TAX AUDIT DUE DATE EXTENDED

Notification Income tax Due date extended to 15.10.2010

F.No. 225/72/2010-ITA.IIGovernment of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

Dated : September 27, 2010

Order under Section 119 of the Income Tax Act, 1961

On consideration of the reports of disturbance of general life caused due to floods and heavy rains, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the due date of filing of returns of income for the Assessment Year 2010-11 from 30.09.2010 to 15th October 2010. Accordingly the due date for Tax Audit report u/s. 44AB of the Income Tax Act is also extended to 15th October, 2010.

(Ajay Goyal)

http://www.incometaxindiaefiling.gov.in/

TAX AUDIT DUE DATE EXTENDED

THE DUE DATE FOR FILLING INCOME TAX RETURN ON SEPTEMBER 30, 2010 IS EXTENDED TILL OCTOBER 15, 2010.

I'VE GOT SMS FROM CA.KETAN VIKAMSAY.

Concurrent audit

 

Web 1 new result for Concurrent audit

Empanelment with United Bank of India for Concurrent Audit ... Notice for Empanelment:-United Bank of India intends to empanel Chartered Accountant Firms for Concurrent Audit of Branches located in North Eastern states, ... taxguru.in/news/display/199//

---

Tip: Use quotes ("like this") around a set of words in your query to match them exactly. Learn more.

Remove this alert.
Create another alert.
Manage your alerts.

E-filing of I-T return for AY 2010-11 - Corporates

Dear All,

Please note that the due date of filing of I-T returns for corporate taxpayers is 30th September, 2010 for AY 2010-11. In case you have not already E-filed your I-T return, please do so immediately without waiting till the last minute. The following are the important points to be noted:

2. Amendment to Rule 12 - Making Digital Signature Mandatory for Companies- Vide notification dated 9th July 2010 amending Rule 12, the CBDT has made it mandatory all Companies filing ITR-6 to digitally sign the I-T return for AY 2010-11.

3. As per Section 140 of the IT Act 1961, the person responsible for signing the I-T return can be, typically, the:

a) Managing Director or any other Director (in case the MD is unavailable) in case of a Company;

i. Any authorized person holding a legal power of attorney in case of a Non-resident Company;

Any person wishing to sign the I-T Return digitally has to complete the registration process for the DSC on the e-filing website- http://incometaxindiaefiling.gov.in prior to signing.

4. The Digital Signature Certificate (DSC) is used for signing the I-T Return at the time of upload, the Department verifies,

i. if the DSC is registered and in case DSC has been updated the DSC being used is the latest DSC registered;

ii. that the unique Sl No of the DSC used to sign the I-T Return is the same as the unique Sl No of registered DSC; and,

iii. the PAN number of the Verifier (Authorized Signatory) as mentioned in the Verification portion of the I-T Return, is the same as that of the person bearing the registered DSC;

only then the I-T Return is permitted to be signed and uploaded.

5. The complete procedure for registration of DSC and related FAQs is available at https://incometaxindiaefiling.gov.in/portal/downloads10-11/itr/Procedure%20for%20Registration%20of%20Digital%20Signature%20and%20Upload%20of%20Income%20Tax%20Returns%20using%20Digital%20Signature.pdf

6. Since the prior registration of the DSC is a pre-requisite before uploading the I-T return for corporates, please ensure that your DSC is registered or updates immediately without any delay. This will prevent any last minute difficulties.

source :- Email of the E-filing Administrator, Income Tax Department

--
--------------------
CA Umesh Malvade
Chartered Accountant

ITR VOL 327 PART 2 & ITR (TRIB) VOL5 PART 5

INCOME TAX REPORTS (ITR)

Volume 327 : Part 2 (Issue dated 27-9-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Companies --Minimum alternate tax--Special provision--Where normal tax payable would be less than ten per cent. of book profits--Book profits deemed to be total income--Provision a self-contained code--100 per cent. of export profits eligible for reduction--Income-tax Act, 1961, ss. 80HHC, 115JB-- Ajanta Pharma Ltd. v. CIT . . . 305

Words and phrases --"Eligibility" and "deductibility"--Meanings of-- Ajanta Pharma Ltd. v. CIT . . . 305

HIGH COURTS

Advance tax --Interest--Company--Computation of income under section 115J--Interest cannot be levied under sections 234B and 234C--Income-tax Act, 1961, ss. 115JB, 234B, 234C-- CIT v. Natural Gems Ltd. (Bom) . . . 269

Appeal to Appellate Tribunal --Powers of Tribunal--Power to rectify mistakes in its order--Mistake which goes to root of matter--Tribunal can rehear the appeal--Income-tax Act, 1961, s. 254(2)-- CIT v. S. K. Gupta (All) . . . 267

Audit --Special audit--Remuneration of special auditor--Effect of section 142(2D)--Remuneration to be determined by Chief Commissioner--Income-tax Act, 1961, s. 142(2D)-- Dhanesh Gupta and Co . v. CIT (Delhi) . . . 246

Capital gains --Depreciable assets--Short-term capital gains--Sale of building and purchase of another building--Effect of section 50--Meaning of "block of assets"--Finding that building sold not used as a hotel--Building sold and building purchased belonging to same block of assets--Assessee entitled to set off amount invested in purchase of building--Income-tax Act, 1961, s. 50(2)--Income-tax Rules, 1962, Appx I, Part A, item I-- CIT v. Scindia Investment P. Ltd. (Bom) . . . 282

----Exemption--Sale of agricultural land and investment in purchase of new land--Registration of new land under assessee's son's name as co-owner--New land used for agricultural purpose--Assessee entitled to deduction--Income tax Act, 1961, s. 54B-- CIT v. Gurnam Singh (P&H) . . . 278

Cash credit --Finding that explanation regarding creditors was false--Addition of amount representing cash credits--Justified--Income-tax Act, 1961, s. 68-- Mahavir Prasad v. ITO (P&H) . . . 178

Civil construction --Estimation of income--Gross profit rate--Rejection of accounts--Commissioner (Appeals) directing flat rate of 12 per cent.--Neither assessee nor Revenue challenging the rate applied--Tribunal affirming order of Commissioner (Appeals)--Proper--Income-tax Act, 1961-- CIT v. Surinder Pal Nayar (P&H) . . . 236

Company --Book profits--Interest--Interest on excess refund under section 234D whether leviable--Provision for voluntary separation scheme--Whether to be added--Matter remanded for fresh consideration--Income-tax Act, 1961, ss. 115JA, 234D-- CIT v. Areva T & D India Limited (Mad) . . . 183

Income from undisclosed sources --Promissory note recovered from third person--Third person subsequently retracting statement that amount covered by promissory note was due to assessee--Amount disclosed as income of firm of which third person was partner--Assessee not given opportunity to cross-examine third person--Amount covered by promissory note could not be assessed as income of assessee from undisclosed sources--Income-tax Act, 1961-- Heirs and Legal Representatives of late Laxmanbhai S. Patel v. CIT (Guj) . . . 290

Industrial undertaking --Special deduction under sections 80HHA and 80-I--Assessee entitled to special deduction under both provisions simultaneously--Income-tax Act, 1961, ss. 80HHA, 80-I-- Deputy CIT v. Blue Bell Polymers P. Ltd. (Guj) . . . 259

Exemption --Industrial undertaking--Interest on foreign loan--No proof of argument before Tribunal whether approval taken as required under section 10(15)(iv)(c)--No apparent mistake--Rectification to withdraw exemption not permissible--Income-tax Act, 1961, s. 10(15)(iv)(c)-- CIT v. Virat Shipping Corporation (Guj) . . . 257

Offences and prosecution --Failure to file returns in time--Issue of notice under section 148 and filing of returns in response thereto--Will not exonerate assessee of liability to prosecution--Mens rea--Statutory presumption as to culpable mental state--Assessee entitled at trial to prove absence of mens rea--Income-tax Act, 1961, ss. 139(1), 148, 276CC, 278E-- R. Inbavalli v. ITO (Mad) . . . 226

----Wilful attempt to evade tax--Fabricating false evidence--Assessee found in possession of two agreements showing different values in respect of same transaction--No proceedings pending at time of search--Not a case of fabrication of false evidence for use in judicial proceedings--Possession of document containing false entry--Prima facie material for framing charge of wilful attempt to evade tax--Income-tax Act, 1961, s. 276C(1)--Indian Penal Code, 1860, s. 193-- Vijayalalitha v. Sta(Mad) . . . 261

Penalty --Concealment of income--Assessee failed to disclose income from capital gains--Assessee not filing revised return in spite of notice under section 148--Assessee convicted for concealment in criminal proceedings--Disclosure in Form 34A does not amount to disclosure in income-tax return--Finding that concealment of income deliberate--Imposition of penalty--Justified--Income-tax Act, 1961, s. 271(1)(c)-- Smt. Ram Piari v. CIT (P&H) . . . 318

----Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Penalty when imposed--Claim for deduction rejected and penalty imposed--Tribunal not justified in cancelling penalty without considering explanation of assessee--Matter remanded--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Sandur Manganese and Iron Ores Ltd. (Karn) . . . 242

----Concealment of income--Explanation that addition to income had been accepted to buy peace and avoid litigation--Explanation found reasonable by appellate authorities--Cancellation of penalty--Valid--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Vasant K. Handigund (Karn) . . . 233

----Waiver of penalty and interest--Conditions precedent--Disclosure of income must be voluntary--Genuine financial hardship if penalty were imposed--Disclosure of income after search and discovery of incriminating material--No evidence of financial hardship if penalty were imposed--Rejection of application for waiver--Justified--Income-tax Act, 1961, s. 273A-- Shardadevi P. Jhunjhunwala v. CIT (Bom) . . . 211

Precedent --Effect of decision of Supreme Court in Benara Valves Ltd. v. CCE [2006] 204 ELT 513 ; [2007] 8 RC 6-- Shardadevi P. Jhunjhunwala v. CIT (Bom) . . . 211

----Supreme Court granting leave to appeal and then dismissing appeal--Effect--Decision of High Court affirmed by Supreme Court-- CIT v. Natural Gems Ltd . (Bom) . . . 269

Purchase of immovable property by Central Government --Agreement of sale of trust property after obtaining sanction under Bombay Public Trusts Act--Sale instance in a subsequent year in a different locality relied on--Details of such sale not furnished--No evidence of attempt to evade tax--Order of pre-emptive purchase not valid--Income-tax Act, 1961, s. 269UD-- Virendra v. Appropriate Authority (Bom) . . . 185

Reassessment --Income escaping assessment--Block assessment set aside by Tribunal on finding that sums added not undisclosed income--Finding of Tribunal binding on Assessing Officer--Reassessment for years comprised in block period to tax same sums not permissible--Income-tax Act, 1961, ss. 147, 148, 158BC-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

----Notice after four years--No finding that assessee failed to disclose fully and truly material facts for assessment--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

----Reassessment after four years--Condition precedent--Failure to disclose material facts for assessment--Claim for exemption in respect of dividends--Claim allowed after considering facts--Reassessment after four years to disallow deduction--Not valid--Income-tax Act, 1961, ss. 10(33), 14A, 147-- Indian Oil Corporation Ltd. v. Deputy CIT (Bom) . . . 272

Reference --Finding of fact--Finding based on relevant material--Finding cannot be set aside--Income-tax Act, 1961, s. 256-- CIT v. Scindia Investment P. Ltd . (Bom) . . . 282

----Question of fact or law--Legal effect of finding of fact is a question of law--Income-tax Act, 1961, s. 256-- Heirs and Legal Representatives of late Laxmanbhai S. Patel v. CIT (Guj) . . . 290

Search and seizure --Unaccounted income--Unaccounted sales--Tribunal holding that once income is estimated for entire period, expenditure has to be correspondingly estimated--Findings of fact--Income-tax Act, 1961-- CIT v. Hindustan Marble P. Ltd . (Guj) . . . 312

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 10(15)(iv)(c) --Exemption--Industrial undertaking--Interest on foreign loan--No proof of argument before Tribunal whether approval taken as required under section 10(15)(iv)(c)--No apparent mistake--Rectification to withdraw exemption not permissible-- CIT v. Virat Shipping Corporation (Guj) . . . 257

S. 10(33) --Reassessment--Reassessment after four years--Condition precedent--Failure to disclose material facts for assessment--Claim for exemption in respect of dividends--Claim allowed after considering facts--Reassessment after four years to disallow deduction--Not valid-- Indian Oil Corporation Ltd. v. Deputy CIT (Bom) . . . 272

S. 14A --Reassessment--Reassessment after four years--Condition precedent--Failure to disclose material facts for assessment--Claim for exemption in respect of dividends--Claim allowed after considering facts--Reassessment after four years to disallow deduction--Not valid-- Indian Oil Corporation Ltd. v. Deputy CIT (Bom) . . . 272

S. 50(2) --Capital gains--Depreciable assets--Short-term capital gains--Sale of building and purchase of another building--Effect of section 50--Meaning of "block of assets"--Finding that building sold not used as a hotel--Building sold and building purchased belonging to same block of assets--Assessee entitled to set off amount invested in purchase of building-- CIT v. Scindia Investment P. Ltd. (Bom) . . . 282

S. 54B --Capital gains--Exemption--Sale of agricultural land and investment in purchase of new land--Registration of new land under assessee's son's name as co-owner--New land used for agricultural purpose--Assessee entitled to deduction-- CIT v. Gurnam Singh (P&H) . . . 278

S. 68 --Cash credit--Finding that explanation regarding creditors was false--Addition of amount representing cash credits--Justified-- Mahavir Prasad v. ITO (P&H) . . . 178

S. 80HHA --Industrial undertaking--Special deduction under sections 80HHA and 80-I--Assessee entitled to special deduction under both provisions simultaneously-- Deputy CIT v. Blue Bell Polymers P. Ltd. (Guj) . . . 259

S. 80HHC --Companies--Minimum alternate tax--Special provision--Where normal tax payable would be less than ten per cent. of book profits--Book profits deemed to be total income--Provision a self-contained code--100 per cent. of export profits eligible for reduction-- Ajanta Pharma Ltd. v. CIT (SC) . . . 305

S. 80-I --Industrial undertaking--Special deduction under sections 80HHA and 80-I --Assessee entitled to special deduction under both provisions simultaneously-- Deputy CIT v. Blue Bell Polymers P. Ltd. (Guj) . . . 259

S. 115JA --Company--Book profits--Interest--Interest on excess refund under section 234D whether leviable--Provision for voluntary separation scheme--Whether to be added--Matter remanded for fresh consideration-- CIT v. Areva T & D India Limited (Mad) . . . 183

S. 115JB --Advance tax--Interest--Company--Computation of income under section 115J--Interest cannot be levied under sections 234B and 234C-- CIT v. Natural Gems Ltd. (Bom) . . . 269

----Companies--Minimum alternate tax--Special provision--Where normal tax payable would be less than ten per cent. of book profits--Book profits deemed to be total income--Provision a self-contained code--100 per cent. of export profits eligible for reduction-- Ajanta Pharma Ltd. v. CIT (SC) . . . 305

S. 139(1) --Offences and prosecution--Failure to file returns in time--Issue of notice under section 148 and filing of returns in response thereto--Will not exonerate assessee of liability to prosecution--Mens rea--Statutory presumption as to culpable mental state--Assessee entitled at trial to prove absence of mens rea-- R. Inbavalli v. ITO (Mad) . . . 226

S. 142(2D) --Audit--Special audit--Remuneration of special auditor--Effect of section 142(2D)--Remuneration to be determined by Chief Commissioner-- Dhanesh Gupta and Co . v. CIT (Delhi) . . . 246

S. 147 --Reassessment--Income escaping assessment--Block assessment set aside by Tribunal on finding that sums added not undisclosed income--Finding of Tribunal binding on Assessing Officer--Reassessment for years comprised in block period to tax same sums not permissible-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

----Reassessment--Notice after four years--No finding that assessee failed to disclose fully and truly material facts for assessment--Notice not valid-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

----Reassessment--Reassessment after four years--Condition precedent--Failure to disclose material facts for assessment--Claim for exemption in respect of dividends--Claim allowed after considering facts--Reassessment after four years to disallow deduction--Not valid-- Indian Oil Corporation Ltd. v. Deputy CIT (Bom) . . . 272

S. 148 --Offences and prosecution--Failure to file returns in time--Issue of notice under section 148 and filing of returns in response thereto--Will not exonerate assessee of liability to prosecution--Mens rea--Statutory presumption as to culpable mental state--Assessee entitled at trial to prove absence of mens rea-- R. Inbavalli v. ITO (Mad) . . . 226

----Reassessment--Income escaping assessment--Block assessment set aside by Tribunal on finding that sums added not undisclosed income--Finding of Tribunal binding on Assessing Officer--Reassessment for years comprised in block period to tax same sums not permissible-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

----Reassessment--Notice after four years--No finding that assessee failed to disclose fully and truly material facts for assessment--Notice not valid-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT (All) . . . 190

S. 158BC --Reassessment--Income escaping assessment--Block assessment set aside by Tribunal on finding that sums added not undisclosed income--Finding of Tribunal binding on Assessing Officer--Reassessment for years comprised in block period to tax same sums not permissible-- Vishwanath Prasad Ashok Kumar Sarraf v. CIT  (All) . . . 190

S. 234B --Advance tax--Interest--Company--Computation of income under section 115J--Interest cannot be levied under sections 234B and 234C-- CIT v. Natural Gems Ltd. (Bom) . . . 269

S. 234C --Advance tax--Interest--Company--Computation of income under section 115J--Interest cannot be levied under sections 234B and 234C-- CIT v. Natural Gems Ltd. (Bom) . . . 269

S. 234D --Company--Book profits--Interest--Interest on excess refund under section 234D whether leviable--Provision for voluntary separation scheme--Whether to be added--Matter remanded for fresh consideration-- CIT v. Areva T & D India Limited (Mad) . . . 183

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake which goes to root of matter--Tribunal can rehear the appeal-- CIT v. S. K. Gupta (All) . . . 267

S. 256 --Reference--Finding of fact--Finding based on relevant material--Finding cannot be set aside-- CIT v. Scindia Investment P. Ltd . (Bom) . . . 282

----Reference--Question of fact or law--Legal effect of finding of fact is a question of law-- Heirs and Legal Representatives of late Laxmanbhai S. Patel v. CIT (Guj) . . . 290

S. 269UD --Purchase of immovable property by Central Government--Agreement of sale of trust property after obtaining sanction under Bombay Public Trusts Act--Sale instance in a subsequent year in a different locality relied on--Details of such sale not furnished--No evidence of attempt to evade tax--Order of pre-emptive purchase not valid-- Virendra v. Appropriate Authority (Bom) . . . 185

S. 271(1)(c) --Penalty--Concealment of income--Assessee failed to disclose income from capital gains--Assessee not filing revised return in spite of notice under section 148--Assessee convicted for concealment in criminal proceedings--Disclosure in Form 34A does not amount to disclosure in income-tax return--Finding that concealment of income deliberate--Imposition of penalty--Justified-- Smt. Ram Piari v. CIT  (P&H) . . . 318

----Penalty--Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Penalty when imposed--Claim for deduction rejected and penalty imposed--Tribunal not justified in cancelling penalty without considering explanation of assessee--Matter remanded-- CIT v. Sandur Manganese and Iron Ores Ltd. (Karn) . . . 242

----Penalty--Concealment of income--Explanation that addition to income had been accepted to buy peace and avoid litigation--Explanation found reasonable by appellate authorities--Cancellation of penalty--Valid-- CIT v. Vasant K. Handigund (Karn) . . . 233

S. 273A --Penalty--Waiver of penalty and interest--Conditions precedent--Disclosure of income must be voluntary--Genuine financial hardship if penalty were imposed--Disclosure of income after search and discovery of incriminating material--No evidence of financial hardship if penalty were imposed--Rejection of application for waiver--Justified-- Shardadevi P. Jhunjhunwala v. CIT (Bom) . . . 211

S. 276C(1) --Offences and prosecution--Wilful attempt to evade tax--Fabricating false evidence--Assessee found in possession of two agreements showing different values in respect of same transaction--No proceedings pending at time of search--Not a case of fabrication of false evidence for use in judicial proceedings--Possession of document containing false entry--Prima facie material for framing charge of wilful attempt to evade tax-- Vijayalalitha v. State (Mad) . . . 261

S. 276CC --Offences and prosecution--Failure to file returns in time--Issue of notice under section 148 and filing of returns in response thereto--Will not exonerate assessee of liability to prosecution--Mens rea--Statutory presumption as to culpable mental state--Assessee entitled at trial to prove absence of mens rea-- R. Inbavalli v. ITO (Mad) . . . 226

S. 278E --Offences and prosecution--Failure to file returns in time--Issue of notice under section 148 and filing of returns in response thereto--Will not exonerate assessee of liability to prosecution--Mens rea--Statutory presumption as to culpable mental state--Assessee entitled at trial to prove absence of mens rea-- R. Inbavalli v. ITO (Mad) . . . 226

Indian Penal Code, 1860 :

S. 193 --Offences and prosecution--Wilful attempt to evade tax--Fabricating false evidence--Assessee found in possession of two agreements showing different values in respect of same transaction--No proceedings pending at time of search--Not a case of fabrication of false evidence for use in judicial proceedings--Possession of document containing false entry--Prima facie material for framing charge of wilful attempt to evade tax-- Vijayalalitha v. State (Mad) . . . 261

Income-tax Rules, 1962 :

Appx I, Part A, item I --Capital gains--Depreciable assets--Short-term capital gains--Sale of building and purchase of another building--Effect of section 50--Meaning of "block of assets"--Finding that building sold not used as a hotel--Building sold and building purchased belonging to same block of assets--Assessee entitled to set off amount invested in purchase of building-- CIT v. Scindia Investment P. Ltd. (Bom) . . . 282

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 5 : Part 5 (Issue dated : 27-9-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Real estate development--Documents seized during survey establishing handing over of possession of flats to purchasers by assessee--Profit from sale of flats handed over to purchasers to be assessed in years in which they were handed over by assessee--Assessing Officer to ascertain developer's liability towards bank, allow deduction and determine net profit--Income-tax Act, 1961, s. 133A-- Growth Techno Projects Ltd. v. CIT (Delhi) . . . 510

Appeal to Appellate Tribunal --Fees--Commissioner (Appeals) dismissing appeal on ground of non-maintainability--Sum of Rs. 500 payable as fee--Income-tax Act, 1961, s. 253(6)(d)-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

Appeal to Commissioner (Appeals) --Maintainability--Revision--Fresh assessment in pursuance of revision order--Appeal from fresh assessment only on issue not attaining finality--Matter remanded--Income-tax Act, 1961, ss. 143(3), 246A, 264-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

Deduction of tax at source --Limitation--Delay of four years from end of financial year in issuing notice--Proceedings barred by time--Income-tax Act, 1961, s. 201-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

----Payments to contractors--Delay in depositing tax deducted at source--Liability to interest--Payment not covered by section 204--Assessee not exempt from interest--Assessee not entitled to claim that payment was for supply of material--Once tax deducted assessee bound to pay it--Income-tax Act, 1961, ss. 194C, 201(1A), 204-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

Housing project --Special deduction under section 80-IB--Condition precedent--Built-up area of residential units should not exceed 1500 sq. ft.--Restriction applicable to entire project--Project comprising some units of area exceeding 1500 sq. ft.--Not eligible for deduction--Income-tax Act, 1961, s. 80-IB(10)-- Asst. CIT v. Viswas Promoters P. Ltd. (Chennai) . . . 449

Interpretation of statutes --Literal construction-- Asst. CIT v. Viswas Promoters P. Ltd. (Chennai) . . . 449

Non-resident --Agent--Who is--Any person "from or through whom" non-resident is in receipt of income directly or in-directly--Single transaction of purchase of shares by assessee from non-resident--Consideration remitted by assessee after deduction of tax at source--Assessee can be treated as agent of non-resident--That assessee has deducted tax at source will not preclude liability to be treated as agent--Income-tax Act, 1961, ss. 163(1)(c), 195-- Utkal Investments Ltd. v. Asst. Director of Income-tax (International Taxation) (Mumbai) . . . 481

Precedent --Decision of different High Courts to be followed by Tribunal-- Priyasha Meven Finance Ltd. v. ITO (Mumbai) . . . 441

Reassessment --Penalty--Concealment of income--Assessee providing bona fide explanation in relation to seized cash as accumulated income of assessment years 1975-76 to 1982-83 and furnishing returns of income--No case of concealment of income or furnishing of inaccurate particulars--Penalty cannot be imposed--Income-tax Act, 1961, ss. 148, 271(1)(c)-- Dhanya Kumar Jain v. ITO (Indore) . . . 497

Search and seizure --Assessment under section 132(5)--Reassessment--Notice based on order passed under section 132(5)--No application of mind by Assessing Officer to material on record--No material to prove assessee recorded unexplained cash credits in books of account--Failure to make out case of escapement of income--Reassessment quashed--Income-tax Act, 1961, ss. 132(5), 147, 148-- Shukla Construction Co. v. Asst. CIT (Indore) . . . 432

Speculative business --Assessee having brokerage business and also trading in shares--Loss arising from trading in shares--Speculation loss--Income-tax Act, 1961, s. 73, Expln.--Circular No. 204, dated 24-7-1976-- Priyasha Meven Finance Ltd. v. ITO (Mumbai) . . . 441

Valuation of stock --Closing stock--Assessee not maintaining quality-wise details of polished diamonds--No proof that net realisable value less than cost--Assessing Officer making additions on ground of undervaluation--Proper--Income-tax Act, 1961-- D. Subhashchandra and Co. v. Asst. CIT (Ahmedabad) . . . 452

----Method of valuation consistently followed by assessee--Fact that other similar businesses were making more profit--Not relevant--Rejection of method without proper reasons and addition to income--Not valid--Income-tax Act, 1961-- Pankaj Diamond v. Asst. CIT (Ahmedabad) . . . 469

Words and phrases --"Any part of the business"-- Priyasha Meven Finance Ltd. v. ITO (Mumbai) . . . 441

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 73, Expln. --Speculative business--Assessee having brokerage business and also trading in shares--Loss arising from trading in shares--Speculation loss--Circular No. 204, dated 24-7-1976-- Priyasha Meven Finance Ltd. v. ITO (Mumbai) . . . 441

S. 80-IB(10) --Housing project--Special deduction under section 80-IB--Condition precedent--Built-up area of residential units should not exceed 1500 sq. ft.--Restriction applicable to entire project--Project comprising some units of area exceeding 1500 sq. ft.--Not eligible for deduction-- Asst. CIT v. Viswas Promoters P. Ltd. (Chennai) . . . 449

S. 132(5) --Search and seizure--Assessment under section 132(5)--Reassessment--Notice based on order passed under section 132(5)--No application of mind by Assessing Officer to material on record--No material to prove assessee recorded unexplained cash credits in books of account--Failure to make out case of escapement of income--Reassessment quashed-- Shukla Construction Co. v. Asst. CIT (Indore) . . . 432

S. 133A --Accounting--Real estate development--Documents seized during survey establishing handing over of possession of flats to purchasers by assessee--Profit from sale of flats handed over to purchasers to be assessed in years in which they were handed over by assessee--Assessing Officer to ascertain developer's liability towards bank, allow deduction and determine net profit-- Growth Techno Projects Ltd. v. CIT (Delhi) . . . 510

S. 143(3) --Appeal to Commissioner (Appeals)--Maintainability--Revision--Fresh assessment in pursuance of revision order--Appeal from fresh assessment only on issue not attaining finality--Matter remanded-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

S. 147 --Search and seizure--Assessment under section 132(5)--Reassessment--Notice based on order passed under section 132(5)--No application of mind by Assessing Officer to material on record--No material to prove assessee recorded unexplained cash credits in books of account--Failure to make out case of escapement of income--Reassessment quashed-- Shukla Construction Co. v. Asst. CIT (Indore) . . . 432

S. 148 --Reassessment--Penalty--Concealment of income--Assessee providing bona fide explanation in relation to seized cash as accumulated income of assessment years 1975-76 to 1982-83 and furnishing returns of income--No case of concealment of income or furnishing of inaccurate particulars--Penalty cannot be imposed-- Dhanya Kumar Jain v. ITO (Indore) . . . 497

----Search and seizure--Assessment under section 132(5)--Reassessment--Notice based on order passed under section 132(5)--No application of mind by Assessing Officer to material on record--No material to prove assessee recorded unexplained cash credits in books of account--Failure to make out case of escapement of income--Reassessment quashed-- Shukla Construction Co. v. Asst. CIT (Indore) . . . 432

S. 163(1)(c) --Non-resident--Agent--Who is--Any person "from or through whom" non-resident is in receipt of income directly or indirectly--Single transaction of purchase of shares by assessee from non-resident--Consideration remitted by assessee after deduction of tax at source--Assessee can be treated as agent of non-resident--That assessee has deducted tax at source will not preclude liability to be treated as agent-- Utkal Investments Ltd. v. Asst. Director of Income-tax (International Taxation) (Mumbai) . . . 481

S. 194C --Deduction of tax at source--Payments to contractors--Delay in depositing tax deducted at source--Liability to interest--Payment not covered by section 204--Assessee not exempt from interest--Assessee not entitled to claim that payment was for supply of material--Once tax deducted assessee bound to pay it-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

S. 195 --Non-resident--Agent--Who is--Any person "from or through whom" non-resident is in receipt of income directly or indirectly--Single transaction of purchase of shares by assessee from non-resident--Consideration remitted by assessee after deduction of tax at source--Assessee can be treated as agent of non-resident--That assessee has deducted tax at source will not preclude liability to be treated as agent-- Utkal Investments Ltd. v. Asst. Director of Income-tax (International Taxation) (Mumbai) . . . 481

S. 201 --Deduction of tax at source--Limitation--Delay of four years from end of financial year in issuing notice--Proceedings barred by time-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

S. 201(1A) --Deduction of tax at source--Payments to contractors--Delay in depositing tax deducted at source--Liability to interest--Payment not covered by section 204--Assessee not exempt from interest--Assessee not entitled to claim that payment was for supply of material--Once tax deducted assessee bound to pay it-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

S. 204 --Deduction of tax at source--Payments to contractors--Delay in depositing tax deducted at source--Liability to interest--Payment not covered by section 204--Assessee not exempt from interest--Assessee not entitled to claim that payment was for supply of material--Once tax deducted assessee bound to pay it-- Block Development Officer v. ITO (TDS) (Delhi) . . . 426

S. 246A --Appeal to Commissioner (Appeals)--Maintainability--Revision--Fresh assessment in pursuance of revision order--Appeal from fresh assessment only on issue not attaining finality--Matter remanded-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

S. 253(6)(d) --Appeal to Appellate Tribunal--Fees--Commissioner (Appeals) dismissing appeal on ground of non-maintainability--Sum of Rs. 500 payable as fee-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

S. 264 --Appeal to Commissioner (Appeals)--Maintainability--Revision--Fresh assessment in pursuance of revision order--Appeal from fresh assessment only on issue not attaining finality--Matter remanded-- Dr. A. Naresh Babu v. ITO (Hyderabad) . . . 485

S. 271(1)(c) --Reassessment--Penalty--Concealment of income--Assessee providing bona fide explanation in relation to seized cash as accumulated income of assessment years 1975-76 to 1982-83 and furnishing returns of income--No case of concealment of income or furnishing of inaccurate particulars--Penalty cannot be imposed-- Dhanya Kumar Jain v. ITO (Indore) . . . 497

 

 

__,_._,___

J&K--date extended to 30/11/2010 & SUPPL GUIDANCE NOTE 44AB

 J&K--date extended to 30/11/2010

 

F.No.225/72/2010/ITA.II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

Dated : September 23, 2010

Order under Section 119 of the Income Tax Act, 1961

On consideration of the reports of disturbance of general life caused due to the law and order problem in the State of Jammu and Kashmir, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the due date of filing of returns of income for the Assessment Year 2010-11 for all category of cases in the State of Jammu & Kashmir to 30th November 2010. Accordingly the date for obtaining and furnishing Tax Audit report u/s 44AB of the Income Tax Act is also extended to 30th November 2010.

(Ajay Goyal)
Director (ITA.II)

 

 .

__,_._,___

ICAI helps Indian firms to take on MNC rivals

Accounting regulator Institute of Chartered Accountants of India is arranging easy financing schemes for its members through public sector banks, as it looks to help domestic audit firms enhance infrastructure
and resource base to ward off competition from larger multinational rivals.

ICAI has already entered into an arrangement with state-owned Corporation Bank, which will grant loans at liberal terms to small and medium firms, said an official with the regulator. "Similar arrangements could also be considered depending on the response we get," he said, requesting anonymity. Indian audit firms face the threat of losing bulk of the lucrative consultancy work to competitors from Europe and China.

ICAI has also urged member firms to network among themselves and create larger entities through mergers and consolidations. Domestic firms are finding it difficult to scale up due to a paucity of funds. "Domestic firms should join hands for long-term prospects," said Amarjit Chopra, president of ICAI. He further said there was a need to review the networking rules so as to encourage mergers.

The regulator has also asked member firms to look into emerging areas of consulting and assurance services rather than depending solely on audit assignments from banks. Noting that 74% of chartered accountants in the country are working as proprietors (working in an independent capacity) depending on annual bank audit, the ICAI president, in a recent communication to all its members, has asked them to get into collaborations to form larger firms capable of competing with MNCs.

In accordance with WTO norms, India allows transnational firms to be in the field of management consulting, even though these entities enter into informal tie-ups with domestic firms to do statutory audit work in India.

ICAI has over 1.5 lakh registered chartered accountants. They either work independently or are engaged by audit firms. Foreign firms having presence in India include US-based Deloitte Touche Tohmatsu, UK-based PriceWaterhouse-Coopers, Dutch firm KPMG and UK-based Ernst & Young –– together called as the Big 4.

The MNC firms have global networks and a large resource base, both in terms of infrastructure and manpower. Lately, India has also seen the emergence of a large domestic firms, although large chunk of the audit professional in India still works independently.

ICAI has conveyed to these multinational entities not to take over small audit firms, a move it feels will come as a hurdle to create a greater number of large domestic audit firms. With the country set to embrace International Financial Reporting Standards, a lot of back office consultancy work is being generated. The regulator wants that the Indian firms create the necessary infrastructure including resource base to earn revenue through consultancy job.

The ministry of corporate affairs, which is the administrative department for the audit regulator, has asked the institute to promote setting up of larger domestic firms under the limited liability partnership (LLP) route.

[Source: The Economic Times]


--
warm regards,
CA. Rahul Bajaj

INCOME TAX 2010-11 (AY 2011-12)

---------- Forwarded message ----------
From: Ashok Kumar Tank <ashokkumartank@gmail.com>
Date: Fri, Sep 17, 2010 at 6:41 AM
Subject: {jalgaoncas} INCOME TAX 2010-11 (AY 2011-12)
To:

Dear All

 

GOI has introduced CEA (Child Education Allowances) in 6th Pay Commission amounting to Rs.12000/- Per Yead per Child subject to limit of two child of Govt Servant.

Controller of Defence Accounts, (South Western Command) Jaipur is including this amount under Income Tax treating as income.

 

As per their instructions all Cash receipt including School Fee and Books /Note books are demanded by them to verified the expendiure and the same is being reimburseed to the employees treating as reimbursement of actual expenditure.

 

As per as my knowledge if this amount paid to the individual without asking voucher, can be treated as part of Income Tax just like HRA (House Rent Allowance) , TA (Travelling allowances) , Conveyance Allowances .

 

This amount is being to the employees as reimbursement of actual expenditure on production of cash vouchers, just like Medical claims, which is not taxable under Income Tax.

 

Kindly clarify whether this CEA is Taxable or not with rule position

 

With regards

 

Ashok Kumar Tank

Jaipur

Alternative dispute resolution mechanism (Arbitrator) at ICAI

Dear Esteemed Members,

The Council at its 296th meeting held on 29th, 30th June, and 1st July, 2010, while considering an issue raised by CA. Sanjay Kumar Agarwal under Item No.2, "Matters of General Interest to the Profession", decided to constitute a Group under the convenorship of CA. Nilesh Vikamsey, to examine the matter of development of an alternative dispute resolution mechanism (Arbitrator) for dealing with disputes of (i) Member vis-à-vis Member; and (ii) Member vis-à-vis Student and bringing the same back to the Council with its recommendations thereon. The President was authorised to nominate the other members of the Group.

Pursuant to the above authority, the President has constituted the Group with the following members:- CA. Nilesh Vikamsey - Convenor CA. Rajkumar S. Adukia, Member CA. S. Santhanakrishnan, Member CA. Abhijit Bandyopadhyay, Member CA. Vijay Garg, Member CA. Pankaj Tyagee, Member

Shri V. Sagar, Joint Secretary (NRO) would act as the Secretary to the said Group.

Compiled By ;

Team -Bhavnagar Branch of WIRC of ICAI

Setting up of Section 25 company for XBRL India

As you may be aware that the ICAI has taken a lead role in the development and promotion of XBRL in India and has accordingly set up a provisional jurisdiction of XBRL in India. To further its development, the ICAI has decided to incorporate a separate company under the Companies Act, 1956. The said company shall be a Section 25 Company which has already been granted name approval as EXTENSIBLE BUSINESS REPORTING LANGUAGE (XBRL) INDIA. Upon the incorporation of the said company, the jurisdiction shall open up its membership as per its byelaws
http://www.xbrl.org/in/nmpxbrl.aspx?id=337

Mobile Share Trading Guidelines Issued By BSE

BSE Notice

Notice no : 20100909-15
Notice date : Thursday, September 09, 2010 4:05:26 PM
Subject : Securities Trading using Wireless Technology
Category : Trading
Segment Name General

Contents :
Securities and Exchange Board of India (SEBI) vide its circular
no.CIR/MRD/DP/25/2010 dated August 27, 2010 as per Annexure II, has
approved and given necessary guidelines for providing "SECURITIES
TRADING USING WIRELESS TECHNOLOGY which shall include devices such as
mobile phone, laptop with data card, etc, that use Internet Protocol
(IP).

For compliance of the said circular, the guidelines are as follows:

Eligibility:
As per the SEBI Circular, facility shall be provided by Bombay Stock
Exchange Ltd members providing Internet Based Trading to all class of
investors.

Application Process:
In order to avail the facility of Securities Trading Using Wireless
Technology at Bombay Stock Exchange Ltd (BSE), trading members need to
submit an application which will be followed by a system audit. The
application should also include Vendor certificate (on the letterhead
of the vendor) and self certification by the member (on the letter
head of the member)
The format of the application is attached as Annexure I. (on the
letter head of the member)

Pre Approval Requisites:
The software and the system proposed for Securities Trading Using
Wireless Technology shall be duly certified by BSE empanelled System
Auditor. Audit charges for the same will be debited to the Member's
settlement account pursuant to the system audit /approval by the
exchange.
Only on fulfillment of the requirements mentioned in the SEBI / BSE
Circulars, permission for commencing Securities Trading Using Wireless
Technology would be granted to the Trading Member.
BSE shall provide a test environment for testing the Securities
Trading Using Wireless Technology. The trading Members are required to
test their software using the said test environment.
Members need to apply for a separate IML ID for Securities Trading
Using Wireless Technology.

Post Approval Requisites:
In case of failure of the wireless network, alternative means of
communication for placing orders should be available to the clients.
Members at their end are required to comply fully with the operational
specifications and risk management mentioned in the SEBI circular.
Also, Members must comply with guidelines issued by BSE for Securities
Trading Using Wireless Technology, from time to time.

Client Intimation:
Member needs to intimate clients about specifying possible risks,
responsibilities and liabilities associated before providing the
facility of Securities Trading using wireless Technology to the
clients.

System Audit Submission frequency:
Once the approval is granted and the member goes live with the
Securities Trading Using Wireless Technology, the member is required
to submit the system audit certificate on yearly basis duly certified
by the CISA certified or equivalent system auditor to inspection
department. The notification will be issued to the market from time to
time informing members about the submission of the same.

Unique Identifier:
BSE has given a unique identifier number as "5" for the orders placed
through Securities Trading Using Wireless Technology, in order to
differentiate the orders from Normal orders.

Format of Location ID which is a 16 digit code which is mentioned below:
From 1st digit to 6th digit – Pin Code e.g. – 400001
From 7th digit to 10th digit – Member Code e.g. – 9999
From 11th digit to 13th digit – Trader / User Id e.g. – 203
For 14th digit – Securities Trading Using Wireless Technology Order Id
– (Fixed code) – 5
From 15th digit to 16th digit – Vendor Id e.g. – 19

Example:
If the IML terminal is located at Dalal Street, Mumbai, Pin Code is
'400001', and the unique Member Code is '9999', the trader ID is '203'
and the order generating from wireless technology than the unique
identifier in that would be '5'. Hence the 16 digit code would appear
as '4000019999203519', which starts with the Pin Code and ends with
the Vendor Id.

For further clarifications, contact on below mentioned no. or undersigned:

General Queries: Help Desk, 022-6136 3175, bsehelp@bseindia.com :
For any queries related to approval & going live process for
SECURITIES TRADING USING WIRELESS TECHNOLOGY: Manthan Desai (022-2272
8890, manthan.desai@bseindia.com) or  Mayuresh Samant (022-2272 8355,
mayuresh.samant@bseindia.com)
For documentation and approvals related queries: Chirag Sodawaterwalla
(022-2272 8156, chirag.sodawaterwalla@bseindia.com)

Process Flow for Availing the facility
Step I: – Member to submit Annexure I (attached with Notice) to
membership compliance department
Step II: – BSE appointed System auditor will do the system audit once
the systems are in place at the member end and submit the report to
BSE.
Step III: – After scrutinizing the audit report BSE will issue a
letter of approval to the member subject to the observations /
rectification as per system audit report by the system auditor.
Step IV: – Members need to apply for separate IML ID for Securities
Trading Using Wireless Technology
Step V: -Member can start providing the above said facility to their clients.

Suniel Vichare Manthan B Desai
Member/ Institutional Sales Member/ Institutional Sales


--
Regards,
Parthiv Mehta

Go Green

P Please consider the environment before printing this e-mail. 1 ton
of paper = 17 trees. Reduce. Reuse. Recycle.





--
Regards,
Parthiv Mehta

FAQ ON SERVICE TAX - CONSTRUCTION SERVICE

 

SERVICE TAX

 

FAQs on service tax on construction service

 

By V.S. Datey

 

 

A 'deemed service' provision has been introduced in case of construction service w.e.f. 1-7-2010. Any industrial or commercial construction or construction of residential complex will be subject to tax if even a part of it is provided prior to obtaining 'completion certificate'. Various queries have been received in respect of the change. The following FAQs answer various queries usually raised.

 

1. Background

 

Can you briefly explain the pre-budget 2010 provisions in respect of construction service?

 

The service tax provisions relating to construction services cover two types of activities - (a) Commercial or industrial construction which is taxable w.e.f. 10-9-2004 and (b) Construction of complex (residential complex of more than 12 residential units) which is taxable w.e.f. 16-6-2005.

 

If works contract tax is payable on these construction activities, these services would get covered under 'works contract service' w.e.f. 1-6-2007.

 

Initially, there were disputes regarding services provided by a builder or a developer for construction of a residential complex or commercial premises.

 

However, on the basis of Court decisions and CBE&C circulars, it was more or less settled that a builder entering into contract for sale of flat or industrial unit (gala) or shop or a developer entering into contract for construction of an individual flat for personal residential use of client are not liable to pay service tax.

 

What is the change made in Budget 2010?

 

In the Finance Act, 2010, an Explanation has been added w.e.f. 1-7-2010, to the definition of 'commercial or industrial construction and construction of residential complex', as follows:

 

"Explanation.— For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer."

 

In case of commercial or industrial construction service, the words used are 'construction of a new building' in place of 'complex'. Otherwise, the wording is identical.

 

Thus, by a 'deeming provision', an activity which is not 'service' as per the Court decisions and CBE&C's own earlier circulars will be a 'deemed service' for the purpose of levy of service tax.

 

Note that the Explanation being added is not a valuation provision.

 

Can you tell me in brief the effect of the change?

 

The effect of the change is that the service tax will not apply only when a builder sales a ready flat or shop or industrial unit (gala) after building completion certificate is obtained from local authority (like Municipal Corporation, Municipality, Gram Panchayat etc.) and entire consideration is obtained only after building completion certificate is obtained.

 

In all other cases, the builder will be liable to pay the service tax. It is well-known that in most of the cases, builder constructs buildings mainly on raising funds from the prospective buyers. Further, even after building is completed and ready for occupation, there is a delay in obtaining building completion certificate from the authorities (Now the delay will be more and 'cost' of obtaining the certificate will rise further).

 

Thus, practically, in all cases, the builder/developer will be liable to pay service tax, except in case of few flats or shops or commercial galas, which he usually keeps for sale at a later date at higher prices. Even in this case, the builder/developer will not be liable only if entire transaction (including receipt of money) takes place after obtaining 'completion certificate' from the municipal or other competent authority.

 

Is the amendment with retrospective effect?

 

Though the amendment is termed as 'Explanation', yet it is not merely to clarify the intention of the Parliament but to give a completely artificial meaning to the 'construction service' by introducing a deeming provision. The Explanation is not merely explaining or clarifying the scope but expanding the scope of taxable service.

 

It cannot have retrospective effect prior to 1-7-2010.

 

Will the amendment apply to works contract service?

 

The amendment will not apply if the contract is covered under the works contract service, i.e., where VAT/Sales tax is payable on the contract.

 

2. Transitory provisions

 

Whether service tax will apply only in case of fresh bookings or will it apply in case of earlier bookings also?

 

Date of booking is not relevant. Date of provision of service is relevant; as provision of service is the taxable event. Hence, if construction service is provided after 1-7-2010, service tax will be payable.

 

The Explanation being added to the definition is only a 'deemed service provision' and not a valuation provision. It does not link payment received with tax liability.

 

If the construction is partly complete on 1-7-2010, what would be the service tax liability?

 

Principally, provision of service is the 'taxable event', i.e., service provided after tax is imposed will be taxable. Thus, service tax will apply in respect of services provided or to be provided on or after 1-7-2010. Receipt of payment or advance is not relevant for determining tax liability. Thus, a builder/developer is not liable to pay service tax in respect of services provided up to 1-7-2010. Such bifurcation is possible only if the builder/developer keeps proper accounts and records.

 

It is highly advisable to issue invoices (running bills) in respect of services provided up to 1-7-2010 and/or obtain certificate from the architect/chartered accountant regarding stage of completion of construction as on 1-7-2010.

 

If construction of residential complex is fully completed before introduction of the new construction service, but completion certificate from local authority has not been granted till 1-7-2010 though applied for, whether service tax will become payable? If so, then what is the procedure of calculating tax liability?

 

If construction is complete before 1-7-2010, no tax is payable as service tax is on provision of service which is the taxable event. Receipt of payment does not decide tax liability.

 

What would be position if the construction is complete but application for completion certificate is not yet submitted?

 

Even then, there is no service tax liability if you establish that construction was completed before cut off date of 1-7-2010.

 

If the customer has paid 100% advance irrespective of completion certificate or possession before the cut off date, i.e., 1-7-2010, then service tax will be imposed or not?

 

As a general principle, tax liability will be on the basis of construction services provided on or after 1-7-2010 and not on the basis of advance received. However, as per Notification No. 36/2010-ST, dated 28-6-2010, in respect of service as per amended definition, if any, advance payment was received prior to 1-7-2010, for service to be provided after 1-7-2010, service tax will be fully exempted. This is a good transitory relief to service providers as well as customers[This provision applies only in respect of services covered under amended definition and not to those services which were already covered under earlier definition].

 

Thus, if advance payment was received prior to 1-7-2010, service tax will not be payable even if service in respect of that advance is provided after 1-7-2010.

 

3. When service tax is payable?

 

Whether service tax is charged on advances of customers?

 

Service tax is payable when advance is received, even if actual service is to be provided later, but that is so only when service is a taxable service. Thus, if advance is received in respect of construction completed up to 1-7-2010, service tax will not be payable.

 

Whether service tax is payable on completion of construction or in stages?

 

Service tax is payable on receipt basis and, hence, as you get payment for construction service from your customer, you have to pay service tax on that amount. If service tax is not shown separately in bill or amount received, the amount received should be taken as inclusive of service tax and then back calculations may be made.

 

Some advance has been received from customer before 1-7-2010 but service is to be provided after 1-7-2010. When service tax should become payable?

 

As explained above, service tax in relation to such advance has been exempted vide Notification No. 36/2010-ST, dated 28-6-2010. Hence, service tax will not apply even if the service is provided after 1-7-2010.

 

4. Liability of service tax

 

What is the rate of service tax?

 

Service tax is payable on gross value of taxable services @ 10.3% (Service tax 10%, plus education cess of 2% plus SAH education cess of 1%).

 

What will be the basic exemption for service tax to a person coming in service tax net for the first time on 1-7-2010?

 

The exemption is Rs. 10 lakhs in first year of taxable service counting from 1-7-2010, if you are coming in tax net for the first time. If turnover in 2010-11 exceeds Rs. 10 lakhs, then there will be no exemption and tax is payable on all services from 1st April, 2011 onwards.

 

A builder/developer has agreed to provide some flats/shops free of cost to the landowner who has given the land for construction. Is service tax payable in respect of these free flats/shops?

 

Really, the flats/shops are not given free but are in lieu of land cost. In such a case, value of service will have to be found out on basis of value of service of identical or similar flat/shop or on basis of cost of construction plus reasonable profit.

 

Two methods are available – (a) Value of similar service (b) If value of similar service is not available, then cost plus reasonable profit [Rule 3 of the Service Tax Valuation Rules].

 

In fact, land owner himself may be held liable to pay service tax when he sells the flat/industrial unit before obtaining completion certificate. Of course, he can argue that all service tax on construction service has already been paid by builder/developer and there is nothing to pay now.

 

Valuation can be on the basis of value of similar service or on cost plus reasonable profit, as provided in rule 3 of the Service Tax Valuation Rules.

 

Service tax has been charged to customer and deposited with department. Later, customer surrenders the booking and refund is made to him. What are the implications in service tax?

 

If you refund the entire amount along with service tax to customer, then you can adjust the service tax in your subsequent payments of service tax. As per rule 6(3) of the Service Tax Rules, if excess tax is paid, in respect of service which is not provided either wholly or partially for any reason, the excess service tax paid can be adjusted against service tax payable for subsequent period, if the value of services and tax thereon is refunded to the person from whom it was received.

 

While giving refund, cancellation charges are usually deducted. These are really in the nature of liquidated damages and not on account of service provided. Hence, in my view, entire service tax can be adjusted under rule 6(3) even if cancellation charges are deducted. However, it is a litigation prone issue and one must be ready to fight it out. If quantum is less, it may be economical to pay service tax instead of entering into litigation.

 

5. Valuation of service

 

Whether service tax is charged on agreement price of the flat, shop or industrial gala?

 

Principally, service tax is payable on value of taxable services. This is also clear from the fact that 'preferential location and development of complex' has been specified as a different taxable service.

 

Thus, if a service provider has proper costing records, it is permissible to deduct value of material and land (or calculate value of service on cost plus profit basis) and pay service tax on value of service @ 10.30%.

 

If this is not feasible, then tax is payable @ 10.30% on 25%/33% of entire value of contract including material (used by builder plus supplied free of cost by customer), but then Cenvat credit is not available, as explained below.

 

Any person providing taxable service of commercial or industrial construction or construction of residential complex (except completion and finishing services like glazing, plastering, painting, tiling, wood and metal joinery and carpentry, swimming pools, acoustic applications, etc.) can opt to pay service tax as follows (w.e.f. 1-7-2010) – (a) on 33% of gross amount charged if the gross amount does not include value of land (b) on 25% of gross amount charged if the gross amount includes value of land (Till 1-7-2010, the 25% scheme was not available. Only 33% scheme was available).

 

This is at the option of the service provider.

 

The 'gross amount' should include value of goods and materials supplied or provided or used. However, he can avail this concession only if - (a) He does not avail Cenvat of duty/service tax paid on inputs, input services and capital goods and (b) He does not avail benefit of Notification No. 12/2003-ST, dated 20-6-2003. - Notification No. 1/2006-ST, dated 1-3-2006 as amended w.e.f. 1-7-2010.

 

The partial exemption is available only if the gross amount charged includes value of goods and materials supplied or provided or used for providing such service [Explanation to Notification No. 1/2006-ST]. Thus, if the customer provides some material, its value will have to be added for the purpose of payment of service tax.

 

As per Notification No. 12/2003-ST, no service tax is payable on the value of material or goods sold to recipient of service. Thus, if a service provider avails exemption under 12/2003-ST (i.e., claims deduction of value of material or goods from gross value of contract), he cannot avail composition rate of 33%/25% of gross amount charged to customers. The service provider can have benefit either under Notification No. 12/2003-ST or 1/2006-ST and not both.

 

This method is not available in case the service provider provides only completion and finishing services (as, in such cases, material content will be much less).

 

This method is also not applicable if service is covered under 'works contract service'.

 

In addition to the flat, the builder provides some common services like park, common sewerage and effluent treatment, internal roads, common recreation hall, etc. Is its cost includible in value of construction service?

 

Definition of 'residential complex' covers these elements. Further, in the Budget 2010, a service termed as 'preferential location or development of complex' has been introduced w.e.f. 1-7-2010. The definition covers both commercial and residential complex. Thus, value of these amenities would get covered under that head (on pro rata basis), even if these are excluded from 'construction service'.

 

As the construction is nearing completion, the value of flat/commercial unit/shop goes up substantially. Does it mean that service tax payable will also increase?

 

Really, even if value (selling price) goes up, that does not mean that cost of construction has gone up to that extent. The value goes up because of demand/supply situation and customer is willing to pay higher price when there is ready possession or construction is nearing completion.

 

In such cases, payment of service tax only on value of service will result in substantial reduction of service tax liability, instead of going in for composition scheme. Hence, it is advisable to calculate value of service and pay service tax on that at the rate of 10.3%.

 

This can also be justified from the fact that 'preferential location and development of complex' has been specified as a different taxable service. Thus, any charge over and above the value of construction service cannot be subjected to tax.

 

A builder has agreed to provide some flats/shops free of cost to the landowner who has given the land for construction. Is service tax payable in respect of these free flats/shops?

 

Really, the flats/shops are not given free but are in lieu of land cost. In such a case, value of service will have to be found out on the basis of value of service of identical or similar flat/shop or on basis of cost of construction plus reasonable profit.

 

Two methods are available – (a) Value of similar service (b) If value of similar service is not available, then cost plus reasonable profit [Rule 3 of the Service Tax Valuation Rules].

 

For extra items, i.e., items not covered in the agreement of sale, builder charges extra amounts. Whether service tax is payable on such extra items and whether the deduction of material purchased for such extra work would be given?

 

Service tax is payable on actual value of taxable services provided and not on the basis of mere written agreement. Thus, service tax will be payable on extra services. Deduction of material is obviously available since service tax is payable only on value of services.

 

Which method of valuation should we adopt?

 

The 25 per cent/33 per cent scheme is simple but the liability of service tax will be high, particularly at places where land costs are very high. Further, if you are getting the work done through contractors/sub-contractors, you cannot take Cenvat credit of service tax paid by contractor/sub-contractor. This will further add to the cost.

 

Hence, in such cases, it is advisable to pay service tax on value of services at the rate of 10.30%.

 

Value of services can be calculated either on cost plus profit basis or by reducing value of land and material from the total contract value.

 

If the contract is small, 25 per cent/33 per cent scheme may be opted since it is simple.

 

Can we adopt different valuation methods for different contracts?

 

Each contract can be treated as separate contract and valued differently.

 

6. Cenvat credit

 

Whether there is a provision of claiming deduction (set-off) on service tax paid to professionals, contractors, etc.?

 

This is termed as Cenvat credit. You can get and utilise Cenvat credit of all your input services and capital goods only if you are paying service tax on the value of services at the rate of 10.30 per cent. If you are paying service tax under simplified scheme on 25 per cent/33 per cent of total value, you cannot avail any Cenvat credit at all.

 

We are providing both taxable and exempt services. How can we avail Cenvat credit?

 

If service provider is providing both taxable and exempt service, then it is advisable to avail Cenvat credit only in respect of input services directly attributable to taxable services. If Cenvat credit is availed of common input services, then rigours of proportionate reversal or payment of 6% 'amount' on exempted services, as contained in rule 6 will apply.

 

Can Cenvat credit on construction activities of one project be allowed towards output service tax on sale of another project?

 

Though Cenvat credit Rules do not require one to one relationship, yet as per rule 6 of the Cenvat Credit Rules, Cenvat credit is not available if output service is exempt from service tax. Subject to this restriction, Cenvat credit amongst various projects is indeed inter-changeable, particularly if you opt for centralised registration.

 

We avail various input services like telephone, courier, mobile, bank charges, audit, security, catering, etc., as Head Office. Can we utilise that credit for service tax payable on construction services?

 

Indeed you can do so, but you have to be careful if you are providing both taxable and exempt services and/or trading in goods. In that case, rule 6 of the Cenvat Credit Rules will apply.

 

7. Other aspects

 

Can a builder or should a builder have separate service tax registration for each project?

 

A builder can either take separate service tax registration for each project or have centralised registration after studying pros and cons. If proper records, etc., are kept, centralised registration will be OK. It may be advisable to register each project separately in following cases – (a) If some services are exempt and some taxable or (b) Valuation basis for each project is expected to be different.

 

What happens if only a part of land or a plot of a larger development is sold to the prospective purchaser, whereby no construction over the said plot is to be done by the seller/ developer?

 

This is not 'construction service' and, hence, the question of service tax cannot arise.

 

A customer who has purchased a flat/commercial unit/industrial gala/shop from builder/developer is selling the same before Completion Certificate is obtained. Is he liable to pay service tax?

 

The words used in the 'Explanation' are 'by the builder or a person authorised by the builder'. A customer is not a person authorised by the builder to enter into a contract for construction. Hence, a customer cannot fall within that definition. Even otherwise, service tax is payable on value of taxable service which has already been paid by builder/developer. Even if the customer sales the flat or unit or shop at a higher price, it does not mean that cost of construction has increased.

 

8. Preferential location and development of complex service

 

What is the definition of 'preferential location and development of complex' service?

 

As per proposed section 65(105)(zzzzu) of the Finance Act, 1994, any service provided or to be provided, to a buyer, by a builder of a residential complex, or a commercial complex, or any other person authorised by such builder, for providing preferential location or development of such complex, but, which does not include services covered under sub-clauses (zzg), (zzq), (zzzh) and in relation to parking place, is a 'taxable service'. Explanation— For the purposes of this sub-clause, 'preferential location' means any location having extra advantage which attracts extra payment over and above the basic sale price.

 

What is taxable under this head?

 

The CBE&C, has clarified as follows – (Annexure- A to JS (TRU-II) D.O. letter F. No. 334/1/2010-TRU, dated 26-2-2010)

 

"It has been reported that in addition to these activities, the builders of residential or commercial complexes provide other facilities and charge separately for them and these charges do not form part of the taxable value for charging tax on construction. These facilities include,– (a) prime/preferential location charges for allotting a flat/commercial space according to the choice of the buyer (i.e. Direction - sea facing, park facing, corner flat; Floor - first floor, top floor, Vastu – having the bed room in a particular direction; Number – lucky numbers); (b) internal or external develop-ment charges which are collected for developing/maintaining parks, laying of sewerage and water pipelines, providing access roads and common lighting etc.; (c) fire-fighting installation charges; and (d) power back up charges etc.

 

Since these charges are in the nature of service provided by the builder to the buyer of the property over and above the construction service, such charges are being brought under the new service. Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be excluded from the taxable value levy. Further, any service provided by Resident Welfare Associations or Cooperative Group Housing Societies consisting of residents/owners as their members would not be taxable under this service."

 

An agreement was entered for PLC before 1-7-2010 and payment was received. Is service tax payable, if construction is completed after 1-7-2010?

 

Service tax will not be applicable in such a case as per transitory relief given vide Notification No. 36/2010-ST, dated 28-6-2010.

 

Will the abatement of 25%/33% available if PLC is charged separately in the agreement?

 

No.

 

9. Agreement for sale/construction of a single flat directly with builder/developer

 

Department had clarified that agreement with builder/developer for an individual flat will not be subject to service tax. Is that clarification still valid?

 

As per section 65(91a) of the Finance Act, 1994, 'residential complex' does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.

 

As per the CBE&C Circular No. 108/02/2009-ST, dated 29-1-2009, if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and construction, and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of 'residential complex'. However, if service of contractor, designer or similar services are received, then such person will be liable to service tax.

 

Really, this clarification should be valid even after amendment to definition of 'construction complex'.

 

However, the word used in exclusion clause is 'complex', while any individual does not enter into contract for construction of entire 'complex' but only a part of it.

 

The issue is litigation prone and ultimate result is unpredictable.

 

10. Conclusion

 

What immediate steps a builder/developer should take?

 

He should apply for registration within 30 days. Further, he should prepare and submit running bills till cut off date, i.e., 1-7-2010. If this is not possible, at least, take Architect and CA certificate about stage of completion and cost of completion up to 1-7-2010 so that there is no service tax liability on that portion.

 

Would you like to give any general suggestion or caution?

 

Whatever I have stated above is on my understanding of the law. It is possible that some of the views may not be accepted by department (In fact, even you may be having some different view on some of the issues discussed above).

 

Hence, you have to take policy decision on the basis of your final conclusion. In service tax, full disclosure is key to safety. Thus, wherever in doubt, your view, your understanding and what you are going to do should be fully disclosed to the department by writing a letter. Asking clarification is not generally advisable. Seeking permission is normally not advisable at all, as you will almost never get the permission and you will be falling in a trap.

 

Full disclosure to department has following advantages – (a) Penalty cannot be imposed and (b) Demand beyond one year is not sustainable. However, interest @ 13% is mandatory if by chance your understanding is not accepted by the Tribunal or High Court or Supreme Court.

 

CA.RAJU SHAH

 

__._,_.___

__,_._,___