Tuesday, May 5, 2015

Merilyn - The Ship ! ; Adv. Or CA - who is eligible to taxpractice ; et al (Like Episodes)

An UPdate


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 Are Chartered Accountants Really Independent?


Accounting Principals
Doubts have been expressed regarding increase the rate of service tax from 12.36% to 14%.
Accounting Principals ?

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MAT: Retrospective Tax Is Back?

MAT provisions in s. 115JB do not apply to foreign companies


Tax Tentacles – 1: An Overview

The Indian tax system is devilishly complex, extortive and a patchwork of various haphazard ideas. This is the first part of a multi-part series on the vexing Indian tax system and the path to genuine reforms, adapted from Justice S Rangarajan Memorial Lecture in Bangalore delivered recently
Justice TNC Rangarajan (retd)

“Merlyin” – A Ship That Neither Sinks Nor Reaches It’s Shore

CA Prarthana Jalan

The author expresses dismay over the fact that though a Special Bench was constituted to resolve an important controversy, the controversy is far from over. Worse, there appears to be no quick resolution in sight in view of the conflicting High Court judgements on the issue. She pleads for the adoption of a quick dispute resolution process to deal with such issues. 

 The text of sec 40a(ia) is as under-

 (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139.

Whenever controversy arises about an interpretation of the ambiguity of law then why don’t we have a system wherein reputed/leaned representatives of law/legal fraternity/judicial members can sit together and reach a specific consensus? Why don’t we have a mechanism wherein instead of going through the litigation process individually, wasting time, energy & money of all the parties involved, an interpretation can be done collectively?

cross refer >

New database of High Courts unearths a 57-year-old case ...


> As regards the view the SC has taken, particularly the given reasoning, as viewed, throws up some intriguing points, pivoted on , besides the “matching concept”, the other related concepts of relevance herein, being ,- “method of accounting”, “paid”, “incurred” and “accrued” ; which, as is expected , may have continued to keep nagging for long the mind of an ‘accountant’, if not a lawyer. Those points , as remembered, have been briefly brought to the fore and shared in , – A HAND BOOK ON TAX PRACTICE (Publisher – Puliani and Puliani)

>> i ) Any debit in the accounts in accordance with the accounting practice based on what is known as ‘matching concept’ is not to be regarded as ‘accrued due’, being the legal meaning of ‘incurred';
ii) The accounting practice since changed for long, for ‘companies’ , ‘accrual’ method of accounting is mandated;
with no option given; hence ‘cash’ method remains ruled out.
iii) The term ‘paid’, as specially defined, means (a) ‘actually paid’ (i.e. cash) OR (b) ‘incurred according to the method of accounting’.
In today’s context, however, the third method known as ‘mixed’ is no longer an option, hence of no relevance. As such, and as ‘cash’ has been separately spelt out as in (a) , the latter expression (b) can only mean ‘accrued due’. What is intriguing is, why then, the term ‘accrual’ makes sense any longer; albeit it is, continued to be used, unwittingly or otherwise, both for accounting and tax.
II. Certain observations of the SC, as read and understood, wprt section 36 (1)(iii) , seem to imply that, if so chosen by assessee, claim could be spread over, following the ‘matching concept’, for accounting . so also for tax.
Nonetheless, if independently analyzed, there could possibly be a different but better view taken. Why say so ? For reasoning, may look up the study as set out in the published Article (TAXMANN) – 14 CPT 819 (at 821, 822)

>>> Among the points qualified as ‘intriguing’, the most concern is the definition of ‘paid’ adverted to.
As per settled position in law, “income’ , if it has been received, attracts tax at that point in time; with no need to further go into and probe as to whether or not accrued .
If so, in sync, expenditure once paid, has to be allowed – that appears to be the crux of the SC judgment.
Anyone having a contra viewpoint!


< xtract

"VIII. Interest on loan taken for acquisition of an asset could only be capitalized till the asset is first put to use

Currently, Section 36(1)(iii) allows deduction for interest paid in respect of capital borrowed for the purposes of the business or profession while computing the income from business or profession.
However, any interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not) for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, was not allowed as deduction.
The Finance Bill, 2015 as passed by Lok Sabha proposes to remove this distinction in allowability of interest in case of existing business and in case of extension of existing business. It proposes to remove the words "for extension of existing business or profession" from proviso to Section 36(1)(iii). Thus, it is proposed that interest on borrowings used for acquisition of asset till the asset is put to use shall not be allowed as deduction in any case."

Cross Refer > Adv. N Devanathan's comment /reply thereto


Controversy freshly stoked/  kindled to keep going/kept alive:

 Doubts over appearance of Chartered Accountants before Income Tax Authorities

Added In Income Tax

The income tax officials are threatening practicing CAs that they can’t appear before them, Recently Tax Bar Association, Rishikesh has issued a letter to Income Tax Authorities to ban chartered accountants from appearing before them. Earlier ,  Rajasthan Tax Bar Association have filed a petition before  Chief Commissioner of Income Tax (CCIT), Rajasthan and urged him  to not to allow anyone else then advocates Registered with state Bar Councils to appear in any proceeding before Assessing Authorities as well as Appellate Authorities of Income Tax.
In my opinion , all such representations are coming out of following two judgments of Madras High Court and Supreme court. i.e Bar Council of India Vs A.K.Balaji [SLP(Civil)No(s)17150-17154/2012] Dt.4.7.2012 (SC) & A.K.Balaji Vs Govt. of India (2012) 35 KLR 290 21.02.2012 (Madras HC)
The recent remarks of the Apex court in the case of Madras Bar Association Vs. Union of India on chartered accountants at the time of declaring NTT unconstitutional have also added fire in to it. Now Explanation to Section 288(2) of Income Tax Act on the lines of the definition of Chartered Accountant in the Companies Act is about to land. These amendments will take effect from 1st June, 2015. where following classes of persons are excluded from being called Accountant:
i.  Those persons who are not eligible for appointment as an Auditor in the case of a company as per Section 141(3) of the Companies Act, 2013
It will further add the fuel and it shall be a tool in the hands of authorities to harass us. Because of activeness of Social media, now Government is issuing clarifications on day to day basis, what’s a wrong with the ICAI to issue a clarificatory note over the issue? That note shall definitely support us to counter their misrepresentations.

Cross Refer :
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swamilook: SC WRIT - NTT ACT, 2005 ultra vires the ... 

swamilook: SC on National Tax Tribunal - Imp Messages >>>>

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    < Manish Kumar Gupta
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    + 91 9718262561
    E-mail: camanishkg@gmail.com

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