CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 20, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 20, 2016

Income Tax Act

SECTION 9

INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Business income : Where assessee, engaged in operation and maintenance of international airport, obtained services of non-resident companies for running duty free retail shops, matter was to be remanded back to determine as to whether commission paid to them was taxable in India after applying definition of term ‘business connection’ as mentioned under section 9(1)(i) – [2016] 66 137 (Cochin – Trib.)

Royalties and fees for technical services : Where assessee made payment to a China based company for designing, drawing, supply and installation of three passenger boarding bridges at Airport, matter was to be remanded back to determine as to whether said payment was taxable in India in terms of ‘fee for technical services’ under section 9(1)(vii) as well as article 12(3) of India-China DTAA – [2016] 66 137 (Cochin – Trib.)

SECTION 10A

FREE TRADE ZONE

Computation of deduction : Where Assessing Officer had disallowed assessee’s claim for deduction under section 10A and Commissioner (Appeals) allowed relief and thereafter Tribunal, on appeal by revenue, following judgment of Tribunal of an identical case confirmed order of Commissioner (Appeals), matter required fresh examination on merits – [2016] 66 152 (Karnataka)

SECTION 11

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

Sub-section (2) : Where assessee-trust spent 85 per cent of its income for construction of building to be used for educational purpose, mere fact that it advanced certain amount to its sister concern out of surplus accumulated which remained at its disposal, there was no violation of provisions of section 11(2) and, thus, assessee’s claim for exemption of income was to be allowed – [2016] 66 127 (Pune – Trib.)

SECTION 15

SALARIES – CHARGEABLE AS

Conditions precedent : Where assessee was engaged as a contractor on contractual basis by one ‘S’ and he disclosed receipts from ‘S’ as income from business or profession, whereas lower authorities treated said receipts as income from salary, matter required to be remanded to Tribunal to decide same afresh – [2016] 66 123 (Punjab & Haryana)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustments – Interest : Where TPO made addition to assessee’s ALP in respect of loan advanced to its AE, in view of fact that assessee had advanced said loan at 247 basis points above LIBOR whereas Indian banks were charging 250 basis points above LIBOR on similar loans, impugned addition was to be set aside – [2016] 66 120 (Delhi – Trib.)

Comparables and adjustments/Comparables – Illustrations : In case of assessee, engaged in rendering software development services to its AE, companies engaged in both activities, i.e., development of own software products as well as providing software development services, could not be accepted as valid comparables while determining ALP – [2016] 66 150 (Hyderabad – Trib.)

SECTION 143

ASSESSMENT – ISSUE OF NOTICE

Requirement of : Where assessee did not file return under section 139(1); or under section 139(4); or in response to section 148; or in response to section 142(1); Assessing Officer was not required to issue notice under section 143(2) before completing assessment under section 143(3), read with section 147 – [2016] 66 127 (Pune – Trib.)

SECTION 11

PENALTY – FOR CONTRAVENTION OF PROVISIONS OF ACT, RULES, ORDERS AND EXPORT AND IMPORT POLICY

By virtue of Nominated Agency Certificate granted to petitioners, they were subject to 100 per cent export condition as stipulated in Circular No. 15, dated 22-7-2013 issued by RBI and thus by diverting 200 kgs of gold into domestice market they had violated RBI guidelines – [2016] 66 153 (Bombay)

Service Tax

SECTION 86

APPEALS – ORDERS OF – APPELLATE TRIBUNAL

Tribunal may pass Final Order in one case and adopt same in other batch of cases; however, practice of clubbing common issues and passing interim order laying down law is incorrect because no law can be laid down in an interim order – [2016] 66 133 (Karnataka)

Central Excise Act

SECTION 4

VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE – TESTING AND INSPECTION CHARGES

Where testing of excisable goods is done at request of buyer and testing charges are reimbursed by buyer, such testing charges are not includible in ‘excisable value’ as goods are marketable even without such testing /inspection done on behalf of buyer – [2016] 66 135 (New Delhi – CESTAT)

SECTION32F

SETTLEMENT OF CASES – PROCEDURE ON RECEIPT OF APPLICATION

Settlement Commission has all powers as that of a Central Excise Officer; hence, Settlement has power to issue summons and take evidence and may also adjudicate cases involving complex issues of fact and law –[2016] 66 134 (Bombay)

Central Excise Tariff Act

CHAPTER 38

CLASSIFICATION OF GOODS – CHEMICALLY COATED MICRONIZED MINERALS AND RED OXIDE

Where assessee cleared chemically coated micronized minerals and red oxide and claimed that they were classifiable under Chapter 25.05, chemically coated micronized minerals were classifiable under Chapter 3824.90 and red oxide under Chapter 2821.10 – [2016] 66  121 (Chennai – 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)

Cst & Vat

SECTION 5A OF GUJARAT VALUE ADDED TAX ACT, 2003

TAX INCIDENCE AND LEVY – ZERO RATED SALE

Where assessee entered into a works contract with one ‘A’ for construction of power project in SEZ and Determining Authority held that, in view of section 5A, assessee was not liable to pay tax on sale of goods to ‘A’ in SEZ, but there should be an endorsement of Customs Authority to prove that sale was made to developer of SEZ, and thereafter assessee obtained endorsement of Customs Authority on purchase bills before entry of goods into SEZ, endorsement on purchase bills was sufficient compliance – [2016] 66 151 (Gujarat)

Statutes

DIRECT TAX LAWS

Section 80-1A of the Income-tax Act, 1961 – Deductions – Profits and gains from Infrastructure Undertakings – Clarification of Term ‘Initial Assessment Year’ in section 80-1a(5) – CIRCULAR NO.1/2016 [F.NO.200/31/2015-ITA-I], DATED 15-2-2016

The Section 133 of The Income-tax Act, 1961 – Income-tax Authorities – Power To Call For Information – Uidelineson procedure to be followed for seeking information from Financial Intelligence Unit-India (Fiu-Ind) and confidentiality to be maintained in handling such information – LETTER F.NO.1(153)/DIT(R)/I.T. DEMAND CATE./2015-16/170-4, DATED 15-2-2016

Section 154 of the Income-tax Act, 1961 – Recitificatgion of mistake – Apparent from records – Passing rectification order under section 154 – INSTRUCTION NO.2/2016 [F.NO.225/305/2015-ITA.II], DATED 15-2-2016

A Section 154 of the Income-tax Act, 1961 – Rectification of mistake – Apparent from records – Following prescribed time-limit in passing order under section 154(8) – INSTRUCTION NO.1/2016 [F.NO.225/305/2015-ITA.II], DATED 15-2-2016

CORPORATE LAWS

IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd’s) (First Amendment) Regulations, 2016 – Amendment in Regulations 12, 13, 15, 16, 28 and substitution of regulation 4 – NOTIFICATION F.NO.IRDAI/REG/1/113/2016, DATED 28-1-2016

Amendments to SEBI (Mutual Funds) Regulations, 1996 – Amendment in Circular NO.CIR/IMD/DF/21/2012, Dated 13-9-2012; Circular NO. CIR/IMD/DF/24/2012,Dated 19-11-2012 and CIRCULAR NO.CIR/I MD/DF/05/2014,Dated 24-3-2014 – CIRCULAR NO.S EBI/HO/IMD/ DF2 / CIR/P/2016/35, DATED 15-2-2016

SEBI (Mutual Funds) (Amendment) Regulations, 2016 – Amendment in Seventh Schedule – NOTIFICATION NO.SEBI/LAD-NRO/GN/2015-16/034, DATED 12-2-2016

Ministry of Finance, Adjudicating Authority under the Prevention of Money-Laundering Act, 2002, Registrar (Group ‘A’ Post) Recruitment Rules, 2016 – NOTIFICATION NO. GSR 161(E) [F.NO.A-12018/10/2010-SO (E.S. CELL)], DATED 12-2-2016

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