2015

JANUARY

PUNE BRANCH OF WIRC OF ICAIPune VOL - IV - Issue No. 1 • 15/-

The Institute of Chartered Accountants of India(Setup by Act of Parliament)

NEWSLETTER

PUNE ICAI WISHES Happy & Prosperous New Year-2015

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“People forget how fast you did a job, but they remember how well you did it”Howard W. Newton.

Opening Ceremony CS. Ravi Bhushan Kumar - Faculty

CA. Rajneesh Desai - Faculty

Dr. Waman Parkhi - Faculty

CA. Vivek Baj - Faculty

CA. Gopal Krishna Raju - Faculty

Adv. Bharat Raichandani - Faculty

CA. Dharmendra Srivastava - Faculty

Ms. Anjali Ahirrao - Speaker

Mr. Kedar Sabne - Speaker

CS. Milind Kasodekar - Faculty

CA.Pritam Mahure - Faculty

CA. Bimal Jain- Faculty

Advanced Excel Course

CA. Kamlesh Chauhan - Faculty

CA. Kedar Junnarkar- Faculty

CA. Pramod Jain - Faculty

3 DAYS EXTENSIVE WORKSHOP ON SERVICE TAX LAW & PRACTICE

SEMINAR ON“ART OF MAKING CV”

3 DAYS EXTENSIVE WORKSHOP ON THE COMPANIES ACT, 2013

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Dear Members,

Wishing you all a Very Happy and Prosperous New Year which is certain to bring about Epic Change.

Year comes and year goes, it has always been our endeavor to make all years eventful. It is in our hands to make the New Year more challenging. This is the time for us to retrospect, introspect, and make new resolutions and to be aspiring to reach newer Scales and greater goals in one’s professional and personal life. We shall always continue to emerge as respectable and vibrant professionals, securing the quality of our prestigious profession.

Here we are, at the beginning of 2015. New Year comes with glow of hopes in our mind. It gives us new confidence and motivation for a fresh & new start. May the joy, happiness, and peace surround you and your dear & near ones through-out the year and also positive that 2015 will bring Prosperity and success for all of us.

For our Country the year of 2014 has poised a successful trail of achievements in various fields ranging from space technology to medical science to the Nobel Peace Prize.

• ISRO’s inter alia the biggest achievement of the year was the success of the country’s Mars Orbiter Mission [MOM], when the “MANGALYAAN” spacecraft entered the Mars orbit on September 24th ; India joined the select club of five proud countries which have successfully sent spacecraft to Mars. Acknowledging & recognizing ISRO’s expertise, NASA signed an agreement with India’s space agency to collaborate on a new earth-observing satellite called NISAR and future missions to Mars.

• The World Health Organization (WHO) declared that India was free from the clutches of the dreaded disease of polio.

• The Pradhan Mantri Jan Dhan Yojana was launched on August 28. This ambitious scheme will certainly enable financial literacy & discipline amongst millions of citizens specially the lower income group and indeed will be a breakthrough in setting a Good Governance model to the credit of the Government.

• The 2014 Nobel Peace Prize was jointly awarded to India’s Kailash Satyarthi, who has waged a heroic battle to free enslaved children.

Pune ICAI congratulates all the Citizens of India and salutes all; who had brought pride and dignity to our motherland during the year 2014.

In keeping with our role in nation-building, our Institute is honored by nomination as one of the nine ambassadors in the Swachh Bharat Mission of the Hon. Prime Minister of India.

Back to the Branch activities the last month of 2014 witnessed the persistent flow of value adding programs for members. The overwhelming response for the 3-days Workshops on Service Tax and Companies Act-2013 conducted in October and November mandated for a repetition which was again well received by the members during December. The other important programs were Refresher Course on Accounting Standards, Seminar on Corporate Governance Code under Companies Act- 2013, Seminar for Members on Art of Making CV, Seminar on Nitty- gritty of Amended Depreciation provisions under Companies Act-2013 - Case Studies & Use of MS-EXCEL as a tool for working on Fixed Assets & Depreciation schedule, Conference on Maharashtra Tax organized by WIRC, Investor Awareness Program and Advanced Excel Workshops. The post qualification Certificate Course on Concurrent Audit of Banks also started in December-2014

The CA students exhibited their extracurricular talents by participating in the

annual Youth Festival “JALLOSH 2015”. The industrial/educational visits to sugar industry and jaggery making units were organized for CA students to educate them on the economy of the agriculture produce and the relevant production cycles. The various lectures and seminars for students covered the topics viz. Companies Act-2013, Appeal & Scrutiny, MVAT Audit, Standards on Audit, How to become Successful Professional, Domestic Transfer Pricing, RTI Act, Central Excise-Practical Aspects, E-Commerce Business and Introduction to Bank Audit.

Major Activities during Months Ahead –

January 2015After the Grand Success of the First ever Pune CA Inter Firm Cricket Tournament-2014; the Second season of Pune CA Inter Firm Cricket Tournament-2015 is scheduled during 23rd to 26th January at Katariya Cricket Ground, Mukundnagar. Not to the surprise the success of last year’s tournament was still on the high as the response from the CA firms was so overwhelming that the enrollment for the 16 teams was full within 2 days from the announcement. The highlight of this tournament is the fun & electrifying atmosphere on the field & off the field, especially during the matches played under the floodlights. The details of the tournament are published elsewhere in this newsletter. Pune ICAI invites all the Students, members & their family to come & enjoy the wonderful Teams playing the wonderful game of cricket.The National Convention for CA students is organized by Board of Studies, ICAI at Pune. The Theme for this year’s Students Convention is “IGNITED MINDS”, as we believe that when the mind is ignited with ambitions and aspirations, it has a knack to find way in every situation. Ignited mind can do wonders. I earnestly appeal all the members to encourage & support your students to participate in this National Convention to be held on 31st January and 1st February, 2015. Details of the Convention are published elsewhere in this newsletter.

Republic day Celebration: Looking forward for your gracious presence at ICAI Bhawan, Pune on 26th January at 8:30 am for flag hoisting on the occasion of Republic day of India.

February 2015This year our Pune Branch has the privilege of hosting the prestigious sport event organized by WIRC of ICAI- The ‘All India CA Cricket League 2015: Cricket for Amity’ scheduled from 4th February to 7th February, 2015. In all 12 branches of ICAI from all over India are participating in this tournament; worth to note that the branches from SIRC will be participating for the first time in this tournament. The enthusiastic responses and registrations from Branches of ICAI are really admirable and appreciated. The matches will be played at the nationally acclaimed grounds of Deccan Gymkhana Cricket Club, Poona Cricket Club Ltd., and PYC Hindu Gymkhana Cricket Club. While concluding this communiqué; I’ once again on behalf of the Pune branch wish you all a Happy and Prosperous New Year and Happy Sankranti !

With warm regards & love.Thank you

CENTRAL COUNCIL MEMBERCA. S. B. Zaware

MANAGING COMMITTEECA. Rajeshkumar Patil (Chairman)CA. Yashwant Kasar (Vice Chairman)CA. Anand Jakhotiya (Secretary)CA. Sachin Parkale (Treasurer)

CA. Jagdeesh DhongdeCA. Rekha DhamankarCA. Ambarish VaidyaCA. Radhesham Agrawal

PUNE BRANCH OF WIRC OF ICAIPlot No. 8, Parshwanath Nagar, Munjeri, Opp. Kale Hospital, Bibwewadi, Pune - 411037 | Tel: 020 2421 2251 / 52 | Web: www.puneicai.org | Email: pune@icai.org

Chairman’s Communiqué

The world suffers a lot not beacause of the violence of bad people but because of the silence of good people..

CA. Rajeshkumar PatilChairmanPune Branch of WIRC of ICAI

REGIONAL COUNCIL MEMBERSCA. Sarvesh JoshiCA. S. G. MundadaCA. Dilip Apte

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COMPLIANCE CALENDAR FOR JANUARY, 2015

Forthcoming Programmes of Pune Branch of WIRC of ICAI

Compiled by CA Amruta Saswadkar, Pune. shivangiamrutaassociates@yahoo.com

Notes :- Programme timing includes 1st half an hour Registration & Breakfast. For online registrations & detailed programme structure visit www.puneicai.org

“Ordinary people with commitment can make an extraordinary impact on their world.”John C. Maxwell

SR. NO. DATE SEMINAR NAME VENUE TIME FEES CPE

HRS.

1 23rd Jan to 26th Jan, 2015

CA Inter Firm Cricket Tournament 2015

Katariya Cricket Ground, Mukundnagar,

PUNE – 411 037

Will inform shortly 25000/- NA

2 26th Jan, 2015 Flag Hoisting-Republic Day ICAI Bhawan Bibwewadi Pune, 37 8.30 AM NA NA

3 31st Jan to 1st Feb, 2015

National Convention For CA Students

Pune- 2015-IGNITED MINDS

Mahalaxmi Lawns, Near Rajaram Bridge,

Karvenagar, Pune

9.30 AM To 6.30 PM

Up to 15th January 2015: Rs.300/- From 16th January

2015: Rs.400/-

NA

4 7th - 8th Feb, 2015 Women CA’s Conference Will inform shortly

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from 7th Feb to 21st Feb 2015

(held on Saturday & Sunday)

Certificate Course on Non-Profit organizations Will inform shortly 9.30 AM To

5.30 PM 7500/- 30 Hrs.

6 14th-15th Feb, 2015 Workshop on “VAT” Will inform shortly

728th Feb to 14th

Mar, 2015 (held on Saturday & Sunday)

Certificate Course on Corporate Social Responsibility Will inform shortly 9.30 AM To

5.30 PM 7500/- 30 Hrs.

Date Particulars

6th January, 2015 Service tax epayment for month/quarter ended December, 2014.

7th January, 2015 TDS/ TCS payment of December, 2014.

Submitting Forms 15G, 15H, 27C received in December, 2014 to IT Commissioner.

10th January, 2015 Excise return for December, 2014 - includes SSI units return for quarter ended December, 2014

STPI Performance report for December, 2014.

15th January, 2015 TDS return for quarter ended December, 2014- Non Govt. Deductors; TCS return for quarter ended December, 2014- ALL Deductors- Returns 24Q, 26Q, 27EQ, 27Q MVAT efiling Audit Report for FY 2013-14 if Turnover > Rs. 1 Crore-Form 704 (submission of documents by 27th January,2015) vide Trade circular no.21T of 2014.

PF epayment of December, 2014.

STPI Performance report for quarter ended December, 2014.

21st January, 2015 ESI deposit of December, 2014.

MVAT and CST return for month/quarter ended December, 2014: Form 231 – 235, CST1.

MVAT and WCT TDS payment of December, 2014.

30th January, 2015 Issue TDS /TCS certificates for quarter ended December, 2014 -Form 16A, 27D.

31st January, 2015 TDS return for quarter ended December, 2014 – Govt. Deductors - Returns 24Q, 26Q, 27EQ, 27Q.

Bank’s Return for quarter ended December, 2014 for interest up to Rs.5,000/- Form 26QAA.

Professional tax of December, 2014 - Form IIIB, MTR-6.

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Henry Ford could get anything out of men because he just talked and would tell them stories. He’d never say, ‘I want this done! He’d say, “I wonder if we can do it”..!!

10 key facets of 122nd Constitutional Amendment Bill CA Pritam Mahurecapritam@gmail.com

In this article paperwriters look at the service tax implications of renting of immoveable property. There have been a lot of disputes with Central taxes being demanded even though immoveable property is state subject, leading to challenges in Courts of law and subsequent amendments in the law. Now it is clear that it is payable. The government is collecting around Rs.7000 Crores+ per annum from this service alone.

BackgroundThe category of renting of immovable property service was introduced under service tax in the year 2007 effective 01.06.2007and was madeapplicable to immovable property for use in business or commerce”.

Though the validity of levy of service tax on renting of immoveable property was questioned and Delhi High Court in the first Home Solutions Retail case held that service tax is not leviable on ‘renting of immovable property’, but on services in relation to ‘renting of immovable property’. An appeal against Delhi High Court (2011-TIOL-610-HC-DEL-ST-LB) was filed before Supreme Court and matter is pending before Hon’ble Supreme Court, the interim order in 2011-TIOL-103-SC-ST makes it clear that there would be stay of recovery [not stay of proceeding] and further it is not applicable for service tax becoming due from 1st of October 2011.

From the above, it is clear that even though the matter is presently sub- judice there seems to be a view that liability would need to be discharged. Until the Supreme Court view on the same is clear; the revenue would be in a position to demand the same.

Renting of immoveable property under Negative List based taxationThe term renting defined in section 65B(41) is as follows- (41) “renting” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property; As can be seen that renting is defined in inclusive basis to include a leasing or other like arrangements in respect of immovable property.

The negative list has an entry namely services by way of renting of residential dwelling for use as a residence. This entry covers only residential dwelling when it is for use as a residence.There is an exemption at Entry no. 19 of Notification 25/2012-ST dated 20.06.2012 which exempts: “Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent.”

Certain Common Issues Till recently there was uncertainty about levy, and many landlords had not been paying service tax.In addition there are some areas of confusion with regards to renting of immoveable property service discussed below.

Rentals towards fitouts and water/electricity chargesThe fitout such as furniture [ movable property] could be given along with the premises by landlord. The term sale includes “transfer of the right use goods for the any purpose for cash, deferred payment or other valuable consideration”. VAT applies on the revenue towards movable fit-outs. It is a settled position of law that no service tax applicable if transaction is sale of goods and the definition of sale includes transfer of right to use goods. The service definition excludes the deemed sale of nature of transfer of right to use goods, given along with possession and control. There cannot be a service tax on the same transaction.Also water, electricity charges could be collected by landlord. As per Section 66B read with Section 67, service tax is levied on the gross amount charged for the taxable services. These two elements i.e. water and electricity are construed to be goods and the definition of service specifically excludes transfer of title to goods by way of sale or gift or in any other manner. Such revenues could get excluded from the scope of service definition. Further also one of the entries in the negative list specifically excludes ‘Trading of Goods’. A view is possible that the water and electricity supply could get excluded from the definition of service or get covered under that negative entry as long as it is collected separately. There have been a number of Tribunal matters including in ICC Realty India Private Limited & others vs C.C.Ex.ST- Pune III [2013 TIOL 1751(CESTAT-Mum)]where it was held that electricity was goods chargeable to duty under the Central Excise Tariff Act, 1986 as well as MVAT Act, 2002 [ albeit at Nil rate] and hence supply of electricity was sale of goods and not provision of service.

Taxability of Jointly Owned property [ Co-Owners] Service tax is leviable on the value of taxable services provided by one person for another for a consideration. In other words, the levy is attracted on every person who is providing taxable services. As per section 68(1), every person providing taxable services is liable to pay service tax subject to small service provider exemption.Small service provider exemption exempts from service tax the taxable services provided of the value of Rs 10 Lakhs pa, provided previous year value of taxable services is less than Rs 10 Lakhs. On perusal of the said notification, we find that the said notification talks about the aggregate value of the taxable services rendered, which should be considered for the purpose of exemption. If taxable services comes to less than Rs 10

Renting of Immoveable Property Service CA. Madhukar.N.Hiregange mhiregange@hotmail.com & CA.Roopa Nayak roopa@hiregange.com

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Sometimes we have to Eat our Words, Chew our Ego, Swallow our Pride & Accept that, we are Wrong. It’s not Giving up, it’s called Growing up

Lakhs for each service provider, then exempted from payment of service tax.If the rental agreement is specifically indicating that each of the co-owners are renting out the property to tenant. Also each of the co-owners received separate cheques for rent from tenant. In such scenario, each co-owner is individually considered as a provider of service, and each such service provider is eligible to small service provider exemption of Rs 10 Lakhs. As the aggregate value fails to exceed threshold limit for each co-owner service provider, service tax is not payable by them.Also, in the numerous cases the Hon’ble CESTAT has held that benefit of SSP exemption has to be given to every owner of the property in a separate manner including in recent decision in Dutsons Builders & Estates Pvt Ltd VsC.C.Ex, Cus. & ST, Visakhapatnam-I (2014-TIOL-1930-CESTAT-BANG) where citing ManjuChampaklalBafna: 2013 (31) S.T.R. 511 (Tri.-Ahmed.)  waiver of pre-deposit and stay granted where there were co-owners of the property.

Service tax on lease premiumIf initially an agreement to lease the land to eligible applicants on payment of premium is entered into subject to construction of commercial buildings on the land and once the construction is completed, a lease agreement is entered into on payment of lease rental. When the vacant land is given on lease or licence for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce, there is a possibility that service tax could be demanded on the said activity under renting of immovable property. But whether premium is liable?As per definition of renting in Section 65B(41) includes letting, leasing, licensing or other similar arrangements in respect of immovable property; The expressions “other similar arrangements” used are expressions of width and amplitude. It would include not only the actual leasing or renting but also any other activity in relation to such leasing/renting. Therefore, the agreement to lease which is entered into prior to the actual leasing and which is in relation to the lease undertaken subsequently subject to construction of building, etc. could also come within the purview of service tax levy. Therefore, the distinction sought to be made in respect of amounts collected as a premium may not matter and the levy would apply, in both the situations. In the view of paperwriters, service tax cannot be charged on the premium or salami paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of service tax is on renting of immovable property& not on transfer of interest in property from lessor to lessee, service tax would be chargeable only on the rent whether it is charged periodically or at a time in advance.There were contradicting decisions on service tax applicability on lease premium with one set of decisions holding it is liable and another set saying it is not liable to service tax.Now there appears to be some emerging clarity. In CIDCO vs CST, Mumbai II 2014-TIOL-1858-HC-MUM-ST held that the service tax is leviable on the quantum of lease and not on the lease premium. The point covered in favour of the assessee. Pre deposit of Rs.

20 Crore ordered by Tribunal on Agency of the State, waived.Similarly order set aside and matter remanded in Greater Noida Industrial Development Authority vs CCE  2014-TIOL-1741-CESTAT-DEL.

Applicability of Service Tax on Service Apartments.The apartments could be given on rental basis for few days or for longer periods to working men/women or students who could stay in same dwelling for a longer period. The negative list entry exempts the residential dwelling for use as residence.It does notinclude a hotel, motel, inn, guest house, camp site, house boat, or like places for temporary stay. Therefore the intention seems to be covering such places where there is some sort of permanence.Even if the dwelling could be used as a house, apartment etc for regular stay, it could be covered in this entry. It is not specifically set out in the negative list based taxation what would be considered as short stay or long stay. We could look for guidance into earlier service tax law, where the taxable service of providing an accommodation for a continuous period of less than 3 months was liable to service tax. Applying itto understand the position under negative list taxation, wherever the accommodation is provided for less than 3 months could be liable to service tax.However they maybe outside the purview if the Tariff is less than Rs. 1000/- per day.For a period of stay longer than 3 months covered in negative list entry, may not be leviable to service tax.Eligibility to Cenvat CreditDue to mis-information there was great resistance on part of landlords who were paying service tax to avail credits related to rentals. There was circular No. 98/1/2008-S.T under earlier law, where it had artificially restricted cenvat credit of service tax related to renting of immoveable property. Therefore credit not availed by majority of the owners of property. The circular was not in line with law and non est to that extent and credit was actually available.As per present Cenvat credit Rules, the provider of output service can avail all eligible credits. At the same time, there is specific restriction on availing certain specified credits on inputs and input services namely: The input definition excludes “any goods” used for construction or execution of works contract of a building or a civil structure or a part thereof or laying of foundation or making of structures for support of capital goods except for the provision of service portion in the execution of a works contact or construction service and such credits would not be available.

The input service definition excludes the following(a) Service portion in the execution of a works contract and construction of a complex, building, civil structure or a part thereof, including complex or building intended for sale to a buyer, wholly or partly, to extent used for Construction or execution of works contract of a building or a civil structure or a part thereof or Laying of foundation or making of structures for support of capital goods. However these credits would be eligible if such services are for provision of specified services mentioned above, ie service portion in works contract.

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Every Interaction is an Opportunity to learn only if we are interested in improving rather than proving.

CENVAT credit on the inputs/capital goods used in the creation of immovable property was held to be admissible as per spate of decisions. So far as credit on input services used in the construction of immovable property given on rent is concerned, such creditwas also held eligible in number of decisions.Recently in M/s Laxmi Enterprise Vs CCE & ST 2014-TIOL-2042-CESTAT-AHM it was held that CENVAT Credit on inputs, input services with respect to services used in construction of immovable property which is subject to service tax under renting of immovable property eligible.It needs to be noted such favourable decisions are under old law, and there is a possibility that specific restriction in

inputs and input services definition could be used to restrict construction credits used for building or a civil structure or laying of foundation or making of structures for  support of capital goods such as tanks, as on date.

ConclusionIn this article, the paper writer has sought to examine the scope and coverage of renting of immoveable property service and common issues in service tax. Feedback welcome at mhiregange@gmail.com or roopa@hiregange.com.

On 19.12.2014, the 122nd Constitutional Amendment Bill (hereinafter referred as ‘CAB’) was introduced in the Lok Sabha.

In the past, to amend the Constitution, 115th CAB was introduced by the UPA Government in March 2011. However, this 115th CAB lapsed.

The rationale for introduction of CAB is that, currently, the Constitution of India does not provide for a parallel levy of indirect taxes by Centre and State which is a pre-requisite for GST. To address this, CAB was introduced in Lok Sabha.

The CAB is a starter for the approaching GST regime. In the following paragraphs let us understand in detail the 10 key facets of CAB.

1. CAB – Enables introduction of GSTThe CAB enables the Centre and State Government (including Union Territories) to introduce law for levying GST on supply of goods or services or both.

Thus, in GST regime, there will be one CGST law and one SGST law each for the States (including Union Territories).

2. ‘GST’ definedThe term ‘GST’ is defined in Article 366 (12A) to mean “any tax on supply of goods or services or both except taxes on supply of the alcoholic liquor for human consumption’.

Thus, all supply of goods or services or both will attract CGST (to be levied by Centre) and SGST (to be levied by State) unless kept out of purview of GST.

GST will be applicable even when the transaction involves supply of both (goods and services). In effect, woks contracts will also attract GST.

As GST will be applicable on ‘supply’ the erstwhile taxable

events such as ‘manufacture’, ‘sale’, ‘provision of services’ etc. will lose their relevance.

It may be noted that the term ‘supply’ is not defined or elaborated or qualified (such as supply for a consideration etc). Thus, it needs to be seen whether even free supply will attract GST.

3. ‘Service’ definedIt may be recalled that earlier 115th CAB did not provide for definition of the term ‘service’. Now, this 122nd CAB specifically provides that ‘services means anything other than goods’ [refer Article 366 (26A)]. This broad definition of the term ‘service’ will altogether remove the disputes on the aspect whether something is goods or services (unless Government proposes different rates for GST on goods or services or both).

4. IGSTAt present inter-State supply of goods attract Central Sales Tax. Now, CAB provides that an inter-State supply of goods or services will attract IGST ((i.e. CGST plus SGST) [refer Article 269A]. It may be noted that IGST will be levied and collected by the Centre and proceeds of IGST will be shared amongst the Centre and the States.

5. Inter-State sale of goods to attract additional taxCAB provides that an additional tax upto 1% will be levied by Centre on inter-State supply of goods (and not on services). This additional tax will be assigned to States from where the supply of goods originates. This additional tax seems be a new version of CST. This additional tax will be applicable for a period of two years and could be extended further by GST Council.

However, CAB is silent on the aspect whether credit of this additional levy will be available or it will be a cost in the supply chain. If it will be a cost then it appears that the tax cascading will continue in the GST regime too.

10 key facets of 122nd Constitutional Amendment Bill CA Pritam Mahurecapritam@gmail.com

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The Vision must be followed by the Venture. It’s not enough to stare up the steps. We must step up the Stairs.

6. Import of goods or servicesAt present, import of goods attracts Basic Customs duty (BCD), Additional Customs Duty (ACD) and Special Additional Customs Duty (SAD). As regards services, it attracts Service Tax (or Research and Development cess in few instances).

CAB provides that the import of goods or services will be deemed as supply of goods or services or both in the course of inter-State trade or commerce and thus it will attract IGST (i.e. CGST plus SGST). Thus, import of goods will attract BCD and IGST. It may be noted that import of services, as against service tax at present, in GST regime, will attract IGST.

7. Alcohol for human consumptionIt appears that ‘alcohol for human consumption’ will be kept outside the GST regime. As only ‘alcohol for human consumption’ is excluded as a corollary it can be stated that all other sectors / goods are intended to be included in GST.

Exclusion of alcohol sector could mean that the companies manufacturing alcohol may not be in a position to avail credit of GST paid by them on their procurements.

8. Petroleum products and tobaccoPetroleum products and tobacco will continue to attract duty of excise. However, CAB specifically provides that the petroleum products may not attract GST, however, at a later stage, GST Council may decide to levy on petroleum products. 9. Role of GST CouncilThe CAB is silent on the key aspects of GST such as -• How the model GST law would be? • Which taxes, cesses, surcharges will be subsumed in GST?• Which goods and services are subject to or exempt from

GST?

• What will be the rate of GST including floor rates?• What will be the threshold limit of GST?

However, to address the aforesaid issues, CAB provides that ‘GST Council’ will be formulated. The GST Council will consist of Union Finance Minister, Union Minister of State and State Finance Minister. On the aforesaid issues, GST Council will have the power to make recommendations to Centre and States.

It may be recalled that earlier 115th CAB also provided for a Dispute Settlement Authority to settle disputes between States or between States and Centre with regard to GST. However, in this CAB the GST Council has been given the authority to determine the modalities to resolve disputes arising out of its recommendations. 10. Compensation to StatesIt may be noted that earlier 115th CAB did not provide for compensation to States. However, this CAB specifically provides that Parliament by law, on recommendation of GST Council, provide for compensation to the Sates for loss of revenue arising out of implementation of GST upto 5 years. By providing for compensation in the Constitution itself, the Centre seems to have addressed the concerns raised by the State regarding fear of loss of revenue. Way forward Though, the CAB may have an easy passage through Lok Sabha (where NDA has a majority) it will be interesting to see how the Government passes the hurdle of Rajya Sabha. Also, to become a law, CAB will have to be approved by more than half of the States.

Readers will agree that continuous assurance on GST coupled with concrete steps shows the Government’s determination to bring GST in India. So, let us hope that a simpler and better tax regime does a ‘Ghar Vapasi’ in India.

Preamble:- Since long the heated controversy is persisting whenever the question of priority of income tax dues arises vis-à-vis the rights of secured creditors of the assessee. The judicial views were not unanimous on the said issue since long.

Income tax dues v/s rights of secured creditors• In the case of Dena Bank vs. BHIKHABHAI PRABHUDAS

PAREKH & CO. & ORS. [247 ITR 165 (SC)] it was held that, “The Crown’s preferential right to recovery of debts, over other creditors is confined to ordinary or unsecured creditors. The Common Law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right for recovery of its debts over a mortgagee or pledgee of goods or a secured creditor. It is only in cases

where the Crown’s right and that of the subject meet at one and the same time that the Crown is in general preferred. Where the right of the subject is complete and perfect before that the King commences, the rule does not apply, for there is no point of time at which the two rights are at conflict, nor can there be a question which of the two ought to prevail in a case where one, that of the subject, has prevailed already. Sec. 158(1) of the Karnataka Land Revenue Act specifically provides that the claim of the State Government to any moneys recoverable under the provisions of Chapter XVI shall have precedence over any other debts, demand or claim whatsoever including in respect of mortgage. Sec. 158 of the Karnataka Land Revenue Act not only gives a statutory recognition to the doctrine of State’s priority for recovery of debts but also extends its applicability over private debts

Income Tax dues v/s Rights of Secured Creditors CA. Bhupendra Shahbhupendrashahca@hotmail.com

9

If you look at what you have in life, you will always have more. If you look at what you don’t have in life, you will never have enough.

forming subject-matter of mortgage, judgment-decree, execution or attachment and the like.—Builders Supply Corporation vs. Union of India AIR 1965 SC 1061 relied on; Collector of Aurangabad vs. Central Bank of India AIR 1967 SC 1831 distinguished. A legislation may be made to commence from a back date, i.e., from a date previous to the date of its enactment. To make a law governing a past period on a subject is retrospectivity. A legislature is competent to enact such a law. The ordinary rule is that a legislative enactment comes into operation only on its enactment. Retrospectivity is not to be inferred unless expressed or necessarily implied in the legislation, specially those dealing with substantive rights and obligations. It is a misnomer to say that sub-s. (2A) of s. 15 of the Karnataka Sales-tax Act is being given retrospective operation. Determining the obligation of the partners to pay the tax assessed against the firm by making them personally liable is not the same thing as giving the amendment a retrospective operation. Principle of s. 25 of Partnership Act cannot be stretched and extended to such situations in which the firm is deemed to be a person and hence a legal entity for certain purpose. The Karnataka Sales-tax Act also gives the firm a legal status by treating it as a dealer and hence a person for the limited purpose of assessing under the Sales-tax Act.—CST vs. Radhakishan AIR 1979 SC 1588 and ITO vs. Arunagiri Chettiar (1996) 134 CTR (SC) 167 : (1996) 220 ITR 232 (SC) relied on. The counsel for the appellant is right in submitting that on the day on which the State of Karnataka proceeded to attach and sell the property of the partners of the firm mortgaged with the bank, it could not have appropriated the sale proceeds to sales-tax arrears payable by the firm and defeating the bank’s security in view of the law as laid down by this Court in CST vs. Radhakishan (1979) 43 STC 4 : AIR 1979 SC 1588. However, still in the facts and circumstances of the case, the appellant bank cannot be allowed any relief. Sec. 15(2A) of Karnataka Sales-tax Act had come into force on 18th Dec., 1983 while the decree in favour of the bank was passed on 3rd Aug., 1992 and is yet to be executed. The claim of the appellant bank is still outstanding. Even if the sale held by the State is set aside, it will merely revive the arrears outstanding on account of sales-tax to which further interest and penalty shall have to be added. The amended s. 15(2A) of the Karnataka Sales-tax Act shall apply. The State shall have a preferential right to recover its dues over the rights of the appellant bank and the property of the partners shall also be liable to be proceeded against. No useful purpose would therefore, be served by allowing the appeal which will only further complicate the controversy.—CST vs. Radhakishan AIR 1979 SC 1588 distinguished. State had preferential right to recover sales-tax dues over the rights of bank and property of the partners could also be liable to be proceeded against for the dues of the firm.”

• Recently, in the case of Stock Exchange, Bombay v. V.S. Kandalgaonkar [(2014) 51 taxmann.com 246 (SC)] it was held that, “By virtue of lien on securities under rule 43 of Bombay Stock Exchange Rules, BSE being secured creditor of defaulting member would have priority over dues of

Income - tax department.”While dealing with the tax recovery u/s 226 of the Income-tax Act, 1961, read with sections 8 and

9 of the Securities Contracts (Regulation) Act, 1956, it was held by the Apex Court that collection and recovery of tax has to be based on proper appreciation of facts of the case. While deciding Other modes of recovery (Priority over debts), the Apex Court duly considered the power of Central Government to direct rules to be made or to make rules and observed that a membership card is only a personal permission from Stock Exchange to exercise rights and privileges that may be given subject to Rules, Bye-Laws and Regulations of Exchange and moment a member is declared a defaulter, his right of nomination shall cease and vest in Exchange because even personal privilege given is at that point taken away from defaulting member. It therefore held that by virtue of rule 43 of Bombay Stock Exchange Rules security provided by a member shall be a first and paramount lien for any sum due to Stock Exchange. Thus, Bombay Stock Exchange being secured creditor would have priority over Govt. dues and if a member of BSE was declared a defaulter, Income-tax department would not have priority over all debts owned by defaulter member. The first thing to be noticed is that the Income Tax Act does not provide for any paramountancy of dues by way of income tax. This is why the Court in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. [2005] 5 SCC 694 (para 19) held that Government dues only have priority over unsecured debts and in so holding the Court referred to a judgment in Giles v. Grover (1832) (131) English Reports 563 in which it has been held that the Crown has no precedence over a pledgee of goods. In the present case, the common law of England qua Crown debts became applicable by virtue of Article 372 of the Constitution which states that all laws in force in the territory of India immediately before the commencement of the Constitution shall continue in force until altered or repealed by a competent legislature or other competent authority. In fact, in Collector of Aurangabad v. Central Bank of India [1967] 3 SCR 855 after referring to various authorities held that the claim of the Government to priority for arrears of income tax dues stems from the English common law doctrine of priority of Crown debts and has been given judicial recognition in British India prior to 1950 and was therefore “law in force” in the territory of India before the Constitution and was continued by Article 372 of the Constitution (at page 861, 862). In the present case, as has been noted above, the lien possessed by the Stock Exchange makes it a secured creditor. That being the case, it is clear that whether the lien under Rule 43 is a statutory lien or is a lien arising out of agreement does not make much of a difference as the Stock Exchange, being a secured creditor, would have priority over Government dues.Conclusion:- Therefore, the present welcome judgment of the Supreme Court in the case of V.S. Kandalgaonkar sets at rest the ongoing controversy and clearly holds that there is priority of rights of secured creditors over the rights of income tax department while recovering dues. This will go a long way and help those secured creditors who are facing difficulties in this regard at no fault of theirs.

10

It’s very easy to give Example. But, it’s very difficult to become an ‘Example’.

PUNE BRANCH OF WIRC OF ICAI

Inter Firm Cricket Tournament 2015

With great pleasure and pride, we invite all the CA Students, CA Members & Family for Second season of CA Inter Firm Cricket Tournament from 23rd January 2015 to 26th January 2015. Few of the matches will be played under flood lights.

The details of the tournament are as under :

TOURNAMENT DATES 23rd January 2015 to 26th January 2015

MATCH TIMINGS 9:30 am to 11:00 pmMATCH VENUE Katariya Cricket Ground,

Mukundnagar, Pune

REGISTRATION FEES:Up to 15th January 2015: Rs.300/- I From 16th January 2015: Rs.400/-

We also extend cordial invitation for National Level ICAI Cricket Tournament –“CRICKET FOR AMITY” organized by WIRC of ICAI & Hosted by Pune Branch of WIRC of ICAI on 4th February to 7th February 2015Venue : Deccan Gymkhana Cricket Club, Poona Cricket Club Ltd., and PYC Hindu Gymkhana Cricket Club.

For Details of Tournament Please visit- www.puneicai.org

11

It’s always better to explain higher prices once than to apologize for quality forever.

Felicitation of CA. Pravin Rajani - Faculty

CA. Pravin Rajani - Faculty & CA. Mahesh Pimputkar - Faculty

CA. Vijay Bhutada - Faculty

Brigadier Rajiv Divekar- Director, SIMS

SEMINAR ON “CORPORATE GOVERNANCE CODE UNDER COMPANIES ACT, 2013- SME PERSPECTIVE”

REFRESHER COURSE ON ACCOUNTING STANDARDS

CA. Pravin Rajani - Faculty

CA. Kusai Goawala - Faculty

Amended Depreciation provisions under Companies Act-2013 CA. Kuntal Shah - Faculty

Mr. Ashwin Kumar - Speaker

CA. Lakshminarayanan R.- Speaker

CA. S.B. Zaware (CCM)-Faculty CA. Vivian Pillai - Faculty CA. Sanjeev Khilnani - Faculty CA. C.D. Upasani - Faculty

INVESTOR AWARENESS PROGRAMME

12

God will never leave you empty. He will replace everything you lost. If he asks you to put something down, it’s because he wants you to pick up something greater.

CA. Students Industrial Visit to Sugar Factory, Jaggery Unit & Agriculture Sector

CA. Students Youth Festival Jallosh Rangoli & Mehandi Competition

13

When GOD pushes you to the edge, trust him fully because only two things can happen. Either he will catch you when you fall or he will teach you to fly.

Inaugural Session Felicitation of CA. Kuntal Shah, Faculty by the hands of CA. Sarvesh Joshi, RCM CA. Kuntal Shah, Faculty

CERTIFICATE COURSE CONCURRENT AUDIT OF BANKS

National Live Webcasts by CPE Committee, ICAI

You can help your ��amily Member� to grow financially... Advice them to take ��LI Agency�.

You can help your ��amily Member� to grow financially... Advice them to take ��LI Agency�.

Publication Date: 10th of Every MonthPosting on 12th of Every month at Pune GPO-411001

NEWSLETTER PUNE BRANCH OF WIRC OF ICAI

RNI Reg. No.: MAHENG/2012/44928Postal Reg. No.: PCE/046/2015-2017

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*7 to 12 Insertions - 15%

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FOR PUNE BRANCH NEWSLETTER WEF AUGUST 2014

Disclaimer: The ICAI and the Pune Branch of WIRC of ICAI is not in any way responsible for the result of any action taken on the basis of advertisement published in the newsletter. The members, however, may bear in mind the provision of the Code of Ethics while responding to the advertisements. The views and opinion expressed or implied in the Newsletter are those of the authors / contributors and do not necessarily reflect of Pune branch. Unsolicited matters are sent at the owner’s risk and the publisher accepts no liability for loss or damage. Material in this publication may not be reproduced, Whether in part or in whole without the consent of Pune branch. Members are requested to kindly send material of professional interest to editor@puneicai.org the same may be published in the newsletter subject availability of space and editorial editing.

Total Circulation: 6000; Total No. of pages 16 including Covers This Newsletter (Monthly) is owned by Pune Branch of WIRC of ICAI Printed & Published by CA. Rajeshkumar Patil, Printed at Deepak Offset, Hadapsar, Pune - 411 028 & Published at ICAI Bhavan, Plot No.8, Parshwanath Nagar, Munjeri, Opp. Kale Hospital, Bibwewadi, Pune - 411 037. Editor: CA. Anand R. Jakhotiya

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If undelivered return to: Pune Branch of WIRC of The Institute of Chartered Accountants of IndiaPlot No.8, Parshwanath Nagar, Munjeri, Opp. Kale Hospital, Bibwewadi, Pune - 411 037. T: 24212251 / 52; Email: editor@puneicai.org

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Apply Now: Chartered Accountants(CA) Industrial Trainee Program

We are looking for highly talented Chartered Accountants (CAs) to join our Industrial Trainee Program in our Mumbai and Pune offices.

Job Title: Chartered Accountants – IndustrialTrainee ProgramPositions will commence in March 2015.

How to Apply:

Please submit an online application via credit-suisse.com/careers by January 15, 2015.For further enquiries, please emailcampus.recruitment-ap@credit-suisse.com

Candidate RequirementsWe will consider your potential, your academicbackground, and extracurricular activities. Allcandidates must:• Be a graduate in Finance/Economics/ Management

or a related subject• Have completed their CA inter (both groups) and

should be in 2nd year of their articleship period• Be highly motivated and creative individuals who

have demonstrated academic achievement, and have the ability to work independently and as a member of a team

We are looking to build future leaders who addfresh perspectives to our business. The qualities welook for are :• A leader who engenders loyalty, assumes

responsibility and mobilizes others• A critical thinker with excellent problem solving skills• A proactive self-starter who achieves significant

results• A supportive and adaptable team member who can

build strong relationships• An articulate communicator who also recognizes

the importance of listening

credit-suisse.com/careers