CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 26, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 26, 2016

INCOME TAX ACT

SECTION 12A

CHARITABLE OR RELIGIOUS TRUST – REGISTRATION OF

Cancellation of : Where assessee-educational trust undertook only one activity of running of school out of 21 objects for charitable purposes and it was charging reasonable fees from students and it also gave a concession to poor and deserving students, registration of trust under section 12AA was to be granted – [2016]

SECTION 40(a)(i)

BUSINESS DISALLOWANCE – INTEREST, ETC., PAYABLE OUTSIDE INDIA

Commission payments to the nonresident agents are not taxable in India, as the agents are remaining outside, services are rendered abroad and payments are also made abroad. The services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of “fees for technical services” and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the Assessing Officer u/s 40(a)(i) towards export commission paid by the assessee to the non-resident was rightly deleted by the Tribunal. In GE India Technology’s case, it was held by SC that the tax deducted at source obligations under Section 195 (1) of the Act arises, only if the payment is chargeable to tax in the hands of the non-resident recipient. When the transaction does not attract the provisions of Section 9 of the Act, then there is no question of applying Explanation 4 to Section 9 of the Act. Consequently, the ratio of SC decision in G.E. India Technology’s case would apply notwithstanding insertion of Explanation 4 to Section 9 (1) (i) of the Act with corresponding introduction of Explanation 2 to Section 195 (1) of the Act, both by the Finance Act, 2012, with retrospective effect from 01.04.1962 – [2016] 66 taxmann 321 (Madras)

SECTION 74

LOSSES UNDER HEAD CAPITAL GAINS

Setting off deemed short term capital gain : Where deemed short term capital gain arose on account of sale of depreciable assets that was held for a period to which long term capital gain would apply, assessee would be entitled to claim setting off said gain against brought forward long term capital losses and unabsorbed depreciation – [2016] 66 taxmann 330 (Bombay)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/TNMM v. CUP : Where on assessee becoming agent of parent shipping company, erstwhile agent was appointed as sub-agent of assessee, price agreement between assessee and its sub-agent could not be used as internal CUP for determining ALP – [2016](Mumbai – Trib.)

Comparables and adjustments/Comparables – Illustrations : In case of assessee, providing investment advisory and support services to its AE, companies engaged in handling of IPOs and carrying on activity of managing directly or indirectly investments mutual funds, venture capital fund, could not be accepted as valid comparables while determining ALP – [2016] (Delhi – Trib.)

SECTION 132A

SEARCH & SEIZURE – REQUISITION OF BOOKS OF ACCOUNT, ETC.

Reassessment : Accounts which were duly verified during regular assessment of assessee could not be reappreciated merely because further a search was conducted in premises of assessee as same would amount to reopening of concluded assessment – [2016] 66 taxmann 264 (Karnataka)

SECTION 194C

DEDUCTION OF TAX AT SOURCE – CONTRACTORS/SUB-CONTRACTORS, PAYMENTS TO

Transportation charges : Where assessee-company, engaged in business of cargo handling, made payments for transportation of goods to transporter which also supplied containers, since use of containers was only incidental to transporting of cargo, assessee was justified in deducting tax at source under sec. 194C from payments in question – [2016] (Rajkot – Trib.)

COMPANIES ACT

SECTION 445

WINDING UP – COPY OF WINDING UP ORDER TO BE FILED WITH REGISTRAR

Contract of Company (in liquidation) with its employees comes to an end on passing of winding up order –[2016] (Bombay)

SECTION 529A

WINDING UP – OVERRIDING PREFERENTIAL PAYMENTS

Bonus is not included in category of wages under sections 529 and 529A and cannot be accorded priority –[2016] (Bombay)

CENTRAL EXCISE ACT

SECTION 35C

APPEALS – ORDERS OF – APPELLATE TRIBUNAL

Remand order of Tribunal may be ‘conditional’ i.e., Tribunal may impose suitable conditions including making of certain deposit as a condition of remanding matter back to adjudicating authority, only if same is necessary due to reasons attributed to assessee – [2016] 66 taxmann 268 (Gujarat)

CUSTOMS ACT

SECTION 27

REFUND – GENERAL

Refund of customs duty paid by SEZ units is governed by section 27 of Customs Act; hence, said refund claim units would lie before Customs Authorities and not before SEZ authorities under the SEZ Act/rules – [2016] (Gujarat)

SECTION 130E

APPEALS – MAINTAINABILITY OF – SUPREME COURT

Where High Court has dismissed review petition against its own judgment, then, proper course is to challenge ‘main order’. If ‘main order’ of High Court is not challenged, appeal/special leave petition against ‘order of High Court dismissing review petition’ is not maintainable before Supreme Court – [2016] (SC)

CENVAT CREDIT RULES

RULE 4

CENVAT CREDIT- CONDITIONS FOR ALLOWING OF

Where cascades were used to transport CNG at boosting station wherein it was re-compressed to be filled into the vehicles, cenvat credit was not admissible on cascades since these were used to mere transport already manufactured and marketable commodity – [2016](Mumbai – CESTAT)

STATUTES

DIRECT TAX LAWS

Section 139A of the Income-tax Act, 1961 – Permanent Account Number – Jurisdiction of PANs of trusts submitting ITR-7 for assessment years 2014-15 and 2015-16 as on 28-1-2016 – LETTER F.NO.DGIT(S)/DIT(S)-3/AST/CIT EXEMPTION JURIS/98/2015-16, DATED 22-2-2016

CORPORATE LAWS

Chartered Accountants Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service and Allowances of the Chairperson and Members of the Board (Amendment) Rules, 2016 – Amendment in rule 9 – NOTIFICATION NO. GSR 148(E) [F.NO.1/30/2015/PI], DATED 8-2-2016

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