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Category: Readers View

Readers View

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The Editor,
BCAJ,
Mumbai – 400 020.

17th July, 2013

Dear Sir,

Re: FDI Reforms

Faced with harsh economic environment, both domestic as well as global, the Dollar starved Government has ushered in FDI Reforms. It has increased FDI Limits in 12 sectors (excluding Civil Aviation, Multi Brand Retail and News Media). In several sectors, 49% limit has been changed to Automatic Route from the FIPB Route. The decision was taken by 11 Key Ministers by consensus. Same day it was reported that Posco of South Korea has junked its $5.3 billion Karnataka Steel Project because of inordinate delay in getting iron ore mining rights. Other FDI Projects in Steel Sector proposed in last 10 years by Arcelor Mittal and others have not yet seen fructification due to delays in Land Allotment and getting exclusive Coal and Iron Ore Mining rights.

Besides the Reforms at Policy Level, the FDI Regulations are such a maze of Press Notes, Circulars, Notifications, Clarifications etc. that leave aside a foreigner, even the Regulators and Expert Consultants cannot find their way through . At times, the RBI does not implement the policy level changes made by the Finance Ministry, Commerce Ministry and DIPP.. Therefore, there is an urgent need to cut thru the clutter of such Press Notes, Circulars and Notifications and ensure that all the concerned ministries and their Officials and RBI are on the same page.

Further, the Reform Mindset has to percolate down to the State Government and the Municipal Authorities Today, it is seen that the Local Bureaucrats and Politicians, whether high or low, are not concerned with development of the State or the Country; their only concern is how do they get their pound of the flesh. They look for opportunities to milk the Businessmen and Industrialists, who are, therefore, looking for greener pastures abroad.

The decision to open up some sectors of the economy to greater foreign investment is a step in the right direction, coming as it does at a time when the country needs such investment to plug a yawning current account deficit. But the idea will not work if the government imposes unreasonable restrictions which put off investors.. While ensuring that loopholes are not exploited, the effort must be to make implementation of rules investor-friendly. The rules themselves must be fair and transparent. Only then will the benefits flow. If Governments, both at the Central and at the States, do not take care of the above, the policy relaxations will remain on paper and would not result in inflow of Foreign Exchange as earnestly hoped by the Union Cabinet and such hope will only remain a “Maya” (illusion).

Yours sincerely,

Tarun Singhal

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Readers View

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Sir,

Apropos of the article, ‘Taxation of commission payments to non-residents’, co-authored by three C.A.s in the International Taxation Section of the BCAJ Journal of March 2012, I would like to share my views as under:

It is true that while dealing with International Taxation we must analyse the given issue with reference to tax law, circulars, notifications, DTAA, and case law evolved by jthe udiciary. The co-authors have done excellent exercise by bringing out the finer points. However, there are two more aspects which one should explore.

First, if an Indian resident agent receives commission from a foreign exporter, what are the tax withholding provisions in the country of the foreign exporter?

Second, if the Indian exporter fails to pay commission to the foreign non-resident agent as per the contract, whether legal remedy (available to the foreign non-resident agent) to recover such commission is available in the Indian Court or in the court of the country in which services were rendered by the foreign non-resident agent. This may have a bearing on the chargeability of the commission. I think the above-mentioned issues should have been addressed while dealing with the commission issue.

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Income-tax Return of Professionals – Issues related to Tax Credit (TDS) Mismatch

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The Editor
Bombay Chartered Accountant Journal
Mumbai
23rd May 2015

Re: Income-tax Return of Professionals – Issues related to Tax Credit (TDS) Mismatch

As
you are aware, most Individual Taxpayers, particularly various
Professionals, maintain their books of account on Cash Basis and
accordingly account for professional fees received on cash basis.

Accordingly,
while filing the Return of Income, credit for TDS deducted by the
payers u/s 194J is claimed in the year in which the relevant
professional income is accounted/ received and offered for tax on
receipt basis, in accordance with the provisions of section 199 of the
Income-tax Act, 1961 which provides that “Any Deduction made in
accordance with provisions of section 192………. 194J ………. and paid to the
Central Government, shall be treated as payment of tax on behalf of the
person from whose income the deduction was made …. and credit shall be
given to him for the amount so deducted, on the production of the
Certificate furnished u/s. 203 in the assessment made under this Act for
the assessment year for which such income is assessable”.

Thus,
whereas the Payers deduct TDS in Year 1 on accrual basis, particularly
various types of Professional fees at the end of the Financial Year as
on 31st March, the Recipient Professionals claim credit for the TDS in
Year 2, upon actual receipt, resulting in TDS Credit mismatch.

Prior
to AY 2014-15, there was no proper disclosure mechanism in the Returns
of Income filed by the Individual Professional Tax Payers for AY 2012-13
and AY 2013- 14 and earlier years. The CPC Bangalore does not give
credit/ has not given credit for TDS in such cases i.e. TDS deducted in
Year 1 but credit whereof is claimed in Year 2, resulting in huge demand
for tax and interest and causing huge mental agony and anxiety to the
taxpayers.

There is no clear, effective and speedy redressal
mechanism in such cases and one has to run from Pillar to Post upon
receipt of Intimation u/s 143(1), reflecting a huge demand on account of
such Tax Credit mismatch.

Through the medium of BCAS’s
prestigious Journal, I wish to highlight this issue faced by thousands
of Individual Professionals, to the attention of High Revenue Officials
in CBDT and CPC Bangalore, requesting them to issue clear guidelines and
establish speedy and effective remedial mechanism.

Regards,
Tarun Singhal

The Editor
Bombay Chartered Accountant Journal

Sir,
Apropos
your editorial captioned “A GOOD BEGINNING” [April 2015 issue] wherein
you have made very important observation about black money lying within
the country and which reads as ” If income or assets on which tax has
been evaded lie within the country, normally they circulate through
distribution channels albeit unofficial…………. must be grossly
unequal. Consequently, to an extent, such moneys gives a fillip to economic activity.”
I fully endorse your view . Black money does play positive role in the
economy.To my mind it is not tax evaders but tax “predators” who cause
immense damage to the economy. Tax predators are those who eat away
taxes paid by taxpayers.They squander taxes in the name of cost of
governance, development and helping poorest of poor. Mindless use of
taxes is as dangerous as tax evasion. Any government be it Congress or
BJP, is interested in finding ways and means for collecting more and
more taxes, [knowing fully well] that this adds to inflationary
conditions in the economy. I am sorry to say, any new legislation
enacted, whatever be its noble objectives, means a new area/era of
litigation, even if it begins well.

Regards

Avinash Rajopadhye
Chartered Accountant

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President’s Page – Readers Respond

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We have had the privilege of going through the ‘President’s Page’ before it is published in the journal.

This year, the year of Naushad Panjwani’s ‘President’s Page’, amazed us with the style and contents thereof. The write-ups were extremely relevant and well put together, especially the last one of June, 2014. In regard to the ‘President’s Page,’ many readers have sent in words of appreciation. It is not possible to publish all of them. As a farewell to him, we are publishing a few responses.

We, at the editorial board, have always welcomed feedback whatever its nature. We welcome the bouquets but are prepared to receive the brickbats as well.

We hope this will encourage readers to respond to the journal.

Anil Sathe                                                                                                Narayan Varma Editor                                                                                                               Publisher

September 2013
You have echoed our thoughts and what generally a common literate Indian feels these days. We don’t feel any special on 15th August every year. But as you rightly said, we are no less patriotic even. However, the general political scenario has brought this apathy towards the nation and its governing people. And there seem to be no ray of hope in the near future for a desired change. But there is another side! There are our youth, our young generation, our young intelligent Indian minds residing abroad and in India who certainly have a different view of the things, of the national problems. The need of the hour is somebody to lead this revolution. The intelligent, good, conscientious people are doing wonders where they are standing. The ‘do good’ effect has to be consolidated and brought forward/in front, so that the others could be inspired. Let us do our bit and hope to build a nation. Thanks for reminding.

— Shubha Gupta


OCTOBER 2013
That was a lovely message. I would like to add that these days, sorry is less accepted. It is better to be safe than sorry, since in certain circumstances, sorry may or may not fetch forgiveness. Also, where deadlines are to be met, it is ‘do or die’ or ‘perform to meet deadline or pay interest and penalty and sometimes may attract even prosecution.” We need to look into such drastic laws and give better justice by giving the defendant a chance to get waiver of penalty and prosecution. We are heading for non compassionate and inhuman treatment. Can the BCAS do something to reverse the harsh impact of changes in laws?

— Gracy Mendes

NOVEMBER 2013
All together a new way of looking into age old issues – very interesting. The thought process was developing in a very intriguing but positive manner. But the end was sort of very pessimistic, doomed. You suggested a solution which you yourself have ruled out. Can we not find a shrewed way out using some ‘chanayak niti’? Being a leader, there should be a more concrete end to the discussion. The questions should not be left hanging I suppose… may be encouraged for further debate! That’s my view

— Shubha Gupta

JANUARY 2014, February 2014
Liked your message as President of BCAS. Your thoughts penned are aligned well with your love for Hindi movies. I do agree that it has been a utter chaos in last three years as far as policymaking is concerned. However, an appeal to our countrymen and especially the young voting class that you mentioned, to keep virtues and values of Indian Culture in mind disguise of rational thinking. I may not be as good as you, but the best way to express myself in form of a hindi movie sher from a ghazal from the movie Umrao Jaan:

“Maana ke doston ko nahin dosti ka paas
Lekin yeh kya keg air ka ehsaan lijiye
Wishing you all the success.”
— Prakash Udeshi

MARCH 2014
A positive note. I am sure, over time, new dishes will surface from A. P. and Telangana to add to your list of favourites. And before the bifurcation takes effect sometime in June, let BCAS host a programme which will include a united A. P. meal. If required, my daughter who is possibly a foodie like you, will assist you in organising such a dinner .

— Puloma/Dushyant Dalal

APRIL 2014
You have given a beautiful and inspiring article to students appearing for the exams. My son is appearing for the CA Final and there is lot of stress and anxiety. This article comes at a right time and will provide a tonic for him. We all have gone through the same phase and now know the value of it. Thanks again.

— Sudhir Avhad

MAY 2014
Naushad, in the current dispensation, I am with the SC. When the Parliament does not function (since the Bofors days), executive has no regard for law and the PM is dysfunctional for a decade, SC’s activism is justified. People are happy with Sahara developments. Our top judicial brains are defending him without answering from where he got the money to repay and how can one repay 20K without recording in the books?

All the cream of our society has made India a ‘Banana republic.’ They now fear only the SC; they don’t fear God!

— Tarunkumar Singhal


JUNE 2014
An excellent piece to be read by every citizen of this country. Beautiful parting speech. Words fail to compliment you. Wish you good luck

— K. Sankaranarayanan

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Reader’s view

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Sir,

Like any other professional Chartered Accountant, I am also reluctant to lift my pen and start writing. This is a nightmare for the Editor who expects a feed back through a column “Readers’ Views”. Successive editors, including yours truly, have failed to excite the readers to write. I therefore thought of taking a first step myself and comment on the editorial of October 2011.

I entirely agree with your view that “Preparation of financial statement is universally an object driven exercise, the reflection of the true state of affairs is rarely one of them.” It is certainly a bold written admission, but “true and fair state of affair” is many times a wishful thinking, a daydream or a utopia.

Accounting Standard and Auditing Standards and many variations thereof like IFRS, Ind. AS, AS original seem to be Greek and Latin to a businessman. You have referred to such standards as written in ‘Sanskrit’. I honestly believe that they must have been written in a language 10 times difficult than Sanskrit. Sanskrit is a very sweet and a lyrical language, much easier to understand, but not the language of so called Standards.

Standard also means that which is static, stands tall, guides a person like a lamppost when he is stranded in rough seawater. Standard is supposed to be a guide for a long time. It could be like a constitution — cannot be changed so easily. We however have standards, which undergo frequent changes like the rates of tax in annual Finance Acts.

The well-publicised, highly appreciated benefit of Standards is stated to be the easy understandability of financial statements by the users in the global village. One can digitise the terms, standardise the phrases but can we then effectively communicate? Language is supposed to be a means of communication, but it changes in tone, accent, meaning every 25 to 30 kilometres geographically. Any attempt for a universal accounting language is bound to be a solid ground for universal confusion. It will make most of the users of financial statements dependent on the so called experts for understanding the accounts of an entity in which they wish to invest. It would be therefore very easy to fool the retail investors whose exit may not be anticipated by the standard setters.

The crux of the matter is ‘cash flow’, both inflow and outflow. Any attempt of standardisation, which affects credit line (Inflow of either debt or equity) of a business entity or the tax burden (outflow of capital) of such an entity is likely to face stiff resistances and a devise would be tried to circumvent the reality. I have heard in one public meeting that at times mergers and acquisitions are undertaken to avoid facing an inconvenient accounting standard.

I do not undermine the importance or the necessity of standardisation. However, the rate of so called creation, setting up and most important — changes in such standards is alarming and confusing and if this persists, then the object of ‘true and fair’ would certainly be a story from fairy tale.

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Readers View

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Sir,

It is always a pleasure reading BCAJ which is full of new views and findings.

In the April issue I read the decision in the case of Frontier Offshore on page 35 of the Journal. The conclusion drawn is that withholding tax as per section 44BB does not lead to any violation of section 40(a)(i) of the Income-tax Act. Reading of the judgment leads to opposite view, what I feel.

It is requested to please look into it and give feedback as to the correct finding. Please take this in a positive manner with no intention to counter the view of the Journal.

— Japan Yagnik Chartered Accountant

Authors’ response
The decision of Frontier Offshore which is digested in April 2011 issue (ITA Appeal No. 200/ Mds/2009) at page 35 has concluded that provisions of section 40(a)(i) are not applicable when the payer has deducted tax at source after taking into account presumptive computation provisions of section 44BB.

It is true that at para 7, the ITAT has rejected the contention of the taxpayer that section 40(a)(i) is not applicable to the cases of short deduction and are restricted only to the cases of absolute failure. Please note that this was only the alternative argument of the taxpayer. The ITAT has accepted the primary argument of the taxpayer to the effect that section 40(a)(i) is not applicable to the cases where TDS has been deducted after taking into account presumptive tax provision.

Also, as is clarified in the gist appearing in April 2011 issue, the earlier decision of the Madras Tribunal in the case of the same taxpayer was decided against and after elaborate discussion, the ITAT has explained as to why after the SC decision in GE India’s case, the earlier decision was no longer a good law. The ITAT has gone to the extent of observing that perpetuating error is not a heroic deed, but to correct the mistake at the right opportunity is wisdom.

Trust we have been able to satisfactorily explain the concern of the reader.

— Geeta Jani, Dhishat Mehta Chartered Accountant

Sir,

Re : Income-tax Refunds — Need to revisit TDS Threshold Limits

This is with the reference to media reports to the effect that the Income-tax Department has granted tax refunds of Rs.78,000 crores to about 85 lakh assessees during the year 2010-11 and that during the first half of April, 2011, the IT Department refunded Rs.6,183 crores to 8,23,101 assessees and all the remaining refunds shall be settled during the remainder part of April, 2011. The CBDT Chairman has stated that the IT Refunds in 2010- 11 are about 70% higher than Rs.50,000 crores made in the previous year and that despite making such huge refunds, the direct tax collection will be in the range of Rs.4.5 lakh crores. The Tax Department needs to be sincerely complimented for expeditiously making such huge refunds which constitute about 20% of net collection and making life easier for the taxpayers.

To reduce such huge workload, the Tax Department needs to analyse what is causing such huge tax refunds; causing huge blockage of capital. Is it on account of excess advance tax paid or excess tax deducted at source? Or is it due to refund of tax pursuant to Appellate proceedings?

My own guess is that vast majority of such huge refunds is due to excess TDS deducted due to very low threshold limits prescribed under various TDS provisions. Now due to operation of section 206AA, most taxpayers/income-earners have obtained PAN. Therefore, there is an urgent need to revisit various TDS threshold limits and increase them substantially so that claims of refunds can go down significantly. The Department also needs to study and adopt Withholding Tax (TDS) practices followed in advanced western countries. Further, the Department need to liberalise self-declaration provisions as it is very difficult, time-consuming, inefficient and costly affair to obtain a Nil or Low TDS Certificate from the Tax Department u/s.197 of the Act.

— Tarun Singhal Chartered Accountant

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READERS’ VIEWS

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Sir, With respect to the feature ‘Controversies — Restriction on Deduction due to section 80-IA(9)’ published in March issue of BCAJ at page no. 41, I would like to bring to the notice of the authors the provisions of section 80A(4) inserted w.e.f. 1-4- 2003. This section was inserted just to give legal sanctity to the Judgment of five member Bench in case of Hindustan ACIT v. Mint & Agro Products (P) Ltd., 123 TTJ 577 (Del.) (SB). However, neither the Delhi High Court nor the Bombay High court took note of the amended section. The reason possibly being it was not cited by anybody. So, for A.Y. 2003-04 and A.Y. 2004-05, I think the position is clear. The comments are solicited. –

– Pawan Singla

Errata In the March 2011 issue, in the `Readers’ Views’ the names of the letter writers were omitted. The letter commenting on `Closements’ was by Mr. G.Y. Limaye and the letter commenting on `is It fair’ was by Mr. B. D. Bhide. The error is regretted. – Editor 

(viii) Campus Placement for Articled Assistants: Board of Studies of ICAI has introduced campus placement scheme for selection of Articled Assistants by C.A. Firms. This is in addition to the Online Placement Service already available at http://bosapp. icai.org The campus placement will be held between 15th and 30th April, 2011 in cities viz. Ahmedabad, Mumbai, Nagpur, Pune, Bangalore, Chennai, Ernakulam, Hyderabad, Kolkata, Indore, Jaipur, Kanpur, Ghaziabad, Chandigarh and New Delhi.

(Refer C.A. Students Journal for March, 2011, Page 33)

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