Corporate and professional update february 19, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 19, 2016

Direct Tax

• Section 80IB(10) : Deduction allowed on additional business declared post search.[Madhav Corporations vs. ACIT (ITAT Ahmedabad), IT(SS) A Nos. 380 to 382/AHD/2014, AY 2010-11].
• Non TDS deduction disallowance is not sustainable if payee discharges his tax liability.[ Kurian Ulahannan Moothukuzhiyil vs. ITO (ITAT Ahmedabad), I.T.A. No. 2524 / Ahd /2014, AY 2010-11]
• Non-Tax Receipt Portal : Platform for making online payment of non-tax receipts by citizens / corporate / others inaugurated by Ministry of Finance on 15.2.16.
• Exemption u/s 11 : Addition on advances to sister concern instead of using the fund on the object of the Trust – The advance made to VISEA Trust therefore can be said to be out of surplus accumulated and remained at the disposal of the assessee and does not offend provisions of section 11(2) in any manner – Chawara Educational Trust Versus The Income Tax Officer, Ward-3 (1) , Dhule – 2016 (2) TMI 466 – ITAT PUNE
• Section 244A does not mandate that interest cannot be allowed on self assessment tax paid u/s 140A. As discussed earlier it cannot be said that interest u/s.244A can be allowed only in cases where excess payments of tax is made consequent to a notice of demand u/s.156. – HC Commissioner of Income Tax, Kolkata-I Versus Birla Corporation Ltd. – 2016 (2) TMI 470 – CALCUTTA HIGH COURT
• Penalty u/s 271AAA is not tenable where no search was conducted. [DCIT vs. M/s. Sam India Abhimanyu Housing (ITAT Delhi), ITA No.1257/ Del./ 2015, AY 2011-12]
• CBDT resolved Rs.5,000cr tax disputes with foreign companies in sectors like Software & Consultancy under Mutual Agreement Procedure (MAP).
• When the Assessing Officer and the Commissioner concurrently found that there was unexplained expenditure and source of such income was not satisfactorily explained, section 69C of the Act would certainly be applicable.
• Scope of ‘transfer’ u/s 47(xiv) : whether the assessee’s transaction of converting his proprietary business into a private limited company is outside the scope of ‘transfer’ as provided under Section 47(xiv) of the Act and therefore not liable to be taxed under the head long term capital gains – Tribunal .[Deputy Commissioner of Income Tax, Central Circle-1 (1), Chennai vs  Shri D. Satish Babu – 2016 (2) TMI 348 – ITAT CHENNAI]
• Computation of income u/s 115JB : unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB , adjudicating authorities can always consider and decide on merits, any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue – Tribunal. [ Income Tax Officer vs M/s Sunshield Chemicals Ltd. – 2016 (2) TMI 339 – ITAT MUMBAI]
• Brokerage expenses not allowed against income from House Property. [M/s Radiant Premises Pvt. Ltd. vs. ACIT (ITAT Mumbai), ITA No. 5494/MUM/2013, A.Y. 2010-2011].
• Interest on TDS deduction default is  not sustainable, where tax liability of deductor is NIL. [M/s Anusha Investment Ltd. Vs. ITO ( Madras High Court), TCA No. 398 of 2007, A.Y. 2002-2003].
• Sec 80P: Principle of mutuality applies to transfer fees, non- occupancy / car parking charges. [Lands End Co-operavtive Housing Society Limited vs ITO (ITAT Mumbai), ITA NO. 3566/Mum/2014]
• CBDT has clarified that the “Initial Assessment Year” means the first year opted for by the assessee for claiming deduction u/s 80IA (5), of the Income Tax Act, 1961 Vide Circular No. 01/2016 dated 15.02.2016.
• CBDT has directed that the time limit of six months is to be strictly followed by the Assessing Officer while disposing off the applications filed by the assessee/deductor/collector under section 154 of Income Tax Act, 1961 Vide Instruction No. 01/2016 dated 15.02.2016.
• IT: Exemption u/s 11 – Addition on advances to sister concern instead of using the fund on the object of the Trust – The advance made to VISEA Trust,  therefore can be said to be out of surplus accumulated and remained at the disposal of the assessee and does not offend provisions of section 11(2) in any manner – Chawara Educational Trust Vs. ITO, W-3(1), Dhule (2016 (2) TMI 466 ITAT Pune)
• IT: Registration granted u/s 12AA and 80G rejected – A colourable transaction is a transaction which is apparently a valid transaction but really unlawful and illusory. – No such circumstances exist in the present case – registration allowed – IME Trust Vs. CIT, Hapur, Chungi, Ghaziabad (2016 (2) TMI 460 ITAT Delhi)
• Time taken by CIT to decide issue of requirement of special audit is excluded from time-limit to complete assessment[2016] 66 138 (Allahabad)  U.P. State Handloom Corporation Ltd. v. CIT
• CBDT has directed that all the rectification applications must be disposed of after passing an order in writing, to be duly served upon the taxpayer concerned and not merely making necessary rectification on the AST System.Vide Instruction No. 02/2016 dated 15.02.2016.

More read:Taxation on Income from Equity and Debt Mutual Fund

Indirect Tax

• Excess Cenvat due to calculation mistake is not wrong availment .[M/s. TNT (INDIA) PVT LTD vs Commissioner of Central Excise and Service Tax BANGALORE-III; (CESTAT- Bangalore); Final Order No. 22133 / 2015]
• ST applies on C&F Agent Services despite non clearing from factory. [Somani Agencies vs. CCE & ST, Indore; (CESTAT-New Delhi); Final Order No. 50085/2016]
• CBEC has issued Service Tax and Central Excise (Furnishing of Annual Information Return) Rules, 2016 which will come into force from 1st April, 2016. Vide Notification No. 04/2016 dated 15.02.2016
• Service Tax : Where assessee had provided ‘leased vehicles’ to its officials and had merely recovered from officials excessive expenses incurred on ‘leased vehicles’ beyond entitlement of such officials, such recovery would not amount to ‘vehicle renting services to officials’ and cannot be charged to Service tax [2016] 66  154 (New Delhi – CESTAT) Coca Cola India Inc. v. Commissioner of Service Tax
• CBEC tights noose on tax evaders; mandates RBI and Electricity boards to file AIR
• Cenvat: Where details prescribed in rule 4A(1) of Service Tax Rules are available in a document, it will be a proper document for availing cenvat credit [2016] 66  128 (Kolkata – CESTAT) Vodafone Essar Spacetel Ltd. v. Commissioner of Central Excise, Customs & Service Tax
• ST: Management, Maintenance or Repair of roads (MMR) – exemption has been extended even for the earlier period from 16.06.2005 to 26.07.2009 – K.O. Periyakaruppan Vs. Union of India & CCE and P. Vivekanandan Vs. Union of India (2016 (2) TMI 472 Madras High Court)
• Refund of SAD : payment of 4 SAD has not been made by cash but has been paid using the Reward Scrip i.e. Focus Product Scheme. – there is no condition in Notification No. 102/07 that SAD should initially be paid through cash – refund allowed- (Commissioner of Customs, Goa Versus M/s Birla Furukawa Fiber Optics Ltd. – 2016 (2) TMI 390 – CESTAT MUMBAI)
• Export of services – taxability of management maintenance or repair service rendered by the respondent prior to the amendment of Export of Service Rules 2005 – The location of the client cannot be uncoupled from the performance of the service – Commissioner of Central Excise, Pune – III Versus HSBC Software Development (India) Pvt. Ltd. – 2016 (2) TMI 475 – CESTAT MUMBAI

Company  Law

Query:  We have incorporated a Pvt Ltd company in January 2014 under Companies Act 1956 when there was no provision regarding the residential status of director.

Facts of the case are- Company was incorporated in January 2014 while one director is a foreigner & other director stayed in India from 22/03/2014 to 30/09/2014. Now my question is whether this is compliance under Section 149(3) or not.

Answer:  MCA vide General circular No- 25/2014 dated 26th June 2014 clarified that residency required shall be reckoned from the date of commencement of Section -149 of CA 2013, i.e 01/04/2014.

The previous calendar year for compliance with these provisions would, therefore, be calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of Calendar year 2014 (1 April 2014- 31 December 2014).

Therefore on proportionate basis, the number of days for which director would need to be resident in India, during Calendar year 2014, shall exceed 136 days, (i.e. 4.5 months approx)

• In your case, director has stayed in India for almost 5 months & 9 days in F.Y 2014-15. So, we can infer that this is in compliance with the provisions of Section 149(3) of Companies Act 2013.
• MCA invites comments on draft rules on NCLT related provisions under Companies Act, 2013
• MCA invite comments on Revised schedule III for a co. whose financial statements are drawn up as per IND AS Rules,2015 & Draft CARO,2016 latest by 23.02.16.

Other Update

• ICSI has invited suggestions on proposed amendments to Secretarial Standards on Meetings of Board of Directors (SS-1) and on General Meetings (SS-2). The draft of revised SS-1and SS-2 are available for public comments & suggestions and suggestions in the prescribed format can be sent to ssb@icsi.edu with cctoccgrt.ssb@gmail.co m latest by Friday, February 26, 2016.
• DGFT has clarified that the IEC applications in manual mode will only be accepted till 31 MAR 2016.

Key Dates

• E-payment of DVAT & CST tax for Jan: 21.02.2016

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