income tax update 18 nov 2015

INCOME TAX UPDATE 18 NOV 2015

INCOME TAX ACT

SECTION 2(15)

CHARITABLE PURPOSE

Object of general public utility : Where assessee was carrying on micro finance business in a commercial manner, its activities fell under category of ‘advancement of any other object of general public utility’ and thereby hit by proviso to section 2(15) disentitling it from exemption

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY

Repairs : Expenditure incurred by assessee towards fixing false ceiling, painting, electrical cabling and certain civil works in rented premises was to be allowed as business expenditure

SECTION 73

LOSSES – IN SPECULATION BUSINESS

Shares : Where assessee, a share broker, suffered loss on account of misdeals in purchase and sale of shares by actual delivery, or trading in derivatives in a recognised stock exchange, said loss was to be regarded as business loss which could be set off against its brokerage income

SECTION 80-IB

DEDUCTIONS – PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKING OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS

Housing project : Fact that assessee, a builder, had not completed construction of all blocks of housing project, within stipulated period, would not deprive assessee from availing of deduction under section 80-IB (10) in respect of each of completed block on stand alone basis

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

CPM is not a residuary method in the sense that if every other method of ascertaining the arm’s length price fails, CPM can be applied on the basis of imperfect data.

If at all there is a residuary method, or what is termed as the method of last resort, it is transactional net margin method. TNMM has almost become the ‘default’ method for taxpayers in recent years

Determination of ALP : Where JMIPL, a contract manufacturer in a capital intensive industry, and car manufacturer MUL agreed on an arrangement where JMIPL would sell finished catalysts to vendors of MUL under instructions of MUL and JMIPL was obliged to procure raw material on instructions of MUL at a price dictated by MUL from source selected by MUL and JMIPL was entitled to a per unit fixed manufacturing charge whereas entire cost of raw materials passed on to or recovered from ultimate customer without any mark up, there was no fault in rejecting Return on Capital Employed (ROCE) as PLI and alternate PLI being OP/TC-RMC i.e., (Operating Cost/Total Cost excluding raw material cost) was to be accepted

Comparables and adjustments/Method of computation – Resale Price Method : Where selection of TNMM by department had been found to be inappropriate by Tribunal in earlier years and assessee’s RPM had been accepted on identical facts, TPO was directed to adopt RPM as most appropriate method for benchmarking assessee’s transaction of import of seeds to its AE in relevant year

A Comparables and adjustments/Adjustments – Exports, in case of : While computing ALP it was wrong to compare individual transactions of import of raw cashew with monthly average price published in cashew Bulletin of cashew Export Council

Comparables and adjustments/Adjustments – Interest : While determining ALP of transaction of purchase from AE, due weightage is to be given towards interest benefit enjoyed by assessee by availing credit for 150 days for payment

SECTION 220

COLLECTION AND RECOVERY OF TAX – WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT

Stay : In view of Instruction No. 1914 Assessing Officer has got ample power to dispose of stay application during pendency of appeal in which demand is disputed; if Assessing Officer had completely overlooked stay application, he had to consider same

WEALTH TAX ACT

SECTION 7

VALUATION OF ASSETS – IMMOVABLE PROPERTY

Land : Where vacant land in excess of ceiling limit under Ceiling Act, which was going to be taken over by Government, would not fetch more than Rs. 2 lakhs, Assessing Officer was not justified in working out value of vacant land by determining what it would have fetched, if it were sold in open market

COMPANIES ACT

SECTION 433

WINDING UP – CIRCUMSTANCES IN WHICH COMPANY MAY BE WOUND UP

Where petitioner firm failed to prove that respondent company was insolvent in commercial sense and company’s refusal to pay debt to petitioner, a chartered accountancy firm, was as a result of bonafide dispute, company was not liable to be wound up

SERVICE TAX

SECTION 65(31)

CONSULTING ENGINEER’S SERVICES

Where applicant executed work of construction of mess, quarters etc., for staff of army, issue as to whether such activity would fall under category of consulting engineer’s services or not was debatable; matter was to be readjudicated

SECTION 89

OFFENCES AND PENALTIES – SERVICE TAX

Finance Act, 1994, being a special and complete Code, prevails over general provisions of IPC and, accordingly, for alleged non-payment of service tax, department cannot filed FIR under provisions of IPC

CENTRAL EXCISE ACT

SECTION 2(f)

MANUFACTURE – MANUFACTURER/JOB-WORKER

Merely because principal manufacturer has extended loan to job-worker for investment in machinery, job-worker cannot be regarded as dummy of principal manufacturer

SECTION 9D

RELEVANCY OF STATEMENTS UNDER CERTAIN CIRCUMSTANCES

In absence of any extraordinary circumstances, denial of cross-examination citing that ‘there is no requirement in law’ or ‘it would delay adjudication’ was unjustified and said denial vitiated entire adjudication and, therefore, demand was set aside

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

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