Saturday, October 29, 2016

RBI allows start-ups to raise 3 million USD through ECBs

The RBI has allowed banks to allow start-ups to raise up External Commercial Borrowings (ECBs) upto 3 million USD or equivalent during each financial year for a minimum average maturity period of 3 years. An entity recognised as a Start-up by the Central Government on date of raising ECB is eligible to raise such ECBs.

 Such borrowing should be denominated in any freely convertible currency or in Indian Rupees  (INR) or a combination thereof. The money raised can be used for any expenditure in connection with the business of company. The borrowing can be in the form of loan or nonconvertible, optionally convertible or partially convertible preference shares.
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Promoter’s a/c can be freezed if an entity doesn't pay fine for non-compliance with disclosure norms

SEBI has observed that some of the listed entities have not paid the fines levied by the stock exchanges for non-compliance with disclosure norms. In order to ensure effective enforcement of listed regulation, it has been decided to freeze the holdings of promoters and promoter group entities of companies in the manner specified below:

• In case non-compliant listed entity fails to pay fine levied by stock exchanges within time frame specified in notice issued by the exchange, the concerned stock exchange shall, upon expiry of the period, freeze holdings in other securities in the demat accounts of promoter and promoter group to the extent of liability which shall be calculated on a quarterly basis.

• In case of non-compliance for two consecutive periods, and failure to comply with the notice issued by the stock exchange within time frame, the recognized stock exchange shall forthwith intimate the depositories to freeze the entire shareholding of the promoter and promoter group in such listed entity. In addition to the freezing of shares of the non-compliant listed entities, the holdings in the demat accounts of promoter and promoter group in other securities shall also be frozen to the extent of liability which shall be calculated on a quarterly basis.

• While freezing the holdings the recognized stock exchange shall have discretion of determining which of the securities and holdings of a promoter or promoter group entity are to be frozen.

India gets taxation rights on investments routed via Korea; CBDT notifies revised India-Korea DTAA

The existing Double Taxation Avoidance Agreement (‘DTAA’) between India and Korea was signed on 19th July, 1985 and notified on 26th September 1986. A revised DTAA between India and Korea signed on 18th May 2015 during the visit of the Hon’ble PM to Seoul has entered into force on 12th September 2016, on completion of procedural requirements by both the countries. Provisions of new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

Some of the salient features of new DTAA are as under:

a) The existing DTAA provided for residence based taxation of capital gains on shares. In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

b) In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income.

No capital gain tax if capital contribution by partner is current asset and not capital asset: ITAT


The issue before the ITAT was as under:

Whether the CIT(A) has erred in deleting the addition of Short Term Capital Gains earned by the assessee on transfer of land to the Partnership firm as their Capital Contribution, by holding that the provisions of section 45(3) was not applicable?

The ITAT held as under:

1) Section 45(3) is applicable only in respect of a capital asset. The said provision has no application in the instant case since what was transferred by the partners was a current asset and not a capital asset.

2) Section 45(3) did not come into operation for the assessment year 2008-09 by reason of conversion of the developed land and building into fixed assets by the said firm or due to revaluation by the said firm of the asset so converted during the previous year ended March 31, 2008.

3) Section 45(3) of the Act is applicable in the year of transfer by the partner of his capital asset to the partnership firm by way of capital contribution. In the instant case, the year of transfer was the financial year ended March 31, 2006. The ITO was wholly unjustified in invoking section 45(3) which had no application in the assessment year 2008-09 or for that matter in the assessment year 2006-07. - [2016] 74 187 (Kolkata - Trib.)

Tuesday, October 25, 2016

Date of dispatch or service of order isn’t relevant for maintainability of settlement application

The disputed issue before the High Court was as under:

Whether the order of assessment would be deemed to be pending for purpose of maintainability of settlement application just because such order was not dispatched or served?

The High Court held as under:

1) There has been divergent views of Bombay High Court and Delhi High Court on this impugned issue. In case of CIT v. Income tax settlement commission[2015] 58 264 (Bombay) the Bombay High Court held that the date of service of assessment order is the crucial date only after which application for settlement could not be filed. However, in case of Qualimax Electronics (P.) Ltd. v. Union of India [2010] 27 STT 231 (Delhi) the Delhi High Court held that the crucial date would be the date of dispatch of the order and not the date of its service.

Monday, October 24, 2016

Sum paid to brothers for vacating house held as cost of improvement of house


a) The assessee had shown income from long-term capital gain from sale of house property.

b) It claimed deduction of certain amount paid to brothers for vacating the house as expenditure incurred for improvement of asset.

c) The Assessing Officer declined such claim on the ground that the assessees were the sole occupant of their property and brothers were neither living in capacity of a tenant nor were paying any rent.

d) On appeal, the CIT (Appeals) affirmed the findings of the Assessing Officer. The aggrievedassessee filed the instant appeal.

The Tribunal held as under:

1) In the present appeals, situation was required to be appreciated, keeping in mind social circumstances and the relationship of the brothers. What was their settlement while residing together? What was feeling of elder brother towards their younger brother, when they displaced them from a property where they were residing for last more than 24 years?

No decision on GST rates–Key takeaways from Third Meeting of GST council

The GST Council headed by Union Finance Minister, Shri Arun Jaitley, has to recommend various issues related to GST, viz., GST rates, administrative control over assessee, compensation to States, etc., in its third Meeting scheduled on 18-20 October, 2016. However, the third meeting of GST council concluded abruptly on October 19, 2016, a day ahead of its schedule. Key takeaways from such meeting are given hereunder:
1. The Centre has proposed four-tiered rate structure, i.e., 6%, 12%, 18% and 26%.Such proposal also includes tax rate of 4% on gold. Maximum rate of 26% has been proposed on demerit or luxuries goods. However, the GST meeting was concluded without any final decision on GST rates. Decision on GST rates will be decided in next meeting of GST council to be held in November, 2016.
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Thursday, October 20, 2016

CBDT notifies final rules on buy back of shares

Section 115-O provides for levy of Dividend Distribution Tax(‘DDT’) on the company at the time when company distributes, declares or pays any dividend to its shareholders. Consequent to the levy of DDT the amount of dividend received by the shareholders is not included in the total income of the shareholder.

However, the consideration received by a shareholder on buy-back of shares by the company is not treated as dividend but is taxable as capital gains under section 46A. 

Unlisted Companies, as part of tax avoidance scheme, were resorting to buy-back of shares instead of payment of dividends in order to avoid payment of tax by way of DDT particularly where the capital gains arising to the shareholders were either not chargeable to tax or were taxable at a lower rate.

HC pulls up tax dept. for issuing unlawful block assessment notice; imposed costs on dept.


This Petition challenges a notice issued by the AO under Section 158BC calling upon the Petitioner to file his return of income within a period of 15 days of service of the notice.

The High Court held as under:

1) It was clear that no incriminating documents were found during the course of search. In any case the appraisal report would indicate that no notice under Section 158BC of the Act could be issued to the Petitioner as the condition precedent to issue such notice (viz, undisclosed income found during the search proceedings) was not satisfied.

2) This action on the part of the Respondents-revenue to issue the impugned notice ignoring the appraisal report was highly deplorable. We live in a Country governed by laws. The Officers of the Income Tax Department are obliged to proceed in accordance with the statutory provisions and not on their whim and fancy.

3) The Officers hold power in trust and must ensure that no citizen is harassed by sending him notices, when on the basis on its own record, such notices are not sustainable. We trust that the Income Tax Department would adopt a standard operating procedure which would provide for appropriate safeguards before issuing notices under Chapter XIVB of the Act. This alone would ensure that Officers of the Revenue act in terms of the mandate provided in the Act.

4) Thus, the Respondent-revenue was directed to pay the costs of Rs. 20,000 to the Petitioner within four weeks from today. - [2016] 74 128 (Bombay) 

Monday, October 17, 2016

Taxable Event under GST

1) Taxable event means an event on happening of which the charge is fixed. Supply is taxable event under GST.

2) GST is a tax on supply of goods and services. Supply includes all forms of supply where goods and/or services are supplied by a person for a consideration.

3) Earlier, excise duty is levied on manufacturing of goods, service tax is levied on provision of services and sales tax or VAT is levied on sale of goods. Under GST regime, all these existing concepts will be irrelevant.

4) The term “Supply” is not properly defined under Model GST law. An inclusive definition is given without defining meaning of supply.

5) To levy GST, these six conditions have to be satisfied:

a) There is supply of goods and / or services

b) Supply is for a consideration

c) Supply is made in the course or furtherance of business

d) Supply is made in the taxable territory

Trust intending to carry out charitable activities outside India entitled to sec. 12AA registration


a) The assessee-institution was formed vide a trust deed. It sought registration under section 12AA.

b) The DIT rejected the registration application as he was of view that the trust intended to carry out activities outside India.

c) The aggrieved-assessee filed the instant appeal.

The ITAT held as under:

1) Registration as per section 12AA by itself will not automatically confer the benefits of sections 11 and 12 to a trust, but the trust will get the benefit only on complying with the requirements of sections 11 & 12, which compliance can be examined by the assessing authority while processing the return filed by the trust. So long as the trust has objects which are charitable in nature, it is eligible for registration under section 12AA, unless there is a finding that the trust is not genuine.

Friday, October 14, 2016

24 things you should know about Draft GST Rules and Forms

With enactment of 101st Constitution Amendment Act, the road to GST is clear. The Govt. had already unveiled draft model law on GST. On 26th September, 2016 CBEC released draft rules and forms under GST on Registration, Invoice and Payment. GST council has also approved of draft rules in its meeting on 30th September, 2016. Key takeaways of draft rules and forms are given hereunder:
1.The application for GST registration will be made online either directly on the GSTN Portal or through Facilitation Centres.
2.The proper officer will examine registration application and grant registration within 3 common working days.
3.If the application is found deficient, then applicant will be intimated within 3 common working days. Thereafter, applicant has to furnish information or documents sought within 7 working days electronically. If the proper officer is satisfied with such details, then he will grant registration within 7 common working days from date of receipt of such details.
4.The person obtaining registration as casual dealer is required to make advance deposit for estimated tax liability for the period for which registration is sought.
5.The registration certificate must be displayed at principal place of business and at every additional place of business. GSTIN (i.e. registration number) must be displayed in the name board at the entry point of business premises.
6.Supplier needs to mention following details in invoice if recipient is unregistered and taxable value of supply is Rs 50,000 or more:
 Name and address of recipient;
 Delivery address along with the name of State.
7.Every invoice should contain place of supply if supply is in course of inter-State trade or commerce.
8.Three copies of invoice should be prepared in case of goods and only two copies of invoice are needed in case of services.
9.In case of taxable supply of services, the invoice shall be issued within 30 days from date of supply of services. However, no time-period is specified for issuance of invoice in case of supply of goods.
10.The registered taxable person is required to file details of outward supplies in Form GSTR-1 electronically. The recipient will receive GSTR 2A on the basis of details furnished by supplier in GSTR 1.
11.The recipient will file details of inward supplies in GSTR 2 electronically on basis of details contained in GSTR 2A. The recipient shall specify the details of inward supplies for which he is not eligible for input tax credit and quantum of such ineligible input credit.
12.The registered taxable person (other than composition dealer) shall file monthly return in GSTR-3. Part of this return will be electronically generated from GSTR 1, GSTR 2, electronic credit ledger, electronic cash ledger and electronic liability register.
13.A notice in Form GSTR 3A will be sent electronically to a registered taxable person who fails to file returns.
14.The electronic tax liability register, electronic credit ledger and electronic cash ledger will be maintained on the common portal for every registered person.
15.The electronic tax liability register shall be debited with amount of tax, interest, late fee, mismatch in credits, etc. It shall be credited with amount paid through electronic cash register or electronic credit register.
16.The electronic credit ledger of taxpayer will show the details of invoice and amount of credit. It will also show details of credit matchingor mismatching.
17.The electronic cash ledger shall be credited with the amount deposited and debiting with the payment therefrom towards tax interest, penalty, fee or any other amount.
18.The final acceptance of input credit will be made available to registered taxable person through Form GST ITC 1 electronically.
19.The refund claimed in Part B of GSTR-3 shall be deemed to be an application filed for refund.
20.The provisional refund, i.e., 80% of refund claimed shall be granted on satisfaction of following conditions:-
 Person claiming refund has not been prosecuted for any offence under GST during any 5 preceding years. If he has been prosecuted under an earlier law, the amount of tax evaded should not exceed Rs.2,50,000.
 GST compliance rating of the applicant is not less than 5 on a scale of 10.
 No proceeding for any appeal, review or revision is pending on issues which form the basis of the refund andif pending, the same has not been stayed by the appropriate authority or court.
21.Refund shall be granted after adjusting any outstanding demand payable by the applicant.
22.If Proper Officer is satisfied that refund is not payable then he shall issue a notice requiring applicant to furnish a reply within 15 days.
23.Any amount rejected as refund shall be re-credited to the electronic credit ledger.
24.Person claiming refund of tax paid on inward supplies shall apply for refund in FORM GST RFD-10 once in every quarter.

Thursday, October 13, 2016

SetCom has powers to make addition in income of assessee to determine tax liability: HC


a) The CIT challenged the order passed by the Settlement Commission (‘SetCom’). Such order was challenged on the ground that the order passed by Set Com was without jurisdiction as the assessee had failed to comply with the statutory requirements under Section 245-C which stipulates that there must be "full and true disclosure" in the Settlement Applications; 

b) It was further stated that when the Set Com had made further addition, it was clear that there was no full or true disclosure of the statement by the assessee for which the Commission should not have allowed the application of the assessee.

The High Court held as under:

1) The Set Com has also got powers to find out if at all any income left out or could not be disclosed by the assessee to come to a mechanism of settlement.

2) The settlement is not only covered by the dispute which arose before them but also for the dispute yet to come. So the Commission has got wide power to consider the income disclosed, add additional income after due investigation and also to add any income which is found to be valid as per report submitted by the Department and finally settle the tax payable by the assessee. [2016] 73 93 (Orissa)

Ban on circulation of trading tips via social media – 8 things you should know

The SEBI has issued consultation paper proposing amendments or clarifications to the investment adviser regulations. The objective of the consultation paper is to specify uniform standards across all the intermediaries/persons engaged in providing investment advisory services irrespective of whether such activity is incidental to their primary activity or not and to address the gaps or overlaps in legal or regulatory standards.

The key highlights of consultative papers are as under:

1. Ban on circulation of trading tips via social media platform: SEBI has proposed to curb the practice of providing trading tips (containing buy or sell recommendation on securities) to the general public through any social media platform such as SMSs, email, telephonic call, whatsapp, ChatOn, Wechat, Twitter, Facebook, etc.

2. Restrictions on mutual fund distributors: Under the existing norms, a mutual fund distributor can sell mutual fund products and he can also provide basic advice on mutual fund products and in executing the transactions. It has been proposed that only corporate entities registered as investment advisers should offer execution or distribution services. Further, mutual fund distributors should be registered as investment advisors if they want to engage themselves in providing incidental or basic investment advisory services on mutual fund products.

Saturday, October 8, 2016

Reference to TPO not invalid even if AO doesn't supply satisfaction note before making reference


a) Assessee filed the instant petition before the High Court challenging the validity of reference made by AO to TPO to determine ALP of international transaction.

b) The petition was filed on following grounds:

- In terms of the Instructions No. 3/2016 dated 10-3-2016, the requirement of passing reasoned order on the objections of assessee (regarding whether a transaction is an international transaction or not) and the service of the order upon the assessee is a condition precedent to the Assessing Officer making a reference to the TPO.

- Non-compliance with either or both the above mandatory conditions render the reference to the TPO void.

The High Court held as under:

1) The satisfaction recorded by the AO in the instant case contained sufficient reasons. He had indicated the relationship between the assessee and the other parties. He had made a comparative chart and alleged that the sales were under invoiced. That would be sufficient to refer the matter to the TPO. Whether the allegations are true or not must be tested before the authorities under the Act and not in a writ petition under Article 226. The challenge on this ground was, therefore, unsustainable.

Wednesday, October 5, 2016

No extension of time-limit under Sec. 54F in absence of genuine hardship: HC


a) The assessee filed application before the CBDT for extension of time-limit to complete construction of house property for availing of Section 54F relief. The CBDT rejected the said application on the ground that the assessee had failed to demonstrate compliance of Section 119.

b) The aggrieved-assessee filed the instant writ petition wherein he seeks quashing of such order of CBDT.
The High Court held as under:

1) As per Section 119(2)(c), on a genuine hardship shown by any assessee, the CBDT can order relaxation in any requirement contained in any of the provisions of Chapters IV or VI-A of the Income Tax Act. Such power is subject to two riders. Firstly, that the default in complying with such requirement was due to circumstances beyond the control of the assessee and secondly, that the assessee had already complied with such requirements before the completion of assessment in relation to the previous year in which such deduction is claimed.

Tuesday, October 4, 2016

4 things you should know about amended Incorporation Rules

MCA had introduced an integrated process of incorporation of companies by notifying single Form INC-29 under Companies Act, 2013. Now MCA has amended the Companies (Incorporation) Rules, 2014 to further simplify the incorporation process by introducing simplified proforma for incorporating company electronically. Key highlights of amended Rules are given hereunder:

1. Separate e-forms for MOA and AOA: Earlier MOA and AOA were drafted in a word format and attached with the ‘E-form INC-29’. Now the MCA has mandated e-filing of Memorandum of Association (‘MOA’) and Articles of Association (‘AOA’) separately. ‘Form INC-33’ and ‘Form INC- 34’ have been notified for e-filing of MOA and AOA, respectively.

2. Digital Sign under MOA and MOA: Earlier each subscriber sheet and witness column in MOA and AOA was signed manually. Now the MCA does away with manual signature and only digital signature needs to be affixed on subscriber and witness column.

3. New e-form INC-32: Form INC-32 is similar to Form INC-29. However, there are some minor changes in reporting requirements under new Form INC-32.

4. Conversion procedure: The MCA has prescribed the procedure for conversion of a company limited by guarantee into a company limited by share. Such conversion procedure is applicable for a company other than a company registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013. Such procedure is given hereunder:

Intimation issued by AO is appealable where fee is charged for delay in filing of TDS returns


a) The issue arising in this appeal was against the intimation issued under section 200A in charging fees payable under section 234E.

b) The CIT(A) held that no appeal was maintainable against the order of AO passed under Section 200A while processing the TDS returns and charging fees under Section 234E. The ITAT held as under:

1) The Legislature recognizes that a deductor who has filed his TDS return, which, in turn, has been processed by the AO and intimation is generated under which, if any amount is found to be payable, then such intimation is also appealable under section 246A since the demand issued by the AO is deemed to be a notice of payment under section 156.

2) Since the intimation issued by the AO was appealable order under section 246A(1)(a) of the Act, therefore, the CIT(A) should have examined the legality of adjustment made under intimation issued under section 200A.- [2016] 74 6 (Pune - Trib.)

Fee for delay in filing TDS return not permissible in an intimation with retro-effect: Pune ITAT

a) The issue raised in this appeal related to charging of fees payable under section 234E prior to amendment to section 200A(1)(c) [vide Finance Act, 2015 w.e.f. 01.06.2015], while processing the TDS returns.

b) The assessee also pointed that the Legislature had inserted clause (c) in section 200A(1) of the Act specifically w.e.f. 01.06.2015 and there was nothing to suggest that the said amendment was clarificatory or retrospective in nature. Hence, in respect of TDS statements filed for the period prior to 01.06.2015, late fees under section 234E could not be levied in the intimation issued under section 200A.

The ITAT held in favour of assessee as under:

1) Where the TDS return could not be filed before the prescribed authority within stipulated time, the assessee was liable to levy of fees under section 234E.