J B Nagar CPE Study Circle of WIRC 1 CA PINKI KEDIA

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1 TDS Return Due date wef 1 st jun 2016 Quarter Form 24Q and 26Q Form 27Q Form 27EQ April to June 31 st July 31 st July 15 th July July to Sep 31 st Oct 31 st Oct 15 th Oct Oct to Dec 31 st Jan 31 st Jan 15 th Jan Jan to Mar 31 st May 31 st May 15 th May Few Key Changes effective from 01/04/ Collection of 1% on cash sales exceeding Rs.2 lakhs (Rs. 5 lakhs, in the case of jewellery) in vogue from , are deleted. Now there is no need to collect TCS on sales exceeding Rs.2 Lakhs. Penalty for violation of Sec 269ST is to be a sum equal to the amount of receipt of two lakhs rupees or more by cash - Finance Act 2017 Few Key Changes effective from 01/06/ Cash sale of goods or provision of services exceeding 2 lacs attract penalty 2. Sec 194-IB - Payment of Rent (land OR Building or Both) Rs per month by any individual or HUF (not subject to Tax audit requirements) deduct - Provision of sec 203A: No requirement to obtain TAN - Point of Deduction: At the time of credit of rent, for the last month of the previous year or last month of tenancy, if the property is vacated during the year, to the account of payee or at the time of payment thereof, whichever is earlier. 3. Sec 194-IC Payment under Specified Agreement (w.e.f ) Any person responsible for making payment to a resident under a Specified Agreement u/s.45(5a) (Joint Development Agreement) Nature of Payment: Consideration(not being consideration in kind) payable under Specified Agreement to any Individual or HUF 4. Sec 194-J Fees for Professional or Technical Services (w.e.f ) Business of operation of call center Limit RS.30000/- - Rate 2% 5. Sec 197A No-deduction of tax at source to be made in certain cases (w.e.f ) Individuals receiving insurance commission referred to in section 194D above Rs.15,000/- on which tax is deductible at the rate of 5%, can file self-declaration in Form 15G/15H for nondeduction of tax at source declaring that tax on his estimated total income of the relevant previous year would be NIL. Few key Changes in Finance Act, 2018 Section 194A - Clause 49 of Finance Act, 2018 proposed to amend Section 194A to increase the threshold limit of Rs to Rs in case of senior citizens. However no change is proposed in TDS rate. Hence the only option left to senior citizens is to file Form 15H. J B Nagar CPE Study Circle of WIRC 1 CA PINKI KEDIA

2 49. In section 194A of the Income-tax Act, in sub-section (3), in clause (i), after the second proviso, the following shall be inserted, namely: Provided also that in case of payee being a senior citizen, the provisions of sub-clause (a), sub-clause (b), and sub-clause (c) shall have effect as if for the words ten thousand rupees, the words fifty thousand rupees had been substituted. Explanation. For the purposes of this clause, senior citizen means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year;. TDS & manner of payment in respect of Trusts As per Finance Act, 2018 the expenditure done by charitable trust on which tax is deductible at source when not deducted or when expenditure is incurred in contravention of section 40A(3) / 40A(3A) such amount shall be chargeable to tax under the head Profits and Gains of Business or Profession. 30% of the expenditure will be disallowed when charitable trust was supposed to deduct TDS & it was not deducted. No deduction shall be allowed in respect expenditure if payment done by trust exceeds Rs & it is done otherwise than by an account payee cheque drawn on a bank or account payee bank draft. Also if expenditure is claimed in particular year & payment is made in subsequent year, & payment exceeding Rs is done otherwise than by an account payee cheque drawn on a bank or account payee bank draft then the expenditure will be deemed as income under the head profits and gains of business or profession in year of payment. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year and subsequent years. Challan in respect of TDS u/s 194IA i) A challan-cum-statement in Form No.26QB is to be filed within 30 days from the end of the month in which the deduction is made ii) TDS certificate in Form no.16b is to be issued to the payee within 15 days from due date of furnishing statement in Form no. 26QB Challan in respect of TDS u/s 194IB i) A challan-cum-statement in Form No.26QC is to be filed within 30 days from the end of the month in which the deduction is made ii) TDS certificate in Form no.16c is to be issued to the payee within 15 days from due date of furnishing statement in Form no. 26QC J B Nagar CPE Study Circle of WIRC 2 CA PINKI KEDIA

3 OUTSTANDING DEMAND / PENALTIES /PROSECUTIONS Default generated for following reasons: Deduction Payment Filing Late Late Late Short Short 1) Short Deduction (u/s 200A): Short deduction is computed when the rate at which TDS Deducted is less than prescribed rate. 2a) Late Payment Interest (u/s 200A read with Sec. 201(1A)): When deductor deposits the TDS after due date of challan deposit, it is a case of late payment and interest will be charged accordingly. Late payment interest will be 1.5% per month from the date of tax deduction to date of tax deposition. * Due date of TDS deposit will be by 7th of the next month of the month for which transaction is reported. 3a) Late Deduction Interest (u/s 200A read with Sec. 201(1A)): When deductor does not deduct the TDS amount on the date of Payment/Credit, then, Interest on Late deduction is computed i.e. if the date of deduction is after the date of payment credit, then the late deduction interest is computed. Late deduction interest is 1% per month from date of transaction to date of tax deduction. *Due date of deduction will be date of payment/credit whichever is earlier. 3b) Interest on Short Deduction (u/s 200A read with Sec. 201(1A)) Short deduction interest is 1% per month on Part of the month from the date on which tax was deductible to the date of the processing of statement. Please note that interest on Short Deduction is provisional in nature. As you pay the short deduction default amount, the corresponding interest (i.e interest on short deduction) would be reversed and the Interest on Late payment or Interest on late deduction shall be levied appropriately, as the case may apply. 4a) Late Filing Fee u/s 234E: As per section 234E, where a person fails to file the TDS/TCS statement within the due date prescribed in this regard, and then he shall be liable to pay, by way of fee, a sum of Rs.200 for each day during which the failure continues. Fee amount will not exceed TDS deductible as per return filed. * Due date of filing will be by 7th of the next month of the month for which transaction is reported. Note: 1) Interest is chargeable for every month or part of the month on the amount of such tax. 2) A month is considered to be a calendar month as per general clauses act. 4b) Penalty for failure to file the TDS/TCS return As per section 271H: where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271H. Minimum penalty shall be levied of Rs. 10,000 which can go upto Rs. 1,00,000. Penalty under section 271H will be in addition to late filing fee prescribed under section 234E. Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. Penalty under section 271H can also be levied if the deductor/collector files an incorrect TDS/TCS return. No penalty will be levied under section 271H for the failure to file the TDS/TCS return, if the person proves that after paying tax deducted/collected by him, alongwith the fee and interest (if any), to the credit of the Central Government, he has filed the TDS/TCS return before the expiry of a period of one year from the due date of filing the TDS/TCS return. In other words, no penalty under section 271H will be levied in case of delay in filing the TDS/TCS return if following conditions are satisfied : J B Nagar CPE Study Circle of WIRC 3 CA PINKI KEDIA

4 1) The tax deducted/collected at source is paid to the credit of the Government. 2) Late filing fees and interest (if any) is paid to the credit of the Government. 3) The TDS/TCS return is filed before the expiry of a period of one year from the due date specified in this behalf. It should be noted that the above relaxation is applicable only in case of penalty levied under section 271H for the delay in filing of TDS/TCS return and not for filing incorrect TDS/TCS return. Apart from above relaxation, in following two cases the taxpayer can get relief from penalty under section 271H: Under section 273A(4) the Principal Commissioner of Income-tax or Commissioner of Incometax has power to waive or reduce the penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A (4) in this regard are satisfied. Apart from shelter of section 273A (4), section 273B also provides immunity from penalty in genuine cases. As per section 273B, penalty under section 271H will not be levied if the taxpayer proves that there was a reasonable cause for failure. Default/ Failure Section Nature of Demand Quantum of demand or penalty Failure to deduct tax at source 201(1) Tax demand Equal to tax amount deductible but not deducted 201(1A) % p.m. of tax deductible 271C Penalty Equal amount of tax deductible but not deducted Failure to deposit tax at source OR Short deduction 201(1) Tax demand Equal to tax amount not deposited / short deducted 201(1A) p.m. of tax not deducted /short deducted 276B Prosecution Rigorous imprisonment for a term for a minimum of 3 months which may extend to 7 years and with fine Failure to apply for TAN No. u/s 203A 272BB Penalty Rs Failure to furnish prescribed statements u/s 200(3) 272A(2)(k) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount J B Nagar CPE Study Circle of WIRC 4 CA PINKI KEDIA

5 Failure to file the TDS/TCS return on or before the due date prescribed in this regard 234 E Late filing Fees Rs. 200 every day during which the failure continues subject to maximum of TDS amount Failure to file the TDS/TCS return on or before the due date prescribed in this regard.this section also covers cases of filing incorrect TDS/TCS return 271H Penalty Minimum : Rs.10,000 Maximum: Rs.1,00,000 Failure to issue TDS certificate u/s (A)(g) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount. Failure to furnish statement of perquisite or profit in lieu of salary u/s 192(2C) Failure to mention PAN of the deductee in the TDS statements and certificates 272(A)(i) Penalty Rs. 100 every day during which the failure continues subject to maximum of TDS amount 272B Penalty Rs As per section 278B, where an offence under the Income-tax Act has been committed by a company (*), then every person who, at the time the offence was committed was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. J B Nagar CPE Study Circle of WIRC 5 CA PINKI KEDIA

6 CORRECTION IN TDS RETURN Statements for financial Year onwards only will be available for corrections. Correction can be made offline or online Correction return cannot be e-filed for any year (incometaxindiaefiling.gov.in) Correction done with Use of DSC - The Correction facility can be availed by using Digital Signature Certificate (DSC). Users without DSC, have an option to facilitate the correction through TDS Assessing Officer. If the buyer makes correction using Digital Signature Certificate (DSC), then there is no need of TDS assessing officer (AO) s approval for making correction in any field of form. But, if the buyer doesn t make correction using Digital Signature Certificate (DSC), then there is some fields in form online correction require approval of their TAN assessing officer (AO). Kindly note that online correction functionality at TRACES is available only for those statements which are processed at TRACES. Since the statement for financial Year , Form 24Q, Quarter 4th is filed and processed before October 2012 (prior to TRACES period), therefore online correction functionality is not available for the aforesaid statement. Online Correction Matrix : Default Challan Add Interest Personal Deductee Pan Pan Modify/add Delete/Add Summary Correction challan to levy to Information Movement Correction Correction deductee salary View (Unmatched / matched) Statement Payment (Annexure 1) (Annexure 2) rows deductee rows Online Correction s (With Digital Signature, onwards ) Online Correction s (With Digital Signature, prior to onwards ) Online Correction s (Without Digital Signature, onwards ) Online Correction s (Without Digital Signature, prior to onwards ) Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N N Y Y Y Y N N N N N N Y Y Y Y N N N N N N J B Nagar CPE Study Circle of WIRC 6 CA PINKI KEDIA

7 Correction in Challans - - Addition of Challan(s) has been discontinued for offline Correction statement(s). - For unmatched challans, update is allowed in all fields. Request to download Conso File will not be accepted till there are unmatched challans in the selected statement. - For matched/overbooked challans, update is allowed only on fields Section code, Interest amount (col. no. 20) and Others amount (col. no. 21). - For overbooked challans, TDS credit, or apportioning of interest amount should be adjusted to the extent of overbooked amount. - Unconsumed challans can be used to pay liability of preceding one year and succeeding one year i.e. unconsumed Challan of F.Y can be use to pay liability of F.Y to F.Y If payment was made using physical challan, you can make an application for correction in the AY, to the concerned bank branch manager in the format available in the attached file within 7 days from the challan deposit date. 2. If payment made through online mode or in case of physical challan, after 7 days from the challan deposit date, you have to make an application to the concerend AO. The original statement will be put on hold for 7 days if Challan Mismatch/ Challan Overbooked/PAN Errors has been identified in the preliminary check. Need to initiate online correction to correct these Errors so that the statement is not processed for defaults. Procedure of challan correction by banks (for physical challans): To remedy this situation, a Challan Correction Mechanism for physical challans has been put in place. Under this mechanism, for income tax payments made on or after , the following fields can be got corrected through the concerned bank branch: Assessment Year Major Head Code Minor Head Code TAN/PAN Total Amount Nature of payment (TDS Codes) The time window for the correction request by tax payer is as follows: Sl.No. Correction required in Field name Period of Correction Request (from Challan Deposit 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 3 months The time window for correction by the bank is 7 days from the date of receipt of correction request from the tax-payer. Conditions: The changes can be made by the banks, subject to following conditions: i. Correction in Name is not permitted. ii. Any combination of correction of Minor Head and Assessment Year together is not allowed. J B Nagar CPE Study Circle of WIRC 7 CA PINKI KEDIA

8 iii. PAN/TAN correction will be allowed only when the name in the challan matches with the name as per the new PAN/TAN. iv. The change of amount will be permitted only on the condition that the amount so corrected is not different from the amount actually received by the bank and credited to Govt. Account. v. For a single challan, correction is allowed only once. However, where 1st correction request is made only for amount, a 2nd correction request will be allowed for correction in other fields. vi. There 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: i. The tax-payer has to submit the request form for correction (in duplicate) to the concerned bank branch. ii. The tax-payer has to attach copy of original challan counterfoil. iii. In case of correction desired for challans in Form 280, 282, 283, the copy of PAN card is required to be attached. iv. In case of correction desired for payments made by a tax-payer (other than an individual), the original authorization with seal of the non-individual taxpayer is required to be attached with the request form. v. 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 window period available to banks for challan correction, the assessee can make a request for correction to his or her assessing officer, who is authorized under the departmental OLTAS application to make such correction in challan data in bonafide cases, to enable credit of the taxes paid, to the concerned assessee. Procedure: i. The tax-payer has to submit the request form for correction (in duplicate) to the concerned assessing officer. ii. The tax-payer has to attach copy of original challan counterfoil. iii. In case of correction desired for challans in Form 280, 282, 283, the copy of PAN card is required to be attached. iv. In case of correction desired for payments made by a tax-payer (other than an individual), the original authorization with seal of the non-individual taxpayer is required to be attached with the request form. v. An Indemnity vi. NOC letter from Bank (from where payment has been made) All the documents to be submitted in soft copy also. Correction in Deductee record Feature to delete the deductee record has been discontinued. In case the user wishes to nullify a deductee records/ transaction, he is required to update the amount and related fields to 0 (zero) and add new record with updated values, however, date of deduction can be nullified by pressing Ctrl + X button on keyboard. - For any update in Annexure II (Salary details) other than PAN updated, delete the respective record and add new record with corrected details. - Non-update of Deductee/Collectee records from Annexure I and Annexure ll in TDS/TCS correction statements when Form 26A/27BA has been generated corresponding to Deductee/Collectee - Addition or delection of deductee record is not allowed in offline correction facility. Form 26A/27BA CBDT prescribes via Notification No.11/2016, dated 2 nd December 2016, Notification No.12/2016, dated 8 th December 2016, a procedure for furnishing and verification of Form J B Nagar CPE Study Circle of WIRC 8 CA PINKI KEDIA

9 26A/27BA for removing default on account of short deduction/collection or nondeduction/collection of tax at source. - Notification No.11/2016 states that authorised tax officer shall receive Form 26A in a prescribed manner in case the taxpayer fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on the sum paid/credited to the account of a resident. - Notification No.12/2016 states that Form 27BA shall be furnished where the person responsible for collecting tax fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee. Furnishing of Form 26A/27BA in electronic form is enabled from 15 th January Mandatory Compliance : ITR of deductee (PAN) should have been filed under Section 139 and no demand should be payable at the time of assessment. Form 26A/27BA should be signed digitally to upload with CPC-TDS J B Nagar CPE Study Circle of WIRC 9 CA PINKI KEDIA

10 REFUND You have to make online application. After this you have to submit copy if online application with No due certificate from your assessing officer to TDS assessing officer. Refund for Excess Claim to be made in Form 26B Provided there is no outstanding demand or credit is not claimed by the Assessee Mandatory to register DSC Contain max of 5 challans. For more challans, submit new request Max refund amount will be the min challan balance amount in challan history Available amount per challan > Rs.100/- Statements should be processed before claiming refund Refund chq will be issued in the Name and Address of the Deductor as per TRACES profile NOTE / ADVISE: a. Not to ignore Notices from Department b. Check Notices from Assessing Officer option under Communication menu under your login in traces Portal c. If there is any technical error or any error / default are not getting resolved you can make Request for Resolution option under Communication menu under your login in traces Portal d. At the time of making online correction you should check personal information and update it if required. Name and PAN of authorised person in TDS statements should be match with name and PAN of authorised person in Traces Profile. e. In personal information mobile number is mandatory, cannot use special character in any field f. You can change record from valid PAN to valid PAN only once. g. Now Nil return cannot be filed. So declaration to be filed online in this respect with reason. h. 197/195 certificate now generated through Traces. There is need to match Alphanumeric 10 digits certificate number, Period and Amount on certificate. Certificate u/s.197 Statutory provision of tax deduction at source at lower rate is person specific and not sum specific Kolkata ITAT in case of Twenty First Century Securities Ltd 163 ITD 270 Dt after referring provision of Sec. 197(2) and Rule 28AA(2)concluded i. To avoid notice: file TDS returns with Interest and late filing fees, if any. Pay Interest upto date of correction J B Nagar CPE Study Circle of WIRC 10 CA PINKI KEDIA

11 ISSUES on TDS TDS on processing Fees paid by NBFC for loan As defined u/s 2(28A) interest includes any service fee or other charges in respect of moneys borrowed or debt incurred or in respect of credit facility which has not been utilised; as per above definition processing charges are part of interest hence TDS will be dedutible as per sec 194A. In case payment is to a bank same is exempt as per sec 194A (3). In case payment is to NBFC TDS is deductible u/s 194A Loan processing fees falls within the definition of interest and the same would be liable to deduction of tax at source u/s 194A Aban Investments P Ltd Vs CIT [2012] 52 SOT 36 (Chennai). TDS on sum paid to Hotel It simply booked the hotel for boarding. The hotel did not work on behalf of the assessee as a contractor. Otherwise every guest whosoever stay in a hotel ought to have deducted TDS while making booking or staying in it. The Hon ble Bombay High Court has considered this issue in the case of East India Hotels vs. CBDT in CWP No of The CBDT had issued a circular bearing No. of 681 dated which was challenged in the High Court. The Hon ble High Court has considered the following question based on the circular and has quashed the circular. The Hon ble Court held that section 194 C is not applicable for payments made by the customer to the hotel. Payment made by persons, other than individuals and HFs for hotel accommodation taken on regular basis will be in the nature of rent subject to TDS under Sec. 194-I. In case employees of a company have themselves entered into a contract individually with a hotel and are directly making the payment to the hotel but, subsequently, claiming the same from company. In this case, the company would not be liable to deduct tax at source even where the total amount of reimbursement individually or collectively exceeds Rs. 180,000. In case company entered into a contract individually with a hotel and is directly making the payment to the hotel, the company would be liable to deduct tax at source even where the total amount of reimbursement individually or collectively exceeds Rs. 180,000. If the amount paid is toward catering services then provisions of Sec194C attracts. In such cases TDS is required to be 2% or 1% as applicable to the hotel. (Limit is Rs. 100,000 p.a) As per Circular No. 715, dated provision of Sec. 194C will not be applicable on serving food in a restaurant. TDS on Internet based Services Telephone, Cellular Mobile : TDS is not deductible on services using technology such as Telephone charges, Internet Charges, cable TV, leased lines etc. Payments for use of standard facilities by the public at large in which some form of technical service is inherent are not covered under sec 194J a. Skycell Communications Ltd v/s DCIT (2001) 251 ITR 53 (Mad) b. CIT v/s Estel Communication (P) Ltd (2008) 318 ITR 185 (Del) Lease lines charges There is no human intervention for providing services, hence not fit for technical services u/s 194J J B Nagar CPE Study Circle of WIRC 11 CA PINKI KEDIA

12 DCIT v/s Tally solutions Pvt Ltd ITA Nos 833 & 834/Bang/2017 dt 31/10/2017 Telecommunication lease lines charges paid to PVT Telephone Operators. Internet connection, Port access charges CIT vs Bharti Cellular Ltd 330 ITR 239 (SC), CIT vs Bharti Cellular Ltd 319 ITR 139 (Del) MICR clearing charges CIT vs Chief Manager, SBI 245 CTR 107 (P&H) Data link Charges igate computers systems ltd v/s DCIT 53 taxmann.com 431 (Pune) ITO (TDS) v/s People Interactive (1) P Ltd ITA No. 2180/Mum/2009 dt 29/02/2012 Web Hosting Charges DDIT v/s Savvis communication corporation ITA No.7340/Mum 2012 dt 31/03/2016 Domain Name Registration Charges Godaddy.com LLC v/s ACIT, ITA No. 1878/Del/2017 dt 3/4/18 Domain names have all the characteristics of and are subject to the same legal norms applicable to other intellectual properties, such as trademark. Purchase of Software AO Royalty under explanation 4 to Sec 9 (1)(vi) Notification 21 of 2012 dt 13/06/2012 No TDS deductible where sellers given confirmation that TDS deducted from earlier purchase u/s 194 J/ 195 CIT v/s Vinzar solution Pvt. Ltd. (2017) 392 ITR 155 (Mad) Pr CIT v/s M. Tech India Pvt. Ltd. (2016) 381 ITR 31 (Del) Subscription to database Inserted expln 5 in 2012 wef 2006 Consideration in respect of right, property or information, whether or not possession / control with payer or used directly by payer. *Factset Research system Inc.in re (2009) 317 ITR 169 (AAR) *CIT v/s Wipro Ltd (2013) 355 ITR 284 (Kar) contradictory judgement TDS on Stock exchange charges Whether 194J? CIT v/s Kotak Securities Ltd 67 Taxmann.com 356 (SC) CIT 4, Mumbai Vs. Kotak Securities Ltd. (SC) Appeal No of TDS on Provisions made in Books Check: i. Liability of TDS cannot be put in service when the deductor cannot ascertain beneficiaries of a credit J B Nagar CPE Study Circle of WIRC 12 CA PINKI KEDIA

13 ii. TDS cannot be deducted until identity of the person in whose hands it is includible in his income 1) IDBI v/s ITO (2007) 107 ITD 45(Mum) Interest charged to Interest payable but not paid but not credited in bond ledger 2) IBM India (P) Ltd v/s ITO (TDS) LTU (2015) 154 ITD 497 (Bang) 3) Abad Builders (P) Ltd. v/s ACIT (2014) 62 SOT 106 (Coch) (URO) 4) PFizer Ltd v/s ITO (2013) 55 SOT 277 (Mum) 5) Dishnet Wireless Ltd v/s DCIT (2015) 154 ITD 827 (Che) Recent judgement and follow Wherever particulars and details of payees were available and amount payable could be quantified, assessee had to necessarily deduct tax at source. 6) Apollo Tyres Ltd. v/s DCIT (TDS) (2017) 163 ITD 177 (Del) 7) Alliance Media & Entertainment Ltd v/s ITO (2017) 163 ITD 627 (Mum) TDS on Lease premium 194I Krishak Bharati Co op Ltd. v/s ACIT 210 Taxman 123 (Del) CIT v/s Panbari Tea Co. Ltd 57 ITR 422 (SC) CBDT circular 35 of 2016 (dt 13/10/16) : Lumpsum Lease premium or one Time up front lease charges, paid for allotment of land or any other property on long term basis and which are not adjustable against periodic rent, are not payments in the nature of rent within the meanings of section 194I not liable to TDS (Delhi HC decision inthe Indian newspaper society, Madras HC decisions in Foxcorn India Developer Ltd.) TDS on Tips for Employees Hotel,Restaurant Whether salary (192)? ITC Ltd v/s CIT (2016) 384 ITR 14 (SC) TDS on payment to Singer TDS is required to be deducted on payment to Singer u/s 194C. As Sec 194J requires TDS to be deducted on specific professional and such other profession as is notified by the Board for the purposes of the Section 44AA or of this section. Sec 44AA discusses about any other profession as is notified by the Board in official Gazette. Singer is covered by Film artist. In definition of Film artist if anyone engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person. Ref No.4791, 4792, 4793 and 4794 appeals CJ International Hotels Ltd (Delhi) dt TDS on payment to retainership Whether 192 or 194 J *CIT v/s Grant Medical Foundation (275 CTR 253) (Bom) *CIT v/s Manipal Health System(P) Ltd. (57 Taxmann.com) (Kas) *DCIT v/s Wockhardt Hospitals Ltd. (2012) 24 Taxmann.com 190 (Hyd.ITAT) *Red Chillies entertainment Pvt ltd v/s ACIT (TDS)(ITA /Mum/2014 ITA 92 & 93/ Mum/ 23015) dt 28/2/17 J B Nagar CPE Study Circle of WIRC 13 CA PINKI KEDIA

14 Deducted under 194 J on the claim production managers were independent professionals Various case laws are there TDS on reimbursement of expenses: Question No. 30 in Circular No.715, dated issued by CBDT deals with this issue. The same is reproduced below for ready reference. Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses? Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source. As per the aforesaid circular, TDS is applicable on reimbursement of expenses too. However, to deal with this aspect one has to analyze the basic principle whether the reimbursement of expenses is income in the payee hands. The answer is NO. As per Charging Section 4 (2) TDS shall be made only on income. In all TDS related Sections 192 to 195 (except Section 194 which deals with Dividend payments) starts with person/any person responsible for paying any income chargeable... If we carefully read the starting lines in the above sections they convey that TDS provisions come into picture only on incomes which are chargeable to tax. Thus it can be concluded that only those amounts that fulfill the character of income are subject to TDS. Many Tribunals and High courts reiterated this fundamental issue. One such recent verdict is CIT vs DLF Commercial Project Corporation in ITA 627/2012 & ITA 507/2013 (Del HC). However in order to overcome the view of the CBDT vide above circular and also to avoid litigation, it is advisable to have a separate bill/invoice for reimbursement of expenses. Identification of appropriate Section: If the nature of work is routine and normal maintenance, it falls u/s 194C. In contrast if it requires technical/professional expertise, the payments are subject to section 194J. Let us take a case study: X Company awarded a contract to Y Company for procurement of materials. As per contract, X company issues purchase requisition to Y. Y is having a team who in turn does market research and analysis in pricing trends and arrives at estimates; Y accordingly gives advertisement and collects quotations from vendors. Based on the quotations, purchase order is placed to lowest quotation. Y collects agreed % of value of Purchase Order (PO) for this job as its remuneration. There arise 3 issues: Whether the payment to Y is subject to TDS 1. u/s 194C since it is contractual payment? 2. u/s 194J since the assignment involves some research and analysis activity which requires professional expertise? 3. u/s 194H since the payment is nothing but commission by way of prefixed %? Here, we have to carefully examine the contractual terms. If the contract is awarded to Y for mere placing PO on suppliers, and Y on his own undertakes analysis activities, then the payment to Y is subject to TDS u/s 194C. However as per conditions of the contract if Y has to undertake certain analysis before placing orders which requires expert knowledge, the payments are subject to TDS u/s 194J. Merely contractual payments involve % payment, the question of Section 194H does not arise. J B Nagar CPE Study Circle of WIRC 14 CA PINKI KEDIA

15 However certain aspects require professional judgment. Hence we have to examine the nature of transaction on case to case basis. The following are some of the peculiar issues: SNo. Nature of Transaction Applicability of TDS Nature of Transaction Applicability of TDS 1 Subscription to Journals No Advertisement in Journals Yes 2 Membership fee to certain organizations No Training fee Yes 3 Software procured in CD form No Payment for customized software Yes Q. Whether tax is required to be deducted if the advertising agencies give a consolidated bill including charges for artwork and other related jobs as well as payment made by them to media? The deduction will have to be made under Sec. 194C at the rate of 1 per cent. The advertising agencies shall have to deduct tax at source at the rate of 10 per cent under Sec. 194J while making payments to artists, actors, models, etc. If payments are made for production of programmes for the purpose of broadcasting and telecasting, these payments will be subjected to 2 per cent. As per Circular No. 715, dated where advertising agencies give a consolidated bill, including charges for art work and other related jobs as well as payment made by them to media, the deduction will have to be made under Sec. 194C at the rate of 1%. The payments made directly to print and electronic media would be covered under Sec. 194C, as these are in the nature of payments for purposes of advertising. Payments made directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government agency, is not liable to income-tax. Q. Whether deduction of tax is required to be made under section 194C for sponsorship of debates, seminars and other functions held in colleges, schools and associations with a view to earn publicity through display of banners put up by the organizers? The sponsorship is in essence an agreement for carrying out a work of advertisement. Therefore, provisions of section 194C shall apply. Deduction of tax is required to be made on payments for cost of advertisements issued in the souvenirs brought out by various organisations under Section 194C. Q. Tour agent is booking ticket on behalf of a Private Limited Co. and charging management fees from our client. The Processing Charges is in nature of commission; it varies with change in ticket amount. The Processing Charges is separately charged and shown in invoice over the ticket charges. Ans: If the processing charges is in nature of commission, S.194H will be applicable. With respect to TDS there is no penalty in higher deduction of TDS whereas penalty is applicable for lower deduction of TDS Q. An individual (not liable to Tax Audit) running a shop taken on rent and paying monthly rent Rs GST Rs.8100 = Rs J B Nagar CPE Study Circle of WIRC 15 CA PINKI KEDIA

16 1. Whether he need to deduct TDS? 2. Whether definition of Rent includes GST? Ans. In the preview of Section 194-IB income payable to the owner is Rs 45000, so no TDS liability arises. Q. If one single person paying rent 60k in total (15k to 4 shop co owner for same shop). All shop co owner has own GST no. and raising separate invoice. should tenant should deduct if rent amount is more than 50k but each co owner raising invoice and getting 15k pm. Ans. No if 4 different land owners receiving less than 50k in individual capacity than TDS u/s 194IB won't be applicable. As section states "Any person, being individual or HUF, responsible for paying to a resident..." Q. I had filed NIL tds return through TRACES, though there was tds deduction done at our end. Now I want to file revise tds return for incorporating such deduction. Kindly inform, is it possible to file revise NIL TDS return & how. Ans. First login through DSC and then request for online correction and add challan. You have to enter all details manually online or after adding challan and process your online correction statement you can generate conso file to add deductee details. Q. Expenditure paid during the Financial Year on which tax is not deducted, whether disallowance of expenditure is called for? _ W.e.f 01/04/2015 Proviso to Section 40(a)(ia) has been inserted which states: Provided that where tax has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in section 139(1), thirty percent of such sum shall be allowed as a deduction in computing the income of the previous year in which tax has been paid. no disallowance shall be made under Section 40 (a)(i) if tax is deducted and deposited by the due date of filing the Return of Income. In order to reduce the hardship, non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure on which TDS is not deducted. Earlier, 100% of such amount is disallowed. Earlier, the non-deduction or non-payment of TDS on payments made to residents results in disallowance only with respect to certain specified categories of payments (viz. interest, commission, brokerage, rent, royalty, fee for technical services or fee for professional services). NOW section 40(a)(ia) of the I-T Act to increase the scope of disallowance to every category of payment made to a resident on which tax is required to be deducted at source under Chapter XVII- B of the I-T Act. Disparity in consequences in respect of payments made to Residents and Non-residents without complying TDS provisions: As per Section 40(a)(ia) in case of any sum on which tax is deductible but paid/credited to any Resident without complying TDS provisions, only 30% of such sum shall be disallowed in computing the income of the assessee. However when it comes to non-resident payments, the whole amount shall be disallowed u/s 40(a)(i) in computing the income of the assessee. J B Nagar CPE Study Circle of WIRC 16 CA PINKI KEDIA

17 As per proviso to Section 201(1) any person who fails to deduct the whole or any part of TDS on the sum paid/credited to a Resident shall not be deemed to be an assesse in default in respect of such tax if such resident: Has furnished his return of income under section 139 Has taken into account such sum for computing income in such return of income; and Has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate (Form 26A) to this effect from an accountant. However there is no such relief in respect of payments made to non-residents. Section code 194DA The Section 10(10d) states than any amount you get from a life insurance policy, including ULIP, traditional policy or term plan (and excluding annuity, pension plans, insurance policy for a disabled dependent and employer sponsored group life insurance) will not be part of your taxable income provided premium in any year is more than 20% of the sum insured if it were bought after 1st April 2003 but before 31st April 2012 or is more than 10% of the sum insured if it were bought after 1st April 2012 or is more than 15% of sum assured for policies bought after 1st April 2013 for disabled or those suffering from ailments (as per section 80DDB). The above conditions do not apply to death claims or any amount received on death of the insured person. Also, there is no cap on the extent of tax free income from life insurance proceeds. Loans on policies will also not get affected. In TDS Return - Remark B is made applicable for Section code 194DA for Form 26Q, FY , Q3 onwards; Form 26Q where the mark value selected as B Applicable for statements which pertains to FY , Q3 onwards. 10 digit alpha numeric value will be allowed under this field wherein first digit should be either G (in case of 15G) or H (in case of 15H) followed by 9 digit numeric value (For example, G or H ) Form no. 15G / 15H Before signing Form no. 15G / 15H please refer the declaration paragraph in the form and also refer point no. 8(15H) or 10(15G), in this point it's clearly mentioned as below. Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961 and on conviction be punishable (i)in a case where tax sought to be evaded exceeds twenty-five lakh rupees, with rigorous imprisonment which shall not be less than six months but which may extend to seven years and with fine; (ii) In any other case, with rigorous imprisonment which shall not be less than three months but which may extend to two years and with a fine. I would request you to avoid such practices for your security. Updates on TCS Sec 206C-IF removed Now 100% penalty is applicable on cash transactions (including jewelry purchase) exceeding Rs. 2 lakh From 1 st April 2017 Same amount of penalty to be paid in case of cash received more than Rs.2 lakhs. J B Nagar CPE Study Circle of WIRC 17 CA PINKI KEDIA

18 In absence of PAN of the buyer of specified goods, the rate of TCS will be twice of the extent rate or 5% whichever is higher (f.y ) TCS return to be filed quarterly 15 th july, 15 th October, 15 th January & 15 th May Credit would be available to the buyer for the TCS so collected by the seller from the buyer. This TCS can be claimed as a credit by the buyer at the time of payment of taxes computed. Penalty for failure to collect tax at source Similar to the provisions of tax deducted at source, section 206C provides certain items in respect of which tax is to be collected at source by the person receiving payment in respect of certain specified items. If the person required to collect tax at source fails to collect the tax, then he shall be liable to pay penalty under section 271CA. Penalty shall be levied of an amount equal to tax not collected. Registration It should contain a minimum of 8 alpha numeric characters with at least one capital letter Password123 Consolidated File TAN_Request Number of request submitted DELA11111D_ Form 16/16A TAN in capital letters DELA11111D Justification Report JR_TAN_Form Type_Quarter_FY JR_DELA11111D_24Q_Q3_ Intimation through TAN_Date of filing original statement (in DDMMYYYY format) DELA_ CA PINKI KEDIA 1024 HUBTOWN SOLARIS N S PHADKE MARG ANDHERI EAST Mumbai Contact / pinkikediaca@gmail.com J B Nagar CPE Study Circle of WIRC 18 CA PINKI KEDIA