TMI Tax Updates - e-Newsletter
January 27, 2016
Case Laws in this Newsletter:
Articles
By: CA Akash Phophalia
Summary: The article discusses GSTR-1, a monthly return that taxpayers, excluding compounding taxpayers and ISD, must file by the 10th of the following month. It outlines the components of the return, including taxpayer details, turnover, and invoice-level supply information for B2B and inter-state B2C transactions. Specific requirements for using HSN codes for goods and accounting codes for services based on turnover are detailed. The return also includes revisions of previous invoices, modifications, and details of exempted and non-GST supplies. Proper documentation is emphasized as crucial for accurate filing, with potential future improvements anticipated.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: In a Supreme Court case concerning a Managing Director of a company, the respondent alleged that the company sold a vehicle with a different engine than invoiced, leading to a criminal complaint for cheating. The Magistrate issued summons, but the appellant contested the complaint's validity, citing lack of jurisdiction and mens rea. The High Court dismissed the appellant's plea, prompting an appeal to the Supreme Court. The Supreme Court found the allegations against the Managing Director vague and noted the absence of the company as a party in the complaint. Consequently, the Supreme Court quashed the criminal proceedings against the Managing Director.
News
Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 67.6428 on January 25, 2016, slightly lower than the previous rate of Rs. 67.7480 on January 22, 2016. Exchange rates for other currencies against the Rupee were also provided: the Euro was Rs. 73.1219, the British Pound was Rs. 96.7360, and 100 Japanese Yen was Rs. 56.93 on January 25, 2016. These rates are based on the US Dollar reference rate and cross-currency quotes. The Special Drawing Rights (SDR) to Rupee rate will also rely on this reference rate.
Summary: The Ministry of Corporate Affairs launched the Central Registration Centre (CRC) on Republic Day 2016 to enhance the speed and efficiency of incorporation services. This initiative is part of Government Process Re-engineering, focusing on automating approval processes, revising rules, and involving professionals for faster manual scrutiny. Initially, the CRC will handle online applications for name availability, aiming to process them by the next working day. Operations begin on January 27, 2016, with plans to expand services. This effort aligns with the ministry's goal to improve the Ease of Doing Business, ensuring quicker, uniform, and monitored application processing.
Summary: The Gold Monetisation Scheme, launched on November 5, 2015, has been updated to enhance customer participation. Key changes include allowing premature redemption of Medium and Long Term Government Deposits after 3 and 5 years, respectively, with reduced interest. Banks will receive a 2.5% commission covering service fees. Gold depositors can now directly approach refiners, and the Bureau of Indian Standards has eased licensing for refiners. Licensed jewellers can apply to act as Collection and Purity Testing Centres. The scheme now allows deposits of any gold purity, with banks able to hedge short-term deposits. Tax exemptions remain for interest and capital gains. As of January 20, 2016, 900.087 kilograms of gold have been mobilized.
Notifications
Companies Law
1.
F. No. A-42011/03/2016-Ad.II - dated
22-1-2016
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Co. Law
Central Government establishes a Central Registration Centre (CRC) having territorial jurisdiction all over India
Summary: The Central Government has established a Central Registration Centre (CRC) with nationwide jurisdiction to process and dispose of applications for name reservations under the Companies Act, 2013. The CRC will operate under the administrative control of the Registrar of Companies, Delhi, until a separate Registrar is appointed. It will handle applications filed via e-Form No. INC-1, while name approvals in e-Form No. INC-29 will remain with the respective jurisdictional Registrars. The CRC is located at the Indian Institute of Corporate Affairs in Gurgaon, Haryana, and the notification takes effect from January 26, 2016.
2.
F. No. 1/13/2013 CL-V-part-II - dated
22-1-2016
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Co. Law
Companies (Incorporation) Amendment Rules, 2016
Summary: The Companies (Incorporation) Amendment Rules, 2016, effective from January 26, 2016, amend the Companies (Incorporation) Rules, 2014. Key changes include the omission of certain sub-clauses in rule 8 and sub-rules 3 and 4. Rule 9 is revised to specify that applications for name reservation must be submitted using Form No. INC.1, subject to approval by the Registrar, Central Registration Centre. Rule 36 is amended to allow three opportunities for document resubmission, with a total period not exceeding thirty days. The existing Form No. INC-1 is replaced with a new version.
Customs
3.
F. No. A. 50050/20/2015-Ad.1C (CESTAT) - dated
21-1-2016
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Cus
Customs, Excise & Service Tax Appellate Tribunal (Procedure for Appointment as President) Rules, 2016
Summary: The Customs, Excise & Service Tax Appellate Tribunal (Procedure for Appointment as President) Rules, 2016, were established by the Central Government under the Customs Act, 1962. These rules outline the procedure for appointing the President of the Tribunal, which includes advertising vacancies and requiring applications through relevant registrars. A Selection Committee, comprising members such as the Chief Justice of India or a Supreme Court Judge, and various government secretaries, will recommend candidates. The committee must have a quorum of three members, including the Chairman, and will propose a prioritized list of three candidates. Medical fitness is a prerequisite for appointment.
Income Tax
4.
F. No. Q.23016/6/2015-Ad.IC(AAR) - dated
21-1-2016
-
IT
Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) Rules, 2016
Summary: The Authority for Advance Rulings (Procedure for Appointment as Chairman and Vice-Chairman) Rules, 2016, outlines the process for appointing the Chairman and Vice-Chairman of the Authority. The rules state that vacancies will be advertised openly, and applications must be submitted through the Registrar of the Supreme Court or High Court. A Selection Committee, including members from the judiciary and various government departments, will oversee the appointment process. The committee will recommend a panel of three candidates for each position. Appointees must be declared medically fit by a Medical Board constituted by the Central Government.
Highlights / Catch Notes
Income Tax
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Company's Trading Activities Reclassified: Recognized as Business Income, Not Income from Other Sources by Tax Authorities.
Case-Laws - AT : When the trading by the assessee company is accepted by the Revenue as incidental to its main business during the earlier years, the income cannot be treated as income from other sources rather it is a business income - AT
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Late Fee u/s 234E Cannot Be Imposed During Return Processing u/s 200A of Income Tax Act.
Case-Laws - AT : Charging of late fee u/s 234E while processing the return u/s 200A - While processing the return u/s 200A of the Act, the ld.AO cannot impose levy of fees under section 234E - AT
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Court Rules Transfer of Development Rights Liable for Long-Term Capital Gains Tax on Rs. 17.50 Lakhs Property Share Sale.
Case-Laws - AT : Addition on account of long term capital gain on transfer of development rights of undivided share in a property - the assessee was only liable for long term capital gains on the considered received, i.e. ₹ 17.50 lakhs on transfer of her 1/4th share in the property. - AT
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"Authority to Guarantee Charges" Not Subject to TDS u/s 194H Due to Lack of Agent-Principal Relationship.
Case-Laws - AT : TDS u/s 194H - whether expenditure towards “Authority to Guarantee charges” falls within the ambit of section 194H or not?- Held no - The requirement of an agent and principal relationship is found absent in this case - AT
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Interest Income Taxable Once Credited and Tax Deducted, Even if Not Received by Individual.
Case-Laws - AT : Addition on interest income on the basis of AIR data - once the interest amount has been credited to the assessee and tax has been deducted by the payer, the assessee cannot take the plea of not offering the income on the ground that he has not actually received the same. - AT
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Interest-Free Loan to Sister Concern Justified for Business Purpose, Interest Expenditure Allowable u/s 36(1)(iii.
Case-Laws - AT : Disallowance of interest expenditure under section 36(1)(iii) - assessee has a business interest in the sister concern, therefore, advancement of interest free loan to the sister concern can be considered to be for commercial expediency. - AT
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Club membership fees for employees are allowed u/s 37 of the Income Tax Act; disallowance removed.
Case-Laws - AT : Club membership fees paid for employees is allowable u/s 37 - assessee has given detailed list of persons for whom the membership is taken. Therefore disallowance of club membership is deleted - AT
Customs
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Appellant's Good Faith Purchase Confirmed; No Penalty Imposed; Duty Demand Set Aside by Commissioner.
Case-Laws - AT : The appellant who is the second purchaser, bought the car from the first purchaser i.e. M/s. HFCL after a year or so, was not at all aware of the mischief played by the importer. His bonafides are confirmed by the Commissioner, who did not impose any penalty on him - demand of duty set aside - AT
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Customs Authorities Can Verify Basmati Rice Exports for Compliance with AGMARK Standards and DGFT Policy Circular.
Case-Laws - AT : Export of Basmati Rice - length and breadth, of the grain - AGMARK standards - DGFT policy circular has clearly indicted that the same may be done - the goods are described in the Customs Notifications (Supra) as "Basmati Rice", and therefore Customs Authorities are fully justified to verify the impugned goods are Basmati Rice or not - AT
Corporate Law
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Amendments to Company Incorporation Rules 2016: Streamlined Process, Enhanced Compliance, and Improved Governance for Easier Business Operations.
Notifications : Companies (Incorporation) Amendment Rules, 2016 - Notification
Indian Laws
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High Court Affirms Money Laundering as Cognizable Offense: Arrests Without Warrant Allowed u/s 4 of Cr.P.C.
Case-Laws - HC : Money Laundering - offenses are bailable or not - whether the offence is cognizable or non-cognizable - as noticed, Section 4 provides for punishment for more than 3 years and thus offences would be cognizable as provided in the Cr.P.C. itself - HC
Service Tax
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Court Rules 'Pouring' and 'Signing' Fees as Taxable Business Auxiliary Services, Not Sale of Space and Time.
Case-Laws - AT : Import of services - 'pouring fees' and 'signing fees' - clearly the service activity involved is not sale of space and time as contended by the appellant. What is sold is the right to advertise and promote the product of the CCIPL - Appellant provided BAS to its client CCIPL on which tax is payable - AT
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Mumbai Service Tax Notice Error: Commissioner Lacked Authority to Independently Adjudicate Nationwide Services Case.
Case-Laws - AT : Territorial Jurisdiction - SCN issued by Mumbai Office of Service Tax Department for whole of India offices -The Commissioner should have refrained from adjudicating and instead could have initiated the process of making show cause notice answerable to the jurisdictional Commissioners or he should have written to the Central Board of Excise and Customs seeking power to adjudicate the case of services rendered pan India - AT
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Extended limitation period not applicable for real estate agent service valuation; Section 78 penalty not sustainable. Cum tax benefit granted.
Case-Laws - AT : Extended period of limitation - Valuation - Real Estate Agent services - inclusion of administrative charges/transfer charges recovered by it from its clients - Extended period in this case is not invocable and therefore penalty u/s 78 ibid is also not sustainable - The appellant is eligible for the cum tax benefit - AT
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ICICI Bank's Marketing Activities Face Service Tax Demand for Non-Compliance with Business Auxiliary Service Rules.
Case-Laws - AT : Marketing and advertising activities undertaken for ICICI Bank - The respondent has not been able to demonstrate as to how and on what basis it had a bonafide belief that the impugned service did not fall under BAS. - Demand of service tax confirmed - AT
Central Excise
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Appellant's Leaflets Not Branded Goods; Turnover Included in Aggregation for Notification Limit Calculation.
Case-Laws - AT : SSI Exemption - The leaflets manufactured by the appellant are not branded goods since that was not traded as such for purchase by general public. Such fundamental test negates stand of the appellant that it manufactured branded goods. Accordingly, turnover therefrom shall enter into aggregation process to compute the limit prescribed by the Notification - AT
VAT
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VAT Not Applicable for Out-of-State Sales in Gujarat; Sweetening Natural Gas Not Considered Manufacturing.
Case-Laws - HC : Levy of VAT / Sales Tax - Since the the sale of goods has taken place outside the State of Gujarat, the question as to whether or not subjecting the Natural Gas to the process of sweetening amounts to manufacture becomes redundant, and hence, it not necessary to enter into the merits of the question as to whether or not the processing of the Natural Gas at ONGC’s sweetening and separation facility at Hazira, whereby the sour gas is converted into sweetened gas, amounts to manufacture. - HC
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High Court Rules Stone Crushing Not Manufacturing Under TNGST Act; No Input Tax Credit for Crusher Machines.
Case-Laws - HC : Input Tax Credit on the capital goods - crushing of stone is manufacturing activity or not. - TNGST - the crusher machine cannot be treated as capital goods - HC
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