CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 10,2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 10,2016

INCOME TAX ACT

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME

Rule 8D : Where in respect of tax free interest income earned on RBI bonds by assessee, Assessing Officer made disallowance under section 14A by invoking provisions of rule 8D(2) without recording his satisfaction under rule 8D(1), impugned disallowance was not sustainable – [2016] 66 taxmann 25 (Kolkata – Trib.)

SECTION 37(1)

BUSINESS EXPENDITURE – ALLOWABILITY OF

Commission : Where assessee claimed deduction in respect of commission paid to various agents, matter was to be remanded back to Assessing Officer for disposal afresh after finding out identity of agents and genuineness of payments by utilising his power under section 131 – [2016] 66 taxmann 36 (Madras)

SECTION 44BB

NON-RESIDENTS – MINERAL OIL, BUSINESS FOR PROSPECTING / EXPLORATION, ETC., IN CASE OF

Computation of gross receipts : Where profits and gains of business carried out by assessee-company were to be computed at 10 per cent of gross receipts as per deeming provisions of section 44BB, it could not claim separate deduction of fuel cost incurred in respect of contract undertaken for construction of offshore facilities for development of certain gas fields – [2016] 66 taxmann 19 (Mumbai – Trib.)

SECTION 69

UNEXPLAINED INVESTMENTS

Land : Where Assessing Officer on basis of an agreement to sell seized from one ‘S’ and statement of ‘S’ recorded under section 131 made additions in crores under section 69 to income of assessee and Tribunal upheld addition to extent of Rs. 11 lakhs, since revenue had failed to bring on record any evidence to prove that assessee had made actual investment in crores, order of Tribunal deserved to be upheld – [2016] 66 taxmann 41 (Gujarat)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

For the purpose of determining most appropriate method for determining Arm’s Length Price, the functions performed by the assessee need to be ascertained. Where assessee claimed to be an independent distributor, asssuming risks in distribution business however TPO confused himself in characterization of assessee’s functions as captive, routine, full fledged distributor at one place and routine distributor in another place matter was to be re-examined on the basis of the agreement entered into between the assessee and AE to determine the actual function performed by the assessee – [2016] 66 taxmann 71 (Chennai – Trib.)

Comparables and adjustments/Adjustments – AMP expenses : Where TPO made addition to assessee’s ALP in respect of incurring AMP expenses on behalf of its AE, matter was to be remanded back for disposal afresh with a direction to firstly ascertain if any part of AMP expenses was for purpose of creating marking intangibles for AE – [2016] 66 taxmann 47 (Delhi)

Comparables and adjustments/Comparables – Illustrations : Where assessee, a UK based company, having its PE in India, rendered design and engineering services to Indian AE, foreign comparables i.e. UK based comparables, could be taken into consideration while determining ALP of services so rendered – [2016] 66 taxmann 10 (Mumbai – Trib.)

Comparables and adjustments/Methods – RPM : In case of assessee, engaged in trading/distributing activities i.e. import and export of spare parts of cars with its AE, Resale Price Method (RPM) was to be regarded as most appropriate method for determining ALP – [2016] 66 taxmann 9 (Delhi – Trib.)

SECTION 115JB

MINIMUM ALTERNATE TAX

Applicability of : Section 115JB is applicable only to entities registered and recognised to be companies under Companies Act, 1956 and, therefore, in case of assessee-corporation established under Damodar Valley Corporation Act, 1948, provisions of section 115JB would not apply – [2016] 66 taxmann 25 (Kolkata – Trib.)

COMPANIES ACT

SECTION 34

COMPANY – INCORPORATION OF

Wherever necessary to give effect to the policy of law, sale of shares of a company may be regarded as sale of its assets by piercing the corporate veil. – [2016] 66 taxmann 72 (SC)

COMPETITION ACT

SECTION 4

PROHIBITION OF ABUSE OF DOMINANT POSITION

Where Government employees were asked by Government to undertake air travel under LTC from OP airlines, Government being consumer enjoyed liberty to exercise its choice of airlines and no case of contravention of sections 3 and 4 was made out against Government and OP airlines – [2016] 66 taxmann 22 (CCI)

Where OP had denied permission to self handle GHS to informant for its TruJet’ flight operations at International Airport at Bangalore (KIAB) in accordance with provisions of GHS Regulations and OP was not providing any GHS at KIAB, there was no leveraging of dominant position by OP – [2016] 66 taxmann 43 (CCI)

SERVICE TAX

SECTION 75

INTEREST – ON DELAYED PAYMENT OF DUTY/TAX

Where tax demanded in notice was Rs. 2,40,780, interest can be demanded only on that amount; department cannot order recovery of interest on suomotu belated payment by assessee, if said payment was not specified in notice – [2016] 66 taxmann 32 (Chennai – CESTAT)

SECTION 80

PENALTY – NOT TO BE IMPOSED IN CERTAIN CASES

Where assessee had himself taken registration under service tax, he could not later claim that non-payment of service tax was due to his confusion as to liability to service tax – [2016] 66 taxmann 33 (Ahmedabad – CESTAT)

CST & VAT

SECTION 45 OF GUJARAT VALUE ADDED TAX ACT, 2003

RECOVERY – PROVISIONAL ATTACHMENT

Where assessee, a Hindu undivided family, was a dealer and Assessing Authority, vide order passed under section 45, attached property of wife of Karta of Hindu undivided family towards dues of Hindu undivided family, property in question could not be attached under section 45 – [2016] 66 taxmann 42 (Gujarat).

CENVAT CREDIT RULES

RULE 7

CENVAT CREDIT – MANNER OF DISTRIBUTION OF CREDIT BY INPUT SERVICE DISTRIBUTOR

Requirement of registration is procedural; hence, credit cannot be denied to input service distributor even if it is unregistered, provided assessee has maintained all records for verification by revenue – [2016] 66 taxmann 31 (Gujarat)

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