Circular No.158/9/2012 dated 08-05-2012 quashed by High Court

The Board vides its Circular No. 158/9/2012 dated 08-05-2012 read with Circular No. 154/5/2012 dated 28-03-2012 clarified that in case the individuals or proprietary firms or partnership firms providing taxable services referred to in sub-clauses (g), (p), (q), (s), (t), (u), (za) and (zzzzm) of clause (105) of section 65 of the Finance Act, 1994(Chartered Accountant, Cost Accountant, Company Secretary, Architect, Interior Decorator, Legal, Scientific and Technical consultancy services) and invoices for the same issued prior to 31-03-2012 for which payment received on or after 01-04-2012, the point of taxation shall be governed by Rule 7 of Point of Taxation Rules, 2011 (as applicable up to 31-03-2012) and thereby service shall be deemed to be provided on the date of receipt of payment and rate of service tax would be 12%.

┬áRecently in this regards, the Hon’ble Delhi High Court in the matters of DELHI CHARTERED ACCOUNTANT SOCIETY (REGD) VS UNION OF INDIA AND ORS [W.P.(C) 4456/2012 & C.M.No. 9237/2012] finds that in such cases sub clause (ii) of clause (b) of Rule 4 -Determination of point of taxation in case of change in effective rate of tax of Point of Taxation Rules, 2011 would be applicable (where the point of taxation will be the date of issuing invoice and accordingly rate of service tax would be 10%) instead of Rule 7 which has been substituted with new rule w.e.f. 01-04-2012 where the said specified eight services provided by individual or proprietary firms or partnership firms do not find any mention.

Moreover this Court finds that the above Circular no. 158 being contrary with the Finance Act, 1994 and the Point of Taxation Rules, 2011 cannot be allowed to govern this controversy and thereby has been quashed.



No Penalty for mere reduction in deduction claimed

IssueWhether the penalty was imposed U/s 271(1)(c ) because of the reason that the deduction claimed under section 80-IB by the respondent-assessee was ultimately allowed at a lower level were valid?

Held – that the mere making of a claim which is ultimately held not to be sustainable in law, would not amount to furnishing inaccurate particulars regarding the income of an assessee. In the present appeals it is only that the claims of deduction under Section 80IB have been downscaled. This, by itself, would not mean that it is a case of furnishing inaccurate particulars of income. Furthermore, there is no finding in the penalty order as to which part of the income the assessee had concealed and with regard to which particular facet of his income had the assessee provided inaccurate particulars thereof.


Amount paid to seconded personnel not liable for deduction of tax at source

The trained man-power deployed abroad is drawn for the employees of its member companies. However, such deployed man-power continue to be the employees of its member companies but are seconded to the projects abroad by the respondent-assessee company. In the assessment year under consideration, the assessee had claimed an amount of Rs. 3.93 crores as expenditure being the overseas compensation paid to the employees of the oil companies seconded abroad under the head seconded personnel expenses. The assessing officer by his order dated 29th March 2000 disallowed the amount of Rs. 3.93 crores paid to seconded employees on account of its failure to deduct tax at source under Section 192 of the Income Tax Act, 1961 (the Act). Therefore, the payment was hit by Section 40(a)(iii) of the Act.

Seconded personal continue to be the employees on the roll of the member oil companies even during the period of secondment. These seconded employees continue to receive their salaries and emoluments from the member oil company of which they are employees. Therefore, not being employees of the respondent-assessee, the overseas allowances cannot be subject to deduction of tax at source.

Consequently, in view of the finding of fact arrived at that the seconded personnel are not the employees of the respondent-assessee, the amount paid as foreign allowances to the seconded personal is not liable for deduction of tax. In view thereof, the occasion to apply Section 40(a)(iii) of the Act does not arise.


Register / Track PAN Card Related Complain / Status

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Nature of Complaint

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