Thursday, 30 October 2014

India Taxes- Due Date Alert for the month November 2014



Sr No
Due Date
Related to
Compliance to be made
1
05.11.2014

Service Tax
Payment of Service Tax for the Month of October 2014
2
07.11.2014

TDS/TCS
(Income Tax)
·        Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of October 2014.

·        Deposit TDS from Salaries  deducted during the month of October 2014

•   Deposit TCS for collections made under section 206C including sale of scrap during the month of October 2014, if any

•    Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of October 2014, if any
3
20.11.2014

VAT
Payment of VAT & filing of monthly return for the month of October 2014
4
30.11.2014

Income Tax
Return filing online along with submission of Form 3CEB in the case, assessee is subject to transactions with AEs and TP study required.
5
20.11.2014
STPI
Submission of Softex forms for the month ended October 2014

UNDERSTANDING DEPRECIATION UNDER SECTION 32 OF INCOME TAX ACT, 1961 WITH LATEST CASE LAWS. Part – II

Earlier in the part 1  we had discuss in length about various depreciation under section 32 of the Income tax act 1961.  You can refer the same here at

Given below the few more summary of recent judgements in respect of depreciation which

No disallowance for non-payment of TDS can be made if payee has paid tax thereon

Shri G.Shankar Vs. Asst. Commissioner of Income-tax (ITAT Bangalore), ITA No.1832/Bang/2013, Date of pronouncement: 10/10/2014
Admittedly, the undisputed fact is that the assessee in the case on hand, has not deducted tax at source on the payments made to Shri Uday Kumar Shetty amounting to Rs.1,53,78,795/-. As submitted by the ld.AR, as far as the payments made by the assessee to Shri Uday Kumar Shetty, the fact that the payee has accounted for these payments in his books of account, financial statements and the same have been offered for tax in his return of income for the period relevant to assessment year

Whether provisions of Sec 14A come into play only after AO first examines disallowance made by assessee itself and then AO is not satisfied with same - YES: ITAT

THE issue before the Bench is - Whether the provisions of Sec 14A come into play only after the AO first examines the disallowance made by the assessee itself and then the AO is not satisfied with the same. YES is the answer.
Facts of the case
The assessee is engaged in Share broking business. Upon scrutiny, the AO noticed that the assessee had claimed dividend income as exempt u/s 14A, however, no disallowance under the said section was made by the assessee. The assessee offered workings for disallowance of interest paid and expenses; The AO accepted the expenses computation but rejected the working of interest income and computed the same invoking Rule 8D and accordingly made additions. On appeal, the CIT(A) held that since the assessee had established direct nexus between the borrowings and investments and accordingly allocated interest expenditure proportionately, the interest disallowance was directed to be restricted to Rs.29,91,393/-, i.e., at the amount worked

Wednesday, 29 October 2014

No TDS on prizes distributed as sales promotion

S. 194B : Deduction at source-Winning from lottery-Cross word puzzle-Winnings from
advertisement–Provision is not applicable. [S.201 & 201(A)]
The assessee company was engaged in the business of manufacture and sale of various consumer
goods / products. During the previous year it had conducted certain sale of promotion schemes. The
Company advertised in packs/ containers of their products. Some of those coupons indicated that on
purchase, the prizes that were offered were Santro car, Maruti Car, Gold Coins, Gold Tables, Silver
Coins, emblems etc. The total amount of prizes distributed valued at Rs.6,51,238 for A.Y : 2001-02
and Rs 54,73,643 for A.Y : 2002-04 . AO conducted survey at assessee’s premises and thereafter

Download All Audit reports utility for Asstt. Year 2014-15

There are various types of audit report utility on internet, out of them some are payable and a few are free, apart from this, the Income Tax Department has been provided free Java Base applicable utility to taxpayers. The all audit report details as under :

1. Audit report under section 44AB of the Income-tax Act,1961 in a case where the accounts of the business or profession of a person have been audited under any other law.

Whether if a contract for sale or purchase is ultimately settled and no actual delivery of goods is effected under settlement, it is to be treated as speculative transaction - YES: ITAT

THE issue before the Bench is - Whether if a contract for sale or purchase is ultimately settled and no actual delivery of goods is effected under the settlement, it is to be treated as a speculative transaction. YES is the answer.
Facts of the case
The assessee company, engaged in the business of trading of cut and polished diamonds, filed its return of income declaring loss at Rs.2,19,91,359/-. AO finalised the assessment u/s 143(3) determining the total income of Rs.78,57,190/. Effective ground of appeal was about

transfer pricing adjustment for “Advertisement & market Promotion

BMW India Pvt. Ltd vs. ACIT (ITAT Delhi)

“Umbrage” taken in Casio that BMW did not follow L. G. Electronics is based on “wrong head note”. L. G. does not deal with a case of distributor and so there is no conflict with the law laid down therein
In L. G. Electronics 140 ITD 41 (Del)(SB), the Special Bench laid down guidelines on how to determine whether a transfer pricing adjustment for “Advertisement & market Promotion” (“AMP”) expenses had to be made or not. Subsequently, in BMW (AY 2008-09), a division Bench held that the ratio of L. G. Electronics did not apply to a “full risk distributor”. Another Division Bench in the case of Casiotook umbrage” at the observations made in Casio and made “surprising

Tuesday, 28 October 2014

International Tax Laws Termonologies


Economies are coming closer & closer due to globalization. Number of cross-border transactions has increased. Cross border transactions have led to a dynamic change in the system of taxation. New issues have aroused due to different styles of business arrangements. In the circumstances, it is important for an aspiring Chartered Accountant to become verse with the basic understanding of different terminologies used in International Taxation.

Whether benefit conferred on assessee by way of conversion of loan into grant by Govt for maintaining SLR so as to enable assessee to carry out banking would constitute capital receipt and hence not liable to tax - YES: ITAT

THE issue before the Bench is - Whether the benefit conferred on the assessee by way of conversion of loan into grant by the Government for maintaining Statutory Liquidity Ratio (SLR) in compliance with the requirements of RBI so as to enable the assessee bank to carry out its banking activities would constitute capital receipt and hence not liable to tax. And the verdict favours the assessee.
Facts of the case

ITAT explains tax aspects of private specific or discretionary trusts

This Tax Alert summarizes a recent ruling of the Bangalore Income Tax Appellate Tribunal (ITAT) in the case of India Advantage Fund – VII (Taxpayer). The ITAT dealt with the tax aspects of a private specific trust wherein contributors were the beneficiaries. The ITAT held that presence of power to terminate trust by trustee or by contributors will constitute a revocable transfer. Accordingly, income arising to the trust was held taxable in the hands of the individual beneficiary (transferor) as per Indian Tax Laws (ITL). Based on facts, the ITAT also held that the Taxpayer was neither a discretionary trust nor an Association of Persons (AOP).


ITAT ruling covers several important areas on taxation of contributory trust on which there was limited guidance available and provides useful guidance to the taxpayers in general. 

CIT vs. Ghatge Patil Transports Ltd (Bombay High Court)

. 2(24)(x) r.w.s 36(1)(va) & 43B: Even employees' contribution to PF etc is allowable if deposited before due date of filing ROI


Section 43B made it mandatory for the department to grant deduction in computing the income under section 28 in the year in which tax, duty, cess, etc. is actually paid. However, Parliament took cognizance of the fact that the accounting year of a company did not always tally with the due dates under certain statutes […]

ITO vs. Onkarmal Kajaria Family Trust (ITAT Kolkata)

S. 50C: AO cannot straightaway adopt stamp duty value as consideration for capital gains but must offer assessee benefit of reference to DVO for valuation


It is difficult to accept the proposition that the assessee had accepted that the price fixed by the District Sub Registrar was the fair market value of the property. No such inference can be made as against the assessee because he had nothing to do in the matter. Stamp duty was payable by the purchaser. […]

G. Shankar vs. ACIT (ITAT Bangalore)




Second proviso to s. 40(a)(ia) inserted w.e.f. 1.4.2013 should be treated as retrospectively applicable from 1.4.2005 and no disallowance for want of TDS can be made if payee has paid tax thereon. Assessee must be given opportunity to file Form 26A


The undisputed fact is that the assessee has not deducted tax at source on the payments made to Uday Kumar Shetty. The fact that the payee has accounted for these payments in his books of account, financial statements and the same have been offered for tax in his return of income for the period relevant […]

Monday, 27 October 2014

Due Date of ST Return 1st Quarter extended to 14.11.2014

CBEC has issued an order to extend due date of Service Tax Return for 1st Quarter to 14.11.2014 vide No. 02/2014-ST dated 24th Oct., 2014 for the period from April-2014 to Septermber-2014. The Actual due date of Service Tax Return is 25th October, 2014. The extended due date of filing of Service Tax Return order is as under :

Download Conso File to rectify unmatched Challans in the TDS Return Statement

An important message has been displayed for the deductors on the TRACES website regarding downloading of conso file.

The displayed message has been given below:

Whether when assessee has option to claim exemption either u/s 10(23C) or Sec 11(1), AO cannot force assessee to go for deduction u/s 11 - YES: ITAT

THE issue before the Bench is - Whether when assessee has option to claim exemption either u/s 10(23C) or Sec 11(1), AO cannot force the assessee to go for deduction u/s 11. YES is the answer of the Tribunal.
Facts of the case

The
assessee is a Trust registered u/s 12AA of the Act. The AO observed that the application of Rs.53,84,680/- which was claimed to have been made through statement of affairs was made on the purchase/addition to the fixed assets. Further, in response of accumulation claimed to have been made as per Explanation to sec 11(1) of the Act, it was also noticed that no application for

Credit of TDS to be allowed for non – mismatch of TDS also.



S.204 : Deduction at source-Person responsible for paying-Bar against direct demand on assessee- 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. [S.205, 221, Form 26AS, 16A]

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 TDS. Even if the deductor, after deducting the TDS, does not deposit the sum with the department, the department has to recover the said amount from the deductor and cannot deny credit to the deductee (Om Prakas Gattani( 2000) 242 ITR 638 (Gau) & Yashpal Sahni ( 2007) 293 ITR 539 (Bom) followed)[SCA No 2349 of 2014 dt 23-06-2014)(AY.2010-11)
Sumit Devendra Rajani . .v. ACIT (Guj.)(HC) 

No attachment proceedings for order passed u/s 201.



S. 220 : Collection and recovery - Assessee deemed in default-High Court directed CIT(A) to
dispose the appeal.[S. 201,201(IA)]
The assessee had filed an appeal before the CIT(A) against Order u/s. 201 and 201(1A) passed by the AO. During pendency of the appeal the AO issued communication to remit 50% of the demand and attached the bank accounts of the assessee.
The assessee filed a petition before the High Court inter-alia contending that it had pending refunds for A.Y.s 2012-13 and 2013-14 the assessment of which years were pending and that it would not press for refunds of the said amounts till the disposal of the appeal before the CIT(A) and hence no coercive action should be initiated. The High Court disposing the petition directed the department to lift the attached bank accounts of the assessee and directed the CIT(A) to dispose of the appeal on or before a particular date and also directed the assessee not to press for refunds till then. (AY. 2012-2013, 2013-2014)

Hosmat Hospital (P.) Ltd. .v. CIT (2014) 222 Taxman 71 (Mag.)(Karn.)(HC)

S. 41(1): Unclaimed & unproven liabilities are deemed to have ceased and are assessable as income

ITO vs. Sajjankumar Didwani (ITAT Mumbai)



(i) When the liability continues to subsist year after year, for several years, serious and valid doubts as to its existence or as representing an existing liability, may arise. This is as in the very nature of the events, nobody would ordinarily, i.e., without justifiable reason, not claim his dues, representing his hard earned money […]

Transfer pricing principles on right of TPO to collect info u/s 133(6

HSBC Electronic Data Processing India vs. ACIT (ITAT Hyderabad)

Transfer pricing principles on right of TPO to collect info u/s 133(6), exclusion of high profit comparables, adjustment for limited risk environment, exclusion of reimbursement costs for computing operation margins explained
(i) The TPO conducted search in the data bases for finding additional comparable by applying 25% employee cost filter. After examining the information obtained from the company u/s 133(6) of the Act the TPO treated it as comparable by observing that the company is engaged in IT enabled services and qualifies all the filters adopted […]

S. 2(1A): Gains from sale of agricultural land is exempt even though purchaser intends to use the land for commercial purposes

DCIT vs. M. Kalyan Chakravarthy (ITAT Hyderabad)


The only reason the A.O. treated the land as non-agricultural land was that ‘agreement of sale’ read with ‘Irrevocable GPA’ does not indicate that land retained the character of agriculture at the time of transfer. This was also the ground raised by Revenue in the appeal that M/s. Ramky Estates and Farms P. Ltd., may […]

AMD Research & Development Center vs. DCIT (ITAT Hyderabad)


In view of the finding of the service-tax authorities that services were rendered, argument that amount paid is a reimbursement of actual cost without profit element is not acceptable and it is chargeable as “fee for included services”
Having held that the amount in question was remitted by the assessee company to ATI Technologies, Canada for certain benefits received by it in the form of services procured by ATI Technologies, Canada from Soctronics India Private Limited and provided to the assessee company, and it was not a case of either gratuitous payment made […]

ITAT explains tax aspects of private specific or discretionary trusts



This Tax Alert summarizes a recent ruling of the Bangalore Income Tax Appellate Tribunal (ITAT) in the case of India Advantage Fund – VII (Taxpayer). The ITAT dealt with the tax aspects of a private specific trust wherein contributors were the beneficiaries. The ITAT held

Friday, 24 October 2014

Law on the tests to distinguish whether gains on sale of shares is short-term or business profits explained

Harsha L. Tahilramani vs. ACIT (ITAT Mumbai)



(i) The assessee wonders as to why should she be not allowed her claim of the delivery-based transactions as being not trade, which stands admitted by her qua non-delivery based transactions? However, that precisely defines the controversy which is to be resolved (with reference to and on the basis of the facts), so that nothing […]

Various arguments on the applicability of s. 14A & Rule 8D

HSBC Invest Direct (India) Ltd vs. DCIT (ITAT Mumbai)

Various arguments on the applicability of s. 14A & Rule 8D where the AO has not recorded satisfaction, where the shares are held in strategic/ subsidiary companies, held as stock-in-trade, where there are surplus funds and the quantum of disallowance under Explanation (f) to s. 115JA/ 115JB considered

(i) When it is said that rule 8D is mandatory (i.e., AY 2008-09 onwards), all that is meant is where the said expenditure cannot be reasonably ascertained with reference to the assessee’s accounts, toward which the AO is to issue his satisfaction or, as the case may be, dissatisfaction, he has no discretion in case […]

Bogus purchases: Filing of confirmation of suppliers with PAN and TIN number are not sufficient to prove the purchases are genuine if they are not supported by other facts including delivery of goods & presence of suppliers

Anuj Kumar Varshney vs. ITO (ITAT Jaipur)



The department had gathered the information through survey and search seizure in above parties and they categorically admitted that they have provided entries and not doing any purchase and sale of gems and jewellery. Even then Assessing Officer asked to produce these parties for verification which could not be produced by it. The Assessing Officer […]

S. 147: The reasons must specifically indicate as to which material fact was not disclosed by the petitioner in the course of its original assessment


Global Signal Cables (I) Pvt. Ltd vs. DCIT (Delhi High Court)



In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe […]

No S. 14A/ Rule 8D Disallowance if accounts not examined. Consent fee paid to SEBI is not penalty for infraction of law

ITO vs. Reliance Share and Stock Brokers (P) Ltd (ITAT Mumbai)



Re Disallowance made u/s 14A r.w. rule 8D (i) It is now settled principle that the assessing officer has to examine the disallowance made by the assessee by having regard to the accounts of the assessee and only thereafter the AO, if he is not satisfied with the correctness of the claim, shall determine the […]

charter hire payment is not assessable as royalty, there is no obligation to deduct TDS and no disallowance u/s 40(a)(i) can be made

Mathewsons Exports & Imports vs. ACIT (ITAT Cochin)



It is very clear that the payments made by the assessee company were in the nature of simple payments for chartering ships on hire for doing the business outside India. Therefore, the payments do not satisfy the test laid down in s.9 of the IT Act, 1961. When s. 9 is not satisfied, there cannot […]

Rule 8D(ii) & 8D(iii) do not apply to shares held as stock-in-trade. Loss arising out of derivatives from the income arising out of buying and selling of shares

DCIT vs. Baljit Securities Private Limited (ITAT Kolkata)



(i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of “speculative transaction” exclusively for purposes of section 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as […]

Gold & Silver rates for current & last ten assessment years & on April 1, 1981

Valuation of Jewellery Under Wealth Tax Act Provisions Rules 18 and 19 which provide the manner in which valuation of jewellery is to be determined. 1. The value of the jewellery shall be estimated to be the price which it would fetch if sold in the open market on the valuation date. 2. The return of net wealth furnished by the assessee shall be supported by - (i) a statement in the prescribed form, where the value of the jewellery on the valuation datedoes not exceed Rs.5 lakh. (Not Required to be attached with Return from A.Y. 2014-15) (ii) a report of a registered valuer in the prescribed form,

Latest e-Tutorial on online Correction of all Challans by TRACES For Asstt. Year 2015-16.

The Online Correction functionality is now enabled for TDS Statements prior to FY 2012-13 also (Financial Year 2007-08 onwards), provided at least one correction for the relevant statement has been processed by CPC (TDS) if there is an error while making payment of Tax either electronically or manually. To rectify these errors, Income-Tax Department has issued new guidelines effective 01-09-2011 which allows Banks to correct physical challans only. For correction in electronic challans, request will have to be made to the concerned Assessing Officer. For general benefit, I am elaborating the the procedure for correction in the tax challan.

Whether when Revenue has failed to establish that business was so arranged that more profit could be attributed to eligible unit, even then benefit of Sec 80IA can be denied - NO: HC

THE issue before the Bench is - Whether when the assessee maintains separate books for its unit located in backward area and the Revenue has failed to establish that business was so arranged that more profit could be attributed to the eligible unit, even then benefit of Sec 80IA can be denied. And the answer goes in favour of the assessee.
Facts of the case

Thursday, 23 October 2014

HAPPY DEEPWALI


CBDT Circular on automatic approval for foreign currency borrowings to avail lower withholding tax rate

Section (S.) 194LC was introduced in the Indian Tax Laws by Finance Act 2012 to provide for a reduced rate of withholding tax (@ 5%[1]) on payment of interest by an Indian company to a nonresident in respect of borrowings in foreign currency made between July 2012 and June 2015 by way of loan agreement or issue of long term “infrastructure” bonds, subject to certain conditions including specific approval of the Government of India (GOI).

Wednesday, 22 October 2014

Expl 2 to S. 132B, though inserted w.e.f. 1.6.2013, is retrospective and seized cash cannot be adjusted against advance-tax liability

DCIT vs. Spaze Tower Pvt. Ltd (ITAT Delhi)




(i) As per provisions of section 132B of the Act the assets seized u/s 132 or requisitioned u/s 132A may be adjusted towards the amount of any “existing liability”. The Explanation 2 to section 132B of the Act inserted by the Finance Act, 2013 w.e.f. 1.6.2013 clarifies that for removal of doubts it is hereby […]

S. 275(1A): Assessee's claim for refund of penalty with interest cannot be defeated by inaction of revenue

Shanti Enterprise vs. ACIT (Gujarat High Court)




(i) What is provided by Section 275(1A) is that the order imposing or enhancing or reducing or cancelling the penalty may be passed on the basis of the assessment as revised by giving effect to the order in appeal. The concerned authority was thus required to make specific order for cancelling the penalty by giving […]

S. 115JB: AO entitled to tinker with P&L A/c if assessee's claim not permitted by accounting principles

Padinjarekara Agencies Pvt. Ltd vs. ACIT (ITAT Cochin)




The question that had arisen was whether the Assessing officer was entitled to disturb the net profit shown by the assessee in the profit and loss account prepared as per the Companies Act, 1956.in order to enable anybody to understand the implication of such deviation, it was made mandatory for the companies to disclose the […]

S. 68: Law regarding addition of share application money as unexplained credit explained

ITO vs. Rakam Money Matters P. Ltd (ITAT Delhi)




The only issue here is the addition of Rs.60 lacs made by the Assessing Officer as unexplained credit on account of the share application money. On going through the facts of the case, we notice that assessee has filed the relevant details which it could have filed in support of its contention of having received […]

Grant given to safeguard the interests of depositors, though used for meeting SLR requirements of RBI relatable to its banking activity, is still capital in nature

The Nanded District Central Co-op. Bank Ltd vs. DCIT (ITAT Pune)




The objective of the Government of Maharashtra to give grant to the assessee was to protect the interests of farmers and depositors from the Nanded district and for the said purpose the Government deemed it fit to provide financial assistance to the assessee-bank to enable it to regularize its functioning. Pertinently, the functioning of the […]

Failure to record detailed reasons in assessment order does justifying s. 147 action. There is a statutory presumption that AO has applied his mind while passing assessment order

Munshi Mini Rice Mill vs. ITO (ITAT Kolkata)




Section 147 of the Act, as substituted w.e.f. 01.04.1989 does not postulates conferment of power upon the AO to initiate reassessment proceeding upon his mere change of opinion. Further, if ‘reason to believe’ of the AO is founded on an information which might have been received by the AO after the completion of assessment, it […]

Tuesday, 21 October 2014

SHUBH DHANTERAS


Salary modes & Income Tax reliefs by amended Finance Act, 2014 for Asstt. Year 2015-16.

Advance learning on tax treatment of various forms of salary like bonus, overtime pay, salary in lieu of notice period, etc. (Theory)
Tax treatment of advance salary :
Advance salary received by an employee is taxed in the year of receipt. The rule behind this is the basis of taxability of salary, i.e., salary is taxed on due or receipt basis, whichever is earlier. However, an employee can claim relief under section 89 (discussed later) in respect of advance salary.

Rule 9B - Whether exhibition rights, broadcasting rights and satellite rights are to be construed as distribution rights - YES: HC

THE issues before the Bench are - Whether exhibition rights, television rights or satellite rights can be treated as 'distribution rights'. And the verdict goes against the Revenue.
Facts of the case
The assessee is an individual. She had declared income at Rs.44,65,471. During assessment, the AO noticed that the assessee had claimed depreciation of Rs.1.20 Crores on cinematographic

Fraud in determination of LIBOR/ EURIBOR no reason to discard it as ALP

Vijay Electricals Limited vs. ACIT (ITAT Hyderabad)



The department claimed that in determining the ALP of an international transaction of loan by the assessee to its AE, LIBOR could not be treated as the ALP as there was a “fraud” regarding fixation of ‘LIBOR’ as evidenced by the fact that Barclays Bank & UBS were fined by the United States Department of Justice for attempted manipulation of the LIBOR and Euribor rates and ultimately UBS agreed to pay to regulators. HELD by the Tribunal:


S. 43(5)(a): Loss on foreign currency forward contracts by a manufacturer/ exporter is a “speculation loss” and not a “hedging loss”

Araska Diamond Pvt. Ltd vs. ACIT (ITAT Mumbai)




In order that forward transactions in commodities may fall within proviso (a) to section 43(5) of the Act, it is necessary that the raw materials or merchandise in respect of which the forward transactions have been made by the assessee must have a direct connection with the goods manufactured or the merchandise sold by him. In other words raw material in respect of which the assessee has entered into forward transactions must be the same raw material which is used by him in his manufacturing

CENVAT credit - Outdoor Caterers Service availed by manufacturer

CCE, Mumbai – V vs. Industrial Ltd. 2013(30) S.T.R. 673 (Tri-MUM)

CENVAT credit - Outdoor Caterers Service availed by manufacturer - Held, providing canteen is statutory requirement - direct nexusand hence 'input service'.
Facts:
Manufacturer of cigarettes, packing materials of paper and paper board and printing inks availed CENVAT Credit on their inputs, capital goods and input services. CENVAcredit of service tax paid on outdoor caterer's services during March 2005-06 was disallowedand upheld but the Commissioner (Appeals) allowed the same. The department's appeal was decided by the Larger Bench in favour

Monday, 20 October 2014

SAFETY TIPS FOR DIWALI CELEBRATION



Special precautions should be taken at the time of Diwali celebrations specially when bursting fire crackers. A few simple prevention measures are outlined below which would help you in celebrating this festival safely.
Fire Safety/Firework accident Prevention
The Do’s

CBDT extends due date of filing 2nd Quarter TDS/TCS returns for Asstt. Year 2015-16

CBDT has issued a Press Release on 17th Oct., 2014 to extend due date of filing of TDs/TCS Statements for 2nd Quarter for Fin. Year 2014-15 for specially deductors/collections belonging to states of Andra Pradesh, Jammu & Kashmir, Odisha and Telangana State.

In view of the recent natural calamities in the States of Andhra Pradesh, Jammu & Kashmir, Odisha & Telangana, the Central Board of Direct Taxes has issued an order extending the due date for filing

Whether if assessee faces financial hardships and gets no support from its CA and has no staff, it constitutes reasonable cause for purpose of penalty u/s 272A(2) - YES: ITAT

THE issue before the Bench is - Whether if assessee faces financial hardships and gets no support from its CA and has no staff, it constitutes reasonable cause for purpose of penalty u/s 272A(2). YES is the Tribunal's answer.
Facts of the case
A) The assessee company is a producer of feature films. The TDS section of the department conducted a survey operation u/s 133A of the Act at the business premises of the assessee. At the time of survey, it was noticed that the assessee company did not file its return of income.

Rule 37BA (credit for TDS) inserted w.e.f. 01.04.2009 to mitigate hardship to taxpayers has to be treated as being retrospective in nature

Parmanand Tiwari vs. ITO (ITAT Kolkata)



The proviso to sub-rule (2) of Rule 37BA of the Rules mitigates the hardship faced by assessee for claiming credit of TDS whereby deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of other person in the information relating to deduction of tax as referred to in sub-rule (1) of Rule 37BA of the Rules. In such provisions of law, the assessee should

S. 271(1)(c): Wrong claim for depreciation by showing a finance or loan transaction as a lease transaction attracts penalty

Times Guaranty Ltd vs. ACIT (ITAT Mumbai) 




The contention that whether a transaction is a lease transaction or a finance transaction is a debatable legal issue, we are not inclined to accept this argument also. Whether a transaction is a lease transaction or a loan transaction, in our view, is a factual issue which is to be decided after appreciation of the relevant facts. If the facts show that the assessee has put a wrong claim of depreciation by showing a finance or loan transaction as a lease transaction, certainly the claim is to

ITAT Explains Entire Law On Taxation Of Private Trusts And AOPs

DCIT vs. India Advantage Fund-VII (ITAT Bangalore)

Entire law on taxation of private specific/ discretionary trusts under revocable & irrevocable transfers and AOPs explained

(i) Private Trusts could be Fixed or Discretionary Trusts. A fixed trust is a trust in which the beneficiaries have a current fixed entitlement to such income as remains after proper exercise of the trustee’s powers. On the other hand, a discretionary trust is one in which the beneficiaries have no such current fixed entitlement, but only a hope (spes) that the trustees in carrying out their duty to consider how much income might be paid to such beneficiaries will in their discretion pay that

Deductor's Survey Questionnaire: Your Feedback Matters!!

065/2014

Date of communication : 18/10/2014

Dear Deductor (TAN - CHEC07239B),

Greetings from CPC(TDS) team!
CPC(TDS) feels glad to release a survey "Deductor's Survey Questionnaire: Your Feedback Matters" with an objective to understand your satisfaction since the time CPC(TDS) and TRACES website came into existence. CPC(TDS) has undertaken transformational initiatives to improve overall service levels for deductors and tax payers by following:-

Friday, 17 October 2014

Adjust Excess TDS paid in next Coming Months.

There are many discrepancy regarding adjustment of Excess TDS deductions. If the deductor remitted excess TDS amount from any employee under section 192, it can be adjusted under the same section in the coming month.

CPC (TDS) wants Feedback from Taxapayers' on Deductor's Survey.

CPC(TDS) feels glad to release a survey "Deductor's Survey Questionnaire: Your Feedback Matters" with an objective to understand your satisfaction since the time CPC(TDS) and TRACES website came into existence. CPC(TDS) has undertaken transformational initiatives to improve overall service levels for deductors and tax payers by following:-

Important information on taxation for Non resident

Is the residential status of a person relevant for determining the taxability of the income in his hands? ​
Yes, the residential status of a person earning income is very much relevant for determining the taxability of such income in his hands.
Taxability of any income in the hands of a person depends on the following two things :
(1) Residential status of the person as per the Income-tax Law; and
(2) Nature of income earned by him.

Whether penalty is warranted when assessee was under bonafide impression that he was 'person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law - NO: ITAT

THE issue before the Bench is - Whether penalty is warranted when assessee was under bonafide impression that he was a 'person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law. NO is the answer.
Facts of the case
The assessee is an employee of Cognizant Technology Solutions as Sr. Software professional. During the course of scrutiny assessment, the AO observed that the assessee had opened a bank account in ICICI Bank. The amount in this savings account was transferred to NRE Fixed Deposit

CBEC circular clarifies that services provided by Indian Banks/Entities acting as agents to off-shore Money Transfer Service Operators (MTSO) would attract Service tax



This Tax Alert summarizes the CBEC's Circular No. 180/06/2014 – ST dated 14 October 2014 (Circular) issued by the TRU that discusses Service tax applicability on activities surrounding inward remittances received from abroad to beneficiaries in India through Money Transfer Service Operators (MTSO) and the commission or fees received by agents / sub-agents appointed in India in this regard.

Circular clarifies that commission, fee or charges for services provided by Indian Banks/Entities acting as agents or sub-agents would attract Service tax.


Possibility of retrospective application of the said Circular by the revenue authorities to raise Service tax demands is not ruled out.

S. 14A & Rule 8D disallowance cannot be made if there is no exempt income or if there is a possibility of the gains on transfer of the shares being taxable.

CIT vs. Holcim India P. Ltd (Delhi High Court)



(ii) Income exempt under Section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax;

S. 14A & Rule 8D disallowance cannot be made if there is no exempt income or if there is a possibility of the gains on transfer of the shares being taxable.

CIT vs. Holcim India P. Ltd (Delhi High Court)



(ii) Income exempt under Section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax;

S. 14A & Rule 8D disallowance cannot be made if there is no exempt income. Cheminvest Ltd. vs. ITO 121 ITD 318 (Ahd) (SB) is not good law.

Alliance Infrastructure Projects Pvt. Ltd vs. DCIT (ITAT Bangalore)




There is no dispute that the assessee had no exempt income during both the years involved. No doubt as mentioned by the DR, the Special Bench of this Tribunal in the case of Cheminvest Ltd. vs. ITO 121 ITD 318, had held that disallowance under section 14A could be made even in an year in which no exempt income was earned or received by the assessee. This decision of Special Bench of the Tribunal has been, in our opinion, impliedly overruled by various decisions of different High Courts, namely, CIT vs Shivam Motors P. Ltd. (All HC), CIT vs. Corrtech Energy Pvt. Ltd (Guj HC), CIT vs. Winsome Textile Industries Ltd 319 1TR 204 (P&H), CIT Vs.Delite Enterprises (Bom HC) & CIT vs. Lakhani Marketing (P&H HC). Therefore, unless and until there is receipt of exempted income for the concerned assessment years, s. 14A of the Act cannot be invoked.

The MCA rationalises norms relating to consolidated financial statements and internal financial controls system

The Companies Act, 2013 (the Act) was largely operationalised from 1 April 2014. The Ministry of Corporate Affairs (MCA) vide notifications dated 14 October 2014 has amended/clarified provisions relating to:
·         the preparation of consolidated financial statements (CFS) by an intermediate wholly-owned subsidiary – amended to provide an exemption
·         the preparation of CFS by companies having just an associate or a joint venture – amended to grant a transition period
·         reporting on the internal financial control systems by auditors, mandatory for financial years commencing on or after 1 April 2015 – amended to grant a transition period
·         the Schedule III-related disclosures made in stand-alone financial statements which are not to be repeated in CFS.
The amendments would be applicable from the date of their publication in the Official Gazette

Thursday, 16 October 2014

Withholding Tax From Reimbursement Of Expenses Routed Through Group Companies


Most of the companies in India which are subsidiaries of entities operating abroad face this one common problem. The expenses incurred by the Indian entity are paid by the foreign entity directly & then the latter is reimbursed by the Indian entity. When the auditors & accountants arrive, they raise a concern regarding various compliances that were overlooked while executing this rather simple transaction.

No Service Tax on Reimbursement of Expenses

The service tax will easily qualify as the legislation which has witnessed the maximum changes over the last 16 years. What started off as a simple tax on three services, has now turned into a cash cow for the Government with revenues expected to cross Rs 100 million soon. The negative list introduced in 2012 is expected to be a game-changer for service tax law as it is touted as a pre-cursor to the Goods and Service Tax (GST) - if and when it does arrive. The Delhi High Court is turning out

Fees for the marketing and business promotion activities conducted outside India to be taxable in India

BEFORE THE AUTHORITY FOR ADVANCE RULING (INCOME TAX)
NEW
DELHI
A.A.R. No. 674 of 2005
Name & address of the applicant
INTERNATIONAL HOTEL LICENSING COMPANY S.A.R.L.
25A, Boulevard Royal, 9th Floor
L-2449
Luxembourg
Commissioner concerned
DIT INERNATIONAL TAXATION, MUMBAI
Present for the Applicant
Mr. Nishith Desai, Advocate & others
Present for the Department
Mr. T N Chopra, Adv.
Justice Syed Shah Mohammed Quadri (Chairman)
Mr. A S Narang (Member)
Mr. A Sinha (Member)

TDS on reimbursement of expenses

Indian tax law provides for deduction of tax at source on various types of incomes. Deducting tax at source is popularly known as "withholding tax".
Section 195 of Income Tax Act casts an obligation on a person, who makes a payment to a non-resident, to deduct tax at source at the time of making the payment or at the time of credit of such income to the account of the payee, whichever is earlier.
Section 195 contemplates deduction of tax at source only on such income as is chargeable to tax in India.

TDS on Reimbursement of Expenses to Non Resident


To elucidate the concept, considered the following cases from TDS deduction perspective u/s 195 of the Income Tax Act:-
  • a) Rs. 10 lacs paid as Fees for Technical Services to Non-Resident (NR) and his expenses (Salary to staff and other admin expenses) were Rs. 6 lacs and Net profit to NR was Rs. 4 lacs. Whether TDS is deductible on Rs. 10 lacs or 4 lacs?
  • b) Rs. 10 lacs paid as fees for Technical Services to NR and he hire external consultant for Project at a cost of Rs. 6 lacs and Net Profit to NR was Rs. 4 lacs.NR claimed exemption for TDS on Rs. 6 lacs, as same is reimbursement of expenses.
  • c) Rs. 10 lacs paid as fees for Technical Services rendered by Permanent Establishment of NR in India. In rendering such services, PE incurred expenses of Rs. 6 lacs and its Net Profit was Rs. 4 lacs. Whether TDS is deductible on Rs. 10 lacs or 4 lacs.?
  • d) Rs. 10 lacs paid as fees for Technical Services to NR along with Rs. 1 lakh as reimbursement of Out of pocket expenses. NR claimed exemption for TDS on Rs. 1 lakh, as same is reimbursement of expenses.
  • e) Rs. 11 lacs paid as fees for Technical Services, all inclusive and incurred Rs. 1 lakh as expenses. Whether TDS is deductible on Rs. 11 lacs or 10 lacs?
  • f) Indian Entity purchases Machinery from outside Indian. It reimbursed Rs. 5 lacs to its foreign affiliate incurred on transportation of Machines to India. Whether TDS is deductible on Rs. 5 lacs?

Calculating Withholding Taxes in India

Withholding taxes are a government’s way of making sure that the proper taxes are paid on an item by way of either withholding or deducting the relevant tax amount from an individual’s or an enterprise’s income. They are of particular note to international companies doing business with India yet without a presence there, as some services provided to Indian customers can be subject to withholding tax. They may also impact on foreign subsidiaries of international companies in inter-company agreements. Withholding taxes in India Chapter XVII-B of India’s Income Tax Act provides for the deduction of taxes at the source of any payments made by an assessee. Furthermore, section 195 of the Income Tax Act casts an obligation on the person responsible for the payment to

Analysis of Permanent Establishment

Introduction:-
Internationally, two basic principles of taxation are followed- the residence based taxation and the source based taxation. Most of the countries, including India, tax their residents on their global income under residence based taxation. They tax non-residents on their income sourced in that country under source based taxation.
When a resident of one country earns income from a source in another country, the possibility of double taxation arises because one country may tax that income on the source principle whereas the other country may tax it on the residence principle. Generally, following the source based taxation,

Real Estate Transactions and Their Tax Implications

Buying a home at a good price and with a good mortgage is only the first step of being a smart homeowner. Smart homeownership is actually a lifelong exercise, requiring that you keep the implications on and for your home in mind as you make major life decisions of any sort. Smart owners also keep in mind the tax implications or advantages involved in the major decisions and actions they take vis-a-vis their homes.

Whether if it is found that assessee has made purchases at abnormally high prices from party that is not traceable, Revenue will have all legitimacy to reject books and tax gross profit on estimate basis - YES: ITAT

THE issue before the Bench is - Whether if it is found that the assessee has made purchases at abnormally high prices from a party that is not traceable, the Revenue will have all the legitimacy to reject the books and tax the gross profit on estimate basis. And the verdict goes against the assessee.
Facts of the case
Assessee is a registered firm engaged in the business as a wholesale dealer in Iron and Steel. During the course of assessment proceedings the AO observed that as against gross turnover of

Bombay High Court rules on applicability of transfer pricing provisions to issue of shares to associated enterprises

We are pleased to release a Tax Alert which summarizes the decision on 10 October 2014 of the Bombay High Court (HC) in the case of Vodafone India Services Private Limited (Taxpayer). The issue before the HC was whether the Indian transfer pricing (TP) provisions are applicable to the Taxpayer’s issue of shares to its associated enterprise (AE) and whether the Indian Tax Authorities have jurisdiction under the Indian Tax Laws (ITL) to tax a short-fall between the alleged fair market value (FMV) of the shares and the issue price of the equity shares.

No disallowance u/s 14A & Rule 8D can be made towards exempt= income earned on strategic investments

Interglobe Enterprises Ltd vs. DCIT (= ITAT Delhi)




The assessee had made significant investments in the shares of subsidia= ry companies which are definitely not for the purpose of earning exempt in= come. Strategic investment has to be excluded for the purpose of arriving = at disallowance under Rule 8D(iii). The disallowance under Rule 8D(iii) ha= s to be computed by excluding the value of strategic investments. No disal= lowance under Rule 8D(i) and 8D(ii) is also warranted (REI Agro (ITAT Kol) followed)

Credit on capital goods is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial

M/s WIMPLAST LIMITED Vs CCE (2014-TIOL-2010-CESTAT-AHM)
Credit on capital goods is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial Company as prescribed under Rule 4(3) of the CCR, 2004 - the words used in Rule 4(3) are “even if the capital goods are acquired on lease, hire purchase or loan agreement, from a financing company”
Facts of case:
the appellant argued that CENVAT credit is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial Company as prescribed under Rule 4(3) of the Cenvat Credit Rules, 2004. Learned advocate relied upon the following case laws to argue that credit on similar facts and circumstances have been allowed by CESTAT benches including Ahmedabad:-
(a) Ilgin Automotive (P) Limited [2014 (299) ELT 129 (Mad.)]
(b) Leamak Healthcare Pvt. Limited [2010 (259) ELT 554 (Tri. Ahmd.)] = 2010-TIOL-1667-CESTAT-AHM
(c) Sharda Motors Industries Limited [2002 (150) ELT 759 (Tri. Del.)]
(d) Kalyani Seamless Tubes Limited [2004 (176) ELT 899 (Tri. Mum.)]
(e) Agro Pack [2009 (240) ELT 135 (Tri. Ahmd.)]
(f) Shree Uma Foundaries Pvt. Limited [2008 (222) ELT 317 (Tri. Kolkata) = 2007-TIOL-1759-CESTAT-KOL

Wednesday, 15 October 2014

S. 147: If AO contests the audit objection but still reopens to = comply with the audit objection, it means he has not applied his mind ind= ependently and the reopening is void

Raaj= ratna Metal Industries Ltd vs. ACIT (Gujarat High Court)


To satisfy ourselves, whether the reassessment proceedings have been initi= ated at the instance of the audit party and solely on the ground of audit = objections ….. On a perusal of the files, the noting made therein = and the relevant documents, it appears that the assessment is sought to be= reopened at the instance of the audit party, solely on the ground of audi= t objections. It is also found that, as such, the AO tried to sustain his = original assessment order and submitted to the audit party to drop the aud= it objections …. … if the reassessment proceedings are initi= ated merely and solely at the instance of the audit party and when the Ass= essing Officer tried to justify the Assessment Orders and requested the au= dit party to drop the objections and there was no independent application = of mind by the Assessing Officer with respect to subjective satisfaction f= or initiation of the reassessment proceedings, the impugned reassessment p= roceedings cannot be sustained and the same deserves to be quashed and set= aside

Offences under Companies Act, 2013

Protection of public interest and minorities are some of the key factors on which the Companies Act, 2013 (hereinafter referred to as the “New Act”) stresses more than anything. Hence, the new Act certifies much stricter and structured rules for offences and penalties. Many of these offences have been classified as non-bailable . Hence, it gets very important for the key decision makers of the

Can Excess TDS Be Adjusted In Coming Months?


Whether excess TDS amount remitted by a company under sec.192 can be adjusted against the TDSamount payable under the same section in the coming month.?

Whether interest payment towards delay in paying sale consideration after slump sale is effected and plant is in operation, is to be treated as revenue in nature - YES: HC

THE issue before the Bench is - Whether interest payment towards delay in paying sale consideration after slump sale is effected and plant is in operation, is to be treated as revenue in nature. YES is the answer.
Facts of the case
A) The assessee concern is a joint venture company formed by Sandvik AB Sweden and M/s. Chokshi Tubes Company Limited. The company was incorporated on 20th October 1996 with the share holding of 51% by Sandvik AB and 49% by M/s. Chokshi Tubes Company Limited. M/s.

Circular Levy of service tax on activities involved in relation to inward remittances from abroad to beneficiaries in India through MTSOs- reg

Circular No. 180/06/2014 – ST

FNo 354/105/2012-TRU (Pt.)

Subject: -  Levy of service tax on activities involved in relation to inward remittances from abroad to beneficiaries in India through MTSOs- reg.
      
            Vide circular No. 163/14/2012–ST, dated 10th July, 2012, on the issue of  levy of service tax on the activities involved in the inward remittance it was clarified that there is