Service Tax Applicable @ 10% (Not 12%) in case of invoice issued prior to 01/04/2012 and amount revived post 01/04/2012(Receipt Basis).

Prior to 01/04/2012 the Point of Taxation (POT) in case of the “Chartered Accountants Service” was prescribed as the date of receipt of payment u/r. 7(c) of the POT Rules, 2011 and hence service tax was payable at the rate applicable on the date of receipt. However, pursuant to budget, 2012 (w.e.f. 01/04/2012) the rate of tax was increased change to 12% from 10% and the erstwhile Rule 7 of POT Rule was made applicable to the CA’s service w.e.f. 01/04/2012. An issue arouse in case of a CA who had provided services and issued invoices prior to 01/04/2012 but received the payment post 01/04/2012 – What could be the rate of service tax. To resolve this issue, Board issued 2 Circular Nos. 154/5/2012-S.T dated 28/03/2012 and 158/9/2012-S.T. dated 08/05/2012 and clarified that the POT in the present situation would be governed by the erstwhile rule 7 (c) of the POT Rules and service tax @ 12% would be payable on payment received post 01/04/2012. In a writ challenging the validity of these circulars, the High Court struck down the said circulars and observed as follows:

(i) Both the circulars were erroneous and contrary to the law since they refereed  to the erstwhile rule 7 (c) of the POT Rules which did not exist at the time of receipt of payment i.e. post 01/04/2012:

(ii) The present issue was squarely covered by Rule 4(a) (ii) of the POT rules which prescribes the POT of service in case of changes in the rate of tax as the date of issuance of invoice.

Hence, the rate of service tax applicable to the present case was held to be 10% i.e. the rate of service tax applicable as on the date of issuance of invoice.

[Delhi Chartered Accountant’s Society (Regd.) vs. UOI (2013) 29STR 461 (Del.)]

Silver Price Comparison-Silver Following its 1970s Pattern...

Advertisement charges paid to Google & Yahoo is not chargeable to tax in India

The assessee, a florist, paid a sum of Rs. 30.44 lakhs to Google Ireland Ltd and Yahoo USA for online advertising. The AO held that the assessee ought to have deducted TDS and that as there was a failure, the expenditure was not allowable u/s 40(a)(i). This was deleted by the CIT(A) on the ground that Google and Yahoo did not have a PE in India. On appeal by the department to the Tribunal, HELD dismissing the appeal:

U/s 5(2)(b) income accruing or arising in India is chargeable to tax in India. A website does not constitute a ‘permanent establishment’ unless the servers on which websites are hosted are also located in the same jurisdiction. As the servers of Google and Yahoo are not located in India, there is no PE in India. As regards the second limb of s. 5(2)(b) of “income deemed to accrue or arise in India”, on heas to consider s. 9. S. 9(1)(i) does not apply as there is no “business connection” in India nor are the online advertising revenues generated in India serviced by any entity based in India. As regards s. 9(1)(vi), it is held in Yahoo and Pinstorm that the advertising revenues are not assessable as “royalty”. As regards s. 9(1)(vii), the services are not “managerial” or “consultancy” in nature as both these words involve a human element. Applying the rule of noscitur a sociis, even the word “technical” in Explanation 2 to s. 9 (1) (vii) would have to be construed as involving a human element. If there is no human intervention in a technical service, it cannot be treated as a technical service u/s 9(1)(vii). On facts, the service rendered by Google & Yahoo is generation of certain text on the search engine result page. This is a wholly automated process. In the services rendered by the search engines, which provide these advertising opportunities, there is no human touch at all. The results are completely automated. Consequently, the whole process of actual advertising service provided by Google & Yahoo, even if it be a technical service, is not covered by the limited scope of s. 9(1)(vii). Consequently, the receipts in respect of online advertising on Google and Yahoo cannot be brought to tax in India under the provisions of the Act or the India US and India Ireland tax treaty.

By ITO vs. Right Florists Pvt Ltd (ITAT Kolkata)

Why Horse Betting is not an Gambling in India as per Income Tax Act?

Horse betting is not an gambling while winning in casino is an gambling as per Income Tax Act. Why is it so? Is it difference of approach? Though both forms part of the gambling. Winning in casino are purely matter of chance, while betting on the horses can involve calculation and experience. People look the horse’s past race record, jockey’s past race record, diet of horses etc. which is provided in booklet at race course. As such people don’t do such calculations at the casino.

SUB BROKING COMMISSION ON SHARE TRADING IS EXEMPT FROM TDS…!!!

In My Opinion

“Any person paying commission (other than that referred to in Sec.194D of the Income Tax Act) or brokerage exceeding Rs. 5,000/- per annum to any resident person is liable to deduct tax at the rate of 10% at the time of credit or payment, whichever is earlier, as per Sec. 194H of the Income Tax Act. Commission or Brokerage includes any payment received directly or indirectly by a person acting on behalf of another person for non-professional services for buying or selling of goods or asset, valuable article or things that are not securities.

Securities have meaning as per the Securities Contract (Regulation) Act, 1956, and includes shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities in or any of any incorporated company or other body corporate; derivatives; units or any other instrument issued by any collective investment scheme to the investors in such schemes; security receipt as defined in Sec. 2(zg) of the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; government securities; such other instruments as may be declared by the Central Government to be securities; and rights or interests in securities.

As payment of brokerage to sub-brokers arises from brokerage received on securities, no TDS is deductible on payment of commission on securities to sub-broker.”

It is advisable

“The main broker to deduct TDS on payment to sub-broker to be on a safer side.”