Analysis Of An Important Judgement On International Taxation

1. The AAR decision in the case of Steria (India) Ltd, reported in [2014] 364 ITR 381 (AAR), poses an interesting challenge to tax professionals in evaluating the role of a Protocol in interpreting Tax Treaties.

2. The Applicant in this case, Steria (India) Ltd [‘S’] is an Indian public company stated to be a leading provider of IT driven business services for its clients’ core business processes.

Groupe Steria SCA ['SF'], is a French partnership firm. SF centralizes technical skills to carry on management functions such as legal finance, human resources, communication risk control, information systems, controlling and consolidation, delivery and industrialization, technology and the management information services etc.

‘S’ entered into a Management Services Agreement with ‘SF,’ whereby ‘SF’ provides ‘S’ various management services with a view to rationalize and standardize its Indian business practices in accordance

Income Tax Exemptions and Deductions for Salaried Employee for Asstt. Year 2015-16

Recently 31st July, 2014 ended, it is deadline to submit Income Tax Return for Salaried Employee and non-audit-able accounts. Near about 90% Taxpayee (Salaried Employee) submit their Income Tax Return by 31st July and now they are in planing to save income Tax for Asstt. Year 2015-16. The following information is most useful and important for salaried Taxpayee for Asstt. Year 2015-16 regarding Income Tax Exemptions and Deductions:

CPC (TDS) reminder for raising Flag "B" in TDS Quarterly Statements against 15G/H Forms for Fin.Year 2013-14

Dear Deductor (TAN XXXXXXXXXX),
As you may be aware that the depositors submit form 15G/H to the bank for no deduction of tax to be made on the interest payments made to them.

DOCUMENTS AND CERTIFICATION

In this blog we will discuss provisions relating to documents related to foreign company and their certification.

Office where documents to be delivered and fee for registration of documents

Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in Chapter XXII of the Act i.e.

INDIAN DEPOSITORY RECEIPTS

• the offer of Indian Depository Receipt;
• the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipt;
• the manner in which Indian Depository Receipt shall be dealt with in a depository mode and by custodian and underwriters; and
• the manner of sale, transfer or transmission of Indian Depository Receipt,

Whether disallowance u/s 40(a)(ia) is warranted merely because assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source - YES: ITAT

THE issue before the Bench is - Whether disallowance u/s 40(a)(ia) is warranted merely because the assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source. And the answer is YES.

Facts of the case

The assessee is an individual who is engaged in the business of transport contractor. He had filed his return, declaring total income at Rs.13,53,520/-. During assessment, AO noted from the details furnished by the assessee revealed that the assessee had received transport charges of

Is Rule 5A(2) of STR 1994 which prescribes for an access by authorised officer for verification etc. and for submission of records by assessee for Service Tax Audit ultra vires?

A C L Education Center (P) Ltd. vs. UOl 2014 (33) STR 609 (All)

Is Rule  5A(2) of  STR 1994 which   prescribes    for  an access  by authorised   officer  for  verification   etc. and for  submission    of records   by  assessee    for  Service Tax Audit  ultra vires?

Facts:

The Excise Department   had issued intimations on various dates calling for

Tax Audit date extended till November 30, 2014

Forgot Password for e-Filing login ? What Now ?

If you have forgotten your password and you have unsuccessfully tried other ways of resetting password, then you can use the new facility to get direct access to your Income Tax Department e-Filing account using the net-banking facility of your bank.

Now e-Filing of Income Tax Return facility through Banks - IT

Income Tax Department is happy to announce the facility of Direct Login from Corporation Bank, Union Bank of India and Oriental Bank of Commerce - Net banking account to the taxpayer's E-filing Account. IT Department has provided facility of e-filing of Income Tax Return through Banks. Customers using internet

Government TDS Deductors must quot AIN details in the TDS Statements - CPC(TDS)

CPC (TDS) asks government deductors to quote AIN details in TDS Statements. The letter issued by CPC (TDS) is as follows:

Dear Deductor,

As per the records of the Centralized Processing Cell (TDS), it has been observed that the Accounts Office Identification Number (AIN) has not been mentioned in the TDS statements submitted by you.

What is AIN and its relevance:

• AIN is a unique seven digit number allotted by

Establishing Foreign Company

We have discussed General provisions related to foreign companies Section 380 asks for delivery of certain documents to the Registrar of Companies within thirty days of establishment of its place of business. The Section requires following documents to be delivered:

• a certified copy of the charter, statute or memorandum and articles of the company or other instrument constituting or defining the constitution of the company and if the instrument is not in English language,

FINANCIAL STATEMENT OF FOREIGN COMPANY

According to Section 381 of the Companies Act 2013 every foreign company, unless exempted, shall in every calendar –

• make out a balance sheet and profit and loss account; and
• deliver a copy of those documents to the Registrar.

If any of these documents is not in English Language, there shall be annexed to it a certified translation thereof in English language.

Whether Section 80IA benefits are available to captive electricity unit supplying power to assessee's manufacturing plant - YES: HC

THE issue before the Bench is - Whether Section 80IA benefits are available to captive electricity unit supplying power to assessee's manufacturing plant. And the answer is YES.

Facts of the case

The assessee company was engaged in the business of manufacturing of fused Aluminium Oxide Grains, Calcined products, Monolithics, Refractories, Bonded Abrasives, Ceramic Paper and trading of Monolithic and Refractories. The assessee had an Abrasives Grains Division that manufactured fused Aluminium Oxide grains etc. The assessee had setup a power plant for captive supply to the Aluminium Oxide gains unit. Profit earned from the power plant unit was claimed as eligible for

Madhukar Khosla vs. ACIT (Delhi High Court)

S. 147: If “reasons to believe” are not based on new, “tangible materials”, the reopening amounts to an impermissible review

(ii) The foundation of the AO’s jurisdiction and the raison d’etre of a reassessment notice are the “reasons to believe”. Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective “trigger”, the AO does not possess jurisdiction to reopen the assessment. It is at the next

S. 14A: For Rule 8D(2)(i) only expenditure relating to investments resulting in tax-free income can be considered. For Rule 8D(2)(iii) all investments, whether yielding tax-free income or not, have to be considered

Bellwether Microfinance Fund Pvt. Ltd vs. ITO (ITAT Hyderabad)

Rule 8D(2)(i) speaks of expenditure directly relating to income which does not form part of “total income”. In the context of s. 2(45) & s. 5, the expression ‘total income’ in Rule 8D(2)(i) must relate to an income which is sought to be

S. 234E: High Court grants ad-interim stay against operation of notices levying fee for failure to file TDS statement

M/s Shree Builders vs. UOI (Madhya Pradesh High Court)

Issue notice to the respondents on interim relief. Additionally issue notice to Attorney General of India as the validity of the Central enactment is put in issue.

Bombay HC upholds the exemption under section 5(3) of the CST Act by treating the local sale as penultimate sale for export, since an inextricable link was established between local sale and export of goods

 

We are pleased to release a Tax Alert which gives an update on the recent decision of the Bombay High Court in the case of M/s. Exide Industries Limited vs. State of Maharashtra and Others [TS-315-HC-2014(BOM)-VAT]. The decision upholds the exemption under Section 5(3) of CST Act in case of penultimate sale of goods for exports.

S. 14A/ Rule 8D: No disallowance can be made if there is no exempt income. Cheminvest(SB) & CBDT Circular are not good law

ACIT vs. M. Baskaran (ITAT Chennai)

 

No doubt in Cheminvest Ltd vs. ITO 121 ITD 318 (SB) the Special Bench of the Tribunal has held that disallowance u/s 14A can be made even in the year in which no exempt income has been earned or received by the assessee. This decision of Special Bench of the Tribunal has been impliedly overruled by the

S. 14A & Rule 8D cannot be applied in a mechanical manner. Disallowance cannot exceed expenditure claimed as a deduction

ACIT vs. Iqbal M. Chagala (ITAT Mumbai)

 The assessee had debited direct expenses on account of dematerialization and STT in the capital account and not in the Profit and loss account. The AO had presumed that the assessee had must have incurred some expenditure under the heads salary, telephone and other administrative charges for earning the exempt income. It is further found that the total expenditure claimed by the assessee for the year is about 13 lakhs and the AO had made a disallowance of about Rs.16 lakhs. He has just adopted the formula of estimating expenditure

Salaried Employee, Individuals how to compute Income Tax for Asstt. Year 2015-16 ?

Efficient tax planning enables you to reduce tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions & rebates. Tax Planning is NOT tax evasion which is illegal under laws. It involves planning of income & investments. Tax Planning can be practiced easily. Often staff gives estimated declaration at Fin.Year starting to minimize tax liabilities but could not save till Fin. Year end; and faces burden in last months. Better start investing from the beginning of Fin. Year to get interest & appreciation from April.

Taxation Entries

This article is helping hand for those students who feel problem in taxation entries. Experts and others are requested to correct me or give their valuable feedback.

Taxation and accounting are the soul of the accounting profession. To become a good accounting professional, a sound correlation between tax and accounts is required. Practically, it has been seen that students feel difficulty in passing the entries of taxation. Problem not arises because of lack of knowledge but due to lack of conceptual clarity. Confusion arises while reversing the entries of Tax Payments (Advance tax, Self assessment tax, TDS recoverable etc.) and Tax Provision. An attempt has been made to clear the concepts of students. Let us discuss point to point these entries.

REGISTRATION FEES

The documents required to be submitted, filed, registered or recorded or any fact or information required or authorised to be registered under the Act shall be submitted, filed, registered or recorded on payment of the fee or on payment of such additional fee as applicable, as mentioned in Table annexed to these rules. [Rule 12(1) of the Companies (Registration Offices and Fees) Rules 2014]

Whether when subjective satisfaction was arrived at by AO for initiation of proceedings u/s 158BD on basis of meterails found during Search, it can be said that initiation of proceedings was vitiated - NO: HC

THE issue before the Bench is - Whether when subjective satisfaction was arrived at by AO for initiation of proceedings u/s 158BD on basis of meterails found during Search, it can be said that initiation of proceedings was vitiated. And the verdict goes against the assessee.

Facts of the case

Upon issue of Form 16A TDS certificate, TDS credit has to be given to the payee even if there is Form 26AS mismatch or deductor is at fault for non-deposit of TDS with Govt.

Sumit Devendra Rajani vs. ACIT (Gujarat High Court)

U/s 204, the liability to deduct TDS is on the employer / payer. U/s 205, when tax is deductible at source, the assessee shall not be called upon to pay tax himself to the extent to which tax has been deducted from that income. This means that the assessee / deductee is entitled to credit of such amount of

Finance Bill 2014 passed

The Finance (No. 2) Act 2014, as assented by the Hon’ble President on 6th August, 2014 and as published in the Official Gazette

Understanding Deemed Dividend with latest case laws : Vol - IV.

We had earlier discussed in details about dividend case laws and analyse with various latest case laws. In continuation of the same given below few more analysis of judgments in respect of deemed dividend.   

How to avoid common mistakes while submitting TDS Statement ? - Important Guidelines.

In our endeavor to facilitate improved TDS administration and lower TDS default rates, we are glad to provide information on common mistakes committed by the deductors while submitting TDS statements. These mistakes result into TDS Defaults in the respective statements.

Following are some useful guidelines to avoid common mistakes, while submitting TDS Statements and you are requested to go through the following in detail.

MAINTAINING AND RECEIVING DOCUMENTS ELECTRONICALLY

The Central Government shall set up and maintain a secure electronic registry in which all the applications, financial statement, prospectus, return, register, memorandum, articles, particulars of charges, or any particulars or returns or any other documents filed under the Act to be electronically stored. [Rule 9(1) of the Companies (Registration Offices and Fees) Rules 2014]

Every document or certificate or notice or other document required to be registered or authenticated by the Registrar or an officer of the Central Government under the Act or rules made there under, shall be

Whether when a private limited company is converted into partnership firm and interest-free loans are advanced out of reserves of erstwhile company in the same ratio as profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47 - YES: ITAT

THE issues before the Bench are - Whether when a private limited company is converted into a partnership firm and interest free loans are advanced out of the reserves of the erstwhile company in the same ratio as the profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47. YES is the Tribunal's answer.

Facts of the case

The assessee firm, Aravali Polymers, LLP, came into existence with effect from August 2010, once the private limited company by the same name was converted into a limited liability

S. 147: Fact that TPO has examined international transactions in payer’s hands and found them to be at arm’s length does not mean the PE of payee cannot be assessed

LG Electronics Inc vs. ADIT (Allahabad High Court)

(iii) The contention that as the Indian subsidiary had, in terms of s. 92E, disclosed all the transactions with the assessee relating to purchase of raw materials, finished goods etc and the TPO had found then to be at arm’s length, the AO was precluded from drawing any inference that any further income of the assessee from the same transactions was chargeable to tax had

S. 14A & Rule 8D: Investments in subsidiaries to be excluded while computing disallowance

EIH Associated Hotels Ltd vs. DCIT (ITAT Chennai)

The investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(A) shows that out of total investment of Rs. 64.18 crore, Rs. 63.31 crore is invested in wholly

Transfer Pricing: Share application money, though not allotted into shares for a long time, cannot be treated as a “loan” for taxing notional interest

Allcargo Global Logistics Ltd vs. ACIT (ITAT Mumbai)

The TPO has not disputed that the transactions were in the nature of payments for share application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has, however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated as in the nature of lending or borrowing, the transactions can be subjected to ALP adjustments, and the ALP so computed can be the basis of computing taxable business profits of the assessee, but the core issue before us is whether such a deeming fiction is envisaged under the scheme of the transfer pricing legislation or on the facts of this case. We do not find so. We do not find any provision in law enabling such deeming fiction

Understanding Transfer Pricing with latest case laws . Part – V.

Today is blog 3rd Anniversary.

It seems that transfer pricing dispute for  taxation on international transactions with associates enterprises (AES) is not going to end for the corporates and further as TP extended its legs also on domestic specified transactions with related parties, it is very important to tax payer to know more about this. Given below few latest case laws judgments only in respect of international transfer pricing  which will enable yourself with

Missed 31st July Deadline for filing of Annual Income Tax Return ? What Now ?

Most of Tax Payers comply with 31st July, deadline for filing Income Tax Returns. However, many miss out due to other commitment in professional and personal life. Missing the deadline does not mean you can not file your return. In fact, if you have missed to file your return for last year ended March, 2013, you can still file however there are some catch. Read the article to know in detail importance of filling of return by 31st July, and methods to file return after due date.

FILING DOCUMENTS IN REGISTRATION OFFICES

Section 398 empowers Central Government for making rules relating to filling of documents with registration Offices or Registrar of Companies.

Manner and conditions of filing

Every application, financial statement, prospectus, return, declaration, memorandum, articles, particulars of charges, or any other particulars or document or any notice, or any communication or intimation required to be filed or delivered or served under the Act and rules made there under, shall be filed or delivered or served in computer readable electronic form, in portable document format (.pdf) or in such other format as

If a service is classifiable under “Business support service” from a given date and the said service is not carved out of any of the existing services, it cannot be construed that service was taxable prior to that date

Baba Trading co vs. CCE (2014-TIOL-1470-CESTAT-MUM)

Facts of case:

Baba Trading Company was given the right to book, deliver, transshipment, handling, loading, unloading etc. and to carry out the business of courier by the ordinary buses of MSRTC. The said agreement by no stretch of imagination can be considered as a “franchise services” because

Whether franchise fee remitted to non-resident for simply using trademark 'Dominos' is required to be partly treated as capital expenditure - NO: HC

THE issue before the Bench is - Whether franchise fee remitted to non-resident for using trademark 'Dominos' is required to be partly treated as capital expenditure. And the HC says NO.

Facts of the case

The assessee is carrying on business of manufacturing and sale of pizza from its retail outlet. The

FAQ on CUSTOMS

CUSTOMS
Q.1	Please give me the rate of duty on a particular item
A.1	We regret that we do not have the personnel at present to give specific rates of duty. All the necessary information to work out the rate on your own is given on the web site.
Q.2	I am not able to find the latest notification or a particular notification.
A.2	As soon as a notification is received by us it is put on the 'what's new'.  If you are already conversant

S. 147/ 148: Writ Petition challenging lack of jurisdiction to issue s. 148 notice on the ground that it is based on ‘change of opinion’ & preconditions of s. 147 are not satisfied is maintainable

Aroni Commercials Ltd vs. ACIT (Bombay High Court)

The argument, based on JCIT vs. Kalanithi Maran, that this Court should not exercise its writ jurisdiction under Article 226 of the Constitution of India and the petitioner should be left to avail of the statutory remedies available under the Act is not acceptable. The decision of the Madras High Court in Kalanithi Maran proceeded on the basis that the dispute urged before it were with regard to adjudicatory facts and not with regard to jurisdictional facts as

S. 57(iii): Interest paid on a loan taken to avoid premature encashment of a fixed deposit is deductible against the interest earned on the fixed deposit

Raj Kumari Agarwal vs. DCIT (ITAT Agra)

On these facts, in order to protect the interest earnings from fixed deposits and to meet her financial needs, when an assessee raises a loan against the fixed deposits, so as to keep the source of earning intact, the expenditure so incurred in wholly and exclusively to earn the fixed deposit interest income. The authorities below were apparently swayed by the fact that the borrowings

S. 80-IB: If the undertaking satisfies the conditions for eligibility in the initial year, it must get deduction for 10 years& non-compliance in a subsequent year is irrelevant

Ace Multi Axes Systems Ltd vs. DCIT (Karnataka High Court)

There is no indication in s. 80-IB that the conditions stipulated therein has to be fulfilled by the assessee in all the 10 years. When once the benefit of 10 years, commencing from the initial year, is granted, if the undertaking satisfy all these conditions initially, the undertaking is entitled to the benefit of 10 consecutive years. The argument that, in the course of 10 years, if the growth

Changes In new Form -3CD Format

In the new format few points has been added/removed as such;

General

1. The major change is done on account of inserting specific tables for each column required like in point No. 13(c), 14(b), 17, 19, 20(b), 21, 21(b), 21{d(a)},

2. Annexure ‘I’ has been removed now in which balance sheet details was given.

Easy Steps to Registration PAN / TAN with TRACES and FAQs.

When I provide my TAN and Token Number, I get the message ‘Invalid details’. Why?
Token Number (Provisional Receipt Number) provided must be of any accepted Regular statement filed by you on or after April 1, 2010 or of any accepted Correction statement filed by you from April 1, 2010 to October 15, 2012.

Unmatched / Miss-matched challans' correction mandatory to download Consolidated file from TDSCPC.

Income Tax Department has communicated through email to their deductos regarding TDS on 09/08/2014 that deductors have to deposit Short Payment before allowing to download Conso File.

Consequences of failure to pay the demand:

 In accordance with provisions of section 201(1) of the Act, where any person, including the principal officer of a company, who is required to deduct any sum in accordance with the provisions of the Act; does not pay, or after so deducting fails to pay, the whole or any

REGISTRATION OFFICES

Working Hours at Registrar Offices:

The central Government empowered to establish registration offices under Section 396 of the Companies Act 2013.

The Central Government shall establish such number of offices at such places as it thinks fit, specifying their

Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availed - NO: HC

THE issue before the Bench is - Whether when assessee discontinues manufacturing activities and commences trading from part of premises and also earns rental income by leasing out remaining part, it is entitled to set off business loss from trading against rental income on which Sec 24 benefit was also availe. NO is the HC's answer.

Facts of the case

S. 153A: AO is required to assess the “total income” and is not confined only to income which was unearthed during search. Law laid down in All Cargo Global Logistics disapproved

Canara Housing Development Co vs. DCIT (Karnataka High Court)

The Tribunal has proceeded on the assumption by virtue of the judgment of the Special Bench in All Cargo Global, the scope of enquiry u/s 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power u/s 263. In the entire scheme of s. 153A

S. 153A: No addition can be made in respect of an unabated assessment which has become final if no incriminating material is found during the search

CIT vs. Murli Agro Products Ltd (Bombay High Court)

(iii) Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed u/s 80HHC would attain finality. In such a case, the AO, while passing the independent assessment order u/s 153A could not have disturbed the assessment order which has attained finality, unless

Whether charges collected by the Promoter developer from flat buyers in terms of provisions of Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963 are liable to service tax under 'Management, maintenance and repair services

Hiranandani Construction (P.) Ltd. vs. CCE [2014] 43 taxmann.com 172 (Mumbai – CESTAT)

'

Facts of case:

The appellant was engaged in the construction of residential complex and collected certain amounts as the development and maintenance fees from the flat buyers before handing over to them possession of the flats. Such sum was collected by it as a promoter to discharge payments towards outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any

Summary of POINT OF TAXATION RULES, 2011

Point of Taxation Rules, 2011

[18/2011-Service Tax dated 01.03.2011]
[as amended by 25/2011-Service Tax dated 31.03.2011 and corrigendum dated 04.04.2011]

  

1. Short title and commencement:

(1)         These rules shall be called the Point of Taxation Rules, 2011.

(2)    They shall come into force on the 1st day of April, 2011.

Tax liability for ESOPs.

 Kumar was handsomely rewarded with Employee Stock Option Plans (Esops) on the foreign company shares (listed on European stock exchanges) from his multinational company last year. He was more than happy when he received his paycheck in August last year after he had exercised his stock options and then sold shares to capitalise on the 10 euro per share (approximately Rs 87) difference (between the market price and the exercise price) that was available on the Esops. His company withheld the required TDS on the Esops realisation and handed the balance to him.

How Secondment employees creates PE

In a recent case, the Mumbai Tribunal held that where the taxpayer has seconded its personnel to work under the direct control and supervision of the Indian company and was not providing any other service to the Indian company, it did not create a permanent establishment (PE) in India under article 5 of the India-USA double taxation avoidance agreement (“tax treaty”).

Implications of Secondment employees in a company

International assignments may have a significant effect on companies' corporate taxes. A variety of U.S. Internal Revenue Code (IRC) provisions that impact international assignments can be traps for the unwary. The following discussion will focus on three areas of planning opportunities that companies should consider regarding their expatriates and their international assignment programs:

How International Assignee creates PE.

The concept of Permanent Establishment (PE) is one of the fundamental principles used by taxing authorities to claim jurisdiction over a corporate entity deemed to be doing business in their location. When sending people to work in overseas locations it is important to consider the impact the PE concept might have on the company as a whole.

Complete procedure to re-submit your Income Tax Return by e-filing portal

If an assessee has filed his income tax return and subsequently found any omission or wrong statement therein, he can re-file/revise the return with necessary modification. This re-filing of the income tax return is referred to as Revised Return. The process for revising the return is very simple. Please remember that the process outlined below is applicable if you had filed the original return online.

LIABILITY AND DISQUALIFICATION OF AUDITOR

According to Section 147(2) of the Companies Act 2013 discussed earlier here, if an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. If an auditor has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a

DUTIES AND POWERS OF AUDITORS

Auditor’s Report:

The auditor shall make a report to the members of the company on accounts examined by him on every financial statements and report financial statement give a true and fair view of the state of the company’s affairs at the end of its financial year and profit or loss and cash flow for the year and such other matters. [Section 143(2)]

The auditor report shall also state:

Whether when assessee has paid advance tax in certain FYs but chooses not to file returns for many years, income of years for which no returns were filed, partakes character of undisclosed income - YES: HC

THE issue before the Bench is - Whether when the assessee has paid advance tax in certain financial years but chooses not to file returns for many years, the income of the years for which no returns were filed, partakes the character of undisclosed income. And the answer is YES.

Facts of the case

Communications from CPC(TDS)

Dear Professional Colleague,
Re: Communications from CPC(TDS)
This is in furtherance of our earlier mail DTC/2014-15/ MM-1 titled 'Communications from CPC(TDS)'. We hope that the information so provided had served the intended purpose. CPC (TDS) has through a recent communication updated us further in this regard.

Delhi High Court Ruling quashes Rule 5A(2) of the Service Tax Rules and the Instructions issued by CBEC which prescribes manner of an audit and the records that can be called for by the authorities

We are pleased to release this Tax Update on a recent decision by the Delhi High Court in the case of Travelite (India) vs. UOI & Ors, which quashes the following:

(i) Rule 5A(2) of the Service Tax Rules, 1994 authorising audit; and
(ii) CBEC’s Instruction F. No. 137/26/2007-CX dated 1.1.2008 (clarificatory instruction) regarding maintenance and furnishing of records in Service Tax.

The Delhi High Court has held that with the introduction of Section 72A of the Finance Act, 1994 the legislation provided the circumstances under which “Special audit” can be conducted. However, it did not intend to provide for a general audit to which every assessee may be subjected to, at the discretion of the authorities. The Court has thus struck down Rule 5A(2) treating its provisions as ultra-vires the rule making power conferred under Section 94(1). The Delhi High Court ruling establishes the well-settled principle that the Rules are merely to give effect to the Statute’s provisions and intent and the same cannot travel beyond the Statute.

Apply Online for New PAN, Reprint of PAN Card, Changes/Correction in PAN Card through NSDL.

NSDL accepts PAN applications on behalf of Income Tax Department (since June 2004) through its chain of TIN-Facilitation Centres (TIN-FCs) and PAN centres set up across the country. Further, NSDL also provides a facility to apply for PAN over internet through its online facility.

There are two types of PAN applications:

Whether refund claim is to be allowed to assessee consequent to an order passed in appeal irrespective of whether a fresh assessment order has been passed by AO or not - YES: HC

THE issues before the Bench are - Whether refund claimed by the assessee could be granted only on a fresh assessment u/s 240; Whether refusal of assessing officer to grant refund to the assessee on ground of pendency of final assessment order would amount to collection of taxes without the authority of law and Whether a refund claim is to be allowed to an assessee consequent to an order passed in an appeal irrespective of whether a fresh assessment order has been passed by the AO in this regard. And the verdict favours the assessee.

Facts of the case

Statutory body like the ITAT is expected to show consistency. Change in constitution of Bench does not mean diametrically opposite views can be taken

M/s Unique Artage vs. UOI (Rajasthan High Court)

It is really surprising that the Tribunal having once held that the petitioner has a prima facie case while disposing of its stay petition, has taken diametrically opposite view when it later dismissed the stay petition. Moreover, when the stay petition was already dismissed, which stay petition was again dismissed, is not clear. Notwithstanding change of composition of the bench, a certain amount of consistency is expected in the working of a statutory Tribunal like the ITAT. The learned senior counsel is right when he argues that if the Tribunal had formed an opinion, albeit tentatively, in the matter, it should have heard and decided the appeal itself. Having regard to the fact that already when the Tribunal had earlier observed that petitioner had an arguable case, this Court deems it appropriate to dispose of the writ petition directing the Tribunal to finally hear and decide the appeal

No S. 271(1)(c) penalty for failure to compute capital gains as per s. 50C. Direct judgements on the topic have to be followed

Harish Voovaya Shetty vs. ITO (ITAT Mumbai)

There are direct judgements which hold that where addition is made on account of application of s. 50C and there is no material on record to show that the assessee had received more amount than that shown by it on sale of property then penalty u/s 271(1)(c) cannot be levied. The decisions relied upon by the Dept are not directly on the issue and distinguishable on facts. The context in which the decisions have been rendered is entirely different from the context of the present case. The law in this regard is well settled as held in Sun Engineering 198 ITR 297 (SC). When there is a direct decision available on the issue, then it will be appropriate to follow the same particularly when no contrary decision on the same very issue is cited by the opposite side

Delhi HC rules sale of CCDs is capital gains and exempt under India-Mauritius DTAA

This tax alert summarizes a recent ruling of Delhi High Court (HC) in the case of Zaheer Mauritius (Taxpayer) wherein the issue was whether sale of equity shares and Compulsory Convertible Debentures (CCDs) is a loan transaction disguised as investment and, accordingly, whether the gains arising on sale of such CCDs can be regarded as interest under the Indian Tax Laws (ITL) as well as India-Mauritius Double Taxation Avoidance Agreement (DTAA). The HC ruled that gains arising on sale of CCDs is in the nature of capital gains and exempt by virtue of India-Mauritius DTAA. The HC also noted that the transaction involving CCDs and

Place of Provision.Rules under Service Tax.

Place of Provision of Service Rules have been notified w.e.f. 1-7-2012.

Rule 3 – General Rule

Rule 3 lays down the general rule that the location of the service recipient would be considered as the place of provision of service. However, where the location of the service recipient is not available in the ordinary course of business, the place provision would be the location of service provider. Rule 3 is a residuary rule and is applicable to a transaction which not covered by the subsequent rules

S. 254(2B): Even though action of the CIT in canceling registration u/s 12AA(3) is illegal, costs cannot be awarded as the said action is in discharge of duty & not mala fide

Parkar Medical Foundation vs. DCIT (ITAT Pune)

(ii) The CIT has passed the order u/s 12AA(3) of the Act during the course of discharge of her duty as CIT. While discharging her duty, her action might have caused some hardship to the assessee due to error of judgement but that in our opinion does not warrant levy of cost on the department. In Pooran Mal vs. Director 93 ITR 505 (SC), it was noted that s. 132 causes

Transfer pricing implications of interest-free loans, corporate guarantee & export turnover adjustments explained

Kohinoor Foods Ltd vs. ACIT (ITAT Delhi)

(i) Interest free loans to AEs: We have no issue of the TPO applying the CUP method. But the problem arises when in the name of applying CUP method; a wholly inapplicable comparable model applied which leads to distorted results. A significant sector of multi-national corporate set up involves creation of subsidiaries and associate enterprises for advancement of their overseas business. They help them in terms of finance by offering soft loans and

S. 133A: No addition can be made on the basis of a surrender simplictor even if the surrender is during the course of s. 133A survey proceedings

ITO vs. Ram Prakash (ITAT Agra)

The issue raised is infructuous inasmuch as even if the surrender is in order but the addition was not warranted on merits, it is only elementary that merely because the assessee has, under misconception of facts or law,

Major Changes in Revised Form 3CD.

The  15 year old format of Form 3CD with standard 32 questions now changed to 41 and following the new disclosures in the Revised Form 3CD.

01.   Details of demand raised or refund issued during the previous year under any tax laws other than Income Tax Act, 1961 and Wealth tax Act, 1957 along-with details of relevant proceedings

Steps to be taken in case of TDS mismatch.

Even if the credit for TDS as claimed in the return matches with the balance as appearing in the Form 26AS, Assessing Officer may still raise a demand for payment of differential amount due to TDS mismatch. The reason for such differences could be as under:

Return of Income & Procedure of Assessment

Sec 139(1): submission of return of income * Being a co. or a firm(even those co’s whose entire income is exempt u/s 10, etc) * Being a person other than co, firm           1) if his total income or           2) total income of any other person in respect of which he is assessable exceeds max. amount not chargeable to tax. NOTE : even a public ltd. Co. though incorporated but has not received certificate of commencement has to file return. Sec 139(1B): Return may be filed on a specific computer readable media, same shall be deemed to be return furnished u/s 139(1)

MEF online empanelment dated extended to 10th August, 2014

Due to last date of filing of ITRs being 31st July, 2014, the pressure on MEF site started from 1st August, 2014 whereby the members are facing problem in filling the same. Considering the genuine difficulty, the last date of online filing of MEF 2014-15 is hereby extended from 4th August to 10th August, 2014 and the last date of submission of duly signed declaration is extended to 20th August, 2014. -

Rotation of Auditor

Sub – section (2) of this section 139 of the Companies Act, 2013 discussed earlier here expressly say that provide that no listed company or some other companies as notified shall appoint or re – appoint (i) an individual for more than one term of five consecutive years, or (ii) an audit firm for more than two terms of five consecutive years. Any audit firm shall not be appointed as auditor which has any common partner or partners with the firm whose tenure has expired in the company immediately preceding financial year.

For the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-

Whether if acquisition of machinery turns out to be contrary to terms of contract, Revenue is right in denying depreciation u/s 32 - NO: HC

THE issues before the Bench are - Whether when there is no substantial change in the language of the substituted provision of law, it can be said that the assessee would be denied deduction merely because the provision has changed; whether in order to claim depreciation u/s 32, it is relevant how the said machinery was acquired & whether in case acquisition of machinery was contrary to the terms of the contract between the parties, depreciation claim can be denied to the assessee. And the verdict favours the assessee.

Whether supply of food, edibles and beverages to persons within a canteen provided by the company would attract service tax asoutdoor catering services?

Indian Coffee Workers' Society Ltd. vs. CCE & ST., Allahabad (2014 (34) STR 546 (All.)

FACTS

Appellant entered into agreements for running and maintenance of an administrative building canteen Appellant supplied food, edibles and beverages to the individual customers in accordance with the rate specified in the agreement. Appellant was provided a place for running the canteen by the Company. Department had contended that Appellant was providing "Outdoor catering services."

A guide to Clubbing of Income in India

INTRODUCTION

In India, Income tax is levied on a slab system. These are considered to be progressive rates of tax and as the income goes up, the rates also go up. At present, the income tax rates start from a minimum of 10 % and it goes up to 30%.However, there is a tendency among the tax payers to reduce their tax liability especially those falling under higher tax brackets, by transferring their assets in favor of their family members or by arranging their sources of income in such a way that tax incidence fall on others, whereas the benefit of the

Knowing About 17 Questions On Loss May Help You In Saving Taxes!

Everybody tries to earn profit, but sometime even best of effort produces losses. Income Tax Act has provisions to adjust the losses from one head to another , within own head and if losses still remain, facility of carry forward to specified years and adjusting in any future years . These provisions are contained in Chapter VI of the I T Act titled "Aggregation of Income And set off or carry forward and set off of losses" . Sixteen frequently asked questions have been answered below

Refund of TDS couldn’t be denied evenif mismatch Form 26AS when tax was deducted by Govt. Dept.

Refund claim made by deductee could not be denied by Assessing Officer on ground that there was mis-match between details furnished by deductee and Form 26AS without verifying whether or not deductor had made payment of TDS in government account.

APPOINTMENT OF AUDITOR

True and fair Audits are core concern for corporate world and its regulators. The manner of appointment of auditors may affect independence of audit. Section 139 of the Companies Act 2013 

Whether when assessee does not cooperate in assessment and DVO also adopts arm-chair approach of making no independent inquiry, merely following return on capital method AO can make huge additions as unexplained investment - NO: HC

THE issue before the Bench is - Whether when the assessee does not cooperate in the assessment proceedings and the DVO also adopts arm-chair approach of making no independent inquiry, merely following the return on capital investment method the AO can make huge additions as unexplained investment. And the verdict favours the assessee.

Facts of the case

Tax Planning by Private Trust

Introduction: The return filing under Indian income tax has under gone sea change after the introduction of efiling. The major problem faced by most of the assessees, being a private trust, is how to file their tax return, inter alia, the type of form and whether to efile or not. The authors have tried to itemize the various ways to combat tricky situations while filing the tax returns for private

FAQ on Capital Gains Tax and Capital Gains Exemption

Q1. What is Capital Gain?

A1: A capital gain is a profit that results from a disposition of a Capital Asset, such as stocks, bonds or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Conversely, capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.

Understanding disallowances of expenses under section 37 of the Income tax act, 1961- Part-III.

The posting had been move to another website. Please click the link below to get the access of the same.  


https://taxofindia.wordpress.com/2015/11/26/understanding-disallowances-of-expenses-under-section-37-of-the-income-tax-act-1961-part-iii/ 

Pre & Post Income tax return formalities

 

Here are some of the things to do for while handling the entire income tax refund process so that you can receive the same quickly:-

File the in time – The entire tax refund process starts with them taking some specific action. For any tax payer, doing nothing will not yield any result in any benefit on the tax front. Thus if there is some outcome desired, then there will have to be efforts to get that particular outcome. When it comes to the question of getting an income tax refund, the first thing that has to be done is to file an

LOAN AND INVESTMENT

According to Section 185 of the Companies Act 2013, save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person. 

INVESTMENT IN OTHERS’ NAME

According to Section 187 of the Companies Act 2013 discussed earlier here, all investments made or held by a company in any property, security or other asset shall be made and held by it in its own name.

The company may hold any shares in its subsidiary company in the name of any nominee or nominees of the company, if it is necessary to do so, to ensure that the number of members of the subsidiary company is not

Whether it amounts to concealment of income warranting penalty when legal expenses incurred to defend himself in a criminal case were claimed as business expenditure but same were disallowed by Tribunal - NO: ITAT

THE issue before the Bench is - Whether it amounts to concealment of income warranting penalty u/s 271(1)(C) when legal expenses incurred by the assessee-actor for defending himself in a criminal case were claimed as business expenditure but the same were disallowed by the Tribunal. And the answer is NO.

CBDT provides clarification on taxability of AIFs having status of non-charitable trusts

The Central Board of Direct taxes has issued Circular no. 13 dated 28 July 2014 to provide clarifications with respect to taxability of Alternative Investments Funds having status of non-charitable trusts.

This alert summarises the salient features of the aforesaid Circular.

http://www.caalley.com/itax14/itCir13.pdf

Whether, a service provider can be directed to pay differential service tax if the recipient of his service is found to have claimed credit in excess of that paid by the service provider? Facts:

SOS Enterprise vs. CCE&ST [2014] 43 taxmann .com 259 (Ahmedabad CETAT)

The Appellant provided services as direct selling agent to its principal and raised invoices on the principal for such services. In a proceeding against the principal, on verification of records, it was found that, the principal has taken the CENVAT Credit more than service tax actually paid by the Appellant' On this ground demand was confirmed against the Appellant to the extent of excess CENVAT Credit and penalties were imposed. The Appellant explained that the differences arise because the Appellant paid the service tax on "receipt basis", whereas the Principal may have taken the CENVAT Credit on the basis of invoice.

Whether lease rental received from letting of property acquired from defaulting borrower under the provisions of SARFAESI Act is liable to service tax as renting of immovable property service or is regarded as recovery of outstanding loan

Maharastra State Co- op. Bank Ltd. vs. CCE [2014] 43 taxmann.com 41 (Mumbai – CESTAT)

Facts:

The appellant is a co-operative bank rendering banking and financial services. It took possession of the Borrower's factories' plant and machinery in terms of section 13(4)(a). of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for the default in repayment of loan. Thereafter,