Tuesday, June 30, 2015

Illegally encroached land is not a capital asset; profit arising on its sale is taxable as income from other source

Property illegally encroached by assessee would not be considered as 'Capital asset' under section 2(14) and, consequently, gain arising from transfer of such property could not be assessed as capital gain but as income from other sources.
a)      The assessee had shown long-term capital gain from sale of unauthorisedly encroached school land for which he had no title/right.
b)      The Assessing Officer held there was no capital assest owned by assessee as he did not have legal right or title over the asset and, therefore, the income declared was not chargeable under section 45 but under section 56 as income from other sources.
c)      On appeal, CIT (A) reversed the findings of AO. Aggrieved with the CIT(A) order, revenue filed the instant appeal before Tribunal.
The Tribunal held in favour of revenue as under:
1)   The assessee pleaded that the definition of capital asset under Section 2(14) has used words property of 'any kind' and it is not necessary that it should be lawfully acquired property. This proposition could not be accepted because the legislature in its wisdom has used this word for lawful property only.
2)      If the plea of the assessee was allowed, then any person will encroach upon a Government land by showing the same in his balance sheet and shall claim capital gains, which is not permissible.
3)    Under the charging section of capital gains, the crucial requirements are that there must be a transfer and such transfer must be of a capital asset. The primary school land was encroached upon/illegally occupied by the assessee and there was no transfer of any capital asset.
4)      Capital gains under section 45 accrue only if there is a sale or any transfer of the capital asset. But in the instant case, there was no transfer as such the assessee encroached upon the school land. Accordingly, the said land could not be called as capital asset owned by assessee.

5)     Since it was nota case of sale or transfer of capital asset, there was no question of capital gains. Hence, profit arising on sale of encroached land would be taxable as income from other source.- ITO v Bhagwan T. Fatnani[2015] 58 taxmann.com 227 (Mumbai - Trib.)

Monday, June 29, 2015

Uniform allowance paid to employees isn’t exempt if no dress code has been specified for employees

No exemption under section 10(14) shall be granted in respect of uniform allowance paid to employees if there was no dress code and the employees were free to wear any dress.
a)  Assessee paid uniform allowance to its employees. The allowance so paid was claimed as deduction under Section 10(14) and not included in the salary of the employees for the purpose of deduction of tax at source under Section 192;
b)  The Assessing Officer disallowed the claim and included the allowance for purpose of deduction of tax at source;
c)  CIT(A) affirmed the disallowance.
The Tribunal held in favour of revenue as under:
1)  The following two conditions must be satisfied to avail exemption under Section 10(14):
a)  the allowance should be given to meet expenses incurred for performance of official duties;
b)  the expenditure must be actually incurred.
2)  In the instant case, the assessee was unable to satisfy any of the conditions as there was no dress code for the employees and they were free to wear any dress;
3)  Therefore, allowance could not be said to be granted to meet the expenses incurred for official purposes. Further, assessee was unable to establish that the expenditure was actually incurred;
4)  Hence, uniform allowance paid to employees must be included in their salary for the purpose of deduction of tax at source under Section 192 - Facets Polishing Works (P.) Ltd. v. ITO [2015] 58 taxmann.com 373 (Ahmedabad - Trib.)

Saturday, June 27, 2015

Auditor's certificate can't be a substitute for TP study to benchmark international transaction

a)    Assessee reimbursed certain costs and expenses to its associated enterprises (‘AEs’) for coordination and liaison works.
b)   Transfer Pricing Officers (TPO) determined the ALP of transactions relating to “reimbursement of Head office overheads” as NIL.
c)    The assessee argued that he had claimed expenditure as per the certificate issued by auditors which spelled out Head office overheads as a percentage of revenues.
d)  TPO rejected the claim of assessee and made additions, which was further confirmed by CIT(A). Aggrieved-assessee filed the instant appeal before Tribunal. 
Tribunal held in favour of Revenue as under:
1)      Assessee had not conducted any transfer pricing study forbenchmarkingof head officer expenditure. He had benchmarked this transaction on basis of certificate issued by the auditors.
2)    Under transfer pricing study, what is required to be seen is whether any other independent entity would have charged or the independent entity receiving the services would have paid to the extent that were charged by the AEs.
3)      This kind of study had not been carried out by the assessee as he was under the impression that the certificate issued by the auditors would satisfy the tests of Transfer Pricing study.
4)   In transfer pricing study, what is required to be done is to validate the claimwith an external comparable. Certificate issued by the auditors only spelled out the percentage of overheads over the revenue and, hence, it was only a factual aspect of internal figures.

5)     Accordingly,certificate issued by auditorscould not be used as a substitute for Transfer Pricing study to benchmark international transaction. - Metro Tunneling Group v. JCIT- [2015] 58 taxmann.com 372 (Mumbai - Trib.)

Friday, June 26, 2015

Mumbai ITAT interprets Article 5 of India-Singapore DTAA to decide constitution of installation PE in India

a)  The assessee was tax resident of Singapore. It had undertaken installation and construction activity in respect of certain projects. The DRP held that the presence of assessee in India in excess of90 days constitutes PE in India under Article 5(6) of India-Singapore DTAA (‘treaty’).
b) The Ld. Counsel of assessee submitted that assessee was purely into installation and construction activity, which would clearly fall within Article 5(3) of treaty. Thus, activities of assessee would not constitute PE due to its presence in India for less than 183 days under Article 5(3) of DTAA.
The Tribunal held in favour of assessee as under:
1)  Article 5(3) of DTAA provides that -
A building site or construction, installation or assembly project constitutes a permanent establishment only if it continues for a period of more than 183 days in any financial year.
2)  Article 5(6) of DTAA provides that -
An enterprise shall be deemed to have a permanent establishment in a contracting State if it furnishes services , other than services referred to in paragraphs 4 and 5 of this Article and technical services as define in Article 12, within a contracting State through employees or other personnel, but only if…..
3)  Article 5(3) is a specific provision dealing with ‘Service PE’, on account of construction, installation or assembly project. Service PE would constitute if project continues for a period of more than 183 days in any fiscal year. WhereasArticle 5(6) envisages that, if an enterprise is “furnishing services” in the contracting State through its employees for a period of 90 days or more, then it is deemed to have Service PE, except for the services referred to in paras 4 and 5.
4)  The threshold period under Article 5(6) is 90 days and more; if such activities are carried out for a related enterprise, then threshold period is more than 30 days. The Article 5(6) explicitly provides that it applies to “services” other than those covered by Articles 5(4) and 5(5), however, the said article is silent as regards its relationship with Article 5(3). Thus, Article 5(6) covers various services which are not covered by paras 4 and 5 of article 5 and technical services as defined in Article 12.
5)  In contradistinction, para 3 of article 5 is very specific and, therefore, such specific activities cannot be read into para 6 of article 5. There cannot be overlapping of activities carried out within the ambit of Article 5(3) and furnishing of services as stated in Article 5(6). Both should be read independent of each other, or else there would be no requirement of enshrining separate provisions.

6)  If the activities related to construction or installation are specifically covered under Article 5(3), then one need not to go in for Article 5(6). Thus, the activity of the assessee which is purely installation services has to be scrutinized under Article 5(3) only and not under Article 5(6). - Kreuz Subsea Pte. Ltd vs DDIT - 58 taxmann.com 371

Thursday, June 25, 2015

SEBI proposes to reduce listing time by half and relax listing norms for startups

The SEBI has taken a number of key policy decisions in its Board meeting held on June 23, 2015. This includes streamlining the process of public issues,simplifyingthe framework of raising capital bystart-ups and other companies, etc.Key decisions taken in board meeting are enumerated here under:

1)Reduction ofIPO timeline: SEBI has proposed to reduce the time as required between listing and closing of an initial public offering (IPO) by half, i.e., from T+12 days toT+6 days.

2)SEBI does away with requirement of issuing cheques for IPO: SEBI mandatesfiling of Application Supported by Blocked Amount (ASBA) applications. It does away with requirement of issuing cheques for IPO. All investors, including retail ones, will now have to come in through the ASBA route.

ASBA route enables the investors to give an authorization of payment of application money in the form itself.Application made through ASBA route also ensures hassle-free of refund, if any,payable by the issuer.

3)Simplified framework for raising of capital by start-ups: Now start-up companies would be able to raise capital through Institutional Trading Platform (ITP), the platform will be accessible to:

i.Companies which are intensive in their use of technology, information technology, intellectual property, data analytics, bio-technology andnano-technology. [If these companies provides products, services or business platforms with substantial value addition and with at least 25% of the pre-issue capital being held by QIBs] or;

ii.Any other company in which at least 50% of the pre-issue capital is held by QIBs.

4)Fast Track Issuances - Follow on Public Offerings and Rights Issues: In order to enable more number of listed companies to raise further capital using fast-rack route, SEBI approved the proposal to reduce the minimum public holding requirement from Rs 3,000 to Rs 1,000 crore in case of Follow on Public Offerings (FPOs) and Rs.250 crore in case of rights issue.

5)Re-classification of Promoters as Public: SEBI has decided to provide proper framework for addressing the issue relating to reclassification of promoters in listed companies under various circumstances. Now an existing promoter of a listed entity may cease to be a promoter and/or re-classify itself as public in the following circumstances, on compliance with conditions stated there under:

i.Pursuant to change in promoter:

a)When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification shall be permitted subject to approval of shareholders in the general meeting.

b)Shareholders need to specifically approve whether the outgoing promoter can hold any Key Management Personnel (“KMP”) position in the company. In any case, the outgoing promoter may not act as KMP for a period of more than 3 years from the date of shareholders’ approval.

c) The outgoing promoter cannot hold more than 10% shares of the company.

ii.In case of transmission/succession/inheritance, the inheritor shall be classified as promoter.

iii.Existing promoters may be re-classified as public in case the company becomes professionally managed and does not have any identifiable promoter

Wednesday, June 24, 2015

Scrutiny of refurbished return forms for Assessment year 2015-16

The ITR Forms 1, 2 and 4S were notified for the assessment year 2015-16 vide Notification No. 41/2015, Dated 15-04-2015. In view of various representations received it was announced that these ITR forms will be reviewed. Having considered the responses received from various stakeholders, new ITR forms have been notified. Key changes made in ITR forms are specified hereunder:

1)Introduction of new Form 2A : At present individuals and HUFs having income from more than one house property or capital gains are required to file Form ITR 2. It was observed that majority of taxpayers who file Form ITR 2 do not have capital gains. With a view to provide a simplified version of this form for these individuals and HUFs, a new Form ITR 2A is notified which can be filed by an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income.

2)Details of foreign trips : It shall not be mandatory to furnish details of foreign trips in new Form ITR 2. Only Passport Number, if available, would be required to be furnished in the Form 2.

3)Details of bank accounts : Now only the IFS Code, account number of all current/savings accounts which are held at any time during the previous year have to be furnished. The balance in accounts will not be required to be furnished. Details of dormant accounts which have not been operational during the last three years are not required to be furnished.

4)ITR 1 for Individuals earning exempt income : It is further provided that individuals having exempt income without any ceiling (other than agricultural income exceeding Rs. 5,000) can also file return in Form ITR 1. If taxpayer has agricultural income the return shall be filed in ITR 2 or ITR 2A, as the case may be.

Editor’s Note : It is to be noted that every individual or HUF whose total income exceeds five lakh rupees or who is required to file return in Form ITR-3 or ITR-4 shall have to file return of income electronically. It is also mandatory for taxpayer (except super senior citizen) to file return of income electronically so as to claim refund of tax from the department.

Monday, June 22, 2015

Depositors can file complaint before CLB until NCLT is constituted; MCA clarifies

This Ministry has received representations seeking clarification regarding processing of the deposits related complaints received from investors in respect of defaults made by companies in repayment of deposits accepted by them before the commencement of the Companies Act, 2013.

The Ministry hasnow clarified that Company Law Board (‘CLB’) would dispose of the complaints received from investors until the National Company Law Tribunal (NCLT) is constituted.Further, Companies can approach CLB for granting extension of time for making repayment of deposits accepted by it before the commencement of the Companies Act, 2013.It is also clarified that there is no bar on the Registrar of Companies for filing of prosecution against a company if such company fails to make repayment of deposits accepted by it under the provisions of the Companies Act, 1956 or Companies Act, 2013.

Saturday, June 20, 2015

ITAT makes Sec. 43B disallowance even when assessee opts for presumptive taxation scheme

IT: Non-payment of statutory liability before due date of filing of return would attract disallowance under Section 43B even if assessee had offered his income on presumptive basis.


Whether disallowance of Section 43B could be made even when assessee opted for presumptive taxation Scheme?

The Tribunal held in favour of revenue as under:

a)Under the presumptive taxation scheme, income of an assessee is computed at a fixed percentage of turnover and it would be deemed that that all deductions allowable under the head business or profession have already been allowed to assessee. In other words deductions allowable under Sections 28 to 43C are deemed to have been granted to assessee.

b)Perusal of provisions of Section 43B shows that said provision is a restriction on allowance of particular expenditure, inter-alia, statutory liability, as it allows deduction of such liability on actual payment basis, i.e., expenditure shall not be allowed to be deducted unless same has been paid before the due date of filing the return.

c)Section 44AF starts with the words “notwithstanding anything to the contrary contained in Sec. 28 to 43C”, whereas section 43B starts with the words “notwithstanding anything contained in any other provisions of this Act”.

d)The non-obstante clause in Sec. 43B has a far wider amplitude because it uses the words “notwithstanding anything contained in any other provisions of this Act”. Therefore, even assuming that the deduction is permissible or the deduction is deemed to have been allowed under any other provisions of this Act, still the control placed by the provisions of Sec. 43B in respect of the statutory liabilities still holds precedence over such allowance.

e)Hence, disallowance could be made by invoking the provisions of Sec. 43B in respect of the statutory liabilities, even though the assessee offered his income to tax on presumptive basis.

Editor’s Note:

In the instant case, assessee has offered his income to tax on presumptive basis under Section 44AF. Provisions of Section 44AF are not applicable from assessment year beginning on or after the April 1, 2011. Thus, it can be inferred that the principal laid down by the ITAT would squarely apply when taxpayer has opted for presumptive taxation scheme under Section 44AD or Section 44AE.

Tax returns of MPs/MLAs can't be disclosed under RTI to compare them with info in election affidavit

Income-Tax Returns filed by MPs/MLAs are exempted from disclosure under RTI Act.Copies of the same cannot be furnished for comparing the information therein with disclosures made by MPs/MLAs in election affidavits.


a)The Petitioner made an application under the RTI Act requesting certain information, more particularly the Income Tax Returns of one of the Member of Parliament (respondent).

b)The information was sought to crosscheck the affidavit filed by the respondent to the Election Commission. The Petitioner sought information on the ground of larger public interest.

c)The RTI application was dismissed by lower authorities on the ground that information sought for had no relationship with any public activity or interest and, therefore,would not qualify in view of the provisions of Section 8(1)(j) of the RTI Act.

d)The instant writ was filed to challenge the order of lower authorities.

The High Court dismissed the writ petition by holding as under:

1)As per Section 8(1)(j) of the RTI Act, personal information of an individual has no relationship to any public activity or interest and could not be disclosed unless larger public interest was involved.However, the proviso to said section carves out an exemption that the information which cannot be denied to the Parliament or the State Legislature shall not be denied to any person.

2)It was held by the Apex Court in the case of GirishRamchandra Deshpande v. Central Information Commission &Ors. (2013) 1 Supreme Court Cases 212 that the details disclosed by a person in his Income Tax returns is a personal information which stands exempted from disclosure under Section 8(1)(j) of the RTI Act, unless larger public interest is involved.

3)As per Section 33A and 33B of the Representation of the People Act, 1950, a candidate standing for the elections has to submit an affidavit to the Election Commission. Further, Section 125-A of the said Act provides for prosecution if the candidate fails to furnish the information or gives false information which he knows to be or has reason to believe to be false.

4)As the Parliament has deemed it appropriate to limit the information in respect of the candidate to the extent mentioned in Section 33A of the Representation of the People Act, 1950, it is not open for a citizen to contend that he seeks certain information to cross check the information which has been revealed by the candidate at the time of filing of his nomination.

5)In the instant case, the petitioner sought information furnished by respondent in his income-tax return to cross check the information furnished by the respondent at the time of filing of his nomination with Election Commission. Therefore, the said reason can hardly said to satisfy the test of the same being in public interest.

6)The petitioner also placed reliance on proviso to section 8(1)(j) to contend that the information couldn’t be denied to him as same could not be denied to the Parliament. In this regard, it is important to note that the Parliament has its own rules of business and, therefore, it cannot be presumed that the information in respect of the Income Tax Returns of a Member of Legislature would be sought by the Parliament. Hence, the proviso to section 8(1)(j) of RTI Act cannot be extended to mean that each and every information is to be provided to the Parliament or to the State Legislature as same would render the enactment of section 8(1)(j) meaningless-SHAILESH GANDHI V. CENTRAL INFORMATION COMMISSION[2015] 58 taxmann.com 147 (Bombay)

Govt. issues ordinance to allow filing of complaint on cheque bouncing at place where payee maintains the account

Recently, there had been a dispute relating to the place of jurisdiction for filing complaint against dishonouring of cheque. The dispute arose mainly in those cases where complaint was filed in jurisdiction of that Court where cheque was presented even if drawer-bank was located in different jurisdiction.

The Supreme Court in case of Dashrath Rupsingh Rathod v. State of Maharashtra [2014] 49 taxmann.com 497 (SC) cleared air on this issue and it interpreted provisions of Negotiable Instrument Act relating to place of jurisdiction for filing complaint. It ruled that complaint for dishounouring of cheque can be filed only at territorial jurisdiction of that Court where cheque is dishonoured by bank on which it is drawn.

Various stakeholder expressed difficulties on Supreme Court’s verdict with regard to the legal interpretation regarding place of jurisdiction in case of dishonouring of cheque. In order to address the difficulties of stakeholders the Government has issued Negotiable Instrument (Amendment) Ordinance, 2015 (‘NI Ordinance, 2015’).

The NI Ordinance, 2015 provides that the offence of cheque dishonour shall be enquired into and tried only by a court within whose local jurisdiction –

(a)the bank branch of the payee (viz, the place where the payee presents the cheque for payment) is situated, if the cheque is delivered for collection through an account; or

(b)the branch of the drawee bank where drawer maintain the account is situated, if the cheque is presented for payment by the payee or holder in due course otherwise through an account.

Further, all cases arising out of Section 138* which are pending in any court before the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015 shall be transferred to the court having jurisdiction as per revised position. Also, in case of more that one prosecution filed by the same payee against the same drawer of cheques is pending before different courts, upon bringing the said fact to the notice of court, such court shall transfer the case to the court having jurisdiction under norms. *The Section 138 of the Negotiable Instrument Act, 1881 (‘NI Act’) deals with the offence relating to cheque dishonour for insufficiency, etc., of funds in the drawers account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability. The section 138 of the NI Act provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.

Saturday, June 13, 2015

ITAT unsettles the settled law; allows set-off of long term capital loss arising from sale of STT paid equity shares


a)Assessee filed its return of income wherein it claimed set-off of long term capital loss arising from sale of shares (STT paid) against the long term capital gain arising from sale of land.

b)The Assessing Officer (AO) denied setting off of such loss by relying upon the verdict of Apex Court in case of CIT vs. Hariprasad & Company Pvt. Ltd. (1975) 99 ITR 118. He was of the view that income includes loss and, therefore, if the long-term capital gain arising from sale of shares (STT paid) does not form part of the total income as per section 10(38), then the loss arising from such shares would also not form part of the total income.

c)The CIT(A) confirmed the order of the AO. Aggrieved by the order of CIT(A), assessee filed the instant appeal before the Tribunal.

The Tribunal held in favour as assessee as under:

1)The ratio and the principle laid down by the Hon’ble Apex Court in the case of Hariprasad (Supra) would not apply in the instant case, as the concept that ‘income will include loss’ would apply only when entire source is exempt from tax and not when only one of the income falling within such source is exempt.

2)Section 10(38) provides for exemption from capital gains only on transfer of Long term equity shares with certain conditions, wherein one of conditions of exemption was payment of security transaction tax (STT). Thus, the income contemplated under section 10(38) is only a part of the source of capital gain and only a limited portion of such source is treated as exempt.

3)From the conjoint reading and plain understanding of sections 2(14), 45, 47, 70 and 71 it can be seen that,

-Firstly, shares in the company are treated as capital asset and no exception has been carved out in section 2(14), for excluding the equity shares and unit of equity oriented funds that they are not treated as capital asset;

-Secondly, any gains arising from transfer of Long term capital asset is treated as capital gain which is chargeable u/s. 45;

-Thirdly, section 47 does not enlist any such exception that transfer of long term equity shares/funds are not treated as transfer;

-Lastly, section 70 & 71 elaborates the mechanism for set off of capital gain. Nowhere, any exception has been made/ carved out with regard to Long term capital gain arising on sale of equity shares.

Thus, whole genre of income under the head capital gain on transfer of shares is a source, which is taxable under the Act. If the entire source is exempt or is considered as not to be included while computing the total income then in such a case, the profit or loss resulting from such a source do not enter into the computation at all. However, if a part of the source is exempt by virtue of particular "provision" of the Act for providing benefit to the assessee, then in our considered view it cannot be held that the entire source will not enter into computation of total income. Hence, Long term capital loss on sale of shares could be set off against Long term capital gain on sale of land- RAPTAKOS BRETT & CO. LTD. V. DCIT [2015] 58 taxmann.com 115 (Mumbai - Trib.)

Friday, June 12, 2015

AO not to raise direct demand against an assessee wherein TDS credit mismatch arises due to default of deductor: CBDT

The concept of TDS was introduced by the Government to collect taxes at very point of origin of income. Accordingly, the responsibility is casted on the payer (i.e., deductor) to deduct tax at specified rate while making remittance of specified income to the payee (i.e., deductee).

As per section 199, deductee is entitled to get credit of tax so deducted only if such amount is paid by the deductor to the Central Government. However, as per section 205, deductee shall not be called upon to pay the tax to the extent tax has been deducted from his income. Thus, the Act puts a bar on direct demand against the deductee where tax has already been deducted from his income by the deductor.

In this regard, grievances have been received by the CBDT from many taxpayers that Assessing Officers were denying credit of TDS in those cases where deductor failed to deposit the TDS to the Government.

Thus, the CBDT has instructed Assessing Officers not to raise coercive demand against assessee on account of TDS credit mismatch wherein such mismatch arises due to default of deductor to deposit TDS into the account of Government - INSTRUCTION NO. 275 DATED 01/06/2015

Tuesday, June 9, 2015

Private Companies will heave a sigh of relief as MCA has relaxed restrictive provisions of Companies Act, 2013

The Ministry of Corporate Affairs (‘MCA’) does away with certain restrictive provisions for private companies vide notification no. F.NO.2/11/2014-CL.V . The MCA has provided exemption to private companies from filing board resolution to Registrar of Companies. It further eased out provisions relating to related party transactions, loans to directors and norms on further issue of share capital. These amendments were much needed as many restrictive provisions were applicable on Private companies which rendered them helpless to carry on day-to-day business activities. The Key changes brought out for private companies are as under:

1)Exemption from filing board resolutions: As per Section 179(3) of companies Act, 2013 companies are required to file certain items of Board Resolutions with the Registrar of Companies in the form called MGT 14. Now this requirement has been done away with for private companies. Thus, now private companies need to file form MGT 14 only in case of special resolutions. This has been one of the major relaxations provided by MCA for private companies.

2)Loan to directors by private companies: Provision relating to loan to directory provides that no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.

Under amended norms, a partial exemption has been granted to private companies giving a loan, providing a guarantee or offering a security in connection with a loan taken by a director. The partial exemption provides that:

(a) There should not be any shareholding of body corporate in the lending/guaranteeing company;

(b) The lending company’s aggregate borrowings from other bodies corporate or banks or financial institutions is limited to lower of (i) 2 * (net worth)of company; or

(ii) Rs 50 crores

(c) There is no pending default in repayment of such borrowings by the lending company.

It may be noted that the restriction on lending by private companies was not there under the Act 1956

3)Relaxation of ceiling on company audits: The ceiling of 20 audits will now exclude one person companies, dormant companies, small companies, and private companies having a paid up share capital of less than Rs. 100 crores.

4)Related Party transactions (RPTs): One of the special features of general meeting approval in case of RPTs is that the resolution has to be approved by a vote of the minority only. Related parties are not allowed to vote on such resolution. This provision has been removed for private companies.

Further, holding-subsidiary relationship and investor-associate relationships have been excluded from the definition of “Related Parties”. Such change will definitely ease the related party transactions.

5)Further issue of shares: Now, issue of further shares to employees of private companies under scheme of Employee Stock Options (‘ESOPs’) can be done by passing an ‘ordinary resolution’ instead of ‘Special Resolution’. Requirement of sending the notice three days prior to opening of the issue by way of specified means under rights issue has now been exempted. Provision with regard to time period of offer in case of rights issue have also been exempted for private companies.

6)Loans against its own securities: Section 67 prohibits companies from providing loans against its own shares. Now, private Companies have been exempted from the provision of section 67, subject to the following conditions:

a)Where no other body corporate has invested any money.

b)Borrowing from banks, FIs or body corporates is less than double of its paid up capital of Rs. 50 crore, whichever is lower.

c)The above qualifying private company should not have defaulted in repayment of borrowings as may be existing on the date of the transaction under the section.

7)Participation of interested director in board meeting: Section 184(2) provides that the directors of a private company should abstain themselves from participating in a board meeting where a matter in which they are interested is to be discussed. However, under the amended provisions, an interested director of a private company can participate in the board meeting after declaring his interest.

8)Voting rights and kinds of share capital: Now the provisions relating to voting rights and Share Capital are not applicable to private companies unless their MoA or AoA provides for the same.

9)Right of persons other than retiring directors to stand for directorship: Provisions of section 160 shall not apply in case of private companies. Similar was the position under section 257 of the Act 1956.

Saturday, June 6, 2015

'Walt Disney' didn't abuse its dominance by requiring release of its movies in India only via Digital Cinema platform

Where informant filed complaint against ‘Digital Cinema Initiatives’ and ‘Walt Disney Company India’ (‘Opposite Parties’) for releasing their movies in India only through Digital Cinema Initiatives (DCI) compliant servers and projectors and DCI compliant format was found to be better than non-DCI compliant format, Opposite parties s had not contravened sections 3 and 4 of Competition Act, 2002 (‘the Act’)


a)The informant was a Digital Cinema Service provider. Its business mainly involved digital projection and screening of films in India through a specific technology known as its proprietary Sky Cinex Technology.

b)The informant filed complaint against opposite parties alleging that they had entered into an anti-competitive agreement amongst themselves to release their movies in India in digital form only through Digital Cinema Initiatives (DCI) compliant servers and projectors.

The Competition Commission of India held as under:

1)It was found that DCI compliant server was better than non-DCI compliant format, as far as quality and security were concerned

2)The Informant failed to show that the alleged conduct of opposite parties was likely to have appreciable adverse effect on the competition

3)Since no material was placed on record to infer anti-competitive agreement as envisaged under section 3 of the Act and the opposite parties were not dominant in the relevant market, no case of contravention of sections 3 and 4 of the Act was made out against them.– K SERA SERA DIGITAL CINEMA (P.) LTD. V. DIGITAL CINEMA INITIATIVES, LLC [2015] 57 TAXMANN.COM 443 (CCI)

Thursday, June 4, 2015

Credit of foreign TDS can't be denied even against tax levied on corresponding income eligible for sec. 10A relief

Assessee qualified for tax relief under article 23 of DTAA between India and Japan in respect of income that has been subjected to tax in Japan even if such income was exempt in India under Secton 10A


a)The assessee filed its return wherein credit of tax deducted at Japan was claimed in respect of its income covered under Section 10A.

b)The Assessing Officer (AO) rejected assessee's claim holding that the income on which the assessee was charged to tax in Japan was not chargeable to tax in India being exempt under the provisions of section 10A and, therefore, assessee was not eligible to claim credit for the tax deducted in Japan.

c)On appeal, Order passed by AO was confirmed by CIT(A). Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.

The Tribunal held in favour of assessee as under:

1)The profits and gains to which the provisions of section 10A apply are not excluded from total income and instead 'a deduction of such profits and gains…..' shall be allowed from the total income of the assessee. It means 'total income' must first be determined from which deduction under section 10A shall be allowed. Therefore, it could not be said that the profits and gains to which section 10A applies are not charged to tax in India

2)As income that has been subjected to tax in Japan was also chargeable to tax in India (although exempted under Section 10A), assessee was qualified for tax relief under article 23 of DTAA between India and Japan- BLUE STAR INFOTECH LTD. V. ACIT [2015] 57 taxmann.com 386 (Mumbai - Trib.)

Tuesday, June 2, 2015

Simplified version proposed for new ITR forms; due date of filing of return may be extended to 31-08-2015

On April 15, 2015 the CBDT had notified revised ITR forms for assessment year 2015-16 requiring several additional disclosures by taxpayers to check menace of black money. In revised forms, apart from other additional disclosure, taxpayers were required to furnish details of foreign travel and details of all bank accounts held by them at any time (including opened/closed ones) during the previous year.

Experts and consultants had criticised those new forms, saying that the government was seeking too much of data. They felt that the addition of new information would make the process of filing returns difficult. Having considered the responses from various stakeholders, these forms are now proposed to be simplified for the convenience of the taxpayers. Proposed changes are as under:

1)ITR 2 and ITR 2A: With a view to provide a simplified form, a new Form ITR 2A is proposed which can be filed by an individual or HUF who does not have capital gains, income from business/profession or foreign asset/foreign income. The main forms of ITR 2 and ITR 2A will not contain more than three pages and other information will be captured in the Schedules which will be required to be filled up only if applicable.

2)Details of bank balance and dormant accounts: In revised ITR forms, taxpayers were required to report closing bank balance and they were also required to furnish details of dormant accounts. Now it has been proposed that closing bank balance and details of dormant accounts (not operational during the last three years) are not required to be furnished.

3)Details of foreign trips: In revised ITR forms assessee was required to report details of overseas travelling. It has now been proposed that it shall not be mandatory to furnish details of foreign trips in new Form ITR 2A and Form ITR 2. Only Passport Number, if available, would be required to be given in these Forms.

4)Details of foreign assets: An individual who is not an Indian citizen and is in India on a business, employment or student visa (expatriate), would not mandatorily be required to report the foreign assets acquired by him during the previous years in which he was non-resident if no income has been derived from such assets during the relevant previous year.

5)Option to choose ITR 1: Under the extant Rules taxpayers could choose ITR-1 only if they were claiming exemption under section 10 (e.g., HRA, Conveyance allowance, etc.) upto Rs 5,000. So, salaried taxpayers who were claiming exemption of HRA or conveyance allowance (exceeding 5,000) were filing ITR-2. Now it has been proposed that individuals having exempt income without any ceiling (other than agricultural income exceeding Rs. 5,000) can now file return in Form ITR 1.

The utility for e-filing of return as per new ITR forms is likely to be available by third week of June 2015. In view of such changes, it is further proposed to extend the time-limit for filing these returns upto 31.08.2015.

Monday, June 1, 2015

ITAT imposes cost on CAs for intimidating RTI applications when appeal is heard and pending for order

ITAT imposed costs on Chartered Accountants (i.e., Ld. Counsel and his son) for filing RTI applications against judicial officers not for any public purposes but to intimidate judicial officers and a blackmailing tactics for mean professional interest.


a) Appeal of the assessee was earlier dismissed by the ITAT. Thereafter the assessee prayed for showing leniency and recalling the original order.The Bench after hearing Ld. Counsel of assessee (A Chartered Accountant by profession), recalled the order of dismissal of appeal and restored the original appeal for hearing.

b) During the course of hearing, Ld. Counsel of assessee gave a seemingly improbable proposition that an anonymous letter was received by him from benami employee of the Income Tax department mentioning that some conspiracy was hatched by income tax officers against the assessee.

c) The Ld. Counsel undertook to file requisite affidavit and requested for time which bench readily acceded by adjourning appeal. On final date of hearing, son of Ld. Counsel (who was also a Chartered Accountant) appeared with an adjournment application, mentioning that his father would not be able to attend the hearing as he had to attend the marriage.

d) The adjournment application was rejected. Ld. Counsel without even waiting for the orders sent letters to judicial officers making wild accusation of corruption, bias, insulting, collusions, etc. and further he filed intimidating RTI applications to judicial officers.

The ITAT held as under:

1) The casual way of adjournment against final chance showed the casual attitude of Ld. Counsel and his son of taking the judicial process for granted. There is nothing to even remotely suggest any reason on the part of bench to show partiality, prejudice, bias or intention to insult Ld. Counsel or his son. They were treated with deserving dignity by offering help and guidance in open court proceedings.

2) Ld. Counsel deliberately filed various RTI applications asking for about 81 queries in respect of number of personal details about the judicial officers. These acts of Ld. Counsel proved that RTI attack was not for any public purposes but to intimidate judicial officers and a blackmailing tactics for mean professional interest, to extract desired result in a sub-judice appeal. This attempt on the part of Ld. Counsel amounts to a total misuse of professional position for dubious gains.

3) Ld. Counseland his son should have waited for the order to be pronounced instead of unfolding foul tactics to influence the pending judicial order. They seemed to be ignorant about filing a proper power of attorney, which is to be given on a non-judicial stamp paper. Furthermore the ICAI guidelines provides that every Chartered Accountant shall mention his registration number on the power of attorney, which both of them have failed to mention.

4) Both Chartered Accountants were liable for suitable proceedings for their professional misconduct, misbehavior, wasting the time of court and unlawfully attempting to interfere in the process of judicial dispensation.

5) Further cost of Rs 25,000 was to be imposed on Ld. Counsel and Rs 10,000 on his son for their delinquencies as mentioned above. - MUNDRA WOOLEN MILLS (P.) LTD. V. ACIT (2015) 57 taxmann.com 447 (Jaipur - Trib.)

RBI fixes USD 2,50,000 for remittances by individual for aggregate of certain current account transactions

The Reserve Bank of India (‘RBI’) has notified amendment to the Foreign Exchange Management (Current Account Transactions) Rules to specify an aggregate limit of USD 2,50,000 for remittance in foreign currency for certain current account transactions, inter-alia, for private visits to any country (except Nepal and Bhutan), gifts or donations, going abroad for employment, emigration, business travels, or medical treatment abroad, etc.

Remittances in foreign currency by an individual for the following current account transactions shall be made within limit of USD 2,50,000:

a)Holiday/Private Visits abroad

b)Business trip


d)Employment or education

e)Remittance for Maintenance of a close relative abroad

f)Medical treatment abroad

g)Emigration facilities

Further, it is provided that an individual can avail of foreign exchange facility of an amount exceeding the limits as prescribed above under the Liberalized Remittance Scheme (‘LRS’) for the purpose of emigration, education, business travel, medical treatment, etc.

However, the amount so remitted by individual under the LRS shall be reduced from the USD 250,000 by the amount so remitted.