Sum received by UK based Co. for allowing Indian telecom operators to use its Virtual Voice Network wasn’t FTS

Facts

a)    Assessee (Interroute Communications Ltd.), a UK based Company, was engaged in the business of providing international telecommunication network connectivity to various telecom operators around the world.

b)    It entered into an agreement with the Indian telecom operators, viz., Vodafone Essar South Limited and Tata Telecommunications Ltd to allow them to use its Virtual Voice Network (VVN), i.e., a facility used to connect the call to the end-operators.

c)    Assessee contended that sum received by it under the aforesaid agreement was in nature of business income and should not be taxable in India in absence of its permanent establishment in India.

d)    Assessing Officer (AO) opined that the payment received by the assessee for allowing Indian telecom operators to use its VVN should be taxable as royalty or FTS as per Article 13 of the India-UK Double Taxation Avoidance Agreement (DTAA).

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

Hike in Stamp Duty on Syndicate Loan Financing

Introduction

1. Financing of infrastructure projects by means of syndicate loan arrangements is a common practice. Syndicate financing refers to a practice wherein a loan is sanctioned to a single borrower jointly by a group of lenders generally on the same terms. These lenders are usually banks, but they can also include other financial institutions. One amongst all these lenders is designated as the lead lender who provides probable participants with a memorandum including borrower specific information. The lead lender also acts as the security trustee on behalf of all other lenders, therefore, it holds the mortgaged property for and on behalf of all other lenders.

StampDuty is a type of government tax which is attracted on every instrument in form of a document by which any rights or liabilities are to be created, transferred, limited, extended, extinguished or recorded. A mortgage deed for the purpose of the Stamp Act is an instrument, hence, applicable, stamp duty is applicable. Therefore, in the syndicate loan financing model the single mortgage deed executed between the borrower and the security trustee (lead lender) would be constituted as an instrument, hence, amenable to stamp duty. Whether such instrument would constitute to encompass only one transaction or whether such instrument shall encompass to include multiple transactions with all other lender banks was the question raised before the Supreme Court.

Facts of the Case

2. In the present case of Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd.[C.A. No. 6054 of 2015, dated 11-8-2015] the respondent Coastal Gujarat Power Ltd. ("CGPL") needed financial assistance for setting-up an ultra-mega power project in the area of Kutch-Bhuj. For that purpose it secured assistance from a few lenders. The lenders, i.e., financial institutions, which were thirteen in number, formed a consortium as a trust and executed a security trustee agreement ("STA") inter se appointing one banker, viz,. the SBI as the security trustee.

CGPL had executed an 'Indenture of Mortgage for Delayed After Assets Deed' ("Mortgage Deed") with the SBI, mortgaging its assets as mentioned in the deed itself. The said document was presented for registration by paying stamp duty of Rs. 4,21,000/- and the deed was registered. However, according to the Stamp Authority, CGPL was liable to pay Rs. 54,62,000/- as stamp duty on the said deed and, hence, demanded the balance amount of Rs. 50,41,000/- from CGPL.

2.1 Applicable Law - For the purpose of this case the following provisions of the Stamp Act are relevant:

2.1-1 Section 2(1) - Defines "instrument" to include every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit policy of insurance, transfer of share, debenture, proxy and receipt.

2.1-2 Section 5 deals with - Instrument relating to several distinct matters or distinct transactions: Any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instrument, each comprising or relating to one of such matters or distinct transactions, would be chargeable under this Act.

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ICSI allows 10 secretarial audits for practicing Company Secretaries for F.Y. 2016-17

The Council of Institute of Company Secretaries of India (ICSI) has reviewed the existing limit for issue of ‘Secretarial Audit Report’ by ‘Practicing Company Secretaries’ (PCS). The Council has also issued set of FAQs to clarify questions relating to the limits of Secretarial Audit. The key takeaways from revised limits are enumerated hereunder:

1.  10 Secretarial Audits allowed per PCS for F.Y. 2016-17 : The Council has fixed 10 Secretarial Audits per partner/Practicing Company Secretary (‘PCS’) for financial year 2016-17.        

Additional 5 Secretarial Audit Reports for peer reviewed unit : The council has allowed PCS to carry out an additional 5 Secretarial Audits in case he has been peer reviewed. With regard to queries as to whom the 5 additional secretarial audit reports would be allowed-whether to individual partners or the practice unit as whole? And whether there is any overall cap on limit on issuing of Secretarial Audit Report? The council clarified that the limit of 5 additional secretarial audits of Peer Reviewed Unit is to be considered as 5 secretarial audits for each individual partner, subject to overall limit of 15 secretarial audits per individual 

Cancellation of agreement on non-completion of construction of house won't effect sec. 54 relief

Facts

a)  Assessee earned capital gain on sale of a residential house property. Thereafter, he paid certain amount to one 'M' for purchase of another residential house property and, accordingly, claimed exemption under section 54.

b)  In terms of agreement, 'M' had to transfer house property to assessee after getting it constructed. However, in view of failure of 'M' to complete construction of property, purchase agreement was cancelled and amount was refunded to assessee.

c)  Assessing Officer (AO) taking a view that assessee neither purchased nor constructed a new house property within the time-limit stipulated in section 54, rejected his claim for exemption.

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

Amendments to transfer pricing provisions can be prospective only: Mumbai ITAT

Amendments to the anti-abuse legislations such as transfer pricing provisions can only be given prospective effect. Therefore, Explanation to Section 92B inserted by Finance Act, 2012, though stated to be clarificatory and effective from 1st April 2002, has to be necessarily treated as effective from the Assessment Year 2013-14

Issue

“Whether amendments to transfer pricing provisions can only be prospective and not retrospective?”

The Mumbai ITAT held as under-

1)    Transfer pricing provision is in the nature of a SAAR (specific anti-abuse rule), and that every anti-abuse legislation, whether SAAR (specific anti abuse rule) or GAAR (general anti-abuse rule), is a legislation seeking the taxpayers to organize their affairs in a manner compliant with the norms set out in such anti-abuse legislation.

2)    An anti-abuse legislation does not trigger the levy of taxes; it only tells you what behaviour is acceptable or what is not acceptable.

An advance or debt is a capital asset; loss on sale of debt allowed as short-term capital loss

Facts

a)  Assessee, a foreign company, granted loan of € 90,00,000 to its subsidiary in India.

b)  It sold the aforesaid debt for € 7,31,000 as its subsidiary ran into serious financial crisis. The assessee claimed short term capital loss on this transaction of sale of debt.

c)  Assessing Officer (AO) disallowed claim of assessee on ground that loan couldn’t be treated as capital asset under Section 2(14).

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

Report of the Company Law Committee -II

I. Introduction:

The first part of this article was published in Taxmann's Corporate Professionals Today ,Vol. 35 , February 16 To 29, 2016, Pp. 325-339.

Carrying forward the spirit of enhancing 'ease of doing business' the Central Government has accepted mostly all recommendations of the Company Law Committee Report submitted in February,2016 and introduced the Companies (Amendment) Bill,2016 in the Lok Sabha on 16^thMarch 2016. Major changes introduced in the Bill include -

•		Allowing incorporation of companies without specific object clause;
•		Raising money through private placement without regulatory oversight and just by filing return of allotment;
•		Allowing six months remedial period when minimum membership of a company falls below the prescribed minimum level;
•		Allowing authentication of documents by any employee of the company authorised by the Board;
•		Complexity involved in the preparation of prospectus arising out of dual compliance of company law and SEBI requirements is removed by elimination company law requirements - Matters to be stated in the prospectus and reports to be included therein shall be as per the SEBI Guidelines to be developed in consultation with the Central Government;

No penalty on co. if cash in excess of Rs. 20,000 was received from directors for meeting business exigency

Facts

a)    Assessee, a private limited company, received share application money of Rs. 5 lakh in cash from its directors.

b)    Assessing Officer (AO) imposed penalty on it under Section 271D for violating the provisions of Section 269SS since the amount had been received in cash exceeding the limit of Rs. 20,000.

c)    Assessee contended that amount was received to meet business exigency warranting immediate discharge of certain liability. Therefore, such genuine transactions would not attract penalty under section 271D as envisaged in section 273B.

d)    Commissioner (Appeals) confirmed the order of the AO. Aggrieved assessee filed the instant appeal before the tribunal.

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.