Corporate & Professional Update for Month October 2015

Corporate tax Update for the Month of Second week

INCOME TAX ACT

SECTION 2(22)

DEEMED DIVIDEND

Loans or advances to shareholder : Where current account transactions between two group companies were business/commercial transactions, same could not be regarded as deemed dividend under section 2(22)(e) –[2015] (Delhi – Trib.)

SECTION 9

INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Where Chinese subsidiary of Indian holding company provides services in China in connection with procurement of goods by Indian company from Chinese vendors, specialized services of market research and information on new developments in China with regard to technology/product/process upgrade etc., fees received, by Chinese company is chargeable to tax in India to extent of full amount received as fees for technical services at the rate of 10% of gross amount – [2015] (AAR – New Delhi)

SECTION 10(23C)

EDUCATIONAL INSTITUTION

Furnishing of Audit Report in Form No. 10BB may be necessary for seeking approval under section 10(23C); however, mere failure to file Audit Report along with application under section 10(23C) would not result in rejection if the assessee furnishes the said report subsequently, prior to the rejection of the application – [2015] (Delhi)

SECTION 11

CHARITABLE OR RELIGIOUS TRUST – EXEMPTION OF INCOME FROM PROPERTY HELD UNDER

Application of income : Where assessee was carrying out relief work in areas affected by natural calamities but it could not produce details of expenditure on said activities, issue was to be restored to Assessing Officer to give one more opportunity to assessee to produce details – [2015] (Hyderabad – Trib.)

SECTION 40A(2)

BUSINESS DISALLOWANCE – EXCESSIVE OR UNREASONABLE PAYMENTS

Transportation and handling charges : Where Assessing Officer had merely assumed certain facts without bringing any evidence or material against assessee in respect of excessive payments of transportation and handling charges, disallowance under section 40A(2) was to be deleted – [2015] (Chandigarh – Trib.)

SECTION 40(a)(ia)

BUSINESS DISALLOWANCE – INTEREST, ETC., PAID TO RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE

Section 194C cases : Where Assessing Officer made disallowance under section 40(a)(ia) for failure of assessee to deduct tax at source out of payments made to sub-contractors, Tribunal was justified in restoring matter to Assessing Officer to verify transactions and if found to be correct, pass order accordingly – [2015] (Punjab & Haryana)

SECTION 69

UNEXPLAINED INVESTMENT

Cash deposit : Where assessee deposited cash and explained same as sale proceeds from his sole proprietorship concern, since assessee did not produce bank account details as well as sale vouchers to show that amount received was part of sale proceeds, matter was to be readjudicated – [2015] 61  99 (Chandigarh – Trib.)

 

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments : In case of assessee, rendering software development services to its AE, companies having functional difference, huge turnover and related party transactions in excess of 15 percent of revenue, could not be accepted as comparables while determining ALP – [2015] (Bangalore – Trib.)

SECTION 145

METHOD OF ACCOUNTING – ESTIMATION OF PROFIT

Net profit rate : Where Tribunal affirmed rejection of account books of assessee, but reduced net profit rate to 6 per cent, since in preceding as well as following year a net profit rate of 6.75 per cent and 5 per cent respectively was applied by Assessing Officer, there was no error in discretion exercised by Tribunal in applying net profit rate of 6 per cent – [2015] (Punjab & Haryana)

METHOD OF ACCOUNTING – REJECTION OF ACCOUNTS

Professional income : Assessing Officer could not reject books of assessee-doctor by presuming that all persons who had undergone lab tests had undergone surgery – [2015] 61 taxmann.com 353 (Chandigarh – Trib.)

Illustrations : Where assessee failed to verify genuineness of opening and closing balance of labour charges payable or furnish details called for by Assessing Officer rejection of books of account was justified – [2015] (Chandigarh – Trib.)

SECTION 153A

SEARCH AND SEIZURE – ASSESSMENT IN CASE OF

Condition precedent : Completed assessments can be interfered with by Assessing Officer while making assessment under section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment – [2015] (Delhi)

SECTION 271(1)(c)

PENALTY – FOR CONCEALMENT OF INCOME

Search & Seizure : Where assessee withdrew claim for depreciation on IPR in statement during search and seizure operations undertaken on assessee but nothing incriminating was found during search which was concealed by assessees, penalty could not be levied under section 271(1)(c) merely on basis of statement during search – [2015] (Mumbai – Trib.)

COMPANIES ACT

SECTION 446

WINDING UP – SUITS STAYED ON WINDING UP ORDER

Proceedings under section 138 of the Negotiable Instruments Act, 1881 cannot be stayed by invoking power under section 446 of Companies Act, 1956 – [2015] (Kerala)

 Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480

More updates: INCOME TAX UPDATE 18 NOVEMBER 2015

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