TMI Tax Updates - e-Newsletter
January 11, 2014
Case Laws in this Newsletter:
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Companies Act, 2013, outlines various types of companies, including associate companies, banking companies, and body corporates. It defines companies limited by guarantee and shares, foreign companies, and government companies. Holding and subsidiary companies are distinguished by control and ownership structures. Listed companies have securities on recognized exchanges, while private companies restrict share transfers and public invitations. Public companies have higher capital requirements, and small companies have limits on capital and turnover. Unlimited companies lack liability limits, while Section 8 companies focus on charitable objectives. Nidhi companies promote savings and lending among members, adhering to specific regulations.
News
Summary: The Bank of Japan and the Reserve Bank of India have expanded their Bilateral Swap Arrangement from USD 15 billion to USD 50 billion, effective immediately. This agreement, signed by the respective governors, aims to address potential short-term liquidity issues and support existing international financial arrangements. It reflects efforts to strengthen cooperation between Japan and India and is expected to contribute to the stability of global financial markets, including those in emerging economies. The arrangement will remain effective until December 3, 2015.
Summary: The Central Statistics Office released the Quick Estimates of the Index of Industrial Production (IIP) for November 2013, showing a general index of 162.4, a 2.1% decrease from November 2012. The period from April to November 2013-14 saw a cumulative growth of -0.2%. Sector-wise, mining grew by 1.0%, manufacturing declined by 3.5%, and electricity rose by 6.3%. Ten of the 22 manufacturing industry groups recorded negative growth, with the Radio, TV, and communication equipment sector experiencing the largest decline at -42.2%. Consumer goods saw an overall decline of -8.7%, while basic, capital, and intermediate goods had modest growth.
Notifications
Income Tax
1.
74/2013 - dated
27-12-2013
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - VEERAYATAN & SHRI SHIV SHAKTI DHAM EDUCATION AND CHARITABLE TRUST
Summary: The Central Government, under Section 35AC of the Income-tax Act, 1961, has approved projects by two institutions for tax deductions. Veerayatan is approved for operating a primary school in Kutch, Gujarat, with an estimated cost of Rs. 7 crore, eligible for deduction over the financial years 2013-14 to 2015-16. Shri Shiv Shakti Dham Education & Charitable Trust is approved for providing free education and welfare programs for SC/ST and Adivasi girls and women in South Gujarat, with an estimated cost of Rs. 3.96 crore, also eligible for deduction over the same period. This notification is valid for three years.
Circulars / Instructions / Orders
VAT - Delhi
1.
F/V Audit/Spl. Audit/2012 - dated
23-12-2013
REGARDING FEES/REMUNERATION FOR SPECIAL AUDIT OF DEALERS UNDER SECTION 58A OF DVAT ACT, 2004
Summary: The circular outlines the fees for Chartered Accountants or CA firms conducting special audits of dealers under Section 58A of the DVAT Act, 2004. The fees are structured based on the dealer's turnover, ranging from Rs. 15,000 for turnovers less than Rs. 50 lakhs to Rs. 4,00,000 for turnovers exceeding Rs. 1000 crore. Local conveyance costs are reimbursable if the auditor's travel exceeds 8 km, capped at 10% of the audit fee. Service tax applies, but travel and daily allowances are not provided for audits outside Delhi. Auditors must submit bills to the Zonal Additional/Joint Commissioner for verification and processing.
Highlights / Catch Notes
Income Tax
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High Court Confirms Additions for Late PF and ESI Deposits; Examines Section 43B and Section 2(24)(x) of IT Act.
Case-Laws - HC : Employees' contribution to PF and ESI - failure to deposit before due date - applicability of section 43B read with section 2(24)(x) - Decision in Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT), distinguished - additions confirmed - HC
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TPO's Adjustment on 5% Markup for FOB Exports Lacks Support Under Transfer Pricing Rules, Deemed Arbitrary.
Case-Laws - HC : Whether the arm’s length price applying the TNMM method was contrary to the transfer pricing provisions – The TPO’s arbitrary exercise of adjusting the cost plus mark up of 5% on the FOB value of exports finds no mention in the IT Act nor the Rules - HC
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Court Upholds Disallowance of Short-Term Capital Loss Due to Unproven Transactions and Artificial Loss Creation.
Case-Laws - HC : Disallowance of short term capital loss - creation of artificial loss - assessee appellants failed to discharge the onus, to prove the genuineness of the transactions of purchase and sales of such shares - HC
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Penalty for Incorrect Tax Claims u/s 271(1)(c) Only If Intent to Evade is Proven.
Case-Laws - HC : Penalty u/s 271(1)(c) - Where an assesse has exercised a bona fide right but the deductions or exemptions so claimed are found to be incorrect, penalty would follow only if the claim is raised with intent to furnish incorrect particulars and to evade tax - HC
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Section 94(7)(b) of Income Tax Act applies to speculative trading in shares from Dec 26, 2003, to Mar 26, 2004.
Case-Laws - HC : Line trading in shares - speculative transaction - The period of three months reckoned from the date of purchase of the units on 26.12.2003, would expire on 26.3.2004 - provisions of Section 94(7)(b) were fully applicable - HC
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Court Rules Revenue's Valuation Discrepancy Not Unexplained Investment; Rejects Rs. 2,35,933/- Claim Based on DVO Report.
Case-Laws - HC : Valuation of property - The difference in the valuation which has been claimed by the revenue as per the valuation report of the DVO amounting to Rs. 2,35,933/- on estimate basis cannot be said to be unexplained investment - HC
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CIT Can Revise Decisions to Correct Taxpayer Errors in Exemption Claims u/s 264 of Income Tax Act.
Case-Laws - HC : Power of CIT u/s 264 - Revision in favor of assessee - Power under Section 264 of the Act, is wide enough, to include rectification of a “bonafide” error committed by an assessee, while claiming exemptions, under the Act - HC
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High Court Affirms Tribunal's Decision on Discrepancy in Construction Costs Due to Lack of Quantitative Records.
Case-Laws - HC : Undisclosed investment - The assessee failed to maintain quantitative details of major building material used in the construction of the building - In view of the cost of construction disclosed by the assessee in the regular books of account vis-a-vis the cost of construction determined by the DVO, the variance was not within the range of 15% - The Tribunal was right in sustaining addition - HC
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Capital Investment Status Unchanged Despite Anticipated Resale; Motivation for Increased Value Doesn't Affect Classification.
Case-Laws - HC : A capital investment and resale do not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and the possibility of enhanced values motivated the investment - HC
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Lump Sum Fees for Technical Know-How and Royalties are Allowable as Revenue Expenditure Under Tax Rules.
Case-Laws - AT : Royalty & lump sum fee – The payment of lump sum fees for the technical know-how and the royalty is allowable as revenue expenditure - AT
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Interest Income from Short-Term Bank Deposits Qualifies as Business Income for Agricultural Credit Societies u/s 80P(2)(a)(i.
Case-Laws - AT : Deduction u/s 80P(2)(a)(i) - agricultural credit society - Whether interest income on short term bank deposits and securities would be qualified as business income u/s 80P(2)(a)(i) - held yes - AT
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Private Terraces Count in Built-Up Area for Section 80IB Tax Deductions on Flats.
Case-Laws - AT : Deduction u/s 80IB - Private terrace area should be included in the built-up area of the flats for the purpose of working out statutory extent of the built-up area - AT
Corporate Law
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Supreme Court Acknowledges Good Faith Error, Applies Section 14 of Limitations Act for Jurisdictional Mistake in Filing.
Case-Laws - SC : The appellant had pursued his remedy in a bonafide manner and if it was filed in a wrong court and if he has pursued his remedy wrongly by filing it in Delhi High Court, instead of Madras High Court, principles enshrined in Section 14 of the Limitations Act clearly get attracted - SC
Service Tax
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Court Rules Goods Used in Repairs Not Included in Service Valuation for Tax; Separate Billing Confirmed.
Case-Laws - AT : Valuation - Whether the value of the goods used by the appellant while carrying out repair activities is required to be added in the value of the services - separate billing was done - Held no - AT
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Commercial Training Services Taxed: Non-University Affiliated Courses Subject to Service Tax as per Regulations.
Case-Laws - AT : Commercial training or coaching service - The applicant had not affiliated to any university till today. The courses are not recognized by any university or by the UGC. Therefore the activity undertaken by applicant comes under the scope of commercial training and coaching service - AT
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Appellants Ordered to Pay Service Tax for Services Claimed as Exported from March to November 2003.
Case-Laws - AT : Export of service - appellants are liable to pay service tax for the period 1.3.2003 to 19.11.2003 in respect of services which are claimed to be exported service - AT
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Appellant Granted Stay in Revenue-Sharing Dispute Over Broadband Infrastructure with M/s. GIPL; No Data Provided by Appellant.
Case-Laws - AT : Revenue sharing - Online information and data base access and/or retrievable services - appellant herein has not provided any data or information to M/s. GIPL and has only given the infrastructure of broadband for the use - stay grnated - AT
Central Excise
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Amendment in Rule 16: Wire Drawing Units Can Claim Payments as Duty, Benefiting Buyers of Drawn Wire.
Case-Laws - AT : Cenvat Credit - Retrospective amendment in Rule 16 is aimed at facilitating ‘wire drawing units’ - The sum paid by the wire drawing unit in such cases will be treated as duty and shall be allowed as credit to the buyer of drawn wire, in terms of the amendment. This amendment would not create any additional liability on any wire drawing unit which did not pay duty on drawn wire during the period of amendment - AT
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