SIMON RODRIGUES - PowerPoint Presentation

Slide1

SIMON RODRIGUES

TAXATION OF CO-OPERATIVE SOCIETIESSlide2

INTRODUCTIONSIMON RODRIGUES & ASSOCIATES

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A Co-Operative Society is a taxable entity under the Income Tax Act, 1961. A Cooperative Society under the Act is to be treated as an

Association of Persons

(AOP), which is included in the definition of 'person' under the Income Tax Act, 1961.

Even though, for taxation purposes, the status of a cooperative society is to be taken as an Association of Persons, the

Section 67A

and

Section 86

of the Act have been

excluded

from application to the members of society.Slide3

PRINCIPLE OF MUTUALITY

SIMON RODRIGUES & ASSOCIATES

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The cardinal requirement in case of mutual association is that ‘

All the contributors to the common fund must be

entitled

to participate in the surplus & all the participators to the surplus must be contributors to the common trade

. In other words there should be complete identity between the contributors and the participators.’

Eg

: If the cooperative earns interest from bank or parking income from non-members or rental income by letting roof for mobile towers, then all these incomes are chargeable. Slide4

COMPLIANCE OF INCOME TAX PROVISIONS

SIMON RODRIGUES & ASSOCIATES

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List of Requirements:-

PAN Card

TAN Registration

Registration under the Central Excise / Service Tax / VAT / Import-Export Laws etc. (whichever is applicable)Slide5

PAYMENT OF ADVANCE TAXSIMON RODRIGUES & ASSOCIATES

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By 15th September- 30%,

By 15th December- 60%

By 15th March - the whole amount of such advance tax as reduced by the amount paid in earlier instalment(s). Slide6

STATUTORY COMPLIANCESSIMON RODRIGUES & ASSOCIATES

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It has to comply with all the TDS provisions excepting few:

No tax

shall be deducted from any

interest payable on debentures

issued by any cooperative society

u/s 193.

Similarly,

TDS provisions u/s 194A

are not applicable for interest other than

interest on securities

, if such income is credited or paid by a cooperative society to a member thereof or to any other cooperative society.

Though a co-operative society is not covered u/s 115-O i.e. not required to pay tax on distributed profit like domestic companies, TDS provision for dividends u/s 194 is not applicable.Slide7

STATUTORY COMPLAINCESSIMON RODRIGUES & ASSOCIATES

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Compliances of other TDS provisions

are all applicable for cooperatives:-

Time limit for deposit of TDS, (7

th

of the following month )

Electronic filing TDS returns,

Issuance of NSDL generated Form 16ASlide8

INCOME TAX RETURNSSIMON RODRIGUES & ASSOCIATES

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Income Tax Returns to be filed by the

30

th

of September

Without filing of returns within the stipulated due date, business losses or loss under the head of capital gains of a society

cannot

be carried forward.

Losses under the head of Income from House Property and un-absorbed depreciation

cannot

be carried forward at all if returns have not been filed.

Provisions related to

E-Filing

and

Digital Signature

are also applicable in the case of societies.Slide9

INCOME TAX RETURNSSIMON RODRIGUES & ASSOCIATES

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In the case of co-operative societies, u/s 115JC, if the tax payable under normal provisions

is less than 18.5% of the Adjusted Total Income,

then the tax payable will be

18.5% of the Adjusted Total Income

which is known as AMT i.e.

Alternate Minimum Tax

.

The Adjusted Total Income should be computed by increasing the deductions as claimed by the

assessee

,

under any section included in Chapter VI-A of the heading

“

C” – Deductions with respect to certain incomes (excluding deductions u/s 80 P)

and

deductions claimed under u/s 10AA

, with the Total Income as assessed by the A.O. Thus, cooperatives which are

only entitled to deductions under section 80P

,

will not

be affected by the AMT Provisions.

The provisions of the

Wealth Tax Act

are

not applicable

to Cooperative Societies.Slide10

Tax Slab for Co-Operative Society A.Y. 2015-2016

:-

SIMON RODRIGUES & ASSOCIATES

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Up to Rs. 10,000

10% of the income

Rs. 10,000 - Rs. 20,000

Rs. 1000 + 20% of (total income minus Rs.10,000)

Above Rs. 20,000

Rs. 3,000 + 30% of (total income minus Rs.20,000)

Surcharge - 10% of the Income Tax, where total taxable income is more than Rs. 1

crore

.

Education cess - 2% of income-tax.

Secondary and higher education cess - 1% of income-tax.

 Total Cess = 3% of Income-Tax.Slide11

DEDUCTIONS u/s 80PSIMON RODRIGUES & ASSOCIATES

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Section 80P of the Income Tax Act 1961 allows deduction in respect of income of cooperative societies which are

attributable

to specified activities.

When a cooperative is engaged in carrying on the business of banking or providing credit facilities to its members, the profit attributable to such business is

deductible

. However the same is

not applicable

for a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Slide12

DEDUCTIONS u/s 80PSIMON RODRIGUES & ASSOCIATES

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With regard to the

applicabilty

of deductions, few principles already established, are as follows:

Carrying on the business of banking or providing credit facilities to its members

Cottage Industries

Marketing of agricultural produce grown by its members,

Purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them

to

its membersSlide13

DEDUCTIONS u/s 80PSIMON RODRIGUES & ASSOCIATES

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Processing, without the aid of power, of the agricultural produce of its members

Collective disposal of the labour of its members,

Fishing or allied activities, that is to say, the catching, curing,

Processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members Slide14

DEDUCTIONS u/s 80PSIMON RODRIGUES & ASSOCIATES

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Primary societies procuring milk, oilseeds, fruits or vegetables raised or grown by its members and supplying them to federal societies, government or local authority or government company or corporation which are engaged in supplying these goods to public

Further,

full deduction is available

in respect of any income by way of

interest or dividends

derived by the cooperative society from its investment with any other cooperative society and in respect of any income derived by the cooperative society from the

letting out of warehouses for storage, processing or facilitating the marketing of commodities.

Income from House Property

and

interest on securities

is deductible for certain societies whose Gross Total Income is

less than

Rs. 20,000/-

Slide15

Disallowances of Expenses & u/s 80P

SIMON RODRIGUES & ASSOCIATES

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Upon violation of the conditions specified under clause (

ia

) the implication under section 40(a) would be that the same amount

will not be

deducted in computing income chargeable under the head ‘Profits and gains of business or profession’.

Now, here the question arises that once any amount is disallowed u/s 40(a)(

ia

), [or any other section like 43B etc] whether the same shall be considered for all purpose as a part of profit which in turn would form gross total income. If the answer is affirmative

, then deduction u/s 80P is available

and vice versa.Slide16

APPLICABILITY OF SECTION 14A

SIMON RODRIGUES & ASSOCIATES

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It is now established by various judicial pronouncements that section 14A has

no applicability

with regard to the deductions allowable u/s 80P.

The provisions of section

14A apply to exempted income

while

80P confers a right for deduction from the gross total income.

While exempted income is not at all included in computing the Total Income, incomes subjected to 80P deductions are required to be made from the Gross Total Income following the provisions of section 80A & 80AB. Slide17

DEDUCTIONS UNDER DIRECT TAX CODE

SIMON RODRIGUES & ASSOCIATES

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Clause 85:-

It provides for deduction to a

primary co-operative society

, to the extent of profits derived from the business of providing

banking, or credit, facility to its members

. Primary Co-Operative Society may be one of the following:-

Primary Agro Credit Society is one whose primary object is providing financial accommodation to its members for agricultural purposes or purposes connected with agricultural activities, including marketing of crops, no other co-op society being its member.

b)

Primary co-op agro & rural dev. bank confined to a

taluka

and providing long term credit for agro and rural dev. activities Slide18

DEDUCTIONS UNDER DIRECT TAX CODE

SIMON RODRIGUES & ASSOCIATES

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Clause 86:-

It provides for deductions to a primary cooperative society:

(a) Of entire profits derived from agriculture or agriculture related activities;

(b) Of income derived from any other activity, limited Rs One

lakh

.

Agriculture-Related Activities:

Purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members

The collective disposal of:-

(A) Agricultural produce grown by its members; or

(B) Dairy or poultry produce produced by its members;

(C) Fishing or allied activities,Slide19

EXEMPTIONS AVAILABLE TO CO-OPERATIVE SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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It includes certain classes of income which do not form part of total income and are exempted from income-tax. These are

excluded

from the computation of gross total income of an

assessee

.

A return of income is also not to be filled for them

. Such types of income fall

under Chapter III of the Income Tax Act

. Some of the permissible exemptions provided are:-

Exemption of profits and gains from a new industrial undertaking in a free trade zone for ten years[Section 10A].

Exemption of the profits and gains for ten years from a 100% export oriented undertaking [Section 10B], etc.Slide20

DEDUCTIONS AVAILABLE TO CO-OPERATIVE SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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It includes certain classes of income which are included in computing the total income of an

assessee

but are exempted from income-tax as they are basically deductions to be made in computing total income.

A return of income is required to be filled for them

.

As per

Section 80A,

in computing the total income of an

assesse

, the deductions specified in Section 80C to 80U shall be

allowed

from his gross total income.Slide21

DEDUCTIONS AVAILABLE TO CO-OPERATIVE SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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Deduction of any amount under

Section 80G

in respect of donations given to certain funds, charitable institutions, etc.

Deduction of 50% of profits and gains of projects implemented outside India

[Section 80HHB].

Deduction of the entire profits from income from export business

[Section 80HHC].

Section 80AB

deals with deductions that need to be made with reference to the gross total income.Slide22

COMPUTATION OF TAXABLE INCOMESIMON RODRIGUES & ASSOCIATES

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First compute the total income under the different heads i.e. income from house property, profits or gains of business or profession, capital gains, and income from other sources, ignoring the prescribed income exemptions. Thus, "gross total income" is obtained.

Now, from the amount, the 

permissible deductions

 under the Income Tax Act are made.Slide23

COMPUTATION OF TAXABLE INCOMESIMON RODRIGUES & ASSOCIATES

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To the 'net income' so arrived at, the 'rates of tax' as per the Finance Act for the respective year is applicable to cooperative societies.

Now to the amount of tax, percent of income tax as surcharge prescribed in the Finance Act is added.

From the tax liability so determined, the amount of

rebate

in the Act is deducted.Slide24

SERVICE TAXSIMON RODRIGUES & ASSOCIATES

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In the negative list based taxation regime of service tax from

1.7.2012,

all services are taxable if it falls within the definition of service1 .The Service defined u/s

65B(44)

is all encompassing as,

“any activity carried out by a person for another for consideration….”

However, it

excludes certain activities, viz

.,

a title of transfer in goods including deemed sale of goods under Article 366(29A) of the Constitution of India,

a transaction in money or

actionable claim or,

provision of service in the course of employment, etc. Slide25

S.T. IN THE CASE OF CO-OPERATIVE HOUSING SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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As per the definition, any unincorporated association or body of persons and a member thereof shall be treated as distinct persons.

A co – operative housing society and its members

cannot claim benefit of mutuality

in the transactions between them.

Therefore, collections from members shall become

liable to tax if they are in the nature of any activity carried out by the society for

its members as provided in the definition

.

It can be seen from

Negative List (Sec 66D)

that service by co – operative society does not find place therein.

 Slide26

S.T. FOR CO-OPERATIVE HOUSING SOCIETIESSIMON RODRIGUES & ASSOCIATES

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However, in the

exemption list2, entry 28 Service by an unincorporated body or a non

‐

 profit entity registered under any law for the time being in force, to its own members by way of

reimbursement of charges

or

share of contribution 

As a trade union;

The provision of carrying out any activity which is exempt from the levy of S.T.

Up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complexSlide27

EXEMPTIONS AVAILABLE TO CO-OPERATIVE HOUSING SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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Sinking Fund

Repair fund (except for current repairs)

Issue of Shares 

Water Charges (except for common use of the society like garden etc)

Muncipal

Tax / Property Tax

Interest on Defaulted Charges

Repayment of Loan & Interest

Non-Occupancy Charges

Lease Rent

Non-Agricultural Tax

Admission/Entrance Fees

Deposits

Premium on Transfer

Voluntary DonationsSlide28

LIABLE TO SERVICE TAX IN CASE OF CO-OPERATIVE HOUSING SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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Club membership fees

Share transfer fees  

Maintenance Charges  

Common Electricity

Service Charges

Car Parking Charges

Insurance

Charges for usage of health-clubs, swimming pools etc.

Use of premises by non-members (terrace, garden etc.)

Sale of space for hoardings, boards etc.Slide29

REVERSE CHARGE MECHANISMSIMON RODRIGUES & ASSOCIATES

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Provision of Reverse Charge Mechanism is applicable only when the service receiver is a Body Corporate as defined under Section 2(7) of the Companies Act 1956.

Body Corporate or Corporation

does not include

the following:-

Corporation Sole

A Co-Operative Society registered under any law relating to Co-Operative Societies

Any other Body Corporate, which the Central Government may notify through the Official Gazette

Therefore, Co-Operative Societies are not covered under R.C.M. Slide30

PAYMENT OF S.T. IN CASE OF CO-OP HOUSING SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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Payment of Service Tax:-

If the billing of above charges

exceeds Rs.5000 per member, per month,

service tax would be payable @ 12.36% and recovered in the bill. However, basic exemption is provided to any

assessee

for total receipt of taxable amount of Rs. 10

Lakhs

(however, this exemption is optional).

Once the receipt exceeds the exemption limit, Service Tax is payable after

deducting first Rs. 10

Lakhs

in the subsequent year and thereafter, Service Tax is applicable every year without any exemption. Slide31

PAYMENT OF S.T. IN CASE OF CO-OP HOUSING SOCIETIES

SIMON RODRIGUES & ASSOCIATES

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However, if the tax is collected, exemption

cannot

be availed.

In case of claim of exemption, CENVAT Credit

cannot

be availed.  

Service tax is payable on billing basis, i.e. even if a member does not pay the bill amount, Service Tax will have

to be paid by the society.Slide32

KEY POINTS ON SERVICE TAXSIMON RODRIGUES & ASSOCIATES

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The co–operative housing society will have to take registration within a month from

when the taxable service crosses Rs.9

Lakhs

billing in a financial year.

CENVAT Credit can be availed on payment of Service tax on input services, like Security Charges, Repairs & Maintenance, etc. The credit can be taken on payment basis, i.e. when payment of input service and service tax is paid to input service provider.Slide33

SERVICE TAX RETURNS

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Service tax is payable on monthly basis,

i

. e

. by 5th of the next month or 6th in case of e –payment

.

Service tax returns to be filed on half yearly basis in the following manner :  

For the period from 1st April to 30th September –  

by 25th October

For the period from 1st October to 30th March –  

by 25th April.Slide34

VAT APPLICABILITY FOR CO-OPERATIVE SOCIETIESSIMON RODRIGUES & ASSOCIATES

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A Society can act as an agent of its members, however, when a given society has the

authority to decide the sales price of goods sold

to members and is not acting merely as an agent of its members, then it is said to be a

dealer.

Profit motive of business is

irrelevant

for the purpose of eligibility of VAT, i.e. VAT applicability is

not dependent

on whether the dealer earns profits or incurs a loss.

Co-Operative Societies, even if engaging in trading activities at no-profit-no-loss equation are still

liable to pay VAT

on their sales.

Generalized VAT Rates are applicable to Co-Operative Societies.Slide35

SIMON RODRIGUES & ASSOCIATES

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