Key changes in new income-tax return forms

Every year CBDT notifies new Income-Tax Return (ITR) forms. However, in the recent past CBDT had notified ITR forms a bit late causing inconvenience to various tax practitioner and taxpayers in filing ITRs within prescribed time. Thus, we have witnessed a spate of writ petitions in the various High Courts for extension of due date of filing return.

The Delhi High Court in case of Avinash Gupta v. Union of India [2015] 63 taxmann.com 121 (Delhi) criticized the Government for its delay in notifying ITR forms every year. The Delhi High Court made following remarks:

There appears to be no justification for delay beyond the assessment year in prescribing the ITR forms. Accordingly, the respondents are directed to, with effect from the next assessment year, at least ensure that the ITR form should be available as on 1st April of the assessment year unless there is a valid reason therefor.

Thus, considering such suggestion of the High Court the Government has now notified the ITR forms, namely, ITR-1, ITR-2, ITR-2A, ITR-3, ITR-4, ITR-4S, ITR-5, ITR-6 and ITR-7 on March 31, 2016.

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.

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.