Monthly Archives: November 2015

11.23.15
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CORPORATE & OTHER LAWS UPDATE NOVEMBER 22, 2015

Corporate and Professional Update November 22, 2015

Untitled20AINCOME TAX ACT

SECTION 12AA

CHARITABLE OR RELIGIOUS TRUST – REGISTRATION PROCEDURE

Cancellation of registration : Mere non-intimation of amendments in trust deed to department cannot ipso facto lead to cancellation of registration under section 12AA(3) – [2015] . 56 (Mumbai – Trib.)

SECTION 28(i)

BUSINESS INCOME – CHARGEABLE AS

Share dealing : Where assessee borrowed funds for purchase of shares, transactions was carried out with many brokers and transactions had resulted in crores of rupee, income earned on such transactions was to be assessed as ‘business income’ – [2015] .57 (Bombay)

SECTION 10B

EXPORT ORIENTED UNDERTAKING

Manufacture : Where only a part of manufacturing activities was got done by assessee from outside agency and that too under direct control and supervision of managerial and technical staff available with assessee, assessee was entitled to exemption under section 10B – [2015] 23 (Allahabad)

SECTION 145

METHOD OF ACCOUNTING – ESTIMATION OF INCOME

Reassessment : Where reasons recorded for reassessment were not supplied to assessee at time of assessment but during appellate proceedings, there was violation of principle of natural justice – [2015] 361 (Calcutta)

SECTION 115BB

LOTTERY, CROSSWORD, PUZZLES, HORSE RACES, ETC., TAX ON

Computation of : Where assessee suffered loss in business, said loss could not be set off against betting income and total betting income was liable to be taxed under section 115BB – [2015] 37 (Madras)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustments – Royalty : Where assessee, engaged in business of manufacturing pre-engineered building system products, made certain royalty payments to its AE, since said payments were periodically approved by RBI, TPO was not justified in determining ALP of same at nil – [2015] .55 (Hyderabad – Trib.)

CENTRAL EXCISE ACT

SECTION 5A

EXEMPTIONS – CENTRAL EXCISE – PRIMARY GOLD

‘Gold bar’ recovered from ‘gold mud’ is a ‘primary gold’ derived from ‘mud form of gold’; hence, same is exempt from duty and exemption cannot be denied merely because ‘gold mud’ was, in turn, recovered from ‘anode slime’ – [2015] 49 (SC)

SECTION 4

VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE – GENERAL

Where, vide interim orders of High Court, ‘controlled prices’ of sugar were enhanced and assessees were allowed to sell sugar at ‘higher prices’, excise duty was also payable based on ‘higher prices’ – [2015] .48 (SC)

CENTRAL EXCISE TARIFF ACT

SECTION 2

CLASSIFICATION – PLASTIC LAMINATED JUTE FABRICS

Plastic laminated jute fabrics, meant for floor coverings, are dominantly jute products; hence, they are classifiable as ‘floor covering made of jute with plastic coating’ under Heading 5904 and not as ‘plastic product’ under Chapter 39 – [2015] . 50 (SC)

CLASSIFICATION – LIFTING MACHINERY

Where issue involved is an important question having reasonably wide ramifications, appellant may be allowed to raise new grounds for first time before Supreme Court – [2015]  47 (SC)

SEBI ACT

SECTION 11B

POWER AND FUNCTIONS OF BOARD

Where plaintiff was aware from September 2013 about its non-inclusion as part of promoter and promoter-company of defendant No. 1 in shareholding pattern filed by defendant No. 1 with stock exchange, but it did not approach SEBI when there was discussion about Letter of Offer or issue of right shares by defendant-company, suit filed by plaintiff to pass a decree declaring Letter of Offer issued by defendant as unlawful, null and void ab-initio for depriving plaintiff of its special right as prompter was to be dismissed. – [2015]  185 (Delhi)

COMPANIES ACT

SECTION 391

COMPROMISE AND ARRANGEMENT

Where main purpose of proposed scheme of amalgamation between trnsferee company and transferor companies was to streamline affairs of companies,tax planning and scheme did not in any manner affect interest of any of stake holders, including public,proposed scheme of amalgamation was to be sanctioned. –[2015] . 203 (Andhra Pradesh)

STATUTES

DIRECT TAX LAWS

Finance Minister’s Budget Announcement – Phasing out plan of deductions under Income-tax Act – PRESS RELEASE, DATED 20-11-2015

CORPORATE LAWS

Prior Approval for Acquisition of Shares or voting rights in Private Sector Banks : Directions, 2015 – MASTER DIRECTION DBR.PSBD.No.56/16.13.100/2015-16, DATED 19-11-2015

Review of provision of factoring services by banks – CIRCULAR DBR.No.FSD.BC.58/24.01.007/2015-16, DATED 19-11-2015

Non-Operative Financial Holding Company (NOFHC) – Application of Capital Adequacy Norms – CIRCULAR DBR.No.57/21.06.201/2015-16, DATED 19-11-2015

Prevention of Money-Laundering (Maintenance of Records) Third Amendment Rules, 2015 – Amendment in Rules 2 and 7 – NOTIFICATION NO. GSR 730(E) [NO.7/2015 (P.12011/1/2013-SO (E.S. CELL)], DATED 22-9-2015

IRDAI (Other Forms of Capital) Regulations, 2015 – NOTIFICATION F.NO.IRDAI/REG/20/110/2015, DATED 13-11-2015

Internet banking facility for customers of Regional Rural Banks – CIRCULAR DBR.RRB.BC.No.59/31.01.001/2015-16, DATED 19-11-2015

CCI imposes penalties upon Airlines for concerted action in Fixing Fuel Surcharge (FSC) on Cargo transport –PRESS RELEASE, DATED 17-11-2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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INCOME TAX UPDATE ON 20TH NOVEMBER 2015

INCOME TAX UPDATE ON 20TH NOVEMBER 2015

Untitled23AINCOME TAX ACT

SECTION 9

INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Where secondees under secondment agreement with foreign parent co are not ordinary employees but those in high level managerial/executive positions and draw salaries from foreign parent co, the amount paid to foreign parent under secondment agreement is FTS under Explanation 2 to sec 9(1)(vii) in view of the fact that secondees were deputed because of their expertise and managerial skills in the field. Further, FTS or royalty paid to non-resident attracts tax u/s 44D on gross amount irrespective of any profit element in the payment –[2015] (Bangalore – Trib.)

SECTION 11

CHARITABLE OR RELIGIOUS TRUST – EXEMPTION OF INCOME FROM PROPERTY HELD UNDER

Capital asset: Where assessee disposed of investments being its capital assets held under Trust wholly for charitable purpose and net consideration from such disposal was utilized for acquiring other capital assets for charitable purpose, assessee’s claim was to be allowed on capital gain arising from such disposal of original investments even though capital assets were not held till end of financial year – [2015 (Kolkata – Trib.)

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME

Applicability of : Where Assessing Officer made disallowance in respect of dividend income by relying upon Rule 8D of Income-tax Rules, 1962, since said rule was applicable for assessment year 2008-09 while assessment year under consideration was 2007-08, impugned disallowance was to be deleted – [2015] (Delhi – Trib.)

Dividend : Where Assessing Officer did not record any finding that any expenditure incurred by assessee was attributable to earning exempt income, disallowance under section 14A was to be deleted – [2015]  (Delhi)

SECTION 28(i)

BUSINESS LOSS/DEDUCTIONS – ALLOWABLE AS

Foreign exchange fluctuation loss: Foreign exchange fluctuation loss incurred by assessee in respect of outstanding foreign currency term loan was to be allowed as business loss – [2015] (Delhi – Trib.)

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Non-compete fee : Where assessee purchased business division of another concern which also included payment to non-compete fee restraining seller from carrying on similar business for three years, said payment was to be regarded as capital expenditure – [2015] (Delhi – Trib.)

SECTION 40A(2)

BUSINESS DISALLOWANCE – EXCESSIVE OR UNREASONABLE PAYMENTS

Commission : Where assessee paid commission on export sales at same rate at which it had been paid by seller of business earlier, disallowance made by Assessing Officer taking a view that a part of commission payment was excessive, was to be deleted – [2015] (Delhi – Trib.)

SECTION 48

CAPITAL GAINS – COMPUTATION OF

Shares : Where in order to give effect to business transfer agreement, assessee purchased shares of management staff, since impugned amount was non-recoverable and was a loss on account of business transfer, it was required to be deducted from capital gain in respect of slump sale of trading business – [2015] 62  284 (Delhi – Trib.)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Dispute Resolution Panel : DRP cannot be absolved from its duty without going into merits of contention of assessee as to whether a comparable company is comparable to it or not – [2015] 62 taxmann.com 321 (Delhi – Trib.)

SECTION 145

METHOD OF ACCOUNTING – SYSTEM OF ACCOUNTING

Professional fees : In case of legal fees, only when legal matter is over and assessee advocate decides on quantum of fees, it becomes income in hands of advocate and entire advance amount that includes pocket payments would not bear any particular characterization for purpose of treating it as income – [2015] 324 (Delhi)

SECTION 172

NON-RESIDENT – SHIPPING BUSINESS OF

An order computing the taxable income is essentially an assessment order therefore, any order passed under section 172(4) is also an assessment order. Since Assessing Officer failed to pass draft assessment order under section 172(4) as required under the DRP provisions contained under section 144C, Assessing Officer’s order was null and void. Order under section 172(4) is an ‘assessment order’ so as to make DRP provisions under section 144C applicable. – [2015] (Rajkot – Trib.)

Demurrage charges : In view of difference of opinion between orders passed by co-ordinate Benches of Tribunal regarding applicability of section 172 in respect of demurrage paid to non-resident shipping company, matter was to be referred to Larger Bench for consideration – [2015] (Bombay)

SECTION 195

DEDUCTION OF TAX AT SOURCE – PAYMENT TO NON-RESIDENT

Under provisions of Section 10(15A) prior to 1st April 1996 payments made for acquisition of an aircraft or an aircraft engine on lease, were exempted from taxation but from 1st April 1996, the Legislature has excluded the payments made for providing spares, facilities or services in connection with the operation of the leased aircraft from the ambit of the exemption under Section 10(15A). Supplemental rent did not fall within the ambit of the exclusionary provisions of Section 10 (15A) as revenue was unable to point out any clause in the agreement that required the lesser to provide facilities or services in connection with the leased aircraft. Thus, there was no obligation of assessee to deduct tax at source on supplementary lease rentals – [2015] (Delhi)

SECTION 271AAA

PENALTY – WHERE SEARCH HAS BEEN INITIATED

Illustration : Where no question was asked during statement recorded under section 132(4), in respect of manner of earning income surrendered, assessee could not be expected to substantiate same later on; penalty could not be levied under section 271AAA – [2015] (Chandigarh – Trib.)

COMPANIES ACT

SECTION 100

SHARE CAPITAL – REDUCTION OF

Where reduction of share capital did not affect normal operation of company or its ability to honor commitments and to pay its debts in ordinary course of business, reduction of paid-up share capital was to be allowed – [2015] 316 (Madras)

NEGOTIABLE INSTRUMENTS ACT

SECTION 138

DISHONOUR OF CHEQUE FOR INSUFFICIENCY ETC., OF FUNDS IN ACCOUNT

Accused convicted for cheque bouncing as he failed to rebut belief that cheque was issued for legally enforceable debt – [2015] (Madras)

SEBI ACT

REGULATION 6A OF SECURITIES & EXCHANGE BOARD OF INDIA (STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992

CONDITIONS OF REGISTRATION

Where to do business as a broker with NSE, a subsidiary of Vadodara Stock Exchange (a company limited by guarantee) is amalgamated with another subsidiary (company limited by shares) to meet the SEBI Policy that “only one subsidiary of a Stock Exchange can be member of another stock exchange and that subsidiary has to be a company limited by stocks” and the amalgamated company registered afresh with BSE, the amalgamated company is not entitled to “Fee Continuity benefit” under SEBI Regulations available to “amalgamation under the compulsion of law” as the first subsidiary could have been wound up instead of amalgamating it with second subsidiary to qualify for “only one subsidiary” policy. In such a case, amalgamated company will have to pay registration fees afresh to BSE and cannot claim “fee continuity benefit” for fees paid by the amalgamating company – [2015] (SC)

REGULATION 10C OF SECURITIES & EXCHANGE BOARD OF INDIA (STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992

PAYMENT OF FEES AND THE CONSEQUENCES OF FAILURE TO PAY FEES

Stock brokers who have converted their individual/partnership membership into a corporate entity prior to 1-4-1997 to Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 are entitled to fee continuity benefit in terms of paragraph 4 of Schedule III – [2015] 44 (SC)

SERVICE TAX

SECTION 65(47)

TAXABLE SERVICES – FRANCHISE SERVICES

Training/Course fee shared in ratio of 25:75 between assessee and centres providing training, is akin to revenue sharing model for training services and therefore, 25 per cent retained by assessee cannot be taxed under franchise services – [2015] (Mumbai – CESTAT)

SECTION 65(102)

TAXABLE SERVICES – STORAGE AND WAREHOUSING OF GOODS SERVICES

Unclaimed auction proceeds, retained by a warehouse from out of sale proceeds of auctioned goods, cannot be taxed under Storage & Warehousing services – [2015] (Mumbai – CESTAT)

CENTRAL EXCISE ACT

SECTION 3

CHARGE/LEVY – EXCISE DUTY ON DTA CLEARANCES BY 100 PER CENT EOU

Catalyst, which is not consumed in manufacture, cannot be regarded as ‘raw material’; hence, concessional duty conditional upon use of ‘domestic raw materials’ cannot be denied merely because of use of imported catalyst –[2015] 315 (SC)

STATUTES

CORPORATE LAWS

Draft of Insolvency and Bankruptcy Bill, 2015 – PRESS RELEASE, DATED 4-11-2015

Report of Bankruptcy Law Reforms Committee – PRESS RELEASE, DATED 4-11-2015

Format for Quarterly Holding Pattern, Disclosure Norms for Corporate Governance Report and manner for Compliance with Two-Way Fundability of Indian Depository Receipts (IDRS) – CIRCULAR NO.CFD/CMD/9/2015, DATED 4-11-2015

Format for Business Responsibility Report (BRR) – CIRCULAR NO.CFD/CMD/10/2015, DATED 4-11-2015

Sovereign Gold Bonds, 2015-16 – Operational Guidelines – CIRCULAR IDMD.CDD.NO.968/14.04.050/2015-16, DATED 4-11-2015

Motor Third Party premium rates for e-Carts [A3/A4], e-Rickshaws (C1(B)]And passenger premium for motorized two wheeler carrying passengers for hire or reward [C4] – CIRCULAR NO.IRDA/NL/CIR/MOTP/196/11/2015, DATED 4-11-2015

Section 396 of the Companies Act, 2013 – Registration Offices – Notified Regional Directors for purpose of section 396(1) – NOTIFICATION NO. GSR 832(E) [F.NO.1/16/2013-CL-V], DATED 3-11-2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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SUM PAID TO UNITED STATE OF AMERICA BASED COMPANY

SUM PAID TO UNITED STATE OF AMERICA BASED COMPANY . TO REVIEW DESIGN OF CRANES COULD BE ‘FTS’ IF MAJOR CHANGES WERE SUGGESTED IN ITS DESIGN

23Gujarat Pipavav Port Ltd. v. ITO (International Taxation), [Mumbai ITAT] ITA No. 7877 of 2010, Date of Decision: August 31, 2015

FACTS OF THE CASE

The assessee is a resident Indian Company in terms of section 6 of the Act and is in the business of developing, constructing, operating and maintaining the port in Gujarat. The assessee had entered into a contract for purchase of cranes from M/s ZPMC, China. These cranes were supposed to be manufactured in China itself and on completion, ought to be imported in India. The assessee engaged M/s Liftech Consultants Inc., a company registered in USA, USA tax resident for review of design of the cranes which were to be supplied by the Chinese concern M/s ZPMC. The assessee made payments to the said M/s ZPMC for supply of goods and services as per purchase contract for installation and commission. It also paid for technical consultancy and engineering services availed from M/s Liftech Consultants Inc., USA with regard to quality control of the cranes.

DECISION OF THE TRIBUNAL

The Appellate Tribunal held that the service to be performed by M/s Liftech Consultant Inc., USA was more of a reviewing the design. The power of review is something more than the power of supervision. However, it is something less than the development and transfer of services and design. If it is only suggestions given, then it will be review but if the M/s Liftech Consultant Inc., USA has forwarded to implement those suggestions on behalf of the assessee and have improvised the design or brought any major change in the design, then such suggestions would amount to transfer of technical services and design, which would be more than the power of review and would attract Article 12 of the India-US DTAA Treaty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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TP : LIBOR IS THE BEST BENCHMARK FOR INTEREST-FREE LOAN GRANTED TO AE

LIBOR IS THE BEST BENCHMARK UNDER TRANSFER PRICING FOR INTEREST-FREE LOAN GRANTED TO AE

Untitled95A

DCIT V. GEODESIC LTD. [MUMBAI ITAT] ITA NO. 1656 OF 2013, DATE OF DECISION: AUGUST 12, 2015

FACTS OF THE CASE
The assessee has undertaken transaction of giving unsecured interest free loan to its subsidiary Geodesic Technology Solutions Ltd. (Hong Kong) (GTSL), which is its Associated Enterprise (AE). The TPO has applied interest rate @ 20.72% based on his consideration of credit rating of AE in the Category “B”. He also analyzed financial ratios like, earning per share, debt equity ratio and interest coverage ratio of the AE and based on such credit rating he held that interest rate of 20.72% is to be charged.

DECISION OF THE TRIBUNAL
The Appellate Tribunal held that the manner in which credit rating had been assigned to the AE was not a correct approach, because there was ‘no specific information’ with regard to the AE and making assumption of various factors for giving the credit rating actually would destroy the estimation of risk assumed. In international transactions LIBOR, is the best basis for benchmarking the interest rate.  Since, there was no independent CUP rate available to benchmark the said international transaction; RBI guidelines should be looked into in respect of ECB rates for the borrowing by the Indian corporates for the purposes of capital account transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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TDS UPDATE ON NOVEMBER 20, 2015

NO DEDUCT TAX AT SOURCE (U/S 196C U/S 196C R.W.S. 115AC) ON INTEREST PAID TO NR ON FOREIGN CURRENCY CONVERTIBLE BONDS WHEN BORROWED SUM WAS UTILIZED BY PAYER FOR ITS OVERSEAS BUSINESS ADIT v. Adani Enterprise Ltd. [Ahmedabad ITAT] ITA No. 2329 of 2011 Date of Decision: September 02, 2015

FACTS OF THE CASE

The assessee-company remitted a certain sum to non-resident investors towards interest payable on foreign currency convertible bonds (FCCBs) issued by assessee. But the assessee-company did not deduct TDS on ground that interest income was not received by non-resident in India. The monies of the debts raised in foreign currencies by the assessee are primarily invested in the foreign subsidiary, which in turn is involved in financing further business abroad. Part of those funds which have not been invested in the subsidiary has been placed in banks abroad and the interest income received from the Time Deposits placed outside India was offered for taxation.

DECISION OF THE TRIBUNAL

The Appellate Tribunal held that the interest paid by the appellant on its FCCBs is covered by exceptions to section 9(1)(v)(b) of the Income Tax Act, and consequently it shall fall outside the ambit of deemed income arising or accruing in India under section 5 of the Act also. Clause (b) of Section 9(1)(v), carves out an exception in respect of interest payable by a person who is resident that in a case where the interest is payable in respect of any debt incurred or money borrowed and used for the purposes of a business or investment outside India, then such interest income cannot be said as even deemed to accrue or arise in India. Therefore, it is held that the appellant- company was not liable to deduct tax at source u/s 196C r.w.s. 115AC of the Act. Since there is no liability to deduct tax at source, as a consequence, appellant-company cannot be treated as the assessee in default u/s 201(1).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

Untitled24AREGULAR  PROFESSIONAL UPDATES

 Direct Taxes:

147: Reopening only on the basis of information received that the assessee has introduced unaccounted money in the form of accommodation entries without showing in what manner the AO applied independent mind to the information renders the reopening void- (Pr. CIT vs. G & G Pharma India Ltd (Delhi High Court).

14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee’s disallowance is wrong- (DCIT vs. G. K. K. Capital Markets (P) Ltd. (ITAT Kolkata).

Transfer pricing adjustment – CUP method as the Most Appropriate Method for determination of ALP for international transactions. The assessee is also directed to furnish the comparables based on independent TP study for adoption of CUP method and produce such other evidences and documents before the Learned TPO / AO to ensure quick disposal of this set aside proceedings- (Lee Harris Pomeroy Architects PC Versus DCIT (IT) Circle – 1 (2), ITAT KOLKATA).

Transfer pricing adjustment – TNMM has almost become the ‘default’ method for taxpayers in recent years. – As such, the TNMM often proves easier to apply than, say, the Cost Plus or RPM methods, and TNMM is less sensitive to minor differences in the products being sold- (Gemstone Glass Pvt Ltd Versus Joint Commissioner of Income Tax Mehsana Range, Mehsana, ITAT AHMEDABAD).

Penalty u/s 271(1)(c) – for such lump-sum disallowance out of wages on the basis of presumption, no penalty u/s 271(1)(c) is leviable- (The Dy. Commissioner of Income-tax, Circle-1, Surat Versus M/s. Abhishek Exim Pvt Ltd – ITAT AHMEDABAD).

Addition u/s 68 – cessation of liability u/s. 41(1) – there is nothing on record to show that there was either remission or cessation of liability of the assessee- (The Assistant Commissioner of Income Tax, Circle 1 (1) , Bangalore. Versus M/s. Alvares & Thomas, ITAT BANGALORE).

Indirect Taxes:

Notification of All Industry Rates (AIR) of Duty Drawback w.e.f. 23.11.2015.

Introducing amendment to The Customs, Central Excise Duties and Service Tax Drawback Rules 1995.

Seeks to amend notification No.22/2015-ST dated the 6th November, 2015 so as to specify that Swachh Bharat Cess will be calculated on abated value.

Seeks to provide that provisions of notification No. 30/2012 – Service Tax dated the 20th June,2012 shall be applicable for the purposes of Swachh Bharat Cess.

Seeks to provide composition rate for Swachh Bharat Cess as applicable to ST under sub-rules 7,7A,7B,7C of rule 6 of STR, 1994.

Option to avail full exemption or partial exemption with CENVAT Credit – appellant-assessees cannot be forced to pay duty as per serial No. 90 of Notification 4/2006 and they have option to pay the duty under other numbers, viz. 91 and 93- (Balkrishna Paper Mills Ltd, Laxmi Board And Paper Mills Ltd, Commissioner Of Central Excise, Thane-I Versus Commissioner Of Central Excise, Thane –I And Laxmi Board And Paper Mills Ltd, CESTAT MUMBAI).

Benefit of CENVAT credit – Credit availed on the basis of debit notes – There is no justification for the Revenue to take a period of 4 years to issue the show-cause notice that too without verification of the documents submitted by the appellant- (Federal Mogul Tpr (India) Ltd Versus Commissioner of Central Excise, Service Tax And Customs Bangalore-II – 2015 (11) TMI 209 – CESTAT BANGALORE).

Leviability of service tax – franchise service – franchisee was obliged not to open any school with any name in the existing premises/building operational area of the school. In other words, the franchisee was free to open any school with any name in a “different premises/building operational area of the school” – no service tax is leviable under franchise service prior to 16.6.2005- (M/s Saani And Savera Educational Welfare Trust Versus Commissioner of Service Tax, Delhi, CESTAT NEW DELHI).

Advertising Agency service or sponsorship service – Import of service – The service rendered by sports bodies abroad could possibly be covered under the head of ‘Sale of Space or Time for Advertisement and Sponsorship Services’, which became taxable with effect from 01.07.2006. However, taxable services in relation to sponsorship services specifically excluded sponsorship of sport events- (M/s. Hero Motocorp Ltd. Versus C.S.T., Delhi, CESTAT NEW DELHI).

FAQ on Company Law:

Query: If the date of the adjourned meeting is decided at the original meeting itself, are companies still required to give notice for an adjourned meeting? What if the date of the adjourned meeting is not decided at the original meeting?

Answer: Yes, even if the date of adjourned meeting is decided at the original meeting, the Notice should be given. If the date of adjourned meeting is not decided at the original meeting, the adjourned meeting should be held only after minimum 7 days, thereby making provision for fresh 7 days Notice.

Query: A company wants to extend a housing loan of Rs. 50 lakh at the interest of 2% p.a. to Mr. A, a whole-time director of the company. The company has been extending this facility to all the employees as part of the conditions of service. Advice the company on the compliance required in respect of the housing loan to be extended to Mr. A?

Answer: Section 185(1) of Companies Act 2013 provides that a company can grant loan to a managing director or whole-time director as a part of the conditions of service extended by the company to all its employees.

As the company has been extending this facility to all the employees as part of the condition of service. Thus, the company may extend a housing loan of Rs. 50 lakh on an interest of 2% p.a to Mr. A, who is whole-time director of the company.

Query: How will companies which were incorporated quite some time back (for example 25-30 years ago) and where old Board Minutes are not available, ensure compliance with Para 1.2.1 of SS 1?

Answer: In case companies are unable to count and give continuous numbering from their incorporation, they may start giving serial numbers from Meetings held on or after 1st July, 2015. Otherwise, they may choose to follow any other system of numbering as given above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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CORPORATE & OTHER LAWS UPDATE NOVEMBER 19 ,2015

Corporate and Professional Update NOVEMBER 19 ,2015

Untitled29A

  • Media should refrain from publishing unauthenticated stories on conciliation in Vodafone case: CBDT
  • Booking rights of fictional property not to be deemed as transferable capital assets
  • IT : Rights in a property couldn’t be deemed as transferable capital assets when such property was neither in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction activity nor commencement of the project had started [2015]  184 (Mumbai – Trib.) S. Narendrakumar & Co. v. DCIT
  • extends time limit for establishing ‘Central KYC Records Registry’ under PMLA norms
  • Now NRs or NRIs may acquire units of ‘Real Estate Investment Trusts’
  • Now Delhi dealers required to submit details of goods sold via each e-commerce website
  • Delhi Govt. devised mechanism to prohibit misuse of auto downloading facility for DVAT forms
  • CCI slapped penalty on Jet Airways, Indigo and Spice Jet for forming cartel to fix fuel surcharge
  • MCA releases new Form MGT 7 with more clarifications
  • DIPP issues a draft list containing various activities with relevant para of FDI Policy
  • amends FDI Policy for various sectors including construction and defence sectors
  • CBDT lays Std. Operating Procedure for allocation/transfer of cases and curing of defective appeals
  • No penalty due to non-charging of ST on bank’s commission as issue of its taxability was sub-judice in various forums [2015] 348 (Mumbai – CESTAT)  Y. M. Motors (P.) Ltd. v. Commissioner of Central Excise
  • Tax Authorities can’t attach Cash Credit Account of taxpayer to recover tax dues
  • Excise & Customs : ‘Tankers’ cannot be regarded as ‘bulk packs’; therefore, receiving chemicals in tankers and transferring same to drums cannot be regarded as ‘repacking from bulk pack to retail packs’ and hence, said activity cannot amount to manufacture [2015]  5 (Mumbai – CESTAT) JPB Chemical Industries (P.) Ltd. v. Commissioner of Central Excise
  • No service-tax on course fee retained by franchisor just because it was referred in franchisee agreement
  • Reverse Charge mechanism shall be applicable for purposes of Swachh Bharat Cess
  • No Swachh Bharat Cess if payment for services is received prior to Nov 15, 2015; Govt. clarifies
  • Excise & Customs : In case three different MRPs are affixed on ‘same package’ even though for ‘different areas’, goods will be assessed to duty as per Explanation 2(a) to section 4A taking highest MRP as the basis. [2015]  84 (SC)Sarup Tanneries Ltd. v. Commissioner of Central Excise
  • Service Tax : Training/Course fee shared in ratio of 25:75 between assessee and centres providing training, is akin to revenue sharing model for training services and therefore, 25 per cent retained by assessee cannot be taxed under franchise services [2015] 312 (Mumbai – CESTAT) Centre for Development of Advance Computing v. Commissioner of Central Excise
  • Cenvat Credit : Service tax paid on insurance services received for insurance of (a) existing as well as retired employees, and (b) stock stored in foreign warehouses, is eligible for input service credit [2015]  370 (Mumbai – CESTAT)  Reliance Industries Ltd. v. Commissioner, Central Excise & Service Tax
  • Swatch BHARAT Cess :
  • Whether SBC would be required to be mentioned separately in invoice?
  • Ans. SBC would be levied, charged, collected and paid to Government independent of service tax. This needs to be charged separately on the invoice, accounted for separately in the books of account and paid separately under separate accounting code which would be notified shortly. SBC may be charged separately after service tax as a different line item in invoice. It can be accounted and treated similarly to Education cesses.
  • Rates of ST after SBC
  • GTA.     4.35%
  • Original Works Contract(OWC)                          5.8%
  • Other than (OWC)                         10.15%
  • Restaurant Services 5.8%
  • Whether Cenvat Credit of the SBC is available?
  • Ans. SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.
  • SBC shall be applicable on Reverse Charge Mechanism also
  • 5 key takeaways from Bankruptcy Bill
  • New Bankruptcy Bill was drafted to speed up the process of revival of financially distressed companies and limited liability entities.
  • Key takeaways from draft bill are given hereunder:
  • Insolvency process to be fast tracked: insolvency resolution process has to be completed within a period of 90 days from the insolvency commencement date.
  • Formation of Insolvency Regulator: Further time-limit of 180 days (which can be reduced to 90 days under fast track process) has been given for regulator to deal with insolvency resolution cases.
  • Insolvency professionals: The draft Bill proposes to regulate insolvency professionals and insolvency professional agencies.
  • Creation of insolvency information utilities: It suggests creation of information utilities which would collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies.
  • Procedure for insolvency resolution- The draft bill provides following procedure:
    • For companies and Limited Liability Entities: Timeline of 180 days has been fixed for insolvency resolution. extended further by 90 days. Insolvency resolution process can be initiated with the approval of 75 % of creditors.
    • For individuals and Unlimited Liability Partnerships: As a precursor to a bankruptcy process, there can be two processes that shall be followed.
    • In the fresh-start process, individuals with annual gross income of less than Rs.60,000 and aggregate asset value of less than Rs.20,000 shall be eligible to make a fresh start through a specified process.
    • In the insolvency resolution process creditors and debtors will engage in negotiations to arrive at an agreeable repayment plan, supervised by a resolution professional.
  • There could be no motive in mis-declaration of value when goods were wholly exempt
    Excise & Customs : Where, based on opinion of expert body, Tribunal found that : (a) goods were software and exempt from duty and (b) declared value thereof was not excessive, said findings, being findings of fact, were not to be interfered with [2015]  330 (SC) Commissioner of Customs  v. Contessa Commercial Co. Ltd.
  • No input tax credit of VAT paid on coal which was used as fuel in manufacturing
    CST & VAT : West Bengal VAT – Where assessee purchased coal after payment of VAT and used same both as raw material and fuel in manufacture of sponge iron, it was entitled to input tax credit only on that part of purchase price of coal which was utilised solely as raw material [2015]  331 (WBTT) Sova Ispat Ltd. v. JCCT, Bankura Charge
  • Condition of recording satisfaction u/s 153C can’t be bypassed even if AO of searched person and other person is same
  • IT: Recording of satisfaction by Assessing Officer having jurisdiction over person searched is an essential and prerequisite condition for bestowing jurisdiction to Assessing Officer of ‘other person’ under section 153C; even where Assessing Officer of searched person and such other person is same, Assessing Officer has to carry out dual exercise, first as Assessing Officer of person searched in which he has to record satisfaction and second as Assessing Officer of ‘other person’ [2015]  327 (Delhi – Trib.)Deputy Commissioner of Income-tax v. Satkar Roadlines (P.) Ltd
  • IT: Where assessee handed over chassises to fabricating agency on account of its expertise with an understanding that bus as a finished product would be delivered to assessee, said activity was a sale not works contract and assessee was not liable to TDS on payment to said agency [2015]  377 (Andhra Pradesh and Telangana) Commissioner of Income-tax v. A.P. State Road Transport Corporation
  • IT : Where in terms of directions issued by CLB, assessee-company paid certain amount over and above face value of shares to departing group of shareholders, amount so paid was to be allowed as revenue expenditure [2015] 13 (Bombay) CIT v. Bramha Bazar Hotels Ltd.
  • IT : Where assessee-company had received an amount of Rs. 35 lakhs from its directors towards share application money in cash, provisions of section 269SS were not applicable in instant case [2015] 15 (Hyderabad – Trib.) ITO v. Sunder Synthetics (P.) Ltd.
  • can’t file FIR against assessee due to default in payment of service tax
  • Service Tax : Finance Act, 1994, being a special and complete Code, prevails over general provisions of IPC and, accordingly, for alleged non-payment of service tax, department cannot filed FIR under provisions of IPC [2015] 281 (Punjab & Haryana) Ajay Kumar Sandhu v. State of Haryana
  • Receipt shown in P&L A/c liable to MAT even if it is shown as capital receipt in notes to accounts 2015]  122 (Bangalore – Trib.) B & B Infotech Ltd. v. ITO
  • IT: Auditor’s report cannot override provisions of Act and, thus, merely because assessee’s false claim for deduction is supported by a Chartered Accountant’s opinion, this fact per se cannot absolve assessee from penalty under section 271(1)(c) [2015]  89 (Chennai – Trib.) DCIT v. Rattha Citadines Boulevard Chennai (P.) Ltd.
  • IT: Where Assessing Officer raised huge tax demand upon assessee and in meantime bank account including cash credit account of assessee had been attached by income tax authorities, in view of decision of Madras High Court in case of K.M. Adam v. ITO [1958] 33 ITR 26, cash credit account of assessee could not be attached and it was entitled to be discharged [2015] 38 (Calcutta) P. C. Chandra & Sons (India) Ltd. v. DCIT
  • IT: Where refunds accrued to assessee for earlier assessment years were not processed, action of Assessing Officer by resorting to section 245 and adjusting same for any new subsisting due could not be valid [2015]  339 (Madras)  ACIT v. Sundaram Asset Management Co. Ltd.
  • CBDT to set-up a ‘Taxpayers’ Lounge’ at Pragati Maidan Trade Fair, Delhi

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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SWACHH BHARAT CESS

SWACHH BHARAT CESS (SBS)@ .5% APPLICABLE W.E.F. 15TH NOVEMBER, 2015

Untitled260With an intent to make a move towards environment protection, Honorable Finance Minister in Finance Bill, 2015, vide clause 117 of Chapter VI, has proposed ‘Swachh Bharat Cess’ (herein after referred as ‘SBC’) @ 2% on the value of services. Today vide Notification No. 21/2015-ST, Central Government appoints 15th November, 2015 as the date of introduction of SBC. Central Government has also issued Notification No. 22/2015-ST to exempt all taxable services from payment of SBC in excess of 0.5% of the value of services.

Therefore w.e.f. 15th November, 2015 ‘Swachh Bharat Cess’ @ 0.5% will apply on value of all taxable services or we can say w.e.f. 15th November, 2015 effective rate of service tax will be 14.5%.

Here, it is pertinent to mention that SBC will not apply on non-taxable services and services which are exempt from service tax.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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11.21.15
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SERVICE TAX UPDATE NOVEMBER 19, 2015

New Update On Services Tax: No Service Tax on Sale of Flats after issue of Occupancy Certificate , Dt : 26th October, 2015

Untitled25ARecently, Press Information Bureau of Ministry of Finance has issued a press release dt. 26th October, 2015 to resolve a long standing issue relating to levy of Service Tax on sale of flats/dwellings etc. after issue of occupancy certificate but before issue of completion certificate in areas under the jurisdiction of Municipal Corporation of Greater Mumbai i.e. Brihanmumbai Municipal Corporation (BMC).

In the said release, it has been conveyed to the Service Tax Authorities in Mumbai, that sale of flats/dwellings etc., where the entire consideration is received after issue of occupancy certificate by BMC, leading to a mere transfer of title in immovable property, would fall outside the definition of “Service” as per Section 65B (44) of the Finance Act, 1994, and is therefore, not taxable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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