Sukanya Samriddhi Account- Tax & Other benefits

Sukanya Samriddhi Account- Tax & Other benefits

 

CA Sandeep Kanoi

 

Prime Minister Narendra Modi has Launched Sukanya Samridhi Yojna' (girl child prosperity scheme) with the vision to provide for Girl Child Education and Her Marriage Expense. Sukanya Samriddhi Account Scheme is asmall deposit scheme for girl child, as part of 'Beti Bachao Beti Padhao' campaign, which would fetch yearly interest rate of 9.1 per cent and provide income tax deduction Under section 80C of the Income Tax Act,1961.

In this article we have discussed Provisions of this Scheme alongwith tax and other benefits :-

Date of Commencement of Scheme- Sukanya Samriddhi Account Scheme is been notified by Ministry of Finance vide Notification No. G.S.R.863(E) Dated 02.12.2014. Shceme become operational by notification of rules namely 'Sukanya Samriddhi Account Rules, 2014'.

 

Depositor- For this scheme Depositor is an individual who on behalf of a minor girl child of whom he or she is the guardian and deposits amount in account opened under this scheme.

Who can be 'Guardian' under this Scheme – In relation to a minor girl Child Guardian means

(i) either father or mother; and

(ii) where neither parent is alive or is incapable of acting, a person entitled under the law for the time being in force to have the care of the property of the minor.

One Girl One Account- Depositor cannot open multiple or more than one account in the name of a Girl Child.

Can be opened for Maximum two girls – Natural or legal guardian of a girl child   allowed to open one account each for two girl children's.

Account opening for third Girl – Under this scheme natural or legal guardian of the girl child shall be allowed to open third account in the event of birth of twin girls as second birth or if the first birth itself results into three girl children, on production of a certificate to this effect from the competent medical authorities where the birth of such twin or triple girl children takes place.

Age Restriction for Opening of Account- The account may be opened by the natural or legal guardian in the name of a girl child from the birth of the girl child till she attains the age of ten years and any girl child, who had attained the age of ten years, one year prior to the commencement of these rules shall also be eligible for opening of account under these rules. Scheme is been commenced from 02.12.2014.

Grace Period for Opening of Account- Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 & 1.12.2004 can open account up to 1.12.2015.

 

Documents to Open the Account and how to open the account- Birth certificate of a girl child in whose name the account is opened shall be submitted by the guardian at the time of opening of the account in post office or bank along with other documents relating to identity and residence proof of the depositor.  As of now, government owned banks are still in the process of completing formalities to open the Sukanya Samriddhi Yojana (SSY) Account, you may visit any of the government banks for the purpose of opening the account. (Some of these banks include – State Bank of India , Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, Andhra Bank, UCO Bank, Allahabad Bank, Corporation Bank etc.,). So Document required for opening Sukanya Samriddhi account are:-

o    Birth certificate of girl child

o    Address proof

o    Identity proof

No Fixed Interest Rate- Under this scheme Interest rate is not fixed and Government will declare on yearly basis the Interest on accounts opened under these rules. For the Financial Year 2014-15 Govt. has declared Interest Rate of 9.10% vide Notification F.NO. 2/3/2014.NS-II, DATED 20-1-2015.

Interest After Maturity of account- If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

Interest Compounding Monthly/ Yearly

Interest will be compounded yearly and will be credited to account till the account completes fourteen years from the date of opening.

In case of account holder opting for monthly interest, the same shall be calculated on the balance in the account on completed thousands, in the balance which shall be paid to the account holder and the remaining amount in fraction of thousand will continue to earn interest at the prevailing rate.

Where one can open account?-   At any post office in India doing savings bank work and Branch of a commercial bank authorised by the Central Government to open an account under 'Sukanya Samriddhi Account Rules, 2014'.

Maximum and Minimum Deposit- The account may be opened with an initial deposit of one thousand rupees and thereafter any amount in multiple of one hundred rupees may be deposited subject to the condition that a minimum of one thousand rupees shall be deposited in a financial year but the total money deposited in an account on a single occasion or on multiple occasions shall not exceed one lakh fifty thousand rupees in a financial year.

Minimum – Rs, 1000/- Per Year

Maximum- Rs. 1,50,000/- Per Year

Term Period – Deposits can be made till completion of fourteen years from the date of opening of the account. The maturity of the account is 21 years from the date of opening of account or if the girl gets married before completion of such 21 years. In other words No Deposit for the period from 15th to 21st Year of account.

Regularisation of irregular account and Penalty – Where minimum amount of Rs. 1000/- a year has not been deposited than such irregular account may be regularised on payment of a penalty offifty rupees per year along with the minimum subscription of Rs. 1000/- for the year (s) of default any time till the account completes fourteen years.

Mode of Deposit – Deposit can be made in cash; or   by cheque or demand draft. Where deposit is made by cheque or demand draft, the date of encashment of the cheque or demand draft shall be the date of credit to the account.

Who can Operation the account and can the girl child operate the account?

(1) The account shall be opened and operated by the natural or legal guardian of a girl child till the girl child in whose name the account has been opened attains the age of ten years.

(2) On attaining age of ten years, the account holder that is the girl child may herself operate the account. however, deposit in the account may be made by the guardian or any other person or authority.

Premature closure of account –

(1) In the event of death of the account holder. the account shall be closed immediately on production of death certificate issued by the competent authority and the balance at the credit of the account shall be paid along with interest till the month preceding the month of premature closure of the account , to the guardian of the account holder.

(2)   Where the Central Government is satisfied that operation or continuation of the account is causing undue hardship to the account holder, it may, by order for reasons to be recorded in writing, allow pre-mature closure of the account  only in cases of extreme compassionate grounds such as medical support in life‑ threatening diseases, death, etc.

Pass book

(1) On opening an account, the depositor shall be given a pass book bearing the date of birth of the girl child, date of opening of account, account number, name and address of the account holder and the amount deposited.

(2) The pass book shall be presented to the post office or bank. as the case may be, at the time of depositing money in the account and receiving payment of interest and also at the time of final closure of the account on maturity.

Transfer of account to other place –    The account may be transferred anywhere in India if the girl child in whose name the account stands shifts to a place other than the city or locality where the account stands.

Pre-Mature Withdrawal- To meet the financial requirements of the account holder for the purpose of higher education and marriage withdrawal up to fifty per cent of the balance at the credit, at the end of preceding financial year shall be allowed but such withdrawal shall be allowed only when the account holder girl child attains the age of eighteen years.

Closure on maturity or before maturity due to Marriage of Account Holder- The account shall mature on completion of twenty-one years from the date of opening of the account but in case marriage of the account holder takes place before completion of such period of twenty-one years the operation of the account shall not be permitted beyond the date of her marriage. In such closure of accounts accountholder have to give an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of account.

Payment of Interest and Principal on Maturity- On maturity or pre maturity withdrawal due to marriage of girl child, the balance including interest outstanding in the account will be paid to the account holder on production of withdrawal slip along with the pass book.

Tax Benefit – The amount deposited towards Sukanya Samriddhi Account is deductible under section 80C of Income tax Act,1961 upto Rs.1.5 lakhs as notified by Notification No. 09/2015 dated 21.01.2015. Amount deposited in this account will be counted in overall limit of Rs. 1.50 Lakh under section 80C. Interest earned in this scheme is taxable, but maturity amount is exempt.

Comparison with PPF in respect of Tax Benefit- under PPF Scheme interest earned is tax free but interest earned on Sukanya Samriddhi Account deposit is taxable. Investment in Both PPF & Sukanya Samriddhi Account is eligible for deduction under section 80C of the Income Tax Act, 1961.

Drawback of the Sukanya Samriddhi Account Scheme-

1.     High Lock in Period

2.     Limitation on No. of Account

3.     Tax on Interest Income

4.     Scheme do not provide for online transfer of Amount in this account. It allows only payment by Cash, Cheque and Demand Draft.

5.     No Clarity on Future Interest Rate for this account.

6.     No Clarity on Taxability of Maturity Amount.

Benefits of Sukanya Samriddhi Account Scheme-

1. Higher Interest Rate

2. Tax Benefit Under Section 80C

3.  Payment on Maturity to Girl Child.

4. Interest Payment even after Maturity if account is not closed.

5. Flexibility in Deposits- Any Number of time amount can be deposits in Multiple of Rs. 100 subject to Maximum Limit of Rs. 1.50 Lakh per year.

6. Transferable Anywhere in India.

7. Even Girl Child can operate after she attains the Age of 10 Year.

Conclusion - It's a good scheme started with a good purpose by the Government but again a halfhearted effort as government should have exempt Interest earned on this scheme or should have provided separate deduction for amount deposited in this scheme instead of including it in Overall Deduction Limit of Section 80C of the Income Tax Act, 1961.

 

 

Service to Government - EXEMPTION WITHDRAWN

Please Note:

Withdrawals of Exemptions - Notification No. 25/2012-ST dated 20.06.2012

Services provided to the Government etc. by way of construction erection,

commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

(a) a civil structure or any other original

works meant predominantly for use

other than for commerce, industry, or

any other business or profession;

(c) a structure meant predominantly for

use as (i) an educational, (ii) a clinical,

or (iii) an art or cultural establishment;

(f) a residential complex predominantly

meant for self-use or the use of their

employees or other persons specified in

the Explanation 1 to clause 44 of section

65 B of the said Act;

THIS EXEMPTION WITHDRAWN FROM 1.4.2015

Regards,
-------
CA.C.V.PAWAR
PATIL DAWARE GIRASE PAWAR & ASSOCIATES

CHARTERED ACCOUNTANTS

0253-2319641. M-9423961209

INDIAN CA - NURTURED IN INDIA, GROOMED FOR THE WORLD

EXCISE RATE APPLICABLE FROM 28.2.2015 IS 12.50%

CENTRAL EXCISE

Standard ad valorem rate of Central Excise Duty on excisable goods

increased from 12% to 12.5% and Education Cess and Secondary and Higher Education Cess are subsumed in the said rate. 

IN OTHER WORDS NO EDUCATION CESS WILL BE CHARGED SEPARATELY NOW. ONLY SINGLE RATE 12.5%

The above change in rate will come into effect immediately.

Regards,
-------
CA.C.V.PAWAR
PATIL DAWARE GIRASE PAWAR & ASSOCIATES

CHARTERED ACCOUNTANTS

0253-2319641. M-9423961209

INDIAN CA - NURTURED IN INDIA, GROOMED FOR THE WORLD

Budget 2015: Clarifications regarding increase in Service Tax Rate –

Budget 2015: Clarifications regarding increase in Service Tax Rate –

 

 

Articles Clarifies Doubts Regarding Applicability of Revised Rate of Service Tax of 14% and Applicability of Swachh Bharat Cess, Educational Cess and SHE Cess on the New Service Tax Rate of 14%. Articles also clear the doubts regarding 16% Service Tax Rate after applicability of Swachh Bharat Cess on Taxable Services.

Amid huge expectations and challenges facing the economy, the Hon'ble Finance Minister Shri Arun Jaitley has presented his 1^st Full-year Union Budget for the year 2015-16 on 28^th February, 2015. In his Budget Speech, he has proposed to increase the effective rate of service tax from 12.36% to 14%. This proposal has created doubts in the minds of some assessee's and professionals as well. The objective of this article is to identify various issues/queries relating to proposed rate of service tax and try to clarify the same in simple language. To begin with, I quote the relevant Clause 121 of the Budget Speech as below:-

^"121. Introduction of 6ST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cess from 12.36% to a consolidated rate of 14%."

 

1. Do I have to charge new rate of service tax from 01-03-2015 onwards like we do in case of changes in rates of central excise?

No, you don't have to charge new rate of service tax from 01-03-2015 onwards as the new rate has not yet come into effect. Till then, the existing rate of 12% (service tax) + 2% (Education Cess on tax) + 1% (SHE Cess on tax) i.e. effective rate of 12.36% shall continue.

 

2. Whether the new enhanced rate of service tax going to be effective from 1^st April, 2015?

No, the proposed service tax rate will not become effective from 01-04-2015. Many service providers and receivers are having the misconception that any change in rate of service tax takes effect from 1^st April of the year. It shall come into effect from a date to be appointed by the Central Government, by way of notification in the Official Gazette, AFTER the enactment of the Finance Bill, 2015. The proposed amendments vide Clause 106 of the Finance Bill, 2015 is quoted as below:-

"106. In section 66B of the 1994 Act, with effect from such date as the Central 6overnment may, by notification in the Official 6azette, appoint, for the words "twelve per cent.", the words ^"fourteen per cent."shall be substituted."

Further, the Tax Research Unit of CBEC has issued instructions vide F. No. 334/5/2015 TRU dated 28-02-2015 and clarified at para 3.3 as quoted below:-

^"3.3 The new Service Tax rate shall come into effect from a date to be notified by the Central 6overnment after the enactment of the Finance Bill, 2015."

It means, that the new service tax rate cannot come into force before the Finance Bill, 2015 get assent from the President of India, after which the government will notify the effective date.

 

3. The Finance Minister's Budget Speech clearly state that it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14% (as quoted above).  Does it mean that once enacted, there won't be any requirement of charging additional Education Cess of 2% and Secondary Higher Education Cess of 1% over service tax of 14%?

Yes, once the new rate is effective, there won't be any requirement of charging 3% education cesses on the service tax.

 

4. Does it mean that the consolidated rate of 14% is inclusive of education cesses? In other words, the tax break-up is 13.59% (service tax) + 0.27% (Education Cess @2%) + 0.14% (SHE Cess @1%) aggregating to 14%?

No, there is no break-up of 14% tax rate which entirely constitute of service tax. The 14% rate has been proposed by substituting 12% in the charging section 66B of the Finance Act, 1994 and being statutory rate, it can~t include any other tax/cess within.

As mentioned in para 3 above, there won~t be any requirement of charging Primary Education Cess of 2% and Secondary Higher Education Cess of 1% on the service tax of 14% because it has been provided vide clauses 179 and 187 respectively of the Finance Bill, 2015 that sections 95 of the Finance Act, 2004 and 140 of the Finance Act, 2007, levying Education Cess and Secondary and Higher Education Cess on taxable services shall cease to have effect from a date to be notified by the Government.

 

5. Ok, now it's clear that 14% is the FINAL effective rate of service tax from the date to be notified by the Central Government?

Yes, subject to Swachh Bharat Cess (SBC) of 2%!!

 

6. What is Swachh Bharat Cess (SBC) and how is that related to service tax?

An enabling provision is being incorporated in the Finance Bill, 2015 (Chapter VI/clause 117) to empower the Central Government to impose a Swachh Bharat Cess on ALL or ANY of the taxable services at a rate of 2% on the value of such taxable services. This cess shall be levied from such date as may be notified by the Central Government after the enactment of the Finance Bill, 2015. The details of coverage of this Cess would be notified in due course.

 

7. 0MG!!! It means that the levy of education cesses has been removed and replaced by 2% cess on service tax to be named as Swachh Bharat Cess making the effective rate of service tax at 16%?

No, it is wrong to say that the levy of education cesses has been removed and replaced by SBC @ 2% on service tax. I quote below the proposed levy of SBC vide Clause 117(2) of Bill:-

^"(2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto."

The new provision clearly says that the new levy of SBC shall be as service tax @ 2% on the VALUE of such services. So, unlike education cesses, which were levied not on value of services but on service tax thereon, SBC is not a tax on service tax. A cess should not be confused with surcharge which is always a tax on tax.

In the Indian context, the Hon'ble Supreme Court, in a ruling in Shinde Brothers Vs. Commissioner, Raichur reported in 1967, said that "the word cess means a tax and is generally used when the levy is for some special administrative expense" citing various examples suggesting the name of the cess explains the object. Thus, cess is a tax which can be collected in any manner but to be utilized only for purposes specified at the time of levy.

Therefore, if the proposed Swachh Bharat Cess is implemented, the Final effective rate of service tax shall be 16% on notified taxable services.

 

8. Whether SBC will be made applicable on all the services?

The Central Government is empowered to issue a notification after the enactment of the Finance Bill, 2015 to impose the new levy on either all the taxable services or on specified services. If selected services are subjected to the new levy of SBC, the issue of classification of service arise which is expected to generate more disputes, litigations and controversies, as has been seen in the past. The effective date of applicability of SBC shall be notified by the government.

 

Author    : Manoj Agarwal Address  : Ganpati Campus, Lal Building Road, Rourkela – 769012 Contact   : +91-9937041788 E:mail      : ServiceTaxExpert@yahoo.com

ITR (TRIB) Volume 38 : Part 2 (Issue dated : 2-3-2015)

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Capital or revenue receipt --Receipt on sale of carbon credit--Capital in nature--Income-tax Act, 1961-- Prabhu Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 209

International transactions --Transfer pricing--Arm’s length price--Determination--Transactional net margin method--Automobile design and engineering services rendered by U. K. company--Selection of comparables--Indian and foreign transfer pricing regulations accepting non-domestic comparables--Failure by Transfer Pricing Officer to take into account comparable analysis of foreign companies--Matter remanded to Transfer Pricing Officer to examine transfer pricing adjustment afresh--Income-tax Rules, 1962, r. 10B-- Tata Motors European Technical Centre Plc. v. Asst. DIT (International Taxation) (Mumbai) . . . 195

 

PRINT EDITION

Volume 38 : Part 2 (Issue dated : 2-3-2015)

SUBJECT INDEX TO CASES REPORTED

Accounting --Rejection of accounts--Low gross profit rate as compared to previous year--Change in market causing change in gross profit rate--Deletion of disallowance proper--Income-tax Act, 1961-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

Assessment --Appeal to Commissioner (Appeals)--Disallowances made by Assessing Officer resulting in positive income--Denial of opportunity to claim exemption under section 10A--Claim made for first time before Commissioner (Appeals)--Duty of Assessing Officer to grant exemption statutorily allowable to assessee--Matter remanded to Assessing Officer--Income-tax Act, 1961, ss. 10A, 143(3)-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

Business expenditure --Disallowance--Foreign travel expenditure--No doubt in details of expenses--Disallowance cannot be made on flimsy ground--Income-tax Act, 1961-- Parle Agro P. Ltd. v. Asst. CIT (Mumbai) . . . 203

----Capital or revenue expenditure--Technical consultancy charges to a foreign company--No material to show no enduring benefit obtained by assessee--Expenditure capital in nature--Income-tax Act, 1961-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

----Disallowance--Payments liable to deduction of tax at source--Disallowance cannot be made for amounts paid before end of relevant accounting year--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

----Disallowance--Payments to non-resident--Failure to deduct tax at source--Usance charges on import of raw material--Are interest within provisions of section 2(28A) and accrue in India--Section 195 applicable--Assessee not deducting tax at source--Assessing Officer justified in disallowing payment--Income-tax Act, 1961, ss. 40(a)(i), 195-- Asst. CIT v. Indian Furniture Products Ltd. (Panaji) . . . 174

----Employees’ contribution towards Employees State Insurance--Contribution made before due date for filing return of income--Disallowance cannot be made--Income-tax Act, 1961, s. 139(1)-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

----Expenditure incurred towards product development including design charges--Revenue expenditure--Whether expenses pertains to subsequent year or year in question--Must be proved with concrete evidence--Income-tax Act, 1961-- Parle Agro P. Ltd. v. Asst. CIT(Mumbai) . . . 203

----Festival expenses--Assessing Officer cannot step into shoes of businessman to decide whether a particular expenditure necessary or not--Disallowance not sustainable--Income-tax Act, 1961-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

----Prior period expenses to be allowed as deduction--Income-tax Act, 1961-- Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

----Travelling and conveyance expenses--Failure by assessee to produce bills and vouchers supporting expenses incurred--Disallowance restricted--Income-tax Act, 1961-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

Business loss --Bad debt--Amounts advanced to for purchase of capital assets--Cannot be allowed as bad debts or business loss--Income-tax Act, 1961-- Hindustan Times Ltd. v. Deputy CIT (Delhi) . . . 165

Capital or revenue expenditure -- Expenditure towards permission from Government for using factory premises for other purposes--Factory premises already in use of assessee--Expenditure towards payment including interest cannot be capitalised--Expenditure revenue in nature--Income-tax Act, 1961, s. 37-- Deputy DIT v. Micron Instruments P. Ltd. (Delhi) . . . 242

----Artwork charges--Artwork mainly for advertisement and for use for short duration--No enduring advantage--Not capital expenditure--Income-tax Act, 1961-- Parle Agro P. Ltd. v. Asst. CIT (Mumbai) . . . 203

----Extension of existing business--Failure by authorities to find nature of project undertaken--Suspension of capitalisation of borrowing requiring examination of facts--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 37-- Hindustan Times Ltd. v. Deputy CIT(Delhi) . . . 165

----Market research expenses for deciding market strategy for promoting its products--Expenses for sustaining market and to push up sales--Revenue expenditure--Income-tax Act, 1961-- Parle Agro P. Ltd. v. Asst. CIT (Mumbai) . . . 203

Charitable purpose --Registration of trusts--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to main purpose profitable in nature--Denial of registration not justified--Income-tax Act, 1961, s. 12AA-- IP India Foundation v. DIT (Exemptions) (Hyd) . . . 195

Depreciation --Rate of depreciation--Computers--Printers, scanners, modems and routers come within ambit of expression “computer†when used along with computer--Entitled to higher rate of depreciation--Income-tax Act, 1961, s. 32-- Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

Exemption --Export oriented undertaking--Export turnover--Profits arising out of fluctuation of rates of foreign exchange--Form part of export turnover--Assessee dealing in manufacture and export of fasteners--Sale of scrap--Proceeds not includible in turnover--Income-tax Act, 1961, s. 10B-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

----Export oriented undertaking--Profits eligible for exemption--Interest from fixed deposit receipts placed for maintaining margin money--Close nexus with business activity of assessee--To be treated as business income--Eligible for deduction under section 10B--Income-tax Act, 1961, s. 10B-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

Income from house property --Deductions--Interest on borrowings--Interest on loan taken for acquiring property--Allowable--Income-tax Act, 1961, s. 24(b)-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

Industrial undertaking --Special deduction under section 80-IC--Profits of undertaking--Subsidies such as transport, power, interest and insurance are part of business profits and gains from industrial undertaking--Deduction allowable--Income-tax Act, 1961, s. 80-IC--Meghalaya Mineral Products v. Asst. CIT (Guwahati) . . . 186

Penalty --Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Acceptance of cash by husband from his wife cannot be treated as loan or advance in strict sense--Order cancelling penalty levied under section 271D justified--Income-tax Act, 1961, ss. 271D, 269SS-- Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

----Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Firm accepting cash from partner otherwise than by account payee cheque--Firm and partner not two different persons--Payment not of character of loan or deposit in general law--Section 269SS not applicable--Order cancelling levy of penalty under section 271D justified--Income-tax Act, 1961, ss. 271D, 269SS-- Asst. CIT v. Vardaan Fashion(Delhi) . . . 247

----Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Scope of section 269SS--No monetary transaction between assessee and creditors--No violation of section 269SS--Order deleting penalty justified--Income-tax Act, 1961, ss. 269SS, 271D-- Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 10A --Assessment--Appeal to Commissioner (Appeals)--Disallowances made by Assessing Officer resulting in positive income--Denial of opportunity to claim exemption under section 10A--Claim made for first time before Commissioner (Appeals)--Duty of Assessing Officer to grant exemption statutorily allowable to assessee--Matter remanded to Assessing Officer-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

S. 10B --Exemption--Export oriented undertaking--Export turnover--Profits arising out of fluctuation of rates of foreign exchange--Form part of export turnover--Assessee dealing in manufacture and export of fasteners--Sale of scrap--Proceeds not includible in turnover--Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

----Exemption--Export oriented undertaking--Profits eligible for exemption--Interest from fixed deposit receipts placed for maintaining margin money--Close nexus with business activity of assessee--To be treated as business income--Eligible for deduction under section 10B--Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

S. 12AA --Charitable purpose--Registration of trusts--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to main purpose profitable in nature--Denial of registration not justified-- IP India Foundation v. DIT (Exemptions) (Hyd) . . . 195

S. 24(b) --Income from house property--Deductions--Interest on borrowings--Interest on loan taken for acquiring property--Allowable-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

S. 32 --Depreciation--Rate of depreciation--Computers--Printers, scanners, modems and routers come within ambit of expression “computer†when used along with computer--Entitled to higher rate of depreciation-- Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

S. 37 --Capital or revenue expenditure-- Expenditure towards permission from Government for using factory premises for other purposes--Factory premises already in use of assessee--Expenditure towards payment including interest cannot be capitalised--Expenditure revenue in nature-- Deputy DIT v. Micron Instruments P. Ltd. (Delhi) . . . 242

----Capital or revenue expenditure--Extension of existing business--Failure by authorities to find nature of project undertaken--Suspension of capitalisation of borrowing requiring examination of facts--Matter remanded to Assessing Officer-- Hindustan Times Ltd. v. Deputy CIT (Delhi) . . . 165

S. 40(a)(i) --Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Usance charges on import of raw material--Are interest within provisions of section 2(28A) and accrue in India--Section 195 applicable--Assessee not deducting tax at source--Assessing Officer justified in disallowing payment-- Asst. CIT v. Indian Furniture Products Ltd. (Panaji) . . . 174

----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Disallowance cannot be made for amounts paid before end of relevant accounting year--Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

S. 80-IC --Industrial undertaking--Special deduction under section 80-IC--Profits of undertaking--Subsidies such as transport, power, interest and insurance are part of business profits and gains from industrial undertaking--Deduction allowable-- Meghalaya Mineral Products v. Asst. CIT (Guwahati) . . . 186

S. 139(1) --Business expenditure--Employees’ contribution towards Employees State Insurance--Contribution made before due date for filing return of income--Disallowance cannot be made-- Universal Precision Screws v. Asst. CIT (Delhi) . . . 233

S. 143(3) --Assessment--Appeal to Commissioner (Appeals)--Disallowances made by Assessing Officer resulting in positive income--Denial of opportunity to claim exemption under section 10A--Claim made for first time before Commissioner (Appeals)--Duty of Assessing Officer to grant exemption statutorily allowable to assessee--Matter remanded to Assessing Officer-- Himson International P. Ltd. v. Deputy CIT (Ahd) . . . 218

S. 194C --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Disallowance cannot be made for amounts paid before end of relevant accounting year-- Ushodaya Enterprises Ltd. v. Deputy CIT (Hyd) . . . 148

S. 195 --Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Usance charges on import of raw material--Are interest within provisions of section 2(28A) and accrue in India--Section 195 applicable--Assessee not deducting tax at source--Assessing Officer justified in disallowing payment-- Asst. CIT v. Indian Furniture Products Ltd. (Panaji) . . . 174

S. 269SS --Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Acceptance of cash by husband from his wife cannot be treated as loan or advance in strict sense--Order cancelling penalty levied under section 271D justified--Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

----Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Firm accepting cash from partner otherwise than by account payee cheque--Firm and partner not two different persons--Payment not of character of loan or deposit in general law--Section 269SS not applicable--Order cancelling levy of penalty under section 271D justified-- Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

----Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Scope of section 269SS--No monetary transaction between assessee and creditors--No violation of section 269SS--Order deleting penalty justified-- Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

S. 271D --Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Acceptance of cash by husband from his wife cannot be treated as loan or advance in strict sense--Order cancelling penalty levied under section 271D justified--Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

----Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Firm accepting cash from partner otherwise than by account payee cheque--Firm and partner not two different persons--Payment not of character of loan or deposit in general law--Section 269SS not applicable--Order cancelling levy of penalty under section 271D justified-- Asst. CIT v. Vardaan Fashion (Delhi) . . . 247

----Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee draft--Scope of section 269SS--No monetary transaction between assessee and creditors--No violation of section 269SS--Order deleting penalty justified-- Asst. CIT v.Vardaan Fashion (Delhi) . . . 247

 

Section 10B ITAT Special Bench Verdict Approved + Imp Verdict On Chapter VI-A Deductions

 

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.

CIT vs. Hritnik Exports Pvt. Ltd (Delhi High Court)

S. 10B(4): All business profits of the undertaking are eligible for deduction and it is not necessary to show that they have a "direct nexus" with the undertaking

Sub-section (4) of s. 10B does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits

CIT vs. J. B. Boda & Co.P. Ltd (Bombay High Court)

Chapter VI-A deductions are not limited to the business profits but are available to the extent of the Gross Total Income

The only question sought to be canvassed is that out of these deductions the admissible deduction under section 80-O ought to be limited to the extent of Rs.69,70,127 which represents business income. In other words, the income from interest and dividend shall not form part of the gross total income as defined under section 80B(5) of the Act. The submission is misconceived

Regards,

 

Editor,

 

itatonline.org

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HOW TO CLAIM REFUND OF LBT. LBT REFUND IF GOODS SOLD OUTSIDE LOCAL LIMITS(OUTSIDE NASHIK)

IN CASE OF GOODS RE-SOLD OUTSIDE NASHIK WITHIN 6 MONTHS (LOCAL LIMITS); THE DEALER / TRADER CAN CLAIM REFUND OF LBT OR EVEN ADJUST AGAINST THE LBT PAYABLE FOR OTHER MONTHS.

HOWEVER, THE DEALER HAS TO KEEP PROPER RECORDS OF MOVEMENTS OF GOODS AND FOLLOW THE PROCEDURE PRESCRIBED UNDER LBT RULES FOR THIS PURPOSE.

FURTHER, IF WHILE DOING THE ACCOUNTING THE SEPARATE LEDGER ARE MAINTAINED FOR LOCAL PURCHASES AND OUTSIDE PURCHASE, LOCAL SALES AND OUTSIDE SALES; THE SAME IS ALSO USEFUL.

MANY DEALERS/TRADERS ARE NOT AWARE ABOUT THIS PROVISION.

THERE WERE NO SUCH PROVISION UNDER OCTROI.

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