CA,CS to physically verify company addresses

CA,CS to physically verify company addresses

MCA begins crackdown on shell cos, benami directors. Cos to rectify 'mistakes' in 6 months

N Sundaresha Subramanian / New Delhi Dec 29, 2012, 13:04 IST In a massive clean-up exercise that will address the age old problem of shell companies and directors with questionable credentials, the ministry of corporate affairs (M CA) has tightened the rules governing the registration of addresses and appointment of directors. The exercise has been set off through a series of notifications amending key rules that were released during the week and followed up with newspaper advertisements. The ministry has amended the Form 18, the standard filing for situation of the registered office or any change thereof. Under the new form, onus has been put on the chartered accountant (CA), cost accountant or company secretary (CS) who verifies the filing to physically check the existence of the company. Under the old form, these verifying professionals had to give a certificate that hey have verified the address from the “books of account and records” of the company. Now, a new clause has been added where the CA/CS has to declare that, “I further certify that I have personally visited the new address, verified it and I am of the opinion that the premises are indeed at the disposal of the applicant company.” Further both the company official filing the form such as managing director, manager or the company secretary and the CA/CS verifying it are required to give identification details such as PAN number/ Director Identification number (DIN) or the membership numbers. In addition to the complete address of the registered office and the address of the police station in which the registered office falls, which were the original requirements, companies will now have to produce the proof of address, which is a mandatory requirement under the new form 18. The practice of using hundreds of shell companies with same addresses, some of them fictitious, as holding and subsidiaries has become so common in the Indian corporate sector. Many promoters also followed the dubious practice of appointing distant relatives or personal staff such as driver, barber etc as directors thus keeping control but without any responsibility. However, recent instances where such companies are used for routing political payments and other corporate favours seemed to have triggered the reforms latest reforms, say experts.  Saurabh Agarwal, director, Kennis Consultancy, which specializes in compliance matters, said, “The ROC (Registrar of ompanies) did not have a formal framework for verification of addresses. It is good that such a structure has been put in place as there were increasing instances of companies with bogus addresses. There will be lot of documentation work that needs to be done by several companies.” Agarwal said his firm is also studying what sort of documentation will be required for companies still under formation. “A company still under formation may not own premises or have leases in its name. We are trying to understand what kind of certification would be necessary in such cases. Physical verification can be done. But we have to certify based on vetting of documentary evidence.” If the company does not own the premises or has taken it on lease, then it has to produce further documentary evidence. If the registered office premises is owned by one of the directors of the company, then a no-objection certificate from the director is required to be attached. If the premises are owned by any other entity then a proof that the company is permitted to use such an address needs to be submitted, the amended form 18 showed. The Ministry has also given a six month period for all companies to rectify any errors or mistakes in the key forms such as Form 1( application for incorporation), Form 1A (Application for name) and Form 44 ( Registration form for a foreign company). Further, through a separate notification, the ministry has also amended the form for application of directors identification number (DIN).  In addition to furnishing proof of identity and residence proof, the persons appointed as directors also need to be verified and certified along with their photographs.

Interest on fixed deposit made for business purpose should be considered as business income and not as income from other sources

Interest on fixed deposit made for business purpose should be considered as business income and not as income from other sources

Submitted by : caupdate08 on dated Saturday, December 18th, 2010

Court : Mumbai bench of the Income-tax Appellate Tribunal 

Brief : Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) held that interest income earned on fixed deposit made for the purpose of business should be considered as business income and not as income from other sources. Further, the Tribunal held that salary and welfare expenses of taxpayer’s staff will not be covered under section 44C of the Income-tax Act, 1961 (the Act) since the expenses are directly related to the Indian Project. The Tribunal also held that the payment made for procurement services cannot be considered to be a payment towards fees for technical services as per India-Korea Tax Treaty (the tax treaty) since procurement services were purely commercial in nature and had nothing to do with rendering of any technical managerial or consultancy services. 

Citation : DDIT v. Samsung Engineering Co. Ltd. [2010-TII-169-ITAT-MUM-INTL] Judgement Date 10 November 2010 AY 200 1-02, 2002-03 and 2004-05)

Judgement : 

Interest received on fixed deposits

 Facts of the case

•           The taxpayer, a tax resident of Korea, is engaged in turnkey projectsrelating to procurement, engineering and construction. The taxpayer was awarded a contract by Indian Oil Corporation Ltd. For the purpose of executing the contract, the taxpayer obtained RBI permission to set up a project office and a site office in India. 

•           The taxpayer had to open letter of credit, performance bond, etc. in favour of various vendors in India and since bankers insisted on margins before opening such letter of credits or for giving guarantees, the taxpayer had to keep fixed deposits on which interest income was earned. The taxpayer treated thisinterest income as business income. 

•           The Assessing Officer (AO) held that the interest income has to be assessed as “income from other sources” unless the taxpayer is engaged in the business of money lending. However, the AO accepted the fact that the interest income was effectively connected with the PE.

Taxpayer’s contentions

•           Maintaining fixed deposits was required for obtaining letter of credit and other guarantees for the various projects. Hence, theinterest income is directly related to the business and should be treated as business income. 

•           RBI had granted permission to open a Project Office and a Site Office for the purpose of executing the contract. The approval of the RBI for operation in India is restricted exclusively for the execution of the contract and therefore the interest income is inextricably connected with the Project Office in India.

Tribunal’s ruling

•           The Tribunal relied on the Delhi High Court’s decision in the case of CIT v. Koshika Telecom (2006) 287 ITR 478 (Bom) and Bombay High Court’s decisions in the case of CIT v. Indo Swiss Jewels Ltd. (2005) 284 ITR 389 (Bom) and Lok Holdings (2008) 308 ITR 256 (Bom) wherein it was held that when deposits are made in connection to business activity, interest earned from such deposits constitutes business income. 

•           Accordingly, the Tribunal held that interest income earned on fixed deposit made for the purpose of business should be considered as business income.

TDS Credit Right of Payee- The Refund Made To the Tax Deductor, Even If Wrongful, Has No Adverse Impact on the Rights of the assessee

TDS Credit Right of Payee- The Refund Made To the Tax Deductor, Even If Wrongful, Has No Adverse Impact on the Rights of the Assessee

Submitted by : admin on dated Thursday, January 20th, 2011

Court : Mumbai bench of the Income-tax Appellate Tribunal 

Brief : Learned CIT(A) erred in not directing the AO to unconditionally grant full tax credit to the appellant f or the taxes deducted at source by Reliance Infocomm Limited of Rs 24,41,58,046 and, consequently, grant refund of the said amount as the entire addition made by the AO was deleted by the CIT(A). - learned CIT(A) erred in not directing the AO to unconditionally grant credit, and, consequently, refund for a sum of Rs. 21,26,74,006, being the TDS deducted by the payer, in respect of which the original TDS certificates were submitted by your appellant with the AO during the course of assessment proceedings.

Citation : Lucent Technologies GRL LLC vs DDIT (International Taxation) (ITAT) ITA No. : 6353/Mum/09 Assessment year: 2002-03 Dated: 31st December 2010
IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI L BENCH, MUMBAI

[Coram : N V Vasudevan JM, and Pramod Kumar AM]

ITA No. : 6353/Mum/09

Assessment year: 2002-03

Lucent Technologies GRL LLC       ..............................Appellant

Vs.

Deputy Director of Income Tax -(International Taxation)

Circle 4 (1), Mumbai 400 020  ...................... ...Respondent

Appearances:

P J Pardiwala and Madhur Agarwal, for the appellant Narendra Singh, for the respondent

O R D E R

Per Pramod Kumar: 

1. By way of this appeal, the assessee has challenged correctness of CIT(A)’s order dated 7th October 2009, for the assessment year 2006-07, on the following grounds : 

1. On the facts and in the circumstances of the case and in law, learned CIT(A) erred in not directing the Assessing Officer to unconditionally grant full tax credit to the appellant for the taxes deducted at source by Reliance Infocomm Limited of Rs 24,41,58,046 and, consequently, grant refund of the said amount as the entire addition made by the AO was deleted by the CIT(A). 

2.         On the facts and in the circumstances of the case and in law, learned CIT(A) erred in not directing the AO to unconditionally grant credit, and, consequently, refund for a sum of Rs. 2 1,26,74,006, being the TDS deducted by the payer, in respect of which the original TDS certificates were submitted by your appellant with the AO during the course of assessment proceedings. 

3.         On the facts and in the circumstances of the case and in law, learned CIT(A), without appreciating the provisions of theIncome Tax Act, 1961, and the fact that, as admitted by the AO, the payee had confirmed, vide letter dated 24th December 2008, that whatever taxes were refunded to it would be paid back to the government as per the indemnity bond dated 18th December 2008, erred in directing the AO to restrict the credit the TDS to your appellant to the extent of TDS not claimed/ obtained by the payer, or amounts which have been deposited by the payer with the Government Treasury, out of the TDS refunded to the payer. 

2. The issue in appeal lies in a very narrow compass of material facts. The assessee (Lucent, in short), a company with fiscal domicile in the United States of America, is engaged, inter alia, in the business of supply of copy righted software in connection with telecommunications project. During the relevant previous year, the assessee received gross amount of Rs 162,77,19,401, towards supply of software, from Reliance Infocomm Limited (Reliance Info, in short) out of which withholding tax under Section 195 of the Income Tax Act, computed @ 15% under Article 12 of India US Double Taxation Avoidance Agreement, amounting to Rs 24,41,58,046 was said to have been deducted by the Reliance. The payer also issued certificates evidencing these tax withholdings, i.e. TDS certificates, after depositing the taxes so deducted by the Reliance and in the prescribed manner, for a sum of Rs 21,26,74,006. As on the time of filing theincome tax return, the remaining TDS certificates were said to be in the process of being issued. On the strength of TDS certificates so issued by the payer, Lucent claimed credits for taxes deducted at source. In the meantime, however, there were some noteworthy developments, which have material bearing on the issue in appeal before us, at the end of the payer also. It appears that the payer’s stand was that no taxes are deductible from payments made for supply of copyrighted software, in as much the payments were only for the use of copyrighted article and not the copyright itself. Accordingly, Reliance Info moved an application to his Assessing Officer requesting permission to make the remittance to this assessee without any deduction of tax at source. This application was turned down by the Assessing Officer. Aggrieved, Reliance Info carried the matter in appeal before the CIT(A), but, at the same time, Reliance Info as well deducted tax at source from the payments made to the assessee. On being successful in appeal, Reliance Info was also refundedthe amount that it had deducted at source from payments made to Lucent and deposited in the Government treasury 

3. It was in this background that the claim for credit of TDS certificates, in assessment of Lucent, was declined by the Assessing Officer, and, while doing so, the Assessing Officer, inter alia, observed as follows: 

The contention and the detailed legal submission of the assessee has been duly considered but the same is not found to be acceptable. Verification of the authenticity and genuineness of the TDS certificates are always within the rights of the department. Moreover, this verification is a factual matter, and hence legal submissions are not required. The credit of the TDS has to be given if the certificates are genuine. In the instant case, the fact that tax deposited by Reliance has been refunded to it is known, and hence certificates issued by it no longer remain valid as no tax remains deposited with the Government. In view of the above, an enquiry was conducted from Reliance Infocomm Limited, vide letter dated 24th December 2008, giving them the details of the TDS certificates on which credit was claimed by the assessee, and they were required to confirm that the taxes as mentioned in those certificates have been actually deposited. In response, Reliance Infocomm Limited filed a letter on 29.12.2008 stating that whatever taxes have been refunded to them, shall be paid back to the Government as per their indemnity bond dated 18.12.2006. However, till that time, no confirmation of the certificate was done. In view of the above, credit for TDS was not given to the ass essee as no taxes have remained to be deposited.

4. The Assessing Officer further added that “the contention of the assessee that the recipient cannot be penalized for an invalid TDS certificate is also not acceptable, in view of the fact that this is an arrangement between the two parties and if credit is given to the certificates, it would amount to a payment by the department for software supplied by Lucent Technologies GRL LLC to Reliance Infocomm Limited”. With these observations, the assessee was declined any credit for the taxes which were withheld by Reliance Info from payments made to Lucent, and in respect of which Lucent has furnished the TDS certificates. Aggrieved, inter alia, by the TDS credit so declined by the Assessing Officer, assessee carried the matter in appeal, but the CIT(A) also confirmed the stand so taken by the Assessing Officer. In her brief operative portion of the order, the CIT(A) held as follows : 

I have considered the submissions made by the appellant. The AO is directed to verify whether the TDS refunded to Reliance has been re-deposited by Reliance with the Government, and, if yes, the credit of the same be granted to the appellant as per law, on the basis of original TDS certificates filed by the appellant. In respect of TDS, which has not been claimed as refund by Reliance, the credit of the same shall be granted to the appellant as per law based on original TDS certificates produced by the appellant. Where no TDS certificates are produced by the appellant, credit be granted on the basis of indemnity being obtained by the appellant as provided in the procedure of law. 

5.         The assessee is aggrieved and is in appeal before us. 

6.         We have heard the rival contentions, perused the material on record and duly considered the applicable legal position. The short question that we need to answer is whether lawful implications of a valid tax deduction certificate can be declined on the ground that the person who has issued the tax deduction certificates has been refunded the taxes which he had deposited with the Government. We may also point out that the legislature has now taken note of an anomalous situation like the one that we are in seisin of this appeal, by ensuring that, with effect from 1st July 2007, an appeal under section 248 can only be filed by the tax deductor when tax deductible under section 195 is to be borne by the tax deductor. However, right now, we are dealing with a situation in which appeal under section 248 was filed by the tax deductor much before 1st July 2007. 

7.         There is no dispute that in terms of the provisions of Section 199 of the Income Tax Act, 1961, “(a)ny deduction made in accordance with the foregoing provisions of this Chapter (chapter XVII) and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made,................ and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable”. There is also no dispute that the taxes have been deducted in accordance with the provisions of Section 195, the tax deduction has fulfilled his obligations under section 200 and that tax deduction certificates have been issued under section 203 – at least to the extent of tax deductions amounting to Rs 21,26,74,006.All these requirements have been duly complied with, and, in all fairness to the Assessing Officer, the compliance in respect of these provisions has not even been questioned. The only reason that has prompted the Assessing Officer to decline the credit in respect of the above TDS certificates is that Reliance Infocomm Limited has been refunded taxes which were deducted by Reliance Infocomm Limited and which were deposited with the Government of India. 

8.         It is also an undisputed position that such a refund to tax deductor, as has been granted in the present case, is not prescribed under the scheme of the Act but appears to be an administrative exercise. Learned Departmental Representative could not point out any provisions of law under which such a refund can be made – particularly as TDS certificates are already issued by the tax deductor, and no fault is found in the certificates so issued. 

9.         Our attention has been invited to circular no. 769 dated 6th August 1998 and circular no. 770 dated 20th April 2000, issued by the Central Board of Direct Taxes, which lay down the guidelines about circumstances under which taxes can be refunded to the tax deductor. We are, however, not inclined to go into the question whether the refund has been rightly made or not, or whether or not the interests of revenue authorities have been adequately protected by indemnity bond executed by the Reliance Info. All that concerns is in this appeal is that the legal implications of this refund vis-à-vis the person from whose income the taxes were deducted at source and who has already been issued, in the prescribed manner, appropriate tax deduction certificate. We find none. It is only elementary that when a tax deductor is granted refund of taxes deducted by him, which have already been paid over to the Government, such a refund is outside the scheme of the Act, and when it is done without the approval of the person from whose income the taxes are so deducted and in respect of which certificate under section 203 is already issued, or without his being a party to the entire exercise of grant of refund, such an exercise cannot take away, curtail or otherwise dilute, the rights of the person from whose income taxes are so deducted and to whom such certificate is issued. The rights are granted to the person, from whose income taxes are so deducted and who is issued the tax deduction certificate in the prescribed manner, by the statute, i.e. the Income Tax Act, 1961, and these rights cannot be abridged by an administrative action on the part of the revenue authorities – and particularly when the person, whose rights are being sought to be abridged, was not even a party to the administrative exercise or was in known of refund being granted to Reliance Info. In our considered view, refund granted to Reliance Info by revenue authorities cannot have adverse impact on the rights of the assessee before us, i.e. Lucent. That is a matter between the tax authorities and Reliance Info; we are sure that revenue authorities, while granting the refund, must have safeguarded their interests effectively, and perhaps by now Reliance Info may have even returned the monies, but assessee cannot be expected to get into these aspects of the matter. In this appeal, our concern is confined to the issue that the assessee, from whose payments taxes have been deducted at source and who is also in receipt of the appropriate certificates in accordance with the scheme of the Act, must get credit admissible under Section 199 of the Act – and that such a credit is not declined on the basis of an action which is neither contemplated by the provisions of the Act, nor even in the control of the assessee.

10. In view of the above discussions, we direct the Assessing Officer to grant due credit to the assessee, on the basis of original tax deduction at source certificates produced by the assessee, in accordance with the law and as long as taxes so deducted have been paid over to the Government and certificates in respect of the same have been issued by the tax deductor - uninfluenced by any refunds subsequently granted to the tax deductor. The refund made to the tax deductor, even if wrongful, has no adverse impact on the rights of the assessee. These observations, however, should not be construed, in any way, affecting the remedies that the revenue authorities may pursue qua the tax deductor, if necessary. With these observations, we direct the Assessing Officer to grant credit for tax deducted at source, in accordance with the law and in the light of our observations above. 

11.       In the result, the appeal is allowed in the terms indicted above. 

Pronounced in the open court today on 31st December, 2010. 

Sd/xx  

(N V Vasudevan)        

Judicial Member          

Revenue dept says PAN mandatory for qualified foreign investors

Revenue dept says PAN mandatory for qualified foreign investors

FAQs published on Monday reiterates requirement despite representations by investors

N Sundaresha Subramanian / New Delhi Dec 27, 2012, 11:21 IST

A proposal by finance ministry’s department of economic affairs to exempt Qualified Foreign Investors (QFIs) from acquiring a Permanent Account Number (PAN) has been virtually shot down by the Department of Revenue.

A Frequently Asked Questions (FAQs) published on the department’s website on Monday reiterates that “QFIs are required to obtainPAN card to comply with tax norms” in India

The document adds “Under the current provisions, QFIs would be required to obtain PAN card. The process of obtaining a PAN card is simple, and user friendly. An application can be  filed by a foreign investor online and the process can be completed within 2 to 3 weeks.”

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department of India to any “person” to facilitate him in making tax payments filing, returns and claiming refunds.

The number, along with other relevant details, is printed on a card called PAN card.

The FAQs come with a disclaimer that, “These FAQs are prepared with a view to help QFI applicants to get generic understanding of the tax framework. These FAQs cannot be used in a court of law to interpret any circular, rules, regulations, statutes etc., one way or the other.”

New Batches for CS Executive / Professional students

INSTITUTE FOR CORPORATE ACHIEVERS (ICA)  is going to start New batches for June 2013 , with the aim to shape the future of imminent Company Secretaries.

Executive Group 1:

Name of the Subject	Faculty	Date
General & Commercial Laws	CS ANUJ	Going to start from 17th  Jan
Company & Cost Accounts	CS NIKITA	Going to start from 17th  Jan
Tax Laws	CA SAMEER NIGAM	Going to start from 17th  Jan

Executive Group 2: 

Name of the Subject	Faculty	Date
Company Law	CS ATUL	Going to start from 17th  Jan
Economic Labour Laws	CS MEENAKSHI SRIVASTAVA	Going to start from 17th  Jan
Securities Laws	CS ATUL	Going to start from 17th  Jan

Professional:

Group:1

Subject	Faculty	Date
Company Secretarial Practices	CS MANOJ BHAGAT	Going to start from 4th  Jan
Drafting, Appearances & Pleadings	CS MEENAKSHI SRIVASTAVA	Going to start from 4th  Jan

Group:2

Subject	Faculty	Date
Financial, Treasury & Forex Management	CS NIKITA	Going to start from 24th  Jan
Corporate Restructuring & Insolvency	CS ATUL	Going to start from 24th  Jan

Group:3

Subject	Faculty	Date
Strategic Management, Allainces & International Trade	CS ATUL	Going to start from 24th  Jan
Advanced Tax Laws & Practice	CA SAMEER NIGAM	Going to start from 24th  Jan

Group:4

Subject	Faculty	Date
Due Diligence & Corporate Compliance Management	CS MANOJ BHAGAT	Going to start from 24th  Jan
Governance, Business Ethics & Sustainability	CS ATUL	Going to start from  24th  Jan

Highlights of the Institute are:

·        Experienced and well Qualified Faculty.

·        Academic Ambience

·        Learner Centric

·        Computer and Internet Facility

·        Well Equipped Library.

·        Assistance in Eligibility Test (ET) Facility

Registrations are open and will be done on first come- first serve basis

Nirmala

Institute for Corporate Achievers

(A Premier Institute for Company Secretary Students)

3rd Floor Chitrahar Building

Naval Kishor Road, near Lela Cinema Hall

 Hazratganj, Lucknow

Contact Nos: 9554279814, 8687113270, 9935778867, 0522-4011081

http://instituteforcorporateachievers.blogspot.in/2012/09/best-cs-coaching-in-lucknow.html

Merry Christmas & Happy New Year

Dear All,     "May you feel the Angels enfold you in their wings. May you always find serenity in the simple things. May the Light of Heaven shine upon your path, and bring you to the completion of your work in Peace and Joy and Grace. "   Merry Christmas! Wishing you a New Year filled with good health, new hope and new beginnings! May year 2013 open up for you more opportunities, lead you onto the path of continued success, happiness and prosperity! I wish ... that the coming year showers on you all that you ever wished for! Good luck and smiles, good cheer and ...  A Happy New Year!     Merry X'mas and Happy New Year!!!                         Cheers! CS MANOJ KUMAR BHAGAT