S. 54EC: ITAT Doubts Correctness Of High Court Verdict + imp updates.

Pr. CIT vs. Shri Jai Shiv Shankar Traders Pvt. Ltd (Delhi High Court)

S. 143(2)/ 292BB: Failure to issue a s. 143(2) notice renders the reassessment order void. S. 292BB saves a case of "non service" of the notice but not a case of "non issue"

The failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act. Section 292BB applies insofar as failure of “service” of notice is concerned and not with regard to failure to “issue” notice. The non-issue of the said notice is fatal to the order of re-assessment

 

CBDT Irked (Again) At Poor Show By Dept Before AAR & Issues Guidelines For Strict Compliance

On an earlier occasion, the CBDT had issued Instruction in F. No. 500/98/2015-FT&TR-V dated 14th August, 2015 in which it had lamented the fact of poor representation on behalf of the department in the cases before the Authority of Advance Rulings. It had issued instructions that only senior officials who are well prepared on facts and law should be deputed so as to effectively represent the Departmental view on complex issues. The CBDT has now issued another Instruction F.No.225/261/2015/ITA.II dated 28.10.2015 in which it has taken exception to the fact that:

(i) Departmental Representatives are seeking adjournment on unjustified grounds;

(ii) Departmental Representatives not committing to a particular position on the ground of seeking further instructions from the field authorities;

(iii) All the questions raised in an application not properly responded to, while furnishing the report.

In order to deal with the malaise, the CBDT has issued clear-cut directions and warned that the said directions should be followed strictly.

Promoter and Promoter Group

The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2^nd September 2015 and will come into force from 1^st December 2015. In this post we will discussion definitions of promoter and promoter group in these regulations.

The “promoter” and “promoter group” shall have the same meaning as assigned to them respectively in clauses (za) and (zb) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. [Regulation 2(1)(w) of the SEBI (LODR) Regulation 2105]

CBEC Allows Education Cess Credit to be used for payment of Service Tax

A recap on the facts:

Education Cess exempted on excise duty: Consequent to the increase in excise duty to 12.5% from 12% with effect from 1.3.2015, the Government by Notification Nos. 14/2015-CE and 15/2015-CE dated 1.3.2015 exempted ‘education cess' and ‘Secondary and Higher Education Cess' on all excisable goods. So, from 1.3.2015, no education cess was payable on excise duty.

The Law - Credit of Education Cess can be used only for payment of education cess: As per Rule (

Whether ex-gratia payment made by employer out of his own sweet will can be treated as 'profits in lieu of salary' u/s 17(3)(i) - NO: HC

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/whether-ex-gratia-payment-made-by-employer-out-of-his-own-sweet-will-can-be-treated-as-profits-in-lieu-of-salary-us-173i-no-hc/ 

erdict On Lapse Of Loss Due To Change Of Shareholding

CIT vs. AMCO Power Systems Ltd (Karnataka High Court)

S. 79: As the purpose of the provision is to prevent misuse of losses by transferring ownership, it should be restricted to cases of transfer of 'beneficial shareholding'. A transfer of shares of the loss-making company by the shareholder-company to its subsidiary is not hit by s. 79

The purpose of Section 79 of the Act would be that benefit of carry forward and set-off of business losses for previous years of a company should not be misused by any new owner, who may purchase the shares of the Company, only to get the benefit of set-off of business losses of the previous years, which may bear profits in the subsequent years after the new owner takes over the Company. For such purpose, it is provided under the said Section that 51% of the voting power which was beneficially held by a person or persons should continue to be held, then only such benefit could be given to the Company

Insurance Regulatory and Development Authority of India (IRDA) issues guidelines on ‘Indian owned and controlled’

The Insurance Laws (Amendment) Act, 2015 (Act) gave an impetus to the capital deprived insurance sector by raising the Foreign Direct Investment (FDI) cap in an Indian Insurance Company (IIC) from 26% to 49%. While doing so, the Act prescribed that ownership and control of the IIC should remain with the Indian promoter/ shareholder.

The Central Government also notified the Indian Insurance Companies (Foreign Investment) Rules, 2015 which prescribe the procedure with respect to the increase in foreign investment limit in IICs.

Now, in order to provide more clarity on the issue of compliance with the Indian owned and controlled requirement for IICs, the Insurance Regulatory and Development Authority of India (IRDA) has issued guidelines on 19 October 2015 (Guidelines).

The Guidelines come into force from the date of their issue i.e. from 19 October 2015.

CBEC issues revised guidelines for prosecution and arrest under Central Excise, Service tax and Customs laws

 


 
This Tax Alert gives an update on the Circulars issued by CBEC prescribing revised guidelines for prosecution and arrest.
 
CBEC has issued revised guidelines for launching prosecution in relation to offences punishable under Central Excise Act, 1944, Finance Act, 1994 and Customs Act, 1962 vide Circular nos. 1009/16/2015 and 27/2015 dated 23 October 2015. It has also issued revised guidelines for arrest and bail under Central Excise, Service tax and Customs vide Circular nos. 1010/17/2015 and 28/2015 dated 23 October 2015.
 
These Circulars supersede the earlier guidelines issued by the CBEC on initiating prosecution and amend the monetary limits for arrest as prescribed earlier.
 
The monetary threshold limits for prosecution and arrest have been increased considerably with a view to target high value offences. This will provide respite to small and medium businesses.

Whether entitlement to set off brought forward losses is to be denied consequent to reduction in beneficial shareholding, by invoking Sec 79, where voting power of such entity together with its wholly owned subsidiary continues to be 51% - NO: HC

THE issue before the bench is - Whether entitlement to set off brought forward losses can be denied to an entity consequent to the reduction in its beneficial shareholding, by invoking Section 79, where the voting power of such entity together with its wholly owned subsidiary continues to be 51%. NO is the answer.

Facts of the case

Extension Granted - ROC annual statutory filing

Dear Professional Colleagues

I am pleased to share that in continuation of the Ministry's General Circular No.10/2015 dated 13.07.2015, keeping in view the request received from various stakeholders, it has been decided to relax the additional fee payable on forms AOC-4 and AOC-4 XBRL upto 30th November, 2015.

The additional fee requirement for MGT-7 E-Form is also relaxed for all such forms filed till 30th November, 2015, wherever additional fee is applicable. You may kindly view the circular at the following link:

http://www.mca21.gov.in/ Ministry/pdf/General_Circular_ 14-2015.pdf

Further, Versions of forms AOC-4 (XBRL and Non-XBRL) and MGT-7 are likely to be modified w.e.f 29th Oct 2015.

OECD issues final report on the tax challenges of the digital economy under Action 1

On 5 October 2015, the Organisation for Economic Co-operation and Development (OECD) released its final report on the tax challenges of the digital economy (Action 1) under its Action Plan on Base Erosion and Profit Shifting (BEPS). This report was released in a package that included final reports on all 15 BEPS Actions.

 

The document, Addressing the Tax Challenges of the Digital Economy (the Digital Economy Report or Final Report), largely follows the initial Action 1 deliverable on the digital economy released by the OECD on 16 September 2014 (the 2014 Deliverable). At 290 pages, the Final Report exceeds the 2014 Deliverable by 88 pages.

 

Insurance Regulatory and Development Authority of India (IRDA)issues guidelines on "Indian owned and controlled"

The Insurance Laws (Amendment) Act, 2015 (Act) gave an impetus to the capital deprived insurance sector by raising the Foreign Direct Investment (FDI) cap in an Indian Insurance Company (IIC) from 26% to 49%. While doing so, the Act prescribed that ownership and control of the IIC should remain with the Indian promoter/ shareholder.

Recent case laws on Liasion office and section 10A

Columbia Sportswear Company vs. DIT (Karnataka High Court)

A liaison office of a foreign co which identifies a manufacturer in India, negotiates the price, helps in choosing raw material to be used, ensures compliance with quality and gets material tested is not a ‘permanent establishment’ under Article 5 of India-USA DTAA
If the petitioner has to purchase goods for the purpose of export, an obligation is cast on the petitioner to see

Final Rules notified by the Central Board of Direct Taxes allowing the use of “Multiple Year Data” and “Range Concept” for computation of arm’s length price

In line with the Hon’ble Finance Minister’s announcement to align the Indian Transfer Pricing regulations with international best practices (by way of introduction of ‘Range concept’ and allowing the use of ‘Multiple Year data’ for determining the Arm’s Length Price [“ALP”]), the Central Board of Direct Taxes (“CBDT”) had on May 21, 2015 issued a draft scheme of the proposed Rules  (“Draft rules”)¹ prescribing the mechanism and conditions for using the ‘Range concept’ and ‘Multiple year data concept’ in computing the ALP. 

 

Listing obligation and Disclosure Regulation

Presently, a private agreement between Stock Exchange and listed company govern all listing obligation and disclosure requirement. This listing agreement like any other agreement among parties creates civil obligation in case of any violation of the agreement.

Securities and Exchange Board of India had standardized this listing agreement using its regulatory powers over the stock exchanges. SEBI from time to time also proposed changes in this agreement among private parties and even decided effective dates of all these proposed amendment to the

Whether to make assessment u/s 143(3) it is mandatory to service Sec 143(2) notice only after return filed is actually scrutinised - YES: HC

THE issue before the Bench is - Whether in order to make assessment u/s 143(3), it is mandatory for an AO to serve the notice under Section 143(2) only after the return filed by the Assessee is actually scrutinized. YES is the answer.

Facts of the case

The assessee company filed its return of income, which was accepted by the Department and an acknowledgement was issued u/s 143(1). Subsequently the return was picked up for scrutiny.

Karnataka High Court rules procurement activity carried out by a liaison office in India is not taxable

 




 

This Tax Alert summarizes a recent ruling of the Karnataka High Court (HC) in the case of Columbia Sportswear Company (Taxpayer) on whether procurement activity undertaken by a liaison office (LO) created a taxable presence in India. The HC noted that the purchase exclusion provided in the Tax Laws (ITL), as well as permanent establishment (PE) exclusion under the India–US Double Taxation Avoidance Agreement (DTAA), is available where a non-resident (NR) purchases goods in India for the purpose of exports. Having regard to the facts of the case and its earlier decisions, the HC held that the various activities performed by the LO were for carrying on the activities of purchasing goods for exports. Additionally, they could also fall within the ambit of PE exclusion for “collecting information” under the DTAA. Accordingly, the Taxpayer is not taxable in India.

T

Indian Tax Administration amends transfer pricing rules regarding use of multiple year data and arm’s length range

 

The Central Board of Direct Taxes (CBDT) made amendments to the Indian transfer pricing rules (hereinafter referred to as the “amended rules”) by notification no 83/ 2015 dated 19 October 2015. The notification amends the Income-tax Rules, 1962 relating to use of multiple year data and arm’s length range while undertaking a transfer pricing analysis.

Whether when there is neither quantification of sum payable nor any actual payment is made, it would still be fair to burden assessee with obligation to deduct tax at source - NO: HC

THE issue is - Whether when there is neither quantification of the sum payable in terms of money nor any actual payment is made in monetary terms, it would be fair to burden a person with the obligation of deducting TDS and exposing him to the consequence of such default. NO is the answer.

Returns under GST

THE joint Committee on Business Process for GST has released its report on GST Return. The important features of returns as per the Report:

Return must even if there is no business: Every registered person is required to file a return for the prescribed tax period. A return needs to be filed even if there is no business activity (i.e. Nil Return).

Pay tax before return: There will be different frequency for filing of returns for different class of taxpayers, after payment of due tax, either prior to or at the time of filing return. The return can

Whether amount of subsidy received prior to insertion of Explanation 10 to sub-section (1) of section 43 is to be reduced from cost of assets - YES: HC

THE issue is - Whether the amount of subsidy received prior to insertion of Explanation 10 to sub-section (1) of section 43 can be reduced from the cost of assets. YES is the answer.

Facts of the case

A) The assessee is a public limited company engaged in the business of manufacturing of

Change in method of selecting cases for TP assessment- CBDT instructions

Last Friday,  CBDT has issued instruction No. 15/2015  to give guidance to Assessing officer ("AO") and the Transfer Pricing officer ("TPO") regarding TP assessments. Amongst many concepts addressed, owing to legislative, procedural and structural changes in the TP landscape, a reference to TPOs henceforth would not be on the basis of  value of international transactions but would be on the basis of risk parameters.

BDT prescribes final rules for use of 'arm's length range' and 'multiple year data'

The CBDT has issued a press release stating that the Rules for determining ALP have been amended to allow for introduction of a “range concept” for determination of ALP and “use of multiple year data” for undertaking comparability analysis in transfer pricing cases. The amended regime will be applicable for computation of ALP of international transactions and specified domestic transactions undertaken on or after 1/04/2014.

LLP Amendment Rules, 2015

MCA has issued the Limited Liability Partnership (Amendment) Rules, 2015 to be effective from 19th October, 2015

It contains some minor procedural amendments. The same may be viewed using the following link:

http://www.mca.gov.in/Ministry/pdf/LLP_Notification_15102015.pdf

Whether electricity generated by assessee amounts to production of an 'article or thing' within meaning of Sec 32(1)(iia) and therefore, assessee would be entitled for additional depreciation @ 20% - YES: ITAT

THE issue is - Whether the electricity generated by the assessee amounts to production of an "article or thing" within the meaning of section 32(1)(iia) and therefore, the assessee would be entitled for additional depreciation @ 20%. YES is the answer.

Facts of the case

The assessee was having a wind mill division. The claim of depreciation made by the assessee in the return of income included depreciation of wind mill @ 80% and additional depreciation @

ITAT Special Bench Explains Imp Law On Taxability Of Damages

National Agricultural Cooperative Marketing Federation of India Ltd vs. JCIT (ITAT Delhi) (Special Bench)

S. 37(1): If a claim of damages and interest thereon is disputed by the assessee in the court of law, deduction cannot be allowed for the interest claimed on such damages

Once a person has not voluntarily accepted a contractual obligation and further there subsists no legal obligation to pay qua such contractual claim at a particular time, it cannot be said that the person incurred any liability to pay at that point of time so as to make him eligible for deduction on that count. Notwithstanding the

Supreme Court rules on allowability of depreciation on trademarks, copyright and technical know-how considering the same as “plant”

 

This tax alert summarizes a recent ruling of the Supreme Court (SC) in the case of Mangalore Ganesh Beedi Works  on the issue of allowability of depreciation on trademarks, copyright and technical know-how (IPRs). One of the issues was whether the association of persons (AOP or Taxpayer), consisting of three partners of erstwhile Mangalore Ganesh Beedi Works (MGBW), had acquired the IPRs of MGBW pursuant to its dissolution or if it was an acquisition of goodwill and whether the Taxpayer is entitled to claim depreciation  on the IPRs as “plant”.

 

CBDT Directive Regarding Paperless Assessment Proceedings

In order to improve the taxpayer services, enhance the efficiency and to usher in a paperless environment for carrying out the assessment proceedings, CBDT has decided to initiate the concept of using email for corresponding with taxpayers and sending through emails the questionnaires, notice etc. at the time of scrutiny proceedings and getting responses from them using the same

Whether transfer for purpose of Sec 50C stands consummated and provisions of 48 come into play as soon as agreement to sale is executed and part consideration is received - YES: HC

THE issue is - Whether transfer for purpose of Sec 50C stands consummated and provisions of 48 come into play as soon as agreement to sale is executed and part consideration is received. YES is the verdict.

Facts of the case

CIT vs. B. S. Shantakumari (Karnataka High Court)

S. 54F is a beneficial provision & must be interpreted liberally. It does not require that the construction of the new residential house has to be completed, and the house be habitable, within 3 years of the transfer of the old asset. It is sufficient if the funds are invested in the new house property within the time limit
The essence of s. 54F is to ensure that assessee who received capital gains would invest same by

AOC – 4 XBRL (v. 1st October2015)

MCA recently introduced the Companies (Filing of Documents and forms in XBRL) Rules 2015 dated 9^th September 2015 for which I have yet to locate published copy in the Official Gazette. These rules shall come into force from the date of publication in Official Gazette.

Tax Guidance for Non Resident in India.

Benefits available to Non- Residents

1. Who is a Non-Resident

Section 2(30) defines non-resident as a person who is not a resident. Section 6 lays down the test of residency for different taxpayers as under:

A. Individual

Whether in block assessment case any legally sustainable addition can be made based on cash memo seized for broken period - NO: HC

THE issue before the Bench is - Whether in block assessment case any legally sustainable addition can be made based on cash memo seized for broken period. No is the answer.

Facts of the case

The assessee is an individual. Consequent to filing of her return, a search was carried out by the

Four Imp Verdicts On Core Issues

Mangalore Ganesh Beedi Works vs. CIT (Supreme Court)

S. 32: Even prior to the insertion of "intangible assets" in s. 32, intellectual property rights such as trademarks, copyrights and know-how constitute "plant" for purposes of depreciation. The department is not entitled to rewrite the terms of a commercial agreement

The question is, would intellectual property such as trademarks, copyrights and know-how come within the definition of ‘plant’ in the ‘sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it’? In our opinion, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and know-how is acquisition of a capital nature, more particularly in the case of the Assessee. Therefore, it cannot be doubted that so far as the Assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of ‘plant’ being commercially necessary and essential as understood by those dealing with direct taxes

 

CBDT Instruction Reg Framing Of Scrutiny Assessments In Cases Of Assessees Engaged In The Business Of Mining

The CBDT has issued Instruction No. 14/2015 in which important directives have been set out with regard to framing of scrutiny assessments in cases of assessees engaged in the business of Mining

Click here to download CBDT Instruction No. 14/2015 regarding Mining companies

REVISED GUIDELINES FOR TRANSFER PRICING SCRUTINY.

The CBDT has issued Instruction No. 15/2015 dated 16.10.2015 in which it has set out revised and updated guidance for implementation of transfer pricing provisions. The Instruction sets out the circumstances in which a reference can be made to the TPO by the AO, the role of the TPO when such a reference is made, the role of the AO after determination of the ALP by the TPO, etc. The

Due date for e-filing of returns for e-commerce dealers of Delhi further extended by one Month

.

Recently, Government of National Capital Territory of Delhi, Department of Trade and Taxes has issued a notification dated 12/10/2015 regarding extention od last date for filing of Online Returns for

Whether when law makes no distinction between tangible and intangible assets, Intellectual Property Rights can be equated with plant & machinery, eligible for depreciation u/s 32 - YES: SC

THE issue before the Bench is - Whether when the law makes no distinction between tangible and intangible assets, Intellectual Property Rights can be equated with plant & machinery, eligible for depreciation u/s 32 r.w Sec 43(3). YES is the answer.

The Facts of the case

In 1939 late Sri S. Raghuram Prabhu started the business of manufacturing beedis. He was later joined in the business by Sri Madhav Shenoy as a partner and thus M/s. Mangalore Ganesh

No Service Tax on Lottery - HC

Taxing  Lottery had been a taxing proposition for the government, not always leading to success. The lottery business in India is a big-time lottery for the organisers and ticket sellers with a turnover of over a lakh of Crores a year.

There is said to be a Lottery Mafia in operation in several States and the whole scheme is full of frauds with absolutely no control. Interestingly the small North Eastern states are the origin for

Rajkot Tribunal grants India-Singapore DTAA benefits to freight income received in the UK; on facts, limitation of relief article not applicable

 
This alert summarizes a recent ruling of the Rajkot Income Tax Appellate Tribunal (Tribunal) in the case of Alabra Shipping Pte. Ltd. (Taxpayer), in which the Tribunal had to evaluate granting of the India-Singapore double taxation avoidance agreement  (DTAA) benefits with respect to freight income received by the Taxpayer in its bank account in London. The Tribunal observed that the limitation of relief (LOR) Article under

How to Claim relief u/s 89(1) with online Income Tax Return.

In many cases Income Tax Department has disallowed relief u/s 89(1) which was claimed by Assessee during Online filing of Income Tax Return for the Assessment Year 2015-16 or Previous Asstt. year.   Earlier there was no doubt in claiming such relief  upto A.Y. 2014-15 from Income Tax Department. Simply Assesee claims in ITR form and Income Tax Department allows the same as claimed by Assessee. 

Private Hospitals Doctors now can issue 80 DDB Certificates.

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

 Income-tax Notification No. 78/2015
New Delhi, the Dated- 12th October, 2015
S.O.2791(E). – In exercise of the powers conferred by section 295, read with section 80DDB of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following

Whether service of notice issued u/s 132 is required to be made in manner specified u/s 282, before passing an order u/s 127 - YES: HC

THE issue is - Whether service of notice issued u/s 132 is required to be made in the manner specified u/s 282, before passing of the order u/s 127. YES is the verdict.

Facts of the case

The assessee is a partnership firm and is engaged in the business of development of real estate. The principal place of business as indicated in the returns was situate at E-41, Ashok Vihar,

High Court Fumes At Irresponsible Attitude Of Dept And Quashes Reopening

CIT vs. Trend Electronics (Bombay High Court)

S. 148: If Dept behaves in an irresponsible manner and does not furnish the record reasons on the basis that the assessee was already aware of them, the assessment has to be quashed
In issues such as this, i.e. where jurisdictional issue is involved the same must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise. We

Whether capital expenditure incurred for replacement of a computer system within a large network can be allowed as business expenditure u/s 36(1)(xi) - YES: HC

THE bone of contention is - Whether the capital expenditure incurred for replacement of a computer system within a large network can be allowed as a business expenditure under section 36(1)(xi). YES is the answer.

Facts of the caase

The assessee is a tea manufacturer. It was submitted by the assessee's counsel that since u/s 36(1)(xi) deduction can be granted so as to make the existing computer system as Y2K

SC rules that anti-dumping duty cannot be levied during the period between the expiry of a provisional duty notification and imposition of final duty

We are pleased to release a Tax Alert that gives an update on the decision of the Supreme Court (SC) in batch of appeals, regarding the levy of Anti-dumping duty (duty). The issue before the SC was whether duty imposed w.r.t. imports made during the period between the expiry of the notification levying provisional duty and the subsequent issuance of notification imposing the final duty, was legal and valid.

 

High Court Directs Dept To Form Self-Audit Vigilance Cell To Save Taxpayers From Harassment + Imp S. 147 Verdict

Arun Ganesh Jogdeo vs. UOI (Bombay High Court)

Dept directed to follow directions of Delhi High Court in 352 ITR 273 and to be vigilant and ensure that such mistakes do not occur. Dept directed to set up a self-auditing vigilance cell to redress taxpayers' grievances

The Income Tax authorities shall follow the directions given by the Delhi High Court in case of Court On Its Own Motion v. Commissioner of Income-tax 352 ITR 273 in other cities, including the city of Mumbai, in Maharashtra State. We hope and trust that the Income Tax Department will be more vigilant and ensure that such mistakes will not occur in future. We also direct the Income Tax Department to form a Vigilance Cell to ensure that there is a monitoring authority, which would monitor various policy decisions which are taken and a self auditing mechanism is required to be formulated to ensure that the income tax assessees are not made to run from pillar to post for the purpose of redressal of their grievances

 

Motilal R. Todi vs. ACIT (ITAT Mumbai)

S. 147: Entire law on whether reopening of assessment in the absence of "fresh tangible material" is permissible reviewed

Availability of fresh tangible material in the possession of AO at the time of recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case. We begin with the judgment of Hon’ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession ‘tangible material’. The term ‘tangible material’ has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment.

Whether if Tribunal errs in making adverse inferences against Revenue and also assessee, such order stands vitiated - YES: HC

THE issue is - Whether if the Tribunal not only erred in adverse inferring against the Revenue for having failed to disprove the oral assertion of the assessee but also made adverse inference against the assessee for having failed to place material to substantiate its oral assertion, such order stands vitiated. YES is the answer.

Facts of the case

The assessee concern was in the business of transportation. It had entered into a contract with

Two Imp Verdicts

Pr. CIT vs. E-Funds International India Pvt Ltd (Delhi High Court)

S. 10A/ 80HHE: Claiming deduction u/s 80HHE for one year does not debar the assessee from claiming deduction u/s 10A for another year. Fact that claim is not made via a revised return is no bar on the right of the appellate authority to consider it
Making of a claim under Section 80HHE of the Act in one assessment year will not preclude an Assessee from claiming the benefit under Section 10A of the Act in respect of the same unit in a succeeding assessment year.

High Court Vows To Make CsIT Pay Personal Costs For Harassing Taxpayers With Frivolous Appeals

CIT vs. Proctor and Gamble Home Products Ltd (Bombay High Court)

For filing frivolous appeals and harassing taxpayers, heavy/exemplary costs to be imposed which will have to be personally paid by the jurisdictional CIT who sanctioned filing of the appeal
We are now putting the Officers of the Revenue to notice, that in all cases including where appeals are filed, the Offices instructing the Counsel would review whether the appeal should at all be pressed in view of the Revenue having accepted the jurisdictional High Court’s order on an identical issue and take necessary instructions from the Commissioner of Income Tax to withdraw and/or not press the appeal. Alternatively, in

Notices under the Indian Income Tax Act 1961

In a layman’s term any communication received from the Income Tax Department is commonly referred to as “Notice”. It is a word that sometimes creates nervousness and fear among the taxpayers. With the government focusing on increasing compliance and zero in on the tax evaders, it is highly likely that salaried classes will be receiving notices, intimation under various section of the Income Tax Act, 1961.

Whether invocation of Sec 14A is automatic and comes into operation, without any exception, as soon as dividend income is claimed as exemption - NO: HC

THE issue is - Whether invocation of Section 14A is automatic and comes into operation, without any exception, as soon as the dividend income is claimed as an exemption. NO is the verdict.

Facts of the case

The assessee is engaged in the business of providing legal support and other support services to l

Amendments proposed in Tamil Nadu VAT Act, 2006

This Alert summarizes and provides an analysis of the amendments proposed in the Tamil Nadu Value Added Tax Act, 2006 (TN VAT Act) vide L.A. Bill Nos. 8 and 9/2015. The bills were introduced in the Legislative Assembly of the State of Tamil Nadu on 28 September 2015.
 
To embark on the next phase of e-Governance in the Commercial Taxes Department, the Government of Tamil Nadu has proposed to implement end-to-end Total Solutions Project. This is done by rolling out completely automated process modules for registration, returns, payments, assessments, statutory forms etc.
 
In order to provide hassle free and smooth implementation of the said Total Solution Project, several amendments pertaining to levy of tax, input tax credit, adjudication and penal provisions have been proposed.

Three Imp Verdicts On S. 44BB Presumption + S. 271(1)(c) Penalty + Capital Gains

DIT vs. Mitchell Drilling International Pvt Ltd (Delhi High Court)

S. 44BB: Service tax & Customs duty collected by assessee from clients is not includible in gross receipt while computing income u/s 44BB

The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd (2009) 317 ITR 156 which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44 BB of the Act. The Court accordingly holds that for the purposes of computing the ‘presumptive

ITAT Takes Contra View On Non-Applicability Of S. 14A/ Rule 8D To Shares Bought From Own Funds And Held As Stock-In-Trade

HDFC Bank Limited vs. DCIT (ITAT Mumbai)

S. 14A/ Rule 8D: (i) Presumption laid down in HDFC Bank 366 ITR 505 (Bom) and Reliance Utilities 313 ITR 340 (Bom) that investments in tax-free securities must be deemed to have come out of own funds and (ii) Law laid down in India Advantage (Bom) that s. 14A and Rule 8D does not apply to securities held as stock-in-trade cannot be applied as both propositions are contrary to Godrej & Boyce 328 ITR 81 (Bom)

In our view, it was incumbent on the parties to have brought its’ decision in the case of Godrej & Boyce to the notice of the Hon’ble Court in HDFC Bank Ltd.. We are conscious that we are deciding an appeal in the case

Special Economic Zone- Concept, Benefits and Tax Savings

Special Economic Zone is not a new concept. China has successfully boosted its export and share in world trade through SEZs. In India, SEZs contribute approximately 30% of total exports of goods and services. However, not many SEZs have come in manufacturing sector and maximum SEZs are in IT and ITeS sector. One of the key benefit for SEZs is exemption from taxes / duties on construction material and from income tax.

Whether income derived from foreign exchange fluctuation gain can be classified as 'any other receipts of similar nature' so as to justify exclusion while computing deduction u/s 80HHF - NO: ITAT

THE issue before the Bench is - Whether income derived from foreign exchange fluctuation gain can be classified as 'any other receipts of similar nature' so as to justify exclusion while computing deduction u/s 80HHF. NO is the answer.

Facts of the case

The assessee-company is engaged in the business of producing customize software/programs for broadcasters like Star TV, BBC, Vijay Television etc. It had filed its return of income declaring total income at Rs.14,41,49,689/-. In this return deduction u/s 80HHF of Rs

SC rules that anti-dumping duty cannot be levied during the period between the expiry of a provisional duty notification and imposition of final duty

 
This Tax Alert gives an update on the decision of the Supreme Court (SC) in batch of appeals, regarding the levy of Anti-dumping duty (duty). The issue before the SC was whether duty imposed w.r.t. imports made during the period between the expiry of the notification levying provisional duty and the subsequent issuance of notification imposing the final duty, was legal and valid.
 
SC held that neither sub-section (2) nor (6) of section 9A of the Customs Act authorises the Central Government, either expressly or implicitly, to make rules and/or to levy duty with retrospective effect.
 

Imp Verdicts On S. 14A/ Rule 8D + Capital Gains

CIT vs. I. P. Support Services India (P) Ltd (Delhi High Court)

S. 14A/ Rule 8D cannot be automatically invoked. It cannot be invoked if the AO does not record satisfaction as to why the assessee’s voluntary disallowance is not proper

The Court disapproves of the AO invoking Section 14A read with Rule 8D (2) of the Rules without recording his satisfaction. The recording of satisfaction as to why “the voluntary disallowance made by the assessee was unreasonable and unsatisfactory” is a mandatory requirement of the law

 

Karnataka HC rules on availability of foreign tax credit relief where the income is exempt from Indian taxes under income-linked incentive scheme

We are pleased to release a Tax Alert which summarizes a recent ruling of the Karnataka High Court (HC) in the case of Wipro Ltd. (Taxpayer), wherein the HC, amongst various other issues, ruled on the matters relating to the availability of foreign tax credit (FTC). The question before the HC was whether the tax paid in a foreign country in respect of income which is exempted under the income-linked incentive scheme (ILIS) of the Indian Tax Laws (ITL), is eligible for FTC in India.

Reports of Joint Committee constituted by Empowered Committee of State Finance Ministers on Business processes of payment, registration and refund under GST

We are pleased to release the report of the Joint Committee constituted by the Empowered Committee of State Finance Ministers on Business Processes for Goods and Services Tax (GST) to make suitable recommendations regarding registration, payment and refund processes under the GST regime.

The Ministry of Finance released these three reports of the Joint Committee with respect to registration, payment and refund processes under the GST regime on 6 October 2015.

These reports give details about the proposed changes as recommended by the Joint Committees and also prescribes forms for various procedures under GST.

These reports have been released with a view to engage with the stakeholders and invite comments from the public at large. Comments / feedback on the draft Business reports can be submitted through the MyGov.in portal and the discussion threads with the feedback, which will be made available shortly on the Department of Revenue’s website.

Release of the business process related reports by the Joint Committee is a first welcome step by the Government in its journey towards GST implementation.

Various proposals on the compliance process as suggested in the reports would facilitate greater efficiency in tax administration and ease of doing business.

All the stakeholders should take this opportunity of providing feedback on the draft proposals to ensure that the Government addresses all the concerns and the hardships faced by the taxpayer in terms of compliances under the current tax regime.

From a completeness perspective, Government should now expedite putting the draft GST legislation in public domain.

Understanding Buyback of Shares under Income tax.

FINANCE Act, 2013 has inserted section 115QA into the Act, wherein buy back of shares of Unlisted Domestic Company is made taxable in the hands of company. Before insertion of this section, Buy back of shares was always taxable u/s 46A of the Act in the hands of shareholders. Such a reversal in mechanism is infixed as a part of tax avoidance measure to counter the practice of foreign companies distributing dividend in the garb of buyback of shares.

MAJOR RECOMMENDATIONS OF CSR COMMITTEE

The High level Committee constituted by Ministry of Corporate Affairs to suggest measures for improved monitoring of implementation of Corporate Social Responsibility Policies by the companies under Section 135 of the Companies Act, 2013 has submitted its Report to the Government. A copy of report is available here.

We will summarily discuss recommendations of the committee in this post.

According to the committee, the main thrust and spirit of law is not to monitor but to generate

Whether activity of embroidery work on sarees constitutes manufacturing activity as character of saree changes and it does not remain original grey synthetic cloth - YES: ITAT

THE issue is - Whether activity of embroidery work on the sarees constitutes manufacturing activity as the character of saree changes and it does not remain the original grey synthetic cloth. YES is the answer.

Facts of the case

CBEC issues clarification in respect of levy of Service tax on services provided by Goods Transport Agency

 
This Tax Alert summarizes Circular No. 186/5/2015 dated 5 October 2015 issued by the Central Board of Excise and Customs (CBEC) clarifying issues in respect of levy of Service tax on services provided by Goods Transport Agency (GTA).

Filing of Quarterly TDS/TCS Statements

This is to inform you that due date for filing Quarterly TDS/TCS statement for Q2 of FY 2015-16 is fast approaching. Do submit the quarterly TDS/TCS statement on or before due dates (as mentioned below) to avoid late filing fee under section 234E of Income Tax Act.

Period	Due Date for Government Deductors/Collectors	Due Date for Other Deductors/Collectors
Quarter 2 of FY 2015-16 (July to September)	31st October 2015	15th October 2015

 

OECD releases final reports on BEPS Action Plan

Organisation for Economic Co-operation and Development (OECD) released final reports on all 15 focus areas in its Action Plan on Base Erosion and Profit Shifting (BEPS).
 
The OECD also briefly discussed the “post-BEPS environment,” stressing the importance of focusing on implementation of the BEPS recommendations in a consistent and coherent manner, monitoring the impact on both double nontaxation and double taxation. The explanatory statement indicates that OECD and G20 countries have agreed to continue to work together on BEPS until 2020 with an intent to develop “a more inclusive framework to support and monitor the implementation of the BEPS package.”
 

Understanding Bright line test for Advertisement, Marketing & Promotion (AMP)

 

Now a days lot of TP discussion is going with reference to Bright line test. The concept of the same is new to the tax world and hence in this respect few briefings given below.

The Concept:

Routine or day-to-day marketing or sale promotion expenses even, when excessive and exorbitant, would not amount per se to ―brand building‖ expenses. It would be incorrect to treat advertisement as equivalent or synonymous with ―brand building‖ for the latter in commercial sense refers to several facets and components.

Any excess expenditure beyond the bright line should be regarded as a separate international transaction of brand building. Such a broad-brush universal approach is unwarranted and would amount to judicial legislation.

There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to bright line test and the non-routine AMP expenses as a separate transaction to be computed in the manner as stipulated.

Delhi High Court Judgement.

TBM  represented the recent path breaking decision rendered by the Delhi High Court (“DHC”), in the case of Sony Ericsson Mobile Communication India Pvt. Ltd. v CIT and a batch of 17 connected appeals and cross-appeals, dealing with Transfer Pricing dispute related to marketing intangible.

DHC ruled that advertising, marketing and promotion expenses (“AMP”) spend in India in relation to a foreign brand constituted an international transaction. DHC laid down important transfer pricing principles, namely, (a) ‘Bright Line Test’ applied by the Revenue has no statutory mandate, and the contention of the Revenue that any excess expenditure beyond the bright line should be regarded as separate international transactions is unwarranted; (b) clubbing of closely linked transactions is permissible; (c) benchmarking of a bundle of transactions applying entity wide transactional net margin method (“TNMM”) is permissible; (d) once the Revenue accepts the TNMM as the most appropriate method, then it would be inappropriate for the Revenue to treat a particular expenditure like AMP as a separate international transaction; and (e) compensation for AMP expenses could also be benchmarked under resale price method (“RPM”) or cost plus method. The Court concluded that when TNMM and RPM methods adopted and applied show that the net / gross profit margins are adequate, no further Transfer Pricing adjustment on account of AMP expenses would be warranted.

TBM View

It is a welcome and significant judgment in the arena of transfer pricing. The maiden ruling lays down the broad parameters to be applied in case of AMP spend adjustments which would serve as a guiding principle to the transfer pricing officers.

Whether share trading or banking activity can be said to have an inherent quality of producing both regular banking income as well as dividend income, to qualify as condition for apportionment of expenses u/s 14A - YES: ITAT

THE issue before the Bench is - Whether share trading or banking activity can be said to have an inherent quality of producing both regular banking income as well as dividend income, to qualify as a condition for apportionment of expenses u/s 14A. YES is the answer.

Facts of the case

The assessee is a bank. During the concerned year, the assessee had an income of Rs.581.23

Final report on BEPS Project released; reveals annual revenue loss of USD 100-240 bn to Exchequers

THE much-awaited OECD final report on BEPS Project was released here today. The Report on measures for a comprehensive, coherent and co-ordinated reform of the international tax rules is going to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru. The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with

CBEC issues clarification in respect of levy of Service tax on services provided by Goods Transport Agency

 
This Tax Alert summarizes Circular No. 186/5/2015 dated 5 October 2015 issued by the Central Board of Excise and Customs (CBEC) clarifying issues in respect of levy of Service tax on services provided by Goods Transport Agency (GTA).
 

Consideration for providing networking facilities taxable as "Royalty" under Indo-US DTAA

ITAT rules that consideration received by assessee (a US entity) for providing access to internet and other networking facilities to an Indian entity, taxable as “Royalty” under Article 12(3) of India-US DTAA; Observes that subject payment was made for the use of embedded secret software (owned by

Place of Effective Management (POEM)

Short Forms:

BVI	:	British Virgin Island.
CIT	:	Commissioner of Income-Tax.
DTA	:	Double Tax Avoidance Agreement.
DTC	:	Direct Taxes Code.
FEMA	:	Foreign Exchange Management Act.
ISP	:	Internet Service Provider.
ITA	:	Income-tax Act.
Key Management	:	See Paragraph 4.2 below.
SPV	:	Special Purpose Vehicles.
TP	:	Transfer Pricing.