LOGO 24th 24 August 2013

Transcription

1 LOGO 24 th August 2013

2 T.D. Venkata Rao v. Union of India [1999] 237 ITR 315 (SC).: "Chartered Accountants, t by reason of their training i have special aptitude in the matter of audits. It is reasonable that they, who form a class by themselves, should be required to audit the accounts of businesses whose income (sic: turnover) exceeds Rs.40 lakhs* and professionals o s whose income (sic: gross receipts) exceeds Rs.10 lakhs** in any given year. There is no material on record and indeed in our view, there cannot be that an income-tax practitioner has the same expertise as chartered accountants in the matter of accounts. For the same reasons the challenge under article 19 must fail, and it must be pointed out that these income-tax practitioners are still entitled to be authorised representatives of assessees. 2

3 GUIDANCE NOTE ON TAX AUDIT UNDER SECTION 44AB OF THE INCOME-TAX ACT, 1961 (Revised 2013 Edition) 9.4. A question may arise in the case of a public sector company or any other company where the statutory auditor has not been appointed by the authorities concerned as to whether the tax auditor appointed under section 44AB can complete his audit without waiting for statutory audit report on the accounts audited by the statutory auditors. It may be noted that Form No. 3CA requires the tax auditor to enclose a copy of the audit report conducted by the statutory auditor or the auditor of the financial statements as the case may be. Where a statutory auditor has not been appointed by the authorities concerned or where the report of the statutory auditor is not available for whatever reasons, it will be possible for the tax auditor to give his report in Form No. 3CB and to certify the relevant particulars in Form No.3CD.This is particularly important in those cases where the assessee concerned has suffered losses in the relevant accounting year. It may, however, be noted that the tax auditor in such cases will have to conduct the financial audit as well in order to enable him to certify whether or not the accounts reported upon by him give a true and fair view of the state of affairs of the assessee whose accounts are audited by him under section 44AB. 3

4 FORM NO. 3CA [See rule 6G(1)(a)] Audit report under section 44AB of the Income-tax Act, 1961, in a case where the accounts of the business or profession of a person have been audited under any other law * I/We report that the statutory audit of [mention name and address of the assessee with permanent account number] was conducted by * me/us/m/s. in pursuance of the provisions of the Act, and * I/we annex hereto a copy of * my/our/their audit report dated along with a copy each of - (a) the audited * profit and loss account/income and expenditure account for the year ended on 31st March, ; (b) the audited balance sheet as at 31st March, ; and (c) documents declared by the said Act to be part of, or annexed to, the * profit and loss account/income and expenditure account and balance sheet. 2. The statement of particulars required to be furnished under section 44AB is annexed herewith in Form No. 3CD. 4

5 3. In * my/our opinion and to the best of * my/our information and according to explanations given to * me/us, the particulars given in the said Form No. 3CD and the Annexure thereto are true and correct. ** Signed Place Name : Date Address Notes : 1. *Delete whichever is not applicable. 2. **This report has to be signed by- (i) a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949); or (ii) () any yperson who, in relation to any State, is, by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), entitled to be appointed to act as an auditor of companies registered in that State; or (iii) any person who is, by virtue of any other law, entitled to audit the accounts of the assessee for the relevant previous year. 3. Where any of the requirements in this form is answered in the negative or with qualification, give reasons therefor. 4. The person, who signs this audit report, shall indicate reference of his membership number/certificate of practice number/authority under which he is entitled to sign this repor 5

6 FORM NO. 3CB [See rule 6G(1)(b)] Audit report under section 44AB of the Income-tax Act, 1961 in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G * I/We have examined the balance sheet as at 31st March,and the * profit and loss account/income and expenditure account for the year ended on that date, attached herewith, of mention name and address of the assessee with permanent account number] 2. * I/We certify that the balance sheet and the * profit and loss account/income and expenditure account are in agreement with the books of account maintained at the head office at and ** branches. 3. (a) * I/We report the following observations/comments/discrepancies/inconsistencies; if any: (b) Subject to above,- (A) * I/We have obtained all the information and explanations which, to the best of * my/our knowledge and belief, were necessary for the purposes of the audit. 6

7 (B) In * my/our opinion, proper books of account have been kept by the head office and branches of the assessee so far as appears from * my/our examination of the books. (C) In * my/our opinion and to the best of * my/our information and according to the explanations given to * me/us, the said accounts, read with notes thereon, if any, give a true and fair view:- (i) in the case of the balance sheet, of the state of the affairs of the assessee as at 31st March, ; and (ii) in the case of the * profit and loss account/income and expenditure account of the * profit/loss or * surplus/deficit of the assessee for the year ended on that date. 4. The statement of particulars required to be furnished under section 44AB is annexed herewith in Form No. 3CD. 7

8 5. In * my/our opinion and to the best of * my/our information and according to explanations given to * me/us, the particulars given in the said Form No. 3CD and the Annexure thereto are true and correct. *** Signed Place : Name : Date Address : Notes : 1. *Delete whichever is not applicable. 2. **Mention the total number of branches. 3. ***This report has to be signed by- (i) a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949); or (ii) any person who, in relation to any State, is, by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), entitled to be appointed to act as an auditor of companies registered in that State. 4. The person, who signs this audit report, shall indicate reference of his membership number/certificate of practice number/authority under which he is entitled to sign this report. 8

9 CLAUSE FROM 3CD REPORT 27. (a) Whether the assessee has complied with the provisions i of Chapter XVII- B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government. Yes No (b) If the provisions of Chapter XVII-B have not been complied with, please give the following details*, namely:- Amount (i) (ii) (iii) (iv) Tax deductible and not deducted at all shortfall on account of lesser deduction than required to be deducted tax deducted late tax deducted but not paid to the credit of the Central Government *Please give the details of cases covered in (i) to (iv) above. 9

10 Chapter XVII B Compliance. Section : 190 Without prejudice to section 4(1) Income should suffer Tax at Source or Advance Tax Direct Tax Payment in compliance of chapter XVII knowingly or unknowingly willfully or willfully fail to pay in part of full is assessee in default. 192 Salary Income Payment. 194 B Winning from lottery or crossword puzzle in force. 194 BB Winning i from Horse Rates in force 194 E Payment to Non-Resident Sportsmen or Sports 10% 194 G Commission on Sale of lottery 10% 194 LB Interest from infrastructure debt 5% 194 LC Interest on Foreign Currency Loan / 5% 194 LD Interest on certain bonds and government 5% 195 Any Interest (other than 194LB and 194 LC) or any other Sum chargeable under the provisions i of this Act (Other than Rate in force. 10

11 Payer is of the opinion that the whole of such sum would not be income chargeable can apply to A O for appropriate sum determination. Other than banking company, any person entitle to receive such sum (not interest or dividend) is of the opinion that there should not be tax chargeable on such sum, can apply in Form No. 15D vide rule 29B. Payer has to file form No 15CA with Form 15CB which includes following details : Remittance Net of Tax Grossing up amount. Taxability under Domestic Law Vs DTAA. Classification of Income TRC Status. Relevant Article of DTAA Remittance is for Royalties, FTS, FIS, Interest, Dividend connected with PE or Without PE. Business Income Taxability Capital Gain Date of TDS and Rate. 195A Income Payable Net of Tax required grossing up. 196B Income from units to offshore 10% 196C Income from foreign currency Bond/ 10% 198 Tax deducted is deemed income received. 11

12 Section 5 SCOPE OF TOTAL INCOME. (1) Subject to the provisions i of this Act, the total t income of any previous year of a person who is a resident includes all income from whatever source derived which (a) Is received ed or is deemed ed to be received ed in India in such year by or on behalf of such person; or (b) Accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) Accrues or arises to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) 127a of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which (a) Is received or is deemed to be received in India in such year by or on behalf of such person; or 12

13 Section 5 SCOPE OF TOTAL INCOME. (b) Accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1 : Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2 : For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 13

14 Section 6 RESIDENCE IN INDIA. For the purposes of this Act, -(1) An individual id is said to be resident in India in any previous year, if he - (a) Is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or (c) Having within the four years preceding peced gthat year been inindia da for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year. Explanation : In the case of an individual, -(a) Being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958, (44 of 1958) or for the purposes p of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words sixty days, occurring therein, the words one hundred and eightytwo days had been substituted; 14

15 Section 6 RESIDENCE IN INDIA. (b) Being a citizen of India, or a person of Indian origin i within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation eato to that year as if for the words ods sixty days, occurring therein, the words one hundred eighty-two days had been substituted. (2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India. (3) A company is said to be resident in India in any previous year, if - (i) It is an Indian company; or (ii) During that year, the control and management of its affairs is situated wholly in India. (4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India. 15

16 Section 6 RESIDENCE IN INDIA. (5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income. (6) A person is said to be not ordinarily resident in India in any previous year if such person is - (a) An individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more, or (b) A Hindu undivided family whose manager has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more. 16

17 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. (1) The following incomes shall be deemedd to accrue or arise in India :-(i) All income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, a,or through or from any asset or source of income in India, a,or through the transfer of a capital asset situate in India; Explanation : For the purposes of this clause - (a) In the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; (b) In the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export; 17

18 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. (c)) In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities t which are aeconfined to the collection o of news and views in India for transmission out of India; (d) In the case of a non-resident, being (1) An individual who is not a citizen of India; or (2) A firm which does not have any partner who is a citizen of India or who is resident in India; or (3) A company which does not have any shareholder who is a citizen of India or who is resident in India, no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India; (ii) Income which falls under the head Salaries, if it is earned in India; 18

19 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. Explanation : For the removal of doubts, it is hereby declared d thatt income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India. (iii) Income chargeable e under the head Salaries a payable by the Government to a citizen of India for service outside India; (iv) A dividend paid by an Indian company outside India; (v) Income by way of interest payable by - (a) The Government; or (b) A person who is a resident, except where the interest is payable in respect of any debt incurred or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes p of making or earning any income from any source outside India; or (c) A person who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India; 19

20 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. (vi) Income by way of royalty payable by - (a) The Government; or (b) A person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) A person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India, or for the purposes p of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government : 20

21 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. Provided further that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India. Explanation 1 : For the purposes of the first proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date; so, however, that, where the recipient of the income by way of royalty is a foreign company, the agreement shall not be deemed to have been made before that date unless, before the expiry of the time allowed under subsection (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for the assessment year commencing on the 1st day of April, 1977, or the assessment year in respect of which such income first becomes chargeable to tax under this Act, whichever assessment year is later, the company exercises an option by furnishing a declaration in writing to the Assessing Officer (such option being final for that assessment year and for every subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st day of April,

22 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. Explanation 2 : For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for - (i) The transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) The imparting of any information concerning the working of or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; (iii) The use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (iv) The imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; (v) The transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or (vi) The rendering of any services in connection with the activities referred to in subclauses (i) to (v); 22

23 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. Explanation 3 : For the purposes of this clause, the expression computer software shall have the meaning assigned to it in clause (b) of the Explanation to section 80HHE; (vii) Income by way of fees for technical services payable by - (a) The Government; or (b) A person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) A person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : 23

24 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. Provided that nothing contained in this clause shall apply in relation to any income by wayof fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1 : For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2 : For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries. 24

25 Section 9 INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. (2) Notwithstanding t anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having been appointed before 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India. 25

26 206AA Requirement to furnish Permanent Account Number: (1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely: (i) at the rate specified in the relevant provision of this Act; or (ii) at the rate or rates in force; or (iii) at the rate of twenty per cent. Company Logo

27 (2) No declaration under sub section (1) or sub section (1A) or sub section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration. (3) In case any declaration becomes invalid under sub section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub section (1). (4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant. Company Logo

28 (5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other. (6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the dd deductee, it shall be deemed d that t the deducteed has not furnished his Permanent Account Number to the deductor and the provisions of sub section section (1) shall apply accordingly. Company Logo

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