CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 13,2016
Table of Contents
CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 13,2016
DIRECT TAX:
Disallowance u/s 14A – no separate books of account are maintained for taxable income and exempt income – some expenditure on account of administrative expenses has to be disallowed on reasonable estimate basis- (M/s. Coated Fabrics Pvt. Ltd. Versus ACIT, Circle-1 (1), Pune – 2016 (2) TMI 373 – ITAT PUNE)
When the Assessing Officer and the Commissioner concurrently found that there was unexplained expenditure and source of such income was not satisfactorily explained section 69C of the Act would certainly be applicable- (RAVIKIRAN CERAMICS PVT LTD Versus PR. COMMISSIONER OF INCOME TAX (CENTRAL) – 2016 (2) TMI 352 – GUJARAT HIGH COURT)
CBDT has entered into two bilateral Advance Pricing Agreements (APAs) with United Kingdom on 29 JAN 2016. The APAs have been entered into soon after the Competent Authorities of India and United Kingdom finalised the terms of the bilateral arrangement under the Mutual Agreement Procedure (MAP) process contained in the India-UK DTAA.
IT: Addition of cess on green leaf – deduction on cess paid on green tea leaves has to be allowed on 100% of the composite income under the Act and not on 60% of the agricultural income – CIT, Kol-II Vs. M/s Moran Tea Co. Ltd. (Calcutta High Court)
IT: Interest u/s 234A – Board has clarified that no interest u/s 234A is chargeable on the amount of self assessment tax paid by the Assessee before the due date of filing of return of income – matter remanded back -Shri Suresh Sharma Vs. ACIT (Karnataka High Court)
AO initiated the penalty u/s 271E for violation of sec. 269TT but levied penalty u/s 271D for violation of the provisions of sec. 269SS. From this conduct of the AO it was clear that the Assessing Officer did not applied his mind before levying penalty – assessee has not accepted the loan or deposit in contravention of the provisions of sec. 269SS – No penalty- (DCIT, Circle-2 (1) , Vijayawada Versus Sri Tirumalaraju Trinadha Raju – 2016 (2) TMI 238 – ITAT VISAKHAPATNAM)
Disallowance of expenditure under the head soil purchase tractor maintenance and other expenses – e assessee has failed to prove the expenditure incurred was reasonable and not excessive – disallowance made by the AO is reasonable- (M/s. P.S.R. Associates Versus Addl. CIT, Kakinada Range, Kakinada and DCIT, Circle-1, Kakinada Versus M/s. P.S.R. Associates – 2016 (2) TMI 239 – ITAT VISAKHAPATNAM)
- Treatment of property lease income that is any income earned by the assessee by the operation of mall has to be taxed under the head of Profits and Gains of business OS Profession. [Chennai Properties & Investments Ltd. Vs CIT 2015 (8) TMI 481 –SC]
- Penalty under custom can be imposed simultaneously on firm and its partners: Larger bench of HC. [Textoplast Industries vs Additional Commissioner of Customs 2011 (272) ELT 513 (Bom).
- The assessee is required to incur expenditure every year to maintain the road of huge stretch, it shows that the assessee is not enjoying enduring benefit and thus claim allowed as revenue expenditure. [MMRDA vs Department of income tax]
- Levy of simultaneous penalties on both the partner and partnership firm in adjudication proceedings under the Customs Act, simultaneous penalties can be imposed on the firm and the partners under the Act and more particularly under Section 112(a) of the Act. – HC. [M/s Amritlakshmi Machines Work, Mr. N.K. Bramchari, Managing Partner, M/s. Amritlakshmi Machine Works vs Commissioner of Customs (Import) – 2016 (2) TMI 57 – Bombay High Court]
- Provision for accounting and auditing expenses, if the assessee is following this practice consistently then it is revenue neutral because every year this expenditure is required to be allowed. [M/s. New Mangalore Port Trust vs Asst. Commissioner of Income-tax, Circle 1 (1), Mangalore. – 2016(2)TMI 76 – ITAT Bangalore.]
- HC allowed deduction of entire deferred revenue expenditure as assessee had abandoned its project[2016] 65 taxmann.com 311 (Calcutta) CIT v. Alcove Industries Ltd.
- Concealment penalty won’t be attracted by mere disallowance of an exp. [2016] 66com 27 (Bombay) CIT v. First Data (India) (P.) Ltd.
- Income from transfer of right to use agricultural land is exempt even if its end use is for non-agricultural purposes [2016] 65 taxmann.com 321 (Mumbai – Trib.) Mrs. Pratima Pramod Nagrecha v. ITO
- A woman can become Karta of HUF if she is eldest member of a family, rules Delhi HC
- Director can’t run parallel business to compete with own Co. due to her animosity against co-director [2016] 66 taxmann.com 18 (Delhi) Rajeev Saumitra v. Neetu Singh
- Exchange diff. related to creditors in respect of imported stock can’t be adjusted with value of the stock
- CBDT lays down procedure for adjustment of refund with outstanding demand
- Renting of farm house – whether appellant is liable to pay service tax under the category of Renting of Immovable Property Service – scope of the lease deed – prima facie the same is not taxable- M/s Jumera Promotors And Developers Pvt Ltd Versus Commissioner of Central Excise, Delhi – 2016 (2) TMI 69 – CESTAT NEW DELHI
- Refund – valuation – quantity discount given after clearance of goods from factory to their depot – Rule 7 – Refund allowed- M/s Cipla Ltd. Versus Commissioner of Central Excise, Mumbai-III – 2016 (2) TMI 67 – CESTAT MUMBAI
- IT: Taxability of income earned by the Assessee in respect of a contract with ONGC Ltd. – There is also no material to indicate that the work done outside India included any input from the Assessee’s PE in India – Not taxable – National Petroleum Construction Company Vs. DIT (Delhi High Court)
- IT: There is no reason to club the service charges received by wife and daughter-in-law of the assessee with the rent received by the Assessee in relation to same property – Harish M Aggarwal Vs. ACIT-Cir-1, Thane (ITAT Mumbai).
- IT: Assessee is required to incur expenditure every year to maintain the road of huge stretch not enjoying enduring benefit – Claim allowed as revenue expenditure – Maharashtra State Film Stage and Cultural Development Corporation Ltd. Vs. ACIT 11 (1) , Mumbai (ITAT Mumbai)
- IT: A BMW car purchased from trust fund but by mistake registered in the name of Trustee, once mistake detected the steps were initiated to correct the mistake and transferred the motor car in the name of the assessee trust – Exemption u/s 11 allowed – ITO, Mumbai Vs. M/s Cancer Aid & Research Foundation (ITAT Mumbai).
- IT:Non Compete Fee (₹ 39,35,00,000/-) received by the assessee company is a component attributable in a negative / restrictive covenant and as such is a capital receipt – taxable as LTCG – DCIT, Cir-11 (1), New Delhi Vs. M/s. Eicher Motors Ltd. (ITAT Delhi).
- IT: No TDS was required to be deducted on discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine – ITO (TDS) 3 (4), Mumbai Vs. Unichem Laboratories Ltd. (ITAT Mumbai)
- Addition on account of Capital Subsidy u/s. 41(1) – to encourage the setting up of wind mill to promote generation of energy through non conventional sources – the subsidy received by the assessee is not taxable u/s 41(1), neither u/s 43(1) and nor u/s 50 – M/s. UniDeritend Limited Versus The Additional Commissioner of Income Tax, Range – 1 (3) , Mumbai – 2016 (2) TMI 117 – ITAT MUMBAI
- CBDThas prescribed two additional modes for Electronic Verification CODE (EVC) for electronically filed Income Tax Return in addition to EVC prescribed vide earlier Notification No. 2/2015 dated 13th July 2015. The new modes are relating to the account details of Bank Account and Demat Account with CDSL/ NSDL at the time of uploading of return and generating EVC (Electronic Verification Code).
INDIRECT TAX:
Commissioner of DVAT directed that all firms/companies engaged in the business of courier activities and having their offices functioning within the National Capital Territory of Delhi, to furnish an online return quarterly return of details of transactions of delivering goods having value more than Rs 10,000 at the doorsteps of their clients either individually or at the business places or offices in the format “Form CR-II” subject to some conditions Vide Notification No. F3(628)/Policy/VAT/2016/1424-36 dated 11.02.2016 (Click here to view)
Commissioner of DVAT has directed that the returns in Form GE-II for the first three Quarters of the current financial year are required to be filed by 29th February, 2016 Vide Notification No. F3(619)/Policy/VAT/2016/1437-47 dated 11.02.2016
ST: Condonation of delay in filing an appeal before Commissioner (Appeal) – write petition – the law does not come to the aid of indolent tardy or lethargic litigant. The conduct of the petitioner would dissuade us from entertaining these petitions – Nice Construction Vs. Union Of India (Gujarat High Court)
DVAT: Great relief for small dealers- Now refund cases up to Rs.10,000 will be processed expeditiously.
Eligibility of exemption – waste steam and low boiling component to concessional rate of duty – the products should have been manufactured wholly out of raw material produced or manufactured in India. – the meaning to the expression raw material has to be given in the ordinary well accepted connotation in common parlance of those who deal with the matter – Tri – Central Excise- (Commissioner of Central Excise, Belapur Versus I.G. Petrochemicals Ltd. – 2016 (2) TMI 186 – CESTAT MUMBAI)
The question of demand of Service Tax on barge charges and the handling charges connected therewith would not arise at all with effect from 10-10-2007 as they form an integral part of the transaction value for levy of customs duty- (M/s Essar Logistics Ltd. Versus Commissioner of Central Excise & Service Tax, Rajkot – 2016 (2) TMI 222 – CESTAT AHMEDABAD)
- Notification No. 39/2012- Service Tax dated 20/06/2012 is amended so as to provide for rebate of Swachh Bharat Cess paid on all services, used in providing services exported in terms of Rule 6A of the Service Tax Rules vide Notification No. 03/2016 dated 03/02/2016.
- Notification No. 12/2013- Service Tax dated 01/07/2013 is amended so as to allow refund of Swachh Bharat Cess paid on specified services used in an SEZ- vide Notification No. 02/2016 dated 03/02/2016.
- Nature of road repairs expenses – assessee is required to incur expenditure every year to maintain the road of huge stretch shows that the assessee is not enjoying enduring benefit. – Claim allowed as revenue expenditure- M/s Maharashtra State Film Stage and Cultural Development Corporation Limited Versus Asstt. Commissioner of Income Tax 11 (1) , Mumbai – 2016 (2) TMI 88 – ITAT MUMBAI
- ST:Renting of farm house – whether appellant is liable to pay service tax under the category of Renting of Immovable Property Service – scope of the lease deed – prima facie the same is not taxable – Jumera Promotors & Developers Pvt Ltd Vs. CCE, Delhi (CESTAT New Delhi)
- ST:CBDT vide Notification No.02/2016, dt.03.02.2016 Clarifies –
- CENVAT credit cannot be used for payment of the Swachh Bharat Cess.
- ST paid on sale of dutiable goods on commission basis allowed as Credit.
- Deduction U/S 57 – The claim of the assessee cannot be thrown into the dustbin on the basis of conjectures and surmises that the agreement does not prove any nexus between the interest income earned form FDR and interest paid on OD account claimed u/s 57 of the Act without declaring the agreement as false and frivolous document- Sunaini Sarin Versus ACIT, Circle 31 (1) , New Delhi – 2016 (2) TMI 85 – ITAT DELHI
- Notification No. 41/2012- Service Tax dated 29/06/2012 is amended so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax rate- vide Notification No. 01/2016 dated 03/02/2016.
- Cenvat Credit Rules, 2004 are amended so as to (i)- specify that the Cenvat Credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Swachh Bharat Cess; (ii)- allow credit of service tax paid on sale of dutiable goods on commission basis- vide Notification No. 02/2016 dated 03/02/2016.
- Amendment in CENVAT Credit Rules, 2004, the provision restricting CENVAT credit to 85 under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 deleted. Consequently ship breaking units would be entitled to avail 100 credit of the CVD paid with effect from 01.03.2015 – 01/2016 – Dated 01.02.2016 – Central Excise – Non Tariff
- Amendment on Notification No. 39/2012-ST dated the 20th June,2012 so as to provide for debate of Swachh Bharat Cess paid on all services used in providing services exported in terms of India, Extraordinary, vide number G.S.R. 481(E) , dated the 20th June, 2012.
- ST:Transfer of right to use goods – effective control and possession of the subject System stands transferred to the Customer – The activity proposed to be undertaken by applicant is not liable to Service Tax – M/s SICPA India Pvt. Ltd. Vs. C.S.T., CT&T, Govt. of NCT of Delhi (A A R)
- Excise & Customs: Where notice does not allege suppression, etc. with intent to evade, extended period cannot be invoked.
- Excise & Customs: Merely because assessee has voluntarily paid ‘time-barred’ duty cannot lead to confirmation of interest and penalty; hence, interest and penalty pertaining to time-barred duty, though paid, were set aside[2016] 65com 300 (Mumbai – CESTAT) Innovassynth Technologies (India) Ltd.v. Commissioner of Central Excise
- Excise & Customs: If department wants to deny SSI-exemption on ground that brand name used by assessee is of another person, department must prove case and assessee cannot be asked to prove that brand name does not belong to any other person, [2016] 65 taxmann.com 298 (Mumbai – CESTAT) Commissioner of Central Excise v. Sams Techno Mech
- Amendment in notification No. 41/2012-ST dated the 29th june, 2012 so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax, published in the Gazette of India, Extraordinary, vide number G.S.R. 519(E), dated the 29th June, 2012.
- ST: CENVAT credit and refund claim thereof for the period prior to registration – export of IT enabled services – nexus of input services with output services – refund allowed- Prudential Process Management Services India Pvt. Ltd. Vs. CST, Mumbai Zone-II (CESTAT Mumbai)
- MRP based value or transaction value of goods i.e. lubricating oil 50 litres package should be valued in terms of Section 4A and not u/s 4 of the Central Excise Act 1944-Tri-Central Excise. [Commissioner Of Central Excise & Customs, Mumbai vs M/s LSR Speciality Oils Pvt Ltd. And vice-versa-2016(2) TMI 62 – CESTAT Mumbai].
- Cenvat credit and refund claim thereof for the period prior to registration, export of IT enabled services, nexus of input services with output services, are allowed for refund- Tribunal, Service Tax. [Prudential Process Management Services India Private Limited vs Commissioner of Service Tax, Mumbai Zone-II-2016(2) TMI 28 – CESTAT Mumbai].
- CBEC allows refund/rebate of Swachh Bharat Cess to exporters and SEZ units
- sets up a common ‘Tax Research Unit’ to deal with direct and indirect tax policies
- DVAT: Due Date to file Form DP-1 is extended to 29 FEB 2016. Notification F.3(352)/2013/1395-1405, dt.01.02.2016.
KEY DATES:
Advance information for second fortnight of feb of functions with booking cost>Rs. 1 lakh in banquet, halls, hotels etc. in Delhi: 12/02/2016
- Assessment completed by AO relying on estimations cannot be remanded back by CIT to reverify some aspects of estimation relied on.[Sri Surakshitha Homes vs. ITO (ITAT Hyderabad), IT Appeal No.-784/2013]
- Expense on gifts to doctors allowed being not prohibited in law, CBDT circular only applicable A.Y. 2013-14 onwards Syncom Formulations (I) Ltd. vs. DCIT (ITAT Mumbai), ITA No.6429 & 6428 /Mum/2012 & ITA No.11/Mum/2012, AY 2010-11 & 2011-12,
- RBI extends the Date for Withdrawal of Pre-2005 Series Banknotes to June 30, 2016
- GN (A) 35 : Guidance Note on Accounting for Depreciation as per Schedule II to Companies Act, 2013.
- Section 80IC : Despite substantial expansion there cannot be two initial assessment year. [Sh. Sumit Kumar vs. ITO (ITAT Chandigarh),ITA No. 139/Chd/2014, Date of Pronouncement : 29/10/2015, Assessment Year: 2010-11]
- No Penalty for non disclosure of manner of Income, if same was not asked during statement recorded u/s/ 132(4).[DCIT vs Shri Rajiv Chopra (ITAT Chandigarh), ITA No. 990/CHD/2014]
- Banks shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018or thereafter. RBI/2015-16/315 DBR.BP.BC.No.76/21.07.001/2015-16
- Return for Non SSI assessee for January: 10/02/2016
- Return for EOU’s for January: 10/02/2016
- Return by units paying duty > 1 Crore: 10/02/2016 (CENVAT+PLA for January)
OTHER :
RBI (FEMA): RBI had notified the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 and old regulations have been repealed and replaced by the new regulations. These regulations seek to regulate opening and maintenance of foreign currency accounts in and outside India by a person resident in India.
- So long as the documents (debit notes) reveal the essential details like registration number, service provided, service recipient, value of taxable service, refund cannot be rejected merely because the documents are debit notes. – Tribunal. [M/s.Shivam Exports, M/s. Mecshot Blasting Equipment (P) Ltd. And M/s. Shree Ram Industries vs CCE Jaipur – 2016 (2) TMI 259 – CESTAT NEW DELHI]
- Interest u/s 234A : Board has clarified that no interest u/s 234A is chargeable on the amount of self assessment tax paid by the assessee before the due date of filing of return of income – HC [Sri Suresh Sharma vs The Assistant Commissioner Of Income Tax – 2016 (2) TMI 274 – KARNATAKA HIGH COURT]
- Refund cannot be denied merely for procedural lapse i.e. if assessee is eligible to get refund, it should be allowed even if there is a delay of 2 days because of the intervening saturday and sunday and the claim was filed on Monday.[Markers Mart And Prince Exports vs C.C.E & S. Tax., Jaipur II – 2016 (2) TMI 258 – CESTAT NEW DELHI]
- Deduction on cess paid on green tea leaves has to be allowed on 100 per cent of the composite income under the Income-tax Act, 1961, and not on 60 per cent of the agricultural income. [Commissioner of Income Tax, Kol-II vs M/s Moran Tea Co. Ltd. – 2016 (2) TMI 278 – CALCUTTA HIGH COURT]
- Revision in All Industry Rates (AIR) of Duty Drawback of various items, amendment in the Notification No. 110/2015-Customs (N.T.), dated the 16th November, 2015
FAQ on Company Law:
Query: Kindly guide us regarding the registration of Part – I Company with the ROC.
Answer: In order to register Part I Company, you are required to file Form INC-1 for name availability. After approval of the same, applicant is required to file Form No. URC-1 (with all attachments) along with filing e forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and DIR-12 as the case may be.
Query: Whether a company can accept the share capital in cash or whether the promoters/shareholders can contribute the same in cash? Is there in violation if share capital is contributed in cash from promoters?
Answer: A company cannot accept the share capital from the subscribers to Memorandum of Association in cash. Share capital is required to be either deposited in cash or transferred by any means from the personal account of subscribers to the Current account of Company maintained in any Scheduled Bank.
Query: We are incorporating a Section -8 company for which we have already filed Form INC-1 regarding the name reservation which has been approved as well. Now we need to apply for the License of Section – 8 Company for which we have to file Form INC-12. But Form INC-12 is not an e-form. So, kindly guide us the method to file Form INC-12 for obtaining its License.
Answer:For the purpose of applying License of Section -8 company, you are required to file Form INC -12 along with all its attachments in e-form RD-1.
Query:A company (A Ltd.) records export sales by applying exchange rate prevailing on the date of mate’s receipt. As per the company date of mate’s receipt is the date of transaction in case of export sales, so exchange rate of that date should be taken for recognising export. Whether policy of recording export sales by A Ltd. is correct?
Answer: No.
As per Para 9 of AS 11, “The Effects of Changes in Foreign Exchange Rates”, a foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. In case of sales, date of transaction should be determined with reference to principles laid down under AS 9, “Revenue Recognition”. In other words, in case of sales, date on which revenue should be recognised as per AS 9 should be considered as date of transaction for the purpose of AS 11.
Referring to above in case of export exchange rate as on date of mate’s receipt can’t be used to record the export. Therefore, in the instant case contentions of A Ltd. is not correct.
Query: A company (C Ltd.) has imported certain stock-in-trade on credit. At the end of the year some amount in respect of the imported stock is still outstanding. C Ltd. has converted the outstanding amount into reporting currency using foreign exchange rate prevailing at the end of the year and resulting exchange difference is adjusted with the value of closing imported stock. Is treatment of exchange difference as provided by C Ltd. correct?
Answer: No.
AS 11, “The Effects of Changes in Foreign Exchange Rates”, states that only exchange differences related to loans taken for acquisition of fixed assets should be adjusted with the carrying amount of the concerned assets. Except this difference all exchange differences should be transferred to the statement of profit and loss. Thus, the accounting treatment of exchange difference followed by C Ltd. is not correct.
- Companies Act 2013: panel suggests 100 amendments to Companies Act and MCA has decided to launch a public consultation process on the suggested changes and has invited comments from all concerned stakeholders till 15 FEB 2016.
UPDATES:
- Finance Minister to inaugurate India Investment Summit on Feb 4, 2016
- RBI-FEMA:The physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted w.e.f. 8 FEB 2016.
- RBI permits NBFCs to offer Safe Deposit Locker facilities to their customers
- RBI vide Circular 40 dated 1st Feb, 2016, under the aegis of the e-Biz project of the Government of India has enabled online filing of the ARF, FCGPR & FCTRS Forms with the RBI. At present both the options i.e. online filing and physical filing are available. Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.
- Conditions & Procedures for export of sesame seeds to European Union countries have been notified vide Notification No. 37/2015-20, dated 03-02-2016
- RBI keeps repo rate unchanged at 6.75%
- RBI keeps Interest rate unchanged and link rate cut to Govt. sticking to fiscal deficit target in bi-monthly monetary policy review
- DGFT clarified that the departure from the 3 document norm as mandated for Exports and Imports.
- Export should not be recorded at exchange rate prevailing on the date of mate’s receipt
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