IT: Solutions: Wrong status of assessee in PAN : HOW TO FILE RETURN?: TAR MUST BE FILED TO AVOID PENALTY

1) File form 49 and get new PAN

2) Surrender old PAN

by filling form 49 amendments:

FAQ ON PAN SURRENDER DOWNLOADED FROM WWW.TIN-NSDL.COM

QUERY:

I have been allotted more than one PAN, what is the procedure for cancellation of other PAN(s)?

ANSWER: In form 49 amendment form, You have to mention the PAN which you are using currently on top of the application form. All other PAN/s inadvertently allotted to you should be mentioned at item no. 11 and the corresponding PAN card(s) should be submitted for cancellation along with the form.

3) KINDLY NOTE THAT EVEN NEW PAN IS NOT RECEIVED WITHIN TIME, TAX AUDIT REPORT MUST BE UPLOADED AND APPROVED TO AVOID PENALTY, EVEN USING PAN SHOWING WRONG STATUS.

 

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Service Tax on Plot of Land

Query: A land owner wants to give a plot of land on rent for using other than residential purpose (like Kolkata Port Trust). Is it a taxable service under current scenario of Service Tax.

 

Answer:

In this regard, kindly note that ‘renting’ has been defined u/s 65B(41) as :

“renting” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;

I would also like to bring into your kind notice that the term ‘immovable property’ has not been defined in the Finance Act, 1994. As per Section 3(26) of General Clauses Act, ‘immovable property’ shall include land, benefit to arise out of land and things attached to the earth, or permanently fastened to anything attached to earth.

Further, Clause (a) of Section 66E, declares renting of immovable property as a taxable service.

Hence, in view of the above provisions, renting of land would be a taxable service and service tax would be applicable on the same.

Now, we need to look into Negative List and Mega Exemption Notification to see if our service is excluded from the levy or exempted from service tax, as the case may be.

In this regard, kindly note that renting of “residential dwelling” for “use as residence” has been specifically excluded from the levy of service tax and has been kept under the Negative List as per Section 66D (m) of the Finance Act, 1994.

Further, as per Clause (d) under Negative List,  renting and leasing of agro machinery or vacant land with or without the structure when used for agriculture purpose has been specifically excluded.

Renting of certain immovable property has also been exempted by Mega Exemption Notification 25/2012 dated 30-06-2012 such as –

a)      Renting of precincts of religious place meant for general public;

b)     Service of renting of immovable property to an educational  institution;

In view of the aforesaid, service tax may be applicable on our service.

 

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How to Claim Deduction for Payment made to relatives as Business Expenditure under section 40A (2) of Income Tax Act

Any reasonable payment made to the relatives during the normal business circumstances /conditions is allowed as deduction under the income tax act. Section 40A of the Income tax Act deals with dis allowance of excessive payment to relatives. “The Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him there from, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction”.

Condition for Claiming Deduction

1. Payment is made
2. To specified persons
3. Not an Excess/unreasonable payment
4. Payment of should be made through account payee cheque to avoid any problem from Assessing officer.

   According to this section if any payment made to a specified person then we have to check that payment is reasonable. In case where payment is in excess then such excess amount will be disallowed.

   Meaning of Specified Persons
   

5. Nature of assessee- individual, HUF , company
6. Specified persons for him

• His relatives- spouse, brother-sister, ascendant, descendent, members of HUF and their relatives, director/their relatives
• An entity in which he/ his relative has substantial interest (i.e. profit share/ voting power >= 20%)
• If a company has substantial interest in the business of individual then such co., its directors, and relative of such directors are Specified persons
• If a firm/ HUF has substantial interest in the business of individual then such firm/ HUF, partners/ members of it and relatives of partners/ members
• If an AOP/BOI has substantial interest in the business of individual then such AOP/BOI, it’s all members and relatives of members
• If an individual has substantial interest in the business of individual then such individual, his relatives and all the companies in which such individual is a director and other directors of that companies and relatives of other directors
• All the firm/HUF/AOP/BOI in which such individual is partner/ member as well as other partners/ members and their relatives are also specified.

  Reference: Section 40A of the Income Tax Act 1961: Expenses or payments not deductible in certain circumstances.

  40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head “Profits and gains of business or profession”.

  (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.

  The following proviso shall be inserted in sub-section (2)(a) of section 40A by the Finance Act, 2012, w.e.f. 1-4-2013 :

  Provided that no dis allowance  on account of any expenditure being excessive or unreasonable having regard to the fair market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if such transaction is at arm’s length price as defined in clause (ii) of section 92F.

  (b) The persons referred to in clause (a) are the following, namely:—

1. where the assessee is an  individual: any relative of the assessee
2. where the assessee is a company, firm, association of persons or Hindu un-divided family : any director of the company, partner of the firm, or member of the association or family, or any relative of  such director, partner or member;
3. any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual;
4. a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member or any other company carrying on business or profession in which the first mentioned company has substantial interest];
5. a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member;
6. any person who carries on a business or profession,—

   (A)  where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or

   (B)  where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person.

   Explanation.—For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a business or profession, if,—

   (a)  in a case where the business or profession is carried on by a company, such person is, at any time during the previous year, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power; and

   (b)  in any other case, such person is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the profits of such business or profession.

   (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.

   (3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:

   Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :]

   Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words “twenty thousand rupees”, the words “thirty-five thousand rupees” had been substituted.]

   (4) Notwithstanding anything contained in any other law for the time being in force or in any contract, where any payment in respect of any expenditure has to be made by an account payee cheque drawn on a bank or account payee bank draft] in order that such expenditure may not be disallowed as a deduction under sub-section (3), then the payment may be made by such cheque or draft; and where the payment is so made or tendered, no person shall be allowed to raise, in any suit or other proceeding, a plea based on the ground that the payment was not made or tendered in cash or in any other manner.

   (7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason.

   (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year.

   Explanation.—For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.]

   (9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) or clause (iva) or clause (v) of sub-section (1) of section 36, or as required by or under any other law for the time being in force.

   (10) Notwithstanding anything contained in sub-section (9), where the Assessing Officer is satisfied that the fund, trust, company, association of persons, body of individuals, society or other institution referred to in that sub-section has, before the 1st day of March, 1984, bona fide laid out or expended any expenditure (not being in the nature of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee referred to in sub-section (9) out of the sum referred to in that sub-section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other provisions of this Act, be deducted in computing the income referred to in section 28 of the assessee of the previous year in which such expenditure is so laid out or expended, as if such expenditure had been laid out or expended by the assessee.]

   (11) Where the assessee has, before the 1st day of March, 1984, paid any sum to any fund, trust, company, association of persons, body of individuals, society or other institution referred to in sub-section (9), then, notwithstanding anything contained in any other law or in any instrument, he shall be entitled—

   (i)  to claim that so much of the amount paid by him as has not been laid out or expended by such fund, trust, company, association of persons, body of individuals, society or other institution (such amount being hereinafter referred to as the unutilized amount) be repaid to him, and where any claim is so made, the unutilized amount shall be repaid, as soon as may be, to him;

   (ii) to claim that any asset, being land, building, machinery, plant or furniture acquired or constructed by the fund, trust, company, association of persons, body of individuals, society or other institution out of the sum paid by the assessee, be transferred to him, and where any claim is so made, such asset shall be transferred, as soon as may be, to him.]

 

How to Claim Deduction for Interest Expenses from Business Income under Section 36(1)(iii)

As per section 36 (1) (iii), Interest is allowable only when loan is taken for the purpose of business/profession i.e. interest on personal loan is disallowed but interest on working capital loan, factory construction, to pay dividend, sales tax, excise, etc allowable because related to business.

Treatment if loan is taken to acquire capital asset of business

1. Interest upto put to use of capital asset: Add in block with cost of asset and claim depreciation
2. Interest of the period after put to use of capital asset: It is of revenue nature so deductable from net profit

   Reference: Section 36 of The Income Tax Act: Other deductions
   

   (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—

   (i)  The amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores used for the purposes of the business or profession;

   (ia)  the amount of any premium paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society;]

   (ib)  the amount of any premium [paid by any mode of payment other than cash] by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme framed in this behalf by—

   (A)  the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government; or

   (B)  any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]

   (ii)  Any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;

   (iia) [Omitted by the Finance Act, 1999, w.e.f. 1-4-2000.]

   (iii)  the amount of the interest paid in respect of capital
   borrowed for the purposes of the business or profession:

   [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.]

   Explanation.—Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfill such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;

   (iiia)  the pro rata amount of discount on a zero coupon bond having regard to the period of life of such bond calculated in the manner as may be prescribed.

   Explanation.—For the purposes of this clause, the expressions—

   (i)  “discount” means the difference between the amount received or receivable by the infrastructure capital company or infrastructure capital fund or public sector company [or scheduled bank] issuing the bond and the amount payable by such company or fund or public sector company[or scheduled bank] on maturity or redemption of such bond;

   (ii)  “period of life of the bond” means the period commencing from the date of issue of the bond and ending on the date of the maturity or redemption of such bond;

   (iv)  any sum paid by the assessee as an employer by way of contribution towards a recognized provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognizing the provident fund or approving the super-Annuation fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head “Salaries” or to the contributions or to the number of members of the fund;

   [(iva)
   any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed ten per cent of the salary of the employee in the previous year.

   Explanation.—for the purposes of this clause, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites;]

   (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust;

   [(va)  any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee’s account in the relevant fund or funds on or before the due date.

   Explanation.—For the purposes of this clause, “due date” means the date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise;]

   (vi)  in respect of animals which have been used for the purposes of the business or profession otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals;

   (vii)  subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]:

   [Provided that in the case of [an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause.]

   [Explanation.—For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee;]

   [(viia) in respect of any provision for bad and doubtful debts made by—

   (a)  a scheduled bank [not being] a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank [or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner :

   [Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year:]

   [Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words “five per cent”, the words “ten per cent” had been substituted :]

   [Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government:

   Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head “Profits and gains of business or profession.”]

   [Explanation.—For the purposes of this sub-clause, “relevant assessment years” means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;]

   (b)  a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);]

   [(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A):]

   [Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year.]

   Explanation.—For the purposes of this clause,—

   [(i)  “non-scheduled bank” means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank;]

   [(ia)]  “rural branch” means a branch of a scheduled bank [or a non-scheduled bank] situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

   [(ii)  “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934)

   [(iii)”public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

   (iv)  “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);

   (v)”State industrial investment corporation” means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and [eligible for deduction under clause (viii) of this sub-section];]

   [(vi)”co-operative bank”, “primary agricultural credit society” and “primary co-operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;]

   [(viii)  in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head “Profits and gains of business or profession” (before making any deduction under this clause) carried to such reserve account:

   Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess.

   Explanation.—In this clause,—

   (a)  “specified entity” means,—

   (i)  a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956);

   (ii)  a financial corporation which is a public sector company;

   (iii)  a banking company;

   (iv)  a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank;

   (v)  a housing finance company; and

   (vi)  any other financial corporation including a public company;

   (b)  “eligible business” means,—

   [(i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for—

   (A)  industrial or agricultural development;

   (B)  development of infrastructure facility in India; or

   (C) development of housing in India;]

   (ii)  in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and

   (iii)  in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India;

   (c)  “banking company” means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;

   (d)  “co-operative bank”, “primary agricultural credit society” and “primary co-operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;

   (e)  “housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes;

   (f) “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);

   (g)  “infrastructure facility” means—

   (i)  an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions as may be prescribed;

   (ii)  an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and

   (iii)  an undertaking referred to in sub-section (10) of section 80-IB;

   (h)  “long-term finance” means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;]

    

   [(ix) any expenditure bona fide incurred by a company for the purpose of promoting family planning amongst its employees:

   Provided that where such expenditure or any part thereof is of a capital nature, one-fifth of such expenditure shall be deducted for the previous year in which it was incurred; and the balance thereof shall be deducted in equal installments for each of the four immediately succeeding previous years:

   Provided further that the provisions of sub-section (2) of section 32 and of sub-section (2) of section 72 shall apply in relation to deductions allowable under this clause as they apply in relation to deductions allowable in respect of depreciation:

   Provided further that the provisions of clauses (ii), (iii), (iv) and (v) of sub-section (2) [and sub-section (5)] of section 35, of sub-section (3) of section 41 and of Explanation 1 to clause (1) of section 43 shall, so far as may be, apply in relation to an asset representing expenditure of a capital nature for the purposes of promoting family planning as they apply in relation to an asset representing expenditure of a capital nature on scientific research;]

    

   [(x)  any expenditure incurred by the assessee, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the assessee and used for the purposes of his business or profession, so as to make such computer system Y2K compliant computer system :

   Provided that no such deduction shall be allowed in respect of such expenditure under any other provisions of this Act:

   Provided further that no such deduction shall be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.

   Explanation.—For the purposes of this clause,—

   (a)  “computer system” means a device or collection of devices including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, or more of which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to, logic, arithmetic, data storage and retrieval, communication and control;

   (b)  “Y2K compliant computer system” means a computer system capable of correctly processing, providing or receiving data relating to date within and between the twentieth and twenty-first century;]

   [(xii)   any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, if,—

   (a)  it is constituted or established by a Central, State or Provincial Act;

   (b)  such corporation or body corporate, having regard to the objects and purposes of the Act referred to in sub-clause (a), is notified by the Central Government in the Official Gazette for the purposes of this clause; and

   (c) the expenditure is incurred for the objects and purposes authorised by the Act under which it is constituted or established;]

   [(xiii) any amount of banking cash transaction tax paid by the assessee during the previous year on the taxable banking transactions entered into by him.

   Explanation.—For the purposes of this clause, the expressions “banking cash transaction tax” and “taxable banking transaction” shall have the same meanings respectively assigned to them under Chapter VII of the Finance Act, 2005;]

   [(xiv) any sum paid by a public financial institution by way of contribution to such credit guarantee fund trust for small industries as the Central Government may, by notification in the Official Gazette, specify in this behalf.

   Explanation.—For the purposes of this clause, “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);]

   [(xv)  an amount equal to the securities transaction tax paid by the assessee in respect of the taxable securities transactions entered into in the course of his business during the previous year, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and gains of business or profession”.

   Explanation.—For the purposes of this clause, the expressions “securities transaction tax” and “taxable securities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004).

    

   (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply—

   [(i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;]

   (ii)  if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made;

   (iii)  any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the [Assessing] Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year;

   (iv)  where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)] and the [Assessing] Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply;

   [(v)  where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.]

 

REPLIES TO QUERIES ON INCOME TAX

QUERY: This is with respect to the tax audit report which has to be filed online. We are facing the following problems:

1. Against point no. 25, the order number & date is being asked for, in order to carry forward the losses. What should be done if we have not yet received the order from the department.

2. Against the point where the quantitative details of stock traded has to be provided, concerns have a huge volume of stock which can exceed 200 in number of items traded. Is it mandatory to fill in the names item-wise or is there any other alternative.

3. Further, when we are filling in the form and saving it as XML file & then reopening it later for filing/editing, some data is not being saved. This is creating problem as it is very cumbersome to fill in the data time & again.

Pointwise reply to your query is :

 1. If you are not having order no or date, there is no problem and u can leave the column blank and in remarks column write that order is pending/ appeal pending as the case may be.

2. You are required to give details of ‘Principle Items traded” 

3. Yes it is true that at each reopening, validation error will show for certain yes and no points. But if you upload the xml so generated without reopening the same, there will be no problem.  

 

REPLIES TO QUERIES ON INCOME TAX

QUERY:  First of all I would like to extend my heartiest commendations to you for you inexorable service to this our profession. The work that you have done is more like a revolution. In my thirty five long years of practice I have not come across a single colleague who devotes so time for the betterment of this profession, that too so very selflessly.

However, let me now state my little problem: I have been training my staff regarding the e-filing of Tax Audit report when while filling up the form; that is, the latest one CR_7, I found out that once I have filled it up completely and generated xml, every data that I entered is showing perfectly in the xml copy but once I import it into the utility half of the data vanishes. All the ‘yes’, ‘no’ choices that I had made, gone, vanished, however showing perfectly in the xml file when I am opening it in any internet browser!!! Big surprise, have got no clue as to its panacea though.

The next thing I would like to ask is that how do one get a print out of the filled up Forms from the utility? I mean,as you know, the clients always create a lot of fuss about having a hard-copy of stuffs that we work upon.

I will really appreciate if you can help me out a bit here.

REPLY:

With regard to your queries, I would just like to state that :

Query 1.- It is correct that in the utility provided by the Department, even after creating the .xml file if you again reopen the same and thereafter validate , It will show that certain points ‘Yes’ or ‘No’ is required to be selected. There is no problem in it. If you upload the xml file after generating the same without reopening further, it will be OK.

Query 2.: Regarding Print out, once you upload the xml, the same is being visible at the client’s worklist, whereby he can view the same in pdf format and then approve the same. There he can take the print out from the pdf version.

 

REPLIES TO QUERIES ON INCOME TAX

QUERY: Please let us know ITR forms to be used for filing of Return of Private Trust where shares of beneficiaries are specific and all the beneficiaries are having taxable income ( applicable tax slab 20%).

REPLY: ITR 5 as AOP and the applicate rate of tax for the trust would be MMR (i,e. 30%)

What is Considered as Personal Effects and Jewellery under Income Tax for Capital Gain Tax

Personal effects, means movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes—

(a)  jewelry;

(b)  archaeological collections;

(c)  drawings;

(d)  paintings;

(e)  sculptures; or

(f)  any work of art.

 

Jewellery includes:

1. Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one more of such precious ,metals, whether or not containing or semi precious stone, and whether or not worked or sewn into any wearing apparel;
2. Precious or semi precious stone, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel.

    

Reference: Section 2(14)(ii) of the Income Tax Act

(ii)  personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes—

(a)  jewellery;

(b)  archaeological collections;

(c)  drawings;

(d)  paintings;

(e)  sculptures; or

(f)  any work of art.

Explanation.—For the purposes of this sub-clause, “jewellery” includes—

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;

(b)  precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

 

Service Tax on restaurant having the facility of airconditioning or central air and Theater

Service Tax is applicable on  Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any time during the year.

Service Tax is applicable on Services provided by way of temporary transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works of cinematography films for exhibition in a cinema hall or cinema theater

Service Tax Notification No.3 /2013

G.S.R….(E)- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied  that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of  Finance (Department of Revenue), No.25/2012-Service Tax, dated the 20th June,  2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide G.S.R. 467 (E), dated the 20th June, 2012, namely:-
In the said notification,-
1. in the opening paragraph,-
(i) in entry 9, for the words “ provided to or by”, the words “provided to ” shall be substituted;
(ii) for entry 15, the following entry shall be substituted, namely:-
“15. Services provided by way of temporary transfer or permitting the use or
enjoyment of a copyright,-
(a) covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical or artistic works; or
(b) of cinematograph films for exhibition in a cinema hall or cinema theatre;”;
(iii) for entry 19, the following entry shall be substituted, namely:-
“19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of airconditioning or central air-heating in any part of the establishment, at any time during the year;”;
(iv) in entry 2o, items (a),(d) and (e) shall be omitted;
(v) for entry 21, the following entry shall be substituted, namely:-“21. Services provided by a goods transport agency, by way of transport in a goods carriage of,-
(a) agricultural produce;
(b) goods, where gross amount charged for the transportation of  goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;
(c) goods, where gross amount charged for transportation of all  such goods for a single consignee does not exceed rupees seven hundred fifty;
(d) foodstuff including flours, tea, coffee, jaggery, sugar, milk products,  salt and edible oil, excluding alcoholic beverages;
(e) chemical fertilizer and oilcakes;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or
(h) defence or military equipments;”;
(vi) entry 24, shall be omitted;
(vii) in entry 25, in item (b), for the words, “a vessel or an aircraft”, the words “a
vessel” shall be substituted;
2. In paragraph 2 relating to Definitions, in clause (k),-
(a) in sub-clause (iv), the word “or” shall be omitted;
(b) sub-clause (v), shall be omitted; .
3. This notification shall come in to force on the 1st day of April, 2013.

Cost of Inflation Index for FY 2013-2014 .i.e AY 2014-15

Cost of Inflation Index for FY 2013-2014 .i.e AY 2014-15 for calculating capital gain is 939. Each Central Board of Direct taxes announces cost of Inflation index for the purpose of calculating inflation adjusted cost of asset for calculating capital gain tax on sale of capital assets.For Financial Year 2013-14 COI Index was declared through income tax Notification No.40/2013/F.No.142/7/2013-TPL. 

GOVERNMENT OF INDIA

MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXES
NOTIFICATION
INCOME-TAX
New Delhi, the 6th day of June, 2013

Notification No.40/2013/F.No.142/7/2013-TPL

S.O. 1464(E) – In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), Central Board of Direct Taxes published in the Gazette of India, Extraordinary, vide number S.O. 709(E), dated the 20th August, 1998, namely:-
2. In the said notification, in the Table, after serial number 32 and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

Sl. No.	Financial Year	Cost Inflation Index
(1)	(2)	(3)
“33	2013-14	939”