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:

Sec. 50 applies only to seller of property and not to buyer of property

Facts

a)    Assessee purchased a property for a consideration of Rs. 48 lakhs. The Assessing Officer (AO) observed that the stamp duty value of such property was much higher than the consideration declared by the assessee.

b)    AO treated stamp duty value as fair market value of such property as per section 50C and, accordingly, made addition under section 69B by treating the differential amount as unexplained investment.

c)    CIT(A) set aside the order of AO by holding that section 50C applies only to seller of property and not to buyer of property.

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

SEBI proposes 25 % votings rights as threshold level to trigger 'control' under Takeover Code

Last week, the SEBI, in its board meeting had considered and approved the proposal for initiation of public consultation process regarding the introduction of brightline tests for acquisition of ‘control’ under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Code”). The SEBI noted that multiple regulators apply the test of control from di􀁹erent perspectives and arrive at di􀁹ering results which may lead to ambiguity.

In pursuance of the SEBI Board meeting, a discussion paper has been released seeking public comments for proposals related to Brightline Tests for Acquisition of ‘Control’ under the Takeover Code.

In the discussion paper, the SEBI has proposed to amend the definition of control to define it as: (a) right or entitlement to exercise at least 25% of voting rights of a company irrespective of whether such holding gives de facto control and/or (b) the right to appoint majority of the non-independent directors of a company.

Notice served on old address couldn't be quashed if assessee didn't intimate the new address to dept.

Facts

a)    The case of the assessee was selected for scrutiny and, accordingly, notice under section 143(2) was issued upon him. The notice was generated through the software application of the Income-tax Department and was sent to the assessee at the address given in the return of income.

b)    Assessee filed an affidavit stating that said notice was not served. However, in affidavit, assessee had not furnished any reasons or evidences as to why notice sent at correct address could not be served on assessee.

c)    It was noticed that address of assessee in affidavit was different from address provided in return of income, which showed that assessee had changed his address and new address was not communicated to Income-tax Department.

Rationalization of Service Tax Abatements and various relief measures

I. Rationalization of Abatements – w.e.f. 1st April 2016 in Notification No.26/2012-ST:

1.0 Passenger/Goods Transportation by Rail – credit on input services extended:

 ♦ Earlier, the notification provided for abatement subject to not taking cenvat credit on inputs, capital goods and input services.

 ♦ The restriction regarding availment of credit on input services has been removed.

 ♦ Given the fact that such abatement is mainly given to take care of the goods portion there was no justification to restrict the credit on input services as the output service suffered tax.

 ♦ This amendment enables taking of credit on input services eventhough abatement is availed.

2.0 Transport of Goods in Containers by Rail – credit on input services extended:

 ♦  Abatement of 70% was available subject to non-availment of credit on inputs, input services and capital goods.

 ♦  Now the abatement is restricted to 60% with cenvat credit benefit on input services.

Government restores exemptions to boost infrastructural projects

I. Introduction:

With affirmation on the economic development of the country as against the global slowdown, the Hon'ble Finance Minister Mr. Arun Jaitley presented its third Union Budget for 2016-17. During the budget speech, the Finance Minister flagged various issues which are in the top most priority of the Government. One of such issue which ranks high in the agenda ever since Mr. Narendra Modi came in power is to make the tax laws of the country transparent and predictable. The Government has been vehemently promoting against retrospective amendments which imposes an unforeseeable burden on the tax payer. In the current budget, the Government has proposed to introduce three new sections under service tax law namely 101,102 and 103 so as to restore certain exemptions where were withdrawn in the previous years.

In order to understand the impact of these new sections, it is relevant to refer to serial numbers 12 and 14 of the Mega Exemption Notification 25/2012-ST dated 30.06.2012 as it stood at the time of its introduction and the subsequent amendments which happened over the years.

SEBI debars wilful defaulters from accessing capital markets

SEBI, in its Board Meeting held on March 12, 2016, approved of certain new initiatives which include imposing restrictions on wilful defaulters, proposing brightline tests for acquisition of ‘control’ under the SEBI Takeover Regulations, 2011, reviewing the manner of dealing with Audit Reports containing qualifications and approving the Budget for 2016-17. The decisions taken by the SEBI Board will have an impact on the overall market, market participants and also on the market intermediaries. The key decisions taken by the SEBI board are discussed as hereunder:

I. Certain restrictions imposed on wilful defaulters: With an intention of restricting wilful defaulters from accessing capital markets for raising funds from public, SEBI Board has approved of the following proposals:

a) Wilful defaulter to be debarred from raising funds : SEBI has proposed to prohibit the issuer company from making public issue of equity securities or debt securities or nonconvertible redeemable preference shares if such issuer company or its promoter or its directors are in the list of wilful defaulters.

b) Wilful defaulter to be restricted from taking control over other entity : If any company or its promoter or its director is categorized as ‘wilful defaulter’, then such person may not be allowed to take control over other listed entity.

However, if listed company or its promoter or its director is categorized as ‘willful defaulter’, and there is a take-over Code, 2011.

c) Criteria for determining ‘fit and proper person re-defined’ : SEBI also proposes to amend the criteria for determining a ‘fit and proper person’ in the SEBI Regulations to include that no fresh registration shall be granted to any entity if the entity or its promoters or its directors or key managerial personnel, as defined under the SEBI (ICDR) Regulations, 2009, are included in the list of ‘wilful defaulters’.