tag:blogger.com,1999:blog-19360210644321853122024-02-08T07:05:34.758+05:30About Direct Tax Laws, Corporate Laws & Indirect Tax LawsAnonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.comBlogger1252125tag:blogger.com,1999:blog-1936021064432185312.post-64070336197548401922017-08-25T16:54:00.002+05:302017-08-25T16:54:55.761+05:30Dubai Villa gifted to Shah Rukh Khan not taxable as his professional receipt: Mumbai ITAT<div dir="ltr" style="text-align: left;" trbidi="on">
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Facts :</div>
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a) Shahrukh Khan (SRK) received Signature Villa as gift from a Dubai based public joint stock company. Assessing Officer (AO) was of opinion that said villa was assessable as 'professional receipt' being covered under Section 28(iv).</div>
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b) SRK had denied rendering any professional services and attributed the receipt of villa to simply a unilateral gratuitous act of gift by Dubai based Company on its Annual Day on account of natural love and affection which wasn’t taxable.</div>
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c) CIT(A) held in favour of SRK. Aggrieved-revenue filed the instant appeal before the tribunal.</div>
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Tribunal held in favour of assessee as under :</div>
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1) Mr. Shah Rukh Khan was one of the guest honour on the occasion of Annual day celebration of Donor-Company. He was under no obligation to attend such function and undertake any sort of brand endorsements.</div>
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2) Mere fact that he had attended annual day celebrations and addressed employees of said company, it could not be concluded that he had indulged in brand endorsement for Donor Company.</div>
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3) Further, gift received in kind had been brought to tax w.e.f. 01/10/2009 under section 56(2)(vii)(b). Earlier, only money received as gift in excess of Rs. 50,000 could be brought to tax vide Section 56(2)(vii)(a).</div>
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4) This case pertained to AY 2008-09 wherein old provision was applicable. Therefore, Signature Villa received as gift by SRK couldn’t be said to be out of exercise of profession and, thus, not taxable. - [2017] 84 taxmann.com 209 (Mumbai - Trib.)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-26385390407323716342017-08-25T16:53:00.002+05:302017-08-25T16:53:38.642+05:30Ind AS 20: EPCG exemption for import duty on capital goods is a Government Grant<div dir="ltr" style="text-align: left;" trbidi="on">
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Query</div>
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A company, say A Ltd. has received exemption of paying custom duty on imported capital goods subject to condition that it has to export the manufactured goods under Export Promotion Capital Goods (EPCG) scheme.</div>
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Whether such exemption by the government can be treated as government grant under Ind AS 20, Government Grants and Disclosure of Government Assistance? If yes, then which type of grant it is and how it will be accounted for?</div>
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Response</div>
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Government grants are defined in para 3 of Ind AS 20 as assistance by government to an entity in the form of transfers of resources subject to past or future compliance with certain conditions which are related with the operating activities of the entity. Therefore, in the present case, the exemption by government to pay custom duty on import of capital goods is a government grant under Ind AS 20.</div>
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The classification of government grant as the grant related to asset or grant related to income requires exercise of judgment and careful examination of terms and conditions of the grant. So, if a grant is classified as the grant related to asset then, as per paras 24 & 26 of Ind AS 20, the amount of the grant (fair value in case of non-monetary grant) should be recognised as deferred income and same is transferred to profit or loss over the useful life of the asset.</div>
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If the grant is classified as the grant related to income then, as per para 29 of Ind AS 20, the grant should be recognised as income on a systematic basis over the periods in which the entity recognises associated costs as expenses. In the present case, if the grant received is to compensate import cost of capital goods subject to condition of exporting then the grant should be recognised as income on a systematic basis that should be related to the fulfillment of export obligations.</div>
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However, if the grant is to compensate import cost of capital goods and condition to export the manufactured goods is secondary in nature then the grant should be recognised as income over the useful life of underlying capital good. </div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-48803170197716820442017-08-23T11:28:00.001+05:302017-08-23T11:28:40.018+05:30No sec. 14A disallowance if no exempt income earned; CBDT circular can’t override express provision<div dir="ltr" style="text-align: left;" trbidi="on">
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The issue before the High Court was as under:</div>
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Whether the disallowance of the expenditure will be made even where the investment had not resulted in any exempt income during the AY?</div>
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High Court held in favour of assessee as under:</div>
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1) Section 14A does not clarify whether the disallowance of the expenditure would apply even where no exempt income is earned.</div>
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2) The words "in relation to income which does not form part of the total income under the Act for such previous year" in the Rule 8D(1) indicate a correlation between the exempt income earned in the AY and the expenditure incurred to earn it. In other words, the expenditure as claimed by the Assessee had to be in relation to the income earned in 'such previous year'.</div>
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3) This implies that if there was no exempt income earned in the relevant AY, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A, read with Rule 8D could not arise.</div>
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4) CBDT's Circular No. 5/2014 dated 11-02-2014 does not refer to Rule 8D(1) at all but only refers to the word "includible" occurring in the title to Rule 8D as well as the title to Section 14A. The Circular concluded that it was not necessary that exempt income should necessarily be included in a particular year's income for the disallowance to be triggered.</div>
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5) For all of the aforementioned reasons, the CBDT Circular (Supra) couldn’t override the express provisions of Section 14A, read with Rule 8D. Therefore, if no exempt income was earned, there could be no disallowance of expenditure in terms of section 14A, read with Rule 8D. [2017] 84 taxmann.com 186 (Delhi)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-20152118343359846222017-08-23T11:26:00.003+05:302017-08-23T11:26:53.737+05:30Treatment of Gift and Perquisites under GST<div dir="ltr" style="text-align: left;" trbidi="on">
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The Goods and Services Tax (GST), the biggest economic reform, has been implemented in India since 01 July 2017. Every new thing comes out with fresh challenges, similar is the case with GST. With the passage of GST in India, there seem to be humongous challenges revolving around Gift and Perquisites provided by an Employer to their Employees.</div>
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In terms of GST Laws, CGST and SGST or IGST shall be levied on supply of goods or services or both. Further, the supply includes activities as specified in Schedule I to GST Act even if made without consideration. Accordingly, tax will be levied on all such activities.</div>
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Entry 2 of Schedule I states</div>
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"Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business" "Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both". Further, as per Section 15 of the GST Laws, employer and employee are considered as "related parties". On reading of the said entry, we understand that gifts provided by an employer to employee exceeding fifty thousand rupees are leviable to tax. However, the term "Gift" has not been defined under the GST Laws. Accordingly, the term gift is open for interpretation</div>
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<a href="https://gst.taxmann.com/topstories/105010000000014658/treatment-of-gift-and-perquisites-under-gst.aspx">Click here to view read full article</a></div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-10158271294171861822017-08-23T11:25:00.000+05:302017-08-23T11:25:12.968+05:30NDTV created a complex structure of subsidiaries to enter into sham dealings; HC affirms reassessment<div dir="ltr" style="text-align: left;" trbidi="on">
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a) New Delhi Television Ltd (NDTV) had filed writ petition against the notice proposing reassessment proceedings initiated under section 147/148.</div>
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b) The Assessing Officer (AO) was of the view that the amount received by NDTV from foreign subsidiaries was actually its unaccounted money and was a sham transaction.</div>
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c) Assessee contended that the "reasons to believe" supplied by the AO did not substantiate on how it had failed to disclose all material facts and instead merely repeated the statutory language. It further argued that during regular scrutiny assessment, AO had made requisite inquiries with respect to foreign investments.</div>
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The Delhi High Court held in favour of revenue as under:</div>
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1. AO had taken into account several specific tax evasion petitions received from shareholder of the NDTV that money introduced in foreign subsidiary through money laundering activities was actually transferred to the NDTV through liquidations and mergers.</div>
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2. The Director of the complainant company was part of the team of NDTV at some point of time, which designed the complex corporate structure to route and reroute funds with layering of funds. Further, complaints against NDTV were received from the shareholder wherein details regarding the raising and routing of funds through round tripping were given. </div>
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3. AO took note of information contained in these tax evasion petitions, because the complaints of tax evasion were received from NDTV's shareholders, who were aware of its internal affairs and aim and object of floating complex corporate structure by the NDTV; therefore, the AO had reason to believe that information was credible.</div>
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4. The complex and circuitous structure of subsidiaries and the transactions entered into therein were closely connected and provided a live link for the formation of the belief of the AO that there had been escapement of income.</div>
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5. Therefore, AO was justified in forming an opinion that prima facie amount so received represented assessee's own unaccounted money which had escaped assessment and, thus, validity of reassessment proceedings initiated by him deserved to be upheld. [2017] 84 taxmann.com 136 (Delhi)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-63996061307768721782017-08-23T11:23:00.000+05:302017-08-23T11:23:16.793+05:30Sec. 54F relief allowable even when multiple flats are sold to purchase one big flat: ITAT<div dir="ltr" style="text-align: left;" trbidi="on">
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a) Assessee had sold 5 house properties during the years 2009-10 to 2011-12 and invested sale consideration in construction of another property, i.e., Mehandi Farms. He claimed deduction under section 54F for investment in Mehandi Farms against the capital gain on sale of house properties.</div>
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b) Assessing Officer held that assessee had already availed deduction under section 54F for investment in construction of Mehandi Farms in the year 2009-10 and therefore, he couldn’t be allowed deduction in construction of the same residential property for capital gain arising in succeeding years.</div>
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c) On appeal, CIT(A) allowed section 54F relief to assessee. Aggrieved-revenue filed the instant appeal before the Tribunal.</div>
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Tribunal held in favour of assessee as under:</div>
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1) Section 54F provides that any capital gain arising from the sale of any long term capital asset shall be exempt from tax if the entire sales proceeds is invested in:</div>
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i) Purchase of one residential property within 1 year before the date of sale or 2 years after the due date of transfer of the property sold or</div>
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ii) Construction of a residential house property within a period of 3 years from the 2) Construction of the house property at Mehandi Farms was not completed and therefore same couldn’t be termed as another residential property for disqualification for deduction under section 54F.</div>
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3) There is also no bar in the section 54F for claiming deduction for second time or third time for the same property if the cost of the property is equivalent to or more than the amount of capital gain.</div>
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4) In the given case, total capital gain in all the three years 2009-10 to 2011-12 was less than the cost of construction of new residential property. Therefore, assessee was eligible for the deduction under section 54F. [2017] 84 taxmann.com 141 (Delhi - Trib.)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-84019593112499912422017-08-23T11:19:00.003+05:302017-08-23T11:19:23.811+05:30Service Permanent Establishment-Changing Landscape?<div dir="ltr" style="text-align: left;" trbidi="on">
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Old age English proverb "Necessity is the mother of all inventions" is very apt owing to which last century has witnessed tremendous advancement in the field of technology. Technology has enormously impacted the way businesses function or the manner in which corporate transactions are structured.</div>
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Today physical presence of personnel is not necessary in order to conduct business in another state. Jobs can be performed over emails, telephones, mobiles, video conferencing etc. Whether, conducting business using technology, which to a large extent eliminates the requirement of physical presence 'on-site (client place)', constitute as the presence of the multinational enterprise in the source state so as to constitute its permanent establishment ('PE') in the source state1?</div>
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This question has been answered in negative (i.e. against the taxpayer) by Hon'ble Bangalore Tribunal in a recent judgment in the case of ABB FZ-LLC v. Dy. CIT (International Taxation), Circle-1(1), and Bengaluru.</div>
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<a href="https://www.taxmann.com/topstories/105010000000014667/service-permanent-establishment-changing-landscape.aspx"><br /></a></div>
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<a href="https://www.taxmann.com/topstories/105010000000014667/service-permanent-establishment-changing-landscape.aspx">Click here to read full article</a></div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-77710881534644200752017-08-23T11:09:00.002+05:302017-08-23T11:09:53.898+05:30ICDS IX - Borrowing cost: An Analysis<div dir="ltr" style="text-align: left;" trbidi="on">
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Deductibility of interest on borrowing cost has been subject matter of litigations in the past on several accounts, viz., deductibility of borrowing cost for purchase of capital asset, deductibility of commitment charges, interest on capital borrowed for earning exempt income, interest on borrowed capital for circular trading, etc.</div>
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Income Computation and Disclosure Standard ('ICDS') has been designed to provide clarity on various contentious tax issues at the time of computing taxable income. ICDS IX contains authoritative guidance on situations that require capitalization of borrowing cost. Accordingly, the treatment of not all types of borrowing costs is iterated in ICDS IX. On the contrary, the scope of ICDS IX is limited to the issue of capitalization of borrowing cost in certain cases. The treatment of borrowing cost for the purposes of deductibility from profit and loss account continues to be governed by section 36(1)(iii) and section 57(iii).</div>
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Definition of Borrowing cost as per ICDS and section 2(28A) of the Income Tax Act, 1961 The definition of interest as per section 2(28A) of the Act states as follows 'interest payable in any manner in respect of any moneys borrowed or debt incurred'. However, as per ICDS IX, the definition of borrowing cost as contained in para 2(1)(a) is as follows: "Borrowing costs" are interest and other costs incurred by a person in connection with the borrowing of funds and include:</div>
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(i) commitment charges on borrowings;</div>
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(ii) amortised amount of discounts or premiums relating to borrowings</div>
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(iii) amortised amount of ancillary costs incurred in connection with the arrangement of borrowings;</div>
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(iv) finance charges in respect of assets acquired under finance leases or under other similar arrangements."</div>
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<a href="https://www.taxmann.com/topstories/105010000000014681/icds-ix-borrowing-cost-an-analysis.aspx">Click here to read full article</a></div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-88034586311213172672017-07-25T11:57:00.004+05:302017-07-25T11:57:52.256+05:30Sec. 68 couldn't be applied for sundry creditors arising out of purchase expenses: Patna ITAT<div dir="ltr" style="text-align: left;" trbidi="on">
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a) Assessee-partnership firm had shown sundry creditors arising out of purchase expenses in its return but failed to establish genuineness of such sundry creditors.</div>
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b) Assessing Officer (AO) disallowed provision for such creditors and added it to total income of assessee under section 68.</div>
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c) CIT (Appeals) confirmed the order of AO. The aggrieved-assessee filed the instant appeal before the Tribunal.</div>
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The ITAT held in favour of assessee as under:</div>
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1) The provisions of section 68 are applied to the cash credit which has not been explained by assessee. In the instant case sundry creditors arose out of the purchases as claimed by assessee which had been duly accepted by the authorities.</div>
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2) AO had invoked section 68 to tax the sundry creditors whereas the assessee was claiming that the aforesaid amount represented the trade creditors and, therefore, it couldn’t be applied.</div>
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3) Admittedly, the creditors were found by the AO and the onus lay on assessee to justify that these were sundry creditors. In order to justify the impugned trade creditors, the assessee had to produce copies of PAN, ledger copies, bills / invoices details of payments, income tax return, mode of payments, etc.</div>
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4) In the instant case, assessee had summarily failed to observe the directions issued by the AO. Therefore, issue was restored to AO for fresh adjudication as per law. - [2017] 83 taxmann.com 187 (Patna - Trib.)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-3129699565187852022017-07-25T11:50:00.000+05:302017-07-25T11:50:04.380+05:30Compensation paid to clients due to negligence of employees was allowable as business exp.<div dir="ltr" style="text-align: left;" trbidi="on">
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a) Assessee was engaged in Marketing of Financial products of various companies as distributor. He claimed Rs.1.54 lakh as expenses in its profit and loss account on account of compensation paid to clients for loses occurred due to negligence of on the part of its employees.</div>
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b) Assessing officer (AO) held that assessee had not been able to prove as to how the loss was payable by it as the losses were suffered by the clients and, therefore, assessee was not entitled to claim such losses its profit and loss account.</div>
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c) CIT (Appeals) also upheld order of AO. Aggrieved-assessee field the instant appeal before the Tribunal.</div>
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The Tribunal held in favour of assessee as under:</div>
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1) Assessee had claimed that the losses which had occurred to its clients due to negligence of employees as the employees of assessee could not square off the positions taken by clients in NIFTY index of National Stock Exchange.</div>
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2) Amount paid to these clients was necessarily an exp. which was allowable under section 37 as section 37 clearly states that any expenditure not in the nature of capital expenditure or personal expense laid out or expenditure wholly and exclusively incurred for the purposes of business or profession shall be allowed.</div>
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3) Moreover Circular no. 35-DCXLVII-20 of 1965 dated 24-11-1965, clearly states that losses arising due to negligence of employees has to be allowed as expense if loss took place in normal course of business</div>
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4) In the instant case, the losses were necessarily incurred in the normal course of business of assessee and therefore, the expenditure was allowable. - [2017] 83 taxmann.com 230 (Amritsar - Trib.)</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-56867664030032822862017-07-25T11:48:00.001+05:302017-07-25T11:48:15.796+05:30Ind AS: Exposure Draft of revised lease standard Ind AS 116 issued<div dir="ltr" style="text-align: left;" trbidi="on">
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Exposure Draft on revised lease standard Ind AS 116 has been issued by the Institute of Chartered Accountants of India (ICAI). Ind AS 116 will replace the existing lease standard Ind AS 17. Last year, International Accounting Standards Board (IASB) revised the lease standard and issued new IFRS 16, Leases.</div>
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Ind AS 116, Leases sets out the provisions for the recognition, measurement, presentation and disclosures of leases. There are differences between Ind AS 116 and Ind AS 17. The major differences are as follows:</div>
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1. Under Ind AS 116, a part of the contract can also be treated as lease if the same conveys the right to use an asset for a period of time for certain consideration.</div>
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2. The principles of Ind AS 116 with regards to accounting of lease by the lessee is substantially different from that of Ind AS 17. However, requirements of Ind AS 116 with regard to lessor is substantially similar to Ind AS 17</div>
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3. Recognition of leases having lease term less than 12 months or value of underlying asset of the lease is low, by lessee is not mandatory under Ind AS 116. In such cases, lessee have to recognise the lease rentals as expense on a systematic basis considering pattern of benefits from the asset.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
4. Ind AS 116 provides for a single accounting model for lessee. Classification of lease as either finance or operating lease by the lessee is not required under Ind AS 116. Initially, lessee should recognise right-of-use assets at cost similarly to other non-financial assets, like property, plant & equipment, intangible assets etc. and lease liabilities at the present value of all future payments.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5. Subsequently, lessee should measure the right-of-use assets either at cost or other specified models like revaluation model. The amount of interest paid on lease liability should be recognised as finance cost.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
6. Under Ind AS 116, lessee shall depreciate the right-of-use asset in accordance with Ind AS 16, Property, Plant and Equipment.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Apart from this the Draft also provides principles with regard to transition from Ind AS17 to Ind AS 116. Ind AS 116 will be applicable from April 1, 2019. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<a href="http://resource.cdn.icai.org/45885asb36137.pdf">The full Exposure Draft can be accessed here.</a></div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-1365746766193550972017-07-20T15:00:00.000+05:302017-07-20T15:00:02.034+05:30No TDS on GST paid or payable on services when GST is separately shown in invoice: CBDT<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
CBDT had issued Circular No.1/2014 wherein it was clarified that TDS had to be deducted on the amount paid/payable without including service tax component. In other words, no TDS would be deducted on service tax component when amount of service tax is shown separately in the invoice.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
After implementation of GST across the country with effect from July 1, 2017, CBDT has received various references for treatment of GST component on services. Now the CBDT has clarified (vide Circular 23/2017) that if as per terms of the agreement of the payee and payer ‘GST on services’ component has been indicated seperately in the invoice, then no tax would be deducted on GST component. GST will include CGST, SGST, IGST, UTGST.</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-30120955062954295802017-07-20T14:57:00.004+05:302017-07-20T14:57:54.504+05:30Legal consultants working on contractual basis can't be enrolled as Advocates: Gujarat HC<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
When contract between petitioner law graduate with a company was in nature of full time employment, such employment of petitioner was violative of requirement of rule 49 of Advocacy Act; Bar Councils had rightly refused to grant her enrolment and certificate to practice law</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Facts of the case:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
i. Petitioner was in her last year of L.L.B. course. During her academic period, Campus placement were started and she was selected in campus interview of Gujarat Industrial Development Corporation as Legal Consultant on contract basis. After that, she had applied for Certificate of practice.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
ii. Bar council had put her enrollment form for Certificate of Practice on hold by saying that she was violating the rule of 49 of the Bar Council of India as she is rendering his full time service to the Gujarat Industrial Development Corporation.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
iii. Further, she contended that contractual arrangement of her service with the Gujarat Industrial Development Corporation could not be viewed as employment and remuneration of Rs. 25,000/- per month paid to her was not by way of salary, as such, there was no employee-employer relationship between them.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
iv. Single Judge of High Court has granted interim relief to the respondent and directed the Bar Council of Gujarat to grant her a temporary enrolment number.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
v. Aggrieved by the directions of Single Judge of High Court, Bar council of Gujarat preferred appeal against the directions of Single Judge. The Gujarat High Court held as under:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
a) In view of the conditions of service contract of the Gujarat Industrial Development Corporation, it was observed that she was in the office from 11.00 a.m. to 5.00 p.m. which are standard hours of work, prima facie it has to be considered as full-time employment. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
b) Further, there is no provision for grant of temporary certificate by the Bar Council for practicing as an advocate under the Advocates Act, 1961 and the rules framed there under.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
c) She could not entitled to practice as advocate so long as she continues such employment - [2017] 83 taxmann.com 129 (Gujarat)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-1724428518982890042017-07-20T14:54:00.001+05:302017-07-20T14:54:08.490+05:30Dept. can’t deny PAN correction in TDS return for more than 4 characters: HC<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Facts:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
a) CPC-TDS has provided an online facility to correct invalid PAN mentioned in TDS return. The online system of department is programmed to permit correction only in case four digits/characters of PAN are to be changed and no more.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
b) In the instant case, entire PAN number of the recipient of the payment was wrongly fed by the assessee-company and the on-line system of the department didn’t permit to carry out changes in PAN in excess of four digits/characters.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
c) Assessee challenged the action of the revenue in not permitting it to correct the error in mentioning the PAN before the High Court.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The High Court in favour of assessee as under:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
1) Once the department recognizes the possibility of errors and also makes provisions for making corrections, it would be wholly illogical to limit such corrections on arithmetical working out of only two alphabets or two numeric of PAN characters.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2) Error in feeding an entry or a number may have multiple origins from typographical error of Data Entry Operation to mechanical failures or through pure oversight referring to one column of PAN instead of another while filling up and uploading the statement.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
3) It is not necessary nor possible for us to envisage different situations under which such errors could crop up and it need not necessarily be confined to limited figures on the letters of the PAN being incorrect. 4) Therefore, decision of department in not permitting the petitioner to correct PAN of the deductee in the statement of tax deducted at source was impermissible. [2017] 83 taxmann.com 205 (Gujarat)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-37783980558773523752017-07-20T14:51:00.002+05:302017-07-20T14:51:26.747+05:30Delhi HC provides temporary relief to advocates for noncompliance with GST<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
There is no clarity on whether all legal services (not restricted to representational services) provided by legal practitioners and firms would be governed by the reverse charge mechanism. If all legal services are to be governed by the reverse charge mechanism, then there would be no requirement for legal practitioners and law firms to compulsorily get registered under the GST Acts.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
No coercive action be taken against any lawyer or law firms for non-compliance with any legal requirement under the GST Acts till a clarification is issued by the Central Government and the GNCTD. - [2017] 83 taxmann.com 202 (Delhi)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-44562232833518657722017-07-20T14:47:00.001+05:302017-07-20T14:47:31.054+05:30Ind AS 12: Create deferred tax asset on goodwill even if eliminated while consolidating financials<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Query</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
A company, say X Ltd. has two subsidiaries, say Y Ltd. and Z Ltd. Ind AS is applicable on X Ltd. from April 1, 2017. In April, 2016 both subsidiaries got amalgamated and consequently goodwill has been recognised in the books of amalgamated subsidiary. This goodwill is an allowable deduction to the amalgamated entity under Income tax laws. X Ltd. decided to apply Ind AS 103, Business Combinations prospectively.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
At the time of consolidation as per Ind AS, X Ltd. has eliminated the goodwill as consolidation adjustments. But, tax base of assets in the consolidated financial statements (CFS) has increased because of eliminated tax deductible goodwill.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Whether X Ltd. should recognise deferred tax asset in CFS on goodwill as the same is deductible under tax laws, even if the goodwill has been eliminated from the CFS?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Response</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Tax base of an asset is defines under para 5 of Ind AS 12, Income Taxes as the amount that will be deductible while determining taxable profits.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
According to para 9 of Ind AS 12, some assets and liabilities have tax base even if they are not recognised in the books. For example, preliminary expenses, which are allowed as deduction over the years under Income tax laws but while determining accounting profit these are recognised as expense in the year of their incurrence. In such case, in the second year, tax base of preliminary expenses is the amount deductible over the future years even if there is no corresponding entry in the financial statements.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Further, para 24 of Ind AS 12 states that deferred tax asset shall be recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available in future years against which the deductible temporary differences can be utilised. But where deductible temporary differences arises on initial recognition of an asset or liability in a business combination or on recognition of a transaction that affectsneither accounting profit nor taxable profit, no deferred tax asset should be recognised. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
From the above paras, X Ltd. should recognise deferred tax asset on the tax base of the eliminated goodwill by crediting consolidated profit or loss to the extent that it is probable that taxable profit will be available in future years against which tax base of the goodwill can be deducted.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Reference</div>
<div style="text-align: justify;">
- Issue 3 of Ind AS Transition Facilitation Group Clarification Bulletin 10</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-61443454970479452952017-07-20T14:43:00.002+05:302017-07-20T14:43:34.801+05:30Sum paid to AAI to operate executive lounge at IGI Airport treated as rent under Sec. 194-I<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Facts :</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
a) Assessee entered into a Licence Agreement (LA) with Airport Authority of India (AAI) in terms of which the premises at the first floor of the IGI Airport was given on license basis to the assessee for the purpose of operating an executive lounge.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
b) Assessee was paying monthly royalty and licence fee for space allotted for operating the Lounge Premises.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The issue before the High Court was "Whether amount paid to AAI for use of lounge premises would be deemed as rent within the meaning of Section 194-I?"</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The High Court held in favour of revenue as under :</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
1) Assessee relied on a certificate issued by the AAI wherein it was clarified that the royalty charged was not for the use of building but only for the right to operate the lounge and accordingly it couldn’t be regarded as rent.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2) Assessee was permitted to operate an executive lounge. The payment made to AAI although in two parts, was for operating an executive lounge. Non-payment of even one component, as either of royalty or of the fee for the space, would entail the assessee losing the right to operate the executive lounge.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
3) The payment for the use of space was inseparable from the payment of royalty. The question of being able to operate the lounge without the actual use of the space simply did not arise.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
4) Thus, sum paid to the AAI under the LA fell within the definition of 'rent' under section 194-I. - [2017] 83 taxmann.com 167 (Delhi)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-74860837144066940652017-07-20T14:39:00.000+05:302017-07-20T14:39:04.135+05:30Dept. can levy fee under Sec. 234E even without regulatory provision Sec. 200A for computing fee: HC<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Fact of the case :</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
a) Assessee filed the petition challenging the demand of fee in terms of section 234E raised by Assessing Officer (AO) under section 200A. He argued that section 200A didn’t authorize the AO to make adjustment of the fee to be levied under section 234E. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
b) The provision introduced with effect from 01.03.2016 wasn’t retrospective and therefore, for the period between 01.07.2012 i.e. when section 234E was introduced in the Act and 01.06.2015 when proper mechanism was provided under section 200A of the Act for collection of fee, the department could not have charged such fee. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The High Court held in favour of revenue as under :</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
1) Section 200A is a machinery provision providing mechanism for processing a statement of deduction of tax at source and for making adjustments, which are, arithmetical or prima facie in nature.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2) With effect from 1-6-2015, this provision specifically provides for computing the fee payable under section 234E. On the other hand, section 234E is a charging provision creating a charge for levying fee for certain defaults in filing the statements.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
3) Under no circumstances a machinery provision can override or overrule a charging provision. Section 200A does not create any charge in any manner. It only provides a mechanism for processing a statement for tax deduction and the method in which the same would be done.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
4) Even in absence of section 200A with introduction of section 234E, it was always open for the revenue to demand and collect the fee for late filing of the statements. Section 200A would merely regulate the manner in which the computation of such fee would be made and demand raised.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5) Thus, the view that without a regulatory provision being found for section 200A for computation of fee, the fee prescribed under section 234E couldn’t be levied was unacceptable. - [2017] 83 taxmann.com 137 (Gujarat)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-87033031203350313902017-07-12T11:33:00.000+05:302017-07-12T11:33:21.828+05:30Paid or Payable – Does it really matter?<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Section 40(a)(ia) was inserted by the Finance Act, 2004 w.e.f April 1,2005 with an intent to expand the compliance of TDS provisions. It seeks to disallow 30% of the sum payable to resident on which TDS was deductible, but not deducted or deducted but not paid to credit of Govt. within due date.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The much disputed issue was whether provisions of Section 40(a)(ia) would be limited to expenditure subject to TDS which remains payable as on 31st March of the previous year or it would include expenditure which was payable at any point of time during previous year.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Now finally the Apex Court settled this controversy. It was held by the court that it is a statutory obligation of a person making payment to the resident payee to deduct tax as per TDS Chapter. Further provisions of TDS suggests that TDS needs to be deducted at the time of credit of such sum to the account of the payee or at the time of payment whichever is earlier. Therefore, it is clear that the tax had to be deducted in both possibilities, such as, when the amount is credited to the payee account or when the payment is actually made.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<a href="https://www.taxmann.com//topstories/105010000000014569/paid-or-payable-%E2%80%93-does-it-really-matter.aspx">Click here to read full article</a></div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-70330816555297579452017-07-12T11:27:00.000+05:302017-07-12T11:27:00.403+05:30Ind AS 109: Include processing fees for undisbursed loan as well while calculating effective interest rate<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Query</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
A company, say B Ltd. is a first-time adopter of Ind AS from FY 2017-18. In April, 2015 it had taken a 10 year term loan. The processing of loan required upfront payment of loan processing fees which was duly paid. As per the terms of loan, it would be disbursed in 5 equal installments from April 2015. As on transition date, i.e. April 1, 2016 B Ltd. has recognised the term loan at fair value by calculating net present value of disbursed loan by using effective interest rate method. Effective interest rate was calculated after adjusting processing fees related to disbursed loan amount.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
What should be the treatment of processing fees related to undisbursed loan amount?</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Response</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Ind AS 109, Financial Instruments, defines effective interest rate as the rate that exactly discounts estimated future cash flows or contractual cash flows through expected life/contractual term of the financial instrument to the gross carrying amount or amortised cost of the financial instrument. While calculating the effective interest rate of a financial instrument, estimated/contractual cash flows should be adjusted with the fees paid or received between parties to the contract that are integral part of the effective interest rate except in cases where the financial instrument is measured at fair value through profit or loss (FVTPL). As per para B5.4.2 of Ind AS 109, such fees includes transaction costs or processing fees.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Accordingly, in the present case, assuming that balance loan amount will be disbursed in future years, total processing fees whether related to disbursed or undisbursed loan amount, should be included in calculation of effective interest rate as on transition date, i.e. April 1, 2016.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Reference</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
- Issue 2 of Ind AS Transition Facilitation Group Clarification Bulletin 10</div>
<div style="text-align: justify;">
--- View</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-73157535646270486152017-07-12T11:18:00.001+05:302017-07-12T11:18:09.443+05:30SC turns down Sahara’s request for extension of time for enchasing cheque amount of Rs, 552.21 crore<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
The Apex Court has denied prayer of Sahara Chief, Subrata Roy for extension of time period for payment of balance amount of Rs. 552.21 crore. Earlier, Mr. Roy had deposited two cheques worth Rs. 2000 crore and promised to honour balance payment by July 15, 2017.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
His first cheque worth Rs. 1500.40 crore has been cleared and his second cheque will be honoured by July 15, 2017. He wanted more time to pay his balance amount and requested Apex Court for extension of time for realization of his second cheque. However, the Apex Court denied to entertain his prayer for extension of time and warned him that if the cheque is dishonoured, then appropriate action will be taken - [2017] 83 taxmann.com 94 (SC)</div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-83557321243954976382017-07-12T11:15:00.003+05:302017-07-12T11:15:35.416+05:30CGST Act-Electronic Commerce Operator and Builder<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Electronic Commerce Operator</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Section 52 contemplates that notwithstanding anything to the contrary contained in this Act [CGST], every electronic commerce operator not being an agent shall collect an amount calculated at such rate not exceeding 1% as may be notified by the Government on the recommendations of the Council of the net value of the taxable supplies made by it through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator. Thus electronic commerce operator is a classic example of bending the collection machinery to garner revenue from the earliest possible source saving time and cost.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Section 52(7) affirms that every supplier who has supplied the goods or services or both through the operator shall claim credit in his electronic cash ledger of the amount collected and reflected in the statement of the operator furnished under sub-section (4) in such manner as may be prescribed. Sub-section (8) of Section 52 stipulates that that details of outward supplies furnished by every operator do not match with the corresponding details furnished by the supplier under Section 37, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed. Sub-section (10) read with sub-section (11) of Section 52 says that if the value of outward supplies reported by operator exceed the same furnished by supplier then unless rectified either by the operator or supplier the same shall be added to the output tax liability of supplier for the month succeeding the one in which discrepancy was communicated which the supplier shall pay with interest.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
GST Issues on Construction of flats by builders</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Taxability (indirect taxes) of flats constructed by builders and the like had a chequered history of litigation. Chiefly, the bone of contention was whether sale of immovable property when it is under construction involves any service element. Constitutional competency of enacting sections exacting service tax on construction of flats was challenged largely unsuccessfully and ultimately, it was accepted by all concerned that service tax is imposable on part of consideration constituting sale of flats except where they are transferred after obtaining completion certificate from competent authorities. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<a href="https://idt.taxmann.com/topstories/105010000000014558/cgst-act-electronic-commerce-operator-and-builder.aspx">Click here to view full article</a></div>
</div>
Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-88526587265265416392017-07-12T11:06:00.001+05:302017-07-12T11:06:19.683+05:30Govt. notifies another set of CGST rules<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
Earlier, Govt. had notified various CGST rules, 2017 viz., Composition levy, Registration, valuation, Input tax credit, Invoice, Returns, Payment, Refund and Transitional rules, etc. Recently, Govt. has notified three CGST rules through N/N- 15/2017, related to:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Inspection, Search & Seizure</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Demands & Recovery</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Offences & Penalties</div>
<div style="text-align: justify;">
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<a href="https://gst.taxmann.com/topstories/222330000000011940/govt-notifies-another-set-of-cgst-rules.pdf">Click here to view full notification</a></div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-51465900386281733922017-07-12T11:00:00.001+05:302017-07-12T11:00:33.472+05:30Govt. specifies procedure of intimating Aadhaar No. to Income-tax dept.<div dir="ltr" style="text-align: left;" trbidi="on">
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Section 139AA(2) of the Income-tax Act provides that every person who has been allotted PAN as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar, shall intimate his Aadhaar on or before a date to be notified by the Central Government (CG). Now, CBDT has specified the procedure for intimating the Aadhaar number to income tax department and quoting the same in PAN application. Taxpayers can opt for any of the following mode for intimation of Aadhaar number:-</div>
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1) SMS mode: Taxpayers can send an SMS in the following predefined format to 567678 or 56161. UIDPAN 12 digit Aadhaar 10 digit PAN</div>
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2) On-line mode: Taxpayer can intimate Aadhaar number by visiting and filing required information’s through link provided on the website of either of PAN Service provider, i.e.,www.tin-nsdl.com or www.utiitsl.com.</div>
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3) Designated PAN Service center: Aadhaar number can be intimated by visiting designated PAN service center of PAN service provider NSDL eGov or UTIITSL.</div>
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4) E-filing portal: Taxpayer can intimated Aadhaar no. by visiting e-filing website of income-tax department i.e. www.incometaxindiaefiling.gov.in.</div>
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CBDT has also specified procedure for quoting Aadhaar number in PAN application form in compliance with section 139AA. Person seeking for PAN shall attach copy of Aadhaar letter or card along with PAN application form. In case Aadhaar has not been allotted to the person, he need to attach copy of such enrolment ID receipt along with the PAN application form.</div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0tag:blogger.com,1999:blog-1936021064432185312.post-68240820171473234162017-06-30T11:40:00.000+05:302017-06-30T11:40:00.513+05:3010 things to know before GST rollout<div dir="ltr" style="text-align: left;" trbidi="on">
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GST will be rolled out from July 1, 2017 and just before its implementation the Govt. had issued various notifications on GST.</div>
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Key takeaways from such notifications are given here under: </div>
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1. There is a requirement to mention HSN code of items in tax invoice under GST. Now the Govt. has given some relief to small assessees with annual turnover uptoRs 1.5 crores. They are not required to mention HSN code in their tax invoice. Taxpayers having turnover in the range of Rs 1.5-5 crore will be required to mention only two digits of HSN code and taxpayers with turnover more than Rs 5 crore will be required to mention four digits of HSN code.</div>
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2. Now the Govt. has given exemption from reverse charge in those cases wherein the value of goods or services does not exceed Rs 5000 and such goods or services are received by registered person from the unregistered person.</div>
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<a href="https://idt.taxmann.com/topstories/222330000000011893/10-things-to-know-before-gst-rollout.pdf">Click here to view full article</a></div>
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Anonymoushttp://www.blogger.com/profile/03211675948453447277noreply@blogger.com0