CORPORATE AND PROFESSIONAL UPDATE JANUARY 14, 2016

CORPORATE AND PROFESSIONAL UPDATE JANUARY 14, 2016

INCOME TAX ACT

SECTION 37(1)

BUSINESS EXPENDITURE 

Allowability OF Interest : SLP granted against High Court’s ruling that interest which was paid after slump sale was effected and where factory was in operation could not be capitalized and therefore, such expenses were revenue in nature – [2016] 65  67 (SC)

Share issue expenses : Stamp duty or fees paid to Ministry of Corporate Affairs towards increase in authorised capital of company would be considered as capital expenditure.

SECTION 43(1)

ACTUAL COST

Explanation 3 : SLP granted against High Court’s ruling that where at time of acquisition of assets, assessee had no income to reduce its tax liability by way of enhanced WDV of assets, Assessing Officer was in error in invoking Explanation 3 to section 43 for disallowance of excess depreciation – [2016] 65  67 (SC)

Explanation 3 : Explanation 3 to section 43(1) could not be applied in respect of acquisition of secondhand plant and machinery by assessee from its sister concerns where firstly, Assessing Officer could not discharge its onus that main objective of transfer of assets was reduction of tax liability and secondly revenue did not discharge its obligation to determine fair value of assets and replace it with cost of acquisition of assessee –[2016] 65 60 (Pune – Trib.)

SECTION 43(5)

SPECULATIVE TRANSACTIONS

Derivatives : Contracts for derivatives in foreign currency are commodity as defined under section 43(5), underlying assets being foreign currency and, hence, are entitled for exemption from being treated as speculative, provided all other conditions as stipulated under section 43(5) are complied with – [2016] 65 94 (Mumbai – Trib.)

SECTION 80P

DEDUCTIONS – INCOME OF CO-OPERATIVE SOCIETIES

Primary co-operative bank : Where assessee, a co-operative society, did not satisfy all three basic conditions mentioned in section 5(ccv) of Banking Regulation Act, to become primary co-operative bank, it could not be held as a co-operative bank under section 80P(4) so as to deny deduction under section 80P –[2016] 65 96 (Karnataka)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments : In case of assessee, rendering agency and distribution services to its Head Office located abroad, allocation of expenses had to be done on basis of ratio of gross profit and not in proportion of turnover – [2016] 65  93 (Delhi – Trib.)

SECTION 194H

DEDUCTION OF TAX AT SOURCE – COMMISSION, BROKERAGE ETC.

Liability of assessee Diagnostic laboratory to deduct TDS u/s 194H from discounts paid to hospitals/labs in respect of diagnostic testing charges received by it depends (a) as to how the hospitals/laboratories have approached the assessee, i.e. whether on the specific instruction of the patient or on its own. (b) whether the laboratories/hospitals are dedicated to the assessee only or not, i.e., whether they have such kind of business link with the competitors of the assessee or not. – [2016] 65  146 (Mumbai – Trib.)

SECTION 269UD

PURCHASE OF IMMOVABLE PROPERTY BY CENTRAL GOVERNMENT – ORDER BY APPROPRIATE AUTHORITY

Lease : Where ‘V’ Engineering, holding leasehold right in plot of land, entered into development agreement with assessee a developer, said transfer of rights in land did not amount to any sale, exchange or lease of such land under provisions of Chapter XXC, because ‘V’ Engineering itself was only a lessee and, therefore, pre-emptive purchase order passed under section 269UD in respect of land in question was to be set aside – [2016] 65 97 (SC)

WEALTH TAX ACT

SECTION 2(ea)

ASSET

In terms of clause (ii) of Explanation 1(b) to section 2(ea)(v), benefit of exemption in respect of urban vacant land is available only when building is fully constructed with approval of appropriate authority and not when construction activity has merely started – [2016] 65  148 (SC)

CONSTITUTION OF INDIA

ARTICLE 226 

WRIT 

Where against order of assessment, assessee filed appeal and also filed writ petition challenging assessment order and demand notice, when very jurisdiction of Assessing Authority to levy tax had been called in question, availability of an alternative statutory remedy would not preclude assessee from invoking extraordinary jurisdiction of High Court under article 226 of Constitution – [2016] 65  147 (Gujarat)

SERVICE TAX

SECTION 86

APPEALS – CONDONATION OF DELAY – APPELLATE TRIBUNAL

Where assessee has been taking different stands (reasons of delay) at every stage of appeal, it is clear that assessee’s explanations are afterthought and therefore, delay cannot be condoned – [2016] 65  89 (Allahabad)

CENTRAL EXCISE ACT

SECTION 35B

APPEALS – APPEALABLE ORDERS

Remand order in context of rebate of excise duty on exported goods will be beyond jurisdiction of Tribunal to entertain appeal – [2016] 65  91 (Mumbai – CESTAT)

CUSTOMS ACT

SECTION 129A

APPELLATE TRIBUNAL 

Against order of Commissioner passed under section 110A for provisional release of goods, appeal would lie before Tribunal under section 129A – [2016] 65  90 (New Delhi – CESTAT)

CST & VAT

SECTION 4 OF CENTRAL SALES TAX ACT, 1956

SALE – OUTSIDE STATE SALE

Where assessee had produced natural gas at Panna-Mukta oil/gas fields and after measuring same at oil fields delivered it to one ‘O’ for transportation to buyer at Hazira (Gujarat) and thereupon ‘O’ transported said gas along with others gas through its pipeline, which passed through a processing plant at Hazira, and thereafter buyer took possession of gas as processed in processing plant from transporter ‘O’, sale of gas by assessee to buyer had taken place at oil fields outside State of Gujarat – [2016] 65  147 (Gujarat)

SECTION 5 OF CENTRAL SALES TAX ACT, 1956

SALE – IN COURSE OF IMPORT

Where assessee supplied natural gas from Panna-Mukta oil/gas fields to Gas Authority of India Ltd. at Hazira, since Panna-Mukta oil fields from where movement of gas was occasioned fell within customs frontiers of India, sale of gas could not be said to have taken place in course of import of goods into territory of India as contemplated under section 5(2) – [2016] 65  147 (Gujarat)

SECTION 44 OF GUJARAT SALES TAX ACT, 1969

REASSESSMENT – TURNOVER ESCAPING ASSESSMENT

Where Assessing Authority had reopened assessments of assessee and notices issued did not disclose formation of any opinion on part of Assessing Authority based on any new material on record that assessee’s turnover had escaped assessment, impugned notices were without jurisdiction and were based on a mere change of opinion – [2016] 65  147 (Gujarat)

CENVAT CREDIT RULES

RULE 2(l)

CENVAT CREDIT – INPUT SERVICE – COURIER SERVICES

Mobile phone services availed for mobile phones allotted to senior executives for assessee-company work are eligible for input service credit, where connections and bills are in name of assessee-company – [2016] 65 88 (Ahmedabad – CESTAT)

STATUTES

DIRECT TAX LAWS

Income-tax (First Amendment) Rules, 2016 – Substitution of Rule 17 & Form 10 and insertion of Form 9A –NOTIFICATION NO. SO 127(E) [F.NO.142/16/2015-TPL], DATED 14-1-2016

Section 237 of the Income-tax Act, 1961 – Refunds – Issue of refunds up to Rs.5,000/- and refunds in cases where outstanding arrear is up to Rs.5,000/- in non-cass cases for assessment years 2013-14 and 2014-15 –OFFICE MEMORANDUM F.NO.312/109/2015-OT, DATED 14-1-2016

CORPORATE LAWS

Relaxations in Branch Authorisation Policy – Off site ATMs – CIRCULAR DBR.NO.BAPD.BC.72/22.01.001/2015-16, DATED 14-1-2016

Credit Information Reporting in respect of Self Help Group (SHG) Members –CIRCULAR DBR.CID.BC.NO.73/20.16.56/2015-16, DATED 14-1-2016

Section 1 of the Juvenile Justice (Care and Protection of Children) Act, 2015 – Act – Enforcement of – Notified date on which said Act shall come into force. – NOTIFICATION NO.SO 110(E) [NO.CW-II-11/4/2015-CW.II], DATED 12-1-2016

Section 135 of the Companies Act, 2013 – Corporate Social Responsibility – Frequently Asked Questions (FAQs) on Corporate Social Responsibility – GENERAL CIRCULAR 1/2016 [NO.05/19/2015-CSR], DATED 12-1-2016

Section 1 of the Companies Act, 2013 – Act – Enforcement of – Notified date on which provisions of Sub-Sections (5), (6) and (7) of Section 125 of said Act shall come into force – NOTIFICATION [F.NO.5/27/2013-IEPF(PART)], DATED 13-1-2016

Investor Education and Protection Fund (Appointment of Chairperson and Members, Holding of Meetings and Provisions for Offices and Officers) Rules, 2016 – NOTIFICATION [F.NO.05/27/2013-IEPF(PART)], DATED 13-1-2016

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