CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 9,2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 9,2016

Direct Tax

IT: Interest paid to partners on capital contribution is not a statutory allowance u/s 40(b) but is an expenditure u/s 36(1)(iii) – If the income is exempt corresponding interest paid to partner will be disallowed u/s-14A – ACIT-19(3), Mumbai Vs. Pahilajrai Jaikishin & Vice Versa (ITAT Mumbai)

IT: Expenditure on Antivirus software and switches – no acquisition of any capital asset – 100% expenditure allowed as revenue expense as these required periodical updation – DCIT, Cir-3 (1), Mumbai Vs. Export Credit Guarantee Corporation of India Ltd. (ITAT Mumbai)

CBDT issued guidelines relating to Paperless Assessment Proceedings – Notification No.2/2016, dt.03 FEB 2016.

Now system generated letters can be sent to non-filers of returns using address given in last return/AIR

Rental income from a fully furnished house is taxable as income from other sources if composite rent is inseparable [2016] 66 99 (Delhi – Trib.) ACIT v. Ajay Kalia

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)

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)

IT: When the AO and the CIT 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. Vs. CIT (Gujarat High Court)

IT: It cannot be said that the payments made for hiring vehicles would fall in the category of payment towards a sub-contract and as such the assessee is not liable to deduct tax at source as per provisions of section 194C(2) and consequently the provisions of section 40(a)(ia) will not apply on such payments – M/s Mayur Roadways Vs. ITO, Ward-2 (3) , Baroda (ITAT Ahmedabad)

Valuation of shares at cost, lack of frequency in transactions and use of own funds are signs of investment in shares[2016] 66 taxmann.com 82 (Mumbai – Trib.) ACIT v. Nemichand P. Jain HUF

IT: The term non-resident means a person who is not a resident as per section 2(30) and for the purposes of sections 92, 93 and 168 includes a person who is not ordinarily a resident within the meaning of 6 (6) – CIT, Sesa Goa Ltd Vs. V.S. Dempo & Co. Pvt. Ltd (Bombay High Court)

IT Addition of Cess on Green Leaf: part of income is agriculture income – Expenditure on cess should be allowed as a deduction before computing the composite income under Rule 8 and the apportionment is to be made after the income is so computed – CIT Vs. M/s Apeejay Tea Co. Ltd (Supreme Court)

Indirect Tax

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 29^th February, 2016 Vide Notification No. F3(619)/Policy/VAT/2016/1437-47 dated 11.02.2016.

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

Re-packing and labelling activities amounts to manufacture under EXIM policy [2016] 66  100 (Mumbai – CESTAT) Keva Fragrances (P.) Ltd. v. Commissioner of Central Excise

VAT & ST: Whether the petitioner could avail the benefit of the judgment which was rendered much after the assessment order was passed and whether such reassessment orders can be passed on their prayer for rectification of the earlier assessment – Held Yes – Sri. Anjaneya Agro Tech Vs. DCCT (Audit), Davanagere and Others (Karnataka High Court)

ST: Appellant is eligible to avail the CENVAT credit of excise duty paid on Furniture and Fittings for providing taxable output services being General insurance services – ICICI Lombard Gen Ins Co. Ltd. Vs. CST, Mumbai-I (CESTAT Mumbai)

Company Law

Bombay High Court pronounces six months imprisonment to director of SuperMax for contempt of Court[2016] 66 taxmann.com 156 (Bombay) Rajinder Kumar Malhotra v. Paresh Biharilal Vyas

Proposed CARO, 2016 brings additional reporting requirements

MCA proposed new CARO, 2016 On 9th February. The newly proposed draft of CARO, 2016 contains 15 clauses, out of which some clauses have been carry forwarded from present CARO, 2015. The draft, if approved, shall be applicable for FY 15-16 onwards.

In comparison to CARO (2015), CARO (2016) proposes few additional reporting requirements and eliminates some of the reporting requirements.

MCA: Version of Form 8 LLP is likely to be modified w.e.f. 13 FEB 2016.

MCA issues draft format for financial statements in line with Ind AS

MCA proposes new CARO, 2016 with wide coverage

MCA invites comments on the draft Companies (Auditor’s Report) order, 2016.

MCA invites comments on the revised Schedule-III to the Companies Act, 2013 for a company whose financial statements are drawn up in compliance of companies (Indian Accounting Standards) Rules 2015 and as amended from time to time.

MCA has notified New version of eForm 4 LLP w.e.f 10 JAN 2016.

Other Update

ICAI on Certification by CAs: To bring uniformity in the manner of signing of certificates CAs issue, the ICAI has decided the Members to include the following details along with their “Signatures” – 1. Name of the CA firm; 2. Firm Registration Number (FRN); 3. Name of the member; 4. Designation (Partner/Proprietor); and 5. Membership Number

RBI (FEMA) has made amendments to the existing regulations relating the Acquisition and Transfer of Immovable Property outside India and notified the Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015 effective from Jan 21, 2016.

RBI: RBI’s Working Group issued recommendations on Interest Rate Options on 8 FEB 2016. In the Report, eleven member Committee headed by PG Apte, has recommended rolling one, two, three, six and twelve month contracts, kicking off with three serial monthly contracts in the first phase. The Working Group has recommended simple call and put options, with minimum lot sizes of Rs.2 Lac to start Interest Rate Options (IROs) in India.

Govt. releases list of Commissioners of Income Tax Appeals nominated as Special Directors for FEMA cases

Transactions of two assessment years emanating from same agreement should be given similar treatment

DGFT has made amendments to the Foreign Trade Policy-2015-2020 and inserted the new provisions relating to SCOMET export permission for ‘Stock & Sale’ purposes and for export of spare parts.

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