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J.B.NAGAR CPE STUDY CIRCLE OF WIRC 4 TH JULY 2012

J.B.NAGAR CPE STUDY CIRCLE OF WIRC 4 TH JULY 2012. Intensive Course on Income Tax. TDS RECENT AMENDMENTS & ISSUES. TDS on Interest on Securities- s.193. W.e.f . 01.07.2012 On listed Debentures of a Public Ltd. Company Increase in threshold to Rs. 5,000 from Rs. 2500

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J.B.NAGAR CPE STUDY CIRCLE OF WIRC 4 TH JULY 2012

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  1. J.B.NAGAR CPE STUDY CIRCLE OF WIRC4TH JULY 2012 Intensive Course on Income Tax TDS RECENT AMENDMENTS & ISSUES NINA P. KAPASI CHARTERED ACCOUNTANT

  2. TDS on Interest on Securities- s.193 • W.e.f. 01.07.2012 • On listed Debentures of a Public Ltd. Company • Increase in threshold to Rs. 5,000 from Rs. 2500 • HUF made eligible if resident • Need not be listed • Separate exemption for interest on listed securities held in demat form continues NINA P. KAPASI CHARTERED ACCOUNTANT

  3. TDS on Directors Remuneration- s.194J • W.e.f. 01.07.2012 • Payment to a Resident Director • Remuneration, fees and commission • Not covered by s.192-Salary • 10% of Remuneration, etc. • Not eligible for threshold exemption-Any amount NINA P. KAPASI CHARTERED ACCOUNTANT

  4. TDS on Acquisition- s.194LA • W.e.f. 01.07.2012 • Increase in threshold from Rs. 1,00,000 to Rs. 2,00,000 TDS on Non resident non-citizen sportsment etc., entertainers – s.115BBA & s.194E • Entertainers covered • Rate increased to 20% NINA P. KAPASI CHARTERED ACCOUNTANT

  5. TDS on payment to NR- s.195(1)&(7) • W.r.e.f. 01.04.1962 • Obligation -always apply and deemed to have applied; • To resident or non-resident • Irrespective of residence or place of business or business connection • Irrespective of presence in India • W.e.f. 01.07.2012 • Board empowered to notify for mandatory application to A.O. • Class of persons or cases • Payer to apply for determination of amount of deduction NINA P. KAPASI CHARTERED ACCOUNTANT

  6. Software Income and Royalty-s.9(1)(vi) • Explanation 4 to 6 clarification w.r.e.f. 01.04.1976 • Trf. of rights in any right, property or info. including; • trf . of right for use or to use a computer software • license & medium irrelevant • consi. for right, property or info. whether or not • in possession or control with the payer • used directly by the payer • located in India • “Process” to include • transmission by satellite, cable, optic fibre, etc. • up linking, amplification, conversion- any seg. • secret or not • Conflict put to rest NINA P. KAPASI CHARTERED ACCOUNTANT

  7. Notification no221/2012 dt.13.06.2012 • Non deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:- • Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where- •  (i)  the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification, • (ii)  tax has been deducted- •  (a)  under section 194J on payment for any previous transfer of such software; or •  (b)  under section 195 on payment for any previous transfer of such software from a non-resident, and • (iii)  the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor. • 2. This notification shall come in to force from the 1st day of July, 2012. NINA P. KAPASI CHARTERED ACCOUNTANT

  8. Failure to Deduct or pay– s.201 • Not to be deemed to be an assessee in default where payee resident had; • Furnished return u/s. 139 • Taken into account the concerned sum in computing income • Paid the tax on returned income • Furnished certificate of ‘accountant’ in prescribed form • Payment of interest for period from date when deductible upto date of filing ROI • Consequences of non compliance • Extension of time for passing order u/s. 201(3) • w.r.e.f. 01.04.2010 • 6 years from 4 years NINA P. KAPASI CHARTERED ACCOUNTANT

  9. Levy of Fee & Penalty for TCS/TDS defaults - s.234E,271H, 272A & 273B • Delay in filing TDS/TCS Returns • Penalty of Rs. 100 per day u/s. 272A upto 30.06.2012 • Penalty of Rs. 10,000 -1,00,000 u/s. 271H from 01.07.2012 • For delay after 1 year of due date • No penalty if return filed with fee & interest within 1 year • Reasonable cause u/s. 273B • Penalty in addition to fee • Penalty for incorrect info. in TDS/TCS return u/s. 271H w.e.f. 01.07.2012 • One time penalty or separate penalties • New provision for levy of Fee -s. 234E w.e.f . 01.07.2012 • Delay in filing TDS/TCS Returns- from due date • Rs. 200 per day of default • Termed as a ‘fee’ • Fee not to exceed the amount of TDS/TCS • Fee to be paid before filing return • Combined fee or separate fees NINA P. KAPASI CHARTERED ACCOUNTANT

  10. Person Responsible- s.204 • W.e.f. 01.07.2012 • Where payer is Government • Drawing or Disbursing Officer • Any other person NINA P. KAPASI CHARTERED ACCOUNTANT

  11. Tax Collection at Source-s.206C • W.e.f. 01.07.2012 • TCS @ 1% on minerals being coal or lignite or iron ore • TCS on sale of bullion or jewelry w.e.f. 01.07.2012 • Seller to collect TCS @ 1% • Only where receipt is in cash and exceeds Rs. 2 Lakhs • Applies to non-business purchases also, • Not applicable to sales by an AOP, BOI & a Juridical Person • Not applicable where sellers turnover etc. is Rs. 1 crore or less • Not applicable to non-business sellers • Bullion not defined • Consequences where no separate collection • Grossing up and exemption for purchaser • Includible in turnoveror not • Deductible or not • Income of purchaser or not • Credit for purchaser or not • No exemption from TAN • Not to be deemed to be an assessee in default but interest payable subject to compliance NINA P. KAPASI CHARTERED ACCOUNTANT

  12. Intimation of TDS/TCS u/s 200A(1)-s.156,154 & 246A • W.e.f. 01.07.2012 • Is Notice of Demand u/s. 156 • Is rectifiable u/s. 154 • Is appeallable u/s. 246A NINA P. KAPASI CHARTERED ACCOUNTANT

  13. Cir No.1/2012 dt. 9.4.2012 • All deductors shall issue TDS certificates in Form 16A to be downloaded from TIN website in respect of all sums deducted on or after 1.4.2012 NINA P. KAPASI CHARTERED ACCOUNTANT

  14. S. 200A Processing of statements of tax deducted at source. • Following adjustments can be made during the processing of statements: i. any arithmetical error in the statement or, ii. any incorrect claim, apparent from any information in the statement. Incorrect claim defined as: • An item, which is inconsistent with another entry. • In respect of rate of deduction of tax at source. Time limit: No intimation shall be sent after the expiry of one year from the end of the financial year in which statement is filed. NINA P. KAPASI CHARTERED ACCOUNTANT

  15. CURRENT ISSUESS.194- I Rent Deposit • ‘Rent’ inclusive definition u/s194I CIT vs. Reebook India Co 291 ITR 455 Del Not refundable and hence advance rent. TDS applicable upfront • Refundable deposit not to be considered as advance rent and hence no TDS u/s.194I Enterprises International Ltd. Vs. ITO 77 ITD 189 Cal NINA P. KAPASI CHARTERED ACCOUNTANT

  16. S. 194 J Fees for professional or technical services. • Payment of transaction charges ,VSAT charges, etc. paid by stock broker to Bombay Stock Exchange and National Stock Exchange. Kotak Securities Ltd. 62 DTR 339(Bom) Bharti Cellular Ltd. 44 DTR 190(SC) Skycell Communication Ltd. 251 ITR 53(Mad) GlaxoSmithline 12 SOT 221 (Del) NINA P. KAPASI CHARTERED ACCOUNTANT

  17. S.194 H Commission or Brokerage • Definition is Inclusive • Commission or brokerage in common parlance • Commission and brokerage in commercial law • Whether principal agent relationship is mandatory ? • Is nomenclature important ? NINA P. KAPASI CHARTERED ACCOUNTANT

  18. S. 194 H Commission or Brokerage Credit Card payments • Mechanism of payment. • To approve the merchant establishment(ME) for processing the credit card payment. • Acquiring Bank (AB) pays ME the amount after deduction. • No indemnity to AB in case of default . • No payment made or amount credited by ME Ref: Vah Magna Retail (P) Ltd. ITA No.905/Hyd/2011 Dt.10/04/2012 NINA P. KAPASI CHARTERED ACCOUNTANT

  19. S. 194 H Commission or Brokerage • Bank Guarantee Commission Kotak Securities Limited ITA No.6657/Mum/11 dt.03/02/12 • Distrubution/Sale of SIM card and recharge coupons (prepaid). Principal to principal or principal agent . Vodafone Essar Cellular Ltd. 35 DTR 393 (Cochin) Idea Cellular Ltd. 29 DTR 237 (2009) (Hyd) Idea Cellular Ltd. 230 CTR 43 (2010) (Del) Bharti Cellular Ltd. 294 ITR 283 (2007) (Kol) • Explanation is not wide enough to cover any payment received in course of buying and selling of goods. • Ahmadabad Stamp Vendor 257 ITR 202 (Guj.) • Kerala Stamp Vendor 150 Taxmann 30 (Ker.) NINA P. KAPASI CHARTERED ACCOUNTANT

  20. S.194 H Commission or Brokerage • Sale of goods at fixed margins and the activity is under the direct supervision and control of the manufacturer. Hindustan Coca Cola Pvt Ltd. 98 TTJ I (Jp) • Control of sales Vs.Contract agency. Title and property passes on to the buyer/distributor on the delivery o goods. Fosters India Pvt. Ltd. 94 TTJ 899 (2005) (del) NINA P. KAPASI CHARTERED ACCOUNTANT

  21. S.194C- Contract for Work NINA P. KAPASI CHARTERED ACCOUNTANT Contract for sale vs. Works contract Relationship- Principal to Principal Passing of property in the goods only on delivery Payment of sales tax and excise Open Market for goods No contribution of expenses from Buyer

  22. BDA Ltd. vs. ITO (TDS) CIT vs. GlenmarkPharmseuticals 324 ITR 194(Bom) -exclusive contract no bar for sale Twin conditions- Property in goods passed on delivery Material from the third party CIT Vs. Seagram Manufacturing (P.Ltd.) Hindustan Shipyard Ltd. vs. State of AP 6 SCC 579 –even though material was obtained from the buyer, the relevance of such material into final product Circular No. 681 dated 08.03.1994 wherein vide para 7(b) no tax is required to be deducted even in cases of a works contract where the property in goods has passed on delivery NINA P. KAPASI CHARTERED ACCOUNTANT

  23. Hindustan Shipyard Ltd. vs. State of AP 6 SCC 579 –even though material was obtained from the buyer, the relevance of such material into final product • Circular No. 681 dated 08.03.1994wherein vide para 7(b) no tax is required to be deducted even in cases of a works contract where the property in goods has passed on delivery NINA P. KAPASI CHARTERED ACCOUNTANT

  24. S.194J- Professional fees If no element of profit and separate debit note- nothing on reimbursement of expenses. Separate debit note Dr. WilmarSchwabeP.Mltd. 3 SOT 71 (Del) Q.30 of s.715 – referring to TDS on gross amt applicable only when composite bill was raised. Credit – TDS u/s.199 – when income was offered for taxation as per the method of income employed by the assessee Smt. VarshaSalunkhe 98 ITD 147 (Mum) NINA P. KAPASI CHARTERED ACCOUNTANT

  25. If part income is offered –prorata TDS, balance when offered Pradeep Kumar Dhirvs.ACIT 107 ITD 118 Chd • TDS on service tax- Cir 4 /008 dt. 21.4.2008 – No TDS on service tax on rent • Letter FNo. 275/73/2007- IT (B) d6.30.6.2008. Since s.194J covers ‘any sum paid’, the Board has decided not to extend the scope of the above circular • Binding nature of circular NINA P. KAPASI CHARTERED ACCOUNTANT

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