/ Direct Tax

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 24, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 24, 2016

www.caindelhiindia.com; CORPORATE UPDATES
www.caindelhiindia.com; CORPORATE UPDATES

ROLE OF DEEMING FICTION OF SEC. 50C TO CLAIM RELIEF UNDER SEC. 54/54F

  1. Introduction:

Section 50C of the Income-tax Act (the Act) was introduced with effect from 1st April, 2003 by the Finance Act, 2002. The purpose of this section was explained thus by the Memorandum to the Finance Bill 2002:

“The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.

It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act.”

  1. Controversies relating to deeming fiction of Section 50C:

When this provision was introduced the Legislature would not have envisaged that so much of controversy would arise as has happened already.

To illustrate the following few case laws may be gone through-

The Mumbai Bench of ITAT in the case of Raj Babbar v. ITO [2013] (Mumbai – Trib.) held that where investment in new asset was more than net consideration received as well as full value of consideration computed as per section 50C, assessee would not be chargeable to capital gains.

The Indore Bench of ITAT in the case of Dhanveer Singh Gambhir v. ITO [2015]  (Indore – Trib.) decided in favour of Revenue by holding that while allowing deduction under section 54 of the Act from long-term capital gain, provision of section 50C was not applicable.

The Bangalore Bench of ITAT in the case of Gouli Mahadevappa v. ITO [2011] 128 ITD 503/[2010]held that for computing Capital Gain, section 50C has to be taken into consideration but the exemption under section 54F or 54 of the Act being a complete Code in itself, exemption has to be worked out as per the provisions of that section itself. This decision which was cited before the Indore Bench in this case was distinguished after making the following observations at para.14 of its order

“As per the provisions of Section 54, exemption is allowable with reference to the amount of Capital Gain and not with reference to the amount of net consideration. Therefore, the issue which arose with reference to exemption under Section 54F wherein exemption is allowed with reference to amount of net consideration does not arise in granting exemption under Section 54.”

The decision of the Bangalore Bench in the case of Gouli Mahadevappa(supra) was approved by the Karnataka High Court on the point of allowing exemption with reference to section 54F of the Act inGouli Mahadevappa v. ITO [2013] 33 . The Karnataka High Court also enlarged the deduction under section 54F of the Act by holding that “where capital gain is assessed on notional basis, whatever amount is invested in new residential house within prescribed period under section 54F of the Act, entire amount so invested, would get benefit of deduction, irrespective of fact that funds from other sources are also utilized for new residential house.” The assessee had claimed, apart from investing the net consideration, a further sum of Rs.4 lakhs invested out of agricultural income under section 54F of the Act and this claim which was negatived till the Tribunal’s stage was allowed by the High Court.

The ITAT Jaipur Bench in the case of Nand Lal Sharma v. ITO [2015] (Jp. – Trib.)following the decision of the Delhi High Court in the case of CIT v. Smt. Nilofer I. Singh [2009] (Delhi) held that while computing exemption under section 54 of the Act, actual sale consideration has to be taken into consideration and not stamp duty valuation under section 50C of the Act. The Delhi High Court in Smt. Nilofer I. Singh’s case (supra) held that “the expression ‘full value of consideration’ used in section 48 does not have any reference to market value but only to consideration referred to in sale deeds as sale price of assets which have been transferred”.

The Mumbai Bench of ITAT in the case of Bhaidas Cursondas & Co. v. Addl. CIT [2015]  (Mum.) has held that deeming provision under section 50C applies to compute capital gains and not to determine written down value of relevant block of assets. (more…)

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CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 23, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 23, 2016

www.caindelhiindia.com; CORPORATE UPDATES
www.caindelhiindia.com; CORPORATE UPDATES

Direct tax Update

  • Extension of due date to file returns in form GE-II for 1st three quarters of F.Y.2015-16 to 07.03.2016. Notification no. F3 (619)/POLICY/VAT/2016/1496-1506.
  • Business set up expenses deductible despite of no business income. [Multi Act Realty Enterprises Pvt. Ltd vs. ACIT (ITAT Mumbai)].
  • Expenses not generating capital asset are revenue in nature. [CIT vs. M/s Manganese Ore India Limited (Bombay High Court)].
  • Reopening on incoherent reasons not valid u/s 147. [Sabharwal Properties Industries Pvt. Ltd. vs. ITO (Delhi High Court)].
  • CBDT Mechanism to Identify of Duplicate PANs. ITBA-PAN Instruction No. 3 – (24/02/2016)
  • CBDT vide its notification has exempted the Competition Commission of India from computing the income as part of the total income for income tax purpose. This includes amount received in the form of Government grants; fees received under the Competition Act, 2002; and interest accrued on Government grants and interest accrued on fees received under the Competition Act, 2002.
  • IT:Disallowance u/s 40(a)(i) – TDS – 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. When the transaction does not attract the provisions of Sec-9 of the Act then there is no question of applying Explanation 4 to Sec-9 – CIT, Chennai Vs. Farida Leather Co. (2016 (2) TMI 798 Gujarat High Court)
  • IT:TDS u/s 194H – credit card commission to the banks are in the nature of normal bank charges and are not in the nature of commission within the meaning of Section-194H and therefore no tax is required to be deducted at source on the same – ITO Vs. Vijay Sales (2016 (2) TMI 786 ITAT Mumbai)

Indirect tax Update

  • ST:The costs claimed to be reimbursibles are not attributable to the business auxiliary service rendered by the assessee but to the cost of the product itself. Not surprisingly the bank reimburses these expenses – demand of service tax with penalty set aside –Bhaven Desai Vs. CST, Mumbai (2016 (2) TMI 806 CESTAT Mumbai)
  • MVAT: Changes in automation processes & other procedures. Trade Circular No. 7T of 2016 -(25/02/2016)

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CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 22, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 22, 2016

www.caindelhiindia.com; CORPORATE UPDATES
www.caindelhiindia.com; CORPORATE UPDATES

DIRECT TAX

  • Loss on revaluation of investments – valuation of stock in trade – the securities of the Banks are investment and have to be valued at costs or market price whichever is less – claim of loss allowed- (The Commissioner of Income Tax (Large Tax Payer Unit) Versus M/s Union Bank of India – 2016 (2) TMI 606 – BOMBAY HIGH COURT)
  • AO can’t question audited books of assessee while computing book profits under sec. 115JB [2016] 66 233 (Karnataka) Sri Hariram Hotels (P.) Ltd. v. CIT
  • Revised monetary limit for filing an appeal before tribunal would apply to pending cases also
  • Waiver of interest couldn’t be restricted till date of HC’s order in another case on same issue
  • IT: Loss on revaluation of investments – valuation of stock in trade – the securities of the Banks are investment and have to be valued at costs or market price whichever is less – claim of loss allowed – CIT Vs. Union Bank of India (2016 (2) TMI 606 Bombay High Court)
  • IT:Deduction u/s 10A denied – assessee customized the electronic data and it was admittedly exported. This Tribunal is of the considered opinion that processing the data by the assessee would amount to providing IT enabled service therefore the assessee is eligible for exemption u/s 10A – Crisil Ltd. Vs. DCIT, Chennai (2016 (2) TMI 599 ITAT Chennai)
  • IT: Where assessees P and S were directors in two sister companies, namely AE and AI, and AI received Rs. 10 lakh as loan from AE, it would be treated as deemed dividend under section 2(22)(e) in hands of P and S in proportion to their shareholdings in AI [2016] 66 taxmann.com 190 (Delhi – Trib.)
  • Section 292C inter alia provides that where any books of accounts or other documents are found in possession or control of any person in the course of search u/s 132 or survey under Section 133A of the Act it may be presumed that such books or documents belong to such person. Undisputedly such presumption is rebuttable- (PR. Commissioner of Income Tax Versus M/s Delco India Pvt. Ltd. – 2016 (2) TMI 607 – DELHI HIGH COURT)
  • Job worker enjoying exemption under Notification No. 214/86 not liable to reverse Cenvat credit as the duty on job worked goods ultimately paid by principal manufacturer. [Precision Metals vs. CCEx (CESTAT Mumbai), Appeal No. E/740/07]
  • Registration petition u/s. 80G(5) is denied where assessee is not an institution expressed to be for the benefit of any particular religious community or caste u/s 80G(5)(iii) or having any purpose the whole or substantially the whole of which is of religious nature under explanation 3 therein – Tribunal.[Shri Yamunaji Mandir, Trust-Moviya vs Commissioner of Income Tax-I – 2016 (2) TMI 569 – ITAT RAJKOT]
  • Import of poppy seeds from Turkey : The explanation offered by the respondents (government) as to the reason and rationale in adopting a prescription of a provisional cap and a country cap, in so far as the imports from Turkey is concerned, is also acceptable. – HC.[M/s M. Traders vs The Union of India And Others – 2016 (2) TMI 577 – KARNATAKA HIGH COURT]

INDIRECT TAX

  • Levy of tax on open space termed as “banquet halls” providing only accommodation or space for marriages/receptions in terms of section 2(c) in the manner stated under section 2(k) of the Haryana Tax on Luxuries Act, 2007. The validity of the same is upheld and the petition is dismissed. – HC.[M/s Laxmi Sadan, Sector 19, Rewari vs State of Haryana and others – 2016 (2) TMI 550 – PUNJAB AND HARYANA HIGH COURT]
  • Penalty cannot be levied unless evasion of duty alleged in SCN. [Precision Metals vs. CCEx, Raigad (CESTAT Mumbai), Appeal No.- E/633/11-Mum]
  • Amendment in Notification No. 25/2012 by inserting new entry for granting exemption from service tax for the services provided by Government or a local authority to a business entity having turnover upto Rs. 10,00,000 in the preceding financial year – 07/2016 – Dated 18-2-2016 – Service Tax
  • CENVAT credit eligible on furniture & fittings used for output service. [ICICI Lombard General Insurance Company Ltd. vs. Commissioner of Service Tax (Mumbai CESTAT)]
  • Transmission and exchange of financial messages service falls under the category of ‘Banking and Other Financial Services’ – CESTAT. [Bank of Baroda vs Commissioner of Service Tax (CESTAT-Mumbai)]
  • ST: Refund of un-utilized cenvat credit – period of limitation – the claim is to be filed within one year and after end of the quarter – Refund allowed – CCE, Pune-III Vs. Computer Land UK Ltd. (2016 (2) TMI 609 CESTAT Mumbai)
  • DVAT department clarifies on framing of central assessments for deficiency in Form 9
  • An ‘endorsed bill of entry’ is also a valid document for taking credit
  • Excise duty rate should be rate prevalent at the time of clearing. [M/s Siemens Ltd. vs. Commissioner of Central Excise (CESTAT Mumbai); Appeal No. E/3360/05]
  • All the services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax with effect from 1.4.2016 .Seeks to appoint 1st day of April, 2016 as the date with effect from which the provisions of Section 109(1) as contained in the Finance Act, 2015 shall come into effect. – 06/2016 – Dated 18-2-2016 – Service Tax
  • Denial of benefit of CENVAT Credit on xerox copy of courier bill of entry, appellant have correctly claimed the CENVAT Credit on the photocopy of the courier bill of entry filed by them and CENVAT Credit cannot be denied on mere technical grounds – Tri.[Arbes Tools Pvt. Ltd. vs Commissioner of Central Excise, Mumbai-II – 2016 (2) TMI 555 – CESTAT MUMBAI]
  • Multi Level Marketing – BAS – service tax is not payable on the Trade discount earned and profit on Trading in Amway goods. But the same is taxable on the commission earned from activity of sponsoring new distributors and commission earned on turnover achieved by them- (Shri Partho Bose, Ms Neelam Srivastava Versus Commissioner of Central Excise, Lucknow – 2016 (2) TMI 610 – CESTAT ALLAHABAD)
  • Business Auxiliary Service – Activity of maintaining complete Toll Operation supply of Man Power and maintenance of Toll Collection System including Plaza maintenance etc. – NHAI is not running any business – Activity is not taxable- (Shri Jivanlal Joitaram Patel Versus Commissioner of C. Ex. & Service Tax, Ahmedabad-III – 2016 (2) TMI 611 – CESTAT AHMEDABAD).

(more…)

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CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 21, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 21, 2016

www.caindelhiindia.com; CORPORATE UPDATES
www.caindelhiindia.com; CORPORATE UPDATES

DIRECT TAX

CBDT had issued Clarifications for implementation of FATCA and CRS Vide Press release dated 19.02.2016

ITAT: Rejects double-deduction on BSE membership card; Special provisions u/s 50 override Sec 55(2)(ab) [TS-75-ITAT-2016(Mum)]

IT: Tax cannot be levied on assessee at a higher amount or at a higher rate merely because assessee, under a mistaken belief or due to an error, offered income for taxation at that amount or that rate [2016] 66 taxmann.com 181 (Rajkot – Trib.) ACIT v. Rupam Impex

Compensation received in connection with termination of share purchase agreement to be taxed as revenue receipt [2016] 66 taxmann.com 183 (Himachal Pradesh) Avantor Performance Materials India Ltd. v. CIT

IT: Penalty u/s 271(1)(c) – the return which was filed on the basis of the certificate issued by the Chartered Accountant though under mistake the assessee could take the benefit on the basis of bonafide belief – CIT-3, Ludhiana Vs. S.S. Food Industries (2016 (2) TMI 517 Punjab & Haryana High Court)

IT: Section 194C(2) had no application when the Union was merely acting in representative capacity and there was no separate contract between the Union and its members (truck operators) for performance of the work – CIT-I, Ludhiana Vs. Truck Operator Union (2016 (2) TMI 520 Punjab & Haryana High Court)

ITAT: False claim supported by CA opinion irrelevant, upholds Sec 271(1)(c) penalty [TS-74-ITAT-2016(CHNY)]

IT: Deduction u/s 80-IA – Whether the Tribunal was right in holding that the deduction under Section 80-IA is not allowable at all to the assessee since there was no taxable income though the unit eligible for deduction had net profit – Held Yes – Sanra Software Ltd. Vs. DCIT, Chennai (2016 (2) TMI 574 Madras High Court)

IT: Advance Rulings – it serves no purpose and certainly not that of the Petitioner to pronounce on the validity of the portion of clause (i) of Section 245R(2) of the Act that exempts resident PSUs from the bar of that provision to be violative of Article 14 of the Constitution – Hyosung Corporation Vs. AFR & ANR (2016 (2) TMI 575 Delhi High Court)

INDIRET TAX

ST: CESTAT dismissed the appeal for non prosecution – The order passed by the CESTAT with regard to the non-appearance of the Assessee is cryptic and devoid of reasons. The reasons are the soul of the Judgment. The order passed without giving reasons cannot be sustained – Empee Distilleries Ltd. Vs. DCST (2016 (2) TMI 581 Madras High Court)

ST: Refund of service tax on the basis of Credit Note – value of services provided (sharing of expenses) earlier got reduced as per the mutual agreement – refund allowed – Piramal Enterprises Ltd. Vs. CST, Mumbai (2016 (2) TMI 545 CESTAT Mumbai)

CBEC has notified the Service Tax and Central Excise (Furnishing of Annual Information Return) Rules, 2016 which shall come into force from 1st April, 2016. The Central Board of Excise and Customs will now use the annual information returns to detect tax evasion.

DVAT Created a separate E-commerce Zone and Ward No.300 for E-Commerce Companies.

Service Tax : Flying training services provided by an approved flying training institute are not liable to service tax, as services fall within meaning of ‘qualification recognized by law’
[2016] 66 taxmann.com 180 (Ahmedabad – CESTAT) Ahmedabad Aviation & Aeronautics Ltd. v. Commissioner of Service Tax

All services provided by Govt. to business entities would be taxable from April 1, 2016

No service-tax on services provided by Govt. to business entities having turnover below 10 lacs

CG appointed 1th day of April, 2016 as the date with effect from which all the services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax i.e. the provisions of Section 109(1) as contained in the Finance Act, 2015 shall come into effect w.e.f. 01.04.2016 Vide Notification No. 06/2016-Service Tax dated 18.02.2016

CG also exempted the services provided by Government or a local authority to a business entity with a turnover up to rupees ten lakh in the preceding financial year w.e.f. 1.4.2016 Vide Notification No. 07/2016-Service Tax dated 18.02.2016.

Delhi VAT Commissioners vested with power to specify dealers who have to furnish returns with digital signature (more…)

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UNION BUDGET 2016-17

UNION BUDGET 2016-17 Budget 2016 expectations: It is that time of the year when everybody is hoping that the Finance Minister has some good news for them in the Budget. With reforms by the Indian government to encourage foreign investment in the country, the upcoming budget is expected to introduce an investor-friendly tax regime and …

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