Income Tax - M/S DELHI INTER EXPORTS PVT LTD. versus THE COMMISSIONER OF INCOME TAX = 2008
Date of Decision: July 9, 2008 - HIGH COURT OF DELHI Tribunal is correct in law in holding that the assessee company, who is procuring export orders from the foreign buyers and passing on to the manufacturers or dealers is not entitled to weighted deductions u/s 35 B of Income Tax Act- in view of sub-section (1A) of 35B which is a non obstante provision, since the assessee is not engaged in the business of export of goods, the deductions cannot be allowed to the assessee – question is answered in favour of the revenue
Income Tax - S.K.BAHADUR versus UNION OF INDIA and OTHERS = 2008
Date of Decision: July 10, 2008 - HIGH COURT OF DELHI Appellant had raised the issue of jurisdiction in the writ petition and had made specific prayers with regard to the assessment proceedings - Tribunal disposed of the appellant’s pending appeals without a reference to the pleas raised by the appellant with regard to jurisdiction pursuant to the liberty granted by this Court – assessee’s submission that he may be permitted to withdraw the present appeals with liberty to approach the Tribunal for rectification u/s 254(2), is accepted
Income Tax - Commissioner of Income Tax, Delhi-VI Versus M/s Oriental Insurance Co. Ltd. = 2008
Date of Decision: July 18, 2008 - SURPEME COURT HC dismissed revenue appeal (against deletion of additions by tribunal) on ground that dept. can’t file appeal without getting clearance from Committee of Disputes (COD) & held that same has to be done within a month - action of dept. can’t be said illegal merely for delay in approaching to COD - order of HC is set aside & directed to consider the question of desirability to proceed in the matter before it on receipt of the report from COD - COD has to consider the matter on merits
Income Tax - C.K. Gangadharan & Anr. Versus Commissioner of Income Tax, Cochin
Decision: July 21, 2008 - SUPREME COURT Assessee takes the stand that the revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case – assessee not established malafides of revenue – revenue contention that because of the small amount of revenue involved & because of revenue neutrality, no appeal is filed, is acceptable – held that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case
IF YOU NEED MORE SUMMARIES OF INCOME TAX CASE LAW JUST MAIL TO ME AT casatbirgill@gmail.com
WITH REGARDS
SATBIR SINGH
PRESIDENT
JAB WE MET CA
Wednesday, July 23, 2008
RECENT SERVICE TAX CASE LAWS
Service Tax - R.B. AGENCIES Versus COMMISSIONER OF CENTRAL EXCISE,
Date of Decision: July 3, 2007 - CESTAT, BANGALOREAppellants merely purchase SIM cards and recharge coupons from BSNL and sell the same for a profit - It is also seen that Sales Tax Authorities are proceeding against the similarly situated parties for payment of Sales Tax - Bench had already taken a view that the appellants do not render any service but simply sell the goods - Therefore, they would not be liable to pay Service Tax under the category of “Business Auxiliary Services” – assessee’s appeal allowed
Service Tax - HINDUSTAN CONSTRUCTION CO. LTD. Versus COMMR. OF C. EX., COIMBATORE = 2008
Date of Decision: April 30, 2008 - CESTAT, CHENNAIAgreement involved HCCL undertaking work of engineering design as well as construction of Water Treatment and Distribution Project (TWP) - HCCL did not render engineering consultancy to client - Therefore the impugned amount of service tax paid as Consulting Engineer by assessee (HCCL) was not due to be paid – refund of same is allowed
Service Tax - CCE, COIMBATORE Versus COIMBATORE KANARAGA LORRY URIMAIYALARGAL NALA TRUST
Date of Decision: May 2, 2008 - CESTAT, CHENNAIActivity of sale of petroleum products by appellants on behalf of Bharat Petroleum Corporation Ltd.- respondents claim itself to be a Trust functioning without profit motive – appellate authority held that the Trust was not a commercial concern & hence exempted from tax under Business Auxiliary Service - provisions of Trust Deed require to be examined for the purpose of determining as to whether the respondents can be treated as a commercial concern – matter remanded for de novo adjudication
Service Tax - R. SUKUMAR Versus COMMR. OF C. EX., TRICHY = 2008
Date of Decision: March 11, 2008 - CESTAT, CHENNAIInvestigation report did not indicate mens rea or contumacious conduct on the part of the assessee to evade service tax - appellant paid the tax due along with interest before issue of the Show Cause Notice - penalty can be imposed under Section 78 only if a service provider has evaded payment of duty by fraud, wilful suppression, collusion etc. - instant case is a fit one to grant relief provided under Section 80 – assessee’s appeal allowed
Service Tax - COMMR. OF C. EX., BELGAUM Versus PRATIK AGENCIES = 2008
Date of Decision: April 10, 2008 - CESTAT, BANGALORECommissioner (A) hold reimbursable amounts are not to be included for calculating the service tax - service tax is only on the Commission received for C&F agency services - Comm. (A) remanded the matter to Original Authority to examine the claim of the appellants in the light of the evidences to be produced – order of comm..(A) is correct – since assessee made entire position clear to dept. about paying tax excluding the reimbursable amount, larger period not invocable – dept. appeal dismissed
Service Tax - SANDEEP SOBTI Versus COMMR. OF C. EX., MEERUT = 2008
Date of Decision: April 2, 2008 - CESTAT, NEW DELHISCN issued proposing demand under Rent-a-cab Scheme Operator – Assessee not replied SCN - demand confirmed by original authority vide its ex parte order – assessee contends that running buses on hire shall not come under Rent-a-cab Scheme Operator - orders of the lower authorities is set aside & matter remanded to the Original Authority – Dept. is also directed to check up the factual position from the RTO authorities regarding category/type of the vehicles used by the appellant
Service Tax - SHEWALKAR HOTELS Versus COMMR. OF C. EX., NAGPUR = 2008
Date of Decision: April 28, 2008 - CESTAT, MUMBAIIssue is regarding the amount received by the applicant from the Franchiser as rent – revenue alleged that assessee has sold goods from his premises so duty is payable under Business auxiliary services - It is seen from the records that the agreement is franchisee agreement - application for waiver of pre-deposit of the amounts is allowed and recovery thereof stayed
Tuesday, July 22, 2008
E-PAYMENT FROM ANOTHER PERSON ACCOUNT
The Central Board of Direct Taxes has issued Circular No. 5/2008 dated 14th July 2008 clarifying the following things -
With a view to facilitating electronic payment of taxes by different categories of taxpayers, it is hereby clarified that, an assessee can make electronic payment of taxes also from the account of any other person. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the assessee on whose behalf the payment is made. It is not necessary for the assessee to make payment of taxes from his own account in an authorized bank.
Further, it is also clarified that payment of any amount by a deductor by way of tax deducted at source (TDS) or tax collected at source (TCS) shall fall within the meaning of `tax' for the purpose of the rule 125 of the Income-tax Rules, 1962.
With a view to facilitating electronic payment of taxes by different categories of taxpayers, it is hereby clarified that, an assessee can make electronic payment of taxes also from the account of any other person. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the assessee on whose behalf the payment is made. It is not necessary for the assessee to make payment of taxes from his own account in an authorized bank.
Further, it is also clarified that payment of any amount by a deductor by way of tax deducted at source (TDS) or tax collected at source (TCS) shall fall within the meaning of `tax' for the purpose of the rule 125 of the Income-tax Rules, 1962.
JAGO GRAHAK JAGO (CONSUMER BEAWARE)
CONSUMER RIGHTS VINDICATED
Railways held responsible for Passenger Safety
While consumers generally tolerate the lack of service in Railways, it causes immense trauma and distress when one's safety is at stake due to inefficiency and abdication of responsibility of Railway and State Police. Mr. S L Bhargava reserved tickets for himself and his companions on Musssourie Express from Delhi to Hardwar in 1997. Barely had the train crossed Ghaziabad that a mob participating in a rally entered the coaches shouting slogans ,making catcalls and making travelling extremely difficult for the passengers with reservations. The passengers had to suffer sheer mental agony and physical pain due to the unruly presence of the mob in the coaches. The passengers had to remain holed up in the coaches without being able to avail the basic amenities till the train reached its last
destination. No Railway police or TTE staff was available on the scene. Mr. Bhargava filed a complaint with a consumer court for deficiency in service by Railways. But in response the
Northern Railways said that the complaint was not maintainable because the complainant was not a consumer, that the District Forum had no territorial jurisdiction and that the compensation claimed was excessive. The Northern Railway denied liability for the situation by claiming that the situation was beyond their control. The Delhi State Commission did not view such reasons sympathetically and said that such an incident demonstrated grossest kind of deficiency in service on the part of a huge organisation like the Railways. Not only the Railway have its
own police, it also has the services of the State Police at its disposal. The Commission further noted that Railways cannot absolve itself and runaway from their responsibility of providing perfect, faultless service, apart from protecting the life and property of the consumer which is very essential. The State Commission awarded a compensation of Rs.25000 for the mental agony, trauma and harassment suffered by the consumer and Rs.5000 as cost of litigation.
S L Bhargava vs Northern Railway, I (2007) CPJ 92 Delhi SCDRC
Railways held responsible for Passenger Safety
While consumers generally tolerate the lack of service in Railways, it causes immense trauma and distress when one's safety is at stake due to inefficiency and abdication of responsibility of Railway and State Police. Mr. S L Bhargava reserved tickets for himself and his companions on Musssourie Express from Delhi to Hardwar in 1997. Barely had the train crossed Ghaziabad that a mob participating in a rally entered the coaches shouting slogans ,making catcalls and making travelling extremely difficult for the passengers with reservations. The passengers had to suffer sheer mental agony and physical pain due to the unruly presence of the mob in the coaches. The passengers had to remain holed up in the coaches without being able to avail the basic amenities till the train reached its last
destination. No Railway police or TTE staff was available on the scene. Mr. Bhargava filed a complaint with a consumer court for deficiency in service by Railways. But in response the
Northern Railways said that the complaint was not maintainable because the complainant was not a consumer, that the District Forum had no territorial jurisdiction and that the compensation claimed was excessive. The Northern Railway denied liability for the situation by claiming that the situation was beyond their control. The Delhi State Commission did not view such reasons sympathetically and said that such an incident demonstrated grossest kind of deficiency in service on the part of a huge organisation like the Railways. Not only the Railway have its
own police, it also has the services of the State Police at its disposal. The Commission further noted that Railways cannot absolve itself and runaway from their responsibility of providing perfect, faultless service, apart from protecting the life and property of the consumer which is very essential. The State Commission awarded a compensation of Rs.25000 for the mental agony, trauma and harassment suffered by the consumer and Rs.5000 as cost of litigation.
S L Bhargava vs Northern Railway, I (2007) CPJ 92 Delhi SCDRC
CUSTOMER IS KING
CONSUMER RIGHTS VINDICATED
Banks held accountable for ATM services
"Offering ATM facility to consumers is a 'service' and
banks are accountable for it", this is the categorical
message that has been given to banks by the Consumer
Court. Mr. Devender Pratap Singh had a saving bank
account with the State Bank of India, under which the
bank extended to him ATM facility. Once when he tried to
withdraw Rs.800 from his SBI account ATM in his native
place Bulandshahar, he was unable to complete the
transaction. The ATM showed that his account balance
was Rs.249.47, even though actually he had Rs. 25565 in
his account. When Mr. Singh came back to Delhi, he
contacted the SBI Branch Manager who confirmed that he
indeed had sufficient balance. When Mr. Pratap filed a
case against SBI in consumer court for deficiency in
service, the bank contended that ATM services do not fall
in the ambit of being called a 'service' under the
Consumer Protection Act, as banks do not charge any
consideration from the consumer for this facility.
Therefore no question arises for any liability on this
account.
The State Commission did not agree with the contention
of the bank and explained the meaning of 'service' under
the Act to the bank. The Commission also observed that it
was neither a case of ATM failure nor malfunction and it
was indeed "the grossest kind of deficiency in service on
the part of those who are maintaining and feeding the
ATMs".
The State Commission upheld compensation of Rs.4000
and Rs.1000 as cost of litigation awarded by the District
Forum to the consumer.
SBI vs Devender Pratap Singh, IV (2006) CPJ 167
Mobile recharge voucher's validity change
penalised
Mr. Pradyumna Kumar Mishra of Cuttak purhased a
mobile recharge card for Rs.200 which had a validity
period of 30 days. However on the 20th day Mishra found
he could no longer make outgoing calls.
When Mishra enquired from Reliance Telecom about the
same, he was told that the validity period of the smart
card had been reduced from 30 days to 20 days and the
same had been published in newspapers. Mishra's
contention was that the mobile recharge card explicitly
said that it was valid for 30 days therefore the service
provider cannot unilaterally reduce the validity period to
twenty days.
When Mishra took the case to Cuttak District Forum,
Reliance's contention was that the relationship between
the consumer and the company was a contractual one
and was governed by the service terms and conditions set
out in the subscriber enrolment form.
While the Cuttak District Forum rejected Mishra's plea,
the Orissa State Commission held that the arbitrary and
unilateral action of the service provider in reducing the
validity period indeed amounted to deficiency in service.
During the period that the his phone calls were barred,
the consumer must have chosen some other mode of
communication by spending additional money.
The Commission assessed the compensation at Rs. 5000
and allowed Rs.1000 as costs of litigation.
Pradyumna Kumar Mishra vs Reliance Telecom Ltd,
I (2007) CPJ 421
Banks held accountable for ATM services
"Offering ATM facility to consumers is a 'service' and
banks are accountable for it", this is the categorical
message that has been given to banks by the Consumer
Court. Mr. Devender Pratap Singh had a saving bank
account with the State Bank of India, under which the
bank extended to him ATM facility. Once when he tried to
withdraw Rs.800 from his SBI account ATM in his native
place Bulandshahar, he was unable to complete the
transaction. The ATM showed that his account balance
was Rs.249.47, even though actually he had Rs. 25565 in
his account. When Mr. Singh came back to Delhi, he
contacted the SBI Branch Manager who confirmed that he
indeed had sufficient balance. When Mr. Pratap filed a
case against SBI in consumer court for deficiency in
service, the bank contended that ATM services do not fall
in the ambit of being called a 'service' under the
Consumer Protection Act, as banks do not charge any
consideration from the consumer for this facility.
Therefore no question arises for any liability on this
account.
The State Commission did not agree with the contention
of the bank and explained the meaning of 'service' under
the Act to the bank. The Commission also observed that it
was neither a case of ATM failure nor malfunction and it
was indeed "the grossest kind of deficiency in service on
the part of those who are maintaining and feeding the
ATMs".
The State Commission upheld compensation of Rs.4000
and Rs.1000 as cost of litigation awarded by the District
Forum to the consumer.
SBI vs Devender Pratap Singh, IV (2006) CPJ 167
Mobile recharge voucher's validity change
penalised
Mr. Pradyumna Kumar Mishra of Cuttak purhased a
mobile recharge card for Rs.200 which had a validity
period of 30 days. However on the 20th day Mishra found
he could no longer make outgoing calls.
When Mishra enquired from Reliance Telecom about the
same, he was told that the validity period of the smart
card had been reduced from 30 days to 20 days and the
same had been published in newspapers. Mishra's
contention was that the mobile recharge card explicitly
said that it was valid for 30 days therefore the service
provider cannot unilaterally reduce the validity period to
twenty days.
When Mishra took the case to Cuttak District Forum,
Reliance's contention was that the relationship between
the consumer and the company was a contractual one
and was governed by the service terms and conditions set
out in the subscriber enrolment form.
While the Cuttak District Forum rejected Mishra's plea,
the Orissa State Commission held that the arbitrary and
unilateral action of the service provider in reducing the
validity period indeed amounted to deficiency in service.
During the period that the his phone calls were barred,
the consumer must have chosen some other mode of
communication by spending additional money.
The Commission assessed the compensation at Rs. 5000
and allowed Rs.1000 as costs of litigation.
Pradyumna Kumar Mishra vs Reliance Telecom Ltd,
I (2007) CPJ 421
REAL ESTAE OR GOLD ?
INVESTMENT IN REAL ESTATE OR GOLD
Q. Is there a correlation between stock market and
property market? If the stock market crashes, will
sentiments turn negative in property market?
A. The answer, however, is not as straightforward as you
might think. Yes, there is, but not much. There are
different demand drivers for different real estate
sectors. The stock market performance and its impact
on general sentiments is only one of the factors.
There are many other factors that also reduce the
correlation. There can be two scenarios - in the first,
if the market goes up, resulting in excessive profits
being invested in the real estate sector. In the second,
the market goes down and investors shift their focus
from the stock market to real estate for safety
reasons.
Q. Ideally when should one invest in real estate? What
are the factors that would suggest that the time is
right to invest in real estate? :
A. The best time to invest in real estate is while the
demand for property in particular location is likely to
increase and prices are still low, and the possibility of
appreciation is high. If prices are already high, they
will eventually plateau out. Another factor to consider
is when you want to diversify your portfolio.
Q. Considering the high rates of interest on home loans,
are there going to be any long-term repercussions on
the real estate market?
A. Interest rates on home loans have risen, and may rise
by another 50-100 basis points within 2 to 3 months.
But this does not change the fact that people need
homes, as well as opportunities to invest. It only
results in people buying smaller homes in lesspreferred
locations, which is what is happening now.
Q. What kind of gold should I buy?
A. The answer, however, is not as straightforward as you
might think. What you buy depends upon your goals.
If your goal is simply to capitalize on price movement
with tax treatment of Mutual funds, then buy Units of
Exchange Traded Funds (Currently UTI Gold Share
and Gold Bees of Bench Mark are traded at NSE).
These offer profit potential just like tracking gold
price.
If you want leverage effect also then buy Gold Futures
at NCDEX or MCX.
If you want to convert gold into ornaments , then buy
physical gold.
Q. When should I buy Gold or Property?
A. The short answer is 'When you need it.' You cannot
approach gold or property the way you approach
equity investments. Timing is not really an issue. The
real question is whether or not you feel the need to
diversify your present portfolio with gold or property.
If you feel the need, the best time to start is now. It is
better to be a day early than an hour late.
Q. Is investment in gold is an insurance against odds?
A. Gold's baseline, essential quality is its role as the only
primary asset that is not someone else's liability. No
matter what happens in this country, with the Rupee,
with the stock and bond markets, the gold owner will
find a friend in the yellow metal something to rely
upon when the chips are down. In gold, investors will
find a vehicle to protect their wealth.
This is precisely what people have discovered during
countless crisis situations over the centuries and in
financial meltdowns in recent history like the Pacific
Rim in 1997, in Argentina and Brazil in 1998, in
Turkey in 2002, and in the Middle East during Iraq
war. When crunch time came, those who owned gold
understood that gold is gold.
Q. What percentage of my assets should I invest in gold?
A. Once again the answer is not cut and dried, but a
general rule of thumb is 10% to 20%; and how high
you go within that range depends upon your analysis
of the current economic, financial and political
situation.
Obviously, the individual with a low level of concern
about the current economic situation will tend toward
the 10% level. Those with lagging confidence in the
way things are going will gravitate to the higher end of
the range.
Q. Can you briefly describe what you believe to be the
biggest mistake investors make when starting out as
gold owners?
A. The biggest trap investors fall into is buying a gold
investment that bears little or no relationship to his or
her objectives. Most often the safe-haven investor
simply wants to add gold coins to his or her portfolio
mix, but too often this same investor ends up instead
with a leveraged gold position.
Q. What about gold futures contracts?
A. Futures contracts are generally considered one of the
most speculative arenas in the investment
marketplace. The investor's exposure to the market is
leveraged and the moves both up and down are
greatly exaggerated. Something like 9 out of 10
investors who enter the futures market come away
losers. For someone looking to hedge their portfolios
against economic and financial risk, this is a poor
substitute for owning the metal itself.
Q. What is the best approach for the safe-haven investor?
A. If you want to protect yourself against inflation,
deflation, stock market weakness and potential
currency problems -- in other words, if you want to
hedge financial uncertainties, there are only two
portfolio items that will serve you in all seasons and
under most circumstances gold or property.
Q. Is there a correlation between stock market and
property market? If the stock market crashes, will
sentiments turn negative in property market?
A. The answer, however, is not as straightforward as you
might think. Yes, there is, but not much. There are
different demand drivers for different real estate
sectors. The stock market performance and its impact
on general sentiments is only one of the factors.
There are many other factors that also reduce the
correlation. There can be two scenarios - in the first,
if the market goes up, resulting in excessive profits
being invested in the real estate sector. In the second,
the market goes down and investors shift their focus
from the stock market to real estate for safety
reasons.
Q. Ideally when should one invest in real estate? What
are the factors that would suggest that the time is
right to invest in real estate? :
A. The best time to invest in real estate is while the
demand for property in particular location is likely to
increase and prices are still low, and the possibility of
appreciation is high. If prices are already high, they
will eventually plateau out. Another factor to consider
is when you want to diversify your portfolio.
Q. Considering the high rates of interest on home loans,
are there going to be any long-term repercussions on
the real estate market?
A. Interest rates on home loans have risen, and may rise
by another 50-100 basis points within 2 to 3 months.
But this does not change the fact that people need
homes, as well as opportunities to invest. It only
results in people buying smaller homes in lesspreferred
locations, which is what is happening now.
Q. What kind of gold should I buy?
A. The answer, however, is not as straightforward as you
might think. What you buy depends upon your goals.
If your goal is simply to capitalize on price movement
with tax treatment of Mutual funds, then buy Units of
Exchange Traded Funds (Currently UTI Gold Share
and Gold Bees of Bench Mark are traded at NSE).
These offer profit potential just like tracking gold
price.
If you want leverage effect also then buy Gold Futures
at NCDEX or MCX.
If you want to convert gold into ornaments , then buy
physical gold.
Q. When should I buy Gold or Property?
A. The short answer is 'When you need it.' You cannot
approach gold or property the way you approach
equity investments. Timing is not really an issue. The
real question is whether or not you feel the need to
diversify your present portfolio with gold or property.
If you feel the need, the best time to start is now. It is
better to be a day early than an hour late.
Q. Is investment in gold is an insurance against odds?
A. Gold's baseline, essential quality is its role as the only
primary asset that is not someone else's liability. No
matter what happens in this country, with the Rupee,
with the stock and bond markets, the gold owner will
find a friend in the yellow metal something to rely
upon when the chips are down. In gold, investors will
find a vehicle to protect their wealth.
This is precisely what people have discovered during
countless crisis situations over the centuries and in
financial meltdowns in recent history like the Pacific
Rim in 1997, in Argentina and Brazil in 1998, in
Turkey in 2002, and in the Middle East during Iraq
war. When crunch time came, those who owned gold
understood that gold is gold.
Q. What percentage of my assets should I invest in gold?
A. Once again the answer is not cut and dried, but a
general rule of thumb is 10% to 20%; and how high
you go within that range depends upon your analysis
of the current economic, financial and political
situation.
Obviously, the individual with a low level of concern
about the current economic situation will tend toward
the 10% level. Those with lagging confidence in the
way things are going will gravitate to the higher end of
the range.
Q. Can you briefly describe what you believe to be the
biggest mistake investors make when starting out as
gold owners?
A. The biggest trap investors fall into is buying a gold
investment that bears little or no relationship to his or
her objectives. Most often the safe-haven investor
simply wants to add gold coins to his or her portfolio
mix, but too often this same investor ends up instead
with a leveraged gold position.
Q. What about gold futures contracts?
A. Futures contracts are generally considered one of the
most speculative arenas in the investment
marketplace. The investor's exposure to the market is
leveraged and the moves both up and down are
greatly exaggerated. Something like 9 out of 10
investors who enter the futures market come away
losers. For someone looking to hedge their portfolios
against economic and financial risk, this is a poor
substitute for owning the metal itself.
Q. What is the best approach for the safe-haven investor?
A. If you want to protect yourself against inflation,
deflation, stock market weakness and potential
currency problems -- in other words, if you want to
hedge financial uncertainties, there are only two
portfolio items that will serve you in all seasons and
under most circumstances gold or property.
DIGITALLY SIGNED TDS CERTIFICATES
CBDT has issued Circular 2/2007 dated 21-05-2007,
allowing employers to issue digitally signed Form 16 to
employees.
Form 16 till now
Every employer has to issue TDS certificate in Form 16 to
employees before 30th April. The certificate has to be
singed by the authorised person.
The certificate, till assessment year 2006-07 was a
critical document in the hands of employee, as it needed
to be attached with the return of income. Without Form
16, the return of income was not accepted.
Annexure less filing for AY 2007-08
This has changed with the introduction of annexure less
returns for the assessment year 2007-2008. There is no
need to attach Form 16 with the return of income. In fact,
it has been made very clear that even if any attachment is
presented , the receiving person will detach the same and
return it to the assessee.
The TDS certificates are now issued only for the purpose
of personal record of the employees subject to the
condition that they may be required to produce the same
on demand before the Assessing Officer.
The TDS details made in the return of income can also
be matched with the e-TDS returns Form 24Q furnished
by the deductors.
Physically signing Form 16
Many companies have a very large number of employees.
This posed problem for the person authorised to issue
TDS certificate as he/she would have to physically sign
each and every certificate, which is very time consuming.
There were representation to the income tax department
to allow the employers to use their digital signatures to
authenticate TDS certificates instead of signing the
certificates manually.
Digital Signature
• Digital signatures are being used to authenticate
most of the e-commerce transactions on the internet.
Digital signature are used for e-filing of return of
income. All ROC returns are also electronically filed
with digital signatures.
Digitally Signed Form 16
• Deductors are now allowed to use their digital
signatures to authenticate the certificates of
deduction of tax at source in Form No.16.
• This is optional and they can continue to manually
sign the certificate.
• The deductors will have to ensure that TDS
certificates in Form No.16 bearing digital signatures
have a control No. and a log of such control number
must be maintained.
• The deductor must ensure that its TAN and the PAN of
the employee are correctly mentioned in such Form.
• The deductors will also ensure that once the
certificates are digitally signed, the contents of the
certificates are not amenable to change by anyone.
When and how to issue
For the financial year 2006-07 , the last date of issuing
Form 16 was April 30, 2007 . This would mean that all the
employers would have already issued Form 16 with
manual signature.
For the financial year 2007-2008, however digitally
signed certificates can be issued.
For issuing the same
• You will require a software tool to create Form 16 in
format which cannot be changed.
• You can also create Form 16 in Microsoft Word file
and digitally sign it. To do this :
1. On the Tools menu, click Options, and click
the Security tab.
2. Click Digital signatures.
3. Click Add.
4. Select the certificate you want to add, and
then click OK.
allowing employers to issue digitally signed Form 16 to
employees.
Form 16 till now
Every employer has to issue TDS certificate in Form 16 to
employees before 30th April. The certificate has to be
singed by the authorised person.
The certificate, till assessment year 2006-07 was a
critical document in the hands of employee, as it needed
to be attached with the return of income. Without Form
16, the return of income was not accepted.
Annexure less filing for AY 2007-08
This has changed with the introduction of annexure less
returns for the assessment year 2007-2008. There is no
need to attach Form 16 with the return of income. In fact,
it has been made very clear that even if any attachment is
presented , the receiving person will detach the same and
return it to the assessee.
The TDS certificates are now issued only for the purpose
of personal record of the employees subject to the
condition that they may be required to produce the same
on demand before the Assessing Officer.
The TDS details made in the return of income can also
be matched with the e-TDS returns Form 24Q furnished
by the deductors.
Physically signing Form 16
Many companies have a very large number of employees.
This posed problem for the person authorised to issue
TDS certificate as he/she would have to physically sign
each and every certificate, which is very time consuming.
There were representation to the income tax department
to allow the employers to use their digital signatures to
authenticate TDS certificates instead of signing the
certificates manually.
Digital Signature
• Digital signatures are being used to authenticate
most of the e-commerce transactions on the internet.
Digital signature are used for e-filing of return of
income. All ROC returns are also electronically filed
with digital signatures.
Digitally Signed Form 16
• Deductors are now allowed to use their digital
signatures to authenticate the certificates of
deduction of tax at source in Form No.16.
• This is optional and they can continue to manually
sign the certificate.
• The deductors will have to ensure that TDS
certificates in Form No.16 bearing digital signatures
have a control No. and a log of such control number
must be maintained.
• The deductor must ensure that its TAN and the PAN of
the employee are correctly mentioned in such Form.
• The deductors will also ensure that once the
certificates are digitally signed, the contents of the
certificates are not amenable to change by anyone.
When and how to issue
For the financial year 2006-07 , the last date of issuing
Form 16 was April 30, 2007 . This would mean that all the
employers would have already issued Form 16 with
manual signature.
For the financial year 2007-2008, however digitally
signed certificates can be issued.
For issuing the same
• You will require a software tool to create Form 16 in
format which cannot be changed.
• You can also create Form 16 in Microsoft Word file
and digitally sign it. To do this :
1. On the Tools menu, click Options, and click
the Security tab.
2. Click Digital signatures.
3. Click Add.
4. Select the certificate you want to add, and
then click OK.
Give Power To Your Portfolio
The demand for power is expected to increase substantially in future with more urbanization and industrialization in
store ahead. The per capita consumption of power in India is 600 KWH, which is very low as compared to 2,634 KWH
world average. The demand is higher than supply and with shortage in the supply side due to low installed capacity
overall, any kind of capacity addition will be welcomed in our country
Even in China due to power shortage recently , the Government has taken steps to reduce power consumption . For
example , it has issued an order asking all its citizens not to keep air conditioners below 25 degree celsius.
• All power generating, distribution, trading and power equipment manufacturing companies are set to benefit
from the bright prospects for the sector.
• You can invest in companies in power sector listed at Stock Exchanges. Some of prominent companies are Jindal
Steel & Power ,Reliance Energy, ABB, Tata Power, JP Hydro., Power Trading Co., Siemens, Crompton Greaves,
Areva T&D India Ltd, Voltamp Trans, Cummins India, NTPC, BHEL, GMR etc..
• You can also invest through Mutual Funds like Reliance Power Sector Fund
NAV Returns
1-Week 1-Month 3-Months 6-Months 1-Year 3-Years Incep.
NAV Growth 3.48% 3.88% 26.45% 19.76% 87.08% 64.98% 59.08%
store ahead. The per capita consumption of power in India is 600 KWH, which is very low as compared to 2,634 KWH
world average. The demand is higher than supply and with shortage in the supply side due to low installed capacity
overall, any kind of capacity addition will be welcomed in our country
Even in China due to power shortage recently , the Government has taken steps to reduce power consumption . For
example , it has issued an order asking all its citizens not to keep air conditioners below 25 degree celsius.
• All power generating, distribution, trading and power equipment manufacturing companies are set to benefit
from the bright prospects for the sector.
• You can invest in companies in power sector listed at Stock Exchanges. Some of prominent companies are Jindal
Steel & Power ,Reliance Energy, ABB, Tata Power, JP Hydro., Power Trading Co., Siemens, Crompton Greaves,
Areva T&D India Ltd, Voltamp Trans, Cummins India, NTPC, BHEL, GMR etc..
• You can also invest through Mutual Funds like Reliance Power Sector Fund
NAV Returns
1-Week 1-Month 3-Months 6-Months 1-Year 3-Years Incep.
NAV Growth 3.48% 3.88% 26.45% 19.76% 87.08% 64.98% 59.08%
Shares held as stock-in-trade or Investment ?
Shares held as stock-in-trade or Investment
The laws in our country are quite confusing at times.
Circulars issued from time to time clarify these issues.
But what can be done, when the circular creates more
confusion that clarifying the issue?
Gains from investment
We have at hand a crucial situation with regard to the
gains from investment. Whether the same be treated as
Capital Gain or Business Income.
• The point became important with the introduction of
Securities Transaction Tax (STT) and corresponding
lowering of tax rate in case of STT paid Capital gains.
• In majority of cases effective tax rate is lower when
the profit is considered as Capital Gain, than as
business income.
• In the case of FII's it is the other way round, since
they are benefited if the same is considered as
business income due to Double Taxation Avoidance
Agreements.
• Either way without any clear-cut instructions, the
issue is always open for litigation.
Past circular
• The issue was raked up one year back when the old
circular issued by The Central Board of Direct Taxes
(CBDT) through Instruction No.1827 dated August
31, 1989 was issued in the Income tax Department
to be followed to determine the taxability.
• Now again this issue is in the news with the
publication of CIRCULAR NO. 4/2007, DATED
15-6-2007
Present Circular No 4/2007
• The present circular hardly says anything new.
• It firstly refers to The Central Board of Direct Taxes
(CBDT) Instruction No.1827 dated August 31, 1989
• Then it goes on to discuss the findings of Supreme
Court Decisions in the case of
o Commissioner of Income Tax (Central), Calcutta
Vs Associated Industrial Development Company
(P) Ltd (82 ITR 586)
o Commissioner of Income Tax, Bombay Vs H.
Holck Larsen (160 ITR 67), and
o The Authority for Advance Rulings (AAR) (288
ITR 641) and also reference is to the AAR in the
case of Fidelity group
What the present circular has to say
The principles referred to by the Circular are summarized
below :
1. The assessee, who being in a position should produce
evidence from its records as to whether it has
maintained any distinction between those shares
which are its stock-in-trade and those which are held
by way of investment.
2. The emphasis is on facts and not on law.
3. The power to purchase or sell shares in the
Memorandum is not decisive of the nature whether
trading or investment.
4. The substantial nature of transactions, the manner of
maintaining books of accounts, the magnitude of
purchases and sales and the ratio between
purchases and sales and the holding would furnish a
good guide to determine the nature of transactions.
5. The purchase and sale of shares with the motive of
earning a profit, would result in the transaction being
in the nature of trade/adventure in the nature of
trade.
6. Where the object of the investment in shares of a
company is to derive income by way of dividend etc.
then the profits accruing by change in such
investment (by sale of shares) will yield capital gain
and not revenue receipt.
7. it is possible for a tax payer to have two portfolios,
i.e., an investment portfolio comprising of securities
which are to be treated as capital assets and a
trading portfolio comprising of stock-in-trade which
are to be treated as trading assets.
8. Where an assessee has two portfolios, the assessee
may have income under both heads i.e., capital gains
as well as business income.
9. No single principle would be decisive and the total
effect of all the principles should be considered to
determine in a given case
The last para of circular practically undoes the whole
exercise by stating that “ These instructions shall
supplement the earlier Instruction no. 1827 dated August
31, 1989.”
If we analyse the circular there are two new things that
emerge from this circular.
1. An assessee can have two portfolios.
2. The total effect of the guiding principles has to be
applied in a given case.
This reduces the threat faced by the retail investor. Now
some instances of non delivery investments or F&O
transactions will not give blanket permission to the
Assessing officer to consider the total investment as
Business.
Does this circular really gives any relief to the Investor?
Does this circular give any clarity on the matter? The
answer to the latter is definitely negative, but for the
former to an extent yes.
We wish the law makers understand the situation and
clear the dilemma. We would like to take the example of
option given to the assessee to chose Indexation benefit
as an alternate to long term tax at a lower percentage.
A similar option will be a real relief. The FII's have AAR to
take shelter, where does retail investor go?
4 July
The laws in our country are quite confusing at times.
Circulars issued from time to time clarify these issues.
But what can be done, when the circular creates more
confusion that clarifying the issue?
Gains from investment
We have at hand a crucial situation with regard to the
gains from investment. Whether the same be treated as
Capital Gain or Business Income.
• The point became important with the introduction of
Securities Transaction Tax (STT) and corresponding
lowering of tax rate in case of STT paid Capital gains.
• In majority of cases effective tax rate is lower when
the profit is considered as Capital Gain, than as
business income.
• In the case of FII's it is the other way round, since
they are benefited if the same is considered as
business income due to Double Taxation Avoidance
Agreements.
• Either way without any clear-cut instructions, the
issue is always open for litigation.
Past circular
• The issue was raked up one year back when the old
circular issued by The Central Board of Direct Taxes
(CBDT) through Instruction No.1827 dated August
31, 1989 was issued in the Income tax Department
to be followed to determine the taxability.
• Now again this issue is in the news with the
publication of CIRCULAR NO. 4/2007, DATED
15-6-2007
Present Circular No 4/2007
• The present circular hardly says anything new.
• It firstly refers to The Central Board of Direct Taxes
(CBDT) Instruction No.1827 dated August 31, 1989
• Then it goes on to discuss the findings of Supreme
Court Decisions in the case of
o Commissioner of Income Tax (Central), Calcutta
Vs Associated Industrial Development Company
(P) Ltd (82 ITR 586)
o Commissioner of Income Tax, Bombay Vs H.
Holck Larsen (160 ITR 67), and
o The Authority for Advance Rulings (AAR) (288
ITR 641) and also reference is to the AAR in the
case of Fidelity group
What the present circular has to say
The principles referred to by the Circular are summarized
below :
1. The assessee, who being in a position should produce
evidence from its records as to whether it has
maintained any distinction between those shares
which are its stock-in-trade and those which are held
by way of investment.
2. The emphasis is on facts and not on law.
3. The power to purchase or sell shares in the
Memorandum is not decisive of the nature whether
trading or investment.
4. The substantial nature of transactions, the manner of
maintaining books of accounts, the magnitude of
purchases and sales and the ratio between
purchases and sales and the holding would furnish a
good guide to determine the nature of transactions.
5. The purchase and sale of shares with the motive of
earning a profit, would result in the transaction being
in the nature of trade/adventure in the nature of
trade.
6. Where the object of the investment in shares of a
company is to derive income by way of dividend etc.
then the profits accruing by change in such
investment (by sale of shares) will yield capital gain
and not revenue receipt.
7. it is possible for a tax payer to have two portfolios,
i.e., an investment portfolio comprising of securities
which are to be treated as capital assets and a
trading portfolio comprising of stock-in-trade which
are to be treated as trading assets.
8. Where an assessee has two portfolios, the assessee
may have income under both heads i.e., capital gains
as well as business income.
9. No single principle would be decisive and the total
effect of all the principles should be considered to
determine in a given case
The last para of circular practically undoes the whole
exercise by stating that “ These instructions shall
supplement the earlier Instruction no. 1827 dated August
31, 1989.”
If we analyse the circular there are two new things that
emerge from this circular.
1. An assessee can have two portfolios.
2. The total effect of the guiding principles has to be
applied in a given case.
This reduces the threat faced by the retail investor. Now
some instances of non delivery investments or F&O
transactions will not give blanket permission to the
Assessing officer to consider the total investment as
Business.
Does this circular really gives any relief to the Investor?
Does this circular give any clarity on the matter? The
answer to the latter is definitely negative, but for the
former to an extent yes.
We wish the law makers understand the situation and
clear the dilemma. We would like to take the example of
option given to the assessee to chose Indexation benefit
as an alternate to long term tax at a lower percentage.
A similar option will be a real relief. The FII's have AAR to
take shelter, where does retail investor go?
4 July
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