corporate & other laws update november 23, 2015

Corporate and Professional Update November 23, 2015

INCOME TAX ACT

SECTION 12AA

CHARITABLE OR RELIGIOUS TRUST – REGISTRATION PROCEDURE

Cancellation of registration: Mere non-intimation of amendments in the trust deed to the department cannot ipso facto lead to cancellation of registration under section 12AA(3) – [2015] . 56 (Mumbai – Trib.)

SECTION 28(i)

BUSINESS INCOME – CHARGEABLE AS

Share dealing: Where assessee borrowed funds for purchase of shares, transactions was carried out with many brokers and transactions had resulted in crores of rupee, income earned on such transactions was to be assessed as ‘business income’ – [2015] .57 (Bombay)

SECTION 10B

EXPORT-ORIENTED UNDERTAKING

Manufacture: Where only a part of manufacturing activities was got done by assessee from outside agency and that too under direct control and supervision of managerial and technical staff available with assessee, assessee was entitled to exemption under section 10B – [2015] 23 (Allahabad)

SECTION 145

METHOD OF ACCOUNTING – ESTIMATION OF INCOME

Reassessment: Where reasons recorded for reassessment were not supplied to the assessee at the time of assessment but during appellate proceedings, there was a violation of the principle of natural justice – [2015] 361 (Calcutta)

SECTION 115BB

LOTTERY, CROSSWORD, PUZZLES, HORSE RACES, ETC., TAXON

Computation of: Where assessee suffered a loss in business, said the

loss could not be set off against betting income and total betting income was liable to be taxed under section 115BB – [2015] 37 (Madras)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustments – Royalty: Where assessee, engaged in the business of manufacturing pre-engineered building system products, made certain royalty payments to its AE, since said payments were periodically approved by RBI, TPO was not justified in determining ALP of same at nil – [2015] .55 (Hyderabad – Trib.)

STATUTES

DIRECT TAX LAWS

Finance Minister’s Budget Announcement – Phasing out plan of deductions under Income-tax Act – PRESS RELEASE, DATED 20-11-2015

SECTION 2(47)

CAPITAL GAINS – TRANSFER

Rights in a property couldn’t be deemed as transferable capital assets when such property was neither in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction activity nor commencement of the project had started – [2015]  184 (Mumbai – Trib.)

SECTION 36(1)(iii)

INTEREST ON BORROWED CAPITAL

Repayment of subsequent loan : Where assessee borrowed funds for repaying old borrowings which had been duly used for purpose of business, interest paid on subsequent borrowings was to be allowed as deduction – [2015] 63  54 (Kolkata – Trib.)

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Contributions : Contribution made by assessee firm to International Fiscal Association, in which one of its partners was a member of Executive Body, towards constructing a meetings hall in its name to hold meetings, conferences etc, was an allowable business expenditure – [2015] 6390 (Delhi)

SECTION 40(b)

BUSINESS DISALLOWANCE – INTEREST, SALARY ETC. PAID BY FIRM TO PARTNER

Salary : Where partnership deed executed provides that each partner shall be entitled to an annual salary equivalent to his percentage share of profits ‘multiplied by’ ‘Allocable Profits’, salaries paid to partners was in accordance with section 40(b) not to be disallowed – [2015]  90 (Delhi)

SECTION 45

CAPITAL GAINS – CHARGEABLE AS

Business income vs Capital gains: Share dealings : Where assessee earned profits on sale of shares, in view of fact that number of share transactions entered into during relevant year was not high and moreover 75 per cent of profits came up from shares held for more than nine months, amount in question was to be taxed as short-term capital gain – [2015] 325 (Bombay)

In whose hand : No capital gains tax on assessee just because property docs not mutated in name of wife pursuant to family settlement – [2015]  54 (Kolkata – Trib.)

SECTION 132

SEARCH AND SEIZURE

Conversion of survey into search : Where during survey conducted under section 133A, department found huge cash and incriminating documents and director of assessee-company failed to provide explanation with regard to cash and dubious entries in seized documents, survey could be converted into search under section 132 after due approval of competent authority – [2015]  88 (Allahabad)

SECTION 271(1)(c)

PENALTY – FOR CONCEALMENT OF INCOME

Disallowance of claim, effect of : Auditor’s report cannot override provisions of Act and, thus, merely because assessee’s false claim for deduction is supported by a Chartered Accountant’s opinion, this fact per se cannot absolve assessee from penalty under section 271(1)(c) – [2015]  89 (Chennai – Trib.)

Non-compete fee : Where for assessment year 1996-97 under an agreement, assessee transferred one of its business to other company but continued its business using its own logo, trade name, licenses and permits, no part of the non-compete fee received by assessee under the aforesaid agreement could be treated as considerations for goodwill and it was not taxable as income – [2015] 62 188 (Madras)

SECTION 43 BUSINESS DISALLOWANCE – CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAYMENT

 Contingent liability: Where import contract stated that after purchase liability in respect of customs duty, excise duty, penalty, sales tax, etc., would be paid by assessee, since liability, was contingent upon uncertain fact, deduction under section 43B was not permissible – [2015]  75 (Delhi)

Clarification on Unautheticated Reports on Conciliation in Vodafone Case – PRESS RELEASE, DATED 18-11-2015

SECTION 68 CASH CREDITS

Gifts : Where assessee claimed that during year his minor children had received gifts of Rs. 3.71 Lakhs from four relatives and Assessing Officer rejected gifts and added amount in income of assessee, since all ingredients of valid gifts had been proved by assessee, impugned addition was not justified – [2015] 62 123 (Allahabad)

SECTION 80PDEDUCTIONS – INCOME OF CO-OPERATIVE SOCIETIES

 Credit societies: SLP granted against High Court’s order where it was held that since assessee was a credit co-operative society, engaged in providing credit facilities to its members only, it was entitled to claim deduction under section 80

SECTION148 INCOME ESCAPING ASSESSMENT – ISSUE OF NOTICE FOR

 Condition precedent/Jurisdiction : Reassessment by jurisdictional Assessing Officer on basis of notice issued by Income-tax Officer collecting AIR information, but having no jurisdiction over assessee, is invalid – [2015 (Lucknow – Trib.)

SECTION 153C SEARCH AND SEIZURE – ASSESSMENT OF INCOME OF ANY OTHER

 PERSON

Delhi HC lays down principles to a void vexatious proceedings u/s 153C against person other than person searched – [2015] 62 

SECTION 194LA DEDUCTION OF TAX AT SOURCE – PAYMENT OF COMPENSATION

ON ACQUISITION OF CERTAIN IMMOVABLE PROPERTY

The question of compulsory acquisition will arise only where the compensation cannot be determined by agreement. In other words when the compensation is based on an agreement between State Government and owner of the land, no more can we say that it is a compulsory acquisition – [2015] 62 393 (Bangalore – Trib.)

SECTION 245D SETTLEMENT COMMISSION – PROCEDURE ON APPLICATION UNDER SECTION 245C

Abatement : Where assessee had not paid requisite amount of taxes and interest on revised undisclosed income on or before specified date, settlement application filed by assessee stood abated – [2015]  82 (Gujarat)

SECTION 260A HIGH COURT – APPEALS TO

Court fee : As section 52A of Kerala Court fees, Act specified court fee in appeal before High Court at 1% of income assessed by Assessing Officer, but in many cases such assessed income might not at all survive, State Government had to make required amendment; High Court opined that instant matter was to be stayed till information about steps taken by State Government was provided – [2015] 62  389 (SC)

SECTION 271(1)(c) PENALTY – FOR CONCEALMENT OF INCOME

Interest income: Penalty could not be levied under section 271(1)(c) on ground that assessee applied different system of accounting for interest expenses and interest received – [2015] 62  81 (Gujarat)

COMPANIES ACT SECTION 397 OPPRESSION AND MISMANAGEMENT

Right provided under sections 397 and 398 are statutory in nature and vested with parties to prevent oppression and mis-management against member or company and such reliefs cannot be granted by civil court; hence on dismissal/withdrawal of civil suit and approaching CLB, principles of res judicata not applicable – [2015]  277 (CLB – New Delhi)

COMPTROLLER AND AUDITOR GENERALS (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT SECTION 20(1) AUDIT OF ACCOUNTS OF CERTAIN AUTHORITIES OR BODIES

Direction of Delhi Govt ordering tariff audit of discoms by CAG quashed as the opportunity given to discoms to represent against the proposal for audit was not a “reasonable opportunity” within the meaning of section 20(3) of the CAG Act as the opportunity was given without disclosing the public interest in which audit of DISCOMS by CAG was deemed expedient and as the opportunity to represent was given before consultation with CAG and before the terms and conditions for audit were agreed between GNCTD and CAG – [2015]  394 (Delhi)

CENTRAL EXCISE ACT

SECTION 5A

EXEMPTIONS – CENTRAL EXCISE – PRIMARY GOLD

‘Gold bar’ recovered from ‘gold mud’ is a ‘primary gold’ derived from ‘mud form of gold’; hence, same is exempt from duty and exemption cannot be denied merely because ‘gold mud’ was, in turn, recovered from ‘anode slime’ – [2015] 49 (SC)

SECTION 4

VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE – GENERAL

Where, vide interim orders of High Court, ‘controlled prices’ of sugar were enhanced and assessees were allowed to sell sugar at ‘higher prices’, excise duty was also payable based on ‘higher prices’ – [2015] .48 (SC)

CENTRAL EXCISE TARIFF ACT

SECTION 2

CLASSIFICATION – PLASTIC LAMINATED JUTE FABRICS

Plastic laminated jute fabrics, meant for floor coverings, are dominantly jute products; hence, they are classifiable as ‘floor covering made of jute with plastic coating’ under Heading 5904 and not as ‘plastic product’ under Chapter 39 – [2015] . 50 (SC)

CLASSIFICATION – LIFTING MACHINERY

Where issue involved is an important question having reasonably wide ramifications, appellant may be allowed to raise new grounds for first time before Supreme Court – [2015]  47 (SC)

CENTRAL EXCISE ACT SECTION 11D RECOVERY – OF SUMS COLLECTED IN EXCESS OF DUTY/TAX

Entire burden of proving that assessee has collected money representing duty/tax rests on revenue; however, where revenue had failed to discharge said burden, Tribunal was correct in remanding matter back – [2015]  257 (Andhra Pradesh)

SECTION 35C APPEALS – RECTIFICATION OF MISTAKES/REVIEW – APPELLATE TRIBUNAL

An error, which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions does not amount to ‘error apparent on face of record’ and is not a rectifiable mistake – [2015]  392 (New Delhi – CESTAT)

CENTRAL EXCISE RULES RULE 19 EXPORTS WITHOUT PAYMENT OF DUTY

Since there was no condition stipulated in main exemption notification 42/01 that supplementary instruction to be issued by CBEC would be mandatory, assessee need not comply with such supplementary instruction so as to furnish bond to avail benefit of main exemption notification – [2015] 62 246 (New Delhi – CESTAT)

RULE 26 PENALTIES – FOR CERTAIN OFFENCES

Where appellants were not found to have acquired possession or handled any excisable goods in any manner that was liable to confiscation, no penalty could be imposed – [2015] 62 194 (Mumbai – CESTAT)

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

Clarification on self-sealing and self-examination of bulk cargo – Prescribed procedures for allowing export without sealing in packages or container – CIRCULAR NO.1011/18/2015-CX, DATED 30-10-2015

Cenvat Credit (Fifth Amendment) Rules, 2015 – Amendment in rule 3 – NOTIFICATION NO.22/2015-C.E. (N.T.), DATED 29-10-2015

Filing of Reconciliation return for Year 2014-15 – CIRCULAR NO.28 OF 2015-16, DATED 30-10-2015

 

SECTION 4

VALUATION UNDER CENTRAL EXCISE – TRANSACTION VALUE

Transaction value is determined at time of clearance of goods at factory; hence, installation and commissioning charges for Erection, Commissioning, Installation, etc. of machines at buyer’s site cannot be included in value –[2015] 83 (SC)

SECTION 4A

VALUATION UNDER CENTRAL EXCISE – RETAIL SALE PRICE/MRP BASED

In case three different MRPs are affixed on ‘same package’ even though for ‘different areas’, goods will be assessed to duty as per Explanation 2(a) to section 4A taking highest MRP as the basis. – [2015]  84 (SC)

SECTION 11D

DUTY OF EXCISE COLLECTED FROM BUYER TO BE DEPOSITED WITH CENTRAL GOVERNMENT

Assessee, being only a “dealer” and not a “manufacturer” was not liable to pay differential amount of excise duty under section 11D on fluctuation in rate of petroleum products – [2015] 51 (SC)

SECTION 32K

SETTLEMENT COMMISSION – POWER TO GRANT IMMUNITY FROM PROSECUTION AND PENALTY

Settlement Commission is entitled to exercise its discretion in imposing penalty on company as well as against its directors on recording elements of mens rea in concealing duty liability – [2015]  52 (Calcutta)

SECTION 35F

DEPOSIT – OF DUTY DEMANDED OR PENALTY LEVIED

Section 35F, as substituted by the Finance (No. 2) Act, 2014, mandating pre-deposit of 7.5% or 10% as a pre-condition for filing appeal is valid. – [2015]  163 (Karnataka)

CORPORATE LAWS

SEBI ACT

SECTION 11B

POWER AND FUNCTIONS OF BOARD

Where plaintiff was aware from September 2013 about its non-inclusion as part of promoter and promoter-company of defendant No. 1 in shareholding pattern filed by defendant No. 1 with stock exchange, but it did not approach SEBI when there was discussion about Letter of Offer or issue of right shares by defendant-company, suit filed by plaintiff to pass a decree declaring Letter of Offer issued by defendant as unlawful, null and void ab-initio for depriving plaintiff of its special right as prompter was to be dismissed. – [2015]  185 (Delhi)

CORPORATE LAWS

COMPANIES ACT

SECTION 391

COMPROMISE AND ARRANGEMENT

Where main purpose of proposed scheme of amalgamation between trnsferee company and transferor companies was to streamline affairs of companies,tax planning and scheme did not in any manner affect interest of any of stake holders, including public,proposed scheme of amalgamation was to be sanctioned. –[2015] . 203 (Andhra Pradesh)

Prior Approval for Acquisition of Shares or voting rights in Private Sector Banks : Directions, 2015 – MASTER DIRECTION DBR.PSBD.No.56/16.13.100/2015-16, DATED 19-11-2015

Review of provision of factoring services by banks – CIRCULAR DBR.No.FSD.BC.58/24.01.007/2015-16, DATED 19-11-2015

Non-Operative Financial Holding Company (NOFHC) – Application of Capital Adequacy Norms – CIRCULAR DBR.No.57/21.06.201/2015-16, DATED 19-11-2015

Prevention of Money-Laundering (Maintenance of Records) Third Amendment Rules, 2015 – Amendment in Rules 2 and 7 – NOTIFICATION NO. GSR 730(E) [NO.7/2015 (P.12011/1/2013-SO (E.S. CELL)], DATED 22-9-2015

IRDAI (Other Forms of Capital) Regulations, 2015 – NOTIFICATION F.NO.IRDAI/REG/20/110/2015, DATED 13-11-2015

Internet banking facility for customers of Regional Rural Banks – CIRCULAR DBR.RRB.BC.No.59/31.01.001/2015-16, DATED 19-11-2015

CCI imposes penalties upon Airlines for concerted action in Fixing Fuel Surcharge (FSC) on Cargo transport –PRESS RELEASE, DATED 17-11-2015

Submission of officially valid documents in respect of change of name on account of marriage or otherwise – Amendment in Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 – CIRCULAR DBR.AML.BC.NO.46/14/.01.001/2015-16, DATED 29-10-2015

Disclosures in abridged prospectus and price information of past issues handled by Merchant Bankers – CIRULAR NO.CFD/DIL/7/2015, DATED 30-10-2015

No fresh permission/renewal of permission to los of foreign law firms – Supereme Court’s Directions – A.P. (DIR SERIES 2015-16) CIRCULAR NO.23, DATED 29-10-2015

Early recognition of financial distress, prompt steps for Resolution and fair recovery of lenders : Framework for revitalising distressed assets in economy – Review of Guidelines On Joint Lenders’ Forum (JLF) And Corrective Action Plan (CAP) – CIRCULAR DNBR.CC.PD.NO.070/03.10.01/2015-16, DATED 29-10-2015 Sovereign Gold Bond 2015-16 – PRESS RELEASE : 2015-2016/1047, DATED 30-10-2015

Instructions for obtaining certificate of registration under IRDAI (Registration of Corporate Agents) Regulations, 2015 – CIRCULAR NO. IRDA/CAGTS/GDL/LCE/202/11/2015, DATED 18-11-2015

FEM (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015 – Amendment in Regulation 4 – NOTIFICATION [NO.FEMA.345/2015-RB]/GSR 859(E), DATED 16-11-2015

FEM (Transfer or Issue of Security by A Person Resident Outside India) (Eleventh Amendment) Regulations, 2015 – Amendment In Regulations 2, 5, 9 & 12 and Insertion of Schedule 11 – NOTIFICATION [NO.FEMA.355/2015-RB]/GSR 858(E), DATED 16-11-2015

Prevention of Money-Laundering (Maintenance of Records) Fourth Amendment Rules, 2015 – Amendment in Rule 9A – NOTIFICATION NO. GSR 882(E) [NO.8/2015 (P.12011/15/2011-S.O. (ES CELL)], DATED 18-11-2015

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More read :

• quick overview on income tax deduction u/s-80c-80u

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• Additional deduction on new payroll expenses

• More read :
  • quick overview on income tax deduction u/s-80c-80u
  • Documents required for registration u/s 12A
  • Additional deduction on new payroll expenses