S P C M ASSOCIATES Chartered Accountants Audit

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S P C M & ASSOCIATES Chartered Accountants Audit Direct Taxes Indirect Taxes Company

S P C M & ASSOCIATES Chartered Accountants Audit Direct Taxes Indirect Taxes Company Law Management Consultancy Newsletter APRIL 2015 EDITORIAL INCOME TAX & WEALTH TAX MVAT & CST Sincerity Professionalism & Commitment is our Motto C. A. Suhas P. Bora 1211 B, Shukrawar Peth, Subhash Nagar Lane No. 4, Pune 411 002, Ph. : (020) 24479119 Telefax (020) 24486663 Email : abhay. bora@spcm. co. in SERVICE TAX COMPANY LAW ARTICLE SECTION DUE DATE CHART C. A. Pradip M. Kataria 207, Nav Maharashtra House, 43, Shaniwar Peth, Pune 400 030 Telefax : (020) 24478059/69 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

From the Editors Desk - CA Suhas P. Bora Dear All, Greetings and a

From the Editors Desk - CA Suhas P. Bora Dear All, Greetings and a very good morning to all of you. As you know budget fever grips us as we enter in the months of February and March every year. Businessmen, media professionals, tax payers and industrialist do eagerly await the outcome of the budget documents and what it entails. This year was no exception either. It remains to be seen as to how many of those expectations have been fulfilled, especially in the arena of a simplified tax regime and effective administration of the same. We of course do take a note and acknowledge the fact that various provisions such as abolition of wealth tax, measures to curb black money, incentives to promote investments, and proposal to set up exclusive commercial divisions in various courts in India are welcome steps. At the same time provisions such as powers of CIT U/Sec. 263 and Explanation 4 to Sec. 271(1)(c) may lead to increased litigation. However it begs understanding as to why the government is hesitant in bringing accountability provision in Tax Laws. Therefore I earnestly hope as a tax professional and a citizen that the Government will take drastic steps to bring accountability in tax administration and advise tax officials, follow the culture of tax service and stop the harassment of honest tax payers. In this issue apart from regular columns such as updates, latest case law and other related articles, we also have contributions from everyone on important amendments that are proposed in the finance bill 2015. I do feel that this would be of great help to our readers. The new fiscal year shall begin from 1. 04. 2015, I take this opportunity to wish all a very happy and prosperous new Financial Year 2015 -16. Let us together envision a planned fiscal 2015 -16 where we can hope that some of the expectation may find resolution that is just. Have a great day, With all my wishes CA. Suhas P. Bora Home 2

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain Recent

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain Recent Update - Income Tax NOTIFICATION NO. 24/2015, DATED 17 -03 -2015 Agreement between the Government of the Republic of India and the Government of the Republic of Croatia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income. S. O. (E). - Whereas, an Agreement and Protocol (hereinafter referred to as the said Agreement and the Protocol) as set out in the Annexure to this notification, was entered into between the Government of the Republic of India and the Government of the Republic of Croatia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income that was signed on the 12 th February, 2014; 2. And whereas, the date of entry into force of the said Agreement and Protocol is the 6 th February, 2015, being the date thirty days after the date of the latter of the notifications of completion of the procedures as required by the respective laws for entry into force of the said Agreement and Protocol, in accordance with paragraph 1 of article 29 of the said Agreement; 3. And whereas, clause (b) of paragraph 3 of article 29 of the said Agreement provides that the provisions of the said Agreement shall have effect in India in respect of income arising in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force. 4. Now, therefore, in exercise of the powers conferred by section 90 of the Incometax Act, 1961 (43 of 1961), the Central Government hereby directs that all the provisions of the said Agreement and Protocol between the Government of the Republic of India and the Government of the Republic of Croatia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income, as set out in the Annexure hereto, shall be given effect to in the Union of India with effect from the first day of April, 2016, being the first day of the fiscal year next following the calendar year in which the said Agreement entered into force. Home 3

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain Recent

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain Recent Case - High Court and ITAT TATA TELESERVICES LTD. vs. INCOME TAX OFFICER (2015) 43 CCH 0268 Jaipur Tribunal Legislation Referred to : Section 194 H, 194 C, 201(1), 201(1 A) Decision in favour of: Assessee TDS—Commission or Brokerage—Assessee was a telecommunication service provider —It sold its products to distributors in bulk against prior payments—Sale price was received minus discount—Assessee sold by right to service to distributor—Whether discount, the difference between the MRP and the selling price to the distributor, amounted to payment of commission to distributors which was liable TDS u/s 194 H— Held, nature of transaction between Assessee and distributors was in the nature of principal to principal and not of principal and agent—Consideration received by Assessee was sale price simpliciter—There was no income held by Assessee on behalf of distributors; since there was no withholding of income the impugned transaction was not covered in the ambit and scope of Section 194 C—Assessee’s Appeal was allowed Conclusion The relationship between Assessee and its distributors is on principal to principal basis and transaction being of sale/purchase, discount does not amount to commission in terms of Section 194 H. INCOME TAX OFFICER vs. GOZARIA NAGARIK SAHAKARI BANK LTD. (2015) 43 CCH 0270 Ahd Tribunal Legislation Referred to 36(l)(viia) In favour of : Assessee Depreciation—Provision for depreciation on government securities—Disallowance— Assessee was engaged in activity of banking business—AO made disallowance on depreciation on government securities on grounds that all provisions which were debited in profits and loss account had to be disallowed and added back to total income—Assessee had shown Government Securities in Balance sheet as investment Home 4

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain and

Income Tax & Wealth Tax - CA Suhas P. Bora, CA Mehul Jain and debited profit and loss account on account of provision for depreciation amounting to which was not allowable—CIT(A) deleted disallowance—Held, CBDT in Circular no. 665 dated 05 -10 -1993 has held that question whether a particular item of investment in securities constitutes stock-in-trade or a capital asset is a question of fact—Banks are generally governed by instructions of Reserve Bank of India from time to time with regard to classification of assets and also accounting standards for investments—Board had, therefore, decided that Assessing Officers should determine on facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment taking into account the guidelines issued by Reserve Bank of India in this regard from time to time—In facts of present case accounts had been maintained and shown as per RBI guidelines—Depreciation of assets had been claimed on securities which had been classified as ‘Available for Sale’ (AFS)—CBDT Circular no. 665 dated 05 -10 -1993 is squarely applicable in this case, where provision for depreciation on the "available for sale' category of securities has correctly been claimed— Revenues appeal dismissed. Conclusion Depredation in value of investment held by bank was allowable as deduction more so when the loss was debited to P&L A/c which was reflected as provision for liability in the balance sheet and the share and securities were valued at cost on the asset side. Business expenditure—Provision for bad and doubtful debts in respect of rural advances of certain banks—AO disallowed claim on ground that such claim for co-operative bank as per Finance Act. 2007, was effective only from 01/04/2007 i. e. for A. Y. 2008 -09, and since present assessment pertained to A. Y. 2007 -08 claim of assessee was not allowable—CIT(A) in appeal reversed order of AO—Held, amendment was brought in so that it was made applicable also to Co-operative banks with effect from 01. 04. 2007—This provision was substantive provision therefore assessee was justified in submitting that it was applicable from assessment year 2007 -08 and not from Year 2008 -09 as held by Assessing Officer—Assessee had justified computation of allowable deduction of provision in its written submissions before AO—AO had not disputed computation—In view of above, CIT(A) was justified in deleting disallowance of claim made u/s. 36(1)(viia). Cases Referred to CIT vs. Nedungadi Bank Ltd (2003) 130 TAXMAN 93 (Ker) CIT vs. Bank of Baroda (2003) 262 ITR 334 Home 5

MVAT & CST - Adv Abhay Bora SALES TAX UPDATES RECENT AMENDMENTS Trade Circular

MVAT & CST - Adv Abhay Bora SALES TAX UPDATES RECENT AMENDMENTS Trade Circular No 4 T of 2015 Dt. 09. 03. 2015 The Commissioner of Sales Tax, Maharashtra State, Mumbai has issued trade circular no 4 T of 2015 Dt. 09. 03. 2015 for simplification of the process of MVAT/CST/PTRC /PTEC Registration. The facility of single application for online registration under the MVAT Act, CST Act, PT Act (both PTRC and PTEC) is made available. Revised procedure has been explained the circular. The applicant who seeks registration under PT Act shall not be required to attend before the registration authority for any physical verification of documents. The applicant who seeks registration only under VAT/CST Act or VAT/CST and PT Acts sahll be required to attend before a single VAT registrations Authority for verification. Internal Circular 4 A of 2015 dt 24/03/2015 The Commissioner of Sales Tax, Maharashtra State, Mumbai has issued Internal Circular 4 A of 2015 dt 24/03/2015 regarding clarification of Administratative relief to Developers and Assessment of refund claim in return. a) With reference to trade circular 18 T of 2006, 14 T of 2007, 15 T of 2010, 14 T of 2012, 17 T of 2012 and 18 T of 2012, the administrative relief shall be granted to the developers who have: Applied for registration on or before 15/10/2012, who have filed the returns in time and paid taxes on or before 31/10/2012. The method of computation of the tax liability shall not be examined at the time of granting administrative relief but the same shall be examined in the cases selected for assessment. Filed most of the returns in time, but some of the returns are missing or not filed and in such cases it the developers have filed 704 for the periods under application for administrative relief. b. The developers were allowed to carry forward the refund from year to year, but on the basis of risk parameters these cases were selected for scrutiny assessment. Now it will not be necessary for assessing officer to go in to audit/assessment of earlier period from which set off/refund is brought forward. Home 6

MVAT & CST - Adv Abhay Bora B. IMPORTANT JUDGEMENTS 1. Set-off Disallowance of

MVAT & CST - Adv Abhay Bora B. IMPORTANT JUDGEMENTS 1. Set-off Disallowance of set-off for the reason that revised J-1 not Àled was set aside on the basis of conÀrmation letter of the vendor. The set-off was disallowed on the basis of the fact that there was mismatch in figure shown by vendor in his J-1 and corresponding figure shown in J-2 by the appellant. The First Appellate Authority disallowed set-off for want of revised J-1 to be filed by vendor. In appeal before the Hon’ble Tribunal appellant produced confirmation letter which confirmed set-off and also mentioned technical reason for not uploading revised J-1. On the basis of the said confirmation letter, the Hon’ble Tribunal observed that, the reason given by the vendor for not uploading revised J-1 could not be doubted and the same was corrected. It was, therefore, necessary to verify the tax paid by the vendor during the year by any other process adopted by the Department. In this view, the Hon’ble Tribunal was of the view that it was proper to set-aside the order passed by the First Appellate Authority and remand the case for verification of the certificate given by the vendor. M/s. Suresh And Sunil Cement vs. The State of Maharashtra, VAT Second Appeal No. 80 of 2014 dated 8 th December, 2014 2. Power of First Appellate Authority under MVAT Act Section 26(6) empowers the appellant to dismiss the appeal for non-payment of part payment, it only mentions that if appellant fails to pay the said amount so enhanced as mentioned by the order, the amount in dispute shall be recoverable and the orders to the contrary shall stand vacated. This means the powers vested with the Appellate Authority are to proceed with recovery or at the most to pass an order vacating the stay, but positively does not give right to the First Appellate Authority to dismiss the appeal for non-payment of part payment amount or for not remaining present for three consecutive dates. M/s. A to Z vs. The State of Maharashtra, VAT Appeal No. 203 of 2014 dated 11 th December, 2014 Home 7

SERVICE TAX - CA. Chetan Parakh This article attempts to cover the major amendments

SERVICE TAX - CA. Chetan Parakh This article attempts to cover the major amendments in service tax with respect to the Finance Bill 2015. It may be noted that changes being made in the Budget are coming into effect on various dates, as indicated in the following paragraphs. Service Tax Rate The rate of Service Tax is being increased from 12. 36% to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the revised rate of Service Tax. The new Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015. Till the time the revised rate comes into effect, the ‘Education Cess’ and ‘Secondary and Higher Education Cess’ will continue to be levied in Service Tax and present service tax rate of 12. 36% will be applicable till that time. Swachh Bharat Cess It is proposed to impose “Swachh Bharat Cess” on all or any of the taxable services at the rate of 2% of the value of taxable services. Thus once this cess becomes applicable the rate of service tax will be changed to 16% (Basic Rate 14% + Swachh Bharat Cess 2%). This cess will become applicable from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015. Change in the definition of consideration: Section 67 prescribes for the valuation of taxable services. It is being prescribed specifically in this section that consideration for a taxable service shall include: (a) all reimbursable expenditure or cost incurred and charged by the service provider. The intention has always been to include reimbursable expenditure in the value of taxable service. (b) amount retained by the distributor or selling agent of lottery from gross sale amount of lottery ticket, or, as the case may be, the discount received, that is the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such tickets. Thus all reimbursement of expenses have been specifically covered within the service tax net, although indirectly these were taxable under the present scenario. Review of the Negative List a) Service tax to be levied on the service provided by way of access to amusement facility such as rides, bowling alleys, amusement arcades, water parks, theme parks, etc. b) Service tax to be levied on service by way of admission to entertainment event of concerts, non-recognized sporting events, pageants, music concerts and award functions, if the amount charged for admission is more than Rs 500. Home 8

SERVICE TAX - CA. Chetan Parakh c) Service by way of admission to exhibition

SERVICE TAX - CA. Chetan Parakh c) Service by way of admission to exhibition of the cinematographic film, circus, dance, or theatrical performances including drama, ballets or recognized sporting events shall continue to be exempt. d) Service tax to be levied on service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption. e) An enabling provision is being made to exclude all services provided by the Government or local authority to a business entity from the Negative List. Once this amendment is given effect to, all service provided by the Government to business entities, unless specifically exempt, shall become taxable. However in this case service tax will have to be paid by the business entities under reverse charge mechanism basis. All the above changes in the Negative List shall come into effect from a date to be notified later, after the enactment of the Finance Bill, 2015. Review of General Exemptions a) Exemption presently available on specified services of construction, repair of civil structures, etc. when provided to Government shall be restricted only to, a) a historical monument, archaeological site b) canal, dam or other irrigation work; c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. b) Exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port is being withdrawn. Thus henceforth construction and related work in relation to airport and ports will be taxable. c) Exemption to services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theater, will be limited only to such cases where amount charged is upto Rs 1, 000 performance (except brand ambassador). d) Exemption to transportation of ‘food stuff’ by rail, or vessels or road will be limited to transportation of food grains including rice and pulses, flours, milk and salt only. Transportation of agricultural produce is separately exempt which would continue. Home 9

SERVICE TAX -CA. Chetan Parakh e) Exemptions are being withdrawn on the following services:

SERVICE TAX -CA. Chetan Parakh e) Exemptions are being withdrawn on the following services: (a) services provided by a mutual fund agent to a mutual fund or assets management company; (b) distributor to a mutual fund or AMC; and (c) selling or marketing agent of lottery ticket to a distributor of lottery. f) Exemption is being withdrawn on the following services, (a) Departmentally run public telephone (b) Guaranteed public telephone operating only local calls (c) Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued New Exemptions: i) Exemption has been provided for all ambulance services including private ambulance services ii) Life insurance service provided by way of Varishtha Pension Bima Yojna iii) Service provided by a Common Effluent Treatment Plant operator for treatment of effluent is being exempted. iv) Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables is being exempted. v) Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted. These services when provided by the Government or local authority are already covered by the Negative List. vi) Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or an association of persons consisting of such exhibitor as one of its members is being exempted. All the above New Exemptions shall come into effect from the 1 st day of April, 2015. Reverse charge mechanism 1. Manpower supply and security services when provided by individual, HUF, partnership firm to a body corporate are being brought to full reverse charge as a simplification measure. Presently, these are taxed under partial reverse charge mechanism. Now full service tax will have to be paid by the service receiver only under reverse charge mechanism basis. 2. Services provided by mutual fund agents, mutual fund distributors and lottery agents are being brought to under reverse charge consequent to withdrawal of exemption on such services. These changes in reverse charge mechanism will come into effect from the 1 st day of April, 2015. Home 10

COMPANY LAW -CA. Manoj Jain -CS Aditi Deo Amendment under Company Law The Companies

COMPANY LAW -CA. Manoj Jain -CS Aditi Deo Amendment under Company Law The Companies (Meetings of Board and its Powers) Amendment Rules, 2015 MCA vide notification dated 18. 03. 2015 made the following amendments: MCA has omitted the below stated item numbers from the Rule 8 (Powers of Board) of the Companies (Meetings of Board and its Powers) Rules, 2015: No Need to file board resolution with ROC in case of following situations To take note of appointment(s) or removal(s) of one level below the Key Management Personnel; To take note of the disclosure of director’s interest and shareholding; To buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company; To invite or accept or renew public deposits and related matters; To review or change the terms and conditions of public deposit; To approve quarterly, half yearly and annual financial statements or financial results as the case may be. The Companies (Share Capital & Debentures) Amendment Rules, 2015 MCA vide Notification dated 18. 03. 2015 has made amendments in the following Rules of The Companies (Share Capital & Debentures) Rules, 2014: Company secretary deemed to be authorized signatory for signing share certificate this provision is removed Issue of duplicate shares for listed companies is to be issued within 45 days from the date of submission of all documents Employee of an associate company is excluded from the definition of employee for Employee stock Options. Home 11

COMPANY LAW -CA. Manoj Jain -CS Aditi Deo If the company is making preferential

COMPANY LAW -CA. Manoj Jain -CS Aditi Deo If the company is making preferential allotment to one more then no need to maintain complete record of private placement offers in PAS 5 In case of issue of debentures by a Government Company or one or more state Government or by both the requirements for creation of charge under sub rule B of rule 18 as per Companies (Share Capital & Debentures) Amendment Rules, 2015 shall not apply. In case of loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under sub rule B of rule 18 as per Companies (Share Capital & Debentures) Amendment Rules, 2015 may also be created on properties or assets of the holding company. The Companies (Management and Administration) Amendment Rules, 2015 MCA vide notification dated 19. 03. 2015 has substituted the Rule 20 of the Companies (Management and Administration) Rules, 2014 titled as Voting though Electronic Means. Home 12

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora In the last Month we have discuss the basics of HUF, in this month we are discussing the few more important issues relating to HUF : 1. Can a son who is the sole surviving coparcener along with other females in the family after his father’s death constitute an HUF? Yes. The HUF shall continue with the son as Karta and other female members as members. 2. . Can a son being a member of HUF consisting of his father, himself and his brothers, form and HUF consisting of himself, his wife and minor son? Under Hindu law, there can be a HUF within a HUF. Therefore, a son can have his own smaller HUF while he continues to be a member of his father’s HUF. In his father’s HUF, he is a mere member - coparcener and in his own HUF, he is Karta. 3. Can there be a HUF with only female members? Yes. Under Hindu Law it is not predicated of a Hindu joint family that there must be a male member. So long as the property which was originally of the joint Hindu family remains in the hands of the widows of the members of the family and is not divided among them, the joint family continues. (Refer CIT v/s. RM AR. Veerappa Chettiar (197)) 76 ITR 467(SC). However, after the enactment of the Hindu Adoptions and Maintenance Act, 1956 as well as Hindu Succession Act, 1956, this legal position does not seem to be correct. This is because such female members, upon such death would get their interest in the property absolutely and their absolute interest so crystallized cannot be divested by any subsequent event, for example remarriage or adoption. 3. HUF PROPERTY 3. 1. What is H. U. F and Individual property of a Hindu? Any property which is received from ancestors by way of partition or otherwise is HUF property. Any property received by the HUF by way of gift through Will, accretions to the existing properties, blended or properties thrown in common hotchpot or impressed with the Character of HUF property by any coparcener etc. are also HUF property, Character of the HUF property on partition in the hands of the coparcener, remains as HUF property. Home 13

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora Any property earned by an individual whether on account of own exertion or out of individual fund without investment of the HUF funds, earning of learning, service, personal qualifications, etc. is separate and individual property of a Hindu (Refer K. S Suffiah Pillai vs. CIT (1999) 237 ITR 11(SC). Self acquired property of a Hindu will pass on to his/her legal heirs as per the rules of succession and the legal heirs receive the property as individual property. So also the share of the deceased co-parcener in HUF, which otherwise devolves by survivorship to other coparcener goes by succession to legal heirs, which they hold as separate property, if such coparcener has left certain class of female relatives or a male relative who claims through such female relative specified in Class I of the first schedule to Hindu Succession Act, 1956. 3. 2. Whether a family that does not own any property can have the character of Hindu joint family? Yes, the concept of HUF is not related to possession of any property by the family nor the existence of such joint property is an essential pre-condition for constituting a HUF. This is because Hindus get joint family status by birth and joint property is simply an adjunct to the joint family. 3. 3 What is the nature of property received by a male member after his marriage but before a male child is born? There is considerable controversy on these aspects. There are divergent views expressed by different courts from time to time. One view is that since a HUF, as known under Hindu law, can consist of even husband wife only, once such a HUF has come into existence upon marriage of a Hindu male, such family can receive property from any source and regard the same as HUF property. However, the other view is that in such a case, a distinction should be made between a property that already has characteristic of a joint property (for example, property received on partition) and other than such properties. In case of receipt of properties of the former kind, such family (that is consisting only of husband wife) can receive and treat such property as joint Hindu family property. But in case of latter (that is, in the cases like gift or will), unless there at least two coparceners in the family, such HUF cannot receive or treat such property as HUF property. In other words since in such family of husband wife there is only one coparcener i. e husband (wife being a mere member and not coparcener), if such HUF wants to receive and regard any property from an outside source as HUF property then it has to have another coparcener in the family i. e son. The earlier view seems to a better one. Of course, a Donor or testator must indicate that he gives it to the person’s HUF. Home 14

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora

ARTICLE SECTION UNDERSTANDING OF LAW RELATNG TO HUF (PART-2) - CA. Suhas P. Bora 3. 4 What is the nature of property received by a Hindu from his father and having only a wife and daughters in his family? This will depend upon whether the property received by such Hindu from his father’s individual property or property of father’s HUF. In case of the former, such Hindu will be receiving the property as a legal heir of the father and rules of succession as prescribed under Hindu Succession Act, 1956 will prevail. If the property is received from father’s HUF, then it can form part of HUF of such Hindu. But the share of the father in the HUF upon his death can go to his legal heirs which will be their individual property if the father has left behind him any female relative or a male relative claiming through such female relative, as in Class I of the schedule to that Act. Of course by will he can give his share to son’s HUF. 3. 5 Whether property acquired on gift by the assessee with an intention of the donor that the money should be used for the benefit of his family is HUF property or not? HUF can receive gifts from anybody including a stranger. In any case, as held by the Supreme Court, (Ref CIT vs. Satyendra Kumar (1998) 232 ITR 360(SC) a gift by mother also can be a source of HUF property. In case of a gift whether from a father, mother, relative or a friend the intention of the donor is important. If there are express provisions to the effect in the deed of gift or will that the son would take the property for the benefit of the family, that is decisive. The donor or testator dealing with self acquired property may by evincing the appropriate intention, render to the property gifted the character of a joint family property or as the case may be a separate property in the hands of the done vis-à-vis his male issue. (Refer C. N Arunachala Mudaliar vs. C. A Muruganatha Muddliar (1953) AIR 1953 SC 495 and CIT vs. M. Balasubramanian (1990) 182 ITR 117 (Mad). It is necessary to take care while making the Will or the gift. Clause should be specific and the donee HUF should open bank account in the name of the HUF. Indication should be clear (Refer CIT v/s. Maharaja Bahadur Singh & others (1986) 162 ITR 343(SC). Home 15

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora The H’ble Finance Minister of Maharashtra, Shri Sudhir Mungantiwar, has presented the proposals of the Maharashtra State Budget, 2015 today. He believes that the tax collection system should be simple, easy and business friendly, however, it should also be a deterrent to the tax avoider. This system will create a favorable environment and provide “Ease of doing Business”. This will also enhance tax collections. The target of tax collection for the year 201415 was at Rs 118640 crore. The analysis of Budget Proposals is as under: 1)Goods and Services Tax. The Constitution Amendment Bill required for introduction of Goods and Services Tax has been tabled in the Lok-sabha. Goods and Services Tax is expected to be implemented from 1 st April, 2016. The State has played a vital role in formulating the business processes proposed under the new tax system and preparatory work required for introduction of new system is under progress. 2)Automation in Sales Tax. The State has recently started the new automation project which will help both the business and the department in further simplification. All the processes envisaged under GST are being incorporated in the new software system under development, so it will make hassle free migration of data of existing tax payer to GST system 3)Increase in FSI premium. The Government has also proposed to enhance FSI limit from 0. 33 to 0. 60 and increase the rate of premium in the Brihan Mumbai Municipal Corporation limit. It is also under consideration of the Government to enhance the rate of premium on grant of all kinds of additional FSI. The Government intends to grant timely permissions, simplify procedure sand charge legitimate premium on additional benefits. 4) Change in rate of Excise duty on Country liquor. Rate of Excise duty on country liquor would be now 200 per cent of the manufacturing cost or Rs. 120 per Proof litre whichever is higher. 5) Amendments of MVAT Act. i)No VAT on Service Tax There are some composite supplies on which Sales Tax as well as Service Tax is levied. To avoid cascading effect of tax, it is proposed that Sales Tax will not be levied on Service Tax collected separately. Home 16

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora ii) Revised Returns In Audit or investigation proceedings, the tax payer can file revised return as per findings therein. However, dealer can file revised return only once. It is proposed to relax this condition and to allow multiple revised returns in case of audit findings or investigation proceedings by Sales Tax authorities. iii) Late Fees on Returns Late fee is attracted in case of a delayed return. Late fee of rupees one thousand is proposed instead of rupees two thousand for delay in filing of return upto one month. iv) Assessment Proceedings It is proposed that assessment can be initiated if there is a reason to believe that the tax payer is not correctly discharging tax liability or is attempting to evade tax on any transaction. It is also proposed to introduce time limit for completion of transaction wise assessment and also provide for cancellation of order if the order is done ex-parte. v) Computation of Interest Under MVAT Act, tax payer can file revised return for a complete year and pay extra tax. In such cases, instead of present method of computing interest, it is proposed to compute interest with effect from 1 st October of the year for which revised return relates. Amendment is also proposed for computation of interest in case of a revised return filed for a period lesser than a year. vi) Appeals Presently, where an appeal or review is being decided under one Act, which has an effect on tax liability under the other Act, which is not subject matter of appeals or review then the concerned authority cannot decide the matter under the other Act. The present provisions need certain technical changes. I propose to make the same. High Court, approves merger or demerger of the companies, thereafter company is required to apply to the Registrar of Companies. I propose to specify a period of thirty days for making application for registration from the date of notification by the Registrar of Companies and amend present provision regarding cancellation of registration in such cases. 6) Entry Tax. It is proposed to levy a five per cent entry tax on long steel. To avoid double taxation on long steel, set-off will be allowed. 7) Tax on wood free Plain and Pre- laminated particle board. It is proposed to levy twelve and half per cent tax on all types of wood free plain and pre laminated particle boards. hed from 1 st August, 2015. Home 17

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora

ARTICLE SECTION Analysis of Proposed Amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora 8) Extension of Tax exemption essential commodities The exemption of the essential commodities such as rice, wheat, pulses and their flour, turmeric, chilies, tamarind, jiggery, coconut, coriander seeds, fenugreek, parsley (suva), papad, wet dates, solapuri chaddars and towels is proposed to continue upto 31 st March, 2016. The tax exemption on Currants and Raisins will also continue upto 31 st March, 2016. The lower rate of five per cent tax on Tea will also continue upto 31 st. March, 2016. 9) Concession in Profession Tax to women. No Profession Tax will be applicable to the women drawing salary upto Rupees Ten Thousand per month. 10) Concession in tax on ladies Purse and Handbags It is proposed to reduce sales tax on ladies purse and handbags from twelve and half per cent to five per cent. 11) Exemption to medicines for treatment of cancer. It is proposed to exempt certain medicines required for treatment of cancer. A list of such medicines will be notified separately. 12) Concession in tax on guide wire. It is proposed to reduce tax on the guide wire required for medical treatment from twelve and half per cent to five per cent. 13) Concession in tax on LED bulb. It is proposed to reduce tax on LED bulb from twelve and half per cent to five per cent. 14) Concession in tax rate of cashew shell. It is proposed to reduce rate of tax on cashew shell to five per cent considering that input should not be taxed at a higher rate than output. . Home 18

ARTICLE SECTION Analysis of Proposed amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora

ARTICLE SECTION Analysis of Proposed amendments of Maharashtra State Budget 2015 Adv. Abhay. Bora 15) Certainty in Taxation. Some amendments in tax rates are proposed to remove ambiguities in rates and avoid litigations: — (i) Exemption from tax to Workbook, Drawing Book, Laboratory Book, Graph Book There is an ambiguity as to whether Workbook, Drawing Book, Laboratory Book, Graph Book are covered in the entry of exercise books. To clear this ambiguity, it is proposed to exempt the tax on these commodities w. e. f. 1 st April, 2015 considering them as exercise books. per cent from 1 st September, 2005 and five per cent from 1 st April 2010 (ii) Rate of tax on White Butter There is not much difference between White Butter and Desi Loni. Therefore, to remove ambiguity, it is clarified that White Butter will be taxed at four I ii) Rate of tax on Paper Presently, there is a dispute as to items falling in the description of “Paper” under schedule entry C-70(a). To bring clarity to the entry, items covered under “Paper” will be henceforth notified. Pending proceedings will continue as per directions issued by the Department from time to time. (iv) Rate of Tax on spices Rate of tax on spices is five per cent. There is an ambiguity as to whether mixture of spices will also be covered under the entry of spices or not. The mixture of spices are spices only, hence the schedule entry will be retrospectively amended so as to cover the ready mixture of spices under the entry of spices. (v) Tax on embroidery thread There is an ambiguity as to whether embroidery thread is covered in the entry of sewing thread. A retrospective clarification will be provided that tax rate on embroidery thread will be same as that of sewing thread. 16) Local Body Tax. The Government is committed to abolition of Local Body Tax. Due to abolition of Local Body Tax, compensation of rupees six thousand eight hundred seventy five crore will be required to be given to the Municipal Corporations excluding Mumbai. This loss of revenue will be compensated by enhancing rate of tax under Value Added Tax Act. The enhanced rate of tax will be applicable to the whole State. Extensive deliberations are required on the enhancement in tax rates under Value Added Tax. The Local Body Tax will be abolished. Home 19

ARTICLE SECTION Article on Section 2(24) of Income Tax Act CA Mehul Jain Income—Chargeability—Lump

ARTICLE SECTION Article on Section 2(24) of Income Tax Act CA Mehul Jain Income—Chargeability—Lump sum alimony and periodical payments Query: ABC had filed a suit against her husband for declaring the marriage a nullity. The Court passed the decree of nullity and directed the husband to pay one lakh rupees as lump sum alimony and also pay five thousand rupees per month as monthly alimony. Are these amounts taxable as income in the assessment of my client? Solution: The definition of "income" in s. 2(24) is not exhaustive and it is well established that the word "income" is of widest amplitude and that it has to be given its natural meaning. Anything which can properly be described as income is taxable under the Act unless exempted under any of the provisions and the income, generally speaking denotes, as has been judicially noticed, "a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources". In the present case, decree granting alimony cannot be regarded as a mere recognition or continuation of earlier obligation but should be treated as a "definite source" from where monthly payments would come. If the decree is set aside or reversed, the monthly payments would cease. If the former husband failed to make payment, the assessee would have to take steps to execute the decree in order to obtain the monthly payments. "Return" is ordinarily a receipt for labour or skill employed or for capital invested but this narrow meaning is not to be attributed to the expression "periodical monetary return" in the judicially noticed definition of income, because even a voluntary payment coming from a definite source may take the shape of "income" in certain circumstances. The monthly alimony payable under the decree should be regarded as "periodical monetary return" coming in with some sort of regularity or expected regularity from definite source. The monthly payments under the decree in question cannot be regarded as periodical windfalls or casual payments. Decree has created a legal right to collect the amount which can be enforced directly. Hence monthly payments under the decree would be regarded as income under the Act. As far as lumpsum amount payable under the decree is concerned two views are equally possible but the better view seems to be that the lumpsum payment directed to be made under the decree should not be regarded as commutation of periodic payments and should be treated as capital receipt. Home 20

ARTICLE SECTION Article on Section 2(24) of Income Tax Act CA Mehul Jain Income—Benefit

ARTICLE SECTION Article on Section 2(24) of Income Tax Act CA Mehul Jain Income—Benefit or perquisite under s. 2(24)(iv)—Waiver of debt Query: The director of a private limited company had taken loan of one lakh rupees from the company some years back but due to certain personal reasons the director made a request to the company to write off the debt and the company by a resolution accepted the said request and wrote off the debt. The AO has taken the view that on account of this act of the company the said amount is liable to be assessed as income of the director on director’s assessment. Can a debt which is written off ever be treated as income of debtor ? Is not the view of the AO unsustainable? Solution: Normally when the creditor writes off the debt of the debtor, the amount representing the debt which is written off cannot be treated as income of the debtor. However, the position is different when the debtor happens to be director and the creditor happens to be a company of which he is a director and the company voluntarily and consciously writes off the debt. Sec. 2(24)(iv) lays down that income includes the value of any benefit or perquisite whether convertible into money or not obtained from the company by a director. In the present case the company has written off the amount taken as loan by the assessee who is its director. By this act the company has precluded itself from recovering the amount from the director, and this has resulted in obtaining by the assessee of wiping off of the said liability, which amounts to a pecuniary benefit. The benefit here was not the loan but pecuniary advantage, that is, profit derived by the director as a result of extinguishment of the liability he owed to the company. What the director has obtained from the company in the relevant year in which the amount has been written off is not the money but a benefit capable of being evaluated in terms of money. Besides, it is not the case of the director that he has received some unauthorised or illegal benefit which he would eventually have to restore to the company. Since the benefit to the director has emanated from the resolution of the company and the benefit has been voluntarily and consciously conferred by the company upon the director, the provisions of s. 2(24)(iv) are attracted and hence, AO is justified in assessing the value of benefit derived by the director as his income Home 21

ARTICLE SECTION REGISTRATION OF CHARGES CA MANOJ JAIN, CS ADITI DEO Definition Charge means

ARTICLE SECTION REGISTRATION OF CHARGES CA MANOJ JAIN, CS ADITI DEO Definition Charge means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. Duty to register the charges It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge holder together with the instruments, if any, creating such charge in Form CHG 1 on payment of fess with Registrar of Companies within 30 Days of its creation. Company can apply for the extension for the time limit up to 300 days to the ROC on payment of Additional fees as prescribed. If delay is beyond 300 days condo nation of delay should be sought from the Central Government. After completion of the procedure of filling the form the registrar will issue certificate of registration. Power to the Lender If the borrower company fails to register a charge within a time prescribed above in that case lender has a right to apply to the Registrar of Companies for registration of charge. Registrar may issue notice to the company and ask for the cause of non compliance and can allow to register a charge with additional fess. Where the registration is effected on application of the person in whose favour charge is created that person shall be entitled to recover from the company the amount of fees or additional fees paid by him to the registrar for the purpose of registration of charge. The provisions apply to 1. A company acquiring any property. 2. Any modification in terms of Agreement, terms, condition or the extent and operation of charge registered Home 22

ARTICLE SECTION REGISTRATION OF CHARGES CA MANOJ JAIN, CS ADITI DEO Date of Notice

ARTICLE SECTION REGISTRATION OF CHARGES CA MANOJ JAIN, CS ADITI DEO Date of Notice of charge Company should keep the register containing the details of the charges in the slandered format. Registrar of companies also maintained the record of the index of charges and it can be inspected by paying appropriate Fees. Satisfaction of Charges A company shall give intimation to the registrar about satisfaction of charge in full of any charge which is registered with the Registrar of companies within 30 days from the date of satisfaction of charge. Register sents a notice to the charge holder about satisfaction of charges and charge holder may show cause within 14 days why the satisfaction of charge should not be recorded and if no cause is shown within time limit registrar order that a memorandum of satisfaction shall be entered. Intimation about appointment of receiver or manager If any person obtains an order for the appointment of a receiver of or person of person to manage, the property, subject to charge, of a company or if any person appoints such receiver or person under any power contained in passing of order or of making of the appointment give notice of such appointment to the company and registrar along with a copy of the order or instrument. Punishment for contravention If any contravention is done by the company then it shall be punishable with fine not less than One Lakh and it may extend up to Ten Lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty five thousand rupees but which may extend to one lakh rupees or with both. Home 23

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha Residential Status under FEMA 1.

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha Residential Status under FEMA 1. Introduction: An Indian abroad, popularly known as an NRI – has two important definitions determining his residential status – the primary one coined under the Foreign Exchange Management Act, 1999 – (FEMA) and the other coined under the Income Tax Act, 1961 - (IT Act) 2. Definition under FEMA: Provisions of FEMA are applicable qua a transaction. However whether FEMA would apply to a particular transaction would depend upon the residential status of the person undertaking the transaction. Thus the residential status is the key on which the applicability or otherwise of the provisions of FEMA depends. As such the residential status is the starting point for ascertaining the compliance with rules and regulations under FEMA. 3. A person (Individual) resident in India A person (being an individual) residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include: (A) A person who has gone out of India or who stays outside India, in either case: (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) A person who has come to or stays in India, in either case, otherwise than— (a) for or on taking up employment in India, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; 4. Not permanently resident Means a person resident in India for the employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years. Home 24

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha 5. What is the status

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha 5. What is the status of Indian students studying abroad under FEMA? It is observed from the representations that when students leave India for prosecuting a course of specified duration, such stay outside India exceeds the period officially intended for various reasons. While taking up studies, or further advance courses, students may have to take up job or seek scholarships to supplement income to meet their financial requirements abroad. As they have to earn and learn, their stay for educational purposes gets prolonged than what is intended while leaving India. Furthermore, the purport of their argument is that though they are students, they are, in reality, not dependent for a dominant part of their expenses on remittances from their households in India. Often they are permitted to work and have to undertake certain related financial transactions. They urge, therefore, that the definition needs to be revised. Having regard to the circumstances stated above, it is clear that on both counts viz. their stay abroad for more that 182 days in the preceding financial year and their intention to stay outside India for an uncertain period when they go abroad for their studies, they can be treated as Nonresident Indians (NRIs). I have tried to summarize the provisions related to the residential status of an individual in the chart below for easy understanding: Home 25

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha Brain Teasers: Q 1. Ram

ARTICLE SECTION FEMA – 1999 CA. Yogita S Muttha Brain Teasers: Q 1. Ram came to India on 1 Sep 07 for taking up an employment in India. – For the Financial Year 2006 -2007, he was not in India. As such, for the financial year 20072008 he is ___________. (resident of India / not resident of India) – For the Financial Year 2007 -2008, he was in India for more than 182 days. As such, he is _________(resident of India / not resident of India) for the financial year 2008 - 2009. Q 2. Gautam came to India on 1 Sep 07 as a tourist and since then he is in India till today. – For the Financial Year 2006 -2007, he was not in India. As such, for the financial year 20072008 he is _______(resident of India / not resident of India). – For the Financial Year 2007 -2008, he was in India for more than 182 days. As such, he is _______ (resident of India / not resident of India) for the financial year 2008 -2009. Q 3. Mr. Ashok, born and brought up in India, goes to USA for taking up an employment on 15 -5 -2007. Determine his residential status under the Act for the F. Y. 2007 -2008. Q 4. Mr. Bharat, born and brought up in India, goes to USA on 10 -4 -2007 to look after his mother, who is suffering from a chronic disease , with the intention to stay in the USA till his mother recovers. Determine his residential status under the Act for the financial year 20072008 and 2008 -2009. Home 26

MONTHLY DUE DATES REGISTER FOR APRIL 2015 ACT Particulars Due dates SERVICE TAX Filing

MONTHLY DUE DATES REGISTER FOR APRIL 2015 ACT Particulars Due dates SERVICE TAX Filing of Service Tax half Yearly Returns 25 th April 2015 INCOME TAX TDS/TCS payment Credit for the month of March 2015 30 th April 2015 PROVIDENT FUND Provident Fund Payment for the month of March 2015 15 th April 2015 LOCAL BODY TAX Payment of Local body tax for March 20 th April 2015 EMPLOYEE STATE INSURANCE CORPORATION Employee State Insurance Corporation Payment for the month of March 2015 21 st April 2015 MVAT/CST E-Payment of Monthly Tax & WCT TDS for March 2015 21 st April 2015 MVAT/CST E-filling of Monthly Returns for March 2015 30 th April 2015 LUXURY TAX E-Payment of Monthly Tax for March 30 th April 2015 NOTE: If Due date is on Sunday or Public Holidays, the next working day is to be considered as due date. Home 27

Thank You Home 28

Thank You Home 28