Friday, February 5, 2016

No additional depreciation if manufactured goods were captively consumed for construction activity

Facts of the case:
a) The assessee was engaged in laying pile foundation on job work basis, which was required in construction activities.

b) Piling work was used to be done at the site itself by digging bores of required sizes and erecting concrete pipes inside the bore, hence, assessee purchased new machinery, which enabled him to fabricate piles of standard size.

c) He claimed additional depreciation under section 32(1)(iia) on machinery contending that the pre-cast or pre-fabricated piles manufactured by using the new machinery resulted in manufacture of new article or thing.

d) Assessing Officer rejected the claim holding that pile was constructed and it was not manufactured or produced and the business of civil construction would not amount to carrying on any manufacturing activity.

No withdrawal of sec. 54 relief if new house was transferred to daughter within 3 years

Facts of case:

a) Assessee sold his residential property and invested sale proceeds in another residential property. He claimed exemption under section 54 in respect of capital gains arising on sale of property.

b) Later on, he had settled the new property to his daughter out of love and affection.

c) He submitted that the settlement of property in favour of the daughter was a gift falling under section 47(iii) and was not taxable.

d) Assessing Officer held that settlement did not cover under section 54(i) or 54(ii) and accordingly denied exemption.

6 changes you must know for registration of company’s name under new Rules

The Govt. has notified the Companies (Incorporation) Amendment Rules, 2016 (‘Amended Incorporation Rules’). Now the process of reservation of name of companies has been simplified. Following changes have been made for ease of doing business in India: 

1) Name of company need not to be in consonance with principal object:

Under extant norms, the company’s name was necessarily required to be in consonance with principal object, if such name resembled any object of company. Now as per the amended Rules the name of company will not be considered undesirable even if it is not in consonance with the principal objects of the company as set out in Memorandum of association. Let us understand this condition with the help of an example. Suppose if a company wants to opt its name as ‘ABC Builders Pvt. Ltd.’ then it is not necessary that its principal object should be related to construction and development only. Thus, now company is free to choose such name which is not in consonance with principal object.

Employer not liable to deduct TDS at flat rate of 20% on nonfurnishing of PAN by employees: ITAT

Assessee-employer deducted TDS as per section 192 in respect of salary of the employees who failed to furnish their correct PAN.

AO applied a flat rate of 20% as per section 206AA and held assessee liable for short-deduction of TDS. ITAT held that as per section 206AA if the deductee fails to furnish PAN, then the deductor shall deduct tax at the rates which is higher of (i) at the rates specified in the relevant provisions of the Act, or (ii) at the rate or rates in force,

Payment of tax demand raised by the taxation authority is not an extra ordinary expenditure

A company (Y Ltd.) is engaged in the business of providing works contract service. Few days back, it had received a notice from excise authority raising a demand of service tax on works contract services provided by it of Rs. XXX. Recently Y Ltd. paid the demand. In the books the payment is being recorded as extra ordinary expenditure. 

Whether payment of tax demand raised by the taxation authority can recognise as extra ordinary item?

Deductor to get interest on TDS refund from date of filing claim and not from date of deposit of TDS

a)    The assessee, a steel manufacturing co., entered into an agreement with German company for transfer of technical know-how in order to establish an integrated steel plant.
b)    Assessee was required to make payment to German Co. in three installments after deducting tax at source under Section 195.
c)    Subsequently, since the German company was not able to fulfil its obligations, it agreed to waive the payment of third instalment of technical knowhow fee and treated the payment of first and second instalments as full and final payment against the contract.
d)    The petitioners subsequently filed an application (after 18 months from the date of waiver of third installment by German Company) claiming refund of the amount which was deposited as advance TDS towards the third instalment of the payment which was to be made to the German company.