Tuesday, May 16, 2017

SAT lifts ban on Satyam’s Raju from accessing capital market

Whole Time Member of SEBI by impugned order had restrained Satyam Computer founder, Ramalinga Raju and his associates (appellants) from accessing securities market for 14 years and had directed appellants to disgorge unlawful gains arising on sale/pledge of Satyam’s shares.

Now, the Security Appellate Tribunal (SAT) has set aside the SEBI’s order from barring appellants from accessing capital market. Further, SAT has asked SEBI to pass fresh order on applicants’ punishment. [2017] 81 taxmann.com 201 (SAT - Mumbai)

Govt. notifies rules for depositing old Rs. 500 or Rs. 1000 notes confiscated on or before 30/12/2016

The Specified Bank Notes (Cessation of Liabilities) Act, 2017 provides for holding, transfer and receiving of old 500 and 1000 rupee notes as an offence. It provides for fine of Rs. 10,000/- or five times the cash held, whichever is higher on holding of more than 10 demonetized notes. It also ends the liability of RBI and the Central Government on the currency notes demonetized on 08-11-2016.

Now, Govt. notifies the Specified Bank Notes (Deposit of Confiscated Notes) Rules, 2017 which provides that if specified bank notes (i.e. old Rs. 500 or Rs. 1000 notes)have been confiscated or seized by a law enforcement agencies or produced before a court on or before the 30-12-2016. Such bank notes may be deposit in a bank account or exchange with legal tender at any office of the RBI or a nationalized bank if following conditions are satisfied:-

1) In case confiscated specified bank notes are returned by the court to a person who is a party in case pending before that court, then, the person shall be entitled to deposit or exchange such specified bank notes:-

a. The serial numbers of which have been noted by the law enforcement agency which confiscated or produced them before the court; and are mentioned in the direction of the court.

2) In case specified bank notes are placed in custody of any other person by an order of the court on or before the 30th day of December, 2016, then, the person shall be entitled to deposit or exchange such specified bank notes:-

a. The serial numbers of which have been noted by the law enforcement agency which confiscated or produced them before the court; and are mentioned in the direction of the court. 

3) In case specified bank notes are forfeited in favour of the Central Government or the State Government by an order of the court. The Government shall be entitled to deposit or exchange such specified bank notes - F. No. S-10/05/2017, dated 12-05-2017

Quoting of Aadhar number in return of income isn’t mandatory for non-residents and super senior citizens

The Finance Act, 2017 had inserted a new Section 139AA under the Income-tax Act, 1961 requiring every person to quote Aadhaar number in the return of income with effect from 1st day of July, 2017. If any person does not possess the Aadhaar Number but he had applied for the Aadhaar card then he can quote Enrolment ID of Aadhaar application Form in the ITR.

It may be noted that firms are also required to Quote Aadhaar number of their Partner/members in new ITR 5. Further, in case of trust Aadhaar number of Author(s) / Founder(s) / Trustee(s) / Manager(s), etc., are required to be specified in new ITR 7. However, the Central Government has issued a Notification No. 37, Dated 11/5/2017 whereby it has been notified that the provisions of section 139AA shall not apply to an individual who does not possess the Aadhaar number or the Enrolment ID and is:-

(i) residing in the States of Assam, Jammu and Kashmir and Meghalaya;

(ii) a non-resident as per the Income-tax Act, 1961;

(iii) of the age of 80 years or more at any time during the previous year, i.e., super senior citizen;

(iv) not a citizen of India.

Retrospective amendment to limit exemption to CMA paper for 3 consequent attempt isn't arbitrary: HC


The petitioner-individual, final year student of C.M.A. course, appeared in the final year examination conducted by the Institute and scored more than 60 % marks in the Business Valuation paper of Group IV but could not clear the other papers in the same group. The petitioner was granted with an exemption from appearing in the Business Valuation paper in the subsequent exams/attempts.

Thereafter, in May 2012 an amendment was carried out by the Institute in the Regulation 41(2) vide Cost and Works Accountants (Amendment) Regulations, 2012 and the said exemption was revoked. Thereafter, petitioner availed exemption for three consecutive terms and when he appeared for forth term, exemption had been denied to him.

The petitioner filed writ on ground that the Institute arbitrarily and mala fidely revoked the exemption granted to the petitioner from appearing in subsequent attempts.

The High Court held that:

An apparent reading of the Hindi and English version of the regulation show they are at variance, in as much as the Hindi version refers to the exemption being applicable to three consecutive years, whereas the English version depicts, the same is applicable to three consecutive terms.

In any case, the said plea would be of no help to the petitioner, inasmuch as it is not the  case of the petitioner that he is entitled to the benefit of exemption for a period of three years and not three consecutive terms and, hence it would not be necessary, to go into an issue as to which version would prevail. - [2017] 81 taxmann.com 7 (Delhi)

Dependent Personal Services and its applicability in the context of Liaison office

Generally, a liaison office ("LO") set up by a foreign enterprise in India is not subject to tax in India as it is not allowed to undertake any commercial activities. However, the controversy of taxing an LO as a Permanent Establishment ("PE") of the foreign enterprise in India has gained momentum in the past few years. The tax authorities generally argue that an LO is an extension of the foreign enterprise in India through which the foreign enterprise is doing its core business, commercial and marketing activities in India.

Consequentially, the foreign parent company defaults in tax withholding on payment made to expatriates assigned on a short-term basis to the Indian LO on the fair (general) assumption that liaison office is not treated as a PE, and, hence, there is no liability to withhold tax on his remuneration. The income-tax department has become quite aggressive with regard to withholding tax compliances, and, therefore, the possible implications may be considered before deputing a person to the Indian LO.

Dividend income to attract Sec. 14A disallowance even if DDT is paid on it, rules Apex Court

The issue before the Supreme Court was as under:

Whether dividend income would attract Section 14A disallowance even if Dividend Distribution Tax is paid as per Section 115-0

The Supreme Court held in favour of revenue as under:-

1) The object behind the introduction of Section 14A is clear and unambiguous. The legislature intended to check the claim of allowance of expenditure incurred on exempt income in a situation where an assessee has both exempted and non-exempted income or includible or non-includible income.

2) If the income in question is taxable and, includible in the total income, the deduction of expenses incurred in relation to such an income must be allowed. Such deduction would not be permissible on dividend income merely on the ground that the dividend distribution tax paid on dividend.

3) A plain reading of Section 14A would go to show that the income must not be includible in the total income of the assessee. Once the said condition is satisfied, the expenditure incurred in earning the said income cannot be allowed to be deducted.

4) Thus, the phrase "income which does not form part of total income under this Act" appearing in Section 14A includes within its scope dividend income on shares in respect of which tax is payable under Section 115-O. [2017] 81 taxmann.com 111 (SC)

Petitions are to be transferred to NCLT if norms of service of notice have been complied within prescribed time

If service of notice of company petition under Rule 26 of Companies (Court) Rules, 1959 has not been complied before 15-12-2016, such petitions shall stand transferred to NCLT whereas all other company petitions would continue to be heard and adjudicated upon only by the High Court

Now, two sets of winding up proceedings would be heard by two different forum, i.e., one by NCLT and another by High Court depending upon date of service of notice, before or after 15-12-2016. - [2017] 80 taxmann.com 359 (Bombay)

President gives his assent to ordinance on Nonperforming Assets

The President has approved an ordinance on Non-performing Assets (NPA) which gives the powers to RBI to issue directions to any banking company to initiate Insolvency resolution process in respect of default under Insolvency and Bankruptcy Code. This amendment will help the banking companies to deal effectively with bad loan problems.