Dept Acts On High Court Directives + ESOP Expenditure Allowable + ITAT Takes Contra View On S. 115JB

CIT vs. Lemon Tree Hotels Ltd (Delhi High Court)

S. 37(1): Cost of Employees Stock Option (ESOP) debited to P&L A/c is allowable business expenditure

The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of Rs. 1,28,19,169/- made by the Assessing Officer (‘AO’) by way of disallowance of the expenses debited as cost of Employees Stock Option (‘ESOP’) in profit and loss account?

 

Is P/L Cr Bal part of NW, Free Reserves under CA2013

Most companies have been following the practice of retaining their excess profit under the Profit & Loss Account under the Companies Act, 1956.Suchprofit was usually not transferred to any reserve becausepayingdividendbyutilisingsuchfreereserveswouldentailcertaincomplianceascompared todirectlydistributingitbyutilisingthecreditbalancelyingintheprofitandlossaccount.

Transfer Pricing: Mechanical Reference To TPO Is Void

DCIT vs. Tata Consultancy Services Ltd (ITAT Mumbai)

Transfer Pricing: (i) If the AO & CIT make a mechanical reference to the TPO without applying mind to the TP report & other data filed by the assessee, the reference is invalid, (ii) A transfer pricing adjustment cannot be made if the assessee's income is exempt u/s 10A or 80HHE or (iii) if the AE is assessed at a rate of tax higher that tax rate in India
(c) The AO erred in not himself examining the issue of Transfer Pricing and with the approval of the CIT, made a reference to the TPO u/s 92CA(1) of the Act; that the AO as well as the CIT failed to apply their mind to the TP Report filed by the assessee, or to any other material or information or document furnished. The TPO made an adjustment which was incorporated by the AO in the assessment order. Thereby, the AO as well as the CIT did not discharge necessary respective judicial functions conferred on them under sections 92C and 92CA of the Act;
(d) Further, the assessee is also correct in contending that no TP adjustment can be made in a case like the present one, where the assessee enjoys u/s 10A or 80HHE of the Act, or where the tax rate in the country of the Associated Enterprises is higher than the rate of tax in India and where the establishment of tax avoidance or manipulation of prices or establishment of shifting of profits is not possible

Broadcasting and Film Production - Review of FDI Policy

In an attempt to further promote ease of doing business and increase investment India, the Government of India has issued a draft press note for liberalising the Foreign Direct Investment (FDI) policy in 15 major sectors of the economy, including the media and entertainment sector (more specifically the broadcasting sector). Changes to be introduced in the policy include increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment.
We set out below a summary of proposed changes, including the potential benefits to the broadcasting and film production segment.

Capital receipt credited to P&L account is part of book profit for MAT purposes

Recently, the Bangalore Income Tax Appellate Tribunal held that where an item of income or expenditure was correctly disclosed in the P&L account as per the Companies Act, any disclosure in the Notes to Accounts in this regard could not be a basis for adjusting book profits for the purpose of Section 115JB of the Income-tax Act. The profit in the P&L account was not open to tinkering by the assessing officer or the assessee while computing book profit under Section 115JB.

Class of shareholders

The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. However, Regulation 31A of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 came into force on 2nd September 2015 on publication of these regulations along with sub – regulation (4) of Regulation 23. Regulation 31A deals with Disclosure of Class of shareholders and Conditions for Reclassification.

Whether exemption u/s 10(23C)(vi) can be denied to a Society running only educational institution on mere pretext that it is making profit - NO: HC

THE issue is - Whether exemption u/s 10(23C)(vi) can be denied to a Society running only educational institution on mere pretext that it is making profit. NO is the answer.

Facts of the case

The Assessee is a Society registered under the Societies Registration Act. One of its objects is to establish an educational institution. In the year 2001-02, the Assessee established an educational institution. Prior to the assessment year 2007-08, the total receipts were below the monetary limit of Rs. 10 crores. Assessee society was declared non-taxable. For the assessment year 2007-08, Assessing Officer found that the income of the Assessee was above Rs.10 crores and, accordingly, disallowed the exemption claimed by the Assessee under Section 10 (23C)(iiiad) on the ground that the registration was required to be obtained under Section 10(23C)(vi). The order of the Assessing Officer was confirmed by the Income Tax Appellate Tribunal.

Imp Verdicts On ITAT Members, 50C, 14A/ Rule 8D, S. 292C Presumption, TDS On Non-Cash Deals Etc

ITO vs. LGW Limited (ITAT Kolkata)

S. 50C should not be invoked if difference between stamp value and declared consideration is nominal, S. 14A/ Rule 8D does not apply to share application money, Pure foreign exchange hedging transactions cannot be treated as speculative transactions
Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted
 

Am I Eligible For Relief For Tax Paid Abroad?

I came in for employment purpose and working here. Now after completing my 3 years tenure I am expected to come back India finally by 31.07.2007. What would be the Tax liability on me in India as I would not be a NRI for the Financial year 2007-08 under the following income structure and tax paid in Fiji.

CBEC formulates a scheme for speedy disbursal of pending refund claims of exporters of service under Rule 5 of the CENVAT Credit Rules, 2004

 

This Tax Alert summarizes Circular no. 187/6/2015-Service Tax dated 10 November 2015 issued by the Central Board of Excise and Customs (CBEC).

 

Vide this Circular the CBEC has formulated a scheme for speedy disbursal of pending refund claims of exporters of services under Rule 5 of the CENVAT Credit Rules, 2004. Key features of the scheme are as follows: 

 

CBEC formulates a scheme for speedy disbursal of pending refund claims of exporters of service under Rule 5 of the CENVAT Credit Rules, 2004

 

This Tax Alert summarizes Circular no. 187/6/2015-Service Tax dated 10 November 2015 issued by the Central Board of Excise and Customs (CBEC).

 

Vide this Circular the CBEC has formulated a scheme for speedy disbursal of pending refund claims of exporters of services under Rule 5 of the CENVAT Credit Rules, 2004. Key features of the scheme are as follows: 

 

Whether sum paid to acquire unexpired portion of service agreements which will generate revenue for assessee, is to be treated as revenue expenditure - YES: ITAT

THE issue is - Whether consideration paid to acquire unexpired portion of service agreements which will generate revenue for the assessee, is required to be treated as revenue expenditure. YES is the answer.

Facts of the case

A) The assessee is an Indian multinational information technology service, consulting and business solutions company. During the concerned year, it had paid Rs. 85,00,000/- to Citi Corp Information Technology Industries Ltd (CITIL) for purchase of their processing division. This amount was amortized over the period of 25 months being balance unexpired period of contract. The assessee thereafter duly filed the copy of assignment agreement effective from 1st August 1998 with the AO. The AO however held that no where it was mentioned in the contract that the

Five Imp Verdicts Of Supreme Court And High Court On Core Issues

Andaman Timber Industries vs. CCE (Supreme Court)

Failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. It is a serious flaw which renders the order a nullity

Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected

 

RELATED PARTY

The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2^nd September 2015 and will come into force from 1^st December 2015. In this post we will discussion definition of Holding, Subsidiary, Associates, Relative, Related Party, and Related Party Transactions.

Whether provisions of section 41(1) cannot be applied where assessee is simply acting on behalf of customers and earns consultancy fee for services rendered - YES: ITAT

THE issue is - Whether provisions of section 41(1) cannot be applied where assessee is simply acting on behalf of its customers and getting consultancy fee from the client on account of services rendered. YES is the answer.

Facts of the case

The assessee is a Public Sector Undertaking engaged in providing conceptual studies and management consultancy, healthcare facility, design, project management and logistic installation. It filed return for relevant AY. During assessment procees, AO observed that there

Clarifications issued with regard to levy of Swachh Bharat Cess effective from 15 November 2015

Vide Notification nos. 21/2015-ST and 22/2015-ST dated 6 November 2015, the Ministry of Finance notified that Swachh Bharat Cess shall be levied at the rate of 0.5% on the value of taxable services with effect from 15 November 2015 for the purpose of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto. Subsequent Notification nos. 23/2015, 24/2015, 25/2015 – ST dated 12 November 2015 have been issued clarifying levy of Swachh Bharat Cess as follows:

Major Reforms in Foreign Direct Investment Policy

With a view to boost the ease of doing business in India and to further promote 'Make in India' and 'Startup India' initiatives, the Government published a Press Note on 10 November 2015, outlining significant reforms in the foreign direct investment (FDI) Policy.  The reforms are aimed at attracting more foreign investments through further easing, rationalising and simplifying the process of foreign investments in the country and putting more FDI proposals under automatic route.

The reforms have a multi-pronged effect:

1. Sectoral reform including construction development, retail trading, wholesale cash and carry, defence, broadcasting, banking, and plantation sectors.

2. Significant ease in establishing/ investing in Limited Liability Partnerships (LLPs) in India as well as downstream investment by such LLPs.

3. Bringing investments by non-resident Indian (NRI)-owned and controlled entities outside India on par with NRI investments.

4. Boosting e-commerce, including allowing e-commerce for manufacturing entities as well as for single brand retail trading entities.

5. A slew of rationalisation measures, including allowing swap of shares without prior approval, enhancement of the limit for Foreign Investmtent Promotion Board from INR 30 billion to INR 50 billion.  

The Department of Industrial Policy and Promotion has been advised to consolidate all FDI-related instructions contained in various notifications and press notes and prepare a consolidated booklet for easy reference by investors.

Whether allowance of expenses on proportionate basis in relation to commercial production at one of units can be said to be perverse if such allowance is based on finding of facts by CIT(A) as well as ITAT - NO: HC

THE issue is - Whether allowance of expenses on proportionate basis in relation to commercial production at one of units can be said to be perverse if such allowance is based on finding of facts by CIT(A) as well as ITAT. NO is the answer.

Facts of the case

The assessee had filed its return declaring loss of Rs. 12,58,75,530/- which was later revised to Rs. 12,54,22,870/-. The assessee subsequently filed second revised return declaring loss of Rs.

No More Tears! NAMO Promises To Make Assessing Officers Accountable For Bogus Additions And Demands

It is common experience that Assessing Officers have the tendency to make huge additions and disallowances on frivolous grounds and raise huge tax demands. Coercive measures are adopted to recover the said demands. This causes immense hardship to honest taxpayers.
There are two reasons for the modus operandi of the Assessing Officers. The first is that the CBDT has/ had a policy of rewarding officers with plum postings and promotions based on the tax collected by them (see Collect Taxes; Get Promotion & Choice Posting: CBDT Chief). The second is that some unscrupulous officers get an excuse to demand bribes from the taxpayers

Transfer of unabsorbed losses

Transfer of unabsorbed losses permissible if amalgamating company in business for three or more years even if business units engaged for less than three years; Activities for setting up of  business also construed as “engaged in business”

The Karnataka High Court, while allowing set off of unabsorbed loss of the taxpayer  acquired on amalgamation, has held that unabsorbed losses pertained to the amalgamating company as a whole, and not to any division. It was the amalgamating company that should have been engaged in business for three or more years prior to amalgamation.