CORPORATE AND PROFESSIONAL UPDATE DATED MARCH 10, 2016

CORPORATE AND PROFESSIONAL UPDATE DATED MARCH 10, 2016

DIRECT TAX

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME:Tribunal faced strong criticism for not following the judgment of jurisdictional High Court given in the case of the petitioner itself for an earlier Assessment Year on identical issue of applicability of Section 14A of the Act to partially disallow interest expenditure when interest free funds available with the Petitioner are in excess of investments made in tax free securities – [2016] 42 (Bombay)

INVESTMENT IN MUTUAL FUND : Where Assessing Officer disallowed part of interest expenses under section 14A for earning exempt income which was a plausible view, Commissioner could not exercise revisionary power under section 263 to disallow whole of interest expenses – [2016]  6 (Gujarat)

INTEREST ON BORROWED CAPITAL : Expansion of business : Where assessee paid interest on borrowed capital which was used for acquisition of windmill for extension of existing business of generation of electricity through windmill, interest could not be allowed till capital asset acquired by assessee was put to use – [2016] 277 (Chennai – Trib.)

DEEMED DIVIDEND LOANS : Where assessee, having beneficial ownership of more than 10 per cent shares in a closely held company, claimed to have received certain amount from company for purchase of land for company but failed to prove same by furnishing relevant details, such amount would come within ambit of section 2(22)(e) – [2016] 67 taxmann 15 (Visakhapatnam – Trib.)

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INDIRECT TAX

WORKS CONTRACT SERVICES : Where assessee has paid service tax on full contract price of a works contract and availed credit of inputs and services and there is no revenue loss to department, department cannot seek to deny credit relying upon valuation rule 2A – [2016]

TAX REFUND : Excise duty refund received by assessee in terms of new industrial policy and concessions formulated by Central Government for State of Jammu and Kashmir vide Office Memorandum of 14-6-2002, whereby Central Government intended to eradicate social problem of unemployment in State by accelerated industries development, would be treated as capital receipt – [2016] 67 taxmann 14 (Amritsar – Trib.)

MCA UPDATES

INCORPORATION OF COMPANY : Section 35 debars raising of any objection relating to incorporation of company after issuance of certificate of incorporation by ROC – [2016]

OTHER UPDATES

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