Monika Goels Online

Classes
For CS Professional Students
Advanced Tax - Laws and Practice
Chapter 1- Basic Concepts

About

the

course

Advanced Tax Law & Practice covers three areas of taxation which have been
allocated differently under new and old syllabus.

Old Syllabus

Part A- Direct Taxes (30

marks)
Includes Return of Income
and assessment
Part B- Indirect Taxes (50
marks)
Covers excise and customs
Part C- International Taxation
(20 marks)

New Syllabus

Part A- Direct Taxes and

International Taxation (30
marks)
Part B- Indirect Taxes (70
marks)
Covers excise, customs,
service tax and VAT.

How to study

Regular study is must

Updated knowledge of amendments, notifications and judicial decisions
very important (almost 20% of the question paper from updates)
Once a topic is introduced in the class, try to finish reading it from
the study material the very next day. Thereafter, check out the
reference books and read it from reference books.
Try solving practical problems with hand, once you have understood
the theoretical aspects.
Mark important aspects in the study material or make your own
notes.
In case of any doubts, click a picture of it and send it to me through
email preferably, else through whatsapp and if the doubts are more,
take an appointment to discuss over phone.
Prepare well for exam preparatory (Dec-15 almost 20% q.p from
exam prep questions) and use the feedback to improve upon your
understanding of the subject.

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Reference Books
Direct Taxes and International
Taxation

Indirect Taxes

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TAXATION IN INDIA- THE

CONSTITUTIONAL
FRAMEWORK
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Constitutional Framework...
Taxes levied by Central Government and State Government(s)
Authority to levy a tax is derived from the Constitution of
India
Which allocates power to levy various taxes between the
Centre and State
Article 265 of the Constitution which states that "No tax shall
be levied or collected except by the authority of law
Article 246 of the Indian Constitution, distributes legislative
powers including taxation, between the Parliament of India and
the State Legislature
Schedule VII enumerates use of three lists;
List - I Where the parliament is competent to make laws
List - II Where only the state legislature can make laws
List - III Where both the Parliament and the State Legislature
can make laws upon concurrently
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...Constitutional Framework
Union List

State List

Income Tax
Custom Duty

Taxes on lands and

Excise Duty
Corporation Tax
Service tax

Central Sales Tax

Stamp duty in

respect of bills of
exchange, cheques,
promissory notes,
etc

buildings
Excise duty on
alcoholic liquor etc
Entry tax
Sales Tax
Tolls
Luxury Tax
Stamp duty in
respect of
documents other
than those specified
in the provisions of
List I

Concurrent List
Stamp duties other

than duties or fees

collected by means
of judicial stamps,
but not including
rates of stamp duty

The constant blurring of taxing jurisdiction between the Centre

and the States has necessitated
multiple Constitutional challenges
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Heads of Taxation in three Lists- Union List

S.
No
.

Parliament

Taxes on incomeother than agricultural income (List I, Entry 82)

Dutiesofcustomsincludingexportduties (List I, Entry 83)

Duties ofexciseontobaccoand other goods manufactured or produced in India except (i)

alcoholicliquorfor human consumption, and (ii)opium, Indianhempand other narcotic
drugsand narcotics, but including medicinal and toilet preparations containing alcohol or
any substance included in (ii). (List I, Entry 84)

Corporation Tax(List I, Entry 85)

Taxes on capital value of assets, exclusive of agricultural land, of individuals and

companies, taxes on capital of companies (List I, Entry 86)

Estate dutyin respect of property other than agricultural land (List I, Entry 87)

Duties in respect of succession to propertyother than agricultural land (List I, Entry 88)

Terminal taxes on goods or passengers, carried by railway , sea or air; taxes on railway
fares and freight (List I, Entry 89)

Taxes other thanstamp dutieson transactions instock exchangesandfutures markets(List

I, Entry 90)

10

Taxes on the sale or purchase of newspapers and on advertisements published therein (List
I, Entry 92)

11

Taxes on sale or purchase of goods other than newspapers, where such sale or purchase
takes place in the course of inter-State trade or commerce (List I, Entry 92A)

12

Taxes on the consignment of goods in the course of inter-State trade or commerce (List I,
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Entry 93A)

Heads of Taxation in three

Lists- State List

S.
N
o

State Legislature

Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for
revenue purposes and records of rights, and alienation of revenues (List II, Entry 45)

Taxes on agricultural income (List II, Entry 46)

Duties in respect of succession to agricultural income (List II, Entry 47)

Estate Duty in respect of agricultural income (List II, Entry 48)

Taxes on lands and buildings (List II, Entry 49)

Taxes on mineral rights (List II, Entry 50)

Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human
consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics (List II, Entry 51)

Taxes on entry of goods into a local area for consumption, use or sale therein (List II, Entry 52)

Taxes on the consumption or sale ofelectricity(List II, Entry 53)

10

Taxes on the sale or purchase of goods other than newspapers (List II, Entry 54)

11

Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by
radio or television (List II, Entry 55)

12

Taxes on goods and passengers carried by roads or on inland waterways (List II, Entry 56)

13

Taxes on vehicles suitable for use on roads(List II, Entry 57)

14

Taxes on animals and boats (List II, Entry 58)

15

Tolls(List II, Entry 59)

16

Taxes on profession, trades, callings and employments (List II, Entry 60)

17

Capitation taxes (List II, Entry 61)

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Taxes on luxuries, includingtaxes onmail:
entertainments,
amusements, betting and gambling (List II, Entry 62)

Constitutional Amendment Bills

To enable Parliament to formulate by law principles for determining the
modalities of levying the Service Tax by the Central Govt. and collection
of the proceeds thereof by the Central Govt. and the State, the
amendment vide Constitution (92nd amendment) Act, 2003 has
been made.
Consequently, new article 268 A has been inserted for Service Tax levy
by Union Govt., collected and appropriated by the Union Govt., and
amendment of seventh schedule to the constitution, in list I-Union list
after entry 92B, entry 92C has been inserted for taxes on services.
The Constitution (One Hundred and Twenty-Second
Amendment) Bill, 2014 was introduced in the Lok Sabha on
December 19, 2014 by the Minister of Finance, Mr. Arun Jaitley. (passed
by Lok Sabha on 6th May 2015)
The Bill seeks to amend the Constitution to introduce the goods and
services tax (GST). Consequently, the GST subsumes various central
indirect taxes including the Central Excise Duty, Countervailing Duty,
Service Tax, etc. It also subsumes state value added tax, octroi and
entry tax, luxury tax, etc.
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Concurrent powers for GST: The Bill inserts a new Article in the

 A law to levy or collect any tax or duty or

cess or fees does not include an executive
order or a rule without express statutory
authority. A Money Bill, which includes a bill
to impose, abolish, remit, alter or regulate
any tax shall not be introduced in Rajya
Sabha or a legislative council. Such a Bill
shall not be moved or introduced except as
the recommendations of the President or
the Governor, as the case may be.
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Constitutional Prohibitions on
taxation
The law imposing the tax, like other laws, must not violate any
fundamental right or contravene any specific provision relating to
particular matters e.g.
the prohibition against specific appropriation of the proceeds of
any tax in payment of expenses for the promotion or maintenance
of any particular religious denomination (Article 27) or
the ceiling of Rs. 2500 per annum in respect of total amount
payable by one person as taxes on profession, trade, calling or
employment (Article 276(2)] or
the specific restrictions on the imposition of sales tax by a State
(Article 286) or
the freedom of trade and commerce carried on between one place
and another in India so as to ensure that the economic unity of
India is not broken up by internal barriers (Article 301).

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Distribution of revenues between the

Union and States
Stamp duties like those on financial documents and excise or medicinal or toilet preparations as
mentioned in the Union list are to be levied by the Government of India but are to be collected
by the States (Article 268).
Central Sales Tax is levied and collected by the Government of India but is assigned to the
States (Article 269).
All taxes and duties referred to in the Union list, except those referred to in Articles 268 and
269, surcharge on taxes and duties, for the purposes of the Union and any cess levied by the
Parliament for specific purposes are to be collected by the Government of India and are to be
distributed between the Union and the States in the manner prescribed by the President by
order until a Finance Commission has been constituted and after its constitution, as prescribed
by the President by order after considering the recommendations of the Finance Commission.
As per recommendations of the Thirteenth Finance Commission duly accepted by the
Government, in the overall scheme of transfer of funds, 39.5% of the gross revenue receipts is
the ceiling for such transfer of funds to the States.
The share of states in the net proceeds of shareable central taxes has been raised from 30.5
per cent to 32 per cent.
Fourteen Finance commission has submitted its report on 24 th February, 2015 increasing the
share of states in divisible pool to 42% and not sharing the proceeds of service tax with the
State of J&K.
The recommendations of fifteenth Finance Commission have also been submitted to the
President of India.

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Review Questions
1. Which of the following does not fall under the
State List as stipulated in the Article 246 read
with Schedule VII of the Constitution of India
(a) Excise on alcoholic liquors and narcotics
(b) Taxes on consumption and sale of electricity
(c) Taxes on advertisements in newspapers
(d) Taxes on advertisements other than those
contained in newspapers.

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Review Question
1. Prior recommendation of the President of India is required to Bills
affecting taxation in which States are interested under Article
(a) 271 of the Constitution of India
(b) 281 of the Constitution of India
(c) 274 of the Constitution of India
(d) 273 of the Constitution of India.
2. As per Article 270(1) read with Article 4(a) of the Constitution of
India, the proceeds of corporation tax are
(a) Not divisible among the States
(b) Divisible among the States
(c) Divisible between the Centre and States
(d) None of the above.
3. Powers given to Parliament by Entry No.97 of List I of Seventh
Schedule to the Constitution of India are called_____________.
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Review Questions
Which schedule to the Constitution of India indicates bifurcation
of powers to make laws, between Union government and State
governments
(a) First Schedule
(b) Seventh Schedule
(c) Eighth Schedule
(d) Twelfth Schedule.
(ii) Which article of the Constitution of India provides that no tax
shall be levied or collected except by authority of law
(a) Article 265
(b) Article 268
(c) Article 269
(d) Article 274.
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Review Question
(i) What is the source of power of levying VAT
under the Constitution of India (a) Entry 84 of List I
(b) Entry 97 of List I
(c) Entry 52 of List II
(d) Entry 54 of List II.
(ii) What is the source of power of levying Service
Tax under the Constitution of India
(a) Entry 92C of List I
(b) Entry 97 of List I
(c) Entry 54 of List II
(d) Entry 59 of List II.
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Review question

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The Income Tax Act, 1961

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Income-tax Act, 1961

Came into force w.e.f. 1st April, 1962
Extends to whole of India
Consists of more than 300 sections, 23 Chapters
and 14 schedules. The number of sub-sections,
provisos and Explanations runs into several
hundreds

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20

Income-tax Act, 1961

The Act determines which persons are liable to
pay tax and in respect of which income. The
sections lay down the law of income tax and the
schedules lay down certain procedures and give
certain lists, which are referred to in the sections.
However, the Act does not prescribe the rates of
Income Tax

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21

Income-tax Act, 1961

The rates of Income-tax are prescribed every year
by the Finance Act (popularly known as The
Budget)
At present, the tax rates are same for all corporate
assessees and partnership firms (30%) and there
are different slabs for Individual tax payers
We also have surcharge and education cess for all
assessees
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22

Finance Act

Part I of the First Schedule to the Finance Act, 2015, seeks

to specify the rates at which income-tax is to be levied on
income chargeable to tax for the assessment year 2015-16.
Part II lays down the rate at which tax is to be deducted at
source during the financial year 2015-16 from income
subject to such deduction under the Income-tax Act, 1961;
Part III lays down the rates for charging income-tax in
certain cases, ratesfor deducting income-tax from income
chargeable under the head "salaries" and the rates for
computing advance tax for the financial year 2015-16 i.e.,
A.Y.2016-17.
Part III of the First Schedule to the Finance Act, 2015 will
become Part I of the First Schedule to the Finance Act,2016
and so on.
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Surcharge on T.D.S

Surcharge and education cess would be levied on T.D.S in case of

non-corporate nonresidents and foreign companies.
If the recipient is a non-corporate non-resident, surcharge@12%
would be levied on such income-tax if the income or aggregate of
income paid or likely to be paid and subject to deduction exceeds
Rs. 1 crore
If the recipient is a foreign company, surcharge@

(i) 2% would be levied on such income-tax, where the income or aggregate of

such incomes paid or likely to be paid and subject to deduction exceeds Rs. 1
crore but does not exceed Rs.10 crore; and
(ii) 5% would be levied on such income-tax, where the income or aggregate of
such incomes paid or likely to be paid and subject to deduction exceeds Rs. 10
crore.

Surcharge would not be levied on deductions in all other cases.

Also, education cess and secondary and higher education cess
would not be added to tax deducted or collected at source in the
case of a domestic company or a resident non-corporate assessee.
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