CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

REGULAR 

CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

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?

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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: singh@carajput.com  or call at 9555555480

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

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