CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 14, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 14, 2016

INCOME TAX ACT

SECTION 10(23FB)

VENTURE CAPITAL FUND

Claim of exemption : In terms of SEBI (Alternative Investment Funds) Regulation, 2012, ‘corpus’ means amount committed by investors and, thus, where assessee fund did not invest more than 25 per cent of amount so committed by investors in only one venture capital undertaking, its claim for exemption under section 10(23FB) was to be allowed – [2016] 66  35 (Mumbai – Trib.)

SECTION 11

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

Application of income : Mere deposit of surplus funds in FDRs cannot be treated as application of fund for charity as per section 11(1)(a) but there has to be nexus between investment in FDRs and achievement of charitable objects of assessee – [2016] 66 12 (Chandigarh – Trib.)

SECTION 43B

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

Sales tax on excise duty : Where assessee had directly deposited excise duty payable on goods, he will be entitled to benefit of deduction of sales tax payable on excise duty component in assessment years in question as sales tax on excise duty is a part of sale price – [2015] 62  278 (SC)

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Highlights of International Taxation

SECTION 80HHC

DEDUCTIONS – EXPORTERS

Rectification of mistake : An omission to produce auditor’s certificate for claiming deduction under section 80HHC is as much a mistake as an omission to take note of a record which can be rectified under section 154 – [2016] 66 37 (Madras)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Comparables – Illustrations : In case of assessee rendering software development services to its AE, Company engaged in providing call centre services and company which had outsourced considerable portion of its business, could not be accepted as valid comparables while determining ALP – [2016] 66  20 (Bangalore – Trib.)

A Comparables and adjustments/Adjustments – Capacity utilization: For purpose of benchmarking international transactions, it is imperative that the effect of underutilization of capacity/excess fixed costs is eliminated while computing the operating margins of the assessee – [2016] 66  20 (Bangalore – Trib.)

Comparables and adjustments/ Comparables/Illustrations: A company in the business of hiring and chartering of ships/vessels cannot be compared to a company engaged in the provision of facilitation support services – [2016] 66  54 (Mumbai – Trib.)

The Comparables and adjustments/Adjustments – Interest: Where assessee, an Indian company, advanced interest-free loan to its foreign subsidiary, it was LIBOR which had to be considered while determining arm’s length interest rate – [2016] 66  55 (Bangalore – Trib.)

SECTION 254

APPELLATE TRIBUNAL – POWERS OF

Powe of rectification : It would be noticed that the power under rule 12 of ITAT Rules to either reject a memorandum of appeal or return it for correction if the memorandum of appeal is not in the prescribed form. It is only after the memorandum of appeal is put in the prescribed form that it has to be represented for acceptance under rule 7 – [2016] 66 52 (Bombay)

COMPETITION ACT

SECTION 4

PROHIBITION OF ABUSE OF DOMINANT POSITION

Where there were large number of players in relevant market for services of development and sale of commercial space in Gurgaon, OP Group i.e., DLF, did not have ability to influence conditions of competition in relevant market and, therefore, DLF did not have a dominant position in relevant market in terms of section 4 –[2016] 66  23 (CCI)

SARFAESI ACT

SECTION 13

ENFORCEMENT OF SECURITY INTEREST

Where petitioner-bank was prevented from taking absolute and exclusive control of subject premises despite order of Chief Metropolitan Magistrate under section 14 of SARFAESI Act, due to an interim order passed by Court but subsequently said interim order merged in final order passed by High Court in favour of petitioner, it was entitled for restitution and Police officers were directed to provide assistance to petitioner – [2016] 66  46 (Andhra Pradesh)

SERVICE TAX

SECTION 65(19)

TAXABLE SERVICES – BUSINESS AUXILIARY SERVICES

In case of multilevel marketers, profit earned on direct marketing (sale and purchase of goods along with turnover-based discount/commission) cannot be charged to service tax; however, commission on downline marketing by sponsoring sub-distributors would be liable to service tax – [2016] 66  77 (Chennai – CESTAT)

SECTION 73

RECOVERY – OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED – INVOCATION OF EXTENDED PERIOD OF LIMITATION

Where fact of transfer of predecessor’s PLA balance to successor’s account was informed by successor to department, then, department could not allege suppression and could not, therefore, invoke extended period to deny said transfer – [2016] 66 34 (Ahmedabad – CESTAT)

CENTRAL EXCISE ACT

SECTION 35B

APPEALS – MAINTABILITY OF – APPELLATE TRIBUNAL

Where issue of time-bar was not raised in earlier proceedings and said fact was duly recorded in remand order of Tribunal passed in earlier proceedings, then, in remand proceedings, assessee could not raise settled issue viz. time-bar aspect before Tribunal – [2016] 66  58 (Kolkata – CESTAT)

CUSTOMS ACT

SECTION 14

LEVY OF DUTY – VALUATION OF GOODS

Ship demurrage charges paid by assessee/importer on import of goods were not liable to be included in assessable value of goods imported for customs duty purposes – [2016] 66  108 (SC)

SERVICE-TAX RULES

RULE 6

PAYMENT – SERVICE TAX

PLA balance of predecessor can be transferred and utilized by successor for payment of its service tax dues –[2016] 66  34 (Ahmedabad – CESTAT)

CENVAT CREDIT RULES

RULE 3

CENVAT CREDIT – GENERAL

Where assessee availed Cenvat credit on invoices issued by one ‘R’ and Adjudicating Authority relying on statement of ‘R’ disallowed Cenvat credit alleging that goods as per these invoices were not actually received by assessee, since Adjudicating Authority had not succeeded in establishing guilt on part of assessee, disallowance of Cenvat credit was unjustified – [2016] 66  73 (New Delhi – CESTAT)

STATUTES

CORPORATE LAWS

Appellate Tribunal for Forfeited Property (Procedure for Appointment of Chairman) Rules, 2016 –NOTIFICATION NO. GSR 138(E) [F.NO.A.12011/1/2015-SO (CA)], DATED 2-2-2016

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