o Audit o Direct Taxes o Indirect Taxes

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o Audit o Direct Taxes o Indirect Taxes o Company Law o Management Consultancy

o Audit o Direct Taxes o Indirect Taxes o Company Law o Management Consultancy JULY 2016 S P C M & ASSOCIATES Chartered Accountants MONTHLY NEWSLETTER Sincerity Professionalism & Commitment is our Motto EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B) C. A. Suhas P. Bora 1211 B, Shukrawar Peth, Subhash Nagar Lane No. 4, Pune 411 002, Ph. : (020) 24479119 T elefax (020) 24486663 C. A. Pradeep M. Katariya 207, Nav Maharashtra House, 43, Shaniwar Peth, Pune 400 030 Telefax : (020) 24478059/69 Email : abhay@spcm. in DISCLAIMER : Every effort has been made to ensure accuracy in the information. The publishers do not hold themselves responsible for errors that may have arisen. Please take professional advice for further implementation. All rights reserved. STRICTLY FOR PRIVATE CIRCULATION BY INVITATION

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Editorial - CA. Suhas P. Bora Dear

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Editorial - CA. Suhas P. Bora Dear All Happy morning The present Government has completed two years in office. The Government has all the while claimed that they have created an atmosphere of ease of doing business in India. There is some truth in this but the business leaders still suggest it is a work in progress. In fact, over a period of time the domestic business professionals find that the number of legislations which they have had to comply has multiplied. This has resulted in huge compliance costs. As I was writing this editorial, the news of the exit of Britain filtered in. As per Chief Economic Advisor Arvind Subramanian Brexit is a sad development but India would not be affected by it due to its solid macroeconomics. . “Brexit is a very sad development. . . it has consequences for both the United Kingdom and Europe, ” he said while delivering keynote lecture on ‘Overview of Indian Economy’ at an international conference being held as part of the ADRI Silver Jubilee Celebrations. In his opinion however India would be “able to deal with”. Stating that Brexit is a significant development with serious political and economic consequences for both the UK and Europe, Mr. Subramanian said it was a landmark moment in the history since World War II. The decision has reversed the experiment by the European countries for togetherness as a collective entity, he said, adding the elites would now be forced to recalibrate and adjust. On a different note the Prime Minister stated that "none of you will believe if I say that out of 125 crore people, there are only 1. 5 lakh, with a taxable income of above 50 lakh rupees “and therefore appealed for better compliance and declaration of incomes. The Income Declaration Scheme, 2016 has become operational from June 1, 2016. The Central Board of Direct Taxes has issued circular 16 of 2016 dated May 20, 2016 in which they have provided explanatory note on the provisions of the scheme. They have issued circular 18 of 2016 dated May 23, which has been given in question and answer format. Considering the appeal of our PM and as a professional I feel the people should take benefit of the scheme, as do not foresee such scheme to come in future. The Delhi High Court has delivered a judgement which has controversial views regarding applicability of service tax for under construction property provided it includes the cost of land. In this bulletin I have given an article on the analysis of the Delhi High Court judgement on the service tax and the interest rates. I am happy to share that in the last month I had an opportunity to chair a Session at DTRC on the subject of Issues in Taxation of LLP and my article on the issues was also hosted on the web site of Pune ICAI. My communication would not be complete, if I do not thank all my partners and readers of “The SPCM E News Letter”, who have motivated me to work for the cause of sharing and updating knowledge at right time. So au revoir until we meet again in the next month. CA. Suhas P. Bora EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Due Dates MONTHLY DUE DATES REGISTER FOR

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Due Dates MONTHLY DUE DATES REGISTER FOR JULY 2016 ACT SERVICE TAX Particulars E- Payment of Service tax by Companies for June 2016 Due dates 06 th. July 2016 INCOME TAX TDS/TCS Payment for the month of June 2016 07 th. July 2016 INCOME TAX E-TDS/E-TCS Quarterly Return for April to June 2015 ( Q -1 A. Y. 2017 -18) Provident Fund Payment for the month of June 2016 31 th. July 2016 EMPLOYEE STATE INSURANCE CORPORATION Employee State Insurance Corporation Payment for the month of June 2016 21 st. July 2016 MVAT/CST 21 st. July 2016 PROFESSION TAX E-Payment of Monthly /Quarterly Tax & WCTTDS for June 2016/ Quarter 2 E-filling of Monthly/ Quarterly Returns for June 2016/Quarter 2 E-Payment of Monthly Tax for June 2016 LUXURY TAX E-Payment of Monthly Tax for June 2016 31 st. July 2016 INCOME TAX Due date for filing of Income Tax return for AY 2015 -16 for assesse whose accounts are not required to be audited. 31 st. July 2016 PROVIDENT FUND MVAT/CST 15 th. July 2016 21 st. July 2016 31 st. July 2016 NOTE: - If Due date is on Sunday or Public Holidays, the next working day is to be considered as due date. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah INCOME TAX UPDATES A. Notification and Circulars 1. CBDT Circular Of Further Clarifications On The Income Declaration Scheme, 2016. With regard to The Income Declaration Scheme, 2016, the CBDT had earlier Circular No. 17 of 2016 dated 20 th May, 2016 in which it provided clarifications to 14 queries. The CBDT has now issued Circular No. 24 of 2016 dated 27 th June 2016 in which it has clarified further queries received from the public about various provisions of the Scheme 2. CBDT Press Release dated 20 th June, 2016 - Clarification regarding threshold limit of tax audit under section 44 AB and 44 AD. Section 44 AB of the Income-tax Act ('the Act') makes it obligatory for every person carrying on business to get his accounts of any previous year audited if his total sales, turnover or gross receipts exceed one crore rupees. However, if an eligible person opts for presumptive taxation scheme as per section 44 AD(1) of the Act, he shall not be required to get his accounts audited if the total turnover or gross receipts of the relevant previous year does not exceed two crore rupees. The higher threshold for nonaudit of accounts has been given only to assessees opting for presumptive taxation scheme under section 44 AD. 3 CBDT circular no. 22/2016 dated 8 th June 2016 - Circular Clarifying Various Issues Relating To TCS Obligations U/s 206 C As Amended by the Finance Act 2016 Section 206 C of the Income-tax Act, 1961 prior to amendment by Finance Act, 2016, provided that the seller shall collect tax at source at specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption, tender leaves, mineral being coal or lignite or iron ore etc. It also provided for collection of tax at source at the rate of one per cent on sale in cash of bullion exceeding 2 lakh rupees and jewellery exceeding 5 lakh rupees. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah In order to reduce the cash transactions in sale of goods and services. Finance Act 2016 has expanded the scope of section 206 C (1 D) to provide that the seller shall collect tax at the rate of one per cent from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees. So far as sale of Jewellery and bullion is concerned, the provisions of sub-section (1 D) of section 206 C prior to its amendment by the Finance Act 2016 shall continue to apply. Further, with a view to bring high value transactions within the tax net, it has been provided in sub- section (1 F) of section 206 C of the Act that the seller who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect one per cent of the sale consideration as tax from the buyer. To clarify the queries about the scope of the provisions and the procedure to be followed, the CBDT has issued Circular No 22/2016 dated 8 th June 2016 in a Q& A format 4. CBDT has issued Notification No 9/2016 dated 09 th June 2016 - Clarification Regarding Simplification Of Procedure Form Nos. 15 G & 15 H The CBDT has issued Notification No 9/2016 dated 09 th June 2016 by which it has provided clarification on the following issues (a) Due date for quarterly uploading of 15 G/H declarations by payers on e-filing portal and (b) The manner for dealing with Form 15 G/15 H received by payer during the period from 01. 10. 2015 to 31. 03. 2016. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah 5. CBDT Notification No 43/2016 dated 2 nd June 2016. - Amending Rule 8 D(2) Relating To Disallowance U/s 14 A Of The Income-Tax Act, 1961 Rule 8 D has been amended by the Income–tax (14 th Amendment) Rules, 2016 notified vide Notification No 43/2016 dated 2 nd June 2016. Clause (ii) of Rule 8 D(2) dealing with indirect expenditure by way of interest has been omitted. It is also stated that the disallowance u/s 14 A r. w Rule 8 D cannot exceed the expenditure claimed by the assessee. The limit of 0. 5% under clause (iii) has been increased to 1%. However, the 1% will apply to the annual average of the monthly averages of the opening and closing balances of the value of investments, income from which does not or shall not form part of total income. The question whether the disallowance can exceed the exempt income and whether the 1% is to be applied only to investments which have generated exempt income during the previous year has not been clarified and hence litigation on those points will continue. B. Recent Reported Decisions - High Court and ITAT 1. Inderjeet Singh Sachdeva vs. DCIT (ITAT Delhi) S. 147/ 148: The AO is duty bound to provide to the assessee the reasons recorded for reopening the assessment within a reasonable time. Failure to do so renders the reassessment order unsustainable in law. It was held that on the request of the Assessee, the AO is bound to furnish the reasons recorded for initiation of proceedings under section 147 of the Act within a reasonable period of time so that the assessee could file its objections thereto and the AO was to dispose of the same by passing a speaking order thereon. As per the rules of natural justice, the assessee is entitled to know the reasons on the basis of which the AO has formed an opinion that income assessable to tax has escaped assessment. The furnishing of reasons to the assessee is to enable/facilitate it to present its defence and objections to the initiation of proceedings under section 147/148 of the Act. In the given case there were no justifiable reasons for the AO to deprive the assessee of the recorded reasons by him for initiating proceedings under section 147/148 of the Act EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah 2. CIT vs. Mukesh Ratilal Marolia (Bombay High Court) S. 10(38)/ 69: Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus" if the documentation and evidences cannot be faulted The explanations of the assessee seem to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999 - 2000 and 2000 -01 have grown into a very sizable amount ultimately yielding a fabulous sum of Rs. 1, 41, 08, 484 which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah C. Unreported Decisions 1. ITO vs. Jinit Properties Pvt. Ltd. , ITA No. 3989/M/2014 dt. 29 -3 -2016, (ITAT Mumbai) Sec. 68 – Receipt of share application money – No cash deposit – confirmation and other evidence filed It was held that the assessee received share application money from three subscribers. The AO treated this share application money as bogus on the ground that the subscribers were allegedly found to be engaged in price rigging and that their financial capacity was of doubtful nature. The assessee filed PAN, confirmation, audited financials, evidence of no cash deposit in subscribers’ bank accounts and all other evidence to substantiate the genuineness of the transaction. Held that the assessee had filed all evidence and the AO had failed to conduct further enquiries. Furthermore, even the incident of price rigging as alleged by the AO took place in the succeeding year. Hence, the CIT (A) was held to be justified in deleting the addition. 2. Lokhandwala Construction Industries Pvt. Ltd. vs. DCIT, ITA Nos. 4403/M/2013 dt. 29 -4 -2016, AY 2007 -08 (ITAT Mumbai) Sec. 271(1)(c) – Penalty not levied in earlier year but levied in current year on the same issue is against principles of consistency – No penalty upon difference in year of allowability of expenditure. It was held that for the current year, the AO made the disallowance and held that the same be allowed in subsequent years. The AO also levied penalty on the disallowance. Since the AO had dropped the penalty for preceding year on an identical issue, penalty cannot be levied in the current year. Furthermore, in subsequent years, the AO himself allowed the disallowed expenditure meaning thereby that the difference in view as regards year of taxability and not genuineness. Hence, penalty was not leviable. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Income Tax Updates - Deepali R. Shah 3. Rugby Association of Maharashtra vs. DIT (E), ITA No. 2511/M/2013 dt. 24 -2 -2016 (ITAT Mumbai) Sec. 12 AA – Application for registration – Grounds for rejection – Not justified The assessee was a company incorporated under section 25 of the Companies Act, 1956. It made an application u/s. 12 AA(1)(b) read with section 12 A which came to be dismissed by the DIT due to the presence of certain grounds. It was held, that promotion of sports and games is required to be considered as charitable purpose. Nothing came into the notice that the object of the applicant is of the nature of trade, business and commerce. Held, the application was wrongly rejected. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 MVAT Updates - CA GOURAV OSWAL, CA

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 MVAT Updates - CA GOURAV OSWAL, CA NIKITA BAJAJ MVAT UPDATES RECENT NOTIFICATIONS 1. Notification No. VAT 1516/CR 77/Taxation-1 Dated 31. 05. 2016 The Government of Maharashtra has issued Notification No. VAT 1516/CR 77/Taxation-1 dtd 31 May 2016 for increasing the rate of tax on petrol w. e. f 01. 06. 2016. The rate of tax has increased by One rupees fifty paise per litre. To give effect to the increase in rates, the Government of Maharashtra has amended Schedule D appended to the MVAT Act 2002. IMPORTANT JUDGEMENT 1. M/s Sumer Corporation Vs The State of Maharashtra Vat Second Appeal No 335 of 2015 dated 03. 05. 2016 The appellant M/s Sumer Corporation was engaged in the business of construction of buildings and tenements for Slum Rehabilitation Authority (S. R. A). The appellant had constructed buildings for SRA in consideration of TDR which the appellant had sold and received money. No contract value in terms of money was fixed. The appellant claimed that the transaction was barter and cannot be taxed under MVAT Act 2002. He further claimed that the assessing authority has committed illegality by holding the sale value and proposed value of TDR as turnover of sale and taxed the same. The tribunal held that the EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER MVAT Updates - CA GOURAV OSWAL, CA

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER MVAT Updates - CA GOURAV OSWAL, CA NIKITA BAJAJ words “other valuable consideration” in the definition of sale price as per section 2(24) would include anything that would directly or indirectly fetch some element of money or any other consideration. TDR can be converted into money and therefore, TDR would be a valuable consideration and hence the transaction is not barter. TDR sale price is not taxed but it is taken as the basis for arriving at the value of contract. However MSTT held the value of the contract shall be arrived on the basis of the value of tenements that would have been fetched as on the date of the agreement and not the actual monetary consideration received on sale of TDR. 2. M/s. Gangadhar Marsingdas Agrawal (HUF) vs. The State of Maharashtra VAT Second Appeal No. 188 of 2011 dated 01. 02. 2016 The appellant was HUF engaged in the business of generation of electricity by wind mill. In assessment the set-off was reduced under rule 53(7 B). It was contention of the appellant that the said rule was not applicable in respect of the appellant as he was being HUF was not covered under the definition of generating company under the Electricity Act, 2003. Hon’ble Tribunal while analyzing the definition of ‘generating company’ under the Electricity Act, 2003, it was observed that, bare reading of the said definition does mention body of individual or artificial judicial person. HUF are in fact group of individuals. They are also artificial judicial persons created by statute. Hence arguments that HUF is not covered in definition of generating company could not be accepted. Hon’ble Tribunal further considered the definition of ‘person’ under Electricity Act. HUF is a body of individuals; they were also artificial judicial person. If the argument of the appellant is considered i. e. he is neither a person nor he is covered under the definition of generating company, and then he ought not to have been given any licence under the provisions of Electricity Act. Therefore, the argument of the appellant could not be accepted. HUF is considered as generating company. Therefore, reduction u/r. 53(7 B) held as applicable. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – COMPANY LAW ARTICLE – TAXATION OF LLP ARTICLE - Amended Rule 58 (1 A & 1 B)

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH SERVICE TAX CORNER SERVICE TAX REFUND-PROCEDURE INSIGHT Heavy pendency of service tax refund / rebate claims of exporters with the service tax department raises a serious question on government’s promise of ease of doing business in India. Where on one side Indian Industry is facing huge demands in Income Tax by Transfer Pricing adjustments, on other side delay in indirect taxes refunds is a hit of double edge sword. Not only it affects the liquidity of the exporters, but their productivity and moral also goes down. Also it raises the doubt on integrity and competency of service tax department. Moreover it will also impact on the successful implementation of most awaited fiscal reform of India Goods and Service Tax Act (GST). SERVICE TAX REFUND RULES: In case a service provider has made excess service tax is paid, assessee is required to file a refund claim. He cannot adjust excess tax pad against subsequent payment of tax. (This does not apply to service tax paid in advance under rule 6(1 A) and rule 6(4 A) of service tax rules as that is deposit and not tax as such) PROCEDURE FOR SERVICE TAX REFUND For claiming Refund for excess service tax paid, the Service Provider shall comply with the following: 1. The Application shall be filed in the prescribed form –R. 2. The Application shall be filed before the expiry of the limitation period of 1 year from the date of payment of Tax EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – COMPANY LAW ARTICLE – TAXATION OF LLP ARTICLE - Amended Rule 58 (1 A & 1 B)

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH 3. The Application for Refund shall be accompanied by a documentary evidence that the Excess Service Tax paid has actually been borne by the Service Provider himself and has not been passed on to any other person (Doctrine of Unjust Enrichment). i. e Copy of TR-6/ GAR-7/PLA/ copy of return evidencing payment of duty, Copy of invoices (in original) REFUND / EXEMPTION OF SERVICE TAX PAID TO EXPORTERS. Exporter of a service or goods has following options or exemptions, w. e. f 1 -7 -2012 a. Export without payment of excise duty/ service tax and utilize Cenvat Credit for payment of excised duty/ service tax on other goods manufactured and sold in India on payment of excise duty or services provided in taxable territory (i. e India) where assessee is liable to pay service tax. b. Claim refund of service tax paid on input services and excise duty paid on input as per Rule 5 and notification No 27/2012 -CE(NT) dated 20 -06 -2012. If credit cannot be utilized for payment of excise duty on goods manufactured or sold in India or taxable service provided in India. Procedure: As per the notification, application should be submitted in Form ‘A’ to Assistant/ Deputy Commissioner. Application should be signed by authorised signatory. In addition, certificate signed by auditor in form as given in Annexure A-1 is required to be submitted. Refund of input service credit will be to the extent of ratio of export turnover to total turnover for the given period. c. Export without payment of service tax and claim rebate of service tax paid on input services and excise duty paid on inputs under Notification No. 39/2012 – ST dated 20 -06 -2012 (effective from 1 -72012) : - EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – COMPANY LAW ARTICLE – TAXATION OF LLP ARTICLE - Amended Rule 58 (1 A & 1 B)

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH

JULY 2016 SPCM & ASSOCIATES MONTHLY NEWSLETTER SERVICE TAX CORNER – CA CHETAN PARAKH Explanation: When any taxable service is exported, the Central Government can grant rebate of service tax paid or duty paid on input services or inputs, as the case may be, used in providing such service. Such rebate will be granted by issuing a notification. The rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification. (Rule 6 A(2) of service tax Rules, 2012 inserted w. e. f 1 -7 -2012). The main conditions are as follows: Rebate is available when service is exported as defined in Rule 6 A of Service tax Rules. Exports to Nepal and Bhutan are not eligible for rebate. Cenvat Credit should not have been availed. Payment for service exported should be received in free foreign exchange. Procedure: The exporter of taxable services has to file a declaration with Assistant/Deputy Commissioner before export of taxable services. This declaration can be filed only after all inputs and input services are actually received by the exporter. If he gives estimated figure, these may not tally with actual figures and rebate claim may be rejected. The declaration shall be verified by Assistant/ Deputy Commissioner prior to export of service. The exporter should obtain inputs from manufacturers or registered dealers, with invoice which is eligible for Cenvat Credit. Input services should be obtained directly from service provider with invoice/bill/challan issued by service provider. Claim of rebate shall be filed with jurisdictional AC/DC of Central Excise after services are exported. Rebate claim should be in form ASTR-2. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – COMPANY LAW ARTICLE – TAXATION OF LLP ARTICLE - Amended Rule 58 (1 A & 1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 SERVICE TAX CORNER – CA CHETAN PARAKH

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 SERVICE TAX CORNER – CA CHETAN PARAKH Whether registration with Service Tax Department is require to claim rebate / refund of Service Tax? Section 69 of the Finance Act, 1994 stipulates when a person is liable to take registration. Every person liable to pay the service tax under Chapter V of the Finance Act, 1994 or Chapter VA of the Finance Act, 2003 or Rules made there under shall : Within such time and in such manner and in such form as may be prescribed, make an application for registration. Rule 4(1) of the Service Tax Rules, 1994 prescribe the time limit of 30 days from the date on which the service tax under section 66 of the Finance Act, 1994 for make an application to the concerned Superintendent of Service Tax for registration. In case of export of services, there is no requirement to pay the service tax and hence the law does not mandate to take registration compulsorily. In numerous court cases, it has been decided registration is not a bar to avail the export benefits. Karnataka High Court held in the case of m. Portal India Wireless Solutions (P. ) Ltd vs. Commissioner of Service Tax [2011] 16 taxmann. com 353 that there is no statutory provision which prescribed that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE TAX – CA SUHAS P. . BORA ANALYSIS OF DELHI HIGH COURT DECISION FOR SERVICE TAX ON UNDER CONSTIURCTION PROPERTY Analysis of Delhi High Court Decision in the case of Sureshkumar Bansal vs. Union of India (Sethi Builders) regarding levy of Service Tax on under Construction Property We all know that builders have been demanding service tax for under construction property since last 6 years of its formal introduction to under construction property under Finance Act 2010. But, last Fridays (3 rd June, 2016) order has sent the buyers in tizzy. The order by Delhi High Court has pronounced that service tax can’t be charged for under construction property provided it includes the cost of land. The order relates to a petition filed in 2011 against Sethi Builder where buyer was charged service tax for under construction flat for its Max Royal project in sector 76, Noida. The order ruled Revenue department to return the said service tax paid by buyer along with interest at 6%. Listed below are few of the main points of consideration that were taken into account by Court while coming up with the judgment: –The court observed that the builder buyer agreement is of composite nature since it involves both i) an element of services and ii) transfer of property in goods. It thereby referred to amendment of Section 67 of the Act which states that a composite contract was not taxable. This is because for a composite works contract, there was no machinery for excluding the non-service components from the taxable services covered therein. The Rules also do not contain any provisions relating to determination of the value of services involved in the service covered under Section 65(105)(zzzh) of the Act. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE TAX – CA SUHAS P. . BORA -It was stated by Revenue department that an Assessee is entitled to abatement to the extent of 75% and only 25% of the gross amount charged by a builder from a flat buyer is charged to service tax. It was suggested on behalf of the Revenue that this indicated that the value of the immovable property as well as the property in goods incorporated in the works would stood excluded. Against this, court took leads from a previous judgment (in the case of Commissioner of Central Excise v. Larsen and Toubro Limited (supra). In that case, the Supreme Court had affirmed the decision of the Orissa High Court in Larsen and Toubro Limited v. State of Orissa and Ors: (2008) 12 VST 31 (Orissa)) wherein the Court held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute. –Delhi high court however didn’t find reasons to oppose service tax on preferential location charges i. e. PLC and ruled that service tax on PLC shall apply. Taking account of the above discussions, Delhi HC ordered refund along with 6% interest of complete service tax amount paid by buyer excluding the service tax paid on preferential location charges. However, there are still few key points left unanswered: -Court felt that levying a tax on the constituent goods or the land (in this case) would intrude into the legislative field reserved for the States under List II of the Seventh Schedule of the Constitution of India. This would have sent a strong indication to States to rest control of the 25% amount on which tax is claimed, although this will have no direct impact on buyer. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 ARTICLE – HIGH COURT DECISION FOR SERVICE TAX – CA SUHAS P. . BORA -Court also stressed that there is no machinery provision for ascertaining the service element involved in the composite contract. It felt that in order to sustain the levy of service tax on services, it is essential that the machinery provisions provide for a mechanism for ascertaining the measure of tax, that is, the value of services which are charged to service tax. This may likely invite a formal amendment in Finance Act 2012 to define which service is taxable under composite contracts. In any case, the Revenue is likely to object to the order and reach Supreme court in this regards. Supreme Court has been divided in its previous judgments with regards to taxation matters and it would be interesting to see where this case eventually leads taxation in composite contracts to. What should the buyers do meanwhile? -They should share the judgment with the builder and ask for service tax receipts against their payments (that attracted service tax) made so far. -Buyers can then approach Revenue for refund taking this order into account. This would ultimately lead to Revenue bringing out an amendment after/before moving a review petition at Supreme Court. What should builder do meanwhile: - A. Builders should reply stating that they are awaiting Service Tax department’s notification for extending this relief. B. Give reply to customer with details of Service Tax Receipts. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA Amended Rule 58(1 A) and New Rule 58(1 B) – Whether “Blessings or Burden” for the builders? (In the Part –I of this article, in last newsletter, the amended provisions in relation to Rule 58(1 A) and its interpretation and probable issues for assessment have been discussed. In continuation of the same, in Part –II we will be studying the amended provisions in relation to Rule 58(1 B) and its interpretation and probable issues for assessment. ) C) Introduction of sub-rule 1 B of Rule 58. “(1 B) (a) Where the dealer undertakes the construction of flats, dwellings, buildings or premises and transfers them in pursuance of an agreement along with the land or interest underlying the land then, after deductions under sub rules (1) and (1 A) from the total contract price, the value of the goods involved in the works contract shall be determined after applying the percentage provide in column (3) of the following TABLE depending upon the stage at which the purchaser entered into contract. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Sr. No. (1) (a) (b) ( c)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 Sr. No. (1) (a) (b) ( c) (d) (e) AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA Stage during which the developer enters into a contract with the purchaser Amount to be determined as value of goods involved in works contract. (2) Before issue of the Commencement Certificate From the Commencement Certificate to the completion of Plinth level After the completion of plinth level to the completion of 100% of RCC framework After the completion of 100% RCC framework to the Occupancy Certificate After the Occupancy Certificate (3) 100% 95% 85% 55% Nil % (b) For determining the value of goods as per the Table of clause (a), it shall be necessary for the dealer to furnish a certificate from the Local or Planning Authority does not have date of completion of the stages referred above and where such authority does not have a procedure for providing such certificate then such certificate from registered RCC consultant? Interpretation: A new sub-rule (1 B)(a) is inserted providing for Stages of Construction and percentage of Value of goods transferred. This is specifically because of the clarification given by the Hon. Supreme Court at paragraph 115 in the judgment of Larsen and Toubro [supra] that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government. As per Rule 58 (1 B), the value of the goods involved in the works contract shall be determined after applying the percentage so provided in the table, depending upon the stage at which the purchaser has entered into the contract. The deduction as per Rule 58 (1 B) shall be applied as per the table on the amount of contract price available after claiming the deductions under Rule 58 (1) and 58 (1 A). For applying table as per Rule 58 (1 B), the dealer should furnish certificate from the Local or Planning Authority for certifying the date of completion of stages of construction. In case no procedure is available for issuance of such certificate from Local or Planning Authority then certificate from registered RCC Consultant is valid. Issues/challenges to be faced at the time of assessment : What should be date of stage of construction? Whether Agreement date or booking date? How to prove that Local /Planning Authority does not have a procedure for providing certificate regarding stage wise completion of work of the project? Whether date of application or date of issue to be considered as date of plinth checking/occupancy certificate? How to Find out Back dated stages for each Flat in case of Housing Projects? How to take back dated certificate form RCC Consultant. What type of documents needs to be submitted to prove it? As per reply to Q. 2 of Circular 12 T of 2014, the 100% RCC framework means 100% of the entire building. But in fact, unit wise, floor wise RCC Completion takes place on different dates and the dealer also EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA obtains the Certificate of RCC Consultant in relation to the same. Whether building wise/Unit wise certificate will be accepted? The Registered RCC consultant appointed by the builder refuses to give the certificates and another Registered RCC consultant is not ready to issue the certificate. In such situation, how the builder can prove the stages of completion as stated in sub-rule (1 B)(a) of Rule 58 ? How to divide the claim for deductions for different years during the construction periods and further for every “Return Period”. i. e. , Monthly/quarterly/six monthly in the year of claim? Whether the set off will be disallowed as per Rule 54(g) for the period prior to the stage of booking or entire set off will be allowed? Whether TDS provisions will be applicable for the period prior to the stage of booking considering that builder is developing the property for himself during that period? Conclusion : The Audit Reports in case of builders have been filed when the old provisions of Rule 58 were in existence and later on there was retrospective amendment to the Rule 58 w. e. f 20. 06. 2006. Therefore Sales Tax Department had issued Trade Circular 7 T of 2014 dtd 21. 02. 2014 with the intention to give an opportunity to the dealers to file revised returns for the period 20. 06. 2006 to 31. 12. 2013 before 30. 04. 2014 claiming deductions as per the amended Rule 58. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA In the SLP order no. 14153/2013 dtd 31. 01. 2014 of Builders Association of India Vs State of Maharashtra, the Hon’ble Supreme Court has clarified that “if the petitioners have filed revised returns such returns will be examined by the concerned assessing officer appropriately in accordance with law”. In my opinion, even in case of the dealers who have not filed revised return also, the assessment will have to be completed as per the amended Rule 58 since the amendments are retrospective in nature w. e. f. 20. 06. 2006 and the dealer has every right to claim the deductions available by producing supporting evidences at the time of the assessment proceedings. In view of these facts and legal status, the assessments of the builders for the period 20. 06. 2006 to 31. 03. 2012 will have to be completed as per the provisions of the amended Rule 58 as per the directions given by the Hon’ble Supreme Court. I take this opportunity to suggest that even though there are conditions and restrictions and many procedural difficulties for claiming deductions as per amended Rule 58(1 A) and new Rule 58(1 B), in every situation each dealer should claim the maximum deductions. The supporting documents and certificates for claim of deductions have already been mentioned in the respective rules but we should develop alternative evidences in absence of specific certificates for claim of deductions. Since these provisions are new and assessments in case of builders are undertaken for the first time there is lack of experience for the department and also in absence of judicial precedents regarding disallowance of claims of deductions, it shall be difficult for the assessing officer to disallow the claims disregarding the alternative documents submitted for claiming deduction. EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE

SPCM & ASSOCIATES MONTHLY NEWSLETTER JULY 2016 AMENDED RULE 58(1 A) AND NEW RULE 58(1 B) – ADV. ABHAY H BORA Friends, after the studying the provisions of the amended Rule 58(1 A) and new Rule 58(1 B) we can certainly say that, these amendments have provided “Blessings” to the builder community in form of deduction of land at actual cost and stage-wise applicability of tax from the time of entering into the contract by the customer but after visualizing the issues/challenges for claiming these deductions in form of “Blessings” there are lots of documentary evidences and supporting certificates from Competent Authorities to be produced, which will definitely be burdensome to the dealer and shall give rise to much more litigations. Hence, even though amended Rule 58(1 A) and new Rule 58(1 B), provides for bundle of “Blessings”, it is accompanied by the package of “Burden”. The million dollar question remains “Whether these provisions are rationally irrational or irrationally rational”? EDITORIAL DUE DATE CHART INCOME TAX UPDATES MVAT UPDATES SERVICE TAX UPDATES ARTICLE – HIGH COURT DECESION FOR SERVICE TAX ARTICLE AMENDED RULE 58(1 A) & NEW EULE 58 (1 B)

S P C M & ASSOCIATES Chartered Accountants Thank You

S P C M & ASSOCIATES Chartered Accountants Thank You