Section 80-IB(10) deduction on percentage completion method

Section 80-IB(10) deduction on percentage completion method
*

*Instruction No. 4/2009, dated 30-6-2009*

Under sub-section (10) of section 80-IB an undertaking developing and
building housing projects is allowed a deduction of 100% of its profits
derived from such projects if it commenced the project on or after 1.10.1998
and completes the construction within four years from the financial year in
which the housing project is approved by the local authority.

2. Clarifications have been sought by various CCsIT on the issue whether the
deduction u/s 80-IB(10) would be available on a year to year basis where an
assessee is showing profit on partial completion or if it would be available
only in the year of completion of the project u/s 80-IB(10).

3. The above issue has been considered by the Board and it is clarified as
under:-

(a) *The deduction can be claimed on a year to year basis where the assessee
is showing profit from partial completion of the project in every year.*

(b) *In case it is late, found that the condition of completing the project
within the specified time limit of 4 years as started in section 80-IB(10)
has not been satisfied, the deduction granted to the assessee in the earlier
years is should be withdrawn.
*

4. The above Instruction will override earlier clarififcation on this issue
contained in Member(R)’s D.O. letter No. 58/Misc./2008/CIT(IT&CT) dated
29.04.2008 and Member (IT)’s D.O. letter No. 279/Misc./46/08-ITJ dated
2.5.2008.

5. This may kindly be brought to the notice to the notice of the all
Assessing Officers in your charge.

Waiver of penalty in certain cases for non-filing of return within prescribed time

Date: 4th July, 2009*

* *

*No. VAT/ AMD-1009/IA/ ADM-06
Trade Cir. 21T of 2009 *

* *

*Sub : Waiver of penalty in certain cases for non-filing of return
within prescribed time.*

*Ref.* : 1. The Budget Speech delivered by Hon'ble Finance Minister
on 4th June 2009.

*2. Trade Circular No.3 T of 2009 dated 23rd January, 2009.*

*3. Trade Circular No.4 T of 2009 dated 23rd January, 2009.*

* *

*Gentlemen/Sir/ Madam,*

* *

*Hon'ble* Finance Minister in his Budget Speech delivered on 4th June 2009
has made an announcement regarding the waiver of penalty for non-filing of
the
returns within prescribed time to the certain dealers who have enrolled at
the Sales
Tax Departments web-site: in order to avail various e-services. The relevant
part of
the Budget speech is reproduced as under:-

* *

*2) Para 4:- "............ ..... I am glad to inform the
Hon'blemembers that Maharashtra is the first State to get tax returns
in large
numbers electronically
from all dealers. The dealers, the trade associations and tax practitioners
have
greatly contributed to this and deserve to be congratulated. In the backdrop
of
their valuable cooperation, I hereby declare that the dealers who having
enrolled
themselves for e-services on the department's web-site, file all their
returns for all
the periods from 1st April 2005 to 30th June 2009 on or before 31st July
2'009
electronically, shall not be liable for penalty for delay in filing of
returns. However,
this will not be applicable to cases where penalty has been already paid."*

* *

*3) You are well aware that scheme of filing returns electronically
wasimplemented in a phased manner. It is now mandatory for every
dealer to file
returns electronically.*

* *

*4) In view of the announcement made by the Hon'ble Finance Minister in his
Budget Speech, it is decided that,-*

*(a) if the dealers who have not filed one or more returns for the periods
starting on or after 1st April 2005 and ending on 30th June 2009, file all
such pending returns electronically along with the due payment
with interest on or before 31" July 2009 then penalty for late filing of
returns will not be levied. *

* *

*(b) in the cases where for the period starting on or after 1st April 2005
and ending on 30th June 2009, if penalty is imposed and recovered, then
dealer will not be entitled for the refund of such amount.*

* *

*(c) In case where the penalty has been already levied for non filing of
returns but the same has not been paid by the dealer, it will not be
recovered if the dealer files all his pending returns electronically with
payment of tax and interest up to 31st July 2009.*

*(d) Where the penalty is already levied and the dealer has filed an appeal
against the said penalty order, then the said penalty or part of the
penalty outstanding shall not be recovered if the dealer files all his
returns upto 31st July 2009 along with payment of tax with interest. The
dealer must however, withdraw the appeal, against such order unconditionally
before availing this benefit. The part payment made in appeal shall not be
refunded.*

* *

*5) It is hereby clarified that the dealers who have already filed returns
for the period starting on or after 1" April 2005 and ending on 30th June
2O09 shall not again be required to file such returns electronically. But it
may please be noted that if required they will have to produce the proof of
filing these returns.*

* *

*6) Needless to state that the dealers who do not file the pending returns
for
the aforesaid periods on or before 31st July 2009, shall be liable for
penalty as per
the provisions of sub-section (8) of section 29 and also recovery of such
penalty
amount. In other words penalty amount will not be waived if dealer fails to
file
the pending returns electronically on or before 31" July 2009.*

* *

*7) This circular cannot be made use of for legal interpretation of
provisions of
law as it is clarificatory in nature. If any member of the trade has any
doubt, he
may refer the matter to this office for further clarification. *

* *

*8) You are requested to bring the contents of this circular to the notice
of the
members of your association.*

*
Yours faithfully,*

* *

* *

*(Sanjay Bhatia)*

*Commissioner of Sales Tax *

*Maharashtra State, Mumbai.*

check status of efiling Ack

Now You can check status of efiling Ack. receipt received by Central
Processing Centre -Bangalore or Not.

For that,

1. Login to the e-iling site with your pan and password.

2. Go to the "My Account " tab

3. In drop down menu under My account Tab click " e- filing processing
status"

4. In next screen fill you ITR-V acknowledgment Number and Select your
assessment year.

5. You will get status of your return/ITR-V processing status in next
screen.

Further, Income tax department clarified that copy of ITR-V sent by them
to CPC Bangalore will be scanned after stamping receipt number and date
of receipt and the same shall be made available to taxpayers on request
through email shortly.

SMS BASED SERVICE FOR CHALLAN STATUS

Tax Information Network (TIN) hosted by National Securities Depository
Limited (NSDL) on behalf of Income Tax Department (ITD) gives you a facility
to verify whether the banks have correctly uploaded the details of your tax
deposit to ITD through SMS.

*SMS based verification *

The procedure for availing this facility is as under:

1. Send an SMS to *575758* with a message containing the word
*CSI*followed by a space and CIN provided by the respective Bank at
the time of
making the Direct tax payment and the amount.

2. Challan Identification Number (CIN) consists of BSR Code of Collecting
Branch (seven digit), Challan Tender Date (DDMMYYYY) and Challan Serial No
(length less than or equal to 5 digit).

3. The amount is an optional field. If you provide the amount in the SMS
you would get the confirmation whether the amount uploaded by bank matches
with the amount paid by you.

4. Each of BSR code, Tender date, the challan serial number and amount
should be separated by commas

*For e.g., if the tax payer input “CSI 0510001,11032009,5,5000” where
in **“0510001”
is the BSR code of the collecting branch, *
*“11032009” is the Challan tender date, *
*“5” is the Challan serial number and *
*“5000” is the amount paid by the taxpayer*.

The tax payer will get the information against which TAN/PAN the payment has
been accounted with the confirmation whether amount entered is matched or
not.

*(This is an illustrative CIN, actual CIN should be provided in the SMS). *

There will be special charges for these SMS. These charges may vary from one
mobile service-provider to another. The charge structure can be obtained
from the concerned service-provider.

* *

*Online Challan Status Inquiry*

You can also get the status of your CIN from
www.tin-nsdl.com
under the section Challan Status Inquiry.

New Tax Code by Aug 20

The Lok Sabha was informed, on Friday that the new direct tax code will
be released for public discussion by August 20. The new code will be
released along with a discussion paper, the Minister of State for
Finance, Mr S. S. Palanimanickam, said in a written reply in the Lok
Sabha.
On July 6, the Finance Minister, Mr Pranab Mukherjee, had in his
Budget speech for 2009-10, promised to pursue structural changes in
direct taxes by releasing the new direct tax code within 45 days.

compulsory to quote Unique Transaction Number (UTN) From January 2010

Lok Sabha The Government has decided to make it compulsory to
quote Unique Transaction Number (UTN) in the Income-tax return forms to
be filed by all the assessees to whom such number has been allocated by
the Income-tax Department. Since the UTN has not been communicated to
the taxpayers, therefore, the requirement of quoting UTN in Income-tax
return form for assessment year 2009-10 has been kept in abeyance.
Unique Transaction Number would be allotted against each transaction in
which tax has been deducted or collected at source. It is proposed to
make it compulsory to quote this Number in the Income-tax return forms
so as to ensure prompt verification and granting of tax credits to the
tax payers. This system of allotting Unique Transaction Number is
expected to become operational by 1st January, 2010. This information
was given by Minister of State for Finance, Shri S.S. Palanimanickam in
written reply to a question raised in Lok Sabha today.
BSC/BY/GN-276/09

Deal with fake Chartered Accountants

The Government has said that it is aware that several
unqualified persons are using false registration numbers and issuing fake
certificates by pretending to be Chartered Accountants. Ninety four
cases of fake certificates since April, 2006 have come to the notice of the
Institute of Chartered Accountants of India. These include issue of false
certificates with fake name, registration number (membership number) address
etc.

The details are given below :

Description

01.04.2006 to 31.03.2007

01.04.2007 to 31.03.2008

01.04.2008 to 31.03.2009

01.04.2009 to 22.07.2009

Total

Cases under investigation with the Police

6

8

4

1

19

Cases under examination with the ICAI to enable to be referred to the Police

15

19

31

10

75

Total

21

27

35

11

94

Giving this information in the Lok Sabha in a written reply
Shri Salman Khurshid, Minister for Corporate Affairs, said that ICAI is
empowered under Chartered Accountants Act, 1949 to deal with such issues.
Recognizing the fact that such instances are on the increase, section 26 of
the said Act was amended in 2006, by the Chartered Accountants (Amendment)
Act, 2006, whereby the offence has been made punishable on the first
conviction with a fine of not less than Rs.5,000/- but which may extend to
Rs.1 lakh and in the event of second or subsequent conviction, with
imprisonment for a term, which may extend to one year or with fine not less
than Rs.10,000/- but which may extend to Rs.2 lakhs or with both.

Bangalore Income Tax department, Central Processing Center (CPC) Helpline Number

To assist taxpayers, a limited call center service with two agents has been established at ITD-CPC, Bangalore.

Taxpayer queries on status of ITR-V receipt at CPC, Bangalore will be answered on

080-43456700
(9:30 AM to 6 PM)

The service will be available in English, Hindi and Kannada.

CBDT withdrawn tax exemption and lower tax rates to foreign firms setting up consortia with domestic companies for engineering, procurement and constr

The government has withdrawn tax benefits enjoyed by consortia of foreign and Indian engineering firms undertaking infrastructure projects, in a move that may hit the sector plagued by severe capacity deficit. The Central Board of Direct Taxes (CBDT) has withdrawn a 20-year-old instruction that provided tax exemption and lower tax rates to foreign firms setting up consortia with domestic companies for engineering, procurement and construction (EPC) contracts in power, oil & gas, roads and other infrastructure sectors.

Under this instruction, an EPC contract is broken up and taxed separately for different portions despite the presence of a consortium. For example, equipment supply by a foreign partner in such contracts is usually tax-free while erection and commissioning face a lower tax rate of 10%.

But now, authorities will tax the income of a consortium as a single unit, at the rate of 42%, the applicable rate for such entities called `association of persons’ in tax parlance. A domestic company as a single entity has to pay tax at the rate of 30%.

The move will increase the cost of implementation of several projects besides discouraging foreign participation in the crucial infrastructure space, say experts.

“We are still in a nation-building mode and there is lack of capacity in the infrastructure sector, so we need to incentivise infrastructure companies. This move puts foreign infrastructure players at a disadvantage as they will have to bear additional tax burden,” said Mr Vinayak Chatterjee, chairman, Feedback Ventures.

While all future contracts will now have to bear the new policy in mind, projects already bid may not be spared either, say tax experts. “Since CBDT has clarified that the withdrawal of the beneficial instruction will not prejudice the tax department’s plea in any appeal, reference or petition, it is likely that past cases may be looked into,” said Sandeep Ladda, associate director (tax and regulatory services) of consultancy firm PwC.

“The instruction was intended for the power sector. But now all other sectors are also taking advantage, leading to a loss of revenue for the exchequer,” said a finance ministry official, requesting anonymity. “There have been instances when a consortium has been created only to take advantage of the instruction.

Slab of Auditors fees for inspection of Mutual Funds for the year 2008-09

Board’s right to inspect and investigation
The Board may appoint one or more persons as inspecting officer to undertake the inspection of the books of accounts, records, documents and infrastructure, systems and procedures or to investigate the affairs of a mutual fund, the trustees and asset management company for any of the following purposes, namely:
» To ensure that the books of accounts are being maintained by the mutual fund, the trustees and asset management company in the manner specified in these regulations;
» To ascertain whether the provisions of the Act and these regulations are being complied with by the mutual fund, the trustees and asset management company;
» To ascertain whether the systems, procedures and safeguards followed by the mutual fund are adequate;
» To ascertain whether the provisions of the Act or any rules or regulations made thereunder have been violated;
» To investigate into the complaints received from the investors or any other person on any matter having a bearing on the activities of the mutual funds, trustees and asset management company;
» To suo-motu ensure that the affairs of the mutual fund, trustees or asset management company are being conducted in a manner which are in the interest of the investors or the securities market.

Notice before inspection and investigation.
» Before ordering an inspection or investigation under regulation 61 the Board shall give not less than ten days notice to the mutual fund, asset management company or trustees as the case may be.
» Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may, by an order in writing direct that such inspection or investigation be taken up without such notice.
» During the course of inspection or investigation, the mutual fund, trustees or asset management company against whom the inspection or investigation is being carried out shall be bound to discharge his obligations as provided in regulation 63.

Obligations on inspection and investigation
» It shall be the duty of the mutual fund, trustees or asset management company whose affairs are being inspected or investigated, and of every director, officer and employee thereof, to produce to the inspecting officer such books, accounts, records, and other documents in its custody or control and furnish him such statements and information relating to the activities as mutual funds, trustees or asset management company, as the inspecting officer may require, within such reasonable period as the inspecting officer may specify.
» The mutual fund, trustees or asset management company shall allow the inspecting officer to have a reasonable access to the premises occupied by it or by any other person on its behalf and also extend reasonable facility for examining any books, records, documents, and computer data in the possession of the mutual fund, trustees and asset management company or such other person and also provide copies of documents or other materials which in the opinion of the inspecting officer are relevant for the purpose of the inspection.
» The inspecting officer, in the course of inspection or investigation, shall be entitled to examine or record the statements of any director, officer, or employee of the mutual fund, trustees and asset management company.
» It shall be the duty of every director, officer, or employee of the mutual fund, asset management company or trustee to give to the inspecting officer all assistance in connection with the inspection or investigation, which the inspecting officer may reasonably require.

Submission of report to the Board
The inspecting officer shall, as soon as possible, on completion of the inspection or investigation submit a report to the Board: Provided that if directed to do so by the Board, he may submit interim reports.

Action on inspection or investigation report
The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquriy by Enquiry Officer and Imposing Penalty) Regulations, 2002.]

Appointment of Auditor
Without prejudice to the provisions of regulation 55, the Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of accounts or the affairs of the mutual fund, trustee or asset management company:
Provided that the Auditor so appointed shall have the same powers of the inspecting officer as stated in Regulation 61 and the obligation of the mutual fund, asset management company, trustee, and their respective employees in regulation 63, shall be applicable to the investigation under this regulation.

Slab of Auditors fees for inspection of Mutual Funds for the year 2008-09

Board’s right to inspect and investigation
The Board may appoint one or more persons as inspecting officer to undertake the inspection of the books of accounts, records, documents and infrastructure, systems and procedures or to investigate the affairs of a mutual fund, the trustees and asset management company for any of the following purposes, namely:
» To ensure that the books of accounts are being maintained by the mutual fund, the trustees and asset management company in the manner specified in these regulations;
» To ascertain whether the provisions of the Act and these regulations are being complied with by the mutual fund, the trustees and asset management company;
» To ascertain whether the systems, procedures and safeguards followed by the mutual fund are adequate;
» To ascertain whether the provisions of the Act or any rules or regulations made thereunder have been violated;
» To investigate into the complaints received from the investors or any other person on any matter having a bearing on the activities of the mutual funds, trustees and asset management company;
» To suo-motu ensure that the affairs of the mutual fund, trustees or asset management company are being conducted in a manner which are in the interest of the investors or the securities market.

Notice before inspection and investigation.
» Before ordering an inspection or investigation under regulation 61 the Board shall give not less than ten days notice to the mutual fund, asset management company or trustees as the case may be.
» Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may, by an order in writing direct that such inspection or investigation be taken up without such notice.
» During the course of inspection or investigation, the mutual fund, trustees or asset management company against whom the inspection or investigation is being carried out shall be bound to discharge his obligations as provided in regulation 63.

Obligations on inspection and investigation
» It shall be the duty of the mutual fund, trustees or asset management company whose affairs are being inspected or investigated, and of every director, officer and employee thereof, to produce to the inspecting officer such books, accounts, records, and other documents in its custody or control and furnish him such statements and information relating to the activities as mutual funds, trustees or asset management company, as the inspecting officer may require, within such reasonable period as the inspecting officer may specify.
» The mutual fund, trustees or asset management company shall allow the inspecting officer to have a reasonable access to the premises occupied by it or by any other person on its behalf and also extend reasonable facility for examining any books, records, documents, and computer data in the possession of the mutual fund, trustees and asset management company or such other person and also provide copies of documents or other materials which in the opinion of the inspecting officer are relevant for the purpose of the inspection.
» The inspecting officer, in the course of inspection or investigation, shall be entitled to examine or record the statements of any director, officer, or employee of the mutual fund, trustees and asset management company.
» It shall be the duty of every director, officer, or employee of the mutual fund, asset management company or trustee to give to the inspecting officer all assistance in connection with the inspection or investigation, which the inspecting officer may reasonably require.

Submission of report to the Board
The inspecting officer shall, as soon as possible, on completion of the inspection or investigation submit a report to the Board: Provided that if directed to do so by the Board, he may submit interim reports.

Action on inspection or investigation report
The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquriy by Enquiry Officer and Imposing Penalty) Regulations, 2002.]

Appointment of Auditor
Without prejudice to the provisions of regulation 55, the Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of accounts or the affairs of the mutual fund, trustee or asset management company:
Provided that the Auditor so appointed shall have the same powers of the inspecting officer as stated in Regulation 61 and the obligation of the mutual fund, asset management company, trustee, and their respective employees in regulation 63, shall be applicable to the investigation under this regulation.

Internal auditor can carry tax audit for FY 2008-09

The Council in its 281st meeting held from 3rd to 5th October, 2008 decided that an internal auditor of an assessee, whether working with the organization or an independently practicing Chartered Accountant being an individual chartered accountants or a firm of chartered accountants, could not be appointed as his tax auditor.

The said decision came into effect from December 12, 2008. As per the decision an internal auditor cannot carryout tax audit on or after December 12, 2008. Subsequently representations have been received pointing out the hardship being caused by the abovesaid decision in respect of those internal auditors who have been appointed as tax auditors for the financial 2008-09 on or before December 12, 2008. The Council considering this hardship has decided that the decision taken by the Council at its meeting between 3rd to 5th October, 2008 shall be applicable to all appointments as tax auditor made on or after December 12, 2008 and accordingly those internal auditors whose appointment have been made as tax auditors before December 12, 2008, can carry out the tax audit of the financial year ending on March 31, 2009, i.e., Assessment Year 2009-2010 only.

Peer review for audit firms of Listed Company

Members may be aware that the Council had accepted the recommendation of Securities & Exchange Board of India (SEBI) that audit of listed companies shall be carried out by the auditors who have undergone Peer Review Process and have been issued Peer Review Certificate by the Peer Review Board

The above decision is effective for accounting periods commencing on or after April 1, 2009.

Consequent to the above decision, all the auditors of Listed Companies are required to undergo Peer Review Process and get Peer Review Certificate issued from the Peer Review Board.

The Peer Review Board is making all out efforts to cover those audit firms, which are not yet selected for Peer Review Process. While the Board will be sending a letter to each such audit firm, it will be in the professional interest of such firms to immediately get selected for Peer Review by emailing us the following information at email id peerreviewboard@icai.org;

* Name of the Firm
* FRN or Membership No. in case of Proprietor firm.
* Latest Contact details i.e. complete address, Tel No with STD Code, Mobile No. & email id.

The Firms who have already been selected under the Peer Review Process and their review is in progress at different stages may also hasten up their Peer Review Process and ensure that their Final report is submitted by the Reviewer to the Board. Such firms are requested to furnish the above details at S.No.1 to 3. along with their present status of review.

In order to complete the Peer Review Exercise timely and smoothly all the audit firms of listed companies and their Reviewers are hereby requested to expedite their Peer Review Process.

Measures initiated by ICAI for revisiting Accounting Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates

CA. Uttam Prakash Agarwal, President, The Institute of Chartered Accountants of India (ICAI) re-iterated the Institute's desire to work closely with Industry and Government in both framing and revising Accounting Standards. He briefly outlined the measures initiated by ICAI for revisiting Accounting Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates.

Chronological order of discussions relating to Revision in Accounting Standard (AS) 11
Accounting Standards Board meeting (148) held on 1 February, 2009

A Working Group was set up for review of accounting treatment of monetary items under AS 11 on the matter being referred by National Advisory Committee on Accounting Standards (NACAS)

Working Group of meeting on AS 11 held on 16 February, 2009- Discussed modalities for revision in accounting treatment.

Working Group meeting on AS 11 held on 2 March, 2009- Discussed modalities for revision in accounting treatment.

Meeting at Ministry of Corporate Affairs Office on 4 March, 2009
There were discussions on various issues related to AS 11. The meeting was attended by President, Vice President and Director of the Institute. Mr. Jitesh Khoslas presence was requested at the Accounting Standards Board meeting the next day but he regretted his inability to attend due to other preoccupations.

Accounting Standards Board meeting (149) held on 5 March 2009

Two senior ministry officials were present at the meeting. Discussions on revision to AS 11 could not be concluded as two diverging views were there on the matter. Industry Representatives gave presentation to the Board on their views. The meeting decided to refer the matter to the Council with both points of view on the matter as in technical matters there was a convention of seeking unanimity.

Council Meeting held on 6,7 & 8 March 2009.
The item relating to revision of AS 11 for long-term monetary items was introduced as an additional agenda item in view of its importance to Industry and the need for providing clarity in accounting treatment for the year ended 31 March 2009. Joint Secretary, Government of India along with other government nominees were present and participating. On the question of a member of the Council as to whether the matter under consideration was of revision of the standard or a discussion on the pros and cons of revision Mr.Jitesh Khosla confirmed it was a process of discussion. The matter thereafter was on the council table for discussion. The council discussed the matter for over 2 1/2 hours as members had strong concerns on the gravity of revising the accounting standard.

As the matter warranted further deliberations to address the concerns of members it was decided that the matter would be referred back to the Accounting Standards Board. It was also decided that a process of discussion would be taken up with industry representatives in the presence of Mr.Jitesh Khosla and a tentative date of 18 March 2009 was fixed for a meeting at Mumbai.

As on that date,CII had organised a seminar on IFRS where President ICAI, Vice President ICAI and Mr.Jitesh Khosla Joint Secretary Government of India were speakers, as per advise of Mr.Jitesh Khosla, a meeting was held with a small group from CII. President ICAI after listening to the views of the group assured them that the matter would be taken up in the Council meeting to be held in April 2009.Proposed meeting with industry representatives scheduled for 18 March 2009 was subsequently cancelled.

National Advisory Committee on Accounting Standards (NACAS) meeting on 24 March, 2009.

The meeting was attended by President ICAI, Vice President ICAI, Chairman Accounting Standards Board ICAI. The meeting was also attended by representatives of the Institute of Cost and Works Accountants of India, Institute of Company Secretaries of India, ASSOCHAM, FICCI, and CII were present. Representatives from the Comptroller and Auditor Generals Office and the Indian Institute of Management Calcutta were also present. At the meeting only the matter relating to AS 11 was discussed.

CA. Uttam Prakash Agarwal, President Institute of Chartered Accountants of India explained all the steps taken by the Institute in this matter to arrive at a consensus decision. He also informed the meeting that there was a process involved both in the issuing of accounting standards as well as revising any standard. He stressed the need that the request of Industry for a revision to the accounting standard be examined in the context of the principles of consistency, prudence and going concern basis so that such action was in the best interest of all concerned. He also pointed out that fluctuation in foreign currency and volatility in foreign exchange markets were a given factor today. There was a mechanism of hedging against the risk of foreign currency fluctuation and it was in fact a failure of business houses decision-making process. He apprised Chairman NACAS of the various questions which had to be addressed such as whether this would require any amendment to the Companies Act as there was a contradiction between Schedule VI and AS? Whether this would amount to a deviation from IFRS? Are we going to defer convergence with IFRS? Whether the change will be specifically to the benefit of a group of people? Would this amount to distribution of losses? Is this an extraordinary circumstance? There has been a criticism that when it came to taking profits, Industry booked it, while when it comes to losses, Industry is approaching for changes. What are the hardships faced by the Industry? What is the impact on the share value? Is this going to be beneficial to the shareholders?

On the issue of certain comments made by Chairman NACAS on CNBC channel, President ICAI stressed that the Institute of Chartered Accountants of India had all along taken a very proactive role in the matter so that problems of industry could be resolved and that all the members of the Council were in support of the process initiated for the purpose of revision to the accounting standards.

About ICAI

The Institute of Chartered Accountants of India (ICAI) set-up by an Act of Parliament viz. The Chartered Accountant Act, 1949 to regulate the profession of Chartered Accountancy is the second largest and prominent accounting body in the world. It has been taking various proactive measures from time to time, aligned with the changing facets of the Indian economy, for continuously raising the standard of quality of accounting and financial reporting. The quality of education and the standards of examination of the Institute are acknowledged to be the best in the world.

ICAI has its Headquarters at New Delhi with 5 Regional Offices at Mumbai, Chennai, Kanpur, Kolkata, New Delhi and 118 branches spread all over the country. In addition, it has also set up 21 chapters outside India and an office in Dubai. Currently over 4,50,000 students are pursuing the Chartered Accountancy course and the total membership of ICAI is more than 1,50,000

Online filing of I-T returns quadruples

The online mode of filing tax returns seems to be gaining popularity with the aam admi.
According to the income tax department data, online filing of returns by salaried employees and interest or pension earners has jumped four times to 5.8 lakh returns in 2008-09 vis-à-vis 1.43 lakh a year ago.
The aggregate online filing by individuals and corporates surged more than two times during 2008-09 to 48.3 lakh against 21.92 lakh returns filed in 2007-08.
It should be noted here that the lower increase in the aggregate figures is because government had already made it mandatory for several groups of earners, such as listed companies and businesses, to file returns online.
About 9% of the returns were filed on the last three days of the financial year 2008-09 — between March 29 and March 31, 2009 — with 343 returns being filed per minute.
One can distinguish the profile of the person filing the income tax return by looking at which of the eight available forms was been submitted.
Form income tax return (ITR) 1 is meant for the salaried class, or people earning an interest on investment or receiving a pension. However, if one had to declare earnings or losses from other investments such as those from stock markets or property sales, then he would have to fill form ITR 2, 3 or 4. Form ITR 3 and 4 are for people who run a business in partnership, while those having a proprietary business would have to fill form ITR 4. Form numbers ITR 5, 6 and 8 are meant for companies, trusts or bodies for e-filing returns, including losses or incomes from businesses and fringe benefit tax on perks given to employees.
The highest number of returns were filed by residents of Maharashtra (8.25 lakh returns), Gujarat (5.08 lakh returns) and Delhi (4.09 lakh returns), respectively.
During the year, people filed returns online not only for the prevailing assessment year, but also for the previous assessment year of 2007-08.
I-T rules say if a person misses out on the deadline of filing tax returns, he can furnish the same within two years of earning the income. So people with an income in the financial year 2007-08 and submitting returns late in 2008-09, are permitted to file returns anytime before March 31, 2010.
However, there is a fine applicable on those filing returns for assessment year 2008-09 after March 31, 2009. An assessment year is the year in which one files returns for his income in the previous year. So, income in the 2008-09 will be assessed in the assessment year 2009-10.

Source : Journals

Service Tax on Commercial Rent Held Unconstitutional

The Delhi High Court has struck down the levy of service tax on renting
of immovable property as "unconstitutional", while deciding 26 writ petitions of different petitioners, by a combined order. The division bench of the Delhi High Court comprised of Mr. Justice Badar Durrez Ahmed and Mr. Justice Rajiv Shakdher observed that service tax shall not be levied on renting of immovable property.

Alishan Naqvee, Advocate, LexCounsel Law Offices, who represented his clients in two of the petitions disposed off today, tells that the category of "renting of immovable property service" was introduced by the Finance Act of 2007. This, in effect brought renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business and commerce, within the service tax net with effect from June 1, 2007. This new levy severely impacted business models across India as most of the rent arrangements did not even stipulate it beforehand.

The businesses across India opted to en masse challenge the constitutionality of levy of service tax on rent, on the primary grounds that renting does not involve any service, and the Central Government is not empowered to tax consideration for transfer of rights in immovable property, being a state subject as per the Constitution of India. Few High Courts, including the High Court of Mumbai, Delhi, Gujarat, Andhra Pradesh, Kolkata and Chennai reportedly granted interim reliefs to the petitioners from payment of service tax until final disposal of their matters. The stays were however granted subject to undertakings by the petitioners, mainly tenants, to deposit the service tax amount with the Government if the tax was ultimately held constitutional. The Delhi High Court however is the first High Court to deliver the final order in the matter that would have persuasive value for the other High Courts.


The detailed order of the Delhi High Court is expected to be available within the next couple of working days. One issue that needs to be seen is whether the Delhi High Court has expressly limited the applicability of its judgment to its territorial jurisdiction. Notably, while granting interim orders, the Delhi High Court had expressed that the stays would be operative within the territorial jurisdiction of the Court. Consequently, a number of petitioners, having operations in multiple states, were constrained to knock at the doors of the other High Courts.

To avoid multiplicity of litigation, the Union of India preferred a transfer petition to the Supreme Court of India seeking transfer of all writ petitions pending before different High Courts of India, to the Delhi High Court for single window adjudication.

It is open for the Government to prefer an appeal before the Supreme Court of India, challenging the decision of the Delhi High Court. The judgment however delivers great relief to the business by helping liquidity in the current times.

Source : Journals

Double taxation in indirect tax law ? an ongoing problem

New Delhi
April 13, 2009

Earlier articles in this column had highlighted the problem with regard to double taxation of a particular transaction under the indirect tax laws that are prevalent in India today. The central problem is with regard to the taxation of a transaction as both a supply of goods as well as a provision of service, with the tax consequence of both the State VAT and the service tax being applicable thereto.

The advent of the Goods and Services Tax (GST) could considerably mitigate, if not all together eliminate, the problem and for this reason alone, its earliest possible introduction is very desirable.

In yet another illustration of the serious challenge faced by taxpayers in regard to double taxation, the Karnataka High Court, in a recent decision in Bharti Airtel Ltd. Vs State of Karnataka (2009-TIOL-99) has held that a particular transaction was chargeable to the State VAT, as a sale of goods, notwithstanding the factual position that it had already been charged to the service tax, as a provision of service.

This decision has taken note of the decision of the Supreme Court in Bharat Sanchar Nigam Ltd. Vs. UOI (2006) 145 STC 91) and nevertheless has come to the above conclusion. In this case, the issue at hand was the taxability of the provision of broadband connectivity by the assessee to its subscribers.

On the particular point of whether the activity of provision of broadband connectivity would at all amount to a supply of goods, as opposed to a provision of service, the High Court considered the technical aspect of the matter in very great detail. It also took note of the decision in the BSNL case (ra) that transfers of the right to use electromagnetic waves or radio frequencies could not be charged to the sales tax or State VAT since they did not constitute goods, for the purpose of Article 366 (29A) of the Constitution of India.

The High Court distinguished broadband connectivity from electromagnetic waves and held that the provision of such connectivity amounted to a sale of light energy and was hence taxable under the Karnataka VAT Act 2003, as a sale of goods. In other words, the Court held that broadband connectivity was essentially the ability to carry data through an optical fibre network whereby light energy was created at the time of commencement of transmission of data/information and was extinguished once the data/information was delivered at the place of intended destination.

The High Court distinguished such energy from electromagnetic waves, which were incapable of abstraction as they traveled through free space from one point to another and were also not extinguished for that reason. Sice broadband was qua the optical fibre network, the properties of ‘goods’ were attracted to the case in point.

The Court then took up the point that the provision of broadband connectivity to its subscribers had already been charged to service tax. It must be mentioned here that the Union Government was also a respondent in this particular appeal and had argued that the appellants had rightly discharged service tax on the activity and that the Court should, if at all it came to the conclusion that the transaction amounted to a sale of goods, nevertheless hold that the appellants were liable both for the service tax as well as the State VAT.

The appellants argued that they had entered into service level agreements with subscribers in relation to the provision of broadband connectivity and it was clearly demonstrated consequently that the dominant objective and intent was the provision of service.

Hence, even if there was a determination that a sale of goods had taken place, it could only be incidental to the aforesaid dominant objective. Consequently, in terms of the decision in BSNL, the lease rentals received from the subscribers for the provision of broadband connectivity could not be taxed under the VAT laws but could only be taxed under the provisions of the service tax laws.

The High Court took note of the decision of the Supreme Court in State of UP Vs. UOI (2003-TIOL-14) in regard to composite contracts for sales and services. In particular, it took note of the observation therein that an activity could be regarded under one statute as a sale of goods and equally as a provision of services under another statute.

Accordingly, the High Court came to the conclusion that in the case in point, the activity of provision of broadband connectivity did undoubtedly answer the description of ‘sale’ within the meaning of the Karnataka VAT law and was taxable therein notwithstanding that the same activity was also correctly held to be a service under the Finance Act 1994.

On the dominant nature test, the High Court concluded, based on a scrutiny of the underlying documentation with regard to the recovery of lease rentals from subscribers, that the dominant intent was actually the sale of artificially created light energy and that the provision of infrastructure in the form of the optical fibre network to facilitate the carrying of the data/information, which alone could constitute the service element in the contract, was only ancillary to this intent.

Thus, the Court determined that the dominant nature of the contract was one for sale of goods and rejected the arguments that the dominant nature of the contract was the provision of service. Thereupon, the High Court held that given the inability of separation of the service and sale element in this particular composite contract, the entire consideration received by the appellant from its subscribers towards lease rentals would be chargeable to the VAT. In arriving at this conclusion, the High Court again relied upon the decision of the Supreme Court in State of U.P. vs. UOI (supra).

It can thus be seen that the High Court has come to a conclusion which clearly brings about a double taxation of one transaction to both the goods tax and the service tax, based purely on a determination that the transaction was essentially one for sale of goods and not for provision of service.

The Court has apparently concluded that this determination can be done by each of the two taxing authorities in question and if such respective determinations resulted in a double taxation of a transaction that was an unavoidable legal consequence and that there was nothing improper or illegal as a result.

The central point of the BSNL case regarding the need for taxing entries in the respective statutes for goods and services to maintain exclusivity appears to have been either overlooked or impliedly understood and interpreted in a particular sense.

It was commonly understood subsequent to the BSNL judgement that the dominant nature test in relation to composite contracts other than those specifically covered by Article 366 (29A) could only result in a determination of either a sale of goods or a provision of service and not both.

To be sure, the Supreme Court in the above case did not lay down rules as to how the problem of double taxation could be effectively avoided by a proper application of the dominant nature test by one or the other of the taxing authorities and not by both. Therein lies the problem.

This decision of the Karnataka High Court once again brings to the fore the real and persistent challenge faced by tax payers with regard to double taxation under indirect tax laws of a particular transaction to both the goods and the service tax.

[Source: The Business Standard]

Finance panel sees 16% GST as basis for future talks

New Delhi
April 11, 2009

A further rejig in service tax and excise duty rates may be on the cards after the upcoming general elections to pave the way for the proposed goods & services tax (GST). According to a study commissioned by the 13 th Finance Commission, a revenue-neutral rate for GST would be just over 16%.

As part of its mandate, the 13 th Finance Commission is reviewing the planned structure of GST to assess its impact on the Centre and states’ tax kitty. It will come out with a new basis for devolution of taxes between the two. Vijay Kelkar, one of the key architects of GST in India, heads the commission. GST will subsume service tax and excise duty, along with a plethora of state-level taxes and duties, and is scheduled for introduction from April 1, 2010.

“The 13 th Finance Commission may be using a 16% rate of GST for its own purpose, but the exact rate will be decided only after the new government is elected, and there are discussions between the Centre and the states,” a finance ministry official said. The empowered committee of state finance ministers and the Union finance ministry have already agreed upon a dual GST structure, with separate rates for the Centre and the states. But discussions on the rate of the proposed tax are yet to begin.

While the Congress party in its election manifesto has reiterated its promise to press ahead with the proposed GST, the BJP has said it would ensure that the tax is introduced on schedule, but at a rate of between 12% and 14%.

After the three stimulus packages, service tax is now levied at 10%, while the median excise duty is levied at 8%. States impose value-added tax (Vat) at rates of 4% and 12.5%. For GST to be levied at 16% or even lower as promised by the BJP, tax experts say that other taxes would have to converge.

Convincing the states to lower taxes, however, won’t be easy. State governments have not evinced much keenness to reduce the Vat rate to align it with the central excise duty. At present, the highest rate under Vat is 12.5%, which is higher than the new median Cenvat rate of 8%.

“A GST rate of 16% will help industry become more competitive. Due to simplification of the indirect tax regime through GST, there will be better compliance and will also cause fewer revenue losses to the exchequer,” said PwC ED R Muralidharan.

[Source: The Financial Express]

I-T dept's petitions against cos on forex losses dismissed

New Delhi
April 9, 2009

The Supreme Court on Wednesday dismissed the Income-Tax Department plea that companies cannot claim deductions against tax liability on account of losses due to foreign exchange rate fluctuations.

A Bench headed by Justice S H Kapadia dismissed the Department’s petitions filed against 33 foreign and domestic companies including Maruti Udyog, Jindal Strips, GE Power Services, Perfetti India, Seagram, Escorts Ltd, E I Dupont India, Woodward Governor India, Honda Siel, Turner International and others.

The department had submitted that companies cannot claim deductions on such losses as they were incurred in the ordinary course of business and were part of it. It had argued that where the loss was incurred in respect of circulating capital, it was to be treated as revenue loss and where it was incurred in respect of fixed capital it was to be treated on the capital account.

However, the copy of the judgment was not available. Stating that the loss was in respect of fixed capital in a few cases, the petitions said: “... Under the mercantile system of accounting, liability can be allowed only when liability was repaid or which had been crystallised/ ascertained. The liability debited by Turner was merely a notional liability.”


The companies had stated that deduction can be allowed as liability was on the revenue account. While the Income-Tax Appellate Tribunal had upheld the assessees’ position, the Delhi High Court had endorsed the department’s plea.

[Source: The Financial Express]

I-T refunds diverted to fake accounts

New Delhi
April 8, 2009

Diligent taxpayers waiting for refunds at the end of the financial year would be aghast to know this: money meant for refunds is suspected to have been diverted to some fake accounts and the authorities have initiated a police probe into the racket.

As many as 10 police complaints have been filed by tax authorities with the Delhi Police against some data entry operators who are suspected to have diverted the money meant for refunds last year, a government official said on condition of anonymity.

The FIRs, filed with the Indraprastha Estate Police Station, near the headquarters of the Income Tax Department, Delhi, named the operators, who were hired by the department for processing of returns in the capital refunds.

In the last financial year, refunds of Rs 41,419 crore were issued, while in the previous year the refunds totalled to Rs 40,701 crore.

When contacted, a spokesperson for Central Board of Direct Taxes told PTI that these instances would not affect the refunds and asserted that the computer systems of the Income Tax Department were not hacked by outsiders.

The CBDT spokesperson, however, declined to give details of the amount involved in the cheating or the number of affected persons whose refunds found different destinations.

While officials maintained the modus operandi of those involved would be known after the police probe, sources said the data entry operators diverted funds through cheques meant for I-T refunds in August last year.

These operators were given user IDs and password of the taxmen by officials themselves and the system was not hacked.

Sources said the appointment of these operators cannot be avoided as there is dearth of staff for doing this work. The sanctioned number of tax assistants in Delhi I-T Department is 1017 but only 886 are working at present, they added.

Similarly, sanctioned number for stenographers, at the level where people are mostly hired as data entry operators, is 262, while only 20 are working right now, sources said.

Anyway in Delhi, refund banker scheme is operational, so there is not a problem with refunds, sources added.

As per the refund banker scheme, cash management product department of country’s largest lender SBI, processes the refunds, sent by the Income Tax department, and sends the refund intimation to the taxpayer.

All taxpayers, excluding corporate and a few others, are covered under the scheme. The scheme is in operation in some more cities like Patna, Bangalore, Chennai, Mumbai and Kolkata as well.

[Source: The Business Standard]