Belgaum Branch of SIRC of ICAI E - Newsletter

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1 The Institute of Chartered Accountants of India (Set up by an Act of Parliament) Belgaum Branch of SIRC of ICAI E - Newsletter Issue 1 Pages 09 Respected Professional Colleagues, Hearty greetings to all my f e l l o w p r o f e s s i o n a l colleagues. I feel privileged to have been addressing you all from this forum as Chairman of Belgaum Branch. I am thankful to all of you for having accepted me as the chairman of Belgaum Branch of SIRC of ICAI. I consider this as an opportunity bestowed upon me to serve my profession and professional colleagues. Change is the only thing which is permanent in this world and I have assumed this position as a Chairman as a result of inevitable change that had to take place. I take this opportunity to congratulate CA Chetan Chougule the immediate past Chairman for his excellent and relentless work for the cause of Belgaum Branch who was ably supported by CA Satish Mehta, secretary. I also take this opportunity to congratulate CA N.D.Gupta who has taken over as President of ICAI and CA Adusumalli Venkateshwar Rao who has taken over the charge as Chairman of SIRC of ICAI. We have planned several programmers during the year for the benefit of members and students, the details of which shall be circulated amongst the members through this E-News Letter. I wish to continue all the good works done by all the past chairmen and conduct programmes throughout the year for the benefit and enlightenment of fellow chartered accountants and chartered accountancy students. The Committee of Belgaum branch is the judicial mixture of young and senior, enthusiastic and experienced members. I am sure with the support of all the members of managing committee and Branch Staff and above all the Chartered Accountant fraternity of Belgaum Branch, we will be in a position to match your expectation. I seek your whole hearted support (tan, man aur dhan), in all our endeavors. It is your support that keeps us moving. Before I lay down my pen, I am duty bound to thank CA Channabasavraj U Bolmal who has wholehearted accepted responsibility of bringing out E-News Letter for the year. Yours in Service Shivakumar Khadabadi Chairman Our Profession... Our Pride OFFICE BEARERS CA. Shivakumar D. Khadabadi Chairman CA. Satish M. Mehta Vice Chairman CA. Jaykumar N. Patil Secretary CA. Rahul V. Adake SICASA Chairman CA. Chetan V. Chougule Treasurer CA. Praveen P. Ghali ITT Co-ordinator

2 LANDMARK RULINGS & STATUTORY CHANGES Goods and Service Tax Case Laws HC ask revenue to make suitable arrangements for registration certificate under GST Modern Pipe Industries v. State of U.P [2017] 88 taxmann.com 155 (All.) The assessee, a partnership firm, was not able to access the registration certificate of his partnership firm which had migrated to GST, even though GST ID and password had been provided to it. The assessee filed a writ petition in the High Court against the same. The High Court held that the revenue had to make suitable arrangement to resolve such kind of problems so that assessee was able to generate his new registration certificate as a partnership firm. Statutory Changes Govt. Waives off late fee for delayed filing of GSTR-4 return NOTIFICATION NO. 73/2017-CENTRAL TAX, DATED The Govt. has waived off the late fee for delayed filing of GSTR-4 return for persons who have opted for composition scheme. Supply of food by college hostel mess is taxable at 5% under GST without ITC; Govt. clarifies CIRCULAR NO. 28/02/2018-GST, DATED Govt. has clarified that the supply of food or drink provided by a college hostel mess or canteen is taxable at the rate of 5% under GST without input tax credit. It is irrelevant whether the service is provided by the educational institution itself or the institution outsources the activity to an outsider contractor. Catering Services by any person other than educational institution is taxable at 5% GST without ITC CORRIGENDUM TO CIRCULAR NO. 28/02/2018- GST DATED Now, the catering services, i.e., supply of food or drinks in a mess or canteen provided by any person other than the educational institution to the concerned educational institution are taxable at the of 5% GST without input tax credit. Now manufacturers opting for composition scheme are required to pay 1% GST; Govt. notifies NOTIFICATION NO. 1/2018- CENTRAL TAX AND UNION TERRITORY TAX, DATED Govt has notified that now manufacturers who have opted for composition scheme under GST are required to pay 1% GST instead of 2% GST of Turnover. Earlier, the traders were required to pay1% GST of the turnover under the composition scheme. Now, the traders are required to pay 1% GST only on the turnover of taxable supplies of goods. 2

3 LANDMARK RULINGS & STATUTORY CHANGES Case Laws Income- tax Revaluation surplus paid to retiring partners isn t distribution of capital assets; firm not liable to tax Mahul construction corporation v. ITO[2017] 88 taxmann.com 181 (Mum. Trib.) The assessee, a partnership firm, acquired development rights over a piece of land for a consideration. Later on, partnership deed was modified and new partners were inducted. Subsequently, vide deed of retirement & reconstitution, three partners retired from the partnership firm and took the amount lying in their capital accounts including surplus on account of revaluation of asset. The assessing officer (AO) held that payment of cash by the firm for settlement of retiring partners revalued capital account balances amounted to distribution of capital asset as contemplated in section 45(4). The Tribunal held in favour of assessee as under: If there was no transfer by way of distribution of assets, then mere fact that retiring partners had withdrawn sum lying to credit in their capital account would not bring assessee-firm within sweep of section 45(4). It was not retirement alone which triggered provisions of section 45(4), rather it was transfer by way of distribution of capital asset by firm coupled with retirement or dissolution which triggered provisions of section 45(4). Since it was not a case of distributing of capital assets amongst partners at time of retirement, therefore, provisions of section 45(4) were no applicable to firm. Development fund received from students couldn t be classified as capital receipt Asstt. CIT v. Scholars Education trust Of India. [2017] 88 taxmann.com 158 (Jaipur Trib.) The assessee was an educational society running various schools. It was registered under section 12AA and was also notified under section 10(23C)(vi). The assessing officer (AO) was of the view that the development fund received by assessee as part of the other fees was not voluntarily offered from any person but a compulsion of students to pay development fund. Accordingly, he treated the development receipt as revenue receipt. The tribunal held in favour of revenue as under: The development fee was not optional for the students but it was compulsory for all the students without any discretion to decide on whether to pay or not to pay the development fund fees. When any payment was compulsory charge in the nature of fee for studying and for continuing the study in the institutions of the assessee, then said payment in the name of development fee couldn t be regarded as voluntary donation. The quantum, the time of payments were decided and determined by the assessee and the students were having no say or role in the quantum of fee or any discretion of paying or not paying the same. Thus, the development fee couldn t be classified as capital in nature and chargeable to tax in hands of assessee. Booking under-construction flat amounts to construction & not purchase for section 54 relief: ITAT Mustansir I Tehsildar v. ITO [2017] 88 taxmann.com 275 (Mum. Trib.) Assessee has sold his 1/3 rd share in a flat on and booked under-construction flat for which payments were made over the year. He took the possession of new flat on Assessee treated the acquisition of new flat as a case of construction and claimed exemption on gain under section 54. However, Assessing Officer (AO) considered the acquisition of flat as a case of purchase of flat. AO took the view that the assessee should have purchased the new flat by as per the requirements of section 54. Accordingly, he disallowed section 54 relief and computed long-term capital gain in hands of assessee. 3

4 LANDMARK RULINGS & STATUTORY CHANGES The Mumbai ITAT held that the booking of flat in an apartment under construction was a case of construction and not a case of purchase. Booking an under-constructed flat must be viewed as a method of constructing residential tenements. Section 54 of the Income Tax Act, 1961 provides that the construction of new residential house should be completed within 3 years from the date of transfer of old residential house. Since assessee duly took the possession of flat within 3 years from date of sale of old flat, he was entitled to section 54 exemption. Society granting loan to general public as well couldn t be termed as co-operative society; SC dismissed SLP Citizen Co-operative society Ltd v. Asstt. CIT[2017] 88 taxmann.com 279 (SC) Assessee a co-operative society claimed deduction under section 80P(2)(a). Deduction was denied on ground that assessee was carrying on banking business for public at large. It was found that activities of assessee were in violation of Mutually Aided Co-operative Societies Act, 1995 under which it was formed. Assessee was catering to two distinct categories, viz., (1) or ordinary members, and (2) nominal members who made deposits with assessee for obtaining loans, who were not members in real sense. Further, most of assessee s business was with second category of persons and depositors and borrowers were quite distinct. Thus, in reality, such activity of assessee was that of finance business and could not be termed as co-operative society. Moreover, it was also found that assessee was engaged in granting loans to general public without any approval from Registrar of societies. Therefore, assessee could not be treated as a co-operative society meant only for providing credit facilities to its members and, accordingly, it would not be entitled to claim benefit of section 80P. Statutory Changes CBDT to intimate about proposed income/loss adjustment prior to issuing intimation u/s 143(1) CIRCULAR NO. 1/2018 [F.NO.225/333/2017-ITA.II], DATED Clause (vi) of section 143(1)(a) of the Income tax act, 1961 provides that while processing of return, the total income or loss shall be computed after making adjustment of income appearing on Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the ITR. The central Board of Direct Taxes (CBDT) had issued instruction No.(s) 9/2017 dated and 10/2017 dated for instance in which section 143(1)(a)(vi) may be invoked in the ITR forms 1 to 6 Since section 143(1)(a)(vi) is being applied for the first time while processing the returns, it has been decided by CBDT that before issuing an intimation of the proposed adjustment, initially an awareness campaign would be carried out to draw the attention of the taxpayers to such differences. This would be in front of an and SMS communication to the concerned taxpayer informing him about the variation in the tax return vis-a-vis the information available in ITR forms and requesting him to respond to the variation within one month of receiving the communication electronically In case the taxpayer fails to respond within the available timeframe or the response is not satisfactory, a formal intimation u/s. 143(1)(a)(vi) proposing adjustment to the returned income would be issued to him. If no response is received from the taxpayer within thirty days of issuance of such intimation, the proposed adjustment shall be made to the returned income. If the taxpayer fully agrees with the proposed adjustment then he is required to file a revised return upon receiving the awareness message or formal intimation u/s 143(1) (a) (vi). 4

5 THE LIGHT ELEMENT There was an octroi check post at the entry point of district place. Quite surprisingly, the officer-in-charge on the octroi post was very honest and upright. One fine morning, a shabbily dressed man, called Lalya, was passing by the check-post. There was a bundle wrapped in a dirty cloth on his bicycle. The officer shouted at him, Hey, you there! What are you carrying in that dirty bundle? Lalya: sir, it is only garbage! Nothing else. Officer: don t be too smart. Bring it inside. Let me check. Lalya: sir, there is really nothing but Kachara Officer: I asked you to bring it in. don t argue. The poor Lalya kept the bicycle below a tree and brought the bundle inside the office. The officer made him open it. And indeed, there was nothing but dirt and dust in the bundle. The officer let him go. The next day, same thing happened. Again, third, fourth,, 10 th day! The officer warned Lalya I am sure, some day or the other, you will take something valuable inside this Kachara. But be sure. I will be checking it every time you come. Lalya had no answer. The story was repeated for about 2 months! The garbage was occasionally sinking. The officer kept on scolding Lalya. Why are you wasting my time? Even if you bring it 10 times every day, I will check it thoroughly. Lalya: sir, aapki marji. Mai kasam khakis kahta hun, is me sirf kachara hai Officer: You can t fool me After a few more months, the honest officer retired from service. But he did not forget to caution his successor. Ye lalya badmash hai. Iske upar dhyan rakhna; kabhi na kabhi yeh shendi lagayega. The successor dutifully obeyed the instructions. After a few weeks, the old officer visited his old check post for some work. He saw the same episode happening. He was simply puzzled. He secretly chased Lalya; and made him stop. Hey, Lalya he said, please stop for while. Lalya stopped and politely asked Yes sir, what can I do for you? Officer: You tell me, what is this you are doing? Why do you carry the garbage every day? Lalya: Sir, I just throw it in some farm. Officer: There is enough garbage in this village. Why do you bring from outside. Believe me, I won t tell anyone. I promise. Officer s curiosity was at its peak. Lalya knew that the honest officer was man of words. He murmured: Sir, please don t tell it to anybody. I am sharing it only with you. Every day. I bring in a new bicycle!! MORAL: As auditors, let us not be distracted by garbage; but focus our attention on bicycles. (Source: Internet) 5

6 EVENTS IN IMAGES Cricket match for CA students at Shivganga Roller Skating Club, Belagavi Student Premier League SPL

7 EVENTS IN IMAGES Cricket match for CA students at Shivganga Roller Skating Club, Belagavi Student Premier League SPL

8 EVENTS IN IMAGES Cricket match between CA s of Belagavi, Hubli & Belgaum Income Tax Officers at Union Gymkhana, Belgaum

9 EVENTS IN IMAGES Republic Day CelebratiAn Chief Guest Shri Jeeva Prabhu from ISCON Temple, Belagavi Felicitation of Newly qualified Chartered Accountants Chief Guest Shri Mahesh Jadhav, Founder - Mahesh Foundation, National Award winner for child welfare