CBDT's circular on reopening of assessments due to retro law in Finance Act, 2012

0 comments Thursday, May 31, 2012

The Finance Minister had stated earlier that CBDT will issue a policy circular to clarify that in cases where assessment proceedings have become final before first day of April, 2012; such cases shall not be reopened.  

 Now CBDT has issued a letter confirming statement of Finance Minister. The Letter is as follows:

Letter [F.No.500/111/2009-FTD-1(Pt.)], dated 29-5-2012
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Service tax (settlement of cases) rules, 2012

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Service tax (settlement of cases) rules, 2012
NOTIFICATION NO. 16/2012-ST, DATED 29-5-2012
In exercise of the powers conferred by clause (j) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as “the Act”), read with sections 31, 32 and 32A to 32P of the Central Excise Act, 1944 (1 of 1944) made applicable to service tax vide section 83 of the Act, 1994, the Central Government hereby makes the following rules, namely:-
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Service Tax- Compounding of offences Rules, 2012

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NOTIFICATION NO. 17/2012-ST, dated 29-5-2012

In exercise of the powers conferred by clause (i) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994)(hereinafter referred to as “the Act”) read with sub-section (2) of section 9A of the Central Excise Act, 1944 (1 of 1944), made applicable to service tax vide section 83 of the Act, the Central Government hereby makes the following rules, namely :

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TDS credit mismatching limit restricted to Rs. 5000 from 1 lac for processing of returns of A.Y. 2011-12

0 comments Sunday, May 27, 2012
CBDT has revised its instructions relating to matching of TDS credit for processing of returns of A.Y. 2011-12. CBDT has withdrawn its earlier instruction No. 01/2012 issued on 2nd Feburary 2012.


Earlier in the withdrawn instruction it was instructed that TDS credit will be allowed if the mismatching in TDS doesnot exceed Rs. 1 lac. Now CBDT has revised this limit to Rs. 5000/- only.

Revised instructions are as follows:
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Section 40(a) not applicable to charitable trusts-no disallowance for non deduction of TDS

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Mumbai ITAT has held in Mahatma Gandhi Seva Mandir Versus Deputy Director of Income-tax (E) 1(2), Mumbai that provisions of section 40(a) are not applicable while computing income of charitable trusts u/s 11 of Income Tax Act, 1961.

In this case disallowance u/s 40(a)(ia) was made by AO while computing income of the assessee-a charitable trust on the ground that TDS was not deducted on the certain payments made by trust and it was violation of section 40(a)(ia).

However the Tribunal held as under:

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Stamp Papers have no expiry period-valid even after 6 months of purchase

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I have found the following judgement of Supreme Court on the issue of expiry period of stamp papers under Indian Stamp Act, 1899 as very useful one. In this case it has been held by Supreme Court that Stamp Papers do not have any expiry period under The Indian Stamp Act, hence it will be valid even after the purchase of 6  months.

Supreme Court in this case held as under:
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Persons carrying on agency business or earning commission income should revise their return for A.Y 2011-12, if original return filed u/s 44AD

0 comments Sunday, May 20, 2012
In the Finance Bill 2012 section 44AD has been amended retrospectively w.e.f A.Y. 2011-12 to the effect that presumptive scheme under the said section is not applicable to

persons carrying on profession as referred to in section 44AA(1) or

persons earning income in the nature of commission or brokerage income or 

 persons carrying on any agency business.
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Exemption u/s 54 available on exchange of an old flat with new one

0 comments Saturday, May 19, 2012
Mumbai ITAT has held in an important case namely Shri Jatinder Kumar Madan vs ITO that exemption u/s 54 will be available for exchange of an old flat with new one as it amounts to construction of a residential house u/s 54 eligible for exemption.

It is notable here that exchange of capital asset also amounts to transfer of capital asset u/s 2(47) of Income Tax Act and consequently capital gain arises out of it.
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Relief u/s 54EC available if investment made within 6 months of receipt of consideration instead of date of transfer

0 comments Wednesday, May 16, 2012
Pune ITAT in Mahesh Nemichandra Ganeshwade vs ITO taking a liberal view on section 54EC has held that investment u/s 54EC can be made within 6 months from the date of receipt of consideration if the same could not be made  within 6 months from the date of transfer of the capital asset.

ITAT relying upon the circular No. 791 dated 02.6.2000 of CBDT wherein CBDT has held in the context of capital gains arising u/s 45(2), that though the transfer arises in the year of conversion of a capital asset into stock-in-trade, the period of 6 months for investment u/s 54E has to be reckoned from the date of sale of the stock-in-trade, allowed the exemption u/s 54EC in such case.
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Constitutional provisions relating to taxation-How important to understand tax laws

0 comments Monday, May 14, 2012

Constitution is the foundation and source of powers to legislate all laws in India. Parliament, as well as State Legislatures gets the power to legislate various laws from the Constitution only and therefore every law has to be within the vires of the Constitution.

Talking about the taxation laws and the interpretation of taxation laws, every lawyer or a tax professional practicing taxation laws must understand the basic provisions of Constitution relating to taxation including the powers of Parliament and State Legislatures to legislate regarding levy and collection of tax, the restrictions imposed by our Constitution on such powers, entries concerning taxation in Central List i.e List-1 and State List i.e List-2 of Seventh Schedule to Constitution of India.
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Lump sum sales tax on brick klin owners on the basis of production capacity is unconstitutional

0 comments Tuesday, May 1, 2012

Punjab & Haryana High Court in M/s Balaji Bricks Industries & Another v State of Punjab [VSTI 2012 P&H B-238] has held that lump sum scheme for payment of sales tax on the basis of production capacity of Brick Klin owners is ultra vires of Article 246 read with Entry 54, List-II-State List of Seventh Schedule of Constitution.

The brick klin owners were being subjected to lump sum tax under section 5(4) of Punjab General sales tax Act, 1948. The grievence of the petitioners was that they(brick klin owners) cannot be subjected to a lump sum tax which is determined on the basis of the capacity of brick klin rather than actual sales.
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Punjab VAT Department launched special drive for surveying unregistered persons liable to be registered

2 comments Tuesday, April 24, 2012
Excise and Taxation Department, Punjab has launched a special drive for finding out the unregistered dealers by way of survey u/s 48 of Punjab VAT Act, 2005, who are eligible for registration under Punjab VAT Act but may not have registered as yet.


All the AETCs incharge of all the districts have been instructed to conduct systematic survey u/s 48 read with section 60 of Punjab VAT Act, 2005 to find out such unregistered persons.


The copy of Public notice is being produced herebelow:
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Transfer of Right to use goods-deemed sale or a service

8 comments Sunday, April 15, 2012


Transfer of Right to use goods for cash, deferred payment or valuable consideration is considered as deemed sales under sub-clause (d) of Article 366(29A) of Constitution of India and also consequently under Punjab VAT Act and CST Act liable to VAT and CST respectively.

 Right to use of tangible goods service has also been brought under service tax net by the Finance Act, 2008, w.e.f 16-05-2008 vide notification No. 18/2008-ST, dated 10-05-2008.whereby taxable service has been defined u/s 65(105)(zzzzj) of Finance Act, 1994  to mean as

“any services provided or to be provided, to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances”.
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Section 40(a)(ia) applicable to expenses payable at the end of year and not to expenses paid during the year

0 comments Thursday, April 12, 2012

Vishakhapatnam Tribunal has held in the following case that disallowance u/s 40(a)(ia) due to non deduction of TDS is applicable to the expenses payable only and not to the expenses already paid in the previous year.

The object behind section 40(a)(ia) which I understand is to disallow those expenses which are expanded without deduction of requisite TDS, however the Tribunal has interpreted the word “payable” in section 40(a)(ia) strictly and consequently has held that said section doesnot apply to the expenses already paid. 
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Limit u/s 54EC can exceed Rs. 50 lakh if investment spreads over two financial years-ITAT Ahmedabad

0 comments Thursday, April 5, 2012
ITAT Ahmedabad has held in the follwing case that exemption u/s 54EC although is limited to Rs. 50 Lakh in one financial year but such exemptiuon can exceed Rs. 50 lakh if inbvestment is spread over two financial years. It has also been held that if the delay in investment of bonds is due to the fact that bonds were not available then such delay can be condoned and exemption will be allowed.

It is notable here that  recently Jaipur ITAT  in Assistant Commissioner of Income-tax, Circle-2, Ajmer v. Shri Raj Kumar Jain & Sons (HUF) [2012] 19 taxmann.com 27 (Jaipur - Trib.) held that as per section 54EC investment within 6 months is investment for that particular financial year in which transfer has taken place and said period of six months would not include some part of subsequent financial year. 
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Applying correct rate of depericiation is not a fresh claim, can be allowed by ractification letter

0 comments Sunday, April 1, 2012

Chennai ITAT has held in an following case namely ITO vs. Sri Balalji Sago and Starch Products that rate of depericiation if wrongly applied in the return of income and assessment proceedings the same can be ractified by filing letter for ractification of mistake, since applying incorrect rate of depericiation is an error apperant on record and there is no need to file revised return for it.

It is further held that judgement of Supreme Court in Goetze (India) Ltd. v. CIT 284 ITR 323 to the effect that no fresh claim can be made except by filing revised return is not appliocable to the facts of this case as the assessee while asking for applying correct rate of depericiation, is not making any fresh claim so as to file revise return.
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Individuals and HUFs having foreign assets cannot file Sehaj and Sugam forms, efiling for income exceeding 10 lakhs also made mandatory

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Rule 12 of Income Tax Rules have been amended so as to provide that a resident individual and HUFs having any asset (including financial interest in any entity) located outside India; or a signing authority in any account located outside India shall not be be eligible to file return of income in ITR-1(Sehaj form) and ITR-4 (Sugam Form).

Efiling of returns from A.Y. 2012-13 by  individuals and HUFs having income exceeding Rs. 10 lakh and the individuals and HUFs having any asset (including financial interest in any entity) located outside India; or a signing authority in any account located outside India and required to furnish the return in Form ITR-2 or ITR-3 or ITR-4, has also been made mandatory.
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Order passed against payer under section 195, read with section 201(1)/(1A), would be invalid, if no action against payee is taken and time limit u/s 148 also expired

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Mumbai ITAT has held in a case namely Crompton Creaves Ltd. vs DCIT that Where revenue had not taken any action against payees for non-deduction of tax at source and time-limit for taking action against them under section 148 had also expired, order passed against payer under section 195, read with section 201(1)/(1A), would be invalid.
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Lump sum scheme for payment of service tax in works contract introduced

0 comments Tuesday, March 20, 2012
In works contract service lump sum scheme for payment of service tax in a works contract has been introduced by amendment in Rule 2A of the  Service Tax (Determination of Value) Rules, 2006 vide Notification No. 11/2012 - Service Tax dated 17-03-2012. In works contract service there were two types of schemes which were earlier available i.e payment of service tax on actual service involved and the composite scheme.

In the composite scheme service tax @ 4.8% is required to be paid on the total value of the whole contract including material part, while in the other case service tax is required to be paid on the actual value of labour and services incorporated in works contract(which can be possible where proper books of accounts are being maintained).
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Rate of tax in composite scheme under works contract service enhanced to 4.8%

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Rate of tax in composite scheme in Works contract service has been changed w.e.f 01-04-2012. The earlier rate of tax in the composite scheme was 4% which now has been enhanced to 4.8%.

Rule 3 of  the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, has been suitably amended whereby  for the words ―four per cent, the figures and words ―4.8 per cent has been substituted.
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