CORPORATE & PROFESSIONAL UPDATE DECEMBER 21, 2015

CORPORATE & PROFESSIONAL UPDATE DECEMBER 21, 2015

INCOME TAX ACT

SECTION 28(i)

BUSINESS LOSS/DEDUCTIONS – ALLOWABLE AS

In the case of a contractual dispute between the parties, liability of the assessee to pay arises only when the claimant against the assessee acquires some legal right to receive the amount – [2015] 64  260 (Delhi – Trib.) (SB)

SECTION 92C

TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Comparables and adjustments/Adjustments – AMP expenses : Approach to be adopted in case of manufacturer and a distributor for working out expenditure on AMP is different, hence, assessee being full-fledged manufacturer guidelines as culled out by High Court in case of ‘Sony Ericsson’ Mobile Communications India (P.) Ltd. v. CIT [2015] 374 ITR 118/231  (Delhi) were to be followed –[2015] 64  84 (Chandigarh – Trib.)

SECTION 132B

SEARCH AND SEIZURE – RETAINED ASSETS, APPLICATION OF

Appropriation towards tax : In absence of any return filed and assessment made or any determinative process undertaken, question of ITO specifying a liability arising out of search proceeding would not arise – [2015] 64 108 (Delhi)

SECTION 147

INCOME ESCAPING ASSESSMENT – GENERAL

Audit objection : Where Assessing Officer had considered issue relating to taxability of interest in detail at time of assessment, action of reopening solely at behest of audit party without any independent belief while recording reasons would surely make reassessment vulnerable – [2015] 63  342 (Gujarat)

SECTION 220

COLLECTION AND RECOVERY OF TAX – WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT

Stay of demand : If demand in dispute related to issues that had been decided in another assessee’sfavour on similar facts by an appellate authority or Court earlier, demand will be stayed – [2015] 64  86 (Madras)

SECTION 254

APPELLATE TRIBUNAL – POWERS OF

Power to grant Stay : Tribunal has power to extend stay beyond period of 365 days as stipulated in section 254(2A) provided delay in disposal of appeal is not attributable to assessee – [2015] 64  111 (Delhi – Trib.)

SECTION 293

BAR OF SUITS IN CIVIL COURT

Search and seizure : Income-tax Act is a complete code and no separate suit is maintainable against finding of fact in such proceeding – [2015] 64  66 (Punjab & Haryana)

Applicability of : Where dues of assessee towards department stood determined by Settlement Commission, in such a case, assessee had a right to claim interest on amount deposited with department in proceedings under section 245D(6) and High Court had no jurisdiction to entertain civil suit filed in that regard in view of specific bar contained in section 293 – [2015] 64  87 (Delhi)

• TDS credit – Vendor deposited the TDS with the PAN of the assessee wrongly instead of its sister concern – Assessee did not offer any income corresponding to TDS – credit allowed – HC – (Commissioner of Income Tax-15 Versus M/s Relcom, DELHI HIGH COURT).

• Commission for issuing the DDs and POs – CIT deleted the additions made in the hands of the Assessee only on the ground that in Ravinder Yadav s hand they have already been taxed – Revenue has not merit in the case appeal dismissed- (PR. COMMISSIONER OF INCOME TAX-6 Versus M/s NORTHERN STRIPS LTD., DELHI HIGH COURT).

• Addition u/s 68 – No addition can be made in the hands of the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law- (COMMISSIONER OF INCOME TAX-9 ERSTWHILE CIT-VI Versus VRINDAVAN FARMS (P) LTD., DELHI HIGH COURT).

• Addition made u/s 14A r.w. 115JB – MAT computation – AO has rightly disallowed the expenditure of Rs. 7307018/- by invoking the provisions of Section 14A read with Rule 8D of Income Tax Rules 1962 for computing book profit u/s 115JB(2) read with clause (f) to explanation 1 to clause 115JB(2)–(DCIT, Central Circle-18 & 19, Mumbai Versus Viraj Profiles Limited., ITAT MUMBAI)

COMPANIES ACT

SECTION 433

WINDING UP – CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP

Winding-up plea dismissed as overdue sum could be set-off against sum receivable from group concern of debtor company – [2015] 64  140 (Calcutta)

Version of Form 3 LLP is likely to be modified w.e.f 24th November 2015 between 09:00PM to 10:00 PM. Stakeholders are requested to plan accordingly.

SERVICE TAX

SECTION 65B(44)

SERVICE – EXCLUSION OF SERVICES PROVIDED BY AN EMPLOYEE TO EMPLOYER

Where employee of foreign holding is deputed to Indian subsidiary for a particular period and during that period, employee was treated as ’employee’ of Indian subsidiary, salary paid to such employee by Indian subsidiary cannot be charged to service tax in view of employer-employee relationship under section 65B(44)(b) – [2015] 64 259 (AAR – New Delhi)

SECTION 93

EXEMPTIONS – SERVICE TAX – REFUND OF TAX PAID ON SERVICES USED FOR EXPORT GOODS

A refund claim of service tax filed beyond time-limit specified in concerned exemption notification is time-barred and not maintainable, even if same is within time-limit specified in section 11B of the Central Excise Act, 1944 –[2015] 64  10 (New Delhi – CESTAT)

CENTRAL EXCISE ACT

SECTION 4

VALUATION UNDER CENTRAL EXCISE

Cost of Pre-delivery inspection (PDI) and free after-sales service (ASS) borne by dealers from their margin would not be included in assessable value of manufacturer for purposes of paying excise duty. In other words – [2015] 64  261 (SC)

SECTION 35C

APPEALS – ORDERS OF – APPELLATE TRIBUNAL

Where Tribunal had merely remanded matter, there was no need for Supreme Court to interfere; however, scope of remand was extended to entire period covered by notice – [2015] 64  79 (SC)

CENTRAL EXCISE TARIFF ACT

SECTION 2

CLASSIFICATION – FROZEN FISH

Mere addition of salt, Vitamin C, etc. to ‘fish’ for chilling/freezing purposes would not make it ‘cooked food or food preparation’; same would continue to be ‘frozen fish’ and not liable to duty – [2015] 64  119 (SC)

CUSTOMS ACT

SECTION 72

WAREHOUSING UNDER CUSTOMS – GOODS IMPROPERLY REMOVED/DEEMED REMOVALS

Goods lying in warehouse beyond permitted period are dutiable as per section 72 based on rate of duty prevalent on date of expiry of warehousing period; judgment in Kesoram Rayon v. Collector of Customs 1996 254 (SC) is correctly decided and does not require reference to larger Bench – [2015] 64 80 (SC)

CST & VAT

SECTION 9 OF HARYANA GENERAL SALES-TAX ACT, 1973

PURCHASE TAX – LIABILITY TO

Where assessee, a manufacturer, was granted tax benefit under rule 28B of Haryana General Sale Tax Rules and it claimed adjustment of purchase tax against notional tax liability, lower authorities were justified in disallowing claim of assessee and amount of purchase tax levied upon it was recoverable – [2015] 64 83 (Punjab & Haryana)

SECTION 24 OF HARYANA GENERAL SALES-TAX ACT, 1973

DECLARATION FORM – FILING OF

Assessee is entitled to produce STD-IV declaration and ST-14B Forms even before Appellate Authoritys

SECTION 44 OF GUJARAT VALUE ADDED TAX ACT, 2003

RETURNS, ASSESSMENT AND TAX ADMINISTRATION – RECOVERY – SPECIAL MODE OF

Where against orders of assessment, assessee filed appeals together with stay applications and in meanwhile Assessing Authority issued on assessee a notice of demand and on same day he passed an order under section 44 attaching bank accounts of assessee, conduct of Assessing Authority in attaching bank accounts was not warranted, when appeals together with stay applications were pending consideration before First Appellate Authority – [2015] 64  104 (Gujarat)

EXPORT OF SERVICES RULES, 2005

RULE 3

EXPORT – SERVICES

Commission received by assessee from foreign entity for transfer of money from abroad to beneficiaries in India, amounts to “export of service” and is, therefore, not liable to service tax – [2015] 64  98 (Mumbai – CESTAT)

INDIRECT TAXES: 

• Works contract service – Composition Scheme being optional having opted for it appellant has no locus standi to revert back to work out the gross value charged for the services rendered- (Sunraj Construction Versus Commissioner of Central Excise & Customs, Mumbai, CESTAT MUMBAI).

• Denial of a refund of the interest recovered by the revenue – demand of interest is not sustainable. Consequently the interest recovered from the appellant is to be refunded. – no show cause notice has been issued to the appellant. Therefore adjustment of demand of interest is not permissible- (M/s Goyal Tobacco Co. Pvt. Ltd. Versus C.C.E. & S.T. Jaipur-I, CESTAT NEW DELHI).

• Denial of CENVAT Credit – Invalid documents – covering letter vide which monthly returns were filed with the authorities indicated copies of RG23A part I and II as enclosures – the invocation of the extended period for demanding the Cenvat credit as being suppressed is incorrect- (M/s Gupta Soaps Versus Commissioner of Central Excise, Mumbai-I, CESTAT MUMBAI).

• Refund due of revision in price escalation clause – Refund claim was filed within one year from the issuance of credit notes – refund allowed- (CCE, Aurangabad Versus Good year South Asia Tyres Pvt. Ltd. And Vice-Versa, CESTAT MUMBAI).

3. ICAI Members/Firms to furnish PAN details:

Decision taken by council following advice received from Income Tax Department. Members required to deposit self attested copy of PAN CARD to concerned regional office on or before 15 December 2015.

STATUTES

DIRECT TAX LAWS

Section 260A of the Income-tax Act, 1961 – High Court – Appeal to – Adoption of Collegium system to consider withdrawal of appeals before High Courts where same are no longer considered prosecutable-OFFICE MEMORANDUM [F.NO.279/MISC./52/2014-(ITJ)], DATED 10-12-2015

CORPORATE LAWS

Testing of software used in or relat

ed to Trading and Risk Management – CIRCULAR NO. CDMRD/DEICE/03/2015, DATED 11-12-2015

Exim Bank’s GOI supported line of Credit of USD 268.35 Million to Government of United Republic of Tanzania –A.P. (DIR SERIES 2015-16) CIRCULAR NO.33, DATED 10-12-2015

Exim Bank’s GOI supported line of Credit of USD 55 Million to Government of Republic of Congo – A.P. (DIR SERIES 2015-16) CIRCULAR NO.34, DATED 10-12-2015

Inclusion of IDFC Bank Ltd in Second Schedule to Reserve Bank of India Act, 1934 – CIRCULAR DBR.NO.RET.BC.66/12.07.136A/2015-16, DATED 10-12-2015

4. FAQ ON COMPANY LAW: 

Query	Answer
If any Private Limited Company has taken unsecured loan from its director and their relatives during 2014-15 then how this will be reported in Audit report, Director report and notes to accounts.	As per Companies Act 2013, Companies are allowed to take loan from directors but are not allowed to take loan from the relatives of directors, during the F.Y 2014-15. Therefore, loan taken by Companies from the relatives of director(s) is required to be qualified by the Auditor in his Auditor’s Report and the Board is required to answer the qualified opinion of Auditor in Director’s Report or Board Report.
I got appointed as statutory auditor in a Private Limited Company on 25th August 2015. Previous auditor has given NOC but till now I have not filed Form ADT-1 and other ROC filing due to confusion in filing Form ADT-1. Like whether I have to attach Form ADT-3 also or not, whether I have to file 2 Form ADT-1 i.e. For the period upto this 30th Sept (date of AGM) and next for 5 years i.e. upto 30th Sept 2020. Please advise me.	Previous Auditor of the Company is required to file Form ADT-3 attaching the copy of his Resignation letter addressed to the Company. And you are required to file Form ADT-1 regarding your appointment as Statutory Auditor of Company from the date of appointment for next five financial years (including current financial year).

• Government may bring change in rate of corporate tax:

It has been known from the sources that Govt. may bring corporate tax rate down from 30% to 25%.

INDIRECT TAX LAWS (ST./EX./CUS. & (CST & VAT)

Applicability of Service tax on services received by apparel exporters in relation to fabrication of garments –CIRCULAR NO.190/9/2015-ST, DATED 15-12-2015

Extension for filing of Reconciliation return for Year 2014-15 – CIRCULAR NO.32 OF 2015-16 [NO.F.3(589)/POLICY/VAT/2015/1162-68, DATED 15-12-2015

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