Saturday, April 30, 2016

No penalty on ‘Aishwarya Rai’ for TDS default if she relied on her CA’s advice

a) Assessee (Aishwarya Rai Bachchan) made payment of US $ 77,500 to a non-resident for development of website without deducting TDS under Section 195.
b) The Assessing Officer (AO) observed that payment made for development of website would fall within the meaning of 'fees for technical services' as per Explanation 2 to Section 9(1)(vii). Therefore, payment so made was taxable in India in hands of non-resident and, hence, assessee had made default for not deducting TDS while making such payment. Consequently, the AO imposed penalty under section 271C for not deducting the TDS.
c) Assessee submitted that she had not deducted TDS by relying upon advice of her CA. Therefore, penalty shouldn’t be imposed as there was no mala fide intension on her part.
d) CIT(A) confirmed the order of AO. Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.
The tribunal held in favour of assessee as under-

Friday, April 29, 2016

Key Transfer Pricing updates for March 2016

The Finance Minister, Arun Jaitley announced the Union Budget 2016 on 29 February 2016, amidst high expectations from several stakeholders including taxpayers, investors and consumers. From a Transfer Pricing (TP) perspective, one of the most important development is the introduction of Country-by-Country (CbyC) reporting norms for TP documentation with effect from the Financial Year (FY) beginning 1 April 2016. The Organisation for Economic Co-operation and Development (OECD) and G201 countries as part of their Base Erosion and Profit Shifting (BEPS) project under Action Plan 13, introduced the three-tier TP documentation structure, which includes master file, local file and CbyC reporting. India, being an active participant of OECD's BEPS project, has proposed to adopt the above recommendations of the OECD's Action Plan 13 in the TP regulations announced during this budget. Some other amendments in the TP arena have also been proposed.
Recently, the Delhi High Court (High Court) in the case of Denso India Limited2, rejected aggregation of an import transaction under the Transactional Net Margin Method (TNMM), since the facts of the case demonstrated that the arrangements made in relation to the transaction, when viewed in their totality, differed from those which would have been adopted by independent enterprises behaving in a commercially rational manner. In a Tribunal ruling in case of Essilor India Pvt Ltd3, the Bangalore Tribunal (the Tribunal) held that in the absence of an arrangement and agreement between the taxpayer and its Associated Enterprise (AE), incurrence of more expenditure on Advertisement, Marketing and Sales Promotion (AMP) compared to comparable companies cannot be inferred as an international transaction between the taxpayer and its AE.

Thursday, April 28, 2016

No capital gain tax on amount standing in capital account received by partner on retirement from firm

IT: Amount received by assessee on retirement as partner from firm, on account of credit balance standing in capital account and current account, and not for relinquishing or extinguishing his rights over any assets of firm, would not be chargeable under section 45(4) as capital gains
IT: While computing total taxable income of EOU, depreciation loss of non-eligible units could not be set off against income of eligible units involved in activity of export
IT: Profits derived from export of articles alone are to be considered for claiming deduction under section 10B and not miscellaneous receipts from eligible profits
IT: Section 115J does not empower Assessing Officer to embark upon a fresh enquiry in regard to entries made in books of account of company
       Click here to Know More at

Wednesday, April 27, 2016

CBDT clarifies that officer below the rank of JCIT can’t initiate penalty proceedings u/s 271D or 271E

CIRCULAR NO.9/DV/2016 [F.NO.279/MISC./M-116/2012-ITJ], DATED 26-4-2016
It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income tax Act, 1961 (hereafter referred to as the Act) commences at the level of the Assessing Officer (below the rank of Joint Commissioner of Income Tax.) or at level of the Range authority i.e. the Joint Commissioner of Income Tax./Addl. Commissioner of Income Tax.
Some High Courts have held that the limitation commences at the level of the authority competent to impose the penalty i.e. Range Head while others have held that even though the Assessing Officer is not competent to impose the penalty, the limitation commences at the level of the Assessing Officer where the Assessing Officer has issued show cause notice or referred to the initiation of proceedings in assessment order.

2. On careful examination of the matter, the Board is of the view that for the sake of clarity and uniformity, the conflict needs to be resolved by way of a "DepartmentalView".

Tips collected by hotel from customers and paid to employees couldn’t be taxable as salary: SC


“Whether tips collected by a hotel from customers and paid to employees could be chargeable as salary in hands of employees?”

Tuesday, April 26, 2016

Bank has no lien on security deposited with DRAT by borrower for consideration of his appeal on merits

Bank has no lien in terms of Section 171 of The Indian Contract Act, 1872 on the pre-deposit made by the borrower under Section 18 of the SARFAESI Act as pre-condition for hearing his appeal on merits

a) The respondent-borrower filed Securitisation Application before the DRT against the steps taken by the secured creditor, a bank, for enforcing his security. However, DRT rejected the same.
b) The respondent-borrower moved to DRAT u/s 18 of the SARFAESI Act and deposited sum of Rs.50 lakhs before the Appellate Tribunal in terms of the proviso to section 18 of the said Act.
c) Realising that the appeal would not survive thereafter, the respondent sought permission from DRAT to withdraw the same and also for refund of the deposited amount. DRAT granted permission to withdraw deposits subject to the disposal of the appeal.
d) As the appeal itself was being withdrawn, the respondent filed writ before High Court.
e) The High Court set aside the said condition and permitted the respondent to withdraw the amount unconditionally.Aggrieved by the order, the appellant-Bank filed an intra-Court appeal which was dismissed by Division bench

On further appeal, the Supreme Court held as under:

Monday, April 25, 2016

Facebook friends may be treated as connected persons for the purposes of Insider Trading: SEBI

This article gives an analysis of the latest SEBI's order on Insider Trading especially it is a case concerning Promoters of a listed company and persons connected with them who have allegedly engaged in insider trading. SEBI has chosen the social media 'Facebook' to determine and to establish connection between the parties who have committed Insider Trading.
1. Introduction
Securities Exchange Board of India (SEBI) had originally framed SEBI (Prohibition of Insider Trading) Regulations, 1992 in order to deter the practice of insider trading in the securities of listed companies. Afterwards several amendments to the said Regulations and also judicial paradigm through various case laws had also evolved to prohibit insider trading. But major overhaul of the Regulations have not been done. But SEBI on 15th January, 2015 had notified SEBI (Prohibition of Insider Trading) Regulations, 2015 [Regulations 2015] and has been done in order to strengthen the legal and enforcement framework, toughen the insider trading rules, align Indian regime with International practices and to provide clarity to certain definitions and concepts.

Surveying authority can’t allege excess stock without demanding standard weighment facility from assessee

a)  Surveying authority conducted survey at premises of assessee and alleged excess stock by weighing stock on basis of cartons. Consequently, the Assessing Officer (AO) made addition on account of excess stock.
b)  Assessee challenged that no addition could made on account of excess stock as weighment was not done by the surveying authority in accordance with the provisions of the Standards and Weights and Measures Act, 1976.
c)  CIT(A) upheld the addition made by the AO by observing that there was no evidence that the assessee provided to the survey team the necessary facility of weighment by a standardized scale.

d)  Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Saturday, April 23, 2016

Mistake by return filing portal, doesn't call for concealment penalty on taxpayer

Where assessee's salary was understated in her return due to mistake of online tax return filing portal ( and she could not verify contents of return due to her pregnancy and immense pressure in office, concealment penalty was not justified
a)     Assessee was a salaried employee who provided her Form No. 16 to an online tax return filing website ( for filing of her return of income. Due to a mistake committed by website, her income was understated in return of income.
b)    Assessee received ITR-V from website and as she was having pregnancy of five months and due to immense work pressure in the office, she could not devote time to see the content of ITR filed, signed it straightaway and sent it to Income-tax Department.
c)     The Assessing Officer (AO) levied concealment penalty on her for understating the income.

d)    CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Friday, April 22, 2016

Facebook friends may be treated as connected persons for the purposes of Insider Trading: SEBI

Probably, it is for the first time that SEBI has treated ‘Facebook’ as a relevant factor to determine connections between persons or to establish connection. In instant case, SEBI observed that having "mutual friends" on Facebook will form the basis of determination of connection for the purpose of Insider Trading. Insider means any person who is (i) A connected person; or (ii) in possession of or having access to unpublished price sensitive information.

SEBI's order No: WTM/PS/152/IVD/Feb/2016 dated 4th February, 2016 held guilty Chairman and Managing Director (CMD) and Chief Executive O􀁹icer (CEO) of Paired Technologies Ltd (PTL), a micro-cap which runs, an online mobile accessories store. The PTL had run into financial di􀁹iculties and therea􀁺er it decided to sell its business on a slump sale basis to another entity. The company decided to declare special dividend and also carry out a buyback of shares. Because of this, the shareholders received an amount far higher than the then ruling market price of the shares. Subsequently, the price of the shares also started rising substantially.

It was later on revealed through investigation that the CMD, CEO were part of a cartel of 15 people termed as 'insiders' and were in possession of unpublished price sensitive information (UPSI) on the basis of which they traded in the scrip of PTL. These persons allegedly connected had purchased the shares of PTL at the earlier low ruling price.

How the parties were found connected?

In the aforesaid case, connections with the other parties were found on various grounds. Mr.PS, the Chairman and MD of PTL was a connected person under the Regulations and the

Thursday, April 21, 2016

Upfront premium received for grant of perpetual tenancy rights in a property is taxable as capital gain

a) Assessee-HUF received one time premium for grant of tenancy rights in a property. It offered the amount so received as capital gain and claimed exemption under section 54EC in respect of investment made in Rural Electrification Corporation Bond.

b) Assessing Officer (AO) allowed exemption to assessee. However, Commissioner by invoking section 263 held that said amount was chargeable as income from house property and, thus, passed revisional order directing the AO to disallow exemption under section 54EC.

c) Aggrieved assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under:

CARO 2016 in a new Avatar

It’s an attempt to provide a brief synopsis of the rationale for issuing the revised version of the CARO, its revised applicability and clause by clause comparison between CARO 2015 and CARO 2016. 
There were various reasons for modifying the already issued CARO 2015, which may be categorized as follows:

2. Brief Summary

2.1 The need: There were various reasons for modifying the already issued CARO 2015, which may be categorized as follows:

2.1.1 Compatibility with the Companies Act, 2013  (the Act 2013): The Companies Act, 1956 had largely ceased to be in force effective from 1 April, 2014 (barring those sections which are still applicable) and, consequently, CARO 2003 (as amended), issued under section 227(4A) of the said Act also lost its validity from the said date. With the introduction of the Act 2013, CARO 2015 was issued; however, a need was felt to further revise the same in such a short span of time for making it more compatible with the Act 2013.  Consequently, following changes have been done to CARO 2015:

§  Reporting on Internal Control Systems deleted, due to a separate reporting on Internal Financial Controls, as mandated by the Act 2013.

§  Reporting with respect to loans, investments, guarantees and security under sections 185 and 186 of the Act 2013 added.

§  Reporting of the fraud by the company and on the company by its officers or employees is mandated now, as against all the frauds on or by the company earlier.

§  Reporting on managerial remuneration added as per the Act 2013.

§  Reporting on compliance with section 177 (Audit Committee) and section188 (Related Party Transactions) of the Act 2013 added.

§  Reporting on non-cash transactions with directors, etc., as per the provisions of section 192 of the Act 2013 added.

2.1.2 Further improvements
§  Increasing of the applicability limits for private companies for scoping out small sized companies

§  Adding new provisions for more transparency or complete reporting, e.g.,
o    Reporting on holding the title deeds of immovable properties in the name of the company.
o    Reporting of loan, etc., given to Limited Liability Partnerships.
o    Reporting on schedule of repayment of loans.
o    Reporting on lender-wise details to be made with respect to defaults on dues.
o    Reporting on moneys raised by way of IPO or further public offer.

2.1.3 Applicability: Every statutory audit report issued by an auditor under section 143 of the Act 2013 on the financial statements of a company, having CARO 2016 applicable for the FY commencing on or after 1 April 2015, shall report matters specified under CARO 2016.

Order 2016 shall not apply to the auditor’s report on consolidated financial statements.

CARO 2016 is applicable to every company including a foreign company, barring following companies:
§  a banking company;
§  an insurance company;
§  a company licensed to operate under section 8 of the Act 2013;
§  an OPC and a Small Company as defined under the Act 2013; and
§  a private limited company (not being a subsidiary or holding company of a public company) with:
o    a paid-up capital and reserves and surplus not more than Rs. 1 crore as on the balance sheet date;

o    which does not have total borrowings exceeding ` 1 crore from any bank or financial institution at any point of time during the financial year; and

o    Which does not have a total revenue as disclosed in Scheduled III to the Act 2013 (including revenue from discontinuing operations) exceeding RS. 10 crore during the financial year as per the financial statements.

2.1.4 Reporting on adverse comments by the auditors: In case the answer to any of the clauses under CARO 2016 is unfavorable or qualified, the auditor shall also provide the basis for such unfavorable or qualified responses. However, in those instances where the auditor is unable to express any opinion on a specified matter, he shall indicate this fact along with the reasons for the same.

For more, please refer Taxmann’s Corporate Professionals Today nVolume 35 nIssue 7 nApril 1 to 15, 2016

AO’s order under Sec. 195(2) determining amount of TDS to be deducted isn’t appealable

a)    Assessee (Bangalore International Airport Limited) was required to make payment to non-resident for the preparation of the bid papers and project proposal with regard to an Airport Project undertaken by it.
b)    It approached the Assessing Officer (AO) under Section 195(2) by filing the application for seeking permission to make the said payment without deduction of tax at source.
c)    AO passed the respective order by holding that the payment in question was in the nature of Fees for Technical Services ('FTS'). Therefore, the assessee was liable to deduct the tax before making such payment.

d)    Assessee challenged the order of the AO before the CIT (Appeals). CIT (Appeals) confirmed the order of the AO. 

Wednesday, April 20, 2016

Amendment in Forms DVAT-16, 17, 30 & 31


Forms #DVAT-30 and DVAT-31 have been amended. Dealers are now required to maintain their records in a manner to provide details of purchases and sales along with the description of goods and their codes.

Simultaneously, Return Forms DVAT-16 and DVAT-17 have been amended. Dealers are now required to furnish details of purchases and sales in Annexure 2A and 2B along with the description of goods and their codes.
Further, in respect of sales made to unregistered dealers/persons, person-wise details including their PAN shall also be furnished wherever these details have been obtained by the seller in compliance to the provisions contained under the Income Tax Act.
As per Rule 114B of the #IncomeTaxRules, every person shall quote his permanent account number (PAN), inter alia, in the following documents pertaining to the transactions relating to sales and purchases:-
Sl. No.
Nature of Transaction
Value of Transaction
Sale or purchase of a motor vehicle or vehicle, as defined in section 2(28) of the Motor Vehicles Act, 1988, which requires registration by a registering authority under Chapter IV of that Act, other than two wheeled vehicles.
All such transactions.
Payment to a hotel or restaurant against a bill or bills at any one time.
Payment in cash of an amount exceeding Rs. 20,000/-.
Sale or purchase, by any person, of goods or services of any nature other than those specified above.
Amount exceeding Rs. 2 lacs per transaction

Queries on Secretarial Audit

The present paper elaborates five most common queries relating to the Secretarial Audit. It relates to the applicability, number of audits, a PCS may undertake, scope of the audit and penal provisions.
1. ABC Pvt Ltd. was incorporated in the year 2010 as Private Company. Its paid up capital is Rs 35 crore, but the annual turnover for the financial year ended on 31stMarch, 2016, first time crossed from Rs 240 crores to Rs 300 crores. XVY Ltd, a public company, controls the composition of the Board of Directors of ABC Pvt Ltd, hence in terms of Section 2(87) of Companies Act, 2013, ABC Pvt Ltd is treated as subsidiary company of XYZ Ltd. A newly appointed Company Secretary of ABC Pvt Ltd suggested the Board of Directors to get the Secretarial Audit of this company. Whether the Secretarial Audit of a Private Limited Company is mandatory as per the provisions of the Companies Act, 2013.
Section 204(1) of the Companies Act, 2013 (CA 2013) provides secretarial audit for bigger companies. In terms this section, "Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board's report made in terms of sub-section (3) of section 134, a secretarial audit report given by a company secretary in practice, in such form as may be prescribed'.

Tuesday, April 19, 2016

Pass-through entities can pass on income as well as corresponding expenditure to their investors

Venture Capital Company and Venture Capital Fund (VCF) are given status of pass through vehicles for purpose of treatment of income received on account of investment made in venture capital undertaking. Therefore, assessee, which invests in a VCF, would be entitled to book expenditure incurred by VCF as if same had been incurred directly by assessee.
a)    The assessee-company received interest in respect of investment made in SARA fund, a SEBI registered VCF.
b)    It offered interest to tax on net basis after claiming the deduction of its share of expenditure incurred by SARA fund.
c)    Assessing Officer (AO) taxed interest income received by assessee from VCF on gross basis without giving deduction of assessee’s share of expenses incurred by VCF for earning said income.
d)    The contention of the AO was that the said expenses were incurred by VCF and not by assessee.

e)    The Commissioner (Appeals) confirmed the order of the AO. Aggrieved assessee filed the instant appeal before the tribunal.

Saturday, April 16, 2016

FAQs on Taxability of Services provided by Govt. to Business Entities

FAQs on Taxability of Services provided by Govt. to Business Entities

1.    Which services provided by Government to business entities are taxable?
With effect from April 1, 2016 all services provided by a Government or a Local Authority to business entities are taxable. Earlier only support services provided by them to business entities were taxable.

2.    Which services provided by Government covered under the negative list?
Services provided by Government are covered under the negative list. But following services are not covered under the negative list:
                              i)   Specified services by Department of Post,
                            ii)   Services in relation to aircraft or vessel,
                           iii)   Transport of goods or passengers,
                           iv)   Services provided to business entities.

3.    Which services have been exempted from service tax under Mega-exemption 25/2012?
Following services are exempt under Mega-exemption 25/2012:
i)      Services provided by Government or a local authority to a business entity with a turnover upto rupees ten lakhs in the preceding financial year.
ii)    Services provided by Government or a local authority to another Government or a local authority.
iii)   Services provided by Government or a local authority to an individual by way of grant of passport, visa, driving license, birth or death certificate.
iv)   Fines or liquidated damages payable to Government or a local authority for non-performance of contract.
v)    Services provided by Government or a local authority by way of registration required under the law or testing, safety check or certification relating to safety of consumers, etc.
vi)   Services in nature of allocation of natural resources to individual farmers or in relation to any function entrusted to Panchayat.
Note: Services provided by Government or a local authority would be exempted from service-tax if the gross amount charged for such service does not exceed Rs.5000. This exemption does not cover-
                                 i)      Specified services by postal department.
                               ii)      Services in relation to aircraft or vessel.
                              iii)      Transportation of goods or passengers

4.    What would be the Point of taxation of services provided by Government or Local Authority?
In case of services provided by Government or a local authority, the point of taxation shall be the date:
                           i)   when payment in part or full in respect of such services become due or,
                         ii)   when payment for such services is made
-    whichever is earlier.
5.    How services provided by government should be valued?
The amount charged by Government or a local authority for providing services will be considered as a value of taxable service. It has been specifically provided that amount of interest or any consideration charged for allowing deferred payment is includible in value of service.

6.    Who is liable to pay tax on services provided by Government or Local Authority?
The recipient of services are required to pay service tax on services received from Government or a Local Authority under reverse charge basis.

7.    On basis of which documents can Cenvat Credit be availed in respect of services provided by Government or a Local Authority?

Cenvat Credit can be availed on the basis of challan evidencing payment of Service Tax by the service recipient.

Thursday, April 14, 2016

India - US intergovernmental agreement on FATCA

India's avidity for exchange of information
In this era of digitalisation where the world has become a global village and distances are no longer a challenge, flow of capital has become easier and faster. Albeit, this globalisation fuelled by technological advancement has led to seamless transfer of goods, services, money and man, the same has also stimulated international tax evasion and avoidance, in particular through tax havens and non-co-operative jurisdictions.
Where the world has recently witnessed the illegitimate stashing of money in foreign jurisdictions and banking scandals, co-operation between tax administrations of different sovereigns has been considered to be critical in this fight against tax-evasion and in protecting the integrity of tax systems.
A key aspect of such co-operation shall be the effective and seamless exchange ofinformation ('EOI'), between the jurisdictions, to curb the practice of tax evasion followed by taxpayers around world.
The 1998 OECD report 'Harmful Tax Competition: An Emerging Global Issue'1 identified the lack of effective exchange information as one of the key characteristics of harmful tax practices and recommended member countries to remove impediments to the access of bank information.