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Form 3CA            Audit report under section 44AB of the Income-tax Act, 1961, in a case where the accounts of the business or profession of a person have been audited under any other law - Certificate of Audit from CA obtained by the assessee whose Income from Business is more than INR 60 Lakhs or Income from Profession is more than INR 15 Lakhs for Companies

 

Form 3CB             Audit report under section 44AB of the Income-tax Act, 1961, in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G - Certificate of Audit from CA obtained by the assesssee whose Income from Business is more than INR 60 Lakhs or Income from Profession is more than INR 15 Lakhs for other than companies

 

Form 3CD            Statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 - Annexure Form for audit report u/s 44AB

 

Form 3CEB          Report from an accountant to be furnished under section 92E relating to international transaction(s) - Every person entering International Transaction

 

Form 29B             Report under Section 115JB of the Income-tax Act, 1961 for computing the book profits of the company - MAT applicable for companies

 

Visit new website for e-filing of return

 

To be an “intangible asset” u/s 32(1)(ii), the rights must be “in rem” & transferable. A “non-compete right” is not an “intangible asset” though “goodwill” is

Sharp Business System vs. CIT

The assessee, a joint venture of Sharp Corp, Japan, and L&T Ltd, paid Rs. 3 crores to L&T as consideration for the latter not competing with the assessee for 7 years. The assessee claimed that the non-compete fee was revenue in nature. It also claimed, in the alternative, that the rights under the non-compete agreement were an “intangible asset” u/s 32(1)(ii) eligible for depreciation. The AO, CIT(A) & Tribunal rejected the assessee’s claim. On further appeal by the assessee before the Tribunal, HELD dismissing the appeal: 

(i) The advantage derived by the assessee from the non-compete agreement entered into with L&T is for a substantial period of 7 years and ensures a certain position in the market by keeping out L&T. The advantage cannot be regarded as being merely for facilitation of business and ensuring greater efficiency & profitability. The advantage falls in the capital field (Eicher 302 ITR 249 (Del) distinguished; Pitney Bowles 204 Taxman 333 (Del) followed);

(ii) The non-compete rights cannot be treated as an “intangible asset” u/s 32(1)(ii) because (a) the nature of the rights mentioned in the definition of “intangible asset” spell out an element of exclusivity which enures to the assessee as a sequel to the ownership. But for the ownership of the intellectual property or know-how or license or franchise, it would be unable to assert the right “in rem”, as against the world. In the case of a non-competition agreement, it is a right “in personam” where the advantage is restricted & does not confer an exclusive right to carry-on the primary business activity. (b) Another way of looking at the issue is whether such rights can be treated or transferred. Every species of right spelt-out such as know-how, franchise, license etc. and even those considered by Courts, such as goodwill, can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal (Techno Shares & Stocks 327 ITR 323 (SC), Hindustan Coco Cola Beverages 331 ITR 192 (Del) & B. Ravindran Pillai 332 ITR 531 (Ker) distinguished)

Note: The judgement in CIT vs. Smifs Securities Ltd (Supreme Court) was not considered. See also ACIT vs. GE Plastics India Ltd (ITAT Ahmedabad) where the law is considered.

SC: Works contract, where service tax had already been paid, no option to pay service tax under the Composition Scheme could be exercised

M/s NAGRJUNA CONSTRUCTION CO. LTD  vs GOI & ANR (Supreme Court)

 

Service Tax - Works Contracts (Composition Scheme for Payment of Service Tax) Rules, 2007

 

In respect of a works contract, where service tax had already been paid, no option to pay service tax under the Composition Scheme can be exercised. Assessee who wants to avail of the benefit under Rule 3 of the 2007 Rules must opt to pay service tax in respect of a works contract before payment of service tax in respect of the works contract and the option so exercised is to be applied to the entire works contract and the assessee is not permitted to change the option till the said works contract is completed.

 

S. 14A - Trader in shares / securities interest paid on borrowings for purchase of shares / securities cannot be disallowed u/s 14A

Shri Zaver Virjibhai Mandalia v. ACIT

 

The assessee is an Individual engaged in the business as Jewellery valuer and also engaged in the trading of shares, securities, mutual funds and has income from share business. The assessee filed his return of income showing loss of Rs.86,72,520/-, in the course of scrutiny AO observed that assessee had purchased/allotted units of Rs.11,50,04,800/- and had made sales of units of Rs.9,88,98,039. The assessee had also earned dividend income of Rs.1,44,72,449. The A.O. also observed that the assessee had claimed interest expenses of Rs.6,50,456/- being the interest paid to Kotak Mahindra Investments Pvt. Ltd. The assessee had made investments in Mutual funds by borrowing the amount from Kotak Mahindra Investments Ltd. A.O. was of the view that the investments were made with a motive to earn dividend which are exempt u/s. 10(33). He also observed that the transaction of purchase and redemption was structured together. He was of the view that the expenses on account of interest incurred was towards cost to earn dividend income. Since the assessee had borrowed the amount from Kotak Mahindra and the borrowed amount was fully utilised for purchasing units, the dividend of which was exempt u/s.10(33), the interest expenses was required to be disallowed u/s. 14A of the Act. He accordingly, disallowed the interest expenses of Rs.6,50,456/- and added it to the total income of the assessee and the order of AO was upheld by the CIT(A).

 

Assessee on further appeal before ITAT

 

The ITAT bench observed that AO also held that assessee is in the business of purchase/sale of shares, and while framing assessment u/s.143(3) the loss of Rs.1,51,21,196/- incurred on the sale/purchase of units have been treated as business loss. In view of the aforesaid facts, it can be stated that assessee is in the business of purchase and sale of shares. Once the purchase and sale of shares is held to be a business activity, the interest paid thereon has to be treated as business expenses in view of the Hon’ble High Court decision in the case reported in (1976) 42 TAXATION 105 (GUJ) thus following the decision of, in the present facts of the case the interest expenses incurred by the assessee has to be treated as business expenses and no disallowance can be made u/s.14A. We accordingly direct the deletion of the disallowance made by A.O. Thus this ground of assessee is allowed.

 

Also Read: Yatis Trading Co. (P.) Ltd. vs. ACIT held “that interest on borrowed funds used for trading activity is an allowable expenditure u/s. 36(1)(iii) and the same cannot be treated as expenditure for earning dividend income which incidental to trading activity. When the real purpose and intent to use the borrowed funds was for trading activity and if incidentally resulted some dividend income on the shares purchased for trading then the same would not change the purpose, nature and character of the expenditure. Thus when the said expenditure (interest) incurred for trading activity then the same cannot be said to have been incurred for earning the dividend in come. As per the basic principle of taxation only the net income i.e. gross income minus expenditure is taxed. Accordingly, the expenditure which was incurred for earning the taxable business income has to be allowed against the taxable income and the question of apportionment of the said expenditure does not arise. The expression “in relation to” used in Sec. 14A means dominant and immediate connection or nexus. Thus in order to disallow the expenses u/s. 14A there must be a live nexus between the expenditure incurred and the income not forming part of the total income. Disallowance cannot be made on the basis of presumption and estimation of the A.O. If the expenditure is incurred with a view to earn taxable income and there is apparent dominant and immediate connection between the expenditure incurred and taxable income then as such no disallowance can be made u/s. 14A merely because some tax exempt income is received incidentally.”

New KYC Norms

New KYC Norms

RBI/2012-13/294
A.P. (DIR Series) Circular No. 51

November 15, 2012

To

All Authorised Persons in Foreign Exchange

Madam/Sir,

Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards / Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 Money changing activities

Attention of Authorised Persons is invited to F-Part-II of the Annex to the A.P. (Dir Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended by the A.P. (Dir Series) Circular No. 60 dated December 22, 2011.

2.Based on several representations received from Full Fledged Money Changers (FFMCs), regarding difficulties in obtaining documents other than passport, and taking into account the procedure followed for money changing in other countries, it has been decided to amend certain instructions contained in the aforementioned Part. The amended instructions are given in the Annex.

3. All the other instructions contained in the A.P. (DIR Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time shall remain unchanged.

4. Authorised Persons may bring the contents of this circular to the notice of their constituents concerned.

5. These guidelines are also applicable mutatis mutandis to all agents/ franchisees of Authorised Persons and it will be the sole responsibility of the franchisers to ensure that their agents / franchisees also adhere to these guidelines.

6. Please advise your Principal Officer to acknowledge receipt of this circular letter.

7. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999)and also under the, Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 and Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 as amended from time to time and are without prejudice to permission /approvals, if any, required under any other law.

Yours faithfully,

Rudra Narayan Kar
Chief General Manager

---

Annex

[Annex to A.P. (DIR Series) Circular No. dated November , 2012]

Customer Identification Procedure Features to be verified and documents that may be obtained from customers

Extant Guidelines		Revised Guidelines
Features	Documents	Features	Documents
Transactions With Individuals		Transactions With Individuals
- Legal name and any other names used	i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP.	- Legal name and any other names used	i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the AP's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP.
- Correct permanent address	(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). (any one of the documents, which provides customer information to the satisfaction of the AP will suffice). Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record.	- Correct permanent address	(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). (any one of the documents, which provides customer information to the satisfaction of the AP will suffice). Note: - In case of foreign tourists, copies of passport containing identification particulars and address, may be accepted as documentary proof for both identification as well as address. Further, a copy of the visa of non-residents, duly stamped by Indian Immigration authorities may also be obtained and kept on record. However, where neither passports contain any address nor foreign tourists are able to produce any address proof, APs may obtain and keep on record, a copy of passport and visa duly stamped by the Indian Immigration authorities and a declaration duly signed from foreign tourists regarding the permanent address.

 

PF withdrawal permitted for International Workers from Social Security Agreement countries

Employees’ Provident Funds (Fourth Amendment) Scheme, 2012

 

MINISTRY OF LABOUR AND EMPLOYMENT

 

NOTIFICATION: [F.No.S-35025/09/2011-SS-II]

 

New Delhi, the 5th October, 2012

 

*G.S.R. 744(E).— In exercise of the powers conferred by section 5, read with sub-section (1) of section 7 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the Central Government hereby makes the following Scheme further to amend the Employees’ Provident Funds Scheme, 1952, namely:-

 

1. (1) This Scheme may be called the Employees’ Provident Funds (Fourth Amendment) Scheme, 2012.

 

(2) It shall come into force on the date of its publication in the Official Gazette.

 

2. In the Employees’ Provident Funds Scheme, 1952 (hereinafter referred to as the principal Scheme), under paragraph 83 relating to special provisions in respect of International Workers.-

 

(a) in paragraph 69 of the principal Scheme, as modified by para 6 of aforesaid paragraph 83, for sub-paragraph (4), the following sub-paragraph shall be substituted, namely:-

 

“(4) In respect of a member covered under social security agreement entered into between Government of India and any other country, on ceasing to be an employee in an establishment covered under the Act.”;

 

(b) in paragraph 72 of the principal Scheme, as modified by para 7 of aforesaid paragraph 83, for sub-paragraph (2), the following sub-paragraph shall be substituted, namely:-

 

“(2) The due amount in respect of the member shall be payable in the payees bank account directly or through the employer”.

 

[F.No.S-35025/09/2011-SS-II]

 

RAVI MATHUR, Addl. Secy.

 

Foot Note: The Employees’ Provident Funds Scheme, 1952 was published in the Gazette of India, Part-II, Section 3, Sub-section (i), vide number S.R.O. 1509, dated the 2nd September, 1952 and lastly amended vide number G.S.R.382(E), dated the 24th May, 2012.

 

MCA: Notification & Circular

Ministry of Corporate Affairs

1. S.O(E),  Dated: 15.10.2012 -  Amendment in NACAS Constitution

 

2. G.S.R.(E), Dated: 12.10.2012 - Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment Rules, 2012

 

3. General Circular No. 35/2012, Dated: 05.11.2012 - Default by Cost Auditors in filing Form 23D against the corresponding Form 23C.

 

4. General Circular No. 36/2012, Dated: 06.11.2012 - Appointment of Cost Auditor by Companies.

 

5. General Circular No. 37/2012, Dated:  06.11.2012 - Examination of Balance Sheets by ROC's.