Monday, 30 September 2013

No recovery proceedings when application is made under VCES

 
This Tax Alert summarizes the recent order passed by the Allahabad High Court in the case of M/s K. Anand Caterers vs. UoI & Ors. [AIT-2013-162-HC].
The writ petition was filed in respect of the recovery proceedings initiated under section 87 of the Finance Act, 1994, when an application had been made for the payment of the defaulted service tax amount under the Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013.
The Allahabad High Court in its interim order, held that, when the liability of service tax is admitted and application has been made under the VCES, 2013 on 20 June 2013, then no recovery proceedings could be taken until the application is disposed of, and the VCES, 2013 permits the assessee to deposit tax in two instalments i.e., to pay 50% by 31 December 2013 and remaining 50% by 30 June 2014.

Whether when assessee transfers its running business and obtains Right of First Refusal to start a new business, compensation received from purchaser for breach of such a right is in nature of capital receipt - YES: ITAT

THE issue before the Bench is - Whether when the assessee transfers its running business and obtains Right of First Refusal to start a new business, compensation received from the purchaser for breach of such a right is in the nature of capital receipt. YES is the Tribunal's answer.
Facts of the case

Larger Bench of Supreme Court affirms Raheja decision - States can levy sales tax on sale of flat

 
 
The much awaited Larger Bench (comprising 3 members) decision of the Supreme Court (“SC”) on the principles laid down in the case of K Raheja Development Corporation v State of Karnataka (2005-5-SCC-162) (“Raheja Development”) has been pronounced. The key question answered by SC is whether taxing sale of goods by State Governments in an agreement for sale of aflat, which is to be constructed by a developer, is permissible under the Constitution.
In answering this question in the affirmative, it was held that when the agreement between developer and flat purchaser is to construct a flat and eventually sell the flat with fraction of land, it is obvious that such transaction involves activity of construction inasmuch as it is only when the flat is constructed, it can be conveyed. The ultimate transaction between the parties may be sale of flat, but it cannot be said that the characteristics of works contract are not involved in that transaction. Hence, the transaction is liable to appropriate sales tax/ VAT.

CBDT Order Regarding Keeping Offices Open For Manual Filing Of TAR

 
Further to Order F.No.225/117/2013/ITA.II dated 26.09.2013 requiring the Tax Audit Report to be filed by 30.09.2013, the CBDT has issued an Order dated 30.09.2013 directing all CCsIT /DsGIT to ensure that all Income Tax Offices shall remain open til1 8:00 p.m on 30th September, 2013 for the convenience of taxpayers, who wish to file Report of Audit manually for assessment year 2013-2014, as per the said order.

CBDT Order Extending Due Date For Filing ROI For Assessees In Gujarat

 
The CBDT has issued an order dated 30.09.2013 u/s 119 of the Act stating that in view of the reports of dislocation of general life caused due to recent heavy rains and floods in the State of Gujarat, the ‘due-date’ for filing Returns of Income in the cases of Income-tax assessees in the State of Gujarat who are liable to file their Income tax returns by 30th September, 2013 is extended to 14th October, 2013.

Sunday, 29 September 2013

Understanding section 28 with latest case laws :

The usage of section 28 to justify any expenditure or loss is rarely found. We try to substantiate the same under section 36 or 37 and sometimes not able to get the deduction due to limitations and conditions laid down in that section. That’s why we should now also try to substantiate the same under section 28 also. If you look into the section  28 it says that all kind of business profit are included and business profit also include business loss. Hence, if we prove that expenses incurred is a pure business loss then we may able to take claim of the same.

Latest e-TDS/TCS 4.0 Ver. with TDS Adjustment Features w.e.f. 01.10.13.

With a good news for All dedductors TIN-NSDL has been published latest FVU version 4.0 and 2.136 for TDS Deductor's and TCS Collector's w.e.f. 01.10.2013 (mandatory) to submit TDS Quarterly Statement for Asstt. Year 2014-15. In the below Key Features shows all these new amendments are to clarify TDS/TCS Deductors difficulties. Therefore, TDS/TCS Deductor read carefully all these amendments features regarding filing of Quarterly Statement for Asstt. Year 2014-15.

Friday, 27 September 2013

UNDERSTANDING INCOME FROM HOUSE PROPERTY WITH LATEST CASE LAWS :

In this article, we will discuss recent decisions of various courts & tribunals in respect of income from house property which will enable us better understanding of the subject and also help us to take better business decisions in this respect.  .
01. Income from Service charges : In the decision of Vikram Golecha Vs DCIT , 319 ITR 22, the court decided that Intention of Land lord to be considered  in determining wheather charging of service provided in terms of agreement  with tenants business income or not. Agreements entered with occupants only conferred contractual right to occupy space for business not vested with any right , title or interest of any kind in service and facilities provided by assessee. Hence to be treated as Income from Business. Again in the case of CIT v Mysore International Hotels (P) Limited, 322 ITR 116,it was held that When property is let out for composite rent , then service part will be business Income.

Ex-auditor couldn’t complaint against new auditor if client found no discrepancy in audit report of new auditor

 




Facts:
a) 'A', auditor of the company, was replaced by ‘B’. A made a complaint against B levying various allegations against him;

Central Excise Notification-No12/2013-DT-27/09/2013

[TO BE PUBLISHED IN THE GAZETTE OF INDIA,
EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
Notification No. 12 /2013-CE (NT)
New Delhi, the 27th September, 2013
G.S.R. (E).- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:-

Service Tax Case Laws Update - Sep 2013


1. Services:

 

Outdoor Catering Service:

 

1.1  CST, Bangalore vs. The Grand Ashok 2013 (31) STR 528 (Kar.)

 

The High Court in this case held that, outdoor catering consists of article of food etc. which constitute sales and other part consists of service to bring food to place designated by client, including transportation, which  alone is liable to service tax and not the entire cost received from client. It is composite but divisible contract of service under Article 366(29A) (f) of Constitution of India on which State Legislature is competent to levy Sales tax on sales aspect only. Hence, sale of goods has to be bifurcated from service provided.

Whether income derived from airconditioning and other charges of let out property can be considered as income from other sources entitled for deduction of expenses u/s 57 - YES: ITAT

THE issue before the Bench is - Whether income derived from the airconditioning and other charges of the let out property can be considered as income from other sources entitled for deduction of expenses u/s 57. And the answer goes in favour of the assessee.
Facts of the case

Thursday, 26 September 2013

CBDT Notifies Rules For General Anti Avoidance Rules (GAAR)

Vide Notification dated 23.09.2013 issued by the CBDT, Rules 10U to 10UC have been inserted in the Income-tax Rules, 1962 to provide for the entire procedure for monitoring the General Anti Avoidance Rules (GAAR). The relevant forms have also been notified. The said Rules will come into effect on 1st April 2016



http://www.itatonline.org/info/?dl_id=1338


Summary of Rules of GAAR

 01. Effective from April 1, 2015.

02. Not applicable in case of arrangement does not exceed the value of INR 30 Mn.

03. Define FII

04. Before reference to commissioner, AO should seeks objections from assessee

05. AO  should  make application to Commissioner in Form 3CEG.

06. Commissioner issue direction to AO in Form 3CEH.

07. Time limit is one month.

Tax Compliances must for all businesses – Profit making or no profit making

imagesRavi, founder and CEO of a private limited is confused of the fact whether his company is required to file taxes and also comply with statutory compliance since the company has not generated any revenue during the financial year. The Company was incorporated on 12/12/2012 and is engaged in development of software applications. Ravi, incurs expenses as staffing cost, power, electricity and rent from his personal source.

Ravi should know that it is more important for businesses to be in compliance with tax and regulatory requirements even if there is no profit or the company is incurring losses during a financial year.

Mumbai Tribunal rules compensation for termination of Right of First Refusal for grant of manufacturing rights is not taxable

 
This Tax Alert summarizes a recent decision of the Mumbai Income Tax Appellate Tribunal (Tribunal) in the case of Parle Soft Drinks Pvt. Ltd. (Taxpayer) on the issue of taxation of compensation received towards termination of “Right of First Refusal” (ROFR) for grant of bottling rights of soft drinks. Such rights provided the Taxpayer with a preferential opportunity to prove its credentials for grant of bottling rights before the grantor could approach any other party.

EXTENTION WHICH HAVE NO MEANING.




F.No. 225/117/2013/ITA.II
Government of India
Ministry of Finance, Department of Revenue,...
Central Board of Direct Taxes
North-Block, ITAII Division New Delhi, the 26th September, 2013

Order under Section 119 of the Income-tax Act. 1961.

CBDT in exercise of power under sec 119(2)(a) of the IT Act, 1961 read with Sec 139 and Rule 12, has decided to relax the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessment Year 2013-14 as under
(a) The assesses, who are presently finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date.
(b) The said Report of Audit should however be furnished electronically on or before 31.10.2013.

A Treatise On The Tax Implications Of Hindu Undivided Family (HUF)

Hindu Law has been discussed by various authors in the light of various judgments of courts. The said law stands amended by various enactments. This discussion would deal with the various aspects of Hindu Law which are relevant for the purpose assessment of income and wealth in the status of Hindu Undivided Family (HUF) as well as the impact of the provisions of Hindu Succession Act 1956 as amended by Hindu Succession (Amendment) Act 2005 which are relevant for the purpose of assessment of income and wealth in the status of HUF under Income Tax Act 1961. Firstly, would be discussing the legal position under the original Hindu law and then discuss the impact of the relevant provisions of Hindu Succession Act 1956.

Whether when running division of business is transferred to Group company as per amalgamation plan approved by High Court and no sale consideration is involved, even then such a transfer gives rise to capital gains taxable u/s 50B - NO: ITAT

THE issue before the Bench is - Whether when a running division of the business is transferred to a Group company as per the amalgamation plan approved by the High Court and no sale consideration is involved, even then such a transfer gives rise to capital gains taxable u/s 50B. And the verdict goes against the Revenue.
Facts of the case

Final Safe Harbour Rules notified by the CBDT

 
Safe harbour refers to circumstances under which the Indian Revenue Authorities (‘IRA’)would accept the transfer price declared by the taxpayer. The Central Board of Direct Taxes (‘CBDT’) had issued Draft Safe Harbour Rules on August 14, 2013 inviting comments from various stakeholders. After considering comments received from interested parties, the CBDT has now issued final safe harbour rules on September 18, 2013.

Larger Bench of CESTAT holds that material supplied free of cost by service recipient is not includible in value of service

 
The larger bench of the CESTAT Delhi bench (“LB”), in this recent judgment held that the value of materials supplied free of cost by the service recipient (“free supplies”) is not includible in the ‘gross amount charged by the service provider’ for the purpose of 67% abatement under Notification No 15/2004 dated September 10, 2004. We have summarized the ruling of the LB below.

Wednesday, 25 September 2013

UNDERSTANDING TRANSFER PRICING WITH LATEST CASE LAWS PART 2.



Now a days, during transfer pricing assessment , the TPO are coming with unique ideas like valuation of intangibles , corporate guarantees, ratings provided by CRISIL etc. this all leads to corporate in a mysterious situation. Below are the summarized form of the latest judicial pronouncements on transfer pricing which will help corporate in better benchmarking of their

Whether when a central agency is engaged in combating money laundering, Income tax search based on inputs from such an agency would be against national interests - YES: HC

THE issues before the Bench are - Whether in a case of search & seizure, the Revenue can claim privilege for not disclosing the satisfaction note prepared on the basis of inputs received from the FIU; Whether disclosure of sources of such information would jeopardise public interest and Whether when a central agency is engaged in combating money laundering, income tax search based on inputs from such an agency would be against national interests. And the assessee's writ dismissed.
Facts of the case

Sum paid to access commercial information for further transmission to principal isn’t a ‘royalty’

Where assessee made remittance for procurement of commercial information for onward transmission to its principal, remittance made was not for availing technical services and did not amount to royalty

In the instant case the assessee had entered into a master clinical services agreement with its principal 'BHAG' for clinical trials. Assessee had arrangement with CSPL to provide information on clinical trial test undertaken by CTU of University of Kelmia, Sri Lanka. It applied for issue of certificate for non-deduction of tax on remittances made to CSPL which had no PE in India. The AO held that remittance for clinical services was in nature of royalty and was liable to be taxed in India. On appeal, the CIT (A) reversed the order of AO.

DTAA WITH AUSTRALIA - RECENT AMENDMENT

TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (ii)]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

(CENTRAL BOARD OF DIRECT TAXES)

Notification No. 74/2013

New Delhi, the day of 20th September, 2013

Whereas the annexed Protocol amending the Agreement between the Government of the Republic of India and the Government of Australia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as “Protocol”) signed on the 16th day of December, 2011 shall enter into force on the 2nd day of April, 2013, being the date of the later of the notifications after completion of the procedures as required by the laws of the respective countries for the entry into force of the Protocol, in accordance with the provisions of Article 7 of the said Protocol.

Whether an employer is competent to determine the allowances, which are exempt from tax - NO: Allahabad HC

THE issues before the Bench are - Whether perquisites are excluded from purview of Sec 10(14); Whether conveyance or additional conveyance allowance is covered by the expression 'perquisite' and the same is taxable and Whether an employer is competent to determine the allowances, which are exempt from tax. And the verdict goes against the assessees.
Facts of the case

Circulars prescribing the guidelines for arrest and bail in relation to offences under Service tax, Central Excise and Customs laws

 
This Tax Alert summarizes the recent circulars issued by the Central Board of Excise and Customs (CBEC) laying down guidelines for arrest and bail, in respect of the offences punishable under the Finance Act, 1994, Central Excise Act, 1944 and the Customs Act, 1962.
These circulars have been issued in light of the recent amendments made by the Finance Act, 2013, in respect of the offences punishable under the Service tax, Central Excise and Customs provisions.
The circulars also prescribe the procedures to be followed for arrest, post arrest formalities, format for the monthly report to be sent by the Chief Commissioners of all the persons arrested etc.
Although the Circulars do provide a clarity that the power to arrest would need to be exercised by the authorities with utmost care and caution, practically it is to be seen as to how and in which specific scenarios the authorities exercise such powers.

CBDT Creates Detailed Procedure To Track Non-Filers Of Income-tax Returns

 
The CBDT has issued Instruction No. 14/2013 dated 23.09.2013 by which it has created a “Standard Operating Procedure for cases under Non-filers Monitoring System”. The Instruction points out that the existing procedure for monitoring cases of ‘Non-Filers of IT Returns’ as identified by Director General of Income Tax (System) results in Non-Filers not being uniformly monitored by the Assessing Officers due to lack of consistency in approach in dealing with such cases. In order to streamline the processing Of such cases and to ensure consistency in monitoring NMS cases by the Assessing Officers, the Board has laid down a detailed Standard Operating Procedure.

Amendment to Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012

 
This Regulatory Alert summarizes the Notification dated 16 September 2013 issued by Securities and Exchange Board of India (SEBI) notifying SEBI (Alternative Investment Funds) (Amendments) Regulations, 2013 amending the SEBI (Alternative Investment Funds) Regulations, 2012. These amendments shall come into force on the date of publication in the Official Gazette.
The Notification has introduced a new category ‘Angel Funds’ within the definition of Venture Capital Funds under Category I- Alternative Investment Funds, as well as prescribed the registration requirements, investment parameters and other conditions for Angel Funds. Further, the Notification also makes provisions for obtaining in-principle approval by the applicants.
The introduction of ‘Angel Funds’ within the definition of VCF by the market regulator, SEBI, is a welcome move to encourage entrepreneurship and finance small businesses by way of notifying new norms for angel investors, who provide funding to companies at their initial stages.

Delhi Government announces “Delhi Tax Compliance Achievement Scheme, 2013”

 
The Government of Delhi has joined the growing list of governments at the Central as well as State level by announcing an Amnesty Scheme for State tax dues. The Delhi Tax Compliance Achievement Scheme, 2013 (“Scheme”) has been notified vide Notification No F3 (16)/ Fin (Rev-I)/ 2013-14/ ds VI/ 786 on September 20, 2013 with a view to incentivize taxpayers to voluntarily declare and pay unassessed tax dues as well as settle assessed tax dues pertaining to the period upto March 31, 2013 and remaining unpaid as on August 31, 2013.

Sunday, 22 September 2013

UNDERSTANDING SECTION 10 WITH LATEST CASE LAWS PART- III:


The most important & disputed clause under section 10 is exemption allowed to STPI and SEZ under clause 10A, 10B & 10AA. However,  from FY 2011-12, the exemption is no more allowed to STPI and EOU units, however continued to allowed to SEZ Units. Still the section requires discussion for pending cases.

We had earlier discuss in detail about the concepts of exemption of section 10 along with various case laws earlier in part –I & part - II. In case you want to refer, the part –I & II, please click on the link below:

 

UNDERSTANDING SECTION 36 DEDUCTIONS WITH LATEST CASE LAWS:




Under section 36 of the Income tax act, 1961 there are number of deductions  available along with their conditions.  Below we are discussing the summary of the few latest case laws in respect of section 36 which will make us understand the deductions in a better way.  The deductions which are

UNDERSTANDING TAX DEDUCTED AT SOURCE WITH LATEST CASE LAWS: PART - II




In the part I of the article Understanding TDS with case laws published on February 2011 now we should move ahead and should discuss the latest judicial development in the area of TDS. 

<!--[if !supportLists]-->·         <!--[endif]-->Trade Discount :  In the case of S.D. Pharmacy Pvt. Ltd. ITA Nos. 948/Coch/2008, A.Y. 2005-06, dt. 5-5- 2009. It was held that trade discount are not in the nature of commission and hence no TDS is required to be deducted u/s 194H of the act. This was again confirmed in the case of Add CIT v Pearl Bottling (P)  Limited.

UNDERSTANDING TRANSFER PRICING WITH LATEST CASE LAWS:

UNDERSTANDING TRANSFER PRICING WITH LATEST CASE LAWS:
With the advent of MNCs(Multi National Concerns) trend has also been adopted by the MNCs to structure their investments and business strategy in such a way that profits are maximized in such jurisdictions where tax rates are low, which give rise to the emerging  problem of transfer pricing all over the world. Many countries have made laws to deal with the issue of transfer pricing. India has been a late enterant in making provisions under the Income Tax Act to tackle the issue of transfer pricing. Although there existed section 92 under Income tax Act 1961 but there were not relevant rules which could help tackle the issue of transfer pricing. Section 92A to 92F had been inserted to deal with transfer pricing by the Finance Act, 2001. Some views are expressed in this article as below explaining

Saturday, 21 September 2013

Treaties with foreign countries can help non-residents lower their tax burden. We explain how

Easing the Burden


If you are going abroad to make a living , leaving behind investments or other sources of income, you will have to pay tax on these earnings here. Worse, you will be liable to pay tax on this income in your country of residence too, as earnings in India will be added to calculate your total global income and taxed in the country of residence.

To avoid paying tax on same income twice , one can use the provisions of the Double Taxation Avoidance Agreement (DTAA), a tax treaty India has signed with many countries.

WHAT IS DTAA

Key Managerial Personnel newly intoduced in Companies Bill 2013

In any company, quality of corporate governance and compliance of ethics depends upon quality of people taking charge of the affairs . After the passing of the Companies Bill 2013, for the first time the concept of Key Managerial Personnel, newly introduced in Companies Bill 2013, has been introduced in India.
The Key Managerial Personnel are the particular class of officers in the company. For the stake of more clarity of understanding the definition, the various terms used are chief executive officer, managing director, manager, company secretary, whole time director and chief financial officer.

Whether advertisement expenses which were considered by Revenue as revenue expenditure were rightly disallowed merely because in books of account same were considered as deferred revenue expenditure - NO, rules HC

THE issues before the Bench are - Whether the advertisement expenses, which were considered by the Revenue as revenue expenditure, were rightly disallowed merely because in the books of account the same were considered by the assessee as deferred revenue expenditure; Whether the provision made by the assessee for warranty for after-sales services is to be considered as contingent liability and not allowable as expenditure and Whether when at the relevant time as per law assessee has deducted tax at source but paid the same in subsequent year, no disallowance can be made as out of two conditions as mentioned in section 40(a)(i) ‘the tax has not been paid’ or ‘deducted’ one condition ‘not deducted’ do not exist. And the verdict goes

Guidelines for arrest and bail in relation to offences punishable under the Finance Act, 1994

Circular 171/6/2013-Service Tax
F.No. 137/47/2013-Service Tax
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Service Tax Wing
***
New Delhi, the 17th September, 2013
To,
All Chief Commissioners of Central Excise
All Chief Commissioners of Customs and Central Excise
All Directors General
All Commissioners of Service Tax

Compulsory Manual Selection of cases for scrutiny during the F. Yr. 2013-14

Instruction No. 13/2013 [F. NO. 225/107/2013/ITA.II] dated 20.09.2013

To,

All Chief Commissioners of Income-tax
All Directors-General of Income-tax

Sir/Madam,

Friday, 20 September 2013

Understanding deductions of section 80-IA & IB with Latest Case Laws Part – II.


 

We had earlier discuss in detail about the concepts of section 80-IA & IB   along with various case laws earlier in article. In case you want to refer, the same, please click on the link below:


Over a period of time, there are number of judgments’ comes from various levels of courts from different locations of India and hence it is very important to know the same for the correct treatment of infrastructure deduction.

Auxiliary Services provided to Schools are exempt

Pl go through the following circular and highlighted portion. This will give big relief on certain services availed by the Schools.
CIRCULAR NO
172/7 /2013-ST, Dated: September 19, 2013
Government of India
Ministry of Finance

Department of Revenue

Central Board of Excise& Customs

Tax Research Unit

146-F, North Block, New Delhi

CENVAT credit - Outdoor Caterers Service availed by manufacturer - Held, providing canteen is statutory requirement - direct nexus and hence 'input service'.

Manufacturer of cigarettes,packing materials 0f paper and paper board and printing inks availed CENVAT Credit on their inputs, capital goods and input services. CENVAT credit of service tax paid 0n outdoor caterer's services during March 2005-06 was disallowed and upheld but the Commissioner (Appeals) allowed the same. Thedepartment's appeal was decided by the Larger Bench in favour of the assessee. The department challenged the order before the Hon'ble Bombay High Court which remanded it back to the Tribunal to decide in accordance with the decision of the High Court in Ultratech Cement Ltd. 2010 (20) STR 577 (Born), The Revenue contended that in the case of UItratech Cement Ltd., the Hon'ble High Court held that once the service tax is borne by the ultimate consumer of the service, namely the worker; the manufacturer cannot take credit of that part 0f the service tax which is borne by the consumer. The Assessee pleaded that the cost of canteen s

Indian Tax Administration issues final rules on transfer pricing safe harbor

 
The Finance (No 2) Act (FA), 2009 introduced provisions in the Indian Income-tax Law (ITL) that empowered the Central Board of Direct Taxes (CBDT), the apex Indian Tax Administration, to issue transfer pricing “safe harbor” rules. A “safe harbor” is defined in the ITL as circumstances in which the Tax Authority shall accept the transfer price declared by the taxpayer. The CBDT on 14 August 2013 released draft safe harbor rules for public comments. After considering comments of various stake holders, on 18 September 2013, the CBDT issued the final safe harbor rules.

Occupancy rights in flat conferred by Articles of Association confer ownership rights in flat. Restriction on transferability of flat in Articles of Association is void

Hill Properties Ltd vs. Union Bank (Supreme Court)
 
Hill Properties Ltd, by its Articles of Association, permitted its shareholders to use and occupy flats in the building owned by it. A shareholder mortgaged a flat to secure a loan taken from the Union Bank. As there was a default in

S. 50B: Transfer of assets without monetary consideration is not a “slump sale”

ITO vs. Zinger Investments (P) Ltd (ITAT Hyderabad)
 
The assessee transferred its manufacturing division to Novapan Industries Ltd under a scheme of amalgamation pursuant to which Novapan transferred investments worth Rs. 25.24 crore to the assessee and allotted shares worth Rs. 6.81 crore to the assessee’s shareholders. There was no monetary

Mumbai Tribunal rules reimbursement of expenses on secondment of employees not FTS

 
This Tax Alert summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (Tribunal) in case of Temasek Holdings Advisors (I) Pvt .Ltd. (Taxpayer) on the issue of taxability of payments made by Taxpayer to its parent company in Singapore, i.e., Temasek Holding Pte. Ltd. (Sing Co) in relation to secondment of employees to India and certain other expenses incurred by Sing Co for the business of Taxpayer.
The Tribunal ruled that payments made by Taxpayer towards salary and other employment costs of the seconded employees amount to reimbursement of expenses and not payments for any services rendered by Sing Co to Taxpayer. Such payments were not taxable in India as the same were reimbursement of expenses and were not fees for technical services (FTS) under the Income Tax Laws (ITL) or India–Singapore Double Tax Avoidance Agreement (Singapore DTAA). Furthermore, since taxes had already been withheld on salary payments made by Sing Co to the seconded employees, there was no further withholding of taxes required when such amount was reimbursed by Taxpayer. Accordingly, such reimbursement cannot be disallowed in computation of income of Taxpayer.

Larger Bench decision in the case of free supplies for construction services

 
This Tax Alert gives an update on the recent ruling of the Larger Bench of the Delhi Tribunal in the case of Bhayana Builders (P) Ltd. & Ors. v CST, Delhi & Ors.
The issue for consideration before the Larger Bench of the Delhi Tribunal was whether the value of goods supplied free of cost by the service recipient and used in the provision of construction service, should be included in the gross amount charged, for service tax valuation purpose, under section 67 of the Finance Act, 1994.
The Larger Bench upheld the non-taxability of the free materials provided by the service recipient towards construction services and concluded that such supplies would not form part of the "gross amount charged" within the meaning of section 67 of the Finance Act, 1994.

Thursday, 19 September 2013

Non-Resident Indian (NRI) - Definition under Income Tax Act and Tax Implication of Residency

"To be, or not to be, that is the question” – thus pondered Shakespeare in Hamlet. Well there isn’t really a choice we have “To be, or not to be” Resident or Non-Resident, but for a person moving outside India or traveling frequently to India, residency is of paramount importance, since that is what determines what Income is taxable and also what sort of bank accounts he can open and operate.


Mandatory requirement of furnishing PAN in all TDS statements u/s. 206AA

The non-quoting of PAN by deductees in many cases have led to delay in issue of refund on account of problems in the processing of returns of income and in granting credit for tax deducted at source.

With a view to strengthening the PAN mechanism, section 206AA provides that any person whose receipts are subject to deduction of tax at source i.e. the deductee, shall mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at source at higher of the following rates –

  • the rate prescribed in the Act;
  • at the rate in force i.e., the rate mentioned in the Finance Act; or
  • at the rate of 20%.

For instance, in case of rental payment for plant and machinery, where the payee does not furnish his PAN to the payer, tax would be deductible @20% instead of @2% prescribed under section 194I. However, non-furnishing of PAN by the deductee in case of income by way of winnings from lotteries, card games etc., would result in tax being deducted at the existing rate of 30% under section 194B. Therefore, wherever tax is deductible at a rate higher than 20%, this provision would not have any impact.

Tax would be deductible at the rates mentioned above also in cases where the taxpayer files a declaration in Form 15G or 15H (under section 197A) but does not provide his PAN.

Further, no certificate under section 197 will be granted by the Assessing Officer unless the application contains the PAN of the applicant.

If the PAN provided to the deductor is invalid or it does not belong to the deductee, it shall be deemed that the deductee has not furnished his PAN to the deductor. Accordingly, tax would be deductible at the rate specified in (ii) above.

These provisions will also apply to non-residents where tax is deductible on payments or credits made to them. However, the provisions of section 206AA shall not apply in respect of payment of interest on long-term infrastructure bonds, as referred to in section 194LC, to a non-corporate non-resident or to a foreign company.

Both the deductor and the deductee have to compulsorily quote the PAN of the deductee in all correspondence, bills, vouchers and other documents exchanged between them.

Whether assessee has case even if he pays higher stamp duty as per valuation of stamp authority and claims lower capital gains as per report of approved valuer - YES: HC

THE issues before the Bench are - Whether assessee has a case even if he pays higher stamp duty as per valuation of stamp authority and claims lower capital gains as per report of approved valuer; Whether valuation by stamp authority is not expected to have any nexus with the market value; Whether valuation under I-T Act is required to take into account attributes like occupancy by tenants, legal encumbrances and other charges; Whether if the value assessed by the stamp valuation authority exceeds u.s 50C, the AO can refer the case to the DVO and Whether if the AO relies on the report of the approved valuer u/s 55A, it is required to apply his mind and record reasons for the same. And the law point goes in favour of the assessee.

Mumbai ITAT rules that non-recognition of interest income on NPAs as per RBI guidelines would by itself not determine non-taxability thereof

 
The Mumbai Income-tax Appellate Tribunal (ITAT) has in the case of KEC Holdings Ltd (Taxpayer) pronounced a ruling on the issue of accrual/ recognition of interest income in the hands of a Non-Banking Financial Company (NBFC) on its advances/ deposits which are classified as Non-Performing Assets (NPA) as per the Reserve Bank of India (RBI) guidelines.

Government of India press release on final transfer pricing safe harbour rules

 
The Finance (No 2) Act, 2009 had introduced provisions in the Indian tax Law (ITL) which empowered the Central Board of Direct Taxes (CBDT), the apex Indian Tax Administration, to notify transfer pricing “safe harbour” rules. A “safe harbour” is defined in the ITL as circumstances in which the Tax Authority shall accept the transfer price declared by the taxpayer. On 14 August 2013, the CBDT had released draft safe harbour rules for public comments[1]. After considering comments of various industry stake holders, on 18 September 2013, a press release issued by the Government of India announces that the safe harbour rules have been finalised.

Tribunal holds scope of ‘Slump Sale’ restricted to only ‘Sale’ transactions

 
The Hyderabad Bench of the Income Tax Appellate Tribunal (‘ITAT’) in a recent ruling in the case of ITO Vs Zinger Investments (P) Ltd.[#_ftn1][1], has held that transfer of an undertaking for non-monetary consideration pursuant to a scheme of arrangement approved by a high court will not be regarded as ‘slump sale’, as defined under section 2(42C)[#_ftn2][2]of the Income-tax Act, 1961 (‘the Act’). The view expressed in this ruling is similar to that of Mumbai Bench of ITAT in the case of Bharat Bijlee[#_ftn3][3] and Avaya Global Connect Limited[#_ftn4][4]wherein it was held that transfer of an undertaking for a lump sum consideration would be regarded as slump sale only if such transfer is effected by way of ‘sale’.

Wednesday, 18 September 2013

How much Gratuity, Voluntary Retirement and Commuted Pension is Exempted from Income Tax?

Where retirement benefits as gratuity is received more than once, either from one employer or more than one employer, or either in the same previous year or over several previous years, then the total gratuity exemption cannot exceed the statutory limit applicable as on the date of his retirement or becoming incapacitated prior to such retirement or his death or whose employment is terminated on or after that date.

Whether power to waive interest u/s 215 is judicial discretion vested in tax authorities and cannot be challenged in writ - YES: Delhi HC

THE issues before the Bench are - Whether the power to waive interest u/s 215 is a judicial discretion vested in the tax authorities and cannot be challenged in a writ petition; Whether the duration of lapse of one year given in Rule 40(1) of Income Tax Rules needs to be computed from the date of the filing of the revised return or from the date of filing of the original return; Whether the assessee would enjoy any undue benefit, if the starting point of computation of such period is taken from the date of filing of the original return; Whether when the AO is not diligent enough and does not complete the assessment within the said period of one year, any i

S. 147/ 151: Merely writing “approved” in the sanction form without recording satisfaction renders the reopening void

Amarlal Bajaj vs. ACIT (ITAT Mumbai)
 
The AO issued a notice u/s 147 and reopened the assessment on the ground that the assessee was the beneficiary of hawala entries in the form of loans, expenses & gifts. He alleged that the assessee had deposited unaccounted cash and received cheques in the form of loans, expenses, gifts. The CIT granted sanction u/s 151 to the reopening by writing the words “approved”. The

Transfer Pricing: Finance Ministry Press Release Reg Safe Harbour Rules

 
The Ministry of Finance has issued a press release stating that the Safe Harbour Rules have been finalized after considering the comments of various stake holders. The significant aspect is that in case of transactions in the nature of routine ITES and ITS activities the earlier ceiling of Rs 100 crore has been removed. Transactions upto Rs. 500 crore have been provided safe harbour margin of 20% and transaction above Rs.500 crore have been provided safe harbour margin of 22%. Similarly, the ceiling of Rs. 100 crore provided for transactions in the nature of corporate guarantee has been removed. Also, the rules provide for a time bound procedure for determination of the eligibility of the assessee and the international transactions. Any rejection of the option exercised by the assessee shall be by way of a reasoned order passed after hearing the assessee. The assessee shall have a right to file an objection with the Commissioner against adverse finding regarding the eligibility. The Commissioner shall thereafter decide about the validity of the option exercised by the assessee.

Ruling of Bombay High Court on maintainability of writ petition on transfer pricing matter

 
This Tax Alert summarizes a recent ruling by the Bombay High Court (HC) in the case of Vodafone India Service Private Limited (taxpayer), challenging the jurisdiction of the transfer pricing officer (TPO) to compute arm’s length price (ALP) in case of transactions not referred to him by the assessing officer (AO). The taxpayer had filed a writ petition before the HC to quash the transfer pricing adjustment of INR 8,500 crores (USD 1330 Million) made by the TPO. The taxpayer claimed that the TPO did not have jurisdiction to determine ALP of transactions relating to sale of call centre business and assignment of call options.

Tuesday, 17 September 2013

Which investments are eligible for deductions u/s 80C for Asstt. Year 2014-15?

There are different tax deductions available to an individual under different Sections of the IT Act. Section 80C for example has a deduction limit of Rs. 1 lakh per annum.

You can save tax by making use of the various deductions available to you under different sections of the IT Act i.e. investing in these instruments.

Salary Allowances and Exempted Allowances

Allowance is defined as a fixed quantity of money or other substance given regularly in addition to salary for meeting specific requirements of the employees. As a general rule, all allowances are to be included in the total income unless specifically exempted. Exemption in respect of following allowances is allowable to the exent mentioned against each :-
House Rent Allowance:- Provided that expenditure on rent is actually incurred, exemption available shall be the least of the following :

Whether when assessee purchased shares for a lock-in period of three years and for acquiring management rights in a company, there cannot be a presumption that shares were acquired with object of trading and not investment - YES: Bombay HC

THE issue before the Bench is - Whether when the assessee purchased shares for a lock in period of three years and for acquiring management rights in the company, there cannot be a presumption that the shares were acquired with the object of trading and not investment. And the verdict goes in favour of the assessee.
Facts of the case

Change in Downstream Investment Guidelines

 
The Reserve Bank of India (“RBI”) has amended the regulations governing Foreign Direct Investments (“FDI”) through a notification[#_ftn1][1] published in the official gazette on September 6, 2013. A circular dated September 12, 2013[#_ftn2][2] has also been issued to this effect. The amendment is in relation to use of internal accruals for downstream investments by Indian companies, which are not owned/ controlled by Indian residents.
The guidelines on downstream investments were introduced through Press Note 4 of 2009 (contents of which were incorporated in the master circular on foreign direct investments issued from time to time). However, the downstream investment guidelines were notified in the official gazette only on June 7, 2013[#_ftn3][3], after more than four years of their introduction.

S. 153A: In case of completed assessments, addition can be made only if incriminating document found during search

MGF Automobiles Ltd vs. ACIT (ITAT Delhi)
 
Pursuant to a search and seizure operation u/s 132, the AO passed an assessment order u/s 153A in which he held that the accumulated loss and unabsorbed depreciation of the amalgamating company was not allowable u/s 72A of the Act. The assessee claimed that as the assessment for that year had

UNDERSTANDING THE US GAAP WITH INDIAN GAAP


With the globalization  and advancement of India, Indian accountant professionals(IAP) are not only required to follow the India AS but also required to follow the US GAAP, as many MNC are doing the accounting job from India and  IAP are not require to prepare the financials for Indian company but also financials for other countries also. Its not only financials, but also various legal & tax compliances for other countries The IAP are doing the same either onsite or offsite.

In the article given below, we try to understand few concepts of US GAAP.