corporate and professional update on direct taxes

 

CORPORATE AND PROFESSIONAL UPDATE ON DIRECT TAXES

• The resultant profits and gains derived from or derived by an industrial undertaking because of the insurance subsidy have to be treated as deductible in terms of the provision of Section 80IB or 80IC- (Deputy Commissioner of Income-Tax Versus Meghalaya Sova Ispat Alloys Pvt Ltd And Vica-Versa – 2015 (12) TMI 125 – ITAT KOLKATA).

• The interest income cannot notionally be excluded for the purpose of determining the allowable deduction of remuneration paid to the partners under Section 40b- (Akshar Associates Versus ACIT, Circle – 10, Ahmedabad – 2015 (12) TMI 123 – ITAT AHMEDABAD)

• Computation of capital gains – The expenditure incurred in pursuant to or as an obligation under the Joint Development Agreement can be claimed as business expenditure despite the fact that the said Joint Development project could not materialize – the expenditure incurred subsequent to JDA cannot be treated as the expenditure incurred for improvement of the capital asset in question – (M/s Triad Resorts & Hotels Pvt. Ltd. Versus The Income-tax Officer, Ward-12 (2) , Bangalore. – 2015 (12) TMI 108 – ITAT BANGALORE)

• TDS u/s 194C or 194I – assessee has rightly deducted the tax at source on berth hire charges paid to Mumbai Port Trust in terms of section 194C of the Act as contractual charges- (J.M. Baxi & Co. Versus The Dy. Commissioner of Income Tax (TDS) -2 (1) , Mumbai and Vica-Versa – 2015 (12) TMI 97 – ITAT MUMBAI)

• Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court – measures for reducing litigation – vide circular no. 21/2015 dated 10/12/2015.

• Disallowance made under Section 40(a)(ia) – The Sine qua non for the application of Section 40(a)(ia) of the Act to apply is claiming of the amount sought to be disallowed as an expenditure /deduction to determine the   taxable income of the assessee- (Commissioner of Income Tax-2, Mumbai Versus Health India TPA Services Pvt. Ltd. – 2015 (12) TMI 568 – BOMBAY HIGH COURT)

• Exemption u/s 10A – the disallowed expenditure becomes a part of the income derived from the activity of export of software and entitled to the deduction under Section 10A of the Act- (The Commissioner of Income Tax-II Versus Ntrance Customer Services Pvt. Ltd. – 2015 (12) TMI 566 – BOMBAY HIGH COURT)

• Income from house property – the unrealized rent cannot be taken to be taxable in the hands of the assessee under the head income from house property when it is not realizable- (Commissioner of Income Tax, Chandigarh-II Versus M/s Punjab State Civil Supplies Corporation Ltd, Chandigarh – 2015 (12) TMI 565 – PUNJAB & HARYANA HIGH COURT)

• Claim of Loss – purchase and sale of shares – speculation loss or not – before application of the Explanation to section 73 aggregation of the business profit or loss is to be worked out irrespective of the fact whether it is from share delivery transaction or derivative transactions-(M/s. Lohia Securities Ltd. Versus DCIT, Circle-6, Kolkata – 2015 (12) TMI 562 – ITAT KOLKATA)

• As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust merely because of non-furnishing of the details as how the said amount is proposed to be spent in future the assessee cannot be denied the exemption as is admissible u/s 11(2)- (Dy. Director of Income Tax (Exemptions) , Circle 17 (2) , Bangalore Versus Ohio University Christ College, Academy for Management Education – 2015 (12) TMI 42 – ITAT BANGALORE)

• Exemption u/s 11 – merely because the payments are made outside India it cannot be said that the charitable activities were also conducted outside the country – the word applied does not mean spent and even if the income has been earmarked and allocated for the purpose of carrying out the objects of the institution it might be deemed to be applied for that purpose- (Dy. Director of Income Tax (Exemptions) , Circle 17 (2) , Bangalore Versus Ohio University Christ College, Academy for Management Education – 2015 (12) TMI 42 – ITAT BANGALORE)

• Income arising to ‘Western Union’ from money transfer services isn’t taxable in India. IT/ILT: ‘Western Union’ isn’t liable to pay any tax in India for transferring money to India for their American clients even if it appoints agents in India to provide those services and setS-up a liaison office to interact with such agents [2015] 64 230 (Delhi – Trib.)  Deputy Director of Income-tax v. Western Union Financial Services Inc.

• Powers given for examination and verification under sec. 131 can be invoked before and after search. IT : Powers under section 131(1A) given to five specified authorities are not hindered by conduct of search; It can be invoked both before and after conduct of search [2015] 64  67 (Jharkhand)  Emaar Alloys (P.) Ltd. v. Director General of Income Tax (Investigation)

• IT : Where assessee paid a tax on assessment under section 140A and later on said amount became refundable due to appellate proceedings, assessee was entitled to interest under section 244A on amount of refund [2015] 64 89 (Madras)  Rajaratna Mills Ltd. v. CIT

• IT: An amount levied as penalty by an order of US Court can never attract any tax nor would such a payment made by applicant attracts any tax liability [2015] 64 162 (AAR – New Delhi)  AUTHORITY FOR ADVANCE RULINGS, (INCOME-TAX), NEW DELHI

• IT : Where Assessing Officer rejected assessee’s claim for deduction under section 54F on ground that assessee owned more than one residential house property at time of sale of long term capital asset, since assessee was a mere co-owner in one of said residential property, impugned order passed by him deserved to be set aside [2015] 63 366 (Delhi)  CIT v. Kapil Nagpal

• IT:Valuation of property – Adoption of State P.W.D. rates or the Central P.W.D. – Tribunal was right in directing the Assessing Officer to adopt the State P.W.D. rates on the ground that the building is located in interior Tamil Nadu –CIT Vs Gracious Knits (2015 (12) TMI 832 – Madras High Court)

• IT: Major changes in requirements of Form 15 CA & 15 CB and foreign remittances under sec 195

• • Rule 37 BB of the IT Rules amended to strike a balance between reducing the burden of compliance and collection of information.
  • No Form 15CA & 15CB will be required to be furnished by individual for remittance which do not require RBI approval.
  • List of payments which do not require submission of Forms 15CA & 15CB has been expanded from 28 to 33 including payments for imports.
  • CA certificate in Form No. 15CB will be required in payments made to non-residents which taxable and the amount during the year exceeds Rs.5 lakh.
  • The amended Rules will become applicable from 01.04.2016.

• CENVAT :

Where goods in question were components entitled for credit as capital goods, condition that to avail 50 per cent of Cenvat credit in subsequent year same should be in possession of manufacturer, would not be applicable [2015] 64 171 (Mumbai – CESTAT) Owens Corning (India) (P.) Ltd. v. Commissioner of Central Excise

• Provision mandating reporting of fraud by auditors is effective from Dec 14, 2015 : MCA

• Equity Shares outstanding at the end of the year should not be used for computing EPS

• Now the service-tax department wants to tax amounts received by the employer from employee treating the same as consideration received in lieu of providing service by letting employees to leave ahead of time. Therefore, employers could become liable to pay service tax on retention bonuses or money taken back from the employees.

• IT: TDS u/s 194C – transporters have transported the goods of seller / supplier – assessee makes the payment to GTA got reimbursed the amount and no expenses booked against such payment – No obligation to deduct TDS u/s 194C because the transporters have not acted on behalf of the assessee – ITO, Ward 12 (1), Ahmedabad Vs. M/s Prakash Agro Mills, (2015 (12) TMI 755 – ITAT Ahmedabad)

• CBDTmandates quoting of PAN for transactions exceeding Rs.2 Lac regardless of the mode of payment w.e.f. 01 JAN 2016.

• CBDTe.f. 01 JAN 2015 raises monetary limit for quoting PAN from Rs.5 Lac to Rs.10 Lac for sale / purchase of immovable property, from Rs 25,000 to Rs 50,000 in the case of hotel or restaurant bills paid at any one time and from Rs.50,000 to Rs.1 Lac in case of purchase / sale of shares of an unlisted company.

• CBDT has introduced the New facility of pre-filling TDS data while submitting online rectification of incorrect TDS details filed in the Income Tax Return.

• IT: CBEC also raises limit of filing of appeal by department to 10 lakhs and 15 lakhs before CESTAT and High court.

• IT: No CA certificate for payments to non-resident upto 5 Lakh; CBDT eases reporting norms

• IT: 6 lakh USD received by CA isn’t unexplained as donor is financially sound and has close relationship with CA

• IT : Where there existed close relationship between donor and assessee for a long time and, donor had funds necessary for making gift, impugned addition made under section 68 in respect of gift in question was to be set aside [2015] 64 131 (Delhi) CIT v. Sudhir Budhraja

• IT: TODAY (15 DEC 2015) is Last Date for Payment of Advance Tax – Cumulative Tax: Companies 75%, Others 60%.

• IT:Royalty income – authoring book on income tax problems – literary & complex work needs intellect & knowledge – Deduction u/s 80QQB allowed – Dilip Loyalka Vs. ACIT, Cir-1 (2015 (12) TMI 700 – ITAT Kolkata)

• IT: India & Japan signed a Protocol for amending existing Convention for avoidance of Double Taxation and for Prevention of Fiscal Evasion.

• IT:Interest u/s 234B would end on the date of determination of total income u/s 143(1) or in case of regular assessment, the date of such assessment and there is no scope for extending such liability to a later date to a revisional appellate or a rectification order as is desired by the revenue – CIT-1 Vs. Applitech Solution Ltd. (2015 (12) TMI 628 – Gujarat High Court)

• IT : Income-tax (19th Amendment) Rules, 2015 : In exercise of the powers conferred by sections 92CB and 92D, read with section 295 of the Income-tax Act, 1961(43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely.

• IT : Extension of last date for December 2015 installment of advance tax for taxpayers in Tamil Nadu and Puducherry.
• The last date of payment of December 2015 installment of advance tax for both corporate and non-corporate taxpayers in the State of Tamil Nadu and Union territory of Puducherry has been extended from 15.12.2015 to 31.12.2015 in view of unprecedented rainfall and floods in these areas.

• IT : Furnishing of information in respect of payments made to the non-resident-regarding.: Section 195 of the Income-tax Act (‘the Act’)empowers the Central Board of Direct Taxes to capture information in respect of payments made to non-residents, whether chargeable to tax or not.
• Rule 37 BB of the Income-tax Rules has been amended to strike a balance between reducing the burden of compliance and collection of information under section 195 of the Act.

• IT: Business which isn’t insignificant as compared to whole business deemed as substantial business under sec. 2(22)(e)

• IT: No penalty merely on admission of undisclosed income during search proceedings

• IT: Filing of reconciliation return for the year 2014-15.

• IT : Protocol signed to amend India-Japan DTAA to include standard for automatic exchange of info.

• IT : Bilateral Investment Agreements aren’t for solving tax disputes: FinMin

Key Dates:

Payment of D-VAT, TDS for November (DVAT 20): 15/12/2015

Payment of Advance Income Tax: Companies (75%) & Others (60%): 15/12/2015

E-Payment of Provident Fund for November: 15/12/2015 (cheque to be cleared by 20^th)

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