No TDS on service tax component – CBDT Clarification0

Earlier position

Till now the tax has to be deducted on the gross amount paid or payable covered under chapter XVII-B including service tax thereon, except in case of payment of rent covered under section 194J of the Income-tax Act, 1961 where CBDT had clarified that tax was not required to be deducted on service tax component on rent.

Recent Position

CBDT has recently clarified vide its Circular No.1/2014 dated 13th January, 2014 that tax is not required to be deducted under Chapter XVII-B on service tax component comprised in amount paid/payable to a resident if service tax shown separately.

Points to be noted

  • Exemption is available only when amount is paid/payable to a resident
  • Exemption is available only when service tax is shown separately
  • Exemption is available in respect of all payment covered under Chapter XVII-B. Therefore the payments in nature of contractors, subcontractor, insurance commission, professional or technical charges, Royalty etc.

Illustration

The above clarification is depicted by way of following illustration

Particulars Earlier position Recent position
Amount of professional service 10000 10000
Service tax @ 12.36% 1236 1236
Total 11236 11236
TDS @ 10% 1124 1000

There in view of above clarification, tax required to be deducted in above is illustration is 1000 (not 1124 which required to be deducted before clarification)

Changes in Form 15CA and 15CB0

The Fourteenth Amendment Rules provide that any person responsible for paying to a non-resident (Section 195), not being a company, or to a foreign company, any interest or salary or any other sum chargeable to tax under the provisions of the Act, shall furnish… Read more

MGI Annual General Meeting, 20130

This year MGI AGM was held at Sydney from 16th to 18th October 2013. It was attended by about 80 members from around the world. There were 8 members from MGI Asia which was a great turnout. MGI Asia members found the meeting beneficial and excellent networking with members from different parts of the world.

Joel Barolsky’s presentation on “Building Trusted Client Relationships” provoked a lively debate on how members conduct business development activities worldwide. Joel spoke on how important it was to build relationship capital and how to go about doing it.

Another external speaker Jonathan Pain’s session on “World Economic Trends & What these mean for MGI” was an eye opener as he talked about the journey from west to east and the huge business potential of the Asian economies.

The main focus for MGI as an organisation this year was the formal launch of the debate on the network question by MGI CEO, Clive Bennett. He also presented recent marketing actions and policy, including a taste of the new website upgrade.

The beautiful city of Sydney was an excellent backdrop for discussions & debate, meeting old friends & making new ones amongst the MGI members.

Intelinsights – Our book “Transfer Pricing Demystified” out now!0

Transfer Pricing Demystified” a book, authored by our Partners, Ms. Pallavi Dinodia (L.L.B., F.C.A.) & Mr. Pradeep Dinodia (L.L.B., F.C.A.) was released by Justice Madan B. Lokur, Judge, Supreme Court of India at India International Centre on 24th October 2013.

The book was introduced by Justice Bader D. Ahmed, Judge, High Court, who has also written the foreword for it.

The book gives practical and logical solutions and truly helps demystify complex transfer pricing issues. Key attractions of the book:

  • Only book covering how to make transfer pricing adjustments in comparables including risk adjustments
  • Includes FAQ’s on Domestic Transfer Pricing
  • Includes discussion on the New Form 3CEB with suggestion methods applicable
  • Provides view on hot TP controversies including Benefit Test and AMP
  • Includes Safe Harbour Rules as applicable from AY 2013-14
  • Provides discussion on India Approach Cross referenced with Jurisprudence in Indian and UN & OECD Guidelines

Justice Madan B. Lokur, Judge, Supreme Court of India while releasing the book, appreciated Mr. Pradeep Dinodia’s understanding of complex tax issues and his expertise in advising on them including in the transfer pricing realm.

Justice Bader D. Ahmed, Judge, High Court, while introducing the book, appreciated the efforts of the authors and was happy that his recommendations for the indexes were implemented. He also explained how transfer pricing is inundated with TP jargon and how a new user finds himself lost in the acronyms. The glossary at the end of the book with the acronyms was a useful guide, he said. Justice Ahmed explained the various chapters in the book one by one with special reference to the table on page 219 which he thought was especially useful. He also, commended the controversies chapter, which in his view would help practitioners and appellate authorities alike.

Shri G.D. Aggarwal – Vice President – Delhi ITAT, in his speech appreciated the book and said that he was sure that it would help everyone in demystifying an otherwise complex law.

You may contact the authors on pallavidinodia@srdinodia.com or srdinodia@srdinodia.com.

You may interact with us through our blog http://intellinsight.srdinodia.com/.

The book is available on all bookshops and also online.

It is available for both international as well as domestic buyers online:

http://www.bharatlaws.com

For domestic buyers it is also available online on:

http://www.flipkart.com

Booksellers In Delhi:  The book will be available with all the law booksellers including Pooja Law House, Jain Book Agency, Connaught Place; Krishna Law House (Outside Super Bazar), Connaught Place.
For booksellers in other citieshttp://www.bharatlaws.com/dealer_network.php

Discrepancies while filing ITR0

  • Regarding E-Filing of ITR–7: Not sure why our tax department could not launch properly Form ITR 7 online this year as well, in spite of all big promises made. The professionals were not able to file online Tax Returns of Charitable institutions/ trusts on Form ITR – 7 electronically. Ultimately, these returns were required to be filed in paper form only.
  • Regarding Re-Setting of the Password: The password reset function in respect of individuals and 1st time clients who do not know/ remember their password, is indeed a tedious or challenging task. As per the tax department` website there are 4 methods for re-setting the password and all of them of cumbersome. The department must learn from Google/ Face book and should allow a method of re-setting the password instantly. The department must allow the taxpayers/ professionals to re-set the password instantly by sending a verification code at the registered mobile number of the taxpayer.
  • Regarding Notification of Form ITR-7: It is further interesting to observe that all taxpayers are given a period of 122 days from the end of financial year to file their tax returns. The period of limitation is a cardinal principle or a well established law. The very basic ITR Form 7 was notified on 11th June, 2013 that simply means out of total 122 days granted for filing of tax return to Charitable Institutions/ Trusts, 71 days were swallowed up by the department. Should not the due date of filing of tax return accordingly & automatically be understood to extend by 71 days to the assesses who were never in a position to file their tax return prior to 11th June, unless relevant form is notified? Hat`s Off to the smartness of the bureaucracy that ITR – 7 was introduced on 11th June, 2013 with retrospective effect from 1st April, 2013. Is it practically possible?
  • Regarding Blocking of Income Tax Site: Every tax professional can be sure of filing his all tax returns on time but above all, he is completely at the mercy of the website of the tax department. On the last day when majority of tax returns are expected to be uploaded/ filed, due to huge traffic the website surprised everyone in the morning. The Govt had itself acknowledged this fact by the afternoon and issued an Order extending the date to 5th August, 2013. India is an IT power for the world but our tax department is yet to realize this fact and is required to do lots of things to improve.
  • Confusions for Filing ITR:     Every individual assessee whose total income was below 5.00 Lacs was like earlier years under this impression/confusion that he is not required to file his/her personal tax return due to relaxation provided in earlier years. The clarification, that such individuals are equally required to file tax returns came very late. The tax professionals and the concerned large number of such beneficiaries are still unable to understand why such requirement has been reintroduced which has been abolished in the recent past for the sake of simplicity of a common taxpayer.

While the taxpayers of our country are in fact funding the Government in respect of all its dream projects and basic needs to run the country, the Government has yet to give him all its due share of quality services in return. Hope things will change soon in the times to come.

Cyprus Notified as a notified Jurisdictional Area Under Section 94a of the Income-Tax Act,19610

CBDT notifies Cyprus u/s 94A for not providing information requested by Indian Income tax authorities under EOI provisions; If assessee enters into transaction with person in Cyprus, all parties to be treated AEs & Transfer Pricing regulations to apply; Stringent conditions to avail deduction in case of payments made/expenditure arising from transaction with Cyprus based person; Onus on assessee to satisfactorily explain source of money if received from person in Cyprus; 30% TDS rate to apply to all payments made to person located in Cyprus.

Press Release

Mr. Pankaj Dinodia’s interview to Entrepreneur India Magazine0

Mr. Pankaj Dinodia, Executive Director (S.R. Dinodia & Co.) & CEO (Dinodia Capital Advisors) is awarded “Entrepreneur of the Year 2013 – Financial Services” by Entrepreneur India, powered by Franchise India.
Mr. Dinodia has been recognized for his Entrepreneurial achievement in the financial services sector. The award was conferred by Mrs. Saloni Narayan – DGM – State Bank of India to Mr. Dinodia.
Here is the interview given by him to Entrepreneur India Magazine.
Mr. Pankaj Dinodia Interview

MGI Asia Area Meeting – Bangkok (6th-7th September, 2013)0

Ms. Pallavi Dinodia, Area Leader – MGI Asia

This year’s MGI Asia Area Meeting was held in Bangkok for over 1.5 days. Opening message was given by Ms. Pallavi Dinodia, Area Leader, MGI Asia.

The first session was on “Driving Innovation & Customer Centric Culture”. MGI Asia members looked at the professional services landscape – opportunities and new emerging business lines and markets. Members shared their respective firm’s client/service offerings.

Issues were discussed such as how to approach the potential clients with MGI’s services and what we can do to differentiate ourselves from other firms.

The members also debated at length on the future steps that they need to undertake to see the MGI brand grow. Budget was allocated and approved against the 2014 action plan. Members pledged to support the initiatives that will be undertaken in the course of the next year. Ms Pallavi Dinodia was elected as Area Leader, MGI Asia for the second consecutive year.

New Companies Bill Promotes CSR Initiative0

This is a new initiative of Ministry of Corporate Affairs to ask corporate to contribute towards society. Earlier there were only voluntary guidelines for CSR and now there is a mandatory provision for CSR by some prescribed companies which is expected to cover a huge number of companies in India. One of the important factor to consider that there is no penalty prescribed for non contribution to CSR, even if fall in prescribed conditions.

Salient Features of the Proposed Law

Every company having net worth of:

  1. Rs. five hundred crore or more, or
  2. Turnover of rupees one thousand crore or more or
  3. A net profit of rupees five crore or more

during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an Independent Director.

The Corporate Social Responsibility Committee shall –

  1. Formulate and recommend to the Board, a CSR Policy which shall indicate the activity or activities to be undertaken by the Company as specified;
  2. Recommend the amount of expenditure to be incurred on the activities related to CSR; and
  3. Monitor the CSR Policy of the Company from time to time.

The Board of every company as aforesaid shall –

  1. After taking into account recommendations made by CSR Committee, approve the CSR Policy and disclose contents of such policy in its report and may also place it on the Company’s website, in such manner as may be prescribed; and
  2. Ensure that the activities as are included in CSR Policy of the Company are undertaken by the company and
  3. That the Company spends in every financial year, at least two per cent of average net profits of the Company made during three immediately preceding financial years, in pursuance of its CSR Policy. Corporate Social Responsibility = 2% of the Average net Profits* during three immediately preceding FY’s. *The “Average Net Profit” shall be calculated in accordance with the provisions of section 198.
  4. While spending towards CSR, preference shall be given to the local area and areas around it where it operates.
  5. Specify the reasons in Board Report in case the Company fails to spend the prescribed amount towards CSR.

Activities which may be included by companies in their Corporate Social responsibility Policies

Activities Relating to:-

  1. Eradicating extreme hunger and poverty
  2. Promotion of education
  3. Promoting gender equality and empowering women
  4. Reducing child mortality and improving maternal health
  5. Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases
  6. Ensuring environmental sustainability
  7. Employment enhancing vocational skills
  8. Social Business projects
  9. Contribution to the Prime Minister’s National relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, The Scheduled Tribes, other backward classes, minorities and women; and
  10. Such other matters as may be prescribed.

CONCLUSION

The proposed CSR activities may add sense of responsibility and contribution among corporate. It is expected to be beneficial to different class of people such as children, women, uneducated, unemployed etc. towards which such CSR activities may be focused.  There is social security system in most of developed countries and mandating CSR is a step towards creating some social security for citizen of India with focused contribution from Corporate.

RBI announces measures to rationalize Foreign Exchange Outflows by Resident Indians0

Keeping in view the current macroeconomic situation, the Reserve Bank of India has announced the following measures vide A. P. (DIR Series) Circular No.23 and A. P. (DIR Series) Circular No.24 dated 14thAugust 2013:

(i) Reduced the limit for Overseas Direct Investment (ODI) under automatic route for all fresh ODI transactions, from 400% of the net worth of an Indian Party to 100% of its net worth.

This reduced limit would also apply to remittances made under the ODI scheme by Indian Companies for setting up unincorporated entities outside India in the energy and natural resources sectors. This reduction in limit, however, would not apply to ODI by Navratna PSUs, ONGC Videsh Limited and Oil India in overseas unincorporated entities and incorporated entities, in the oil sector.

(ii) Reduced the limit for remittances made by Resident Individuals, under the
Liberalized Remittance Scheme (LRS Scheme), from USD 200,000 to USD 75,000 per financial year.

Resident Individuals have, however, now been allowed to set up Joint Venture
(JV)/Wholly Owned Subsidiary (WOS) outside India under the ODI route within the revised LRS limit.

(iii) While current restrictions on the use of LRS for prohibited transactions, such as, margin trading and lottery would continue, use of LRS for acquisition of immovable property outside India directly or indirectly will, henceforth, not be allowed.

CONCLUSION
The present set of measures is aimed at moderating outflows. However, any genuine requirement beyond these limits will continue to be considered by RBI under the approval route.