Saturday, August 24, 2013

CA queries

QUERY: Dear Sir, From A.Y. 13-14, Transfer Pricing is also applicable on domestic transaction.
Therefore, I want to know the exact rules & regulation of Transfer Pricing applicability in domestic transaction and what documents & which type of report to be prepared.
CA. Himanshu Agrawal
+91-9771478203QUERY:
REPLY:  Dear Mr. Agrawal, With regard to reporting of SDT transactions, you can refer the revised guidance note issued by ICAI in August 2013. The copy of the same has been attached herewith.
 Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
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QUERY: Respected Sir,
Hope You are fine and at the top of your spirits. I wish You provide Your esteemed thoughts on the matter please.
Wanted to know what would be the consequences if the export proceeds do not come to India within 1 (now 9 months) year from date of raising of export invoice. The overseas service receiver is a Related Party of the Indian service provider and so cannot be pressurised to send money. The Indian Company does not wish to apply for extension of time to the AD Bank as there are many invoices unpaid within 1 year. But proceeds have entered India after 1 year and have been reported to RBI through AD Bank when endorsed SOFTEX from STPI is lodged to AD. At present the Company has deregistered itself from STPI.
Is there any penal provisions in FEM (Export of Goods & Services) Regulations 2000 as amended.
Warm Regards,
CA Dipjyoti Majumdar  
REPLY: Dear Dipjyoti,

This has reference to the query raised in the trailing mail.

In this regard, kindly note that there is no penal provisions in FEM (Export of Goods & Services) Regulations 2000. However, in terms of Sec. 13 of the Foreign Exchange Management Act, 1999, penalty upto thrice of the amount involved in contravention may be levied.

In case you need further clarification, please let us know.

Best Regards,

CA. Rahul Gupta
Partner – Taxation
ARVG & Co
M: +91 98308 86543
D: +91 33 4004 6644 / 6050 5593
QUERY:Dear Sir,Please guide us as to the whether MAT certificate in Form 29B is to be issued for every company or only to companies in case tax u/s MAT becomes payable? For clarifying my question, I wish to know if I have to file Form 29B even in case of company where tax is being paid on the income computed as per Income Tax provisions and not on book profit u/s 115JB.
 Thanks,
 Siddhartha Agrawal
FCA, DISA(ICAI)
M - 9431183210
REPLY: 
Dear Mr. Agrawal:MAT liability can be ascertained only after comparing normal tax liability with book profits. Accordingly, Section 115JB(4) provides for obtaining a report from an accountant and Rule 40B provides a format for that. Therefore, it is possible to argue that the report in Form 29B should be obtained in all cases, irrespective of whether the company is liable to MAT.

Section 115JB (4), to the contrary, inter-alia uses the words “Every Company to which this section applies” – implying report to be obtained only where there is MAT liability. Further, the Act does not stipulate any penalty for not obtaining this report. Section 139(9) also does not consider the tax return to be defective if Form 29B is not obtained. Hence, there is no explicit downside in cases where a company is not liable under MAT. However, given the legal issues involved in computing the Book Profits under MAT, on a prudent basis, a company should consider safeguarding its risk to the extent possible by getting the MAT computation vetted by a Chartered Accountant

Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
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D: +91-33- 2213 7625 / 3022 4196; M: +91 - 90518 03800
 
QUERY:Dear Sir,If a person repaid the housing loan taken from one bank by own resources and then again taken loan from another bank.In this case whether assessee can avail benefits of second housing loan under income tax act i.e. repayment of principal amount (80C) and payment of interest 24(b) ?
REPLY: You can refer the article on the below mentioned link. This should answer the query you looking for.
Tax benefits on interest component of the home loans u/s 24(b) is allowed not only for original home loan but also for second /subsequent / new home loan taken to refinance the first loan. In other words, if the new housing loan is taken to pay off an existing housing loan, tax benefit under section 24(b) is allowed.

However, unlike section 24(b), there is no specific mention under section 80c for prepayment of existing home loan by taking a fresh home loan. Further, Section 80C deduction is available only on actual re-payment of loan basis. Accordingly when you repay the balance outstanding principal component of your first / original / existing home loan by taking a second home loan, you’ll be entitled for tax deduction under section 80c but within the overall limit of one lakh.

Further, when you subsequently start repaying your second housing loan, you’ll be entitled for tax benefit only on the interest portion u/s 24(b) and not on the repayment of principal component u/s 80C. This is quite obvious because otherwise it will amount to double tax deduction on the principal component of the home loan.

Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
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D: +91-33- 2213 7625 / 3022 4196; M: +91 - 90518 03800

QUERY: Dear Sir, Please advice on ITR form to be used to file Provident Fund, Gratuity Fund and Pension Fund Trust return of income  as ITR 7 has no provision for income exempt under section 10(25). As section 139(4a),(4b),(4c) and (4d) are not applicable to the before mentioned trusts, is ITR 5 the correct form to be filed ?
CA H.S.Dua
REPLY: Yes. Filing ITR – 5 would be correct.

Warm Regards,
CA. Richa Rateria

QUERY: Dear Sir,If a builder develops an apartment on land given by land owner and they both distribute the flats in the ratio as decided by them (Normal Market trend).In this case what is the Tax implications on both of them i.e. land owner and builder ?
REPLY:  Dear Mr. Somani In the instant case the nature of income for both have been provided below :
 Land owner – Capital Gains income (Conversion of capital asset to stock-in-trade is generally disregarded by the income-tax department e.g. in the case of Sathappa Textiles P. Ltd. [263 ITR 371 (Mad.)]
 Builder – Construction business income
 Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
------------------------------------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91 - 90518 03800

 QUERY:Dear Nitesh Ji , Please Advise on the following case:- 
I have one client a Charitable Trust running hospital and School  ( Which is Registered u/s 12 AA of the Income Tax Act ) enjoying Exemption U/s 11 of the Income Tax Act. 
There are two trustees who are getting salary from hospital and school  (  Not in the capacity of Trustees ) but in the in some other capacity say they are supervising in the capacity of a  ADMINISTRATOR of the Hospital and the second trustee is Administrator of the School 
 It is due the efforts of these two trustees that Hospital and school are making progress. These two trustees have no other business or any other source of income except salaries they are getting from Hospital and school respectively.
Now My Query is:- 
1. Whether this salary to the trustees is allowable expenditure.
2. If yes,  whether this information is to be Reported in Audit Report in Form 10B  
under " clause 3 of form 10B under the Part II - Application or Use of Income or Property  for the benefit of persons specified in section 13 (3)."
If we report this information, can we give remarks with this information that they are getting salary in the capacity other than Trustees.
Please Guide.

REPLY:Section 194 – IA would only apply to payments being made on or after 1 June 2013, and would not apply to payments made for the same property prior to 1 June 2013, when the relevant law was not in force. However, for the purposes of computation of the limit of Rs.50 lakh, the total consideration, whether paid before 1 June 2013 or subsequently, would have to be considered.  Thus in the case mentioned by Mr. Sunil TDS would be required to be deducted on the final payment if the total consideration of the property being purchased in more than Rs. 50 lacs.
Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
------------------------------------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91 - 90518 03800
QUERY: 
Service charges for providing Still photography & Video Coverage Assignment  on seminars.
TDS is deductible under which head 194C or 194J?
Please advice over the same & enclose any circular/case law if possible.
With Regards
REPLY: 
Dear Mr. Binani,

This has reference to the query raised in the trailing mail.

In this regard, it may be kindly noted that services provided by the photographer shall not be covered under the definition of professional of Sec. 194J. Reference may be had to the decision of Hon’ble Mumbai ITAT in the case ofEMC v. ITO, TDS ([2010] 37 SOT 31 (Mum)), wherein the ITAT held that the jobs of art work and photography would be covered under the provision of Sec. 194C(1). The relevant extract of the said decision has been reproduced below:
                    
“The department had treated the art work and photography work as a professional work. The professional service has been defined in clause (a ) of the Explanation to section 194J. None of the services mentioned in clause (a) was relevant to the services of the assessee and only other services which have been notified by the Board and not appearing in the clause are the profession of authorized representative and the profession of film artist. Again the profession of authorized representative was not applicable to the case of the assessee and the phrase ‘film artist’ has been defined in the aforesaid notification itself to mean any person engaged in his professional capacity in the production of cinematography film whether produced by him or any other person, actor, cameraman, etc. The photography and the art work in case of the assessee had not been done in relation to production of any cinematography. Therefore, the art work and photo-graphy would not come within the purview of ‘Professional services’. Since the assessee had assigned the jobs of art work and photography to others, its claim that job often had been given on contract basis had to be accepted. Therefore, the jobs of art work and photography would also be covered under the provision of section 194C(1). Therefore, all the payments made by the assessee would be covered under the provisions of section 194C(1).”

From the above discussion, it can be inferred that the TDS need to be deducted u/s 194C in respect of payment made for providing Still photography & Video Coverage Assignment  on seminars.

Hope the above clarified your doubt, in case you need further clarification, please let us know.

Best Regards,

CA. Rahul Gupta
Partner – Taxation
ARVG & Co
M: +91 98308 86543
D: +91 33 4004 6644 / 6050 5593

Dear All,

We are pleased to inform you that definition of ‘Control’ in paragraph 2.1.7 of existing FDI Policy Circular 1 of 2013 has been redefined to make it sync with SAST Regulations, 2011 and new Cos. Bill vide press note No. 4 (2013 Series) dated 22-8-2013.

As per the new definition, Control' shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

The above definition shall be effective from immediate effect.

In case you need further clarification, please let us know.

Best Regards,

CA. Rahul Gupta
Partner – Taxation
ARVG & Co
M: +91 98308 86543
D: +91 33 4004 6644 / 6050 5593


QUERY:Sir, Can a NRI create his HUF & avail the benifit of HUF?
REPLY:Every Hindu living in any country, irrespective of whether he holds an Indian, British, US or any other passport and regardless of whether or not he was born in India, is entitled to considerable tax savings through HUF
.
What applies to non-resident individuals will also, in some cases, be applicable to a non-resident HUF. A HUF, whose management and control is exercised wholly outside India during the financial year. From a tax point of view, if it can be shown that all decisions concerning the family members and the affairs of the HUF were taken outside India during the relevant year, that HUF will enjoy all benefits also available to a non-resident individual and the same tax exemptions.
Warm Regards,
CA. Richa Rateria
ARV Advisory Services (P.) Ltd.
Room 15A, Martin Burn Building,
1, R.N.Mukherjee Road, Kolkata – 700 001
------------------------------------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91 - 90518 03800
 QUERY: Sir;I will appreciate your helping me in solving following query :

1. " I paid booking advance of Rs 7 lac for a flat in May,2013. Builder has raised a demand of 
Rs 10 lac payable on or before 18.08.2013. Whether I should deduct 1% TDS on Rs 17 lac, as forming part of consideration, OR only on Rs 10 lac on the ground that this amount is paid  
 after 01.06.2013, the date of applicability of the said Section".

2. The Section heading is -" Payment on transfer of certain immovable property"
And on reading the section it casts duty to deduct TDS on --" Any person, being a transferee,
responsible for paying to a resident transferor  any sum by way of CONSIDERATION FOR
TRANSFER"  In my case I am only paying installment and no transfer is taking place. Shall no TDS need be deducted-?

Thanks.
B.K.Malhotra
 , FCA

REPLY:  Dear Mr. Malhotra

Section 194 – IA would only apply to payments being made on or after 1 June 2013, and would not apply to payments made for the same property prior to 1 June 2013, when the relevant law was not in force. However, for the purposes of computation of the limit of Rs.50 lakh, the total consideration, whether paid before 1 June 2013 or subsequently, would have to be considered.  Thus in the case mentioned in the below email, TDS would be required to be deducted on the payment of Rs. 10 lacs if the total estimated consideration of the property being purchased in more than Rs. 50 lacs.

Warm Regards,
CA. Richa Rateria



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