No service-tax on sale of under-construction flats if contract price includes value of land: HC

a. Assessee purchased flat in a residential complex. The builder, in addition to the consideration for the flats, also recovered service tax from the assessee.

b. Assessee challenged levy of service tax on ground that composite contract (inclusive of value of land) could not be charged to service tax. It was argued that the agreement with the builder was a composite contract for purchase of immovable property and in absence of specific provisions for ascertaining the service component in the said agreement, the levy would be beyond the legislative competence of the Parliament. 

The Delhi High Court held as under:

1. The legislative competence of the Parliament to tax the element of service involved in constructing the complex could not be disputed. But the levy itself would fail, if it did not provide for a mechanism to ascertain the value of the services component which was the subject of the levy.

Interest on compensation paid to accident victim is tax-free

Facts:

a) The assessee was travelling in a car, which met a serious accident, leaving her permanently disabled. She claimed a compensation for this tragic loss of her physical abilities. She did eventually get it after the long struggle of 21 years.

b) But this long struggle was not enough, the destiny had more in store for her. It is this settlement of the accident compensation claim that has led to a new round of litigation- this time about taxability of a component of compensation, i.e. interest component.

c) During assessment proceedings, the Assessing Officer held that that interest component on compensation was taxable as it is covered under section 145A(b) r.w.s. 56(viii).The CIT(A) had also confirmed this stand. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

IndiGo Airlines didn't abuse dominance by hiring AirIndia's pilots a􀁺er obtaining NOC from competent authority

Facts:

a) The Appellant, Air India, had filed information against the respondent- Indigo alleging that it had systematically indulged in predatory recruitment of trained pilots of appellant and had contravened provisions of section 4 of Competition Act, 2002.

b) The Commission held that allegations against respondent did not raise any competition concern in market and there was no bar on informant or any other airlines from recruiting pilots belonging to other airlines after seeking 'No objection Certificate' from them On appeal, the Competition Appellate Tribunal held as under:

1) Since except making bald allegations appellant did not produce any tangible evidence on record to prima facie show that respondent had in fact indulged in predatory hiring of pilots already serving other airlines and, thereby, affected flying operations of particular airlines, which could be treated as abuse of dominant position within meaning of section 4(2) or violation of section 3(3)(b) and (c), Commission could not have returned a prima facie finding that respondent had indulged in anti-competitive activities or abused its dominant position in relevant market

"NCLT constituted with e ect from 1-6-2016"

The Ministry of Corporate A airs (MCA) has issued notifications on 1st June, 2016, constituting the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) with e ect from 1st June, 2016 for the implementation of the provisions of Companies Act, 2013.

Hon’ble Justice S. J. Mukhopadhaya, Judge (Retd), Supreme Court of India has joined as the Chairperson of NCLAT while Hon’ble Justice M. M. Kumar, Judge (Retd), has joined as the President, NCLT.

Initially, the NCLT will have eleven branches – two in New Delhi and one each in Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. Overall NCLT will have 21 benches and 63 members.

DGFT defines e-Commerce for Merchandise Export India Scheme

Background

The Foreign Trade Policy of India embarks a structure and environment for uplifting the export of goods and services. It is designed to lay emphasis on generation of employment and increasing value addition in the country to align its objectives with the "Make in India" vision of our Hon'ble Prime Minister. The government has considered extending its support to both the manufacturing and services sector, with special emphasis on improving "Ease of Doing Business in India".

The Foreign TradePolicy 2015-20¹ (hereinafter called as "FTP 2015-20"), introduced 2 new schemes for promoting exports in India. The main objective behind introducing the new schemes was to provide reward to exporters to offset infrastructural inefficiencies and associated costs involved and also to provide exporters a level playing field.

No denial of indexation benefit at assessment stage just because long-term capital gain wasn't declared in ITR

Facts:

a) The assessee invested certain amount in mutual fund units of HSBC and earned long-term capital gain on its redemption. He had not declared the said long-term capital gain in the return of income.

b) During the course of assessment proceedings, it offered to pay tax on the long-term capital gain (LTCG). The Assessing O􀁹icer (AO) added LTCG and brought it to tax at special rate of 20 per cent without giving the benefit of cost inflation indexation.

c) Commissioner (Appeals) upheld the addition made by the AO. He further held that since the assessee had not disclosed the long-term capital gain in the return of income filed, AO was free to adopt either method with or without applying cost inflation index, whichever is favourable to revenue.

d) Aggrieved-assessee filed instant appeal before the tribunal.

Tribunal held in favour of assessee as under

1) As per section 112(1)(a), any income arising to an individual from transfer of long-term capital asset is chargeable at the rate of 20% after allowing the benefit of the cost inflation indexation as provided in the second proviso to section 48. However, with respect to the income arising from the transfer of listed securities or units or zero coupon bonds, it shall be chargeable at the rate of 10% without applying cost inflation index.

Now listed Cos. have to disclose impact of audit qualification in a separate format, SEBI clarifies

SEBI vide. Circular No. CIR/CFD/CMD 56/2016 has required listed entities to disclose the cumulative impact of all audit qualifications on relevant financial items in a separate form called 'Statement on Impact of Audit Qualifications' instead of the present form. Such disclosures will have to be made along with annual audited financial results filed in compliance with the listing regulations.

The new mechanism will be applicable for all the annual audited standalone/consolidated financial results submitted by the listed entities for the period ended March 31, 2016 and thereafter. The new requirement has to be given in a separate form called ‘Statement on Impact of Audit Qualifications’. Disclosures are required to be made in a table form and need to be enclosed with the annual audited earnings, filed in compliance with the listing regulations. The operational details for implementing the aforesaid amendment shall be as under:

1. Estimation of impact if qualification isn’t quantified by auditor : Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments

2. Declaration in case of unmodified opinion : For audit reports with unmodified opinion, the listed entity shall furnish a declaration to that effect to the stock exchange(s) while submitting the annual audited financial results.

'Magicbricks' isn't a dominant player in market of real estate brokers in India: CCI

Facts:

a) The Confederation of Real Estate Brokers' Association of India ('Informant'), was a confederation of thirty five real estate brokers association, having combined membership of approximately 20,000 real estate brokers. The informant filed case against Magicbricks.com, 99acres.com, Housing.com,Commonfloor.com and Nobroker.in ('OP's) alleging that advertising 'No Brokerage Policy' (NBP) on their websites, mobile applications, newspapers, etc., were imposing unfair and discriminatory conditions on the traditional real estate brokers who were doing real estate business on the basis of commission.

b) It was alleged that because of the practice of these top players and other online real estate listing portals of not charging broking charge/commission or charging much less compared to traditional brokerage fee of 2 per cent of the sale/purchase value of a property, the traditional real estate brokers had not been able to compete with them and, therefore, they had been losing their business. The informant also alleged that OPs were dominant players as they were top real estate listing websites in India.

The Competition Commission of India (CCI) held as under:

1. CCI observes that India is one of the fastest growing e-commerce markets. With the growth of e-commerce, the number of online portals engaged in the activities of real estate listing, property finder solution, etc., have been increasing. It is observed that besides OPs, there are also many other real estate listing sites which are offering similar services, providing various options to the consumers.

2. Since both the online platforms and the off-line traditional brokers are offering similar services to the customers, CCI is of the opinion that on-line and off-line services of brokers cannot be distinguished while defining the relevant product market in the instant case. Both are alternative channels of delivering the same service. So, the market for 'the services of real estate brokers/agents' is considered as the relevant product market in the instant case.

3. It is observed that the traditional brokers/agents provide services within their respective localities whereas OPs offer their services anywhere in India. Therefore, the relevant geographic market in instant case is considered as 'India'.

6 things you must know about Krishi Kalyan Cess

The Central Government had announced,at the time of budget 2016, a new cess, namely, ‘Krishi Kalyan Cess’ (“KKC”), which is to be levied at rate of 0.5% on the value of all taxable services w.e.f June 1, 2016. Earlier the rate of service-tax was 14.5% (after including Swacch Bharat Cess at 0.50%).But after the introduction of KKC the effective rate of service tax would beat 15%. For example- If a service of Rs.100 is provided then amount of tax would be computed as follows:

Service tax - Rs 14 (@ 14% ),

Swachh Bharat Cess (SBC) - Rs.0.05 (@0.5%),

Krishi Kalyan Cess would be Rs.0.05 (@0.5% rate).

Recently, the CBEC has issued various notifications on KKC. Impacts of such notifications are given hereunder:

1) KKC will be levied, charged, collected and paid separately to the Government independent of service tax. CBEC has allotted separate accounting codes for KKC [Circular No. 194/01/2016-ST]

2) KKC is not leviable on services which are exempt from the whole of service tax by a notification or special order issued under Finance Act, 1994. In case of services, where service tax is leviable on abated value, KKC will also be leviable only on that taxable value [Notification No. 28/2016 – Service Tax]

3) KKC is also leviable on services on which service tax is leviable as per reverse charge mechanism. –[Notification No. 27/2016 – Service Tax].

No discrimination if SBI lending rate is basis to tax concessional loan of all bank employees: HC

Facts:

a)   Petitioner (‘All India Union Bank O icers Federation’) filed a writ petition before the High Court challenging constitutional validity of section 17(2)(viii) of the Income-tax Act, 1961, read with Rule 3(7)(i) of the Income-tax Rules, 1962.

b)  Section 17(2)(viii) provides the method for computation of perquisite value of interest free or concessional loan provided by an employer to his employee on the basis of interest rate charged by the State Bank of India (SBI).

c)  Petitioner challenged the constitutional validity of aforesaid section by contending that it was unfair to compare the rate of interest charged by the individual banks on the loans advanced to their employees with the rate of interest o ered by the State Bank of India as each bank fixed its own rate of interest, depending upon the economies of their operation.