Monday, 30 June 2014
Sunday, 29 June 2014
MCA UPDATE Clarification on Format of Annual Return applicable for Financial Year 2013-14 and Fees to be charged by Companies for allowing Inspection of Records.
· While filing Annual Return (AR) of a Company under The Companies Act for the financial year ended on or before 01-04-2014:
§ Should we use old format
§ Or should we use new format as per Companies Act 2013 ?
Circular No. 22/2014 dated 25-June-2014 (Please find attached a copy)
v In all such cases where FY ended on or before 01-04-2014,
v We have to use old format of AR given under Companies Act 1956.
Whether fees to be charged by Companies for allowing Inspection of Records?
Circular No. 22/2014 dated 25-June-2014 (Please find attached a copy)
vClarified that until the requisite fee is specified by companies, inspections could be allowed wlthout lely of fee.
Saturday, 28 June 2014
S. 201/ 201(1A): The payer is not liable for TDS default if the Dept does not prove that the tax could not be recovered from the recipient, further no liability for interest u/s 201(1A) if recipient of income had no tax liability embedded in such payments
The assessee, a bank, - was held liable u/s 201(1) and 201(1A) r.w.s. 194 A - for failure to withholding TDS on interest paid by it to customers on deposits placed by them with the assessee.
The assessee claimed that it could not be treated as an assessee-in-default as no steps had been taken to determine whether the recipients of the interest had paid tax thereon.
HELD by the Tribunal allowing the appeal:
(i) A short deduction of tax at source, by itself does not result in a legally sustainable demand u/s 201(1) and u/s 201(1A).
As held in Hindustan Coca Cola Beverages vs. CIT 293 ITR 226, taxes cannot be recovered once again from the assessee in a situation in which the recipient of income has paid due taxes on income embedded in the payments from which tax withholding requirements were not fully or partly, complied with.
In Jagran Prakashan vs. DCIT 21 TM.com 489 (All) it was held that the deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that the recipient has also failed to pay tax directly;
(ii) S. 201(1) seeks to make good any loss to revenue on account of lapse by the assessee tax deductor.
However, the question of making good the loss of revenue arises only when there is indeed a loss of revenue and the loss of revenue can be there only when recipient had a liability to pay the tax and he has not paid tax;
(iii) The onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Once all the details of the persons to whom payments have been made are on record, it is for the AO, who has all the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld;
LEVY OF INTEREST U/S 201(1A)
(iv) As regards the levy of interest u/s 201(1A), though the interest is compensatory in nature and is applicable whether or not the assessee was at fault, it is applicable for the period from the date on which tax was required to be deducted till the date when tax was eventually paid.
In a case in which the recipient of income had no tax liability embedded in such payments, there will obviously be no question of delay in realization of taxes and s. 201(1A) will not come into play at all.
Thursday, 26 June 2014
MCA issues draft Notification for Comments on various sections of Companies Act, 2013 for Private Companies.
30-6-14 (Monday) is LAST DATE to file Return of Deposits on 1-4-14 in DPT-4 attached to GNL-2 by ALL Cos. Repay Deposits by 31-3-15 or by due date, if earlier.
Revised TDS returns to be accepted without Original Provisional receipts wef 01.06.2014
Circular No: NSDL/TIN/2014/024,
E-file Wealth Tax Returns with Digital Signature for those assessees who are liable to get accounts audited under section 44AB from assessment year 2014-15.
In other cases Individuals/HUF can also file returns manually for the assessment year 2014-15 if no Tax Audit. IT Notification number 32 of dated 23-6-14.
Sunday, 22 June 2014
A transfer of shares under a family arrangement is for a determinable "consideration" & is not "voluntary".
A transfer of shares under a family arrangement is for a determinable "consideration" & is not "voluntary". Consequently, the shares are not received under a "gift" & the transferee cannot claim benefit of cost, and holding period, of the transferor
The members of the Bilakhia family entered into a deed of family arrangement with a view to consolidate and equalize values of the assets held by each of the parties. Pursuance to the said family arrangement, the family members transferred the shares of Nestle India Ltd and Hindustan Lever Ltd held by them as investment to the assessee, an investment company in which the individual members of the family had equal interest. The assessee sold the shares and claimed that as it had acquired the shares vide a "gift", in computing the capital gain, the cost of acquisition of the shares to, and the period of holding by, the transferors, had to be considered. The AO rejected the claim though the CIT(A) accepted it. On appeal by the department to the Tribunal HELD allowing the appeal:
(i) On the issue as to
Whether the shares received on family arrangement is pursuant to a "gift",
s. 122 of the Transfer of Property Act 1882 provides that a transfer of moveable or immovable property can be treated as a gift only if the same is made voluntarily and without any consideration.
It cannot be said that a family arrangement is "without consideration".
In CWT vs. HH Vijayaba, Dowgner Maharani Saheb of Bhavnagar Palace 117 ITR 784 (SC) it was held that a family settlement or family arrangement which is to buy peace is for good consideration and creates an enforceable agreement between the parties.
Consequently it cannot be said that a family arrangement is without consideration and a "gift";
(ii) On the issue as to
Whether this consideration can be measured in money or monies worth,
the purpose of the family arrangement was to equalize the holdings between the respective families of three brothers. Therefore, it cannot be said that consideration for transfer of shares cannot be measured in terms of money or monies worth. The equalization of wealth has only monetary connotation.
To avoid disputes cannot be said to be without monetary consideration as it is common knowledge that family disputes ruin the family financially. The family disputes are being settled in monetary terms by resorting to arbitration and in case such settlement is not done, matter travels to the court and the family suffers heavily not only mentally but also financially. Thus, it cannot be said that the consideration for transfer of shares was not for monetary consideration;
(iii) On the issue as to
Whether the receipt of shares under the family arrangement was "voluntary" or not, the term "voluntary" is defined to mean "free choice; done with free will; without any compulsion ..". The family arrangement cannot be said to be voluntary because it was enforceable and binding on the parties and with the purpose of equalization of wealth of the family members, which had monetary connotation.
M/s N.K. Goel & Bros.
CA Yashu Goel
In the absence of application seeking condonation of delay, the Commissioner Appeal should inform the assessee to file an application for condonation of delay before dismissing the appeal on the ground of it being barred by limitation.
In the instant case,
The assessee could not file the appeal before the Commissioner (Appeals) within the time period prescribed (2 months) by Section 85 of the Finance Act, 1994 and delayed it by 10 days.
Further, the assessee did not submit the application for condonation of delay and the Commissioner rejected the appeal as being barred by limitation.
The Ahmedabad CESTAT observed that though the appeal has been filed after the statutory period of two months and no application for condonation of delay has been filed but the appellate authority should have informed the assessee to file an application for condonation of delay. Moreover, the delayed period also lies within the power vested with the appellate authority in terms of proviso to Section 85(3A) which provides that the Commissioner (Appeals) has the power to condone the delay by a further period of one month subject to the condition that the appellant was prevented by sufficient cause from filing the appeal. Therefore, the appeal could not be rejected merely on non-filing of application for condonation of delay.
M/s N.K. Goel & Bros.
CA Yashu Goel
Tuesday, 17 June 2014
Today Ministry of Corporate Affairs considering the procedural aspects on e-voting and clarity on demand of poll and postal ballot, it has been decided not to treat the relevant e-voting provisions as mandatory till 31st December 2014. In view of this till December 2014, e-voting is not mandatory for companies. MCA Circular No.20 dated 17th June 2014.
The department filed an appeal before the Tribunal raising several grounds relating to s. 69C etc.
The CIT(A) had allowed relief to the assessee on the ground that as the expenses were duly recorded in the books and there was no dispute as to their genuineness, s. 69C had no application.
HELD by the Tribunal dismissing the appeal:
The ITO, the Appellant, as well as the CIT, who has authorised the AO to prefer an appeal, did not apply their mind in the correct perspective and in a very lacklustre and routine manner filed the appeal which, in turn, resulted in wastage of time of the court
… At this juncture it may be noticed that the power is vested in the CIT and not with the AO because the Legislature, in its wisdom, thought that a superior/ senior officer can take a more balanced decision so as to avoid filing frivolous appeals in routine manner. However, even the CIT has not given his reasons as to why he has authorised the AO to file an appeal on this issue
…. we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the CIT not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position…. this is a peculiar case where even the CIT (Admin) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all …
Therefore we award a token cost of Rs. 5,000 upon the CIT who has given the authorisation and cost of Rs. 10,000 upon the AO who has filed this appeal… The said payment should be made to the assessee within one month from the date of receipt of this order. Registry is also directed to mark a copy to the Chairman, CBDT so that in future the Income Tax Commissioners, who are responsible for filing appeal before the Tribunal, would take proper care to scrutinise the issues before authorising the AO to file appeals before the Tribunal.
M/s N.K. Goel & Bros.
CA Yashu Goel
Friday, 13 June 2014
Service tax paid by Service provider, on being pointed out by Department, can be treated as business expenditure
We are sharing with you an important judgment of the Hon'ble High Court of Gujarat in the case of Commissioner of Income Tax-III Vs. Kaypee Mechanical India (P.) Ltd. [(2014) 45 taxmann.com 363 (Gujarat)] on the following issue:
Where assessee had not collected and deposited Service tax but on being pointed out, deposited the same along with Interest, can it be treated as expenditure deductible under Section 37 of the Income Tax Act, 1961?
Facts & background:
The Department conducted an audit of records of Kaypee Mechanical India (P.) Ltd. ("Kaypee" or "the Assessee") for the Financial Year 2003-04 to 2006-07. During the audit, the authorities raised an audit objection pointing out that the Assessee had not collected the service tax on mechanical erection and installation of plant and machinery, structure work, piping work, etc., for the period from financial year 2003-04 to 2006-07. Therefore, a demand of service tax of Rs. 23,07,450 along with interest of Rs. 9,36,353 was raised on Kaypee.
The Assessee deposited the amount of Rs. 32,44,004 towards the demand raised by the Department out of its own pocket. Further, Kaypee claimed the deduction of Service tax paid along with interest as business expenditure.
The Revenue contended that the Assessee should not be allowed to claim deduction of the Service tax paid along with interest as expenditure since the amount has been paid by Kaypee as an infraction of law.
The Commissioner (A) and the Hon'ble CESTAT accepted the contention of the Assessee. The Hon'ble CESTAT held that Kaypee has rightly debited the Service tax and interest thereon as expenses in the P/L account. The Revenue did not produce any material on record that the Service tax including interest which is debited in the P/L A/c had been recovered by Kaypee from its Service recipients. Therefore, the Service tax and interest thereon shall be treated as expenses of the Assessee, which were incidental and arising out of the business of Kaypee. The interest payment is compensatory in nature. Accordingly, it was held that the expenses incurred by the Assessee have direct nexus with the business operation of Kaypee. Therefore, the expenses are allowable under Section 37 of the Income Tax Act, 1961 ("the IT Act") as incurred wholly and exclusively for business purposes.
The Revenue filed an appeal against the order of the Hon'ble CESTAT with the Hon'ble Gujarat High Court.
The Hon'ble Gujarat High Court also upheld the view taken by the Hon'ble CESTAT and held that the amount was expended by the Assessee during the course of business, wholly and exclusively for the purpose of business. If the Assessee had taken proper steps and charged Service tax to the Service recipients and deposited with the Government, there was no question of the Assessee expending such sum. It is only because the Assessee failed to do so, that he had to expend the said amount, though it was not his primary liability. Be that as it may, this cannot be stated to be a penalty for infraction of law.
It is equally well settled that payment of interest is compensatory in nature and would not partake of the character of penalty.
Accordingly, it was held that Service tax and interest paid by the Assessee were rightly claimed as deductible business expenditure under Section 37 of the IT Act.
Therefore, the contention of the Revenue was rejected and the case was decided in favour of the Assessee.