(BQ) Part 2 book Tax laws and practice has contents: Collection and recovery of tax, procedure for assessment; appeals, revisions, settlement of cases and penalties offences; tax planning tax manageme; basic concepts of international taxation, advance ruling and gaar,... and other contents.
Lesson 10 Collection and Recovery of Tax 451 Lesson 10 Collection and Recovery of Tax LESSON OUTLINE LEARNING OBJECTIVES – Collection and Recovery of Tax The Income-tax Act provides for collection and recovery of income-tax in the following ways, namely, – Payment of Income-Tax (a) Deduction of Tax at Source (i) deduction of tax at source in respect of income by way of salaries, interest on securities, interest other than interest on securities, winnings from lotteries and crossword puzzles, winnings from horserace, insurance commission, dividends, payment to contractors or subcontractors and payments to non- residents; Consequence in the event of default (Section 201) e-TDS Return : (b) Advance Payment of Tax – Due Dates and Installments of Advance Tax – Refunds (Sections 237 to 245) – Whom to apply for refund? (ii) advance payment of income-tax before the assessment by the assessee himself; – For failure to deduct and pay tax at source [Section 201] (iii) direct payment of income-tax by the assessee on self-assessment; and – Interest for belated payment of Income-tax [Section 220(2)] (iv) payment made after the assessment is made by the Assessing Officer – Interest for default in furnishing Return of Income(Section 234A) Once the tax is being collected either by others, it is their duty to deposit the same to the credit of the Central Government under prescribed procedures stated under the Income Tax Act, 1961 Here the question of TDS arises and in this chapter this aspects of the Income Tax Act has been elaborately discussed with special emphasis on e-TDS and other relevant issues – Interest for default in payment of Advance Tax (Section 234B) – Interest for deferment of Advance Tax (Section 234C) – Interest Receivable by the Assessee At the end of this lesson, you will learn; – Section 244A (Interest on refunds) – Lesson Round Up – What is tax deducted at source and tax collected at source – Self Test Questions – What are the rates of TDS and TCS – The due dates for payment of TDS and TCS and Advance Tax The Tax on income is collected in four ways- Tax Deduction at source (TDS), Advance Tax, direct payment of income-tax by the assessee on self-assessment basis and payment after the assessment is made by the Assessing Officer 451 452 EP-TL&P COLLECTION AND RECOVERY OF TAX (a) Notice of Demand (Section 156) (Rules 15, 38, Forms 7, 28) When any tax, interest penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable (b) Intimation of loss (Section 157) When in the course of the assessment of the total income of any assessee, it is established that a loss has taken place which the assessee is entitled to have carried forward and set off against the income in subsequent years, the Assessing Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of carry forward and set off (c) Assessee in Default The amount specified in the notice of demand shall be paid within 30 days of the service of the notice at the place and to the person mentioned in the notice If the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of 30 days is allowed he may, with the prior approval of the Joint Commissioner reduce the period as he thinks fit (Section 220) If the amount specified in the notice of demand is not paid within the period mentioned in the notice, the assessee shall be liable to pay simple interest at one and one-fourth per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the 30 days or shorter period, as allowed, and ending with the date of payment of the tax If the assessee is not in a position to pay the amount in the prescribed time, he may submit an application to the Assessing Officer before the expiry of the due date of the payment On receipt of such application, the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose If the amount is not paid as mentioned above, the assessee shall be deemed to be in default and shall be liable to pay in addition to the amount of the arrears and the amount of interest, by way of penalty such amount as the Assessing Officer may direct In the case of continuing default, he shall be liable to pay such further amount as the Assessing Officer may, from time to time, direct However, the total amount of penalty shall not exceed the amount of tax in arrears Where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may draw up under his signature a statement in the prescribed form specifying the amount of arrears due from the assessee and shall proceed to recover from such assessee the amount specified in the certificate (being the statement referred to above) by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule (A)(i) attachment and sale of the assessee’s movable or immovable property; (ii) arrest of the assessee and his detention in prison; and (iii) appointing a receiver for the management of the assessee’s movable and immovable properties (Section 222) (B) The Assessing Officer may also recover the tax by any one or more of the following modes of recovery: (i) attachment of salary; (ii) garnishee order; Lesson 10 Collection and Recovery of Tax 453 (iii) from a court; (iv) sale of movable property (Section 226); (C) Through State Government (Section 227); (D) In pursuance of agreement with foreign countries (Section 228A); (E) By suit or under other law (Section 232) Note: For details please refer to the relevant sections of the Act PAYMENT OF INCOME-TAX The Income-tax Act provides for collection and recovery of income-tax in the following ways, namely, (i) deduction of tax at source in respect of income by way of salaries, interest on securities, interest other than interest on securities, winnings from lotteries and crossword puzzles, winnings from horse-race, insurance commission, dividends, payment to contractors or subcontractors and payments to nonresidents; (ii) advance payment of income-tax before the assessment by the assessee himself; (iii) direct payment of income-tax by the assessee on self-assessment; and (iv) after the assessment is made by the Assessing Officer The provisions relating to tax deduction at source and payment of tax in advance of assessment are being discussed below: (a) Deduction of Tax at Source Sections 192 to 206 of the Income-tax Act lay down the provisions relating to deduction of tax at source The provisions in respect of different incomes are as follows: (1) Salary (Section 192) (i) Any person responsible for paying any income (employer) chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the rates applicable to the estimated income of the assessee (employee) under this head for that financial year It is not the total income that is subject to deduction of tax at source but the estimated income under the head “Salaries” that is important W.e.f August 1, 1998, an assessee having an income under the head ‘salaries’ may furnish in the prescribed manner giving the details of the losses under the head ‘Income from House Property’ to the person responsible for making the payment who shall taking into account such loss for the purposes of computing the tax deductible from salaries, which may be reduced in such a case Only where the loss under the head “Income from House Property” has been taken into account TDS deductible from the head salaries may be reduced due to such loss taken into account For this purpose the salary shall be computed in the same manner as discussed under the head ‘Salaries’ From such salary the following deductions shall be made: (a) amount deductible Sections 80C, 80D, 80DD and 80DDB (b) deduction under Section 80G, in respect of donations made to the National Defence Fund, Jawahar Lal Nehru Memorial Fund, the Prime Minister’s Drought Relief Fund etc subject to conditions laid down under Section 80G; (c) deduction under Section 80GG in respect of rent paid; (d) deduction under Section 80RRA in respect of remuneration received in foreign currency; 454 EP-TL&P (e) deduction under Section 80U on production of a certificate by the employee from the Assessing Officer authorising such deduction Certificate need not be produced by individuals who have already produced a certificate under the old provision applicable upto 1991-92 assessment year (ii) The employer may, at the time of making any deduction, increase or reduce the amount to be deducted for the purpose of adjusting any excess or deficiency arising out of any previous deductions or failure to deduct during the financial year (iii) The trustees of a recognised provident fund or an approved superannuation fund shall deduct the tax at the time of the accumulated balance due to an employee is paid provided it is not exempted No tax will be required to be deducted at source in case the Gross Total income does not exceeds – ` 2,00,000 in case of individual below 60 years of age – ` 2,50,000 in case of individual having the age of 60 years but below 80 years – ` 5,00,000 in case of individual having the age of 80 years and above Where the salary is payable to an assessee outside India in foreign currency its value in rupees shall be the telegraphic transfer buying rate of such currency as on the date on which the tax is required to be deducted at source ‘Telegraphic transfer buying rate’ means the rate of exchange adopted by the State Bank of India for buying such currency as made available to the bank through a telegraphic transfer Every employer shall file a quarterly return in Form No 24Q within 15 days from end of quarter and for the quarter ending on 31st March will be submitted on 31st May following the close of the relevant financial year showing: (a) the name and address of every employee who is drawing such amount as may be prescribed; (b) the amount of income so received by or so due to each such person; and (c) the amount of tax deducted and deposited from the income of such person The employer shall issue a certificate of deduction of tax to the employee in Form No 16 Also, a person responsible for paying any income chargeable under the head “Salaries” is required to furnish, to the person to whom such payment is made, a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed (2) Interest on Securities (Section 193) The person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier deduct income-tax at the rates in force on the amount of the interest payable Credit of any income by way of interest on securities to any account, whether called “Interest payable account” or “Suspense account” or by any other name in the books of account of the person liable to pay such income, is, for the purposes of Section 193, deemed to be credit of such income to the payee and attracts applicability of the provisions of Section 193 However, tax shall not be deducted from the interest on the following securities: (i) 4-1/4% National Defence Bonds, 1972 held by a resident individual (ii) 4-1/4% National Defence Loan, 1968 and 4-3/4% National Defence Loan, 1972 and National Development Bonds Lesson 10 Collection and Recovery of Tax 455 (iii) year National Savings Certificates IV Issue (iv) Debentures issued by Co-operative Society (including Co-operative Land Mortgage Banks or Cooperative Land Development Banks) or any other institution or authority as the Central Government may specify in the Official Gazette (v) Gold bonds provided the assessee is a resident individual and the nominal value of the bonds did not exceed ` 10,000 at any time during the period to which the interest relates (vi) Securities of the Central Government or State Government (vii) Any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if (a) the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed five thousand rupees; and (b) such interest is paid by the company by an account payee cheque (viii) Interest on such debentures as are issued by a statutory corporation or a Government company (ix) Interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, in respect of any securities owned by it or in which it has full beneficial interest; or (x) any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under Sub-section (1) of Section 16 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or (xi) any interest payable on any other insurer in respect of any securities owned by it or in which it has full beneficial interest.” TDS can be made at the time of payment or at the time of credit to the account of the payee or transfer to interest payable amount or suspense account, whichever comes earlier The identity of the person in whose hand it is includible have to be identified Case law: [IDBI v ITO (2006) 10 SOT 497/104 TTD 230 (Mum.)] Rate of TDS: The rate of TDS on Interest on securities is 10% No education cess and SHEC shall be added to the rate The rate of TDS shall be 20% if PAN is not quoted by the payee (3) Dividends (Section 194) The principal officer of an Indian company or a company which has made prescribed arrangements for the declaration and payments of dividends within India shall deduct, from the amount of dividend [Dividend under Section 2(22)(a) to (d) payable on or after 1.6.2002] or deemed dividend under Section 2(22)(e), before making any payment in cash or before issuing cheque, income-tax at the prescribed rates No such deduction shall be made in the case of shareholder (being an individual, who is resident in India), of a company in which the public are substantially interested, if: (a) the dividend is paid by such company by an account payee cheque; and (b) the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder does not exceed rupees two thousand five hundred 456 EP-TL&P No such deduction shall be made in respect of any dividends referred to in Section 115-O except where the dividend is covered under section 2(22)(e) The provisions of Section 194 were amended by the Finance (No 2) Act 1991 with effect from 1.10.1991 to provide specifically that no TDS shall be deducted on the distribution or payment of dividends to the shareholders who are resident in India (4) Interest other than Interest on Securities (Section 194A) Any person not being an individual or a H.U.F who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities amounting to more than rupees 5,000 or `10,000 as the case may be, shall, at the time of crediting to the payee or at the time of payment or the interest, deduct tax at the prescribed rates Rate of Tax: (i) 10% plus education cess No surcharge, education cess or SHEC shall be added from 1st October, 2009 (ii) When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% However, the tax shall not be deducted in the following cases: (i) Where the payee is a banking Company, a co-operative society engaged in carrying on the business of banking or any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf , and the aggregate amount of interest credited or paid during the financial year does not exceed ` 10,000 (ii) Where the payee is other than the (i) above and the aggregate amount of interest paid or credited does not exceed `5,000 (iii) Where the interest credited or paid to a banking company, a co-operative society doing banking business, Financial Corporation established by a Central or State Act, the Life Insurance Corporation of India, the Unit Trust of India, any company or co-operative society carrying on the insurance business and any other institution which the Central Government may notify in this behalf (iv) Interest credited or paid by a firm to its partners (v) Interest credited or paid by a co-operative society to its members or to any other co-operative society (vi) Where interest credited or paid in respect of deposits under any scheme framed by Central Government (vii) Interest credited or paid in respect of deposits other than time deposits with a banking company to which the Banking Regulation Act, 1949 applies (viii) income credited or paid in respect of deposits with a primary agricultural credit society or cooperative society engaged in carrying on the business of banking including a cooperative land mortgage bank or a cooperative land development bank (ix) income credited or paid by the Central Government under Income Tax Act, 1961 or Indian Income Tax Act, 1922 or the Estate Duty Act, 1953 or the Wealth Tax Act, 1957 or the Gift Tax Act or the Super Profits Tax Act, 1963 or the Companies (Profits) Surtax Tax Act, 1964 or the Interest Tax Act, 1974 (x) income which is paid or payable by an infrastructure capital company or infrastructure capital fund or a public sector company in relation to a zero coupon bond issued on or after the 1st day of June 2005 by such company or fund or public sector company Lesson 10 Collection and Recovery of Tax 457 (xi) to such income credited or paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees The responsible person may, at the time of making any deduction increase or reduce the amount to be deducted for the purpose of adjusting any excess or deficiency arising out of any previous deductions or failure to deduct during the financial year The responsible person shall file a shall file quarterly return in Form No 26Q with in 15 days from end of quarter and for the quarter ending on 31st March will be submitted by 15th May following the close of the financial year showing the names and addresses of the person and the amount paid or credited to each of such person With effect from 1.6.2002, individuals and HUF covered under Section 44AB(a) and (b) i.e whose gross turnover of the business in the immediately preceding financial year exceeds ` crore (or receipts from the profession ` 25 Lakh), are also required to deduct tax at source Cheque discounted charges are different from interest payments and provisions of Section 194A are not attracted ITO v A.S Babu Sah (2003) 86 ITD 283 (Mad.) (5) Winnings from Lotteries or Crossword Puzzles (Section 194B) The person responsible for paying to any person any income by way of winnings from lotteries or crossword puzzles or card game and other game of any sort, an amount exceeding `10,000 shall deduct tax at the prescribed rates at the time of such payment and a statement in Form No 26 has to be filed by the end of the month of June falling in the financial year immediately following the previous year No such deduction shall be made from any such payment before 1.6.1972 Rate of Tax: The prescribed rate is 30% No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% Important Points (i) When the prize is given partly in cash and partly in kind, income-tax will be deducted from cash prize with reference to the aggregate amount of the cash prize and the value of the prize in kind (ii) No income-tax will be deducted from the prize given only in kind (iii) When the prize is given in instalments, the tax will be deducted only at the time of actual payment of each instalment (iv) Income-tax is not deductible from the income by way of bonus or commission paid to lottery agent or sellers of lottery tickets on the sales made by them Prizes won by lottery agent under “Lucky dip draws” are lotteries for the purposes of deduction of tax at source (Circular dated 11-2-1980) (6) Winnings from Horse Races (Section 194BB) Income-tax has to be deducted at source from any income by way of winnings from horse races at such rate as may be prescribed by the annual Finance Act Deduction of tax at source will be made only in cases where the income by way of winnings from horse races to be paid to a person exceeds `5,000 The obligation to deduct tax at source will apply only where such winnings are paid by a book maker or a person to whom a licence has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course 458 EP-TL&P Rate of Tax: The prescribed rate is 30% No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 30% (7) Payment to Resident Contractor or Sub-contractor (Section 194C) Any person responsible for paying to any of the contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier Rate of Tax: (i) 1% where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) 2% where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein – No surcharge, education cess or SHEC shall be added from 1st October, 2009 – When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the contractor No deduction shall be made from the amount of any sum credited or paid to, the contractor, if such sum does not exceed ` 30,000 Provided that where the aggregate of the amounts credited or paid during the financial year exceeds `75,000 the person responsible for paying shall be liable to deduct income-tax No deduction shall be made from any sum paid or credited during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum Explanation – For the purposes of this section, – (i) Any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person, – (A) does not covered above and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; shall be liable to deduct income tax from such sum paid or credited (ii) “contract” shall include sub-contract; (iii) “work” shall include – (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; Lesson 10 Collection and Recovery of Tax 459 (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer (8) Insurance Commission (Section 194D) Any person responsible for paying to a resident any income by way of commission or otherwise for soliciting or procuring insurance business (including continuance or renewal of policies) shall, at the time of crediting the account of the payee or at the time of payment thereof, whichever is earlier No deduction shall be made from the amount of any sum credited or paid to, if such sum does not exceed `20,000 Rate of Tax: The prescribed rate is 10% No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% (9) Payment in respect of Deposits under National Savings Scheme etc (Section 194EE) The person responsible for paying to any person any amount referred to in Section 80CCA(2)(a) shall, at the time of payment thereof, deduct income-tax at the rate of 20% No deduction shall, however, be made under Section 194EE where the amount of such payment or the aggregate of such payment to the payee during the financial year is less than ` 2,500 Further, nothing contained in Section 194EE shall apply to the payment of the said amount to the heirs of the assessee Rate of Tax: The prescribed rate is 20% No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% (10) Commission, etc on sale of lottery tickets (Section 194G) Any person paying any income by way of commission, remuneration or prize (by whatever name called) on lottery tickets on amounts exceeding ` 1,000 shall deduct income-tax at the rate of 10%.No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20%.irrespective of the fact whether the payment is made in cash or by the issue of a cheque or draft or by any other mode The provisions of Section 194G have been extended to any account, whether called ‘suspense account’ or by any other name in the books of account of the person liable to pay (11) Commission or Brokerage (Section 194H) Any person, not being an individual or a Hindu Undivided Family, who is responsible for paying, or after 1st day of June, 2001, to a resident any income by way of commission (not being insurance commission referred to in Section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10% No surcharge,education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% 460 EP-TL&P Provided that no deductions shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed ` 5,000 Individuals and HUF covered under Section 44AB(a) and (b) i.e whose gross turnover of the business in the immediately preceding financial year exceeds ` crore (or receipts from the profession ` 25,00,000), are also required to deduct tax at source (12) Rent (Section 194-I) A new Section 194-I in the Income-tax Act relating to deduction of Income-tax at source has been inserted by the Finance Act, 1994 Any person other than an individual or a HUF who is responsible for paying to a resident any income by way of rent is required to deduct tax from rent if such rent is in excess of ` 1,80,000 per financial year Tax is to be deducted @ 2% for use of any machinery or plant or equipment; and @ 10% for the use of any land or building (including factory building) or furniture or fittings No surcharge, education cess or SHEC shall be added from 1st October 2009 When the payee does not furnish his PAN to deductor, tax will be deducted with effect from 1st April 2010 @ 20% Explanation: For the purpose of this section: (i) “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee (ii) where any income is credited to any account, whether called “suspense account” or by other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly Individuals and HUF covered under Section 44AB(a) and (b) i.e whose gross turnover of the business in the immediately preceding financial year exceeds ` crore (or receipts from the profession ` 25,00,000), are also required to deduct tax at source Payment made to C&F agent are regarded as payment made for carrying out work under Section 194C instead of treating it as rent – National Panasonic India (P) Ltd v CIT (TDS) (2005) 35 OT 16 Del Payment for advertisement for boarding site is dealt under Section 194C - ITO v Roshan Publcity (P.) Ltd (2005) 45 OT 105 Mum Landing and Parking Fee received by Airport Authorities is treated as rent as was decided in the case United Airlines v CIT (2006) 152 Taxman 516 Del (13) Payment on transfer of certain immovable property other than agricultural land (Section 194-IA) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon No deduction shall be made where the consideration for the transfer of an immovable property is less than 50 lakh rupees (a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (b) "immovable property" means any land (other than agricultural land) or any building or part of a building 752 EP-TL&P – Assistant Commissioner of Commercial taxes (Assessment), – Assistant Commissioner of Commercial taxes (Enforcement), and – Commercial Tax Officers and other officers shall perform the function Under Section 54 State has power of revision of Deputy Commissioner Under section 56 of the Act the Chairman of the Appellate Tribunal has power to transfer appeals Under section 65 authority has power to order production of accounts and powers of entry, inspection, etc and also powers to inspect goods delivered to a carrier or a bailee Test Your Knowledge Under which of the following sections of the Tamilnadu Value Added Tax Act, 2006 Chairman of the Appellate Tribunal has power to transfer appeals (a) Section 56 (b) Section 55 (c) Section 54 (d) Section 53 UTTAR PRADESH Appointment, jurisdiction and powers of the authority Under section 55 of the Uttar Pradesh Value Added Tax Act, 2007, the State Government may appoint different dates in respect of different provisions Under section 39 of the act the State Government has power to grant installment Under section 45 of the Act state government has power to order production of accounts documents and power of entry, inspection, audit Under section 46 the authority has power of search, inspection and seizure in case of a person other than dealer Under Section 47 of the Act the assessing authority has power to seek information and to issue summons Under section 48 of the Act an officer authorized under sub-section (1) of section 45 shall have the powers to seize any goods Under section 53 of the Act an officer exercising powers under the provisions of sections 45, 48, 50, 51 or 52 may take the assistance of police or other officers or officials of the state Under section 70 of the Act the State Government may make rules to carry out the purposes of this Act WEST BENGAL Appointment, jurisdiction and powers of the authority Under section of the West Bengal Value Added Tax Act, 2003, all persons appointed under this Act to exercise any power or to perform any function there under shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code, 1860 (45 of 1860) Lesson 20 VAT provisions in India and VAT System in other Countries and Scope for Company Secretaries 753 Under section 19 of the Act the State Government may by notification, fix the rate of tax, with prospective or retrospective effect Under section 21 of the Act the state government after giving by notification not less than 14 days’ notice of its intention so to do, may by like notification with prospective or retrospective effect Under section 72 of the Act the authority has power of the Commissioner to stop delivery of goods and seizure of such goods Under section 88B of the Act the Commissioner has power to revise orders prejudicial to revenue Under section 91 of the Act the Appellate and Revisional Board, the Commissioner, the Special commissioner, the Additional Commissioner, or any person appointed under sub-section (1) of section to assist the Commissioner, shall for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908) Under sections 111, 112 the Commissioner has power to collect statistics from dealer and power of State Government to prescribe rates of fees and power of State Government to engage any person, firm or company to collect certain information’s and also power of state government to make rules Test Your Knowledge The VAT system is applied by different States in India as an alternative to the Central Sales Tax System – True – False ROLE AND POSITION OF COMPANY SECRETARIES As we know that the VAT system in India is not unique and every state and Union Territories have its own VAT Act or Rules; it becomes quite a difficult task to give a generalized picture regarding Certification of Documents by professionals applicable to all states or union territories However, considering the above situation, in general terms a professional including a Company Secretary, has to see that all documents to be filed before VAT authorities are correct or not Specially the calculation sheet, tax calculation sheet, TIN or GRN No., etc Apart from this the Company Secretary has to see the returns to be filed before VAT authorities are made in prescribed rules He is also taken into consideration the procedural aspects regarding payment of VAT and related assessment proceedings As a professional he has to see that whether the dealer has maintained the records and documents required under the Act He has to advice the concerned client the provisions relating to appeals and revisions if any matter relating to VAT proceedings is undertaken by Appellate Tribunal or Court of Law as the case may be Company Secretary has also be well versed with the technical aspects in dealing with seizure and confiscation procedure before judicial or quasi judicial bodies Besides this a professional dealing with VAT authorities has to carefully vouch and take careful steps with regard to books of accounts, and return procedures annually Every state has its own peculiarities regarding to documents to be filed before the VAT authorities in connection with filing of return and other related issues The technicalities and calculation of tax is an important component of services is to be provided by professional under VAT authorities in India Any mistakes or errors can put the client in great displeasure and anxiety 754 EP-TL&P The profession of Practicing Company Secretaries, which made a humble beginning in the sixties, has now reached greater heights With the blended knowledge of various laws, the Practicing Company Secretaries are versatile professionals capable of rendering wide range of services in diversified fields including VAT (1) AUTHORIZED REPRESENTATIVE BEFORE VAT AUTHORITIES The Company Secretaries play poignant role in their professional capacity before VAT authorities in our country The acceptability of company secretaries before the VAT authorities is increasing day by day Company Secretaries in Practice have now been recognized to act as an authorized representative for the purpose of appearing before VAT authorities under Statutes of various States The Company Secretaries in Practice have been recognized to act as Authorized Representative under (i) West Bengal Value Added Tax Rules, 2005 – Rule 2(1)(a)(iv) (ii) Bihar VAT Act, 2005 – Section 87(d) (iii) Goa VAT Act, 2005 – Section 82(1)(b) (iv) Karnataka VAT Rules, 2005 – Rule 168(1) (v) Kerala VAT Act, 2003 – Section 86(e) (vi) Daman & Diu VAT Regulation, 2005 – Regulation 82(1)(b) (vii) Jharkhand VAT Rules, 2006 – Rule 51(1)(c) (viii) Delhi Value Added Tax Act, 2004 – Section 82(1)(b) The Company Secretaries in Practice have been recognized to act as Authorized Representative under the VAT Laws of the other states also via Section 288 of the Income Tax Act, 1961 read with Rule 50 of the Income Tax Rules, 1962 (2) CERTIFICATION OF DOCUMENTS Moreover, the VAT system in India is not unique and every state and Union Territories have its own VAT Act or Rules; it becomes quite a difficult task to give a generalized picture regarding Certification of Documents by professionals applicable to all states or union territories A professional including a Company Secretary, has to see that all documents to be filed before VAT authorities, specially the calculation sheet, tax calculation sheet, TIN or GRN No., etc (3) FILING OF RETURNS The Company Secretary has to see the returns to be filed before VAT authorities are made in prescribed rules He should also consider the procedural aspects regarding payment of VAT and related assessment proceedings Every state has its own peculiarities regarding the documents to be filed before the VAT authorities in connection with filing of return and other related issues (4) SCRUTINY OF RECORDS AND ADVISING TO CLIENTS As a professional he has to see that whether the dealer has maintained the records and documents required under the Act He has to advice the concerned client the provisions relating to appeals and revisions if any , matters relating to VAT proceedings is undertaken by Appellate Tribunal or Court of Law as the case may be Company Secretary has to be well versed with the technical aspects in dealing with seizure and confiscation procedure before judicial or quasi judicial bodies Besides this a professional dealing with VAT authorities has to carefully vouch and take careful steps with regard to books of accounts, and return procedures annually The technicalities and calculation of tax is an important component of services to be provided by professional under VAT authorities in India Lesson 20 VAT provisions in India and VAT System in other Countries and Scope for Company Secretaries 755 VAT AUDIT The Company Secretaries in Practice have been recognized to conduct VAT Audit under the following States: (a) Jharkhand VAT Act, 2005 – section 2(i) (b) Karnataka VAT Rules, 2005 – As a Tax Practitioner under Rule 34(1) (c) Gujarat VAT Act, 2005 – As a Tax Practitioner under Rule 59(1)(a) VAT IN OTHER COUNTRIES VAT does not primarily link tax liability to residence This means that also foreign companies can become liable for VAT in countries other than the country where they have their business establishment Transactions for the supply of goods or services are normally covered by a sales contract or sales conditions If drawn carefully, these contracts or sales conditions will also contain tax clauses Such clauses are governed by contract law, which means that their contents should be distinguished from the legal situation according to tax law In order to be sure that both parties, i.e., supplier and customer, are fully aware of the VAT (but also e.g., customs, excise, sales tax) treatment, it is recommendable to verify the tax clauses of the contract or sales conditions before the agreement is concluded Value Added Tax (VAT) is a type of sales tax In some countries, including Australia, Canada, New Zealand and Singapore, this tax is known as “goods and services tax” or GST; and in Japan it is known as “consumption tax” VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax (namely the seller rather than the consumer) As VAT is intended as a tax on consumption, exports (which are, by definition, consumed abroad) are usually not subject to VAT or VAT is refunded VAT was first introduced in France in 1954.Worldover more than 145 countries have adopted VAT List of few countries that collect VAT include :Algeria, Argentina, Azerbaijan, Bangladesh, Belarus, Belgium, Brazil, Bulgaria, Cameroon, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Guatemala, Guyana, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Latvia, Lebanon, Lithuania, Luxembourg, Malta, Mexico, Monaco, Montenegro, Morocco, Netherlands, Norway, Pakistan, Panama, Peru, Philippines, Poland, Portugal, Romania, Russia, Senegal, Serbia, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand, Tunisia, Turkey, Ukraine, United Kingdom, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia AUSTRALIA The alleged high administrative and compliance costs associated with the VAT, relatively larger scope for tax evasion compared to retails sales tax, overstatedclaims for tax credit as a potential loophole and concerns expressed by trade unions regarding regressivity of the VAT have been cited as some of the reasons for Australia’s deciding against the VAT However, according to some others, the real reason against introduction of the VAT in Australia has been the far greater lead time required, of the order of an additional twelve months, for securing the approval of Parliaments compared to retail sales tax as it would be practically impossible to get any law passed through the Australian Parliament, which has a term of only three years CANADA There is federal VAT, the Goods and Services Tax (GST), that applies throughout the country In one province, namely, Alberta, the GST is the only sales tax In four provinces, namely, British Columbia, Saskatchewan, Manitoba, and Ontario, in addition to the GST, there is the only sales tax (RST) applied to the GST-exclusive tax base In one province, Prince Edward Island, the provincial RST is applied to the GST-inclusive tax base, in three provinces, Newfoundland, Nova Scotia, and New Brunswick, there is a joint federal-provincial VAT, called the Harmonized Sales Tax (HST) and administered by the federal government at a uniform rate of 15 per cent 756 EP-TL&P THE EUROPEAN UNION The value added tax was perceived by the member-countries of the European Union as the ideal means to “promote neutrality and uniformity of the tax burden and to provide incentives for increased productivity and industrialization Though the EC Fiscal and Financial Committee had recommended as early as 1962 that all member-countries should shift to the VAT system, the change for the original members was completed only in 1973 when Italy switched over to the VAT However, certain other recommendations of the committee regarding uniformity of rates and eventual adoption of the original principle for taxation of trade within the EC were not implemented immediately Test Your Knowledge Which of the tax is applicable in the province of Alberta in Canada? (a) Goods and Services Tax (GST) (b) Only Sales Tax (RST) (c) Harmonized Sales Tax (HST) (d) Value Added Tax (VAT) FRANCE The Value Added Tax (VAT) had its origin only in France The latest innovation is the value-added tax Its emergence in France illustrates the process by which a sort of continuing ferment of improvisation now and then gives rise to an invention of the first order They were the first Europeans to adopt it in 1954 A new regulation was introduced in France regarding VAT transaction Since September 1st, 2006 according to Article 283-1 of the FTC when a supply of goods or services is carried out by a French VAT liable entity non-established in France, VAT must be self-assessed by the buyer when he is VAT identified in France VAT registration is mandatory for intra-EV operations When the supplier is not established in E.O., the Respondent is necessarily get its Fiscal Representative nominated through application under Article 289A of French Tax Code (FTC) GERMANY On January 1, 1968, Germany replaced its multi-point sales tax on goods and services, which extended down to the retail stage, by a VAT with a normal rate of 10 per cent and a reduced rate of per cent on foodstuffs and agricultural products like raw wool raw hides, and timber The switchover to the VAT was meant to be revenueneutral and was not expected to have any tangible effect on prices UNITED KINGDOM The VAT was introduced in the United Kingdom on April, 1973 As in Spain, this was in fulfillment of one of the key conditions for entry into the European Community It is destination-based, general consumer expenditure tax chargeable on all supplies of goods and services in the country, barring those which are exempted or zero-rated The tax is expected to be borne by the final consumer, though collected at each stage of production/trade The VAT replaced two of the major indirect taxes levied in the UK earlier, viz., the Purchase Tax (PT) on commodities and the Selective Employment Tax (SET) The PT was a single stage tax on wholesalers that had to make a distinction which was often difficult to draw between goods and services and between different categories of dealers and goods The purchase tax was then chargeable at three different rates–25 per cent, 18 per cent and 11.15 per cent and these rates represented substantial reductions from previous levels in preparation for the introduction of the VAT on the wholesale values of many goods The SET was a tax essentially on selected Lesson 20 VAT provisions in India and VAT System in other Countries and Scope for Company Secretaries 757 services The Government felt that these taxes were inferior to a tax on the value added that could be applied to consumer expenditures comprehensively On several counts, the VAT clearly offered a better instrument of taxation Then there was the EC requirement It should, however, be noted that UK would have gone in for the VAT in any case because of its intrinsic merits UNITED STATES The United States, with a federal structure, provides an important case study for consideration of the VAT for any federal economy in general Even though the Unites States has been interested in the Vat for the last thirty years, its actual introduction in the US does not seem to be anywhere near the horizon The main reason for this situation is that the United States does not merely appear to be satisfied with its existing states retail sales taxes but the possibility of the federal government usurping the states’ powers of sales taxation has been keeping it away from the VAT at a respectable distance Although attempts for a federal level VAT date as far bask as the proposal by T.S Adams in 1921, it was in 1972 that the VAT was recommended as a source of revenue for providing relief on residential property taxes The proposed Tax Restructuring multiple rates between 10 and 15 per cent In the late seventies, Congressman Ulman came up with a proposal for the VAT to replace part of the pay roll tax, personal income tax and corporate income tax for $50 billion and $28 billion respectively This proposal was subjected to a great deal of public debate even after 1980 when Ulman lost his election Test Your Knowledge Which of the following indirect taxes were replaced by VAT in UK? (a) Purchase Tax (PT) (b) Selective Employment Tax (SET) (c) Harmonized Sales Tax (HST) (d) Goods and Services Tax (GST) LESSON ROUND UP – All states and union territories, adopted the VAT regime Moreover, the VAT system in India is not unique and every state and Union Territories have its own VAT Act or Rules; – The Company Secretaries play poignant role in their professional capacity before VAT authorities in our country The acceptability of company secretaries before the VAT authorities is increasing day by day Company Secretaries in Practice have now been recognized to act as an authorized representative for the purpose of appearing before VAT authorities under Statutes of various States – The Company Secretaries in Practice have also been recognized to conduct VAT Audit – VAT was first introduced in France in 1954.Worldover more than 145 countries have adopted VAT SELF TEST QUESTIONS These are meant for re-capitulation only Answers to these questions are not to be submitted for evaluation ELABORATIVE Discuss the role of Company Secretaries in the professional capacity before VAT authorities in our country 758 EP-TL&P Explain briefly the practices followed in developed countries with regard to goods and services tax How the practice followed specially in Western Countries is different from practices followed in our country under VAT regime Discuss briefly the powers of the VAT authorities of Andhra Pradesh, Haryana and Maharashtra Explain briefly the procedures relating to the appointment of Chairman and other officers under VAT regime in the states of West Bengal, Gujarat and Tamilnadu Test Your Knowledge (a); (c); (a); True; (a); (a) and (b) SUGGESTED READINGS Dr V K Singhania : Students Guide to Income-tax; Taxmann Publications Pvt Ltd., New Delhi Girish Ahuja and Ravi Gupta : Systematic Approach to Income-tax and Sales-tax; Bharat Law House, New Delhi Test Papers 759 EXECUTIVE PROGRAMME TAX LAWS AND PRACTICE EP-TL&P/2014 TEST PAPERS A Guide to CS Students To enable the students in achieving their goal to become successful professionals, Institute has prepared a booklet ‘A Guide to CS Students” providing the subject specific guidance on different papers and subjects contained in the ICSI curriculum The booklet is available on ICSI website and students may down load from http://www.icsi.edu/Portals/0/AGUIDETOCSSTUDENTS.pdf WARNING It is brought to the notice of all students that use of any malpractice in Examination is misconduct as provided in the explanation to Regulation 27 and accordingly the registration of such students is liable to be cancelled or terminated The text of regulation 27 is reproduced below for information: “27 Suspension and cancellation of examination results or registration In the event of any misconduct by a registered student or a candidate enrolled for any examination conducted by the Institute, the Council or the Committee concerned may suo motu or on receipt of a complaint, if it is satisfied that, the misconduct is proved after such investigation as it may deem necessary and after giving such student or candidate an opportunity to state his case, suspend or debar the person from appearing in any one or more examinations, cancel his examination result, or studentship registration, or debar him from future registration as a student, as the case may be Explanation - Misconduct for the purpose of this regulation shall mean and include behaviour in a disorderly manner in relation to the Institute or in or near an Examination premises/centre, breach of any regulation, condition, guideline or direction laid down by the Institute, malpractices with regard to postal or oral tuition or resorting to or attempting to resort to unfair means in connection with the writing of any examination conducted by the Institute” 760 EP-TL&P EXECUTIVE PROGRAMME TAX LAWS AND PRACTICE TEST PAPER 1/2014 (This Test Paper is for recapitulate and practice for the students Students need not to submit responses/answers to this test paper to the Institute.) Time Allowed : Hours Maximum Marks : 100 NOTE : All the references to sections mentioned in Part-A of the Question Paper relate to the Income-tax Act,1961 and relevant Assessment Year 2014-15, unless stated otherwise PART A (Income Tax & Wealth Tax) (a) Discuss five items which are disallowed as deduction under section 40 while computing firm’s income from business and profession (5 marks) (b) X furnishes following information regarding his income earned during the previous year relevant to the assessment year 2014-15 : ` (i) Interest on American Development bonds( two fifths received in India) 60,000 (ii) Income from agriculture in Nepal, received there but later on `20,000 is remitted to India (agriculture activity is controlled from Nepal) 1,60,000 (iii) Pension from a former employer in India, received in USA 65,000 (iv) Income from property in USA received outside India 86,000 (v) Dividend paid by a foreign company but received in India on April 20, 2013 36,000 Find out the gross total income of X, if he is (i) Resident and ordinarily resident in India, (ii) Resident but not ordinarily resident in India and (iii) Non resident in India for Assessment year 2014-15 (5 marks) (c) What is Transfer Pricing? Explain it with reference to relevant provisions of the Income Tax Act (5 marks) (d) Discuss the provisions regarding deduction allowable under section 80C to 80U to an assessee in respect of the following: (i) Deduction in respect of Investment made under any Equity Saving Scheme (section 80CCG) (ii) Deduction in respect of Repayment of Loan taken for Higher Education (section 80E) (5 marks each) Attempt all parts of either Q.No or Q No 2A (a) R has a house property in Delhi whose particulars are as under : ` Municipal Value 3,00,000 Standard Rent 3,12,000 Municipal Taxes Paid 50,000 Test Paper 1/2014 761 Interest on money borrowed for acquiring the house after 01-04-2009 1,60,000 Period of occupation for own residence months Actual rent for 10 months 35,000 p.m Compute the income from house property for assessment year 2014-15 (5 marks) (b) Differentiate between the following: (i) “Defective return of income” and “Belated return of income” (ii) “Tax avoidance” and “Tax Evasion” (5 marks each) OR Alternate Question to Q No 2A (a) What you understand by “Deemed assets” under section of Wealth Tax Act? Briefly discuss various deemed assets under this section (10 marks) (b) Raghav sold gold ornaments on 16-07-2013 for a sum of `10,00,000 This gold was purchased in 1978 for `60,000 by his father The fair market value of the gold as on 01-04-1981 was `1,00,000 His father gifted the gold to Raghav on 15-07-2013 He spent `2,00,000 till 31-07-2014 (the due date for filing of the return) on construction of a house property and deposited `5,00,000 on 31-07-2013 under capital gain scheme and spent a sum of `4,00,000 for construction of the house property till the stipulated time Compute the capital gain chargeable to tax on this transaction for various relevant assessment years Consider the cost Inflation Index for the year 2013-14 as 939 (5 marks) (a) From the following particulars, calculate the taxable income of Suman for the assessment year 201415: ` Salary per month Dearness Allowance per month 16,000 6,000 Medical bill reimbursed (out of which ` 14,000 is spent on treatment of specified Ailment in a hospital approved by the Chief Commissioner) 42,000 Free telephone at residence 12,000 House Rent Allowance per month (Rent paid `15,000 p.m for a house in Delhi) 10,000 House property is let out on a monthly rent of `2,000 The annual value of the house property is `30,000 Municipal tax paid is `1800 for whole year Re-payment of house building loans taken from friends is ` 5,000 and from Life Insurance Corporation is `9,000 (which includes `6,000 on account of interest) Interest on Savings Bank A/c Interest on PPF A/c Income from units of Unit Trust of India 34,000 2,000 800 Life Insurance Premium 6,000 Contribution to PPF 6,000 Deposit in Account under National Savings Scheme, 1992 10,000 Interest accrued on (NSC VIII Issue) 34,000 The construction of the building was completed on 01-01-1993 (10 marks) 762 EP-TL&P (b) State provisions regarding Clubbing of income in case of a minor (5 marks) (a) Sumit furnishes the following particulars for the previous year 2013-14 in respect of an industrial undertaking established in special economic zone during the financial year 2008-09: ` Total sales 60,00,000 Export sales 40,00,000 Profit from above undertaking 8,00,000 Compute the amount of exemption available to Sumit under section 10AA (5 marks) (b) State the provisions regarding deduction of tax at source in respect of the following income: (i) Winning from lottery or crossword puzzles (ii) Rent (5 marks each) PART B (Service tax & Sales tax) (a) Define briefly the scope of service tax in India (5 marks) (b) What you mean by ‘Reverse Charge’ and under what circumstances the service receiver is liable to pay service tax? Indicate such cases (5 marks) (c) Determine the VAT liability of X from the following information: ` 2,50,000 Purchases from local market (including VAT) VAT rate on input 4% ` 10,000 Transport, insurance and handling charges Goods sold at a profit margin of 15% on cost of production VAT rate on sales is 10% (5 marks) Attempt all parts of either Q.No or Q No 6A (a) write short notes on the following: (i) Registration procedure under VAT (ii) Service tax return (5 marks each) (b) What is the due date for payment of service tax? What is the rate of interest for delayed payment and penalty for default in payment of service tax? (5 marks) OR 6A (a) On what type of purchases input tax credit is not available Enumerate (b) Distinguish between ‘exempt sales’ and ‘zero rate sales’ under VAT scheme (5 marks) (5 marks) (c) For whom registration is compulsory under service tax? What is the time limit for registration? How much fees is determined for it? (5 marks) Test Paper 2/2014 763 TEST PAPER 2/2014 (This Test Paper is for recapitulate and practice for the students Students need not to submit responses/answers to this test paper to the Institute.) Time Allowed : Hours Maximum Marks : 100 NOTE : All the references to sections mentioned in Part-A of the Question Paper relate to the Income-tax Act,1961 and relevant Assessment Year 2014-15, unless stated otherwise PART A (Income tax & Wealth tax) (a) Who is considered as a Deemed owner under section 27 of the Income tax Act, 1961 while computing income from house property? (5 marks) (b) From the following particulars submitted by Mr.Raju Compute his income from other sources for the assessment year 2014-15 ` Director’s meeting fees received from Y Ltd 4,000 Agricultural income from land situated in India 12,000 Agricultural income from Nepal 20,000 Interest: (a) from bank on FDR (Net) 30,000 (b) on post office saving account 12,000 (c) on Government securities 6,500 (d) on Public Provident Fund 13,000 (e) on National Savings Certificate VIII issue 8,000 (f) Dividend from A Limited declared on 25-08-2013 35,000 (g) Lottery prize received after T.D.S 27,640 (h) Rent from Sub Letting of a flat (rent paid to landlord for the flat is `6,000) 12,000 Raju spent `600 for realizing the rent He has also spent `10,000/- for the purchase of lottery tickets and received the prize on one ticket (5 marks) (c) Explain the provisions relating to ‘advance ruling’ in the Income Tax Act, 1961 Who can seek advance rulings? (5 marks) (d) Write short notes on the following: (i) Indexed cost of acquisition (ii) Exemption to capital gains under section 54G (5 marks each) Attempt all parts of either Q.No or Q No 2A (a) Compute the net wealth of Mr.R from the following details as on 31-03-2014 for the assessment year 2014-15 The individual is engaged in the business of processing and selling of gold and silver articles and ornaments in India and outside India: 764 EP-TL&P ` Bank Balance 4,30,000 Unaccounted cash balance 70,000 Gold articles 25,00,000 Jewellery made of silver 14,00,000 Guest house 35,00,000 Motor cars 6,40,000 Factory Building 8,00,000 Mr.R has taken a loan of `8,00,000 by mortgaging guest house for purchasing factory building (5 marks) (b) Differentiate between the following: (i) ‘Normal depreciation’ and ‘additional depreciation’ (ii) ‘Standard rent’ and ‘expected rent’ (5 marks each) 2A (a) Discuss the provisions regarding deduction allowable under Section 80C to 80U to an assessee in respect of the following: (i) Deduction in respect of Rent paid (Section 80GG) (ii) Deduction in respect of Maintenance including medical treatment of a dependent who is a person with disability.(section 80DD) (5 marks each) (b) Mention the due dates for filling return of income for different categories of assesses (5 marks) (a) Mr Ramesh, a Government employee and citizen of India, was sent to London on Official duty, on 0106-2013 He stayed there upto 31-01-2014 The salary and allowance drawn by him during this period are given below: ` months salary in India 2,00,000 months salary in London 3,60,000 Overseas allowance 2,40,000 Free residence in London (Rent `40,000 per month for months) 3,20,000 He has a house property situated in Delhi which is self-occupied During his stay in London his wife and children were staying in this property throughout the previous year The fair rental value of the house is `56,000 He has Paid `6,000 as municipal taxes and `2,000 as ground rent during the year He received dividend from an Indian company amounting to `2,200 He has donated a sum of `60,000 to an institution to which section 80G is applicable Compute his Total Income for the assessment year 2014-15 (10 marks) (b) Discuss the scope of the provisions, Central Government may make under Section 90(A)(1) of the Income Tax Act, 1961, in respect to an agreement between specified associations (5 marks) (a) Ram is owner of a goods transport company During the previous year, he used two light commercial vehicles for months days and one heavy commercial vehicle for months In addition, he possesses heavy vehicles throughout the year His receipts from freight were `13,00,000 and his operating Test Paper 2/2014 765 expenses were ` 9,70,000 including ` 2,50,000 for depreciation As per income tax rules, depreciation allowable was ` 2,80,000/- Whether Ram should opt for presumptive profit under section 44AE? Explain (5 marks) (b) Explain the concept of ‘Permanent Establishment’ (5 marks) (c) When is an assessee liable to pay advance tax and for whom it is not compulsory? What are the due dates for payment of advance tax? (5 marks) PART B (Service tax & Sales tax) (a) What you understand by ‘point of taxation’ in service tax? How is it determined where service is taxed for the first time? (5 marks) (b) Compute the invoice value to be charged and amount of tax payable under VAT by a dealer who had purchased goods for Rs 2,00,000 and after adding expenses of `10,000 and adding a profit mark up of `25,000/-, had sold out the same The rate of VAT on purchases and sales is 12.5% (5 marks) (c) What you mean by Negative list of services? Enumerate any five services which are covered under Negative list (5 marks) Attempt all parts of either Q No or Q No.6A (a) Write short notes on: (i) Input tax credit (ii) Reverse charge mechanism (5 marks each) (b) Discuss briefly about the Audit and Returns filed under VAT (5 marks) OR 6A (a) Explain the procedure for registration under Service Tax (b) What are the various records to be maintained under VAT system by a registered dealer? (5 marks) (5 marks) (c) What is ‘Composition scheme’ under VAT? Enumerate two advantages and two disadvantages of Composition scheme (5 marks) 766 EP-TL&P ... Advance tax is payable as follows: Upto Cumulative Each instalment % ` ` 15.09 .20 13 30 22 ,116 [73, 720 x30%] 22 ,116 15. 12. 2013 60 44 ,23 2 [73, 720 x60%] 22 ,116 15.03 .20 14 100 73, 720 [73, 720 x100%] 29 ,488... tax payable by 1st and 2nd instalment would be based on Tax excluding Tax on LTCG and advance tax payable by 3rd and 4th instalment would be based on tax including tax on LTCG Tax excluding tax. .. (1,00,000) Total Income 21 ,05,000 Step 2: Computation of Estimated Tax Liability and Advance Tax Payable Particulars ` ` Tax on: LTCG @ 20 % (3,60,000 x 20 %) Balance Income @ 30% [ (21 ,05,000 - 3,60,000)