which exceeds Rs.50,000 (rupees fifty thousand), will become taxable in the hands of the donee,
being an individual or a Hindu Undivided Family (HUF), as income from other sources under
clause (vii) of sub-section 2 of section 56 of the Act. Therefore, any such person who receives a
gift of any such property on or after 1st October 2009 must pay the income tax due on the value
of the gift and disclose the taxable value of such property in the return of income for assessment
year 2010-11 and subsequent years.
The following types of gifts will, however, not be subject to tax, i.e. gifts (a) from a
person who is a relative; (b) on the occasion of marriage of the individual; (c) under a will or by
way of inheritance; (d) in contemplation of death of the donor; (e) from any local authority as
defined in the Explanation to section 10(20) of the Act; (f) from any fund or trust established
under section 10(23C) of the Act; (g) from any trust or institution registered under section 12AA
of the Act.
Relative is defined in the Act as (i) spouse; (ii) brother or sister; (iii) brother or sister of
the spouse; (iv) brother or sister of either of the parents; (v) any lineal ascendant or descendant;
(vi) spouse of any of the relative at clauses (ii) to (v); of the individual. Gifts received from
these relatives will not be subject to tax.
Earlier cash gifts exceeding Rs.25,000 were subject to tax with effect from 1st April
2004. Later the Act was amended with effect from 1st April 2006 to tax all cash gifts having
aggregate value exceeding Rs.50,000. Cash gifts also enjoy exemptions as is available for giftsin-
kind.

Procedure for filing TDS returns with insufficient deductee PAN

2009-10-12T12:07:00.000+05:30

As per instructions issued by the Central Board of Direct Taxes (CBDT), it is
mandatory for deductors to file TDS/TCS statements with a threshold limit of
Permanent Account Number (PAN) of deductees. To facilitate deductors who face
problem in filing TDS returns because of insufficiency of PAN of the deductees and
also to accommodate the deductees who have intimated their PAN, the Income Tax
Department (ITD) has specified the following procedure for filing TDS/TCS returns:
• Deductors can file a return containing deductee records which meets the
specified threshold limit of PAN quoting, i.e., a deductor can file a return
containing deductee details who have provided valid PAN. It can
subsequently file a correction return with details of remaining deductees.
E.g. as below:
o Suppose a challan payment of Rs.1,00,000/- has been made for nonsalary
TDS against 100 deductees each with TDS of Rs.1,000/-. Under
the existing procedure the deductor will have to quote at least 85 PAN
failing which his return will be rejected.
o If there are only 50 deductees whose PAN is available and the
deductor attempts to file a return with details of 100 deductees with
PAN of only 50 deductees, the return will automatically be rejected at
present.
o However, if he files a return with challan amount of Rs. 1,00,000/- and
with details of 50 deductees with PAN, with deductee total of
Rs.50,000/-, the return will be accepted. It means the deductor can
furnish the details relating to such deductees whose PANs are
available.
o The deductor can later file correction returns with other details of
remaining deductees with the same challan details, i.e., the challan
amount should be the amount deposited (in this case Rs. 1,00,000/-).
o The return will be accepted so long as the TDS total of incremental
deductees is less than or equal to the balance of Rs.50,000/-.

e-TDS - New Process

2009-10-10T11:55:00.000+05:30

CHALLAN VERIFICATION INCORPORATED IN FVU 2.128

2009-10-09T09:50:00.001+05:30

Normal 0 false false false MicrosoftInternetExplorer4

Reason for incorporating Challan Verification in FVU-

Mismatch in challan

· Normally following mistakes were found in challan data uploaded by bank and furnished in etds return

o Date of challan

o Amount of challan

o BSR code of bank branch

o Challan serial number

How we can avoid

· Earlier we can check challan details from the Tin-nsdl site and can match challan details manually ,one by one. But that was not compulsory and people just ignored this step and faced problem at later stage

· But now challan verification is a part of FVU process.

· Now to create a etds/etcs return you have to download challan detail from TIN-nsdl site in CSI format and to use the same in FVU while creating etds returns

CHALLAN VERIFICATION IN FVU 2.128

· To overcome this drawback now Tin-NSDL has started challan verification in fvu itself.

· By this feature deductor can know all the mismatch before submission of etds return and can correct the error so that there is no mismatch in challan uploaded by the bank and challan detail given in etds return

UTN not mandatory for filing it returns

2009-07-01T09:10:00.001+05:30

The Central Board of Direct Taxes have further decided that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.

Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

Further, the date from which the Notification No. 31 / 2009 shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.

BSC/BY/GN-154/09

NSDL site ready for filing Form 15CA

2009-07-01T09:05:00.001+05:30

NSDL site is ready for filing of Form 15CA

Guidelines for filing are as follows :Procedure for furnishing information under sub-section (6) of section 195 of the Income-tax Act, 1961 read with rule 37BB of the Income-tax Rules, 1962.

General

Form 15CA should be used for furnishing information of remittances in e-mode in accordance with the provisions of section 195 (6) of the Income-tax Act, 1961. The information should be furnished after obtaining a certificate in Form 15CB from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961. The print out Form 15CA should be signed and submitted to the Reserve Bank of India/authorized dealer prior to remitting the payment.
The Form should be furnished at the website of the Tax Information Network www.tin-nsdl.com.
Fields marked with (*) are mandatory.
Select the values from the drop down wherever provided.
Each transaction detail should be filled in separately.

Guidelines for Part A of Form 15CA:

Remitter:

Permanent Account Number (PAN) and Tax Deduction and collection Account Number (TAN) allotted by the Income Tax Department should be mentioned. TAN is mandatory in cases where-

tax has been deducted or will be deducted at source;
the remitter has obtained an order under section 195 (2) of the Income-tax Act from the Assessing Officer.

In case an invalid PAN and/or TAN is filled in by the remitter, the Form will not be generated.
In case the remitter does not have a TAN, it is mandatory to quote PAN of the remitter.
PAN of the remitter should invariably be given. However, the same is mandatory if status of entity is Company or Firm. If PAN is not given in such cases, the remitter will not be allowed to generate the Form.
Details in at least two address fields for remitter shoule be mentioned.
Name of the entity should be mentioned in the “Name of remitter” field.
No value is to be provided in Area code, AO type, Range code & AO number. The fields will be entered by the system after validating the PAN and/or TAN.
Email id and mobile no., if any, should be provided.

Recipient of remittance:

Complete address of recipient of remittance, separated by coma, should be provided.
PAN, allotted by the Indian Income Tax Department should be mentioned.
If status of entity is “company”, then provide type of company i.e., “domestic” or “other than domestic”.
In the field “ Principal Place of Business”, the country of tax residence of the recipient of the remittance should be mentioned.

Information for accountant

Enter name of the Chartered Accountant in the field “Name of the accountant”.
Details in at least two address fields should be mentioned.
Date of certificate should not be a future date.
Registration no. should be numeric.
Details of accountant are not required if point no. 15 is selected i.e. any order u/s 195 (2)/ 195 (3)/ 197 of the Income-tax Act has been obtained from Assessing Officer.
Certificate number is an alphanumeric field.

Guidelines for PART B of the Form (Particulars of Remittance and TDS)

Provide the values as per the accountant certificate obtained in Form 15CB.
In case name of the country is not available in drop down list, select value “other” from the drop down and provide name of the country.
In case currency name is not available in drop down then select value ”other” from the drop down and provide name of the currency.
Proposed date of remittance should be current date or a future date.
Amount of TDS should be less than amount of remittance.
Actual amount of remittance after TDS should be less than amount of remittance.
BSR code of the bank through which the remittance is made should be mentioned.
Rate of TDS as per DTAA (if applicable) should be mentioned upto two decimal places.
Amount should be mentioned upto 2 decimal places.
Select any one out of fields 12, 13, 14 and 16. One form is to be filled for one type of remittance.
Details of “responsible person” should be mentioned for verification.
If no tax has been deducted then value “0.00” should be mentioned in “Amount of TDS” field (foreign currency and Indian Rs.)
Value for “rate of deduction as per the Income-tax Act” should be “0.00” if no tax has been deducted and “amount of TDS in Indian and foreign currency” should be “0.00”.

Generation of Form 15CA

After filling up the information, click “submit”. On submission of details if system shows any errors, rectify and re-submit the form.
A confirmation screen with all the data filled by the user will be displayed. The same can be either confirmed or edited.
On confirmation, a filled up Form 15CA with an acknowledgement number will be displayed. Print out of the Form should be taken, signed and submitted prior to remitting the payment.
Form 15CA can be re-printed by selecting the re-print option. For re-printing, please enter “acknowledgement no.”, “PAN” and/or “TAN” mentioned in the Form.

Flow Chart on Filing of Undertaking U/s 195 released

2009-06-30T11:02:00.000+05:30

Circular No. 04/2009
F.No.142/19/2007-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
****
New Delhi, the 29th June, 2009
Subject:- Remittances to non-residents under section 195 of the Income-tax Act ––
matters connected thereto - reg.
Section 195 of the Income-tax Act, 1961 mandates deduction of income tax from
payments made or credit given to non-residents at the rates in force. The Reserve Bank of
India has also mandated that except in the case of certain personal remittances which have
been specifically exempted, no remittance shall be made to a non-resident unless a no
objection certificate has been obtained from the Income Tax Department. This was
modified to allow such remittances without insisting on a no objection certificate from the
Income Tax Department, if the person making the remittance furnishes an undertaking
(addressed to the Assessing Officer) accompanied by a certificate from an Accountant in a
specified format. The certificate and undertaking are to be submitted (in duplicate) to the
Reserve Bank of India / authorised dealers who in turn are required to forward a copy to the
Assessing Officer concerned. The purpose of the undertaking and the certificate is to
collect taxes at the stage when the remittance is made as it may not be possible to recover
the tax at a later stage from non-residents.
2. There has been a substantial increase in foreign remittances, making the manual
handling and tracking of certificates difficult. To monitor and track transactions in a timely
manner, section 195 was amended vide Finance Act, 2008 to allow CBDT to prescribe
rules for electronic filing of the undertaking. The format of the undertaking (Form 15CA)
which is to be filed electronically and the format of the certificate of the Accountant (Form
15CB) have been notified vide Rule 37BB of the Income-tax Rules, 1962.
3. The revised procedure for furnishing information regarding remittances being
made to non-residents w.e.f. 1st July, 2009 is as follows:-
(i) The person making the payment (remitter) will obtain a certificate from an
accountant* (other than employee) in Form 15CB.
(ii) The remitter will then access the website to electronically upload the remittance
details to the Department in Form 15CA (undertaking). The information to be furnished in
Form 15CA is to be filled using the information contained in Form 15CB (certificate).
* An “accountant” means a chartered accountant within the meaning of the Chartered Accountants Act,
1949 (38 of 1949), and includes, in relation to any State, any person who by virtue of the provisions of subsection
(2) of section 226 of the Companies Act, 1956 (1 of 1956), is entitled to be appointed to act as an
auditor of companies registered in that State.
-2-
F.No.142/19/2007-TPL
(iii) The remitter will then take a print out of this filled up Form 15CA (which will
bear an acknowledgement number generated by the system) and sign it. Form 15CA
(undertaking) can be signed by the person authorised to sign the return of income of
the remitter or a person so authorised by him in writing.
(iv) The duly signed Form 15CA (undertaking) and Form 15CB (certificate), will be
submitted in duplicate to the Reserve Bank of India / authorized dealer. The Reserve Bank
of India / authorized dealer will in turn forward a copy the certificate and undertaking to
the Assessing Officer concerned.
(v) A remitter who has obtained a certificate from the Assessing Officer regarding the
rate at or amount on which the tax is to be deducted is not required to obtain a certificate
from the Accountant in Form 15CB. However, he is required to furnish information in
Form 15CA (undertaking) and submit it along with a copy of the certificate from the
Assessing Officer as per the procedure mentioned from Sl.No.(i) to (iv) above.
(vi) A flow chart regarding filing of Form 15CA and Form 15CB is enclosed at
Annexure -A.
4. The Directorate General of Income-tax (Systems) (www.incometaxindia.gov.in)
shall specify the procedures, formats and standards for running of the scheme as well as
instructions for filling up Forms 15CA and 15CB. These forms shall be available for
upload and printout at www.tin-nsdl.com.
5. The Reserve Bank of India is being requested to circulate the revised procedure
among all authorised dealers.
(Anand Kumar Kedia)
Secretary,
Central Board of Direct Taxes.
Copy to :
1. PS to FM/OSD to FM/ OSD to MoS(R)
2. PS to Secretary(Revenue)/ OSD to Advisor to FM.
3. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above.
4. All Chief Commissioners/Directors General of Income-tax – with a request to circulate amongst all officers
in their regions/charges.
5. DGIT(Systems)/DGIT(Vigilance)/DGIT(Admn.)/DG(NADT)/DGIT(L&R)
6. Media Co-ordinator and Official spokesperson of CBDT with a request to post it on the Dept. website.
7. DIT(IT)/DIT(RSP&PR)/DIT(Audit)/DIT(Vig.)/DIT(Systems)/DIT(O&MS)/ DIT(Spl.Inv.).
8. The Reserve Bank of India (RBI) with a request to circulate the revised procedure among all
authorised dealers.
9. The Comptroller and Auditor General of India (10 copies).
10. Joint Secretary and Legal Advisor, Ministry of law and Justice, New Delhi.
11. The Institute of Chartered Accountants of India, IP Estate, New Delhi.
12. All Chambers of Commerce as per usual mailing list.
(Anand Kumar Kedia)
Secretary to CBDT
****************
Remitter
Obtains certificate of Accountant (Form 15CB).
This form is available at the website
www.tin-nsdl.com
RBI/Authorized dealer remits the
Amount
Submits the signed paper
undertaking form to the
RBI/Authorized dealer along with
certificate of an Accountant in
duplicate.
Printout of the undertaking form
(15CA) is signed
Electronically uploads the remittance
details in Form 15CA
Takes printout of filled undertaking
form (15CA) with system generated
acknowledgement number.
A copy of undertaking (Form
15CA) & certificate of
Accountant (Form 15CB)
forwarded to Assessing Officer
Accesses the above
website
Annexure – A
Flow chart of filing undertaking form u/s 195 of I T Act 1961

E-Filing for AY 2009-10 has been enabled

2009-06-03T13:34:00.001+05:30

E-Filing for AY 2009-10 has been enabled for ITR-1, ITR-2, ITR-3, ITR-4 forms. Efiling for ITR-5, ITR-6, ITR-8 forms will be enabled shortly.

Please furnish the Form ITR-V to The Income-tax Department by mailing it to Income Tax Department , CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka within thirty days after the date of transmitting the data electronically. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.

New TDS and TCS payment and information reporting system

2009-05-27T08:45:00.000+05:30

F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 1 of 8
F.No. 142/22/2008-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
….
New Delhi, the 21st May, 2009
Subject:- New TDS and TCS payment and information reporting system- Notification No.
858(E), dated 25th March, 2009 published in Official Gazette-regarding.
_______________________________________________________________________
The Finance Act, 2008 inserted a new sub-section (1A) in section 143 of the Income-tax Act,
1961 empowering the Board to make a scheme for centralised processing of returns with a view to
expeditiously determining the tax payable by, or the refund due to, the assessee. For the purposes of
enabling centralised processing of returns, it is necessary to ensure the integrity of the database, in
particular, the information relating to tax deduction at source, advance tax and self assessment tax.
2. One of the fundamental principles of financial accounting is that if a person claims credit for
payment of money to a third person, the credit should be allowed only if the payment and the
information relating to the transaction have been received from the third person. The advance tax and
self assessment tax is paid directly by the assessee by filling a challan which bears a unique Challan
Identification Number (CIN) and the PAN of the assessee. These two number systems are used to cross
verify the claim of tax payment made by the assessee and allow appropriate credit.
3. In the context of TDS, the first best principle is that no claim for TDS / TCS should be admissible
unless the deductor / payer has paid the amount so deducted / collected to the credit of the Central
Government and the information relating to the transaction is received. Since the business process of
the Income Tax Department was manually organised and the volume of TDS related information was
large, it was not feasible to undertake 100 per cent matching of TDS claims with information furnished
by the deductor. Consequently, the Income Tax Department adopted a risk management strategy for
allowing claim for TDS as a second best option. With the advances in information technology, it is
technically feasible to design a business process which would enable 100 per cent matching in real time,
thereby, eliminating the risk. Pursuant to the recommendation of the Task Force on Direct Taxes
(chaired by Dr. Kelkar), as a first step in this direction, the deductors were required to electronically
furnish the TDS related information (through the NSDL). This system was introduced in early 2004 as
one of the modules of the Taxpayer Information Network (TIN).
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 2 of 8
4. The quantity and quality of data flowing through this module is far from satisfactory. The data is
largely unverifiable. The matching of the deduction reported by the deductor and claimed by the
deductee assessee continuous to be poor for the following reasons:-
(i) Non-compliance, especially by Government deductors, with TDS return filing
requirement.
(ii) Low quoting of PAN number in TDS returns that are filed on account of non-furnishing of
PAN by deductees to their deductors and negligence by deductors.
5. Unlike in the case of advance tax and self assessment tax, the TDS information does not bear a
unique transaction identification number. As a result, the PAN forms the only basis for matching. To
the extent PAN quoting is inadequate or deficient, it is not feasible to match the claim made by the
deductee assessee with the TDS information reported by the deductor. Hence, it becomes necessary to
make ad-hoc rules for allowing credit for TDS or in the alternative, interface with the assessee for
physical verification of the TDS certificate. Both these approaches are flawed since there is no
reconciliation of deductees claim with the information provided by the deductor and the integrity of the
system is questionable. The efforts of the Income Tax Department over the last four years for improving
the TDS and TCS database have not yielded desired result.
6. Further, Government (both Central and State together) is the largest deductor of tax being the
largest employer and the largest spender on works contract. Under the extant procedure, tax deducted
by the Central Government departments is paid to the account of the Central Government through book
transfer. Unlike other deductors, these departments do not make any direct payment of the TDS
amount in the banks. Similarly, the Central Government Ministries, departments and their sub-ordinate
and attached offices are large scale defaulters in complying with the TDS information reporting
requirements. Even the certificates issued by these organisations are often illegible and of poor quality.
Hence, these are unreliable. This has been a constant source of public grievance. It also creates an
opportunity for interface with the taxpayer. This process also does not assure the department of the
legitimate revenues and enforce compliance. Hence, the mechanism of payment of tax so deducted and
compliance with the reporting requirements is not satisfactory.
7. Unlike the Central Government, the State Government is required to make a consolidated
payment of the TDS amount in respect of all its deductors and deductions directly into the Reserve Bank
of India. This is done by the Accountant General of the State. As a result, there is no correlation
between the deduction, payment and reporting. Further, compliance by State Governments with the
TDS information reporting requirement is no better than in the case of the Central Government.
8. In the light of the above, the Department adopted the second best option of a risk management
strategy for allowing TDS claims. Under this strategy, the Department has been allowing credit for TDS
claims even though the transactions do not fully match/reconcile with the information provided by the
deductor. Further, the Department have also been unable to undertake follow up verification of such
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 3 of 8
claims at the deductors end on account of inadequate resources. As a result the system is vulnerable
and exposes public revenues to extreme risk of fraud and leakage.
9. With a view to resolving the problems in granting credit for pre-paid taxes, the Central Board of
Direct Taxes constituted a sub-group to analyse the various problems in granting credit for prepaid taxes
and make appropriate recommendations. According to the Sub-group, the problem of matching and
reconciliation of prepaid taxes is rooted in the three sets of data pertaining to TDS entering the system
separately at different times from different sources, thus causing mismatch. Therefore, the Sub-group
recommended that the ‘problem can be solved if the agency receiving the TDS amount and the TDS
returns (and the documents by which this is done) is the same. In such a situation the TDS payments
can be immediately credited to the accounts of the deductees by the agency handling both the
operations. For example, if the detailed list giving break-up and identity particulars of deductees are
given to the bank along with the TDS challans for the consolidated amount of TDS at the time of
payment, the accounts of deductees can be simultaneously credited, thus eliminating the reconciliation
issues between challan data in OLTAS and in TDS returns. Owing to the advances in technology, it is now
feasible to implement this recommendation.
10. The Sub-group also examined the issue of granting credit for TDS deducted by government
deductors and recommended that Central Government deductors should also be brought into the
discipline of deposit of TDS in bank accounts like other deductors.
11. As stated above, the Government has introduced the centralised processing of returns which
envisages no interface with the taxpayer. Further, the processing is also required to be done in an
automated jurisdiction-less manner. Therefore, it is necessary to have in place a perfect TDS payment
and information reporting system so as to optimise the efficiency of the centralised return processing
system. It is imperative to move to the first best solution to also minimize the risk of financial fraud.
This is in the interest of all stakeholders – Government, Income-tax Department and taxpayers.
Therefore, the Board have decided that, henceforth, claim for TDS and TCS shall be allowed only if
the–
(i) amount has been deposited by the deductor / collector;
(ii) information relating to the deductee has been furnished by the deductor / collector;
and
(iii) claim matches the information furnished by the deductor / collector.
12. With a view to enabling the implementation of the aforesaid decision, the TDS and TCS payment
and information reporting system has been redesigned vide notification No. 858(E) dated 25th March,
2009 published in Official Gazette. The salient features of the new TDS and TCS payment and
information reporting system are the following: -
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 4 of 8
(i) The new system has been harmonized for all deductors (including Central and State
Governments). Therefore, like non-governmental tax deductors, every deductor in the
Central and State Government have also been made responsible for making direct
payment of TDS in the bank. They are no longer allowed to make payments of the TDS
and TCS by making book adjustments or consolidated payments. As a result, the TDS
payment and information reporting system will be uniform across deductors.
(ii) Rule 30 and Rule 37 CA of the Income-tax Rules, 1962 have been substituted to provide,
inter alia, for the following: -
(a) All sums of tax deducted at source under Chapter XVII-B and of tax collected at
source under Chapter XVII-BB shall, in general, be paid to the credit of the
Central Government within one week from the end of the month in which the
deduction, or collection, is made. Similarly, the same time limit for payment will
also apply for income-tax due under sub-section (1A) of section 192.
(b) It is mandatory for all deductors (including Central Government and State
Governments) to pay the amount by electronically remitting it into the RBI, SBI
or any authorized bank.
(c) It is mandatory for all deductors (including Central Government and State
Governments) to make the payment by electronically furnishing an income-tax
challan in Form No. 17.
(iii) In the process of electronically furnishing the income-tax challan in Form No. 17, the
deductor will be simultaneously required to furnish to the Taxpayer Information
Network (TIN) system maintained by National Securities Depository Limited (NSDL)
either through screen based upload or file upload, three basic information relating to
the deduction i.e., PAN, name of the deductee and amount of TDS/TCS.
(iv) Upon successful remittance of the TDS/TCS to Central Government account and the
uploading of the basic information as mentioned above to the TIN system, every
deduction record will be assigned a unique transaction number (UTN).
(v) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of
the deductor is available with them. In addition, they will also create a facility for the
deductor to download the UTN file.
(vi) The UTN will be required to be quoted by the deductor on the TDS/TCS certificate issued
by him to the deductee.
(vii) NSDL will also create a facility to allow independent viewing of the UTNs by the
deductee.
(viii) With a view to enabling the Income Tax Department to monitor compliance by the
deductor with the TDS provisions, every person (including Central Government and
State Government) who has obtained a Tax Deduction or Collection Account Number
(TAN) shall electronically furnish a quarterly statement of compliance with TDS
provisions in Form No. 24C. It is mandatory for all TAN holders to furnish this form
irrespective of whether any payment liable to TDS has been made or not. This form
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 5 of 8
shall be furnished on or before the 15th July, the 15th October, the 15th January in
respect of the first three quarters of the financial year, respectively, and on or before
the 15th June following the last quarter of the financial year. This e-form No. 24C has to
be furnished at http://incometaxindiaefiling.gov.in. The first quarter in respect of
which Form 24C is required to be furnished is the quarter ending on 30th June, 2009.
(ix) In order to enable the deductor to furnish the UTN to the deductee, the existing Form
16 and Form 16A have been appropriately modified.
(x) The quarterly returns of TDS and TCS hitherto required to be filed in Form No. 24Q,
Form No. 26Q, Form No. 27Q and Form No. 27EQ shall now be required to be filed for
all quarters on or before the 15th June following the Financial Year. Effectively, the
quarterly returns have now been replaced by an annual return.
13. The above new system will be effective for all tax deducted at source or tax collected at
source on or after the 1st April, 2009. However, any TDS or TCS effected on or after the 1st April, 2009
but not later than 31st May, 2009 shall continue to be paid to the credit of the Central Government by
using the old challan form. The TDS or TCS effected on or after the 1st June, 2009 shall be required to
be paid electronically by electronically furnishing income tax challan in Form No. 17.
14. Where the payment of TDS or TCS effected on or after the 1st April, 2009 but not later than 31st
May, 2009 is paid to the credit of the Central Government by using the old challan form, the deductor /
collector shall, nevertheless, be required to fill up Form No.17 in respect of such payments any time
between 1st July, 2009 to 15th July, 2009. Therefore, the deductors/collectors are advised to prepare
the schedule relating to details of TDS / TCS from deductees in Form No.17 in advance (in an excel
sheet) and be in a state of preparedness to file the same by 15th July, 2009 so that the UTNs relating to
TDS / TCS transactions carried out in the month of April and May can be generated / obtained for
onward transmission to the deductees.
15. Further, a deductor can split the total amount of TDS and TCS which he is required to deposit to
the credit of the Central Government so that every deposit to the account of the Central Government is
made through a separate challan in Form 17. For example, if a deductor is liable to deposit Rs. 1 lakh, he
can split the amounts into four payments of Rs 25000/- each and deposit each of the amounts through a
separate challan in Form 17 at four different times.
16. The return of income in Form No. ITR-1 to Form No.ITR-8 for Assessment Year 2009-10 have
been notified which requires, amongst other, the quoting of the relevant UTN for every TDS or TCS claim
made by the assessee. Therefore, the credit for any TDS or TCS claim will be allowed, amongst others, if
the assessee quotes the relevant UTN for every TDS and TCS claim and the said UTN matches with the
UTN in the database of the Income Tax Department. With a view to enabling the processing of returns
relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the
UTN for TDS and TCS transactions in the Financial Year 2008-09 (relevant for Assessment Year 2009-10),
the following procedure shall be followed: -
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 6 of 8
(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS
transaction records in Financial Years 2007-08 and 2008-09, reported in the quarterly
returns received by it.
(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of
the deductor is available with them. In addition, they will also create a facility for the
deductor to download the UTN file.
(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases
where the UTNs are available to the deductor before the issue of the TDS/TCS certificate
to the deductee, the deductor will indicate the UTNs on the certificate. However, if the
UTNs are not available to the deductor before the issue of TDS/TCS certificate, the
deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions
indicating the UTNs.
(d) NSDL will also create a facility to allow independent viewing of the UTNs by the
deductee. As a result, even if the UTNs are not received by the deductee from the
deductor, they can be directly obtained from the NSDL database and quoted while
making claims of TDS and TCS in the return of income.
17. TDS certificates were hitherto required to be issued in Form 16 or Form 16A as the case may be.
Similarly, TCS certificates were issued in Form 27D. These forms have been substituted by the new Form
16, Form 16A and Form 27D with effect from the 1st day of April, 2009. In the new Forms, it is
mandatory for the deductor/collector to quote, inter-alia, the UTN. Therefore, where the certificate is
required to be issued in respect of deduction or collection made before the 1st April, 2009, the
deductor/collector may adopt any of the following course of action:-
(a) The deductor/collector may issue certificate of deduction or collection in the Form 16,
Form 16A or Form 27D, as the case may be, as it existed prior to 1st April, 2009 and
send a consolidated statement of UTNs to the deductee/buyer/lessee etc., as soon as
the same is received by him; or
(b) The deductor/collector may issue certificate of deduction or collection in the new Form
16, Form 16A or Form 27D, as the case may be.
18. Rule 31 of the Income Tax Rules, as it existed prior to its substitution, provides that, in general,
the TDS certificates in Form 16 and Form 16A should be issued within one month from the end of the
month in which the deduction is made. Similarly, Rule 37D, as it existed prior to its substitution,
provides that, in general, the TCS certificates in Form 27D should be issued within one month from the
end of the month in which the collection is made. Therefore, if the deductor/collector chooses to adopt
the course specified in item (b) of para 13 above, the TDS/TCS certificate may be issued beyond the
stipulated period of one month but not later than 30th June, 2009.
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 7 of 8
19. As regards, TDS/TCS certificates in respect of deduction or collection effected on or after the 1st
April, 2009, it is mandatory to issue the certificates in the new Forms and quote the UTN relating to the
TDS/TCS transactions.
20. As stated above, a new Form 24C has been notified to monitor compliance with the provisions
of TDS/TCS. The first part of the Form relates to personal information and filing status. The Schedule
COM-I relates to details of TDS/TCS compliance in the first month of the relevant quarter. Likewise
details of TDS/TCS compliance for the second and third month of the relevant quarter would have to be
reported in Schedule COM-2 and Schedule COM-3 respectively. In this Schedule in column (3), for
example, against section 194A in column (1), the TAN holder is required to furnish the total amount of
interest paid during the month. Let us assume that this total amount is Rs. 1 crore. In column (4) of the
corresponding entry, the deductor is required to furnish the total amount on which TDS was liable or
eligible to be deducted out of Rs. 1 crore. As is well known, no TDS is required to be deducted if the
interest payment is less than Rs. 10,000. If the total of the amounts of interest payment/credit less than
Rs. 10,000 is Rs. 30 lakhs, then the deductor must report in column (4) an amount of Rs. 70 lakhs (Rs. 1
crore – Rs. 30 lakhs). In column (5), the deductor has to report that the total amount on which tax was
deducted at prescribed rate out of the amount reported in column (4). In the instant case the rate of
tax to be deducted at source is 11.33 percent (including surcharge and education cess). However, in
many instances the recipients of interest exceeding the threshold limit of Rs. 10,000/- would either
furnish certificate for non deduction of tax or deduction at a lower rate than the prescribed rate. Let us
assume that the amount of interest paid to such recipients is Rs. 15 lakhs. Therefore, the amount of
interest payment liable to TDS at the prescribed rate would be Rs. 55 lakhs (Rs. 70 lakhs – Rs. 15 lakhs),
which is required to be reported in column (5). Since the prescribed rate is 11.33%, and the amount of
interest liable to TDS at the prescribed rate is Rs. 55 lakhs, the amount of TDS on such payment is Rs.
6,23,150/-. This amount is required to be reported in column (6). In column (7), the deductor is
required to report the amount of Rs. 15 lakh i.e., the amount of interest payment liable to TDS at less
than the prescribed rate. Let us assume that the TDS at ‘nil’ or lower rate on the amount of Rs. 15 lakh
is Rs. 50,000/-. This amount would be required to be reported in column (8). The total amount of TDS
of Rs. 6,73,150/- (Rs. 6,23,150 + Rs. 50,000) is required to be reported in column (9). The above
example is reproduced below in the tabular form as would appear in Form 24C:-
Section Nature of payment
Total Expense
or Capital
outgo under
the section
Total Amount
on which
TDS / TCS was
liable or
eligible to
be deducted
or collected
out of (3)
Total Amount
on which tax was
deducted or
collected
at prescribed rate
out of (4)
Amount of
tax deducted or
collected
on (5)
Total Amount
on which tax
was deducted or
collected at less
than prescribed
rate out of (6)
Amount of
tax deducted or
collected
on (7)
Total
Amount
=(6) + (8)
(1) (2) (3) (4) (5) (6) (7) (8) (9)
194A
Interest other than
interest on securities
1,00,00,000 70,00,000 55,00,000 6,23,150 15,00,000 50,000 6,73,150
F.No. 142/22/2008-TPL
Circular No. 02 / 2009
Page 8 of 8
21. Form 24C is required to be furnished by all TAN holders irrespective of whether a TDS/TCS
transaction has been effected during the quarter or not. In the event of the column (3) of the Schedules
in From 24C is zero for all nature of payments, the deductor/collector should specify in the section on
filing status in Form 24C that it is a case of ‘Nil Return’ and it would not be necessary to fill in the
Schedules.
22. In Schedule PAY of Form 24C, the deductor/collector is required to indicate the details of the
payment of the TDS/TCS to the credit of the Central Government.
23. The new TDS and TCS payment and reporting system will enable faster payment, accurate
accounting and uniformity across deductors. It will facilitate accurate, quicker and full credit for taxes
paid enabling faster refunds to taxpayers. It will also minimize interface of tax administration with
taxpayers and intermediaries, thereby eliminating any opportunity for rent seeking behaviour.
(Munesh Kumar)
Secretary
Central Board of Direct Taxes
F.No. 142/22/2008-TPL
Copy to:-
i. PS to FM / OSD to FM / OSD to MOS(R).
ii. PS to Secretary (Revenue).
iii. The Chairman, Members and all other Officers in the CBDT.
iv. All Chambers of Commerce/Industry/Trade Associations.
v. All Chief Commissioners/Directors General of Income-tax with a request to circulate amongst
all officers in their regions/ charges.
vi. Director General, National Academy of Direct Taxes, Nagpur.
vii. Directors, Regional Training Institutes, Ahmedabad/ Bangalore/ Chandigarh/ Chennai/
Kolkata/ Lucknow/ Mumbai.
viii. Comptroller and Auditor General of India (40 copies).
ix. Controller General of Accounts, Lok Nayak Bhavan, New Delhi (40 copies).
x. Joint Secretary and Legal Advisor, Ministry of Law & Justice, New Delhi (10 copies)
xi. Secretary, Settlement Commission, New Delhi.
xii. The Institute of Chartered Accountants of India, I.P. Estate, New Delhi.
(Munesh Kumar)
Secretary
Central Board of Direct Taxes

UTN(unique transaction number) mandatory for ITR AY 2009-10

2009-05-27T08:35:00.001+05:30

In new ITR for Ay 2009-10 new columns has been inserted in TDS schedule regarding UTN(Unique Transaction Number) ,at the time of releasing of Form Every body assume that this is a error by Income tax Department but Now department has clarified vide circular 2/2009 that UTN is mandatory to be filled in New ITR for AY 2009-10 ,otherwise TDS credit will not be given.

New TDS Provisions applicable from 01.07.2009

2009-05-12T13:56:00.002+05:30

No.402/92/2006-MC (11 of 2009)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi, Dated: April 11, 2009

PRESS RELEASE

The Central Board of Direct Taxes have decided to defer the implementation of Notification No.31/2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962. The amended / substituted Rules will now come into effect on 1st July 2009 instead of 1st April 2009.

Tax deductors / collectors may continue to deposit TDS / TCS tax and file TDS / TCS returns as per the pre-amended provisions in the interim period.

Implementation of Form 17 - New TDS Challan from July 1, 2009

2009-05-08T08:51:00.000+05:30

Form 17 - New TDS Challan -CBDT all set to extend date for implementation of new form from July 1, 2009 - TDS to be deposited in the old form no.281 till then.

Notification being issued soon.

UPCOMING-SERVICE TAX SUMMARISED

2009-04-27T12:00:00.000+05:30

Watch for Service Tax Provisions-Summarised

Benefit of Enhanced Depn on Commercial Vehicle extended

2009-04-25T14:00:00.001+05:30

No.402/92/2006-MC (10 of 2009)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated the 24th April 2009
PRESS RELEASE
The benefit of enhanced depreciation on commercial vehicles has been extended up to
30th September 2009. Now, commercial vehicles acquired on or after 1st January 2009 and put to use
before the 1st October 2009 will be eligible for depreciation at the rate of 50 percent. The Central
Board of Direct Taxes have issued a notification vide S.O. 989(E) dated 21st April 2009 (Notification
No.37/2009/F.No.142/01/2009-TPL) to this effect, substituting the words “1st day of April 2009”
with the words “1st day of October 2009”.
Earlier, the benefit was made available for commercial vehicles acquired on or after 1st January
2009 and put to use before the 1st April 2009 vide a notification dated 19th January 2009.

Income Tax (8th Amend.) Rules 2009

2009-04-01T11:00:00.005+05:30

Major Amendments :
Amendments applicable from 01.04.2009

1.TDS Compliance Statement to be furnished.
2.Form 16AA abolished.
3.Form 17 for pyt of TDS/TCS
4. Detail of TDS/TCS from deductees to be uploaded if record >10
5. Form 16 & 16A format changed.
6. Duplicate TDS certificate to be issued on request of deductee.
7. AO before giving credit on basis of duplicate certificate required to obtain indemnity bond & pyt to be certified by AO designated on behalf of Chief Comm. or Comm.
8. Mandatory for all assessees having TAN to file return
9. E pyt of TDS mandatory for all assessees.

Download Complete Circular for Reference.

NotificationNo.SO8...

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INCOME-TAX (SEVENTH AMENDMENT) RULES, 2009

2009-03-30T15:08:00.002+05:30

Income Tax Seventh...

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Income from Salary - Part II

2009-03-28T12:33:00.003+05:30

http://www.box.net/files#0:f:25802190

Income from Salary-Part1

2009-03-20T09:38:00.002+05:30

Salary Income.pdf

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NOTIFICATION NO. 8 /2009, - SERVICE TAX, DATED 24-2-2009

2009-03-01T15:42:00.001+05:30

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts all the taxable services specified in sub-section 105 of section 65 of the Finance Act from so much of service tax leviable there on under section 66 of the Finance Act, as is in excess of the rate of ten per cent of the value of taxable services.
[F. No. 354/210/2008-TRU(part)]

Effective Date of the reduced rate will be 24.02.2009 i.e date of Notification

ADDL. DEPN. ON COMMERCIAL VEHICLES

2009-01-22T11:49:00.001+05:30

INCOME-TAX (THIRD AMENDMENT) RULES, 2009 - AMENDMENT IN NEW APPENDIX 1

NOTIFICATION NO 10/2009, DATED 19-1-2009

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:―

(1) These rules may be called the Income-tax (Third Amendment) Rules, 2009

(2) They shall come into force on the 1st day of April, 2009.

2. In the Income-tax Rules, 1962, in the Table to New Appendix 1, in Part-A relating to TANGIBLE ASSETS, under the heading III. MACHINERY AND PLANT, in item (3), after sub-item (vi) and entries relating thereto, the following shall be inserted, namely:―

"(via) New commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of April, 2009 and is put to use before the 1st day of April, 2009 for the purposes of business or profession [See paragraph 6 of the Notes below this Table] 50".

Income from House Property-S.22-27

2009-01-14T13:09:00.001+05:30

http://www.box.net/files#0:f:23017168

UPCOMING

2009-01-10T12:02:00.003+05:30

I will be posting summarized provisions of Income Tax shortly.

Allowability of capital expenditure by tenant

2008-12-26T16:42:00.000+05:30

Allowability of capital expenditure by tenant

Court : HIGH COURT OF DELHI

Brief : : The cost of repairs incurred by an assessee-tenant in respect of tenanted premises would have to be allowed under section 30(a)(i); the question of disallowing such an expenditure and relegating the assessee to claim depreciation under section 32 does not arise

Citation :

Judgment :

Allowability of expenditure towards renovation of rented premises under section 30(a)(i) of IT Act, 1961

The cost of repairs incurred by an assessee-tenant in respect of tenanted premises would have to be allowed under section 30(a)(i); the question of disallowing such an expenditure and relegating the assessee to claim depreciation under section 32 does not arise

HIGH COURT OF DELHI

CIT

v.

Hi Line Pens Pvt. Ltd.

ITA NO. 1202/2006

September 15, 2008

RELEVANT EXTRACTS:

** ** ** *************************************************************************

16. After having considered the arguments advanced by the learned counsel for the parties and examined the decisions cited by them, we are of the view that the assessee’s claim for deduction under Section 30(a)(i) has been rightly allowed by the Tribunal. The decisions cited by the learned counsel for the revenue relate to “current repairs”. There is a clear distinction between the expression “repairs” and the expression “current repairs”. It is obvious that the word “repairs” is much wider than the expression “current repairs”. This fact has also been taken note of by the Supreme Court in the case of Saravana Spinning Mills P. Ltd. (supra). The expression “current repairs” is much more restricted than the word “repairs” because the latter is qualified by the word “current”. What the assessee has done in the present case has been construed to be repairs by the Tribunal as a finding of fact. It has not brought about any new asset and more importantly it was not the intention of the assessee to bring about any new capital asset. The expenses that were incurred by the assessee were towards repairing the premises taken on lease so as to make it more conducive to its business activity. Such expenses would clearly fall within the expression of repairs to the premises as appearing in Section 30(a)(i). The legislature has made a distinction between expenses incurred by a tenant for “repairs” of the premises and expenses incurred by a person who is not a tenant towards “current repairs” to the premises. This distinction has to be given meaning. Perhaps the logic behind the distinction was that a tenant would, by the very nature of his status as a tenant, not undertake expenditures as would endure beyond his likely period of tenancy or create a new asset. Whereas, an owner may undertake expenditures so as to even bring about new assets of capital nature. It was, therefore, necessary to qualify the expenditure on repairs. The deduction was, therefore, limited to expenditure on “current repairs” only. It follows, therefore, that the cost of repairs that have been incurred by a tenant in respect of such premises would have to be allowed under Section 30(a)(i). The question of disallowing such an expenditure and relegating the assessee to claim depreciation under Section 32 does not arise. The assessee has not claimed depreciation. It has claimed deduction under Section 30(a)(i). Once the assessee’s claim falls within that provision there is no question of considering the question of applicability of Section 32. Consequently, the question that has been framed is answered in favour of the assessee and against the revenue. The appeal is dismissed.

Rule 8D-Method for determining amount of expenditure in relation to income not includible in total income.

2008-12-26T16:31:00.000+05:30

[Method for determining amount of expenditure in relation to income not includible in total income.

8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with

(a) the correctness of the claim of expenditure made by the assessee; or

(b) the claim made by the assessee that no expenditure has been incurred

in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2).

(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely :

(i) the amount of expenditure directly relating to income which does not form part of total income;

(ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely :

A x	B
	C

Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year ;

B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ;

C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ;

(iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year.

3. For the purposes of this rule, the 'total assets' shall mean, total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets.]

PARLIAMENT PASSES LLP BILL 2008

2008-12-17T12:51:00.000+05:30

Parliament Passes Limited Liability Partnership (LLP) Bill 2008

Parliament has passed the Limited Liability Partnership (LLP) Bill 2008. Lok Sabha today gave its assent to the Bill which was earlier passed by the Rajya Sabha. Replying to the debate on the Bill in the Lok Sabha, Shri Prem Chand Gupta, Minister for Corporate Affairs, expressed the hope that the first ever LLP in the country would be registered by the first day of the new Financial Year i.e. 1.4.2009. In this context he informed the Hose that concept LLP Rules have already been placed on the website of the Ministry. Shri Gupta also assured the House that registration of LLPs will also be a paperless affair as it will also be covered under MCA-21 e-governance program of the Ministry. Regarding taxation, Shri Gupta said that as the matter relates to the Finance Ministry, this concern will be taken care of by that Ministry, but he assured the House that Indian LLPs will in no way be put to any disadvantage and our LLPs will have a level playing field with other similar bodies outside the country.

LLP is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner.

For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost.

The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm. This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals.

In our country, several expert groups have examined the need for such a concept since 1972 and recommended from time to time, the enactment of a law that would enable the setting up and functioning of the LLPs. These include the Abid Hussain Committee 1997, the Naresh Chandra Committee on Private Companies and Partnerships 2003 and the Irani Committee for new Company Law, 2005.

As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP.

Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

Today, the world is in the grip of an unprecedented financial crisis, which is adversely affecting economies of most of the countries, including our own. In such a situation, availability of LLP as an alternative business vehicle to our trade and industry will be an important step. Service industry has grown considerably in India and it accounts for nearly half of our GDP. We believe that the LLPs would further contribute to the growth of the service industry in the future.

An earlier version of the LLP Bill was introduced in the Rajya Sabha around 2 years ago on 15th December, 2006 and was referred to the Parliamentary Standing Committee on Finance. The Standing Committee submitted its report on 27th November, 2007. Taking into consideration the suggestions of the August Committee, the revised Bill, namely the Limited Liability Partnership Bill, 2008 was introduced in the Rajya Sabha on 21st October, 2008. The House passed it on 24th October, 2008.

The salient features of the LLP Bill, 2008 are as under:‑

(i) The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The proposed Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii)While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

(iv) LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be

applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike a ordinary partnership firm where the maximum number of partners can not exceed 20.

(iv) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(v) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.

(vii) While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Source : ICWAI - ICWAI.ORG.COM

TAX LAW UPDATES- By Kumar Gaurav

CBDT permits issue of TDS certificate for non-salary (Form 16A) income with digital signature

New validation for quarterly e-TDS/TCS statement pertaining to FY 2010-11 and onwards. Amended file format and FVU version 3.1 & 2.130 released (March 18, 2011)

Acceptance of e-TDS/TCS statements in Pen Drive

Due date for filing income tax returns for A.Y. 2010-11 / Financial Year 2009-10 extended from 30/9/2010 to 15/10/2010

Receipt number to be quoted in Form 16/ 16A

S. 14A, Rule 8D & Daga Capital: Judgement Pronounced

S. 14A, Rule 8D & Daga Capital: Hearing concluded, Judgement awaited!

Fee for software is not royalty & TDS u/s 195 not required

Income Tax Return Filing last date extended to 4th August 2010

Mandatory for all Companies to File I-T Returns Electronically with Digital Signature

Routers and switches should be classified as part of computers and will be eligible for depreciation @ 60%

View Tax Ledger-Form26AS without regn with NSDL

Procedure for efiling of Central Excise and Service Tax

Corrigendum in Notification from CBDT

Taxable HRA calculator

Adjustment of “Advance Tax in respect of Fringe Benefits” forAssessment Year 2010-11 against “Advance Tax”

GST may not meet 01.04.10 deadline

Date for filing ITR V extended

Govt Said that UTN no. is scrapped which was to come on 01.01.10

Disallowance under S. 14A read with rule 8D can be made only if there is actual nexus between tax-free income and expenditure

Taxability of Gifts in kind in excess of Rs.50000

Procedure for filing TDS returns with insufficient deductee PAN

e-TDS - New Process

CHALLAN VERIFICATION INCORPORATED IN FVU 2.128

UTN not mandatory for filing it returns

NSDL site ready for filing Form 15CA

Flow Chart on Filing of Undertaking U/s 195 released

E-Filing for AY 2009-10 has been enabled

New TDS and TCS payment and information reporting system

UTN(unique transaction number) mandatory for ITR AY 2009-10

New TDS Provisions applicable from 01.07.2009

Implementation of Form 17 - New TDS Challan from July 1, 2009

UPCOMING-SERVICE TAX SUMMARISED

Benefit of Enhanced Depn on Commercial Vehicle extended

Income Tax (8th Amend.) Rules 2009

INCOME-TAX (SEVENTH AMENDMENT) RULES, 2009

Income from Salary - Part II

Income from Salary-Part1

NOTIFICATION NO. 8 /2009, - SERVICE TAX, DATED 24-2-2009

ADDL. DEPN. ON COMMERCIAL VEHICLES

Income from House Property-S.22-27

UPCOMING

Allowability of capital expenditure by tenant

Allowability of capital expenditure by tenant

Rule 8D-Method for determining amount of expenditure in relation to income not includible in total income.

A x

B

C

PARLIAMENT PASSES LLP BILL 2008