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News Flash May 2013
 

News Flash May 2013

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Recent updates on Service Tax , FDI Policy, TDS Rates by abm & associates, chartered accountants

Recent updates on Service Tax , FDI Policy, TDS Rates by abm & associates, chartered accountants

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    News Flash May 2013 News Flash May 2013 Document Transcript

    • abm & associatesCHARTERED ACCOUNTANTSNEWS FLASHMay 2013
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 1ContentsWEB SEARCH ONLINE ADVERTISEMENT PAYMENTS MADE TO GOOGLE AND YAHOO NOTTAXABLE IN INDIA______________________________________________________ 2IN BRIEF ...................................................................................................................................2ISSUE UNDER CONSIDERATION ........................................................................................................3TRIBUNAL RULING........................................................................................................................3OUR VIEW .................................................................................................................................3CHANGES IN THE CONSOLIDATED FDI POLICY GUIDELINES EFFECTIVE FROM APRIL 25,2013_________________________________________________________________ 4TAX DEDUCTION AT SOURCE (TDS) RATES FOR FY 2013-14 ______________________ 6UNINTERRUPTED POWER SUPPLY (“UPS”) IS ENERGY SAVING DEVICE AND HENCEQUALIFIES FOR 80% DEPRECIATION _______________________________________ 8IN BRIEF ...................................................................................................................................8ISSUE UNDER CONSIDERATION: .......................................................................................................8TRIBUNAL RULING: ......................................................................................................................8TRIBUNAL HELD THAT ...................................................................................................................8SERVICE TAX RETURN FILING DATE FOR OCT-2012 TO MARCH-2013 EXTENDED TO31.08.2013____________________________________________________________ 9
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 2Web Search Online Advertisement Payments made to Google and Yahoonot taxable in IndiaIn BriefRecently, ITAT Kolkata ‘B’ Bench in case ofRight Florists Pvt. Ltd1held that paymentmade to Google and Yahoo for Online WebSearch engine based advertisement is notliable to be tax in India as “Website”doesn’t constitute ‘PE’ unless the serverson which websites are hosted are alsolocated in the same jurisdiction. As theservers of Google and Yahoo are notlocated in India, there is no PE in India.Further, it has also held that payment isneither “Royalty” u/s 9(1)(vi) nor “FTS” u/s9(1)(vii).FactsAssessee is a florist and he uses advertising1 I.T.A. No.: 1336/ Kol. / 2011 for A.Y. 2005-06on search engines, i.e. by Google andYahoo, which does a web search for anyoneon use of certain keywords wherebyassessee name is shown as a result of suchsearch. The assessee had made paymentsaggregating to Rs 30.44 Lakhs in respect ofonline advertising to US based entities,namely Google Ireland Limited (GoogleIreland, in short) and Overture Services IncUSA (Yahoo USA, in short). However, notaxes were withheld from these payments.The AO held that the assessee ought tohave deducted TDS and that as there wasa failure, the expenditure was not allowableu/s 40(a)(i). This was deleted by the CIT(A) on the ground that Google and Yahoodid not have a PE in India.
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 3Issue under considerationWhether payment made to Google andYahoo for Online Web Search basedAdvertisement Payment is taxable in Indiaeither as “Business Income”, or as“Royalty” or as “FTS”.Tribunal RulingTribunal held that A website does not constitute a‘permanent establishment’ unless theservers on which websites are hostedare also located in the same jurisdiction.As the servers of Google and Yahoo arenot located in India, there is no PE inIndia. S. 9(1)(i) does not apply as thereis no “business connection” in India norare the online advertising revenuesgenerated in India. As regards s. 9(1)(vi), relying ondecision in case Yahoo2and Pinstorm3that the advertising revenues are notassessable as “royalty”. As regards ‘FTS” under s. 9(1)(vii), theservices are not “managerial” or“consultancy” in nature as both these2 140 TTJ 195 (Mum)words involve a human element.Applying the rule of noscitur a sociis,even the word “technical” inExplanation 2 to s. 9 (1) (vii) wouldhave to be construed as involving ahuman element. If there is no humanintervention in a technical service, itcannot be treated as a technical serviceu/s 9(1)(vii). The process is a whollyautomated as services are rendered bythe search engines, there is no humantouch at all. The results are completelyautomated. Consequently, the wholeprocess of actual advertising serviceprovided by Google & Yahoo, even if itbe a technical service, is not covered bythe limited scope of s. 9(1)(vii).Consequently, the receipts in respect ofonline advertising on Google and Yahoocannot be brought to tax in India under theprovisions of the Act or the India US andIndia Ireland tax treaty.Our View This verdict has reasserted that mere‘Website’ doesn’t constitute “PermanentEstablishment” and wholly automatedprocess without human interventiondoesn’t amount to ‘Technical Service’3 54 SOT 78 (Mum)
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 4Changes in the Consolidated FDI Policy Guidelines effective from April25, 2013 Pricing of sharesThe criteria has been changed for theshares subscribed under Memorandumof Association. Now the condition ofDFCF method in case of subscriptionshares has been dispensed with andsuch shares can be issued at face value. Conversion of External CommercialBorrowings / Lump Sum Fee /Royalty etc. into EquityAs per old FDI Policy, the companieswere allowed to issue Equity Sharesagainst import of capital goods /machinery (excluding second handmachinery), subject to certainconditions. One among these conditionswas mandatory requirement ofindependent valuation of Capital goods/ machinery by third party, preferablyby an independent valuer from thecountry of import along with productionof copies of documents issued bycustoms authorities towardsassessment of the fair value of suchimports. The said condition is dispensedwith in new FDI Policy dated April 5,2013. Pakistan citizens, nationals andcompanies are allowed to invest in Indiaafter prior approval from thegovernment. RBI has prescribed the format for filingannual Return of Foreign Assets &Liabilities for Indian Companies. Thesaid return is to be filed with RBI. Transfer of Shares / Convertibledebentures from Resident to Non –ResidentAs per amended definition of ‘PersonResident Outside India’ includes foreignnational, NRI, incorporated non-resident entities, FII other thanerstwhile OCBs. Earlier definition of‘Person Resident Outside India’excluded foreign national, FII, NRI for
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 5the purposes of transfer of Shares /Convertible Debentures from residentto non-resident. Allowed 49% stake by a foreign airlinesin the domestic carriers which are cash-strapped. Raised FDI cap in various broadcastingservices to 74%. Allowed upto 51% inflows of FDI inmulti-brand retail sector. Permitted up to 49% foreign investmentin the power trading exchanges. Increased foreign investment ceiling inARCs to 74%, up from 49%. This moveis aimed at inviting foreign expertise inthis segment. It has also been said thatthe total shareholding of an FII in anARC will not exceed 10 per cent of thetotal paid-up capital.
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 6TAX DEDUCTION AT SOURCE (TDS) RATES FOR FY 2013-14Sr.No.SectionofIncomeTax ActNature of Payment to ResidentThresholdLimit₹Rates in force4(%)Individualor HUFOthers1 192 Salaries (including payments to Non-Resident)BasicExemptionSlabRates5 -2 193 Interest on Securities 5,000 10 103 194 Deemed dividend - 10 104 194AInterest other than Interest on Securities byBank on Term Deposit10,000 10 105 194A Interest other than Interest on Securities 5,000 10 106 194B Lottery, Cross Word Puzzle, Gambling 10,000 30 307 194BB Winnings from Horse Race 5,000 30 308 194CContracts including Sub-Contracts,Advertisement Contracts6 30,00071 29 194D Insurance Commission 20,000 10 1010 194EE Payments out of deposits under NSS 2,500 20 -11 194F Repurchase of units by MF/UTI 1,000 20 2012 194G Commission on sale of lottery tickets 1,000 10 1013 194H Commission or Brokerage 5,000 10 1014 194IRent for Land, building, furniture or fittings 1,80,000 10 10Rent for Plant and Machinery, Equipment,Vehicles etc.1,80,000 2 215 194IATransfer of immovable property other thanagriculture land8 50 Lakh 1 116 194JFees for Professional, Technical Services orRoyalty or Non-compete30,000 10 10Any remuneration or fees or commission paid todirector of the company including Sitting Feesother than Salaries9NIL 10 1017 194LACompensation on acquisition of immovableproperty2,00,000 10 104 Rate shall be at “rates in force” or 20% whichever is higher in case payee doesn’t possess PAN5 Equal Monthly Instalment of Estimated Yearly Tax (Tax including Surcharge and cess applicable)6 No TDS on payment of freight for Goods Transport to Transport contractor furnishing PAN to payer7 Individual Contract less than ₹ 30,000 but aggregate of all contracts during the year exceeds ₹ 75,000- TDS applicable.8 Newly inserted by Finance Bill, 2013, shall be effective from 1.06.13, Purchaser shall deduct the Tax.9 Effective from 1.07.12
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 7Note:a) TDS needs to be deducted on payment or credit whichever is earlier including credit to“Suspense Account”.b) TDS needs to be paid with 7 days from date of deduction in case of salaries and before7th of the succeeding month in case of payments other than salaries. TDS deducted on31st March (on Credit) shall be paid before 30th of April.c) Quarterly Return in Form 24 in case of Salary and in Form 26 in case of others before15th of the end of Quarter and before 15th of May in case of March Quarter needs tofiled.d) Non-deduction, delay deduction, wrong deduction are liable for interest @ 1.5% perMonth and delay in payment is liable for interest @1 % per month.e) Non-deduction, Non-payment of Tax before due date of filing Return of Income is liablefor disallowance of Expenditure and penalties and prosecutions (in case delay is beyond1 year) and Deductor shall be treated as “Assessee in Default”f) Delay in filing Quarterly Returns is liable for fees of ₹ 200 per day of delay (mandatorily)in addition to Penalty.
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 8Uninterrupted Power Supply (“UPS”) is Energy Saving Device and hencequalifies for 80% DepreciationIn BriefRecently, ITAT Mumbai ‘G’ Bench in case ofGodery Phillips India Ltd10held thatUninterrupted Power Supply (“UPS”) is an‘Automatic Voltage Controller’ falling withinthe heading ‘Energy Saving Device‘in theAppendix to the Income Tax Rules 1962giving depreciation rates @ 80% and hencequalifies for such depreciation.Facts:Assessee for the Assessment Year 2006-07and 2007-08 considering the UninterruptedPower Supply (“UPS”) as Energy SavingDevice had claimed depreciation at higherrate i.e. 80%. AO disallowed such excessdepreciation of ₹ 5,74,579 for A.Y. 2006-07and ₹ 4,72,596 for A.Y. 2007-08.Issue under consideration:Whether Uninterrupted Power Supply(“UPS”) is an ‘Automatic Voltage Controller’falling within the heading ‘Energy SavingDevice‘ and eligible for higher Depreciation.Tribunal Ruling:Tribunal held that“Automatic Voltage Controller’ fallingwithin the heading of energy saving device10 ITA No. 7682/Mum/2010 and ITA No. 8549/Mum/2010in the Appendix to the Income Tax Rules1962 giving depreciation rates. Legislaturein its wisdom has chosen to show anAutomatic Voltage Controller’ as anelectrical equipment eligible for 100%depreciation, falling under the broaderhead of energy saving devices. OnceLegislature deemed that an ‘AutomaticVoltage Controller’ is a specie falling withinenergy saving device, it is not for theAssessing Officer or Ld. CIT (A) to furtheranalyse whether such an Item wouldindeed an energy saving device. In fact itis beyond their powers. Hence the onlyquestion to answer, in our opinion iswhether an UPS is an Automatic VoltageController’. It is mentioned in the productthat the UPS automatically corrected lowand high voltage conditions and stepped uplow voltage to safe output levels. Thus inour opinion there cannot be a quarrel thatUPS was doing the job of voltagecontrolling automatically. Even when it wassupplying electricity at the time of powervoltage, the outages remained controlled.Therefore in our opinion a UPS woulddefinitely fall under the head of ‘AutomaticVoltage Controller’.
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 9Service Tax Return Filing date for Oct-2012 to March-2013 Extendedto 31.08.2013Date for filing the ST-3 return, for theperiod from Oct’12 to March’13 has beenextended from 25th Apr, 2013 to 31stAugust, 2013Vide Order No: 03/2013-ServiceTax, CBEC has extended the return filingdate for the period starting October, 2012to March, 2013, from 25th April, 2013 to31st August, 2013. Further it is alsoinformed that utility to prepare the servicetax return will be available at ACES websiteby 31st July, 2013.Please refer Notification No: Order No:03/2013-Service Tax dated 23rdApril, 2013athttps://www.aces.gov.in/Documents/order_3_of_2013_service_tax_dated_23_4_2013.pdf
    • abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 10Our OfficesNavi Mumbai#NL 5/11/03, Sector 3Next to Parsik BankNerul EastNavi Mumbai – 400 706: +91 22 2771 2275Pune#11/E-2, New FriendsHousing SocietyPaul RoadPune – 411 038: +91 20 2539 7707Kolhapur#1-2, Atharva 7thAvenueC.S.No.2007, 7thLaneRajarampuriKolhapur – 416 008: +91 231 2531 707The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavorto provide accurate and timely information, there can be no guarantee that such information is accurate as of date it is received or that it will continue to be accuratein the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.Newsletters & Other Updateshttp://www.abmnassociates.com/newsletters/subscribeSubscribe to our…Visit Our WebsiteTo Know More…http://www.abmnassociates.comFor Inquiryinfo@abmnassociates.comMail Us…