Highlight on Tax Update

Income Tax Act

Income – Deemed To Accrue Or Arise In India

Royalty: Where at time of making the assessment, assessee disclosed all material facts showing that software license fee paid to the foreign company was in nature of revenue expenditure, AO could not initiate reassessment proceedings subsequently merely on basis of change of opinion that fee so paid was in nature of royalty and thus, the assessee was required to deduct tax at source while making said payment – (2015) 57 taxmann.com 236 (Gujarat).

Permanent establishment: Where Commissioner(Appeals) had dealt with DTAA but had not discussed actual work and nature of job done by assessee nor had he given reasons as to how he arrived at the conclusion that provisions of article 5 of DTAA of Indo-Netherland were not applicable, a matter required re-adjudication – (2015) 57 taxmann.com 228 (Mumbai – Trib.).

Allowance/Rate Of Depreciation

Windmills : in absence of any material on record, Assessing Officer could not reject assessee’s claim for depreciation on purchase of windmills taking a view that cost of said windmills had been inflated -(2015) 57 taxmann.com 235 (Bombay)

SECTION 35DDA

Quantum of yearly deduction : It is not amount debited in profit and loss account which had no bearing on tax liability, but amount computed in terms of section 35DDA, that would be eligible for yearly deduction on amortization of VRS expenditure – (2015) 57 taxmann.com 26 (Delhi – Trib.) (TM).

SECTION 37(1)

Stores and spares: Where the Assessing Officer did not examine the issue of allowability of particular expenditure despite several opportunities, the addition made by him was to be deleted – (2015) 57taxmann.com 26 (Delhi – Trib.) (TM).

Technical know-how fee: In the case of the assessee, engaged in the production of engineering related products, expenditure incurred towards procurement of right to use technical know-how by paying a lump sum consideration in course of business was a revenue expenditure falling under section 37 and provisions of section 35AB were not applicable to assessee’s case – (2015) 57 taxmann.com 233 (Karnataka).

Lease rent: Where assessee paid lease rent to a group company in respect of windfarm taken on lease, since lease rent was fixed in accordance with the formula provided by Indian Renewable Energy Development, a Government of India Company, impugned disallowance made by Assessing Officer under section 40A(2)(b) was to be set aside – (2015) 57 taxmann.com 235 (Bombay)

SECTION 40A(3)

Professional Expenditure: Where assessee was a film artist and incurred expenditure in cash in excess of Rs. 20,000 on costumes, makeup, wig material, traveling expenses, etc., at different places of shooting same was to be allowed – (2015) 57 taxmann.com 189 (Madras).

SECTION 79

Losses – Carry Forward And Set Off Of, In Case Of Certain Companies:-

Where Commissioner (Appeals) had accepted assessee’s explanation regarding set off of an unabsorbed loss and both members of Tribunal agreed that claim of the assessee was acceptable if such explanation was correct, there was no need to send the matter back to Assessing Officer for examining such explanation -(2015) 57 taxmann.com 26 (Delhi – Trib.) (TM)

SECTION 80G

Approval under section 80G(5): Where assessee-charitable society had fulfilled requisite conditions of section 80G, approval under section 80G could not be denied merely because land required for establishing its activities had not been registered in its name – (2015) 57 taxmann.com 230 (Hyderabad – Trib.).

SECTION 143

Notice: Where the Assessing Officer doubts the correctness of the claim made by the assessee, he is required to follow the procedure prescribed under section 143(2) and section 143(3); since Assessing Officer did not follow the prescribed procedure, matter remanded back – (2015) 57 taxmann.com 225 (Andhra Pradesh and Telangana)

SECTION 145

Reconciliation of quantitative details: Where details contained in Form 3CEB were with reference to royalty paid/payable by assessee-company and not details of production, and reconciliation had been filed by assessee regarding sale on which royalty had been paid during the year, rejection of books of account on ground of alleged difference in the quantity shown in Form 3CEB and quantitative details furnished by the assessee was not justified – (2015) 57 taxmann.com 26 (Delhi – Trib.) (TM).

SECTION 158BB

Loss/unabsorbed loss, setting off: Where search was conducted in the year 1996-97 for which regular return was not filed but losses were claimed for the assessment year 1996-97, losses incurred for part of the year 1996-97 preceding date of the search were to be adjusted for determining the undisclosed income of block period – (2015) 57 taxmann.com 18 (Andhra Pradesh)

SECTION 158BC

Writ remedy: Against notice issued to assessee requiring him to file block assessment return as a result of disclosure made in search of premises of other people, the assessee had remedies under Income-tax Act to file an appeal against said notice; writ petition against same was not maintainable – (2015) 57taxmann.com 232 (Andhra Pradesh and Telangana).

SECTION 206C

Sale of forest produces Furnishing of Form No. 27C by the buyer at the time when the collection of tax at source is contemplated under section 206C has to be construed as mandatory – (2015) 57 taxmann.com 238 (Delhi – Trib.).

SECTION 220

Condition precedent/Notice under section 156: In absence of any notice of demand under section 156, assessee could not be treated as ‘assessee in default’ – (2015) 57 taxmann.com 177 (Madras).

SECTION 260A

Condonation of delay: Where assessee took the voluntary decision not to assail the order of Tribunal and accepted same, only because assessee succeeded on the same issue 5 years later, same could not be a sufficient cause to condone delay of 5 years in filing appeal before High Court – (2015) 57 taxman.com7 (Bombay).

SECTION 281B

Condition precedent/Notice: In absence of notice as per Rule 51 of Second Schedule Part III to pay arrears, there could not be any provisional attachment under section 281B – (2015) 57taxmann.com 177 (Madras).

Competition Act

Where OP having a dominant position in the relevant market of Point of Sale (POS) terminals in India had forced informants to purchase Software Development Kit (SDK) with Electronic Ticketing Machine (ETM), OP abused its dominant position – (2015) 57 taxmann.com 263 (CCI)

Service Tax

Marriage is a social institution that existed much before religions came into being; hence, marriage is a social function and cannot be held as a religious function, and services relating to thereto are taxable under Mandap Keeper’s services – (2015) 57 taxmann.com 170 (Mumbai – CESTAT)

Central Excise Act

Exemptions – Central Excise – General:-

Goods on which duty is paid by 5th/6th of next month must be regarded as ‘duty paid’ goods; and therefore, if an exemption is conditional upon use of ‘duty paid’ motor spirit, said exemption may be availed in respect of final product using ‘motor spirit’, on which duty is paid by 5th/6th of next month -(2015) 57 taxmann.com 128 (Punjab & Haryana).

SECTION 35F

Where, in earlier matters, pre-deposit had been waived and matter was remanded back to Commissioner (Appeals) for disposal on merits, Tribunal cannot adopt a different approach and order pre-deposit in other matters involving same issue – (2015) 57 taxmann.com 169 (Himachal Pradesh).

Customs Act

No confiscation or redemption fine, if : (a) goods already cleared and not available for confiscation, (b) goods have also not been seized and subsequently released against bond; and (c) person who own goods now is also not known – (2015) 57 taxmann.com 79 (Mumbai – CESTAT)

SECTION 129E

Appeals – Deposit Of Certain Percentage Of Duty/Tax Demanded Or Penalty Imposed Before Filing Appeal:-

Since : (a) right of appeal granted by statute is a conditional right; (b) condition of mandatory pre-deposit of ‘small percentage’ (i.e., 7.5 per cent) of duty/penalty confirmed, prior to filing appeal, is ‘not so onerous’ as to deprive assessee of an effective right of appeal, and (c) same is refunded in event of assessee succeeding in appeal; hence, said condition of pre-deposit is valid – (2015) 57 taxmann.com75 (Kerala).

CST & VAT

Cancellation of registration certificate of assessee on ground that he had not filed returns electronically was wrong and if assessee had complied with requirements of sub-section (4) of section 29, registration certificate had to be restored – (2015) 57 taxmann.com 172 (WBTT).

Cenvat Credit Rules

HR Steel Sheets, Plates etc. used for repair and maintenance of storage tank (which is specifically covered under definition of ‘capital goods’), are eligible for credit as ‘inputs’ – (2015) 57 taxmann.com152 (Bangalore – CESTAT).

If some credit is admissible on basis of cenvatable documents existing with assessee on date of visit of audit officers, but credit is not taken, then same can be taken only after date of visit of audit officers; assessee cannot take back-dated credit and file revised returns – (2015) 57 taxmann.com 97 (Ahmedabad – CESTAT).

Indirect Tax Laws (St/Ex. & Cus./Cst & Vat):-

Refund of excess Cenvat Credit to Service provider in case of partial reverse charge – Amendment in Notification No. 12/2014-C.E. (N.T.), Dated 3-3-2014 – Notification No.15/2015-C.E. (N.T.), Dated 19-5-2015.