BOOKS OF ACCOUNTS TO BE MAINTAINED

Companies Act, 1956

• A company is required to maintain its books of account and vouchers for a period of 8 years immediately preceding the current year. As per sub section 4A of section 209.
• Licensed Companies u/s 25 of The Companies Act, 1956 is required to maintain its books of account and vouchers for a period of not less than 4 years.
• The books and papers of the Amalgamated/Transferor Company must be not be disposed of without the prior permission of the Central Government.
• The books and papers of a company which has been wound-up and of its liquidator shall not be destroyed for a period of 5 years from the date of its dissolution. They may be destroyed earlier with prior Central Government permission.
• Every company (not being an NBFC) accepting public deposits must maintain a Register of Deposits for 8 calendar years from the financial year in which the latest entry is made in the Register.
• The Register and Index of Members must be maintained permanently.
• The Register and Index of Debenture-Holders must be maintained for 15 years after the redemption of debentures.
• The copies of all Annual Returns and Certificates annexed thereto must be maintained for 8 years from date of filing with the ROC.

NBFC Directions

• Every NBFC accepting public deposits must maintain a Register of Deposits for each branch and a consolidated Register for 8 calendar years following the financial year in which the latest repayment /renewal entry is made in the Register.

Income-tax Act, 1961

• Assessees are required to preserve the specific books of account for a period of 6 years from the end of the relevant assessment year, i.e., for a total period of 8 previous years. Thus, accounts must be maintained for PY 2002-03 and onwards and accounts up to 31st March, 2002 (PY 2001-02) need not be maintained for Income-tax purposes.
• Transfer Pricing documents and Information specified under Rule 10 D must be maintained for a period of 8 years from the end of the relevant assessment year , i.e., for a total period of 10 previous years.

Central Excise

• Daily stock Account of goods produced must be maintained for 5 years immediately after the financial year to which such records pertain.

Service Tax

• Records maintained under various other laws in force from time to time would be acceptable.

Maharashtra Value Added Tax Rules

• Every Registered Dealer must preserve all books of account, registers and other documents relating to stocks, purchases, dispatches and deliveries of goods, payment made and receipts towards sale or purchase of goods for at least 5 years from the expiry of the year to which they relate.

SEBI Regulations

• Under the SEBI Regulations for Stock Brokers, Merchant Bankers, Portfolio Managers, Underwriters, Debentures Trustees, FIIs, Custodian of Securities and Depository Participants the Records prescribed by SEBI under relevant Regulations must be maintained for a minimum period of 5 years.
• Under the SEBI Regulations for Venture Capital Funds and Mutual Funds the records prescribed by SEBI under relevant Regulations must be maintained for a minimum period of 8 years.
• SEBI regulations for Registrar & Transfer Agents and Bankers to an Issue the records prescribed by SEBI under relevant Regulations must be maintained for a minimum period of 3 years.

ICAI- Council’s decision of 1957

• CAs should preserve records relating to audit and other work done by them, routine correspondence and other papers for a minimum period of 10 years.

CBDT Instruction On Grant Of TDS Credit For AY 2011-12

Instruction No. 4/2012 [F. No. 225/34/2011-ITA.II], dated 25-5-2012

The Board has decided to withdraw Instruction no. 01/2012 issued on 2nd February, 2012 on the subject above with immediate effect. The following decisions have been taken in this regard:

(i) In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. Five thousands, the TDS claim may be accepted without verification.

(ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification.

(iii) Where there are TDS claims with invalid TAN, the TDS credit for such claims is not to be allowed.

(iv) In all other cases TDS credit shall be allowed after due verification.

SERVICE TAX EXEMPTION

Service Tax act/Rules has provided exemption to small scale service provider from service tax up to aggregate value of taxable services provided of 10 lakh in a Financial Year . This exemption was available before 01.07.2012 and continued even after 01.07.2012 in negative list regime with few changes wef 01.04.2012.

If in the previous financial year the aggregate value of taxable services provided by you was less than Rs.10 lakh and in the present financial year the aggregate value of taxable services provided by you is also less than Rs.10 lakh. Then no need to pay service tax .

If in the previous financial year aggregate value of taxable services provided was less than 10 lakh but this year aggregate value of taxable services provided is more than 10 lakh them you start paying service tax after crossing the threshold of Rs 10 lakh.

If in the previous financial year aggregate value of taxable services provided was more than 10 lakh but this year aggregate value of taxable services provided is less than 10 lakh them you start paying service tax from rupee one.


See chart

Aggregate value of Taxable Services provided		Service Tax applicable
Preceding Financial  Year	Current Financial year
Less than 10 lakh	Less than 10 lakh	No service tax
Less than 10 lakh	More than 10 lakh	Service tax applicable after 10 lakh
More than 10 lakh	Less than 10 lakh	service tax applicable from Rs one ,No exemption available

The Finance Act 2012, has amended the provision relating to small scale exemption recognizing that the aggregate value up to Rs 10 Lakhs will be in terms of invoices issued/to be issued for taxable services and not payments received.(Notification no.33/2012-ST dated 20.6.2012). This is w .e .f 1.7.2012. 

1.Meaning of aggregate value :The small service provider exemption of ` 10 Lakh is available towards “aggregate value not exceeding ` 10 Lakhs”, means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification.

The definition of the ‘aggregate value’ has been amended w.e.f. 01.04.2012 whereby the sum total of the value of taxable services charged in the first consecutive invoices issued/required to be issued during the financial year shall be considered instead of payments received.

The exemption as to small service provider is provided for the keeping the small service provider outside the tax net.

2. Single Limit for all services By same person : where a taxable service provider provides one or more taxable services , the exemption under this notification shall apply to the aggregate value of all such taxable services and not separately for each  services; 

Suppose A person is providing service XXX and YYY . To avail this exemption aggregate service provided for service XXX and YYY should be less than 10 Lakh

the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year. 

3. Single Limit for all offices /Location : where a taxable service provider provides taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises; 

Example:In service Tax person can get separate registration for deferential location .To calculate 10 lakh Limit ,Aggregate value of taxable services at all location ,even having different registration number , is to be considered.

In brief this exemption is available person wise not location or service wise.

4.Cenvat Credit not available if Exemption of 10 lakh  has been availed. 

5. Exemption is optional not mandatory : This exemption  is optional so that even such small service providers can opt to pay tax instead of availing the benefit of exemption. In case of such opting to pay service tax, the service provider would get the benefit of CENVAT Credit of duties and taxes paid on capital goods, inputs and input services. By this mechanism the CENVAT credit can get passed on whereby the basic cost of output service would get reduced if the service receiver can avail CENVAT credit.  

6.Once exercised Can not be reversed : The option as to non-availment of such small scale exemption and opting to pay tax once exercised, cannot be withdrawn during the remaining part of such financial year. 

Option is granted to service provider to avail benefit of threshold exemption to the tune of ` 10/- lakhs. In case option is exercised by service provider, service tax would be applicable only if the aggregate value of taxable service ( provided during the previous financial year exceed ` 10 Lakhs )

7.No exemption where service tax is payable under Reverse Charge: However the above exemption shall not be available to the person made liable to pay service tax under sec (68)(2) [Reverse Charge and Joint Charge liabilities]  


The liability of the service provider and service recipient are different and independent of each other. Thus in case the service provider is availing exemption owing to turnover being less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.

8. No Exemption If Service are provided under brand name or trade name of others :The person providing service under the brand name or trade name of others. Some persons are providing the services under name of brand name owner. These service providers would not be eligible to the exemption which is available to the small service providers.

If service provided under own brand name or trade name then eligible : If a person is providing a service under his own brand name, he would be entitled to the exemption.

9. The Basic Exemption subject to above condition is available to all type of Person :The basic exemption is not restricted only to individual or partnership firm but it is available to all assessees.

‘Person’ is not restricted to natural person. ‘Person’ has been defined Section 65 B of the Act.  The following shall be considered as persons for the purposes of the Act:

1. an individual
2. a Hindu undivided family
3. a company
4. a  society
5. a  limited liability partnership
6. a firm
7. an association or body of individuals, whether incorporated or not
8. Government
9. a  local authority,  or
10. every artificial juridical person, not falling within any of the preceding sub-clauses.

10. Abatement and exempted services is not to be counted for calculation of 10 Lakh: Various services has been exempted from service tax vide notification 25/2012 .If service provider is providing both exempted and taxable services than turnover of exempted services is not be added for calculation of 10 lakh .
Similarly abatement from gross amount charged by service provider  has been defined in notification 26/2012  .To calculate 10 lakh part only taxable part after abatement is to be considered.

Example: Person is providing services of renting motor vehicle designed to carry passengers. In a given financial year he has charged gross Rs 20 lakh for services . In notification 26/2012 only 40% part i.e 8 Lakh is taxable for renting of motor vehicle designed to carry passengers  (40% of 20 Lakh) . So he can can avail 10 lakh exemption available to small service provider ,as taxable part of services provided by him is less than 10 lakh

Atma Ram Properties Pvt Ltd vs. DCIT (Delhi High Court)

Atma Ram Properties Pvt Ltd vs. DCIT (Delhi High Court)

S. 147: AO must specify what facts are failed to be disclosed. Lapse by AO no ground for reopening if primary facts disclosed

In AY 2001-02, the AO assessed advances of Rs. 1.56 crores received from a group concern as “deemed dividend” u/s 2(22)(e). In appeal, the CIT (A) held that the advances received in earlier years could not be assessed. The AO thereafter reopened the assessment for AY 1999-00 (after 4 years from the end of the AY). Though the AO alleged that there was a failure on the part of the assessee to disclose full and true material facts, he did not specify what that failure was. The reopening was upheld by the CIT (A) & the Tribunal. On appeal to the High Court, HELD allowing the appeal:

Amendment in Section 44AA to 44AF of Income Tax Act 1961

Amendment of section 44AA – Maintenance of accounts by certain persons carrying on profession or business

As per the provisions of clause (iii) of subsection (2) of Section 44AA of the Income-tax Act, every person carrying on business or profession not being a profession referred to I subsection (1) and who claims that his income is lower than the profits or gains so deemed to be the profits and gains of his business under section 44AD or section 44AE or section 44AF or section 44BB or section 44BBB as the case may be shall have to keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

v     It proposed to substitute the figures and letters “section 44AE” for the figures and letters “section 44AD or section 44AE or section 44AF”.

v     It has also been proposed to substitute the words “previous year” at the end of the clause with words “previous year or”

v     A new clause (iv) shall be inserted after the clause (iii). The new clause (iv) reads as under:

            “(iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under the section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,”

The proposed amendment makes it mandatory the maintenance of accounts by an assesse who falls under the ambit of new section 44AD, if he claims that   his income from profits and gains of the business is lower than the profits and gains as computed in accordance with the provisions of section 44AD and if his income exceeds the maximum amount which is not chargeable to income-tax.

This amendment will take effect from 1^st April 2011. Accordingly apply to the assessment year 2011-12 and subsequent years.

Amendment of section 44AB – Audit of accounts of certain persons carrying on business or profession

       

It is proposed to amend clause (c) of section 44AB. As per the proposed amendment for the words, figures and letters “section 44AD or section 44AE or section 44AD or section 44AE or section 44AF”, the word, figure and letters “section 44AE shall be substituted.

Ø      As per the proposed amendment Every Person who is engaged in the business of plying, hiring or leasing such goods carriages, if he claims that his income from the said business is lower than the presumptive income as specified in subsection (2) of section 44AE has to keep and maintain such books of account and other documents as required under subsection (2) of section 44AA and get his accounts audited and furnish a report of such audit as required under section 44AB before the specified date.

Ø      As per the proposed new clause (d) to be inserted Every Person who claims that his income from business deemed to be the profits under section 44AD to be lower than the profits and gains so deemed to be profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable t income-tax in any previous year get his accounts of such previous year audited by an accountant before the specified date.

This amendment will take effect from 1^st April, 2011. Accordingly apply to the assessment year 2011-12 and subsequent years.

Amendment of section 44AD – Special provision for computing     profits and gains of business of civil constructions, etc.,  

This section has been completely redrafted and substituted for the old section.

Ø      The provisions of this section apply to eligible assessees engaged in eligible business.

Ø      The terms eligible assessee and eligible business have been defined in the Explanation.

Ø      An eligible assessee means (1) A resident Individual (2) A resident HUF and (3) A resident partnership Firm. LLP is excluded from the partnership firm for this section. Hence LLP is not an eligible assessee for this section.

Ø      Eligible business means any business except the business of plying, hiring or leasing of goods carriages referred to in section 44AE.

Ø      The income of the eligible assessee from the eligible business in the previous year is computed @ 8% on the gross receipts or total turnover or a sum higher than the said sum claimed to have been earned by the eligible assessee.

Ø      All deductions under sections 30 to 38 shall be deemed to have been given full effect in arriving at the income of the eligible assessee from the eligible business and no further deductions are available under these sections.

Ø      If the eligible assessee is a partnership firm the deduction towards interest and partenrs’ remuneration shall be allowed subject to the limits and conditions laid down in section 40(b).

Ø      Written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee has calimed the depreciation and he was actually allowed the depreciation for each of the relevant assessment year.

Ø      The eligible assessee who is engaged in the eligible business is under no obligation from payment of Advance Tax as the provisions of Chapter XVII-C are not applicable.

Ø      There is ambiguity in subsection (5) of the proposed section 44AD. 

Ø      The eligible assessee is under an obligation to maintain such books of account and other documents as required under subsection (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB, if claims that his profits and gains from the eligible business are lower than the profits and gains specified under subsection (1) of this section and his income exceeds the maximum amount which is not chargeable to tax.

Ø      As seen from the above an assessee whose profits are lower than the prescribed rate 8% of his gross receipts or total turnover and his income exceeds the maximum amount which is not chargeable to tax.

Ø      Both the conditions are simultaneous.

Ø      An amendment is necessary to do away with the ambiguity.

The provisions of this section shall take effect from 1^st April 2011 and accordingly apply to the assessment year 2011-12 and subsequent year

Amendment of section 44AE – special provisions for computing profits and gains of business of plying, hiring or leasing goods carriages

Subsection (2) of section 44AE is proposed to be amended.

The deemed profits from the business as per the provisions of amended section are-

§         Rs. 5,000/- per month per each heavy vehicle owned in the previous year by the assessee or the amount actually claimed to have earned by the assessee from such vehichle which ever is higher.

§         Rs. 4,500/- per month per each heavy vehicle owned in the previous year by the assessee or the amount actually claimed to have earned by the assessee from such vehichle which ever is higher.

§         Other provisions of this section remained unchanged.

The amended provisions shall take effect from 1^st April 2011. Accordingly will apply to the assessment year 2011-12 and subsequent years.

Deletion of section 44AF – Special Provisions for computing profits and gains of retail business

A new subsection (6) has been proposed to be inserted with effect from 1^st April 2011 in section 44AF. As per the proposed subsection the provisions of section 44AF are not applicable from the assessment year 2001-12 onwards.