Ride Sharing and not risk sharing.

Booking seats on trains or buses is likely to be difficult. Engaging a private taxi is expensive. For city travel, there are several taxi aggregators like Ola, Uber and Meru to depend on.  For long-distance travel, there were a few options till one carpooling service which had been making waves in the country the BlaBlaCar stepped in. Ever since that the interest in ridesharing services has been on the upswing in India.

BlaBlacars model is simple. It connects people looking for a city-to-city ride with car owners going in the same direction so that they can travel together and share the cost of their journey. The name is a play on how chatty members are while riding in the cab.

So it is basically hooking up people who are driving with those without a car who are heading in the same direction. This creates a new market, and at the same time eases traffic congestion, and helps the environment. Passengers will also be able to save some money as it is cheaper than renting a car and drivers will get to earn a bit for a trip they were already planning to make. However, its business model is not fool-proof and has a grave risk.

In case of an accident and unfortunate injury or death of your co-passenger will your insurance company honour your claim?  No, because you are carrying a passenger for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward.

BlaBlaCar claims that “Co-travellers' contributions to car owners do not generate profit, they only offset costs, therefore ridesharing is not ever hire and reward. Rides must only be given in a vehicle seating four passengers or less. BlaBlaCar scrupulously fulfills these conditions, as we limit number of seats and cap price per co-travelers”

 

BlaBlaCar’s interpretation is based on the clarification issued by The Association of British Insurers, which states as  “All ABI motor insurers have agreed that your insurance cover will not be affected if your passengers contribute towards your journey costs (including fuel, vehicle depreciation and associated vehicle running costs), as long as lifts are given in a vehicle seating eight passengers or less. This does not apply if you make a profit from payments received or if carrying passengers is your business. The ABI is supportive of car sharing platforms such as BlaBlaCar, Liftshare, GoCarShare whose prices and the number of seats offered are usually automatically capped, fulfilling the above requirement regarding profit. The ABI recommend that users of these services look at the terms and conditions associated with the schemes”

BlaBlaCar should be reminded that the British have left India in 1947 and Motor Vehicle Insurance in India is governed by the provisions of The Motor Vehicles Act, 1988 and regulated by IRDA.

 

A gratuitous or fare paying passenger in a goods vehicle or fare paying passenger in private vehicle has been proved to be a good defense for refusing the claim by Insurance Company and in number of other cases this judgment has been reiterated with a direction that the Insurance Company shall first make payment of the compensation to the claimant and then recover it from the owner.

Private Car Insurance Policy covers Vehicles used for social, domestic and for professional purpose (excluding carriage of goods other than the registered owner ) of the insured or used by insured's employees for such purpose but excluding use for hire or reward, racing, pace making, reliability trial, speed testing and use for any purpose in connection with the Motor Trade

What will happen if your insurance claim is rejected?  With the development of law, liability of the insurance Company has been made strict to the third party even if there is no negligence or defense to the Insurance Company are available. A right has been given to the Insurance Company by way of legal precedents incorporating various provisions to recover the said amount paid to third party from owner. This recovery can be made by mere filing of an execution application and not by a separate civil suit.

Being BlaBla you have the option to reduce your cost of travel, pollution level, find new friends and many endless benefit but at the cost of losing your hard earned saving and peace of mind.

So when you go BlaBla remember that “Once a word has been allowed to escape, it cannot be recalled”

Income Tax Filing Due date.

Many taxpayers see the Income Tax Department as a heartless organisation that is ready to haul them over the coals for the smallest of mistakes. However, there is a soft side to the taxman as well, which is evident from the rules for late filing of tax returns. For instance, if you have missed the deadline for filing your income tax return, there's no need to be worried.

The tax department accepts returns till the end of the assessment year. If all your taxes are paid, you will not be levied a penalty or get a notice for non-filing as long as you file the return for Accounting year 2013-14 by 31 March 2016. However, if there is some tax to be paid, you will have to give a 1% late payment fee for every month of delay since April 2014. If the tax due is more than Rs 10,000, you should have paid an advance tax. Advance tax is payable in three tranches—30% is to be paid by 15 July of the relevant financial year, 60% by 15 December and 100% by 31 March.

If advance tax has not been paid, the penalty per month will be applicable from the due date of the advance tax. There's even a small window of reprieve for the ultra-lazy taxpayers, who haven't filed their returns for the past two years. They can do so for the income earned in 2011-14 by 31 March 2016. However, this will be treated as a belated return and there could be a `5,000 penalty for late filing depending on the discretion of the assessing officer.

Tax experts say the penalty is rarely slapped if all taxes have been paid. The assessing officer invokes this provision only when there is an additional tax liability. The salaried individuals and retirees, whose income is subject to tax deduction at source, are on dry ground. However, keep in mind that there may be some income on which you have not paid tax. Although there is now  Rs 10,000 deduction on interest earned on savings bank deposits, the income from other bank deposits and infrastructure bonds bought a few years earlier is fully taxable.

Though the tax laws give you a grace period if you file your return late, you also forgo some of your rights as a taxpayer. For one, you cannot modify your tax return if it has been filed after the due date. If you have filed by the due date, you can alter it any number of times before the end of the assessment year or till the return is assessed. However, after the due date, you are not allowed to change it. So if you miss out on any deduction or exemption, you can't claim it later.

You also cannot carry forward any short-term or long-term losses if you have filed after the due date. The taxpayers, who have filed by the due date, can carry forward capital losses and adjust them against future capital gains. They can also carry forward these losses up to eight financial years. For instance, if you had suffered capital losses in 2012-13, these can be adjusted against gains till 2020-21.

However, this benefit is not available to the late filer. The other problem with late filing is that you get tax refunds late. The earlier you file the return, the faster it is assessed and you receive the refund. Even if it gets delayed due to clerical errors and bureaucratic sloth that government departments are notorious for, you will earn an interest. This is because the interest on refund is calculated from the time that you file your tax return.

5 facts on belated returns:

1)      No difference in filing procedure. The process of filing before or after the deadline is the same. However, don't forget to mention in the tax form that the return being filed is a belated one.

2)      Responding to a tax notice, If the belated return is being filed in response to an income tax notice, mention this in the return. Last year, 9.75 lakh notices were issued for non-filing.

3)      Don't ignore the notice from tax department Prosecution proceedings can be initiated against the taxpayer if he ignores a notice for non-filing of tax return in case the payable tax exceeds Rs 3,000.

4)      Taxman lenient for genuine cases: The tax department is considerate if the taxpayer is unable to file returns by the due date due to a genuine reason, such as serious illness or injury.

5)       Lower interest on your tax refund, If the tax refund is delayed, the taxpayer is eligible for interest, but it starts accruing from the time he files his return. Late returns earn less interest.

So Relax, and do not worry that Income Tax Web site has started behaving like IRCTC site, once the congestion is cleared you can file the return after 1^st August at your pleasure.

Service Tax on 'Air Conditioned Restaurants'

 Last time when you had visited an air-conditioned restaurant did you notice 4.94% service tax on your food bill apart from the local VAT charges? Well with effect from 1^st April 2013 Service Tax is applicable on sale or supply of food stuff in air-conditioned restaurants whether or not part of any hotel. Even the eating joints in air-conditioned malls and eateries like Pizza Hut, Mc Donald’s, Coffee Cafe day etc are also liable to Service Tax on supply of food in their premises as all of these are air-conditioned.

Let us take a quick look in the history Service Tax on Restaurants in India.

Service tax prior to Negative List

For the first time a new category of taxable service for levy of service tax on restaurants was introduced by insertion of sub-clause (zzzzv) in clause (105) of Section 65 of the Finance Act, 1994.

This made restaurant service a taxable service with effect from 01/05/2011. Since in a restaurant service sale element is also involved, an abatement of 70 per cent was provided for the purposes of valuation vide Notification No. 34/2011-ST. Thus, service tax was levied on 30 per cent of Gross amount charged by the service provider.

Under Negative List regime

With effect from 1^st July 2012, Section 66E was inserted for introducing the new concept of DECLARED SERVICES under the service tax legislature. According to that, restaurant services were held as declared services. However, Mega Exemption Notification No. 25/2012 entry no. 19 provided that restaurants, eating joints or mess other than those having the facility of air conditioning or central air-heating in any part of the establishment, at any time during the year and a license to serve alcoholic beverages shall be exempt from service tax.

Further, for the purpose of valuation, Rule 2C of Service Tax (Determination of Value) Rules, 2006 provided that service tax would be levied on 40% of gross amount charged by the service provider. Thus under negative list, restaurant industry was imposed to additional service tax on 10% of value on gross amount charged as compared to earlier levy. Effectively customers had to shell out additional 4.94% on their food bill.

As service tax is levied only on the service portion involved in a transaction, in this case, we fail to understand, how the service portion involved in a particular  Industry increased (30% to 40%) due to major change in legislation(Introduction of Negative list Regime).

After the Budget of 2013

Subsequently, Notification No. 3/2013 has amended Notification No. 25/2012(Mega exemption) according to which service tax will be levied even on the restaurants which do not have a license to serve alcoholic beverages. This is a major change for the industry as thousands of restaurants and eating joints including small and medium have come within the ambit of Service Tax. The Change was effective from 01/04/13. This change did have a direct impact on the pocket of common man. Due to this change, even a small eating joint having a seating arrangement and the facility of air conditioning in the establishment shall be liable to service tax even if operating in places like hospitals, temples etc.

No specific definition of "Restaurant" has been prescribed under the service tax regulations containing any limitation to any area, number of seats or otherwise. It covers all restaurants, eating joints or a mess. Therefore, it seems to cover almost all the following categories of restaurants, having the facility of air conditioning or central air heating in any part of the establishment at any time during the year:

·       Restaurants

·       Cafes

·       Food Courts

·       Food Kiosks

·       Pubs etc.

Isn’t not strange both Service Tax as well as VAT was charged on the same food? Well that is when The Honourable High Court of Kerala stepped in.

 

Service tax on restaurants and hotels not Constitutional

On 3^rd July 2013, the Kerala High court, in Kerala Classified Hotels and Resorts Association and others vs Union of India and others  (HC-KERALA-WP(C) No.14045 /2011 Dt.3^rd July 2013 ), held the levy of service tax on supply of food and beverages by restaurants and services of lodging provided by hotels as unconstitutional.

The petitions before the high court involved the specific question of whether the central government had the Constitutional right to levy service tax on the service portion involved in the transaction of sale of food and beverages by restaurants.

As per the Constitution of India, the definition of tax on sale or purchase of goods was expanded by the 46th amendment to the Constitution, which inserted the clause 29A to the article 366, to include: "(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating),…"

The high court, while adjudging the levy of the service tax on transaction of sale of foods and beverages by the restaurants as unconstitutional, has relied on the judgment of the Constitutional Bench of the apex court, in K Damodarasamy Naidu and Bros vs state of Tamil Nadu (2002-TIOL-884-SC-CT-CB). There, the apex court held that the Article 366(29A)(f) empowers the state government to impose tax on supply of food and beverages whether it is by way of service or as a part of a service. Such transfer delivery or supply is deemed to be a sale of those goods and the provision of service is only incidental to such sale. Accordingly, it was held that the price paid by the customer for supply of foods in a restaurant cannot be split-up.

Thus, levy of service tax by the Centre on your restaurant bill is unconstitutional.

Since the decision is a consequence of a writ petition and as there is no other conflicting high court decision, the favourable Kerala HC decision constitutes law of the land. Restaurants across India can rely on the decision. The ruling also holds good for current provisions, where the service tax ambit has been expanded to cover all air-conditioned restaurants.

However, while the Kerala HC order said the petitioners were entitled to seek refund of service tax collected and paid by them, it may not be practically feasible. "Restaurants merely collect service tax from customers and pass it on to the government. It would be impossible for them in turn to refund each customer from whom service tax has been collected

When Adam Smith wrote about the four important canons of taxation — equity, certainty, convenience and economy — in the book The Wealth of Nations, he would have expected all nations to, by and large, follow them However, it appears that lawmakers in India often ignore these canons while formulating their tax laws. Retrospective amendments — just to show their angst over landmark decisions of the Supreme Court and High Courts — and frequent tinkering with laws are examples of this attitude. Service tax laws follow this pattern as well so it is a matter of time before this Order is challenged. Until then enjoy your Christmas and New Year Parties in your favorite Air Conditioned Restaurant without paying the Service Tax. 

Wish you all Merry Christmas and a Happy New Year 2014.

Deduction for Tuition fees Payment under Section 80-C of the Income Tax Act.

It has been generally noticed that Drawing and disbursing officers (DDO) /Employers are not entertaining the deduction claim of employee regarding payment of Tuition fees for full time education of their children as a whole. They are allowing only the fee which has been shown as with title "Tuition fees” in fees receipt issued by educational institutes. 

Admission fees, Computer fee, Science Class fees ,Practical fees ,exam fees etc are not being generally allowed. In most of the cases even after employees raises the query to DDO that why he has disqualified the other type of fees for the purpose of section 80C, the queries are not being properly addressed. Moreover in few cases DDO raised a cross question where it is written that all type of fees are allowed.

So in this post we will try to resolve this issue .Firstly relevant provision of section 80C has been reproduced here under. Section 80C (2) clause (xvii)

Any sums paid or deposited in the previous year by the assessee

(xvii) As tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,

(a) to any university, college, school or other educational institution situated within India;

(b) for the purpose of full-time education of any of the persons specified in sub-section (4);

Further clause 80(4)(C) reproduced here under:-

“(c) for the purposes of clause (xvii) of that sub-section, in the case of an individual, any two children of such individual.”

School, colleges are generally charged various types of fees from student like admission fees, practical fees, exam fees, computer class fees, building fund and tuition fees. The tuition fees word used by School/ colleges and word used in section 80C have different meaning. 

Tuition fees used in section 80C have broader meaning and it includes all type of fees payment made to school /colleges etc except following two type of payment or payment of similar nature as suggested below:-

Development fees 

Donation 

The example of above are Building Fund,development fees etc.

So all other type of fees is allowed and eligible under section 80C and should also be allowed by DDO's. This issue has been recently clarified through circular 8/2013 dated 10.10.2013 

Relevant part of circualar 8/2013 has been reproduced here under.

Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.

Full-time education includes any educational course offered by any university, college, school or other educational institution to a student who is enrolled full-time for the said course.

It is also clarified that full-time education includes play-school activities, pre nursery and nursery classes.

It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature. 

In the above circular it has been clarified that "tuition fees shall include any payment of fees" "except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature."

So all type of fees is allowed under section 80C and not only tuition fees as generally understood in common parlance. So if you have following type of fees (examples) in you school /college fees receipt then ask your DDO to allow the deduction under section 80C

Admission fees 

Exam fees

Computer class fees

Practical fees

Smart class fees 

Further CBDT also clarified that full-time education includes play-school activities, pre nursery and nursery classes.

From the above we can summarize the provisions related to deduction of tuition fees payment under section 80C as under.

·         Tuition fees deduction is allowed under section 80C of the income tax act.

·         The overall limit of 1,00,000 is applicable of section 80C ,80CCD(2) ,80CCC for fy 2013-14

·         The tuition fees under section 80C has broader meaning then generally prevails in society as explained above

·         However ,Tuition fees does not include the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature

·         Tuition fees deduction allowed for "any two child" of individual. Younger/elder no concept.

·         If a couple have four children then both can claim fees for any two children each.

·         Even fees of one child can be claimed partly by Husband & wife according to amount paid by each of them .However for the sake of practicability they should arrange separate receipts for their own parts. 

·         Tuition fees is allowed only to the individual and not allowed to HUF.

·         Tuition fees paid for education of assessee himself is not allowed.

·         Tuition fees can be claimed for children's education even if child is not depended on person.

·         Tuition fees can be claimed for children's education even if child is Major. 

·         A tuition fee is allowed on payment basis only. So if you have paid fees for FY 2013-14 in March 2013 then it is not allowed in FY 2013-14.

·         Tuition fees paid in advance is to be allowed in the year of payment.

·         Tuition fees for play school ,pre nursery ,nursery classed also allowed  

·         Educational institute must be in situated in India. So fees paid abroad not allowed.

·         The education must time "Full time education”, part time courses not allowed .

·         In of the opinion Transport fees, Hostel fees, Mess charges etc which are not directly associated with education are not allowed u/s 80C.

Reference:-

Section 80-C

http://law.incometaxindia.gov.in/dittaxmann/incometaxacts/2008itact/section80c.htm

Circulars

http://law.incometaxindia.gov.in/DIT/Circulars.aspx