Saturday, January 7, 2017

SEBI issues guidance notes on Board Evaluation

The SEBI has issued guidance note on evaluation of Board of Directors. The main purpose of this guidance note is to educate the listed entities and their board. The guidance note covers all major aspects of board evaluation, viz, process of evaluation and criteria for evaluation of different persons, feedback to the persons being evaluated and action plan. Guidance note also includes disclosure to stakeholders on various aspects such as frequency of evaluation, responsibility of board evaluation and review of the entire evaluation process.

Loan to HUF is deemed dividend when shareholder-Karta has substantial interest in HUF: Apex Court


a) The assessee-HUF received advances from G.S. Fertilizers (P) Ltd. ('Company'). The AO concluded that the HUF was both the registered shareholder of the Company and also the beneficial owner of shares, as it was holding more than 10% of voting power. On this basis, the amount of advance was included in the income of the HUF as deemed dividend.

b) The assessee argued that being a HUF, it was neither the beneficial shareholder nor the registered shareholder. It was further argued that the Company had issued shares in the name of Karta of the HUF, and not in the name of the HUF as shares could not be directly allotted to a HUF. Thus, the provisions of Section 2(22)(e) could not be attracted. 

The Supreme Court held as under:

1) In the instant case, the impugned advance was made to the assessee which was a HUF. However, the Karta of HUF held shares in the lending Company. The said Karta was, undoubtedly, the member of HUF.

2) It was not disputed that Karta was entitled to not less than 20% of the income of HUF. Thus, he had substantial interest in the HUF, being its Karta. Therefore, the provisions of Section 2(22)(e) would be attracted as advance was given to the concern in which shareholder had substantial interest. It was not even necessary to determine as to whether HUF could be beneficial shareholder or registered shareholder in lending company. [2017] 77 71 (SC)

Eight meeting of GST Council: Key takeaways

The GST council headed by Finance Minister, Arun Jaitley, met 8th time a􀁺er its formation. The key takeaways from council meeting are given hereunder:

1. Issue of dual control 

It is very unfortunate that even in the 8th round of meeting GST council did not reach to any consensus on issue of dual control. The Centre is not willing to accept demand of States for exclusive control over assesses having turnover below Rs 1.5 crore.

2. Cess

Officials from State Govt. were of the view that cess to be levied on more items in addition to demerit goods as the demonetization drive would reduce the tax collection in first year of GST implementation. The revenue loss from GST rollout post-demonetisation could be as much as Rs 90,000 crore,” said West Bengal Finance Minister Amit Mitra.

Click here to read full document

GSTN revised enrollment schedule for taxpayers; provides State wise enrollment details

Goods and Services Tax Network (GSTN) has revised the enrollment schedule for GST migration. The GST enrolment will be available for service tax assessees from January 9, 2017 till January 31, 2017. However, all assessees registered with Central Excise can apply for GST enrollment from January 5, 2017 till January 31, 2017 provided they are not registered with State VAT department

GSTN has also published State-wise status of assesses enrolled under GST. The GST enrollment has received overwhelming response in States like Madhya Pradesh, Gujrat and Chhattisgarh wherein around 75 percent of dealers enrolled under GST. The Delhi Government has enrolled 45 percent of dealers, whereas Haryana Government has enrolled 29 percent dealers.

Click here to view State wise status of GST enrollment

MAT Co. entitled to indexation benefit for computing exempted capital gains under Sec. 10(38): ITAT


a) The assesse filed return of income under provisions of Section 115JB. The Assessing Officer denied benefit of indexed cost of acquisition for computing exempted capital gains.

b) The Assessing Officer was of the opinion that long term capital gain without indexing the cost of acquisition were to be considered for the purpose of computing tax liability u/s 115JB.

c) The CIT(A) upheld the action of Assessing Officer

The ITAT held in favour of assessee as under:

1) Section 10(38) provides that any income arising from transfer of a long-term capital asset, being equity share in a company or a unit of an equity oriented fund shall be exempt. Therefore, the issue revolves around interpretation of the term 'any income' as used in subsection (38) of section 10 from the transfer of long term capital asset.

2) The term 'any income' used in sub-section (38) of section 10 refers to only the amount of long term capital gains computed under the provisions of section 48 which means that the benefit of indexation of cost of acquisition should be given to the assessee while computing long term capital gain for the purpose of section 115JB of the Act.

3) Therefore, the assessee-company would be entitled to the benefit of indexation while calculating long term capital gains for the purpose of computing tax liability u/s 115JB. - [2016] 76 360 (Bangalore - Trib.)

Saturday, December 31, 2016

CA can't exercise lien over client's documents for nonpayment of fees

As per decision of Ethical Standard Board (ESB) of ICAI, A chartered accountant cannot exercise lien over the client documents/records for non-payment of his fees. In this regards section 170 of the Indian Contract Act, 1872 reads as under: "Bailee's particular lien - Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.


(A) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.

(B) A gives cloth to B, a tailor, to make into a coat, B promises A to deliver the coat as soon as it is finished, and to give a three months' credit for the price, B is not entitled to retain the coat until he is paid." [Emphasis supplied]

The above view is based on the general principles of law under which any person having lawful possession of someone else's property may retain the property for non-payment of his dues. As section 170 uses the words 'goods' and not the word 'property' and as client's books of account and papers are not 'goods', lien under section 170, will not be available to lawyers/CAs/CWAs/CSs.

Therefore, withholding books and papers of the client for unpaid fees appears to be not legally tenable and even amounts to professional misconduct.

Tax collection isn’t valid if made from ‘tax illiterate person’ due to ignorance of law: ITAT

(a) The assessee filed return of income which was picked up for scrutiny where he was required to explain the deposits in his saving bank account. The AO made additions on account of unexplained cash deposits.

(b) The CIA (A) upheld the addition made by AO without considering fresh evidences filed by assessee. Evidences were considered as not admissible by the Commissioner (Appeals). Since as per record, no application seeking admission of fresh evidences under rule 46A was filed. ITAT held as under:

(1) The tax so collected on the foundation of the ignorances of a 'tax illiterate tax payer' could not be termed to be a collection of either 'just' nor 'due' taxes collected by the State in accordance with law. The assessee represented by an equally ignorant counsel, should have been appropriately guided by the First Appellate Authority. The fact that the Commissioner (Appeals) while exercising his discretion refused to admit evidence inspite of sufficient cause being shown as a matter of record was unwarranted and arbitrary.

(2) Since in the facts of the instant case due to his wife's illness the assessee was prevented by sufficient cause from producing the evidences in support of his claim, the impugned order was set aside and the issue to be restored back to the Commissioner (Appeals) with a direction to permit the assessee to produce the evidences in support of his claim.

Govt. approves ordinance, proposes jail term for people holding old notes

The Union Cabinet has approved an ordinance to impose penalty and a jail term for people holding demonetized notes of Rs 5,00 and 1,000. Only specified category of people will be allowed to keep demonetized notes. However, anyone can possess 10 old notes of Rs 5,00 or Rs 1,000 denominations.

The Government has prescribed penalty equivalent to higher of Rs 50,000 or five times of the amount of demonetized notes. The Union Cabinet has also approved an ordinance to amend RBI Act to extinguish the liability of the Government and Central bank on demonetized notes. The deadline for deposit of demonetized notes in banks is December 30, 2016. Thus, the ordinance should be cleared by the President before December 30, 2016.

(This document is prepared on basis of information gathered from sources.)

Benefit of vacancy allowance would be available even when house is under renovation: Bangalore ITAT

a) The Assessing Officer proposed to assess the annual letting value of the flat. The assessee has submitted that flats were vacant and therefore even if Annual Letting Value (ALV) has to be assessed, the vacancy allowance should be allowed. The Assessing Officer before the CIT (Appeals). The CIT (Appeals) confirmed the addition made by the Assessing Officer The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1. The assessee has explained that the house was under renovation and therefore, it could not be let out during the year under consideration. Further it was not intentionally kept vacant by the assessee. Thus, vacancy of the house was beyond the control of the assessee and, therefore, the benefit of vacancy is available to the assessee as per the provisions of section 23(1)(c).

2. The process of letting out may take some time in searching the suitable tenant and for settling the terms and conditions of the letting out. Therefore, even if it is presumed that the house is ready for occupation if it is not intentionally kept vacant by the assessee then it cannot be presumed that the assessee has deliberately not let out the house during the year under consideration.

3. Thus, the addition made by the Assessing Officer was to be deleted. - [2016] 76 278 (Bangalore - Trib.)

Tuesday, December 27, 2016

CBDT issues clarifications on ‘Direct Tax Dispute Resolution Scheme, 2016

The Direct Tax Dispute Resolution Scheme, 2016 incorporated as Chapter X of the Finance Act,
2016 provides an opportunity to tax payers who are under litigation to come forward and
settle the dispute. The provisions of the Scheme have been clarified vide Circular No.33 of 2016
dated 12.09.2016. Subsequently, further queries have been received from the field authorities
and other stakeholders. Now the Govt. has considered the queries and decided to clarify the
same in the form of questions and answers.

Click here to view clarifications on ‘Dispute Resolution Scheme, 2016’