TDS only on arrears of salary actually paid during FY 2008-09

TDS only on arrears of salary actually paid during FY 2008-09
October, 01st 2008
TDS only on arrears of salary actually paid during FY 2008-09
No. 402/92/2006-MC (46 of 2008)
Government of India/ Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, the 30th September 2008
Clarification regarding tax deduction at source on arrears of salary paid to government servants on account of implementation of the recommendations of Sixth Central Pay Commission
The Implementation Cell of the Department of Expenditure, Ministry of Finance vide its Office Order F. No. 1/1/2008-IC dated 30th August, 2008 has stated at Para 2(v)
“Bills may be drawn separately in respect of the arrears of pay and allowances for the period from January 1, 2006 to August 31, 2008. The aggregate arrears, computed after deduction of subscription at enhanced rates of GPF and NPS with reference to the revised pay, may be paid in two installments, the first installment being restricted to 40% of the aggregate arrears. DDOs/PAOs will ensure that action is taken simultaneously in regard to Government’s contribution towards enhanced subscription. Orders in regard to the payment of the second installment of arrears will be issued separately.”
2. A number of representations have been received by Central Board of Direct Taxes(CBDT) seeking clarification as to whether TDS need to be deducted on 40% of arrear to be paid during 2008-09 or on the entire arrear payable to the government servant. The matter has been examined by the CBDT and the issue is clarified as under:-
Salary is as defined under Section 15 of Income Tax Act, 1961:-
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
3. It is clear from the Office Memorandum issued by the Department of Expenditure that 60% of the pay arrears neither fall in the category of due nor are allowed. Moreover, Section 192 of Income Tax Act’61, inter alia, requires any person responsible for paying any income chargeable under the head “Salaries” to deduct income tax on the amount payable at the stipulated rate at the time of payment. Therefore it is clarified that income tax at source would be deducted u/s 192 only from the arrears of salary actually paid during FY 2008-09. On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid.
4. The above clarification has been issued by the CBDT vide Circular No.9/2008 [F.No.275/192/2008-IT(B)] dated 29th September, 2008.

'If it is creamier after Rs 4.5 lakh, then raise tax limit to Rs 4.5 lakh'

'If it is creamier after Rs 4.5 lakh, then raise tax limit to Rs 4.5 lakh'
October, 04th 2008
Ashoka Kumar Thakur, a lawyer and a petitioner in the Supreme Court case against the 27 per cent OBC quota in educational institutions, says that the increase in the income ceiling for creamy layer would hurt the poor among the OBC most.
Your petition had sought exclusion of the creamy layer from the OBC quota. What do you think of the increase in the cut-off in income ceiling of creamy layer?
It de facto means inclusion of the creamy layer. How many people earn Rs 4.5 lakh a year? The decision would hurt the poor among the OBC most and almost nullify the benefits of quota for them as the well-to-do among them grabs all.
Will the Supreme Court look at it as a contempt of its judgement?
It dilutes the whole spirit of the ruling. However, the government has every right to decide income limits for the poor and rich. I don’t think the court would say anything. I had asked so-called OBC leaders like Lalu Prasad and others if they needed quotas. They need it just for the votes.
What do you propose to do now?
I had agitated against the inclusion of creamy layer in OBC quotas earlier when Uttar Pradesh, Bihar and later Tamil Nadu and Kerala tried to open quota to all. I still believe that the benefits should reach only the deserving and not spread thin to all and sundry. We will examine the decision and see what can be done.
May be the limit of Rs 4.5 lakh would look all right after a few years?
Why then is our income-tax ceiling less than Rs 2.5 lakh? Why don’t they (the government) raise it to Rs 4.5 lakh if the creamy layer starts there?
What would be the increase in the number of beneficiaries after this change in the income limit?
I can only say that everyone except the poor among the OBC would benefit now. I have always believed that reservation is a churning and not the permanent solution. Unless poverty and illiteracy is not removed, the poor among the OBC will never be able to make use of these quotas.

LAW SOON TO PERMIT LIMITED LIABILITY PARTNERSHIPS

A law will soon be enacted to permit limited liability partnerships for professions like chartered accountancy, Prime Minister Manmohan Singh said Tuesday, even as he emphasised on good corporate governance for India Inc to compete globally.
“A law on limited liability partnership is on the anvil,” the prime minister told the diamond jubilee celebrations of the Institute of Chartered Accountants of India (ICAI) here.
“This would help in the consolidation and growth of small firms and promote multi-disciplinary practices in line with the evolving global trends,” the prime minister added.
Unlike public and private limited companies, India at present does not permit limited liability clause for partnership firms, as a result of which all its partners are jointly and severally liable in the event of losses.
Even the personal assets of a partner and his immediate family can be used to settle debts and pay off creditors in the event of loss. This apart, chartered accountancy firms cannot float private or public limited companies.
He also said the Chartered Accountants Act of 1949 will be amended and invited suggestions in this regard from the institute, whose membership has grown from 1,700 professionals in 1949 to over 150,000 today.
According to the prime minister, in various public discourses concerning the way Indian companies had been functioning, not much attention was being paid to corporate governance.
“Unless Indian firms come to be recognised worldwide for good corporate governance, they will not be able to compete globally in an increasingly inter-dependent integrated world,” he said.
“In the era of protectionism, few bothered about corporate governance and transparency in accounting and in management. Such laxity, however, is no longer possible. Shareholder democracy has come to stay,” he added.In this regard, the prime minister said chartered accountants were the watchdogs of this new corporate world that is full of opportunities, but also not without challenges.
The prime minister also said that while governance was being decentralised with more administrative powers to the village-level bodies, also called Panchayati Raj institutions, there was an equal need to ensure proper utilisation of funds.“A proper accounting system for funds received and spent by Panchayati Raj institutions will be critical to making this innovative experiment in decentralisation a success,” he said.
“With the presence of chartered accountants even in the remotest part of our country, you can also facilitate financial inclusion and access to finance for the rural poor, through micro finance and other innovative measures.”

AMENDMENTS IN DIRECT TAXES AND INDIRECT TAXES

FOE AMENDMENTS IN DIRECT AND INDIRECT TAXES FOR CA FINAL/ PE II/PCC STUDENTS


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COMPANIES BILL 2008

PRESS RELEASE
Sub: The Companies Bill, 2008
The Ministry of Corporate Affairs took up a comprehensive
revision of the Companies Act, 1956 (the Act) in 2004 keeping in view
that not only had the number of companies in India expanded from
about 30,000 in 1956 to nearly 7 lakhs, Indian companies were also
mobilizing resources at a scale unimaginable even a decade ago,
continuously entering into and bringing new activities into the fold of
the Indian economy. In doing so, they were emerging internationally as
efficient providers of a wide range of goods and services while
increasing employment opportunities at home. At the same time, the
increasing number of options and avenues for international business,
trade and capital flows had imposed a requirement not only for
harnessing entrepreneurial and economic resources efficiently but also
to be competitive in attracting investment for growth. These
developments necessitated modernization of the regulatory structure
for the corporate sector in a comprehensive manner.
2. Earlier, a Bill called Companies (Amendment) Bill, 2003 had been
introduced by M/o Corporate Affairs (MCA) (then Department of
Company Affairs) in the Rajya Sabha on 7.5.2003. Later on, a large
number of changes were found to be necessary in the Bill. A decision
was, therefore, taken to carry out a comprehensive review of the
Companies Act, 1956 and to introduce a new Companies Bill for the
consideration of the Parliament.
3. The review and redrafting of the Companies Act, 1956 was taken
up by the Ministry of Corporate Affairs on the basis of a detailed
consultative process. A `Concept Paper on new Company Law’ was
placed on the website of the Ministry on 4th August, 2004. The inputs
received were put to a detailed examination in the Ministry. The
Government also constituted an Expert Committee on Company Law
under the Chairmanship of Dr. J.J. Irani on 2nd December 2004 to advise
on new Companies Bill. The Committee submitted its report to the
Government on 31st May 2005. Detailed consultations were also taken
up with various Ministries, Departments and Government Regulators.
The Bill was thereafter drafted in consultation with the Legislative
Department of the Central Government.
4. The Companies Bill, 2008 seeks to enable the corporate sector in
India to operate in a regulatory environment of best international
practices that fosters entrepreneurship, investment and growth and
provides for :-
1
(i) The basic principles for all aspects of internal governance
of corporate entities and a framework for their regulation,
irrespective of their area of operation, from incorporation to
liquidation and winding up, in a single, comprehensive, legal
framework administered by the Central Government. In doing
so, the Bill also harmonizes the Company law framework with
the imperative of specialized sectoral regulation
(ii) Articulation of shareholders democracy with
protection of the rights of minority stakeholders,
responsible self-regulation with disclosures and
accountability, substitution of government control over
internal corporate processes and decisions by
shareholder control. It also provides for shares with
differential voting rights to be done away with and valuation of
non-cash considerations for allotment of shares through
independent valuers.
(iii) Easy transition of companies operating under the
Companies Act, 1956, to the new framework as also from one
type of company to another.
(iv) A new entity in the form of One-Person Company
(OPC) while empowering Government to provide a simpler
compliance regime for small companies. Retains the concept of
Producer Companies, while providing a more stringent regime
for not-for–profit companies to check misuse. No restriction
proposed on the number of subsidiary companies that a
company may have, subject to disclosure in respect of their
relationship and transactions/dealings between them.
(v) Application of the successful e-Governance initiative of the
Ministry of Corporate Affairs (MCA-21) to all the processes
involved in meeting compliance obligations. Company processes,
also to be enabled to be carried out through electronic mode.
The proposed e-Governance regime is intended to provide for
ease of operation for filing and access to corporate data over the
internet to all stakeholders, on round the clock basis.
(vi) Speedy incorporation process, with detailed declarations/
disclosures about the promoters, directors etc. at the time of
incorporation itself. Every company director would be required to
acquire a unique Directors identification number.
(vii) Facilitates joint ventures and relaxes restrictions
limiting the number of partners in entities such as
partnership firms, banking companies etc. to a maximum 100
with no ceiling as to professions regulated by Special Acts.
2
(viii) Duties and liabilities of the directors and for every
company to have at least one director resident in India. The Bill
also provides for independent directors to be appointed on the
Boards of such companies as may be prescribed, along with
attributes determining independence. The requirement to
appoint independent directors, where applicable, is a minimum
of 33% of the total number of directors.
(ix) Statutory recognition to audit, remuneration and
stakeholders grievances committees of the Board and recognizes
the Chief Executive Officer (CEO), the Chief Financial Officer
(CFO) and the Company Secretary as Key Managerial Personnel
(KMP).
(x) Companies not to be allowed to raise deposits from the
public except on the basis of permission available to them
through other Special Acts. The Bill recognizes insider trading by
company directors/KMPs as an offence with criminal liability.
(xi) Recognition of both accounting and auditing
standards. The role, rights and duties of the auditors defined as
to maintain integrity and independence of the audit process.
Consolidation of financial statements of subsidiaries with those
of holding companies is proposed to be made mandatory.
(xii) A single forum for approval of mergers and
acquisitions, along with concept of deemed approval in certain
situations.
(xiii) A separate framework for enabling fair valuations in
companies for various purposes. Appointment of valuers is
proposed to be made by audit committees.
(xiv) Claim of an investor over a dividend or a security not
claimed for more than a period of seven years not being
extinguished, and Investor Education and Protection Fund (IEPF)
to be administered by a statutory Authority.
(xv) Shareholders Associations/Group of Shareholders to be
enabled to take legal action in case of any fraudulent action on
the part of company and to take part in investor protection
activities and ‘Class Action Suits’.
(xvi) A revised framework for regulation of insolvency,
including rehabilitation, winding up and liquidation of companies
with the process to be completed in a time bound manner.
Incorporates international best practices based on the models
3
suggested by the United Nations Commission on International
Trade Law (UNCITRAL).
(xvii) Consolidation of fora for dealing with rehabilitation of
companies, their liquidation and winding up in the single forum
of National Company Law Tribunal with appeal to National
Company Law Appellate Tribunal. The nature of the
Rehabilitation and Revival Fund proposed in the Companies
(Second Amendment) Act, 2002 to be replaced by Insolvency
Fund with voluntary contributions linked to entitlements to draw
money in a situation of insolvency.
(xviii) A more effective regime for inspections and
investigations of companies while laying down the maximum
as well as minimum quantum of penalty for each offence
with suitable deterrence for repeat offences. Company is
identified as a separate entity for imposition of monetary
penalties from the officers in default. In case of fraudulent
activities/actions, provisions for recovery and disgorgement have
been included.
(xix) Levy of additional fee in a non-discretionary manner for
procedural offences, such as late filing of statutory documents,
to be enabled through rules. Defaults of procedural nature to be
penalized by levy of monetary penalties by the Registrars of
Companies. The appeals against such orders of Registrars of
Companies to lie with suitably designated higher authorities.
(xx) Special Courts to deal with offences under the Bill.
Company matters such as mergers and amalgamations,
reduction of capital, insolvency including rehabilitation,
liquidations and winding up are proposed to be addressed by the
National Company Law Tribunal/ National Company Law
Appellate Tribunal.
* * * * * * * *
4

AMENDMENTS IN EXCISE FOR CA FINAL

AMENDMENTS APPLICABLE FOR NOVEMBER 2007

EXCISE
Rule 8 of CER, 2002 (Pg. 34)
1 In case of non-SSI:-
Provided further that an assessee, who has paid duty of Rs. 50 lakh or more, other than by CENVAT credit, in the preceding financial year, shall thereafter, deposit the duty electronically through internet banking. [Inserted w.e.f. 1-4-2007]
Explanation For the purpose of this rule expression ‘duty’ or ‘duty of excise’ shall also include the amount payable in terms of the Cenvat Credit Rules, 2004. [w.e.f. 1-3-2007]

Rule 11 of CER, 2002(Pg. 36)
2. The invoice shall be serially numbered and shall now also contain
address of the concerned Central Excise Department [Inserted w.e.f. 1-4-2007]
Rule 12 of CER, 2002(Pg. 37)
1. Return:-
Provided that an assessee manufacturing Pan Masala, shall along with monthly return file a statement summarizing:-
à the purchase invoices for the month with the names and addresses of suppliers along with quantity purchased
à the sales invoices for the month with the names and addresses of buyers along with quantity, description and value of goods sold.

Rule 12 of CER, 2002
Indian Ordnance Factories, Department of Defence Production, Ministry of Defence have also been exempted from filing annual information financial statement.

Procedure and facilities for large tax payer
Rule 12BB [w.e.f.30-9-2006]
The provisions of rule 12BB of the Central Excise Rules, 2002 providing for procedures and facilities for the large taxpayer are:
(1) A large taxpayer may remove excisable goods (intermediate goods), without payment of excise duty
® except motor spirit, commonly known as petrol, high speed diesel and light diesel oil
® under the cover of a transfer challan or invoice from any of his registered premises (sender ­premises) where such goods are produced, manufactured or warehoused
® to his other registered premises (recipient premises) for further use in the manufacture or production of such other excisable goods (subject goods).

Such removal of intermediate goods without payment of duty from the sender premises to recipient premises shall be subject to the conditions that­
(a) the subject goods are manufactured using the said intermediate goods and cleared on payment of appropriate duties of excise leviable thereon within 6 months, from the date of receipt of the intermediate goods in the recipient premises; or
(b) the subject goods are manufactured using the said intermediate goods and exported out of India, within 6 months, from the date of receipt of the intermediate goods in the recipient premises, and that any other conditions prescribed by the Commissioner are satisfied.

Explanation 1 The transfer challan or invoice shall be serially numbered and shall contain the registration number, name, address of the large taxpayer, description, classification, time and date of removal, mode of transport and vehicle registration number, quantity of the goods and registration number and name of the consignee.

Provided that, if the subject goods manufactured or produced using the said intermediate goods are not cleared on payment of appropriate duties of excise leviable thereon or are not exported within the said period of 6 months, duties payable on such intermediate goods shall be paid by the recipient premises with interest in the manner and rate specified under section 11 AB of the Act.
Illustration:- Excise duty is payable on intermediate goods, namely, electronics goods, manufactured by factory A which are removed without payment of duties of excise for use in the manufacture of subject goods, namely, machines, in factory B of the large tax payer. In case such machines are not exported or are removed without payment of excise duty, then factory B shall pay duty on the electronic goods so cleared alongwith interest.

Provided further, if any duty is payable on such intermediate goods and, if the said duty is not payable on such subject goods, the said duty of excise as equivalent to the total amount payable on such intermediate goods along with interest under section 11 AB of the Act shall be paid by the recipient premises.
Illustration:- NC duty is payable on intermediate goods namely, polyster yarn manufactured by factory A. Such yarn is removed without payment of duty for use in the manufacture of subject goods, namely, grey fabrics in factory B of LTU(on which NC duty is not payable), then factory B shall pay an amount equal to the NC duty that would have been payable on the polyster yarn alongwith interest.

Explanation 2 The duty payable shall be the duty payable on the date and time of removal of the intermediate goods from the sender's premises.

Explanation 3 If the large taxpayer fails to pay such amount, it shall be recovered along with interest in the same manner as provided under section 11 A and section 11 AB respectively of the Act.
(2) Where a registered premises of a large taxpayer has paid duty in excess of duty payable on account of arithmetical error, it may adjust the excess duty, against his liability for the subsequent period.
However, such adjustment shall be admissible only if the incidence has not been passed on.
(4) A large taxpayer shall submit the monthly returns, as prescribed under these rules, for each of the registered premises.
(5) A large taxpayer, on demand, may be required to make available the financial, production, stores and CENV AT credit records in electronic media, such as, compact disc for carrying out scrutiny.
(6) A large taxpayer may, with intimation of at least 30 days in advance, opt out to be a large taxpayer from the first day of the following financial year.
(7) The provisions of other rules of Central Excise Rules, 2002 in so far as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large taxpayer.

Large Tax Payer Unit
Rule 2(ea) “large tax payer unit” means a person who
(i) has one or more registered premises under central excise act or
(ii) has one or more registered premises under Finance Act 1994
and is an assessee under the Income Tax Act, who holds a permanent account number used under section 139A of the said Act and satisfies the conditions and observes the procedures notified by the central government in this regard.












Procedure for large tax payer
Rule 12A of CCR, 2004
A large tax payer may remove inputs or capital goods, except petrol, HSD and LSD, on which credit has been taken, without payment of amount referred in rule 3(5).
But if final product is not cleared on payment of duty or capital goods are used exclusively in the manufacture of exempted goods then amount equal to credit taken on input or capital goods has to be paid.
Other provisions of Rule 12BB shall be applicable here also.

Power to impose restriction
Rule 12CC
® Notwithstanding anything contained in these rules, where the central government,
® having regard to the extent of evasion of duty, nature and type of offences or such other factors as may be relevant,
® is of the opinion that in order to prevent evasion of and default in payment of, excise duty,
® it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter,
may by a notification in the official gazette, specify nature of restrictions including suspension of registration in case of a dealer, types of facilities to be withdrawn and procedure for issue of such order by an officer authorized by the board. [Inserted w.e.f. 30-12-2006]


Special procedure for removal of excisable goods for carrying out certain processes
Rule 16C (Pg. 40)
® The Commissioner may, by special order and subject to conditions as may be specified by him,
® permit a manufacturer to remove excisable goods manufactured in his factory
for carrying out tests or any other process not amounting to manufacture [Inserted w.e.f. 28-12-2006]
® to some other premises whether registered or not and
® to bring back such goods to his factory, without payment of duty, or to some other registered premises and allow these goods to be removed on payment of duty, or without payment of duty for export from such other registered premises.

Rule 19 of CER, 2002 (Pg. 84)
Rate of interest, when goods are diverted for home consumption, has changed from 24% to the rate mentioned in Section 11AB.


REMAINING TO BE CONTINUED........................