CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 16, 2016
CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 16, 2016
INCOME TAX ACT
SECTION 4
INCOME – CHARGEABLE AS
Nagpur Bench of Bombay High Court said that corruption in India can be beaten if all work together. Calling corruption a “hydra-headed monster”, the court asked citizens to not to pay taxes if the government fails to curb corruption – [2016] 66 taxmann 90 (Bombay).
SECTION 5
INCOME – ACCRUAL OF
Legal fees : Where assessee-solicitor received money from his client to meet out expenses incurred on behalf of client, solicitor remained liable to account by this money to his client, and, hence, it did not become income of assessee – [2016] 66 taxmann 13 (Kolkata – Trib.)
SECTION 14A
EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME
Recording of satisfaction : Where Assessing Officer straight away computed disallowance under section 14A without recording his satisfaction, action of Assessing Officer was not in accordance with law – [2016] 66 taxmann 13 (Kolkata – Trib.)
BUSINESS EXPENDITURE – ALLOWABILITY OF
Personal expenses : Where disallowance of expenses on account of personal element was made on estimation and revenue had not challenged issue before Tribunal for earlier assessment years, disallowance had to be restricted in line with previous assessment years – [2016] 66 taxmann 13 (Kolkata – Trib.)
SECTION 40A(3)
BUSINESS DISALLOWANCE – CASH PAYMENT EXCEEDING PRESCRIBED LIMIT
Where assessee engaged in manufacturing leather goods had made payment in cash to butchers/pheriwalas who supplied hides and skin to it against kacha bills because purchases were made from unorganized sector and suppliers did not have printed bills, such payment was fully covered within meaning of rule 6DD(e)(ii), and no disallowance under section 40A(3) would be called for – [2016] 66 taxmann 40 (Chandigarh – Trib.)
SECTION 68
CASH CREDITS
Share capital : Assessing Officer could initiate reassessment proceedings taking a view that having regard to net worth of assessee-company, huge premium received by it on issue of share capital represented unexplained cash credit which escaped assessment to tax – [2016] 66 taxmann 8 (Gujarat)
SECTION 80HHC
DEDUCTIONS – EXPORTER
Revision : Where in respect of section 80HHC deduction, Assessing Officer had adopted a view which was permissible in law, Commissioner could not exercise its revisionary power even if there was loss of revenue –[2016] 66 taxmann 38 (Allahabad)
SECTION 92C
TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
There is no rule that TP adjustments cannot exceed global profits of the MNC group as a whole – [2016] 66 taxmann 92 (Ahmedabad – Trib.)
Comparables and adjustments/Comparables – Illustrations : In case of assessee rendering investment advisory related support services to its AE, companies carrying out merchant banking activities and offering portfolio management services to domestic retail investors, could not be accepted as comparables while determining ALP – [2016] 66 taxmann 14 (Mumbai – Trib.)
SECTION 94
SECURITIES – AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS
Dividend stripping : Where assessee sold securities within three months on which dividend was received, loss on securities was liable to be restricted to extent of dividend received – [2016] 66 taxmann 13 (Kolkata – Trib.)
SECTION 145
METHOD OF ACCOUNTING – ESTIMATION OF INCOME
GP rate : Where rate of goods in assessee’s line of business vary from lot to lot, size to size and as per grade and length of leather/skins, shine of skins, etc., Assessing Officer could not conclude on basis of certain bills that assessee was selling goods to sister concerns at lower price than that charged from others and, thus making addition on account of suppressed sales – [2016] 66 taxmann 40 (Chandigarh – Trib.)
SECTION 194J
DEDUCTION OF TAX AT SOURCE – FEES FOR PROFESSIONAL OR TECHNICAL SERVICES
Registration charges : Where assessee paid sum towards deficit registration charges as directed by High Court, no tax needed to be deducted at source – [2016] 66 taxmann 13 (Kolkata – Trib.)
SECTION 195
DEDUCTION OF TAX AT SOURCE – PAYMENT TO NON-RESIDENT
Section 172 falls in Chapter XV titled as ‘Liability in Special Cases – Profits of Non-residents’ and is referable to section 44B; sub-sections of section 172 specifies how to levy, assess and recover tax from shipping business of non-resident and thus, there is no warrant to apply provisions in chapter XVII for ‘collection and recovery of the tax’ and tax deduction at source vide section 195 – [2016] 66 taxmann 93 (Bombay)
SECTION 220
COLLECTION AND RECOVERY OF TAX – WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT
Stay : Where assessee was declared to be an assessee-in-default under section 220 and a demand of tax was made against it with allegation that it failed to make TDS under section 194H on brokerage/commission paid to its dealers, in view of fact that for earlier years issue whether discounts made by assessee to its dealers could be treated as brokerage/commission was pending before Supreme Court, Deputy Commissioner was directed not to take any coercive steps for recovery of disputed tax demand subject to assessee depositing 40 per cent of demanded amount – [2016] 66 taxmann 15 (Andhra Pradesh)
COMPANIES ACT
SECTION 433
WINDING UP – CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP
Where petitioner had filed winding up petition against respondent company on alleged failure of respondent to pay its outstanding and, dispute raised by respondent company was a bona fide, reasonable and genuine dispute and there was no determined or a definite sum of money payable by respondent company to petitioner, petition for winding up of respondent company was not required to be admitted and entertained – [2016] 66 taxmann 44 (Gujarat)
WINDING UP – CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP
Where respondent company had raised bona fide defence against claim of petitioner for construction work carried out by it and respondent was a going concern, winding up petition filed by petitioner against respondent was to be dismissed – [2016] 66 taxmann 21 (Gujarat)
SERVICE TAX
SECTION 65(19)
TAXABLE SERVICES – BUSINESS AUXILIARY SERVICES
Crate rentals recovered by beverage-manufacturers is ‘deemed sale’ as there is transfer of right to use with effective control and possession of crates; hence, same is liable to VAT/CST and cannot be charged to service tax – [2016] 66 taxmann 56 (New Delhi – CESTAT)
CST & VAT
SECTION 4 OF CENTRAL SALES TAX ACT, 1956
SALE – WHEN IS A SALE OR PURCHASE OF GOODS SAID TO TAKE PLACE OUTSIDE A STATE
In case of sale of motor vehicle, seller or manufacturer/dealer is bound to transport motor vehicle to office of Registering Authority and only when it reaches there safe and sound, it can be said to be in a deliverable state and only then property in such a motor vehicle can pass to buyer – [2016] 66 taxmann 91 (SC)
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