Corporate and professional update january 7, 2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 7, 2016

INCOME TAX ACT

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME

Rule 8D : When assessee itself admitted that a disallowance had to be made with regard to expenditure for earning of income which was exempted from taxation under Act, such expenditure had to  computed not on ad hoc basis by estimating same but as per method prescribed under rule 8D(2)

SECTION 48

COMPUTATION OF– CAPITAL GAINS 

Expenses in connection with transfer : Where assessee received a property with clause in his mother’s will providing overriding title in favour of his three sisters, payment made by assessee to his sisters for acquiring absolute title in property would be reduced as expenditure while computing capital gain on sale of said property

SECTION 54EC

CAPITAL GAINS – NOT TO BE CHARGED ON INVESTMENT IN CERTAIN BONDS

Bonds, availability of : Where REC Bonds in which assessee wanted to invest were not available on date on which period of six months for making such investment under section 54EC expired and as soon as such bonds became available, assessee made investment at earliest possible opportunity, exemption under section 54EC was to be allowed to assessee.

SECTION 69

UNEXPLAINED INVESTMENTS

Unaccounted sales : Where assessee failed to justify his stand that there was no unaccounted sale as indicated in seized documents, addition made on basis of seized documents was justified.

Stocks : Where there was no material to show that assessee had received any consideration in excess of amount shown in sale deed, merely because valuation given to bank to avail higher bank limit, no addition could be made.

SECTION 80G

DEDUCTIONS – DONATION TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS

Trusts or organizations, which claim exemption under section 80G and perform their duties to further their aims and objects, are duty bound to maintain proper accounts

SECTION 90

DOUBLE TAXATION RELIEF – WHERE AGREEMENT EXISTS

Taxes covered : Surcharge and education cess is not leviable when tax rate is prescribed under DTAA

SECTION 92CA

PRICING – REFERENCE TO TPO TRANSFER

Reference under section 92CA made to TPO where there was no assessment pending was invalid and bad in law, hence, order of TPO pursuant to illegal reference could not be used in reassessment proceedings by Assessing Officer and therefore reassessment proceedings based on illegal reference were held to be void ab initio

SECTION 145

METHOD OF ACCOUNTING – SYSTEM OF ACCOUNTING

System of accounting : Position prior to amendment by Finance Act, 1997: Assessee having opted for mercantile system of accounting in respect of all other activities, could have adopted cash system in respect of sales of newspaper and advertisement revenue.

SECTION 245F

SETTLEMENT COMMISSION – POWER AND PROCEDURE OF

Income Tax Settlement Commission has no right to direct a special audit u/s 142(2A) in the course of settlement proceedings under Chapter XIX-A of the Act as assessment of the type contained in section 143(3) is outside the purview of settlement proceedings

SECTION 293

CIVIL COURTS, BARS OF SUITS IN

Scope of Court’s power : Where department filed an application under section 132A for handing over of silver bullion seized by police from assessee, in view of fact that neither police nor department had gathered any information regarding ownership of silver bullion, Trial Court was justified in passing order of handing over of goods to department subject to payment of cash security.

Read our articles:  Top Taxation Relaxation to MSMS

Highlights of International Taxation

COMPANIES ACT

SECTION 290

DIRECTORS – VALIDITY OF ACTS OF

The benefit of Section 290 of the 1956 Act (section 176 of the 2013 Act) is generally available to third parties who enter into transactions with a company not knowing what the internal structure and mechanism of the company.

SERVICE TAX

SECTION 65(19)

TAXABLE SERVICES – BUSINESS AUXILIARY SERVICES

Where assessee-franchisee was only engaged in trading of SIM cards/recharge coupons of BSNL and his relationship with BSNL was on principal-to-principal basis and assessee was not acting as agent of BSNL and BSNL had already paid service tax on full MRP, no service tax could be demanded from assessee.

SECTION 65B(44)

SERVICE – ACTIVITY CARRIED OUT FOR A CONSIDERATION

Provision of a facility by club to its members is an ‘activity’ for consideration and since clubs and members are deemed to be separate persons under Explanation 3(a) to section 65B(44), Membership fee/Entrance fee for provision of such facilities is liable to service tax.

CENTRAL EXCISE ACT

 APPEALS – BINDING NATURE OF PRECEDENTS – HIGH COURT

Judgment passed by co-ordinate Bench of High Court is binding on another bench of High Court even if earlier judgment of High Court has not been appealed against by Revenue owing to monetary limits.

CUSTOMS ACT

SECTION 125

 CONFISCATION – RE-CONFISCATION

Once goods were confiscated in hands of importer and allowed to be redeemed on payment of redemption fine and penalty, same cannot be re-confiscated in hands of bona fide purchaser of said goods.

STATUTES

CORPORATE LAWS

SEBI (Terms and Conditions of Service of Chairman and Members) Amendment Rules, 2015 – Amendment in Rule

INDIRECT TAX LAWS 

Reference regarding proper Certificate under Notification No.108/95-C.E., Dated 28-8-1995

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