Sunday, 16 July 2017

FinMin : GST payable on difference amount on supply of second hand goods

FinMin notifies margin scheme under GST clarifying that GST on supply of second hand goods to be payable on difference between the selling price and the purchase price in terms of Rule 32(5) of CGST Rules, 2017, however where the value of such supply is negative, same shall be ignored; Further, states that Central Tax is exempted in case of intra-state buying and selling of second hand goods where the supplier is not registered since ITC is not available on such supplies; Moreover, states that margin scheme is also applicable to supplies of old and used empty bottles : FinMin Press Release  

Govt. clarifies GST applicability on "legal services" provided by Advocates / Sr.Advocates

Legal services, which includes representational services, provided by Advocates, are under reverse charge, clarifies Finance Ministry; Govt. clarifies that legal service has been defined to mean any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority; Further, states that the words "by way of legal services", appearing in Notification No. 13/2017-Central Tax (Rate), apply to an individual advocate, senior advocate and firm of advocates; Hence, legal services provided by either of them are liable for payment of GST under reverse charge by the business entity : Finance Ministry Press Release   

Monday, 3 July 2017

No IGST on import of goods & services by SEZs

Govt. exempts all goods and services imported by SEZ unit or developer from whole of Integrated tax leviable thereon u/s 3(7) of Customs Tariff Act, for authorized operations  

Finmin notifies new Central Excise Rules, CENVAT Credit Rules & Credit Transfer Document

Finance Ministry notifies new Central Excise Rules 2017 and CENVAT Credit Rules 2017 w.e.f. July 1; Prescribes ‘Credit Transfer Document’ for unregistered dealers seeking to avail transitional ITC of manufactured goods in stock subject to specified limitations, conditions and procedures; Also exempts levy of Education Cess & Secondary and Higher Education Cess on IGST and Compensation Cess on import of goods; Notifies levy of SAD at 4% on import of petroleum crude, motor spirit (petrol), High Speed Diesel, Aviation Turbine Fuel, Liquefied natural gas and Natural Gas; Further issues various Notifications prescribing effective customs duty rates on import of various goods like electronics and petroleum products, while granting exemption to reimport of goods exported under duty drawback, rebate of duty or under bond on or after July 1 : Finance Ministry Notifications  

Registrations for tax deductors & collectors to commence from July 25

On account of deferment of TDS and TCS provisions in GST, Registration for same will commence from July 25​; Enrolment window for existing taxpayers under VAT, Excise & Service Tax to remain open for next 3 months​: GSTN

Finance Ministry notifies excise duty rates on petroleum products w.e.f July 1

Finance Ministry notifies excise duty rates on petroleum products w.e.f. today, i.e. July 1; Levies duty at Rs. 8.48 per litre on Motor Spirit (Petrol) ‘intended for sale without brand name’ vs. Rs. 9.66 per litre for ‘other’; High Speed Diesel (HSD) ‘intended for sale without a brand name’ shall attract rate Rs. 10.33 per litre excise duty while 'other' shall be taxed at Rs. 12.69 per litre; Extends exemption to ‘Kerosene’ for ultimate sale through public distribution system, 5% & 10% ethanol blended petrol, HSD oil blended with alkyl esters of long chain fatty acids, LNG, and Natural Gas (other than compressed natural gas); Aviation Turbine Fuel drawn by operators or cargo operators from the Regional Connectivity Scheme (RCS) airports to be taxed at 2% till August 25, 2019; Supersedes Notification No. 12/2012-CE : Finance Ministry Notification 

Thursday, 29 June 2017

OECD claims tax transparency progress but near 'empty' tax haven list disappoints some

OECD releases outcome of "Fast-Track review process" to assess transparency standards of countries in the run-up to the G20 Summit scheduled on July 7-8; OECD states that "The latest results of the Fast Track review show that progress has now been made by most jurisdictions in meeting the international tax transparency standards"; Only one jurisdiction, Trinidad and Tobago, rated as “Non-Compliant” against the Exchange of Information on Request (EOIR) standard, while six jurisdictions viz. Anguilla, Curaçao, Indonesia, Marshall Islands, Sint Maarten, and Turkey have been rated as “Partially Compliant”; OECD Release says "In the last 15 months, the significant changes made by jurisdictions towards meeting the EOIR standard have led to upgrades in the overall ratings of 17 jurisdictions..."; Panama and the United Arab Emirates have received upgraded rating of 'Largely Compliant'; OECD clarifies that the outcome of the "fast-track review" is a provisional rating and the jurisdictions which have received improved provisional ratings will undergo a full peer review under the second round of reviews; India has been rated as "compliant" while countries like Singapore, Mauritius, Cyprus, Liechtenstein, Luxembourg have been rated as "Largely Compliant" in the first round of Global Forum reviews; NGO Tax Justice Network sharply criticises the OECD announcement as undermining the progress that has been achieved over the last few years, terms it " disheartening to see the OECD fall back into the old pattern of creating ‘tax haven’ blacklists on the basis of criteria that are so weak as to be near enough meaningless..."  

Sunday, 25 June 2017

Comparable sales instances of commercial properties is no deciding factor in determining valuation of residential flat: HC

THE ISSUE BEFORE THE COURT IS - Whether comparable sales instances of commercial properties can be a deciding factor in determining valuation of a residential flat. NO is the verdict.
Facts of the case:
The Revenue preferred the present appeal challenging the order, whereby the ITAT had deleted the addition made by AO u/s 69B of I-T Act, of Rs.1,06,18,870/- ignoring the comparable prevailing rates of the properties of the same locality and the valuation report of the said property obtained from the DVO as per Section 55A.
On appeal, the HC held that,
++ it has been observed by the Tribunal that the comparable sales instances produced on record are of commercial properties and the property in question is a residential flat. The explanation given by the assessee has been considered by the Tribunal. The assessee has given explanation that after 1981, the said property was lying vacant, the property was ill-reputed inasmuch as the Municipal Corporation had issued notice u/s 52 of the MRTP Act for illegal possession. The agreement of sale is also produced on record. The initial burden is upon the Revenue. The explanation given by the assessee is required to be considered objectively. Considering the explanation given by the assessee, the Tribunal has arrived at a reasonable and plausible conclusion

Saturday, 17 June 2017

HC : Sandvik ratio applicable only to CBDT's 'wanton' delay, not for delayed refund claim

Meghalaya HC allows Sec. 244A interest on TDS refund  to assessee-deductee (a co-operative bank) for AYs 2000-01 to 2003-04, but rejects ‘interest on interest’ claim; With respect to TDS on assessee’s interest income wrongly deducted by certain Central, State organisations (despite being exempt u/s. 80P), assessee made TDS refund claim with interest before CBDT u/s. 119(2)(b) which was rejected; HC allows assessee’s interest on refund claim u/s. 244A  relying on SC ruling in Tata Chemicals Ltd. and P&H HC ruling in National Horticulture Board, but holds that in view of Sec. 244A(2),  interest be allowed from the date of making petition to CBDT and not before; Referring to factual matrix, HC holds that “the delay in claiming refund, from the date it should have been claimed for the relevant AYs and until 26.02.2008 (i.e date of filing petition before CBDT) for each of the four AYs, is squarely attributable to the petitioners alone”;   HC further rejects assessee’s compensation claim in the form of 'interest on interest', distinguishes its reliance on SC ruling in Sandvik Asia Ltd., notes that assessee therein was made to wait for refund of interest for decades and was hence greatly prejudiced for inordinate delay on the part of the Revenue;  Notes that in present case, the initial long delay (prior to making application before CBDT) was attributable to the petitioners themselves, further observes that " the question is as to whether the present one had been a case of wanton or intentional inaction on the part of the respondents to the extent that further compensation in the form of interest over interest be allowed? In our view, the answer is in the negative.";  With respect to assessee’s TDS refund  claim, HC allows the same despite non-verification from concerned deductors relying on Allahabad HC ruling in Rakesh Kumar Gupta , takes note of the TDS certificates submitted by assessee.:HC 

Saturday, 3 June 2017

Deduction of Interest expense under income tax.

Deduction of expenses incurred for earning business income is spelt out in the Sections 30 to 36 of Income Tax Act, 1961. Under Section 36 of Income Tax Act, 1961, there are number of deductions available subject to the conditions laid down. In this discussion, we would take up Section 36(1)(iii) of the Income Tax Act, 1961 and analyse the provision therein from all facets, which will make us understand the deduction in a comprehensive way. In the vortex of legal pronouncements, we will analyse few case laws as well, which throw light on the grey areas that are not captured or construed in the tax legislation. 

Friday, 26 May 2017

Special Learning on GST

Ø  No Change in Annual Return Possible
Ø  No GST on gift to employees value less than 50,000
Ø  No Input credit on any tax demand paid u/s 73 , 74, 129 & 130
Ø  Only  E Notices being served and reply require to make within 15 days. 
Ø  In case of related party transactions, where the price made to next party is known, the valuation between related party is 90% value of known price
Ø  Reimbursement of expenses subject to GST
Ø  Disallow portion of input credit in case same being used for exempt items, nil rated, liquor & petroleum, securities& interest, land & sale of building
Ø  For banks , 50% of the input being disallowed.
Ø  No input on construction or extension of immovable property.
Ø  No input credit on goods lost, destroyed, gift, free sample, write off

Ø  For Donation -  reduce the cost by 5% per quarter of capital goods. 

CBDT clarifies financial transaction (SFT) registration not necessary absent ‘reportable transactions’

CBDT issues clarification with respect to filing of Statement of Financial Transaction (‘SFT’) & SFT Preliminary Response; CBDT states that the reporting person/entity is required to register with the Income-tax Department and generate Income Tax Department Reporting Entity Identification Number (‘ITDREIN’) in case there are reportable transactions for the year; Clarifies that ITDREIN registration is mandatory only when at least one of the Transaction Type is reportable; Highlights that a functionality ‘SFT Preliminary Response’ has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. 

HC Explains Imp Law On S. 153A Search Assmnts

Balgopal Trust vs. ACIT (ITAT Mumbai)

S. 54F: U/s 161, a trust which is for the sole benefit of an individual, has to be assessed as an “individual” and not as an “AOP”. Consequently, a trust is eligible for s. 54F deduction  

HC : Quashes order denying SSI exemption absent thorough examination of issues; SCN without jurisdiction

HC allows assessee’s appeal, sets aside CESTAT order which denied SSI exemption on ground that turnover of manufactured electric furnace and heating elements exceeded turnover limit prescribed under Notification No. 1/93; Accepts assessee’s plea that aggregate value of clearance of manufactured products was not correctly computed and that Revenue failed to discuss vital issues such as whether bought out items were subjected to processes, and whether furnaces transported to customers’ sites in CKD condition were goods or not; Also finds that show cause notice invoking extended limitation period alleging fraud / suppression by Jt. Commissioner was without authority absent approval from Commissioner u/s 11A(1) of Central Excise Act; Remarks, despite ground of jurisdiction being specifically raised by assessee, lower authorities including CESTAT failed to discuss the same, which in fact goes to root of matter; Finds no mention in CESTAT order as to how conclusion of suppression of material facts had been arrived at, and in this context, states that a charge of suppression is required to be levelled with specificity and conclusion of suppression can be reached only when assessee is unable to rebut same  : Madras HC


The FAQ is based on Draft GST law, and could change after the implementation of Final GST Act.

1.             What is Goods and Service Tax (GST)?
It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.   

HC : 'Settlement Commission' not an 'adjudicating authority', Writ jurisdiction cannot set-aside conditions imposed thereto

HC dismisses assessee’s writ, refuses to set aside order passed by Settlement Commission’s u/s 32E of Central Excise Act, 1944, which recorded certain findings about clandestine removal of goods, and accepted settlement application by imposing certain conditions; Rejected assessee’s submission that, Commission’s order was passed based on report of Jurisdictional

Search - Whether additions can be made in relation to a particular AY without having any incriminating materials qua that AY - NO: HC

THE issue before the court is - Whether additions can be made in relation to a particular AY without having any incriminating materials qua that AY. NO is the answer.

Facts of the case

Exemption u/s 54 cannot be denied on ground that residential property was purchased outside India when requirement of making investment in property only in India was subsequently added - ITAT

THE ISSUE BEFORE THE TRIBUNAL IS - Whether assessee's claim for exemption u/s 54 can be denied on the ground that residential property was purchased outside India, when there was no scope u/s 54 existing at that time for importing the requirement of making such investment in a residential property located in India. NO is the answer.

Sunday, 21 May 2017

New Pincode for CPC Bengaluru is 560500; Unique Pincode allotted

Income Tax Deptt. has informed that a unique and new PINCODE Number ‘560500’ has been allotted by the Postal Deptt. to the Centralized Processing Centre (CPC) of Income Tax Department located in Bengaluru.

Therefore, the Taxpayers can henceforth address their mails, using the unique/ new Pincode, to “Centralized Processing Center, Income Tax Department, Bengaluru 560500” for the purpose of submission of ITR-V forms and other documents which require physical mode of transmission.

Saturday, 20 May 2017

Centre releases GST Rate Schedule of 'Goods', Compensation Cess rates for different supplies

Centre releases GST Rate Schedule of Goods as well as GST Compensation Cess Rates for different supplies, pursuant to GST Council meeting today; “Rate Schedule” contains 98 chapters categorized into Nil, 5%, 12%, 18% and 28% tax slabs; Rate structure for following items yet to be decided - Biri wrapper leaves (Chapter 14), Biscuits (Chapter 19), Biris (Chapter 24), Textiles (Chapters 50 to 63), Footwear (Chapter 64), Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery, coin (Chapter 71), and Power driven Agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, Harvesting or threshing machinery, machines for cleaning, sorting or grading, machinery used in milling industry and parts thereof (8432, 8433, 8436 and 8437); “Compensation Cess Schedule” provides rates of Cess leviable on various products; Aerated waters, Lemonade to attract 12% Cess, Pan Masala – 60%, Coal – Rs. 400 per tonne, while Small Cars of sub 4 meter length will attract 1% and 3% for petrol < 1200 cc and diesel < 1500 cc respectively; Motorcycles with engine capacity more than 350 cc to attract 3% Cess, while 15% Cess shall apply to large cars, mid segment cars, SUVs; States that information will be subject to further vetting during which the list may undergo some changes

Sec.80HHD not analogous with Sec.80HHC, allows deduction without reducing ineligible hotel’s losses

Madras HC upholds ITAT order for AY 1998-99, holds that while computing 'eligible profit' for allowing deduction u/s 80HHD(1) (available to companies running hotels) loss from ineligible units/hotels cannot be deducted; Rejects Revenue’s stand that the expressions ‘business profits’ and ‘total receipts’ used in Sec. 80HHD(3) [prescribing formula for computing ‘eligible profits’], should take into account the gains/losses of ineligible entities as well;  Noting that Sec. 80HHD is a ‘beneficial provision’, HC opines that “full benefit of the provision should be extended to an eligible assessee without there being an attempt to whittle down the same.”; HC rules that “sub-section (3) has to be read along with sub-section (1) by statutory prescription and in such an event, all parameters of the formula should relate solely to the receipts/profits/income of the eligible unit alone and none other.”; Cites Karnataka HC ruling in ITC Hotels Ltd., holds that the deduction should be granted qua eligible unit/units only, clarifies that Revenue cannot draw support from Sec. 80HHC provisions and the two provisions (i.e Sections 80HHC and 80HHD) are not analogous:HC 

Important Tax Verdicts.

DCIT vs. Ateev V. Gala (ITAT Mumbai)

S. 56(2)(vi): A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to s. 56(2)(vi)

GST Council - Majority services taxable at 12% & 18%; Most exemptions to be grandfathered

GST Council announces 4 rates for services - 5%, 12%, 18% and 28%; 5% rate mostly for transportation services; Most of current service tax exemptions grandfathered and may continue under GST; Healthcare & Education shall continue to be exempt; Rates for Restaurant services will vary as per tariffs charged and facilities provided, ranging from 12-18%; Gambling and Cinema services to fall under 28% slab, as entertainment tax merged with service tax under GST; ​Works contract taxable at 12% with full Input Tax Credit; Council to meet next on June 3rd to deliberate on rates for gold & precious metals : GST Council Press Conference  

ITAT : Internal cost' of employing individual constitutes FTS, excludes deputation cost towards travel/insurance

Mumbai ITAT rules that amount received by assessee ( a US company engaged in grading and certification of diamonds) on account of reimbursement of travel expenses, group health insurance and other incidental expenses in connection with the assignment under training and technical service Agreement (‘TTA’), not FTS for AYs 2009-10 and 2011-12; Assessee had entered into TTA for training the employees of the Indian group company and providing technical services for the implementation of grading policies, procedures and processes, further separate debit notes were raised for training & technical services and reimbursement;  Rejects Revenue’s stand that the total amount received by assessee including reimbursement would constitute FTS;   Referring to the TTA, ITAT notes that assessee was entitled to receive by way of fee only the amount incurred by towards cost to ‘employ’ individuals plus mark-up of 6.5%, remarks that “the expression cost to ‘employ’ individuals is different from the expression cost incurred to ‘depute’ a person”; Rules that the cost of employment would include only internal costs incurred by organisation to employ individual, whereas any cost incurred over and above that to depute the individual for a particular assignment (i.e. travel, insurance etc.), would be external cost, not includible as FTS, relies on SC ruling in A.P. Moller Maersk A/S:ITAT

Saturday, 13 May 2017

Few Points on GST Return.

Ø  For ordinary dealer in case return not filed for 6 months then registration going to be cancelled and for composite dealer  in case they three quarter return not filed, then registration going to be cancelled 
Ø  No output return for ISD & Composite dealer.   

Important Verdict.

CST vs. Sunil Haribhau Pote (Bombay High Court)

Valid service of notice: Law explained on whether sending a notice by RPAD and its return by the postal authorities with the remark "addressee refused to accept" amounts to a valid service or not
When it was sent by R.P.A.D. to the address, it was returned by the postal authorities with the remark, that the addressee refused to accept the packet. That is why it is returned. Thus, the presumption that when the addressee whose address is set out on the envelope had an occasion to notice and peruse the packet, meant for him, but he refuses to accept it, then, that is deemed to be served. The addressee in this case is correctly described. There is no dispute about his identity. Even his address is correct. It is at that address the packet is carried and by the concerned postal authority. The duly authorised person carrying the packet reached the address. On noticing the addressee, he serves it, but the addressee after having perused the packet refused to accept it. It is in these circumstances, the postal remark that the concerned person has refused to accept; hence, returned to the sender denotes good and valid service

Analysis of SGST Bill as passed by Goa Assembly

Goa GST Bill provides for levy of Goa GST on all intra-State supplies of goods and / or services except supply of alcoholic liquor for human consumption; Bill seeks to broadbase ITC by making it available in respect of taxes paid on any supply of goods and / or services used or intended to be used in course or furtherance of business; Bill further imposes obligation on e-commerce operators to collect tax at source at 1% of net value of taxable supplies, out of payments to suppliers supplying goods / services through their portals; Also provides for self-assessment of taxes payable by registered person, conduct of audit to verify compliance with provisions, and recovery of arrears of tax using modes including detaining and sale of goods, movable and immovable property of defaulting taxable person; Anti-profiteering clause ensures that business passes on benefit of reduced tax incidence on goods / services to consumers : Goa GST Bill 2017 

ITAT : Forfeited media rights advance not capital loss; Grants deduction to Zee Entertainment

Mumbai ITAT allows deduction u/s. 37 to Zee Entertainment (‘assessee’) with respect to write off of advance given to BCCI, rejects Revenue's stand that it represents a capital loss as it is in relation to acquisition of media rights (which is a capital asset); Assessee acquired media rights from BCCI on payment of US $ 17.5 million, out of which US$ 10 million was adjusted against two matches played and the balance was kept as deposit (to be adjusted against last series), however, owing to dispute, the contract was terminated and the deposit was forfeited by BCCI during relevant AY 2008-09; ITAT holds that the agreement with BCCI for acquiring the media rights was pursuant to assessee’s normal business activity (of broadcasting and distribution of TV programmes) and US$ 10 million which was adjusted in earlier year was offered to tax by assessee; Further rejects Revenue’s stand that since the assessee filed a legal case for recovery and also initiated arbitration proceedings, it could not be said that the loss had actually crystallized during relevant AY, similarly, rejects Revenue’s submission that write-off was premature as assessee did not fully explore the possibility of its recovery; ITAT remarks that “it is the judgement of the assessee as a businessman.”, notes that despite arbitration proceedings, as assessee did not visualize any sign of recovery, it wrote-off the forfeited amount and claimed deduction:ITAT 

SC : 'Appy Fizz' not "aerated soft drink", upholds classification basis scientific & technical meaning

SC rules that ‘Appy Fizz’ is classifiable as “fruit juice based drink” under Entry 71 of Notification issued u/s 6(1)(d) of Kerala VAT Act, liable to VAT at 12.5% (now 14.5%); Rejects Revenue’s reliance on Kerala HC order in case of Trade Lines which applied the common parlance test to classify said product as “aerated branded soft drink” taxable at 20% u/s 6(1)(a); Perusing legislative

New ITAT rules propose ‘digitisation’ in appeal-filing / hearing, prescribe 90-days for order passing

Draft new ITAT rules propose that no orders shall be passed by ITAT after expiry of 90 days from the date of conclusion of hearing, further state that every  endeavour  shall  be  made  by  the  Bench  to pronounce the order within 60 days; Draft rules propose e-filing of appeals, provide option to assessee of hearing the appeal through video conference; Also propose mandatory listing of stay applications on Fridays, as long as they are filed on or before Wednesdays; Draft rules empower ITAT to award costs for adjournments, also provide that the hearing shall not ordinarily be adjourned beyond 5 occasions, except in cases where ITAT deems it appropriate to grant adjournment thereafter; New rules also permit ITAT to admit Expert’s depositions as additional evidence 

Monday, 8 May 2017

Note on Section 50CA

There are few anti-abuse measures already in place with respect to curbing the practise of avoiding tax through transfer of shares. The Budget has unveiled additional anti-abuse measures in the Income-tax Act, 1961 (Act), as regards the taxability on transfer of unquoted shares below the fair market value (FMV). The amendments proposed in the Budget seek to tax the transactions on account of transfer of unquoted shares, which mitigated tax liability (if transferred below FMV). However, the proposed amendments provide for taxation of the same amount in the hands of two tax payers. This article elaborates the amendments proposed in the Budget and their tax impact with regard to transfer of unquoted shares.

Monday, 1 May 2017

High court allows import of UK treaty into France treaty: Invokes MFN clause

  • Protocols under a treaty form a part of it and do not need to be notified separately unless the treaty/protocol itself suggests otherwise.
  • The Most Favoured Nation (MFN) clause in the India- France DTAA ensures that a lower rate or a restrictive scope in another convention with an OECD member and India can be imported into the India- France DTAA.
  • Payments made for management services by the Indian company to the French company does not constitute FTS under the Indo France DTAA by virtue of the MFN clause.
Recently the Delhi High Court (“Court”) in the case of Steria India Ltd. v. Commissioner of Income Tax and Anr1 relying on the most favored nation clause under the India - France Double Taxation Avoidance Agreement (“India – France DTAA”) held that payments made by an Indian company to a French company for management services does not constitute Fees for Technical Services (“FTS”).  

Friday, 28 April 2017

Seized material must have some nexus to additions sought to be made by AO and must be relevant for forming belief regarding escaped income: HC

THE ISSUE BEFORE THE COURT IS - Whether the seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment. YES is the verdict.  

Mandatory return-filing before due-date to claim tax-holiday not 'discriminatory'; Upholds Constitutional validity

Delhi HC dismisses assessee’s (100% EOU) writ for AY 2007-08, upholds constitutional validity of Sec. 80A(5) as well as fourth proviso to Sec. 10B(1) (the sections mandate filing of return of income within prescribed due-date u/s 139(1) in order to claim tax holiday u/s. 10A/10B); Assessee submitted that the provisions discriminate between two sets of assessees – one, who file return u/s. 139(1) but claim the deduction subsequently by way of revised return u/s. 139(5), and another set of taxpayers, who could not file return within due date but claim the deduction in the original return filed belatedly u/s. 139(4) and therefore violative of Article 14 of the Constitution; HC observes that the provisions did not curtail any vested rights of taxpayer but it only imposed an obligation to claim deductions in a timely manner and in the return so filed; HC also refers to SC ruling in Nallamilli Ramli Reddi to hold that Article 14 permits reasonable classification if it is based on intelligible differentia and it has reasonable connection with the object sought to be achieved; Noting that the objective behind insertion of the two provisions was to defeat multiple claims of deductions and to ensure better tax compliance, HC rules that “it is open to legislate and prescribe different conditions in respect of those who claim benefits, just as the substantive provisions which stipulate the conditions (kind of accounts to be maintained, eligibility criteria, etc.).”; Also relies on SC rulings in Kedarnath Jute Manufacturing Co. Ltd. and Sanjay Kumar Jain to uphold the validity of fourth proviso, being merely a qualifying proviso, which seeks to limit the general provision in Sec. 10B(1) with a further stipulation or condition:HC 

Sunday, 23 April 2017

Few Points on ICDS

(a)  ICDS will decide the turnover  required to be computed for Presumptive taxation
(b)  The CBDT issued a FAQ on March 23, 2017 and details of same available  at following link.
(c)  ICDS applicable only to Income from business/profession and Income from other sources
(d)  The concept of prudence is no more applicable and hence no expected loss being applicable
(e)  Unlike accounting standard which uses word “shall’, the ICDS uses the word “should” only.
(f)   For 9 ICDS, there are transitional provisions.
(g)  In case there is no Tax audit, then the disclosure of ICDS required to  be made at computation.
(h)  For computation of service work in progress, there are  following  method
Ø  Physical measurement
Ø  Estimated Cost
(i)    Act & rules both  will prevail over ICDS but the supreme court judgement are debatable.
(j)    For construction contract, the transitional provision is that  for existing old pprojects, they can continue with their old method till their completion.
(k)  Provide for interest income in case the customer contract mention the same and in case same is debatable, then  provide for bad debt u/s 36(1)(vi).
(l)    Capitalise all interest expenses even the duration of creation  of asset is less than 12 months.
(m) Provision of expenses must be reasonable
(n)  Recognition of contingent asset.
(o)  Section 115A -  Tax on special case -  ICDS applicable
(p)  Any change is accounting policy is retrospective and any change in accounting estimate is prospective.
(q)  ICDS not applicable to assesse who follow cash system. Also  not applicable to Individual/ HUF who not subject to tax audit.
(r)   No completed contracted method  (CCM) now exist, only PCM ( Percentage Completion Method).

Saturday, 25 March 2017


01.   ICDS is not for purpose of maintainace of books of accounts but for the purpose of taxable income. 
02.   ICDS will over and above all earlier judicial precedents. 
03.   ICDS  applicable to all taxpayer who require to pay tax under  Business Income and Income from other source.
04.   Income tax act will prevail over ICDS in case of any conflict.
05.   ICDS not applicable in the case of MAT but applicable in the case of AMT.
06.   MTM loss now cannot be allowed as expenditure.
07.   Retention money  recognition now cannot be deferred on receipt basis.
08.   ICDS also applicable to real estate companies as applicable to other construction companies.
09.   Interest and Royalty now require to  book under accrual basis.
10.   Expenditure on P&M before commencement of production will be capitalised.
11.   Taxation of government grant include subsidy in any form.  – if relate to capital item then reduce the cost, otherwise P&L.
12.   Revenue Recognition – Service -  percentage completion method.
Forex rules regarding valuation of foreign branch transactions

Sunday, 12 March 2017


(A) MAT Computation in the first year of adoption of Ind AS

The Phase I companies are adopting Ind AS during the current financial year ending 31 March 2017 with comparative year 31 March 2016 and transition date of 1 April 2015. For accounting purposes on account of first time adoption of Ind AS, transition adjustments are recorded in opening equity as at 1 April 2015. However, for MAT purposes, the transition adjustments as of 31 March 2016 shall be considered for computation of MAT liability for the previous year 2016-17 (assessment year 2017-18) and thereafter.
The transition adjustments will be included in the book profit for the purpose of computation of MAT liability as follows:

Imp Verdicts On S. 271(1)(c) And S. 14A/ Rule 8D

Wadhwa Estate & Developers India Pvt. Ltd vs. ACIT (ITAT Mumbai)

S. 271(1)(c): Penalty cannot be levied if the omission to offer income, and the wrong claim of deduction, was by oversight and the auditors did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s 271(1)(c) is imposed is a fatal error
Undisputedly, in the return of income assessee has failed to offer interest on fixed deposit amounting to ` 5,92,186 and loss claimed on account of fixed asset written–off amounting to Rs 1,82,242. It is also a fact on record that in the course of assessment proceedings, the assessee accepted the taxability of these items of income and offered them to tax. The assessee has explained that non–disclosure of aforesaid two items of income is due to oversight and due to the fact that neither in the tax audit nor in the statutory audit such omission was pointed out. We find merit in the aforesaid explanation of the assessee

Saturday, 11 March 2017

Sections 50C /56(2)(vii)(b) can be invoked in cases of differences in rates charged by builder/developer from their customers in respect of similar flats

ISSUE IS - Whether Sections 50C / 56(2)(vii)(b) can be invoked in cases of difference in the rates charged by a builder company from its customers in respect of similar flats. NO is the verdict.
Facts of the case:

Saturday, 4 March 2017

Claiming set-off of losses suffered during amalgamation is no valid reason to deny depreciation to amalgamating company on brand value acquired: ITAT

THE ISSUE IS - Whether mere claiming set off of loss suffered during amalgamation, cannot be a reason to disallow the depreciation claimed by amalgamating company upon acquisition of brand value of such amalgamated company. YES is the answer.  

Saturday, 25 February 2017

Book on BEPS

The most latest book on  Base Erosion and Profit Shifting (BEPS)  now published and you can place your order at  to book your E copy.  The contents of the books is given below.


Page No.
Important Summary

BEPS Action 1 : Addressing the tax challenges of the digital economy

BEPS Action Plan 2: Neutralizing the effects of hybrid mismatch arrangements
BEPS Action Plan 3: Designing effective controlled foreign company rules

BEPS Action Plan 4: Limiting base erosion arising from interest deductions

BEPS Action 5: Countering harmful tax practice more effectively
BEPS Action Plan 6: Preventing inappropriate treaty benefit grants 
Action Plan 7 : Preventing the Artificial Avoidance of Permanent Establishment Status
BEPS Action Plan 8: Transfer pricing of intangibles 
BEPS Action 9: Risk and Capital 
BEPS action plan 10: Other high-risk transactions
Action Plan 11 -- Measuring and Monitoring BEPS
BEPS Action Plan Action 12: Disclosing Aggressive Tax Planning Arrangements
BEPS Action Plan 13: Transfer pricing documentation and country-by-country reporting
BEPS action plan 14: Making dispute resolution mechanisms more effective   
BEPS 15-point action plan: Developing a multilateral instrument to modify bilateral tax treaties
Introduction of BEPS into Indian domestic law
The Practical Impact of Country by Country Reporting.  
A model template for the Country- by-Country Report
Master & Local File