One can account for income from choreography on cash basis and income from production on accrual basis

Facts

a)    Assessee was a professional dance director for cinematographic films. He was also producing films under a proprietorship concern.

b)    Assessee followed cash system of accounting in respect of his professional receipts whereas he was following mercantile system of accounting for computing income from production of films.

c)    Assessing Officer (AO) took a view that assessee was following hybrid system of accounting which was not permissible in view of amendment made to section 145 of the Income-tax Act by the Finance Act, 1995.

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

Brand promotion of GoDaddy by its Indian subsidiary amounts to export of service

Facts

a) Assessee (‘GoDaddy India’) is an Indian subsidiary of GoDaddy US. It proposed to enter into an agreement to provide brand promotion and support services in India to GoDaddy US.

b) It sought advance ruling by contending that place of provision (POP) of services to be provided by it to GoDaddy USA is outside India. Therefore, it would not be liable to pay service tax in India.

c) Revenue on the other hand contended that service to be provided by the assessee is intermediary services which is to be consumed by Indian customers and as per POP rules, POP would be location of service provider i.e. India. Therefore, such services should not be treated as export of services.

Salary of NR for rendering service in US won't be taxed in India as per DTAA even if salary is received in India

Facts

a)  The assessee was transferred from Indian company to its American sister concern to act as a lead software engineer

b)  He left India on 30^th May of relevant financial year in connection with his US employment. However, for internal facilitation, his salary for relevant period was paid by Indian company in India.

c)  Assessee filed his return claiming status of a non-resident and claimed his salary income as exempt from tax in view of Article 16(1) of the DTAA between India and USA.

d)  Assessing Officer (AO) held that since salary was received in India, the same would be taxable in India irrespective of his residential status.

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

Your Queries on Service Tax

Query – We have obtained contract from a company for running two canteens. We prepare food and serve to employees of company. The company has one AC canteen which is under Factories Act as company employs more than 250 employees. Company has another non AC canteen in another unit, where employees are less than 250 and is not under Factories Act.

The company is of the view that service tax is not chargeable by us to them in both the cases. However, department is taking a view that our services are 'outdoor catering services' and we are liable to pay service tax on 60% of value.

Answer - Section 66E(i) of Finance Act, 1994 defines following as 'declared service' - Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.

Real Estate Bill - Internal control implications

1.0 Introduction

The Real Estate (Regulation and Development) Bill has been cleared by both houses of parliament. The provisions of this new legislation assume critical importance in the context of internal controls at real estate companies. CFOs, controllers and audit committees of companies in this sector need to gear up for system and process changes to ensure compliance with this new legislation and at the same time comply with the provisions of section 134 of the Companies Act.

2.0 Internal Controls - Provisions of Companies Act

As per section 134 of the Companies Act, 2013, the Board of Directors, in case of a listed company, are responsible for laying down internal financial controls and ensuring the adequacy and effectiveness of such controls. The Directors are also responsible for devising proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

An order already revised under sec. 264 couldn't be subsequently revised by invoking sec. 263

Where original assessment order had been revised under section 264 and, thus, no longer existed, order passed by CIT under section 263 revising original assessment order was void ab initio

Facts

a)    Assessee filed revision application under section 264 before the Commissioner of Income-tax (CIT) to revise the assessment order passed by Assessing Officer (AO) under section 143(3).

b)    CIT accepted the revisional application of assessee and directed AO to revise the assessment order accordingly.

c)    However, subsequently, the original assessment order of AO was revised by CIT under section 263.

No action could be taken against foreign parent Co. by issuing notices to its Indian group Co.

Facts:

a)        Ingram Micro Asia Holdings Inc., a company incorporated in USA and part of US based Ingram Group, acquired shares of assessee-company (Techpac Holdings Ltd.), a company incorporated in Bermuda and ultimate holding co. of Techpac Group.

b)       After the aforesaid acquisition, the Indian entity of the Ingram Group [Ingram Micro India Pvt. Ltd.] was merged into the Indian entity of the Techpac Group [Tech Pacific India] and post-merger, the name of Tech Pacific India was changed to Ingram Micro India Ltd.

c)        During the search and seizure proceedings carried out at the premises of Ingram Micro India Ltd. [previously known as Tech Pacific India] (hereinafter referred to as ‘Ingram Micro India’), Assessing Officer (AO) found share purchase agreement under which shares of assessee-company (i.e., Techpac Holdings Ltd.) were transferred to Ingram Micro Asia Holdings Inc.

d)       It was contended by AO that by virtue of the said agreement, assessee had transferred all the assets and liabilities of its Indian Group Company (i.e., Tech Pacific India) to Ingram Micro Asia Holdings Inc. Hence, there was a clear transfer of capital asset in India and, therefore, by virtue of the provisions of Section 9 of the Income-tax Act (‘Act’), the income from such transfer was deemed to accrue in India.

Where assessee had deducted tax at source from salary paid overseas to its nonresident employees and had deposited the same in Governments account, such payment could not be disallowed merely because tax was not paid within timelimit prescribed under section 200(1).

Facts:

a) The assessee had claimed deduction in respect of payments made to expatriates pertaining to the assessment of financial year 1990-91 that was still pending.

b) The CIT(A) disallowed such claim under Section 40(a)(iii) on the ground that assessee had failed to deposit TDS within prescribed time-limit under Section 200(1). The ITAT upheld the order of CIT(A). The High Court held in favour of assessee as under :

1) A plain reading of section 40(a)(iii) indicates that no deduction would be allowable in respect of any payments chargeable under the head 'Salaries' if (a) the same are payable outside India, and (b) if tax has not been paid or deducted thereon under Chapter XVII B of the Act.

10 key takeaways from Companies Amendment Bill, 2016

Companies Amendment Bill, 2016 (the bill) was introduced in Lok Sabha on 16^th March, 2016. Most of the amendments proposed in bill are broadly aimed at addressing difficulties in implementation of provisions of Companies Act, 2013.

Key amendments proposed in the bill are as follows:

  1) Appointment of auditors: It has been proposed to do away with the requirements of annual ratification by members with respect to appointment of auditors. Further, under the exisitng provisions, the auditor who has resigned from the company needs to file Form No. ADT-3 with the company and ROC. His failure to do so may attract maximum penalty of Rs 5 lakhs. Now it has been proposed to reduce such penalty to Rs 50,000. However, such penalty should not exceed the remuneration of auditor.

  2) Prohibition on loan or guarantee: Bill seeks to limit the prohibition on loans, advances, etc., to any person in which any of the director is interested in. It has been proposed to allow companies to give loan's or guarantee's or provide security to any person in whom any of the director is interested in subject to passing of special resolution by the company and utilisation of loans by the borrower for its principal business activities.

  3) Restrictions on layers of investment companies: Under the existing provisions a company shall make investment through not more than two layers of investment companies. The Bill proposes to delete the restrictions on layers of investments.

Govt. lowers interest rates on small savings schemes; interest on PPF reduced to 8.1%

Every year in the month of March, the Finance Ministry notifies the interest rates on various Small Savings Schemes for the next financial year.

However, as per the Press Release of the Government, dated 16th February, 2016, instead of annual resetting of interest rates for the next financial year, the interest rates now on will be reset a er every quarter based on the G-Sec yields of the previous three months.

Accordingly, interest rates on various Small Savings Schemes for the 1st quarter of 2016-17 have been notified by the Government considering the G-Sec yields for the months of December 2015 to February 2016. The rates of interest on various small savings schemes have been notified as under: