CA and CS HUB

Bad Debt admissible if written off as irrecoverable in books: CBDT

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXES
NEW DELHI

CIRCULAR NO. 12/2016, Dated: May 30, 2016

Subject:- Admissibility of claim of deduction of Bad Debt under section 36(1) (vii) read with section 36(2) of the Income-Tax Act, 1961- reg.

Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allowability of bad debt that are written off as irrecoverable in the accounts of the assessee. The dispute relates to cases involving failure on the part of assessee to establish that the debt is irrecoverable.

2. Direct Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(1)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the 1st April, 1989.

3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon’ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010 (available in NJRS 2010-LL-0209-8)  , has stated that the position of law is well settled. “After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1) (vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee. “

4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act.

5. Accordingly, no appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue before various Courts/Tribunals may be withdrawn/not pressed upon.

6. This may be brought to the notice of all concerned.

F.No.279/Misc./140/2015-ITJ

(Sadhana Panwar)
DCIT (OSD) (ITJ), CBDT

The Five Most Important Years for Your Financial Life

To secure your retirement, make the proper moves at a few key moments.

When you’re saving and investing for retirement, you can make a lot of progress by staying on cruise control. Sign up for your 401(k), set a high savings rate, and continue stashing away money throughout your career. Occasionally, though, you’ll reach pivotal ages when your retirement will require hands-on attention—you’ll have to make a decision about your savings or health care, for example, that will affect your financial security or quality of life for years to come.

At these times your window of opportunity may last as little as a few months. So mark these five ages (or the ones that still apply to you) on your calendar.

Age 25: Commit to Saving

Why this age is critical: When you’re just out of college, saving can be hard. But halfway through your twenties—with a job or two behind you, and maybe grad school too—you’re psychologically and financially ready to set money aside. Along with the monetary payoff of starting at 25 (see chart), you’ll develop a habit that will serve you well for life, says Denis Horrigan, a financial planner in Farmington, Conn.

Key move: Aim to put away at least 10% of your pay in your workplace plan, if you have one, or a Roth IRA. Feeling pinched? Use a free app to divert small amounts into savings. Acorns.com rounds up your debit or credit card transactions to the nearest dollar, funneling that change into an investment account.

Age 45: Turn Up the Volume

Why this age is critical: You’re near your peak earning year—for men, 48, and for women, 39, PayScale found in 2014—so you can power-save. And you most likely have fewer working years ahead of you than behind you, so retirement has to be a priority, says Brooklyn planner Tom Frederickson.

Key move: Use online tools and retirement calculators to estimate how much retirement income your portfolio will generate. While forecasts aren’t perfect, they can inspire. A 2014 study out of Stanford and the University of Minnesota found that seeing such estimates helped spur workers to boost their savings.

Age 60: Suss Out Social Security

Why this age is critical: The earliest you can receive Social Security, generally, is at 62, but claiming strategies, especially for married couples, can be complicated. “These are big decisions, and most people need a couple of years to figure out what’s right for them,” says Jim MacKay, a financial planner in Springfield, Mo.

Key moves: Although some 40% of retirees claim at 62, look for ways to hold off; monthly benefits grow 7% to 8% a year until you’re 70. While you wait, build up one to two years of cash to cover emergencies and daily expenses. To lower the risk of a bear market crushing your nest egg, slowly shift your investments so you end up with an appropriately conservative portfolio by your expected retirement date. Most advisers suggest arriving at a 50%/50% stock/bond mix.

Age 65: Enroll in Medicare

Why this age is critical: Unless you or your spouse is still working and you’re on an employer plan—coverage via COBRA doesn’t count—you have three months after the month you turn 65 to sign up for Medicare (at medicare.gov). Miss the deadline and you’ll pay higher premiums—for example, 10% more for each year you delay Medicare Part B (for doctors).

Key move: Shop around for a Part D plan for drug coverage and a Medigap plan to help pay extra costs, such as co-payments and deductibles. Compare choices at medicare.gov/find-a-plan. And go to shiptacenter.org to connect with local experts and trained volunteers providing free guidance on all your Medicare options.

Age 70½: Tackle your taxes

Why this age is critical: Starting the year you turn 70½, the clock begins ticking on the required minimum distributions you must take from your 401(k) and IRAs. (You can defer your first RMD until April 1 of the next year, but you’ll have to take a second one before year-end.) Miss an RMD and you’ll pay a hefty 50% penalty on the money you should have withdrawn.

Key move: Get charitable. In 2015 Congress made permanent a rule letting direct donations from your IRA—up to $100,000 a year—count toward your RMD (and perhaps lower your tax bill). So if you don’t need the money, you can find it a good home.

Source : money.com

How much aware are you of tax rules?

Only one out of three respondents know that the interest received on fixed deposits and recurring deposits is fully taxable.
Apart from investment products and calculation of returns, investors should also be aware of tax rules. Surprisingly, only one out of three respondents know that the interest received on fixed deposits and recurring deposits is fully taxable. A lot of investors think that since TDS has been deducted on the interest from their fixed deposits, they need not pay any more tax. "Many people don't understand that TDS and final tax liability are separate issues," says Adhil Shetty, CEO, BankBazaar.
Tax-saving fixed deposits is another cause for confusion. Investors think that since these are tax saving deposits, the income is also tax-free. Though the taxpayer is eligible to claim deduction for the amount invested in the tax saving deposit under Section 80C, the interest earned on the deposit is fully taxable. The infrastructure bonds issued five years ago offered tax deduction under Section 80CCF, but the income from them has to be reported and tax has to paid on it. It's worrisome to note that this illiteracy exists even among high income earners. More than 60% of the respondents who earn more than Rs 25 lakh a year believe that the interest from bank FDs is not taxable. These investors may get into trouble because the income tax infrastructure is getting into shape in India and banks are reporting the interest paid with PAN details.

Even if TDS has been deducted, the taxpayer may have to pay additional tax. TDS is only 10% and if he earns Rs 5-10 lakh a year, he will have to pay 10% more. If income is more than Rs 10 lakh a year, he will have to shell out 30% in tax. To be sure, this is more a literacy issue and not a deliberate attempt to evade tax. Even so, if he has not paid tax on fixed deposit interest, the taxpayer may get a tax notice and may have to pay a penalty for non-payment of tax.
Source : ET wealth

Brief on Service Tax Related advance Ruling

The businessman would like to be clear in his mind about various aspects of his venture and risks involved. He would like to get clear verdict about his doubts in respect of taxation matters, before he decides to venture in the new business. Otherwise, he may be exposed to certain unexpected risks which may have serious adverse consequences over his business which may be difficult to overcome later.

Meaning of advance ruling

‘Advance ruling’ means determination of a question of law or fact specified in the application submitted by applicant regarding the liability to pay duty in relation to activity (of manufacture/ production/ import/ export) proposed to be undertaken by the applicant.

(a) Classification of goods (or services in case of services tax)

(b) Applicability of an exemption notification

(c) Principles to determine value of goods for purpose of assessment

(d) Notifications issued in respect of excise duty payable under CEA, CETA or any other law where duty is chargeable in same manner as duty of excise or customs duty payable under Customs Tariff Act.

As per section 96C (2) of finance act, 1994 (applicable to service tax), application for advance ruling can be made on a question in respect of-

(a) Classification of any service as a taxable services

(b) Valuation of taxable services for charging a service tax

(c) Principles to be adopted for determination of value of taxable services

(d) Applicability of notification issued

(e) Admissibility of credit of duty or tax in terms of the rules made in this regard [clause amended w.e.f. 28th May, 2012].

(f) Determination of liability to pay service tax (clause inserted w.e.f. 18-4-2006)

In McDonald’s India P Ltd., inre2004 (165) ELT404 = 8 STT 245 = 1 VST 150 = 3 STR 245 (AAR), it was held that the advance ruling can be only in respect of activity proposed to be taken. Applicant who has already commenced his business cannot seek ‘advance ruling’.

Even if the activity was done on tutorial basis in India, application for advance ruling is not maintainable as law does not differentiate between trial run and regular activity.

Who can apply to the authority

As per section 23A(c) of CEA, section 28E(c) of Customs Act and section 96A(a) of Finance Act, 1994, application for advance ruling can be made by any of following, if they propose to undertake any business activity in India-

(i) (a) Non-residence Setting up a Joint venture in India in collaboration with a non-resident or a resident

(b) A resident setting up a Joint venture in India in collaboration with a non-resident or

(c) A wholly owned subsidiary Indian company, of which the holding company is a foreign company, who or which proposes to undertake any business activity in India.

(ii) A joint venture in India or

(iii) A resident falling in any class or category, as may be specified by Central Government by issuing a notification. [Public sector company (but not Government departments), public limited company and resident imported goods under project import scheme are notified under this provision, as discussed below]

(iv) The resident private limited company.

It is clear from the above case laws that only start up is on new business proposal can go for AA, if they have only issue is R, matters specified above.

The application for advance ruling should be submitted in quadruplicate, along with fees of Rs. 2,500. Application should be duly signed by authorized person. Application can be withdrawn within 30 days from date of application.

However keep remember that there is no provision in Act or Rules for refund of application fee, even if application is withdrawn- Sunbeam Auto Ltd. In re (2007) 6 STT 374 (AAR).

Procedure on receipt of application-

On receipt of application, the application will be scrutinized and deficiency/ defect shall be communicated to applicant, as far as Possible within 10 working days. Application will be taken as received only after it is re-submitted after removal of deficiencies. After removal of defects, a serial number will be allotted. A copy will be sent to commissioner of Central Excise and, if necessary, call upon him to furnish relevant records. The record will be returned as soon as possible.

Rejection of application-

The authority shall reject the application for advance ruling in following cases-

(a) If the question raised is already pending before an officer of Excise/ Customs, Tribunal or any court, or

(b) If the matter has already been decided by Tribunal or any High Court. However, opportunity of hearing will be given before rejecting the application. If application for advance ruling is rejected, reasons for the same will be given in the order.

In GSPL India Transco Ltd. In re (2012) 35 STT 433 = 20 Taxmann.com 30 = 49 VST 310 =281 ELT 721 (AAR), it was held that if same matter is pending before CESTAT (though in relation to holding company), application is not maintainable, as same will lead to incompatible decision on same question by two different authorities. This decision has been set aside in GSPL India Transco Ltd. v. UOI (2012)36 STT 722 = 25 taxmann.com 86 = 56 VST 19 (Guj HC DB), on the ground that a holding company and its subsidiary are two separate entities.

Hearing and order-

If application is admitted, authority will examine the material submitted by applicant or obtained by authority. Personal hearing will be given if requested by the applicant. Authority will then pronounce its advance ruling within 90 days of receipt of application. Copy of the order, signed by members of authority, will be sent to the party and commissioner.

In A Tex (India) P Ltd. In re 2005 (179) ELT 540 (AAR), it was held that advance ruling is binding only on appellant and commissioner. It does not bind others- same view in Zee Telefilms Ltd. v. CCE (2006) 5 STT 182 = 4 STR 349 (CESTAT) Cyril Eugene Pereira In re (1999) 105 Taxmann 273 (AAR).

Though legally, opinion in other case will not be binding on department, the opinion given in other case will have persuasive value and cannot be discarded by departmentor by assessee without valid reasons.

No appeal against decision of AAR but writ Petition is maintainable, as AAR is Tribunal-

There is no Provision of Appeal against decision of AAR. However, writ petition is maintainable.

In Columbia sportswear v. DIT (2012) 25 taxman.com 470=210 Taxman 42=283 ELT 321 (SC), it was held that authority of Advance Ruling (AAR) is a Tribunal. Writ Petition against the decision of AAR can be filed before High Court’. The matter should be heard by Division Bench of High Court. The High should decide the matter as expeditiously as possible. Supreme Court can entertain Special Leave Petition (SLP) directly (without first approaching High Court) only if there is a substantial question of general importance or a similar question is already pending before Supreme Court.

Conclusion

After reading the above article, it can be concluded that, before starting any new venture or a project, a businessman or a start-up must take professional advice about the taxability involves in the venture or a business before it’s too late.

(Author CA. Himanshu Sharma is a member of ICAI. He can be reached at info@company360.in or www.company360.in)

Scope of prima facie adjustment u/s 143(1) of Income Tax Act enhanced

The Finance Act, 2016 has made a very important amendment to section 143(1) of Income Tax Act, 1961, whereby the scope of prima facie adjustments u/s 143(1) has been enhanced while processing the returns. The following four sub-cluases and two provisos to the clause (a) of Section 143(1) have been added to allow for the following adjustments also while processing the returns:

“(iii) disallowance of loss claimed, if return of previous year for which set off of loss is claimed was furnished beyond the due date specified under section 139(1);

(iv) disallowance of expenditure indicated in the the audit report but not taken into the account in computing the total income in the return;

(v) disallowance of deduction claimed under section 10AA, 80-IA, 80IAB, 80IB, 80IC, 80ID, 80IE, if the return is furnished beyond the due date specified under section 139(1);

(vi) addition of incopme appearing in form 26AS or form 16A or Form 16 which has not been included in computing the total income in the return:

Provided that no such adjustments shall be made unless an intimation is given to the assesseeof such adjustments either in writting or in electric mode:

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within 30 days of the issue of intimation, such adjustments shall be made.”

Thus before filing your return you must check your 26AS form and audit report as also the dates on which your returns have been filed. Otherwise the return would be processed by addition to your income as per form 26AS or after disallowing the set off of losses, expenditures and deductions which you failed to do in the return of income  filed.

These amendments are applicable w.e.f. 01.04.2017 i.e. A Y 2017-18

(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amitbajajadvocate@hotmail.com , M +919815243335)

Changes vide Service Tax Notifications at the time of Budget 2016

LIST OF CHANGES MADE BY SERVICE TAX NOTIFICATIONS AT THE TIME OF BUGDET 2016

First of all we would like to thank the Tax Guru readers for showing overwhelming response to our post dated 26th May’ 2016. http://taxguru.in/service-tax/simplified-approach-service-tax-complete-analysis.html.

In this article, we have herein below summarized the amendments made by notifications in service tax law.

Notification No 08/2016 Dt.  1st March, 2016 (Applicable w.e.f. 01st April’ 2016)

ABATEMENT NOTIFICATION 26/2012 AMENDED

Cenvat credit on Input Services allowed for Transportation of Goods by Rail
Cenvat credit on Input Services has now been allowed for the services of transportation of goods by Rail (Other than transport of goods in containers by rail by any person other than Indian Railways). (There is an abatement of 70% for transportation of goods and passengers by rail, still the government allowed the cenvat credit on Input Services.) – S. No 2 of Notification.

Taxable Portion increased from 30% to 40% for Transport of goods in containers by Rail by any person other than Indian Railways
In case of transport of goods in containers by Rail by any person other than Indian Railways the taxable portion has been increased to 40% from the earlier 30%. Further, cenvat credit on Input Services shall still be allowed. It is to be noted that cenvat credit on Inputs and Capital Goods shall not be taken. – S. No 2A of Notification.

Cenvat credit on Input Services allowed for Transportation of Passengers by Rail
Cenvat credit on Input Services has now been allowed for the services of transportation of Passengers by Rail. (There is an abatement of 70% for transportation of goods and passengers by rail, still the government allowed the cenvat credit on Input Services.) – S. No 3 of Notification.

Taxable Portion increased from 30% to 40% for services of Goods Transport Agency in relation to transportation of used household goods.
Pre amendment, the abatement for services of Goods Transport Agency in relation to transportation of all goods was 70 % without the facility of cenvat credit.

Post amendment, the abatement for services of Goods Transport Agency in relation to transportation of used household goods reduced from 70% to 60 %. There is no change in cenvat credit scheme. – S. No 7A of Notification.

Abatement for “Service provided by a foreman of Chit in relation to Chits” has been restored.
Pre Amendment, the abatement of 30% was withdrawn by Notification 08/2015 w.e.f. 1st April’ 2015. Thus, the services in relation to Chits were made taxable at 100% with full cenvat credit.

Post amendment, the abatement of 30% is restored and the taxable portion would be 70%. Further, no cenvat credit shall be allowed. Thus, service provided by a foreman of Chit in relation to Chits shall now be made taxable @ 70% with no cenvat credit.

Abatement of 60% in case of Transport of Passengers has been extended to “A Stage Carriage”. (This change is to be effective from 1st June’ 2016).
The Negative List entry that covers “service of transportation of passengers, with or without accompanied belongings, by a stage carriage” is proposed to be omitted [section 66D (o)(i)] with effect from 1.06.2016. As a consequence, the above services become taxable with effect from 1.06.2016. However, such services by a non-air-conditioned contract carriage will continue to be exempted by way of exemption notification [Notification No. 25/2012-ST, as amended by notification No. 09/2016-ST, dated 1st March, 2016]. The service of transportation of passengers by air-conditioned stage carriage is being taxed at the same level of abatement (60%) as applicable to the transportation of passengers by a contract carriage, with same conditions of non-availment of Cenvat credit. – S. No 9A of Notification.

Further, at present, there is abatement of 60% on the gross value of renting of motor-cab services, provided no cenvat credit has been taken. It is being made clear by way of inserting an explanation in the notification No. 26/2012-ST that cost of fuel should be included in the consideration charged for providing renting of motor-cab services for availing the abatement. – S. No 9 of Notification. (Insertion of Explanation ‘BA’ in notification No. 26/2012-ST)

Cenvat credit on Input Services allowed for Transportation of Goods in a Vessel.
Cenvat credit on Input Services has now been allowed for the services of transportation of Goods in a Vessel. (There is an abatement of 70%, still the government allowed the cenvat credit on Input Services.) – S. No 10 of Notification.

Major changes in “Services by a Tour Operator”.
In cases where the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour, abatement of 90% is available with specified conditions. However, this abatement of 90% cannot be claimed in such cases where the invoice, bill or challan issued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation. There is no change in the rate of abatement or the conditions required to be fulfilled for claiming the said abatement. – S. No 11 of Notification.
Abatement rates in respect of services by a tour operator in relation to a tour other than above (i.e. other than providing services solely of arranging or booking accommodation) , is being rationalised from 75% and 60% to 70%. Consequently, the definition of “package tour” as provided in the relevant notification is being omitted. – S. No 11 of Notification.
Thus, post amendment; there are only 2 types of abatement viz, 90% and 70%.

Uniform abatement @ 70% for Services of Construction of Complex, etc
At present, two rates of abatement have been prescribed for services of construction of complex, building, civil structure, or a part thereof,- (a) 75% of the amount charged in case of a residential unit having carpet area of less than 2000 square feet and costing less than Rs 1 crore, and (b) 70% of the amount charged in case of other than (a) above, both subject to fulfillment of certain conditions prescribed therein. A uniform abatement at the rate of 70% is now being prescribed for services of construction of complex, building, civil structure, or a part thereof, subject to fulfillment of the existing conditions. – S. No 12 of Notification.

Notification No 09/2016 Dt.  1st March, 2016 (Applicable w.e.f. 1st April, 2016)

MEGA EXEMPTION NOTIFICATION AMENDED

SOME EXEMPTIONS CHANGED

Entry No 6 relating to Legal Services provided by Advocates substituted
Following services are now made taxable:-

Services provided by a Senior Advocate to an Advocate or Partnership Firm of advocates, and
A person represented on an arbitral tribunal to an arbitral tribunal;
Further, these are now made taxable under direct charge and existing exemption regarding legal services provided by a firm of advocates or an advocate other than senior advocate is being continued.

Entry No 16 modified
The threshold exemption limit of consideration charged for services provided by a performing artist in folk or classical art forms of music, dance or theatre, is being increased from Rs 1 lakh to Rs 1.5 lakh per performance.

SOME EXEMPTIONS WITHDRAWN

Entry No 14 relating to Exemption for construction, erection, commissioning or installation of original works pertaining to monorail or metro is being withdrawn.
Construction, erection, commissioning or installation of original works pertaining to monorail or metro is now made taxable. However, contracts entered into before 1st March 2016 shall continue to be exempted. The other exemptions under S. No. 14 of notification No. 25/12-ST shall continue unchanged.

Entry No 23 relating to transportation passengers by Ropeway, cable car or aerial tramway is now being made taxable.
This change shall be effective from 1st March’ 2016.

Further, services of transportation of passengers by a stage carriage is made taxable pursuant to amendment in Negative List w.e.f. 01st June’ 2016. However, the services of transportation by non air-conditioned stage carriage continued to be exempted under the present exemption entry. Thus, only air-conditioned stage carriage is taxable and that too after the abatement of 60%.

RESTORATION OF CERTAIN EXEMPTIONS WITHDRAWN LAST YEAR

Entry at S. No. 12A
Notification 06/2015 dated 1st March’ 2015 had withdrawn the exemption given to certain construction related services to Government, Local Authority or a governmental authority w.e.f. 01st April’ 2015. Now, as a matter of relief, the present entry 12A has reintroduced the same exemption for the contracts entered into prior to the 1st March’ 2015 upto 1st April’ 2020.

New entry at S. No. 14A
Notification 06/2015 dated 1st March’ 2015 had withdrawn the exemption given to certain construction related services for Airport or Port. Now, as a matter of relief, the present entry 14A has reintroduced the same exemption for the contracts entered into prior to the 1st March’ 2015 upto 1st April’ 2020.

NEW EXEMPTIONS GIVEN

New entry at S. No. 26C
The services of life insurance business provided by way of annuity under the National Pension System (NPS) regulated by Pension Fund Regulatory and Development Authority (PFRDA) of India is being exempted from service tax.

New entry at S. No. 51
Services provided by Securities and Exchange Board of India (SEBI) set up under SEBI Act, 1992, by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market are being exempted from service tax.

New entry at S. No. 49
Services provided by Employees‟ Provident Fund Organisation (EPFO) to employees are being exempted from service tax.

New entry at S. No. 52
Services provided by National Centre for Cold Chain Development under Department of Agriculture, Cooperation and Farmer‟s Welfare, Government of India, by way of knowledge dissemination are being exempted from service tax.

New entry at S. No. 50
Services provided by Insurance Regulatory and Development Authority (IRDA) of India are being exempted from service tax.

New entry at S. No. 26(q)
Services of general insurance business provided under “Niramaya‟ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability in collaboration with private/public insurance companies are being exempted from service tax.

New entry at S. No. 9D
Services provided by way of skill/vocational training by Deen Dayal Upadhyay Grameen Kaushalya Yojana training partners are being exempted from service tax.

10. New entry at S. No. 9C

Services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development & Entrepreneurship are being exempted from service tax.

New entry at S. No. 13 (ba)
Services by way of construction, erection etc. of a civil structure or any other original works pertaining to the “In-situ Rehabilitation of existing slum dwellers using land as a resource through private participation” component of Housing for All (HFA) (Urban) Mission / Pradhan Mantri Awas Yojana (PMAY), except in respect of such dwelling units of the projects which are not constructed for existing slum dwellers, is being exempted from service tax.

New entry at S. No. 13 (bb)
Services by way of construction, erection etc., of a civil structure or any other original works pertaining to the “Beneficiary-led individual house construction/enhancement” component of Housing for All (HFA) (Urban) Mission/ Pradhan Mantri Awas Yojana (PMAY) is being exempted from service tax.

New entry at S. No. 14 (ca)
Services by way of construction, erection, etc., of original works pertaining to low cost houses up to a carpet area of 60 sq.m per house in a housing project approved by the competent authority under the “Affordable housing in partnership” component of PMAY or any housing scheme of a State Government are being exempted from service tax.

New entry at S. No. 9B
Services provided by the Indian Institutes of Management (IIM) by way of 2 year full time Post Graduate Programme in Management(PGPM) (other than executive development programme), admissions to which are made through Common Admission Test conducted by IIMs, 5 year Integrated Programme in Management and Fellowship Programme in Management are being exempted from service tax. These exemptions are clarificatory in nature.

The above changes in notification No. 25/12-ST, except the change mentioned in S.No 10, 11, 12 & 13 (which will come into effect from 1st March, 2016), shall come into effect from the 1st day of April 2016.

NEW EXEMPTIONS GIVEN PERSUANT TO AMENDMENT IN NEGATIVE LIST

New entry at S. No. 23(bb)
Services by a stage carriage were in the negative list of services [clause (o) (i) of section 66D]. As this entry is proposed to be omitted through the Finance Bill 2016, a new entry is being inserted in notification No.25/2012-ST so as to exempt services by a stage carriage other than air conditioned stage carriage.

New entry at S. No. 53
Services by way of transportation of goods by an Aircraft from a place outside India up to the customs station of clearance in India were in negative list of services [clause (p)(ii) of section 66D]. As this entry is proposed to be omitted through the Finance Bill 2016[para 4.1(C) above refers], the said service is being exempted by amending notification No.25/2012-ST.

SOME DEFINITIONS INSERTED

(ba) “Approved Vocational Education Course” means, –

(i)  A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or

(ii) A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship;‟;

(oa) “Educational Institution” means an institution providing services by way of:

(i)     Pre-school education and education up to higher secondary school or equivalent;

(ii)   Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;

(iii)  Education as a part of an approved vocational education course;”;

(zdd) “Senior Advocate‟ has the meaning assigned to it in section 16 of the Advocates Act, 1961 (25 of 1961);‟

Notification No 10/2016 Dt.  1st March, 2016 (Applicable w.e.f. 1st March, 2016)

POINT OF TAXATION RULES AMENDED

The Point of Taxation Rules, 2011 have been framed under provisions of clause (a) and (hhh) of section 94(1). Now specific powers is also being obtained under section 67A to make rules regarding point in time of rate of service tax. Thus, any doubt about the applicability of service tax rate or apparent contradiction between section 67A and POTR would be taken care of.

Therefore, consequent modifications have been done in POTR.

(a) Rule 5 of POTR applies when a new service comes into the service tax net. Although in the case of new levy, provisions of Chapter V of the Finance Act, 1994, and rules made thereunder, are invariably made applicable in relation to the levy and collection of the new levy. However, doubts have been raised regarding its applicability in case of new levy. Therefore, an Explanation is being inserted in Rule 5 stating that the same is applicable in case of new levy on services.

(b) Further, in Rule 5 of POTR, it is provided that in two specified situations the new levy would not apply. Another Explanation is being inserted therein stating that in all other situations, the new levy or tax shall be payable.

Notification No 11/2016 Dt.  1st March, 2016 (Applicable w.e.f. 1st March, 2016)

NEW EXEMPTION GIVEN TO INFORMATION TECHNOLOGY SOFTWARE

With effect from 21.12.2010, media falling under Chapter 85 with recorded Information Technology Software has been notified under section 4A of the Central Excise Act. Accordingly, Central Excise duty/CVD is to be paid on the value of such media with recorded Information Technology Software and the assessable value of such media is required to be determined on the basis of the retail sale price (RSP) affixed on the package of such media under the Legal Metrology Act, 2009 or the rules made thereunder. In respect of transactions involving supply of such media bearing RSP, not amounting to sale/deemed sale, service tax is being exempted. Thus, only Central Excise duty is levied on such transactions.

In certain situations like delivering customised software on media, such media with recorded Information Technology Software, is not required to bear the RSP when supplied domestically or imported. Difficulties are being experienced in the assessment of such media to Central Excise duty/CVD besides giving rise to the issue of double taxation – levy of Central Excise duty/CVD as well as service tax. In order to resolve the issue, media with recorded Information Technology Software which is not required to bear RSP, is being exempted from so much of the Central Excise duty/CVD as is equivalent to the duty payable on the portion of the value of such Information Technology Software recorded on the said media, which is leviable to service tax. In such cases, manufacturer/importer would therefore be required to pay Central Excise duty/CVD only on that portion of value representing the value of the medium on which it is recorded along with freight and insurance. The exemption is subject to the fulfillment of certain conditions. Thus, the levy of Central Excise duty/CVD and service tax will be mutually exclusive.

Notification No 12/2016 Dt.  1st March, 2016 (Applicable w.e.f. 1st April, 2016)

NEW EXEMPTION GIVEN

The exemption given to services provided by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology has been extended to services provided by bio-incubators recognized by the Biotechnology Industry Research Assistance Council, under Department of Biotechnology.

Notification No 13/2016 and 14/2016 both Dt.  1st March, 2016 (Applicable on the enactment of Finance Bill ’2016)

INTEREST RATES REVISED

Vide the present Notifications, the provisions of interest across all Indirect Taxes has been rationalised.

Interest rates on delayed payment of duty/tax across all indirect taxes is proposed to be made uniform as follows:-

The present rates of Interest shall be applicable both under section 73B and section 75 of the Finance Act, 1994.

It is pertinent to note that, in case of assessees, whose value of taxable services in the preceding year/years covered by the notice is less than Rs. 60 Lakh, the rate of interest on delayed payment of service tax will be 12%.

Notification No 15/2016, 16/2016 and 17/2016 all Dt.  1st March, 2016 (Applicable w.e.f. 1st April, 2016)

SERVICES PROVIDED BY GOVERNMENT OR LOCAL AUTHORITY

Finance Act, 1994 was amended vide Finance Act, 2015 so as to make any service (and not only support services) provided by Government or local authorities to business entities taxable from a date to be notified later. 1st April, 2016 has already been notified as the date from which any service provided by Government or local authorities to business entities shall be taxable.

Consequently, 1st April, 2016 is also being notified

As the date from which the definition of “Support Services” shall stand deleted from the Finance Act, 1994 and
As the date of related modifications in Reverse Charge Notification
Notification No 18/2016 Dt.  1st March, 2016 (Applicable w.e.f. 1st April, 2016)

REVERSE CHARGE NOTIFICATION 30/2012 AMENDED

Services provided by a Mutual Fund Agent Excluded from Reverse Charge
In Union Budget, 2015, services provided by a Mutual Fund Agent or Distributor, to a mutual fund or asset management company was made taxable. These services were put under Reverse Charge Mechanism, i.e., the Asset Management Company was made liable to pay service tax for the services received from such agents/distributors.

With the present amendment vide the above referred notification; services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under Direct Charge Mechanism. i.e. the service provider is being made liable to pay service tax. The small sub-agents down the distribution chain will still be eligible for small service provider exemption [threshold turnover of Rs 10 lakh/year] and a very small number will be liable to pay service tax.

Services provided by Senior Advocates Excluded from Reverse Charge
As the amendment to Mega Exemption notification during Budget’ 2016, the services provided by a Senior Advocate to an Advocate or Partnership Firm of advocates has been made taxable. As per the present amendment vide the above referred notification; these services are now made taxable under direct charge mechanism. Thus, Reverse Charge Mechanism shall not be made applicable on the legal services provided by Senior Advocates. The term “Senior Advocates” has been defined in Notification 09/2016 as follows:-

“Senior Advocate has the meaning assigned to it in section 16 of the Advocates Act, 1961”.

Notification No 19/2016 Dt.  1st March, 2016 (Applicable w.e.f. 01st April’ 2016)

SERVICE TAX RULES’ 1994 AMENDED

First Proviso to Rule 6(1) – Quarterly Payment Facility Extended
Pre amendment, the quarterly payment facility for service tax was applicable for Individual or Proprietary Firm or Partnership Firm
Post Amendment, the quarterly payment facility has also been extended to One Person Company whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year and Hindu Undivided Family.
(The concept of One Person Company (OPC) in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity with limited liability. One person Company has been defined in Section 2(62) of the Companies Act, 2013.)

Third Proviso to Rule 6(1) – Facility of Payment on Cash / Receipt Basis Extended
Pre amendment, the payment of service tax on Cash / Receipt basis was allowed for Individual or Partnership Firm
Post Amendment, the payment of service tax on Cash / Receipt basis has also been extended to One Person Company.
Rule 6(1) – Provisional Assessment
After the amendment, the procedure as prescribed in Central Excise Rules’ 2002 shall be followed instead of the procedure prescribed in Central Excise Rules’ 2001.

Rule 6(7A) – Special Manner of Payment in case of Insurer carrying on Life Insurance Business
The service tax liability on single premium annuity (insurance) policies is being rationalized and the effective alternate service tax rate (composition rate) is being prescribed at 1.4% of the total premium charged, in cases where the amount allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing of service.

Rule 7(3A) – New Annual Service Tax Return Introduced in Service Tax
As per the present amendment, the assessee, in addition to filing of half yearly service tax returns, shall also submit an annual return for the financial year to which the return relates, in such form and manner as may be specified in the notification in the Official Gazette by the CBEC, by the 30th day of November of the succeeding financial year;

Further as per Sub Rule (3B), the Central Government may, subject to such conditions or limitations, specify an assessee or class of assesses who may not be required to submit the annual return referred above.

Rule 7B(2) – Revision on Annual Service Tax Return
As per the present provisions, an assessee who has filed the annual return by the due date may submit a revised return within a period of one month from the date of its submission.

Rule 7C(2) – Late Fees for delay in filing Annual Service Tax Return
As per the present provisions, where the annual return is filed after the due date, the assessee shall pay an amount calculated at the rate of Rs. 100/- per day for the period of delay in filing of such return, subject to a maximum of Rs. 20,000/-.
Source : taxguru.in

CBDT invites comment on Implementation of GAAR

F No 370149/89/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)

PRESS RELEASE

Subject: Implementation of General Anti Avoidance Rule Provisions-Issuance of Guidance Note-Comments of the Stakeholders-reg.

The provisions of General Anti Avoidance Rule (GAAR) are contained in Chapter X-A of the Income-tax Act, 1961 (the Act). The GAAR provisions shall be effective from assessment year 2018-19 onwards, i.e.; financial Year 2017-18 onwards. The necessary procedures for application of GAAR and conditions under which it shall not apply, have been enumerated in Rules 10U to 10UC of the Income-tax Rules, 1962.

Several stakeholders and industry associations have represented that guidelines for implementation of GAAR be issued so that there is adequate clarity in this regard.

The general public and stakeholders are therefore requested to provide their inputs on the provisions of GAAR in respect of which further clarity is required, from its implementation perspective. For the exercise to be meaningful, it is essential that reference to hypothetical situation is avoided. If the input relates to interpretation of a specific real world structure or arrangement, the structure should be such as commonly occurs in the sector and involves clarification of general principles of application. Further, in relation to such structure, the particular provision and apprehensions or doubt alongwith basis thereof may also be provided with all the relevant facts. The inputs may be provided on or before 30.06.2015 electronically on e-mail ID gaar-dor@gov.in and/ or by post at the following address with “Comments for Guidance Note on GAAR” written on the envelop. The Director (Tax Policy & Legislation)-I Room No. 147-D, Central Board of Direct Taxes, North Block, New Delhi – 110001.

(Meenakshi J Goswami)
Commissioner of Income-tax
(Media & Technical Policy)
Official Spokesperson, CBDT

3 Mistakes that can lead to an Income Tax Notice

Rajeev Ranjan

Needless to say, tax is really a complex subject and people do not even bother about that. Those who are working and fall under a tax slab as per their annual income get TDS deducted by their employers on a monthly basis, whereas small business owners are often seen escaping the tax demon by hiding their actual annual income. Correspondingly, they save thousands on taxes, which is not a very good idea to save the taxes because these people are going to get a tax notice sooner or later. These transgressions can invite penalties and the person has to pay up to 300% of the unpaid amount as the tax.

Irrespective of the reason(s) why one failed to pay liable tax, he or she cannot avoid getting tax notice anytime in the future.There could be many reasons behind people getting a notice from income tax department. Below are some smart tips that can help you pay your taxes in time:

1. Hidden Income from Interest

People are often seen making this mistake, which might be because of lack of knowledge or they could be doing it purposely. Anyone earnings from a recurring deposit, fixed deposit, and tax-saving bank depositsas well as infrastructure bond are taxable in every aspect. In reality, the interest income ofRs. 10, 000 is free, but that is only on the interest earned on one’s bank balance in the savings account. Some people believe that there is no further need to pay tax after TDS has been deducted by the bank. However, they might forget that TDS is not more than 10% of one’s income, subject to the tax slab he/she falls in.

Another big confusion is that some people think that they need to pay 10% of their income as TDS while the same is subject the tax slab they fall in. Someone earning 10 lakh a year falls in a higher tax slab and 30% is deductible as TDS.

Tip: One needs to manually calculate one’s interest income from fixed deposits, recurring deposits, and other investments, and then add that to the income.

2. Forgetting Previous Job’s Income

When one switches his or her job, there are chances of falling foul of income tax laws. In such scenarios, the new employer does not consider one’s previous income while calculating tax and one get tax exemption all over again on the new income. In the other words, instead of 2.5 lakh as basic slab tax exemptionalong with 1.5 lakh as the deduction for savings/investments under section 80C, one gets basic exemption of Rs. 5 lakh and Rs. 3 lakh additional deduction. This actually results in almost no tax paying as compared to what that is payable.

Such discrepancies can never be hidden lifelong and do come out when one files income tax return sooner or later.

Tip: One should inform his or her income from the previous employer in order to get TDS deducted in accordance with that.

3. Tax Return Not Filed

Anyone whose annual income falls in tax slabs should file income tax return. As per current income tax slabs, one getsthe tax exemption of up to 2.5 lakh below 60 years of age, whereas anyone who is above 60 years of age gets thetax exemption of up to 3 lakh annually. On the other hand, if one’s age is above 80 years, he or she gets the tax exemption of up to 5 lakh.

All these calculations are based on one’s gross income prior to any deduction, which means that if one’s annual income is 4 lakh and he or she invests 1.5 lakh in a policy under section 80C, then one no longer has the tax liability. Likewise, one with a higher salary can get the tax exemption of up to 25, 000 for the premiums paid towards health insurance for self below 60 years of age.

However, there is still a need for filing income tax return, including the scenario when one has already paid all his/her taxes.

Tip: Do not forget to file income tax return even if there is not such liability or all taxes are paid already.

Despite all, if one receives income tax notice related to non-filing of ITR, TDS claims, documents verification etc., one does not need to worry because such issues can be resolved in not more than 24 hours. Consult a tax lawyer for more information about income tax and filing an ITR.

(Author can be reached at Rajeev@policybazaar.com)

Annual Return under Service Tax

CA Aayush Jain
1. As per Rule 7(1) of the Service Tax Rules, 1994, all the assessees registered under service tax are required to file service tax returns on a half yearly basis. The half yearly return is to be filed by 25th of the month following the particular half year.

2. The Central Board of Excise and Customs (͞the Board͟) have amended Rule 7, 7A and 7B of service tax vide Notification No. 19/2016 whereby the Board has introduced the requirement of filing an annual return.

3. However, the requirement of filing of half yearly return is still there, the annual return is in addition to the normal half yearly returns.

4. As per the amendments made by the Board in Rule 7 all the assessees are required to file an annual return by 30th November of the succeeding financial year.

5. As on today, there are no exemptions for anyone for filing this annual return. However, the Central Government is yet to notify the assessees or class of assesses who will not be required to submit this annual return.

6. The Board has also made amendments in Rule 7B whereby the assessee who has filed the annual return till 30th November may submit a revised return within a period of one month from the date of submission of the said annual return.

7. The Board has also amended Rule 7C pertaining to which the assessee who has delayed in filing the annual return will have to deposit an amount of Rs.100 per day for the period of delay in filing the return subject to a maximum amount of Rs.20,000 to the credit of Central Government.

8. The above amendments are effective from the 1st day of April, 2016.

(Author can be reached at aayush.jain993@gmail.com)

Brief Analysis of Krishi Kalyan Cess

CA Vishrut Shah

After Collecting cess in the name of Education, Higher Education, Cleanliness (Swachh Bharat Cess) now the government is also keen to put burden of welfare of the Farmers on all of us (Including from the farmers for any service availed by them. Imagine person paying Tax for his own welfare which might not ultimately reach to him !!!!!) so all the person availing any services on or after 1st June,2016 or making any payment for the Services after 1st June,2016 need to make payment of additional 0.5% Cess on the value of Services. It is a move towards reaching neutral rate of GST (Goods & Service Tax) as proposed by the committee of 16% – 18% which most likely as per current situation. (So Government is trying to ensure that people absorb increase in rate in slower installments rather than sudden jump to 16% or 18% which may have practically difficulty in implementation and to reduce oppose at that point of time). Nevertheless to mention the fact that Swachh bharat Cess can be increased upto 2% as passed and provided by the Finance Act,2015. So that hanging sword may hit at any point of time as government may deemed fit and increase our burden more towards Clean India Campaign.

Legal Validity:-

Krishi Kalyan Cess was proposed in the Finance Budget 2016 and which was passed by the parliament under Section 161 of Finance Act,1961 and now applicable on all the services w.e.f. 1st June,2016.

Leviability :-

Taxability this cess is leviable on all Services which are taxable as of today. It will not be applicable on manufacturers or traders. It will be equally leviable where service tax is required to be paid under reverse charge mechanism. However it will not be applicable on the services which are totally exempt from the payment of services tax.

Tax Rate:-

It will be applicable at the rate of 0.5% on the entire value of service like service tax (Government may be thinking that cost required be incurred for Swachh Bharat Abhiyan and Krishi Kalyan shall be same). So now the effective rate of Service Tax shall come to 15% on Value of Service Provided.

However wherever there is abatement applicable proportionately abatement shall be applicable to Krishi Kalyan Cess also. Hence in case of real estate construction services where abatement is 30% the effective rate of Krishi Kalyan Cess would be 0.15%. Similar would be the impact in case of works contract and restaurant services etc.

Cenvat Credit :-

Only Service provider can avail the CENVAT Credit of this cess, Manufacturers cannot avail CENVAT of the same. Meaning thereby if there is any manufacturer who is paying service tax under reverse charge mechanism for any services that there will be no cenvat credit shall be allowed to them for the payment of Krishi Kalyan Cess and it will straight away add to the cost. There seems no logic for such additional burden on manufacturers specially where government is pushing up towards GST regime where such cascading effect is required to be removed for better and efficient tax structuring. This would hamper the business and their profitability. (Government may have thought that with Swachh bharat cess people are accustomed to the non creditable cess payment so it will not affect the industry and they will accept it. However in my opinion there needs to be come representations required to be mady at industry association level to remove the same allow common credit to all kind of assessee)

Also the credit of Krishi Kalyan Cess shall be available for the payment of Krishi Kalyan Cess only. Also it is clarified that the said cenvat credit shall not be adjustable when payment of Krishi Kalyan Cess is required to be made under Reverse Charge Mechanism. Hence Cesspayable at the time of RCM will have to be paid by challan only

Accounting codes :-

CBEC vide circular No. 194/04/2016-ST dated 26.05.2016 have prescribed following accounting code for Krishi Kalyan Cess.

Basic Cess          :- 00441509

Interest on Cess :- 00441510

Penalty on Cess :- 00441512

Refund:-

SEZ units are entitled to claim refund of Krishi Kalyan Cess paid on input services along with service tax. Also rebate of Krishi Kalyan Cess paid on input services in the course of providing export of services shall be also available.

Point of Taxation :-

Point of taxation for levying Krishi Kalyan Cess would be determined as per Rule 5 of the Point of Taxation Rules, 2011 since it is a new levy.

If invoice is issued and payment is received before June 1, 2016, it would not be levied. In all other cases where invoices were issued prior to 1st June,2016 but payment thereon is received on or after 1st of June 2016 so it will have to be paid on all outstanding debtors as on 31st May, 2016. In cases where advance payment has been received prior to 1st June,2016 then the invoice for the same can be issued till 15th June,2016 without levying Krishi Kalyan Cess, for any invoice issued on or after 15tht June,2016 it will be applicable.

In case of Service Tax need to paid under Reverse Charge Mechanism where invoice are issued prior to 1st June 2016 but payment is made on or after 1st June 2016Krishi Kalyan Cess will not be payable. In all other case it will be payable.

(The Author is Tax & Management Consultant and can be reached on +91-9824798534 or on vishrut1303@gmail.com)

Rights & Obligations of Allottees Under Real Estate Act, 2016

CS Deepak Pratap Singh

Rights And Obligations Of Allottees Under Real Estate (Regulation And Development) Act, 2016

The Real Estate ( Regulation and Development ) Act, 2016 defines “ Allottee” as the person to whom a plot, apartment or building , as the case may be , has been allotted, sold( whether as freehold or leasehold)  or otherwise transferred by the  promoter. It also includes person who subsequently acquires the said allotment through sale, transfer or otherwise. But the definition of “Allottee” does not include a person to whom land or apartment is give on rental basis.

The Rights of allottes  given in Sections 11 to 19 of The Real Estate (Regulation and Development) Act, 2016; which are as follows;

(i) Right of information  [ Section 11(3), 19(1) and 19(2)];

(ii) Right to receive Completion Certificate/Occupancy certificate [ Section 11(4)(b)];

(iii) Right to remedy of approaching RERA against wrongful cancellation of allotment by promoters( Builders and Developers) [ Section 11(5)];

(iv) Right to claim compensation or interest from promoters for breaches of agreement of sale [ Section 12, 14(3) 18, Section 19(4)];

(v) Right to withdraw from the project and claim return of investment with interest and compensation[Section 12, 18(1)] in case of false advertisement or non fulfilment of any conditions mentioned in the agreement;

(vi) Right to claim compensation for the promoters in case of loss caused to allottes due to defective title [ Section 18(2)];

(vii) Right to execution of Agreement for Sale, before payment of 10 % of cost of flat/ apartment/ gala/land etc.[ Section 13];

(viii) Right to receive  title of insurance to be transferred in the name of allottees or association or society of allottees  [Section 16];

(ix)  Right to statutory remedy of filing compliant with adjudication authorities for enforcement of rights;

(x)  Right to execution of registered conveyance deed by the promoters [Section 17(1)];

(xi)  Right to possession [ Section 17(1), 18(1) , 19(10)];

(xii) Right against alteration of project without their consent [ Section 14(1), 14(2)];

(xiii) Right against transfer or assignment of project by the promoters to third party without consent of allottees or association of allottees {Section 15];

(xiv) Right to be charge same rate of interest for default in payment as promoters will be charges in case of breach of any clauses of the Agreement of Sale.

SOME COLLECTIVE RIGHTS TO BE ENJOYED BY THE ALLOTTEES;

(i) Right to occupation/ completion certificate of the project to be acquired by the promoters and handed over to allottees or association or society of allottees , within a period as may be allowed by RERA;

(ii) If project is on lease from town planning authority, then the promoter will hand over the lease certificate in favour of allottees or associations of allottees;

(iii) Right to document of insurance, the promoters of a project are required to execute or take an insurance policy form insurers to insure the project and after completion of the same promoters will transfer the title of insurance in favour of allottees or association of allottees;

(iv) Rights to documents and plans, the promoter will hand over all plans, documents, certificates , drawings, NOC to the allottees or association of allottees after completion of project or at the time of handing over the possession of project;

(v) In case registration of a promoter is revoked by the RERA, then allottees or association of allottees have right to transfer the amount kept in separate bank account by the promoters according to the provisions of The Real Estate (Regulation and Development) Act, 2016.

NOW LETUS CONSIDER ALL POINTS SEPERATELY;

RIGHT TO INFORMATION [SECTION 11(3), 19(1) 19(2)];

Section 19(1) provides that the allottee shall be entitled to obtain information regarding sanctioned plans, layout plans along with specifications approved by the competent authorities, the Agreement of Sale etc., signed by the promoters with competent authorities.

Section 19(2) the allottes are entitled to information regarding stage wise completion of project including provisions of water, sanitation, and electricity and other amenities and services according to the clauses of Agreement of Sale.

Section 11(3) provides that at the time of booking the promoters are bound to provide following information to the allottees;

(a)  Sanctioned plan, layout plan, along with specifications approved by the competent authority, by display at the site or such other place as may be specified by the regulations made by the Authority;

(b)  The stage wise schedule of completion of the project, including the provisions for civic infrastructure like water, sanitation and electricity.

RIGHT TO OCCUPANCY/COMPLETION CERTIFICATE [section 11(4) (b)]; the promoter is responsible to acquire Completion / Occupancy Certificate from competent authority according to rules and regulations prescribed in this regard.

RIGHT TO REMEDY BY APPROACHING RERA AGAINST WORNGFUL CANCELLATION OF ALLOTMENT;

The cancellation by the promoter can be said to be wrongful only if all these conditions are satisfied;

(i) It is not in accordance with the Agreement of Sale;

(ii) If is unilateral i.e. it not a cancellation by mutual agreement of parties; and

(iii) It is without sufficient cause.

The allottees may approach to the authority for getting remedy against wrongful cancellation of agreement by promoters.

RIGHT TO CLAIM COMPENSATION[ Section 14(3), 18 & 19(4)] the allottees are entitled to get their amount invested with interest and compensation if promoters are not giving possession at the right time or in accordance with the Agreement of Sale or if promoters has been breached any terms and conditions of the Agreement of Sale.

The interest shall be payable at prescribed rate and the compensation will be calculated according to the provisions of Section 19(4) of the Act.

Section 18(1) provides that the allottees will get refund of his investment with interest and compensation if he withdraws himself from the project. In other case if allottee does not withdraw from the project then the promoter will pay him monthly interest at such rate as may be prescribed by the RERA, following conditions need to be fulfilled in this case;

(i) Failure by the promoter to hand over the physical possession according to the terms of Agreement of Sale;

(ii) Where persons makes an advance or deposit on the basis of false or incorrect statement contained in any notice, advertisement or prospectus or model apartment or plot or building[ Section 12].

Section 12, Provides that where any person makes an advance or a deposit on the basis of the information contained in the notice advertisement or prospectus, or on the basis of any model apartment, plot or building, as the case may be, and sustains any loss or damage by reason of any incorrect, false statement included therein, he shall be compensated by the promoter in the manner as provided under the Act.

RIGHT TO CLAIM COMPENSATION FOR LOSS CAUSED BY DEFECTIVE TITLE[Section18(2)];  if a project has been developed on a land for which promoter has defective title then any loss caused to the allottees , will be compensated by the promoter and claim of such compensation will not be barred by law of limitation.

RIGHT TO EXECUTION OF REGISTERED CONVEYANCE DEED[Section 17(1)]; the promoter shall execute a registered conveyance deed in favour of the allottee  along with the undivided proportionate title in the common areas to the association of the allottees or the competent authority , as the case may be, and hand over the physical possession of the plot, apartment of building , as the case may be to the allottees and the common areas to the association of allottees or the competent authority , as the case may be in real estate project, and other title documents pertaining thereto within the specified period according to the sanctioned plans as required by the local authority’s rules and regulations.

THERE ARE SOME RIGHTS TO BE ENJOYED BY ALLOTTEES COLLECTIVELY;

1.      RIGHT AGAINST ALTERATION OF PROJECT; the promoters without consent of two third numbers of allottees does not carry structural changes in the project.

2.      RIGHT AGAINST TRANSFER OR ASSIGNMENT OF PROJECT; the promoter shall not transfer or assign his majority rights and liabilities in respect of a real estate project to a third party without obtaining prior written consent or approval of authority.

3.      RIGHT AGAINST MORTGAGE OF ANY PART OF PROJECT BY PROMOTER; the promoter without prior written consent of allottees does not mortgage any part of project.

SECTION 8 provides that upon lapse of the registration or on revocation of the registration under the Act, the Authority with consultation of appropriate government take such steps as they deem fit including carrying out the remaining development works by competent authority or by association of allottees or in any other manner, as may be determined by the authority.

OBLIGATIONS OF ALLOTTEES;

(i) Responsibility to pay interest for delay in payment according to Agreement of Sale;

(ii) Responsibility to participate in formation of Association of Allottees;

(iii) Responsibility to take physical possession of the apartment, plot or building as the case may be , within a period of two months of the issue of Occupancy certificate;

(iv) Responsibility in participating in execution of conveyance deed;

(v)  Responsibility to pay penalty for breach of any order of the Competent Authority;

(vi) Penalty for failure to comply with the order of Appellate Tribunal.

TCS on Sale of Goods and Service required to be revamped

TCS provisions have been made applicable to all the goods and services wef 01-06-2016. While the provisions are intended to frame a system of reporting high value transactions to curb black money, the law framed by the parliament in this regard is plagued by number of doubts and issues which can clog the very implementation of provisions. The author has made a humble attempt to consolidate the issues involved in this taxation as under:
Relevant TCS provisions

Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration,—

(i) for bullion, exceeds two hundred thousand rupees; or

(ii) for jewellery, exceeds five hundred thousand rupees;or

(iii) for any goods, other than those referred to in clauses (i) and (ii), or any service, exceeds two hundred thousand rupees

Provided that no tax shall be collected at source under this sub-section on any amount on which tax has been deducted by the payer under Chapter XVII-B

(1E) Nothing contained in sub-section (1D) in relation to sale of any goods (other than bullion or jewellery) or providing any service shall apply to such class of buyers who fulfil such conditions, as may be prescribed

Explanation.—For the purposes of this section-

(aa) buyer” with respect to—

(i) sub-section (1) means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include,—

(A) a public sector company, the Central Government, a State Government, and an embassy, a High Commission, legation, commission, consulate and the trade representation, of a foreign State and a club; or

(B) a buyer in the retail sale of such goods purchased by him for personal consumption;

(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section;

(c ) seller” means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) or sub-section (1D)] are sold or services referred to in sub-section (1D) are provided

Analysis

Persons who are required to collect TCS as “Seller” are:

a) Central Government,

b) a State Government or

c) any local authority or

d) corporation or authority established by or under a Central, State or Provincial Act, or

e) any company or

f) firm or

g) co-operative society and also includes

h) An individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year

Persons not covered:

a) Individual carrying on business whose turnover u/s 44AB(a) is less than or equal to One crore for immediately preceding financial year or

b) Individual carrying on profession whose turnover u/s 44AB(b)

i) For the purpose of Financial year 2016-17, whose gross receipts is less than or equal to 25 lacs for immediately preceding financial year 2015-16

ii) For Financial Year 2017-18 and onwards, whose gross receipts is less than or equal to 50 lacs for immediately preceding financial year 2016-17 and onwards

c) HUF carrying on business whose turnover u/s 44AB(a) is less than or equal to One crore for immediately preceding financial year or

d) HUF carrying on profession whose turnover u/s 44AB(b)

i) For the purpose of Financial year 2016-17, whose gross receipts is less than or equal to 25 lacs for immediately preceding financial year 2015-16

ii) For Financial Year 2017-18 and onwards, whose gross receipts is less than or equal to 50 lacs for immediately preceding financial year 2016-17 and onwards

e) AOP, whether incorporated or not

f) Body of Individuals, whether incorporated or not

g) Society registered under Societies registration Act. Wholly for charitable or religious purposes even if carrying on business which is incidental to the objects of the Society

h) Trust, not being section 25 company, Wholly for charitable or religious purposes even if carrying on business which is incidental to the objects of the trust

i) Association or Institution entitled to exemption u/s 10.

j) Club

Scope of Transactions Covered

As per S.206C(ID) TCS is applicable to Seller who receives any amount in cash as consideration for :

a) Sale of Goods or

b) Provision of Service

Issues Involved:

1. Whether TCS applicable to full Sale Consideration or Consideration received in cash for Sale of Goods or Provisions of Service

The Principal issue involved is whether TCS is to be collected on:

a) The amount of cash received only or

b) The full amount of sale consideration where any amount is received in cash as consideration for Sale

Opinion:

Finance Minister’s Budget Speech (para 149 of the Budget Speech)

149. I also propose to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs.ten lakh and purchase of goods and services in cash exceeding Rs.two lakh. For compliant tax payers with resources, this levy not only advances collection of tax when the expenditure is incurred, but it provides data to the tax authorities to identify the persons who incur such expenditure, but may be missing from the tax base. Farmers and notified class of persons will have an option of giving a form by which TCS will not be charged.

Memorandum Explaining the provisions of Finance Bill 2016

The existing provision of section 206C of the Act, inter alia, provides that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption, tendu leaves, scrap, mineral being coal or lignite or iron ore, bullion etc. in cash exceeding two lakh rupees.

In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to amend the aforesaid section to provide that the seller shall collect the tax at the rate of one per cent from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees and sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees.

It is also proposed to provide that the sub-section (1D) relating to TCS in relation to sale of any goods (other than bullion and jewellery) or services shall not apply to certain class of buyers who fulfil such conditions as may be prescribed.

This amendment will take effect from 1st June, 2016.

Section 206C(1D)

Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration

Hence

a) As per Memorandum explaining provision of Finance bill 2016, TCS @1% is applicable to sale in cash of any goods exceeding two lakh rupees.

b) However as per express provisions of S.206C (1D), TCS is collected @ 1% of Sale Consideration for receipt of any amount in cash as consideration for sale of goods.

So, there appears to be a contradiction with in the provisions of law and memorandum explaining provisions of finance bill. While as per Memorandum explaining finance bill and FM’s Speech, TCS is applicable only on cash sale of goods for sum exceeding Rs. 2 lacs, the express provisions provide that even if a paltry amount against sale exceeding Rs. 2 lacs is received in cash, the entire sale consideration to be brought under TCS net and not to be restrained to the amount of cash receipt.

2. Whether TCS is applicable to sale or provision of services made before 01-06-2015

The point of taxation for TCS on sale of goods or provision of service is “the time of receipt of such amount in cash” and not Sale of Goods

Hence ,If sale consideration amount is outstanding on 31-05-2016, and any amount is received there after in cash , the assessee is liable to pay tax on the amout recived after 31-05-2016 in respect of transactions executed before 31-05-2016. However, another incidental issue involved is :

a) Whether only the amount received in cash after 31-05-2016 out of outstanding balance on 31-05-2016 shall be exigible to TCS or

b) Whether the entire amount of consideration excluding the amount received before 01-06-2015 become exigible to TCS

Opinion

As per Section 206C(ID):

“Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery or providing any service, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax”

TCS to be collected on 1% of sale consideration and not amount in cash as consideration for sale of goods. Hence, TCS might apply on entire sum reducing the amount received before 01-06-2016.

3. Whether TCS is applicable where both sale of goods and provision of service is involved i.e. in the case of works contract

As per Section 206C(ID), TCS is applicable on sale of goods or provision of service. However, where both sale of goods and provision of service is involved, an issue arises that whether TCS provisions u/s 206C(ID) shall become applicable.

Opinion

As per Article 366(29A), transfer of property in goods in case of works contract is deemed as sale. Further as per Section 66E(b) and 66E(h), service portion is declared service in case of works contract. Hence TCS shall become applicable to works contract also. However the matter needs clarification by legislature.

4 Whether 1% TCS to be collected on the amount of Vat and Excise Duty Charged.

Opinion

The word sale consideration is not defined under Income Tax Law but as per Section 145A,
“…….the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “Profits and gains of business or profession” shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation ………..”

Hence TCS to be charged on full amount of sale consideration. Taxes, Duties, Cess or fee can not be segregated. The word “Sale Consideration” can not be equated with “Gross Turnover” u/s 44AB , where in refundable taxes are required to be excluded.

4. Whether TCS is applicable to amount of advance received in cash:

The Definition of buyer under Explanation to Section 206C, specifically includes “right to receive” for the purposes of 206C(1), however for 206C(1D), it is missing. So, when advance is paid by the buyer towards right to receive the goods, whether TCS provisions can be applied

Opinion:

The matter requires clarification. If such a version is adopted, the assesses might resort to the policy of receiving entire sum as advance in cash. There by defeating the purpose of introducing the provisions.

5. Whether TCS is applicable where payment is made through bearer cheque.

Opinion: Since TCS is applicable only to receipt of cash as consideration for sale, TCS provisions u/s 206C(1D) shall not apply where payment is received through bearer cheque

6. Whether TCS is applicable where goods are exchanged under Barter System [say Jewellery is exchanged for bullion]

Opinion: Since TCS is applicable only to receipt of cash as consideration for sale, TCS provisions u/s 206C(1D) shall not apply where payment is received through exchange of goods.

7. Whether TCS provisions under section 206C(1D) also cover the goods or services covered by other provisions.

As per Section 206C(1) for alcoholic liquor for human consumption, tendu leaves, timber, forest products, scrap, coal, lignite or iron ore,

and as per S.206C(1C), for parking lot, toll plaza and mining and quarrying, TCS is applicable at the time of debit of amount to the account of buyer or receipt of amount in cash or cheque or draft or any other mode, which ever is earlier.

At the same time 206C(1D) is applicable to receipt of any amount in cash as consideration for sale of goods or provision of service.

The issue that arises is that whether 206C(ID) can result in Duplication of levy in respect of goods or services covered by other provisions.

Opinion

One may follow the Latin Maxim Generalia Specialibus Non Derogant i.e. the provisions of a general statute must yield to those of a special one. But the matter should have been clarified by the legislature instead of leaving the taxpayer to the mercy of tax officials.

8. Whether TCS is applicable where buyer or seller or both are non residents

Opinion: Section 206C does not put any embargo upon transactions with non residents.

But in case of import of goods, where seller is non resident, the provisions of the Act can not be extended beyond India. Further, it the seller who is liable to collect tax and not the resident buyer.

In case of export of goods, where buyer is non resident, enforcing deposit of tax on behalf of buyer who has no income chargeable to tax in India can not be sustained in the Court of law, because TCS is tax collected and paid on behalf of buyer. Further as per Section 9, where operations of non resident are confined to procurement of goods in India, no Income can be deemed to have accrued or arisen in India.

9. Whether TCS is applicable to transactions between two residents where Sale of Goods is in Course of Import i.e. High Sea Sales.

Opinion

High Sea Sales take place before the goods cross the Custom Frontiers of India. Although the Income Tax Act does not extend beyond India and the word “India” is defined u/s 2(25A) as

India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters

However Section 206C(ID) does not place any embargo upon such transactions and hence shall be covered by TCS

Conclusion: Section 206C(ID) as introduced by Finance Act 2016 and to be implemented from 01-06-2016 requires clarification on number of issues discussed here in above. The better sense of wisdom demands that issues which can pest the large number of tax payers be resolved before launching the avalanche of enigma.
Source : taxguru.in

Services to become costlier from Jun 1, farmer cess notified

Eating out, mobile phone usage and air and rail travel will become expensive with the new Krishi Kalyan Cess (KKC) of 0.5 per cent on taxable services coming into force from June.

With imposition of Krishi Kalyan Cess the total incidence of Service Tax will go up to 15 per cent.

KCC to be levied on all taxable services is aimed at financing and promoting initiatives to improve agriculture.

The Central Board of Excise and Customs (CBEC) has notified that the Cess will come into force from June 1.

The service tax is levied on all services, expect a small negative list.

"The levy of KKC will add extra burden on the pockets of service recipient. The levy has already been raised from 12.36 per cent to 15 per cent within a span of one year only and will contribute to inflationary pressures," said Amit Maheshwari, Partner, Ashok Maheshwary & Associates.

Last year, the government had imposed Swachh Bharat Cess of 0.5 per cent on Service Tax.

HDFC Bank through SMS has already informed its cardholders about increased rate of Service Tax from June 1.

Prashant Deshpande, Senior Director, Deloitte in India said the input credit of KKC is not permitted to be used other than for payment output of KKC on taxable services.

"By implication therefore, Krishi Kalyan Cess will be a cost to the manufacturers availing services on which KKC is being paid by the service provider. Perhaps a remedy can lie in exempting Krishi Kalyan Cess on services provided to manufacturers," he said.

Maheshwari further said as per the amendments pertaining to Point of Taxation, this has been clarified that in cases where invoice had been issued prior to levy of this cess and payment is receivable either in full or part thereof as on date of levy then this cess will be leviable from the date of levy (June 1, 2016).

"Thus the Cess would be leviable on outstanding balances as on May 31, 2016. This may prove to be regressive for serviceproviders as it may not be possible to convince all the debtors particularly for the dues outstanding for relatively longer period and they may have to bear the cost for this extra levy," he said.
Source : Moneycontrol.com