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Union Cabinet approves GST Constitution Amendment Bill

The Union Cabinet, on Wednesday, December 17, 2014 has approved the Constitutional Amendment Bill on Goods and Services Tax (“GST”), taking a step towards the rollout of an ambitious Indirect Tax reform to rationalise Central and State Indirect Taxes into a harmonised GST expecting to raise revenues and boost growth.

The Government aims to implement GST by April 1, 2016. The Government hopes to introduce the Bill in the current winter session of the Parliament. The Bill needs to be approved by a 2/3^rd majority of the House. After this, it needs to be endorsed by at least half of the State Assemblies (15).

Major points of agreements are as under:

·        The Petroleum products have been included in GST but will be taxed at zero rate for three years, implying that States will be able to tax these for that period.

·        Alcohol and Tobacco would be kept out of GST. 

·        Entry tax to be included in GST, thereby making it a comprehensive tax. 

·        The Centre has agreed to compensate the States for revenue loss for five years. Further, the Centre will provide full compensation for the first three years and then progressively reduce it. 

·        The States will be having substantial representation in the proposed GST council, where they will be having 2/3rd of the voting power.

The stalemate between the Centre and the States was broken after Finance Minister Mr. Arun Jaitley held a series of meetings over the past few days with State Finance Ministers to address their concerns including compensation. He had also announced compensation of Rs. 11,000 crore to make up for the cut in the Central Sales Tax (CST) rate to 2% from 4% and assured an additional sum in the coming budget. The issue of CST compensation had been a key irritant.

The Finance Minister has further said that it would be important for all stake holders to ensure GST covers all transactions including petroleum, real estate and electricity in due course, if not immediately. Thus even if some of the products / services are kept out of GST initially, we may expect them to be included within the purview of GST in the course of time.

With the expectation that the Bill will now be tabled in the Parliament in the current winter session, we can hope that GST regime may get implemented from April 2016.

ICSI Admit Cards December 2014 Session

ICSI Admit Cards December 2014 Session
The Institute of Company Secretaries of India (ICSI)

                                                     http://icsi.indiaeducation.net/

No clubbing of interest-free loan given by ‘Shahrukh Khan’ to his wife from whom she had purchased assets

IT : 'Shahrukh Khan' gave interest-free loan to his wife, Gauri Khan, who in turn, purchased a residential house and jewellery from said loan amount. The department clubbed the value of loan amount in the net wealth of 'Shahrukh Khan'. Extending cash loan, to wife does not come within the definition of asset as provided under Section 2(ea) of the wealth tax Act, thus, it could not be said that there was a transfer of asset; the impugned loan amount was not includible in net wealth of assessee

Facts:

(a)		Shahrukh Khan (assessee) gave interest free loan to his wife, Gauri Khan, who, in turn, purchased residential house and jewellery in her name from such loan amount.
(b)		The Assessing Officer ('AO') opined that the loan given by the assessee to his wife would be treated as indirect "transfer of asset" within the meaning of section 4(1)(a)(i) of the Wealth Tax Act. Accordingly, he clubbed the value of loan amount in the net wealth of the assessee.
(c)		On appeal, the CIT(A) affirmed the view of the AO against which the assessee had filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

(1)		Section 4(1)(a)(i) of the Wealth-tax Act, 1957 provides as under:
		In computing the net wealth of an individual, there shall be included, the value of any asset which are held by spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart.
(2)		Extending cash loan, to wife does not come within the definition of asset as provided under Section 2(ea) of the wealth tax Act, thus, it could not be said that there was a transfer of asset as alleged by the department.
(3)		The instant case was not of tax avoidance as in the instant case assessee gave the loan to his wife and the same was duly declared. There is distinction between the term "transfer" and "loan". In act of transfer, some legal interest is created in the transferee over the subject matter of transfer, whereas in case of lending, except a possessory interest, which may be momentary also, no other interest is created.
(4)		In the instant case, the wife of assessee was having independent source of income, filing her return and even subsequently repaid part of the loan. Therefore, there was no "transfer of asset" or "colourable device", as assessee was not the owner of "any asset" which was transferred to the wife, rather a new property was purchased from a third party out of the interest free cash loan taken by the wife from her husband.
(5)		The CIT(A) had opined that it amounts to indirect transfer of asset within meaning of Section 4(1)(a)(i) of the Wealth Tax Act. This angle of CIT(A) was on weak footing as in the instant case there was no transfer of asset rather interest-free loan was given by the assessee to his wife.
(6)		Thus, the impugned loan amount was not includible in wealth of assessee. Accordingly the order of CIT(A) was to be reversed.

Electronic Mode of Payment- Who required to Pay Taxes online

Income Tax Rules provide that the following persons shall pay tax electronically (i.e. internet banking facility or through credit/debit cards) on or after the 1st day of August, 2008:

i.  A company; and

ii.  A person (other than a company), to whom the provisions of section 44AB of the Income-Tax Act 1961 are applicable.

As per the report of Central Board of Excise and Customs (CBEC):

i.  With effect from 01.10.2014, it is mandatory for all Central Excise assesses and service provider/tax payer to electronically pay duty through internet banking.

ii.  E-payment of duty is mandatory for Accredited Clients Programme (ACP) importers paying duty of ₹ 1.00 lakh or more per Bill of Entry.

Further, Government in August 2011 had asked Public Sector Banks (PSBs), FinancialInstitutions (Fls) and Public Sector Insurance Companies (PSICs) to deal with payments to staff, vendors, suppliers and disbursement of loans and payments towards instalments and investments only through direct credit to accounts.

This was stated by Shri Jayant Sinha, MoS in the Ministry of Finance in written reply to a question in the Lok Sabha.

Income Tax Returns need not be disclosed under RTI - HC

A person who is said to be an informer of the Income Tax Department sought under the Right to Information Act, 2005 information and all the records available with the Income tax department in respect of nine assessees.

The CIC allowed the appeal and directed the PIO to provide inspection of the records and also other information sought for.

The assessees whose records have been sought for, are in writ before the Delhi High Court.

The High Court observed,

The income tax returns filed by an assessee and further information that is provided during the assessment proceedings may also include confidential information relating to the business or the affairs of an assessee. An assessee is expected to truly and fairly disclose particulars relevant for the purposes of assessment of income tax. The nature of the disclosure required is not limited only to information that has been placed by an assessee in public domain but would also include information which an assessee may consider confidential. As a matter of illustration, one may consider a case of a manufacturer who manufactures and deals in multiple products for supplies to different agencies. In the normal course, an Assessing Officer would require an assessee to disclose profit margins on sales of such products. Such information would clearly disclose the pricing policy of the assessee and public disclosure of this information may clearly jeopardise the bargaining power available to the assessee since the data as to costs would be available to all agencies dealing with the assessee. It is, thus, essential that information relating to business affairs, which is considered to be confidential by an assessee must remain so, unless it is necessary in larger public interest to disclose the same. If the nature of information is such that disclosure of which may have the propensity of harming one's competitive interests, it would not be necessary to specifically show as to how disclosure of such information would, in fact, harm the competitive interest of a third party.

Assessment proceedings are quasi-judicial proceedings where assessee has to produce material to substantiate their return of income. Income tax has to be assessed by the income tax authorities strictly in accordance with the Income Tax Act, 1961 and based on the information sought by them. In the present case, the respondent wants to process the information to assist and support the role of an Assessing Officer. This has a propensity of interfering in the assessment proceedings and thus, cannot be considered to be in larger public interest. The CIC had proceeded on the basis that the income tax authorities should disclose information to informers of income tax departments to enable them to bring instances of tax evasion to the notice of income tax authorities. This reasoning is flawed as it would tend to subvert the assessment process rather than aid it. If this idea is carried to its logical end, it would enable several busy bodies to interfere in assessment proceedings and throw up their interpretation of law and facts as to how an assessment ought to be carried out. The propensity of this to multiply litigation cannot be underestimated. Further, the proposition that unrelated parties could intervene in assessment proceedings is wholly alien to the Income Tax Act, 1961. The income tax returns and information are provided in aid of the proceedings that are conducted under that Act and there is no scope for enhancing or providing for an additional dimension to the assessment proceedings.

The High Court held that the information furnished by an assesse can be disclosed only where it is necessary to do in public interest and where such interest outweighs in importance, any possible harm or injury to the assesse or any other third party. However, information furnished by corporate assessees that neither relates to another party nor is exempt under Section 8(1)(d) of the Act, can be disclosed.