Friday, July 31, 2015

Highlights of Key changes in new ITR Forms 3, 4, 5, 6 and 7

The new ITR Forms 1, 2 and 4S were notified for the Assessment Year 2015-16 vide Notification No. 41/2015, Dated 15-04-2015. However, in view of representations received from various stakeholders, the CBDT came out with simplified version of ITR forms 1, 2, 2A and 4S.
Now the CBDT has notified the remaining ITR forms, viz, ITR Forms 3, 4, 5, 6 and 7 vide Notification No. 61/2015. Key changes in ITR forms is highlighted below.
1)   Expenditure on CSR activities: Section 37(1) was amended by the Finance (No. 2) Act, 2014 to provide that any expenditure incurred by an assessee on the activities relating to corporate social responsibility (CSR) shall not be allowed as deduction as same could not be considered to be incurred for the purposes of the business or profession. Accordingly, ITR 6 has been revised to provide for reporting of expenditure on CSR activities if the same is debited to profit and loss account.
2)   Foreign portfolio investors/Foreign Institutional investors: Foreign Institutional Investor (FII) and Foreign Portfolio Investor (FPI) are required to furnish their SEBI registration number in the new ITR 5 and 6.
3)   Bank accounts held by assessee: In old return forms taxpayers are required to give details of only one bank account. Now in new return forms taxpayer are required to report details of all bank accounts except dormant accounts.
4)   Change in partners/members: A new column has been inserted in ITR-5 to require the assessee to furnish the details of change in the partners/members of the firm/AOP/BOI, as the case may be, during the previous year.

5)   Aadhaar Number and passport number: Aadhaar number and passport number are required to be given in new ITR 3 and 4 (if assessee has obtained the same). 

Thursday, July 23, 2015

CBDT releases Java Utility for e-filing Form 6 to declare black money

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘Black Money Act’) has been enforced from July 1, 2015.
The Black Money Act provides for 30% tax on the value of undisclosed foreign income or assets and a penalty of three times of tax so computed. It further provides for prosecution of up to 10 years in case of willful attempt to evade tax on foreign income or assets held outside India.
However, the Black Money Act allows one-time compliance window for the taxpayers to voluntarily disclose the undisclosed foreign income or assets. The declaration can made by September 30, 2015. Any person availing of benefit of compliance window is required to pay tax at the rate of 30% of value of undisclosed foreign income or asset and a penalty of 100% of tax. Such taxes and penalty are required to be paid by the declarant on or before December 31, 2015.
The Government has notified Form 6 to make declaration of undisclosed foreign income or asset under the compliance window. The taxpayer has an option to file the declaration either manually to CIT, Delhi or to e-file it using the digital signature.
Therefore, for the purposes of e-filing of Form 6, the Board has released the Java utility for the same. The taxpayer can now fill Form 6 by downloading the Java utility from e-filing website.

After filling the relevant information in Form 6 Java Utility, the taxpayer need to generate the .xml file and submit it under e-file option available after login at https://incometaxindiaefiling.gov.in. Declarant need to attach relevant scanned documents (i.e., scanned copy of valuation report or FMV computation) in PDF or ZIP format along with XML file. The size of PDF/ZIP documents could not exceed 50MB.

Monday, July 20, 2015

Age of 70 years isn’t an automatic mid-stream disqualification for Managing Director

Companies Act : Section 196(3) does not operate as an aberration in the appointment of any Director made prior to the coming into force of the 2013 Act, even in a case where the Managing Director crosses the age of 70 years during the term of his appointment; it also does not interrupt the appointment of a Managing Director appointed after 1st April 2014 where at the date of such appointment or re-appointment the Managing Director was below the age of 70 years but crossed that age during his tenure
Issue :
On 1st April 2014, the Companies Act, 2013 (“the 2013 Act”) was brought into force. It introduced a new clause in Section 196(3)(a) of the 2013 Act that apparently sets a lower and upper age limit of 21 years and 70 years Respectively, on the appointments and ‘continued employment’ of Managing Directors, Whole Time Directors and Managers.
The issue in the instant case was whether there would be a mid-stream disqualification for Managing Director on attaining age of 70 years? , i.e., Whether section 196(3)(a) interrupts an appointment of any Managing Director made prior to the coming into force of the 2013 Act, if such Managing Director crosses the age of 70 years during the term of his appointment?
The High Court held as under :
1) Under Companies Act, 1956, there was no ‘discontinuance’ of Managing Directorship at the age of 70; the section applied only to his appointment and reappointment. Sections 269(2) and 267 of the 1956 Act are now sought to be merged in Section 196(3), and also further modified (to eliminate the previous regime of Central Government’s approval). It shows that the age of 70 years was never an automatic mid-stream disqualification even under the 1956 Act. It only required a certain precautionary measure at the commencement of the term, i.e., at the time of appointment (or reappointment), i.e., a special resolution.
2) There is nothing to suggest that the rationale behind this has in any way changed in the 2013 Act. It cannot be constructed that with the advent of the 2013 Act, every Managing Director at age 70 must, as it were, step down the bus.
3) The only conclusion that one can draw is that the word ‘continue’ is correctly used in its strict sense in relation to clauses (b), (c) and (d) of Section 196(3), i.e., as a cessation eo instante on the occurrence of any of the events those sub-clauses contemplate, but in the context of Section 196(3)(a), it means, and can only mean ‘appointment’ and ‘reappointment’.
4) Section 196(3) does not operate as an aberration in the appointment of any Director made prior to the coming into force of the 2013 Act, even in a case where the Managing Director crosses the age of 70 years during the term of his appointment; it also does not interrupt the appointment of a Managing Director appointed after 1st April 2014 where at the date of such appointment or re-appointment the Managing Director was below the age of 70 years but crossed that age during his tenure.
5) There is no mid-tenure cessation of Managing Directorship as a result of Section 196(3)(a). All that Section 196(3)(a) does is to sound a note of caution in the public interest and to demand from the company a special resolution when a person who has already crossed the age of 70 at the date is proposed to be appointed or reappointed. - SRIDHAR SUNDARARAJAN V. ULTRAMARINE & PIGMENTS LTD. (2015) TAXMAN.COM 249 (BOMBAY)

Saturday, July 18, 2015

Amended Delhi VAT Act – An insight into

Delhi Value Added Tax Act, 2005 has been amended by Delhi Value Added Tax (2nd Amendment) Act, 2015. Now, Government of Delhi got powers to increase VAT upto 30% on petrol, liquor, aerated drinks etc.Following are the changes in DVAT Act effective from July 15, 2015:
Rates of Tax
Certain petroleum products, liquor, tabacco, gutkha, aerated drinks and some other items are mentioned in fourth Schedule of DVAT Act. Items mentioned in fourth Schedule are taxable at flat rate of 20%. Now VAT rate on such items can be increased to 30% as an upper cap of 30% has been prescribed for such items.
Post Sale Discounts
Earlier discounts or incentives offered by seller after issuance of invoice (through credit notes) was adjusted in output tax liability. As per the amended provision now such post sale discounts cannot be adjusted in output tax liability. Similarly, the purchaser need not reduce its input tax credit arising on account of such post sale discount. Further, seller-dealer is also debarred from issuing credit note to purchaser for such post-sale discounts.
Cancellation of Registration
Now dealers need not surrender their registration certificate while applying for cancellation of registration. Similarly, dealers whose registration are otherwise cancelled need not surrender their registration certificate. Further amendment also does away with requirement of levying penalty on dealers who failed to surrender their registration certificate. Provision which constitutes non-surrendering of registration certificate as an offence has also been omitted.
Refund
Earlier commissioner could demand security within 15 days from the date on which return was filed or refund claim was made. Now this time-limit has been enhanced to 45 days.
Penalties
Now penalties for certain defaults has been reduced, which is prescribed hereunder:
(1) Section 86(5) – for failure to file information under Section 21(1) for amendment in registration
Old Penalty – Rs. 500 per day subject to maximum penalty of Rs. 10,000
New Penalty – Rs. 200 per day subject to maximum penalty of Rs. 10,000
(2) Section 86(6) – Failure to apply cancellation of registration due to closure of business under Section 22(2)
Old Penalty – Rs. 1,000 per day subject to maximum penalty of Rs. 25,000
New Penalty – Rs. 200 per day subject to maximum penalty of Rs. 25,000
(3) Section 86(6) – for failure to surrender certificate of registration under Section 22(7)
Old Penalty - Rs. 1,000 per day subject to maximum penalty of Rs. 25,000
New Penalty – No penalty as this provision is now omitted
(4) Section 86(9) – for failure to file of returns and documents, etc.
Old Penalty – Rs. 500 per day subject to maximum of Rs. 50,000
New Penalty – Rs. 200 per day subject to maximum penalty of Rs. 50,000
(5) Section 86(16) – for failure to issue tax invoice under Section 50
Old Penalty – No Penalty
New Penalty – Higher of Rs. 5000 or 20% of tax deficiency

Thursday, July 16, 2015

Service provider can't ask revenue to recover taxes from service-recipient even if recipient agrees to pay Service Tax

Undoubtedly, service tax burden can be transferred by contractual arrangement to other party; but, on that account, assessee cannot ask revenue (except under reverse charge) to recover tax dues from a third party or to wait for discharge of liability by assessee till it has recovered amount from its customers (i.e., service recipients).
Facts :
1) The assessee, Delhi Transport Corporation (DTC), entered into contracts with agencies (contractors/advertisers) providing space to such parties for display of advertisements on bus-queue shelters and time-keeping booths.
2) The agreement provided that it shall be the responsibility of the contractor/advertiser to pay advertisement tax or any other taxes directly to the concerned authority in addition to the quoted license fee.
3) Assessee didn’t pay service tax to the department as it, by way of contract, casted responsibility on the contractor/advertiser to pay the same. However, service tax was also not paid by the contractor/advertiser.
4) The Department raised demand of service tax on assessee under 'Sale of Advertising Space or Time Services'.
The High Court held in favour of revenue as under :
a) Though assessee's services were taxable, but the service tax burden could have been transferred by way of a contract.
b) The ruling of Supreme Court in the case of Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran (2012) 35 STT 664/21 taxmann.com 20 cannot detract from the fact that in terms of the statutory provisions it is the assessee which is to discharge the liability towards the revenue on account of service tax. Undoubtedly, the service tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the revenue to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors.
c) Hence, demand was confirmed with interestas contractor/advertiser didn’t pay the service tax to the Department, though they were contractually liable to pay the same - (2015) 59 taxmann.com 51 (Delhi).

Thursday, July 9, 2015

RBI issues FAQs on Forex facilities and 'Liberalised Remittance Scheme' for residents

Are you planning to travel abroad and you are not sure how much foreign exchange can you buy when travelling on private visits to country outside India? You are not sure as how much foreign currency can be carried in cash for travelling abroad? You want to know how much Indian currency can be brought in while coming into India?  
Now RBI has released FAQs in respect of Forex facilities including Liberalized Remittance Scheme for general guidance and to answer these type of queries. Certain FAQs are highlighted as under:
Q.   How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?
For private visits abroad, other than to Nepal and Bhutan, any resident can obtain foreign exchange upto an aggregate amount of USD 2,50,000, from an Authorised Dealer or Full-Fledged Money Changers (FFMCs), in any one financial year, irrespective of the number of visits undertaken during the year.
This limit has been subsumed under the Liberalised Remittance Scheme w.e.f. May 26, 2015. If an individual has already remitted any amount under the Liberalised Remittance Scheme in a financial year, then the applicable limit for travelling purpose for such individual would be reduced from USD 250,000 by the amount so remitted.

Q.   How much foreign currency can be carried in cash for travel abroad?

Country of travel                                                           Limit of Forex

              i.        Travelers proceeding to Iraq and Libya           Upto USD 5000
             ii.        Travelers proceeding to Islamic republic         Upto USD 25000
            iii.        For Haj/Umrah pilgrimage                             USD 250, 000 or specified limit.
           iv.        Others                                                     Upto USD 3000 and balance in bank draft


Q. How much Indian currency can be brought in while coming into India?
Returning from                    Limit of Forex

              i.        Nepal/Bhutan                Upto USD 25,000 in Denomination not exceeding of Rs. 100

             ii.        Others                         Upto USD 25,000

            iii.        Pakistan/ Bangladesh     Upto USD 10,000 per person


  Q.   What is the Liberalised Remittance Scheme (LRS) of USD 2,50,000 ?
 Under the LRS, all resident individuals, including minors, are allowed to freely remit upto USD  2,50,000 in financial year for any permissible current or capital account transaction or a  combination of both.
 Further, resident individuals can avail of foreign exchange facility for the purposes mentioned in  Para 1 of Schedule III of FEM (CAT) Amendment Rules 2015, within the limit of USD 2,50,000  only. If an individual has remitted any amount under LRS in a financial year, then the applicable l  limit for such individual would be reduced from USD 250,000 by the amount so remitted. In case  of remitter being a minor, the LRS declaration form must be countersigned by the minor’s natural  guardian.


Wednesday, July 8, 2015

CBEC unveils procedure for maintenance of electronic records and their authentication by digital signature

The Hon’ble Finance Minister in his budget speech for 2015-16 announced that Central Excise and Service Tax assessees will be allowed to issue digitally signed invoices and to maintain electronic records. Requisite amendments were done in Central Excise Rules, 2002 and Service Tax Rules, 1994. Further, CBEC had been given power to specify conditions, safeguards and procedure to be followed by an assessee for using digitally signed invoices and for preserving digitally signed records.
Finally, CBEC has laid down the system for issue of invoices, preserving records in electronic form and authentication of records and invoices by digital signatures. The system is as follows:
1) Assessee who opts to maintain records in electronic form having more than one factory or service tax registration shall maintain separate electronic records for each factory or each service tax registration.
2) Assessee shall use Class 2 or Class 3 Digital Signature Certificate duly issued by the Certifying Authority in India.
3) Assessee proposing to use digital signature shall intimate following details to jurisdictional Deputy Commissioner/Assistant Commissioner (“authority”), at least fifteen days in advance:
a) name, e-mail id, office address and designation of the person authorised to use the digital signature certificate;
b) name of the Certifying Authority;
c) date of issue of digital certificate and validity of the digital signature with a copy of the certificate issued by the Certifying Authority along with the complete address of the said Authority
4) Assessee already using digital signature shall intimate to authority the above details within fifteen days of issue of this notification, i.e., July 21, 2015.
5) Any change in details shall also be intimated to authority within fifteen days of such change.
6) Assessee shall ensure that appropriate backup of records in electronic form is maintained and preserved for a period of 5 years immediately after the financial year to which such records pertain to.
7) On request by a Central Excise Office, assessee shall produce the specified records in electronic form and invoices through e-mail or on a specified storage device in an electronically readable format for verification of the authenticity of the document. The officer shall specify the request for such records and invoices in the letter or e-mail.
8) During enquiry/investigation/audit, a Central Excise Officer may direct an assessee to furnish printouts of the records in electronic form and invoices and may retain printouts of such records and invoices after verifying the correctness of the same in electronic format. The officer may also request assessee or his authorized representative to sign print outs of such records in electronic form –Notification No 18/2015-Central Excise (N.T.) Dated July 6, 2015.
CBEC also issued instructions to its officers explaining features of above system and laid down procedures for verification of digitally signed invoices and documents vide F. No. 224/44/2014-CX-6 Dated July 6, 2015.

Monday, July 6, 2015

Compliance window under Black Money Act – An insight into

The Hon’ble Finance Minister in his budget speech for 2015-16 had proposed introduction of Black Money Bill in the Parliament. The Bill was passed by the Parliament in its budget session. The Bill received the assent of the President on May 26, 2015 and it became the law. It is to be called as “The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015” (“the Black Money Act”). It has been clarified by the Government that such Black Money Act would be applicable from July 1, 2015.
The Black Money Act provides for 30% tax on the value of undisclosed foreign income or assets with a penalty equivalent to three times of tax so computed. It further provides for prosecution of up to 10 years in case of willful attempt to evade tax on foreign income or assets held outside India.
The Black Money Act provides for compliance window, i.e., one-time opportunity for taxpayers to voluntarily disclose the undisclosed foreign income or assets. Declaration under compliance window can be made during the period from July 1, 2015 to September 30, 2015.Any person who opts for this compliance window shall be liable to pay reduced penalty of 100% of tax and would also get immunity from prosecution. Such taxes and penalty are required to be paid by declarant on or before December 31, 2015.
However, a person will not be eligible to obtain benefit of compliance window if any information regarding undisclosed foreign asset or income has been received by Government on or before June 30, 2015. Thus, taxpayers on HSBC list might be denied benefit of compliance window.
Declaration shall be void and shall be deemed to have never been made if the declarant –
a) Fails to pay the entire amount of tax and penalty on or before December 31, 2015, or
b) Where the declaration has been made by misrepresentation or suppression of facts or information.
Where the declaration is held to be void for any of aforesaid reasons, then declarant would be liable to pay penalty three times of tax and will also be liable for prosecution.

Thursday, July 2, 2015

Cost of additions or improvements on habitable house is also eligible for sec. 54F relief

Where asset acquired by assessee is habitable, cost of any addition or improvements made on that asset would also be eligible for exemption under section 54F
Facts
a)  Assessee earned capital gain on sale of a residential house property. She invested the sale proceed to purchase a habitable house property and also spent some amount to make addition or improvement to said property. Accordingly, she claimed exemption under section 54F.
b)  The exemption so claimed by assessee was disallowed to the extent amount was spent towards making addition or improvement to habitable house property. The contention of the revenue was that no exemption under section 54F could be available in respect of the amount invested by way of improvement to a habitable house property.
c)  Aggrieved by the order of appellate authorities, assessee filed the instant appeal before the High Court
The High Court held in favour of assessee as under-
1)  As per section 54F, it is the ‘cost of the new asset’ which is to be taken into consideration while determining the capital gain exemption and not the "consideration for acquisition of the new asset".
2)  In law, it is permissible for an assessee to acquire a vacant site and carry out construction thereon; the cost of the new asset would be cost of land plus (+) cost of construction.
3)  On the same analogy, even though assessee purchased a new asset, which was habitable but required additions, alternations, modifications and improvements and if money was spent on those aspects, it would be included in the cost of the new asset.
4)  The approach of the authorities that once a habitable asset is acquired, any additions or improvements made on that habitable asset are not eligible for deduction, is contrary to the statutory provisions.

5)  Hence, amount spent towards making addition or improvement in habitable house property would also be eligible for Section 54F exemption- Mrs. Rahana Siraj v. CIT [2015] 58 taxmann.com 333 (Karnataka)