Digital Economy: Equalisation Levy

In this era of technology intertwined lifestyle, e-commerce has become a way of life. E-commerce seemingly facilitates every other aspect of our lives at a click of a button, whether its procurement of daily household items or requisitioning of any particular service. Today, accessibility to the digital world is not a privilege but a necessity for most people, particularly in urban areas.

Over the past few decades, the burgeoning development of the Information and communication technology ('ICT'), its accessibility and affordability has led to this digital revolution around the world. ICT has also provided opportunity to businesses to tap the world markets and bridge the requirement of physical presence across the globe.

The model of doing business electronically has provided immense growth opportunities.Digital economy across the world is reflecting a growth rate of 10%¹ which is significantly higher than the growth numbers of the global economy as a whole. Research and studies around the world have indicated that investment in ICT positively affects the productivity and GDP growth of a country. Developed countries in terms of ICT development have the highest GDP levels, which indicates that implementation of ICT in a country improves its overall economic health.

Lower tax rate of DTAA would apply even if assessee omitted to fill up schedule of ‘Special Income’ in ITR

Facts

a)  Assessee, a company incorporated in Cyprus, received interest in respect of investment made in debentures of an Indian Company.

b)  The said interest income was offered to tax at the rate of 10% purportedly in line with the provisions of Article 11(2) of the India-Cyprus Double Taxation Avoidance Agreement (DTAA).

c)  Assessing Officer taxed interest income at normal rate of 43.23 % on ground that assessee did not fill up the 'Special Income' (SI) schedule in the return of income.

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

New composition scheme of Tax of 5% under Delhi VAT

A new composition scheme has been notified under the Delhi VAT Act Vide Notification No. F.3(29)/Fin(Rev-I) 2015-2016/dsvi/93 dated 18.3.2016 with effect from 1.4.2016 for every registered dealer -

(i)		whose turnover during the preceding year as well as expected turnover during current year does not exceed Rs.50 lacs; and
(ii)		who is not making any sales other than that of ready to eat foods and non-alcoholic beverages including cooked food, snacks, sweets, savouries, juices, aerated drinks, tea & coffee etc. and served in or catered indoors or outdoors by hotels, restaurants, sweet-stalls, sweet shops, clubs, caterers & any other eating houses.

Such dealer may elect for the new composition scheme and pay tax @ 5% of the entire turnover. The electing registered dealer shall comply with the conditions and restrictions specified in this notification, such as, -

Depreciation should be allowed on trademark, even though it may not be registered in name of assessee

Facts

a)  Assessee acquired business of a company including its trademark. It claimed depreciation on cost incurred on acquisition of such trademark.

b)  Assessing Officer (AO) disallowed depreciation on ground that trademark was not registered in the name of assessee.

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

FAQs on Panama Papers

1. What are the 'Panama Papers'?

The 'Panama Papers' are a set of confidential documents leaked from one of the biggest law firms of Panama - 'Mossack Fonseca'. The Panama Papers provide information about thousands of offshore entities, identities of their shareholders and directors. It listed various world leaders, public officials, billionaires, celebrities, sports stars and politicians.

2. How much data has been leaked and by whom?

a)  The leaked data consists of 11.5 Million Documents in around 2,600 GB taken from the Mossack Fonseca's internal database by one of its employees.

b)  These documents were obtained by Sueddeutsche Zeitung, a daily newspaper headquartered in Munich, Germany. Sueddeutsche shared the Panama Papers with the Washington-based International Consortium of Investigative Journalists (ICIJ) and other news outlets, including the BBC, the Guardian and the Indian Express.

c)  Sueddeutsche mentioned that an employee at the law firm had leaked the data, telling the newspaper that he had risked his life in doing so.

Provision allowing auditing by CMAs under Karnataka Societies Act doesn't encroach on CA profession

Karnataka Co-operative Societies Act, 1959 : Karnataka High Court rejected writ petition filed by 'Karnataka State Chartered Accountants Association' challenging the amendment to the Karnataka Co-operative Societies Act, 1959 (KCS) which allowed auditing of accounts by Cost Accountant or Cost Accountants Firm saying it to be statutorily governed and denied to interfere with same.

• Amendment to the definition of Auditor under the Karnataka Co-operative Societies Act, 1959 to include a Cost accountant, within the meaning of Cost and Works Accountants Act, 1959 couldn't be said to null and void and ultra-vires the Constitution of India and Central Legislatures as it did not result in encroachment on the profession of Chartered Accountants.

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.