corporate and professional update january 6, 2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 6, 2016

INCOME TAX ACT

SECTION 2(15)

CHARITABLE PURPOSE

Object of general public utility : Where assessee-society was providing latest information and training to those persons who were already in relevant field of advertising communication, etc. and in such process if certain persons became super-specialists in particular field and institution was charging fee, case would not fall under proviso to section 2(15)

Read our articles:  Top Taxation Relaxation to MSMS

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Commission : Foreign export commission paid through banking channels to foreign commission agent, who sold assesse’s product in foreign countries, could not be disallowed as unverifiable

SECTION 80-IA

DEDUCTIONS – PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS

The use of non-obstante clause in section 80-IA(2A) would show that tax holiday to undertaking providing telecommunication services is in respect of “profits of eligible business” and not restricted to “profits derived from eligible business” as mentioned in section 80-IA(1)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Export of commodities to AE at the same price at which those were purchased from local market did not call for transfer pricing adjustment if transaction was made by assessee to retain the status of Star Export House

Comparables and adjustments/Comparables – Illustration : Leading provider of business process outsourcing service cannot be compared to company rendering technical support services by its own

Comparables and adjustments/Adjustments – Risk adjustment : Where an assessee, a captive service provider does not assume any risk or takes lesser risk as compared to comparable company which undertakes higher risks, it is entitled to some risk adjustments

SECTION 145

METHOD OF ACCOUNTING

Rejection of accounts : Books of account were rejected, where majority of purchases were found to be not verifiable

COMPETITION ACT

SECTION 4

PROHIBITION OF ABUSE OF DOMINANT POSITION

Where OP, distributor of natural gas, invoked ‘pay for if not taken’ liability under gas sales agreement (GSA) with informant, conduct of OP was not abusive as GSA was entered into by parties after thorough negotiation

SERVICE TAX

SECTION 65(64)

MANAGEMENT, MAINTENANCE OR REPAIR SERVICE

Since there was difference of opinion between two members of Tribunal as to whether services provided by assessee engaged in exporting software consultancy, development of software, maintenance or repair of software and management consultancy in relation to ERP software implementation were taxable under head ‘management maintenance or repair’ service or ‘consulting engineers’ service and to what extent same was taxable, matter was to be referred to Third Member

SECTION 67

VALUATION OF TAXABLE SERVICES – EXCLUSIONS

Interest was excluded from ‘taxable value’ vide Explanation 1(viii) to section 67 from 10-9-2004; since insertion of said Explanation had removed an anomaly that existed earlier, it should be treated as clarificatory in nature and retrospective from 16-8-2002

CENTRAL EXCISE ACT

SECTION 3

CHARGE/LEVY

Toilet preparations containing alcohol are subject to excise duty under Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and said duty is collected by States; duty cannot be demanded thereon under Central Excise Act

In case clearance by EOU to job-workers in DTA, local sale price in India cannot be regarded as ‘customs value’ under proviso to section 3(1) of Central Excise Act, 1944; value is to be determined as per customs law

SECTION 11A

RECOVERY – OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED

When first notice had merely raised issue of exemption, second notice raised upon new facts regarding valuation, can validly invoke extended period of limitation

CST & VAT

SECTION 8 OF CENTRAL SALES TAX ACT, 1956

RATE OF TAX – CONCESSIONAL RATE OF TAX

Where assessee, a works contractor, applied for inclusion of construction equipment, plant, machinery and tools used in process of execution of works contract in certificate of registration under Central Sales Tax Act, said items were eligible for inclusion

CENVAT CREDIT RULES

RULE 2(l)

CENVAT CREDIT – INPUT SERVICE – CAB SERVICES

Cab services utilised by a BPO company for transportation of its employees to and from work place and their homes, are eligible for input service credit

RULE 3

CENVAT CREDIT – REMOVAL OF INPUTS/CAPITAL GOODS

No cenvat reversal can be demanded on exchange of inputs with associate/related companies, as demand is revenue neutral; however, for infraction of procedural rule 3(5) of CENVAT Credit Rules, 2004, penalty is leviable

RULE 9

CENVAT CREDIT – DOCUMENTS ON WHICH CREDIT MAY BE TAKEN

Non-mentioning of registration number of service provider cannot be ground to deny input service credit for those services which are eligible

STATUTES

DIRECT TAX LAWS

Section 115JB, read with sections 115JA and 271(1)(c), of the Income-tax Act, 1961 – Minimum Alternate Tax – Penalty under section 271(1)(c) wherein Additions/ Disallowances made under normal provisions of the said Act but Tax levied under MAT provisions under sections 115JB /115JC, for Cases prior to Assessment Year 2016-17

Section 153C, read with section 158BD, of the Income-tax Act, 1961 – Search and Seizure – Assessment of income in case of other person – Recording of Satisfaction note under section 158BD/153C of said Act

Income-tax (Twenty Second Amendment) Rules, 2015 – Substitution of rules 114B, 114C, 114D, 114E, Form No.60, 61 and 61A xes, Tax assistant Group C posts, Recruitment Rules, 2015