Law Updates

[Ghatkopar Study Circle]

Date : 6th June 2015   Daily Tax & Corporate Laws Digest
INCOME TAX ACT SECTION 2(47) CAPITAL GAINS – TRANSFER Transfer of property : Transaction of transfer of property would relate to date when sale-deed was executed, sale consideration was paid and possession was handed over but not on date when document was presented before Registrar for registration of sale-deed - (2015) 57 taxmann.com 118 (Ahmedabad - Trib.) SECTION 28(i) BUSINESS LOSS/DEDUCTION - ALLOWABLE AS Shares dealings : Where assessee claimed deduction of loss incurred on valuation of shares kept as stock-in-trade, in view of fact that transaction of purchase of shares was genuine and loss had been computed on principle of stock valuation of 'cost or market price whichever is less', claim so raised was to be allowed - (2015) 57 taxmann.com 446 (Jaipur - Trib.) (TM) BUSINESS INCOME - CHARGEABLE AS Leasing out of commercial property : Where in case of assessee, a builder and developer, Assessing Officer after examining lease agreement and relevant material on record, identified letting out of floor space in infrastructure facility as business activity of assessee, view taken by him being one of possible views, could not be set aside by passing a revisional order - (2015) 57 taxmann.com 213 (Pune - Trib.) SECTION 32 DEPRECIATION – ALLOWANCE Re-assessment : Where based only on assessment records, Assessing Officer opined that depreciation on 'plant and machinery' and 'land and building' given on lease was not allowable, since there was no failure on part of assessee to fully and truly disclose all material facts, reopening of assessment was not valid - (2015) 57 taxmann.com 260 (Allahabad) SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE Comparables and adjustments/Comparables – Illustrations : A software product company cannot be compared with a company providing software development services, similarly, a company providing software development services is as different from a company providing non-development software services - (2015) 57 taxmann.com 438 (Delhi - Trib.) Comparables and adjustments/Comparables – Illustrations : Where financial results of certain companies stood distorted due to extraordinary events of merger and acquisition having taken place during relevant year, same could not be taken as comparables - (2015) 57 taxmann.com 438 (Delhi - Trib.) Comparables and adjustments/Adjustments - Data to be used : Where nothing had been placed on record by assessee to demonstrate that his case fell under proviso to rule 10B(4), authorities below were right in considering only current year's data of comparable companies - (2015) 57 taxmann.com 438 (Delhi - Trib.) SECTION 276C OFFENCES AND PROSECUTION - WILFUL ATTEMPT TO EVADE TAX, ETC. False verification in return : Where upon perusal of complaint it was evident that only after getting proper sanction complaint had been lodged and magistrate concerned had also taken cognizance of same, conviction and sentence under sections 276C and 277 were to be confirmed - (2015) 57 taxmann.com 440 (Madras) COMPETITION ACT SECTION 4 PROHIBITION OF ABUSE OF DOMINANT POSITION Where informant filed complaint against OP for releasing their movies in India only through Digital Cinema Initiatives (DCI) compliant servers and projectors and DCI compliant was found to be better than non-DCI compliant format, OPs had not contravened sections 3 and 4 - (2015) 57 taxmann.com 443 (CCI) SERVICE TAX SECTION 66 CHARGE/LEVY - SERVICE TAX Question of rendering any service in respect of imported goods would arise only after customs transaction is completed; hence, import freight/charges, etc. which are incurred prior to import or which are included in customs value, cannot be charged to service tax under Cargo Handling or any other service - (2015) 57 taxmann.com 429 (Mumbai - CESTAT) As per Notification 1/2002-ST as amended by Notification 21/2009-ST, only services 'to' installations, structures and vessels in CSI/EEZI were subjected to service tax and, therefore, services provided 'by' installations, structures and vessels in CSI/EEZI could not be taxed prior to 27-2-2010 - (2015) 57 taxmann.com 435 (Bombay) SECTION 73 RECOVERY - OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED - INVOCATION OF EXTENDED PERIOD OF LIMITATION Where assessee had made proper declarations before revenue by regularly filing of returns, extended period of limitation was not invocable - (2015) 57 taxmann.com 430 (Mumbai - CESTAT) CONSTITUTION OF INDIA ARTICLE 226 WRIT PETITION - ALTERNATIVE REMEDY Where a writ petition filed against adjudication order alleging violation of principles of natural justice, is pending in High Court for more than one year, same cannot be rejected on ground of an appeal remedy, which may be barred by limitation - (2015) 57 taxmann.com 196 (Bombay) CST & VAT SECTION 23 OF RAJASTHAN SALES TAX ACT, 1954 REFUND - INTEREST ON Where Assessing Authority allowed refund to assessee resulting from its right of set off of tax under obtaining provisions, assessee was entitled to interest on amount of refund at rate of 15 per cent prescribed under section 23(2) - (2015) 57 taxmann.com 171 (Rajasthan) SECTION 78 OF RAJASTHAN SALES TAX ACT, 1994 PENALTY - FOR VIOLATION OF PROVISIONS OF ACT Where Competent Authority checked a vehicle transporting goods from Jaipur to Agra and having found that vehicle was moving on road which did not have check-post imposed penalty under section 78(10A) upon driver of vehicle, since documents produced by driver were neither found to be incomplete nor forged one, imposition of penalty was not justified - (2015) 57 taxmann.com 425 (Rajasthan) statutes DIRECT TAX LAWS Central Action Plan for Financial year 2015-16 - PRESS RELEASE, DATED 23-5-2015 Section 35AC, read with Explanation(B) thereto, of the Income-tax Act, 1961 - Eligible projects or schemes, expenditure on - Notified eligible projects or schemes - NOTIFICATION NO.124/2015 (F.NO.V.27015/1/2015-SO(NAT.COM))/SO 1411(E), DATED 26-5-2015 CORPORATE LAWS Constitution of Companies Law Committee for effective implementation of Companies Act, 2013 - ORDER (F.NO.2/19/2011-CL-V), DATED 4-6-2015 INDIRECT TAX LAWS (ST./EX. & CUS./CST & VAT) Section 66E(I) of the Finance Act, 1994, read with Rule 2C of the Service Tax (Determination of Value) Rules, 2006 – Declared Services – Valuation of services provided in relation to serving of food or beverages by a Restaurant, eating joint or a mess having facility of air-conditioning or central air-heating in any part of establishment- Clarification on rate of Service Tax on Restaurant service - CIRCULAR NO.184/3/2015-ST, DATED 3-6-2015 Section 5A of the Central Excise Act, 1944 - Power to Grant Exemption from Duty of Excise - Exemption to Specified Excisable Goods - Amendment in Notification No.12/2012 - C.E., Dated 17-3-2012 - NOTIFICATION NO.32/2015-CE DATED 4-6-2015 Powered by www.taxmann.com Disclaimer : User are requested to verify the validity of the content before taking any informed decisions.   Subscribe | View in Browser | Contact us

[Ghatkopar Study Circle]

Date : 8th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 22 INCOME FROM HOUSE PROPERTY - CHARGEABLE AS Letting out of commercial complex : Income derived from letting out of commercial space, i.e., offices and shops, which was not accompanied by incidental services, shall be assessed as 'Income from house Property' - (2015) 56 taxmann.com 156 (Delhi - Trib.) SECTION 28(i) BUSINESS INCOME - CHARGEABLE AS Grants : Where Government provided grant of certain sum to a co-operative bank on account of RBI's restrain on it to carry out normal banking business, such transaction of financial assistance would be capital receipt - (2015) 57 taxmann.com 422 (Pune - Trib.) SECTION 36(1)(iii) INTEREST ON BORROWED CAPITAL For purpose of business : Where assessee-firm borrowed money from bank for settling liability of retiring partners, deduction of interest under section 36(1)(iii) on borrowed fund was not allowable - (2015) 57 taxmann.com 331 (Karnataka) SECTION 36(1)(viia) BAD DEBTS Computation of deduction : Deduction under section 36(1)(viia) is to be restricted to actual amount of provision for bad and doubtful debts made in books of account - (2015) 57 taxmann.com 422 (Pune - Trib.) SECTION 37(1) BUSINESS EXPENDITURE - YEAR IN WHICH DEDUCTIBLE Advertisement expenses : Where assessee following mercantile system of accounting, incurred certain expenses on brand building during relevant year, Assessing Officer could not make ad hoc disallowance of 50 per cent of same, merely on ground that it was relatable to future years - (2015) 56 taxmann.com 156 (Delhi - Trib.) SECTION 43D PUBLIC FINANCIAL INSTITUTION Interest on NPA advance : Where interest relatable to non-performing assets advances had not yet accrued to co-operative bank, same would not be includible in total income of assessee - (2015) 57 taxmann.com 422 (Pune - Trib.) SECTION 50C CAPITAL GAINS - SPECIAL PROVISION FOR COMPUTATION OF FULL VALUE CONSIDERATION Adoption of market value : Where Assessing Officer had not examined whether assessee could have sold her plot at a price which was stipulated by stamp duty authorities and assessee had given a detailed clarification about low price, addition made on basis of stamp duty valuation was to be deleted - (2015) 57 taxmann.com 414 (Mumbai - Trib.) SECTION 69 UNEXPLAINED INVESTMENT Suppression of sales : Where pursuant to search conducted at premises of sister concern of assessee, Assessing Officer relying upon information supplied by Director, Bureau of Investigation, made addition to assessee's income on account of suppression of sales, since seized books of account pertained to sister concern which were never confronted to assessee, impugned addition made solely on basis of unsubstantiated information deserved to be deleted - (2015) 57 taxmann.com 436 (Guwahati - Trib.) (TM)

SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE

Comparables and adjustments/CUP Method : In a case where a comparable uncontrolled transaction is possible to identify and locate, CUP method would be most reliable measure of arm's length price in relation to tested international transaction - (2015) 57 taxmann.com 330 (Pune - Trib.) SECTION 143 ASSESSMENT Duty of income-tax authorities : Where assessee had been charged more tax than what was due and payable by him, Commissioner was not only entitled but was duty bound to correct assessment in revision - (2015) 57 taxmann.com 40 (Bombay) SECTION 144 BEST JUDGMENT ASSESSMENT Opportunity of hearing : Where documents seized by CBI were not made available to assessee prior to passing of best judgment assessment, such assessment would not be valid - (2015) 57 taxmann.com 140 (Gauhati) SECTION 158BA BLOCK ASSESSMENT IN SEARCH CASES - ASSESSMENT OF UNDISCLOSED INCOME Section 143(2) v. Section 158BA : When assessee was denied benefit of Voluntary Disclosure Scheme in view of requisition being issued by revenue under section 132A prior to disclosure, amount in consideration should be assessed as 'undisclosed income' in accordance with provisions of Chapter XIV-B and not under section 143 - (2015) 57 taxmann.com 354 (Karnataka) SECTION 221 COLLECTION AND RECOVERY OF TAX – PENALTY PAYABLE WHEN TAX IN DEFAULT ITAT reduced penalty under section 221 as assessee had made payment of self-assessment tax within 5 months from the date of filing of return. However, denied to follow the decision in the case of DCIT v. Kamala Mills Ltd. (ITA No. 7775 to 7777/Mum/2004 dated 31.10.2007) in which it was held that assessee shouldn't be treated as assessee-in-default if he makes payment of tax in reasonable time. ITAT noticed that decision in the case of Kamala Mills (supra)was contrary to the express provisions of section 140A(3). - (2015) 58 taxmann.com 54 (Mumbai - Trib.) SECTION 240 REFUNDS - ON APPEAL, ETC. Invalid return : Where revised return filed by assessee was declared invalid, tax and interest amount offered by assessee based on such invalid return had to be refunded by authorities - (2015) 57 taxmann.com 439 (Karnataka) SECTION 255 APPELLATE TRIBUNAL - PROCEDURE OF Scope of Third Member's Power : President or Third Member has no right to go beyond scope of reference and has to consider only difference of opinion as stated by Members of Bench - (2015) 57 taxmann.com 436 (Guwahati - Trib.) (TM) COMPANIES ACT SECTION 433 WINDING UP - CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP Where company raised different lines of defence which ran contrary to each other, defences were cooked up to stall process of winding up and, therefore, winding up petition against company was to be admitted - (2015) 57 taxmann.com 444 (Calcutta) COMPETITION ACT SECTION 27 ORDERS BY COMMISSION AFTER INQUIRY INTO AGREEMENTS OR ABUSE OF DOMINANT POSITION The Competition Commission of India has imposed a penalty of Rs. 60 Crores (approx.) on 'GlaxoSmithKline Pharmaceuticals' and a penalty of Rs. 3 Crores (approx.) on 'Sanofi' for collusive bidding in supply of a meningitis vaccine to the Government for Haj pilgrims. Both the parties have been directed to deposit the amount of penalty within 60 days of the receipt of order. - (2015) 58 taxmann.com 55 (CCI) SERVICE TAX SECTION 65(12) TAXABLE SERVICES - BANKING AND OTHER FINANCIAL SERVICES - STAY ORDER Exemption available to 'services provided by RBI' cannot be extended to services provided under agency from RBI - (2015) 57 taxmann.com 406 (New Delhi - CESTAT) SECTION 65(97a) TAXABLE SERVICES - SITE FORMATION AND CLEARANCE, EXCAVATION AND EARTHMOVING AND DEMOLITION SERVICES Where tax on services provided by sub-contractor has been paid by contractor, prima facie, no service tax can be demanded from sub-contractor - (2015) 57 taxmann.com 433 (Chhattisgarh) CUSTOMS ACT SECTION 25 EXEMPTIONS - CUSTOMS – GENERAL Interpretative rule 2(a) of Tariff will have no application to an exemption notification under section 25; hence, import of parts of a plant cannot be considered as 'plant' itself and cannot be eligible for exemption available to 'plant' - (2015) 57 taxmann.com 409 (SC) SECTION 28 RECOVERY - OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED - ADJUDICATION OF DEMAND If extended period could be invoked against original holder of fraudulent/forged DEPB, same could be invoked against successor/purchaser; hence, demand invoking extended period against buyer of fraudulent DEPB scrip was valid - (2015) 57 taxmann.com 96 (Bangalore - CESTAT) SECTION 108 SUMMONS – GENERAL Statements made to an Officer of Customs are admissible in evidence under section 108; Court has merely to scrutinize whether admissions made were voluntarily or otherwise and if they are unretracted/voluntary, they may be relied on - (2015) 57 taxmann.com 409 (SC) CUSTOMS TARIFF ACT SECTION 2 CLASSIFICATION - LIQUID CRYSTAL DISPLAY Liquid Crystal Display (LCD) imported by assessee for use in manufacture of electricity meters are classifiable as 'LCD not constituting articles provided for in other headings' under Heading 9013.80 and not as 'parts of electricity meters' under Heading 9028.90 - (2015) 57 taxmann.com 434 (SC) statutes DIRECT TAX LAWS Section 154 of the Income-tax Act, 1961 – Rectification of mistake – Apparent from records – Expeditious disposal of applications for rectification under section 154 during Financial Year 2015-16 - LETTER (F.NO.225/148/2015-ITA-II), DATED 5-6-2015 Section 139 of the Income-tax Act, 1961 - Return of income - Income-tax return Forms ITR 1, 2 and 4S simplified for convenience of tax payers and introduction of a new Form ITR-2A - PRESS RELEASE (31-05-2015) Section 285BA of the Income-tax Act, 1961 - Obligation to furnish Annual Information Return - India joined Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Information (AEOI) - PRESS RELEASE (03-06-2015) CORPORATE LAWS Constitution of Companies Law Committee for effective implementation of Companies Act, 2013 - ORDER (F.NO.2/19/2011-CL-V) 4-6-2015

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

Section 5A of the Central Excise Act, 1944 - Power to grant Exemption from Duty of Excise - Exemption to specified excisable goods - Amendment in Notification No.12/2012 - C.E., dated 17-3-2012 - NOTIFICATION NO.32/2015-CE, DATED 4-6-2015 Section 66E(I) of the Finance Act, 1994, read with Rule 2C of the Service Tax (Determination of Value) Rules, 2006 - Declared services - Valuation of services provided in relation to serving of food or beverages by a Restaurant, eating joint or a mess having facility of Air-Conditioning or central Air-Heating in any part of establishment- Clarification on rate of Service Tax on Restaurant Service - CIRCULAR NO. 184/3/2015-ST 3-6-2015

[Ghatkopar Study Circle]

Date : 9th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 2(22) DEEMED DIVIDEND Loans or advances to share holders/Shareholder : Where recipient of loan, namely, assessee was not a shareholder of company giving such loan, section 2(22)(e) would not apply - (2015) 57 taxmann.com 113 (Bombay) SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF New projects : Where new project did not materialized, expenses incurred towards such project was revenue expenditure - (2015) 57 taxmann.com 250 (Gujarat) Travelling expenses : Where Assessing Officer made disallowance of business expenditure for want of relevant books which were produced before Commissioner (Appeals), Commissioner (Appeals) should call for remand proceedings - (2015) 57 taxmann.com 248 (Chennai - Trib.) Software : Where software was purchased by assessee-software exporter to use same as a raw material in manufacturing of software, same to be treated as revenue expenditure - (2015) 57 taxmann.com 369 (Hyderabad - Trib.) SECTION 68 CASH CREDIT Remuneration : Where assessee had received remuneration partly in cash and partly in cheque and he had already recorded cash deposited in his account as remuneration, it cannot be said that it was unaccounted money of assessee - (2015) 57 taxmann.com 248 (Chennai - Trib.) SECTION 80HHC DEDUCTIONS – EXPORTERS Computation of deduction : Where Interest income was received on investments, while interest paid on borrowings pertained to business expenditure, not 90 per cent of gross interest but 90 per cent of net interest was to be reduced for computing section 80HHC deduction - (2015) 57 taxmann.com 250 (Gujarat)

SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE

Comparables and adjustments/Comparables – Illustration : Segmental information pertaining to a comparable obtained by TPO should be provided to assessee for its objections and then he has to re-consider whether said company is comparable or not - (2015) 57 taxmann.com 307 (Hyderabad - Trib.) Comparables and adjustments/Adjustment - Risk adjustment : Allowing deduction of 1 per cent towards risk profile uniformly cannot be adopted as a norm as risk profile of each assessee differs depending on its own business activity - (2015) 57 taxmann.com 307 (Hyderabad - Trib.) Comparables and adjustments/Adjustment - Risk adjustment : There is no need for making any negative working capital adjustment when assessee does not bear any working capital risk - (2015) 57 taxmann.com 307 (Hyderabad - Trib.) SECTION 220 COLLECTION AND RECOVERY OF TAX - WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT Stay : Where Assessing Officer held activity of assessee slum rehabilitation authority not charitable in view of newly inserted proviso to section 2(15), but assessee fairly made out a case that its activity would be charitable being its object a general public utility, pending appeal before Commissioner (Appeals), recovery of demand against assessee was to be stayed on deposit of 10 per cent of demand - (2015) 57 taxmann.com 286 (Bombay)

COMPETITION ACT SECTION 4 PROHIBITION OF ABUSE OF DOMINANT POSITION

DDA is dominant in relevant market of provision of service for sale and distribution of flats in territory of Delhi and it had made unfair provisions in its Housing Scheme, 2010 - (2015) 57 taxmann.com 445 (CCI) SARFAESI ACT SECTION 13 ENFORCEMENT OF SECURITY INTEREST A secured creditor, who has initiated action for enforcement of its security interest in terms of provisions of SARFAESI Act is not entitled to publish photograph(s) of defaulting borrower(s)/guarantor(s) in newspapers/magazines etc. - (2015) 57 taxmann.com 348 (Calcutta) SERVICE TAX SECTION 65(55b) TAXABLE SERVICES - INTELLECTUAL PROPERTY SERVICES Prima facie, foregoing of rights to operate a part of business or sharing of domain knowledge would not under Intellectual Property Right Services - (2015) 57 taxmann.com 427 (Mumbai - CESTAT) CUSTOMS ACT SECTION 27 REFUND - DOCTRINE OF UNJUST ENRICHMENT Amount deposited for release of seized goods in compliance with interim order passed by High Court, was not towards duty; hence, question of unjust enrichment would not arise at all to refund thereof - (2015) 57 taxmann.com 408 (SC) SECTION 114 PENALTY - SMUGGLING/ILLEGAL EXPORT When Department itself, only on basis of chemical analysis, was able to ascertain that goods attempted to be exported were misdeclared, in such case, a CHA cannot be expected to know of exact nature of product at sight; hence, no penalty can be levied on CHA for such misdeclaration by exporter - (2015) 57 taxmann.com 126 (Madras) CST & VAT

SECTION 78 OF RAJASTHAN SALES TAX ACT, 1994 PENALTY

Where Form No. 18A accompanied with goods under transport was incomplete only to extent that seller did not fill up columns though purchaser had duly sent filled in Form on his part, imposition of penalty on plea that Form No. 18A was not filled in properly was not justified - (2015) 57 taxmann.com 426 (Rajasthan) CENVAT CREDIT RULES RULE 2(l) CENVAT CREDIT - INPUT SERVICE - HOUSEKEEPING SERVICES Housekeeping, landscaping and gardening services availed by an assessee to maintain their factory premises in an eco-friendly manner, are eligible for credit as 'input services' - (2015) 57 taxmann.com 131 (Madras) STATUTES CORPORATE LAWS Database for Distinctive Number (DN) of Shares - CIRCULAR NO.MRD/DP/10/2015 (05-06-2015) Section 406, read with section 462, of the Companies Act, 2013 - Nidhi - Exemptions to - NOTIFICATION (F.NO.2/11/2014-CL.V), DATED 5-6-2015 Section 2(8), read with section 462, of the Companies Act, 2013 - Charitable Companies - Exemptions to - NOTIFICATION (F.NO.1/2/2014-CL.I), DATED 5-6-2015 Section 2(45), read with section 462, of the Companies Act, 2013 - Government Companies - Exemptions to - NOTIFICATION [F.NO.1/2/2014-CL.V], DATED 5-6-2015

[Ghatkopar Study Circle]

Date : 10th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 2(47) CAPITAL GAINS – TRANSFER Land/capital asset : Where assessee company had entered into consortium agreement and passed bundled of rights to consortium on land and even permitted bank for mortgage on said property, there was a transfer - (2015) 57 taxmann.com 115 (Hyderabad - Trib.) SECTION 50C CAPITAL GAINS Stamp duty value : Where assessee had already shown stamp duty value as sale consideration while computing capital gains and there was no escapement of income, notice under section 148 was not justified - -(2015) 57 taxmann.com 224 (Allahabad) SECTION 92C TRANSFER PRICING Comparables and adjustment/Adjustment : Interest: Where assessee had given interest free loans to its wholly owned foreign subsidiaries and part of loan was subsequently converted into equity, no transfer pricing adjustment was required to extent of loan converted into equity with effect from date of such conversion - -(2015) 57 taxmann.com 274 (Mumbai - Trib.) Comparables and adjustments/Comparables – Illustration : A company having revenue from both software development and software products cannot be compared to a company providing only software development services - (2015) 57 taxmann.com 272 (Hyderabad - Trib.) Comparables and adjustments/Adjustment - Operating cost : Provision for bad and doubtful debts should be considered as part of operating cost while computing margins of comparables - (2015) 57 taxmann.com 272 (Hyderabad - Trib.) SECTION 143 ASSESSMENT Notice under section 143(2) : Issue of a notice under section 143(2) is mandatory in reassessment proceedings and notices issued prior to reopening would not satisfy requirement specified under section 143(2) - (2015) 57 taxmann.com 415 (Bangalore - Trib.) SECTION 221

COLLECTION AND RECOVERY OF TAX

Delayed payment of tax : Where there was no intention on part of assessee to avoid or intentionally delay payment of taxes as admitted under section 140A and belated payment was made voluntarily without resort to any coercisve steps, authorities were justified in restricting penalty to 25 per cent - (2015) 57 taxmann.com 442 (Delhi) COMPANIES ACT SECTION 167 DIRECTORS - VACATION OF OFFICE BY In case of a closely held company it can be presumed that there is an implied leave of absence granted to director who has abstained from board meetings and unless it is shown that director absented from three consecutive board meetings without obtaining leave of absence from board, he would not cease to be a director under section 283(1)(g) of Companies Act, 1956 - (2015) 57 taxmann.com 411 (CLB - New Delhi)

SECTION 271 WINDING UP - CIRCUMSTANCES IN WHICH A COMPANY MAY BE WOUND UP

Neglect in payment of debt due as statutorily defined without a bona fide dispute or substantial defence entails consequence of winding up of a company-in-default - (2015) 57 taxmann.com 158 (Rajasthan) BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1970 SECTION 9 POWER OF CENTRAL GOVERNMENT TO MAKE SCHEME Government criteria for appointment of non-official director would not be made parameters for judging fit and proper status of a candidate who submitted nomination for post of shareholder director - (2015) 57 taxmann.com 396 (Calcutta) CENTRAL EXCISE ACT SECTION 4 VALUATION UNDER CENTRAL EXCISE - TRANSACTION VALUE – PACKING Cost of boxes/containers and wooden packing meant for safe transport cannot be included in assessable value because it is not a requirement for sale at factory gate - (2015) 57 taxmann.com 296 (SC) SECTION 11AA INTEREST - ON DELAYED PAYMENT OF DUTY/TAX Where duty demand is admitted and delay in payment thereof is admitted, there may not be any need to issue SCN for recovery of interest and interest, in such cases, is payable automatically - (2015) 57 taxmann.com 401 (Bombay) SECTION 35G APPEALS - MAINTAINABILITY OF - HIGH COURT Where assessee's appeal before High Court against Tribunal order declining condonation of delay (CoD) was not supported by a copy of 'CoD application filed before Tribunal', High Court dismissed said appeal holding that assessee was not serious in pursuing matter and was trying to drag on proceedings - (2015) 57 taxmann.com 432 (Madras) SECTION 35L APPEALS - ORDERS OF - SUPREME COURT Issue whether 'Greig fabrics' coming into existence at intermediate stage in course of manufacture of 'wire cloth' are excisable/marketable and consequently, liable to basic and additional duties of excise was remanded back to Commissioner for consideration afresh - (2015) 57 taxmann.com 341 (SC) CUSTOMS ACT SECTION 27 REFUND - GENERAL Having not challenged order of assessment, assessee cannot, at a belated stage, claim refund by pressing into service a new exemption notification - (2015) 57 taxmann.com 403 (Madras) CST & VAT SECTION 2(14) OF THE GUJARAT VALUE ADDED TAX ACT, 2003 MANUFACTURE Gujarat VAT - Where assessee was in business of converting Natural Sesame Seeds (NSS) into Huld Seeds (HS) and while converting NSS to HS it was required to undertake process of cleaning, drying and brushing with chemicals and removing upper layer of NSS, process undertaken by assessee amounted to manufacture - (2015) 57 taxmann.com 361 (Gujarat) CENTRAL EXCISE RULES RULE 173Q PENALTY - FOR EVASION OF DUTY/TAX Where delay in payment of duty was due to industrial unrest, said cause cannot be said to be intentional and therefore, department cannot levy evasion penalty equal to duty - (2015) 57 taxmann.com 377 (Bombay) STATUTES DIRECT TAX LAWS Section 276C, read with section 276D, of the Income-tax Act, 1961 - offences and prosecution - wilful attempt to evade tax, etc. - clarification on prosecution of tax evaders - PRESS RELEASE, DATED 8-6-2015 Section 119 of the Income-tax Act, 1961 - Income-Tax Authorities - Instructions to Subordinate Authorities – Condonation of Delay in Filing Refund Claim and Claim of Carry Forward Losses under Section 119(2)(b) - CIRCULAR 9/2015 (F.NO.312/22/2015-OT), DATED 9-6-2015 CORPORATE LAWS Assessment Framework for State Level Reforms Enabling Ease of Doing Business (2015) - PRESS RELEASE, DATED 8-6-2015 Strategic Debt Restructuring Scheme - CIRCULAR DBR.BP.BC.NO.101/21.04.132/2014-15, DATED 8-6-2015 Section 25 of The Insurance Regulatory and Development Authority Act, 1999 - Insurance Advisory Committee - Establishment of - Reconstitutionof Insurance Advisory Committee - NOTIFICATION F.NO.IRDA/IAC/7/97/2015, DATED 25-5-2015

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

Rule 9 of The Central Excise Rules, 2002 - Registration - Exemption from Operation of Said Rule to Every Manufacturing Unit Engaged in Manufacture of Alumunium Roofing Panels - NOTIFICATION NO.17/2015-C.E. (N.T.), DATED 8-6-2015 Section 66E(i) of the Finance Act, 1994, Read with Rule 2C of the Service Tax (Determination of Value) Rules, 2006 - Declared Services - Clarification Issued in Matter of Service Tax on Services Provided by Restaurants, Eating-Joints or Messes Which Have Facility of Air-Conditioning or Central Air-Heating in Any Part of Establishment - PRESS RELEASE, DATED 9-6-2015

[Ghatkopar Study Circle]

Date : 11th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 2(15) CHARITABLE PURPOSE Objects of general public utility/Maintenance of Gaushalas : Where assessee-trust was established with object to protect, preserve, maintain and develop Indian breed of cows and its progeny, it was to be regarded as charitable purpose within meaning of section 2(15) and, thus, assessee's application seeking registration under section 12AA was to be allowed - (2015) 58 taxmann.com 37 (Guwahati - Trib.) Education : Where treasurer and secretary of a trust had admitted in their sworn statement that trust was collecting capitation fee over and above fee prescribed for admission of students which was shared amongst trustees, trust was not entitled for registration under section 12AA as it was running educational institution in a commercial manner for profit - (2015) 58 taxmann.com 40 (Cochin - Trib.) SECTION 14A EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME Interest : Where borrowed funds were used in particular project, no part of interest could be disallowed applying rule 8D - (2015) 58 taxmann.com 42 (Mumbai - Trib.) SECTION 37(1) BUSINESS DISALLOWANCE - ALLOWABILITY OF Bogus purchase : Assessee inflated expenditure by showing higher purchase price through fictitious invoices in name of 33 fictitious parties, Tribunal was justified in disallowing 25 per cent of purchase price - (2015) 58 taxmann.com 44 (Gujarat) SECTION 57 INCOME FROM OTHER SOURCES – DEDUCTIONS Administrative and other expenses : Where assessee a co-operative society, earned interests on deposits kept with scheduled banks only net interest income, i.e., interest income reduced by administrative expenses and other proportionate expenses to earn said income had to be brought to tax under section 56 - (2015) 58 taxmann.com 35 (Karnataka) SECTION 69B UNDISCLOSED INVESTMENTS Reopening of assessment : Where Assessing Officer passed reassessment order taking a view that assessee made unexplained investment in different items exceeding funds available with him, since said belief of Assessing Officer was not based on any relevant material and, moreover, impugned order was passed for bringing to tax only those incomes in respect of which no reasons were recorded, same deserved to be set aside - (2015) 58 taxmann.com 36 (Guwahati - Trib.)

SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE

Comparables and adjustments/Adjustments – Interest : Where TPO made addition to assessee's ALP in respect of interest on loan given to its AE, since interest rate charged by assessee from its AE was higher than LIBOR rate in year under consideration, impugned addition was to be set aside - (2015) 58 taxmann.com 38 (Delhi - Trib.) Comparables and adjustments/International Transaction, a conditions precedent : When bio-division of assessee did not have any international transactions with AEs, profit or loss from said division should not affect ALP of international transaction of software development services to AEs and only margin of software services was to be considered - (2015) 58 taxmann.com 39 (Bangalore - Trib.) SECTION 115JB MINIMUM ALTERNATE TAX - PAYMENT OF TAX Adjustment of disallowance under section 14A : Necessary adjustment of expenditure disallowed under section 14A is to be made in computing book profits under section 115JB - (2015) 58 taxmann.com 42 (Mumbai - Trib.) SECTION 145 METHOD OF ACCOUNTING - REJECTION OF BOOKS Rejection of books of account : Where on comparison of financial results of earlier year with current year, it was found that besides low G.P. rate, there were other deficiencies in books of account such as under reported yield of rice, paddy milling, sales of husk etc., books of assessee were to be rejected - (2015) 58 taxmann.com 41 (Punjab & Haryana) SECTION 158BD BLOCK ASSESSMENT IN SEARCH CASES - UNDISCLOSED INCOME OF ANY OTHER PERSON Conditions precedent : Where revenue had not produced any evidence to show that Assessing Officer of searched person had arrived at a satisfaction that undisclosed income belonged to assessee, notice under section 158BC was not valid - (2015) 58 taxmann.com 43 (Gujarat) SECTION 271(1)(c) PENALTY - FOR CONCEALMENT OF INCOME Explanation 5 : Where papers were seized from custody of appellant and affidavits filed were neither based on any record nor corroborated with cogent evidence, levy of penalty was just - (2015) 58 taxmann.com 44 (Gujarat) NEGOTIABLE INSTRUMENTS ACT, 1881 SECTION 138 DISHONOUR OF CHEQUE FOR INSUFFICIENCY ETC., OF FUNDS IN ACCOUNT No individual notice under section 138 is required to be sent to directors of a company before a complaint could be filed against such directors along with company - (2015) 58 taxmann.com 47 (SC) Where proceedings under section 138 were initiated prior to judgment in DashrathRupsinghRathod v. State of Maharshtra (2014) 128 SCL 26 which restricted territorial jurisdiction to Court where cheque is dishonoured by bank, proceedings would be preserved at place where they were filed only when post summoning and appearance of alleged accused, recording of evidence had commenced as envisaged under section 145(2) - (2015) 58 taxmann.com 46 (SC)

SERVICE TAX SECTION 65(12) TAXABLE SERVICES - BANKING AND OTHER FINANCIAL SERVICES

A manufacturer of industrial gases cannot be regarded as 'banking company or financial institution including non-banking financial company or any other body corporate or commercial concern'; hence lease of 'vacuum insulated storage tanks' by such manufacturer does not amount to Banking and Other Financial Services - (2015) 57 taxmann.com 410 (Mumbai - CESTAT) SECTION 85 APPEALS - CONDONATION OF DELAY - COMMISSIONER (APPEALS) Right to file an appeal is conferred by a statute and must, therefore, be availed along with all its impediments; hence, proviso to section 85(3)/(3A) restricting condonable period of Commissioner (Appeals) is valid - (2015) 58 taxmann.com 33 (Punjab & Haryana)

CENTRAL EXCISE ACT SECTION 4

VALUATION UNDER CENTRAL EXCISE - TRANSACTION VALUE - RELATED PERSON Prior to 1-7-2000, if clearances made to holding company are at higher than market rate paid by holding company to its other unrelated suppliers, transaction value cannot be rejected, as there is no arrangement/scheme of evasion - (2015) 57 taxmann.com 320 (SC) SECTION 11A

RECOVERY - OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED - INVOCATION OF EXTENDED PERIOD OF LIMITATION

When entire exercise is revenue neutral i.e., credit of duty paid on captive consumption is available to assessee itself, extended period cannot be invoked, as assessee could not have achieved any purpose to evade duty - (2015) 58 taxmann.com 28 (SC) CST & VAT SECTION 5 OF KERALA GENERAL SALES TAX ACT, 1963 LEVY OF TAX - ON SALE OR PURCHASE OF GOODS Where Official Liquidator issued a notice inviting tenders in respect of sale of assets of a company in liquidation and appellant had offered its highest bid which was inclusive of all statutory levies such as sales tax, etc. and offer so made was accepted by Official Liquidator, liability to pay taxes could not be imposed on appellant - (2015) 58 taxmann.com 27 (SC) SECTION 11 OF GUJARAT VALUE ADDED TAX ACT, 2003 TAX CREDIT - ADJUSTMENT OF Tribunal rightly allowed assessee to adjust tax liability of current year out of available input tax credit - (2015) 57 taxmann.com 346 (Gujarat) Where assessee claimed input tax credit on purchases made from one 'L' and Revisional Authority disallowed claim on ground that registration certificate of 'L' had been cancelled by appropriate authority by holding that all transactions made by 'L' were bogus and not genuine, matter required to be remitted back to Revisional Authority to consider assessee's claim afresh after providing it copy of order passed in case of 'L' - (2015) 58 taxmann.com 26 (Gujarat)

CENVAT CREDIT RULES RULE 2(l)

CENVAT CREDIT - INPUT SERVICE - RENT-A-CAB/TRANSPORTATION SERVICES Where, in assessee's own case, in respect of their Hinjewadi Unit, benefit of credit on outward freight services has been extended for period after 1-4-2008, same benefit cannot be denied to assessee'sChakan Unit - (2015) 58 taxmann.com 29 (Mumbai - CESTAT) STATUTES DIRECT TAX LAWS Section 199 of the Income-tax Act, 1961 – Deduction of Tax at Source – Credit for Tax Deducted – Non-Deposit of tax deducted at source - INSTRUCTION NO.275/29/2014-IT-(B), DATED 1-6-2015 CORPORATE LAWS RBI Seeks Comments/feedback on Draft framework on Issuance of Rupee linked Bonds overseas - PRESS RELEASE : 2014-2015/2603, DATED 9-6-2015

[Ghatkopar Study Circle]

Date : 12th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT

SECTION 22 INCOME FROM HOUSE PROPERTY - CHARGEABLE AS

Business income v. House property income : Where assessee having constructed commercial complex, let out shops to various parties, in view of fact that it was a case of renting simplicitor and services incidental to letting out did not constitute such complex character so as to render it as a business by itself, rental income in question was to be taxed as 'income from house property' - (2015) 58 taxmann.com 12 (Delhi - Trib.) SECTION 37(1)

BUSINESS EXPENDITURE - YEAR IN WHICH DEDUCTIBLE

Brand building expenditure : Where assessee, following mercantile system of accounting, debited certain amount in profit and loss account towards brand building expenditure, entire expenditure was to be allowed as deduction in relevant year itself when liability to pay crystallised irrespective of fact that a part of said amount related to profits of subsequent years - (2015) 58 taxmann.com 12 (Delhi - Trib.) Business expenditure - Allowability of Sales commission : Where Commissioner (Appeals) reduced disallowance of sales commission paid by assessee to 5 per cent in accordance with accepted past history of case and having regard to fact that quantum of expenditure was lesser than similar expenditure incurred by assessee in preceding assessment years, order so passed did not require any interference - (2015) 58 taxmann.com 24 (Agra - Trib.) SECTION 80-IA DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS Computation of deduction : Where losses in year earlier to initial assessment year already set off against other income of earlier years, such earlier losses could not be considered again for computing admissible deduction under section 80-IA - (2015) 58 taxmann.com 18 (Madras)

SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRICE

Comparables and adjustments/Comparables – Illustrations : A company mainly deriving revenue from medical transcription and consultancy services cannot be compared with ITES provider - (2015) 57 taxmann.com 437 (Delhi - Trib.) Comparables and adjustments/Comparables – Illustrations : Company in business of investment, merchant banking and corporate finance cannot be compared to company engaged in investment advisory activities - (2015) 58 taxmann.com 15 (Mumbai - Trib.) Comparables and adjustments/Comparables – Illustrations : A software development service provider is functionally different from a company which owns significant intangibles and has huge revenues from software products - (2015) 58 taxmann.com 14 (Bangalore - Trib.) Comparables and adjustments/Comparables – Illustrations : Where TPO made addition to assessee's ALP in respect of rendering software development services to group companies located abroad, in view of fact that some of comparables were improper on account of their huge turnover whereas one comparable was developing its own software products and, thus, there existed a functional difference, impugned addition was to be set aside - (2015) 57 taxmann.com 241 (Bangalore - Trib.) Comparables and adjustments/Adjustments – Reimbursements : Where amount received by assessee from its AE is purely in nature of reimbursement of expenses, it can neither be considered as operating income nor operating expenses for purpose of calculating operating margin of assessee - (2015) 57 taxmann.com 241 (Bangalore - Trib.) Comparables and adjustments/Comparables – Illustrations : Where TPO made addition to assessee's ALP in respect of rendering software development services to its AE, in view of fact that one comparable selected by TPO earned abnormal profits and, moreover, exact nature of services rendered by it was not available on record, impugned addition was to be set aside - (2015) 58 taxmann.com 13 (Hyderabad - Trib.) SECTION 132 SEARCH AND SEIZURE Search warrant : Where warrant of authorisation indicated premises where search and seizure operation was to be conducted and said premises had not been partitioned by metes and bounds, while searching said premises, search of portions occupied by petitioners in said premises was valid and proper, even though their names were not mentioned in authorisation of search, in such case provisions of section 158BD would be attracted - (2015) 58 taxmann.com 21 (Allahabad) SECTION 145 METHOD OF ACCOUNTING - REJECTION OF ACCOUNTS Gross profit rate : Where assessee could not substantiate its claim of gross profit rate of 8.7 per cent declared by it as purchase cost and sale price were unverifiable, gross profit rate of 11 per cent determined by Commissioner (Appeals) and Tribunal was justified - (2015) 58 taxmann.com 19 (Rajasthan) SECTION 250 COMMISSIONER (APPEALS) - PROCEDURE OF Admission of additional evidence : Where facts of a case warrant that, before disposal of any appeal, Commissioner (Appeals) is required to make further inquiries, either on his own or through Assessing Officer, he is not denuded of powers to do so because of provisions of rule 46A of Income-tax Rules, 1962 - (2015) 58 taxmann.com 24 (Agra - Trib.)

SECTION 255 APPELLATE TRIBUNAL - PROCEDURE OF

Single Member Bench : Single Member Bench has powers to hear any case, which is otherwise in jurisdiction of this Bench, pertaining to an assessee whose total income as computed by Assessing Officer does not exceed Rs. five lakh irrespective of quantum of additions or disallowances impugned in appeal - (2015) 58 taxmann.com 24 (Agra - Trib.)

COMPETITION ACT SECTION 4 PROHIBITION OF ABUSE OF DOMINANT POSITION

Where appellant had filed complaint against respondent-builder on false assertion without any relevant document and respondent was not dominant in relevant market of Group Housing Project in Dharuhera, complaint against respondent for abuse of dominance was to be dismissed - (2015) 58 taxmann.com 22 (CAT) NEGOTIABLE INSTRUMENTS ACT

SECTION 138 DISHONOUR OF CHEQUE FOR INSUFFICIENCY ETC., OF FUNDS IN ACCOUNT

Where in a proceeding under section 482 of CrPC High Court quashed criminal complaint filed under section 138 on basis of disputed factual defences, High Court committed grave error of law and its order was to be set aside - (2015) 57 taxmann.com 174 (SC) PREVENTION OF CORRUPTION ACT SECTION 7 PUBLIC SERVANT TAKING GRATIFICATION OTHER THAN LEGAL REMUNERATION IN RESPECT OF AN OFFICIAL ACT Where evidence on record showed that respondent, a public servant, had demanded and accepted bribe in lieu of registration certificate, respondent was to be convicted for offence under sections 7 and 13 - (2015) 58 taxmann.com 23 (SC) SERVICE TAX SECTION 65(39a) TAXABLE SERVICES - ERECTION, COMMISSIONING AND INSTALLATION SERVICES - STAY ORDER Fabrication/erection of tanks at site brings into existence an immovable property; hence, prima facie, it is not manufacture under section 2(f) of Excise Act and is liable to tax as erection, commissioning and installation services - (2015) 57 taxmann.com 428 (Mumbai - CESTAT) SECTION 93 EXEMPTIONS - SERVICE TAX Service tax paid on Terminal Handling Charges used for export goods is eligible for refund, even if invoice thereof is issued by Customs House Agent, who is himself not authorised for provide port services - (2015) 58 taxmann.com 30 (Mumbai - CESTAT) CENTRAL EXCISE ACT SECTION 35C APPEALS - RECTIFICATION OF MISTAKES/REVIEW - APPELLATE TRIBUNAL Where assessee disputes that Tribunal's observations on facts are incorrect and not arising from record, remedy is to approach Tribunal by way of rectification application and not appeal before Supreme Court - (2015) 57 taxmann.com 269 (SC) CUSTOMS ACT SECTION 108 SUMMONS – GENERAL If department wants to seek information from assessee on doubts entertained by it, said doubts have necessarily to be stated by department; hence, notice/summons merely listing said doubts and asking for information cannot be regarded as motivated against assessee and cannot, therefore, be challenged on ground of being prejudiced - (2015) 58 taxmann.com 9 (Delhi) SECTION 121 CONFISCATION - SALE PROCEEDS OF SMUGGLED GOODS Where department alleges that assessee's bank account was credited with sale proceeds of smuggled goods and assessee fails to prove, prima facie, that proceeds were not tainted, department's action in freezing bank account was valid - (2015) 58 taxmann.com 32 (Delhi) CST & VAT SECTION 42 OF ORISSA VALUE ADDED TAX ACT, 2004 ASSESSMENT - AUDIT ASSESSMENT Where Sales Tax Officer relying upon a letter of Deputy Commissioner prepared audit report in case of assessee and thereafter Deputy Commissioner on basis of said report passed assessment order on assessee, since Deputy Commissioner was involved in audit process, he was not competent to assess assessee under section 42 - (2015) 58 taxmann.com 4 (Orissa)

CENVAT CREDIT RULES RULE 2(l)

CENVAT CREDIT - INPUT SERVICE - CATERING SERVICES Outdoor catering services availed in factory premises for employees, is eligible for input service credit except upto extent cost of food is borne by employee; amendment by Notification No. 3/2011 denying credit to services meant for personal use of employee, is effective from 1-4-2011 only - (2015) 57 taxmann.com 58 (Madras) STATUTES DIRECT TAX LAWS Section 92CC of the Income-tax Act, 1961 - Transfer Pricing - Advance Pricing Agreement (APA) - clarifications on rollback provisions of Advance Pricing Agreement Scheme - CIRCULAR NO.10/2015 (F.NO.500/7/2015-APA-II), DATED 10-6-2015 Section 119 of the Income-tax Act, 1961 - Income-tax Authorities - Instructions to Subordinate Authorities – Extension of due date of filing Return of Income for Assessment Year 2015-16 - ORDER (F.NO.225/154/2015/ITA.II), DATED 10-6-2015 Section 35AC, read with Explanation (b) thereto, of the Income-tax Act, 1961 - Eligible Projects or Schemes, Expenditure on - Notified Eligible Projects or Schemes - YugantarBharati(NGO), Ranchi - NOTIFICATION NO.79/2015 (F.NO.V.27015/4/2015-SO(NAT.COM))/SO 449(E), DATED 11-2-2015 Section 35AC, Read with Explanation (b) thereto, of the Income-tax Act, 1961 - Eligible Projects or Schemes, Expenditure on - Notified Eligible Projects or Schemes – Gandhigram Trust, Gandhigram - NOTIFICATION NO.78/2015 (F.NO.V.27015/4/2015-SO(NAT.COM))/SO 448(E), DATED 11-2-2015 Section 35AC, read with Explanation (b) thereto, of the Income-tax Act, 1961 - Eligible Projects or Schemes, Expenditure on - Notified Eligible Projects or Schemes - Mata Amritanandamayi Math, Kerala - NOTIFICATION NO.73/2015 (F.NO.V.27015/3/2014-SO(NAT.COM))/SO 443(E), DATED 11-2-2015 Section 35AC, read with Explanation (b) thereto, of the Income-tax Act, 1961 - Eligible Projects or Schemes, Expenditure on - Notified Eligible Projects or Schemes – Bharat SevashramSangha, Kolkata - NOTIFICATION NO.68/2015 (F.NO.V.27015/4/2015-SO(NAT.COM))/SO 438(E), DATED 11-2-2015 Section 10 of the Wealth-tax Act, 1957 – Wealth-tax Authorities – Instructions to Subordinate Authorities – Clarifications on amendment brought out by Finance Act, 2013, W.r.e.f. 1-4-1993 in Wealth-tax Act for purpose of claiming refund of Wealth-tax paid on Agricultural Land as per Provisions of said Act Prior to Finance Act, 2013 - CIRCULAR NO.11/2015 (F.NO.325/02/2014-WT), DATED 11-6-2015 INDIRECT TAX LAWS (ST/EX. & CUS./CST & VAT) Section 5A of the Central Excise Act, 1944 - Power to Grant Exemption from Duty of Excise - Exemption to Anti-Retroviral Drugs (Arv Drgus) and Diagnostics and Equipments - NOTIFICATION NO.33/2015-CE, DATED 10-6-2015

[Ghatkopar Study Circle]

Date : 13th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 2(22) DEEMED DIVIDEND Loans or advances to shareholder/substantial interest, connotation of : In order to determine substantial interest of a shareholder for invoking provisions of section 2(22)(e), it is ownership of shareholder alone in company to which loan/advance has been made by assessee-company, and not his or her relative or family members, which is determinative factor - (2015) 58 taxmann.com 11 (Delhi - Trib.) SECTION 4 INCOME - CHARGEABLE AS Non-compete fee : Where a joint venture partner holding 85 per cent share in JV company paid certain amount to assessee, director of JV company, as non-compete fee in order to save said company from possible competition due to specialized knowledge of assessee in relevant field, amount so received by assessee would be treated as capital receipt not liable to tax - (2015) 57 taxmann.com 214 (Madras) SECTION 10B EXPORT ORIENTED UNDERTAKING Installed : Where government authorities had certified installation of machinery and commencement of manufacturing activity of assessee-firm, deduction under section 10B could not be denied to assessee on ground that machinery was not installed - (2015) 57 taxmann.com 212 (Visakhapatnam - Trib.) SECTION 32 DEPRECIATION - ALLOWANCE/RATE OF Windmill electric generator : Where Assessing Officer had granted 50 per cent depreciation on windmill electric generator as claimed by petitioner bank, re-opening of assessment on ground of wrong allowance of depreciation was a mere change of opinion and, hence, unjustified - (2015) 58 taxmann.com 20 (Bombay) SECTION 36(1)(vii) BAD DEBTS Conditions precedent : Where petitioner-bank claimed bad debts on basis of deduction claimed in earlier assessment order without taking into account rectification made in quantum of provision created under section 36(1)(viia) in earlier year, initiation of reassessment proceedings was justified - (2015) 58 taxmann.com 20 (Bombay) SECTION 40(a)(ia) BUSINESS DISALLOWANCE - INTEREST, ETC., PAID TO RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE Form No.15-I/15J : In case of payments made to sub-contractors, non-filing of Form No. 15-I/J is only a technical defect and provisions of section 40(a)(ia) are not attracted in such a case - (2015) 57 taxmann.com 273 (Karnataka) SECTION 44C NON-RESIDENT – HEAD OFFICE EXPENDITURE IN CASE OF Neither the payment of "license fees" nor the "management charges", falls within the ambit and purview of section 44C and, accordingly, the nature of adjustment to the total income for the purpose of disallowance is not required. In the result, assessee's appeal allowed - (2015) 58 taxmann.com 58 (Mumbai - Trib.) SECTION 70 LOSSES – SET OFF OF FROM ONE SOURCE AGAINST INCOME FROM Long-term capital loss of sale of equity shares attracting STT is allowed to be set off against long term capital gain on sale of land in accordance with section 70(3) - (2015) 58 taxmann.com 115 (Mumbai - Trib.) SECTION 195 DEDUCTION OF TAX AT SOURCE – PAYMENT TO NON-RESIDENT No withholding tax on "arranger fee" u/s 195 as it is not "interest" as defined u/s 2(28A) nor is it FTS u/s 9(1)(vii) - (2015) 58 taxmann.com 101 (Mumbai - Trib.) SECTION 234B Interest, chargeable as Computation of : Interest under section 234B would be computed upto date of admission of application by Settlement Commission under section 245D(1) and not up to date of order of Settlement Commission under section 245D(4) - (2015) 58 taxmann.com 16 (Calcutta) WEALTH-TAX ACT SECTION 2(ea) ASSETS Exclusion : Where legal issue that benefit of exclusion of asset would not apply was not raised in appeal, same could not be raised in petition filed for rectification - (2015) 57 taxmann.com 288 (Madras) SECTION 35 RECTIFICATION OF MISTAKES Jurisdiction : Tribunal in execise of its jurisdiction under section 35(1)(e) can only rectify mistake apparent from record; it has no power to recall its final order passed on merits of case - (2015) 57 taxmann.com 288 (Madras) SERVICE TAX SECTION 65(115) TAXABLE SERVICES - TOUR OPERATOR'S SERVICES Transport of employees of a company to/from company's office does not prima facie amount to 'tour operator service' - (2015) 58 taxmann.com 5 (Mumbai - CESTAT)

SECTION 93 EXEMPTIONS - SERVICE TAX

If services are availed by an exporter for business of export and assessee has paid service tax thereon, classification by service provider need not be examined; hence, assessee-exporter was eligible for refund of service tax paid on Terminal Handling Charges, Customs House Agent's charges and banking charges - (2015) 58 taxmann.com 7 (Mumbai - CESTAT) CENTRAL EXCISE TARIFF ACT SECTION 2 CLASSIFICATION - BLENDED MARBLE VINYL FLOORING (FLOOR TILES) Where floor tiles consisted 85 per cent limestone and 13 per cent PVC and plastic was used merely as a binder, said tiles were to be regarded as 'stone tiles' (Heading 68.07) and not as 'plastic tiles' (Heading 3918.10) - (2015) 57 taxmann.com 323 (SC) CENVAT CREDIT RULES RULE 6 CENVAT CREDIT - EXEMPTED AND DUTIABLE GOODS OR EXEMPTED AND TAXABLE SERVICES, OBLIGATION OF ASSESSEE If an assessee has taken input service credit of common services used for both taxable and non-taxable services, his entire credit cannot be denied; department may only seek compliance with rule 6(3) of CENVAT Credit Rules, 2004 - (2015) 58 taxmann.com 6 (Ahmedabad - CESTAT) STATUTES CORPORATE LAWS Subscription to Chit Funds by Non-Resident Indian on Non-Repatriation Basis - A.P. (DIR SERIES 2014-15) CIRCULAR NO.107,. DATED 11-6-2015 External Commercial Borrowings (ECB) for low cost affordable Housing Projects - A.P. (DIR SERIES 2014-15) CIRCULAR NO.108,. DATED 11-6-2015 External Commercial Borrowings (ECB) for Civil Aviation Sector - A.P. (DIR SERIES 2014-15) CIRCULAR NO.109,. DATED 11-6-2015 Reporting requirement on On-Site, Off-Site and Mobile ATMs - CIRCULAR DBR.NO.BAPD.BC.102/22.01.001/2014-15, DATED 11-6-2015 Guidelines on sale of Financial Assets to Securitisation Company (SC)/Reconstruction Company (RC) and related Issues - CIRCULAR DBR.NO.FID.5/01.02.00/2014-15, DATED 11-6-2015 RBI issues master circular on NBFCs - Read More

[Ghatkopar Study Circle]

Date : 15th June 2015

Daily Tax & Corporate Laws Digest

INCOME TAX ACT SECTION 12AA CHARITABLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE Cancellation : Where issue relating to investment in shares had already been examined by Director of Income-tax at time of granting registration and by Tribunal at time of considering claim of exemption, on same issue cancellation of registration of trust was invalid - (2015) 57 taxmann.com 226 (Hyderabad - Trib.) SECTIONS 45 CAPITAL GAINS - CHARGEABLE AS Capital gains v. Income from other sources : A tenancy right is a capital assets and its surrender would attract section 45 and, gains derived would be assessable under head 'capital gains' and not under any other head - (2015) 58 taxmann.com 49 (Gujarat) SECTION 69A UNEXPLAINED MONEY Burden of proof : Where during search at assessee's premises, certain bank accounts were found and assessee's father claimed that amount lying in said accounts belonged to his HUF business, burden of proving transactions in name of assessee could not be placed on revenue - (2015) 57 taxmann.com 306 (Karnataka)

SECTION 115JB MINIMUM ALTERNATE TAX - PAYMENT OF TAX

The book profit under Section 115JB shall be reduced by the amount of income to which provision of section 10 applies. However, income under the provisions contained in section 10(38) will not be reduced. The concept of indexation while computing the long-term capital gain cannot be imported into the computation of book profit under Section 115JB - (2015) 58 taxmann.com 116 (Mumbai - Trib.) SECTION 194-I DEDUCTION OF TAX AT SOURCE – RENT Revision : Where on scrutiny under CASS scheme, Assessing Officer allowed rent paid on mixture machine without deduction of tax at source, said view being one of possible view regarding TDS provisions, his order did not suffer from any error requiring revision - (2015) 58 taxmann.com 50 (Jodhpur - Trib.) COMPANIES ACT SECTION 111 TRANSFER OF SHARES - POWER TO REFUSE REGISTER AND APPEAL AGAINST REFUSAL Where appellant, insurance company, satisfied insured's claim regarding loss of shares of respondent company, respondent company was directed to rectify its register of members subject to appellant filing indemnity bond to its satisfaction - (2015) 58 taxmann.com 25 (CLB - Mumbai) SECTION 397 OPPRESSION AND MISMANAGEMENT Where petitioner had been deprived of his shares with mala fide motive and for no valid reason to gain control over affairs of company, it amounted to grave act of oppression - (2015) 58 taxmann.com 48 (CLB - Mumbai) SECTION 433 WINDING UP - CIRCUMSTANCES IN WHICH COMPANY MAY BE WOUND UP Where company took defence that winding up petitioner had not reconciled of defective supply and company was financially strong, winding up petition was to be dismissed - (2015) 58 taxmann.com 51 (Andhra Pradesh)

SERVICE TAX SECTION 66 CHARGE/LEVY - SERVICE TAX

Service elements in a composite (works) contract (involving transfer of property in goods and rendition of services), are subject to levy of service tax even prior to 1-6-2007 where such services are classifiable under 'Commercial or Industrial Construction'; 'Construction of Complex' or 'Erection, Commissioning or Installation' (as defined) - (2015) 58 taxmann.com 52 (New Delhi - CESTAT) (LB) CENTRAL EXCISE ACT SECTION 5A EXEMPTIONS - CENTRAL EXCISE Where 99 per cent sales of defibrillators was without paddles and, accordingly, for 'external use' only; merely because 1 per cent sales are made with optional paddles and can be used 'internally', entire 100 per cent sales cannot be regarded as 'for internal use' and, therefore, not exempt - (2015) 58 taxmann.com 34 (SC) CST & VAT SECTION 6 OF HARYANA VALUE ADDED TAX ACT, 2003 TAXABLE TURNOVER - RETURN OF GOODS Where assessee claimed return of goods sold to a person, in terms of rule 22(4) assessee was not entitled to claim benefit of return of goods sold to any person in any other quarter except quarter in which goods had been returned - (2015) 58 taxmann.com 3 (Punjab & Haryana) SECTION 81 OF WEST BENGAL VALUE ADDED TAX ACT, 2003 TRANSPORT OF GOODS - ISSUE OF WAY BILL Where Assessing Authority is satisfied that particulars furnished in application for issue of way bills are correct and complete and prayer for issue of certain number of way bills is reasonable, he cannot deny assessee required number of way bills - (2015) 58 taxmann.com 2 (WBTT)

CENVAT CREDIT RULES RULE 2(l)

CENVAT CREDIT - INPUT SERVICE - MANPOWER RECRUITMENT AND SUPPLY SERVICES Service availed for maintaining a health centre in compliance with Rajasthan Factories Rules, is eligible for input service credit, when, without such compliance, assessee would not be allowed to carry on manufacturing - (2015) 58 taxmann.com 8 (New Delhi - CESTAT) STATUTES CORPORATE LAWS Section 1 of the Payment and Settlement Systems (Amendment) Act, 2015 – Date – Enforcement of – Notified date on which all Provisions of said Act shall come into force - NOTIFICATION NO. SO 1451(E) (F.NO.6/1/2014-BO.II), DATED 1-6-2015 Section 148 of the Companies Act, 2013 - Central Government to specify Audit of items of cost in respect of certain Companies - Extension of time for filing of notice of Appointment of Cost Auditor for Financial Year 2015-16 in Form CRA-2 and filing of cost Audit Report to Central Government for - Financial Year 2014-15 in Form CRA-4 - GENERAL CIRCULAR NO.8/2015 (F.NO.1/40/2013/CL-V), DATED 12-6-2015 Companies (Cost Records and Audit) (Amendment) Rules, 2015 – Substitution of Forms CRA-2 and CRA-4 - NOTIFICATION (F.NO.1/40/2013-CL-V), DATED 12-6-2015 Exchange traded cash settled Interest Rate Futures (IRF) on 6 Year, 10 Year and 13 Year Government of India (GOI) Security - CIRCULAR NO.MRD/DRMNP/11/2015, DATED 12-6-2015 Clarification on Grant of registration as a Foreign Portfolio Investor (FPI) to registered Foreign Venture Capital Investors (FVCI) - CIRCULAR NO.IMD/FIIC/05/2015, DATED 12-6-2015 Infrastructure Debt Fund-Non-Banking Financial Companies (Reserve Bank) Directions, 2011 - MASTER CIRCULAR DNBR (PD) CC NO.039/03.01.001/2014-15, DATED 11-6-2015 Amendment to Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 - Additional Documents for limited purpose of proof of Address - CIRCULAR DBR.AML.BC.NO.104/14.01.001/2014-15, DATED 11-6-2015