News Flash June 2013

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Recent updates on Maharashtra Local Body Tax (LBT), The Real Estate Bill, 2013 by abm & associates, chartered accountants

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News Flash June 2013

  1. 1. abm & associatesCHARTERED ACCOUNTANTSNEWS FLASHJune 2013
  2. 2. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 1ContentsOPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY ON BOT BASIS – I.E. LICENSE TOCOLLECT TOLL IS “INTANGIBLE ASSET” ELIGIBLE FOR DEPRECIATION ___________________________ 2IN BRIEF................................................................................................................................................................................2FACTS ....................................................................................................................................................................................2ISSUE UNDER CONSIDERATION............................................................................................................................................3TRIBUNAL RULING ................................................................................................................................................................3THE REAL ESTATE BILL, 2013 _____________________________________________________________________ 4IN BRIEF................................................................................................................................................................................4THE MAIN FEATURES OF THE DRAFT BILL...........................................................................................................................4MAHARASHTRA LOCAL BODY TAX_________________________________________________________________ 7INTRODUCTION .....................................................................................................................................................................7WHAT IS LBT? .....................................................................................................................................................................7WHO IS LIABLE TO REGISTER?............................................................................................................................................7TAX RATES ............................................................................................................................................................................7TAX PAYMENTS .....................................................................................................................................................................8RETURN FILING.....................................................................................................................................................................8RECORDS TO BE MAINTAINED..............................................................................................................................................8INTEREST & PENALTY...........................................................................................................................................................8
  3. 3. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 2Operation and Maintenance of Infrastructure facility on BOT basis – i.e.License to Collect Toll is “Intangible Asset” eligible for DepreciationIn BriefRecently, ITAT Pune ‘B’ Bench in case of AshokaInfraways Pvt. Limited1held that Cost Incurred forDevelopment and Construction of Infrastructurefacility on Build Operate and Transfer (BOT) basisunder “License to Collect Toll” is an IntangibleAsset and shall be entitled for depreciation undersection 32 of the Income Tax Act, 1961.FactsAssessee is engaged in the business ofconstruction, operation and maintenance ofInfrastructure facilities.The assessee was awarded an infrastructure work1 ITA.No.185 & 186/PN/12of the Dewas By-pass Road in the State ofMadhya Pradesh on BOT basis. As terms of theagreement with the Government of MadhyaPradesh, assessee was required to develop,construct and maintain the road at its own costfor a specified period. On expiry of the specifiedperiod, the infrastructural facility was to betransferred to the Government of MadhyaPradesh free of charge. In consideration of theexpenditure incurred on construction, operationand maintenance of the road and handing it overto the Government of Madhya Pradesh free ofcharge, assessee was bestowed a right to collectToll from the motorists using the road during the‘specified period’ i.e. approx. 11 Years.Assessee had Invested Rs. 61.06 Crores ondevelopment and construction infrastructure
  4. 4. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 3facility which it had capitalised in Books as assets–‘License to Collect Toll’. Assessee claimeddepreciation on said asset being akin to a license,being ‘intangible asset’ within the meaning ofsection 32(1)(ii) of the Income Tax Act, 1961.AO held that the ‘Right to collect Toll’ was neithera license nor a valuable commercial or businessright covered in the expression ‘intangible asset’for the purposes of section 32(1)(ii) of the Act andhence disallowed the claim of Depreciation of Rs.11.44 Crores. However, AO allowed proportionatecost of development of Rs. 5.38 Crores on pro-rata basis spread over the specified period.Issue under considerationWhether the assessee was eligible to claimdepreciation on ‘Right to Collect Toll’ as anintangible asset in terms of section 32(1)(ii) of theIncome Tax Act, 1961.Tribunal RulingTribunal held thatSection 32(1)(ii) of the Act permits allowance ofdepreciation on assets being ‘intangible assets’which are wholly or partly owned by the assesseeand used for the purpose of its business.Assessee had got the ‘Right to collect Toll for thespecified period only after incurring expenditurethrough its own resources on development ofInfrastructure facility. Hence, ‘Right to Collect Toll’being an intangible asset falls within the purviewof section 32(1)(ii) of the Act.
  5. 5. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 4The Real Estate Bill, 2013In BriefThe Bill proposes to regulate transactions in thereal estate sector and is in pursuance of thepowers under Entries 6, 7 and 46 of theConcurrent List of the Constitution, which dealswith Transfer of Property, Registration of Deedsand Documents, and Contracts. The draft Bill hasbeen prepared after detailed deliberations withthe State Governments and concerned CentralGovernment Ministries, and after having suitablyincorporated the suggestions received from them.The main features of the Draft Bill Applicability of the Bill:The proposed Bill is limited in its applicability toresidential real estate i.e. housing and any otherindependent use ancillary to housing. The twoimportant definitions in this regard are:“real estate project means the development of abuilding or a building consisting of apartments, orconverting an existing building or a part thereofinto apartments, or the development of a colonyinto plots or apartments, as the case may be, forthe purpose of selling all or some of the saidapartments or plots or buildings and includes thedevelopment works thereof”“apartment whether called dwelling unit, flat,premises, suite, tenement, unit or by any othername, means a separate and self-contained partof any immovable property located on one ormore floors or any part thereof, in a building oron a plot of land, used or intended to be used forresidential purposes, or for any other type ofindependent use ancillary to the purposespecified and includes any covered garage,whether or not adjacent to the building in whichsuch apartment is located which has beenprovided by the promoter for the use of theallottee for parking any vehicle, or as the casemay be, for the residence of any domestic helpemployed in such apartment”
  6. 6. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 5 Establishment of Real EstateRegulatory Authority:Establishment of one or more ‘Real EstateRegulatory Authority’ in each State/UT, or oneAuthority for two or more States/UT, by theAppropriate Government, with specified functions,powers, and responsibilities to exercise oversightof real estate transactions, to appoint adjudicatingofficers to settle disputes between parties, and toimpose penalty and interest; Registration of Real Estate Projectsand Registration of Real EstateAgents:Mandatory registration of real estate projects andreal estate agents who intend to sell anyimmovable property, with the Real EstateRegulatory Authority; Mandatory Public Disclosure of allproject details:Mandatory public disclosure norms for allregistered projects, including details of thepromoters, project, layout plan, plan ofdevelopment works, land status, carpet area andnumber of the apartments booked, status of thestatutory approvals and disclosure of proformaagreements, names and addresses of the realestate agents, contractors, architect, structuralengineer etc.; Functions and Duties of Promoter:Duty of promoters towards disclosure of allrelevant information and adherence to approvedplans and project specifications, obligationsregarding veracity of the advertisement for sale orprospectus, responsibility to rectify structuraldefects, and to refund moneys in cases of default; Compulsory deposit of seventypercent or such lesser percent asnotified by the AppropriateGovernment, to cover theconstruction cost of the project, offunds received by the Promoter, in aseparate bank account:Provision to compulsorily deposit seventy percentor such lesser percent as notified by theAppropriate Government, of the amounts realizedfor the real estate project from the allottees, fromtime to time, shall be deposited in a separateaccount to be maintained in a scheduled bankwithin a period of fifteen days of its realization tocover the cost of construction and shall be usedonly for that purpose. Functions of Real Estate Agents:Real estate agents not to facilitate the sale ofimmovable property which are not registered withthe Authority required under the provisions of theAct, obligation to keep, maintain and preservebooks of accounts, records and documents,obligation to not involve in any unfair tradepractices, obligation to facilitate the possession ofdocuments to allottees as entitled at the time ofbooking, and to comply with such other functionsas specified by Rules made in that regard; Rights and Duties of Allottees:Right to obtain information relating to theproperty booked, to know stage-wise timeschedule of project completion, claim possessionof the apartment or plot or building as per
  7. 7. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 6promoter declaration, refund with interest in caseof default by the promoter, and after possessionentitled to necessary documents and plans. Dutyof allottees to make necessary payments andcarry out other responsibilities as per theagreement; Functions of Real Estate RegulatoryAuthority:The Authority to act as the nodal agency to co-ordinate efforts regarding development of thereal estate sector and render necessary advice tothe appropriate Government to ensure thegrowth and promotion of a transparent, efficientand competitive real estate sector; Fast Track Dispute SettlementMechanism:Establishment of fast track dispute resolutionmechanisms for settlement of disputes, throughadjudicating officers (an officer not below the rankof Joint Secretary to the State Government) to beappointed by the Authority, and establishment ofan Appellate Tribunal to hear appeals from theorders of the Authority and the adjudicatingofficer; Establishment of Central AdvisoryCouncil:Establishment of Central Advisory Council toadvise the Central Government on mattersconcerning implementation of the Act, with amandate to make recommendations on majorquestions of policy, protection of consumerinterest and to foster growth and development ofthe real estate sector. The Council to have amongothers, five representatives of State Governments,to be selected by rotation; Establishment of Real EstateAppellate Tribunal:Establishment of Real Estate Appellate Tribunal,by the appropriate government to hear appealsfrom the orders or decisions or directions of theAuthority and the adjudicating officer. TheAppellate Tribunal is to be headed by a sitting orretired Judge of the High Court with one judicialand one administrative/technical member; Punitive Provisions:Punitive provisions including de-registration ofthe project and penalties in case of contraventionof the provisions of the Bill or the orders of theAuthority or the Tribunal; Power to make Rules andRegulations:Appropriate Government to have powers to makerules over subjects specified in the Bill, and theRegulatory Authority to have powers to makeregulations.
  8. 8. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 7Maharashtra Local Body TaxIntroductionRecently, the Maharashtra Governmentintroduced Local Body Tax (LBT) in Pune, Pimpri-Chinchwad, Navi Mumbai, Thane, and NagpurMunicipal jurisdictions which is applicable fromApril 1, 2013. LBT has been introduced in lieu ofOctroi / Cess in various cities.What is LBT?The LBT is payable on the entry of goods broughtinto the areas of a municipal corporation for thepurpose of consumption, use or sale.Who is liable to Register?Dealers having turnover exceeding the thresholdlimits are required to obtain registration. Thelimits are as under:DealerTurnover CriteriaTotal Turnover Schedule AGoodsImporter Sales / Purchasesof ₹ 1 LakhSale / Purchaseof ₹ 5,000Others Sales / Purchasesof ₹ 1 LakhSale / Purchaseof ₹ 5,000A dealer registered under Maharashtra ValueAdded Tax Act, 2005, having a place of businesswithin the Municipal Corporation limits is deemedto be registered for LBT.Tax RatesLBT is applicable on all goods as mentioned inSchedule A. This Schedule provides the rates ofLBT, which varies from 0.1 % to 7%. Any goodsnot mentioned in Schedule A or Schedule B would
  9. 9. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 8fall under 4% category. Goods specified underSchedule B are exempt from LBT. These goodsinclude, basic necessities like Milk, Vegetables etc.Tax PaymentsThe dealer is required to pay the LBT by 10th offollowing month. Banks which accepts LBTpayments & Challans are mentioned in everyMunicipal Corporations levying LBT.Return FilingThe dealer is required to file returns as underPeriodicity FormTypeDue DateSixMonthlyE- I 15 Days from the endof such half yearYearly E – II 15 Days from the endof such yearRecords to be maintainedDealers are required to maintain a register inprescribed format containing details of goodsimported, consumed, purchased or sold by him.The dealer is also required to maintain a registerof purchases and receipt of goods on transferbasis in form D.He should also state the person deemed to be themanager of business in Form F.The dealer is also required to mention thefollowing certificate as declaration.“I/We hereby certify that my/our registrationcertificate under these rules is in force on the dateon which the sale of goods specified in thisbill/invoice/cash memorandum, is made by me/usand that the transaction of sale covered by thisbill/invoice/cash memorandum, has been effectedby me/us in the course of my/our business.”Interest & PenaltyWhen a dealer fails to pay the LBT on time, he isliable to pay interest at 2% per month for the first12 months and 3 % after that.Failure to issue bills, invoice or cash memo issubject to a maximum of double the tax payable.Failure to apply for registration is subject to amaximum of 10 times the LBT payable during theunregistered period.Failure to submit returns in prescribed time leadsto a maximum of ₹ 5,000 penalty. Failure tomaintain records in prescribed format leads to apenalty of ₹ 5,000 or double the LBT payable(whichever is less).
  10. 10. abm & associatesCHARTERED ACCOUNTANTSHead Office : Navi Mumbai Branches : Pune | Kolhapur | Belgaum 9Our 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…

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