Income Tax relief measure by Finance minister on 13.05.2020

Income Tax relief measure announced by Finance minister on 13.05.2020 are as follows:

1. TDS & TCS rates for other than Salary payments will be reduced by 25 percent of the specified rates from tomorrow i.e. 14.05.2020 for the remaining period of FY 20-21. 

2. The due date of Income Tax Returns for all assessees (including individual assessee) for AY 2020-21 will be extended to 30 November, 2020 and tax audit due date will be extended to 31 October 2020. 

3. The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020. (However no clarification for extension of application & order due date, official gazette may provide clarification on same.)

4. Date of assessments getting barred on 30^th September, 2020 (AY 18-19) extended to 31^st December, 2020 and those getting barred on 31^st March,2021 (AY 2019-20) will be extended to 30^th September, 2021

POSSIBILITY OF DEPOSITING TDS ON QUARTERLY BASIS INSTEAD OF MONTHLY BASIS

Amid situation of lockdown where establishments are struggling with temporary closure of businesses, maintaining adequate fund flow situation would become critical for the management of any establishment. Establishments are keen to reduce fixed variable & fixed overheads by adopting various measures like re-negotiation of agreements, curtailing payroll overheads etc to address the issue of fund flow requirement, however still there are some fixed overheads like statutory dues which require immediate fund outflow. TDS is one of the statutory compliance which require cash outflow on monthly basis. In this post we will discuss how monthly fund requirement of depositing TDS on monthly basis can be converted to quarterly basis.

Rule 30 of Income Tax rules states the provision related to deposit of TDS, relevant text of provision is extracted below:

 “(2) All sums deducted in accordance with the provisions of Chapter XVII-B by deductors other than an office of the Government shall be paid to the credit of the Central Government—

(a)		on or before 30th day of April where the income or amount is credited or paid in the month of March; and
(b)		in any other case, on or before seven days from the end of the month in which—

(i)		the deduction is made; or
(ii)		income-tax is due under sub-section (1A) of section 192.”

However sub rule (3) empowers assessing officer with prior approval of Joint Comissioner to permit quarterly payment of TDS, relevant text of provision is extracted below:

“(3) Notwithstanding anything contained in sub-rule (2), in special cases, the Assessing Officer may, with the prior approval of the Joint Commissioner, permit quarterly payment of the tax deducted under section 192 or section 194A or section 194D or section 194H for the quarters of the financial year specified to in column (2) of the Table below by the date referred to in column (3) of the said Table:—

TABLE

Sl. No.	Quarter of the financial year ended on	Date for quarterly payment
(1)	(2)	(3)
1.	30th June	7th July
2.	30th September	7th October
3.	31st December	7th January
4.	31st March	30th April   ”

Basis the above, any establishment may evaluate the possibility of filing an application with the officer seeking the special approval by highlighting the impact on the business due to COVID19 as the reasons impacting the business adversely.

DECISIONS OF AAR SUPPORTING NO TP ADJUSTMENTS IN TRANSACTIONS OF SUBSCRIPTION OF SHARES OF SUBSIDIARY OUTSIDE INDIA

 

·                  Dana Corporation., AAR No. 788 of 2008 reported in 30^th November, 2009

Para 8 and 8.1 of the Ruling

“Section 92 is not an independent charging provision. The expression ‘income arising’ in the opening words of section92 postulates that income has arisen under the substantive charging provisions of the Act. If by application of the provisions of section 45 read with section 48, which are integrally connected one with the other, income cannot be said to arise, section 92 does not come to the aid of the Revenue even though it is an international transaction. Section 92 obviously is not intended to bring in a new head of income or to charge tax on income which is not otherwise chargeable under the Act.”

 

·             Amiantit International Holding Ltd., AAR No. 879 of 2009 reported in February 23,2010

wherein it was held that in a case where income was not chargeable at all transfer pricing provisions of section 92-B(i) of the IT Act would not apply.

 

 

 

 

 

Disclaimer: The view expressed above posted here for knowledge sharing purpose without any commercial aspect. Professional opinion must be sought before entering into any similar transactions mentioned above. Author shall not be held liable for loss of any kind arising from the exercise of information contained in it.

 

Taxability of Royalty paid to non resident on receipt basis

FACTS:

A LLC (USA) no PE in India enters into an agreement with B LTD (India) the effect of which, royalty income will be generated in the hands of A INC in consideration of services provided to B LTD.

A INC follows cash basis whereas B Ltd follows accrual basis of accounting. During FY 2014-15 A raised invoices for USD 10 million out of which USD 7.86 million were paid by B Ltd during the same FY however as per mercantile system of accounting and out of abundant caution TDS is deducted by B Ltd on entire USD 10 million.

QUERY:

1.      The fact that since A LLC follows cash basis of accounting can it offer for taxation in India only USD 7.86 million ?

 

2.      How much of tax credit can be claimed?

OPINION

Issue 1

As per Sec 90(2) “Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assesse”.

The beneficial provisions are not only to be understood from the point view of lesser rate of tax but also to determine the taxability of income as well.

In INDIA-USA DTAA, Article 12 deals with taxability of royalty & fees for technical services

1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed :

(a)    in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article [other than services described in sub-paragraph (b) of this paragraph] :

(i)    during the first five taxable years for which this Convention has effect,

(a)    15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company ; and 

(b)    20 per cent of the gross amount of the royalties or fees for included services in all other cases ; and

 

(ii)    during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services ; and

(b)    in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services.

3. The term "royalties" as used in this Article means :

(a)    payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof ; and

(b)    payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8.

In Article 12(1) phrase used was “paid to a resident of other contracting state” further definition of royalties also means “payment of any kind received”. Since the phrases used in the DTAA is ‘paid’ or ‘received’, therefore one can say that as per INDIA-USA DTAA royalty income is taxable on receipt basis and hence non-resident recipient with no PE in India can offer royalty for taxation in INDIA on receipt basis.

 

Issue 2

As per rule 37BA of Income tax rules, “Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable”. Hence TDS credit corresponding to the income offer for taxation can be claimed, however balance tds credit can be carried forward to future years.

 

 

  

Disclaimer: The view expressed above is those of the contributors and posted here for knowledge sharing purpose without any commercial aspect. Professional opinion must be sought before entering into any similar transactions. The contributor shall not be held liable for loss of any kind arising from the exercise of information contained in it.

DIFFERENT TYPES OF WRITS & THEIR USE IN APPELATE

As a citizen of India each person has certain rights and obligations towards the nation which forms the fundamental limb towards democracy in India. Our constitution has given us various rights and obligations as a citizen of India. The Fundamental Rights to the citizen of India can be enforced through High Courts or Supreme Court of India according to the provisions of Article 32 of the Constitution. Article 226 of the Constitution provides that “ Notwithstanding anything in Article 32 , every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority , including in appropriate cases, any government , within those territories , directors, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any rights conferred by Fundamental Right and for any other purpose.”

Different types of Writs and their use is discussed as below:

HABEAS CORPUS: This word Habeas Corpus means “to have a body”, it is a remedy for those people, who have been confined in prison or custody without legal justification. Through this writ the court orders the concerned authority to produce before it the person and facts of his detention. The court let the person free after considering facts before it produced by the detaining authority.

The principal of Equitable Justice is that no person can be deprived from his personal liberty and independence except for violation of any law enforced and in accordance with due course of law as prescribed. It means that the authority cannot snatch the liberty or right to live in peace of a person or deprive a person from liberty unless he/she has done something against the law of land. The detention of the person will be done according to rules prescribed in this regard by the government.

A person detained or any person or his relative may approach to the High Court for a writ of Habeas Corpus.

 

MANDAMUS: It means a “Command” is issued to direct any person, corporation, inferior court or government authority requiring him to do a particular thing therein specified, which pertains to their office and related to their public duty. This writ can be issued for any public authority.

It is important that the applicant must have legal right that the duty to be performed in his favour by the authority against whom writ is issued. If any public authority has any grievance against performance of duty in favour of applicant, then this writ will not be issued.

This writ will enforce the inferior court or public authority to do its/ his duty in favour of applicant. Article 360 of the Constitution of India prohibits any writ of mandamus against President of India and Governors’ of the States. This cannot be issued against any private body, unless state is in collusion with the private body.

The court before issuing this type of writ, consider all types of remedies.

 

PROHIBITIONS: – Supreme Court or any High Court in India can issue orders for prohibiting any court inferior to it preventing latter from exercising any jurisdiction, which is not in their power. It forces a court or tribunal to act within their jurisdiction, when they cross limits provided to them by statue.

This writ is available only against judicial or quasi judicial authorities and not available against public servant who is not vested with juridical powers.

The Supreme Court may issue this writ only in case of Fundamental Rights being affected by reason of the jurisdictional defect in the proceedings.

This remedy is available during the pendency of proceedings and before the order is made.

CERTIORARI:- It is available to any person whenever anybody of persons having legal authority to determine questions affecting the rights of subjects and having the duty to act judicially, acts in excess of its legal authority.

This writ remove the proceedings from such body to the High Court so that the decision shall be quashed, which has gone beyond power of deciding authority.

 

QUO WARRANTO: – It can be issued by the court on application or prayer to inquire the legality of appointment of a person in the office of a public and of a substantive nature. Through this writ court order to check the procedures or legality of appointment of that person and if found to be illegal, he will be removed from the public office.

This writ is available to the public to ensure that no unauthorized person will be appointed in a public office.

When a person challenges the validity of appointment to a public office, it is maintainable whether or not any fundamental or other legal right of such person has been infringed. This writ is intended to safeguard against the usurpation of public offices.

DEDUCTION U/S 32AC

Section 32AC is introduced vide Finance Act, 2013 as an investment linked incentive for attracting new investment and to quicken the implementation of projects by providing an incentive for acquisition and installation of new high value Plant or Machinery to manufacturing companies.

For AY 2014-15 & AY 2015-16 [Sec 32AC (1)]

A deduction of 15% of the actual cost of Plant & machinery acquired and installed by a manufacturing company between April 1, 2013 and March 31, 2015. A company is eligible for claiming the deduction u/s 32AC subject to following conditions:

1.  The company should be engaged in the business of manufacturing of an article or thing.
2. The actual cost of new Plant or Machinery should exceed INR 100 crore (aggregate) and such Plant or Machinery should be acquired and installed (both) during the period 1 April 2013 to 31 March 2015.
3. The deduction shall be available in the financial year in which the aggregate cost exceeds INR 100 crore.
4. The Plant or Machinery should not include office equipments, computers and computer software, Plant or Machinery installed in office premises or any residential accommodation, vehicles, ship or aircraft or any second hand Plant and Machinery.
5. Such Plant or Machinery cannot be sold or otherwise transferred within a period of 5 years from the date of its installation, otherwise the deduction allowed would be taxable as business income in the year of transfer. However, transfer can be made under amalgamation or demerger but the restriction of 5 years would apply to the amalgamated or demerged company.

For AY 2015-16 & AY 2017-18 [Sec 32AC (1A)]

Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium-size investments in plant and machinery eligible for deduction, a new sub section (1A) has been introduced vide Finance Act, 2014 which provide that a deduction u/s. 32AC (1A) shall be allowed if a company, on or after 1st April, 2014, invests more than Rs. 25 crore in plant and machinery in the previous year subject to following conditions:

1. The company should be engaged in the business of manufacturing of an article or thing.
2.  Deduction shall be 15% of actual cost of new plant or machinery.
3. Acquisition & installation both should be done in the same previous year.
4. The Plant or Machinery should not include office equipment’s, computers and computer software, Plant or Machinery installed in office premises or any residential accommodation, vehicles, ship or aircraft or any second hand Plant and Machinery.
5. No deduction shall be allowed under section 32AC(1A) for AY 2015-16 where an assessee is eligible to claim deduction under sub section (1) i.e. where aggregate value of new plant & machinery acquired and installed during the period 01-04-13 to 31-03-15 exceed Rs. 100 crore. Such Plant or Machinery cannot be sold or otherwise transferred within a period of 5 years from the date of its installation, otherwise the deduction allowed would be taxable as business income in the year of transfer. However, transfer can be made under amalgamation or demerger but the restriction of 5 years would apply to the amalgamated or demerged company.

Interview Questions on TDS profile

General questions asked in interview for TDS profile in an organisation

Dear Friends,

Recently i have been given opportunity to conduct technical session during interviews of candidates for TDS related profile in my department (Direct taxation), i therefore prepared a list of Q&A series and would like to share with you as below:

Ques:  What are the different types of forms of filing TDS return?

Ans:    24Q-Salary, 27EQ-TCS, 27Q-Non resident, 26Q- Other than salary, non resident & TCS.

Ques:  Exposure about online corrections, what are the different types of corrections can be done online? How online correction of TDS return is done?

Ans:    Different types of corrections which can be done online: Pan correction, Challan correction, Addition of challan to Statement. Correction can be done online by submitting a combination of details of Original TDS return & latest revised return (details like return acknowledgement number, challan number, 3 deductee details) with use of Digital signature of Authorised signatory.

Ques:   TDS software using in current company for filing TDS return?

Ans:   Candidate who had experience on software currently using by companies are given a preference. Candidates should go through a quick tutorials of best used TDS softwares like Webtel, Genius, Computech, Taxmann etch available on internet .

Technical questions

Ques:   How to identify actual/genuine TDS defaults appearing in TRACES website?

Ans:    Justification report (JR) & Console file is downloaded from TRACES. JR states the reason of TDS demand & console file is generally the TDS data what we have filed in our TDS return. By applying checks on both two files integrity of demand can be identified.

Ques:  Exposure on non-resident payment?

Ans:   Generally Panel is not looking for exhaustive knowledge of Non resident TDS however Candidate must have basic knowledge like tds rate in case of non-resident is tax as per income tax or as per DTAA whichever beneficial however benefit under DTAA to deductee only when following documents were received from deductee:

Tax residency certificate (TRC)

            Pan card copy

            Certificate of establishment

Ques:   Employee TDS

Ans:    Quarterly TDS return is filed mentioning salary paid & TDS deducted however in quarterly statement of Q4 additional details of salary of employee for the whole year is also required to file to generate Form 16. Candidate should have knowledge on basic Income tax provision of employee TDS like exemption calculation for HRA (least of Actual HRA received, Rent paid-10% of salary or 50% (metro cities) or 40%(non metro cities) of salary), Gratuity (least of Actual gratuity received, 15 days average salary for each completed year or Rs 10 lakhs)

Ques:   Current organization workflows of TDS calculation & TDS return?

Ans:    Candidates should prepare the current workflow for preparation of data in their current organisation for payment of TDS & TDS return filing in a narrative form & practice it to make it understand clearly to panel members without missing any important activity.

Hope questions shared above will help you in interview. Please share your experience.

Best of Luck