TAX BY MANISH

Monday, January 12, 2015

Central Government notifies the Depository Receipts Scheme 2014 for facilitating issue of Depository Receipts outside India

We are pleased to release a Regulatory alert summarizes the key provisions of the Depository Receipts Scheme, 2014 (“2014 Scheme”) which was notified by the Central Government with effect from December 15, 2014. With the notification of the 2014 Scheme, the erstwhile provisions dealing with depository receipts in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 (“1993 Scheme”) stand repealed except to the extent they are relating to foreign currency convertible

Whether when assessee is a Board of State Govt it cannot claim exemption for its income under Article 289(1) of Constitution - YES: ITAT

Assessee is a statutory authority created by the Govt. of Andhra Pradesh with effect from 24/01/1976 in exercise of power conferred by section 4(1) of water (prevention and control of pollution) Act, 1974. Till AY 2002-03, assessee claimed exemption u/s 10(20) of the Act as a local authority. However, after amendment to the definition of local authority u/s 10(20) with effect from 01/04/2003, by Finance Act, 2002, assessee became liable to pay income-tax. Since assessee failed to file any return of income, even after it became liable to pay tax, AO initiated action u/s 147 of the Act by issuing a notice u/s 148 on 31/10/08 calling upon assessee to submit return of income for AYs. 2004-05 to 2008-09. In response to the notice issued u/s 148,

The Law In S. 56(2) On Taxation Of Gifts Encourages Cash Transactions

Chorus from all quarters has started pouring in for simplification of the Income Tax Act as the budget day is drawing close. But in my opinion Indian Income Tax laws are most simple in the World, unless they are made complicated by the executing officers. Most of the issues under Income Tax Act are settled by various courts of law, therefore, any kind of tinkering with basic structure of Income Tax Act might lead to quantum jump in litigation, but few irritants of Income Tax Act need to be resolved.

ITO vs. Modipon Ltd (ITAT Delhi)

S. 50C: The consideration has to be determined on the basis of the circle-rate prevailing on the date of execution of sale deed and not on the basis of the circle-rate prevailing on the date of registration of the sale deed

It is manifest that u/s 50C, the value adopted by the stamp-valuation authority is deemed as the consideration for computation of capital gain. However, such valuation adopted by the stamp-valuation authority should be in respect of the transfer by the assessee, of the capital assets. This enhancement was beyond the control of the assessee (seller). It is also not the case of the revenue, that the buyer has given more than the consideration that has been accepted by the parties where they executed the agreement to sale.

Watson Pharma Pvt Ltd vs. DCIT (ITAT Mumbai)

Transfer Pricing: Law on making adjustments for 'risk' and 'location savings' explained

The arm’s length principle requires benchmarking to be done with comparables in the jurisdiction of tested party and the location savings, if any, would be reflected in the profitability earned by comparables which are used for benchmarking the international transactions. Thus in our view, no separate/additional allocation is called for on account of location savings

ACIT vs. Indian Furniture Products Limited (ITAT Panaji)

S. 40(a)(i): Usance charges paid by the Assessee on import of raw material from foreign countries attracts tax in India u/s 5(2)(b) r.w.s. 9(1)(v)(b)

From reading the decisions of the Hon’ble Supreme Court in CIT vs. Vijay Ship Breaking Corporation as reported in 314 ITR 309 (SC) and the Hon’ble Gujarat High Court (reported in 261 ITR 113) it is apparent that the Hon’ble Supreme Court has not reversed the decision in the case of CIT vs. Vijay Ship Breaking Corporation, 261 ITR 113 (supra) on the finding that the usance charges are not interest u/s 2(28A) except where an undertaking is engaged in the business of ship breaking in view of explanation (2) to Sec. 10(15)(iv)(c) inserted by the Taxation Laws (Amendment) Act, 2003 with retrospective effect

Minda Sai Limited vs. ITO (ITAT Delhi)

(i) Unabsorbed depreciation of AYs 1997-98 to 2001-02 is eligible for relief granted by amended s. 32(2) in AY 2002-03 (ii) Judgement of a non-jurisdictional High Court has to be preferred over the judgement of a Special Bench of the ITAT (iii) In the absence of exempt income, s. 14A disallowance cannot be added to s. 115JB book profits even if assessee has accepted s. 14A disallowance in the normal computation

The assessee may have accepted the disallowance under section 14A but once it is a settled legal position, in the light of the law laid down in CIT Vs Holcim India Pvt Ltd (Del) that there cannot be any disallowance under section 14A unless there is corresponding exempt income and the assessee has no such exempt income, adjustment under clause (f) of Explanation to Section 115JB (2) cannot indeed be made. The adjustment has to meet the tests of law and what cannot be considered to be ‘expenditure relatable to exempt income’ under the law, cannot be subjected to the adjustment either. There is no estoppel against the law. The mere fact that the assessee has accepted this disallowance affects that disallowance only and nothing more than that; it does not clothe such an adjustment, in computation of book profit under section 115JB, with legality

Manpreet Singh vs. ITO (ITAT Delhi)

S. 22: Rent received from mobile phone company for use of terrace to install antenna is taxable as "Income from house property" and not as "Other sources"

The true test is whether the space rented out is part of the building or land appurtenant thereto. The rent is not for the antenna but for the space for installation of antenna. It is not the case of the Assessing Officer that the rent is for the antenna, and, therefore, it is wholly irrelevant whether antenna is part of the building or land appurtenant thereto. What is relevant is the space which has been rented out and, therefore, as long as the space, which has been rented out, is part of the building, the rent is required to be treated as “income from house property”.

Saturday, January 10, 2015

Jabalpur Tribunal rules on interplay between provisions of PE and FTS for taxing installation/commissioning activities in composite contracts

This Tax Alert summarizes a recent ruling of the Jabalpur Income Tax Appellate Tribunal (Tribunal), in the case of Birla Corporation Ltd. (Taxpayer) , on the issue of taxability of installation and commissioning charges of machinery in India under the Indian Tax Laws (ITL) and the seven applicable double taxation avoidance agreements (DTAAs). The installation and commissioning activities were in connection with machinery/equipment supplied by vendors from outside India. The Tribunal held that such activities do not create an installation permanent establishment (PE), since the activities did not exceed the threshold provided in the DTAAs. Furthermore, the payments would not be covered under the fees for technical services (FTS)/fees for included services (FIS) articles of the DTAAs. Hence, the payment towards installation and commissioning activities made to foreign vendors would not be taxable in India and the Taxpayer is under no obligation to deduct tax at source on such payments, under the ITL.

DCIT vs. Sun Pharmaceuticals Ltd (Gujarat High Court)

The High Court had to be consider whether for computing the profits eligible for deduction u/s 80HHC and 80-IA, depreciation (under the concept of ‘block of assets’) had to be deducted even though the assessee had not claimed the same. The department relied on the judgement of the Full Bench of the Bombay High Court in Plastiblends India Limited vs. ACIT 318 ITR (Bom) (FB) where it was held that for the purposes of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable

Revised Draft issued by CBDT on Income Computation and Disclosure Standards.

Today, CBDT has issued a Press Release on Revised Draft of Income Computation and Disclosure Standards (Icds) for the purpose of notification under section 145 (2) of Income Tax Act, 1961 with seeks public comments. The first draft of Tax Accounting Standards issued in August, 2012 by Income Tax Department. The revised draft contains changes as sub-section (1) of section 145 of the Income Tax Act, 1961 (‘the Act’) provides that the income chargeable under the head “Profits and gain of business or profession” or “Income from other sources” shall [subject to the provisions of sub-section (2)] be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Sub-section (2) of section 145 provides that the Central Government may notify Income Computation and Disclosure Standards(ICDS) for any class of asssessees or for any class of income. The Revised Press Release is as under :

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

PRESS RELEASE

Take Benefit of Additional Depreciation u/s. 32(1)(iia) of Income Tax Act for Asstt. Year 2015-16

ADDITIONAL DEPRECIATION

U/s-32(1)(iia) of Income Tax Act 1961.

The Income Tax Department is an important department to collect revenue for nation development. Income Tax Department wants little changes as a policy "Give and Take", it means little benefits to get for Business Assessee and take advantages of revenue. In this part the Additional Depreciation benefits available for Business Assessee on some conditional points, which is as under:

relief Relief for Arrear Salary Under Section 89

Relief under section 89 is allowable to mitigate the extra tax burden that arises due to receipt of any sum, being paid as arrear or in advance resulting in increase in tax liability.
Relief u/s 89 is available in the following situations:

salary being received in arrears or advance;
where the payment is in the nature of gratuity in respect of past services extending over a period of not less than five years is received;

Whether in the light of the principle of unjust enrichment recipient of service can claim refund u/s. 11B of Central Excise Act if ultimate burden of service tax liability has been borne by him?

Commissioner of Customs, Central Excise & Service Tax vs. Indian Farmers Fertilizers Cooperative Ltd. [2014] 48 taxmann.com 79 (Allahabad)

FACTS:

An assessee, a service recipient, received services of transport of natural gas from Mis. RGTIL falling under "Transport of Goods other than Water through Pipeline or other Conduit Services." Transmission charges payable, are fixed by a regulatory body. Invoices are raised on the basis of the provisional rates notified. Later, the tariff was

Understanding CIT appeal under income tax

Taxpayer when not satisfied with the order passed by the tax-officer can appeal before CIT Appeal under section 246 of the Income tax act, 1961. Hence it is very important for tax professional to obtain procedural knowledge in this respect.

According to the provisions of Section 246 any assessee who is aggrieved by an order, passed by the Assessing Officer may prefer an appeal to the Commissioner of Income-tax (Appeals).

ACIT vs. M/s G V Sons (ITAT Mumbai)

Bogus purchases: Merely because a party has admitted to indulging in sham/ accommodation transactions does not mean that all his transactions with the assessee should be treated as sham

We cannot accept a bald statement made by the AO that any transaction/business done with a party would be sham, simply because the opposite party besides doing regular business was also indulging in providing accommodation entries. Simply on the basis of statement given by the third party, that they were also providing accommodation entries as well, the conduct of the assessee cannot be doubted and held to be sham

How to Request re-issue of Income tax Refund? Detailed Procedure.

Income Tax Refund cheque issued by CPC Bangalore Returned undelivered or not been credited due to wrong account info, expired cheque etc?
Now days Assessee who file their Income tax Return online gets their refund cheque issued by CPC Bangalore. Refunds are issued by two modes:-

By crediting the refund amount in Assessee’s bank account if the Assessee has correctly mentioned his bank details in Income tax Return Filed by him.
By sending Income Tax Refund Cheque if Assessee failed to submit or correctly mention his bank account details in Income tax Return filed by him.

CPC (TDS) advised to TDS Deductors use Single Challan instead of multiple Challans for TDS Payment in a month.

Recently, Centralized Processing Cell (TDS) observed that TDS Deductor used multiple Challan in a Month for Payment of TDS (Tax). Therefore, it has issued an advisory communication to TDS deductors stating about the establishment of processing logic in the system that can accept a Single Challan per month for reporting of Tax Deposited as per following situation. The details are as under :

Whether expenditure incurred on refurbishing of existing assets to achieve international standards is to be construed as revenue in nature - YES: HC

THE issue before the Bench is - Whether expenditure incurred on refurbishing of existing assets to achieve international standards is to be construed as revenue in nature. And the verdict favours the assessee.

Facts of the case

The assessee is a Public Limited Company carrying on the business of hotel. The AO disallowed a sum towards expenditure incurred under repairs and Maintenance of the hotel building. On a

Andhra Pradesh HC rules on no double taxation under MAT provisions

We are pleased to release an alert which summarizes a recent Andhra Pradesh High Court (HC) ruling in the case of Nagarjuna Fertilizers & Chemicals Ltd. (Taxpayer) in the context of Minimum Alternate Tax (MAT) provisions in a peculiar fact pattern.

Guide to the law on reopening of assessments u/s 147 of the Income-tax Act

The scope and effect of a reopening of assessment is still shrouded in mystery even after various judgments of the Supreme Court and High courts. Reassessment is one of the distinguishing weapons in the armoury of the Department, empowers the Assessing Officer to assess, reassess or recompute income, turnover etc, which has escaped assessment. A number of intricate issues crop up during the reassessment proceedings. Some of the issues are been dealt with here under:

S.80G:Donation-Deductions can be claimed for donation as well as exemption under section

The assessee made a donation of a certain amount, which was debited to its 'K' Unit. In the

computation of income, entire donations paid were added back to income of 'K' unit and exemption

under section 10A was claimed on the entire income of 'K' unit. The AO opined that once donations

CBDT plans to celebrate 'Good Governance day' on every Wednesday

GOOD GOVERNANCE DAY - INSTRUCTIONS ON OBSERVANCE OF WEDNESDAYS AS A PUBLIC HEARING DAY FOR HEARING PUBLIC GRIEVANCES

OFFICE MEMORANDUM [F.NO.DIR.(HQRS.)/CH.(DT)/29/2013], DATED 6-1-2015

DRAFT OF STANDARD OPERATING PROCEDURE FOR MATCHING THE UNCONSUMED CHALLAN

Recently CBDT has issued a Draft of Standard Operating Procedure for Matching the Unconsumed Challan for administering TDS incorporating the re-engineered processes developed by the CPC-TDS which is as under :

A challan may remain unconsumed on the computer system under following circumstances: