Friday, 29 August 2014

Increase in statutory salary ceiling from INR 6,500 to INR 15,000 per month for coverage and contributions for local employees under the Indian social security schemes

 
On 10 July 2014, while presenting the Budget 2014, the Finance Minister of India proposed to increase the statutory salary ceiling from INR 6,500 (USD 108) to INR 15,000 (USD 250) per month under the Indian social security schemes (Provident Fund Scheme, Pension Scheme and Deposit Linked Insurance Scheme) and fix minimum monthly pension benefit at INR 1,000.

Delhi High Court rules 50% as the benchmark to evaluate ‘substantial value’ on taxation of indirect transfers

 
This Tax Alert summarizes a ruling of the Delhi High Court (HC) in a batch of cases, with the lead case being that of Copal Research Limited, Mauritius (Taxpayer) on the issue of taxability of direct/ indirect transfer of shares in certain Indian companies. In a series of transactions, shares of India and US entities were transferred by Mauritius companies. The Taxpayer had approached the Authority for Advance Rulings (AAR) which ruled, among other things, that the transaction would not be taxable in India. Against this ruling, the Tax Authority filed a writ petition in HC whereby, HC was required to evaluate implications under the Indirect Transfer Provision

Thursday, 28 August 2014

Dormant Companies

The Companies (Miscellaneous) Rules 2014, for the purposes of sub-section (1) of section 455, a company may make an application in Form MSC-1 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 to the Registrar for obtaining the status of a Dormant Company in accordance with the provisions of section 455 after passing a special resolution to this effect in the general meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value). [Rule 3 of the Companies (Miscellaneous) Rules 2014]

How to select TP Valuation Methods.


Factors determine the Most Appropriate method (MAM) rule 10C(2).
·         
       Nature and class of international transactions.
·         Class of associated enterprises and functions performed.
·         Availability and reliability of data
·        

Intangible asset : A Transfer Pricing Appraisal !

THE layman description of intangible asset is understood as distinct from a physical and visible asset. The investors and the stakeholders add on the attribute of future benefits that will be valued for the stake repatriation. Corporate national and international are demanding a common language for identifying and valuing intangible assets.
With Indian Inc in the global ground for takeovers and mergers, intangible assets valuation is becoming captive with the Indian corporate.
Indian economy had the real flavour of intangible assets when India turned out to be an outsourcing hub of the world.

S. 80-IB: An “industrial undertaking” can be formed by taking P&M on hire. Not necessary for the assessee to “own” the P&M. Dept’s tendency to try to unsettle matters strongly disapproved

CIT vs. Jyoti Prakash Dutta (Bombay High Court)

The assessee, a film producer, claimed deduction u/s 80-IB in respect of the profits from his film called ‘Border’. The AO, relying on Textile Machinery Corp 107 ITR 195, denied the claim for deduction on the ground that as the assessee did not own any plant & machinery, he was not an “industrial undertaking” u/s 80-IB(2)(ii). However, the CIT(A) & Tribunal allowed the assessee’s claim. On appeal by the department, HELD dismissing the appeal:

Income generated from sale of carbon credits won't be eligible for sec. 80-IA relief


Where assessee deputed some of its employees to AE to render services of commercial value, TPO was justified in making addition to assessee's ALP holding that a markup of 5 per cent should have been charged in addition to reimbursement of salary expenses by AE

Income on sale of Certified Emission Reduction/carbon credit which is admittedly a benefit arising out of business of assessee, would fall within definition of 'income' under section 2(24)(vd) and, thus, it is chargeable to tax

Even though income on sale of Certified Emission Reduction/carbon credit would form part of profit and gains of business, yet it cannot be treated as

so long as activity is service and even if it is not taxable, it has to be considered as an exempted service - it is not necessary that service should be taxable and an exemption notification exempting from levy of service should have been issued: CESTAT

DURING the period from 10/2005 to March 2008, the appellants had paid service tax due from them by utilizing more than 20% of the credit available. Taking a view that appellants were also providing cargo handling service in respect of exported goods which is not taxable and the same is treated as exempted service and therefore in the absence of separate records for common inputs, the appellant could not have utilized more than 20% of the tax payable from CENVAT credit account, proceedings have been initiated. Such Proceedings have culminated in confirmation of demand for service tax paid from CENVAT credit account during the relevant

Whether registration to a Trust u/s 12AA can be refused merely because it earned some income from housing projects but applied the same towards charitable objectives - NO: HC

THE issue before the Bench is - Whether a trust can be denied registration u/s 12AA when it has earned income from housing projects, but applied them towards charitable objectives. And the verdict goes against the Revenue.
Facts of the case
The assessee applied for the registration u/s 12A. The assessee stated that they are in the process of obtaining permission from various government organisations to have a Heritage Park

Wednesday, 27 August 2014

Understanding section 10A with latest case laws : Part – IV.


Section 10A is now only effective only for SEZ units and now become obsolete sections for other EOU units STPI etc. However, the  exemption is still disputed at various levels for the company and hence there is necessity to have knowledge of the section.  Earlier we had discuss the same in details and for your reference the link is given below.

recent notification on applicability of service tax on radio taxi and advertisement

1.      Notification No. 18 /2014-ST – dated 25th August, 2014 - Seeks to notify the date on which Clauses A, B, C of the section 114 of the Finance (No.2) Act 2014 becomes effective.
(i)     Clause A & B of Finance Act, 2014 for Services of radio taxi and services of advertisement other than selling of space for advertisements in print media, such services should be taxable from 1st October, 2014.

All about TDS / TCS Return Statements - FAQs.

Who is required to file e-TDS / e-TCS statement?
As per Income Tax Act, 1961, all corporate and government deductors / collectors are mandatorily required to file their TDS / TCS statements on electronic media (i.e. e-TDS / TCS statements). However, deductors / collectors other than corporate / government can file either in physical or in electronic form.

Whether provisions of Sec 41(1) come into play only when there is cessation of a liability - YES: ITAT

THE issue before the Bench is - Whether provisions of Sec 41(1) come into play only when there is cessation of a liability. And the answer is YES.
Facts of the case

Assessee derives income from construction of civil work of commercial and residential buildings. AO found that there are sundry creditors amounting to Rs.25.92 crores as on 31st March, 2009. It observed that in respect of four creditors, no transaction took place since 1.4.2008 to 31.03.2011. In respect of 19 creditors, notice was issued u/s 133(6) which return back as

Karnataka HC rules that sourcing support activities carried on by a foreign company is entitled to “purchase exclusion” provision

We are pleased to release a Tax Alert which summarizes a recent ruling of the Karnataka High Court (HC) in the case of Mondial Orient Ltd. (Taxpayer) on the issue of whether benefit of purchase exclusion provision i.e., the exclusion provided in the Indian Tax Laws (ITL) for purchase of merchandise for the purpose of export out of India, is available for sourcing support activities of the Taxpayer in India. Having regard to the facts of the case, the HC

India’s Delhi Tribunal rules on TP issues regarding AMP expenses, software support services and CAPM risk adjustments

We are pleased to release a Tax Alert which summarizes a recent ruling of India’s Delhi Income-tax Appellate Tribunal (Tribunal). The Taxpayer in this case is engaged in the distribution of telecom equipment mobile phones and provision of telecom services in India. The Taxpayer’s Associated Enterprise (AE) is the legal owner of the trademarks and brand name (collectively referred to as marketing Intangible Property or Marketing IP) under which the products are distributed. The Taxpayer also provides software development services and marketing and administrative support services to its AEs.

Tuesday, 26 August 2014

Understanding section 43B disallowance with latest case laws: Part – II.


In past we had discuss the concept of disallowance under section 43 . The link of same is given below:
However, found that taxpayer still find difficult before tax-officer in respect of expenses allowed on cash basis and hence given below more latest case laws in respect of 43B.
§  Provision of excise duty payable on payment basis irrespective of method of accounting followed. Refer, CIT v. Simbhaoli Industries P. Ltd, 365 ITR 173.

Understanding applicability of VAT or CST on inter-state works contracts

In this article an attempt has been made to clarify the position in regard to the levy of VAT or CST on inter-state works contracts.
The State Governments have the power under entry 54 of the State List of the Seventh Schedule to the Constitution of India, to levy tax on the sale and purchase of goods within the jurisdiction of such States. In works contracts there is a deemed sales of the goods incorporated in such contracts  to the contractee,

Short Payment of Default TDS close by using Online Correction Facility

CPC (TDS) advisory for closure of Short Payment Defaults using Online Correction facility before allowing Conso Files

As you may be aware that at the time of filing TDS statements, it is mandatory to quote the challan particulars through which TDS payments have been made. The TDS forms prescribe quoting of such challans and the underlying deductee transactions corresponding to such challans.

REGISTERING COMPANIES AUTHORISED TO REGISTER

Part – I of Chapter XXI deals with companies authorizes to register under this Companies Act, 2013.
Any company formed under any law for the time being in force duly constituted according to law and consisting of seven or more members may at any time register under this Act as a company. This registration shall not be invalid by reason only that it has taken place with a view to the companies being wound up. We have discussed these provisions of Section 366 of the Companies Act, 2013 .
The Companies (Authorised to Registered) Rules 2014 supplement the provisions of the Companies Act

Whether even if investments made by assessee earn no income, expenditure incurred on such investments is liable to disallowed under Rule 8D(2) - NO: ITAT

THE issue before the Bench is - Whether even if investments made by assessee earn no income, expenditure incurred on such investments is liable to disallowed under Rule 8D(2). And the tribunal's answer is NO.
Facts of the case

The
assessee is a non-banking financing company engaged in the business of investing in micro-

Monday, 25 August 2014

Myths about Income Tax Return Filing

Myth 1: TDS has already been deducted by the employer, so there is no need to file the Income Tax Return
Fact: Even if the entire tax has been deducted at source by the employer and there is no more tax liability, you still need to file your tax return.
Payment of income tax and filing of income tax returns are two different set of liabilities and are independent

REGISTRATION OF CHARGES RULES

For registration of charge as provided in subsection (1) of Section 77, Section 78 and Section 79, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge in Form CHG – 1 (for other than Debentures) or Form CHG – 9 (for debentures), as the case may be, duly signed by the company and the charge holder and filed with the Registrar within a period of thirty days of the date of creation or modification of charge along with the fee. [Rule 3(1) of the Companies (Registration of Charges) Rules 2014]

Whether Sec 80IB benefits are not to be denied merely because ownership of the Undertaking changes from proprietorship to partnership firm - YES: HC

THE issues before the Bench are - Whether Sec 80IB benefits are not to be denied merely because the ownership of the Undertaking changes from proprietorship to partnership firm; Whether on conversion of a proprietorship firm into a partnership firm, there is any transfer of plant and machinery to the new firm and Whether in that case there is only a transfer of industrial undertaking as a whole along with assets and liabilities. And the verdict goes in favour of the assessee.

Service tax being destination based consumption tax, services received outside India by branches of an Indian company outside India not liable for service tax uls. 66A of the Finance Act, 1994

kpit Cummins Infosystems Ltd. vs. Commissioner of central Excise, Pune – I (2013 –TICO –1568 –CESTAT – mum)



Facts:
The overseas branches of the appellant provided services abroad and remitted the consideration for the bills raised by them to its Indian head office after deducting the expenditure incurred. Further, the appellant also had permanent establishments abroad by way of personnel located in the offices of their various clients and so remitted certain amount for the expenditure incurred by them for providing various services. The department

Saturday, 23 August 2014

Prospectus of Letter of Offer for IDRs:

The prospectus or letter of offer shall, inter alia, contain the following particulars, namely:-
General information-
  • Name and address of the registered office of the company;
  • name and address of the Domestic Depository, the Overseas Custodian Bank with the address of its office in India, the Merchant Banker, the underwriter to the issue and any other intermediary which

Understanding about Letters of Credit


Letters of Credit


Purpose
The purpose of this document is to provide a general understanding of letters of credit, their use and application. The topics covered are the following:

Friday, 22 August 2014

UNDERSTANDING DISALLOWANCE UNDER SECTION 40 OF INCOME TAX ACT, 1961 WITH LATEST CASE LAWS. Part – II.


Earlier in the part 1  we had discuss in length about various disallowances under section 40 of the Income tax act 1961.  You can refer the same here at
However, out of this Disallowance for  non deduction of TDS under section 40(a)(i)   I still find a challenge for tax payers and accordingly provided few more recent judgements which may enable you with more knowledge  about section 40(a)(i) disallowances.

e-Filing Form 3CA-3CD & 3CB-3CD (Revised) in JAVA Utility Free Download For Asstt. Year 2014-15.





The posting had been move to another website. Please click the link below to get the access of the same.   


https://taxofindia.wordpress.com/2015/11/28/e-filing-form-3ca-3cd-3cb-3cd-revised-in-java-utility-free-download-for-asstt-year-2014-15/ 



APPLICATION AND PROCEEDS OF IDRs

In earlier post here, we discussed, eligibility and procedure related to issue of Indian Depository Receipt. In this post, we will discuss application for IDRs, its proceeds and Transfer of Indian Depository Receipts.
Application for IDRs
No application form for the securities of the issuing company shall be issued unless the form is accompanied by a memorandum containing the salient features of prospectus in the specified form.

Whether if money is routed indirectly from firm to assessee's account in garb of gifts, same is to be taxed in hands of donor as unexplained income - YES: HC

THE issues before the Bench are - Whether if the assessee has not availed opportunity of being heard as provided by the A.O, the burden shifts on the assessee to prove its bonafide on the basis of the statement made by the donor and whether in case the money is routed indirectly from the firm to the assessee's account under the garb of the gifts, the same is taxable in the hands of donor as unexplained income. And the verdict goes against the assessee.
Facts of the case

Analysis Of An Important Judgement On International Taxation

1. The AAR decision in the case of Steria (India) Ltd, reported in [2014] 364 ITR 381 (AAR), poses an interesting challenge to tax professionals in evaluating the role of a Protocol in interpreting Tax Treaties.

2. The Applicant in this case, Steria (India) Ltd [‘S’] is an Indian public company stated to be a leading provider of IT driven business services for its clients’ core business processes.

Groupe Steria SCA ['SF'], is a French partnership firm. SF centralizes technical skills to carry on management functions such as legal finance, human resources, communication risk control, information systems, controlling and consolidation, delivery and industrialization, technology and the management information services etc.

‘S’ entered into a Management Services Agreement with ‘SF,’ whereby ‘SF’ provides ‘S’ various management services with a view to rationalize and standardize its Indian business practices in accordance

Thursday, 21 August 2014

Income Tax Exemptions and Deductions for Salaried Employee for Asstt. Year 2015-16

Recently 31st July, 2014 ended, it is deadline to submit Income Tax Return for Salaried Employee and non-audit-able accounts. Near about 90% Taxpayee (Salaried Employee) submit their Income Tax Return by 31st July and now they are in planing to save income Tax for Asstt. Year 2015-16. The following information is most useful and important for salaried Taxpayee for Asstt. Year 2015-16 regarding Income Tax Exemptions and Deductions:

CPC (TDS) reminder for raising Flag "B" in TDS Quarterly Statements against 15G/H Forms for Fin.Year 2013-14

Dear Deductor (TAN XXXXXXXXXX),
As you may be aware that the depositors submit form 15G/H to the bank for no deduction of tax to be made on the interest payments made to them.

DOCUMENTS AND CERTIFICATION

In this blog we will discuss provisions relating to documents related to foreign company and their certification.
Office where documents to be delivered and fee for registration of documents
Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in Chapter XXII of the Act i.e.

INDIAN DEPOSITORY RECEIPTS

  • the offer of Indian Depository Receipt;
  • the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipt;
  • the manner in which Indian Depository Receipt shall be dealt with in a depository mode and by custodian and underwriters; and
  • the manner of sale, transfer or transmission of Indian Depository Receipt,

Whether disallowance u/s 40(a)(ia) is warranted merely because assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source - YES: ITAT

THE issue before the Bench is - Whether disallowance u/s 40(a)(ia) is warranted merely because the assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source. And the answer is YES.
Facts of the case
The assessee is an individual who is engaged in the business of transport contractor. He had filed his return, declaring total income at Rs.13,53,520/-. During assessment, AO noted from the details furnished by the assessee revealed that the assessee had received transport charges of

Is Rule 5A(2) of STR 1994 which prescribes for an access by authorised officer for verification etc. and for submission of records by assessee for Service Tax Audit ultra vires?

A C L Education Center (P) Ltd. vs. UOl 2014 (33) STR 609 (All)
Is Rule  5A(2) of  STR 1994 which   prescribes    for  an access  by authorised   officer  for  verification   etc. and for  submission    of records   by  assessee    for  Service Tax Audit  ultra vires?
Facts:

The Excise Department   had issued intimations on various dates calling for

Tax Audit date extended till November 30, 2014


Tuesday, 19 August 2014

Forgot Password for e-Filing login ? What Now ?

If you have forgotten your password and you have unsuccessfully tried other ways of resetting password, then you can use the new facility to get direct access to your Income Tax Department e-Filing account using the net-banking facility of your bank.

Now e-Filing of Income Tax Return facility through Banks - IT

Income Tax Department is happy to announce the facility of Direct Login from Corporation Bank, Union Bank of India and Oriental Bank of Commerce - Net banking account to the taxpayer's E-filing Account. IT Department has provided facility of e-filing of Income Tax Return through Banks. Customers using internet

Government TDS Deductors must quot AIN details in the TDS Statements - CPC(TDS)


CPC (TDS) asks government deductors to quote AIN details in TDS Statements. The letter issued by CPC (TDS) is as follows:

Dear Deductor,

As per the records of the Centralized Processing Cell (TDS), it has been observed that the Accounts Office Identification Number (AIN) has not been mentioned in the TDS statements submitted by you.

What is AIN and its relevance:
  • AIN is a unique seven digit number allotted by

Establishing Foreign Company

We have discussed General provisions related to foreign companies Section 380 asks for delivery of certain documents to the Registrar of Companies within thirty days of establishment of its place of business. The Section requires following documents to be delivered:
  • a certified copy of the charter, statute or memorandum and articles of the company or other instrument constituting or defining the constitution of the company and if the instrument is not in English language,

FINANCIAL STATEMENT OF FOREIGN COMPANY

According to Section 381 of the Companies Act 2013 every foreign company, unless exempted, shall in every calendar –
  • make out a balance sheet and profit and loss account; and
  • deliver a copy of those documents to the Registrar.
If any of these documents is not in English Language, there shall be annexed to it a certified translation thereof in English language.

Whether Section 80IA benefits are available to captive electricity unit supplying power to assessee's manufacturing plant - YES: HC

THE issue before the Bench is - Whether Section 80IA benefits are available to captive electricity unit supplying power to assessee's manufacturing plant. And the answer is YES.
Facts of the case

The assessee company was engaged in the business of manufacturing of fused Aluminium Oxide Grains, Calcined products, Monolithics, Refractories, Bonded Abrasives, Ceramic Paper and trading of Monolithic and Refractories. The assessee had an Abrasives Grains Division that manufactured fused Aluminium Oxide grains etc. The assessee had setup a power plant for captive supply to the Aluminium Oxide gains unit. Profit earned from the power plant unit was claimed as eligible for

Monday, 18 August 2014

Madhukar Khosla vs. ACIT (Delhi High Court)


S. 147: If “reasons to believe” are not based on new, “tangible materials”, the reopening amounts to an impermissible review
(ii) The foundation of the AO’s jurisdiction and the raison d’etre of a reassessment notice are the “reasons to believe”. Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective “trigger”, the AO does not possess jurisdiction to reopen the assessment. It is at the next

S. 14A: For Rule 8D(2)(i) only expenditure relating to investments resulting in tax-free income can be considered. For Rule 8D(2)(iii) all investments, whether yielding tax-free income or not, have to be considered

Bellwether Microfinance Fund Pvt. Ltd vs. ITO (ITAT Hyderabad)

Rule 8D(2)(i) speaks of expenditure directly relating to income which does not form part of “total income”. In the context of s. 2(45) & s. 5, the expression ‘total income’ in Rule 8D(2)(i) must relate to an income which is sought to be

S. 234E: High Court grants ad-interim stay against operation of notices levying fee for failure to file TDS statement

M/s Shree Builders vs. UOI (Madhya Pradesh High Court)

Issue notice to the respondents on interim relief. Additionally issue notice to Attorney General of India as the validity of the Central enactment is put in issue.

Bombay HC upholds the exemption under section 5(3) of the CST Act by treating the local sale as penultimate sale for export, since an inextricable link was established between local sale and export of goods

 
We are pleased to release a Tax Alert which gives an update on the recent decision of the Bombay High Court in the case of M/s. Exide Industries Limited vs. State of Maharashtra and Others [TS-315-HC-2014(BOM)-VAT]. The decision upholds the exemption under Section 5(3) of CST Act in case of penultimate sale of goods for exports.

S. 14A/ Rule 8D: No disallowance can be made if there is no exempt income. Cheminvest(SB) & CBDT Circular are not good law

ACIT vs. M. Baskaran (ITAT Chennai)
 
No doubt in Cheminvest Ltd vs. ITO 121 ITD 318 (SB) the Special Bench of the Tribunal has held that disallowance u/s 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the

S. 14A & Rule 8D cannot be applied in a mechanical manner. Disallowance cannot exceed expenditure claimed as a deduction

ACIT vs. Iqbal M. Chagala (ITAT Mumbai)
 The assessee had debited direct expenses on account of dematerialization and STT in the capital account and not in the Profit and loss account. The AO had presumed that the assessee had must have incurred some expenditure under the heads salary, telephone and other administrative charges for earning the exempt income. It is further found that the total expenditure claimed by the assessee for the year is about 13 lakhs and the AO had made a disallowance of about Rs.16 lakhs. He has just adopted the formula of estimating expenditure

Thursday, 14 August 2014

Salaried Employee, Individuals how to compute Income Tax for Asstt. Year 2015-16 ?

Efficient tax planning enables you to reduce tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions & rebates. Tax Planning is NOT tax evasion which is illegal under laws. It involves planning of income & investments. Tax Planning can be practiced easily. Often staff gives estimated declaration at Fin.Year starting to minimize tax liabilities but could not save till Fin. Year end; and faces burden in last months. Better start investing from the beginning of Fin. Year to get interest & appreciation from April.

Taxation Entries

This article is helping hand for those students who feel problem in taxation entries. Experts and others are requested to correct me or give their valuable feedback.

Taxation and accounting are the soul of the accounting profession. To become a good accounting professional, a sound correlation between tax and accounts is required. Practically, it has been seen that students feel difficulty in passing the entries of taxation. Problem not arises because of lack of knowledge but due to lack of conceptual clarity. Confusion arises while reversing the entries of Tax Payments (Advance tax, Self assessment tax, TDS recoverable etc.) and Tax Provision. An attempt has been made to clear the concepts of students. Let us discuss point to point these entries.

REGISTRATION FEES

The documents required to be submitted, filed, registered or recorded or any fact or information required or authorised to be registered under the Act shall be submitted, filed, registered or recorded on payment of the fee or on payment of such additional fee as applicable, as mentioned in Table annexed to these rules. [Rule 12(1) of the Companies (Registration Offices and Fees) Rules 2014]

Whether when subjective satisfaction was arrived at by AO for initiation of proceedings u/s 158BD on basis of meterails found during Search, it can be said that initiation of proceedings was vitiated - NO: HC

THE issue before the Bench is - Whether when subjective satisfaction was arrived at by AO for initiation of proceedings u/s 158BD on basis of meterails found during Search, it can be said that initiation of proceedings was vitiated. And the verdict goes against the assessee.
Facts of the case

Upon issue of Form 16A TDS certificate, TDS credit has to be given to the payee even if there is Form 26AS mismatch or deductor is at fault for non-deposit of TDS with Govt.

Sumit Devendra Rajani vs. ACIT (Gujarat High Court)

U/s 204, the liability to deduct TDS is on the employer / payer. U/s 205, when tax is deductible at source, the assessee shall not be called upon to pay tax himself to the extent to which tax has been deducted from that income. This means that the assessee / deductee is entitled to credit of such amount of

Finance Bill 2014 passed

The Finance (No. 2) Act 2014, as assented by the Hon’ble President on 6th August, 2014 and as published in the Official Gazette

Wednesday, 13 August 2014

Understanding Deemed Dividend with latest case laws : Vol - IV.



We had earlier discussed in details about dividend case laws and analyse with various latest case laws. In continuation of the same given below few more analysis of judgments in respect of deemed dividend.   

How to avoid common mistakes while submitting TDS Statement ? - Important Guidelines.

In our endeavor to facilitate improved TDS administration and lower TDS default rates, we are glad to provide information on common mistakes committed by the deductors while submitting TDS statements. These mistakes result into TDS Defaults in the respective statements.

Following are some useful guidelines to avoid common mistakes, while submitting TDS Statements and you are requested to go through the following in detail.

MAINTAINING AND RECEIVING DOCUMENTS ELECTRONICALLY

The Central Government shall set up and maintain a secure electronic registry in which all the applications, financial statement, prospectus, return, register, memorandum, articles, particulars of charges, or any particulars or returns or any other documents filed under the Act to be electronically stored. [Rule 9(1) of the Companies (Registration Offices and Fees) Rules 2014]
Every document or certificate or notice or other document required to be registered or authenticated by the Registrar or an officer of the Central Government under the Act or rules made there under, shall be

Whether when a private limited company is converted into partnership firm and interest-free loans are advanced out of reserves of erstwhile company in the same ratio as profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47 - YES: ITAT

THE issues before the Bench are - Whether when a private limited company is converted into a partnership firm and interest free loans are advanced out of the reserves of the erstwhile company in the same ratio as the profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47. YES is the Tribunal's answer.
Facts of the case
The assessee firm, Aravali Polymers, LLP, came into existence with effect from August 2010, once the private limited company by the same name was converted into a limited liability

S. 147: Fact that TPO has examined international transactions in payer’s hands and found them to be at arm’s length does not mean the PE of payee cannot be assessed

LG Electronics Inc vs. ADIT (Allahabad High Court)

(iii) The contention that as the Indian subsidiary had, in terms of s. 92E, disclosed all the transactions with the assessee relating to purchase of raw materials, finished goods etc and the TPO had found then to be at arm’s length, the AO was precluded from drawing any inference that any further income of the assessee from the same transactions was chargeable to tax had

S. 14A & Rule 8D: Investments in subsidiaries to be excluded while computing disallowance


The investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(A) shows that out of total investment of Rs. 64.18 crore, Rs. 63.31 crore is invested in wholly

Transfer Pricing: Share application money, though not allotted into shares for a long time, cannot be treated as a “loan” for taxing notional interest

Allcargo Global Logistics Ltd vs. ACIT (ITAT Mumbai)

The TPO has not disputed that the transactions were in the nature of payments for share application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has, however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated as in the nature of lending or borrowing, the transactions can be subjected to ALP adjustments, and the ALP so computed can be the basis of computing taxable business profits of the assessee, but the core issue before us is whether such a deeming fiction is envisaged under the scheme of the transfer pricing legislation or on the facts of this case. We do not find so. We do not find any provision in law enabling such deeming fiction

Tuesday, 12 August 2014

Understanding Transfer Pricing with latest case laws . Part – V.

Today is blog 3rd Anniversary.


It seems that transfer pricing dispute for  taxation on international transactions with associates enterprises (AES) is not going to end for the corporates and further as TP extended its legs also on domestic specified transactions with related parties, it is very important to tax payer to know more about this. Given below few latest case laws judgments only in respect of international transfer pricing  which will enable yourself with

Missed 31st July Deadline for filing of Annual Income Tax Return ? What Now ?

Most of Tax Payers comply with 31st July, deadline for filing Income Tax Returns. However, many miss out due to other commitment in professional and personal life. Missing the deadline does not mean you can not file your return. In fact, if you have missed to file your return for last year ended March, 2013, you can still file however there are some catch. Read the article to know in detail importance of filling of return by 31st July, and methods to file return after due date.

FILING DOCUMENTS IN REGISTRATION OFFICES

Section 398 empowers Central Government for making rules relating to filling of documents with registration Offices or Registrar of Companies.
Manner and conditions of filing
Every application, financial statement, prospectus, return, declaration, memorandum, articles, particulars of charges, or any other particulars or document or any notice, or any communication or intimation required to be filed or delivered or served under the Act and rules made there under, shall be filed or delivered or served in computer readable electronic form, in portable document format (.pdf) or in such other format as

If a service is classifiable under “Business support service” from a given date and the said service is not carved out of any of the existing services, it cannot be construed that service was taxable prior to that date

Baba Trading co vs. CCE (2014-TIOL-1470-CESTAT-MUM)



Facts of case:
Baba Trading Company was given the right to book, deliver, transshipment, handling, loading, unloading etc. and to carry out the business of courier by the ordinary buses of MSRTC. The said agreement by no stretch of imagination can be considered as a “franchise services” because

Whether franchise fee remitted to non-resident for simply using trademark 'Dominos' is required to be partly treated as capital expenditure - NO: HC

THE issue before the Bench is - Whether franchise fee remitted to non-resident for using trademark 'Dominos' is required to be partly treated as capital expenditure. And the HC says NO.
Facts of the case
The assessee is carrying on business of manufacturing and sale of pizza from its retail outlet. The

FAQ on CUSTOMS


CUSTOMS
Q.1
Please give me the rate of duty on a particular item
A.1
We regret that we do not have the personnel at present to give specific rates of duty. All the necessary information to work out the rate on your own is given on the web site. 
Q.2
I am not able to find the latest notification or a particular notification.
A.2
As soon as a notification is received by us it is put on the 'what's new'.  If you are already conversant

Monday, 11 August 2014

S. 147/ 148: Writ Petition challenging lack of jurisdiction to issue s. 148 notice on the ground that it is based on ‘change of opinion’ & preconditions of s. 147 are not satisfied is maintainable

Aroni Commercials Ltd vs. ACIT (Bombay High Court)

The argument, based on JCIT vs. Kalanithi Maran, that this Court should not exercise its writ jurisdiction under Article 226 of the Constitution of India and the petitioner should be left to avail of the statutory remedies available under the Act is not acceptable. The decision of the Madras High Court in Kalanithi Maran proceeded on the basis that the dispute urged before it were with regard to adjudicatory facts and not with regard to jurisdictional facts as

S. 57(iii): Interest paid on a loan taken to avoid premature encashment of a fixed deposit is deductible against the interest earned on the fixed deposit

Raj Kumari Agarwal vs. DCIT (ITAT Agra)

On these facts, in order to protect the interest earnings from fixed deposits and to meet her financial needs, when an assessee raises a loan against the fixed deposits, so as to keep the source of earning intact, the expenditure so incurred in wholly and exclusively to earn the fixed deposit interest income. The authorities below were apparently swayed by the fact that the borrowings

S. 80-IB: If the undertaking satisfies the conditions for eligibility in the initial year, it must get deduction for 10 years& non-compliance in a subsequent year is irrelevant

Ace Multi Axes Systems Ltd vs. DCIT (Karnataka High Court)

There is no indication in s. 80-IB that the conditions stipulated therein has to be fulfilled by the assessee in all the 10 years. When once the benefit of 10 years, commencing from the initial year, is granted, if the undertaking satisfy all these conditions initially, the undertaking is entitled to the benefit of 10 consecutive years. The argument that, in the course of 10 years, if the growth

Changes In new Form -3CD Format



In the new format few points has been added/removed as such;

General
1. The major change is done on account of inserting specific tables for each column required like in point No. 13(c), 14(b), 17, 19, 20(b), 21, 21(b), 21{d(a)},
2. Annexure ‘I’ has been removed now in which balance sheet details was given.

Easy Steps to Registration PAN / TAN with TRACES and FAQs.

When I provide my TAN and Token Number, I get the message ‘Invalid details’. Why?
Token Number (Provisional Receipt Number) provided must be of any accepted Regular statement filed by you on or after April 1, 2010 or of any accepted Correction statement filed by you from April 1, 2010 to October 15, 2012.

Unmatched / Miss-matched challans' correction mandatory to download Consolidated file from TDSCPC.

Income Tax Department has communicated through email to their deductos regarding TDS on 09/08/2014 that deductors have to deposit Short Payment before allowing to download Conso File.

Consequences of failure to pay the demand:

 In accordance with provisions of section 201(1) of the Act, where any person, including the principal officer of a company, who is required to deduct any sum in accordance with the provisions of the Act; does not pay, or after so deducting fails to pay, the whole or any

REGISTRATION OFFICES

Working Hours at Registrar Offices:
The central Government empowered to establish registration offices under Section 396 of the Companies Act 2013.
The Central Government shall establish such number of offices at such places as it thinks fit, specifying their

Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availed - NO: HC

THE issue before the Bench is - Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availe. NO is the HC's answer.
Facts of the case

S. 153A: AO is required to assess the “total income” and is not confined only to income which was unearthed during search. Law laid down in All Cargo Global Logistics disapproved

Canara Housing Development Co vs. DCIT (Karnataka High Court)



The Tribunal has proceeded on the assumption by virtue of the judgment of the Special Bench in All Cargo Global, the scope of enquiry u/s 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power u/s 263. In the entire scheme of s. 153A

S. 153A: No addition can be made in respect of an unabated assessment which has become final if no incriminating material is found during the search

CIT vs. Murli Agro Products Ltd (Bombay High Court)

(iii) Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed u/s 80HHC would attain finality. In such a case, the AO, while passing the independent assessment order u/s 153A could not have disturbed the assessment order which has attained finality, unless

Whether charges collected by the Promoter developer from flat buyers in terms of provisions of Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963 are liable to service tax under 'Management, maintenance and repair services

Hiranandani Construction (P.) Ltd. vs. CCE [2014] 43 taxmann.com 172 (Mumbai – CESTAT)
'

Facts of case:
The appellant was engaged in the construction of residential complex and collected certain amounts as the development and maintenance fees from the flat buyers before handing over to them possession of the flats. Such sum was collected by it as a promoter to discharge payments towards outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any

Friday, 8 August 2014

Summary of POINT OF TAXATION RULES, 2011

Point of Taxation Rules, 2011

[18/2011-Service Tax dated 01.03.2011]
[as amended by 25/2011-Service Tax dated 31.03.2011 and corrigendum dated 04.04.2011]
  
1. Short title and commencement:

(1)         These rules shall be called the Point of Taxation Rules, 2011.

(2)    They shall come into force on the 1st day of April, 2011.


Tax liability for ESOPs.

 Kumar was handsomely rewarded with Employee Stock Option Plans (Esops) on the foreign company shares (listed on European stock exchanges) from his multinational company last year. He was more than happy when he received his paycheck in August last year after he had exercised his stock options and then sold shares to capitalise on the 10 euro per share (approximately Rs 87) difference (between the market price and the exercise price) that was available on the Esops. His company withheld the required TDS on the Esops realisation and handed the balance to him.

How Secondment employees creates PE

In a recent case, the Mumbai Tribunal held that where the taxpayer has seconded its personnel to work under the direct control and supervision of the Indian company and was not providing any other service to the Indian company, it did not create a permanent establishment (PE) in India under article 5 of the India-USA double taxation avoidance agreement (“tax treaty”).

Implications of Secondment employees in a company

International assignments may have a significant effect on companies' corporate taxes. A variety of U.S. Internal Revenue Code (IRC) provisions that impact international assignments can be traps for the unwary. The following discussion will focus on three areas of planning opportunities that companies should consider regarding their expatriates and their international assignment programs:

How International Assignee creates PE.

The concept of Permanent Establishment (PE) is one of the fundamental principles used by taxing authorities to claim jurisdiction over a corporate entity deemed to be doing business in their location. When sending people to work in overseas locations it is important to consider the impact the PE concept might have on the company as a whole.

Complete procedure to re-submit your Income Tax Return by e-filing portal

If an assessee has filed his income tax return and subsequently found any omission or wrong statement therein, he can re-file/revise the return with necessary modification. This re-filing of the income tax return is referred to as Revised Return. The process for revising the return is very simple. Please remember that the process outlined below is applicable if you had filed the original return online.

LIABILITY AND DISQUALIFICATION OF AUDITOR

According to Section 147(2) of the Companies Act 2013 discussed earlier here, if an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. If an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a

DUTIES AND POWERS OF AUDITORS


Auditor’s Report:
The auditor shall make a report to the members of the company on accounts examined by him on every financial statements and report financial statement give a true and fair view of the state of the company’s affairs at the end of its financial year and profit or loss and cash flow for the year and such other matters. [Section 143(2)]
The auditor report shall also state:

Whether when assessee has paid advance tax in certain FYs but chooses not to file returns for many years, income of years for which no returns were filed, partakes character of undisclosed income - YES: HC

THE issue before the Bench is - Whether when the assessee has paid advance tax in certain financial years but chooses not to file returns for many years, the income of the years for which no returns were filed, partakes the character of undisclosed income. And the answer is YES.
Facts of the case

Communications from CPC(TDS)

Dear Professional Colleague,
Re: Communications from CPC(TDS)
This is in furtherance of our earlier mail DTC/2014-15/ MM-1 titled 'Communications from CPC(TDS)'. We hope that the information so provided had served the intended purpose. CPC (TDS) has through a recent communication updated us further in this regard.

Thursday, 7 August 2014

Delhi High Court Ruling quashes Rule 5A(2) of the Service Tax Rules and the Instructions issued by CBEC which prescribes manner of an audit and the records that can be called for by the authorities


We are pleased to release this Tax Update on a recent decision by the Delhi High Court in the case of Travelite (India) vs. UOI & Ors, which quashes the following:
(i) Rule 5A(2) of the Service Tax Rules, 1994 authorising audit; and
(ii) CBEC’s Instruction F. No. 137/26/2007-CX dated 1.1.2008 (clarificatory instruction) regarding maintenance and furnishing of records in Service Tax.
The Delhi High Court has held that with the introduction of Section 72A of the Finance Act, 1994 the legislation provided the circumstances under which “Special audit” can be conducted. However, it did not intend to provide for a general audit to which every assessee may be subjected to, at the discretion of the authorities. The Court has thus struck down Rule 5A(2) treating its provisions as ultra-vires the rule making power conferred under Section 94(1). The Delhi High Court ruling establishes the well-settled principle that the Rules are merely to give effect to the Statute’s provisions and intent and the same cannot travel beyond the Statute.

Apply Online for New PAN, Reprint of PAN Card, Changes/Correction in PAN Card through NSDL.

NSDL accepts PAN applications on behalf of Income Tax Department (since June 2004) through its chain of TIN-Facilitation Centres (TIN-FCs) and PAN centres set up across the country. Further, NSDL also provides a facility to apply for PAN over internet through its online facility.

There are two types of PAN applications:

Whether refund claim is to be allowed to assessee consequent to an order passed in appeal irrespective of whether a fresh assessment order has been passed by AO or not - YES: HC

THE issues before the Bench are - Whether refund claimed by the assessee could be granted only on a fresh assessment u/s 240; Whether refusal of assessing officer to grant refund to the assessee on ground of pendency of final assessment order would amount to collection of taxes without the authority of law and Whether a refund claim is to be allowed to an assessee consequent to an order passed in an appeal irrespective of whether a fresh assessment order has been passed by the AO in this regard. And the verdict favours the assessee.
Facts of the case

Statutory body like the ITAT is expected to show consistency. Change in constitution of Bench does not mean diametrically opposite views can be taken

M/s Unique Artage vs. UOI (Rajasthan High Court)

It is really surprising that the Tribunal having once held that the petitioner has a prima facie case while disposing of its stay petition, has taken diametrically opposite view when it later dismissed the stay petition. Moreover, when the stay petition was already dismissed, which stay petition was again dismissed, is not clear. Notwithstanding change of composition of the bench, a certain amount of consistency is expected in the working of a statutory Tribunal like the ITAT. The learned senior counsel is right when he argues that if the Tribunal had formed an opinion, albeit tentatively, in the matter, it should have heard and decided the appeal itself. Having regard to the fact that already when the Tribunal had earlier observed that petitioner had an arguable case, this Court deems it appropriate to dispose of the writ petition directing the Tribunal to finally hear and decide the appeal