TPO couldn't re-characterize share application money as loan even if there was delay in allotment of shares

Facts

a)    Assessee entered into a transaction with its wholly owned subsidiary (‘SGPL’) to contribute further to its share capital and, accordingly, paid share application money to SGPL. However, SGPL issued shares to assessee belatedly.

b)    Transfer Pricing Officer (TPO) held that since shares were allotted belatedly, the transaction was that of a loan under the garb of share application money.

c)    TPO contended that since shares were not issued to assessee during the relevant assessment year, the assessee did not derive any benefit from its investment and, therefore, addition should be made to assessee’s income on account of notional interest.

Aggrieved assessee filed the instant appeal before the tribunal.

MCA notifies 3 Standards - 2 on Revenue Recognition & 1 on Fixed Assets

On March 30, 2016 the Ministry of Corporate Affairs (MCA) has notified three new Standards, viz Ind AS 11, Ind AS 18 and Accounting Standard (AS) 10, Property, Plant and Equipment.

1. Ind AS 11, Construction Contracts and Ind AS 18, Revenue

Applicability of Ind AS 115, Revenue from Contracts with Customers has already been deferred till April 1, 2018. So, MCA has notified two Ind ASs, Ind AS 11 and Ind AS 18 to provide guidance on recognition and measurement of revenue.

Ind AS 11, deals with measurement and recognition of revenue in the financial statements of contractorsin case of construction contracts. Ind AS 11 is similar to existing AS 7, Construction Contracts except that as per this Standard, contract revenue should be recognised at fair value.

Ind AS 18, provides guidance on accounting for revenue arising from the following transactions:-

Govt. permits 100% FDI in marketplace based model of e-commerce

The Government vide press note 3 dated March 29, 2016 has clarified that 100% foreign direct investment (FDI) is allowed under automatic route in marketplace model of e-commerce. Extant FDI policy permits 100 % FDI under automatic route in B2B (business-to-business) without any conditions whereas FDI is permitted in B2C (Business to Consumer) subject to riders.

Now in order to bring clarity to the extant policy, Govt. has formulated guidelines for FDI in e-commerce sector. The key takeaways are enumerated hereunder:

1. 100% FDI permitted in marketplace model of e-commerce: DIPP clarified that 100% FDI under automatic route shall be permitted in marketplace model of e-commerce, i.e., a model under which e-commerce entity provides an IT platform to act as a facilitator between buyer and seller. In other words, 100% FDI is allowed only when e-commerce entities providing a marketplace shall not exercise ownership over the inventory, i.e., goods to be sold online.

2. FDI not permitted in inventory based model of e-commerce: DIPP clarified that FDI shall not be permitted in inventory based model of e-commerce, i.e., a model under which e-commerce entities own inventory of goods and services and sell directly to consumers.

3. Cap of 25% of sales by a vendor: As per new guidelines, now e-commerce entities shall not permit more than 25% of the sales affected through its marketplace from one vendor or their group companies. The cap of 25% on sales by a vendor on marketplace will encourage entry of new vendors.

4. No warrantee/guarantee on post-sale by E-commerce entities: Now e-commerce entities will not assume liability for post-sale delivery, guarantee/warrantee of goods and services sold in the market place model as such liability of any guarantee/warrantee shall be responsibility of the seller (vendor).

5. No more heavy discounts by e-commerce Cos: The DIPP has strictly clarified that e-commerce entities providing market place shall not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Hence, now e-commerce Cos can’t provide discounts of their own.