{"id":20144,"date":"2023-04-05T10:27:49","date_gmt":"2023-04-05T04:57:49","guid":{"rendered":"https:\/\/gstguntur.com\/?p=20144"},"modified":"2023-04-05T10:28:38","modified_gmt":"2023-04-05T04:58:38","slug":"equalisation-levy-ca-final-dt-question-bank","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/equalisation-levy-ca-final-dt-question-bank\/","title":{"rendered":"Equalisation Levy \u2013 CA Final DT Question Bank"},"content":{"rendered":"

Equalisation Levy \u2013 CA Final DT Question Bank<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Equalisation Levy \u2013 CA Final DT Question Bank<\/h2>\n

Question 1.
\nChapter VIII of the Finance Act, 2016 has amended the provisions of section 10 and section 40(a) to address the issues and problems relating to taxation of e-commerce transactions.
\nExplain in this context the following:
\n(i) Equalisation Levy
\n(ii) Meaning of Specified Service [CA Final Nov. 2017] [4 Marks]
\nAnswer:
\n(i) Equalisation Levy
\nChapter VIII of the Finance Act, 2016 provides for an equalisation levy of 696 of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment in India, from a resident in India who carries on business or profession or from a non-resident having permanent establishment in India.<\/p>\n

(ii) Meaning of Specified Services<\/p>\n

    \n
  1. Online advertisement;<\/li>\n
  2. Any provision for digital advertising space or any other facility or service for the purpose of online advertisement;<\/li>\n<\/ol>\n

    Specified Service also includes any other service as may be notified by the Central Government.<\/p>\n

    \"Equalisation<\/p>\n

    Question 2.
    \nNikanu Ltd., an Indian Company involved In manufacturing and trading in cotton garments under the brand name \u201cPCOTT\u201d. In order to expand its exports sale it launched a massive publicity campaign in overseas market. For the purpose of online advertising, it hired the Sky Inc., a New York based company which has no permanent establishment in India and paid \u20b9 10 lakhs for its services in previous year 2020-21.<\/p>\n

    Discuss the tax and TDS implications of such transaction both in the hands of Nikanu Ltd. and Sky Inc. [CA Final May 2018 (New Syllabus)] [3 Marks]
    \nAnswer:
    \nAs per Sec. 165 of Finance Act, 2016, every person who is a resident and carrying on business or profession or a non-resident having PE in India, shall deduct an Equalisation levy @ 6% from the amount paid or payable to a non-resident in respect of the specified service.<\/p>\n

    However, the equalisation levy shall be deducted only if the aggregate amount of consideration received or receivable for specified services by the non-resident from a person resident in India and carrying on business\/profession or from a non-resident having PE in India exceeds \u20b9 1,00,000 in any previous year and the payment for the specified service has been made for the purposes of carrying out business or profession. Specified service includes online advertisement.<\/p>\n

    Implications for Nikanu Ltd.
    \nIn this case, Nikanu Ltd., an Indian company, engaged in manufacturing and trading in cotton garments, has hired Sky Inc. for the purpose of on\u00acline advertisement to expand its exports sale. Sky Inc. is a New York based company and has no PE in India and therefore, Nikanu Ltd. is required to deduct equalisation levy @ 6% on the payment of \u20b9 10,00,000 (i.e. \u20b9 60,000) made to Sky Inc. for its services, since the amount of consideration for online advertisement exceeds \u20b9 1,00,000.<\/p>\n

    \"Equalisation<\/p>\n

    Sec. 40(a)(ib) provides that no deduction shall be allowed in respect of any consideration paid or payable to a non-resident for a specified service on which equalisation levy is deductible but has not been deducted or after deduction has not been paid on or before the due date specified u\/s 139(1). However, if levy has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified u\/s 139(1), then such sum (disallowed earlier) shall be allowed as a deduction in the previous year in which such levy has been paid. Therefore, if Nikanu Ltd. fails to deduct equalisation levy or after deduction fails to deposit is with the credit of the C.G., then no deduction shall be available to Nikanu Ltd. in respect of \u20b9 10,00,000 paid to Sky Inc. for online advertisement.<\/p>\n

    Implications for Skv Inc. Ltd.
    \nSec. 10(50) provides for the exemption of any income arising from providing any specified service on or after 01.06.2016 or arising from any e-commerce supply or services made or provided or facilitated on or after 01.04.2021 and chargeable to Equalisation levy under Chapter VIII of Finance Act, 2016. Therefore, \u20b9 9,40,000 received by Sky Inc. after deducting Equalisation levy shall be exempt in the hands of Sky Inc. u\/s 10(50).<\/p>\n

    \"Equalisation<\/p>\n

    Question 3.
    \nRaghu Ltd. made a payment of \u20b9 3,00,000 on 30-6-2020 towards procuring online advertisement space to a foreign company which had no place of business in India.
    \nThe company remitted the equalization levy on 23.3.2021. Calculate interest and penalty payable by Raghu Ltd., if any. [CA Final May 2019 (New Syllabus)] [3 Marks]
    \nAnswer:
    \nAs per Sec. 166, the equalization levy deducted @ 6% (i.e. \u20b9 3,00,000 \u00d7 6% = \u20b9 18,000) by the assessee shall be paid to the credit of Central Government within 7 days from the end of the month of deduction.<\/p>\n

    As per Sec. 170, where the assessee fails to pay the equalization levy to the credit of the Central Government within the specified period, simple interest @ 1% on such levy for every month or part of the month by which such crediting is delayed shall be payable.<\/p>\n

    Also, Sec. 171 provides that on failure to pay equalization levy to the credit of the Central Government, penalty of \u20b9 1,000 for every day during which such failure continues, not exceeding the amount of levy shall be payable.<\/p>\n

    In this case, Raghu Ltd. had made payment on 30.6.2020 and therefore, the equalization levy shall be paid to the credit of the Central Government upto 07.07.2020. But, the company remitted the equalization levy on 23.3.2021 and therefore, the company shall be liable for such delay as follows:<\/p>\n

    Interest Payable @1% for every month or part \u00a9f the month
    \n= \u20b9 18,000 \u00d7 1% \u00d7 9 (months of delay)
    \n= \u20b9 1,620
    \nPenalty payable of \u20b9 1,000 for every day during which such failure continues not exceeding the amount of levy.
    \n= \u20b9 1,000 \u00d7 259 (days of delay)
    \n= \u20b9 2,59,000
    \nHowever, penalty shall not exceed the amount of levy and therefore, Raghu I Ltd. shall be liable for penalty of \u20b9 18,000.<\/p>\n

    \"Equalisation<\/p>\n

    Question 4.
    \nM\/s. Raghuram Co. Ltd., Mumbal entered into the following agreements with various non-resident entities during the previous year 2020-21:
    \n(i) Paid \u20b9 4,00,000 to M\/s. Neil Inc., a company based in USA for online advertisement of its products. M\/s. Neil Inc., does not have a PE in India.
    \n(ii) Paid \u20b9 50,000 to Mr. David, a non-resident individual, against providing digital space for online advertisement of its products.
    \n(iii) Paid \u20b9 1,55,000 to M\/s JLOX Ltd., for providing a platform for sale of its used furniture items. M\/s. LOX Ltd., is a company based in New Zealand and does not have a PE in India.<\/p>\n

    Discuss the relevant provisions of Income-tax Act, in respect of such agreements and also state the tax implications of such payments. [CA Final May 2019 (Old Syllabus)] [6 Marks]
    \nAnswer:
    \nChapter VIII of the Finance Act, 2016, provides for an equalisation levy of 6% of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment (PE) in India, from a resident in India who carries out business or profession, or from a non-resident having PE in India.<\/p>\n

    \u201cSpecified service\u201d means –<\/p>\n

      \n
    1. Online advertisement;<\/li>\n
    2. Any provision for -digital advertising space or any other facility or service for the purpose of online advertisement;<\/li>\n
    3. Any other service as may be notified by the Central Government.<\/li>\n<\/ol>\n

      However, equalization levy is not chargeable where the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a PE in India, does not exceed \u20b9 1 lakh.<\/p>\n

      \"Equalisation<\/p>\n

      Further, equalization levy is not attracted where payment for specified service is not for the purposes of carrying out business or profession:
      \n(i) In this case, equalisation levy @ 6% is chargeable on the amount of \u20b9 4,00,000 received by M\/s Neil Inc., a non-resident not having a PE in India, from M\/s Raghuram Co. Ltd., an Indian company for online advertisement of its products. Accordingly, M\/s Raghuram Co. Ltd. is required to deduct equalisation levy of \u20b9 24,000 ie., @ 6% of \u20b9 4 lakhs, being the amount paid towards online advertisement services provided by M\/s Neil Inc.<\/p>\n

      Non-deduction of equalisation levy would attract disallowance under section 40(a)(ib) of 100% of the amount paid to M\/s. Neil Inc. while computing business income of M\/s. Raghuram Co. Ltd.<\/p>\n

      (ii) In this case, equalisation levy is not chargeable as the amount of consideration of \u20b9 50,000 for digital space for online advertisement paid to Mr. David does not exceed \u20b9 1,00,000.<\/p>\n

      (iii) In this case, equalisation levy is not chargeable on the amount of \u20b9 1,55,000 received by M\/s LOX Ltd., a non-resident not having a PE in India, from M\/s Raghuram Co. Ltd., an Indian company, since the said payment was for providing a platform for sale of its used furniture items and not for the purposes of carrying on business or profession.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Equalisation Levy \u2013 CA Final DT Question Bank is designed strictly as per the latest syllabus and exam pattern. Equalisation Levy \u2013 CA Final DT Question Bank Question 1. Chapter VIII of the Finance Act, 2016 has amended the provisions of section 10 and section 40(a) to address the issues and problems relating to taxation …<\/p>\n

      Equalisation Levy \u2013 CA Final DT Question Bank<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[169],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/20144"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=20144"}],"version-history":[{"count":1,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/20144\/revisions"}],"predecessor-version":[{"id":20145,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/20144\/revisions\/20145"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=20144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=20144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=20144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}