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Direction for fixing new appeals on 60th day of its filing dispensed with

Posted on by Business So Simple in Miscellaneous


ITAT’S NOTE ON DEPARTMENT’S GENERAL GRIEVANCES IN THE MATTER OF REPRESENTATION AND ADJUDICATION OF CASES FIXED BEFORE EACH BENCH OF ITAT DELHI
NOTE, DATED 21-1-2013
The CIT-DR (Admn.), vide letter dated 27th December, 2012, (Annexure) has expressed their grievance with regard to cases fixed before each Bench, which usually exceed 20. She has stated that due to paucity of manpower with the Department and the large number of fixation, it becomes very difficult for the Departmental Representatives to handle those cases.
2. The policy of fixing the new appeals on the 60th day of filing of appeal was framed when the total pendency of Delhi Benches was reduced to around 5,000 appeals. However, now the pendency of Delhi Benches as on 1st January, 2013 has increased to 11,899. From the last several months, the institution of appeals is much more than the disposal. Out of the nine Benches sanctioned for Delhi, only six Benches are functional. In the above circumstances, the fixation of new appeals on the 60th day of the filing of appeal has become impracticable. Moreover, the variation in the number of appeals fixed for hearing each day is mainly because of fixation of new appeals on the 60 day. In the above circumstances, in my opinion, the policy of fixing the new appeals on the 60th day of the filing of appeal should be dispensed with for the time being. These new cases are to be fixed in regular course.
3. Accordingly, the following directions are issued:-
 (i) The new appeals should not be fixed on the 60th day of filing of appeal but should be kept pending and be fixed in due course.
(ii) It is to be ensured that the cases fixed before each Bench every day should not exceed 20 except covered or group matters. If on any day the regular cases fixed are much more than 20, then, after taking the order from the Vice President, the excess cases should be adjourned to the next available date.
4. The above letter of the Department is to be circulated to the learned Members of Delhi Benches so that they can keep in mind the grievance expressed by the Department.
ANNEXURE
GENERAL GRIEVANCES OF THE DEPARTMENT IN THE MATTER OF REPRESENTATION AND ADJUDICATION IN THE ITAT
LETTER [F. NO. CIT(DR)(ADMN.)/A- BENCH/ITAT/2012-13/780], DATED 27-12-2012
It is to bring to your kind notice that we have been running a general crisis in the deployment of man power to argue the cases before the Hon’ble benches. This is an addition to the general problems arising out of transfer etc.
Therefore, cases are assigned to DRs depending on the availability of man power, which often is disproportionate to the number that can be handled by them. So we are forced to apply for adjournment in some cases in each Bench. It has been kindly instructed in a circular by your good self that the number of cases in a day per Bench should not be exceed 20, apart from the covered matter and new cases where department is expected to get adjournment liberally.
But it is often noticed that not only the cases fixed per bench are more in number but cases are found added at the last minute at the end of the CIT, giving very less time for the DRs to prepare the cases.
It is further noticed that the arguments of the DRs are often not properly recorded to give justice to the stand of revenue and in any case short and not touching upon any aspect of the argument at all. This makes the revenue lose salient points which can be profitably taken up before the higher court.
This apart, in some of the orders, adverse judgment have been rendered against revenue on the ground of non-representation, even while making adverse comments on the functioning of the department (in its representation before the ITAT). You may kindly appreciate that each bench is manned by a CIT DR and a Sr. DR and they are not supposed to argue cases in other benches without instruction from higher authorities.
Therefore, a particular DR may be absent on a particular day which may lead to adjournment application for these cases listed before that bench, irrespective of the number of CITs and the Sr. DRs. on that day.
Therefore, such adverse comment reflecting upon the functioning of the department is best avoidable considering the ground realities. Worse it is noticed that in some of the judgments the adverse comments have been given despite proper filing of adjournment petition by the DRs.
It is therefore requested that the above grievances of the DRs, deeply felt at their level may be taken up for redressal in the right earnest and the Hon’ble members apprised of the issues. It is also requested that adjournment should be done on merit even in an absence of a party which will be in line with judgments of the Hon’ble jurisdictional High Court. Thanking you,

CLARIFICATION ON ISSUES RELATING TO EXPORT OF COMPUTER SOFTWARE

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CLARIFICATION ON ISSUES RELATING TO EXPORT OF COMPUTER SOFTWARE (CIRCULAR NO. 1/2013 [F. NO. 178/84/2012-ITA.I ], DATED 17-1-2013)
SECTION 10A, READ WITH SECTIONS 10AA & 10B OF THE INCOME-TAX ACT, 1961 – FREE TRADE ZONE – DIRECT TAX BENEFITS – CLARIFICATION ON ISSUES RELATING TO EXPORT OF COMPUTER SOFTWARE
CIRCULAR NO. 1/2013 [F. NO. 178/84/2012-ITA.I], DATED 17-1-2013
1.The Indian Software Industry has been the beneficiary of direct tax incentives under the provisions like sections 10A, 10AA & 10B of the Income -tax Act, 1961 in respect of their profits derived from the export of computer software. These provisions prescribe incentives to “units” or “undertakings”, established under different schemes, which are/were deriving profits from export of computer software subject to fulfilling the prescribed conditions.
2. It has been represented by the software companies that several issues arising from the above mentioned provisions are giving rise to disputes between them and the Income-tax authorities leading to denial of tax benefits and consequent litigation and, therefore, require clarification. Various issues highlighted by the Software Industry have been examined by the Board and the following clarifications are hereby issued –
(i)  (a) Whether “on-Site” development of Computer Software Qualifies as an extort activity for tax benefits under sections 10A. 10AA and 10B of the Income-tax Act, 1961; And
(b) Whether receipts from deputation or Technical Manpower for such “On-Site” Software development abroad at the Client’s place are eligible for deduction under sections 10A, 10AA and 10B.
(a)  CBDT had earlier issued a Circular (Circular No. 694, dated 23-11-1994) which provided that a unit should not be denied tax-holiday under section 10A or 10B on the ground that the computer software was prepared ‘on-site’, as long as it was a product of the unit, i.e., it is produced by the Unit. However, certain doubts appear to have arisen following the insertion of Explanation 3 to sections 10A and 10B (vide Finance Act, 2001) and Explanation 2 to section 10AA (vide Special Economic Zones Act, 2005) providing that “the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India”, and a clarification has been sought on the impact of the Explanation on the tax-benefits as compared to the situation that existed prior to the amendments.
The matter has been examined. In view of the position of law as it stands now, it is clarified that the software developed abroad at a client’s place would be eligible for benefits under the respective provisions, because these would amount to ‘deemed export’ and tax benefits would not be denied merely on this ground. However, since the benefits under these provisions can be availed of only by the units or undertakings set up under specified schemes in India, it is necessary that there must exist a direct and intimate nexus or connection of development of software done abroad with the eligible units set up in India and such development of software should be pursuant to a contract between the client and the eligible unit. To this extent, Circular No. 694, dated 23-11-1994 stands further clarified.
(b)  It has also been brought to notice that it is a common practice in the software industry to depute Technical Manpower abroad (at the client’s place) for software development activities (like upgradation, testing, maintenance, modification, trouble-shooting etc.), which often require frequent interaction with the clients located outside India. Due to the peculiar nature of software development work, it has been suggested that such deputation of Technical Manpower abroad should not be considered detrimental to the benefits of the exemption under sections 10A, 10AA and 10B merely because such activities arc rendered outside the eligible units /undertakings.
The matter has been examined. Explanation 3 to sections 10A and 10B and Explanation 2 to section I0AA clearly declare that profits and gains derived from “services for development of software” outside India would also be deemed as profits derived from export. It is therefore clarified that profits earned as a result of deployment of Technical Manpower at the client’s place abroad specifically for software development work pursuant to a contract between the client and the eligible unit should not be denied benefits under sections 10A, 10AA and 10B provided such deputation of manpower is for the development of such software and all the prescribed conditions are fulfilled.
(ii)  Whether it is necessary to have separate master service agreement (MSA) for each work contract and to what extent it is relevant.
As per the practice prevalent in the software development industry, generally two types of agreement arc entered into between the Indian software developer and the foreign client. Master Services Agreement (MSA) is an initial general agreement between a foreign client and the Indian software developer setting out the broad and general terms and conditions of business under the umbrella of which specific and individual Statement of Works (SOW) are formed. These SOWs, in fact, enumerate the specific scope and nature of the particular task or project that has to be rendered by a particular unit under the overall ambit of the MSA. Clarification has been sought whether more than one SOW can be executed under the ambit of a particular MSA and whether SOW should be given precedence over MSA.
The matter has been examined. It is clarified that the tax benefits under sections 10A, 10AA and 10B would not be denied merely on the ground that a separate and specific MSA docs not exist for each SOW. The SOW would normally prevail over the MSA in determining the eligibility for tax benefits unless the Assessing Officer is able to establish that there has been splitting up or reconstruction of an existing business or non-fulfilment of any other prescribed condition.
(iii)  Whether Research and development (R & D) Activities Pertaining to Software Development would be Covered under the Definition of “Computer Software” Stipulated Under Explanation 2 to sections 10A and 10B.
The definition of “computer software” stipulated under Explanation 2 to sections 10A and 10B includes “any customized electronic data or any product or service of similar nature, as may be notified by the Board,…”. The CBDT had already issued Notification No. 890(E), dated 26-9-2000 specifying such items. The notification includes Engineering and Design but does not specifically include Research and Development activities related to software development in respect of which clarification has been sought.
After examining the matter, it is clarified that the services covered by the aforesaid Notification, in particular, the ‘Engineering and Design’ do have the in-built elements of Research and Development. However, for the sake of clarity, it is reiterated that any Research and Development activity embedded in the ‘Engineering and Design’, would also be covered under the said Notification for the purpose of Explanation 2 to the above provisions.
(iv) Whether tax Benefits under sections 10A, 10AA and 10B would continue to Remain available in case of a slump-Sale of a Unit/Undertaking.
The vital factor in determining the above issue would be facts such as how a slump-sale is made and what is its nature. It will also be important to ensure that the slump sale would not result into any splitting or reconstruction of existing business. These are factual issues requiring verification of facts. It is, however, clarified that on the sole ground of change in ownership of an undertaking, the claim of exemption cannot be denied to an otherwise eligible undertaking and the tax holiday can be availed of for the unexpired period at the rates as applicable for the remaining years, subject to fulfilment of prescribed conditions.
(v)  Whether it is necessary to maintain separate books of account for an assessee in respect of its eligible units claiming tax benefits under sections 10A and 10B.
Since there is no requirement in law to maintain separate books of account, the same cannot be insisted upon. However, since the deductions under these sections are available only to the eligible units, the Assessing Officer may call for such details or information pertaining to different units to verify the claim and quantum of exemption, if so required.
(vi)  Whether tax benefits under section10AA can be enjoyed by an eligible SEZ unit consequent to its transfer to another SEZ
This issue relates to cases where an eligible SEZ unit is shifted from one SEZ to another SEZ on account of commercial exigencies. This shifting is permissible under Instruction No. 59 (F.No-C-4/2/2010-SEZ) issued by Department of Commerce (SEZ Division), provided approval from the Board of Approvals (BOA) has been obtained. Doubts have been raised whether such shifting of an eligible unit would deprive the unit/undertaking of tax benefits, provided there is no splitting or reconstruction of an existing business.
The matter has been examined and it is clarified that the tax holiday should not be denied merely on the ground of physical relocation of an eligible SEZ unit from one SEZ to another in accordance with Instruction No. 59 of Department of Commerce (referred to above) and if all the prescribed conditions are satisfied under the Income-tax Act, 1961. It is further clarified that the unit so relocated will be eligible to avail of the tax benefit for the unexpired period at the rates applicable to such years.
(vii) Whether new Units/undertakings set up in the same location where there is an existing eligible unit/undertaking would amount to expansion of the existing unit/undertaking
Whether setting up of new unit/undertaking in a location (covered by section 10A, 10AA or 10B), where an eligible unit is already existing, would amount to expansion of such already existing unit is a matter of fact requiring examination and verification. However, it is clarified that setting up of such a fresh unit in itself would not make the unit ineligible for tax benefits, as long as the unit is setup after obtaining necessary approvals from the competent authorities; has not been formed by splitting or reconstruction of an existing business; and fulfils all other conditions prescribed in the relevant provisions of law.

3. The above may be brought to the notice of all concerned.

CENTRALISED PROCESSING OF STATEMENTS OF TDS SCHEME, 2013

Posted on by Business So Simple in Miscellaneous

CENTRALISED PROCESSING OF STATEMENTS OF TAX DEDUCTED AT SOURCE SCHEME, 2013
NOTIFICATION NO. 3/2013[F.NO.142/39/2012-SO(TPL)], DATED 15-1-2013
In exercise of the powers conferred by sub-section (2) of section 200A of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following scheme for centralised processing of statements of tax deducted at source, namely:-

Short title and commencement

1. (1) This scheme may be called the Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013.
(2) It shall come into force on the date of its publication in the Official Gazette.

Definitions

2. (1) In this scheme, unless the context otherwise requires,-
(a)  “Act” means the Income -tax Act, 1961 (43 of 1961);
(b)  “Assessing Officer” means the Assessing Officer who is ordered or directed under section 120 of the Act to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under Chapter XVII of the Act;
(c)  “authorised agency” means the person authorised by the Director General to receive the statement of tax deducted at source or correction statement of tax deducted at source;
(d)  “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);
(e)  “Cell” means the Centralised Processing Cell having jurisdiction over such statements of tax deducted at source as may be specified by the Board;
(f)  “Commissioner” means the Commissioner of Income-tax in charge of the Centralised Processing Cell;
(g)  “correction statement of tax deducted at source” means the statement furnished for rectifying any mistake or to add, delete or update the information furnished in the statement of tax deducted at source furnished under sub-section (3) of section 200 of the Act;
(h)  “deductor” means a person deducting tax in accordance with the provisions of Chapter XVII of the Act;
(i)  “Director General” means the Director General of Income-tax (Systems) appointed as such under sub-section (1) of section 117 of the Act;
(j)  “portal” means the web portal of the authorised agency or the web portal of the Cell, as the case may be;
(k)  “statement of tax deducted at source” means statement of tax deducted at source furnished under sub-section (3) of section 200 of the Act.
(2) The words and expressions used herein but not defined and defined in the Act shall have the meaning respectively assigned to them in the Act.

Centralised Processing Cell

3. The Board may set up as many Centralised Processing Cells as it may deem necessary and specify their respective jurisdictions.

Furnishing of correction statement of tax deducted at source

4. (1) A deductor shall furnish the correction statement of tax deducted at source in the form specified by the Director General-
(a)  at the authorised agency through electronic mode; or
(b)  online through the portal.
(2) The correction statement referred to in sub-paragraph (1) shall be furnished under digital signature or verified through a process in accordance with the procedure, formats, and standards specified by the Director General.

Processing of statements

5. (1) The Cell shall process the statement of tax deducted at source furnished by a deductor in the manner specified under sub-section (1) of section 200A of the Act after taking into account the information contained in the correction statement of tax deducted at source, if any, furnished by the deductor before the date of processing.
(2) The Commissioner may-
(a)  adopt appropriate procedure for processing of the statement of tax deducted at source; or
(b)  decide the order of priority for processing of the statement of tax deducted at source based on administrative requirements.

Rectification of mistake

6. (1) An Income-tax authority of the Cell may, with a view to rectifying any mistake apparent from the record under section 154 of the Act, on its own motion or on receiving an application from the deductor, amend any order or intimation passed or sent by it under the Act.
(2) An application for rectification shall be furnished in the form and manner specified by the Director General.
(3) Where a rectification has the effect of reducing the refund or increasing the liability of the deductor, an intimation to this effect shall be sent to the deductor electronically by the Cell and the reply of the deductor shall be furnished in the form and manner specified by the Director General.
(4) Where an amendment has the effect of reducing a refund already made or increasing the liability of the deductor, the order under section 154 of the Act passed by an Income-tax authority of the Cell shall be deemed to be a notice of demand under section 156 of the Act.

Adjustment against outstanding tax demand

7. Where a refund arises from the processing of a statement under this scheme, the provisions of section 245 of the Act shall, so far as may be, apply.

Appeal

8. (1) Where a statement of tax deducted at source is processed at the Cell, the appeal proceedings relating to the processing of the statement shall lie with the Commissioner of Income-tax (Appeals) having jurisdiction over the Assessing Officer who has jurisdiction over the deductor and any reference to Commissioner of Income-tax (Appeals) in any communication from the Cell shall mean such jurisdictional Commissioner of Income-tax (Appeals).
(2) The Assessing Officer who has jurisdiction over the deductor shall submit the remand report and any other report to be furnished before the Commissioner of Income-tax (Appeals) and an order, if any, giving effect to appellate order shall be passed by such Assessing Officer.

No personal appearance at the Cell

9. (1) No person shall be required to appear personally or through authorised representative before the authorities at the Cell in connection with any proceedings.
(2) The Cell may call for such clarification, evidence or document as may be required for the purposes of the processing of statement of tax deducted at source or for the purposes of the rectification of any order or intimation passed or sent by the Cell under the provisions of the Act.
(3) The deductor shall furnish the reply to any communication under sub¬paragraph (2) in such format as may be specified by the Director General.

Service of notice or communication

10. (1) The service of a notice or order or intimation or any other communication by the Cell may be made by delivering or transmitting a copy thereof to the deductor,-
(a)  by electronic mail; or
(b)  by placing such copy in the registered electronic account of the deductor on the portal of the Cell; or (c) by any mode mentioned in sub-section (1) of section 282 of the Act.
(2) The date of posting of any communication under sub-paragraph (1) in the electronic mail or electronic account of the deductor in the portal of the Cell shall be deemed to be the date of service of such communication.
(3) The intimation, orders and notices shall be computer generated and need not carry physical signature of the person issuing it.

Power to specify procedure and processes

11.The Director General may specify procedures and processes, from time to time, for effective functioning of the Cell in an automated and mechanised environment, including specifying the procedure, formats, standards and processes in respect of the following matters, namely:-
(a)  form of correction statement of tax deducted at source;
(b)  the manner of verification of correction statement of tax deducted at source;
(c)  receipt of correction statement of tax deducted at source;
(d)  form of rectification application;
(e)  the manner of verification of rectification application;
(f)  receipt and processing of rectification applications in the Cell;
(g)  the mode and format of the acknowledgement to be issued by the Cell for the receipt of any document;
(h)  the mode of authentication of any document or information submitted to the Cell, including authentication by digital signature or electronic signature;
(i)  validation of any software used for electronic filing of correction statement of tax deducted at source or rectification application;
(j)  provision of web portal facility including login facility, tracking status of correction statement of tax deducted at source or statement of tax deducted at source, display of relevant details of tax deduction or refunds to the taxpayer or deductor, as the case may be, and facility of download of relevant information;
(k)  call centre to answer queries and provide taxpayer services, including outbound calls to a deductor requesting for clarification to facilitate the processing of the statement of tax deducted at source filed;
(l)  provision of grievance redressal mechanism in the Cell;
(m)  managing tax administration functions such as receipt, scanning, data entry, processing, storage and retrieval of statement of tax deducted at source and documents in a centralised manner or receipt of paper documents through authorised intermediaries.

 
Contact us for any query/clarifications

Bipul Kumar
Email: bkumarca80@gmail.com
+91-9560084833 [Cell]