corporate and professional update dec 13, 2016

Professional Update for the Day:

DIRECT TAX:

• Reopening u/s 147 of the assessment is not valid if the reasons recorded are incoherent and do not indicate what the basis for reopening is – Delhi High Court in Sabharwal Properties Ind Pvt. Ltd vs. ITO.
• Continuous payments made to transporters would be aggregated to consider TDS limit under sec. 194C Sri Shivamurthy v. Additional Commissioner of Income-tax, Shimoga Range, Shimoga [2016] (Bangalore – Trib.)
• No bench marking at entity level when assessee was earning more than 50% of revenue from Non-AE clients AXA Technologies Shared Services (P.) Ltd. v.Deputy Commissioner of Income-tax, Circle-11(1), Bangalore [2016] (Bangalore – Trib.)
• HC : Reverses ITAT; Concealment penalty unsustainable on DRE-deduction claim despite earlier year disallowance [TS-650-HC-2016(BOM)]
• Reopening of assessment – return was filed before the wrong authority – Such being the facts it cannot be stated that the petitioner had filed no return. The very foundation for issuing notice therefore as recorded in the reasons would be belied- (Manish kumar Pravin bhai Kiri versus Asst. Commissioner of Income tax – 2016 (1) TMI 787 – GUJARAT HIGH COURT).
• IT: TDS u/s 194C – AO erred in law in making disallowance despite the facts that the said amount is paid for purchases and section 194C of the Act is not applicable – ITO, W-7(2), Kol Vs. M/s Winsome Breweries Ltd. (ITAT Kolkata)
• IT:Penalty u/s 271(1)(c) – The income has been detected on due to scrutiny assessment and would be evaded if the same was not done – Penalty on concealment should be imposed – Rahul Syal Vs. ITO, W-18 (1) (ITAT Delhi)
• Depreciation worked out with reference to the written down value computed as a result of order passed under Section 250(6) – Higher WDV – No error could be pointed out in the approach- (Commissioner of Income-tax, Jalandhar Versus M/s Max India Ltd. – 2016 (1) TMI 784 – PUNJAB AND HARYANA HIGH COURT).
• Non-resident will not to be liable to deduct tax at source from payments made to persons resident in India,if the source of the aforesaid payments is located outside the Indian Territory.
• Compensation for breach of contract for sale of land, is not liable to income tax either as a revenue receipt or as a capital receipt [C.I.T. vs Sterling Investment Corporation Ltd., 123 I.T.R. p.441 (Bombay.)].
• Benefit of section 10(10AA) is available even in case of resignation from service by an employee.
• Gifting of property will entitle assessee to claim exemption u/s 54 if left with only one [ITO v Shri Sameer jasuja (ITAT Delhi), ITA 4187/Del/2012, A.Y.2009-10].
• Section 68 cannot be applied where Assessee discharges onus to prove receipt of share capital along with premium [Dy. Commissioner of Income Tax -Vs- M/s Ansh Intermediate Services Pvt. Ltd.(ITAT Lucknow), ITA No.243/LKW/2015, A.Y.2010-11].
• Warehouse leasing Income of Company incorporated with such object is to be taxed as business income [DCIT vs. DRS Warehousing (North) Pvt. Ltd. (ITAT Delhi), Income Tax (Appeal) No. 4354 of 2012, AY 2009-10].
• HUF or its Karta cannot become partner or designated partner in LLP [General Circular No. 2/2016].
• Claim of export turnover if foreign exchange not realised in specified period u/s 80HHC tantamount to deemed concealment of income [Emblem Fashion Wear Exports Pvt. Ltd. vs. ITO (ITAT Mumbai), Income Tax (Appeal) No. 2101 of 2012, AY 2003-2004].
• Generate Electronic Verification Code (EVC) for e-filing of Income Tax Return by giving Bank/ Demat A/c details.
• Adjustment entries being not in nature of loan or advances are outside the purview of deemed dividend u/s 2(22)(e) [CIT (TDS) vs. Schutz Dishman Bio-Tech Pvt. Ltd. (Gujarat High Court), Tax Appeal nos. 958 & 959 of 2015].
• Being an investment company, interest on loan used for investment in jointly controlled entity allowed as revenue expenditure [ ITO vs. M/s. First American Securities Pvt. Ltd. (ITAT Delhi), Income Tax (Appeal) No. 4768 of 2012, AY 2007-2008].

INDIRECT TAX:

• Cenvat Credit – Allocation of input services to the concerned department as earned by the Table-C department – appellant provides taxable service as well as exempted service – entire disallowance does not call for any decision in favour of Revenue- (SIFY Technologies Limited Versus Commissioner of Service Tax, LTU, Chennai – 2016 (1) TMI 768 – CESTAT CHENNAI).
• ST: Additional Services to the purchaser of Cars (Viz. like collection of RTO registration charges, Smart Card Fees, Vehicle Registration Fees and other extra charges) are not Business Support Services – Wonder Cars Pvt. Ltd. Vs. CCE (CESTAT Mumbai)
• ST: Valuation of Construction Service provided by a builder to a landowner who transfers his land / development rights under tri-partite construction business model should be guided by the BoardCir.No.151/2/2012-ST, dt.10.2.2012 and not the CBEC’s Education Guide on Taxation of Services, 2012 – High Level Committee.
• Cenvat credit cannot be denied to the service recipient for non-payment of Service Tax by the Service provider [Memories Photography Studio vs. Commissioner of CEST, Vadodara].
• No VAT on free supply of medicines [Mapra Laboratories (P) Ltd. vs. Commercial Tax Officer].
• Classification of Import of services from M/s. Society for Worldwide Interbank Financial Telecommunication (SWIFT) which is a non-resident entity not having an office in India – reverse charge – Demand conformed invoking the extended period of limitation- (Bank of Baroda Versus Commissioner of Service Tax, Mumbai-I – 2016 (1) TMI 767 – CESTAT MUMBAI).
• Applicability of Service Tax on the services received by apparel exporters in relation to fabrication of garments [Circular No. 190/9/2015-ST].
• Re-credit of duty, paid through Cenvat Credit, is not allowed [Garden Silk Mills Ltd. vs. Comm. of CEST, Surat, (2016)].
• CBEC has issued instructions dated 9th December, 2016 for the use of digital mode of payment while making financial transactions as this will disclose all financial transactions and hence enhanced turnover might get reflected in the Books of Accounts.

Companies Act  Update:-

• Of India issued report on Companies Amendment Bill, 2016.
• MCA has notified the Companies (Transfer of Pending Proceedings) Rules, 2016 which shall come into force w.e.f 15th December, 2016 except rule 4, which shall come into force from 1st April, 2017.

Other Update:-

• Senior IRS officer Rajendra Kumar appointed as the new member of the CBDT, the policy making body for the Income Tax Department.

Key Dates:-

• Payment of Advance Income Tax for all assessees (75%) : 15/12/2016.
• E-Payment of PF for Nov: 15/12/2016.
• Payment of DVAT TDS for Nov : 15/12/2016.
• Issue of TDS certificate in case of payment/credit made in Oct for purchase of property u/s 194IA : 15/12/2016.

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