CORPORATE AND PROFESSIONAL UPDATE DECEMBER 23, 2015

CORPORATE AND PROFESSIONAL UPDATE DECEMBER 23, 2015

INCOME TAX ACT

SECTION 2(22)

DEEMED DIVIDEND

Inflated Purchases : Payment of money by inflating purchases cannot be construed as loan or advance within meaning of section 2(22)(e) – [2015] 64  88 (Chennai – Trib.)

Read our articles:  Top Taxation Relaxation to MSMS

SECTION 28(i)

BUSINESS INCOME – YEAR IN WHICH CHARGEABLE

Year of accrual : Where assessee advanced individual home loans, profits could be brought to tax only when recoveries are made from individual borrowers – [2015] 64  90 (Ahmedabad – Trib.)

SECTION 32

DEPRECIATION – ALLOWANCE/RATE OF

Leased assets : Where an assessee is a legal owner of assets covered by sale and lease back transactions and has used it in course of his business, he is eligible to depreciation; use in leasing business is also a use of the asset – [2015] 64  90 (Ahmedabad – Trib.)

SECTION 36(1)(vii)

BAD DEBTS

For the purpose of business : Where assessee-company advanced money to another company in ordinary course of its business activity of finance and interest on it was assessed as its business income and on issue of debenture by said company amount due to said company could be written off under section 36(1)(vii) – [2015] 64 90 (Ahmedabad – Trib.)

SECTION 43B

BUSINESS DISALLOWANCE – CERTAIN DEDUCTION TO BE ALLOWED ONLY ON ACTUAL PAYMENT

Payment, connotation of : When pursuant to settlement creditor agreed to convert a portion of interest into shares, it must be treated as extinguishment of liability for purpose of section 43B – [2015] 64  65 (Delhi)

SECTION 47

CAPITAL GAINS – TRANSACTIONS NOT REGARDED AS TRANSFER

Reassessment : Where assessee had shown gift of shares to a company, merely because assessee had been called upon by Assessing Officer for verification of value of shares in terms of section 47(iii), it would not enable revenue to resort to section 147 – [2015] 64  92 (Bombay)

SECTION 69

UNEXPLAINED INVESTMENTS

Borrowed funds : Where Commissioner (Appeals) held that investment in properties were made out of borrowed funds, but details of borrowed funds and its nexus for making investments were not examined, addition under section 69 could not be made – [2015] 64  88 (Chennai – Trib.)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Where the Revenue has been unable to demonstrate some tangible material that there is an international transaction involving AMP expenses between Indian subsidiary and foreign parent, the Revenue cannot proceed to determine ALP of AMP expenses by inferring the existence of an international transaction based on the bright line test – [2015] 64  324 (Delhi)

Comparables and adjustments/Comparables – Illustrations : Assessee, which was rendering engineering support services including related design and drawing as per specification of its foreign AE, could not be compared with a company which was engaged in functions of Third Party Inspections (TPI), certification of equipment supplied by vendors and installation of work of contractors of ONGC, other government departments and private sector undertakings – [2015] 64  160 (Delhi – Trib.)

SECTION 201

DEDUCTION OF TAX AT SOURCE – CONSEQUENCE OF FAILURE TO DEDUCT OR PAY

Before 1.4.2010, there was no limitation period under Section 201 of the Act for initiating action on TDS default. It was only by the Finance Act, 2009, the sub-section (3) to section 201 was inserted to provide for a period of limitation of – [2015] 64  325 (Karnataka)

SECTION 254

APPELLATE TRIBUNAL – POWERS OF

Power of rectification : Where on merits Tribunal had recorded finding that order passed by Assessing Officer was one within provisions of section 237, revenue could not challenge said finding in guise of rectification of order – [2015] 64  63 (Madras)

COMPANIES ACT

SECTION 397

OPPRESSION AND MISMANAGEMENT

Disputes raised in a properly filed petition under sections 397, 398, 402 and 403 are not referable to arbitration in accordance with agreement between parties – [2015] 64  176 (CLB – New Delhi)

SARFAESI ACT

SECTION 2(zd)

SECURED CREDITOR

Whether the respondent-debenture trustee of three debenture holders viz., (LIC, Canara Band and Oriental Bank of Commerce), which was neither a bank nor a financial institution and was not even registered as Securitisation company u/s 3 of SARFAESI could be treated as a secured creditor within the meaning of section 2(zd) of the SARFAESI Act? If yes, whether it can invoke the provision of SARFAESI for enforcement of security interest? –[2015] 64  326 (Andhra Pradesh)

CENTRAL EXCISE ACT

SECTION 3A

CHARGE/LEVY – EXCISE DUTY BASED ON PRODUCTION CAPACITY

In context of capacity based excise duty, there is difference between ‘temporary non-production for 15 days or more’ and ‘closure of factory’; in case of ‘closure of factory’ for even 6 days, assessee cannot be made liable to pay duty and if duty has already been paid, same is liable to be refunded back to assessee – [2015] 64 102 (Ahmedabad – CESTAT)

SECTION 11AA

INTEREST – ON DELAYED PAYMENT OF DUTY/TAX

Where assessee asks department to clarify applicability of exemption and in absence of clarification, proceeds with payment of duty along with benefit of Cenvat credit, then, assessee cannot be said to have ‘wrongly taken’ credit; hence, even if said goods are later clarified to be exempted and assessee is made to reverse credit, assessee is not liable to pay interest on reversed Cenvat credit – [2015] 64  148 (Andhra Pradesh)

CUSTOMS ACT

SECTION 14

VALUATION OF IMPORTED GOODS – TRANSACTION VALUE – GENERAL

In case of undervaluation of goods imported at Chennai port, imports of same goods made by assessee himself at Mumbai port may be regarded as ‘identical/similar goods’ and may be used to determine customs value of imports at Chennai – [2015] 64  24 (SC)

CENVAT CREDIT RULES

RULE 2(1)

CENVAT CREDIT – INPUT SERVICE – EVENT MANAGEMENT SERVICES

Event management services availed by advertising agency to procure advertising space in shows, etc. organized by such event managers, is eligible for input service credit in hands of such advertising agency – [2015] 64 153 (New Delhi – CESTAT)

STATUTES

DIRECT TAX LAWS

Section 6 of the Income-tax Act, 1961 – Residential Status – Draft guiding Principles for determination of Place Of Effective Management (Poem) Of A Company – LETTER [F.NO.142/11/2015-TPL], DATED 23-12-2015

CORPORATE LAWS

SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2015 – Amendment in Regulation 34 – NOTIFICATION NO.SEBI/LAD-NRO/GN/2015-16/27, DATED 22-12-2015

IRDAI (Issuance of Capital by Indian Insurance Companies Transacting other than Life Insurance Business) Regulations, 2015 – NOTIFICATION F.NO.IRDAI/REG/21/111/2015, DATED 15-12-2015

Registration and submission of information to CBDT for compliance with obligations under Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standards (CRS) – CIRCULAR NO.IRDA/F&A/CIR/GLD/222/12/2015, DATED 21-12-2015

Sixth Meeting of International Advisory Board of SEBI – PRESS RELEASE NO.297/2015, DATED 23-12-2015

Debts Recovery Appellate Tribunal, Allahabad (Court Master) Recruitment Rules, 2015 – NOTIFICATION NO. GSR 960(E) [F.NO.5/3/2015-DRT], DATED 11-12-2015

Debts Recovery Appellate Tribunal, Mumbai (Court Master) Recruitment Rules, 2015 – NOTIFICATION NO. GSR 961(E) [F.NO.5/3/2015-DRT], DATED 11-12-2015

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