Course launched by USA University in India isn't its business activity as it is registered as NPO

Facts:

a) The Regents of the University of California (‘UCLA’) entered into an agreement with Northwest Universal Education Private Ltd (‘NUEP’) to launch a Management Program in India which would train the senior executives of the companies.

b) It agreed to send its professors for training the senior executives working in India in respect of management techniques.

c) The applicant raised following questions:

- Whether program fee received by the Applicant is chargeable to tax in India as ‘fees for included services’ under Article 12 of the India-US DTAA?

- Whether the activities undertaken by it in India, viz., teaching would constitute its PE in India in terms of Article 5 of the India-US DTAA?

The Authority held as under:

1) Since the nature of the activity by the applicant in that case was educational activity, it could not amount to fees for included services particularly because of the provision of Article 12(5)(C).

SEBI tightens screw on promoters for enforcement of exit option in case of compulsory delisting

Under the existing delisting norms a Recognized Stock Exchange has power to delist the equity shares of listed company on certain grounds. The whole time directors and promoters of Company (which has been compulsory delisted) are debarred from accessing the securities markets for a period of 10 years from the date of compulsory delisting. 

The existing delisting Regulations provides that pursuant to compulsory delisting of a company, the promoter shall acquire delisted equity shares from the public shareholders, subject to their option of retaining their equity shares, by paying them the fair value. 

In addition to the existing delisting Regulations, SEBI has imposed new restrictions on promoters and whole time directors of company to ensure effective enforcement of exit option to the public shareholders in case of compulsory delisting of company. Accordingly, SEBI hereby directs that in case of such companies whose fair value is positive:

a) such a company and the depositories shall not effect transfer of any of the equity shares and corporate benefits (like dividend, rights, bonus shares, split, etc.) shall be frozen, for all the equity shares, held by the promoters/ promoter group till the promoters of such company provide an exit option to the public shareholders in compliance with delisting Regulations;

b) the promoters and whole-time directors of the compulsorily delisted company shall also not be eligible to become directors of any listed company till the exit option is provided.

Subsidiary company can adopt calendar year as its FY for consolidation of accounts

Facts

a) Universal Robots (India) Pvt. Ltd., is an Indian Subsidiary of Universal Robots AS, which is registered in Denmark.

b) It had adopted FY ending March 31, 2015as per the requirement of the Companies Act, 2013. Whereas, the holding company followed the calendar year as FY. So, it realised that due to different FY it will be difficult to consolidate its accounts with that of holding company.

c) The Board of Directors of the Universal Robots (India) Pvt. Ltd.passed a resolution to change its FY to calendar year. Holding company also consented for the same. d) It filed petition to get permission to follow calendar year as its FY for consolidation of accounts.

The NCLT held as under:

1) Section 2(41) of the Companies Act, 2013 provides as follows:

CA not guilty of misusing of service tax collected from client; further inquiry ordered

Facts:

a) A CA used to file returns of his client and at the end of every month, he used to collect the amount of service tax on behalf of the client for depositing it in the service tax account. 

b) He used to give photocopies of the Challans deposited in the Bank. On verification of service tax payments to bank it was found that CA was not depositing the same of service tax as collected from client.

c) Client filed a complaint with the ICAI council against such CA. The Council held that the CA was guilty of 'professional misconduct'.

The High Court held as under:

1) The complaint did not mention the relative amounts, the challans, the amounts allegedly collected as due, and the amounts paid. However, the relative or corresponding demands from the Service Tax authorities or the assessment orders, or even the service tax returns, were not on the record. These would have substantiated to a large measure the client's allegation. Likewise, there was no material to suggest that the amounts were deposited in some other concern's account. Quite possibly the respondent has been charge criminally for an offence.However, that ipso facto did not transform into proof of such criminal misconduct;

the prosecution or the complainant would have to establish his guilt. 

2) The matter requires to be gone into afresh by the Council. Having regard to the gravity of the allegations, it would be appropriate that the Council should consider all the relevant materials, including the documents and the deposition of the complainant before preparing a fresh report.

When refund is granted partly, it has to be first adjusted against interest payments and balance against tax

Facts:

a) The income-tax dept. refunded part amount of tax to the assessee in the first phase and refunded remaining tax amount in the second phase.

b) The assessee arguedthat it was entitled to interest on balance amount of tax refund paid in the second phase but the AO had not granted the same.

c) Thus, the issue before the ITAT was:

Whether the amount of refund paid in the second phase should be adjusted first against the interest component and thereafter the balance amount should be adjusted against the principal component?

The ITAT held as under:

1) It was not a case of payment of interest on interest. Thus, the CIT (A) had wrongly applied the judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals[2014] 42 taxmann.com 1 (SC).

2) It is clear that where the amount of tax demanded is paid to the assessee then it shall first be adjusted towards interest payable and balance, if any, adjusted towards whatever tax payable.

Dy. Director of Income Tax isn’t empowered to lodge complaint for prosecution against taxpayer

Facts:

a) The Deputy Director of Income Tax (‘Dy. DIT’) filed complaint for prosecution against taxpayers (i.e., husband and wife) under Indian Penal Code on basis of revelation that the statements made by taxpayers on the date of the search were false and misleading.

b) The Trial Court held that sufficient grounds had been made out against taxpayers to proceed under Sections 191,193, 200 IPC.

c) The taxpayers sought annulment of order of Trial Court primarily on the ground that the search operations having been undertaken by the I.T.Os., the complaint could not have been lodged by the DY. DIT, who was not the appellate authority in terms of Section 195(4) of the CrCPC. On appeal, the High Court declined to interfere on either of these contentions.

The Supreme Court held as under:

1) The DY. DIT, cannot be construed to be an authority to whom appeal would ordinarily lie from the decisions or orders of the I.T.Os involved in the search proceedings so as to empower him to lodge the complaint in view of the restrictive preconditions imposed by Section 195 of CrPC.

2) Thus, the complaint filed by the Deputy Director of Income Tax was to be held as incompetent. – [2016] 73 taxmann.com 32 (SC)

Bank can purchase auction property of borrower in absence of any response from bidder: SC

Rule 17 of the Second Schedule of Income Tax Rules, 1961 doesn’t impose any restriction on the Bank from participating and purchasing property in auction where invitation to bid did not result in any response from any interested bidder and it is the Recovery Officer on whom such an embargo has been placed.

Issue:

a) Whether a bank can purchase mortgaged property in auction sale from its own borrower where there is no show or invitation to bid doesn’t result in any response from bidder?

b) Whether Rule 17 of the Second Schedule of Income Tax Rules, 1961 imposes any restriction in permitting a Bank to take part in the public auctions?

Facts:

a) ICICI bank Ltd. approached DRT for enforcing security interest against loan. The DRT directed recovery officer to conduct a public auction after fixing offset price however, no bidder came forward to purchase property.

b) In such circumstances, the Bank itself had offered to purchase the properties and Bank’s o􀁹er was accepted and property were sold to Banks. The Bank gave an option to the respondents-borrowers to deposit the amount with interest however, the respondent borrowers did not acted upon.

c) The respondent-borrowers moved to DRT and later to DRAT against sale of the mortgaged properties to Bank however, the plea was dismissed by both the Tribunals.

Tax Benefits by Ireland to Apple: 8 Things to Know

Apple Inc. has been asked by the European Commission to pay tax of €13 billion plus interest to the Irish Government. Such directions have been given by the European Commission after its investigation that Ireland had granted undue tax benefits to Apple Inc. which is illegal under the EU State Aid Rules.

The European Commission in its investigation found that Apple Inc. was carrying on business in Ireland through its two subsidiary companies, namely, Apple Sales International and Apple Operations Europe.

The Irish subsidiaries were internally allocating almost all their profits to their respective head office. These head offices were existed only on papers and not based in any country. Therefore, Irish Subsidiaries were paying tax in Ireland only on profits that were allocated to Irish branch and not on majority of profits that were allocated to the ‘head office’.

The Irish Apple subsidiaries were able to transfer their profits to head office without paying any taxes because of two tax rulings of Ireland whereby they were allowed to allocate most of their profits to the head office and were liable to pay tax only on remaining part.

After assessing the business operations of Apple and tax rulings of Ireland, the European Commission concluded that Ireland had violated the EU State Aid Rules by allowing Apple’s subsidiaries to artificially allocate their profits to non-existent head office.

To read more, click below:

TaxBenefits by Ireland to Apple: 8 Things to Know

EuropeanCommission’s Press Release

Rules restricting appearance of outside lawyer in court without local lawyer are valid: SC

Rules 3 and 3A of the Allahabad High Court Rules, 1952 which mandates that a lawyer outside state cannot appear in Court without a Local lawyer's appointment are perfectly valid, legal and do not violate right of appellant under article 19(1) (g ) of the Constitution

Facts:

a) The Allahabad High Court framed Rule 3 and 3A of the Allahabad High Courts Rules, 1952 under the Advocates Act, 1961. As per the Rules, an Advocate who is not on the Roll of Advocate or the Bar Council of the State is not allowed to appear, act or plead in the said Court unless he files an appointment along with the advocate who is on the Roll of such State Bar Council and is ordinarily practicing in that Court.

Sum received from developer due to hardship caused on redevelopment of flat not a revenue receipt

The issue before the ITAT was as under:

Whether compensation received towards hardship caused to assessee on redevelopment of flat was in the nature of capital receipt and as such not taxable?

The ITAT held as under:

1) Similar facts were present in case of Kushal K Bangia v. ITO [2012] 18 taxmann.com 31 (Mum.), wherein the Mumbai ITAT held as under:

“It is not even the case of the AO that the compensation received by the assessee is in the revenue field, and rightly so because the residential flat owned by the assessee in society building is certainly a capital asset in the hands of the assessee and compensation is referable to the same. The only defence put up by DR is that cash compensation received by the assessee is nothing but his share in profits earned by the developer which are essentially revenue items in nature. This argument however proceeds on the fallacy that the nature of payment in the hands of payer also ends up determining it's nature in the hands of the recipient. In order to find out whether it is a capital receipt or revenue receipt, one has to see what it is in the hands of the receiver and not what it is in the hands of the payer"

2) Following the judgment of Kushal (Supra), it could be held that such compensation could not be said to be of revenue nature, and, accordingly, the same was outside the ambit of income under section 2(24).

3) The impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same would be taken into account as such, as and when occasion arises for computing capital gains in respect of the said asset. - JITENDRA KUMAR SONEJA V. ITO [2016] 72 taxmann.com 318 (Mumbai - Trib.)