Corporate and Professional Update November 23, 2015
DIRECT TAX LAWS
SECTION 2(47)
CAPITAL GAINS – TRANSFER
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.)
SECTION 36(1)(iii)
INTEREST ON BORROWED CAPITAL
Repayment of subsequent loan : Where assessee borrowed funds for repaying old borrowings which had been duly used for purpose of business, interest paid on subsequent borrowings was to be allowed as deduction – [2015] 63 54 (Kolkata – Trib.)
SECTION 37(1)
BUSINESS EXPENDITURE – ALLOWABILITY OF
Contributions : Contribution made by assessee firm to International Fiscal Association, in which one of its partners was a member of Executive Body, towards constructing a meetings hall in its name to hold meetings, conferences etc, was an allowable business expenditure – [2015] 6390 (Delhi)
SECTION 40(b)
BUSINESS DISALLOWANCE – INTEREST, SALARY ETC. PAID BY FIRM TO PARTNER
Salary : Where partnership deed executed provides that each partner shall be entitled to an annual salary equivalent to his percentage share of profits ‘multiplied by’ ‘Allocable Profits’, salaries paid to partners was in accordance with section 40(b) not to be disallowed – [2015] 90 (Delhi)
SECTION 45
CAPITAL GAINS – CHARGEABLE AS
Business income vs Capital gains: Share dealings : Where assessee earned profits on sale of shares, in view of fact that number of share transactions entered into during relevant year was not high and moreover 75 per cent of profits came up from shares held for more than nine months, amount in question was to be taxed as short-term capital gain – [2015] 325 (Bombay)
In whose hand : No capital gains tax on assessee just because property docs not mutated in name of wife pursuant to family settlement – [2015] 54 (Kolkata – Trib.)
SECTION 132
SEARCH AND SEIZURE
Conversion of survey into search : Where during survey conducted under section 133A, department found huge cash and incriminating documents and director of assessee-company failed to provide explanation with regard to cash and dubious entries in seized documents, survey could be converted into search under section 132 after due approval of competent authority – [2015] 88 (Allahabad)
SECTION 271(1)(c)
PENALTY – FOR CONCEALMENT OF INCOME
Disallowance of claim, effect of : 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.)
Non-compete fee : Where for assessment year 1996-97 under an agreement, assessee transferred one of its business to other company but continued its business using its own logo, trade name, licenses and permits, no part of the non-compete fee received by assessee under the aforesaid agreement could be treated as considerations for goodwill and it was not taxable as income – [2015] 62 188 (Madras)
SECTION 43 BUSINESS DISALLOWANCE – CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAYMENT
Contingent liability: Where import contract stated that after purchase liability in respect of customs duty, excise duty, penalty, sales tax, etc., would be paid by assessee, since liability, was contingent upon uncertain fact, deduction under section 43B was not permissible – [2015] 75 (Delhi)
Clarification on Unautheticated Reports on Conciliation in Vodafone Case – PRESS RELEASE, DATED 18-11-2015
SECTION 68 CASH CREDITS
Gifts : Where assessee claimed that during year his minor children had received gifts of Rs. 3.71 Lakhs from four relatives and Assessing Officer rejected gifts and added amount in income of assessee, since all ingredients of valid gifts had been proved by assessee, impugned addition was not justified – [2015] 62 123 (Allahabad)
SECTION 80PDEDUCTIONS – INCOME OF CO-OPERATIVE SOCIETIES
Credit societies: SLP granted against High Court’s order where it was held that since assessee was a credit co-operative society, engaged in providing credit facilities to its members only, it was entitled to claim deduction under section 80
SECTION148 INCOME ESCAPING ASSESSMENT – ISSUE OF NOTICE FOR
Condition precedent/Jurisdiction : Reassessment by jurisdictional Assessing Officer on basis of notice issued by Income-tax Officer collecting AIR information, but having no jurisdiction over assessee, is invalid – [2015 (Lucknow – Trib.)
SECTION 153C SEARCH AND SEIZURE – ASSESSMENT OF INCOME OF ANY OTHER
PERSON
Delhi HC lays down principles to a void vexatious proceedings u/s 153C against person other than person searched – [2015] 62
SECTION 194LA DEDUCTION OF TAX AT SOURCE – PAYMENT OF COMPENSATION
ON ACQUISITION OF CERTAIN IMMOVABLE PROPERTY
The question of compulsory acquisition will arise only where the compensation cannot be determined by agreement. In other words when the compensation is based on an agreement between State Government and owner of the land, no more can we say that it is a compulsory acquisition – [2015] 62 393 (Bangalore – Trib.)
SECTION 245D SETTLEMENT COMMISSION – PROCEDURE ON APPLICATION UNDER SECTION 245C
Abatement : Where assessee had not paid requisite amount of taxes and interest on revised undisclosed income on or before specified date, settlement application filed by assessee stood abated – [2015] 82 (Gujarat)
SECTION 260A HIGH COURT – APPEALS TO
Court fee : As section 52A of Kerala Court fees, Act specified court fee in appeal before High Court at 1% of income assessed by Assessing Officer, but in many cases such assessed income might not at all survive, State Government had to make required amendment; High Court opined that instant matter was to be stayed till information about steps taken by State Government was provided – [2015] 62 389 (SC)
SECTION 271(1)(c) PENALTY – FOR CONCEALMENT OF INCOME
Interest income: Penalty could not be levied under section 271(1)(c) on ground that assessee applied different system of accounting for interest expenses and interest received – [2015] 62 81 (Gujarat)
COMPANIES ACT SECTION 397 OPPRESSION AND MISMANAGEMENT
Right provided under sections 397 and 398 are statutory in nature and vested with parties to prevent oppression and mis-management against member or company and such reliefs cannot be granted by civil court; hence on dismissal/withdrawal of civil suit and approaching CLB, principles of res judicata not applicable – [2015] 277 (CLB – New Delhi)
COMPTROLLER AND AUDITOR GENERALS (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT SECTION 20(1) AUDIT OF ACCOUNTS OF CERTAIN AUTHORITIES OR BODIES
Direction of Delhi Govt ordering tariff audit of discoms by CAG quashed as the opportunity given to discoms to represent against the proposal for audit was not a “reasonable opportunity” within the meaning of section 20(3) of the CAG Act as the opportunity was given without disclosing the public interest in which audit of DISCOMS by CAG was deemed expedient and as the opportunity to represent was given before consultation with CAG and before the terms and conditions for audit were agreed between GNCTD and CAG – [2015] 394 (Delhi)
CENTRAL EXCISE ACT SECTION 11D RECOVERY – OF SUMS COLLECTED IN EXCESS OF DUTY/TAX
Entire burden of proving that assessee has collected money representing duty/tax rests on revenue; however, where revenue had failed to discharge said burden, Tribunal was correct in remanding matter back – [2015] 257 (Andhra Pradesh)
SECTION 35C APPEALS – RECTIFICATION OF MISTAKES/REVIEW – APPELLATE TRIBUNAL
An error, which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions does not amount to ‘error apparent on face of record’ and is not a rectifiable mistake – [2015] 392 (New Delhi – CESTAT)
CENTRAL EXCISE RULES RULE 19 EXPORTS WITHOUT PAYMENT OF DUTY
Since there was no condition stipulated in main exemption notification 42/01 that supplementary instruction to be issued by CBEC would be mandatory, assessee need not comply with such supplementary instruction so as to furnish bond to avail benefit of main exemption notification – [2015] 62 246 (New Delhi – CESTAT)
RULE 26 PENALTIES – FOR CERTAIN OFFENCES
Where appellants were not found to have acquired possession or handled any excisable goods in any manner that was liable to confiscation, no penalty could be imposed – [2015] 62 194 (Mumbai – CESTAT)
INDIRECT TAX LAWS (ST./EX./CUS. & (CST & VAT)
Clarification on self-sealing and self-examination of bulk cargo – Prescribed procedures for allowing export without sealing in packages or container – CIRCULAR NO.1011/18/2015-CX, DATED 30-10-2015
Cenvat Credit (Fifth Amendment) Rules, 2015 – Amendment in rule 3 – NOTIFICATION NO.22/2015-C.E. (N.T.), DATED 29-10-2015
Filing of Reconciliation return for Year 2014-15 – CIRCULAR NO.28 OF 2015-16, DATED 30-10-2015
SECTION 4
VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE
Transaction value is determined at time of clearance of goods at factory; hence, installation and commissioning charges for Erection, Commissioning, Installation, etc. of machines at buyer’s site cannot be included in value –[2015] 83 (SC)
SECTION 4A
VALUATION UNDER CENTRAL EXCISE – RETAIL SALE PRICE/MRP BASED
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)
SECTION 11D
DUTY OF EXCISE COLLECTED FROM BUYER TO BE DEPOSITED WITH CENTRAL GOVERNMENT
Assessee, being only a “dealer” and not a “manufacturer” was not liable to pay differential amount of excise duty under section 11D on fluctuation in rate of petroleum products – [2015] 51 (SC)
SECTION 32K
SETTLEMENT COMMISSION – POWER TO GRANT IMMUNITY FROM PROSECUTION AND PENALTY
Settlement Commission is entitled to exercise its discretion in imposing penalty on company as well as against its directors on recording elements of mens rea in concealing duty liability – [2015] 52 (Calcutta)
SECTION 35F
DEPOSIT – OF DUTY DEMANDED OR PENALTY LEVIED
Section 35F, as substituted by the Finance (No. 2) Act, 2014, mandating pre-deposit of 7.5% or 10% as a pre-condition for filing appeal is valid. – [2015] 163 (Karnataka)
CORPORATE LAWS
Submission of officially valid documents in respect of change of name on account of marriage or otherwise – Amendment in Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 – CIRCULAR DBR.AML.BC.NO.46/14/.01.001/2015-16, DATED 29-10-2015
Disclosures in abridged prospectus and price information of past issues handled by Merchant Bankers – CIRULAR NO.CFD/DIL/7/2015, DATED 30-10-2015
No fresh permission/renewal of permission to los of foreign law firms – Supereme Court’s Directions – A.P. (DIR SERIES 2015-16) CIRCULAR NO.23, DATED 29-10-2015
Early recognition of financial distress, prompt steps for Resolution and fair recovery of lenders : Framework for revitalising distressed assets in economy – Review of Guidelines On Joint Lenders’ Forum (JLF) And Corrective Action Plan (CAP) – CIRCULAR DNBR.CC.PD.NO.070/03.10.01/2015-16, DATED 29-10-2015 Sovereign Gold Bond 2015-16 – PRESS RELEASE : 2015-2016/1047, DATED 30-10-2015
Instructions for obtaining certificate of registration under IRDAI (Registration of Corporate Agents) Regulations, 2015 – CIRCULAR NO. IRDA/CAGTS/GDL/LCE/202/11/2015, DATED 18-11-2015
FEM (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015 – Amendment in Regulation 4 – NOTIFICATION [NO.FEMA.345/2015-RB]/GSR 859(E), DATED 16-11-2015
FEM (Transfer or Issue of Security by A Person Resident Outside India) (Eleventh Amendment) Regulations, 2015 – Amendment In Regulations 2, 5, 9 & 12 and Insertion of Schedule 11 – NOTIFICATION [NO.FEMA.355/2015-RB]/GSR 858(E), DATED 16-11-2015
Prevention of Money-Laundering (Maintenance of Records) Fourth Amendment Rules, 2015 – Amendment in Rule 9A – NOTIFICATION NO. GSR 882(E) [NO.8/2015 (P.12011/15/2011-S.O. (ES CELL)], DATED 18-11-2015
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