CORPORATE AND PROFESSIONAL UPDATE JANUARY 30,2016

CORPORATE AND PROFESSIONAL UPDATE   JANUARY 30,2016

DIRECT TAX

• Penalty for default in filing of TCS return waived-off as assessee was unaware of TCS provisions [2016] 65 taxmann.com 254 (Ahmedabad – Trib.)  Jaihind Projects Ltd. v. Additional Commissioner of Income-tax

• Disputed liability not settled for long period couldn’t be said to be ceased as per sec. 41(1)
  [2016] 65 taxmann.com 220 (Ahmedabad – Trib.)  Income-tax Officer v. Sanghvi Fincap Ltd.

• Details given to police about lavish wedding of daughter couldn’t be used by AO to reopen a case [2016] 65 taxmann.com 216 (Chandigarh – Trib.)  Subhash Chander Goel v. ITO

• Software utility developed to file income-tax return with Digital Signature Certificate Started new facility for members

• Payer of income can’t be treated as ‘assessee-in default’ if such income is exempt in hands of payee [2016] 65 taxmann.com 219 (Panaji – Trib.)  RBL Bank Ltd. v. Income-tax Officer (TDS)

• resolves more than 100 transfer pricing disputes with US under MAP

• Compensation received by a journalist on termination of contract with a news agency held as capital receipt [2016] 65 taxmann.com 153 (Delhi)  CIT v. Sharda Sinha

• Employer not liable to deduct TDS at flat rate of 20% on non-furnishing of PAN by employees: ITAT [2016] 65com 292 (Visakhapatnam – Trib.) Rashtriya Ispat Nigam Ltd. v. Additional CIT

• No concealment penalty where assessment is made on estimated basis after rejecting books of account [2016] 65com 248 (Chandigarh – Trib.)  California Design & Construction INC India, Chandigarh v. ITO

• Now residents can acquire immovable property overseas jointly with non-resident relatives

INDIRECT TAX

• Service Tax: Where assessee has already collected Service tax from its client, then, at time of payment of same to Government, assessee cannot raise argument of non-taxability or financial hardship or ignorance in paying such ‘collected taxes’ to Government
  [2016] 65 202 (Mumbai – CESTAT)  Mohtamaan Industries v. Commissioner of Central Excise
• Services of professional Tea tasters are taxable under business auxiliary services
  [2016] 65 205 (Chennai – CESTAT) Container Tea & Commodities  v. Commissioner of Central Excise
• Cenvat Credit : Catering services for employees are ineligible for credit up to extent of amount recovered from employees further, services for Dussera festival celebration are ineligible for credit, being unconnected with business[2016] 65 285 (Mumbai – CESTAT)
  Mahindra Casting Ltd. v. Commissioner of Central Excise
• Excise dues couldn’t be recovered from buyer if he hadn’t purchased a property from tax defaulter
  [2016] 65 256 (Mumbai – CESTAT)  Rajaram Steel Industries (P.) Ltd. v. Commissioner of Central Excise
• Delhi Govt. directs speedy disposal of VAT refund up to Rs 10,000
• releases integrated Central Excise and Service Tax Audit Manual

OTHER :  

Question: CSR : Whether an expense or appropriation of profits ? Another question which preparers of financial statements face is whether CSR should be shown as an expense in the Statement of profit and loss or whether it be shown as an appropriation of profits ?

Answer :If CSR expenditure is related to business activities of the entity, then such an expenditure should be treated as an expense to statement of profit and loss. However, if CSR expenditure is not related to the business activities of the entity, then such expenditure should be treated as appropriation of profits.

As per Income-tax Act Tax authorities have already clarified that if CSR expenditure is an expenditure which falls under either of sections 30 to 36 of the Income Tax Act then it shall be allowed as an expenditure, otherwise CSR expenditure shall not be allowed as an expenditure for the purposes of computation of Income-tax.

Liability in respect of warranty arises as soon as an entity sells the product

Question: A company is in the business of manufacturing textiles. It has taken a long-term debt from a bank. As per the agreement with the bank, in case the company did not pay interest or repayments on time then the bank shall have an option to convert the outstanding amount into equity shares of the company (conversion at par value). Till date the company has not made any default.

Whether the loan get covered under the definition of potential equity shares and, accordingly, does the company need to disclose ‘Diluted Earnings Per Share (EPS)’ as required by AS 20 ?

Answer : Yes, from the AS 20 perspective, this should be treated as contingent equity shares and should be included while calculating the Diluted Earnings Per Share in accordance with AS 20. Para 7 of AS 20 for Ready Reference Examples of potential equity shares are:

(a) debt instruments or preference shares, that are convertible into equity shares;
(b) share warrants;

(c) options including employee stock option plans under which employees of an enterprise are entitled to receive equity shares as part of their remuneration and other similar plans; and

(d) shares which would be issued upon the satisfaction of certain conditions resulting from contractual arrangements (contingently issuable shares), such as the acquisition of a business or other assets, or shares issuable under a loan contract upon default of payment of principal or interest, if the contract so provides.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact :  info@caindelhiindia.com or call  at 011-233 43 333

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