Application of 194H - Post Paid & Pre Paid Mobile Services

SUMMARY OF CASE LAW

Where the assessee company itself admits that it is liable to deduct tax at source u/s 194H in respect of post-paid services rendered through itsdistributors, it is the duty of the assessee to prove that the services rendered by the assessee through thedistributors on pre-paid package is different from the post paid package so as to qualify the former for exemption from operation of section 194H; therefore, if post-paid scheme is subject to section 194H, it is quite unlikely that pre-paid system would be outside the purview of section 194H.

CASE LAW DETAILS
Decided by: ITAT, COCHIN BENCH, COCHIN, In The case of: Vodafone Essar Cellular Ltd. v. ACIT, Appeal No. ITA Nos. 106 to 113/Coch/2009, Decided on: April 30, 2009

RELEVENT PARAGRAPH

25. There is no dispute or dis-agreement regarding the nature of transactions entered into between the assessee and its distributors. The assessee company, by virtue of the licence issued by the Department of Telecommunications, Government of India, is engaged in providing Mobile telephone services to the public at large. The Govt, of India \s allotting the licence to various parties in the field on the basis of geographical specifications. The assessee is operating on all India level and therefore provides services in various States. The services provided by the assessee-company in the State of Kerala is treated as a unit, under the name and style of Kerala Circle for the purpose of sales, administration and control. The assessee company either of its own or through outsourcing establishes the infrastructure facilities for providing Cellular services.

26. The assessee is offering two types of services to the public. The first of its kind is postpaid mobile services whereby the customers are opening account with the assessee company and makes the payment on monthly basis or so against the bills issued by the assessee company. In that case, the assessee company provides services to its customers at the first instance and thereafter issues bills and realizes the proceeds. The assessee company has appointed a number of distributors to manage the distribution business of postpaid mobile services, where the distributorsare supposed to identify the customers, ensure proper documentation of the connection on behalf of the assessee, attend to the complaints of the customers, account for the air time consumed by the customers, and carry out the work of raising bills and collection of the proceeds. In this segment of activity carried on by the assessee company, it is paying commission to the distributors for the services rendered by them and deducts tax at source, whenever the services are remunerated either by payment or by book entry. Therefore, there is no dispute about the applicability of section 194H as far as the post paid mobile telephone services are concerned.

27. The second segment of services rendered by the assessee is the pre-paid mobile services. In pre-paid mobile services, the assessee is delivering the access cards known as SIM Cards of fixed denomination coupled with specific air time duration to the consumers at large. The consumers pay in advance and use SIM Cards by activating their mobile connection provided by the assessee company. It appears that in view of the developments in modern technology, there are number of products and services available in the market and also provided by the assessee company alongwith SIM Cards, to the consumers at large. As In the case of post-paid services, in this segment also the assessee company is appointing State-wide Distributors for identifying the customers and distributing the pre-paid products to the consumers.

28. The distinction in the present case is that the consumers are paying in advance to the distributors as well as the distributors are paying in advance to the assesseecompany. In the case of post-paid cellular services, the customers are paying after availing the services and the distributors are also collecting the amount and paying over to the assessee company after rendering the services.

29. In the case of pre-paid cellular services, the assessee appoints a number ofdistributors on the basis of agreements. As already stated, just like consumers are paying in advance for obtaining SIM Cards from the distributors, the distributors are also paying in advance to the assessee company for getting the pre-paid products. Against such advance payment, the assessee company is delivering the necessary products to the distributors. The Maximum Retail Price (MRP) is mentioned on every product. Distributors/ Retailers are not permitted to sell the products to the ultimate consumers beyond the MRP. The assessee company is delivering these products to thedistributors for a specified margin. For example, if the MRP is Rs. 100/-, the assesseecompany may deliver the same to its distributors at Rs.80/-. This is the invoice price of the assessee company. The assessee company collects this invoice price in advance from the distributors. The distributors are permitted to deliver these products to the ultimate consumers at a price of their choice but not exceeding Rs.100/- per unit, which is the MRP. The margin earned by the distributors being the difference between the sale price and the invoice price is the remuneration of the distributors in this chain of transactions. Therefore, the basic question to be decided in these appeals is whether this margin of the distributors is commission or brokerage coming within the purview ofsection 194H of the I.T.Act,1961 or the margin is a discount as claimed by the assessee company which is outside the purview of that section. The questions whether the assessee is in default and is liable to proceed u/s.201(1) and 201(1A) are only consequential to the finding whether the margin of the distributors is commission/brokerag e or discount.

32. A commercial/business agreement is always subject to various restrictions imposed by the parties inter se but not contravening the provisions of any law. The restriction should not act as a restriction on trade. The restrictions cannot act as un-lawful regulations on the parties. It is permissible for the parties to enter into such contracts and agreements so long as those terms and conditions are not violating provisions of any law.

46. Therefore, it is necessary for us to examine at the outset itself, whether the nature of business transactions entered into between the assessee-company and itsdistributors are sale and purchase of goods or providing service through various distributors/ agents.

48. Therefore, the question whether the assessee company and the distributors are linked up in providing any service is to be answered in the affirmative, in the light of the judgment of the Hon’ble High Court of Kerala in the case of M/s. BPL Mobile Cellular Ltd. vs. State of Kerala and others in Writ Petition No.29202 of 2005. The Court has held that there is no sale or purchase of goods. In the present case, the assessee is doing exactly the same business. Therefore, it is not possible to hold that the SIM Cards and re-charge coupons delivered by the assessee company to its consumers and made available by them to the ultimate considers in the State of Kerala are goods.

49. The above recent judgment of the Hon’ble High Court on the nature of the transaction is paramount in deciding the issue. We may not be able to place much reliance on the judgments of Hon’ble High Court in the case of Kerala State Stamp Vendors Association vs. Office of the Accountant General and others -282 ITR 07(Ker.); M.S.Hameed and Others vs. Director of State Lotteries and others – 249 ITR 186(Ker.) and that of Ahmedabad Stamp Vendors Association vs. Union of India – 257 ITR 202(Guj.) and also on the decision of the Delhi Bench in the case of Idea Cellular Ltd. – 121 TTJ 352 and also that of Hyderabad Bench in the case of M/s. Idea Cellular Ltd., a copy of which was placed before us after the conclusion of hearing. Therefore, all thecase laws relied on by the assessee will have to be viewed in the light of the judgment of the Hon’ble High Court Kerala in the case of M/s. BPL Mobile Cellular Ltd. where the court has held that the relationship between the predecessor of the assessee-company and distributors are relationship of parties involved in providing service of pre-paid telephone services to the ultimate consumers.

50. While relying on the above judicial pronouncements, the assessee company has very much relied on the flexibility of pricing given to the distributors as per the latest agreement. It is the case of the assessee company that there was no occasion for the assessee company to make any payment to the distributors or to credit their accounts .for services rendered by them. While the case of the assessee company is compared to the case of lottery tickets agents and stamp vendors, there are few vital differences. In the case of stamp vendors, even if he is purchasing stamp paper from the Government Depot at a discounted price, the stamp vendor cannot sell the stamp papers at below the denomination printed on it. The stamp worth Rs.100/- is always sold to the general public at Rs.100/- and not for any lesser price or any discount. Government remunerate the stamp vendors by providing a margin which is given at the time of the delivery of the stamp paper itself so that net amount receivable by the Government is collected instantly. Except for realizing the margin, the stamp vendors do not have any freedom of price fixation. This is almost in the case of lottery tickets as well. Therefore, there is no much force in the argument of the assessee company that the case of the assessee is always different because of the freedom of pricing given to the distributors.

51. It is obvious that a service can only be renderedand cannot be sold. The owner of the SIM Cards and re charge coupons is the assessee company, M/s. Vodafone vEssar Cellullar Ltd. This is because the assessee company .is operating under the right of a licence agreement entered into with the Govt, of India. No-body else can be given the right to operate as Cellular telephone service providers. The ultimate service is provided by the assessee company to every one and every-where. The SIM Card is in the nature of a key to the consumer to have access to the telephone net-work established and operated by the assessee company on its own behalf. Since the SIM Card is only a device to have access to the mobile phone network, there is no question of passing of any ownership or title of the goods from the assessee company to the distributor or from the distributor to the ultimate consumer. The distributors are acting only as a link in the chain of service providers. The assessee company is providing the mobile phone service. It is the ultimate owner of the service system. The service is meant for public at large. In between providing of that service, it is necessary for the company to appoint distributors to make available the pre-paid products to the public as well as to look after the documentation and other statutory matters regarding the mobile phone connection. So, what is the essence of service provided by the distributors? The essence of service rendered by the distributors is not the sale of any product or goods. The distributors are providing facilities and services to the general public for the availability of devices like SIM Cards to have access to the mobile phone network of the assessee company. Therefore, it is beyond doubt that all the distributors are always acting for and on behalf of the assessee company. Only for the reason that the distributors are making advance payment for the delivery of SIM Cards and other products and distributors are responsible for the stock and account of those cards, it is not possible to hold that the distributors are not acting for the assessee company but the distributors are acting on their own behalf. Such a proposition is in-conceivable in the facts of the present case. It is always possible for the telephone company itself to provide all these services directly to the consumers as the Department of Telecom was doing; but such a direct service is not feasible now-a-days. Therefore, the assessee has made out a business solution to appoint distributors to take care of the operational activities of the company for providing service. The distributor is one of the Important links in that chain of service.

52. Another important feature is that the SIM Cards stocked by the distributors are still the property of the service provider, the assessee company. The permissive right to use SIM Cards to get access the phone network of the assessee company is given only to the ultimate consumer who activates the connection by using the secrete number provided in the SIM Card. It is only for the ultimate consumer or the assessee company who has the authority to un-cover the secrete number and bring the card into activation. This unique situation negates the argument of the assessee company that once delivery of the SIM Card is taken, it is the absolute property of the distributors. No, this is a mis-conception. distributors are acting on the platform of principal to principal relationship.

53.De facto, there is no case of any purchase and sale in the,matter of pre-paid SIM Cards /re-charge coupons. All these technical products are only distributed through distributors and retailers. Any contractual or legal obligation in respect of providing of a pre-paid mobile telephone service is in fact, between the assessee company and the ultimate consumer.

54As held by the Hon’ble Supreme Court in the case of CIT vs. Durga Prasad More (1973) 82 ITR 540, human conduct and behavior have to be seen in order to decide the true and correct nature of the transaction between the parties.

55.The basic function of the assessee company is delivery of service relating to mobile telephone system. The assessee is operating under the licence issued by the Govt, of India. Assessee is providing services on post-paid basis as well as on pre-paid basis. Even though post-paid and pre-paid are two different methods employed by Telecom operators for providing services and collecting revenue, the nature and content of the service rendered under both the methods is one and the same. As far as the ultimate consumer is concerned, they are getting the service of mobile telephone whether he is subscribing to the scheme of post paid or the scheme of pre-paid.

56. In the case of post-paid scheme, the assessee company is treating the benefits enjoyed by a distributor as commission and deducting tax at source/ -r Where the assessee company itself admits that it is liable to deduct tax at source u/s.l94H in respect of post-paid services rendered through its distributors, it is the duty of the assessee to prove that the services rendered by the assessee through the distributors on pre-paid package is different from the post paid package so as to qualify the former for exemption from operation of section 194H.

57. It is beyond any dispute that the essence of service rendered to the pre-paid and post-paid consumers are one and the same. There is no difference. The only difference is technical. The difference exists only in billing system and revenue collection, etc. In both the cases, assessee company is providing the service. Distributors are helping to reach such services to the ultimate consumers. In both the system, there is documentation. In both the system, the distributors render similar types of services to the assessee company. Of-course accounting the revenue collection and related matters are different. The essence of post-paid and pre-paid services rendered by the assessee company is the same and the relationship between the assessee and the customers is also the same. Therefore, if post-paid scheme is subject to section 194H, it is quite unlikely that pre-paid system would be outside the purview of section 194H.

58. In the case of pre-paid scheme, the ultimate consumer pays in advance and in turn distributors also pay in advance. In the pos- paid scheme, the ultimate consumer is paying after availing the service and the distributors are also paying afterwards In one case money is received in advance and in the other case services are rendered in advance. Billing and collection may be different. But billing, collection, etc. are peripheral matters. These matters do not change the basic character of the transaction/ service between the distributors and the assessee company. Under both the schemes, the character of the relationship between the assessee company and the distributors is the same. Therefore, we find it difficult to accept the profound contention of the assessee company against the application of section 194H.

59. Now from the accounting point of view also, as mentioned in the assessment order, the assessee has debited the account for “commission paid to distributors” . What are the accounting entries passed by the assessee company on delivering the pre-paid cards to the distributors? The assessee company is crediting the sales account by the gross amount and not by net proceeds. For example, the MRP of a pre-paid card is Rs.100/-; margin availed by the distributor is Rs.20/-. The net proceeds available to the assessee is Rs.80/-. Let us see how the assessee is accounting for the above. When the SIM Card is given to the distributor, the assessee company is crediting the sales account for an amount of Rs.100/-. Assessee is debiting the cash account with Rs.80/- being the cash paid by the distributor. Assessee company is debiting the commission account for Rs.20/-. This is the margin enjoyed by the distributor. As far as the assessee company is concerned, it has given a commission of Rs.20/-. On delivery of a pre-paid card of Rs.100/-, assessee is adjusting the payment of commission through accounts and invoice. In the first instance sale is accounted for Rs. 100/-; the second cash is accounted for Rs.80/-; and the third commission is accounted for Rs.20/-. It shows that as far as the sale is concerned, it is Rs.100/- and the assessee has given a commission of Rs.20/- to the distributor and the net cash proceeds is Rs.80/-. Instead of treating the sale at the net value of Rs.80/-, the assessee is accounting the sales at the gross value of Rs.100/- and thereafter debiting an expenses account for commission paid of Rs.20/-. Therefore, in the facts and circumstances of the case and in the light of the finding of the Hon’ble jurisdictional High Court in the case of M/s. BPL Mobile Cellular Ltd. (Writ Petition No-29202 of 2005) that the essence of the contract between the assessee and the distributor is that of service, we find that the distributors are acting as agents of the assessee company and the margin enjoyed by the distributors are the commission/brokerag e allowed by the assessee company.

60. The next question is whether the Commission/brokerag e allowed by the assessee company at the stage of raising the invoice is equivalent to paying of commission/brokerag e to the distributors. The assessee has always raised a contention, that too in the light of the judicial pronouncements including that of M.S.Hameed and Others%s. Director of State Lotteries and others – 249 ITR 186 (Ker.) that the assessee company had no occasion to deduct tax at source as the assessee company was not making any payment to the distributors or crediting the account of the distributors for any services rendered to it. But that occasion was removed by the assessee itself by conscious wordings of the terms of the agreement. The assessee company can collect the net sale proceeds along with TDS element from the distributors while distributing the pre-paid products to the distributors. The distributors shall file their returns before the concerned authorities and depending upon the working results, they can adjust the TDS collected by the assessee company against their tax liability or the refund due. The fact that the distributors may some time deliver the products for a price less than the MRP is not at all an impediment in deducting the tax at source. The distributors may deliver the products at a lesser price, but even then for the purpose of section 194H, as in the above example, the margin available to the distributor is Rs.20/-, which is to be treated as commission, and the assessee has to consider that amount for the purpose of quantifying the element of TDS. The assessee company has to collect the net price along with the above stated TDS element. Therefore, the argument that there was no occasion as in the case of M.S.Hameed and Others vs. Director of State Lotteries and others – 249 ITR 186 (Ker.) has no relevance here. The situation considered by the Hon’ble High Court was different. In that case one party is State Government. Without executing an authority in conformity with the statutory and administrative Rules, no-body can become an Agent of the Government. Further, the Court has considered the subject transaction as that of purchase and sale of goods. But, in the present case, there is no failure of any procedural provisions as apprehended by the assessee company.

61. We have considered the issue raised in these appeals in the light of the judgments of the Hon’ble High Court of Kerala in the case of Kerala State Stamp Vendors Association vs. Office of the Accountant General and others – 282 ITR 07; M.S.Hameed and Others vs. Director of State Lotteries and others – 249 ITR 186; Gujarat High Court in the case of Ahmedabad Stamp Vendors Association vs. Union of India -257 ITR 202 and the Hon’ble Bench of Income-tax Appellate Tribunal, Delhi, in the case of Idea Cellular Ltd. vs. Dy.CIT -121 TTJ 352 and that of the Hon’ble Bench of Income-tax Appellate Tribunal, Hyderabad in the case of M/s. Idea Cellular Ltd.

62. We have also considered all other judgments relied on by the assessee company in support of various propositions relied on,while explaining the features of relationship of principal to principal, principal to agent and meaning to be assigned to the words brokerage, commission, discount, etc.

63. The findings arrived at in all these judgments, though delivered on analogous situation, cannot be implanted in the present case because of the judgment of the Hon’ble High Court of Kerala in the case of M/s. BPL Mobile Cellular Ltd. vs. State of Kerala in Writ Petition No. 29202 of 2005 dated 13-02-2009 which has been pronounced in assessee’s own case in matters relating to Kerala Value Added Tax.

64. Therefore, in the facts and circumstances of the case, we hold that the margin earned by the distributors on supply of SIM Cards and other service products are in the nature of commission and therefore, the assessee is liable to deduct tax at source U/S.194H. As the assessee has not complied with the provisions as stated above, the assessee Is liable to be visited with the consequences provided u/s.201(1) and 201(1A) of the I.T.Act. The assessee company fails in its appeals filed before us.

Service Tax Accounting Codes

Accounting head Service Tax (Put 0044 before these codes)	Tax & Education Cess Code	Interest /Penalty/ Other Payments
ADVERTISING AGENCY	0013	0016
ADVERTISING SPACE OR TIME	0354	0355
AIR TRANSPORT OF PASSENGER	0362	0363
AIR TRAVEL AGENCY	0032	0033
AIRPORT SERVICES	0258	0259
ARCHITECTS SERVICES	0072	0073
ASSET MANAGEMENT	0418	0419
ATM OPERATIONS	0346	0347
AUCTIONEERS SERVICES	0370	0371
BANKING AND FINANCIAL	0173	0174
BEAUTY PARLOURS	0209	0210
BROADCASTING SERVICE	0165	0166
BUSINESS AND EXHIBITION SERVICES	0254	0255
BUSINESS AUXILIARY SERVICES	0225	0226
BUSINESS SUPPORT SERVICES	0366	0367
CAB OPERATORS	0048	0049
CABLE OPERATORS	0217	0218
CARGO HANDLING SERVICES	0189	0190
CHARTERED ACCOUNTANTS	0092	0093
CLEANING SERVICES	0318	0319
CLEARING AND FORWARDING AGENCY	0045	0046
COMMERCIAL TRAINING & COACHING	0229	0230
COMPANY SECRETARIES	0100	0101
CONSTRUCTION OF RES. COMPLEX	0334	0335
CONSTRUCTION SERVICES IN RESPECT OF COMMERCIAL OR INDUSTRIAL BUILDINGS AND CIVIL STRUCTURES	0290	0291
CONSULTING ENGINEER	0057	0058
CONTAINERS BY RAIL	0390	0391
CONVENTION SERVICE	0133	0134
COST ACCOUNTANTS	0096	0097
COURIER AGENCY	0014	0018
CREDIT CARD RELATED SERVICES	0394	0395
CREDIT RATING AGENCIES	0088	0089
CUSTOM HOUSE AGENT	0026	0027
DESIGN SERVICES	0422	0423
DEVELOPMENT AND SUPPLY OF CONTENT SERVICES	0414	0415
DREDGING SERVICES	0310	0311
DRY CLEANING SERVICES	0221	0222
ERECTION,COMMISSIONING AND INSTALLATION	0233	0234
EVENT MANAGEMENT SERVICE	0197	0198
FACSIMILE SERVICES FAX)	0149	0150
FASHION DESIGNER SERVICES	0213	0214
FORWARD CONTRACT SERVICES	0282	0283
FRANCHISE SERVICES	0237	0238
GENERAL INSURANCE BUSINESS	0005	0006
GOODS TRANSPORT OPERATORS	0067	0068
HEALTH CLUB AND FITNESS CENTER	0205	0206
INFORMATION TECHNOLOGY SOFTWARE SERVICE	0452	0450
INSURANCE AUXILIARY	0169	0170
INTELLECTUAL PROPERTY SERVICES OTHER THAN COPYRIGHT	0278	0279
INTERIOR DECORATORS/ DESIGNER'S SERVICE	0076	0077
INTERNET CAFÉ	0241	0242
INTERNET TELECOMMUNICATION/ (TELEPHONY) SERVICE	0382	0383
LEASED CIRCUITS	0137	0138
LIFE INSURANCE SERVICES	0185	0186
MAILING LIST COMPILATION	0330	0331
MAINTENANCE OR REPAIR SERVICE	0245	0246
MANAGEMENT CONSULTANTS	0116	0117
MANAGEMENT OF INVESTMENT UNDER UNIT LINKED INSURANCE PLAN (ULIP) SERVICE	0430	0431
MANDAP KEEPER	0035	0036
MANPOWER RECRUITMENT AGENCY	0060	0061
MARKET RESEARCH AGENCY	0112	0113
MEMBERSHIP OF CLUBS	0322	0323
MINING SERVICES	0402	0403
ONLINE INFORMATION AND DATA	0153	0154
OPINION POLL SERVICES	0274	0275
OUTDOOR CATERING	0051	0052
PACKAGING SERVICES	0326	0327
PAGER SERVICES (RADIO PAGING)	0015	0020
PANDAL OR SHAMIANA SERVICES	0054	0055
PHOTOGRAPHY SERVICE	0129	0130
PORT SERVICES	0177	0178
PRIMARY EDUCATION CESS	0298	0299
PROCESSING AND CLEARINGHOUSE SERVICE	0442	0443
PUBLIC RELATIONS SERVICE	0374	0375
RAIL TRAVEL AGENT	0201	0202
REAL ESTATE AGENTS	0104	0105
RECOGNISED ASSOCIATION OR REGISTERED ASSOCIATION COMMONLY KNOWN AS COMMODITY EXCHANGE SERVICE	0438	0439
RECOVERY AGENT	0350	0351
REGISTRAR TO AN ISSUE	0338	0339
RENTING OF IMMOVABLE PROPERTY SERVICES	0406	0407
SCIENTIFIC AND TECHNICAL CONSULTANCY	0125	0126
SECONDARY AND HIGHER EDUCATION CESS	0426	0427
SECURITY / DETECTIVE AGENCIES	0108	0109
SERVICING OF MOTOR VEHICLES	0181	0182
SHARE TRANSFER AGENT	0342	0343
SHIP MANAGEMENT SERVICE	0378	0379
SITE PREPARATION AND CLEARANCE	0306	0307
SOUND RECORDING SERVICE	0161	0162
SPONSORSHIP SERVICE	0358	0359
STEAMER AGENT	0029	0030
STOCK BROKER	0008	0009
STOCK EXCHANGE SERVICE	0434	0435
STORAGE AND WAREHOUSE SERVICE	0193	0194
SUPPLY OF TANGIBLE GOODS FOR USE SERVICE	0445	0447
SURVEY AND EXPLORATION OF MINERAL	0270	0271
SURVEY AND MAP MAKING	0314	0315
TECHNICAL TESTING,INSPECTION, CERTIFICATION	0249	0250
TELECOMMUNICATION SERVICES	0398	0399
TELEGRAPH SERVICE	0141	0142
TELEPHONE SERVICES	0003	0119
TELEX SERVICES	0145	0146
TOUR OPERATOR	0063	0064
TRANSPORT BY CRUISE SHIPS	0386	0387
TRANSPORT OF GOODS BY AIR	0266	0267
TRANSPORT OF GOODS BY PIPELINE OR OTHER CONDUIT	0302	0303
TRANSPORT OF GOODS BY ROAD	0262	0263
TRAVEL AGENTS (OTHER THAN AIR/RAIL TRAVEL AGENTS)	0294	0295
TV OR RADIO PROGRAMME PRODUCTION	0286	0287
UNDER WRITERS	0084	0085
VIDEO TAPE PRODUCTION	0157	0158
WORKS CONTRACT SERVICES	0410	0411

Salaried People : File your Return Correctly

Salaried People : File your Return Correctly

Most of the salaried employees tend to believe that their only source of taxable income is from their salary. However, in actual this is not so.

There are five heads of Income on which tax is payable.

1. Salary

2. House Property

3. Business or Profession

4. Capital Gains

5. Other Sources.

Generally, all the salaried employees fill up their income tax return declaring only their salary as per their form 16. But they must know that they may have other income taxable under 4 other sources as specified above. So they should properly declare their income from all the head as specified below. This may cost them a certain amount of additional tax but it also provided peace of mind as they will have all their income declared and nothing is concealed.

Income from Salary

Declare income as per your Form 16 received.

Here one thing is also to be noted that if you are employed with more than one employer during the financial year, you should add the gross salary of both the employers in declaring your salary.

Income under House Property

If you own more than one house property and if the other one is rented, you should declare income under head house property.

Income from Business & Profession

Generally, salaried people will not have income from Business or Profession but now a days most of the salaried employees are also active in share market.

It may be noted that the income from F & O trading is considered as business income as per Income Tax. So you should declare your F & O income as business income.

It may also be noted that intra-day share trading income is considered as speculation income under the Business Income Head.

Capital Gains

Salaried people can easily have income under head Capital Gains.

If you are active in share market, mutual funds etc. you can have income under this head. So you should care for calculating your exact amount of Profit from shares and declare under this head. Even if you have LTCG which is exempt from tax, it should be declared.

Income from Other Sources

This is mostly ignored head of income. All the salaried employee have their saving bank account. The interest earned on savings account is taxable under Other sources Income which normally no one declares.

Interest Income from investments like FDR, NSC, MIS is taxable under this head and should be reported accordingly.

So all the salaried people should keep above points in mind and prepare their income statement correctly which is to be submitted to Income Tax Department.

amit.easytaxsolutions@gmail.com

Composition Scheme for Works Contractors - Service Tax India - Changes Notified

Notification No.23/2009 – Service Tax– New Delhi, the 7^th July, 2009

G.S.R. (E).- In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following rules further to amend the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, namely:-

1. (1) These rules may be called the Works Contract (Composition Scheme for Payment of Service Tax) Amendment Rules, 2009.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, in rule 3,-

(A) in sub-rule(1), for the Explanation, the following Explanation shall be substituted, namely:-

“Explanation. -For the purposes of this sub-rule, gross amount charged for the workscontract shall be the sum,-

(a) including-

(i) the value of all goods used in or in relation to the execution of the works contract, whether supplied under any other contract for a consideration or otherwise; and

(ii) the value of all the services that are required to be provided for the execution ofthe works contract; (b) excluding-(i) the value added tax or sales tax as the case may be paid on transfer of property in goods involved; and (ii) the cost of machinery and tools used in the execution of the said works contract except for the charges for obtaining them on hire: Provided that nothing contained in this Explanation shall apply to a works contract, where the execution under the said contract has commenced or where any payment, except by way of credit or debit to any account, has been made in relation to the said contract on or before the 7^th day of July, 2009.”;

(B) after sub-rule(3), the following sub-rule shall be added, namely :-

“(4). The option under sub-rule (3) shall be permissible only where the declared value of the works contract is not less than the gross amount charged for such works contract.”.

[F.No.334/13/ 2009-TRU]

(Prashant Kumar)

Under Secretary to the Government of India

Note:- The principal rules were notified vide notification No.32/2007,- Service Tax, dated the 22^nd May, 2007 and published vide number G.S.R.378(E) , dated the 22^ndMay, 2007 and amended videnotification No.7 /2008-Service Tax, dated the 1^st March, 2008, published vide No. G.S.R. 151 (E), dated the 1^st March, 2008.

Budget 2009 - Highlights

DIRECT TAX

Individual Taxation

· Ceiling limit for

o Men – 1.60 lakhs (increase from Rs.1.50 lakhs)

o Women – 1.90 lakhs (increase from Rs.1.80 lakhs)

o Senior Citizens – Rs.2.40 lakhs (increase from Rs.2.25 lakhs)

· Surcharge removed for Individuals

· Meaning of perquisite in salary to include value of any specified security or sweat equity shares allotted or transferred directly or indirectly by the employer/former employer free of cost or at a concessional rate.

· Perquisite will also include amount of any contribution to an approved super annuation fund by the employer in excess of Rs. One lakh.

· Gift in kind whose fair market value (other than immoveable property) exceeds Rs.50000 or the difference between the consideration and the fair market value exceeds Rs50000 will be taxed in the hands of the recipient. (from 1^st October 2009)

· Benefit of 80DD increased to Rs. 100000

· Benefit of 80E – Interest on educational loans extended to vocational training courses

Corporate Taxation

· Corporate tax remains @ 30%

· Minimum Alternate Tax increased from 10% to 15%

· Fringe Benefit Tax abolished

· Benefit of 150% deduction of expenditure on scientific research extended to all items of manufacture or production except Eleventh Schedule

· Commodity transaction tax abolished

· STPI benefit extended by one more year. (upto 2010-2011)

· 100% deduction for donations to electoral trusts (political party trusts)

For Firms

· Remuneration of partners of a firm

o Upto Rs.3 lakhs – 150000 or 90% of the book profit whichever is more

o On the balance – at the rate of 60% of the book profit

Limited Liability Partnerships

· Limited Liability Partnership will be treated as Firm in the Income Tax Act.

Special Aspects

· Section 40A (3) dealing with payments in cash in excess of Rs. 20000 amended wrt plying, hiring or leasing goods carriages(transport operators) where the ceiling has been increased to Rs.35000 (1^st Oct 2009)

· Wealth tax limit increased to Rs.30 lakhs

· TDS on rent u/s 194I reduced from 15% to 10% for payment to individuals and at 2% for machinery, plant or equipment

· TDS for contract will be @1% for payment to Individuals/HUF and 2% to any other entity.

· Flat rate of 20% TDS in case deductee doest not furnish PAN to deductor.

· Limit for advance tax raised from Rs.5000 to Rs.10000.

· Presumptive taxation(8%) extended to all business (individuals, HUFs and firms) having turnover less than 40 lakhs

INDIRECT TAX

Customs

· Duty on specified life saving drugs/ vaccine is reduced from 10% to 5% and specified heart devices from 7.5% to 5%.

· Duty on gold bars increased from Rs.100 to Rs.200 per 10 gram, other forms of gold increased form Rs.250 to Rs.500 per 10 grams.

· Duty on silver increased from Rs.500 per Kg to Rs.1000 per Kg

· Duty on cotton, wool waste reduced from 15% to 10%.

Excise

· Duty rates on items currently attracting 45 duty has been increased t 8% with some exceptions like drugs and pharmaceutical items, medical equipments, varieties of paper, paper boards etc

· Duty on manmade fiber and yarn, polyester chips, PTA and DMT, acrylonitrile has been increased from 4% to 8%.

· Scheme of Optional duty for pure cotton is restored

· Full exemption from excise duty is provided for goods manufactured and used in construction sites.

· On packaged software exception is provided on the portion that represents consideration for transfer of right to use.

· Duty on branded articles of jewellery has been reduced from 2% to Nil

· A manufacturer of both dutiable and exempted goods who does not maintain separate accounts of inputs shall pay an equal amount to 5% of the total price of exempted goods instead of 10%

Service Tax

· Service tax imposed for transport of goods by rail, transport of coastal goods and inland water, Legal consultancy services, cosmetic and plastic surgery service.

· Definition of stock broker is amended to exclude sub broker.

· A provider of both dutiable and exempted services who does not maintain separate accounts of inputs shall pay an amount equal to 6% of the total price of exempted services instead of 8%

· Cenvat Credit Rules amended to provide a service provide shall to pay back the amount of credit taken on inputs/capital goods fully written off.

· Retrospective amendment is given to notification no.1/2009 will come into effect from 01.01.2005.

Budget 2009 - Personal Income Tax Exemption Limit Raised

THE Finance Minister, in today's budget speech, announced marginal tax benefits for individual tax payers.

He increased the basic exemption limit for male taxpayers and female taxpayers by Rs 10,000 and that of senior citizens by Rs 15,000. Further, he abolished the surcharge of 10% on income over Rs 10 lakh.

The new tax slabs now stand as follows:

Male taxpayers
0 to 160000 0
160001 to 300000 10%
300001 to 500000 20%
Above 500000 30%

Female taxpayers
0 to 190000 0
160001 to 300000 10%
300001 to 500000 20%
Above 500000 30%

Senior citizens
0 to 240000 0
160001 to 300000 10%
300001 to 500000 20%
Above 500000 30%

In addition to this, an education cess of 3% on the tax amount continues while a 10% surcharge on income over Rs 10 lakh has been abolished.

Savings after Budget

For men and women

Taxable income (Rs)	Tax - before budget		Tax -after budget		Difference
	Male	Female	Male	Female	Male	Female
200000	5150	2060	4120	1029	1030	1031
500000	56650	53560	55620	52529	1030	1031
1000000	211150	208060	210120	207029	1030	1031
1200000	300245	296845	271919	268829	28326	28016
1500000	402215	398815	364619	361529	37596	37286
2000000	572165	568765	519119	516029	53046	52736
2500000	742115	738715	673619	670529	68496	68186
4000000	1251965	1248565	1137119	1134029	114846	114536
						In Rs

Payment to Non Residents - Guidelines for furnishing Form 15CA & 15CB in compliance to Section 195

Procedure for furnishing information under sub-section (6) of section 195 of the Income-tax Act, 1961 read with rule 37BB of the Income-tax Rules, 1962.

General

1. Form 15CA should be used for furnishing information of remittances in e-mode in accordance with the provisions of section 195 (6) of the Income-tax Act, 1961. The information should be furnished after obtaining a certificate in Form 15CB from an accountant as defined in the Explanation to section 288 of the Incometax Act, 1961. The print out Form 15CA should be signed and submitted to the Reserve Bank of India/authorized dealer prior to remitting the payment.

2. The Form should be furnished at the website of the Tax Information Network www.tin-nsdl.com.

3. Fields marked with (*) are mandatory.

4. Select the values from the drop down wherever provided.

5. Each transaction detail should be filled in separately.

Guidelines for Part A of Form 15CA:

Remitter:

1. Permanent Account Number (PAN) and Tax Deduction and collection Account Number (TAN) allotted by the Income Tax Department should be mentioned. TAN is mandatory in cases where

a. tax has been deducted or will be deducted at source;

b. the remitter has obtained an order under section 195 (2) of the Income tax Act from the Assessing Officer.

2. In case an invalid PAN and/or TAN is filled in by the remitter, the Form will not be generated.

3. In case the remitter does not have a TAN, it is mandatory to quote PAN of the remitter.

4. PAN of the remitter should invariably be given. However, the same is mandatory if status of entity is Company or Firm. If PAN is not given in such cases, the remitter will not be allowed to generate the Form.

5. Details in at least two address fields for remitter shoule be mentioned.

6. Name of the entity should be mentioned in the “Name of remitter” field.

7. No value is to be provided in Area code, AO type, Range code & AO number. The fields will be entered by the system after validating the PAN and/or TAN.

8. Email id and mobile no., if any, should be provided.

Recipient of remittance:

1. Complete address of recipient of remittance, separated by coma, should be provided.

2. PAN, allotted by the Indian Income Tax Department should be mentioned.

3. If status of entity is “company”, then provide type of company i.e., “domestic” or “other than domestic”.

4. In the field “Principal Place of Business”, the country of tax residence of the recipient of the remittance should be mentioned.

Information for accountant

1. Enter name of the Chartered Accountant in the field “Name of the accountant”.

2. Details in at least two address fields should be mentioned.

3. Date of certificate should not be a future date.

4. Registration no. should be numeric.

5. Details of accountant are not required if point no. 15 is selected i.e. any order u/s 195 (2)/ 195 (3)/ 197 of the Income-tax Act has been obtained from Assessing Officer.

6. Certificate number is an alphanumeric field.

Guidelines for PART B of the Form (Particulars of Remittance and TDS)

1. Provide the values as per the accountant certificate obtained in Form 15CB.

2. In case name of the country is not available in drop down list, select value “other” from the drop down and provide name of the country.

3. In case currency name is not available in drop down then select value ”other” from the drop down and provide name of the currency.

4. Proposed date of remittance should be current date or a future date.

5. Amount of TDS should be less than amount of remittance.

6. Actual amount of remittance after TDS should be less than amount of remittance.

7. BSR code of the bank through which the remittance is made should be mentioned.

8. Rate of TDS as per DTAA (if applicable) should be mentioned upto two decimal places.

9. Amount should be mentioned upto 2 decimal places.

10. Select any one out of fields 12, 13, 14 and 16. One form is to be filled for one type of remittance.

11. Details of “responsible person” should be mentioned for verification.

12. If no tax has been deducted then value “0.00” should be mentioned in “Amount of TDS” field (foreign currency and Indian Rs.)

13. Value for “rate of deduction as per the Income-tax Act” should be “0.00” if no tax has been deducted and “amount of TDS in Indian and foreign currency” should be “0.00”.

Generation of Form 15CA

1. After filling up the information, click “submit”. On submission of details if system shows any errors, rectify and re-submit the form.

2. A confirmation screen with all the data filled by the user will be displayed. The same can be either confirmed or edited.

3. On confirmation, a filled up Form 15CA with an acknowledgement number will be displayed. Print out of the Form should be taken, signed and submitted prior to remitting the payment.

4. Form 15CA can be re-printed by selecting the re-print option. For re-printing, please enter “acknowledgement no.”, “PAN” and/or “TAN” mentioned in the Form.