CORPORATE & PROFESSIONAL UPDATE DECEMBER 13, 2015
CORPORATE & PROFESSIONAL UPDATE DECEMBER 13, 2015
INCOME TAX ACT
SECTION 9
INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA
Penalty as ordered by US Court : An amount levied as penalty by an order of US Court can never attract any tax nor would such a payment made by applicant attracts any tax liability – [2015] 64 162 (AAR – New Delhi)
Royalty : Where assessee company reimbursed its foreign associate licence fees and charges for software used for report generation as said expenditure was incurred by foreign associate, there could be no TDS liability on assessee – [2015] 63 341 (Mumbai – Trib)
SECTION 36(1)(vii)
BAD DEBTS
Write off : Where assessee had placed details with regard to parties to whom advances had been given and later written off and authorities below had not made any inquiry from such parties, amount written off could not be disallowed – [2015] 64 15 (Ahmedabad – Trib.)
SECTION 37(1)
BUSINESS EXPENDITURE – YEAR IN WHICH DEDUCTIBLE
Additional remuneration to managing director : Where approval for additional remuneration paid to MD of assessee was received in succeeding year, such payment could not be allowed in current year – [2015] 64 15 (Ahmedabad – Trib.)
BUSINESS EXPENDITURE – ALLOWABILITY OF
Compensation : Where on one hand Tribunal held that amount paid by assessee, a production company, to exhibitors of its films, for loss incurred by them, was capital in nature and on other hand held that it was compensation paid to stay afloat in business, since Tribunal was giving two divergent views, matter was to be readjudicated – [2015] 63 340 (Madras)
SECTION 40(a)(i)
BUSINESS DISALLOWANCE – INTEREST, ETC., PAID TO NON-RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE
Depreciation : Depreciation is not an outgoing expenditure and, therefore, provisions of section 40(a)(i) are not attracted on such deduction – [2015] 63 341 (Mumbai – Trib.)
SECTION 40(a)(ia)
BUSINESS DISALLOWANCE – INTEREST, ETC., PAID TO A RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE
Payment of TDS : In view of decision of Smt. J. Rama v. CIT [2012] 344 ITR 608/[2010] 194 Taxman 37 (Kar.), assessee was liable to deduct tax at source from payments made to taxi owner; matter was to be remitted back to find out whether TDS payments were made within time – [2015] 63 347 (Karnataka)
SECTION 54F
CAPITAL GAINS – EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE
Ownership of more than one house : Where Assessing Officer rejected assessee’s claim for deduction under section 54F on ground that assessee owned more than one residential house property at time of sale of long term capital asset, since assessee was a mere co-owner in one of said residential property, impugned order passed by him deserved to be set aside – [2015] 63 366 (Delhi)
SECTION 92C
TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
For the purposes of Chapter X of the Act, the Transfer Pricing Adjustment envisaged is “price adjustment” (substitution of transaction price of international transaction with ALP) and not a “quantitative adjustment” by first determining whether the AMP spend of the Assessee on application of the bright line test (BLT), is excessive, thereby evidencing the existence of an international transaction involving the Associated Enterprises. – [2015] 64 150 (Delhi)
Comparable and adjustments – Comparables : Persistent loss making means continuous loss making for more than 3 years; company which earned profit in one of last three years could not be considered as loss making entity so as to exclude same from comparability analysis – [2015] 63 339 (Pune – Trib.)
TNMM : TNMM is appropriate method to benchmark international transaction pertaining to receipt of commission for marketing machines of AE – [2015] 63 339 (Pune – Trib.)
SECTION 145
METHOD OF ACCOUNTING – SYSTEM OF
Hybrid system : As per section 145, Hybrid system of accounting is not allowable – [2015] 64 15 (Ahmedabad – Trib.)
SECTION 145A
METHOD OF ACCOUNTING IN CERTAIN CASES
Section 145A of the Act was brought into statute in 1998 when MODVAT scheme was prevalent which allowed credit/set off on specified inputs used in manufacture of excisable goods apart from capital goods but now with Cenvat Scheme in operation which allows both manufacturers and service providers to take input credits on goods and services apart from capital goods across cross sectors without any one to one correlation and the Apex Court already holding in Eicher Motor that cenvat credit once validly taken cannot be effaced and creates an accrued right in favour of the enterprise, there is a need to align Section 145A of the Act with the present regime of indirect taxation which Parliament alone in its wisdom can do to keep pace with the developments taking place in economy – [2015] 64 161 (Mumbai – Trib.)
KAR VIVAD SAMADHAN SCHEME, 1998
SECTION 95
SETTLEMENT OF TAX DISPUTES – SCHEME NOT TO APPLY IN CERTAIN CASES
Constitutional validity : Where Finance Act, 1998 had introduced KarVivadSamadhan Scheme for settlement of tax disputes pending as on 1-9-1998 and section 95(iii) thereof excluded a class of persons, against whom prosecution for offence of cheating under Chapter XVII of IPC had been launched, from benefit of scheme, such class of persons had been rightly excluded from benefit of scheme – [2015] 64 28 (Bombay)
COMPANIES ACT
SECTION 394
AMALGAMATION
Where Court in principle agreed to sanction scheme of amalgamation whereby entire undertaking of transferor company was proposed to be transferred to transferee company but found exchange ratio to be unfair and unjust and not based on market realities, Registrar of Companies was to be directed to examine matter through experts and determine a fair and just exchange ratio – [2015] 64 11 (Gauhati)
SERVICE TAX
SECTION 68
PAYMENT – SERVICE TAX
Section 12B of Excise Act, providing for presumption of transfer of burden of taxes, is incorporated in service tax law tax; therefore, section 64A of Sale of Goods Act is also impliedly made applicable and accordingly, service provider may recover levy/increase of service tax from service recipient – [2015] 63 354 (Delhi)
SECTION 78
PENALTY – FOR EVASION OF DUTY/TAX
Penalty is levied only where any service tax has not been paid by reason of fraud, etc.; hence, when assessee’s activity is held to be not liable to service tax, question of penalty or imposition of penalty cannot arise – [2015] 64 35 (Allahabad)
CENTRAL EXCISE ACT
SECTION 2(d)
EXCISABLE GOODS – MARKETABILITY
Friction cloth arising at intermediate stage in manufacture of V-belts is non-marketable and non-excisable product; therefore, same is not includible in turnover limit for SSI-exemption purposes – [2015] 64 40 (New Delhi – CESTAT)
SECTION 11B
LEVY AND COLLECTION OF DUTY
Even date of filing of refund claim before wrong authority could be taken as date of filing for purpose of determining limitation – [2015] 63 359 (Bangalore – CESTAT)
CST & VAT
SECTION 8 OF CENTRAL SALES TAX ACT, 1956
DECLARATION FORM – FILING OF
Where assessee failed to produce Forms ‘C’ and ‘F’ before Assessing Authority and it approached Tribunal seeking opportunity to produce declaratory forms before it and Tribunal taking view that reasons assigned by assessee in not having produced forms before Assessing Authority were not acceptable, rejected appeal, assessee was to be permitted to establish reasons assigned in not producing declaratory forms before Assessing Authority – [2015] 64 27 (Karnataka)
CENVAT CREDIT RULES
RULE 2(l)
CENVAT CREDIT – INPUT SERVICE – INSURANCE SERVICES
Medical insurance of employees is an ‘activity relating to business’ and therefore, a manpower supplier is eligible to take input service credit thereof – [2015] 64 26 (New Delhi – CESTAT)
RULE 5
CENVAT CREDIT – REFUND OF
As per relevant notifications, read with section 11B, Cenvat refund claim must be filed ‘quarterly’ but within 1 year from ‘date of export’ – [2015] 64 53 (Jharkhand)
RULE 11
CENVAT CREDIT – REVERSAL AND LAPSING OF CREDIT WHEN EXEMPTION CLAIMED
Rule 11(3) of CENVAT Credit Rules providing for ‘lapsing of credit’ applies only if final products are totally exempted; same is inapplicable in case of conversion of DTA unit into EOU because DTA clearances by EOU are not exempt. Therefore, unutilized credit balance lying in hands of DTA unit can be carried over by EOU and used for payment of duty on DTA clearances – [2015] 64 36 (Mumbai – CESTAT)
STATUTES
DIRECT TAX LAWS
Section 268A of the Income-tax Act, 1961 – Filing of appeal or application for Reference by Income-tax Authority – Revision of monetary limits for filing of appeals by the Department beforeIncome Tax Appellate Tribunal, High Courts and Supreme Court – CIRCULAR NO.21/2015 [F. NO. 279/MISC. 142/2007-ITJ (PT.)], DATED 10-12-2015
CORPORATE LAWS
Maintenance of Statutory Liquidity Ration (SLR) – CIRCULAR DBR.NO.RET.BC.64/12.01.001/2015-16, DATED 10-12-2015
Fourth Bi-Monthly Monetary Policy Statement, 2015-16 – SLR Holdings under held to maturity category –CIRCULAR DBR.NO.BP.BC.65/21.04.141/2015-16, DATED 10-12-2015
Guidelines on Trading of Currency Futures and Exchange Traded Currency options in recognized Stock Exchanges – Introduction of cross Currency futures and Exchange traded option Contracts – A.P. (DIR SERIES 2015-16) CIRCULAR NO.35, DATED 10-12-2015
INDIRECT TAX LAWS (ST./EX./CUS. & (CST & VAT))
Report on Revenue Neutral Rate and structure of rates for Goods and Service Tax (GST) – PRESS RELEASE, DATED 4-12-2015
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