CORPORATE AND PROFESSIONAL UPDATE FEBRUAY 5,2016
CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 5,2016
Direct Tax
- Treatment of property lease income that is any income earned by the assessee by the operation of mall has to be taxed under the head of Profits and Gains of business OS Profession. [ Chennai Properties & Investments Ltd. Vs CIT 2015 (8) TMI 481 –SC]
- Penalty under custom can be imposed simultaneously on firm and its partners: Larger bench of HC. [Textoplast Industries vs Additional Commissioner of Customs 2011 (272) ELT 513 (Bom).
- The assessee is required to incur expenditure every year to maintain the road of huge stretch, it shows that the assessee is not enjoying enduring benefit and thus claim allowed as revenue expenditure. [MMRDA vs Department of income tax]
- Levy of simultaneous penalties on both the partner and partnership firm in adjudication proceedings under the Customs Act, simultaneous penalties can be imposed on the firm and the partners under the Act and more particularly under Section 112(a) of the Act. – HC. [M/s Amritlakshmi Machines Work, Mr. N.K. Bramchari, Managing Partner, M/s. Amritlakshmi Machine Works vs Commissioner of Customs (Import) – 2016 (2) TMI 57 – Bombay High Court]
- Provision for accounting and auditing expenses, if the assessee is following this practice consistently then it is revenue neutral because every year this expenditure is required to be allowed. [M/s. New Mangalore Port Trust vs Asst. Commissioner of Income-tax, Circle 1 (1), Mangalore. – 2016(2)TMI 76 – ITAT Bangalore.]
- HC allowed deduction of entire deferred revenue expenditure as assessee had abandoned its project[2016] 65 311 (Calcutta) CIT v. Alcove Industries Ltd.
- Concealment penalty won’t be attracted by mere disallowance of an exp. [2016] 66 27 (Bombay) CIT v. First Data (India) (P.) Ltd.
- Income from transfer of right to use agricultural land is exempt even if its end use is for non-agricultural purposes [2016] 65 321 (Mumbai – Trib.) Mrs. Pratima Pramod Nagrecha v. ITO
- A woman can become Karta of HUF if she is eldest member of a family, rules Delhi HC
- Director can’t run parallel business to compete with own Co. due to her animosity against co-director [2016] 66 18 (Delhi) Rajeev Saumitra v. Neetu Singh
- Exchange diff. related to creditors in respect of imported stock can’t be adjusted with value of the stock
- CBDT lays down procedure for adjustment of refund with outstanding demand
- Renting of farm house – whether appellant is liable to pay service tax under the category of Renting of Immovable Property Service – scope of the lease deed – prima facie the same is not taxable- M/s Jumera Promotors And Developers Pvt Ltd Versus Commissioner of Central Excise, Delhi – 2016 (2) TMI 69 – CESTAT NEW DELHI
- Refund – valuation – quantity discount given after clearance of goods from factory to their depot – Rule 7 – Refund allowed- M/s Cipla Ltd. Versus Commissioner of Central Excise, Mumbai-III – 2016 (2) TMI 67 – CESTAT MUMBAI
- Department Of Trade and taxes directs expeditious disposal of refund cases of amt upto Rs 10000 pending upto 31.03.15.Circular no. 37 of 2015-16 dt. 29.1.16.
- IT:Taxability of income earned by the Assessee in respect of a contract with ONGC Ltd. – There is also no material to indicate that the work done outside India included any input from the Assessee’s PE in India – Not taxable -National Petroleum Construction Company Vs. DIT (Delhi High Court)
- IT:There is no reason to club the service charges received by wife and daughter-in-law of the assessee with the rent received by the Assessee in relation to same property – Harish M Aggarwal Vs. ACIT-Cir-1, Thane (ITAT Mumbai).
- IT:Assessee is required to incur expenditure every year to maintain the road of huge stretch not enjoying enduring benefit – Claim allowed as revenue expenditure – Maharashtra State Film Stage and Cultural Development Corporation Ltd. Vs. ACIT 11 (1) , Mumbai (ITAT Mumbai)
- IT:A BMW car purchased from trust fund but by mistake registered in the name of Trustee, once mistake detected the steps were initiated to correct the mistake and transferred the motor car in the name of the assessee trust – Exemption u/s 11 allowed –ITO, Mumbai Vs. M/s Cancer Aid & Research Foundation (ITAT Mumbai).
- IT:Non Compete Fee (₹ 39,35,00,000/-) received by the assessee company is a component attributable in a negative / restrictive covenant and as such is a capital receipt – taxable as LTCG – DCIT, Cir-11 (1), New Delhi Vs. M/s. Eicher Motors Ltd. (ITAT Delhi).
- IT:No TDS was required to be deducted on discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine – ITO (TDS) 3 (4), Mumbai Vs. Unichem Laboratories Ltd. (ITAT Mumbai)
- Addition on account of Capital Subsidy u/s. 41(1) – to encourage the setting up of wind mill to promote generation of energy through non conventional sources – the subsidy received by the assessee is not taxable u/s 41(1), neither u/s 43(1) and nor u/s 50 – M/s. UniDeritend Limited Versus The Additional Commissioner of Income Tax, Range – 1 (3) , Mumbai – 2016 (2) TMI 117 – ITAT MUMBAI
- CBDT has prescribed two additional modes for Electronic Verification CODE (EVC) for electronically filed Income Tax Return in addition to EVC prescribed vide earlier Notification No. 2/2015 dated 13th July 2015. The new modes are relating to the account details of Bank Account and Demat Account with CDSL/ NSDL at the time of uploading of return and generating EVC (Electronic Verification Code).
- No addition for change in valuation of stock,where method is changed in compliance of ICAI Accounting Standard.[ACIT vs. M/s J. K. Synthetics Ltd. (ITAT Lucknow), ITA No.563/LKW/2010 & ITA No.506/LKW/2010 and others]
- Income from temporary letting of property taxable as income from house property if letting is not the main object. [G.R. Commercial Pvt. Ltd. vs. ITO (Individual) (ITAT Delhi), Income Tax (Appeal) Nos. ITA No.273/Del/2013 and ITA No.1134/Del/2013, AY 2005-2006 and 2006-2007]
- Revenue expenses u/s 37 allowed in same year, AO not authorized to treat as deferred revenue expenditure.[ACIT vs. M/s Citi Financial Consumer Finance India Ltd. (ITAT Delhi), ITA No. 2848/Del/2012 & ITA No. 6305/Del/2012].
Indirect Tax
- Notification No. 39/2012- Service Tax dated 20/06/2012 is amended so as to provide for rebate of Swachh Bharat Cess paid on all services, used in providing services exported in terms of Rule 6A of the Service Tax Rules vide Notification No. 03/2016 dated 03/02/2016.
- Notification No. 12/2013- Service Tax dated 01/07/2013 is amended so as to allow refund of Swachh Bharat Cess paid on specified services used in an SEZ- vide Notification No. 02/2016 dated 03/02/2016.
- Nature of road repairs expenses – assessee is required to incur expenditure every year to maintain the road of huge stretch shows that the assessee is not enjoying enduring benefit-Claim allowed as revenue expenditure- M/s Maharashtra State Film Stage and Cultural Development Corporation Limited Versus Asstt. Commissioner of Income Tax 11 (1) , Mumbai – 2016 (2) TMI 88 – ITAT MUMBAI
- ST:Renting of farm house – whether appellant is liable to pay service tax under the category of Renting of Immovable Property Service – scope of the lease deed – prima facie the same is not taxable – Jumera Promotors & Developers Pvt Ltd Vs. CCE, Delhi (CESTAT New Delhi)
- ST:CBDT vide Notification No.02/2016, dt.03.02.2016 Clarifies –
- CENVAT credit cannot be used for payment of the Swachh Bharat Cess.
- ST paid on sale of dutiable goods on commission basis allowed as Credit.
- Deduction U/S 57 – The claim of the assessee cannot be thrown into the dustbin on the basis of conjectures and surmises that the agreement does not prove any nexus between the interest income earned form FDR and interest paid on OD account claimed u/s 57 of the Act without declaring the agreement as false and frivolous document- Sunaini Sarin Versus ACIT, Circle 31 (1) , New Delhi – 2016 (2) TMI 85 – ITAT DELHI
- Notification No. 41/2012- Service Tax dated 29/06/2012 is amended so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax rate- vide Notification No. 01/2016 dated 03/02/2016.
- Cenvat Credit Rules, 2004 are amended so as to (i)- specify that the Cenvat Credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Swachh Bharat Cess; (ii)- allow credit of service tax paid on sale of dutiable goods on commission basis- vide Notification No. 02/2016 dated 03/02/2016.
- Amendment in CENVAT Credit Rules, 2004, the provision restricting CENVAT credit to 85 under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 deleted. Consequently ship breaking units would be entitled to avail 100 credit of the CVD paid with effect from 01.03.2015 – 01/2016 – Dated 01.02.2016 – Central Excise – Non Tariff
- Amendment on Notification No. 39/2012-ST dated the 20th June,2012 so as to provide for debate of Swachh Bharat Cess paid on all services used in providing services exported in terms of India, Extraordinary, vide number G.S.R. 481(E) , dated the 20th June, 2012.
- ST:Transfer of right to use goods – effective control and possession of the subject System stands transferred to the Customer – The activity proposed to be undertaken by applicant is not liable to Service Tax – M/s SICPA India Pvt. Ltd. Vs. C.S.T., CT&T, Govt. of NCT of Delhi (A A R)
- Excise & Customs: Where notice does not allege suppression, etc. with intent to evade, extended period cannot be invoked.
- Excise & Customs: Merely because assessee has voluntarily paid ‘time-barred’ duty cannot lead to confirmation of interest and penalty; hence, interest and penalty pertaining to time-barred duty, though paid, were set aside[2016] 65 300 (Mumbai – CESTAT) Innovassynth Technologies (India) Ltd.v. Commissioner of Central Excise
- Excise & Customs: If department wants to deny SSI-exemption on ground that brand name used by assessee is of another person, department must prove case and assessee cannot be asked to prove that brand name does not belong to any other person, [2016] 65 298 (Mumbai – CESTAT) Commissioner of Central Excise v. Sams Techno Mech
- Amendment in notification No. 41/2012-ST dated the 29th june, 2012 so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax, published in the Gazette of India, Extraordinary, vide number G.S.R. 519(E), dated the 29th June, 2012.
- ST:CENVAT credit and refund claim thereof for the period prior to registration – export of IT enabled services – nexus of input services with output services – refund allowed- Prudential Process Management Services India Pvt. Ltd. Vs. CST, Mumbai Zone-II
- MRP based value or transaction value of goods i.e. lubricating oil 50 litres package should be valued in terms of Section 4A and not u/s 4 of the Central Excise Act 1944-Tri-Central Excise. [Commissioner Of Central Excise & Customs, Mumbai vs M/s LSR Speciality Oils Pvt Ltd. And vice-versa-2016(2) TMI 62 – CESTAT Mumbai].
- Cenvat credit and refund claim thereof for the period prior to registration, export of IT enabled services, nexus of input services with output services, are allowed for refund- Tribunal, Service Tax. [Prudential Process Management Services India Private Limited vs Commissioner of Service Tax, Mumbai Zone-II-2016(2) TMI 28 – CESTAT Mumbai].
- CBEC allows refund/rebate of Swachh Bharat Cess to exporters and SEZ units
- Sets up a common ‘Tax Research Unit’ to deal with direct and indirect tax policies
- DVAT:Due Date to file Form DP-1 is extended to 29 FEB 2016. Notification # F.3(352)/2013/1395-1405, dt.01.02.2016.
Company Law
Companies Act 2013: panel suggests 100 amendments to Companies Act and MCA has decided to launch a public consultation process on the suggested changes and has invited comments from all concerned stakeholders till 15 FEB 2016.
Query:Whether a company can accept the share capital in cash or whether the promoters/shareholders can contribute the same in cash? Is there in violation if share capital is contributed in cash from promoters?
Answer: A company cannot accept the share capital from the subscribers to Memorandum of Association in cash. Share capital is required to be either deposited in cash or transferred by any means from the personal account of subscribers to the Current account of Company maintained in any Scheduled Bank.
Query:We are incorporating a Section -8 company for which we have already filed Form INC-1 regarding the name reservation which has been approved as well. Now we need to apply for the License of Section – 8 Company for which we have to file Form INC-12. But Form INC-12 is not an e-form. So, kindly guide us the method to file Form INC-12 for obtaining its License.
Answer: For the purpose of applying License of Section -8 company, you are required to file Form INC -12 along with all its attachments in e-form RD-1.
Query: A company (A Ltd.) records export sales by applying exchange rate prevailing on the date of mate’s receipt. As per the company date of mate’s receipt is the date of transaction in case of export sales, so exchange rate of that date should be taken for recognising export. Whether policy of recording export sales by A Ltd. is correct?
Answer: As per Para 9 of AS 11, “The Effects of Changes in Foreign Exchange Rates”, a foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. In case of sales, date of transaction should be determined with reference to principles laid down under AS 9, “Revenue Recognition”. In other words, in case of sales, date on which revenue should be recognised as per AS 9 should be considered as date of transaction for the purpose of AS 11.
Referring to above in case of export exchange rate as on date of mate’s receipt can’t be used to record the export. Therefore, in the instant case contentions of A Ltd. is not correct.
Query: A company (C Ltd.) has imported certain stock-in-trade on credit. At the end of the year some amount in respect of the imported stock is still outstanding. C Ltd. has converted the outstanding amount into reporting currency using foreign exchange rate prevailing at the end of the year and resulting exchange difference is adjusted with the value of closing imported stock. Is treatment of exchange difference as provided by C Ltd. correct?
Answer:AS 11, “The Effects of Changes in Foreign Exchange Rates”, states that only exchange differences related to loans taken for acquisition of fixed assets should be adjusted with the carrying amount of the concerned assets. Except this difference all exchange differences should be transferred to the statement of profit and loss. Thus, the accounting treatment of exchange difference followed by C Ltd. is not correct.
Other Update
- Finance Minister to inaugurate India Investment Summit on Feb 4, 2016
- RBI-FEMA:The physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted w.e.f. 8 FEB 2016.
- RBI permits NBFCs to offer Safe Deposit Locker facilities to their customers
- RBI vide Circular 40 dated 1st Feb, 2016, under the aegis of the e-Biz project of the Government of India has enabled online filing of the ARF, FCGPR & FCTRS Forms with the RBI. At present both the options i.e. online filing and physical filing are available. Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.
- Conditions & Procedures for export of sesame seeds to European Union countries have been notified vide Notification No. 37/2015-20, dated 03-02-2016
- RBI keeps repo rate unchanged at 6.75%
- RBI keeps Interest rate unchanged and link rate cut to Govt. sticking to fiscal deficit target in bi-monthly monetary policy review.
- Online Aplications are invited for Empanel of CA Firms/LLPs wth O/o C&AG for 2015-16 at saiindia.gov.infrm01Jan to15Feb2016.
- DGFT clarified that the departure from the 3 document norm as mandated for Exports and Imports of goods from India and into India respectively vide notification dated 12-03-2015 is envisaged only in exceptional cases where a substantial legal requirement exists for doing so.
- Export should not be recorded at exchange rate prevailing on the date of mate’s receipt.
Key Updates
Today (05.02.16) is last date for filing DVAT return in form DVAT-16,DVAT-17,& DVAT-48 for Q3 of 2015-16.Circular no. 36 of 2015-16.
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.comor call at 011-233-43-333