CORPORATE AND PROFESSIONAL UPDATE JANUARY 20, 2016

 CORPORATE AND PROFESSIONAL UPDATE JANUARY  20, 2016

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  • Government of India has vide its Notification F.No. 4(19)-W&M/2014 dated 14.01.2016 announced that the Sovereign Gold Bonds, 2016 will be open for subscription from 18.01.2016 to 22.01.2016.
  • Refunds up to Rs.5,000/- and refunds in cases where arrear demand is up to Rs.5,000/- may be issued without any adjustment of outstanding arrears under section 245 of the Act during financial year 2015-2016.
  • SEBI looking to lower expense charges for mutual funds.
  • Protocol amending the agreement between Government of the Republic of India and the Government of the Republic of Belarus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on property (Capital) notified vide notification no. 2/2016.
  • Transfer pricing adjustment – TPO take the amount of ALP at NIL – determination of Management Consultancy Fee – foreign exchange loss in financial transactions cannot be considered as service charge for the intra group- (M/s. DQ Entertainment (International) Ltd, Versus Asst. Commissioner of Income Tax, Circle-1 (2) , Hyderabad – 2016 (1) TMI 451 – ITAT HYDERABAD).
  • DTAA: Amendment made in the Agreement between Republic of India and the Government of the Republic of Belarus to make the treaty effective from 19 NOV 2015 – Notification No.2/2016, Dt.13th Jan 2016.
  • Initiatives taken by CBDT to reduce litigation.
  • Now CBDT would issue refunds up to Rs. 5,000 without adjustment of outstanding tax liability.
  • CBDT notifies forms for accumulation of income by a trust.
  • Initiation of penalty proceedings u/s 271(1)(c) without specifying basis makes such proceedings void -ab-initio.
  • Tax Reforms Committee submits its first report :Recommends presumptive scheme for professionals, lower TDS rates.
  • ST:  is considering higher Service Tax Exemption Limit to benefit small service provides.
  • Likely to hike Service Tax exemption threshold for small service providers “service tax exemption threshold limit could be hiked from Rs 10 lakh to Rs 25 lakh.” said a government source.
  • Service-tax: ‘Mistaken payment’ of service tax in excess of actually payable amount amounts to ‘deposit’ and time-limit of section 11B would not apply to refund thereof [2016] 57 (Ahmedabad – CESTAT) Nobles Constructions Gujarat (P.) Ltd. v. Commissioner of Service Tax.
  • No denial of Cenvat credit availed on invoices issued in the name of branch offices, which were not registered [Manipal Advertising Services Pvt. Ltd. vs. C.C.E., Mangalore (2009 (10) TMI 434 – CESTAT, BANGALORE)].
  • Central Government hereby appoints the 13th day of January, 2016 as the date on which the provisions of sub-section (5), sub-section (6) [except with respect to the manner of administration of the investor Education and Protection Fund] and sub-section (7) of section 125 of the said act shall come into force.
  • No service tax on advance received as an earnest money for which bank guarantee of equal amount is given to the customers [Thermax Instrumentation Ltd. vs. Commissioner of Central Excise, Pune – I (2015 (12) TMI 1222 – CESTAT MUMBAI)].
  • All Govt. entities in Delhi to file return for purchases made by them for purpose of consumption.
  • Startup India: Hon’ble PM Modi launches Startup India Program on Sat, 16 JAN 2016 to boost innovation based business with many incentives and ease of doing business.
  • New Juvenile Justice Act comes into force from Jan 15, 2016.
  • SEBI: SEBI has established its Local Office at Jammu under the administrative control of its Northern Regional Office at New Delhi.
  • Minister of State for Finance Jayant Sinha on Thursday said that the government will present the Budget for 2016-17 on February 29, 2016.
  • TDS rates for individuals be reduced to 5% from 10%.
  • Making the process of refunds fasterand pay 12-18% interest if refund issued beyond 6 months.
  • Deferring the contentious Income Computation and Disclosure Standards (ICDS) provision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

CORPORATE AND PROFESSIONAL UPDATE JANUARY 13,2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 13,2016

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DIRECT TAX:

  • Income Tax 1st Amendment Rules, 2016 Notified vide notification no. 3/2016/2015.
  • Corrigendum to Notification No. 93/2015 dated 16/12/2015 has been issued vide Notification No 1/2016 – Dated 12-1-2016.
  • Service of an independent contractor – whether would be taxable as salary contrary to the contract of service – Whether it is professional or skilled work; nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations. Suresh Kumar Hooda Versus The Commissioner of Income Tax, Rohtak and another.
  • Allowability of exemption u/s 10(1) – For earning agricultural income it is not necessary that the assessee must own the land and it is enough if it is established that the agricultural organizations have been actually carried on by the assessee. Monsanto India Ltd Versus Addl Commissioner of Income Tax.
  • Protocol amending the agreement between Government of the Republic of India and the Government of the Republic of Belarus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on property (Capital) notified vide notification no. 2/2016.
  • Transfer pricing adjustment – TPO take the amount of ALP at NIL – determination of Management Consultancy Fee – foreign exchange loss in financial transactions cannot be considered as service charge for the intra group- (M/s. DQ Entertainment (International) Ltd, Versus Asst. Commissioner of Income Tax, Circle-1 (2) , Hyderabad – 2016 (1) TMI 451 – ITAT HYDERABAD).
  • Reopening of assessment – it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. – Notice u/s 148 quashed – Tri – Income Tax- (Vardai Overseas (P) Ltd. C/o Shri V.K. Sabharwal, Adv. Versus Income Tax Officer, Ward-8 (3) , New Delhi-2016 (1) TMI 450 – ITAT DELHI)
  • IT:Service of an independent contractor – nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations – Suresh Kumar Hooda Vs. CIT, Rohtak and anr (Punjab & Haryana High Court).
  • DTAA:Amendment made in the Agreement between Republic of India and the Government of the Republic of Belarus to make the treaty effective from 19 NOV 2015 – Notification No.2/2016, Dt.13th Jan 2016.
  • IT:  Addition u/s 68 – cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit – Minalben Dipakbhai Mehta Vs. ITO, W-3(3) Suat (ITAT Ahmedabad)
  • ITAT affirms sanctity of CA certificate; denies to impose penalty for TDS default relying upon such certificate [2016] 65 taxmann.com 68 (Mumbai – Trib.)  ADIT (IT) v. Leighton Welspun Contractors (P.) Ltd.
  • On foreign travel of directors disallowed as company had no business in such locations [2016]  92 (Bombay) Advance Power Display Systems Ltd. v. CIT
  • Trading in derivate can’t be held as speculative if co. has only income from other sources
    [2016]  62 (Delhi – Trib.) A.K. Capital Markets Ltd. v. DCIT
  • TDS u/s 194J – Procurement of ready study data by the parent company from another foreign company and supplying it to the assessee amounts – Non deduction of tds on technical services rendered to a resident – No TDS required. Commissioner of Income Tax (Tds) Versus Heramec Ltd – 2016 (1) TMI 503 – ANDHRA PRADESH HIGH COURT
  • Addition u/s 68 cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit. Smt. Minalben Dipakbhai Mehta Versus ITO, Ward-3 (3) Suat. – 2016 (1) TMI 489 – ITAT AHMEDABAD
  • Initiatives taken by CBDT to reduce litigation
  • Now CBDT would issue refunds up to Rs. 5,000 without adjustment of outstanding tax liability
  • CBDT notifies forms for accumulation of income by a trust
  • Disallowance on account of interest expenses u/s.40A(2)(b) – the unsecured loan was required to be paid on demand but in the case of related parties there was no such condition. We are of the considered view that the interest 18 is reasonable- (Asian Mills Pvt. Ltd. Versus Deputy Commissioner of Income Tax, Addl. Commissioner of Income Tax – 2016 (1) TMI 449 – ITAT AHMEDABAD).
  • Disallowance u/s 14A gets attracted even if a mix of interest bearing & non-bearing funds used to make investments earning exempt income [M/s Thermotech Engineering vs. ACIT, Pune (ITAT Pune), ITA No.- 533/PN/2013, A.Y 2009-10].
  • Cancellation of Registration u/s 12AA(3) should be based on activities of Trust and not of Trustees [Friends of WWB India vs Director of Income Tax-Exemption (ITAT Ahmedabad), ITA No. 2076/Ahd/2014, A.Y 2009-10].
  • IT: Addition u/s 68 – The existence of shares of 1,50,000 in the hands of assessee was established by filing concerned demat account. Therefore the conditions for making addition under section 68 were missing – ACIT-13(3), Mumbai Vs.  Late Shri Himatlal H. Dadia (ITAT MUMBAI)
  • Initiation of penalty proceedings u/s 271(1)(c) without specifying basis makes such proceedings void -ab-initio.
  • Benefit of reduced penalty allowed if duty and interest paid within 30 days of communication of SCN/order [Principal Commissioner of Service Tax vs. Tops Security Ltd (Delhi High Court); CEAC 42/2015].
  • Tax Reforms Committee submits its first report – Recommends presumptive scheme for professionals, lower TDS rates
  • IT: Easwar Committee suggested several taxpayer-friendly measures to improve ease of doing business, reduce litigation and accelerate the resolution of tax disputes, such as:
  • Simplifying provisions related to TDS and increase in threshold for payment subject to TDS
  • TDS rates for individuals be reduced to 5% from 10%
  • Deletion of Section 143 (1D) to avoid undesirable delay in issue of refund
  • Making the process of refunds faster and pay 12-18% interest if refund issued beyond 6 months.
  • Payment of Interest on refund due out of Self Assessement Tax
  • Stock trading gains of up to Rs.5 Lac to be treated as capital gains and not business income
  • Deptt. to desist from the practice of adjusting tax demand of a taxpayer whose tax return is under assessment against legitimate refunds due.
  • Deferring the contentious Income Computation and Disclosure Standards (ICDS) provision.
  • IT:  Disallowance on account of bogus purchases – Merely because notices u/s 133(6) could not be served on the suppliers assessee- buyer cannot be put to an inconvenience of disallowance when he has provided the correct address of those parties – DCIT Versus Norma India Ltd. (ITAT Delhi)

INDIRECT TAX:

  • It is here by seeked to further amend notification No 12/2012-Central Excise dated 17.03.2012 so as to increase the Basic Excise Duty rates on Petrol and Diesel(both unbranded and branded).
  • Introduction of Tariff Notification in respect of fixation of tariff value of Edible Oil, Brass, Poppy Seed, Areca Nut, Gold & Silver.
  • Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – In Re : K. Ram Mohan – 2016 (1) TMI 543 – AUTHORITY FOR ADVANCE RULINGS, NEW DELHI
  • Area based exemption – substantial expansion by way of installed capacity by not less than 25 – Notification No. 50/2003-CE dated 10/6/03 – it was contended that production capacity of the both the units are to be counted as one – benefit of exemption allowed- CCE, Meerut – II Versus M/s Prakash Straw Board Pvt. Ltd. – 2016 (1) TMI 521 – CESTAT NEW DELHI
  • ST: Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – K. Ram Mohan (Authority for Advance Rulings, New Delhi).
  • ST: Govt. is considering higher Service Tax Exemption Limit to benefit small service provides.
  • Likely to hike Service Tax exemption threshold for small service providers “service tax exemption threshold limit could be hiked from Rs 10 lakh to Rs 25 lakh.” said a government source.
  • Service-tax: ‘Mistaken payment’ of service tax in excess of actually payable amount amounts to ‘deposit’ and time-limit of section 11B would not apply to refund thereof [2016] 57 (Ahmedabad – CESTAT) Nobles Constructions Gujarat (P.) Ltd. v. Commissioner of Service Tax.
  • Mobile phone and courier services used for business purposes are eligible for credit [2016] 65 taxmann.com 88 (Ahmedabad – CESTAT) Commissioner of Central Excise & Service Tax v. Miranda Tools
  • ST: Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal – M/s MPA Marketing Pvt. Ltd. Vs. CESTAT & anr (Punjab And Haryana High Court)
  • Levy of personal penalty on co-noticees – when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25 of the duty as penalty there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods – (Commissioner of Central Excise And Customs Aurangabad / Nashik – II Versus Ambika Waste Management Pvt Ltd, Ambadas Santosh Ngargoje, Harishkumar Harjivandas Gandhi, Shree Salasar Ispat Pvt Ltd – 2016 (1) TMI 438 – CESTAT MUMBAI).
  • Cenvat Credit – Eligible input services – Other welfare service i.e. service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant- (Mahindra Casting Ltd. Versus Commissioner of Central Excise, Pune I – 2016 (1) TMI 437 – CESTAT MUMBAI).
  • VAT: Form GE-I & GE-II for the period from Apr, 2015 to Dec, 2015 to be furnished by 15 FEB 2016. Notification, dt.12 JAN 2016.
  • DVAT:– All Govt Entities having their offices functioning within NCT of Delhi are required to furnish an Quarterly Return in ‘Form GE-II’, of purchases made by them for purpose of consumption or use by them from the dealers registered under the Act and having a valid TIN.
  • Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal- M/s MPA Marketing Pvt. Limited Versus Customs, Excise and Service Tax Appellate Tribunal and another – 2016 (1) TMI 482 – PUNJAB AND HARYANA HIGH COURT
  • ST: Incentive received for achieving the targets is not excludible from the assessable value of the service which as per Sec-67 is the gross amount received for the service rendered – M/s Hari Om Telecom Vs. CCE, Chandigarh (CESTAT New Delhi)
  • Likely to hike Service Tax exemption threshold for small service providers
    It may enhance to 25 lacs.
  • Delhi VAT authority isn’t empowered to pass an order until power thereof is delegated by Commissioner[2016]  103 (Delhi) Yongnam Engineering & Construction (P.) Ltd. v. Commissioner, DVAT
  • DVAT: Due date to file Form-9 (Online Reconciliation Return) extended to 29.2.16. Cir.No.34, dt.15.01.2016.
  • Delhi VAT-Filling of reconciliation return for year 2014-15- Date extended to 29.02.2016.
  • Increase in Excise Duty on Petrol by 75 paise and on Diesel by Rs. 2 per litre [Notification No. 2/2016-Central Excise]
  • ST: Refund – service tax was mistakenly paid – amount paid by the appellant under Manpower Recruitment Agency Services is required to be refunded because no tax can be collected without the authority of law –Sharam Sewa Associates Vs. CCE, Allahabad (CESTAT Allahabad)

COMPANY LAW:

Query: A Private Limited company accepted unsecured loan from its existing two Directors. This is exempt deposit under section 73 of the Companies Act, 2013. Subsequently above two Directors resigned from the Directorship of the Company. Is the loan becomes deposits after their resignation? Is the loan becomes repayable after resignation not to attract deposit Rules?

Answer: There is no necessity to repay the loan immediately and at the time of acceptance of loan from the person who has given loan were directors of the company and the money can be retained till the date of maturity.

Query:Whether Security Deposit given to Director for taking his premises on rent will attract section 185? Please Guide.

Answer: Yes, it attract section 185 but not applicable in case of private company if- a) In share capital of private company, no other body corporate has invested any money and, b) If the borrowings of such company from banks/ Financial Institutions/ body corporate is less than twice of its paid-up capital or Rs. 50 Crore (Whichever is lower) and, c) Company has no default in repayment of such borrowings, and also not applicable in case of public company, if- loan given to a M.D or W.T.D as part of conditions of service or Approved by a Special Resolution.

Query:One company is having 1 subsidiary and 2 associates companies as on 31.03.2015. Whether consolidation of all the companies is required or only the consolidation of subsidiary companies?

Answer: As per Section 129(3) of the Companies Act 2013, where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub section (2), prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub section (2). Further explanation to this sub section provides that “the word subsidiary shall include associate company and joint venture”.

Query: Kindly provide me the Consent letter format for conducting EGM at shorter notice?

Answer: Unlike the Companies Act, 1956, the MCA does not provide any format. Even there is no format provided in the Rules. In fact proviso to sub section 1 of section 101 only mentions that the shorter notice to be given by the shareholders. Wherever in the MCA the section mentions that “as may be prescribed” the same has been provided by the Rules. As the phrase “as may be prescribed” is not mentioned in the section, the presumption is that no format would be prescribed. Thus liberty has been granted to the shareholders with regard to the fomat of the notice. The safe course would be to follow the form 22A prescribed under the Companies Act, 1956 with requisite changes.

CORPORATE SOCIAL RESPONSIBILITY

Query:What is meaning of ‘any financial year’ mentioned in Section 135 (1) of the Companies Act, 2013?

Answer: “Any Financial year” referred under Sub- Section (1) of Section 135, implies any of the three preceding financial years

Query: Compliance under section 135 of the Act i.e. Corporate Social Responsibility, is applicable from which Financial Year?

Answer: the spending of requisite amount on CSR activities came into force from April, 2014.

  • Central Government has notified 13th day of January 2016 as the date from which commencement if section (5), (6), (7) of Section 125 of Companies Act, 2013 come into force except with respect to manner of administration of the Investor Education & Protection fund.
  • MCA has issued Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act,2013 vide General Circular 1/ 2016 dated 12.01.2016.
  • MCA: Services on the www.mca.gov.in portal will not be available from 08:00 AM to 06:00 PM on Saturday, 16th JAN 2016 due to periodic maintenance activities.

OTHER UPDATES:

  • Startup India: Hon’ble PM Modi launches Startup India Program on Sat, 16 JAN 2016 to boost innovation based business with many incentives and ease of doing business.
  • ICAI: Result of the CA Final Exams held in Nov’ 2015 and CPT Exams held in Dec, 2015 declared y’day (17-01-2016) – Congrats who cleared and all the Best who appears next time.
  • We congratulate our CA students, who have passed exams. CA result analysis: CA final both group 5.75 %, Group 1- 12.61%, Group 2- 11.99 %, CPT -34.45 %.
  • Sovereign Gold Bonds, 2016 to be open for subscription from 18.01.2016 to 22.01.2016 vide its Notification F.No. 4(19)-W&M/2014 dated 14.01.2016.
  • Rules for the Investor education & protection fund authority (Appointment of Chair Person and Members, holding meeting and provision for offices and officers) Rules 2016.
  • All Govt. entities in Delhi to file return for purchases made by them for purpose of consumption
  • New Juvenile Justice Act comes into force from Jan 15, 2016.
  • Stamp duty paid to increase authorised capital is capital expenditure [2016] 65 taxmann.com 94 (Mumbai – Trib.) Inventurus Knowledge Services (P.) Ltd. v. ITO
  • CCI: Shri Devender Kumar Sikri, an officer of 1975 batch IAS took oath as Chairman of Competition Commission of India (CCI).
  • SEBI: SEBI has established its Local Office at Jammu under the administrative control of its Northern Regional Office at New Delhi.
  • ICAI has extended last date “for complying with the CPE hours requirement for the Calendar Year 2015” – from 31st December, 2015 to 31st March, 2016.
  • Applicability of MRP based valuation to institutional buyers for goods specified U/s. 4A of Excise Act.
  • Refund allowable where Service tax is paid twice by Appellant due to clerical error [Tikaula Sugar Mills Ltd. Vs. CCE, Meerut-I (2015 (12) TMI 884 – CESTAT New Delhi)].
  • Rent-a-cab services to SEZ Unit for transportation of its staff to and from their residence is exempt from Service Tax.
  • Minister of State for Finance Jayant Sinha on Thursday said that the government will present the Budget for 2016-17 on February 29, 2016.
  • Section 80IB(10) – Canopy/ Porch cannot be treated as part of Built up Area as it is not habitable [DCIT vs. Smt. Suman Jagannath Pharande (ITAT Pune)].
  • Revision valid under section 263 where AO has not made any enquiry about quantification of losses claimed [ITAT Delhi in the case of G. E. Money Financial Services Ltd. vs. DCIT].
  • Being ownership vest with lessor in leased including sale & lease back assets, depreciation u/s 32 allowed [ITAT Mumbai in the case of ICICI Ltd. vs. ACIT].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

CORPORATE AND PROFESSIONAL UPDATE DECEMBER 17, 2015

CORPORATE AND PROFESSIONAL UPDATE DECEMBER 17, 2015

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FAQ on Company Law:

Query: We have incorporated a Pvt Ltd Company on 29th October 2015. But since then no Board meeting has been held regarding the appointment of First Auditors of company as well. Kindly advice in the matter.

Answer: Section 139(6) of the Companies Act, 2013 lays down that the first auditor of company shall be appointed by the Board of Directors within 30 days of the registration of the company.

Section 139 (6) continues to provide further that if the Board of Directors fails to appoint

such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.

Query: One of our client company appointed us as Auditors of the company at the Annual General Meeting held on 30th September, 2015.

But brother of one of partner of Auditor firm has invested in the equity shares for face value of Rs. 1 lakh on 15th October, 2015. Clarify whether we are disqualified as Auditor of that Company or not. 

Answer: According to section 141(3)(d)(i) of the Companies Act, 2013, a person who, or his relative or partner holds any security of the company or its subsidiary or of its holding or associate company a subsidiary of such holding company, which carries voting rights, such person cannot be appointed as auditor of the company.

Provided that the relative of such person may hold security or interest in the company of face value not exceeding 1 lakh rupees.

In your case you,being Auditors, did not hold any such security. But your brother held equity shares of company of face value Rs. 1 lakh, which is within the specified limit.

Further Section 141(4) provides that if an auditor becomes subject, after his appointment, to any of the disqualifications specified in sub-section 3 of section 141, he shall be deemed to have vacated his office of auditor.

Hence, your Auditor firm can continue to function as auditors of the Company even after 15th October 2015.

Query: Can the Managing director of a public company make investment in another company? 

Answer: Section 186(2) requires consent of all the directors present in the board meeting; therefore Managing Director cannot take the decision on investment alone.

Query: Can a company remove Auditors of company without obtaining Central government’s approval. Clarify.

Answer: Section 140(1) stipulates that any auditor appointed under section 139 may be removed from office before the expiry of his term by passing special resolution in general meeting, after obtaining the previous approval of the Central Government in that behalf. Provided that before taking any action under subsection (1) of Section 140, the auditor concerned shall be given a reasonable opportunity of being heard.

The first auditors appointed by Board of Directors can be removed in accordance with the provision of Section 140(1) of the companies act, 2013. Hence the removal of the first auditor appointed by the Board without seeking approval of the Central Government is invalid.

Query: A Managing Director was removed during the tenure of office and certain compensation was paid to him. It was later on found that during the tenure of his office that he was guilty of corrupt practices and the company felt that no compensation should have paid to him and therefore wants to recover the compensation so paid to him. Can the company succeed?

Answer: The Companies Act, 2013 does not provide for the refund of any compensation paid by the company to its MD, WTD or manager. It only lays down the situations under which no compensation is payable for loss   of office and one such situation is the commitment of fraud or breach of trust by the director.

Moreover, in Bell vs. Lever Brothers, (1932), Lever Brothers removed their managing director of a subsidiary by paying him compensation. It was afterwards discovered that during his tenure of office he had been guilty of so many breaches of duty and corrupt practices that he could have been removed without compensation. An action was then commenced to recover back the compensation money. It was held that Bell was not bound to refund the compensation money and to disclose any breach of his fiduciary obligation so as to give the company an opportunity to dismiss him. Thus, the Managing Director is not bound to refund the compensation. Hence, the company can not succeed.

Direct Taxes:

Govt. of India enters Agreement for Avoidance of double taxation and prevention of fiscal Evasion With Government of the Republic of Macedonia vide Notification No. 94/2015 dated 21.12.2015.

Addition under Section 68 – ITAT was fully justified in coming to the conclusion that there exists no evidence to establish that there was any re-routing of the money collected by the Respondent-Companies. None of the shareholders denied having contributed to their share capital, No addition- (Commissioner of Income Tax-VIII Versus SVP Builders (India) Limited, SVP Developers Limited, S.V. Liquor India Limited – 2015 (12) TMI 1185 –   DELHI HIGH COURT)

Exemption u/s 54F – LTCG – Even before the sale of the property he had borrowed housing loan and started construction on the site belonging to him. After the sale the amount spent towards construction of the house is more than the consideration received by the sale of agricultural land and therefore he is entitled to the benefit of Section 54F- (THE COMMISSIONER OF INCOME-TAX AND THE INCOME-TAX OFFICER WARD-3 (2) BANGALORE Versus SRI. ANANDRAJ – 2015 (12) TMI 1179 – KARNATAKA HIGH COURT)

No TDS liability of banks if FD is made on directions of Court during pendency of proceedings vide circular no. 23/2015.

Issuance of Circular No. 22/2015 dated 17.12.2015 by CBDT to ensure allowability of employer’s contribution to funds for the welfare of employees in terms of section 43B(b) retrospectively  in the Income tax Act.

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)

MAT – Income from capital gain – whether should be included for the purpose of computing Book Profit under Section 115JB? – AO has no power to recompute the book profit and has to rely upon the authentic statements of accounts of the company the accounts being scrutinized and certified by the statutory auditors though with a qualification- (Sri Hariram Hotels (P) Ltd. Versus Commissioner of Income-Tax (III) , Bangalore, Income Tax Officer, Ward 12 (2) , Bangalore – 2015 (12) TMI 1419 – KARNATAKA HIGH COURT).

People earning above 10 lakhs no more entitled to LPG Subsidy.

Transfer pricing adjustment – in the absence of a machinery provision it would be hazardous for any TPO to proceed to determine the ALP of such a transaction since BLT has been negatived by this Court as a valid method of determining the existence of an international transaction and thereafter its ALP- (The Commissioner of Income Tax-LTU, Whirlpool of India Ltd. Versus Whirlpool of India Ltd., Deputy Commissioner of Income-Tax – 2015 (12) TMI 1188 – DELHI HIGH COURT)

Compensation on termination of joint-venture agreement – the receipt of Rs. 6080.95 lakhs by the Assessee as a result of the termination of the JVA during AY 1998-99 was a capital receipt but in light of Section 55 (2) (a) of the Act as it stood at the relevant time the said amount cannot be brought to capital gains tax- (The Commissioner of Income Tax Versus HCL Infosystems Ltd. – 2015 (12) TMI 1187 – DELHI HIGH COURT)

Transfer Pricing: An adjustment with respect to transfer pricing has to be confined to transactions with Associated Enterprises and cannot be made with respect to transactions with unrelated third parties. CIT v. Thyssen Krupp (Bombay High Court)

Commission earned by a non-resident agent who carried on business of selling Indian goods outside India cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 & Circular No.786 of 2000 were withdrawn on 22.10.2009. The withdrawal of a Circular cannot have retrospective operation. CIT v. Gujarat Reclaim & Rubber Products (Bombay High Court)

Indirect Taxes:

Whether the Tribunal while remitting the matter back is right in law in giving a positive direction not to impose penalty on the 1st respondent especially when the imposition of such penalty u/s 76 and 78 of Finance Act 1994 is not only automatic but also mandatory – Order of Tribunal is not correct- (The Commissioner of Service Tax Versus M/s. Zak Trade Fairs & Exhibitions Pvt. Ltd. & Customs, Excise and Service Tax Appellate Tribunal, Chennai – 2015 (12) TMI 91 – MADRAS HIGH COURT).

Refund claim – if the service tax liability is discharged on which education cess is paid on the goods exported the benefit of refund of such education cess paid should not be denied when the export of goods is not in dispute- (Tumkar Minerals Pvt Ltd, Prime Minerals Pvt. Ltd., Fomento (Karnataka) Mining Co. Pvt. Ltd., Sociedade de Fomento Industrial Pvt. Ltd., Sesa Goa Ltd., Sesa Resources Ltd., Dinar Tarcar Resources (India) Pvt. Ltd., Minescape Minerals Pvt. Ltd. Versus CCE Goa – 2015 (12) TMI 21 – CESTAT MUMBAI)

DVAT – it is only the Commissioner who can pass an order under Section 36A(8) unless and until the power of the Commissioner has been delegated under Section 68 of the said Act to the VATO. – But that has admittedly not been done. – order set aside – Yongnam Engineering & Construction (Private) Limited Versus Commissioner, Delhi Value Added Tax & Others – 2015 (12) TMI 1087 – DELHI HIGH COURT

Instruction regarding imposition of cost of CESTAT on ground of quality of adjudication order.

Technical testing and analysis service – reverse charge – services are imported or not – Proviso to Rule 3(ii) states that when a service is partly performed in India it shall be treated as performed in India. Revenue has not justified how the service is performed outside India, Demand set aside- (M/s Crompton Greaves Ltd. Versus Commissioner of Central Excise, Aurangabad – 2015 (12) TMI 1167 – CESTAT MUMBAI)

Denial of rebate claim – receipt of commission on transaction – service was received by the recipient abroad and it is partly performed in India and partly performed abroad – refund allowed- (ENERVISION SERVICES P. LTD. Versus COMMR. OF C. EX., CUS. & S.T., HYDERABAD-II – 2015 (12) TMI 1166 – CESTAT BANGALORE) 

Denial of rebate of Service Tax – no nexus between the input services and the exported output service – There is no clear proposition or proposal for this in the show cause notice. In the absence of a clear proposal the ground of nexus to reject the rebate claim of tax paid on output service could not have been used- (TEXTRON   INDIA PVT. LTD. Versus COMMR. OF S.T., BANGALORE – 2015 (12) TMI 1165 – CESTAT BANGALORE)

100 EOU – payment of duty at the time of debonding – petitioners are permitted to pay the excise duty foregone from the legally availed Cenvat credit account. Upon the excise duty being paid through the Cenvat credit account the second respondent shall issue No Due Certificate to the petitioners for debonding out of 100 EOU Scheme- (Messrs Dishman Pharmaceuticals And Chemicals Pvt. Ltd. Versus Union of India – 2015 (12) TMI 1211 – GUJARAT HIGH COURT)

Demand of service tax – arbitrary quantum while doing best judgement assessment – the order fatally suffers from lack of analysis/discussion regarding the contentions and arguments of the appellant and makes a mockery of the quasi-judicial process in-as-much-as it is not merely non-speaking but also absurd in parts- (M/s. Carlsberg India Pvt. Ltd. Versus C.S.T., Delhi – 2015 (12) TMI 1403 – CESTAT NEW DELHI)

CENVAT Credit – since the title or ownership of goods passed on to the buyer at their site such site of the buyer will be considered as the place of removal and as per the definition of input service the freight payable for such transportation of goods will be considered as input service for the purpose of taking cenvat credit- (Commissioner of Central Excise, Delhi-III Versus M/s Asian Color Coated Ispat Ltd. – 2015 (12) TMI 1394 – CESTAT NEW DELHI)

FTP : Export Policy of Onions- Removal of Minimum Export Price (MEP) on Onions. – 29/2015-20 – Dated 24-12-2015

Key Dates:

Issue of D Vat Certificate for deduction made in November: 22/12/2015.

Issue of TDS Certificate u/s 194-IA for TDS deducted in November on purchase of property: 22/12/2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

CORPORATE AND PROFESSIONAL UPDATE, 20TH NOVEMBER 2015

Untitled24AREGULAR  PROFESSIONAL UPDATES

 Direct Taxes:

147: Reopening only on the basis of information received that the assessee has introduced unaccounted money in the form of accommodation entries without showing in what manner the AO applied independent mind to the information renders the reopening void- (Pr. CIT vs. G & G Pharma India Ltd (Delhi High Court).

14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee’s disallowance is wrong- (DCIT vs. G. K. K. Capital Markets (P) Ltd. (ITAT Kolkata).

Transfer pricing adjustment – CUP method as the Most Appropriate Method for determination of ALP for international transactions. The assessee is also directed to furnish the comparables based on independent TP study for adoption of CUP method and produce such other evidences and documents before the Learned TPO / AO to ensure quick disposal of this set aside proceedings- (Lee Harris Pomeroy Architects PC Versus DCIT (IT) Circle – 1 (2), ITAT KOLKATA).

Transfer pricing adjustment – TNMM has almost become the ‘default’ method for taxpayers in recent years. – As such, the TNMM often proves easier to apply than, say, the Cost Plus or RPM methods, and TNMM is less sensitive to minor differences in the products being sold- (Gemstone Glass Pvt Ltd Versus Joint Commissioner of Income Tax Mehsana Range, Mehsana, ITAT AHMEDABAD).

Penalty u/s 271(1)(c) – for such lump-sum disallowance out of wages on the basis of presumption, no penalty u/s 271(1)(c) is leviable- (The Dy. Commissioner of Income-tax, Circle-1, Surat Versus M/s. Abhishek Exim Pvt Ltd – ITAT AHMEDABAD).

Addition u/s 68 – cessation of liability u/s. 41(1) – there is nothing on record to show that there was either remission or cessation of liability of the assessee- (The Assistant Commissioner of Income Tax, Circle 1 (1) , Bangalore. Versus M/s. Alvares & Thomas, ITAT BANGALORE).

Indirect Taxes:

Notification of All Industry Rates (AIR) of Duty Drawback w.e.f. 23.11.2015.

Introducing amendment to The Customs, Central Excise Duties and Service Tax Drawback Rules 1995.

Seeks to amend notification No.22/2015-ST dated the 6th November, 2015 so as to specify that Swachh Bharat Cess will be calculated on abated value.

Seeks to provide that provisions of notification No. 30/2012 – Service Tax dated the 20th June,2012 shall be applicable for the purposes of Swachh Bharat Cess.

Seeks to provide composition rate for Swachh Bharat Cess as applicable to ST under sub-rules 7,7A,7B,7C of rule 6 of STR, 1994.

Option to avail full exemption or partial exemption with CENVAT Credit – appellant-assessees cannot be forced to pay duty as per serial No. 90 of Notification 4/2006 and they have option to pay the duty under other numbers, viz. 91 and 93- (Balkrishna Paper Mills Ltd, Laxmi Board And Paper Mills Ltd, Commissioner Of Central Excise, Thane-I Versus Commissioner Of Central Excise, Thane –I And Laxmi Board And Paper Mills Ltd, CESTAT MUMBAI).

Benefit of CENVAT credit – Credit availed on the basis of debit notes – There is no justification for the Revenue to take a period of 4 years to issue the show-cause notice that too without verification of the documents submitted by the appellant- (Federal Mogul Tpr (India) Ltd Versus Commissioner of Central Excise, Service Tax And Customs Bangalore-II – 2015 (11) TMI 209 – CESTAT BANGALORE).

Leviability of service tax – franchise service – franchisee was obliged not to open any school with any name in the existing premises/building operational area of the school. In other words, the franchisee was free to open any school with any name in a “different premises/building operational area of the school” – no service tax is leviable under franchise service prior to 16.6.2005- (M/s Saani And Savera Educational Welfare Trust Versus Commissioner of Service Tax, Delhi, CESTAT NEW DELHI).

Advertising Agency service or sponsorship service – Import of service – The service rendered by sports bodies abroad could possibly be covered under the head of ‘Sale of Space or Time for Advertisement and Sponsorship Services’, which became taxable with effect from 01.07.2006. However, taxable services in relation to sponsorship services specifically excluded sponsorship of sport events- (M/s. Hero Motocorp Ltd. Versus C.S.T., Delhi, CESTAT NEW DELHI).

FAQ on Company Law:

Query: If the date of the adjourned meeting is decided at the original meeting itself, are companies still required to give notice for an adjourned meeting? What if the date of the adjourned meeting is not decided at the original meeting?

Answer: Yes, even if the date of adjourned meeting is decided at the original meeting, the Notice should be given. If the date of adjourned meeting is not decided at the original meeting, the adjourned meeting should be held only after minimum 7 days, thereby making provision for fresh 7 days Notice.

Query: A company wants to extend a housing loan of Rs. 50 lakh at the interest of 2% p.a. to Mr. A, a whole-time director of the company. The company has been extending this facility to all the employees as part of the conditions of service. Advice the company on the compliance required in respect of the housing loan to be extended to Mr. A?

Answer: Section 185(1) of Companies Act 2013 provides that a company can grant loan to a managing director or whole-time director as a part of the conditions of service extended by the company to all its employees.

As the company has been extending this facility to all the employees as part of the condition of service. Thus, the company may extend a housing loan of Rs. 50 lakh on an interest of 2% p.a to Mr. A, who is whole-time director of the company.

Query: How will companies which were incorporated quite some time back (for example 25-30 years ago) and where old Board Minutes are not available, ensure compliance with Para 1.2.1 of SS 1?

Answer: In case companies are unable to count and give continuous numbering from their incorporation, they may start giving serial numbers from Meetings held on or after 1st July, 2015. Otherwise, they may choose to follow any other system of numbering as given above.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480