CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 15, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 15, 2016

INCOME TAX ACT

SECTION 2(1A)

AGRICULTURAL INCOME

Compensation on acquisition of agricultural land : Where Assessing Officer’s decision that compensation received by assessee for acquisition of her agricultural land was exempt from tax, was one of possible views, Commissioner could not impose his view on Assessing Officer by invoking provisions of section 263 – [2016] 65  321 (Mumbai – Trib.)

SECTION 4

ASSESSABLE AS HINDU UNDIVIDED FAMILY

Pursuant to Hindu Succession (Amendment) Act, 2005, plaintiff, a female, being first born amongst co-parceners of HUF property, would by virtue of her birth, be entitled to be its Karta – [2016] 66  28 (Delhi)

Read our articles:  Top Taxation Relaxation to MSMS

Highlights of International Taxation

SECTION 9

INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Deduction of export commission paid to foreign agents for sourcing of export orders in favour of assesse-firm without deduction of tax at source under section 195 is to be allowed where export commission paid to foreign brokers is not a sum chargeable to tax in hands of foreign brokers as contemplated under section 195 and is neither a fee for technical/managerial services as defined in explanation 2 to Section 9(1)(vii) so as to bring it to tax under fiction created by deeming provisions of Section 9 – [2016] 66 30 (Mumbai – Trib.)

SECTION 10A

FREE TRADE ZONE

Under section 10A only condition for software exported from India to be considered in an year is receipt of consideration of sale proceed within six months from end of previous year (or within period extended by RBI) in convertible foreign exchange and importing of any other condition such as furnishing of SOFTEX Form or obtaining of STPI clearance is completely unwarranted – [2016] 65  318 (Hyderabad – Trib.)

SECTION 12AA

CHARITABLE OR RELIGIOUS TRUST – REGISTRATION OF

Cancellation of registration : Merely because certain expenditure was incurred on religious purpose, registration granted to trust or institution could not be cancelled – [2016] 65  327 (Pune – Trib.)

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME

Interest paid to partners on capital contribution is not a statutory allowance under section 40(b) but is an expenditure under section 36(1)(iii) and, thus, if this expenditure is incurred in relation to income which does not form part of total income as envisaged under section 14A, same shall only be allowed as deduction only against exempt income under section 14A or in other words, such interest expenditure on partner’s capital shall be disallowed under section 14A – [2016] 66  30 (Mumbai – Trib.)

SECTION 68

CASH CREDITS

Gift : Where assessee failed to explain source of gift made by his wife and showed it as a liability repayable, addition under section 68 was to be upheld – [2016] 65  325 (Pune – Trib.)

Construction contracts : Where certain addition was made to assessee’s income on basis of amount credit in books of account in respect of sale of shops based on percentage completion method, in absence of proper explanation regarding accounting entries so made, matter was to be remanded back for de novo assessment –[2016] 65 22 (Delhi – Trib.)

SECTION 194C

DEDUCTION OF TAX AT SOURCE – CONTRACTORS/SUB-CONTRACTORS PAYMENT TO

Condition precedent : Where assessee failed to prove transportation charges paid, but Assessing Officer had not confronted assessee with results of verification exercise carried out, issue was to be readjudicated – [2016] 65 325 (Pune – Trib.)

SECTION 194H

DEDUCTION OF TAX AT SOURCE – COMMISSION OR BROKERAGE ETC.

Supply of building materials : Payments made by assessee for supply of building materials was not liable to deduction of tax at source under section 194H – [2016] 65  324 (Chandigarh – Trib.)

SECTION 271(1)(c)

PENALTY FOR CONCEALMENT OF INCOME

Where assessee had only claimed expenditure which was disallowed by AO and due to which carry forward loss arose.

It could not be said that assessee had furnished inaccurate particulars of income by showing carried forward loss as once a loss was shown in e-return, the software suo-motu reflects the returned loss as carried forward loss.

Further, the fact that assessee had not claimed carry forward loss in subsequent year was evident of the fact that there was no intent on part of assessee to furnish inaccurate particulars – [2016] 66  27 (Bombay)

ARBITRATION AND CONCILIATION ACT

SECTION 9

COMPOSITION OF ARBITRAL TRIBUNAL – GROUNDS FOR CHALLENGE

As per principles of tracing benefits acquired by fraud, breach of confidence, breach of fiduciary relationships or by other wrongdoings do not get benefit under the defence of change of position.

Change of position as a defence has to be casually linked to the receipt that makes it inequitable for the recipient to make restitution.

Mere fact that the recipient has spent the money in whole or in part does not make it inequitable as expenditure might have been incurred by him in any event in ordinary course of things.

But a bona fide recipient is entitled to establish the defence that he had increased his outgoings as a result of the receipt.

Since analogous principles have to be applied in the instant case, the sketchy pleadings and no material save and except the shareholding pattern in Southend does not entitle VSL to any tracing order against Southend which is an independent entity –[2016] 66 29 (Delhi)

CUSTOMS ACT

SECTION 112

PENALTY – SMUGGLING/ILLEGAL IMPORT

Penalty under Customs can be imposed simultaneously on firm and its partners: Larger bench of HC – [2016] 66  49 (Bombay)

STATUTES

DIRECT TAX LAWS

Government Sets up Tax Policy Research Unit and Tax Policy Council – PRESS RELEASE, DATED 2-2-2016

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