Wednesday, August 31, 2016

Rules restricting appearance of outside lawyer in court without local lawyer are valid: SC

Rules 3 and 3A of the Allahabad High Court Rules, 1952 which mandates that a lawyer outside state cannot appear in Court without a Local lawyer's appointment are perfectly valid, legal and do not violate right of appellant under article 19(1) (g ) of the Constitution


a) The Allahabad High Court framed Rule 3 and 3A of the Allahabad High Courts Rules, 1952 under the Advocates Act, 1961. As per the Rules, an Advocate who is not on the Roll of Advocate or the Bar Council of the State is not allowed to appear, act or plead in the said Court unless he files an appointment along with the advocate who is on the Roll of such State Bar Council and is ordinarily practicing in that Court.

Tuesday, August 30, 2016

Sum received from developer due to hardship caused on redevelopment of flat not a revenue receipt

The issue before the ITAT was as under:

Whether compensation received towards hardship caused to assessee on redevelopment of flat was in the nature of capital receipt and as such not taxable?

The ITAT held as under:

1) Similar facts were present in case of Kushal K Bangia v. ITO [2012] 18 31 (Mum.), wherein the Mumbai ITAT held as under:

“It is not even the case of the AO that the compensation received by the assessee is in the revenue field, and rightly so because the residential flat owned by the assessee in society building is certainly a capital asset in the hands of the assessee and compensation is referable to the same. The only defence put up by DR is that cash compensation received by the assessee is nothing but his share in profits earned by the developer which are essentially revenue items in nature. This argument however proceeds on the fallacy that the nature of payment in the hands of payer also ends up determining it's nature in the hands of the recipient. In order to find out whether it is a capital receipt or revenue receipt, one has to see what it is in the hands of the receiver and not what it is in the hands of the payer"

2) Following the judgment of Kushal (Supra), it could be held that such compensation could not be said to be of revenue nature, and, accordingly, the same was outside the ambit of income under section 2(24).

3) The impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same would be taken into account as such, as and when occasion arises for computing capital gains in respect of the said asset. - JITENDRA KUMAR SONEJA V. ITO [2016] 72 318 (Mumbai - Trib.)

Monday, August 29, 2016

Sec. 145A applies only to valuation of goods and not services

a) The assessee was engaged in the business of real estate consultancy/agency and property management services. During the course of the assessment proceedings, the AO sought to include the service tax as trading receipts on invocation of Section 145A(ii).

b) The assessee contended that Section 145A(a)(ii) would have no application to the present facts as service tax is not mentioned therein.

c) On appeal, the CIT (Appeals) held that Section 145A(a)(ii) would apply as it is not restricted only to manufacturing and trading companies. It was concluded that the service tax stands on the same footing as excise duties, sales tax and other taxes, which are collected to be paid over to the Government.

d) Further, the Tribunal held in favour of assessee by observing that section 145A(a)(ii) deals with goods and not services.

The High Court held as under:

1) For the better appreciation of the controversy to be examined, it was necessary to reproduce Section 145A of the Act, which at the relevant time read as under :—

“145A - Notwithstanding anything to the contrary contained in Section 145 —

a) The valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be

i) In accordance with the method of accounting regularly employed by the assessee; and

ii) Further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.”

Friday, August 26, 2016

No compensation from Insurance Co. if there is theft without a forcible entry: Apex Court

Insurer cannot claim compensation against theft from insurance company in absence of any forcible entry.
a) Appellant had taken insurance on assets taken over from company under the Fire Policy and the Burglary and House Breaking policy.
b) At the time of auction of asset, it was detected that some parts of plant and machinery were missing from factory premises. Thus, appellant filed claim for theft with the insurance company.
c) The claim of appellant was rejected by the insurance company on the ground that the theft was not occurred as result of forcible and violent entry of and/or exit from the premises.

The Apex Court held as under:
1) It was clear from the facts of the present case that the Appellant has made out a case of theft without a forcible entry. The case of appellant is that forcible entry is not required for a claim to be made under the policy.

Tuesday, August 23, 2016

Church can furnish decree issued by bishop to establish creation of trust for sec. 12A registration

a) The assessee, a religious institution (Parish),was created under the conventional way by issuing a 'decree' under Cannon law by the concerned Bishop. It filed an application in Form No. 10A requesting for registration under section 12A.

b) The Commissioner denied registration stating that since the assessee had not produced copy of the instrument in support of creation of the trust, the objects and its activities as well as the existence of the trust could not be ascertained.

The Tribunal held as under:

1) A plain reading of rule 17A makes it clear that a religious or charitable organization can be an institution other than a 'trust'. The usage of the words 'charitable or religious trust or institution' in the first and second limb of rule 17A connotes that where the trust is created, or institution is established, under an instrument, the instrument in original, together with a copy thereof, have to be filed along with the prescribed Form No. 10A for registration.

Monday, August 22, 2016

Any dishonest act of CA isn’t a professional misconduct if it is done in Individual capacity

Chartered Accountant Act, 1949: Where a CA sold his shares but continued to receive dividends declared by the Company by cheating upon transferee, such activity could not be said done in relation to practice as CA as such act of dishonesty was done in individual capacity. Thus, disciplinary committee’s proposal to remove CA’s name from registers of members of ICAI for 6 months was to be set aside.


1) A Chartered Accountant sold his shares in November 1999 however, share transfer deed for transfer of shares was lodged on November 04, 2004. In the meantime, CA continued to receive dividend declared by company for 5 years.

2) The transferee made complaint about this conduct of CA before the Disciplinary Committee of the Institute of Chartered Accountants. The Disciplinary Committee found that the conduct of CA was wholly unworthy and amounted to professional misconduct.

On appeal the High Court held as under:

a) In the instant case the respondent was acting as an individual in his dealings with the complainant which were purely commercial. While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant.

Saturday, August 20, 2016

Updates on Income Declaration Scheme

Recently, the CBDT has amended Income Declaration Scheme (‘IDS’) Rules and it has also issued fi􀁺h set of FAQs on IDS.

Key takeaways from such changes are given here under:

1) The CBDT has amended the valuation rules to determine fair value of property declared under IDS on basis of stamp duty valuation.

2) Where loans, creditors, advances received, share capital, payables etc. are disclosed in the audited balance sheet but are fictitious in nature and cannot be directly linked to acquisition of a particular asset, then such fictitious liabilities can be disclosed under the IDS as such without linking the same with the investment in any specific asset.

3) The income declared under the IDS for an earlier assessment year can be taken into account to explain the related transactions of the subsequent assessment years in assessment proceedings pending before the Assessing Officer provided there is a nexus between the two.

Friday, August 19, 2016

'Loan processing fee' paid to bank would be treated as interest; not liable to sec. 194A TDS

a) The assessee-company was engaged in providing outdoor media advertising services to leading Indian and multinational brands. During the course of assessment, the AO observed that assessee had debited certain processing fees without deducting tax at source. The AO rejected the claim of the assessee as he was of the view that such payment was made for rendering managerial services and liable to TDS under Section 194J.

b) The assessee submitted that no tax was deductible under Section 194J on processing fee as it would fall within the exclusion provided in section 194A(3). The Commissioner (Appeals) decided the appeal in favour of the assessee. The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The definition of interest will include any service fee or any other charge in respect of money borrowed. Here, processing fee definitely falls within such definition and, therefore, it could not be reckoned as payment for rendering of any managerial services by the bank.

2) Despite such a payment to the Nationalized Bank falls within the ambit of 'interest' under section 2(28A), the TDS provisions under section 194A would not be applicable, because it falls within the exclusionary provisions as laid down in sub-section (3) of section 194A. Thus assessee was not required to deduct tax at source on such processing fee paid. – DY. CIT (TDS) v. Laqshya Media (P.) Ltd. [2016] 72 119 (Mumbai - Trib.)

Wednesday, August 17, 2016

Time-limit for acknowledgment extended to 30 days for IDS declaration made in month of July, 16

The Principal Commissioner or Commissioner issues Form 2 to the declarant as an acknowledgment of income disclosed under Income Declaration Scheme (‘IDS’). He has to issue Form 2 within 15 days from the end of the month in which the declaration has been furnished. Hence, the acknowledgment in Form-2 for the declaration filed in the month of July, 2016 is required to be issued by 15th August, 2016.

Earlier declarants were required to pay taxes under IDS till November 30, 2016. However, the CBDT has notified the revised schedule for payment of taxes in three installments till September 30, 2017. Accordingly, necessary amendments to Form-2 as prescribed in the Rules are in the process of being made. In view of the above, the CBDT hereby extends the time for issuance of acknowledgment in Form-2 from 15 days to 30 days in respect of the declarations filed under the Scheme in the month of July, 2016.

Tuesday, August 16, 2016

Service tax levy on short-term accommodation in hotel is unconstitutional: Delhi HC

‘Federation of Hotels and Restaurants Association of India’ filed a writ before the Delhi High Court challenging the constitutional validity provision whereby, service tax is levied on supply of food items by restaurants having AC facility. It also challenged constitutional validity of provision, whereby service tax is levied on short-term accommodation by hotels. 
The Delhi High held as under:
I. It upheld the constitutional validity of service tax levy on foods items served in AC restaurants and made following observations:
- Rule 2C of the Service Tax (Determination of Value) Rules, 2006 enables the assessing authority to put a definite value to the service portion of the composite contract of supply of goods and services in an air-conditioned restaurant.
- Correspondingly there is an abatement for that portion which pertains to the supply of goods in the form of food and drink which would be amenable to sales tax or value added tax.
- It is to be kept in mind that the ready reckoner formula is useful where an assessee does not maintain accounts in a manner that will enable the assessing authority to clearly discern the value of the service portion of the composite contract. With the machinery provision for the levy and determination of service tax on the service portion clearly being spelt out in the Rules themselves, the legal requisites stand satisfied.

Saturday, August 13, 2016

Usage of second residential property as office won't lead to denial of sec. 54F relief

a) The assessee sold his Gurgaon Flat and earned long term capital gains. He invested the same in a residential property and claimed deduction under section 54F.

b) The AO disallowed such claim as he was of the view that property of assessee (located at New Delhi) was a second residential property. The AR was of the view that such property was only used by assessee for his own profession.

c) The DR submitted that such premises was undisputedly a residential house as per the municipal corporation and thus it will not change the character.

d) The CIT(Appeals) upheld the order of the Assessing Officer.The aggrieved-assessee filed the instant appeal before Tribunal.

The Tribunal held in favour of assessee as under:

Friday, August 12, 2016

Letter of comfort given to AE is outside the ambit of international transaction

The issue for consideration of the Tribunal was as under:

Whether Letter of Comfort issued by the assessee-company to its Associate Enterprise (‘AE’) could be deemed as international transaction under transfer pricing provisions?

The Tribunal held as under:

1) Letter of Comfort was nothing but a guarantee given by the assessee-company to its AE so as to enable the AE to avail of loan facility. By giving such loan, the assessee exposed itself to the risk of repaying the loan availed by the AE.

2) However, in Redington (India) Ltd. v. Asstt. CIT [2016] 69 351 (Chennai), the Tribunal held that such a guarantee or Letter of Comfort did not involve any cost to the assessee, therefore, it was outside the ambit of international transaction.

3) Thus, following such verdict of Redington (supra) it could be concluded that Letter of Comfort given to AE could not be deemed as international transaction and there would not be any need to make any adjustment in respect of Letter of Comfort. Accordingly, the orders of the lower authorities were to be set aside. - TVS Logistics Services Ltd. v. DY. CIT [2016] 72 89 (Chennai - Trib.)

Income from distribution of “Ten Sports” channel to cable operators couldn’t be held as ‘royalty’


a) The assessee was engaged in business of telecasting “Ten Sports”. Its revenue arose from advertisement and distribution of sports channel in India. A distribution agreement was entered into by the assessee with ‘Taj India’ for distribution of pay channel to various cable operators and ultimately to consumers in India.

b) The AO made following observations:

The income from distribution of sports channel by assessee is taxable as royalty.

Transponder fee paid to US based company for rendering services in connection with telecasting of “Ten Sports” was taxable as royalty.

c) The CIT(A) reversed the order of AO. The aggrieved-revenue filed the instant appeal. The Tribunal held as under:

Wednesday, August 10, 2016

No sec. 69C additions on basis of info received from sales tax dept. without giving hearing change to assessee


a) The assessee filed return of income declaring certain taxable income.

b) Information received from Sales Tax Department revealed that the assessee was involved in taking accommodation entry of bogus purchases. On the basis of this information, the assessment was reopened by the AO. He made certain additions to income of the assessee under section 69C.

c) On appeal, the CIT(A) partly allowed the appeal of the assessee and restricted the disallowance to 25 per cent of the purchases.

On appeal, the Tribunal held as under:

Tuesday, August 9, 2016

Statement of salesman would trigger block assessment when assessee failed to rebut such statement

a) The assessee was a partnership firm, engaged in the business of furniture.Survey was conducted at the premises of the assessee and an assessment was made under section 153C.

b) Assessee challenged such assessment as he was of the view that such assessment was based on statements of salesmen recorded under Section 133A. The CIT(A) and Tribunal dismissed the appeal of assessee.

c) Aggrieved-assessee filed the instant appeal.

The High Court held as under:

Monday, August 8, 2016

Society providing training in travel and tourism is entitled to sec. 11 exemption

a) The assessee was a society registered under section 12A. It provided various courses, including certificate course in Travel & Tourism' which was being conducted in collaboration with Miranda House, University of Delhi.
b) The AO held that courses conducted by assessee did not have any recognition from Govt. and activities carried on by assessee would fall outside purview of 'charitable purpose' as given under section 2(15). Consequently, assessee was not entitled to exemption under sections 11 and 12.
c) The CIT(A) reversed order of the AO. Aggrieved-revenue filed the instant appeal. The Tribunal held in favour of assessee as under:
1) For certificate course of Travel & Tourism the course content was set by Miranda House, education and training was provided by the appellant, examination paper was set out by appellant, examination was conducted by appellant and the Diploma Certificate was awarded by both Miranda House and the appellant to the successful candidates/students.

Saturday, August 6, 2016

Govt introduces employees' compensation bill in lok sabha

1. Now the Centre and the States, both have powers to make laws with respect to levy of taxes on both goods and services. However, the Parliament will have exclusive powers to make laws with respect to goods and services tax where the supply of goods, or services, or both takes place in the course of inter-State trade or commerce.

2. CGST collected from intra-State trade or commerce shall be assigned to States in accordance with law formulated by the Parliament.

3. IGST collected from inter-State trade or commerce shall be apportioned between the Union and the States on the recommendations of the GST Council.

4. GST apportioned by Central Government to States will not form part of Consolidated Funds of India.

5. The President of India will constitute GST council.

Click here to read full article

Friday, August 5, 2016

Hevy fine for traffic violations – 8 things you should know

In an attempt to improve road safety in the country, the Cabinet has approved of the Motor Vehicle (Amendment) Bill.
Key takeaways from Motor Vehicle amendment bill are as follows:
1. Compensation for Hit and Run cases proposed to be increased from Rs. 25,000 to Rs. 2,00,000. Bill also includes provision for payment of compensation upto Rs. 10 lakh in road accident fatalities.

2. Guardian or owner shall be deemed to be guilty in cases of offences by the Juveniles. They will have to pay penalty of Rs. 25,000 apart from undergoing 3 years imprisonment. The juvenile will be tried under Juvenile Justice Act. Registration of his/her motor vehicle will be cancelled.

3. It would enable online learning licenses, increase validity period for driving licenses and do away with the requirement of educational qualifications for transport license. 

4. It proposes to have automated fitness testing for the transport vehicles with effect from 1 October 2018.

Thursday, August 4, 2016

A decade long Journey of GST Bill

Today, Rajya Sabha is discussing amendments to Constitution Bill for Goods and Service Tax i.e. Constitutional (One Hundred and Twenty-Second Amendment) Bill, 2014. Hopefully, GST will be introduced in the country after a long journey of 13 years as it was discussed in the Kelkar Task Force report on indirect taxes in 2003 for the first time.

Since, Government agreed to drop 1% additional tax which was key demand of Congress and recommendation of Select Committee of Rajya Sabha and gave assurance that it will compensate States for any revenue loss incurred due to GST rollout, there is high probability that this amendment bill will be passed and supported by all parties. Today, Ministry of Finance issued “Frequently Asked Questions” on Goods and Service Tax and ICAI issued Background Material on Model GST law. There will be a huge impact of GST on common man. Goods like Small Cars, Two wheeler, Movie Tickets, Electronic Items etc. will be cheaper. But Air Travel, Insurance, Textile, Jewellery, Mobile Calls, Cigarettes will be costlier.

Wednesday, August 3, 2016

CCI slaps penalty of Rs 72 crores on Lupin for restricting supply of drugs

Competition Act, 2002: Act of restricting supply of drugs by Lupin, pharmaceutical company, due to non-compliance of condition of furnishing of NOC by ‘Chemists and Druggist association’ was anti-competitive
Facts :
a) Karnataka Chemists & Druggist Association (KCDA) restrained pharmaceutical companies from appointing new stockists in the State of Karnataka without a NOC.
b) Maruti & Co. (Informant) was appointed as a stockist for the Diabetes care division. Lupin, being a Pharmaceutical company, refused to supply drugs to informant. It had directed informant to obtain an NOC from KCDA to get supply of drugs.

Tuesday, August 2, 2016

MFN clause is an integral part of DTAA and selfoperational; Delhi HC sets aside decision of AAR

Facts :
a) An application was filed by the Steria India (i.e., petitioner) before the AAR to determine taxability of payment made for the management services provided by Steria France.
b) The Petitioner (i.e., Steria India) was of the view that due to existence of Most Favoured Nation (‘MFN’) clause in India-France DTAA (Clause 7 of the Protocol) the less restrictive definition of FTS‟ appearing in the India-UK DTAA, must be read as forming part of the India-France DTAA as well.
c) The AAR disagreed with the Petitioner. It ruled that the Protocol could not be treated as forming part of the DTAA itself. Further, it held that the “make available” clause found in the India-UK DTAA could not be read into the expression “FTS” occurring in the India-French DTAA unless there was a notification issued by the Govt. to incorporate the less restrictive provisions of the India-UK DTAA into the India-France DTAA.
d) The petitioner filed the writ petition against such ruling of AAR. The Delhi High Court held in favour of assessee as under:

Monday, August 1, 2016

Stringent law to deal with Benami Properties - 7 things you should know

n an attempt to restrain the generation of black money in domestic market, the Lok Sabha has approved the Benami transactions Prohibition (Amendment) Bill.
Key takeaways from Bemani amendment bill are as follows:
1) It empowers the Government to confiscate Benami properties held in the name of another person or under a fictitious name to avoid taxation and conceal wealth.
2) The person found guilty of Benami transaction may have to face rigorous imprisonment for a period not less than one year and which may be extended to seven years. In addition to imprisonment, there would be a penalty of 25 percent which will be calculated on the basis of fair market value of the property.