THIS MONTHS ’ MAJOR

Between Fine Lines January 2013 Vol 2 Issue 1

INSIDE THIS ISSUE:

Main Story 1

Latest in Income Tax 2

Latest in VAT 3

Tax Compliance in January

4

Latest in Service Tax 5

Tax Trivia 6

MGS & Co. Chartered Accountants

Latest in Corporate 7 law

Charitable Trust — Charitable activity may not precede application for registration u/s 12AA Income Tax authorities have usually been conservative in issuing registration u/s 12AA of Income Tax Act, 1961 (“Act”) to new charitable trusts in absence of application of funds towards charitable activities. In absence of such registration, the Trusts usually find it difficult to obtain exempt status in initial years. However, in Gurusikh Education Society v. CIT, Dehradun [I.T.A.No. 3615/Del/12], it has been held that registration cannot be denied merely on the ground that funds have not been utilized or applied for charitable purposes. The Hon’ble Tribunal held that in grant-ing such registration, registration authority should consider the genuineness, aims and objectives of the applicant. The facts of the case are that Gurusikh Education Society (“Society”) applied for registration u/s 12AA of the Act along with requisite enclosures. On perusal, further information was called for and provided by the Society. However, Ld. Commissioner rejected their application stating that the Society had not produced any evidence and accounts to show the expenditure on charity in AY 2011-12 and that the expenditure towards charity is small in comparison to the receipts of the Society. The Society moved to Hon’ble Tribunal against the impugned order. On appeal, Hon’ble Tribunal observed that the department has not disputed the fact that the above aims and objec-tives of the society as mentioned hereinabove are purely charitable and for the welfare of poor and needy persons. Accordingly, relying on the objects of the Society, Tribunal observed that registration should have been granted to it. Hon’ble Tribunal relied on the judgements of Hon’ble Punjab & Haryana Court in the case of O.P. Jindal Global University vs CCIT, Panchkula in CWP no. 6171/2010 dated 11.11.2011, wherein the Hon’ble High Court was pleased to observe that while deciding the application of reg-istration u/s 12AA of the Act, objectives of the trust is to be seen. Reliance was also placed on the decision in the case of DIT(E) vs Meenakshi Amma Endowment Trust in ITA No.152/2010 [Karnataka High Court] wherein it was held that that a trust could be formed today and within a week registration u/s 12A of the Act could be sought, as there is no prohibition under the Act seeking such registration immediately after creation of the trust. It was observed by the Hon’ble Court that it is always open to the authorities concerned to withdraw the registration already granted. Reference and reliance was also made to the decision of DIT vs Foundation of Ophthal-mic & Optometry Research Education Centre in ITA No.-1687/2010 [Delhi HC] wherein their lord-ship held that the statue does not prohibit or enjoin the Commissioner from registering trust solely based on its objects without any activity, in case of a newly created trust. Thus, the present case has reiterate the position that charitable purpose is a prerequisite for ap-plication for registration u/s 12AA and not application of funds towards charitable purpose. The law provides suitable safeguards towards monitoring of application of funds of such persons.

W HET HER S ALE TO UN AGENCIES QUALIFY FOR DEDUCTION U /S 80HHC

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In the case of Indian Del. P. Ltd. v. Commissioner of Income-Tax [2012] 349 ITR 330 (Delhi), the assessee was engaged in the business of metal printing, coating, varnishing, lacquering and sizing, etc. Its turnover during the year included sales to UNICEF. These sales were claimed by the assessee to be its “export sales” for the purpose of deduction under section 80HHC. The Assessing Officer held that the assessee was not entitled to the special deduction. This order was confirmed by the Commissioner (Appeals) and the Tribunal on the basis that the goods had not been physically exported out of India and, therefore, the important and necessary condition precedent for claiming the deduction under section 80HHC had not been satisfied. Thus, the assessee was not entitled to deduction under section 80HHC.

I NCOME TAX UPDAT ES

In the case of ChalasaniVenkateshwararao v. Income-Tax officer [2012] 349 ITR 423 (AP), the assessee was a partner in a firm with 50 per cent share. The partnership was part-nership at will. The disputes arose between the partners of the firm. The assessee sent a notice for dissolving the firm. According to section 43 of the Partnership Act, 1932, where the partnership is at will, the firm stands dissolved by any partner giving notice in writing of his intension to dissolve the firm. Therefore, the partnership stood dissolved. There were dis-putes regarding settlement of accounts. Ultimately, under a compromise recorded in the Supreme Court the assessee received Rs. 15 lakhs. The Assessing Officer held that this amount constituted capital gains and this was upheld by the Tribunal. The High Court held that when the assessee was paid Rs. 15 lakhs in full and final settlement towards his 50 per cent share on the dissolution of the firm, there was no “transfer” as understood in law and, consequently, there could not be a tax applied on capital gains on this amount.

CAPITAL GAIN ON S ETLEMENT AT D ISSOLUTION OF P ART NERSHIP

Tax Byte TDS defaulters to be penalized

CBDT has inserted a new section 234E in the Income Tax Act according to which non filers (of Tax deducted at source) are required to pay a fee of Rs. 200 for everyday of delay as penalty and the system does not accept the TDS statement until the delay fee has been paid.

INCOME TAX CASES

Notification No. 55/2012-IT dated -28-12-2012, The Central Government notifies the under-taking operated by M/s. iLABS Hyderabad Technology Centre Pvt. Ltd., Hyderabad, as an industrial park for the purposes of clause (iii) of sub-section (4) of section 80-IA of the Income Tax Act, 1961 which provides for “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.”

Notification No. 56/2012 [F. No. 275/53/2012-IT (B)], Dated 31-12-2012, The Central Gov-ernment has notified that under Chapter XVII of the Income Tax Act, 1961, no deduction of tax shall be made on the payment mentioned below, if such payment is made by a person to a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), excluding a foreign bank, namely:- bank guarantee commission cash management service charges depositary charges on maintenance of DEMAT accounts underwriting services charges clearing charges (MICR charges) credit card or debit card commission for transaction between the merchant establishment

and acquirer bank . This notification shall be applicable with effect from 1st January, 2013.

STEEL WELD (INDIA) PVT LTD V/S SALES TAX OFFICER, SALT LAKE CHARGE & OTHERS:-(2012) 56 VST 307

Under this case dealer is a manufacturer of tanks which are used in making transformers. The dealer claimed that tanks manufactured by it are taxable at 4% on the grounds that tanks are made from iron & steel goods which are taxable at 4% as specified in sec14(iv) of Central Sales Tax Act,1956 & further all electrical goods fitted inside the tanks were also taxable at 4%. However sales tax officer directed payment of tax at 12.50%. On petition to taxation tribunal, tribunal dismiss the petition on the grounds that tanks which are manufactured from iron & steel plates which are taxable at 4% as specified by sec 14(iv) of Central Sales Tax Act,1956 but that did not mean that goods made of these raw materials were also be taxed at 4%. Dealer was selling an altogether distinct new commercial commodity. Thus while Declared goods would be exigible to tax @4% under Central Sales Tax At, goods made out of such commodities would not enjoy similar benefits.

Chloropalsts V/s State of Kerala:- (2012) 56 VST 319 Under this case dealer got poly vinyl chloride pipes manufactured under its brand name from a small scale unit which claimed exemption from sales tax on the grounds of declaration issued by the dealer in form no 25D stating that dealer was paying tax on sale of products which was point of levy by virtue of operation of sec 5(2) of Kerala General Sales Tax Act, 1963. Further dealer also claimed benefit of Notification SRO No 1091 of 1999, that even though goods are taxable at 12% the sealer was entitled to be taxed at 8% as it pur-chases from small scale units. Assessing officer denied such claim and Sale Tax Appellate Tribunal also con-firm levy of tax at 12%. On appeal, petition was dismissed on the grounds that the condition for granting con-cessional rate is production of declaration in Annexure IV obtained from small scale industrial unit. Admittedly dealer had not obtained Annexure IV. Therefore on non compliance of procedure specified in the Notification, dealer was rightly denied from concessional rate under Notification SRO No 1091 of 1999.

Medi Carrier P Ltd V/s Commissioner of Tax And Other:- (2012) 56 VST 339 Under this case dealer got registration as a transporter under Tripura Sales Tax Act. 1976 with a security de-posit of Rs 5Lakh for transportation of medicines & obtained statutory forms XXIV. Since the petitioner could not run its business of transportation, the Superintendent of Taxes issued notice as to why its registration should not be cancelled. The petitioner replied requesting to withdraw petitioner’s registration & to refund se-curity amount with interest. The Superintendent forfeit the security on the ground that petitioner has failed to use forms supplied to it & returned the same as unused & discontinued its operations, thereby mis-utilizing the Government agency. On a petition it was held that security deposit is made to ensure that any taxable liability of a person does not escape recovery. If after registration person chooses not to carry on his business his security deposit cannot be forfeited in the absence of any law. Since the petitioner had not incurred any tax liability, the Department cannot forfeited the security deposit on the ground that petitioner mis-utilized the Gov-ernment Agency by obtaining registration. Hence the forfeiture of security deposit was wholly against law. At the same time demand of interest by petitioner was also not tenable in law.

I MPORTANT CASES FOR THIS MONT H

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VAT U PDAT ES As per Order No .F.3(33)/P-II/ VAT/ Misc./2006 dated 26-12-2012, time limit for providing reconciliation of Central Sales in

From DVAT 51 along with Central Statutory Forms received from the parties for the period 2011-12 has been extended from 31-12-2012 to 28-02-2013.

As per Notification No 1079-1090 dated 03-01-2013, submission of details online regarding Interstate Purchases, Stock Transfer or Imports in Form T-2 shall come into force with effect from 01-02-2013 instead of 01-01-2013.

As per notification No 1068-78 dated 01-01-2013, no security is required to be furnished with the Department of Trade & Taxes by the dealers who apply for Registration under DVAT Act,2004 upto 31-03-2013.

As per notification No 1056-67 dated 01-01-2013, organisations listed in sixth schedule off DVAT Act,2004 are now eligi-ble for claiming refund of tax borne in respect of purchase made against a single tax invoice if it exceeds Rs 5000.

MGS & Co. Chartered Accountants

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5th Jan. 2013 Service Tax : Deposit service tax quarterly in case of assesses being individual, proprietary concern and partnership firms for the quarter ending December and monthly in case of companies & other than the assesses mentioned above for the month of December.

6th Jan. 2013 Service Tax : Deposit service tax quarterly in case of assesses being individual, proprietary concern and partnership firms for the quarter ending December and monthly in case of companies & other than the assesses mentioned above for the month of December when making e-payment.

7th Jan. 2013 Income Tax: Deliver a copy of form 15G/15H/27C to CCIT or CIT for declarations received in the month of December.

Income Tax: Deposit TDS/TCS for deductions/collections made in the month of December.

15th Jan.2013 Income Tax: Submit quarterly statement of deduction of tax from salary in form 24-Q, tax deducted from other payments in form 26-Q, from payments made to non residents in form 27-Q & TCS in form 27-EQ for quarter ending December (other than office of the govt.)

Delhi VAT: Deposit TDS (VAT) in DVAT-20. Issue certificate for TDS in Form DVAT- 43 for deductions in the month of De-

cember. 21st Jan. 2013 Delhi VAT: Deposit tax for month of December by monthly dealers and also by

quarterly dealers liable to pay net tax above `1 lac during previous Financial Year or whose tax liability exceeds `1 lac during current Financial Year

25th Jan. 2013 Delhi VAT: File DVAT/CST returns in electronic form for the month of Dec. for the class of dealers, having monthly tax period & for Quarter ending December for class of dealers, having quarterly tax period. File annexure 2A & 2B electroni-cally. Delhi VAT: Composition dealers file DVAT-17 in electronic form for the quarter ending December.

28th Jan. 2013 Delhi VAT: Furnish monthly / quarterly return in DVAT 16/Form 1 in hard copy with VAT department along with proof of filing of Annexure 2A & 2B.

30th Jan. 2013 Income Tax: Issue TDS/TCS certificates in new Form No. 16A/27D for credits/payments made in the quarter ending December.

31st Jan. 2013 Income Tax: Submit quarterly return of non deduction of tax at source by a banking company from interest on time deposits in form 26QAA for quarter end-ing December.

Delhi VAT: Last date for framing of default assessment by Assessing Authorities in all cases for the year 2008-09, 2009-10 & 2010-11 where deficiency of forms exists

Note: Income Tax. E-payment is compulsory for all corporate assesses and for persons whose accounts audited u/s 44 AB of Income Tax Act. All deductors need to download form 16A from TIN of NSDL which is issued to deductees whose TDS has been deducted. DVAT E-payment of DVAT and CST is compulsory for all dealers Service Tax E-payment is compulsory for all assesses whose liability of Service Tax was more than Rs 10 Lakhs during the proceeding financial year.

TAX COMPLIANCE DURING J ANUARY 2013

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I MPORTANT CASES FOR THIS MONT H

In the case of Larsen & Toubro Ltd. v. Commissioner of Service Tax, Bangalore [2012] 37 STT (Bangalore- CES-TAT), Assessee was working as a commission agent of L & T and was also undertaking repairs of machines sold by said company during the warranty period. Assessee contended that he was commission agent and exempt under Noti-fication no. 13/2003-S.T. Department contended to levy of service tax on repair undertaken under management, main-tenance or repair service. It was decided that as per explanation to section 65 (19) inserted with effect from 16/5/2005, any person undertaking any activities relating to such sale or purchase of such goods or services is regarded as com-mission agent and said explanation is clarificatory and retrospective. Therefore, activities undertaken by assessee were covered under commission agent.

In the case of Rathour Engg. Works v. Commissioner of Central Excise, Chandigarh [2012] 37 STT (New Delhi- CESTAT), from period 10/9/2004 to 28/2/2005 assessee was providing the activity of grinding and smoothening edges by clipping of rough iron castings on job work, which did not amount to manufacture. Department decided to levy ser-vice tax thereon. Under BusinessAuxiliary Services, during material period, only ‘production of goods on behalf of cli-ents’ was liable to service tax. It was only with effect from 16/6/2005 that assessee was liable to pay service tax only on production or processing of goods for or on behalf of client. Therefore, demand for period prior to 16/6/2005 was liable to be set aside.

In the case of Commissioner of Service Tax, Bangalore v. Lakshminarayana Mining Co. [2012] 37 STT (Karnataka), Assessee was receiving services of transport of iron ore. Demand of service tax was raised from assessee by Department along with interest and penalty which was paid by the as-sessee. Assessee filed appeal and claimed the refund of service tax paid wrongly on the ground that said services were not taxable under goods transport services if it has been received from individual truck owners. It was held that service tax paid on transportation charges was covered under expres-sion ‘clearance of final products from place of removal’ and therefore, assessee is entitled to CENVAT Credit.

In the case of Institution of Valuers v. Union of India [2012] 28 taxmann.com 104 (Guj.), the assessee, an asso-ciation of qualified engineers was engaged in providing services of valuation of immovable property. Department de-manded service tax from assessee under ‘Consulting Engineering Services’. It was held that service of valuer by as-sessee will not be taxable under said category as services of valuer were not covered under engineering because even non engineers could provide services as valuer. Hence, the case was in the favour of assessee.

MGS & Co. Chartered Accountants

I MPORTANT UPDAT ES OF S ERVICE TAX

NOTIFICATION NO. 49/2012-ST, DATED 24-12-2012, The Central Government makes amendment in the notification no.25/2012-Service Tax, dated the 20th June, 2012. In the said notification, after entry 26, the following shall be inserted namely "26A. Services of life insurance business provided under following schemes - (a) JanashreeBimaYojana (JBY); or

(b) AamAadmiBimaYojana (AABY);"

CIRCULAR NO.167/2 /2013 - ST [F.NO.B-1/2/2010 -TRU], DATED 1-1-2013, vide this circular it is clarified that the service by way of transportation of milk by rail or a vessel from one place in India to another, is covered by the Notification No.25/2012-ST, dated 20-6-2012 which provides for exemptions from Service Tax.

CIRCULAR NO. 166/1/2013-ST [F.NO. 354/190/2012-TRU], DATED 1-1-2013, vide this circular it is clarified that reminder letters/notices for insurance policies not being invoices would not invite levy of service tax. In case of issuance of any invoice, point of taxation shall accordingly be determined.

Department has made certain registration relevant changes in Form ST-1 in ACES for which department has also issued clarification for new Registrants and for Existing Registrants. Department has also issued clarification for pending amend-ment applications.

UPDAT ES O N CUSTOM DUT Y

Notification No.58/2012-Customs (ADD) dated 25/12/2012,The central government imposes anti-dumping duty on Phthalic Anhydride originating in, or exported from, Korea RP, Taiwan (Chinese Taipei) and Israel.

Notification No.62 / 2012 – Customs dated 24/12/2012, The Central Government makes an amendment in the Notifica-tion no. 12/2012-Customs, dated the 17th March,2012 by inserting new entry 142A after s. no. 142 regarding the exemp-tion from custom duty on import of Liquefied petroleum gases (LPG).

Notification No.57/2012-Customs (ADD) dated 24/12/2012, Imposition of anti-dumping duty on import of Choline Chlo-ride originating in, or exported from, the People’s Republic of China.

Circular No. 2/2013-Customs, dated 1.1.2013: Replacement of Fixed Deposit Receipts (FDRs) furnished in respect of provisional Mega or Ultra Mega Power Projects with Bank Guarantees (BGs)

Last month’s Answers What is the time period for filing any amendment in particulars of registration under DVAT Act, 2004?

Ans: The time period for filing any amendment in particulars of registration under DVAT Act, 2004 is 30 days. (Rule 15 of DVAT Act, 2004)

What is the due date to deposit TDS amount with the Government ?

Ans: The due date to deposit TDS amount with the government is 7th of next month but if tax deducted in the month of march, TDS should be deposited before 3oth April.

Whether separate bill books are required for tax and retail invoices under DVAT Act, 2004 ? Ans: Yes, separate books are required for tax and retail invoices under DVAT Act, 2004 other-

wise there is a penalty of Rs. 5000 per bill or 20% of tax. What is the codes prescribed by the Government to deposit the amount of Service Tax post July 1,

2012 ? Ans: Circular No. 165/2012 has prescribed codes for registration and payment of service tax for different services.

This month’s Trivia What is the due date for submitting quarterly TDS Return in Form 26Q ? How many Board Meetings of the Company are required to be held every year? What is the period of limitation of payment of tax on distributed income ? For how many years a loss from a Specified business can be carried forward under section 35AD ?

TAX TRIVIA

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CORPORATE L AW UPDATES

MGS & Co. Chartered Accountants

GENERAL CIRCULAR NO. 43/2012, DATED 26-12-2012: Due date of filing Cost Audit Report and Compliance Report in XBRL mode further extended till 31-1-2013.

NOTIFICATION [F.NO. 5/80/2012-CLV], DATED 24-12-2012, The Central Government makes certain rules to amend the Companies (Directors Identification Number) Rules, 2006. These rules may be called the Companies Directors Identification Number (Third Amendment) Rules, 2012 which shall come into force with effect from 25-12-2012.In the Companies (Directors Identification Number) Rules, 2006, in Annexure 'A' for Form DIN-1, the following Form shall be substituted, namelyFORM NO. DIN-1- Application for allotment of Director Identification Number [See Rule 3(1) of the Companies (Director Identification Number) Rules, 2006, Rule 10 of Limited Liability Partnership Rules, 2009].

Notification No.F.No. 5/80/2012- CL dated 24-12-2012, The Central Government makes certain rules to amend the Companies (Central Government's) General Rules and Forms, 1956. These rules may be called the Companies (Central Government's) General Rules and Forms (Seventh Amendment) Rules 2012 which shall come into force with effect from 25.12.2012.In the Companies (Central Government's) General Rules and Forms, 1956, in Annexure 'A' forForm 18, the follow-ing Form shall be substituted, namelyFORM 18-Notice of situation or change of situation of registered office.

NOTINIFICATION NO [ F NO 5/80/2012-CL V] dated 24-12-2012, The Central Government makes certain rules to amend the Companies (Directors Identification Number) Rules. 2006. These rules may be called the Companies Directors Identifica-tion Number (Third Amendment) Rules, 2012 which shall come into force with effect from 25.12.2012. In the Companies (Directors Identification Number) Rules, 2006, In Form DIN-4, the certification column after serial no. 17, the following 2nd para of the certification in Form DIN-4shall be substituted, namely:- I hereby verify that I have satisfied myself about the identity of the director/designated partner based on the perusal of the original of the attached documents. I also verify having attested the photograph of the said person Who is personally known to me, or Who met me in person along with the original of the attached documents. It is further certified that all required attachments have been completely attached to this application.

In the case of Dr. Partha Bhattacharya v. JR&M Banik (P.) Ltd. [2012] 28 taxmann.com 129 (CLB-Kolkata), the respon-dent company was a private company limited by shares. The company defaulted in holding its Annual General Meetings for three consecutive years and in making other statutory compliances because of fights between the two groups of sharehold-ers. The Company Law Board held that defaults in holding Annual General Meetings caused irreparable prejudice to the company and also to its members and, therefore, respondent company was directed to call and hold Annual General Meet-ings for all three years immediately.

In the case of Devganga Traders v. Official Liquidator of Mahendra Mills Ltd. [2012] 28 taxmann.com 126 (Gujrat), auction of company’s property was confirmed in favour of the applicant ‘B’. ‘B’ defaulted in payment of full sale considera-tions. Time for the payment of remaining amount was extended as asked by him. But it was found to be a defaulter, who did not stand up to promise and did not pay remaining amount of sale considerations even during time for which he was seeking extension. The appellant filed appeal against refusal of company Judge to grant further extension. The High Court held that the amount deposited by the appellant-applicant towards sale considerations was to be refunded on completion of sale. However, the appellant-applicant would not be entitled to refund of Earnest Money Deposit because he doesn’t stand up to his promise to pay remaining amount of sale considerations.

IMPORTANT CASES OF CORPORAT E L AW

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CONT RIBUTORS TO T HIS EDIT ION

CA Man Mohan CA Gaurav Gupta CA Amit Porwal CS Kirti Gupta CA Anuj Aggarwal CA Sunny Sharma CA Neha Khurana Sanjeev Mittal Parampreet Kaur Aanchal Jaggi Naman Gambhir Shruti Gupta For any query in respect of the newsletter, please mail to cagauravmgs@gmail.com

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