corporate and professional update february 7,2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 7,2016

INCOME TAX ACT

SECTION 40A(3)

BUSINESS DISALLOWANCE – CASH PAYMENT EXCEEDING PRESCRIBED LIMITS

Agent in villages : Where assessee made cash payments in excess of Rs. 20,000 for purchase of crackers, in absence of even names of agencies or agents or retailers living in villages to whom said payments were made on a day-to-day basis, impugned disallowance made by authorities below under section 40A(3) was to be confirmed – [2016] 65 189 (Madras)

SECTION 47

CAPITAL GAINS – TRANSACTIONS NOT REGARDED AS TRANSFER 

Others : Where assessee had sold his residential property in April, 2010 and invested sale proceeds in August, 2010 in another residential property and in November, 2010 he had settled new property to his daughter out of love and affection, settlement of property was a gift falling under section 47(iii) and assessee was entitled to exemption under section 54 in respect of capital gains arising on sale of property – [2016] 65 211 (Chennai – Trib.)

SECTION 69A

UNEXPLAINED MONEYS

Pay order : Where Authorised Officer during search seized a letter dated 12-4-1999 from a colleague of assessee, which was written by Chief Manager of Union Bank of Switzerland to assessee stating that pay order in favour of assessee payable in India had expired its encashment period and fresh pay order was in process of being issued and thereafter Assessing Officer assessed assessee for assessment year 2000-01 and on basis of above letter made certain addition to his income, since assessee had not established that amount mentioned in pay order was not in nature of income, impugned addition deserved to be upheld – [2016] 65 81 (Mumbai – Trib.)

SECTION 69B

UNDISCLOSED INVESTMENTS

Jewellery : Where Assessing Officer on basis of documents seized on search made addition to income of assessee on account of unexplained ornaments, watches and cash in hand and assessee in that regard stated that he had shown said assets in account books for current assessment year as opening capital carried over from generations as part of family heirloom, since income returned by assessee for preceding nine years was meager, impugned addition deserved to be confirmed – [2016] 65181 (Mumbai – Trib.)

SECTION 69C

UNEXPLAINED EXPENDITURE

Personal expenses : Where Assessing Officer made addition of Rs. 28.50 lakhs to income of assessee on account of life style other expenditure, said estimate, to be valid in law, had to be an informed one, taking into account different variables or attributes on which it depended and since no such exercise had been attempted by Assessing Officer, addition required to be made on basis of assessee’s own estimate at Rs. 7.50 lakhs

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustment – AMP expense : Where existence of an international transaction involving AMP expense with an ascertainable price is unable to be shown to exist, even if such price is nil, Chapter X provisions cannot be invoked to undertake a TP adjustment exercise – [2016] 65 141 (Delhi)

Comparables and adjustments/Adjustments-General Where assesse e-company received support services from AE in terms of marketing services, operations and logistics services etc. on basis of which it managed to reduce its raw material cost and achieve higher sales, TPO could not determine ALP of said services at nil taking a view that services so rendered had not resulted in any benefit to assessee – [2016] 65  188 (Delhi – Trib.)

A Comparables and adjustments/Adjustments – Sale proceeds realization : Where transactions relating to purchase and sale entered into by assessee with its AE were found to be at arm’s length, since early or late realization of sale proceeds was integral part of main transaction of sale made to AE, impugned addition made by TPO on account of delay in realisation of dues from AE was to be set aside – [2016] 65 187 (Bangalore – Trib.)

SECTION 194J

DEDUCTION OF TAX AT SOURCE – FEES FOR PROFESSIONAL OR TECHNICAL SERVICES

Payment of wheeling charges : Where assessee-company paid wheeling charges for transportation of electricity, said charges paid could not be characterized as fee for technical service and no deduction under section 194J could be made – [2015] 62  166 (Delhi)

SECTION 268A

FILING OF APPEALS OR APPLICATION FOR REFERENCE BY INCOME-TAX AUTHORITIES

Circular No. 21 of 2015 : Where department against order of Commissioner (Appeals) dated 15-1-2009 filed appeal before Tribunal, wherein tax effect was less than Rs. 10 lakhs, keeping in view Circular No. 21 of 2015, dated 10-12-2015 and also provisions of section 268A, department should not have filed instant appeal – [2016] 65 212 (Delhi – Trib.)

COMPANIES ACT

SECTION 391

COMPROMISE AND ARRANGEMENT

Composite scheme involving more than one independent scheme of arrangement is maintainable – [2016] 65 159 (Punjab & Haryana)

SECTION 394

AMALGAMATION

Where there was nothing prejudicial to interest of creditors, members of both transferor and transferee company or to public interest and all required procedures had been followed, scheme of amalgamation so proposed had to be sanctioned – [2016] 65  183 (Rajasthan)

SARFAESI ACT

SECTION 35

PROVISION OF ACT TO OVERRIDE OVER OTHER LAWS

A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant.

A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression ‘any other law for the time being in force’ as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State legislatures. It can only extend to the laws operating in the same field. – [2016] 65  80 (SC)

SERVICE TAX

SECTION 65(19)

TAXABLE SERVICES – BUSINESS AUXILIARY SERVICES – STAY ORDER

New percentage-based pre-deposit law is applicable to appeals filed on or after 6-8-2014 and all pending appeals/stay applications filed prior to 6-8-2014 shall be governed by erstwhile law – [2016] 65  133 (Madras)

CENTRAL EXCISE ACT

SECTION 11A

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

Where all relevant facts were within knowledge/notice of Department while issuing first notice and said notice was even dropped on merits, department cannot issue second notice invoking extended period alleging mis-statement/mis-declaration on part of assessee – [2015] 62  200 (SC)

CENTRAL EXCISE RULES

RULE 57A

CENVAT CREDIT – INPUT

“Aquachem” used for purifying water used in manufacture of cement is eligible for input credit and parts/accessories used in construction/manufacture of ‘plant and machinery’ are eligible for capital goods credit –[2016] 65  114 (Chennai – CESTAT)

STATUTES

 Amendment to SEBI Circular CIR/MRD/DSA/33/2012, dated 13-12-2012 pursuant to amendment in Regulation 2(1)(b) of SECC Regulations, 2012 – CIRCULAR NO.SEBI/HO/MRD/DSA/CIR/P/2016/30, DATED 22-1-2016

Competition Commission of India (Salary, Allowances, other Terms and Conditions of Service of the Secretary and Officers and other Employees of the Commission and the Number of such Officers and other Employees) (Second Amendment) Rules, 2016 – Amendment in Schedule I – NOTIFICATION NO. GSR 83(E) [F.NO.5/21/2015-CS], DATED 14-1-2016

Know Your Client Requirements – Clarification on Voluntary Adaptation of Aadhaar based E-Kyc Process –CIRCULAR NO.MIRSD/29/2016, DATED 22-1-2016

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

Section 5A of the Central Excise Act, 1944 – Power to grant exemption from duty of excise – Amendment in Notifications No.56/2012-C.E. and No.57/2002-C.E., both dated 14-11-2002 – NOTIFICATION NO.3/2016-C.E., DATED 22-1-2016

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