corporate and professional update december 26, 2015

CORPORATE AND PROFESSIONAL UPDATE DECEMBER 26, 2015

INCOME TAX ACT

INCOME TAX ACT

SECTION 2(15)

CHARITABLE PURPOSE

The object of general public utility – Banking technology service: Where assessee-society was established by RBI to provide Banking Technology services and to carry out research which was charitable in nature; merely because it had generated surplus during the course of carrying on ancillary objects, it could not be denied exemption under section 11 – [2015] 63  297 (Hyderabad – Trib.)

SECTION 4

INCOME – CHARGEABLE AS

Compensation for closure of business: Where assessee-company was formed for carrying out bottling activities for Coca Cola Co. in a particular area, in view of fact that Coca Cola Co. subsequently decided to set up its own bottling plant, compensation paid by it to the assessee for closure of business was to be treated as capital receipt not liable to tax – [2015] 63  338 (Mumbai – Trib.)

SECTION 11

CHARITABLE OR RELIGIOUS TRUST – EXEMPTION OF INCOME FROM PROPERTY HELD UNDER

Application of income: Once it is held that assessee-society is eligible for exemption under section 11, as a logical corollary, its income has to be computed on commercial principles – [2015] 63  297 (Hyderabad – Trib)

SECTION 13

CHARITABLE OR RELIGIOUS TRUST – DENIAL OF EXEMPTION

Sub-Section (1)(c): Where assessee, an educational institution, entered into an agreement with managing trustee for purchase of his land and paid a certain amount to him in advance and subsequently said the agreement was canceled and managing trustee returned principal amount along with interest, it could not be said that money was diverted for the interest of managing trustee and hence there was no violation of section 13(1)(c) – [2015] 64  46 (Chennai – Trib.)

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME

Tax-free bonds: Where assessee claimed that interest-bearing borrowed funds were utilized entirely for purpose of business and investment in tax-free bonds had been made out of its own funds and Assessing Officer having noticed that assessee had kept all funds in one common pool partly disallowed interest paid on borrowed funds applying section 14A, disallowance of interest paid not justified – [2015] 63  345 (Bombay)

SECTION 32

DEPRECIATION – ALLOWANCE/RATE OF

In case of trust: Where assessee-trust was eligible for exemption under section 11, it was not entitled for depreciation under section 32 – [2015] 64  46 (Chennai – Trib.)

The hiring of vehicles: Where assessee-owner of vehicles, was engaged in the business of hiring and leasing of those vehicles to third parties, a higher rate of depreciation had to be allowed in respect of leased out vehicles – [2015] 63  338 (Mumbai – Trib.)

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Research expen: Where assessee incurred expenditure for obtaining technical feasibility research reports, for further selling to its customers, said the expenditure was allowable as revenue expenditure as it was for the expansion of the business – [2015] 63  344 (Delhi – Trib.)

Professional fee: Whether where assessee paid a certain amount to ‘R’ towards professional fees in connection with the negotiation, drafting agreements and finally receiving compensation from Coca Cola Co., payment so made was to be allowed as business expenditure – [2015] 63  338 (Mumbai – Trib.)

SECTION 40(a)(ia)

BUSINESS DISALLOWANCE – INTEREST ETC., PAID TO A RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE

Deposit of tax : Where assessee had deducted tax in last month of previous year and deposited same before due date of filing of return under section 139(1), Assessing Officer could not disallow said payment under section 40(a)(ia) – [2015] 64  47 (Mumbai – Trib.)

SECTION 69

UNEXPLAINED INVESTMENTS

Purchases : Where nothing was there on record to show that purchases and sale was made outside regular books of account by assessee, merely because assessee was prosecuted for keeping sugar beyond permissible limits, addition of value of excess sugar as undisclosed income was not justified – [2015] 64  43 (Punjab & Haryana)

SECTION 80G

DEDUCTIONS – DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS

Condition precedent : Filing of copy of registration under section 12AA along with application for grant of approval under section 80G is a condition precedent for consideration of request for grant of such approval –[2015] 64  33 (Lucknow – Trib.)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments : Where foreign AE gave Indian assesseelicence to manufacture and market insulin and transactions arranged between assessee with Indian third party to get insulin manufactured also involved AEs, provisions of section 92B would be attracted and said transaction would be an international transaction between assessee and AE requiring determination of ALP under section 92(1) – [2015] 63 351 (Bangalore – Trib.)

Comparables and adjustments/Comparable – Illustrations : Huge turnover companies and companies in which extraordinary event of amalgamation had taken place could not be considered as comparables with assessee being a small company providing ITES – [2015] 63  351 (Bangalore – Trib.)

SECTION 115JA

MINIMUM ALTERNATE TAX

Computation of book profit : Excess provision for depreciation provided for in earlier years and credited to profit and loss account consequent to change in method of depreciation, would qualify for adjustment under clause (i) of Explanation to section 115JA – [2015] 63  329 (Madras)

SERVICE TAX

SECTION 78

PENALTY – FOR EVASION OF DUTY/TAX

For computing reduced penalty of 25 per cent in section 78, ‘service tax assessed or determined under section 73(2)’ is taken, which shall include both : (a) sums paid prior to issuance of notice and appropriated in adjudication order; as well as (b) further sums confirmed as payable in adjudication order – [2015] 64 243 (Allahabad – CESTAT)

SERVICE TAX

SECTION 65(19)

TAXABLE SERVICES – BUSINESS AUXILIARY SERVICES

Commission earned by authorised agents of BSNL on sale of SIM cards/vouchers of BSNL is not chargeable to service tax – [2015]  295 (Madras)

SECTION 65(25)

TAXABLE SERVICES – CLEARING AND FORWARDING AGENT’S SERVICES

Merely supervising loading/handling of coal and movement from collieries to client’s factories, without any role in clearance of coal from collieries, cannot amount to ‘Clearing and Forwarding Services’; hence, not liable to service tax – [2015](Bombay)

CENTRAL EXCISE ACT

SECTION 5A

EXEMPTIONS – CENTRAL EXCISE – SSI/THRESHOLD EXEMPTION

Clearances made with other’s brand : (i) are governed by normal provisions of Act, (ii) are liable to duty with benefit of Cenvat credit; and (iii) are outside scope of SSI-exemption notification; and, therefore, mere taking of Cenvat Credit thereon cannot lead to denial of SSI-exemption on unbranded clearances – [2015]  (SC)

CENVAT CREDIT RULES

RULE 3

CENVAT CREDIT – GENERAL

Where DEBP scheme specifically barred taking of credit of CVD not paid in cash, assessee cannot take credit of CVD paid by debit to DEPB script – [2015]  300 (Madras)

STATUTES

CENTRAL EXCISE ACT

SECTION 3A

CHARGE/LEVY – EXCISE DUTY BASED ON PRODUCTION CAPACITY

Since section 3A does not itself provide for levying of interest, rules 96ZO, 96ZP and 96ZQ cannot do so and none of other provisions of Act can come to aid of revenue; hence, demand for interest was set aside on merits. – [2015] 63  310 (SC)

CUSTOMS TARIFF ACT

SECTION 2

CLASSIFICATION – VIRGINIAMYCIN

Virginiamycin, a pure chemical, is classifiable as ‘Vitamin’ and cannot be classified as ‘animal feed’, as same is not imported in premix condition – [2015] 64  242 (SC)

CENTRAL EXCISE RULES

RULE 4

DUTY PAYABLE ON REMOVAL

Without giving any reason, Commissioner could not deny extension of permission to store goods without payment of duty outside factory premises, when both Range Superintendent and Division Officer found case genuine – [2015] 64  59 (Mumbai – CESTAT)

SEBI ACT

SECTION 11

POWERS AND FUNCTIONS OF BOARD

Where in order to comply with direction of SEBI that a company getting trading membership of NSE could not carry on any other activity apart from broking, appellant – PGSL was incorporated for taking over membership card of PCMIL, transfer of membership from PCMIL to PGSL was due to compulsion of law and appellant would be entitled to benefit of fee continuity and, thus, would not be required to pay fresh registration fees – [2015] 64 141 (SC)

COMPETITION ACT

SECTION 44

PENALTY FOR MAKING FALSE STATEMENT OR OMISSION TO FURNISH MATERIAL INFORMATION

Where appellants invoked jurisdiction of Commission by asserting that R-2 insurance company was in a dominant position and it had abused its position by not removing their names as defaulter from Specific Approval List, but suppressed a crucial fact that they had already availed similar remedy by filing writ petition before High Court, they would not be entitled to claim any relief – [2015] 64  29 (CAT – New Delhi)

NEGOTIABLE INSTRUMENTS ACT

SECTION 138

DISHONOUR OF CHEQUE FOR INSUFFICIENCY ETC., OF FUNDS IN ACCOUNT

Section 141 creates a legal fiction against defaulting company, so as to cover within its ambit all persons who have consented, connived or anyway attributed to commission of offence – [2015] 64  42 (Delhi)

SERVICE TAX

SECTION 65(25aa)

TAXABLE SERVICES – CLUB OR ASSOCIATION’S SERVICES

Sections 65(25aa), 65(105)(zzze) and 66 are ultra vires and beyond legislative competence of Parliament, insofar as they seek to levy service tax on services provided by clubs/associations to their members – [2015] 63 154 (Gujarat)

CENTRAL EXCISE ACT

SECTION 4

VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE – DESIGN CHARGES

Where assessee manufactured goods using design prepared by its sister concern and client paid separately to assessee and sister concern, charges for design prepared by sister concern were includible in value of goods manufactured – [2015] 63  352 (Mumbai – CESTAT)

SECTION 37C

SERVICE OF DECISIONS, ORDERS, SUMMONS, ETC.

Where Adjudicating Authority passed refund order on 3-4-2009 and dispatched same to assessee by speed post on 16-4-2009 and Commissioner (Appeals) in view of dispatch of order on 16-4-2009 assumed date of receipt by assessee on 18-4-2009, Commissioner (Appeals) was in error in holding that date of service on assessee was 18-4-2009 without proof of same available on record – [2015] 64  49 (Mumbai – CESTAT)

CST & VAT

SECTION 8 OF CENTRAL SALES TAX ACT, 1956

RATE OF TAX – PARTIAL EXEMPTION FROM PAYMENT OF TAX

Where assessee in terms of notification dated 6-5-1986 was allowed partial exemption from tax payable in respect of inter-State sales for assessment years 1999-2000 to 2001-02, reopening of impugned assessments subsequently on plea that partial exemption was wrongly retained by assessee, as full central sales tax was collected from consumers, was illegal – [2015] 63  233 (Rajasthan)

SECTION 34 OF DELHI VALUE ADDED TAX ACT, 2004

RETURNS, ASSESSMENT AND TAX ADMINISTRATION – ASSESSMENT AND RE-ASSESSMENT – LIMITATION ON

Where Assessing Authority issued on assessee notices of default assessment and penalty dated 1-4-2015 for assessment year 2008-09, impugned notices had been issued after expiry of period of six years as stipulated in section 34 from relevant year 2008-09 and were liable to be quashed – [2015] 63  30 (Delhi)

STATUTES

DIRECT TAX LAWS

Clarification regarding defective notices issued to FII/FPIs – PRESS RELEASE, DATED 10-12-2015

Section 90 of the Income-tax Act, 1961 – Double Taxation Agreement – Meeting between heads of Revenue Administration of India and Korea for suspension of collection of taxes during pendency of Mutual Agreement Procedure (MAP) – PRESS RELEASE, DATED 9-12-2015

New Facility of Pre-Filing TDS Data while submitting online rectification – PRESS RELEASE, DATED 10-12-2015

CORPORATE LAWS

Monthly Development Report for Commodity Derivative Exchanges – CIRCULAR NO.CDMRD/DEA/4/2015, DATED 9-12-2015

FEM (Manner of Receipt and Payment) (Amendment) Regulations, 2015 – Amendment in Regulation 5 –NOTIFICATION [NO.FEMA.357/2015-RB]/GSR 935(E), DATED 7-12-2015

INDIRECT TAX LAWS (ST./EX./CUS. & (CST & VAT)

Central Excise (Second Amendment) Rules, 2015 – Amendment in Rules 8, 12 and 17 – NOTIFICATION NO.25/2015-C.E. (N.T.), DATED 9-12-2015

Service tax (Third Amendment) Rules, 2015 – Amendment in Rule 6 – NOTIFICATION NO.26/2015-ST, DATED 9-12-2015

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.

SECTION 9

INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Business income : In absence of any material on record as to whether non-resident agents appointed by assessee rendered services abroad and they had no business connection in India, question regarding assessee’s obligation of deduction of tax at source on payment of sales commission to them was to be disposed afresh –[2015] 64  253 (Chennai – Trib.)

SECTION 10(23C)

EDUCATIONAL INSTITUTIONS

Sub-clause (iiiab): Where assessee-society running educational institutions filed its return claiming exemption under section 10(23C)(iiiab) in view of fact that Government was substantially financing and interested in management of assessee, its claim for exemption was to be allowed – [2015] 64  312 (Punjab & Haryana)

SECTION 68

CASH CREDITS

In terms of section 68, assessee is liable to disclose only source(s) from where he has himself received credit and it is not burden of assessee to show source(s) of his creditor nor is it burden of assessee to prove creditworthiness of source(s) of said sub-creditors – [2015] 64  329 (Delhi)

Donations : Where assessee claiming himself to be a Sewadar of Historic Dera, deposited donations received in name of Dera in his own bank account and, moreover, he failed to prove that any charitable activity in terms of section 2(15) was ever carried out by him, authorities below were justified in making addition to his income under section 68 in respect of donations in question – [2015] 64  311 (Punjab & Haryana)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Bright line test (BLT) is not a valid method for either determining the existence of international transaction or for the determination of ALP of such transaction – [2015] 64  328 (Delhi)

Comparables and adjustments/Adjustments-Interest: ALP of an international loan transaction, which was designated in hard currency, is to be ascertained, the interest rate on rupee transactions in India is not relevant –[2015] 64  251 (Bangalore – Trib.)

Comparables and adjustments/Adjustments-Interest: In case of interest on outstanding interest from loan transactions, that was designated in hard currency, rate of interest and terms applicable in a materially similar situation of delay in payment of interest to Exim Bank would apply mutatis mutandis for determining ALP –[2015] 64  251 (Bangalore – Trib.)

SECTION 92CA

TRANSFER PRICING – REFERENCE TO TPO

Where value of international transactions entered into between assessee and its AE exceeded Rs. 5 crores, Assessing Officer was required to refer matter to TPO for determining ALP – [2015] 64  252 (Madras)

SECTION 151

INCOME ESCAPING ASSESSMENT – SANCTION FOR ISSUE OF NOTICE

Recording of satisfaction : SLP dismissed against High Court’s ruling that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid – [2015] 64  313 (SC)

SECTION 153C

SEARCH AND SEIZURE – ASSESSMENT OF INCOME OF ANY OTHER PERSON

Applicability of : Even in cases where Assessing Officer of person searched and assessee who is sought to be assessed under section 153C is same, still Assessing Officer is required to record his satisfaction that assets/documents seized belong to a person (assessee) other than searched person – [2015] 64 309 (Delhi)

SECTION 269UC

PURCHASE OF IMMOVABLE PROPERTY BY CENTRAL GOVERNMENT – RESTRICTIONS ON TRANSFER OF PROPERTY

Where immunity certificate issued by department under KVSS to vendor covered impugned transaction of sale of property, non-filing of form 37-I by vendor would not entitle department to launch prosecution under sections 269UC and 276AB against her – [2015] 64  254 (Madras)

SECTION 271(1)(c)

PENALTY – FOR CONCEALMENT OF INCOME

Recording of satisfaction: Before levying penalty under section 271(1)(c), it is incumbent upon the Assessing Officer to state whether the penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income – [2015] 64  155 (Kolkata – Trib.)

COMPETITION ACT

SECTION 3

PROHIBITION OF AGREEMENTS – ANTI-COMPETITIVE AGREEMENTS

Where evidences showed that exhibition of Tamil and Malayalam films to Informant theatre were denied at behest of OP association representing film theatres in Kerala and OP held position of strength in film industry in Kerala, conduct of OP was anti-competitive and penalty was to be imposed on it – [2015] 64  207 (CCI)

PML ACT

SECTION 45

SPECIAL COURTS – OFFENCES TO BE COGNIZABLE AND NON-BAILABLE

Where applicant was arrested for schedule offence of fraudulent remittance of foreign currency and he failed to prove money received by him was not crime money, bail could not be granted to him during period of investigation – [2015] 64  249 (Gujarat)

STATUTES

DIRECT TAX LAWS

Section 119 of the Income-tax Act, 1961 – Income-tax Authorities – Instructions to Subordinate Authorities – Facilitating Taxpayers’ Electronic Interface with the Department

Section 115JB of the Income-tax Act, 1961 – Minimum Alternate Tax (MAT) – Applicability of MAT on Foreign Companies for period prior To 1-4-2015 – INSTRUCTION NO.18/2015 [F.NO.153/12/2015-TPL], DATED 23-12-2015

CORPORATE LAWS

Special Deposit Scheme, 1975 – Payment of Interest for Calendar Year 2015 – CIRCULAR DGBA.GAD.NO.2023/15.01.001/2015-16, DATED 23-12-2015

Withdrawal of all old series of Banknotes issued prior to 2005

Reporting of Compliance with Indian Ownership and Control

DIRECT TAX LAWS

Prime Minister to launch Gold related Schemes on 5-11-2015 – PRESS RELEASE, DATED 3-11-2015

CORPORATE LAWS

Gold Monetization Scheme, 2015 – Interest Rate – CIRCULAR DBR.IBD.BC.53/23.67.003/2015-16 

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

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