Though income of Chamber of Commerce held as business receipt, yet Sec. 11 relief available as profit motive absent

The concept behind Section 28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way.

The reason for the introduction of Section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association "for its members". Such income would either be charged as business income or under the residual head, depending upon the question whether the activities of the association with the non-members amount to a business or otherwise.

Section 28(iii) constitutes certain income of the association to be business income without affecting the scope of the exemption under Section 11.

Section 2(15) which incorporates the definition of "charitable purposes" simply shows that several mutual associations may also fall within the definition.

The receipts derived by a chamber of commerce and industry for performing specific services to its members, though treated as business income under Section 28(iii) would still be entitled to the exemption under Section 11 read with Section 2(15) of the Act, provided there is no profit motive.

Thus, assessee being a charitable Institution carrying on the object of promotion and development of trade and commerce and which is not involved in the carrying on of any activity in the nature of "business", the said section 28(iii) of the Act does not apply.

Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. The basic principle underlying the definition of "charitable purpose" remained unaltered even on amendment in the section 2(15) of the Act w.e.f. 01/04/2009, though the restrictive first proviso was inserted therein.

Sournce: www.taxmann.com

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SBI deposit holder can generate Form 15G or 15H to avoid TDS deductions by Online "Generate 15 G/H" Utility.

Recently, State Bank of India has provided a very important and useful utility with the name of "Generate 15 G/H".  To avoid TDS deduction on the fixed deposits, please download form 15 G/H, verify it , sign it and submit it to the branch concerned (in three copies) for recording the same in CBS. The branch will subsequently submit the form 15 G/H to the Income Tax Assessing Officer under whose jurisdiction the branch is located.  The functionality for online generation of Form 15G/H has been introduced for the sake of customer convenience by obviating the manual filling up fixed deposit details by the customers.

Required Fields to Generate 15 G/H :

• Name
• Address
• Mobile No.
• Pan No.
• Deposit Details etc.

Some fields like A.O. Codes and nature of business were asked to enter manually. 

Requirement for generation of Form 15G / 15H :

• SBI login user id and password.
• Any deposit in the shape of FDR with any branch of State Bank of India.
• Path for Generation of Form 15G or 15H. is given in below picture. 

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No TDS liability of bank under sec. 194A on interest accrued on Fixed Deposit

IT: Where litigant deposit FD with the bank on directions of Court, he ceased to have any control or proprietary right over those funds. Although FD was drawn in the name of the Registrar General, he was neither the recipient of the amount credited to that account nor the interest accruing thereon. There was no assessee to whom interest income from the FD could be ascribed, thus, bank was not liable to deduct tax under section 194A on interest accrued on such FD.

Facts:
(a)           The petitioner ('UCO Bank') accepted a Fixed Deposit ('FD') made by litigant as per directives of the Court. The bank did not deduct tax on accrued interest on such FD as it was in name of Register General of Court as custodian and the actual beneficiaries were not known, as the matter was sub-judice.
 

(b)           Thus, the issue that arose for consideration of the High Court was:
          • Whether the bank would be liable to deduct tax under section 194A on interest accrued on such FD where the assessee was not ascertainable and the person in whose name the interest was credited was also not a person liable to pay tax under the income-tax Act ('the Act')?

The High Court held in favour of assessee as under:
(1)           The words "credit of such income to the account of the payee" occurring in section 194A of the Act necessarily imply that deduction of tax bears nexus with the income of an assessee. In absence of an assessee, the machinery provisions for deduction of tax to his credit were ineffective. The expression "payee" under section 194A of the Act would mean the recipient of income whose account was maintained by the person paying interest.
 

(2)           In the instant case, although FD was made in the name of the Registrar General, the account represented funds which were in custody of the Court and the Registrar General was neither the recipient of the amount credited to that account nor the interest accruing thereon. Thus, the Registrar General could not be considered as payee for the purpose of section 194A of the Act.
 

(3)           There was no assessee to whom interest income from the FD could be ascribed; no person could file return claiming the interest payable by bank as income. The machinery provisions of recovering tax by deduction of tax at source would not be applicable in absence of an ascertainable assessee.
 

(4)           The litigant who was asked to deposit the money in the court ceased to have any control or proprietary right over those funds. The amount deposited vested in the Court and the depositor ceased to exercise any dominion over those funds. It was also not necessary that the litigant who deposited the money would be the ultimate recipient of income. The person to whom funds would be granted was to be determined by orders passed subsequently. Thus, petitioner-bank was not required to deduct tax under section 194A on interest accrued on FD made by the litigant.

Source: www.taxmann.com

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No TDS liability under sec. 194H if exp. incurred for rendering free services

Where payment of rent did not exceed limit of Rs. 1,20,000 specified under section 194-I, assessee was not liable to deduct TDS.

Where expenses were wrongly ledgerised under commission account while expenses were, in fact, for free services, assessee was not liable to deduct TDS.

Where payment of advertisement and publicity expenses was below specified limit of Rs. 50,000 in whole of year, assessee was not liable to deduct TDS.

Where PF and ESI were not made within due date of respective Acts but were paid within due date of filing of return of income, deduction was to be allowed.

Source: www.taxmann.com

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No TDS liability of assessee on fees charged by NR bank.

Where a foreign bank charged certain sum terming it as interest on an Indian bank in process of negotiating letter of credit on behalf of its customer i.e. assessee, and said bank recouped amount from assessee, in view of fact that assessee had privity of contract with Indian bank and amounts were also paid to Indian bank only, transaction in question could not be said to fall within meaning of section 195 and, therefore, assessee was not required to deduct tax at source while making payments of interest

Where assessee claimed deduction of conveyance allowance paid to employees on lump sum basis without there being any correlation to expenses actually incurred and without showing that it was paid for defraying expenses wholly, necessarily and exclusively in performance of their duty, Tribunal was justified in rejecting said claim

Source: www.taxmann.com

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No TDS to be deducted if commission paid to foreign agents.

No TDS to be deducted if commission paid to foreign agents for rendering services abroad

Article authored by Mr. Alok Patnia, founder of Taxmantra.com

ITAT Chennai Bench recently held that assessee is not liable to deduct tax at source for making payment to its foreign agents for rendering services abroad, if the foreign agent does not have a permanent establishment in India and the service rendered is not in the nature of technical service.

Facts of the case:

The assessee, a private limited company, manufactures and exports leather garments and incurred expenditure towards commission paid to non-residents for the purpose of procuring orders abroad. The A.O disallowed the same, by observing that section 9 of the Act applied in this case as the commission amount had accrued to a non-resident/ payee principally on account of a business activity in India which required TDS deduction. The Assessing Officer further held that the certificate under section 195(2) of the Act had also not been produced. Accordingly, he disallowed/added the commission amount in assessee’s income.

The Appellate Tribunal held that:
The Revenue’s only grievance is that the aforesaid foreign agency commission paid by the assessee to the non residents/payee attracts disallowance under section 40 (a)(i) for non deduction of TDS. It is made clear that in support of this plea, no cogent evidence has been produced. It transpires from the case file the assessee has paid foreign exchange commission to its non-resident agent who do not have any permanent establishment in India. There is no material to prove that these payment have arisen out of an agreement executed in India. Nor there is any evidence to conclude that the non-resident/payee has rendered any technical service to the assessee. The Revenue also fails to prove the payments to have been accrued, arisen or paid in India so as to make it taxable under provision of the Act.

Taking into consideration all these circumstances, CIT(A) held that the assessee was not liable to deduct TDS on above stated commission paid to its non-resident payees.

Source: www.blog.tdsman.com

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No Relief u/s. 80-IB, if Assessee filed return after Due Date. - ITAT

IT: Where assessee had sufficient reasons which prevented it from producing various documents before Assessing officer, documents sought to be admitted as additional evidence

IT: Where assessee had not filed return within due date as provided under section 139(1) in violation of section 80AC, he was not entitled to avail deduction under section 80-IB

IT: Where power plant was ready and no further major purchases had been made on account of power plant till August 2008, and plant was commissioned, same was entitled for depreciation

IT: Section 80B(5) creates no bar in setting off loss of power plant from income of rice mill

IT: Provision for allowance of additional depreciation could be considered in case of assessee engaged in business of generation or distribution of power only form assessment year 2013-14

IT: Where it was found that during search, stock had been valued on approximate basis and exact valuation had not been done, addition made on account of unexplained adjustments was to be deleted

Source: www.taxmann.com

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No TDS on Certain Cases Income Tax Notification w.e.f. Ist day of January, 2013

No Tax Deduction at Souce on Certain Cases, Notification issued by Income tax department which is as under:

Section 197A of the income-tax Act, 1961 - Deduction of tax at source - no deduction in certain cases - Specified payment under section 197A(1f)

NOTIFICATION NO. 56/2012 [F. NO. 275/53/2012-IT(B)], DATED 31-12-2012

In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that no deduction of tax under Chapter XVII of the said Act shall be made on the payments of the nature specified below, in case such payment is made by a person to a bank listed in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), excluding a foreign bank, namely:-

(i)  bank guarantee commission;

(ii)  cash management service charges;

(iii)  depository charges on maintenance of DEMAT accounts;

(iv)  charges for warehousing services for commodities;

(v)  underwriting service charges;

(vi)  clearing charges (MICR charges);

(vii)  credit card or debit card commission for transaction between the merchant establishment and acquirer bank.

2. This notification shall come into force from the Ist day of January, 2013.

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On Accidental Claim No TDS Deduction applicable.

As an accidental claim is not a income part it is an award to beneficiary and due this ground there is no TDS Deduction applicable. TDS deduction is applicable when the Taxpayee get income likely Salary, Interest, Rent, Horse Rate or Lottery or Wining Prize etc. The following judgement regarding claiming of TDS Deduction is not valied on Accidental Claim.

In this case, the National Consumer Disputes Redressal Commission ("Commission") considered the issue whether tax is deductible on the compensation paid to the parents, whose child dies in an escalator mishap maintained by Airport Authority of India ("AAI")?

The Commission relied on the judgment of Delhi Development Authority vs. ITO [1995] 53 ITD 19 (Delhi) wherein it was held that the compensation paid to the customer, for deficiency in service was not an interest, rather it was a damage, which didn't warrant deduction of tax at source under section 194A. Therefore, it was held that the compensation awarded in such cases cannot be equated with income and, thus, it is not liable for deduction of tax at source. Accordingly, the AAI directed to refund the tax it has deducted while paying the compensation - GEETA JETHANI V. AIRPORT AUTHORITY OF INDIA [2012] 25 taxmann.com 23 (NCDRC - New Delhi)

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No TDS even if the Rent collected exceed limit whether the property is owned jointly.

Income Tax Act provides for TDS on collected Rent u/s. 194-I. Accordance with this section 194-I, any person any person (other than individual/HUF with turnover less than the limit specified in section 44AB in immediately preceding financial year), who is responsible for paying to a resident any income by way of rent is required to deduct tax at sources at the prescribed rates. Before 01.07.2010 the Limit of exemption for deducting TDS on collected Rent u/s. 194-I is Rs. 1,20,000/- and after this the Income Tax exceed exemption limit by Rs. 1,80,000/-.

Rates of TDS on Rental Payments:

• @ 2% for payment towards the use of any machinery or plant or equipment.
• @ 10% for the use of any land or building or furniture or fittings for all persons.
• @ 20% in all cases, if PAN is not quoted by the deductee with effect from 01-04-1010.
  

What is the provision for non-deduction of TDS on Rent?
Though the property is owned by two or more person then the income from such property shall not be assessed as income of association of person (AOP) exempted to deduct TDS u/s. 26 from tenant. Instead, the share of each such person in the income from the property shall be included in his total income, if the following condition are satisfied:

• The property consists of buildings or buildings and land appurtenant thereto, and
• Respective shares of such persons are definite and ascertainable.
  

Clarification on non-deduction of TDS on Rent by CBDT:
Whether the limit of Rs, 120,000 per annum would apply separately for each co – owner of a property ?
Under section 194–I, the tax is deductible from payment by way of rent if such payment to the payee during the year is likely to be Rs. 120,000/- or more. If there are a number of payees, each having a definite and ascertainable share in the property, the limit of Rs. 120,000/- (Now Rs. 180,000/- per annum) will apply to each of the payees/co – owners separately. The Payers and payee are however, advised not to enter into sham agreements to avoid TDS provisions.”

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Relaxation from compulsory e-filing of Return of Income for Assessment Year 2012-13

CBDT exempt for compulsory e-filing of Income Tax for Assessment Year 2012-13 by under circulars:

Circular No. 6/2012
F.No.133/44/2012-SO (TPL)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
*****
New Delhi, the 3rd August, 2012

Subject: Relaxation from compulsory e-filing of return of income for assessment year 2012-13 - for representative assessees of non-residents and in the case of private discretionary trusts –regarding.

Rule 12 of the Income-tax Rules, 1962 mandates that an individual or Hindu undivided family, if his or its total income or the total income in respect of which he is or it is assessable under the Act, during the previous year, exceeds ten lakh rupees, shall furnish the return electronically for the assessment year 2012-13 and subsequent assessment years.

2. It has been brought to the notice of the Board that the agents of non-residents, within the meaning of section 160(1) (i) of the Income –tax Act, are facing difficulties in electronically furnishing the returns of non-residents. This is because there may be more than one agent of the non-resident in India for different transactions or a person in India may be an agent of more than one non-resident. Such situations are not covered by the existing e-filing software which functions on the principle of one assessee-one PAN-one return.

3. It has also been brought to the notice of the Board that ‘private discretionary trusts’ having total income exceeding ten lakh rupees are facing problems in filing their return of income electronically in cases where they are filing their return in the status of an individual. This is because status of a private discretionary trust has been held in law as that of an ‘individual’. The existing e-filing software does not accept the return of a private discretionary trust in the status of an ‘individual’.

4. Accordingly it has been decided by the Board that:
(i) it will not be mandatory for agents of non-residents, within the meaning of section 160(1) (i) of the Income –tax Act, if his or its total income exceeds ten lakh rupees, to electronically furnish the return of income of non-residents for assessment year 2012-13;
(ii) it will not be mandatory for ‘private discretionary trusts’, if its total income exceeds ten lakh rupees, to electronically furnish the return of income for assessment year 2012-13.

[Ashis Mohanty]
Under Secretary (TPL-IV)

Copy to:
i. All Chamber of Commerce /Industry/Trade Associations.
ii. All Chief Commissioners/Directors General of Income-tax with a request to circulate amongst all officers in their regions/charges
iii. Director General, National Academy of Direct Taxes, Nagpur
iv. Directors,RegionalTrainingInstitute,Ahmedabad/Bangalore/Chandigarh/Chennai/ Kolkata /Lucknow/Mumbai.
v. Comptroller and Auditor General of India. (40 copies)
vi. Ministry of Law. (10 copies)
vii. Secretary, Settlement Commission, New Delhi.
viii. All officers and technical sections in CBDT.

[Ashis Mohanty]
Under Secretary (TPL-IV)

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Exemption to specified persons from requirement of furnishing a Return of Income u/s. 139(1).

EXEMPTION TO SPECIFIED PERSONS FROM REQUIREMENT OF FURNISHING A RETURN OF INCOME UNDER SECTION 139(1) FOR ASSESSMENT YEAR 2011-12

NOTIFICATION NO. 36/2011 [F. NO. 142/09/2011 (TPL)], DATED 23-6-2011

In exercise of the powers conferred by sub-section (1C) of section 139 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby exempts the following class of persons, subject to the conditions specified hereinafter, from the requirement of furnishing a return of income under sub-section (1) of section 139 for the assessment year 2011-12, namely :—
Class of Persons
1. An Individual whose total income for the relevant assessment year does not exceed five lakh rupees and consists of only income chargeable to income-tax under the following head,—
(A) "Salaries";
(B) "Income from other sources", by way of interest from a savings account in a bank, not exceeding ten thousand rupees.
Conditions
2. The individual referred to in para 1,—
(i) has reported to his employer his Permanent Account Number (PAN);
(ii) has reported to his employer, the incomes mentioned in sub-para (B) of para 1 and the employer has deducted the tax thereon;
(iii) has received a certificate of tax deduction in Form 16 from his employer which mentions the PAN, details of income and the tax deducted at source and deposited to the credit of the Central Government;
(iv) has discharged his total tax liability for the assessment year through tax deduction at source and its deposit by the employer to the Central Government;
(v) has no claim of refund of taxes due to him for the income of the assessment year; and
(vi) has received salary from only one employer for the assessment year.
3. The exemption from the requirement of furnishing a return of income-tax shall not be available where a notice under section 142(1) or section 148 or section 153A or section 153C of the Income-tax Act has been issued for filing a return of income for the relevant assessment year.
4. This notification shall come into force from the date of its publication in the Official Gazette.

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Exemption from Filing of Income Tax Return - Clarification

Clarification regarding Non-filing of Income Tax Return by the Income Tax department

1. What is the purpose of this notification and who are proposed to be exempted from the requirement of filing of the return?
The primary objective of this notification is to exempt those salaried taxpayers from the requirement of filing income-tax returns, who have -

• total income not exceeding Rs.5,00,000, and
• the total income consists only of income chargeable to income tax under the head Salaries and interest income from savings bank account if such interest income does not exceed Rs.10,000.

Further, such salaried taxpayer would be eligible for exemption from filing a return of income only if tax liability has been discharged by the employer by way of Tax Deducted at Source (TDS) and the deposit of the same to the credit of the Central Government. For this purpose, taxpayer has to intimate his interest income to the employer during the course of the year.

For Example –

1. If an individual has salary income of Rs.4,90,000 and interest income from savings bank account not exceeding Rs.10,000 (which has been reported to the employer and tax has been deducted thereon), then the taxpayer would be exempt from the requirement of filing income-tax returns since the total income from both the above sources does not exceed five lakh rupees.
2. A taxpayer having salary income of Rs.4,98,000 and interest income from savings bank account of Rs.2,000 (which has been reported to the employer and tax has been deducted thereon), would also be eligible under this Scheme.(iii) A taxpayer having salary income upto Rs.5,00,000 and nil interest income would also be eligible under this Scheme.
3. A taxpayer having salary income of Rs.5,50,000, interest income from savings bank account of Rs.8,000(which has been reported to the employer and tax has been deducted thereon), and who has claimed deduction of Rs.70,000 under section 80C (on account of certain payments/investments/savings) would also be eligible under the Scheme.
4. A taxpayer having salary income of Rs.6,10,000, interest income from savings bank account of Rs.10,000 (which has been reported to the employer and tax has been deducted thereon), and who has claimed deduction of Rs.1,00,000 under section 80C (on account of certain payments/investments/savings), a deduction of Rs.20,000 under 80CCF (Infrastructure Bonds) and a further deduction of Rs.15,000 under section 80D (Health Insurance Premium) would also be eligible under the Scheme.

2. Whether a salaried taxpayer having total income of less than Rs.5,00,000 and claiming a refund of Rs.3,000 would be eligible under this Scheme ?
No. The taxpayer has to file a return of income for making a claim of refund.

3. Is having a valid PAN number a precondition for being covered by the notification?
Yes. The notification clearly specifies that the individual has to report his PAN to the employer. Hence having a valid PAN is a precondition for falling within the ambit of the notification.

4. Can an individual who is getting income under the head “salaries” from more than one employer take benefit of the notification?
No. A salaried taxpayer who has earned income from more than one employer during the financial year is not covered under this Scheme.

5. Whether this notification would also cover taxpayers having ‘loss from house property’, which are often reported by the employees to the employer.
No. Under the existing procedure, DDO/employer can give credit to the employee for a claim for loss under the head “income from house property” u/s 24 made by the employee. As a result, a salaried employee’s total income may reduce to less than Rs.5,00,000 as loss from the head “income from house property” would have been set-off against salary income. Such a taxpayer is not exempted from filing his return of income as the notification exempts only cases where the total income is under the head “salary” and from savings bank account (income from other sources) not in excess of Rs.10,000. If the taxpayer has any loss under the head “income from house property”, he will not be eligible for exemption from filing a return of income.

6. Does savings bank account include other banking accounts like fixed deposits or recurring deposits accounts?
No. The benefit of the notification is available to taxpayers whose interest income comprises of interest earned on savings bank account ONLY.

7. Circular No. 8/2010 dated 13.12.2010 which is applicable for Assessment Year 2011-12 stipulates that the Drawing and Disbursing Officer (DDO)/Employer while deducting TDS from salary of an employee cannot allow deduction u/s 80G except donations made to the Prime Minister’s Relief Fund, the Chief Minister’s Relief Fund or the Lt. Governor’s Relief Fund. Whether the notification would cover only these cases?
Yes. An individual cannot avail the exemption under this notification if the claim of deduction for donations under section 80G is for donations other than those mentioned in Circular No.8/2010. A taxpayer has to file a return of income for making a claim in respect of claim of deduction under section 80G for such donations
(not specified in Circular No.8/2010).

8. Will a salaried individual having agricultural income, which is exempt from tax, be covered within the ambit of the notification?A salaried individual with agricultural income exceeding five thousand rupees shall be out of the ambit of the notification. A return will have to be filed in such a case, even if other conditions of the notification are satisfied as the agricultural income (of more than Rs.5,000) has to be included, for rate purposes, in the
total income,.

Download Central Board of Direct Taxes FAQs
EXEMPTION FROM FILING OF INCOME TAX RETURN
How to Submit your Annual Income Tax Return? (Click Here)
Download Income Tax Form (Click Here)

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No Tax Benefit u/s. 89 to Salaried Employee under some Circumstances.

Every Salaried Employee (Assessee) thinking about relief of Tax under various sections. The Income Tax Department has changed the rule from Assessment year 2010-12 that there is No relief under section 89 in respect amount received or receivable by an Salaried assessee on his voluntary retirement or termination of his service or voluntary separation of service if the employee has availed the exemption of compensation of voluntary retirement under section 10 (10C).

Section 10(10C)

⁷²[(10C) ⁷³any amount received^{74 75}[or receivable] by an employee of—

(i) a public sector company ; or

(ii) any other company ; or

(iii) an authority established under a Central, State or Provincial Act ; or

(iv) a local ⁷⁶[authority ; or]

⁷⁷[(v) a co-operative society ; or

(vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

(vii) an Indian Institute of Technology within the meaning of clause (g) of section 3⁷⁸ of the Institutes of Technology Act, 1961 (59 of 1961) ; or

⁷⁹[(viia) any State Government; or]

⁸⁰[(viib) the Central Government; or]

⁸¹[(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette⁸², specify in this behalf; or]

(viii) such institute of management as the Central Government may, by notification⁸³ in the Official Gazette, specify in this behalf,]

⁸⁴[on his] ⁸⁵[voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees] :

Provided that the schemes of the said companies or authorities ⁸⁶[or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be ⁸⁷prescribed ⁸⁸[***]:

Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year :]

⁸⁹[Provided also that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year;]

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