Transactions where quoting PAN is mandatory- CBDT 22 Amendment

The CBDT make an amendment in income tax rules with 22ns amendment with rule 114B, Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A.

In exercise of the powers conferred by section 139A, section 271FAA and section 285BA, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income–tax (22nd Amendment) Rules, 2015.
(2) Rules 114B, 114C and 114D shall come into force from the 1 st day of January, 2016 and rule 114E shall come into force from the 1s t day of April, 2016.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), for rules 114B, 114C, 114D and 114E, the following rules shall respectively be substituted, namely:-

“114B. Transactions in relation to which permanent account number is to be quoted in
all documents for the purpose of clause (c) of sub-section (5) of section 139A.-

Every person shall quote his permanent account number in all documents pertaining to the
transactions specified in the Table below, namely:—




S.No
Nature of transaction
Value of transaction
1
Sale or purchase of a motor vehicle or vehicle, as defined in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988) which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles
All such transactions
2
Opening an account [other than a time-deposit referred to at Sl. No.12 and a Basic Savings Bank Deposit Account] with a banking company or a cooperative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).
All such transactions
3
Making an application to any banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution, for issue of a credit or debit card.
All such transactions
4
Opening of a demat account with a depository, participant, custodian of securities or any other person registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).
All such transactions
5
Payment to a hotel or restaurant against a bill or bills at any one time
Payment in cash of an amount exceeding fifty thousand rupees.
6
Payment in connection with travel to any foreign country or payment for purchase of any foreign currency at any one time.
Payment in cash of an amount exceeding fifty thousand rupees.
7
Payment to a Mutual Fund for purchase of its units.
Amount exceeding fifty thousand rupees.
8
Payment to a company or an institution for acquiring debentures or bonds issued by it.
Amount exceeding fifty thousand rupees.
9
Payment to the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) for acquiring bonds issued by it
Amount exceeding fifty thousand rupees.
10
Deposit with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).
Deposits in cash exceeding fifty thousand rupees during any one day.
11
Purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act).
Deposits in cash exceeding fifty thousand rupees during any one day.
12
A time deposit with, - (i) a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a Post Office; (iii) a Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013); or (iv) a non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.
Amount exceeding fifty thousand rupees or aggregating to more than five lakh rupees during a financial year.
13
Payment for one or more pre-paid payment instruments, as defined in the policy guidelines for issuance and operation of pre-paid payment instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007), to a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or to any other company or institution.
Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount aggregating to more than fifty thousand rupees in a financial year
14
Payment as life insurance premium to an insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938).
Amount aggregating to more than fifty thousand rupees in a financial year.
15
A contract for sale or purchase of securities (other than shares) as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).
Amount exceeding one lakh rupees per transaction.
16
Sale or purchase, by any person, of shares of a company not listed in a recognised stock exchange
Amount exceeding one lakh rupees per transaction.
17
Sale or purchase of any immovable property.
Amount exceeding ten lakh rupees or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees.
18
Sale or purchase, by any person, of goods or services of any nature other than those specified at Sl. No. 1 to 17 of this Table, if any.
Amount exceeding two lakh rupees per transaction:
Provided that where a person, entering into any transaction referred to in this rule, is a minor and who does not have any income chargeable to income-tax, he shall quote the permanent account number of his father or mother or guardian, as the case may be, in the document pertaining to the said transaction:

Provided further that any person who does not have a permanent account number and who enters into any transaction specified in this rule, he shall make a declaration in Form No.60 giving therein the particulars of such transaction:

Provided also that the provisions of this rule shall not apply to the following class or classes of persons, namely:-
(i) the Central Government, the State Governments and the Consular Offices;
(ii) the non-residents referred to in clause (30) of section 2 of the Act in respect of the transactions other than a transaction referred to at Sl. No. 1 or 2 or 4 or 7 or 8 or 10 or 12 or 14 or 15 or 16 or 17 of the Table.

Explanation.—For the purposes of this rule,—
(1) “payment in connection with travel” includes payment towards fare, or to a travel agent or a tour operator, or to an authorised person as defined in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

(2) “travel agent or tour operator” includes a person who makes arrangements for air, surface or maritime travel or provides services relating to accommodation, tours, entertainment, passport, visa,
foreign exchange, travel related insurance or other travel related services either severally or in package;

(3) “time deposit” means any deposit which is repayable on the expiry of a fixed period.
Scrutiny Assessment of Income Tax in Computer Aided Scrutiny Selection

Scrutiny Assessment of Income Tax in Computer Aided Scrutiny Selection

The CBDT issued an instruction no. 20 dated 29 December 2015 regarding Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection (`CASS')

The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014 dated 26.09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. 

2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made: 

(i)Year of applicability: As stated in the Instruction No. 7/2014, the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014. 

ii. Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been selected under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/26AS data, then the said Instruction would not apply. 

iii. Scope of Enquiry: Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. 

iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data, the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 

3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year-- one is 'Limited Scrutiny' and other is 'Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 (Act). The procedure for handling 'Limited Scrutiny' cases shall be as under: 

a. In 'Limited Scrutiny' cases, the reasons/issues shall be forthwith communicated to the assessee concerned. 

b. The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny' issues. 

c. These cases shall be completed expeditiously in a limited number of hearings.

d. During the course of assessment proceedings in 'Limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny' with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 

4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice. 

5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 

6. Hindi version to follow 
(An ita Pandey) Under Secretary to the Government of India 
(F.No. 225/269/2015-ITA.11)

E.com dealers need to file Delhi VAT return

In exercise of the powers conferred on me by section 27 of Delhi Value Added Tax Act, 2004, I, Sanjeev Khirwar, Commissioner, Value Added Tax, Government of NCT of Delhi, hereby prescribe a return to provide details of dealers located in Delhi, supplying goods either to customers of Delhi or outside Delhi and details of dealers located outside Delhi, supplying goods to customers of Delhi, for the persons engaged in providing facility of electronic shopping (commonly known as e-commerce) through their web-portals. The companie.sifirms/LLPs/ proprietorship concerns etc. may be acting as facilitators, directing the transaction to the dealer concerned for supplying the goods to the customer who has ordered for such supply or supplying the goods directly to the customers from the godown maintained. managed and owned by such facilitating entities, where the goods of concerned dealer have already been stored. The said return is subject to following conditions: 

1. All such persons engaged in the business of e-commerce shall have to enrol themselves by logging on to the web-site of the department (www.dvat.qov.in) at first by clicking on the relevant link in the Menu. Basle information has to be filed online in Form EC-I. A unique ID would be generated after successful submission. This ID should be used for filing the said return. Password for logging on to the site would be communicated on email provided by the person. 

2. Return should be filed on quarterly basis in Form EC-II & EC-Ill by 20th day of the month following the quarter to which the return pertains. To begin with, return for the first quarter of current financial year 2015-16 may be filed by due date. 

3. The return should be uploaded on the above said portal of the department in off-line / online mode by digitally signing the same. 

4. Net sale turnover of a dealer, reducing there from the turnover of the sold goods returned which have been sold during the same quarter. 

5. The return of a quarter can be revised by the end of next quarter for making corrections for the goods sold in that quarter but returned in subsequent quarter. 

6. Non-compliance of the notification by the eligible persons referred above would be treated as violation of the provisions of Delhi Value Added Tax Act, 2004 and would be proceeded accordingly. 

7. Suppression of information relating to any dealer engaged in supplying goods directly or indirectly through the portal of e-commerce entity would also be treated as violation of the provision of Delhi Value Added Tax Act, 2004 / Central Sales Tax Act, 1956. Such turnover would be deemed as sale made by the e-commerce entity. 

2 The notification shall come in force with immediate effect. 

Download Form EC1
Download Form EC2
Download Form EC3
CBDT Circular no. 23 about TDS on interest of Fixed Deposit

CBDT Circular no. 23 about TDS on interest of Fixed Deposit

The Central Board of Direct Taxes issued a circular no. 23/2015 dated 28 December 2015 about TDS on interest of fixed deposit under section 194A made on direction of court.

Section 194A of Income Tax Act, 1961 (“the Act”) stipulates deductions of tax at source (TDS) on interest other than interest on securities if the aggregate of amount of such interest credited or paid to the account of the payee during the financial year exceeds the specified amount .

2. In the case of UCO Bank in Writ Petition No. 3563 of 2012 (available on NJRS at 2014) and CM No. 7517/2012 vide judgment dated 11/11/2014, the Hon’ble Delhi High Court has held that the provisions of section 194A do not apply to fixed deposits made in the name of Registrar General of the Court on the directions of the Court during the pendency of proceedings before the Court. In such cases, till the Court passes the appropriate orders in the matter, it is not known who the beneficiary of the fixed deposits will be. Amount and year of receipt is also unascertainable. The Hon’ble High Court thus held that the person who is ultimately granted the funds would be determined by orders that are passed subsequently. At that stage, undisputedly, tax would be required to be deducted at source to the credit of the recipient. The High Court has also quashed Circular No. 8 of 2011.

3. The Board has accepted the aforesaid judgment. Accordingly, it is clarified that interest on FDRs made in the name of Registrar General of the Court or the depositor of the fund on the directions of the Court, will not be subject to TDS till the matter is decided by the Court. However, once the Court decides the ownership of the money lying in the fixed deposit, the provisions of section 194A will apply to the recipient of the income.

4. Accordingly, such issues may not be contested in appeal and pending litigation, if any on the issue before various Courts/Tribunals may be withdrawn/not pressed upon.

5. This may be brought to the notice of all concerned.

(Ramanjit Kaur Sethi)
DCIT (OSD) (IJT)
CBDT New Delhi
How to earn tax free income

How to earn tax free income

Everybody is interested to make money and moreover taxpayers are more keen to earn tax free income. There are some ways with you can earn tax free income.

USE INDEXATION TO NULLIFY TAX
High inflation has been a curse for investors in the past few years, but for some, it has been a boon. Tax rules allow inves- tors to adjust the cost of an asset to infla- tion during the holding period.

INVEST THROUGH A NON- WORKING SPOUSE 
If you gift money to your wife and it is invested, the taxman will club the earning with your income for the year. But if you invest in tax-free instruments like PPF or tax free bonds, there is no tax implication.

AVAIL OF MINOR EXEMPTION 
If you invest in a minor child's name, the income is clubbed with that of the parent who earns more. However, there is a small `1,500 exemption per child per year from such investments. You can avail of this for a maximum of two children.

TAKE HELP OF AN ADULT CHILD 
After a person turns 18, he is treated as a separate individual for tax purposes. His earnings are no longer clubbed with his parent's income. Save on tax by investing in the name of an adult offspring.

PARENTS CAN HELP TOO 
Your parents can also help you avoid the tax net. If any or both of your parents do not have a high income, while you are in the highest 30% tax slab, you can invest in their name to earn tax-free income. Such income is not clubbed.

REVIVE YOUR FORGOTTEN ULIP 

Most of us have Ulips in our portfolios and many of us have stopped paying the premium. If you are part of this crowd, you can use your Ulip to earn tax-free income. Pay all the pending premiums at one go and earn tax free returns. 7 FORM AN HUF WITH INHERITED WEALTH Double your basic exemption andsavings limit simply by establishing a Hindu Undi- vided Family (HUF). The tax authorities treat the HUF as a separate entity. It is entitled to the same tax benefits.

TRACES new facility of lower TDS deposited in quarters

You would appreciate that timely Deduction of Tax and it́s timely Deposit to the Government Account is in vital interest of the National Economy. Centralized Processing Cell (TDS) congratulates you for your valued partnership and contribution in the Nation building process.

However,as per the records of the Centralized Processing Cell (TDS), it has been observed that there is (40%/ 45%/ 50%/ 55%/ 60%) reduction in the amount of Tax Deposited by you during the period April 1 to October 15, 2015 as compared to the corresponding period in Financial Year 2014-15.

You may have reasonable causes for less Deduction and less Payment of tax with respect to the above mentioned reduction. CPC TDS has released a "Self Declaration" feature on web-portal TRACES with respect to Lower TDS deposited during a Quarter/s to facilitate the deductors to share the reasons for reduction in TDS deposited during the year or quarter compared to last year.

How to use the functionality:
1- Navigate to "Declaration to Deposit Lower TDS" under "Statements/ Payments" Menu

2- Add statement details with respect to Financial Year, Quarter and Form Type for which declaration needs to be made.

3- Add "Nature of Payment" and "TDS Lower by %"

4- Select "Reasons for Lower Deduction" from the drop down menu.

5- Check declaration by submitting "I Agree" radio button.

The following provides a view of the final screen after submitting required details:
If any amount needs to be deducted and deposited, immediate action may be taken without any further delay.Otherwise, you are requested to submit at your option the "Self-Declaration for Lower Deposit of TDS" as prescribed above.

CPC (TDS) is committed to provide best possible services to you.
CBDT issued POEM draft guidelines

CBDT issued POEM draft guidelines

Section 6(3) of the Income-tax Act, 1961, prior to its amendment by the Finance Act, 2015, provided that a company is said to be resident in India in any previous year, if it is an Indian company or if during that year, the control and management of its affairs is situated wholly in India. This allowed tax avoidance opportunities for companies to artificially escape the residential status under these
provisions by shifting insignificant or isolated events related with control and management outside India. To address these concerns, the existing provisions of section 6(3) of the Income-tax Act, 1961 were amended vide Finance Act, 2015, with effect from 1st April, 2016 to provide that a company is said to be resident in India in any previous year, if-

(i) it is an Indian company; or

(ii) its place of effective management in that year is in India .

2. For the purposes of this clause, "place of effective management" means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.

3. 'Place of effective management' (PoEM) is an internationally recognised test for determination of residence of a company incorporated in a foreign jurisdiction. Most of the tax treaties entered into by India recognize the concept of 'place of effective management' for determination of residence of a company as a tie-breaker rule for avoidance of double taxation.

4. The Explanatory Memorandum to the Finance Bill, 2015 has stated that a set of guiding principles to be followed in the determination of PoEM would be issued for the benefit of the taxpayers as well as the tax administration. Accordingly the guiding principles on the following lines are proposed to be issued.

5. For the purposes of these guidelines, -
(a) A company shall be said to be engaged in “active business outside India” if the passive income is not more than 50% of its total income and ,-

(i) less than 50% of its total assets are situated in India; and
(ii) less than 50% of total number of employees are situated in India or are resident in India; and
(iii) the payroll expenses incurred on such employees is less than 50% of its total payroll expenditure 

(b) “Head Office” of a company would bethe place where the company's senior management and their direct support staff are located or, if they are located at more than one location, the place where they are primarily or predominantly located. A company’s head office is not necessarily the same
as the place where the majority of its employees work or where its board typically meets;

(c) “ Passive income”of a company shall be aggregate of ,-
(i) incomefrom the transactions where both the purchase and sale of goods is from / to its associated enterprises; and
(ii) income by way of royalty, dividend, capital gains, interest or rental income;

(d) “Senior Management” in respect of a company means the person or persons who are generally responsible for developing and formulating key strategies and policies for the company and for ensuring or overseeing the execution and implementation of those strategies on a regular and on-going basis. While designation may vary, these persons may include:
(i) Managing Director or Chief Executive Officer;
(ii) Financial Director or Chief Financial Officer;
(iii) Chief Operating Officer; and
(iv) The heads of various divisions or departments (for example, Chief Information or Technology Officer, Director for Sales or Marketing).

6. Any determination of the PoEM will depend upon the facts and circumstances of a given case. The PoEM concept is one of substance over form. It may be noted that an entity may have more than one place of management, but it can have only one place of effective management at any point of time. Since “residence” is to be determined for each year, POEM will also be required to be determined on year to year basis. The process of determination of POEM would be primarily based on the fact as to whether or not the company is engaged in active business outside India.

7. The place of effective management in case of a company engaged in active business outside India shall be presumed to be outside India ifthe majority meetings of the board of directors of the company are held outside India.

7.1 However, if on the basis of facts and circumstances it is established that the Board of directors of the company are standing aside and not exercising their powers of management and such powers are being exercised by either the holding company or any other person (s) resident in India, then the place of effective management shall be considered to be in India.

7.2 For the purpose of determining whether the company is engaged in active business outside India the average of the data of the previous year and two years prior to that shall be taken into account. In case the company has been in existence for a shorter period, then data of such period shall be considered.

8. In cases of companies other than those that are engaged in active business outside India referred to in para 7 the determination of POEM would be a two stage process , namely:-
(i) . First stage would be identification or ascertaining the person or persons who actually make the key management and commercial decision for conduct of the company’s business as a whole.

(ii) . Second stage would be determination of place where these decisions are in fact being made.

8.1 The place where these management decisions are taken would be more important than the place where such decisions are implemented. For the purpose of determination of POEM it is the substance which would be conclusive rather than the form.

8.2 Some of the guiding principles which may be taken into account for determining the PoEM are as follows:

(a) The location where a company’s board regularly meets and makes decisions may be the
company’s place of effective management provided, the Board-

(i) retains and exercises its authority to govern the company; and
(ii) does, in substance, make the key management and commercial decisions necessary for the conduct of the company’s business as a whole.

It may be mentioned that mere formal holding of board meetings at a place would by itself not be conclusive for determination of POEM being located at that place. If the key decisions by the directors are in fact being taken in a place other than the place where the formal
meetings are held then such other place would be relevant for POEM. As an example this may be the case where the board meetings are  held in a location distinct from the place where head office of the
company is located or such location is unconnected with the place where the predominant activity of the company is being carried out.

If a board has de facto delegated the authority to make the key management and commercial decisions for the company to the senior management or any other person including a shareholder and does nothing more than routinely ratifying the decisions that have been made, the company’s place of effective management will ordinarily be the place where these senior managers or the other person make those decisions.

(b) A company’s board may delegate some or all of its authority to one or more committees such as an executive committee consisting of key members of senior management. In these situations, the location where the members of the executive committee are based and where that committee develops and formulates the key strategies and policies for mere formal approval by the full
board will often be considered to be the company’s place of effective management.

The delegation of authority may be either de jure (by means of a formal resolution or Shareholder Agreement) or de facto (based upon the actual conduct of the board and the executive committee).

(c) The location of a company’s head office will be a very important factor in the determination of the company’s place of effective management because it often represents the place where key company decisions are made.The following points need to be considered for determining the location of the head office of the company:-

• If the company’s senior management and their support staff are based in a single location and that location is held out to the public as the company’s principal place of business or headquarters then that location is the place where head office is located.

• If the company is more decentralized (for example where various members of senior management may operate, from time to time, at offices located in the various countries)then the company’s head office would be the location where these senior managers,-
(i) are primarily or predominantly based; or
(ii) normally return to following travel to other locations; or
(iii) meet when formulating or deciding key strategies and policies for the company as a whole.

• Members of the senior management may operate from different locations on a more or less permanent basis and the members may participate in various meetings via telephone or video conferencing rather than by being physically present at meetings in a particular location. In such situation the head office would normally be the location, if any, where the highest level of
management (for example, the Managing Director and Financial Director) and their direct support staff are located.

• In situations where the senior management is so decentralised that it is not possible to determine the company’s head office with a reasonable degree of certainty, the location of a company’s head office would not be of much relevance in determining that company’s place of effective management.

(d) It may be clarified that day to day routine operational decisions undertaken by junior and middle management shall not be relevant for the purpose of determination of POEM.

(e) The use of modern technology impacts the place of effective management in many ways. It is no longer necessary for the persons taking decision to be physically present at a particular location. Therefore physical location of board meeting or executive committee meeting or meeting of senior management may not be where the key decisions are in substance being made. In such cases the place where the directors or the persons taking the decisions or majority of them usually reside may also be a relevant factor.

(f) If the above factors do not lead to clear identification of POEM then the following secondary factors can be considered :-
(i) Place where main and substantial activity of the company is carried out; or
(ii) Place where the accounting records of the company are kept.

9. It needs to be emphasized that the determination of PoEMis to be based on all relevant facts related to the management and control of the company, and is not to be determined on the basis of isolated facts that by itself do not establish effective management, as illustrated by the following examples:

i. The fact that a foreign company is completely owned by an Indian company will not be conclusive evidence that the conditions for establishing PoEM in India have been satisfied.

ii. The fact that one or some of the Directors of a foreign company reside in India will not be conclusive evidence that the conditions for establishing PoEM in India have been satisfied.

iii. The fact of , local management being situated in India in respect of activities carried out by a foreign company in India will not , by itself, be conclusive evidence that the conditions for establishing PoEM have been satisfied.

iv. The existence in India of support functions that are preparatory and auxiliary in character will not be conclusive evidence that the conditions for establishing PoEM in India have been satisfied.

10. It is reiterated that the above principles for determining the PoEM are for guidance only. No single principle will be decisive in itself. The above principles are not to be seen with reference to any particular moment in time rather activities performed over a period of time, during the previous year, need to be considered. In other words a “snapshot” approach is not to be adopted. Further, based on the facts and circumstances if it is determined that during the previous year the PoEM is in India and also outside India then PoEM shall be presumed to be in India if it has been mainly /predominantly in India

11. Further, in case the Assessing officer proposes to hold a company incorporated outside India, on the basis of its PoEM, as being resident in India then any such finding shall be given by the Assessing officer after seeking prior approval of the Principal Commissioner or the Commissioner, as the case may be, in this regard. The Principal Commissioner or the Commissioner shall provide an opportunity of being heard to the company before deciding the matter.

12. The comments and suggestion of stakeholders and general public on the above draft guidance are invited. The comments and suggestions may be submitted by 02nd January, 2016 at the email address (dirtpl1@nic.in) or by post at the following address with “Comments on draft Guidance on POEM”
written on the envelop.
RBI extends last date of exchange pre-2005 notes

RBI extends last date of exchange pre-2005 notes

Please refer to our circular DCM (Plg) No.G-15/5486/10.27.00/2014-15 dated June 26, 2015 and the Press Release dated June 25, 2015 on the captioned subject.

2. On a review of the matter, it has been decided to extend the date for exchanging the pre-2005 banknotes to June 30, 2016. However, from January 01, 2016, such facility will only be available at identified bank branches (https://www.rbi.org.in/Scripts/Regionaloffices.aspx) and Issue Offices of RBI. These instructions have been included in a Press Release dated December 23, 2015 (copy enclosed).

3. You are advised to facilitate the exchange of such notes without causing any inconvenience to the public, whatsoever. These notes will retain their legal tender status.

4. Suitable instructions may be issued to all your identified bank branches to provide exchange facilities to members of public and to stop re-issue of the pre- 2005 series banknotes. In this regard, you may please refer to the list of dos and don’ts enclosed with our circular dated March 03, 2014. Please also ensure that such notes are not dispensed through the ATMs / over your counters. The methodology to be followed for dealing with the Pre-2005 series banknotes contained in Para 3 of our circular DCM (Plg) No. G-17/3231/10.27.00/2013-14 dated January 23, 2014 remains unchanged.

5. Please acknowledge receipt.

Yours faithfully,
(Uma Shankar)
Principal Chief General Manager
CBDT draft guideline for determination of residence of company

CBDT draft guideline for determination of residence of company

The Finance Act, 2015 has amended, with effect from 01.04.2016, the provisions of Income-tax Act relating to determination of residence of a company. In accordance with the amended provisions a company would be said to be resident in India in any previous year, if it is an Indian company or its Place of Effective Management (POEM)in that year is in India.

2. The Explanatory Memorandum to the Finance Bill, 2015 stated that a set of guiding principles for determination of POEM would be issued for the benefit of the taxpayers as well as the tax administration.

3. In this regard draft guiding principles for determination of POEM have been formulated and have been uploaded on the Finance Ministry website (www.finmin.nic.in) and website of the Income-tax Department (www.incometaxindia.gov.in) for comments from stakeholders and general public.

4. The comments and suggestion on the draft guidance may be sent by 2nd January, 2016 at the email address (dirtpl1@nic.in) or by post at the following address with “Comments on draft Guidance on POEM” written on the envelop.

Director (Tax Policy & Legislation)-I
Central Board of Direct Taxes,
Room No. 147-D,
North Block,
New Delhi – 110001

(Dr. B. K. Sinha)
Commissioner of Income-tax
(Media & Technical Policy)
Official Spokesperson, CBDT

Latest Excise ER1 ER2 and ER3 return excel utility free download

The Central Excise notified latest return excel utility ER1, ER2 and ER3. ER1 and ER2 excel return utility are updated on 11 December 2015 wheras ER3 excel return utility is updated on 16 December 2015.









ER1
ER1 is a monthly Return for production and removal of goods and other relevant particulars and CENVAT credit.

ER2
ER2 is a monthly Return for production and removal of goods and other relevant particulars and CENVAT credit.

ER3
ER3 is a quarterly Return for production and removal of goods and other relevant particulars and CENVAT credit.

CBDT revised limits for filing of appeal by the Income tax department

 The Central Board of Direct Taxes has issued a Circular revising the monetary limits for filing of appeals by the Department with the objective of reducing litigation as a part of its initiatives to reduce grievances of the taxpayers.

The monetary limits for filing of appeals by the Department before the Income Tax Appellate Tribunal and the High Courts have been revised to tax effect of Rs. 10 Lakhs and Rs. 20 Lakhs, respectively, from the present limits of tax effect of Rs. 4 Lakhs and Rs. 10 Lakhs. The revised limits have been made applicable retrospectively to pending appeals also. Directions have been issued that pending appeals which are below the revised monetary limits may be withdrawn or not pressed.

In another noteworthy decision, the CBDT has issued an Office Memorandum directing Principal Chief Commissioners to constitute a collegium of Chief Commissioners of Income Tax comprising of two officers in their respective Regions. This collegium will consider withdrawal of appeals filed by the Department in cases involving tax effect above the revised monetary limit from the High Courts if no question of law is involved, the issue is considered settled by the Department or the appeal is no longer relevant in view of subsequent amendment.


These two decisions are expected to reduce pending litigation filed by the Department by 50 percent and provide relief to taxpayers facing long standing litigation. 

Circular No.21/2015 and O.M. bearing F.no.279/Misc/52/2014-(ITJ) are available on the website of the Department www.incometaxindia.gov.in .

(Shefali Shah)
Pr. Commissioner of Income Tax (OSD)
Official Spokesperson, CBDT 
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