TAX HIGHTLIGHTS OF BUDGET 2013-2014

DIRECT TAXES

·   A tax credit of Rs. 2000 to every person with total income up to Rs.5 lakhs will be provided.

·  Surcharge of 10 % on persons (other than companies) whose taxable income exceeds Rs. 1 crore.

·  Increase surcharge from 5% to 10 % on domestic companies whose taxable income exceed Rs.10 crore.

·  In case of foreign companies if the taxable income exceeds Rs.10 crore then surcharge increase from 2% to 5 %,. 

·   In all other cases such as dividend distribution tax or tax on distributed income, current surcharge increased from 5% to 10 %.

·   Additional surcharges to be in force for only one year.

·   Education cess to continue at 3 %.

·  Permissible premium rate increased from 10 % to 15 % of the sum assured by relaxing eligibility conditions of life insurance policies for persons suffering from disability and certain ailments.

·   Contributions made to schemes of Central and State Governments similar to Central Government Health Scheme, eligible for section 80D of the Income tax Act.

·   Donations made to National Children Fund eligible for 100% deduction u/s 80G.

·  Investment allowance at the rate of 15% to manufacturing companies that invest more than Rs.100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015.

·   Eligible date’ for projects in the power sector to avail benefit under Section 80- IA extended from 31.3.2013 to 31.3.2014.

·  Concessional rate of tax of 15% on dividend received by an Indian company from its foreign subsidiary proposed to continue for one more year.

·   Securitization Trust to be exempted from Income Tax. Tax to be levied at specified rates only at the time of distribution of income for companies, individual or HUF etc. No further tax on income received by investors from the Trust.

·    Investor Protection Fund of depositories exempt from Income-tax in some cases.

·    Parity in taxation between IDF-Mutual Fund and IDF-NBFC.

·    A Category-I AIF set up as Venture capital fund allowed pass through status under Income-tax Act.

·   TDS at the rate of 1% on the value of the transfer of immovable properties where consideration exceeds Rs.50 lakhs. Agricultural land to be exempted.

·  A final withholding tax at the rate of 20% on profits distributed by unlisted companies to shareholders through buyback of shares.

·    Reductions made in rates of Securities Transaction Tax in respect of certain transaction.

·    Modified provisions of GAAR will come into effect from 1.4.2016.

·  Rules on Safe Harbour will be issued after examing the reports of the Rangachary Committee appointed to look into tax matters relating to Development Centers & IT Sector and Safe Harbour rules for a number of sectors.

·   A number of administrative measures such as extension of refund banker system to refund more than Rs.50,000, technology based processing, extension of e-payment through more banks and expansion in the scope of annual information returns by Income-tax Department.

·   Income limit for RGESS raised to 12 lakh from Rs 10 lakh.

·   Fifth large tax payer unit to open at Kolkata shortly.

·   Proposal to introduce Commodity Transaction Tax (CTT) in a limited way. Agricultural commodities will be exempted.

·   Proposal to increase the rate of tax on payments by way of royalty and fees for technical services to non-residents from 10% to 25%.

INDIRECT TAXES

Customs

·   No change in the peak rate of basic customs duty of 10% for non-agricultural products.

·  Period of concession available for specified part of electric and hybrid vehicles extended up to 31 March 2015.

·  Duty on specified machinery for manufacture of leather and leather goods including footwear reduced from 7.5% to 5%.

·   Duty on pre-forms precious and semi-precious stones reduced from 10 to 2%.

·   Export duty on de-oiled rice bran oil cake withdrawn.

·   Duty of 10% on export of unprocessed ilmenite and 5% on export of ungraded ilmenite.

·   Concessions to air craft maintenance, repair and overhaul (MRO) industry.

·   Duty on Set Top Boxes increased from 5% to10%.

·   Duty on raw silk increased from 5% to 15%.

·   Duties on Steam Coal and Bituminous Coal equalized and 2% custom duty and 2% CVD levied on both kinds of coal.

·   Duty on imported luxury goods such as high end motor vehicles, motor cycles, yachts and similar vessels increased.

·   Duty free gold limit increased to Rs.50,000 in case of male passenger and Rs.1,00,000 in case of a female passenger subject to conditions.

EXCISE DUTY

·   There is no change in excise duty.

·  Relief to readymade garment industry. In case of cotton, zero excise duty at fiber stage also. In case of spun yarn made of manmade fiber, duty of 12% at the fiber stage.

·   Handmade carpets and textile floor coverings of coir and jute totally exempted from excise duty.

·   To provide relief to ship building industry, ships and vessels exempted from excise duty. No CVD on imported ships and vessels.

·  Specific excise duty on cigarettes increased by about 18 %. Similar increase on cigars, cheroots and cigarillos.

·    Excise duty on SUVs increased from 27% to 30%. Not applicable for SUVs registered as taxies.

·    Excise duty on marble increased from Rs.30 per square meter to Rs. 60 per square meter.

·    Proposals to levy 4% excise duty on silver manufactured from smelting zinc or lead.

·    Duty on mobile phones priced at more than Rs. 2000 raised to 6 %.

·  MRP based assessment in respect of branded medicaments of Ayurveda, Unani, Siddha, Homeopathy and bio-chemic systems of medicine to reduce valuation disputes.

SERVICE TAX

·    There is no change in service tax rate.

·    2 items are added in negative list:-

      i.   Vocational courses offered by institutes affiliated to the State Council of Vocational Training

      ii.   Testing activities in relation to agricultural produce

·   Exemption of Service Tax on copyright on cinematography limited to films exhibited in cinema halls.

·   For homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs.1 crore or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from 75 to 70 %.

·  A onetime scheme called ‘Voluntary Compliance Encouragement Scheme’ proposed to be introduced. Defaulter may avail of the scheme on condition that he files truthful declaration of Service Tax dues since 1st October 2007.

·    Tax proposals on Direct Taxes side estimated to yield to Rs.13, 300 crore and on the Indirect Tax side Rs.4, 700 crore.

·    Proposals to levy Service Tax on all air conditioned restaurant.

GOODS AND SERVICE TAX

·   For GST need to be pass by Constitutional Amendment. To present Draft Bill on GST in parliament in next few months.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, 

Delhi-110001

Mobile No. +91-9873082769

Website: www.caaga.co.in  

ITAT DELHI BENCH ‘C’: EXPENSES ALLOWED IN EARLIER YEAR CANNOT BE DISALLOWED IN SUBSEQUENT YEARS IF FACTS ARE SAME (In Favour of Assessee)

In its judgment dated 11^th January, 2013 ITAT DELHI BENCH ‘C’ in the case of Assistant Commissioner of Income-tax vs. Hindustan Fertilizer Corpn.Ltd. held that if facts are same in the subsequent years as in earlier years, than expense allowed in earlier years cannot be disallowed in subsequent years.

Facts of the Case

·       In the present case two appeals were filed by the assessee. The grounds of appeal raised by the assessee are common in both the appeals.

·      The ground of appeal was, if the expenses were allowed in earlier year than they should be allowed in the subsequent years also if the facts are same.

·         The first appeal was filed in respect of disallowance of depreciation and the second appeal was filed in respect of deduction for Voluntary Separation Scheme u/s 35DDA (1).

·        Assessee is a Government of India undertaking. It is engaged in the business of manufacture of fertilizer.

·         Due to heavy losses, the company had stopped the manufacturing activity since earlier years.

·         The Government of India has decided to close the business due to heavy losses 

·         The facts of the first appeal are:

o  During the accounting year relevant to assessment year under consideration, the Assessing Officer disallowed depreciation on several assets, viz., building, roads and culverts, water system, office appliances etc.

o   However in AY 2004-05, the assessee had claimed the depreciation on all the assets including plant & machinery, which was allowed by A.O except depreciation on plant & machinery because the assessee company had stopped the manufacturing activity. However, the depreciation on other assets viz., building, office appliances, roads and culverts, drainage system etc. was allowed.

o   The assessee accepted the view of the Department taken in AY 2004-05 and in the year under consideration did not claim depreciation on plant & machinery but claimed on other assets.

o   However, in the year under consideration, the Assessing Officer, taking a different view than the view taken in AY 2004-05 disallowed depreciation on all the assets.

o   Assessee file an appeal with CIT (A) against this order of AO, however CIT (A) also agreeing with the decision of AO.

o   Therefore assessee files an appeal before ITAT.

·         The facts of the second appeal are:

o    During the financial year 2006-07, relevant to assessment year 2007-08, the assessee made a payment of Rs. 9, 94, 63,000/- under the Voluntary Separation Scheme (VSS).

o       On the above scheme, the provisions of Section 35DDA were applicable and therefore, the Assessing Officer, following the provisions of Section 35DDA, allowed 1/5th of the payment made under VSS in the year under consideration.

o      However CIT (A) directed the AO to allow entire payment made under VSS, on the ground that Section 35DDA presupposes that there should be continuance and existence of business for the next five years and scheme is not voluntary but compulsory.

o     CIT(A) states that the Govt. of India has decided to close the business and the scheme is not voluntary in nature, it is compulsory and is to be opted by all the employees and if it is not availed by certain employees then in that circumstance those employees will be compulsorily retrenched.

o      Assessee files an appeal before ITAT.

Judgment

After considering the facts and circumstances of the case Tribunal is of the opinion that if facts and circumstances of the case are same in the year under consideration with that of any earlier years, than the same decisions will be squarely applicable in subsequent years.

Observation of ITAT in the First Appeal:-

·     The Assessing Officer is not justified in taking a view inconsistent with the view taken by the Department in AY 2004-05.

·       In fact, the assessee did not claim the depreciation on the assets on which the depreciation was disallowed by the Revenue in AY 2004-05.

·        If the Assessing Officer has to take a different view than the view taken in earlier years, on the identical facts, then there has to be a specific reason there for.

·   We do not find mention of any such specific reason in the order for the year under consideration.

·        In view of the above, we deem it proper to set aside the orders of the authorities below on this point and restore the matter to the file of the Assessing Officer.

·      We order accordingly and direct the Assessing Officer to allow depreciation on the assets on which depreciation was allowed in AY 2004-05.

Observation of ITAT in the Second Appeal:-

For the applicability of sec 35 DDA the following conditions are to be satisfied:-

 (i)  The assessee incurs any expenditure in any previous year;

 (ii) The expenditure should be by way of payment of any sum to the employee; and

(iii) The payment should be in connection with the voluntary retirement in accordance with any

      scheme of voluntary retirement.

·       As per findings there is no dispute with regard to fulfillment of condition Nos. (i) and (ii). The only dispute by the CIT(A) is that the scheme was not voluntary but compulsory in nature.

·        From the above finding, it cannot be said that the scheme was not voluntary. If the scheme is compulsory, there is no question of any option to the employees. It may be a different thing that the government persuaded or pressurized all the employees to accept the scheme giving threat of retrenchment.

·    From the perusal of Section 35DDA, we do not find any condition that there should be continuous existence of business for the next five years.

·        It is only the presumption and inference of the learned CIT(A) which does not find anywhere in the provisions of Section 35DDA.

·         In view of the above, we hold that on the facts of the assessee’s case section 35DDA is clearly applicable in respect of payment under VSS

Therefore decision of CIT (A) in both the appeals were reversed and decision goes in favour of assessee

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, 

Delhi-110001

Mobile No. +91-9873082769

Website: www.caaga.co.in 

NEW SERVICE TAX RETURN ST3 NOTIFIED, Q2 RETURN TO BE FILED BY 25th MARCH 2013

Notification No.:  01/2013-ST

Date: 22/02/2013

The Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:-

Ø  These rules may be called the Service Tax (Amendment) Rules, 2013.

Ø  In the Service Tax Rules, 1994, -

a)   in rule 7(2) after the proviso, the following proviso shall be inserted, namely:-

“Provided further that the Form ST- 3 for the period between the 1^st days of July 2012 to the 30^th day of September 2012 shall be submitted by the 25^th day of March, 2013”;

b)   For Form ST-3, the new Form ST-3 shall be substituted. 

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, 

Delhi-110001

Mobile No. +91-9873082769
Website: www.caaga.co.in 

Clarification Regarding Deemed Export Benefits for Supply Against ARO/Invalidation Letter Against Advance Authorization

Policy Circular No.:15 /2009-2014 (RE 2012)

Dated: 21/02/2013

Policy Circular No.9/2009-14 dated 1.10.2009  had clarified that supply of goods against Advance Release Order (ARO) is eligible for refund of duty drawback only and not for Terminal Excise Duty (TED) and  supplies against invalidation letter is eligible for Advance Authorization and TED refund.

The matter has been further examined in this Directorate. Benefits available against ARO/invalidation letter in respect of Advance Authorization are as under:

1.   For supply against ARO : 

a)   Refund of Duty drawback

b)   Refund of TED 

2.   For supply against invalidation letter against Advance Authorization    (AA) : 

a)   Ab-initio exemption from TED. (hence there would be no question of refund of TED).

b)   AA/DFIA for intermediate supply.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

701, Nirmal Tower,

26, Barakhamba Road,

Connaught Place, 

Delhi-110001

Mobile No. +91-9873082769

Website: www.caaga.co.in