From The Desk of CA SANDHYA JAIN

Government of India  Ministry of Finance  Department of Revenue  Central Board of Direct Taxes  (Foreign Tax and Tax Research-I Division)  PRESS RELEASE  Chapter X of the Income-tax Act, 1961 contains special provisions relating to avoidance of tax. Terms such as ‘associated enterprise’, ‘international transaction’, ‘intangible property’, and ‘specified domestic transaction’ are defined in different sections of the Chapter. Section 92C provides that the arm’s length price in relation to an international transaction or specified domestic transaction shall be determined by any of the methods listed thereunder, being the most appropriate method, having regard to the nature of transaction or class of transactions or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe. The methods listed are: (a) comparable uncontrolled price method;  (b) resale price method;...

F No. 500/139/2012  Government of India  Ministry of Finance  Department of Revenue  Central Board of Direct Taxes  (Foreign Tax and Tax Research-I Division) New Delhi, the 29th June, 2013  Circular No.06 /2013  (amending Circular No.03/2013 dated 26th March,2013) Subject: Circular on conditions relevant to identify development centres engaged in  contract R&D services with insignificant risk  It has been brought to the notice of CBDT that there is divergence of views amongst the field officers and taxpayers regarding the functional profile of development centres engaged in contract R&D services for the purposes of determining arm’s length price/transfer pricing. In some cases, while taxpayers insist that they are contract R&D service providers with insignificant risk, the TPOs treat them as full or significant risk-bearing entities and make transfer pricing adjustments accordingly. The issue has...

Withdrawal of Circulars No. 2 dated 26th March, 2013  Circular No. 05 /2013 [F. No. 500/139/2012-FTD-I], dated 29-06-2013  1. The Central Board of Direct Taxes had issued Circular No. 2 (hereinafter called "the Circular") on 26th March 2013 regarding application of Profit Split Method. 2. It is noticed the Circular appeared to give the impression that there was a hierarchy among the six method listed in section 92C and that Profit Split Method (PSM) was the preferred method in the case involving unique intangible or in multiple interrelated international transactions. 3. Accordingly, the Central Board of Direct Taxes withdraws Circular No 2 dated 26th March 2013 with immediate effect. The above may be brought to the notice of all concerned. (Batsala Jha Yadav)  Director to the Government of India  Central Board of Direct Taxes  Copy to:  1. The Chairperson, Members and all other officers of the CBDT of the rank of Under Secretary and...

Relief to Tech Firms The income-tax department on Saturday revoked its recent circular (issued on March 26 th 2013 circular no 2) on adoption of profit-split method as a preferred mode for computing tax liability on multinational companies’ development centers in India. It also clarified that another circular (issued on March 26 th 2013 circular no 3), relating to the parameters defining R&D centers, would be suitably modified. Now the Circular no 2 dated 26 th March 2013 has been rescinded and Circular no 3 dated 26 th march 2013 replaced with Circular no 6 dated June 29 th 2013 loosen the norms. Circular no 2  was on application of profit-split method for transfer pricing, while the Circular no 3 was for identifying development centers engaged in contract R&D services with insignificant risk. According to the profit-split method , part of parent company’s profit is taken into account while computing the tax liability of its centers. This would have meant ...

The   finance ministry   may soon clarify that takeaway and home delivery of food will not attract service tax, a move that will be welcomed by the likes of Mcdonalds, Dominoes and Pizza Hut. "The ministry is examining the issue. There is a strong view that takeaways and home deliveries should not attract service tax," as told by a senior government official. Finance minister   P Chidambaram   is also understood to have favored this reading of the service tax   rules. The finance ministry's clarification, if it finally materializes, will bring the much-needed relief to the industry that has made several representations to the government seeking clarity on the issue and even pitching for deferment of the new levy. The confusion stems from the   union budget   2013-14 that had extended service tax to all air-conditioned restaurants from April 1 this fiscal. As a result air-conditioned restaurants began charging service tax from their customer...

Is an   ice-cream   a product or a service? Well, you are in for a surprise if you think that it's a product. The tax authorities feel that the ice-cream served by the likes of Amul,   Vadilal,   Kwality Walls, Baskin Robbins and a host of others retail vends or parlours constitute a   service   and should be taxed accordingly.   The logic - it is served from air-conditioned facilities.   The budget this year brought under tax the services provided in relation to food or beverages served by a restaurant, eating joint or a mess having air-conditioning or central air-heating facility in any part of the establishment.   Ice -cream, which depends on air-conditioning for its very existence, naturally meets this condition.   The Central Board of Excise and Customs, the apex indirect taxes body under the ministry, is still to issue a directive on implementation of the budget provision. However, field officials, under pressure to m...

The provident fund department has set an ambitious internal target to settle most claims in less than three days instead of the 30-day deadline set under its citizen charter, promising a huge relief to employees who are often forced to wait for months on end. The Employees' Provident Fund Organization (EPFO), which manages over eight cr. accounts with more than Rs 5 lakh cr. of retirement savings, has been struggling to cope with the increasing workload of account transfers and withdrawals arising out of greater mobility in the labor market in recent years. EPFO has summoned all regional PF bosses to Delhi on 5th July to finalize an action plan for clearing claims expeditiously. The department wants 70-80% of the 1.2 cr. claims expected in 2013-14 to be paid out within three days.  If this plan is successfully applied then more than 1 cr. Employees get benefited in terms of claiming their own hard earned money from PF department. ...

Back to Basics-Accounting Standard What Are Accounting Standards Accounting standards are written documents, policy documents issued by expert accounting body or by the government or other regulatory bodies covering the aspect of recognition, measurement, treatment, presentation and disclosure of accounting transaction in the financial statement. Accounting standard in India are issued by ICAI. Objective of Accounting Standards  Objective of accounting standards is to standardize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statement and add the reliability to the financial statements. The Institute of Chartered Accountants of India recognized the need to harmonize the diverse accounting policies and practices, constituted an Accounting Standard Board (ASB) on 21 st April 1977.  Scope of Accounting standard v   The standard formulated by ASB includes paragraphs in bol...

Applicability of accounting Standard on Special Entities   What Are Accounting Standards Accounting standards are written documents, policy documents issued by expert accounting body or by the government or other regulatory bodies covering the aspect of recognition, measurement, treatment, presentation and disclosure of accounting transaction in the financial statement. Accounting standard in India are issued by ICAI. Objective of Accounting Standards  Objective of accounting standards is to standardize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statement and add the reliability to the financial statements. Accounting Standard And 1.       The Auditors a.        Auditors are duty bound while discharging their attest function to ensure the accounting standards issued and made mandatory by the ICAI are implemented. b. ...

TDS on immovable property (194-IA) From the June 1 st , 2013 all the buyer of property 50 lakh or more than will get ready to pay TDS @1%.However the rural agriculture land and compulsory land acquisition deals are out of its scope. As well those who are planning to buy property less than 50 lakh are also out of the purview of this section. Provision Related to Tax Deduction and Taxability   The Finance Act 2013 had provided that purchaser of an immovable property (other than agricultural land) worth over Rs 50 lakh is required to pay withholding tax at the rate of 1% from the consideration payable to a resident transferor.  The rate at which tax is to be cut is 1%, but it would go up to as high as 20% if the seller does not disclose his permanent account number.   This amendment  is effective from 1st   June, 2013 CBDT has notified the new provision of TDS on immovable property……………….. The provision will apply even when the property ...