We are pleased to release a Tax alert which summarizes a recent ruling of the Karnataka High Court (HC) in the case of IBM Global Services India Pvt. Ltd. (Taxpayer) on whether payment made for domestic customer database and human skills is to be regarded as revenue in nature.
Tuesday, May 20, 2014
Monday, May 19, 2014
DECLARATION AND PAYMENT OF DIVIDEND
In an earlier post here, we have discussed provisions related to
dividend under the Companies Act, 2013. Now we have the Companies (Declaration
and Payment of Dividend) Rules 2014 as notified on 31st March 2014
for discussion.
These Rules explains procedure under Section 123
of the Companies Act, 2013 and need to be read with the Section 123. According
to Second and Third Proviso to sub – section of Section 123; where a company
EQUITY SHARES WITH DIFFERENTIAL RIGHTS
According to Section
43 of the Companies Act, 2013 as we have already discussed in detail here, Equity share capital may be Equity Share
Capital with voting right or Equity Share Capital with differential right as to
dividend, voting or otherwise.
Rule 4 of the
Companies (Share Capital and Debentures) Rules 2014 deals with equity shares
with differential rights.
Whether when assessee decides not to charge any interest on loans given to third party and loan is recovered after a civil suit is filed, any notional disallowance for said interest is warranted u/s 36(1)(iii) - NO: HC
THE issues before the Bench are - Whether when assessee
decides not to charge any interest on loans given to third party and loan is
recovered after a civil suit is filed, any notional disallowance for said
interest is warranted u/s 36(1)(iii); Whether provisions of Section 2(22)
(e) can be invoked, in case there is a genuine business transaction between two
entities and funds of the appellant director were infact lying with the company
for most of the time and no profit is derived out of the said loan transaction
and Whether in that case such a transaction would be
Saturday, May 17, 2014
Save Tax on Salary
My friend Anand was really happy that he received a Rs. 12 lakh per annum offer letter. Rs. 1 lakh per month was a huge amount for Gopal who hails from a middle class background. But he was in for a rude shock when the salary hit his bank account at the end of the month. It was just Rs. 70,000/-. He came to me asking me to solve the case of the missing 30,000/-.
Whether the share broker's service used by a manufacturer of telecom equipment's for sale of its investment in shares of anothercompany is an input service?
2014 (33) STR 357 (Kar) United Telecom Limited vs. CCEx, Bangalore –I
Facts:
The Appellant was engaged in the manufacture and sale of telecom equipments and was paying excise duty on the same. In the month of November 2008, the Appellant had availed the services of a Stock Broker for selling its investment in the other company's shares. TheAppellant availed Service tax paid on said stock broker's service treating the same as input service. The Revenue authorities and Tribunaldisallowed the claim of the Appellant by contending that the same was not integrally connected to the business of the Appellant.
Before the High Court, the Appellant contended that the stock broker's service was used for the purpose covered by the inclusive part of the definition of "input service".
Friday, May 16, 2014
Superannuation fund isn't a taxable until employee is entitled to receive it. - AAR
IT/ILT/AAA: Employer's contribution to the superannuation fund assures only future benefit to employees and they do not get any vested
right at the time of making
contribution to the fund - Therefore, such
contribution could not be treated as taxable
perquisite in the hands employee
until they are entitled to receive it
TAX PLANNING FOR MARRIAGE EXPENSES
| MARRIAGE EXPENSES - POWERS OF I.T. AUTHORITIES | ||
In the recent past the Income Tax Department has been concentrating on collecting information with regard to expenses on marriage as well as other expenses by utilising power under section133A of the Income Tax Act. It has been a matter of controversy between the I.T.Department and the person incurring the expenses as to quantum of expenses actually incurred. It becomes yet more difficult as such inquiries may lead to the investigation about the source of the money spent. In practical life one must appreciate that the department's suspicion is not always unfounded.
| ||
Whether when Ruler of Palace rents out part of palace which he occupies as official resident, such income is to be included in his total income - NO, exemption u/s 10(19A) is available: HC Larger Bench
THE issues before the Bench are - Whether mere fact that an
earlier judgment of High Court was allowed to attain finality, would cast an
impediment on the Revenue to take correct interpretation of that provision qua
the same assessee and whether when Ruler of Palace rents out part
of palace which he occupies as official resident, such income is to be included
in his total income. And the Larger Bench rules that the exemption u/s 10(19A)
will continue to be available to the Ruler.
Whether interest on account of default in making tax payment is to be calculated with reference to date of first assessment order and not with date of an order passed in remand - YES: ITAT
THE issue before the Bench is - Whether interest on account of
default in making payment of Income Tax would have to be calculated with
reference to the date of first assessment order and not with the date of an
order passed in remand proceedings. And the verdict goes against the
assessee.
Facts of the
case
Important principles of law on taxation of discretionary & specific trust explained
CWT vs. Estate of Late HMM Vikramsinghji of Gondal (Supreme Court)
A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour. Having regard to the above legal
Thursday, May 15, 2014
Salaried employee vs. consultant: Know the tax implications
You have got an offer from a company to either join as an employee or a consultant. Before you decide, know the tax implications between the two options as they differ significantly.
The income received as fees from professional or technical services rendered is classified as income from business or profession, whereas in case of employment, it is considered as salary income. A salaried employee can claim tax deduction on certain components of the salary such as house rent allowance, leave travel allowance, conveyance allowance and uniform allowance.
The income received as fees from professional or technical services rendered is classified as income from business or profession, whereas in case of employment, it is considered as salary income. A salaried employee can claim tax deduction on certain components of the salary such as house rent allowance, leave travel allowance, conveyance allowance and uniform allowance.
DEMATERIALISATION, REFUND AND COMMISSION
In this post, we
will discuss dematerialisation of shares, Refund of application money and
payment of commission on issue of share capital.
DEMATERIALISATION OF
SECURITIES
Section 29 of the
Companies Act 2013, say every company making public offer; and such other class
or classes of companies as may be prescribed shall issue the securities only in
the dematerialised form. This section was discussed in detail earlier on this blog here.
Rule 9 of the Companies (Prospectus and Allotment
of Securities) Rules 2014 prescribes that the promoters
10 answers every NRI wants to know about demat account !
Where can an NRI/PIO open a demat account?
Ans. NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL. Almost every bank in India today also gives service of demat account . So, you can contact your bank , and they will do the rest .
S. 50B applies only to a “sale” for a “monetary consideration” and not to a case of “exchange” of the undertaking for shares under a s. 391/394 scheme of arrangement
CIT vs. Bharat Bijlee Ltd (Bombay High Court)
The assessee transferred its Lift Division to Tiger Elevators Pvt. Ltd under a scheme of arrangement u/s 391 & 394 of the Companies Act, 1956. The transfer of the undertaking took place in exchange of preference shares and bonds issued by Tiger Elevators as per a valuation report. The assessee claimed that the transfer was not liable to tax on capital gains on the basis that there was no“cost of acquisition” of the undertaking. The AO held that the transaction was a “slump sale” as defined in s. 2(42C) and that the gains
If Income exempt u/s. 10 then no relief u/s. 11 - IT
For availing exemption under section 11, income derived from property held under trust has to be considered irrespective of fact that some of income so derived is also exempt under section 10
Whether when AO allows an expenditure as revenue in nature during original assessment, any attempt to treat same as capital expenditure in reassessment would amount to change of opinion - YES: HC
THE issue before the Bench is - Whether when AO
allows an expenditure as revenue in nature during original assessment, any
attempt to treat the same as capital expenditure in reassessment would amount to
change of opinion. And the verdict goes in favour of the
assessee.
Facts of the
case
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