Uttarakhand High Court denies quashing of notification that blacklisted Cyprus for not sharing tax information

EXPRO GULF LTD. V. UNION OF INDIA (2015) 53 taxmann.com 413 (Uttarakhand High Court)

The Government had specified 'Cyprus' as notified jurisdictional area' for the purposes of the section 94A via NOTIFICATION NO.86/2013 as it was not providing information sought for by Indian Tax authorities. The instant petition was filed to quash such notification on the ground that "Cyprus" ought not have been declared as notified jurisdictional area as they had never denied any information and they had been ready and willing to supply the information sought for by the Indian Government. The High Court denied quashing of said notification.

Facts:

The instant petition was filed to quash the Notification no. 86/2013, on the ground that "Cyprus" ought not have been declared as notified jurisdictional area as Cyprus have never denied any information and they had been ready and willing to supply the information sought by the Government of India.

The High Court denied to quash the notification and made following observations:

• Bare perusal of the notification would reveal that Cyprus had not been providing the information as requested by the Indian Authorities under the provisions of Exchange of Information Agreement, therefore, Government of India had decided to notify Cyprus as notified jurisdictional area under Section 94-A.
• While exercising the writ jurisdiction ordinarily Court should not proceed to look into whether information sought by the Indian Authorities was declined by the Government of Cyprus or whether the Government of Cyprus was ready and willing to supply the information sought for by the Indian Authorities. Moreover, there seemed to be no valid reason to disbelieve the satisfaction so recorded by the Indian Authorities.
• Thus, relief sought for by petitioner could not be granted. -

Delhi High Court reads down first proviso to sec. 2(15); rescues genuine charities from its clutches

INDIA TRADE PROMOTION ORGANIZATION V. DGIT (EXEMPTIONS) (2015) 53 taxmann.com 404 (Delhi High Court)

Facts:

• The instant writ petition was filed for quashing of the first Proviso to Section 2(15) of the Income-tax Act, 1961 ('Act').
• The petitioner contended that the first proviso was arbitrary and unreasonable since the Finance Act, 2008 introduced it to deny the benefit of exemption to "purely" commercial entities, which wore the mask of a charity but it, hit even genuine charitable organizations.
• The petitioner also contended that the first proviso clubs together two unequal entities, i.e., 'purely business and commercial entities' and 'charitable entities'; therefore, it is violative of Article 14 of the Constitution of India.

The High Court upheld the constitutional validity of first proviso and made following observations:

• The Finance Act, 2008 introduced the first proviso to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It was not designed to hit those institutions, which had the advancement of the objects of general public utility at their heart and were charitable institutions.
• First Proviso carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In order to determine whether the institution would fall within the ambit of first proviso to section 2(15), the dominant and the prime objective has to be seen behind both the activities.
• If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'.
• On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it would be regarded as an institution established for charitable purposes.

Mere cash deposit of above 10 lakhs in bank account doesn't indicate that income has escaped assessment, says ITAT

BIR BAHADUR SINGH SIJWALI V. ITO (2015) 53 taxmann.com 366 (Delhi - Tribunal)

 

The assessee had deposited cash in excess of Rs 10 lakhs in his saving bank account but he had not filed return of income. The AO reopened the assessment of assessee, as he had reason to believe that there was an escapement of income in respect of cash deposited in bank account. The Tribunal held that the AO proceeded on the fallacious assumption that bank deposits constituted undisclosed income and overlooked fact that the source of deposit need not necessarily be income of the assessee.

Facts:

• The assessee had deposited Rs 10 lakhs (approx) in his saving bank account but no return of income was filed by him. The AO reopened the assessment of assessee, as he had reason to believe that there was an escapement of income of Rs 10 lakhs on part of assessee.
• The instant appeal was filed against validity of reassessment proceedings.

The Tribunal held in favour of assessee as under:

• At the stage of recording the reasons for reopening the assessment, the formation of prima facie belief that an income has escaped the assessment is necessary. However, it is also necessary that there must be something which indicates, even if not establishes, the escapement of income from assessment.
• Merely because some further investigation had not been carried out, which, could have led to detection to an income escaping assessment could not be a reason enough to hold the view that income had escaped assessment.
• In the instant case, merely the fact that deposits have been made in a bank account do not indicate that these deposits constitute an income which had escaped assessment.
• AO proceeded on the fallacious assumption that bank deposits constituted undisclosed income and overlooked the fact that the sources of deposit need not necessarily be income of the assessee. The reassessment proceedings could not be resorted to unless there was reason to believe, rather than suspect, that income had escaped assessment. Thus, reassessment proceeding was to be set aside.

Acceptance of the Order of the High Court of Bombay in the case of Vodafone India Services Private Limited

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, in a major decision, has decided to accept the order of the High Court of Bombay in the case of Vodafone India Services Private Limited (VISPL) dated 10.10.2014. This is a major correction of a tax matter which has adversely affected investor sentiment.

Based on the opinion of Chief Commissioner of Income-tax (International Taxation), Chairperson (CBDT) and the Attorney General of India, the Cabinet decided to:

• accept the order of the High Court of Bombay in WP No. 871 of 2014, dated 10.10.2014; and not to file SLP against it before the Supreme Court of India;
• accept of orders of Courts/ IT AT/ DRP in cases of other taxpayers where similar transfer pricing adjustments have been made and the Courts/ IT AT/ DRP have decided/decide in favour of the taxpayer.

The Cabinet decision will bring greater clarity and predictability for taxpayers as well as tax authorities, thereby facilitating tax compliance and reducing litigation on similar issues. This will also set at rest the uncertainty prevailing in the minds of foreign investors and taxpayers in respect of possible transfer pricing adjustments in India on transactions related to issuance of shares, and thereby improve the investment climate in the country.

The Cabinet came to this view as this is a transaction on the capital account and there is no income to be chargeable to tax. So applying any pricing formula is irrelevant.

VISPL is a wholly owned subsidiary of a non-resident company, Vodafone Tele-Services (India) Holdings Limited, Mauritius. On 21.8.2008, VISPL issued shares (at a premium of Rs.8509/-) which resulted in VISPL receiving a total consideration of Rs.246.39 crore from Vodafone Mauritius, on issue of shares and this was shown as "Capital Receipts" in the books of accounts. VISPL reported this transaction as an "International Transaction" and stated that this transaction does not affect its income.

The Transfer Pricing Officer (TPO), vide order dated 28.01.2013, determined the Arm's Length Price of the shares issued by VISPL on the basis of Net Asset Value, at Rs.53,775/- per share and made an upward adjustment of Rs.1,308.91 crore. In addition, the difference Rs.1,308.91 crore between the transaction price and the Arm's Length Price was treated as 'deemed loan' given by VISPL to the holding company; and interest that would have been payable on the loan in an arm's length transaction was computed at Rs.88.35 crore. In total, transfer pricing adjustment of Rs.1,397.26 crore was proposed by the TPO for Assessment Year 2009-10. The matter was agitated by VISPL at the stage of Draft AO itself and therefore the tax payable could not be crystallized. However, the tax rate of 33 percent was applicable for Assessment Year 2009-10.

The DRP, on 11.2.2014, held that the premium determined by the TPO, to the extent not received, is an income arising from issue of shares, and that the AO and the TPO have jurisdiction.

VISPL filed a 2nd Writ Petition in the High Court of Bombay. The High Court, on 10.10.2014, has amongst other things observed:

• "Section 92(2) of the Act deals with a situation where two or more AEs enter into an arrangement whereby they receive a benefit, service or facility then the allocation, apportionment or contribution towards the cost or expenditure is to be determined in respect of each AE having regard to ALP. It would have no application in the cases like the present one, where there is no occasion to, allocate, apportion or contribute any cost and/ or expenses between the Petitioner and the holding company."
• The crucial words “shall be chargeable to income tax” which are found in Section 42(2) of the 1922 Act are absent in Chapter X of the Act..... Therefore it is clear that the deemed income which was charged to tax under Section 42(2) of 1922 Act was done away with under this Act."
• The tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of Arm's Length Pricing to transactional value/ consideration itself does not arise."
• If its income which is chargeable to tax, under the normal provisions of the Act, then alone Chapter X of the Act could be invoked. Sections 4 and 5 of the Act brings /charges to tax total income of the previous year. This would take us to the meaning of the word income under the Act as defined in Section 2 (24) of the Act. The amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of Income, except in cases covered by Section 56(2)(viib) of the Act. Thus such capitalccount cannot be brought to tax as already discussed herein above while considering the challenge to the grounds as mentioned in impugned order." 
• The issue of shares at a premium is on Capital account and gives rise to no income. The submission on behalf of the revenue that the shortfall in the ALP as computed for the purposes of Chapter X of the Act is misplaced. The ALP is meant to determine the real value of the transaction entered into between AEs. It is a re-computation exercise to be carried out only when income arises in case of an International transaction between AEs. It does not warrant re-computation of a consideration received / given on capital account.

The Bombay High Court quashed the reference dated 11.7.2011 by the AO to the TPO, order dated 28.1.2013 of the TPO, draft AO dated 22.3.2013 of the AO and order dated 11.2.2014 of the DRP on the preliminary issue of jurisdiction to tax, setting them aside as being without jurisdiction, null and void.

Press Information Bureau
Government of India
Ministry of Finance 

Hidden Costs While Buying Property

All eyes dream of owning a home. The decision of buying a house is one of the most important ones as it not only involves a lot of money but has many emotions attached to it as well. For majority of the people, all their dreams and savings get invested when they plan to own a house.

At the first go the house that you plan to buy may look manageable but after buying it you realize there are many other costs also involved. It happens that the payment varies with what you might have calculated. Actually, your calculations are done by multiplying the cost per square feet with the total area. But this is not what you actually have to pay.

There are some other costs such as registration cost, stamp duty, service tax, property tax etc that go unaccounted for in your calculations but they exist and finally get added in the cost that is reflected in your final payment schedule. The additional costs also vary from builder to builder and facilities that your house is equipped with.

Obviously, if the cost of home turns out to be more than what you have calculated it becomes difficult to go for it. There are number of add-ons that the developers and real estate agents disclose later and that shoots up the actual cost of the place by approximately 20% to 25%. It goes without saying that it is important for you to be well prepared and have a clear view about all the additional costs and add-ons that might come in the way when you are buying a house.

What are the Hidden Costs?

Following are the additional costs that you might have to incur when you plan to purchase your dream home. Take a look.

Parking Space – When it comes to large residential buildings, an additional amount is charged under the head of Parking Space allotment. This is quite a new trend in the Indian realty market and a good amount is charged to you for providing you with an exclusive parking space for your vehicle. The type of property decides this amount. This amount may vary from Rs 2 Lacs – Rs 5 Lacs. Primarily, factors like locality, type of property and parking space are taken into consideration prior to fixing the amount under this head. Going by the ruling of Supreme Court after March 2012, additional amount for parking rights at residential areas cannot be charged by the developers but this ruling is being by-passed and the amount is being still included in the property cost.

Registration Costs – The registration charge is based on the actual worth of your property. There are a number of states wherein approximately 6% to 10% amount of the property cost falls under the head of legal charges in form of registration fees and stamp duty etc. About 5% to 7% of the cost of property forms the stamp duty. For example – If your property is worth Rs 10 Lac then you will be required to purchase a stamp of Rs 50K in order to get the sale deed typed. The registration fees of approximately 1% - 2% of the cost of property is also charged that is payable to the court. This does not end here. Apart from these costs you will also bear the cost of number of miscellaneous expenses like fees of lawyers and notary who represent you and get your job done in the court.

Loss of Tax Rebate, Interest and Rental – A number of reasons call for delay in the projects and this is very common - almost everywhere around us. These delays in project add to your worries. They not only add to your additional expenses in form of extra interest that you pay towards your home loan but they also lead to price escalations. Projects are generally expected to get delayed by six months to one year. It is always advisable to include the extra interest that you might have to pay due to delay in project while you plan your finances for buying property. The rental earnings for the delayed period are also to be kept into account. Till the time the property is not completed and handed over to you, you also lose on to the tax rebates that are applicable on home loans. These costs cannot be ignored while you plan your budget for purchasing a property.

Deposit for Maintenance – Many of the builders take an upfront maintenance deposit that may range from a period of 10 years or more and for lifetime, at places. The buyer suffers a loss due to charges under this head. You are required to pay a good lump-sum amount on the initial level and bear interest on such borrowings. Going by the trend of inflation the amount that is charged for the above mentioned period is likely to run out earlier than predicted. You will then be required to pay another lump-sum amount under the head of deposit for maintenance. Developers keep insisting on the deposit for maintenance to be paid initially as it provides them with more capital.

Cost of Interiors – You simply cannot ignore the fact that your choices and preferences are ought to be different from the developer. Once you acquire the property of your choice you will, for sure, spend on the interiors of your newly acquired home as per your requirements and choice. Generally, when we plan for purchasing a property, expenses under this head somehow escape our mind. However, we cannot ignore the fact that this head may also require substantial amount to be invested depending on the type and nature of interior work that is opted by you. To be on the safer side, approximately 1%-1.5% of the cost of property may be dedicated to this head of expense.

Preferential Location Charges (PLC) – These charges are clamped by the builder for your choice about the floor on which your want to purchase your home or you want your home to be east facing or corner one and so on. Developers generally charge you for providing you with preferential locations. The amount, however, varies with how many preferential options you have opted for.

Apart from the above mentioned costs, there are charges like unpaid civic authority dues; unapproved plans etc may also add to your pain. Therefore, it is always advisable to keep a surplus of approximately 20%-25% over and above the initial cost of property before you plan to buy your dream home. Clear knowledge about the add-on costs help you in planning your finances accordingly. It saves you from facing the ugly situation of “buy or not to buy” once you have set your heart on your favorite property after the add-ons get revealed.

Common Mistakes to Avoid in Personal Finance Planning

Financial planning involves a complete understanding of one’s financial needs and future goals. Once these are established it is easy to finalise on a comprehensive solution. In the journey towards securing ourselves financially there are some common mistakes that we commit. Some of the mistakes to avoid and the solution are discussed in detail.

No Concrete Budget Plan in place

This is the most unhealthy personal finance habit that we must be wary of. This has two disadvantages: firstly we end up spending excessively in areas that are not necessary and secondly we end up not spending money where it is needed. This could leave you high and dry, in spite of all your hard work and years of service. A sound budget is one that includes all the expenses (don’t forget to allocate funds towards entertainment, house repair and renovation and retirement savings) and factors in affordability and consistency. This must be backed by proper execution of the plan. Ensure financial discipline by all family members.

Trying to Make a Quick Buck When Investing

Many of us plan and budget well, but we skid and slip in the execution phase. Temptation gets the better of us and we try to put hard earned money in schemes that lure the investors with false promises. Most of these investments turn sour and we end up losing our investments. It is better to keep safe distance from such companies that promise say, to double your money in one month or give returns as high as 40-50% etc.

Making Investments That You Can’t Really Afford

Do not make investments that you cannot afford. Example, do not invest in life insurance that requires you to pay a huge sum as premium at the beginning of your career. Plan the amount of investment in each instrument with care and ensure you have enough to spend for rest of your needs.

Buying a Product Because it Looks Attractive

You must have your future in mind before buying an investment product. For e.g. taking a health insurance plan when you are already covered in a previous policy becomes redundant, however attractive the product may seem. Similarly, there could be newer and better sounding products that surface from time to time. It is imperative to check if these are suited to your needs and fit into the general scheme of things before you invest in them.

Investing – as a Quick Fix Solution

Investment cannot be done as a quick fix option to existing situation. For instance, in order to save tax you should not buy a product which cannot be serviced or continued in the future. Instead the extra tax liability can be paid for one year and a proper tax saving cum investment option should be planned for the years ahead.

Listen to Advice, Implementation Can Wait

Procrastination can defeat the purpose of listening to advice. If you postpone the actual investment to a later date, the features of the plan or even its availability could vary. Deciding on what to buy and implementing the decision at the earliest are both equally important.

Portfolio Without Diversity

Putting all the eggs in the same basket may spell danger as far as investments go. Remember, diversifying portfolio reduces the risk associated with a single industry. Not only should you invest in various schemes like pension, life insurance, medical insurance etc…, but also varied options like insurance, bonds, stocks of blue chip companies, gold, real estate etc.

Only One Person in the Family Knows Where the Money Goes

This situation should be avoided due to the uncertainties associated with human life. In case of an emergency it is always preferable that more than one person in the family knows where the funds have been invested. Details regarding medical claim, insurance claim should be shared with the spouse. Physically held investments like bond certificates, gold, etc. should be secured in lockers and the key should be kept safe. 

There is No Emergency Fund

We are living in an era of ATMs and therefore may be tempted to leave the money in the bank as long as we can, so that it can earn interest till we find the need for the cash. While this lends so seamlessly to logical thinking, care must be taken before you empty the house of the minimum cash which may be required during times of emergency. There are times when the ATMs near the house do not work or are out of cash. Some vendors do not believe in credit cards and hence do not accept them.

Children are Kept Away From Money Concepts

In the fast paced world it is very important to teach children about money matters. Children should be allowed not only to buy what they need from nearby shops, they should also be told about the finances of the house to the extent understandable by them. This will help them draw up their budget and plan their expenses when they start earning. While this will make them avoid unwanted expenses, it will also encourage them to spend where required.

Employee Benefits aren’t Well Understood or Utilized

There are certain benefits given by employers for the benefits of employees. It is imperative to understand these correctly and utilize them as they are intended to be utilised. For instance your company could make a part of the payment in the form of food coupons. Make sure you collect them and use them in the relevant outlets.

Renting Your Living Accommodation Rather Than Buying It

If you do this you will end up paying a lower rent, nevertheless at the end of the many years of paying increasing rent you will retire without a roof over your head. Investing in a house is important as it saves the tax that you need to pay, while creating an asset for you.

The points discussed above are broad guidelines which will help you in planning your finances. As a final word of caution I would like to add that there are no quick ways of making money. Better be safe than sorry!

Basic Investment Principles for Beginners

Investment is like planting a tree today so that in future you and your family may be able to enjoy its fruits and also be able to rest in its shade comfortably. You all know how important it is for you to provide financial security to your family and yourself.

It is needless to say that all the hard work and effort that you put in from morning to evening in earning those dollars and rupees is aimed at providing your family and yourself a good standard of living and also securing future. The best way to manage your hard earned money is to invest it sensibly so that in future it not only helps you when in need but also multiplies itself in the due course of time.

There cannot be a rule book that can guide you through with your investment planning and procedure but there are a few basic principles or guidelines that can help you to become a successful investor. These are: 

1. Investing Early – It is always advisable to start investing as soon as you start earning. It is quite obvious that you may be able to invest say as little as Rs 500 every month but you should not forget that compounding earns you good margins even with small savings. This also cultivates a habit of investing regularly in a disciplined manner. It is also advisable to re-invest the interest that you earn and just wait and watch how magically it grows through compounding formula. 

2. Analyze Yourself – This means it is important for you to identify the kind of investor you are. It is important for you to realize if you are the one who will get deeply involved in the art of investing and put in your time and energy in exploring every possible lucrative investing option thus earning higher returns, or are you an individual who will put in less effort and time and will be satisfied with a lower profit margin. 

3. Know the Market in which you will Invest – It is important for you to gather as much information as possible about the scheme, plan or options in which you plan to invest. It is also important for you to take a glance at all the market players who are offering the same or similar schemes and plans and the returns or commitments that each one of them is giving. This will help you in cracking the most profitable deal for your investment. It is very important for you to understand completely the plan you are investing in, the player you are investing with and the returns you are aiming at. 

4. Investment Goals – It is advisable for you to comprehend your goals pertaining to your investment. This would include the assessment of your current financial condition, the amount you can spare from your expenditure, time frame i.e monthly, quarterly, half-yearly etc, the kind of investment and also the kind of returns that you wish to have which again maybe based on your personal requirements like for a retired individual monthly credit of interest seems to be quite apt. 

5. Diversification of Funds – As the famous phrase goes “You should never put all your eggs in one basket” it is very important for you to diversify your funds i.e do not put all your money in one particular scheme or plan. Always invest in a bouquet of funds in order to balance the risk. 

6. Time Factor – When it comes to time, you need to keep in mind two factors related to time. First is the time when you enter the market and the second is the duration for which you play in the market. It is very difficult to anticipate the movements in the market. You need to be clear and specific about when you enter the market and for how long you have to stay there. 

7. Long Duration Investment – It is always advisable to stay tuned in market for a longer duration. The duration of investment determines the risks and returns on your investment. It depends on you as to how much return you aim at and the risk you are ready to take. Generally if you stay invested for long duration, your risk gets balanced due to an average market condition thereby bringing better returns. Put it this way - it is important for you to analyze the risk that you can take. 

8. Adopt a conservative approach when it comes to valuation of profits – you need to understand that you can not be overly optimistic about the investments you are making. You need to adopt a conservative approach while weighing your returns from a particular investment. It is very important to be cautious and careful while computing your future growth rates. 

9. Hallo and Horn Effect – Do not get affected by the Hallo and Horn Effect. This means that you should not judge an investment plan or scheme merely on the basis of its past performance or solely because it benefited your friend so it will benefit you as well. You cannot totally neglect the past performance of the stock but you cannot predict the future of the same solely on past performance. 

10. Don’t let one slump affect future prospects – It is very important to be cautious. So goes the famous phrase “once bitten twice shy” but it emphasizes on being cautious, learning from past experiences but it doesn’t say that you will let one market slump hinder your long-term investment planning. Do not get discouraged by the bulls and bears of the market. 

11. Once sold, it is gone – It is always advisable to let bygones be bygones. Once you have taken a decision of selling your stock, do not check the price of your stock once you have sold it. You have just started investing. It’s a big life and a long game. “Ohhh I sold it…should have waited more.” This can always tickle your mind after you have sold your stock. But what if you had waited and the returns have been less than what you gained today? Seize the day and go ahead with no regrets. 

12. Keep Patience – There are moments when we all run out of patience and when its money that you are playing with it is obvious to be anxious and be impatient. But keeping your cool will always help you to sail smoothly through the lows and highs of the market. 

13. Monitoring your Portfolio – It is very important for you to keep yourself updated with the market scenario and keep a constant check on your portfolio. You cannot hold on to a stock forever. So keep updating your portfolio with the ever changing scenario of the volatile market. 

14. Accept, you can not be right always – You need to accept this before you get started that you are a human being and you are bound to make mistakes. You can not always make a right decision for every investment that you make. The key is to make the best out of the right choice and to learn from the wrong ones. 

Financial Investment Options

There are a number of financial investment options available in the market and you can pick and choose as per your requirement from the bouquet of options which are as follows:

• Equities
• Precious Stones
• Gold/Silver
• Bonds
• Mutual Funds
• Fixed Deposits
• Recurring Deposits
• Real Estate
• Insurance Plans

Gross Direct Tax Collections During April-December of the Financial Year 2014-15 is up by 12.93 Percent and Stood at Rs. 5,46,661 Crore as Against Rs. 4,84,063 Crore in the same period last year

Gross direct tax collection during April-December of the Financial Year 2014-15 is up by 12.93 percent at Rs. 5,46,661 crore as against Rs. 4,84,063 crore collected during the same period last year. Gross collection of Corporate tax has shown an increase of 12.79 percent and stood at Rs. 3,50,494 crore as against Rs. 3,10,754 crore collected during the same period last year. Gross collection of Personal income tax is up by 12.62 percent and stood at Rs.1,90,391 crore as against Rs.1,69,059 crore collected during the same period last year. Securities Transaction Tax(STT) stands at Rs. 4940 crore at a growth of 43.44%. Net direct tax collections are up by 7.41 percent and stand at Rs. 4,48,401 crore, as compared to Rs. 4,17,477 crore in the same period in the last fiscal.

Advance tax collection has shown a growth of 13.15% during April-December of the FY 2014-15 as against the growth of 8.76% shown at the same time previous year. Growth in TDS is 7.84% as against 16.73% in the same period last year.

The Self-Assessment Tax shows a growth of 22.20% as against 11.86% in the same period last year. The growth in Regular Tax is 33.03% as against 15.60% in the same period last year. 

Press Information Bureau
Government of India
Ministry of Finance 

Five Easy Ways to Save Tax

A year of hard work and part of the salary vanishes in the name of tax. It is quite obvious that working people would want to make use of their payments in a better way. The government has given many avenues to do so and a person who is aware of these easy methods can utilize it to the maximum extent.

For example consider the basic necessities of modern day living, food, shelter, travel, health care, investments and consider the possible ways of saving tax on these.

1. Food: The taxable amount on a salaried employee will reduce if the company offers food to the employee during the working hours. The cost of the meal can be a maximum of Rs 50 and the annual total of this expense is deducted from the taxable amount of employee. 
2. Shelter: If the employee is living in a rented house then certain percentage of the basic pay is allowable as house rent and this amount also gets deducted from the taxable sum of the employee. For this purpose a receipt from the owner of the house for rent paid is required. So if you are living in a rented house start collecting these receipts that help you during the end of the financial year.If the person (irrespective of salaried or self employed) is repaying a home loan then he/she can get a claim up to Rs 1 lakh on the repayment of principal and Rs 1.5 lakh on the amount paid towards interest on housing loan annually.
3. Health care: The next important factor in a person’s life would be the health and there is an allowance towards the expenses made towards medical treatment. An amount of Rs 15,000 is deducted from taxable amount if proper receipts are produced by the employer for the expenses that are incurred in a financial year.  Make sure that the receipts contain the Tax Identification Number (TIN). An additional Rs.15,000 is allowable as exemption from tax if this amount is paid towards the health insurance scheme of parents. So if your parents are not insured with health insurance, it is a good idea to shop for a policy now. 
4. Travel: Conveyance allowance is paid for the expense of the employee’s travel from and to the office. This is a very small amount but yet, can be accounted for, to some extent if you use the mass transport system. The allowance is up to Rs 800 per month. There is also an allowance called  leave travel allowance(LTA). This allowance lets you travel with your family and the expense to certain extent is deducted from the taxable income.
5. Investments: Government also encourages investments in mutual funds, insurance schemes, ELSS, Public Provident Fund etc. There is a tax exemption of Rs 1 lakh that you get on investments made towards these schemes. The Government has increased the limit of investment in PPF from Rs.70000/- to Rs.100000/- to encourage savings in long term investments. There is another simple way to divert your income towards your personal benefits like, purchasing a life insurance policy for self while you also reduce the taxable income on the other hand. These are more a benefit because it helps the tax payer make use of his income in the best possible way by removing off some basic expenses through these deductions in tax.

Tax planning, the right way...

Tax planning probably sounds a bit weird now, because the tax filing season just got over and nobody is really thinking about it or doing anything. Tax consultants are going on holiday this month. But smart people will realise how important it is to do tax planning right now. To save tax, you are better off starting now than later because you will have a lot more options now, time to think and make the right decision and no HR person sitting on your head to do the needful as soon as possible.

Myths and reality

Many people still have this notion that tax planning is wrong and responsible citizens should pay their taxes and not cheat. Tax planning is not tax evasion or tax avoidance. Tax evasion or tax avoidance is illegal where the letter and spirit of the law are broken. Tax planning is done well within the framework of the law and the government actually encourages you to plan your taxes by seeking investment in tax saving bonds, giving benefits under various sections etc.

Another misconception about tax planning is that it is all about investing in 80C.

People ask which is better, PPF or ELSS for tax planning? Tax planning is much more than 80C investments. It requires thoughtful planning of how your income is accounted, how you spend and invest your money and a few more nitty gritties. It is also a myth that tax planning is cumbersome and quite tricky for an average person to comprehend. Of course the tax laws are complex and dynamic, but what is applicable to the normal common person is rather simple.

Tax planning has to be integrated with your overall financial plan. In everything you do, you have to find a tax efficient way of doing it. For eg: You can invest in liquid funds or short term debt funds for emergency needs. But depending on your tax bracket, the short term funds can be more advantageous than the liquid funds or vice versa.

How to save tax?

Invest your surplus savings or use your income in any of the following ways and your total taxable income will come down to that extent, subject to a maximum of Rs 1 lakh.

Repay your home loan – the principal portion can be claimed for deduction

Pay tuition fees for children's education (maximum 2 children)

Pay life insurance premium

Invest in national saving certificate.

Invest in public provident fund

Invest in equity linked savings schemes (ELSS)

Invest in banks and post office fixed deposits of five years.

You can claim tax exemption on house rent allowance received as part of your salary if you are staying in a rented house.

Home loan
If it is a self occupied property, you can claim upto R1.5 lakh paid as interest as loss on house property. That will bring down your overall taxable income. If your property is rented out, on one side you will have to add the rent with your other income and pay tax, meanwhile you can deduct all the interest amount (without any limit) from your overall income and bring down taxable income.

Education loan
The interest paid on an education loan taken for higher education of self, spouse or children can be deducted under Section 80E and thereby your total taxable income can come down.

Protect your health
If you pay premium for a medical insurance policy for self or spouse or dependent children/ parents you can claim tax rebate under Section 80D. And from the current year, a sum of R 5,000 can be claimed if you or your dependants do a preventive health check up.

Social cause
Under Section 80G donations to particular institutions/ funds get tax benefits. While it is true that tax planning is a critical activity, a financial decision to buy a house or make an investment should not be motivated by tax saving. It is the financial plan that should tell you what to do with your money, but within the options, you should choose the most tax efficient one to get the best benefits

No TDS liability of buyer when capital gain arose to Non-Resident wasn't taxable due to section 54 relief

A. MOHIUDDIN V. ADIT(INTERNATIONAL TAXATION) (2015) 53 taxmann.com 102 (Bangalore - Tribunal)

 

Where on date of purchase of house property from non-resident vendor, assessee was aware of fact that capital gain was not taxable in vendor's hands due to availability of deduction under section 54, he was not required to deduct tax at source while making payment of sales consideration

Facts:

• Assessee had purchased a residential property from a non-resident ('NR') and made payment to him without deducting tax at source.
• He argued that that he was not required to deduct tax at source while making payment to NR since NR was eligible to claim relief under section 54 in respect of capital gain arising out of sale of residential property.
• The Assessing Officer ('AO') opined that capital gain tax would be chargeable in the hands of the recipient on sale of the house property. Hence, assessee was required to deduct tax while making payment irrespective of fact that recipient was entitled to deduction under section 54. Consequently, the AO raised demand under section 201 by treating assessee as assessee-in-default.
• The CIT(A) affirmed the order of AO. The aggrieved assessee filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

• The ultimate levy of taxes depends upon many circumstances like exemption, deduction etc. In the instant case assessee did not deduct tax on payment as he was aware that such payment to NR did not require deduction of tax due to availability of Section 54 relief to NR.
• If facts of the instant case were to be examined in the light of instruction No. 2/2014 dated 26-02-2014, it would indicate that the AO is required to determine the appropriate proportion of the sum chargeable to tax to ascertain the tax liability on which the deductor shall be deemed to be an assessee in default under section 201.
• The facts on record indicated that from the date of payments, parties were aware that these payments would not be subject to taxes, because of exemption, hence, there was no need to deduct the taxes. Thus, assessee could not be treated as assessee in default under section 201.

Fee charged by bank for receiving payments from customers of assessee via credit card won't attract section 194H

CIT V. JDS APPARELS (P.) LTD. (2015) 53 taxmann.com 139 (Delhi High Court)

 

'Commission' paid to bank on payments received from customers via credit cards is not liable to TDS under section 194H.

The issue that arose before the High Court was as under:

Whether 'commission' paid to bank on payments received from customers via credit cards could be treated as a commission or brokerage under section 194H so as to attract TDS?

The High Court held in favour of assessee as under:

• The intention of the legislature behind introducing the provisions of section 194H was to include commission or brokerage within its ambit when a third person interacts between the seller and the buyer as an agent and, thereby, renders services in the course of buying and/or selling of goods. 
• In the instant case, bank was providing services to its client (i.e., trader) which could not be treated as services rendered by an agent during course of buying or selling of goods as banker does not render any service in nature of agency.
• Thus, the amount charged by bank was a fee for rendering banking services to its client and same could not be treated as a commission or brokerage under section 194H for the purposes of TDS.

Section 143(1) intimation won't be deemed as completion of assessment to bar filing of revised return

TATA METALIKS LTD V. CIT (2014) 52 taxmann.com 480 (Calcutta)

Issue of intimation under section 143(1) could not amount to completion of assessment so as to bar an assessee from filing a revised return under section 139(5)

The issue that arose before the High Court was as under-

Whether issue of intimation under section 143(1) could not amount to completion of assessment so as to bar an assessee from filing of revised return under section 139(5)?

The High Court held in favour of assessee as under-

• The provision of section 143(1)(i) contemplates an assessment without prejudice to the provisions of Section 143(2).
• Section 143(2) allows Assessing Officer (AO), if he considers it necessary, to serve on the assessee a notice requiring him, on a date to be specified therein, to attend his office or to produce or cause to be produced thereon, any evidence on which the assessee may rely on in support of the return and after taking into account all relevant materials the AO shall by an order in writing make an assessment.
• Thus, AO could resort to the provisions of section 143(2) even after issuing of intimation under section 143(1) and, therefore, processing of return under section 143(1) could not be said to be completion of assessment so as to restrict assessee from filing a revised return under section 139(5).

Sum paid for fans/electrical fittings of house are personal effects; not includible in cost of acquisition of house

SACHINDER MOHAN MEHTA V. ACIT (2015) 53 taxmann.com 114 (Delhi High Court)

Sums paid for acquiring items like wooden temple, crockery, fans, light fittings, etc., while purchasing a house property could not be included in the cost of acquisition of such property as said items are primarily 'personal effects' which are excluded from the definition of capital asset under section 2(14).

Facts:

• Assessee earned capital gain on sale of residential house property. At the time of computing capital gain, assessee claimed deduction of amount spent on items like wooden temple, crockery, fans, light fittings, etc., at the time of purchase of property by treating the same as cost of acquisition of the house property.
• The Assessing Officer (AO) rejected assessee's claim by holding that the aforesaid items were personal effects which were not covered under the head 'capital asset' as per the provisions of section 2(14).
• The CIT(A) as well as the Tribunal upheld the finding of AO. Aggrieved by the order of Tribunal, assessee filed the instant appeal before the High Court.

The High Court held in favour of revenue as under:

• The AO was right in rejecting assessee's claim by recording factual finding that there was no mention in the sale deeds about purchase of the furniture and fixtures by way of a separate agreement and the purported purchase was only effected by way of a bill.
• Further, the amount paid for items like wooden temple, crockery, fans, light fittings, etc., were 'personal effects' which were excluded from the definition of capital asset under section 2(14). Thus, amount paid on such items could not be considered as cost of acquisition of house property.
• So, the appellate authorities were right in disallowing the impugned claim of assessee for the purpose of computation of the capital gains.

Petitioner couldn't ask for transfer of case for his convenience to participate in proceedings

D.V. MERCY V. ITO (2014) 52 taxmann.com 519 (Madras High Court)

Facts:

• Petitioner was residing with her husband at Tanjore till 2008, after which they moved to Chennai. Petitioner's husband as well as the petitioner were Income-tax assessee and the petitioner's husband died on 29-3-2013, leaving behind two sons and a daughter as his legal heirs.
• The Income-tax Officer ('ITO') issued notices to the petitioner and her two sons under section 148, calling upon them to produce the accounts and documents pertaining to the estate of her husband.
• Pursuant to the notice, the petitioner had sought for transfer of the files from Tanjore to Chennai.
• The assessee submitted that merely because notices were issued at Tanjore and statement of the petitioner's son was recorded at Tanjore, it could not be a ground to compel the petitioner to travel from Chennai to Tanjore on each occasion for participating in the assessment proceedings.

The High Court held in favour of revenue as under:

• On a reading of the provisions of section 127, it was seen that the object for which such provision was enacted is for the purpose of administrative convenience. The said provision does not empower the Assessing Officer to transfer a case from his jurisdiction to that of another and even when the Director General or the Chief Commissioner or the Commissioner exercising such power, can transfer any case after recording his reasons for doing so.
• For the purpose of recording reasons, it is obvious that the Commissioner has to consider the circumstances involved in each case.
• When the transactions have taken place within the jurisdiction of the ITO and the transaction pertained to the immovable property, the petitioners could not insist that the files should be transferred from Tanjore to Chennai solely on the ground that it would be convenient for the first petitioner to partake in the assessment proceedings.
• The ITO after considering the representation of petitioner, called for a report from the Assessing Officer and the contentions raised by the representative of the petitioner was considered and reasoned order had been passed.
• Thus, the impugned order being a reasoned order and nothing has been placed before Court to show that the impugned order was either ex facie perverse or vitiated by any patent error. In the impugned order reasons have been assigned for rejecting the request for transfer, which was based on the records. Therefore, Court was not inclined to interfere with the discretion exercised by the ITO in refusing to transfer the case from Tanjore to Chennai.

No deduction of legal fee incurred by assessee to defend his criminal case on charges of customs duty evasion

PRAVEEN SAXENA V. JOINT CIT (2014) 52 taxmann.com 451 (Delhi - Tribunal)

Legal fees incurred to defend criminal case related to customs duty evasion would meet disallowance under section 37(1) as it did not have any connection with business of assessee

Facts:

• Assessee was arrested by the Department of Revenue Intelligence (DRI) on charge of evading customs duty on import of palm oil. 
• It claimed deduction of legal fees paid to lawyers for representing his criminal case before High Court and Lower Courts.
• The Assessing Officer (AO) held that legal expenditure was in the nature of personal expenditure and disallowed the same.
• CIT(A) affirmed the order of AO by holding that the expenditure incurred for defending the criminal proceedings could not be allowed under any provision of Income Tax Act.
• Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.

The tribunal held in favour of revenue as under:

• Expenditure on legal fees and proceedings could be allowed under section 37 if it was wholly or exclusively related to carrying on the business of the assessee, but in this case, legal fees was paid to defend criminal prosecution which was totally unrelated to the business of assessee. 
• Therefore, the expenditure so incurred was rightly disallowed as it was having no connection with carrying on business of assessee.

Time gap of 30 days isn't intended between book closure date and record date for declaration of dividend, says SAT

Oracle Financial Services Software Ltd. v. Securities and Exchange Board of India (2014) 51 taxmann.com 24 (SAT - Mumbai)     

As per clause 16 of 'Listing agreement' time gap of 30 days is intended to be between two book closures and two record dates and not between a book closure and a record date

Facts:

• The appellant-company, listed on BSE and NSE ('respondents'), had declared book closure date for the purpose of its AGM. The AGM was held and on the same day interim dividend was declared and the record date was fixed.
• Thereafter, both the respondent's alleged that time gap between book closure date and record date was less than 30 days which was violative of clause 16 of the 'Listing Agreement'.
• The SEBI held that appellant-company had violated clause 16 and, accordingly, called upon appellant to comply with it.

On appeal the Securities Appellate Tribunal held as under:

• On perusal of clause 16 of 'Listing Agreement' it was seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc.
• If more than one book closure was postulated under clause 16 of the listing agreement, then the time gap of 30 days under clause 16 would be referred to as the time gap between two book closure dates and it could not be inferred that time gap should be between book closure date and record date.
• Where a company kept its transfer books closed during AGM as per clause 16 and also sought to declare dividend, then stipulating record date for such dividend after 30 days of book closure date as well as payment of dividend would be violative of section 205A of the Companies Act, 1956.

Indirect Tax Revenue (Provisional) Collections Increase from Rs. 3,54,049 Crore in April-December 2013 to Rs. 3,77,648 Crore During April-December 2014; Indirect Tax Revenue (Provisional) Collections Increase from Rs. 3,54,049 Crore in April-December 2013 to Rs. 3,77,648 Crore During April-December 2014

Registering an Increase of 6.7% During April-December 2014 over the Corresponding Period in the Previous Year; Customs Collections Increase by 9.7 % While Service Tax Collections Increase by 8.7 % During the Same Period

Indirect Tax Revenue (Provisional) collections have increased from Rs 3,54,049 crore in April-December 2013 to Rs. 3,77,648 crore during April-December 2014. Thus an increase of 6.7 % has been registered during April-November 2014 over the corresponding period in the previous year. This is an achievement of 60.6% of the target fixed for BE 2014-15.

Collections from Customs increased from Rs.1,26,285 crore during April-December 2013 to Rs. 1,38,529 crore during April-December 2014 registering an increase of 9.7 %. This is an achievement of 68.6% of the target fixed for BE 2014-15.

Service Tax collections have increased from Rs. 1,09,887 crore in April-December 2013 to Rs.1,19,400 crore during April-December 2014 registering an increase of 8.7%. This amounts to an achievement of 55.3 % of the target fixed at BE 2014-15.

Central Excise collections have increased from Rs. 1,17,887 crore in April-December 2013 to Rs.1,19,719 crore during April-December 2014 registering an increase of 1.6%. This amounts to an achievement of 58.3 % of the target fixed at BE 2014-15.

Details of Indirect Tax revenue (provisional) collections during April-December 2014, along with growth rate compared to the corresponding period in the previous year.

For the period April – December 2014

(Rs. in crores)

Tax Head		For the month		% Growth	Upto the month		% growth	% of BE achieved
	B.E. 2014-15	2013-14	2014-15		2013-14	2014-15
Customs	201819	14441	15222	5.4	126285	138529	9.7	68.6
Central Excise*	205452	14889	17450	17.2	117877	119719	1.6	58.3
Service Tax	215973	17905	16979	-5.2	109887	119400	8.7	55.3
Total	623244	47235	49651	5.1	3540494	377648	6.7	60.6

*Exclusive of cess administered by other departments.