DEPARTMENT ISSUING NOTICE TO CHARITABLE TRUST IF THEY COLLECTING ANY FESS , CESS OR OTHER CONSIDERATION FOR SERVICES RENDERED

Recently, many industry organisations in the country have received notices from the Income-tax department asking them to pay advance tax because the amendment to Section 2(15) in the last Budget made them ineligible for the exemption meant for entities working for “charitable purpose.” As per the new definition of charitable purpose in Finance Act 2008, advancement of any object of public utility, which was earlier considered to be “charitable purpose,” is now not so if it involves the “carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration...”

The industry bodies are however contesting the notices citing the remarks made by finance minister P Chidambaram while replying to the debate on Finance Bill 2008 in parliament. He assured the House that “genuine charitable organisations will not in any way be affected” by the
amendment and that the CBDT would issue an explanatory circular containing guideline for determining whether an entity is a genuine charitable organisation. He had further said, “Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, chambers of commerce and similar organisations rendering services to their members would not be affected by the amendment...“ However, the CBDT has since not issued any explanatory circular to clarify the matter. And the chambers and industry bodies who received notices from the I-T department are a worried lot.

TAX STRUCTURE IN INDIA

1) Qus. : What are you doing?
Ans.: Business.
Tax: PAY PROFESSIONAL TAX!

2) Qus. : What are you doing in Business?
Ans.: Selling the Goods.
Tax: PAY SALES TAX!!

3) Qus. : From where are you getting Goods?
Ans.: From other State/Abroad
Tax: PAY CENTRAL SALES TAX, CUSTOM DUTY OCTROI!

4) Qus. : What are you getting in Selling Goods?
Ans.: Profit.
Tax: PAY INCOME TAX!

5) Qus. : Where you Manufacturing the Goods?
Ans.: Factory.
Tax: PAY EXCISE DUTY!

6) Qus. : Do you have Office / Warehouse/ Factory?
Ans.: Yes
Tax: PAY MUNICIPAL FIRE TAX!

7) Qus. : Do you have Staff?
Ans.: Yes
Tax: PAY STAFF PROFESSIONAL TAX!

8) Qus. : Doing business in Millions?
Ans.: Yes
Tax: PAY TURNOVER TAX!

9) Qus. : Are you taking out over 25,000 Cash from Bank?
Ans.: Yes, for Salary.
Tax: PAY CASH HANDLING TAX!

10) Qus. : Where are you taking your client for Lunch Dinner?
Ans.: Hotel
Tax: PAY FOOD ENTERTAINMENT TAX!

11) Qus. : Are you going Out of Station for Business?
Ans.: Yes
Tax: PAY FRINGE BENEFIT TAX!

12) Qus. : Have you taken or given any Service/s?
Ans.: Yes
Tax : PAY SERVICE TAX!

13) Qus. : How come you got such a Big Amount?
Ans.: Gift on birthday.
Tax: PAY GIFT TAX!

14) Qus. : Do you have any Wealth?
Ans.: Yes
Tax: PAY WEALTH TAX!

15) Qus. : To reduce Tension, for entertainment, where are you going?
Ans.: Cinema or Resort.
Tax: PAY ENTERTAINMENT TAX!

16) Qus. : Have you purchased House?
Ans.: Yes
Tax : PAY STAMP DUTY REGISTRATION FEE !

17) Qus. : How you Travel?
Ans.: Bus
Tax: PAY SURCHARGE!

18) Qus. : Any Additional Tax?
Ans.: Yes
Tax: PAY EDUCATIONAL, ADDITIONAL EDUCATIONAL SURCHARGE ON ALL THE CENTRAL GOVT.'s TAX !!!

19) Qus. : Delayed any time Paying Any Tax?
Ans.: Yes
Tax: PAY INTEREST PENALTY

Department activities to increase tax collections

The income tax department is set to act tough on state governments, many of which have been
defaulting on deducting tax at source. The department is planning to allot Tax Deduction Account Number (TAN) to all drawing and disbursing officers of all states and central ministries.

TAN is a unique identification number, which is allotted to people who are deducting or collecting tax at source on behalf of the income tax department. It has to be quoted in all TDS/ TCS returns. As in the case of permanent account numbers (PAN) that helps to keep track of all assessees and their returns, TAN is used to keep a tab on all tax dedicators and deductions. If all
these officers have a TAN, It would be easier to track collections by state governments through TDS.

Tax officials point out that a large number of states have deducted the tax but have not remitted it to the Centre for the past two to three years. Some others meanwhile have not deducted the tax at all from the salaries and pensions of their employees.

The issue was also taken up at the recent income tax chief commissioner’s conference as a part to strengthen the TDS mechanism. While the exact quantum of such defaults by states is difficult to assess, tax officials say it is a recurring problem and needs to be addressed in order to increase collections through TDS.

The income tax department is also mulling several other measures to strengthen the TDS mechanism in states and increase collections. It is planning to appoint more officers in its Commissionerate to supervise deductions and collections under the system. The department may also start training programmes to sensitise the authorized dedicators in the states to comply with law and improve the TDS collections.

Increasing collections from TDS is a key focus area of the department, especially as it has been relying more on voluntary compliance. As a result of the various steps that have been undertaken, TDS collections increased by 51% in 2007-08 to Rs 1,06,700 crore from a mere 2.36% in 2004-05. The total tax collection in the fiscal stood at Rs 3, 14,486 crore. Similarly, till June this year, tax deducted and collected at source has risen at a rate of 50%.