FINANCE & LAW TODAY: Reverse charge in Service Tax

FINANCE & LAW TODAY: Reverse charge in Service Tax: For minimisation of service tax evasion central government extended the liability of service tax payment from provider of service to  re...

Reverse charge in Service Tax

For minimisation of service tax evasion central government extended the liability of service tax payment from provider of service to recipient of service. In other word in some cases service recipient pays service tax.

As per rule 2(1)(d) of SERVICE TAX RULES, 1994 followings services are under preview of Reverse charge -:

FULL REVERSE

Whole amount of service tax is paid by service receiver

1. Services provided or agreed to be provided by INSURANCE AGENT to a person who is carrying business of insurance.

2. Services provided or agreed to be provided by RECOVERY AGENT to BANKING COMPANY or FINANCIAL INSTITUTION or NON BANKING FINANCIAL INSTITUTION

3. In respect of services provided or agreed to be provided by a MUTUAL FUND AGENT OR DISTRIBUTOR to MUTUAL FUND OR ASSETS MANAGEMENT COMPANY.

4. In respect of services provided or agreed to provided by SELLING OR MARKETING AGENT OF LOTTERY TICKETS to LOTTERY DISTRIBUTOR OR SELLING AGENT.

5. In respect of services provided or to be provided by GOODS TRANSPORT AGENCY in respect of transport of goods to

a. Factory register under factories act, 1948

b   Body corporate established under any law

c    Society registered under the society act,1860 or any other law for the time being    force.  

e   Co – Society registered under any law,

d   Dealer who is registered under central excise act, 1944

e   Partnership firm whether registered or not

Provided that when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax.

6. In respect of services provided or agreed to be provided by way of SPONSORSHIP SERVICE to ANYBODY CORPORATE OR PARTNERSHIP FIRM located in taxable taxable territory.

7. In respect of services provided or agreed to be provided by arbitral tribunal to any business entity located in taxable territory.

8. In respect of services provided or agreed to be provided by INDIVIDUAL ADVOCATE OR PARTNERSHIP FIRM OF ADVOCATES by way of legal services to BUSINESS ENTITY located in taxable territory.

9. In respect of services provided or agreed to provided by a DIRECTOR OF A COMPANY OR BODY CORPORATE to THE COMPANY OR THE BODY CORPORATE

10. In respect of services provided or agreed to be by GOVERNMENT OR LOCAL AUTHORITY by way support services to BUSINESS ENTITY located in taxable territory except -:

a) Renting of immovable property

b)  Services specified in sub clauses

( i ) Services by department of post by way of speed post, express parcel post, life insurance and agency services provided to a person other than government

(ii) Services in respect of aircraft or vessel, inside or outside the area of a port or an airport.

(iii) Transport of goods or passengers of clause (a) of section 66D of the finance act, 1994

11. In respect of services provided or agreed to be provided by way renting of motor vehicle by INDIVIDUAL, HUF OR PARTNERSHIP

to BODY CORPORATE, designed to carry passengers on abated value to any person who is not carrying similar business.

12. In respect of services provided or agreed to be provided by way of supply of MANPOWER for any purpose or SECURITY services by INDIVIDUAL, HUF , PARTNERSHIP FIRM

     to ANYBODY CORPORATE.

13. In respect of services provided or agreed to be provided by any person who is located in NON TAXABLE TERRITORY and received any person LOCATED IN THE TAXABLE TERRITORY.

14. in relation to service provided or agreed to be provided by a person involving an aggregator in any manner ,the liable to pay tax is aggregator of the service .

PARTIAL REVERSE CHARGE

15. In relation to portion in execution of work contract service provided or to be provided by individual, HUF, proprietary partnership

To business entity register as body corporate.

50% pay by provided by Service Provider

50% pay by recipient of service

16. In respect of services provided or agreed to be provided by way renting of motor vehicle by individual, HUF or partnership to body corporate, designed to carry passengers on non abated value to any person who    is not carrying similar business.

       50% pay by provided by Service Provider

       50% pay by recipient of service

Best Regards

K.K. SINGH

FINANCE & LAW TODAY: Claim your Income Tax Refund for six years

FINANCE & LAW TODAY: Claim your Income Tax Refund for six years: Present Legal provisions on filing of return for loss or claiming refund You are required to file your income tax return in case your gr...

Claim your Income Tax Refund for six years

Present Legal provisions on filing of return for loss or claiming refund

You are required to file your income tax return in case your gross total income exceeds the amount of the basic exemption limit. You can file your return of income for claiming refund of taxes even if your income does not exceed the exemption limit due to TDS or payment of advance taxes . You can also file your income tax return for claiming the refund in case the actual tax liability is lower than the aggregate of the TDS and taxes paid by you like advance tax or self assessment tax. This return for claiming the refund of excess taxes paid can be filed within a period of two years from the end of the financial year for which claim the refund relates. For example there was excess TDS for the financial year ended 31-03-2014, for which the due date was 31^st July 2014, you can still file your income tax return for claiming the refund of excess TDS by 31^st March 2016.

Moreover in case you want to carry forward any losses suffered during the year, you have to file your income tax return by the due date which is 31^st July for normal tax payers and which has been extended to 31^st August this year. In case you fail to file your return of income by the due date, you lose your right to carry forward the losses.

Extension of time limit:

Under the provision of Income Tax Act, CBDT has powers to issue orders for granting relaxation from these requirements. In exercise of these powers CBDT has been issuing instruction, passing orders, from time to time, giving relaxation in order to mitigate genuine hardships caused to the taxpayers where the taxpayers could not claim the refund due to expiry of the statutory time limits for filing income tax returns. The CDBT has very recently issued  circular no. 09/2015 on 9^th June prescribing the procedure to condone the delay for n claiming the income tax refund/carry forward of losses. Let us understand what the latest instruction of CBDT provides for.

Period of for which request can be made

A tax payer can make a request to condone the delay in filing of return within six years from the end of the assessment year in respect of which the return is to be filed. So effectively in case of claim for income tax refund, you get an extension of five years only as presently also you can file your income tax return for refund one year after end of the assessment year. So now you can make an application for condonation of delay for any financial year ending 31-03-2009 or thereafter. So in case any of you who failed to file your return in which you were entitled to claim income tax refund or carry forward of losses, can file the application now in case it relates to financial year ended 31-03-2019 or thereafter.

Who can condone the delay

This circular provides for different authorities who can condone the delay based on the amount invoiced. Any application to condone the delay for claim amount of Rs. 50 lacs or more has to be made to CBDT only. In case the amount of claim is between Rs. 10 lacs and 50 lacs the application will have to be made to the Chief Commission of income tax or Principal Chief Commissioner of Income tax. However in case the amount involved is less than 10 lacs, the same can be entertained by either Principal Commission of income tax or commissioner of Income Tax. The limits specified are same whether your application is for income tax refund or for carry forward and set off of losses. It may also be noted the above limits apply to each financial year separately and not for the aggregate f the claim for all the years taken together. Before accepting or rejecting the application these authorities are supposed to verify that the claim is correct and genuine. It may be noted that the assessing office who will eventually process your income tax return can make scrutiny of your claims before granting you refund or allowing you to carry forward the loss.

Conditions for making the application:

In order to ensure that your application to condone the delay is accepted, you need to satisfy certain conditions. The income in respect of which the refund is being claimed should not be includible in the income of any other persons. The claim for refund should have arisen due to TDS, of payment of advance tax or self assessment tax.

Generally you are entitled to get interest on the amount of refund due to you in case you have filed your return of income within two years from end of the financial years but in case you avail this facility of condonation of delay under these instruction you will not be entitled to any interest on the amount of refund due to you.

Moreover under these instructions you can even make an application for claiming supplementary refund in case you already have received part of the income tax refund.

How to go about it

No specific form or format for making such application is prescribed so the application can be made on plain paper stating the facts of the case in detail, which will help the authorised commissioner to take the appropriate decision.

Though no specific process has been prescribed under these instruction I would suggest you to file your income tax return along with the application for condonation of delay. So in case your application is accepted, you return will also be taken up for processing immediately.

I am sure above discussion will help few of you will be benefited who could not claim income tax refund as they had missed the deadline for filing of the income tax return.

Best Regards

K.K.SINGH

FINANCE & LAW TODAY: Some Recent Case Decisions on Important Issues in ...

FINANCE & LAW TODAY: Some Recent Case Decisions on Important Issues in ...: Stay on Demand.--   Stay on demand should be granted till the disposal of appeal where assessment was framed ex­parte u/s 144 of the Act. ...

Some Recent Case Decisions on Important Issues in Income Tax

Stay on Demand.--  Stay on demand should be granted till the disposal of appeal where assessment was framed ex­parte u/s 144 of the Act. Whose fault was, for passing ex-parte order is immaterial for the proceedings of stay. ACIT vs. Anirban Transport Services (ITAT Kolkata)ITA No.821/Kol/2013. Sec 68: Cash credits-Share capital – Identity disclosed – Deletion was held to be justified. Once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds. It was held that Tribunal was justified in deleting addition in the hands of assessee company. CIT vs. Nishan Indo Commerce Ltd. (2014)101 DTR 413 (Calcutta High Court). Sec 68: Cash credits-–Unsecured loan-Name, address, PAN, copy of IT Returns, balance sheet, profit and loss account of all creditors/lenders as well as their confirmation had been furnished, A.O could not make addition on account of unsecured loan and interest thereon. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender were furnished and when it has been found that the loans were received through cheques / banking channels and the loan account were duly reflected in the balance sheet, the A.O was not justified in making the addition on account of Cash Credit u/s. 68 of the Income Tax Act, 1961 (AY. 2007-08). CIT vs. Apex Therm Packaging (P.)Ltd. (2014)222 Taxman 125(Mag.) (Gujrat High Court). Sec 68: Cash credits–Booking of flats-Address and PAN of concerned persons discharged its primary onus addition of said amount to income – without making proper inquiries u/s. 133(6) was not justified.[ Sec 133(6)]. Assessee received certain amount from four persons on account of booking of flats. A.O. rejected assessee’s explanation and added said amount to its taxable income. Tribunal opined that since assessee had discharged primary onus cast on it, A.O should have made inquiry u/s. 133(6). On issuance of notice, the assessee claimed that these were not deposits, but were booking amounts for flat purchased. The identity with the address and PAN numbers had been supplied to the A.O but the A.O was not satisfied with the documents. The Hon’ble High court held that the onus which was required to be discharged on the part of the assessee respondent was duly done. Not only the identity of the persons concerned but also the PAN numbers were before the Assessing Officer. In the event of any further inquiry, it was open to the A.O. to make inquiry under section 13 3(6) of the Act. On its choosing not to exercise such powers, it was erroneous on the part of the Assessing Officer to make addition of a sum of Rs. 23,00,000/-, despite such cogent evidences having been put-forth by the assessee. No question of law, therefore, arises and hence in absence of any such enquiry the addition made by the A.O. u/s. 68 was deleted. (AY. 2008-09). CIT vs. Chanakya Developers (2014)222 Taxman 164 (Gujrat High Court). Sec 68: Cash credits–loan -Books of account, bank statement and income-tax return of lender was on record – loan could not be regarded as bogus. The addition on basis that four depositors furnished requisite details to prove their identity and showed the place of their residence. The loan was received through account payee cheques, copies of bank statement was given and the details of PAN were available. All these materials duly proved the genuineness of the transaction of loan as well as the creditworthiness of the depositors. Hence, the Addition u/s. 68 cannot be made. (AY. 2005-06). CIT vs. Patel Ramniklal Hirji (2014)222 Taxman 15(Mag.) (Gujrat High Court) Sec 68: Assessment proceedings under the Income Tax Act are not a game of hide and seek. If A.O does not conduct proper inquiry, the obligation to do so is on the CIT(A) & ITAT. The A.O here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. CIT vs. Jansampark Advertising & Marketing (P) Ltd. (Delhi High Court) Sec 68: Cash credits-Share Application money –Bank accounts were fabricated- Addition was held to be justified. The addition was made u/s 68 with respect to share application money received by the assesse. The A.O held that assesse had failed to discharge the onus to prove the creditworthiness of the said investors in terms of u/s 68 as the extracts of bank statements furnished by assesse was fabricated and further held that assesse had filed to discharge the onus in proving the identity of the creditors/ subscribers, genuineness of the transactions and held that even if the transaction were not required to be fulfilled in respect of share application money / share capital once identity is established. On appeal in Tribunal, Tribunal confirmed the finding of the CIT (A) relying on CIT V. Lovely Exports(P)Ltd. 216 CTR (SC) 195. On further appeal in HC, the court reversed the order of Tribunal and held that bank statements of the investors furnished by the assesse during the original assessment proceedings were fabricated and misleading. They omitted to show that there was deposit of cash immediately prior to issuance of cheques for preparation to pay orders or DDs in favour of the assessee regarding subscription of its share capital. Court further held that false evidence had been adduced by the assesse during the original proceedings to get undue advantage of giving colour of genuineness to bogus entries through the bank accounts and the deposits were mostly by cash, the A.O was justified in making addition u/s 68. (AY. 2001-02). SLP of assesse was rejected. SPL no 7784 of 2014 dt 26-09-2014 N. Tarika Property Investment (P) Ltd v.CIT (2014) 227 Taxman 373 (SC). CIT vs. N. Tarika Properties Investment (P) Ltd (2014)264 CTR 472 (Delhi High Court). Sec 68: Cash credits–Share application–Genuine applications. The assessee had furnished material which included income-tax returns, balance-sheets, Registrar of Companies particulars and bank account statements. On the basis of these, the Commissioner (Appeals) held that the share application money or the source of the share application money had been satisfactorily explained. The Tribunal was of the opinion that no interference was warranted having regard to the facts of this case. This was a pure finding of fact. Sec 68 was not applicable. (AY. 2000-2001). CIT .v. Expo Globe India Ltd. (2014)361 ITR 147 (Delhi High Court). Sec 68: Cash credits –Share application money-No addition shall be made in the hands of the assessee where transactions related to the receipt of share application money are genuine and are fully recorded by the share applicants. The assessee had received share application money from 11 different companies. The A.O proposed an addition on the ground that the assessee could not discharge the onus and prove the genuineness of the receipt. The first appellate authority observed that the assessee had placed on record various documents in support of the share application money received. The Tribunal restored the matter to the A.O since it was not evident that the impugned amounts were assessed in the hands of share applicants, in which case they could not be assessed in the hands of the assessee and vice versa. The High Court upheld Tribunal’s order clarifying that the A.O should objectively examine the whole issue and in case he found that the transactions were genuine and fully recorded by the share applicants, no addition would be made in the hands of the respondent assessee. In other words, the two conditions had to be satisfied. First the transaction should be genuine, true and not a camouflaged, and secondly the transaction should be duly recorded in the books of the share applicants. In case any of the two conditions were not satisfied, it would be open to the A.O to act in accordance with the law and make appropriate additions if justified and mandated by Statute (AY. 200 1-02). CIT vs. Kansal Fin cap Ltd. (2014)221 Taxman 151 (Mag.) (Delhi High Court). Sec 68: Cash credits – Where in support of receipt of share application money – assessee produced names, addresses and PAN of depositors which were sufficient to prove their identity and creditworthiness – it was not justified in making addition u/s. 68 in respect of amount in question. The A.O found that the assessee had reflected amount in the balance sheet under the head “share application money pending allotment” as on 31.3.2005. During the assessment proceedings the assessee could not file confirmation of share applications and therefore addition of the entire amount is made in the hands of the assessee. The CIT (A) dismissed the appeal confirming the findings of the A.O. Share application money had deposited the cash in their respective bank accounts before cheques in the name of the assessee for share allotment. The High Court observed that the A.O made the addition for the reason that the assessee did not file confirmation from the share applicants. However, he did not doubt either the identity or the creditworthiness of the share applicants because no such discussion has been made in the assessment order. The explanation of the assessee as regards to the inability in filing the confirmation before the Assessing Officer was that the sufficient time was not provided. It is noticed that the learned CIT (A) confirmed the addition for the reason that the creditworthiness was not proved. High Court held that, the assessee had discharged the onus by furnishing the name, address and Permanent Account Number of the share applicants and if the A.O was having any doubt he could have issued the summons to the persons who were claimed to be assessed to income tax and were having Permanent Account Number. (AY. 2005-06). CIT vs. Som Tobacco India Ltd (2014)222 Taxman 58(Mag.) (Allahabad High Court). Sec 68: Despite documentary evidence and broker’s confirmation, genuineness of penny stock transactions has to be determined on the basis of ‘preponderance of human probabilities’. If assessee is unable to explain ‘intriguing’ facts and circumstances, genuineness of transaction cannot be accepted Firstly, documentary evidences, in the face of unusual events, as prevailing in the instant case, and without any corroborative or circumstantial evidence/s, cannot be regarded as conclusive. Two, the preponderance of probabilities only denotes the simultaneous existence of several ‘facts’, each probable in itself, albeit low, so as to cast a serious doubt on the truth of the reported ‘facts’, which together make up for a bizarre statement, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible and independent evidences. ITO vs. Shamim M. Bharwani (ITAT Mumbai). Sec 68: Only credits received during the year can be assessed as unexplained cash credits. Credits of earlier years, even if unexplained, cannot be assessed. Though the assessee could not furnish the confirmation of the loan and other evidences but such a loan could not have been added in the A.Y. 2005-06 as the same was taken in the earlier years and is being carried forward. In this year it is appearing balance of the current year. Thus, legally such an addition could not sustained in this year. Rita Stephen Pinto vs. ITO (ITAT Mumbai). Sec 147: Reopening (even of s. 143(1) assessment) on the ground that a specific aspect requires verification is not permissible. In the present case, the A.O does not state that any income chargeable to tax has escaped assessment. All that the Revenue desires is verification of certain details and pertaining to the gift. That is not founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. That belief is not recorded and which alone would enable the Assessing Officer to proceed. Nivi Trading Limited vs. UOI (Bombay High Court). Sec 147: Sec 143(3) assessment order is not a scrap of paper & A.O is expected to have applied his mind. Reopening on ground of “oversight, inadvertence or mistake” is not permissible. The assessee made a claim for deduction for bad debts which was allowed by the A.O u/s 143(3). Subsequently, within four years from the end of the assessment year, the A.O reopened the assessment u/s 148 on the ground that the amount written off as bad debts was a capital loss and could not allowed as a deduction. The Tribunal allowed the assessee’ s appeal and quashed the reassessment proceedings. Before the High Court, the department urged that the reopening was valid because (a) the A.O acted on an audit objection which constitutes “tangible material” and (b) as the A.O had not dealt with the issue in the original assessment order, he had jurisdiction as held in Kalyanji Mavji & Co 102 ITR 287 (SC), New Light Trading Co256 ITR 391 (Del) and Dr. Amin’s Pathology Laboratory 252 ITR 673 (Bom). HELD by the High Court dismissing the appeal: (i) The Tribunal has rendered a finding of fact that the A.O raised a query with regard to the issue which was responded to by the assessee and on satisfaction of the same the A.O passed the assessment order. Therefore, reopening of assessment on an issue in respect of which a query was raised and responded to by the assessee would amount to a change of opinion; (ii) The argument that the tangible material is the audit objections received by the A.O is not acceptable because there is no mention of any tangible material in the reasons recorded. A reopening notice can be sustained only on the basis of grounds mentioned in the reasons It is not open to the Revenue to add and/or supplement later the reasons recorded at the time of issuing reopening notice; (iii) The argument that the A.O has been careless in bringing to tax a particular amount which is chargeable to tax and that the Revenue should not be precluded from issuing notice u/s 148 overlooks the fact that power to reopen is not a power to review an assessment order. At the time of passing assessment order, it expected of the A.O that he will apply mind and pass an order. An assessment order is not a mere scrap of paper. To accept the submission of the department would mean to negate the well settled position in law as stated by the Supreme Court in CIT Vs. Kelvinator of India Ltd 256 ITR 1 (Delhi)(FB) that the concept of ‘change of opinion’ brought in so as to have in built test to check abuse of power; (iv) Kalyanji Mavji & Co 102 ITR 287 (SC), where it was held that “oversight, inadvertence or mistake” in passing assessment order will give the A.O jurisdiction to reopen the assessment, is not good law in view of the subsequent decision in Indian and Eastern Newspaper Society Vs. CIT 119 ITR 996. An error discovered on a reconsideration of the same material (and no more) does not give him that power. The aforesaid view on the above proportion has been reiterated by the Apex Court in A.L.A.Firm vs. CIT 183 ITR 285. New Light Trading Co 256 ITR 391 (Del) and Dr. Amin’s Pathology Laboratory 252 ITR 673 (Bom) are also distinguishable on facts. CIT vs. Jet Speed Audio Pvt. Ltd (Bombay High Court). Sec 263: Fact that assessment order is silent on a point does not mean that there is no application of mind by A.O if he has raised a query during the assessment proceedings and assessee has replied. This Court has followed the case of “Idea Cellular Ltd. Vs. Deputy Commissioner of Income Tax & Ors., [(2008) 301 ITR 407 (Bom.)]” wherein it was held that if a query is raised during assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment Order would not lead to a conclusion that no mind had been applied to it. CIT vs. Fine Jewellery (India) Ltd (Bombay High Court).

FINANCE & LAW TODAY: Loan to Director – Section 185

FINANCE & LAW TODAY: Loan to Director – Section 185: As per Section 185:  No Company ( Private & Public) Directly or Indirectrly Advance any loan, including book debt, to any of its  ...