Tuesday, May 31, 2016

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.

Saturday, May 28, 2016

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


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].

Thursday, May 26, 2016

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


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.

Wednesday, May 25, 2016

NO TDS liability on software purchases on basis of retro-amendment in definition of ‘royalty’

a)       The assessee had purchased software from residents of different countries for its business of oil and gas exploration. It made payment for such purchases without deducting tax at source.
b)       Assessing Officer (AO) was of the view that the Explanation 4 has been inserted with retrospective effect in section 9(1)(vi) which specifically includes computer software in the definition of royalty. These payments would be liable for TDS deduction u/s 195. Thus, assessee was to be treated as assessee-in-default.
c)       On appeal, the CIT(A) held that the payment made by the assessee for purchase of software would not amount to royalty.
d)       The aggrieved-revenue filed an instant appeal before the Tribunal.
The Tribunal held in favour of assessee as under:

1)    A perusal of the definition of royalty as provided in Article 12 of the India-USA 'DTAA' reveals that it is the payment which is received as consideration for the 'use of' or the 'right to use' 'any copyright of literary, artistic, scientific work including….'(emphasis supplied)

Tuesday, May 24, 2016

Computation of book profits by Ind AS compliant companies for levy of MAT

1) Introduction
The provisions of Section 115JB provide for levy of MAT on basis of "book profits", i.e., the profit disclosed in profit and loss account prepared in accordance with provisions of The Companies Act. Ind AS compliant companies shall be required to bifurcate their Profit or Loss account into following two parts -

Net profit or loss for the year;

Net Other Comprehensive Income.
Now question arises whether 'Net other comprehensive income' should be considered for computation of book profit under Section 115JB? On June 8, 2015, the CBDT had constituted a committee to,inter alia, suggest the framework for computation of book profit for the purpose of levy of MAT on the Ind AS compliant companies in the year of adoption and thereafter.
Now the committee has submitted its report after having consultation with MCA. Recommendations of committee and other related terms have been discussed in this article in the form of Q&As.

Time-limit for claiming rebate in case of export starts when docs confirming such export are furnished to assessee


1.   Assessee was engaged in manufacturing and exporting lead and its alloys. It exported goods on July 14, 2008 a er payment of duty and filed rebate claim under Rule 18 of the Central Excise Rules, 2002 on September 10, 2009.

2.  The adjudicating authority rejected the claim on the ground of limitation stating that the rebate claim was filed a er expiry of one year from the date a er export of goods as per Section 11B of the Central Excise Act, 1944. The assessee filed writ petition contending that provisions of Section 11B would not be applicable to the instant case.

3.  The assessee also argued that the refund claim could not be filed until export documents and shipping bills were received from Custom authorities. Since the relevant documents were received in first week of September, 2009, refund claim could not be filed. The assessee contended that even if Section 11B was considered to be applicable, then the date of release of the necessary documents by the department would be the date for computation of limitation.

Monday, May 23, 2016

SEBI’s board proposes top 500 listed Cos. to have mandatory dividend distribution policy

SEBI held its board meeting at Mumbai, on May 19, 2016 and approved of the following proposals:

1. Dividend distribution policy for top 500 listed Cos. SEBI proposed a new regulation that mandates listed firms to have a ‘dividend policy’. The new regulatory framework is likely to be applicable to top 500 listed companies initially based on their market value and then to other listed companies. SEBI said that dividend policy would help investors to get clear picture of return on investments and to make well informed decisions.

2. To amend Infrastructure Investment Trusts Regulations: In order to make the process of registration of Infrastructure Investment Trusts easier, the SEBI has approved for bringing out a consultation paper proposing certain changes/proving clarification in the SEBI (Infrastructure Investment Trust) Regulation, 2014. Further SEBI has proposed relaxation by way of reducing the mandatory sponsor holding to hold 10 % and allowing InvITs to invest in the 2 level special purpose vehicle.

3. Tighten norms for Offshore Derivative Instruments (ODIs): SEBI has proposed to tighten norms for offshore derivative instruments(ODI). Now Offshore derivative instruments issuers would need to adhere to the Indian know your client (KYC) norms and subscribers will have to take prior approval from ODI issuers in case of transfer of the instrument to another offshore investor. Further ODI issues will have to report all the transfers made among the instruments issued by them on a monthly basis to the SEBI.

Saturday, May 21, 2016

No denial of exemption u/s 11 to an educational trust if it lets out its auditorium for educational activities

a)    Assessee-trust, established for educational purposes, had let out its auditorium to a management institute on a nominal rent.
b)    Assessing Officer (AO) found that the first proviso to section 2(15) was attracted in view of the income earned by the assessee from letting out of the said premises. Accordingly, exemption under section 11 was denied to assessee.
c)    The Tribunal, after examining the facts, had come to a conclusion that the main object of the assessee-trust was to promote educational activities. It was in the course of this activity that the premise was let out. Hence, proviso to section 2(15) wouldn’t be attracted in case of assessee.
d)    Aggrieved by the order of the Tribunal. The revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

Friday, May 20, 2016

Protocol to India-Mauritius DTAA: A move towards avoidance of double non-taxation

A thirty three year old journey, peppered with much fund inflows, tax benefits, and simultaneously, ample criticism, is set to change its course, aligning with the emerging global tax order. The India-Mauritius tax treaty has finally been amended to remove capital gain exemption, albeit in a phased manner, particularly in the wake of India's commitment to BEPS2Action plan which advocates Stateless income, treaty abuse and round tripping of funds.
The Indian Government needs to be lauded and given credit for the manner in which the treaty has been sought to be amended (in a phased manner and not an abrupt shift), namely levying capital gains tax on transfer of Indian shares, which are acquired after 1st April, 2017. In other words, all investments made through Mauritius in shares of Indian companies till 31st March, 2017, have been grandfathered, thus the existing interests of investors have not been infringed at all. Further, it is proposed to introduce capital gains tax with respect to investments made in Indian shares on or after 1st April, 2017, in a phased manner, namely 50% of the tax for capital gains arising between 1st April, 2017 and 31st March, 2019, subject to fulfilling the limitation of benefit clause; and post 1st April, 2019, capital gains tax shall be levied at full rate. The aforesaid amendment to the tax treaty with Mauritius is likely to impact the India-Singapore tax treaty in a similar manner, as per the protocol signed between India & Singapore.

Forex loss incurred on loan is deductible if its underlying objective is to save interest cost

a)    Assessee had, initially availed of various term loans in Indian rupee from banks for acquisition of assets and for expansion of project etc. It had converted these loans into foreign currency loans to take benefit of lower rate of interest on such foreign currency loans vis a vis loans in Indian rupee. However, assessee incurred loss due to fluctuation in rate and claimed it as a business loss.
b)    Assessing Officer disallowed loss claimed by assessee on ground that loans were obtained to acquire capital asset, thus, same could not be allowed as revenue expenditures.
c)    The Commissioner (Appeals) granted partial relief to assessee on account of foreign currency fluctuation loss arising on loans connected to revenue items such as bill discounting, debtors, etc.

d)    Aggrieved assessee filed the instant appeal before the Tribunal.

Thursday, May 19, 2016

Indian subsidiary won’t form PE of foreign parent Co even if latter has right to audit subsidiary

a) Adobe Systems Incorporated (“assessee”) is a company incorporated outside India having a wholly owned subsidiary in India (Adobe India).

b) Adobe India provides software related Research and Development (R&D) and is paid on cost plus basis in terms of an agreement entered into between the Assessee and Adobe India.

c) Assessee claimed that such income received from Adobe India was not assessable in India as assessee did not have any business operations in India, thus he did not file return in India.

d) Assessing O􀁹icer (AO) issued notice under section 148 on observation that as per the agreement between assessee and Adobe India, it was obliged to audit the facilities of Adobe India for maintenance of the requisite standards. Therefore, it had a Service PE in India in terms of Article 5(2)(l) of the Indo-US DTAA and was liable to file return of income and pay taxes in India.

Wednesday, May 18, 2016

Disallowance on account of cash payment exceeding Rs. 20,000 would be eligible for sec. 80-IB relief

Where assessee paid cash for certain expenses in excess of limit prescribed under Section 40A(3) and, consequently, it was added back to income of assessee, it would be treated as income from undertaking and, thus, would be eligible for deduction under section 80-IB.
a)    Assessee, eligible for deduction under section 80-IB, made payment in cash for certain expenses in violation of section 40A(3). Consequently, the Assessing Officer (AO) disallowed said payments.
b)    Assessee filed an unsuccessful appeal before the CIT(A). The contention of the assessee was that, though the expenses were disallowed under Sec. 40A(3) and would be added back to gross total income, deduction under section 80-IB was allowable on same.

c)    Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Tuesday, May 17, 2016

Proviso to sec. 2(15) won't apply if management institute is running business to impart practical training to students

a) The assessee-society was an educational institution running courses of B. Tech, M. Tech and MBA, etc.

b) It was also running a textile division which was engaged in manufacturing of cloth and yarn and was attached to very institution for imparting practical training to students. 

c) Textile division of assessee incurred a huge loss which was adjusted against profits generated from educational institution.

d) The DIT(E) held that the assessee was doing business as well as was engaged in educational activity and, therefore, it was hit by proviso to section 2(15), inserted by the Finance Act, 2008. In view of activities of the assessee, the registration granted to it under section 12AA was withdrawn.

Monday, May 16, 2016

NHAI isn't liable to collect TCS on toll charges retained by developers of national highways

a)    The National Highway Authority of India (NHAI) granted a project to Oriental Pathways Pvt. Ltd. (OPPL) to develop a National Highway on BOT (Build, Operate and Transfer) basis. As per the agreement, OPPL was required to pay Rs. 1 per year to NHAI during the term of the agreement.
b)    The development cost of highway was to be recovered by OPPL through collection of toll. However, the toll collection was required to be deposited in an escrow account jointly held by both the parties. The purpose of depositing the amount in escrow account was to make a provision, in case NHAI had to recover any amount from OPPL.
c)    Assessing Officer (AO) contended that NHAI was liable to collect TCS from OPPL on toll fee collected by it as per section206C(1C).
d)    The CIT(A) set aside the order of the AO by holding that the OPPL was required to pay only Re. 1 per year to NHAI and not the toll fee. Therefore, provisions of section 206C(IC) could not be applied on this very nominal and insignificant amount.
e)    Aggrieved by the order of CIT(A), revenue filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

Saturday, May 14, 2016

Sec. 54 relief is available even if expenditure is incurred for making new house habitable

a)  Assessee earned capital gain on sale of his tenancy rights in a residential house property. He invested the sale proceeds to purchase another house property which was in a dilapidated condition.
b)  In order to make the said house fit for residential purpose, assessee incurred certain expenses on repairs and painting work etc. Assessee claimed deduction under section 54 in respect of expenses so incurred to make the new house property habitable.
c)  Assessing Officer (AO) contended that only the cost paid for acquiring new residential house is to be taken for the purposes of granting benefit under section 54 and not cost incurred towards the improvement of the same. Thus, the claim of the assessee towards cost of making a new house property habitable was disallowed.
d)  The CIT(A) confirmed the order of the AO. Aggrieved by the order of the AO, assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

Friday, May 13, 2016

No denial of sec. 54 relief if house is purchased within 2 years, though occupancy certificate is received later on

a) Assessee earned capital gain on sale of a residential house property. He claimed exemption under section 54 in respect of investment made for purchase of a flat.

b) Assessing O􀁹icer (AO) disallowed the claim of the assessee on ground that the assessee didn’t get the occupancy certificate of said flat with in the period of 2 years from the date of transfer of residential house property.

c) Appellate authorities allowed exemption to assessee. Aggrieved revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

Thursday, May 12, 2016

‘Big B’ in Tax trouble; Apex Court nods to reopening of his tax case of 2001

a) The CIT passed revisionary order under Section 263 against assessee (Amitabh Bachchan) on ground that requisite enquiries were not made by the Assessing Officer (AO) prior to finalization of the assessment.

b) Consequently, a show cause notice was served on the assessee detailing issues on which the assessment order was proposed to be revised and, thereafter, revisional order was passed under Section 263.

c) Assessee challenged the order of the CIT on ground that additions were made on basis of issues which were not mentioned in show cause notice.

d) The tribunal and the High Court held in favour of assessee. Aggrieved by the order of the High Court, revenue filed the instant appeal before the Supreme Court.

The Supreme Court held in favour of revenue as under-

Wednesday, May 11, 2016

Land is stock-in-trade for builders; money forfeited on cancellation of agreement to purchase land is revenue loss

a)  The assessee-company was engaged in the business of construction of residential complexes. It paid advance money to purchase a plot of land. It, however, cancelled the transaction and, consequently, advance money was forfeited by the vendor. The amount so forfeited was treated as revenue loss by assessee.
b)  The Assessing Officer (AO) treated the same as capital loss on the ground that the land in question was treated as capital transaction by the vendor of the land. The CIT(A) confirmed the order of the AO.

c)  Aggrieved by the order of the CIT(A), the assessee filed the instant appeal before the tribunal.

Tuesday, May 10, 2016

Provisions relating to gift apply only to an Individual or HUF and not to an AOP

a)    Assessee was a beneficiary trust assessed in status of an AOP. It received a gift of Rs. 1.60 crore from one of its beneficiaries which was not included in total income in terms of section 56(2)(vi).
b)    Assessing Officer (AO) included said amount in income of the trust. The contention of the AO was that Section56(2)(vi) is an exemption provision which provides exemption in respect of gift subject to certain conditions, inter-alia, recipient of such gift should be an Individual or a HUF. However, in the instant case, assessee was assessed as an AOP and not as an Individual or a HUF. Therefore, it was not eligible for exemption under Section 56(2)(vi).

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

Monday, May 9, 2016

HC flaks AO for passing draft assessment order against a Mauritian firm by treating it as a foreign Co.

a)    Assessee (“ESPN Star Sports”), a partnership firm established under the laws of Mauritius, entered into an agreement with “Star Sports India Private Limited” for allotting advertisement slots to various advertisers and advertising agencies in India.
b)    Assessing Officer (AO) passed draft assessment order as per section 144C(1) of the Income tax Act (‘Act’) treating assessee as “Foreign company”.
c)    Assessee filed objection before Dispute Resolution Panel (DRP) that it wasn’t an ‘eligible assessee’ as per section 144C(15) because it was neither a ‘foreign company’ nor any TP adjustment was made in its case. Therefore, no draft assessment order could be passed against it.
d)    DRP accepted the plea of assessee and declined to issue any direction but AO proceeded to pass final order on basis of such draft assessment order.

e)    Aggrieved assessee filed the instant writ petition before the High Court challenging the final assessment order passed by the AO.

Saturday, May 7, 2016

The Insolvency and Bankruptcy Code at a glance

Lok Sabha has passed the Insolvency and Bankruptcy Code 2016 on May 05, 2016. It covers individuals, companies, limited liability partnerships and partnership firms. The new code will speed up the resolution process for stressed assets in the country. It attempts to simplify the process of insolvency and bankruptcy proceedings. The highlights of bankruptcy code are enumerated hereunder:

1. Strict deadlines : Authority to decide insolvency applications within 180 days further, an extension of additional 90 days can be allowed

2. Fast track Insolvency process: Fast track process is available for Corporate- Debtor with low income and assets, Specified class of creditors and any other category notified by Govt. Under fast track process, 90 days time-limit to complete whole process and further an extension of 45 days is allowed

3. Adjudicating Authority:

NCLT for Corporates

DRTs for Individuals and Partnerships Firms

NCLAT to act as Appellate Authority

4. Insolvency Regulator: To exercise regulatory authority over insolvency professionals, insolvency professional agencies and informational utilities

RBI revisits ECB provisions for infra-sector

The basic objective of the extant External Commercial Borrowings (ECB) policy is to supplement domestic capital for creation of capital assets in the country, limited by considerations for capital account management. The earlier ECB policy1 had gone through thorough revamping during the month of November, 20152 (Framework, 2015) based on the recommendations made by the Sahoo Committee, under the chairmanship of M.S Sahoo, in February, 20153. This framework brought in a host of changes in the ECB framework.
Salient features of Framework, 2015 are as under:-

Inclusion of financial lease as a forms of borrowings

Relaxing rules for NBFCs but restricting it to INR denominated borrowings

Segmenting the Minimum Average Maturity (MAM) in three tracks - Track I, Track II, Track III

A more liberal approach, with fewer restrictions on end uses, higher all-in-cost ceiling, etc. for long term foreign currency borrowings as the extended term makes repayments more sustainable and also minimizes roll-over risks for the borrower;

A more liberal regime for INR denominated ECBs where the currency risk is borne by the lender;

Expansion of the list of overseas lenders to include long-term lenders, such as, Insurance Companies, Pension Funds, Sovereign Wealth Funds;

Only a small negative list of end-use restrictions applicable in case of long-term ECB ( Track II) and INR denominated ECB ( Track III);

Friday, May 6, 2016

Interest on Continuing Debit Balance– Notional or Real!

Over the years since the introduction of the Indian Transfer pricing regulations, the transfer pricing audits based on the experience and learnings gained have seen numerous interpretations of the provisions, thereby leading to transfer pricing adjustments. The Indian transfer pricing litigation scenario has seen the trend of adjustments shifting from mere dispute on comparable companies to larger issues such as location savings, management cross charges, intangibles, share valuations, business restructuring, etc.
One such issue being the continuing debit balance in the financials of multinational companies(MNC). Globally due to the financial exigencies, the MNCs often commercially require to defer the payables / receivables. The continuing debit balance / receivables have been treated by the tax authorities as an international transaction and thereby sought to impute arm's length interest on receivables outstanding from the associated enterprise (AE) that were not realized within the credit period.
The Section 92B of the Indian transfer pricing regulations provides the coverage of the transactions that could be treated as international transaction. Vide Finance Act 2012, a clarificatory Explanation was inserted with retrospective effect from 1 April 2002. By virtue of the said Explanation, inter alia the expression 'international transaction' included capital financing such as any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type o

Changes in the Finance Bill 2016 as passed by the Lok Sabha

On May 5, 2016, the Lok Sabha passed the Finance Bill, 2016. The Bill which was presented originally in the Lok Sabha on February 29, 2016 has not been passed in its original shape. Various changes have been made in the Bill. New amendments have been proposed. Some earlier proposed amendments have been removed, so on and so forth. A snippet of some changes made in the Finance Bill, 2016 as passed by the Lok Sabha viz-a-viz the Finance Bill, 2016 presented originally in the Lok Sabha are presented hereunder.

1. The Finance Bill, 2016 as passed by the Lok Sabha inserted a new clause to provide that unlisted shares of company would be treated as short-term capital asset if it is held for a period of 24 months or less immediately preceding the date of its transfer.

2. The Finance Bill, 2016 proposed a new section 80-IAC to provide 100 percent deduction for 3 assessment years to an ‘eligible Start-up’. The ‘eligible start-up’ is defined to mean a ‘company’ engaged in an eligible business. The Finance Bill, 2016 as passed by the Lok Sabha extends the definition of ‘eligible start-up’ to include ‘LLP’.

3. The Finance Bill, 2016 had proposed an additional tax of 10% if amount of dividend received by a taxpayer exceeds Rs. 10 Lakhs. The Finance Bill, 2016 as passed by the Lok Sabha provided that aggregate amount of dividend (i.e., dividend paid or declared or distributed by one or more domestic companies) shall be considered for the limit of Rs.10 lakhs.

4. The Finance Bill, 2016 proposed that every seller of a motor vehicle shall collect TCS at the rate of 1% of value of motor car if such value exceeds ten lakh rupees. Such tax was proposed to be collected from the buyer under section 206C at the time of debiting the amount receivable or at the time of receipt, whichever happened earlier. The Finance Bill, 2016 as passed by the Lok Sabha provides that tax shall be collected under Section 206C only at the time of receipt of consideration.

Thursday, May 5, 2016

Service tax can be levied on freight even if same is included in custom value of imported goods

Service Tax : There is no law that 'if customs duty is chargeable, Service Tax is not leviable on same component'; hence, service tax may be levied on imported service, even if customs duty was already paid thereon by inclusion in customs value
Service Tax : Expenditure or costs incurred by C&F Agent i.e., freight, insurance, loading, unloading, handling charges etc. are excluded from value, only if conditions enumerated in rule 5(2) of Service Tax Valuation Rules, 2006 are satisfied.

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An agricultural land couldn't be treated as non-agricultural land just because it was situated near a highway

a)    The assessee sold a land and claimed the same to be an agricultural land not being a capital asset within the meaning of section 2(14) of the Income-tax Act (‘Act’).
b)    The Assessing Officer (AO) opined that since the land was situated near a highway, it could not be considered as an agricultural land. Therefore, assessee was liable to pay tax on capital gain arising from sale of such land.
c)    CIT(A) reversed the order of the AO. Aggrieved by the order of the CIT(A), revenue filed the instant appeal before the tribunal.
The tribunal held in favour of assessee as under-

1)    The term 'agricultural land' is not expressly defined under the Act. In the case of CWT v. Officer-in-Charge (Court of Wards) [1976] 105 ITR 133 (SC), the Supreme Court held that the agricultural land must be a land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purpose.

Wednesday, May 4, 2016

AS 18: Names of KMP having control over entity should be disclosed even if there is no transaction with them

A Managing Director (MD) (Mr. A) of a company (B Ltd) has 21% voting power in the company. Key Management Personnel (KMP) include MD of a company as per the definition given in AS 18, 'Related Party Disclosures'. So, Mr. A is a related party of B Ltd. As per an agreement between Mr. A and B Ltd., he has the power to direct financial and operating policies of A Ltd. So, he has control over B Ltd. as per the definition of 'Control' given in AS 18. During the year there were no transactions between Mr. A and B Ltd. In the financial statement B Ltd. has not made any disclosure in respect of Mr. A. The management of B Ltd. is of view that disclosure is not required if there is no transaction with related party (i.e., Mr. A).
Is contention of B Ltd. correct?
Para 21 of AS 18 requires that name of the related party and nature of the related party relationship where control exists should be disclosed irrespective of whether or not there have been transactions between the related parties.
In this case Mr. A is a related party of B Ltd. having control over it. So, with reference to Para 21 of AS 18 as mentioned above, B Ltd. should disclose the name of Mr. A and nature of relationship with him in the financial statement.

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