AMIT BAJAJ ADVOCATE

Circular No. 164/15/2012-ST,   New Delhi, 28^th August, 2012

            Clarification has been sought in respect of levy of service tax on certain vocational education/training/ skill development courses (VEC) offered by the Government (Central Government or State Government) or local authority themselves or by an entity independently established by the Government under the law, as a society or any other similar body.

Briefly the facts are during the relevant previous year, the assessee has sold 1,10,000 shares for a consideration of Rs.96,36,519. Out of sale consideration of shares, the assessee invested a sum of Rs.55,68,662/- for purchasing a flat in the name of his minor daughter. The assessee claimed the amount invested in purchase of flat as a deduction u/s 54F (1) of the Act. The AO disallowed the deduction claimed on the ground that the flat was not purchased by the assessee in his own name. The AO relying upon different High Courts’ decisions and also a decision of ITAT, Nagpur Bench in case of ITO vs. Prakash Timaji Dhanjode 258 ITR (AT) 0114 held that the assessee is not entitled for deduction u/s 54F(i). Assessee being aggrieved by the assessmentorder filed an appeal before the CIT (A). Since the AR of the assessee or no one appeared before the CIT (A) on the last date fixed on 28-11-2011 the appeal was decided by the CIT (A) on the basis of statement of facts and grounds of appeal filed before him. The CIT (A) upheld the reasoning of the AO that since the property was purchased in the name of the assessee’s doughter and not in the name of the assessee himself, no deduction u/s 54F can be allowed.

Calcutta High court in Serajudding & Brothers vs CIT has held that Even if the income from other sources is included in the profit and loss accounts to ascertain the net profit in relation to book-profit for computation of the remuneration of the partners u/s 40(b)(v) the same cannot be discarded.

It means that book profits for the purpose of calculating remuneration of partners in a partnership firm u/s 40(b)(v) will include income from other sources as well if the same has been included in the Profit & Loss Account. In such case not the profits computed under the head Business alone to be considered as Book Profits for the purpose of section 40(b)(v) but other income included in P&L A/c has also to be considered as part of Book Profits for the purpose of section 40(b)(v).

The Punjab government, which is expecting to mop up Rs 500 crore by imposing a tax on the self-employed and salaried professionals, is looking up to Bihar to finalise the modalities. Bihar, governed by Nitish Kumar-led JDU-BJP combine imposed the professional tax in September last year and fund-starved SAD-BJP government in Punjab, led by Parkash Singh Badal, has decided to follow suit.

Punjab will be the tenth state to tax the professionals and, following the Bihar model, will be charging Rs 1,000 to Rs 2,500 depending on the salary of the employed. The slab, incidentally is one of the highest in comparison to the tax imposed in other states.