ICAI withdraws 5 Guidance Notes on various Accounting Aspects

The Institute of Chartered Accountants of India has decided to withdraw 5 Guidance Notes on different accounting aspects. The list of the Guidance notes which have been withdraws are as follows:-

1.  Guidance Note on Accounting for Depreciation in Companies.

2.  Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets.

3.  Guidance Note on Some Important Issues Arising from the Amendments to Schedule XIV to the Companies Act, 1956.

4.  Guidance Note on Remuneration Paid to Key Managerial Personnel - Whether a Related Party Transaction.

5.  Guidance Note on Applicability of Accounting Standard (AS) 20, Earning Per Share.

These Guidance notes have been withdrawn because the guidance provides in these guidance notes have been addressed by changes made in the Companies Act, 2013.

CBDT extends due date for filing of return and tax audit report up to 31-10-2015 in all States

Pursuant to the order of High Courts of Gujarat and Punjab & Haryana, the CBDT vide order No. 225/207/2015/ITA.II dated September 30, 2015, extended the due date for filing of return only for the taxpayers in the State of Gujarat, Punjab, Haryana and Chandigarh.

Thereafter, Bombay and Orissa High Courts also directed the CBDT to extend the due date up to October 31, 2015. Thus, to avoid discrimination with taxpayers residing in other states, CBDT decides to extend the due date up to 31-10-2015 for all tax payers across the Country for filing of return and tax audit report.

Activity of distribution of lottery isn't liable to service-tax, rules Sikkim High Court

Service Tax: Activity of buying and selling of lottery is not service. Department cannot demand service tax on said activity on basis of Rule 6(7C) of Service Tax Rules since it is an optional scheme of payment of tax and does not create a charge of service tax.

Facts

1)  Assessee was engaged in business of sale of paper and online lottery tickets organized by Government of Sikkim.

2)  Section 65B(44) defines service. It excludes transaction in money or actionable claim. An Explanation was inserted vide Finance Act, 2015 to restrict the meaning of transaction in money or actionable claim. Explanation excluded, from purview of transaction in money or actionable claim, activity carried out by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind.

3)  Section 66D provides negative list of services. Any service listed under Section 66D is outside the ambit of service tax net. An Explanation was inserted in Section 66D to exclude aforesaid activity from purview of negative list of services.

4)   The effect of aforesaid amendments was: said activities in relation to lottery became subjected to service tax. Department demanded service tax from assessee on the basis of aforesaid amendments.

5)  The assessee challenged said levy of service tax.

The High Court held in favour of assessee as under:

a)  Section 65B(44) defines service. Principal requirements of said provision is that the activity should be carried out by a person for another and that such activity should be for a consideration. Activity of assessee did not establish the relationship of principal and agent but rather that of a buyer and a seller on principal to principal basis. Nature of transaction being bulk purchase of the lottery tickets by the assessee from the State Government on full payment of price as a natural business transaction. There is no privity of contract between State and assessee. It was held in an earlier case of assessee and this position is not changed even after Finance Act, 2015.

b)   Department demanded service tax on the strength of Rule 6(7C) the Service Tax Rules, 1994. In earlier case of assessee it was held that Rule 6(7C) only provides an optional composition scheme for payment of service tax which by itself does not create a charge of service tax. This Rule is only a piece of subordinate legislation framed under the rule making power provided in the Finance Act, 1994 and, therefore, in view of the position of law that Subordinate Legislation cannot be override the statutory provisions, Rule 6(7C) cannot go beyond the provision of the Finance Act, 1994. This provision has not changed even now.

c)  Assessee in buying and selling the lottery tickets was not rendering service to the State and, therefore, their activity does not fall within the meaning of 'service' as provided under Section 65B(44) and, therefore, outside the purview of impugned Explanation as well.

d)  Hence levy of service tax on activities carried out by assessee is invalid. - Future Gaming & Hotel Services (P.) Ltd. v. Union of India [2015] 62 taxmann.com 238 (SIKKIM)

ITAT refused to invoke LOB clause of India-UAE treaty as shipping Co. wasn’t a conduit Co. in UAE

Shipping company in UAE could not be said to have been created for the purpose of availing India-UAE tax treaty benefits on the ground that such company was owned by shareholders in Switzerland when treaty protection in respect of income of such a nature was anyway available under India-Swiss tax treaty

Facts

a)  The Assessing officer denied benefit of India-UAE DTAA to shipping company by invoking Limitation of Benefit ('LOB') clause of DTAA.

b)  The AO had given two reasons for invoking LOB clause – First, that vessel is owned by an entity based in Marshall Island which has no tax treaty with India; and – Second, that the assessee company is owned by shareholders in Switzerland and if the assessee company were to carry on business directly, the treaty protection would not have been available.

Held

A.  On first ground

1)    Though the merchant vessel was owned by a Marshall Island based entity and it was given to the assessee under long-term time charter arrangement but ownership of vessel is not a sine qua non for availing treaty protection of shipping income under Article 8.

2)    Article 29 of DTAA can be pressed into the service only when main purpose, or one of the main purposes of the creation of an entity was to obtain benefits of DTAA which would otherwise not be available but then since nothing really turns on the situs of ownership of the ships so far as treaty benefits, are concerned, the fact of the ships being owned by an entity in Marshall Island is wholly irrelevant for invoking Article 29.

B.  On second ground

1)    Coming to the second ground on which the AO had invoked Article 29, it has been stated that the income from operations of ships of the Switzerland based entities in international traffic is not covered by Article 8 of India-Swiss DTAA and therefore, if the shareholders, which wholly own capital of the assessee-company, were to carry on business directly, the treaty protection would not have been available.

2)    Whether a Swiss tax resident earns Indian sourced income from operations of ships in international traffic or whether a UAE tax resident earns Indian sourced income from operations of ships in international traffic, the income is not taxable in India – in the former case because of provisions of Article 22(1) of India-Swiss tax treaty, and in the later case of because of provisions of Article 8 of India-UAE tax treaty.

3)    When treaty protection in respect of income of such a nature was anyway available, though under a different kind of provision of the India-Swiss tax treaty, the assessee entity could not be said to have been created for the purpose of availing India-UAE tax treaty benefits. The action of the AO in invoking the provisions of Article 29 was vitiated in law on this count- ITO v. MUR Shipping DMC Co., UAE [2015] 62 taxmann.com 319 (Rajkot - Trib.)