MONTHLY COMMUNIQUÉ SEPTEMBER 2011

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Tiffany Robbins
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1 INCOME TAX Guidelines for deduction of tax at source from salaries: The Central Board of Direct Taxes (CBDT) has issued Circular No.5/2011 which provides guidance to employers for deduction of tax at source from salaries under section 192. The present Circular contains the rates of deduction of Income Tax Service Tax Central Excise Customs FTP income-tax from the payment of income chargeable under the head "Salaries" during the financial year and explains certain related provisions of the Income-tax Act. The circular can be accessed at (Circular No. 5/2011, dated August16, 2011) Extension of time for claiming excess tax deducted at source or paid: The CBDT had earlier issued Circular No.2/2011 which prescribed procedure regulating the refund of excess tax paid in respect of tax deducted at source in respect of payments to residents (Refer our Communique for the month of May 2011). The Circular provided that where the excess amount is detected after the financial year in which such excess payment is made, claim for refund can be made to Assessing Officer (TDS) within two years from the end of the financial year in which the tax was deductible. Now, CBDT has extended the time period in respect of the refund claims pertaining to the period till March 31 st 2009 up to 31 st December 2012.(Circular No. 6/2011, dated August 24, 2011) Guidelines for correction of errors in challans for payment of taxes: Under OLTAS (On Line Tax Accounting System), the physical challans of all direct tax payments received from the deductors / taxpayers are digitized on daily basis by the collecting banks and the data transmitted to TIN (Tax Information Network) through link cell. Presently, banks are permitted to correct data relating to three fields only i.e. amount, major head code and name. The other errors can be corrected only by the assessing officers. With effect from a new Challan Correction Mechanism for physical challans has been put in place. The following fields can be corrected through the concerned bank branch, within the time limit prescribed: Sl. No Correction required in Field name Time period for correction (from Challan Date) 1 TAN/PAN 7 days 2 Assessment Year 7 days 3 Amount 7 days 4 Other fields (Major head, Minor head,nature of payment) Within three months Further, the instruction provides that the bank needs to effect the correction within 7 days from the date of receipt of correction request from the taxpayer. 1 P a g e

2 There MONTHLY COMMUNIQUÉ Conditions: Additionally, the following conditions have been prescribed: The tax payer cannot apply to bank for any correction in the name. Any combination of correction of Minor Head and Assessment Year together is not allowed. The tax payer could apply for change in PAN/TAN only when the name in the challan matches with the name as per the new PAN/TAN. The request for change of amount by tax payer is allowed provided the amount so corrected is not different from the amount actually received by the bank and credited to Government Account. The tax payer can apply for correction of challan details only once. However, where 1 st correction request is made only for amount, a 2nd correction request will be allowed for correction in other fields. will be no partial acceptance of change correction request, i.e. either all the requested changes will be allowed, if they pass the validation, or no change will be allowed if any one of the requested changes fails the validation test. Procedure: The tax-payer has to submit the request form for correction (in duplicate) to the concerned bank branch. The tax-payer has to attach copy of original challan counterfoil. In case of correction desired for challans in Form 280 (for depositing advance tax, self assessment tax, dividend distribution tax, tax on regular assessments), Form 282 (For depositing Securities transaction tax, Estate duty, Wealth-tax, Gift-tax, Interest-tax, Expenditure/other tax and Hotel Receipt tax), 283 (For depositing banking cash Transaction Tax and FBT), the copy of PAN card is required to be attached. In case of correction desired for payments made by a tax-payer (other than an individual), the authorization in original with seal of the non-individual taxpayer is required to be attached with the request form. A separate request form is to be submitted for each challan. Procedure of challan correction by Assessing Officers (both physical and e-payment challans) After the lapse of the period available to banks for challan correction, the assessee can make a request for correction to the jurisdictional assessing officer (AO). The AO would allow for such correction challan data in bonafide cases, to enable credit of the taxes paid, to the concerned assessee. 2 P a g e

3 SERVICE TAX: Electronic filling of service tax return mandatory:filing of half yearly service tax returns in Form ST-3electronically is mandatory for all the assesses effective October 01, 2011.Hitherto, filing of e- return was mandatory only for the assesses who had paid a service tax of Rs. 10 lakhs or more, including the amount paid by utilization of CENVAT Credit in the preceding financial year. This would require every service provider / recipient as the case may be, to make an application in Form Annexure A to the PRO (Public Relations Officer) requesting for issue of user id and password which would enable them to file the returns electronically (the form can be accessed at The tax office will communicate the user id and password to the id of the assesse as indicated in the application after which the returns may be filed electronically. (Notification no. 43/2011, dated August25, 2011) Concept paper on taxation of service based on negative list of services: The Honourable Finance Minister had earlier announced to initiate a public debate on the subject of taxing of services based on a negative list of services. In this regard, the Union Finance Ministry has issued a Concept Paper on The paper has classified the services into 27 broad categories in which the negative list of services are under nine different heads. The paper proposes to keep certain services in areas of social welfare and public utilities, agriculture and animal husbandry, financial sector, transport, education and health in the negative list. The concept paper is placed in the public domain to initiate an informed public debate on widening the tax base as a step towards the GST regime for the service sector.( No Service tax on penal charges collected: It is clarified that delayed payment charges received on account of delayed payments by the service recipient to the service provider are in the nature of a penal charge for not making the payment within the stipulated time. Consequently, such amounts are not includible in the taxable value for charging service tax. However such charges have to be shown separately in the account statement/invoice/ bill, as the case may be to claim exemption. (Circular-F.No.137/25/2011, dated August 03, 2011) Service tax leviable on the fee charged by the Chambers of Commerce for issue of COOC(Country of Origin Certification):The CBEC has clarified that the activity of certification of the national character of the export goods, is covered under the definition of technical inspection or certification'and not under 'club or association service since the chamber or EPC or Trade Association which issues COOC acts as a technical inspection and certification agency.accordingly, it would taxable under the category of technical inspection or certification agency services. (Circular No.145/14/2011-ST,dated August19, 2011) 3 P a g e

4 CENTRAL EXCISE: Monetary limits for filing of appeal: The Central Board of Excise and Customs has issued a circular specifying the monetary limits with respect to preferring of appeals by the department. Accordingly, only if the disputed duty / tax or refund is exceeding the amounts mentioned below, the department shall consider preferring an appeal. Appellate Forum Monetary limit CESTAT (Tribunal) Rs. 5,00,000 High Courts Rs. 10,00,000 Supreme Court Rs. 25,00,000 The revised monetary limits shall be effective from September 01, 2011 Further, the following clarifications have been provided Determinative element of monetary limit would be duty/tax under dispute. In a case involving duty uptors.25 lakhs with penalty and interest or otherwise, the Commissionerates shall not send a proposal to the Board for filing Civil Appeal or Special Leave Petition in the Supreme Court. In case of dispute relating to imposition of penalty or demand of interest,the monetary limits shall be applicable to the said penalty or interest for further litigation. Where the constitutional validity of the Act or Rule is challenged or where the notification, instruction, order or circular has been held illegal or ultravires in a judgment, the matter can be further contested without the applicability of monetary limits. Monetary limits shall apply on the disputed duty and not on the total duty demanded in a case. Monetary limits are applicable to refunds also. The limits are not applicable to applications filed before the Joint Secretary (Revision Application). The limits will be applicable to audit objections accepted by the department. (Instruction F.No.390/MISC/163/2010-JC,dated August 08, 2011) CUSTOMS: Prohibition on carrying rice in baggage by air passengers travelling to USA:United States of America has prohibited carrying of rice by all passengers travelling by air including passengers travelling from India. The prohibition would also be applicable to dispatch of rice through other means such as courier or mail. This is effective from July 30, (Circular No.34/2011- Customs,dated August 03, 2011) 4 P a g e

5 Waiver from the requirement of Bank Guarantee in respect of EOUs / EHTPs / STPs / BTPs:In terms of the provisions contained in the Foreign Trade Policyread with the the Board s Circular No.54/2004 dated , an exemption has been granted from furnishing bank guarantee by 100% Export Oriented Units (EOUs) at the time of import or at the time of sending goods on job work in Domestic Tariff Area (DTA), subject to certain prescribed conditions. These prescribed conditions are: (i) unit has a turnover of Rs. 5 crores or above; (ii) unit is in existence for at least 3 years; (iii) unit is having an unblemished track record and (iv) unit has achieved Positive NFE. However, the Customs / Central Excise field formations are insisting for Bank Guarantee even for Status Holder on the ground that show cause notices have been issued to them and the condition of unblemished track record is not satisfied in terms of the policy requirements. In this regard, it has been now clarified that the entitlement of bank guarantee exemption to 100% EOUs / EHTP / STP / BTP units shall be denied only in cases involving fraud/ collusion/ willful misstatement/ suppression of facts, whether or not extended period for issue of SCN has been invoked under the relevant provisions. However, in simple cases of issue of show cause notices for procedural violation against such units, the entitlement of exemption from furnishing bank guarantee to EOU/EHTP/STP/BTP units need not be denied. Accordingly, the Board s Circular has also been modified to the above extent. (Circular No. 36/2011-Customs, dated August12, 2011) FOREIGN TRADE POLICY (FTP): Restoration of DEPB benefit on export of Cotton yarn:export of Cotton yarn including Melange yarn appearing under the Product Group Textiles will be entitled for DEPB benefit on exports made on or after and under the categories Textiles and Miscellaneous respectively. Hitherto, the same was withdrawn vide Public Notice No. 45 (RE 2010)/ dated March 31, 2011 and Public Notice No. 57/ dated April21, 2010, respectively.(public Notice No.67 and 68 / (RE 2010), dated August 04, 2011) ACCRETIVE SDU CONSULTING PRIVATE LIMITED +91 (80) specialists@accretiveglobal.com This monthly communiqué summarises select legislative developments on tax and exchange control regulations during the previous month. The views expressed and the information provided in this newsletter are of general nature and is not intended to address the circumstances of any particular individual or entity. Further the above content should neither be regarded as comprehensive nor sufficient for making decisions. Although we endeavour to provide accurate and timely information, there is no assurance or guarantee 5 in Pthis a gregard. e No one should act on the information or views provided in this publication without appropriate professional advise. It should be noted that no assurance is given for any loss arising from any actions taken or to be taken or not taken by anyone based on this publication.

New Procedure of Income Tax payment challan correction by banks (for physical challans) from 1st September 2011

New Procedure of Income Tax payment challan correction by banks (for physical challans) from 1st September 2011 Revised Procedure from 1st September 2011 to get Income Tax, TDS, Self Assessment Tax, Advance