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MCA

Ministry has brought out amendments relating to Corporate Social Responsibility by widening the list of entities through which companies can undertake CSR activities. Accordingly, companies can now carry on CSR activities through Section 8 company not only which is established in association with its holding or subsidiary or associate company but also with any other company and its group companies. However, participation of the company in establishment of such section 8 company is essential, which was not the position earlier. Companies may also conduct its CSR activities through unrelated Section 8 companies, provided such company shall have an established track record of 3 years.

MCA

MCA has relaxed Indian companies from Consolidation of financial statements for their foreign subsidiaries. All Companies which have 1 or more subsidiaries incorporated outside India shall not be required to consolidate such companies in its financial statements for the current financial year i.e. financial year commencing from April 1, 2014. This transitional relief is a temporary relief to Indian Companies provided for easing the consolidation challenges for companies having foreign subsidiaries.

New Road Map of AS in India

NEW DELHI: Prescribing the road map for the implementation of the new Indian accounting standards (Ind AS), the Corporate Affairs ministry on Friday specified the class of companies that have to move to the new accounting system that are close to the International Financial Reporting Standards (IFRS).


Ind AS will be applicable from the next financial year on a voluntary basis and from April 2016 it will be mandatory for companies with net worth of Rs 500 crore. Companies which have a net worth of Rs 250 crore or more but less than Rs 500 crore will have to mandatorily move to Ind AS from April 2017.

A statement from the government said that companies whose equity or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of Rs 500 Crore or more will move to Ind AS from April 1, 2016. Companies other these, but having net worth of Rs 500 Crore or more and also their holding, subsidiary, joint venture or associate companies have to mandatorily move to this standard from April 1, 2016.

The statement also said that companies with net worth of Rs 250 crore or more but less than Rs 500 crore and their holding, subsidiary, joint venture or associate companies have to mandatorily move to Ind AS from April 1, 2017. However, companies whose securities are listed or in the process of listing on SME exchanges will not be required to follow Ind AS. Such companies will continue to comply with the existing Accounting Standards unless they choose otherwise.

Once a company opts to follow the Indian Accounting Standards (Ind AS), it will be required to follow this for all the subsequent financial statements. Companies not covered by the above road map will continue to apply existing Accounting Standards prescribed in Annexure to the Companies (Accounting Standards) Rules, 2006.

The government will issue a notification for the same soon. Banking Companies, insurance companies and non- banking finance companies (NBFCs) will not be covered under this notification and will have a separate road map.

GST – Uniting India

States taken care of, Madam(s) silenced, major parties who matter in the Parliament supporting, the process to introduce the biggest indirect tax reform in India, the GST, has begun.

Bill No. 192 of 2014, The Constitution (one hundred and twenty second amendment) Bill, 2014 seeks to insert the following articles 246A, 269A and 279A in The Constitution apart from making certain amendments to already existing articles. These amendments will pave way for introduction of a dual structure Goods and Services Tax.

Article 246A is introduced in Part XI Chapter 1 titled “Legislative Relations”. This article empowers the legislature of every state to make laws with respect to goods and services tax imposed by the Union or by the State. The fear of the States that they will lose the power to legislate on tax related matter is thus allayed. However, with respect to goods and services tax where the supply of goods or services or both takes place in the course of inter-state trade or commerce the power to legislate is retained by the Parliament.

Part XII Chapter 1 titled “Finance” will be a place for the new article 269A which will address the issue of distribution of revenue between the Union and the States. The goods and services tax supplied in the course of inter-state will be levied and collected by the Government of India. The proportion of sharing of such tax between the Union and the States will be decided by the Parliament by a law on the recommendation of the Goods and Services Tax Council. Through this article the Parliament is also empowered to formulate the principles for determining the place of supply and when a supply of goods or services or both takes place in the course of inter-state trade or commerce.

Article 279A is being inserted in Part XII. It is significant to note that through this article a new authority called the “GST Council” will be constituted.  The article requires the President to constitute the GST Council within 60 days from the date the amendments contained in the bill are notified. The GST Council will comprise of the following:

Union Finance Minister – Chairperson

Union Minister of State in Charge or Revenue or Finance – Member

The Minister in Charge of Finance or Taxation or any other Minister nominated by each State Government – Members

The members of the GST Council are empowered to choose among themselves any one person to be the Vice Chairperson for such period as they may decide.

The GST Council is empowered to make recommendations to the Union and the States on:

  • The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and service tax;
  • The goods and services that may be subjected to, or exempted from the goods and services tax;
  • Model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply;
  • The threshold limit of turnover below which goods and services may be exempted from goods and services tax;
  • The rates including floor rates with bands of goods and service tax;
  • Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;
  • Special provision with respect to the states of Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
  • Any other matter relating to the goods and services tax, as the Council may decide.

The GST Council is also empowered to recommend the date from which GST shall be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel. Till such time, excise duty will continue to be levied on these products by the Centre and VAT by the States.  Alcoholic liquor for human consumption will be outside the GST and the Council shall have no power whatsoever in deciding the taxation of these goods. It is provided in the article that the GST Council shall continue to work towards creating a National market for goods and services in India that will ultimately pave way for a harmonized structure of goods and services tax. In fine print the idea is welcome but India with its diversities it will be a challenge to achieve this objective.

The amendment in article 366 seeks to introduce a much simpler definition for the term service by defining the same as “services means anything other than goods”. A similar definition is found in EU VAT.

An amendment that could have been avoided is the levy of additional tax on supply of goods in the course of inter-state trade not exceeding one percent to be levied and collected by the Government of India for a period not exceeding two years or such other period as the GST Council may recommend.

The concept of sale being replaced with supply will bring to tax free supplies in the nature of samples, compliments, testing etc. unless otherwise specifically exempted in the GST law.

The fate of indirect taxation will thus vest with the GST Council and suo moto the States will not able to decide on the rate, cesses and surcharge. Though the GST Council has only recommendatory powers yet it will have the final say in matters relating to GST. Professionals will have an important role to play in the smooth implementation as the GST law will replace number of indirect taxes, remove cascading effect and above all provide for a common national market for goods and services. The stage is thus set for a United India at least in taxation, are we ready for the Change?

Amendment in Companies (Cost Records and Audit) Rules, 2014

MCA vide notification dated 31st December 2014 has made amendment in the Companies (cost records and audit) Rules, 2014 through Companies (Cost Records and Audit) Amendment Rules, 2014. The details of amendment is reproduced as below:-

1. In rule 2
After clause (a) the following clause shall be inserted:-
(aa) Central Excise Tariff Act Heading means the heading as referred in the Additional Notes in the First schedule of the central Excise Tariff Act, 1985 [5 of 1986]

2. Rule 3 shall be substituted by the following rule:- 
Position under existing rule 3:
The existing rule 3 provides for applicability of the requirement of maintaining the cost records on the following class of companies:

  • Companies engaged in production of prescribed goods under strategic sector
  • Prescribed classes of company regulated by sectoral regulator or a ministry or department of central government

  • Companies operating in areas involving public interest

  • Company including foreign company (other than liaison offices) engaged in the production, import, supply or trading of prescribed category of medical devices.

        For each of the aforesaid classes of companies, a separate limits were prescribed for the compliance of the rule


3. Rule 3 after amendment:
Application of Cost Record - For the purposes of sub-section (I) of section 148 of the Act. the class of companies, including foreign companies defined in clause (42) of section 2 of the Act, engaged in the production of the goods or providing services, specified in the fable below, having an overall turnover from all its products and services of rupees thirty five crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account, namely:

MCA has notified the much awaited amendments to Cost Rules.

Cost Records applicable if turnover exceeds Rs.35 cr. Cost Audit applicability if turnover exceeds Rs.50 Cr (Regulated Industry), Rs.100 Cr. (Others). Refer Detailed Notification athttp://www.mca.gov.in/ Ministry/pdf/Amendment_Rules_ 01012014.pdf

Some Important Judgment come under Section- 284 of Companies Act, 1956 (Corresponding of Section-169 of Companies Act, 2013)

KHETAN INDUSTRIES PRIVATE LIMITED VS. MANJU RAVINDRA PRASAD KHETAN.

In this case it was held by the court that the shareholders have a right to remove the directors under section 284 by passing ordinary resolution and section 284 provides an inbuilt mechanism for the enforcement of the right and civil court has no jurisdiction to entertain the suit for removal of director.

LIC of India v Escorts Ltd.

As per a milestone judgment given in LIC of India v Escorts Ltd. (1986) it was held that it is not necessary to give reasons in explanatory statement for removal of a director as desired by section 173(2) (corresponding Section-102) . Reason behind this judgment given by the court was that the company is acting on the basis of a special notice given by the shareholder u/s 284 and it is not a resolution proposed by the company.

Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director

PROCEDURE FOR REMOVAL OF DIRECTOR IN TABULAR FORM:

 

1.   

(Special notice) of the intension to move a resolution for the removal of director be furnished by No. of members (according to requirement of Section- 115 of Companies Act, 2013) to the company at least 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served and the day of the meeting. (Section 169)

2.   

The company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting.

3.   

If is not possible for the company to give notice to all the members, publish by advertisement in the newspaper having an appropriate circulation not less than 7 days before the meeting.

4.   

The company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The director shall have the right to be heard on the resolution at the meeting.

5.   

The director, who is sought to be removed, can make a representation in writing against his removal and request the company to notify it to the company’s members [section 169]. If the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must

(a)

Mention in the notice of the resolution to be moved at the annual general meeting, the fact of the representation having been received; and

(b)

Send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

If the representation could not be sent to the members because it was received too late or because the company made a default in sending it, the company must read out the representation at the annual general meeting, if the director requires it to do so. In addition, director can make oral representation at the annual general meeting.

6.   

Hold and convene a General meeting to discuss besides others the following matters: To pass a [Ordinary resolution] for the removal of director.

7.   

In case of listed companies, file a copy of the proceeding of the general meeting in the Stock exchange (s) where the securities of the company are listed.

8.   

File [e-form no. 12] with the Registrar of Companies within 30 days of passing the resolution.

9.   

Pay the requisite fees, as prescribed by the Companies (Registration Offices and Fees) Rules, 2014.

10.   

Fees can be paid through Credit Card / by cash / by cheque in favour of “MCA Collection Account ICICI Bank” at the prescribed rates. http://www.mca.gov.in/Ministry/pdf/tableoffee_01042014.pdfTable of Fees given on this Link.

 

REMOVAL OF DIRECTORS UNDER COMPANIES ACT- 2013 PROCEDURE REMOVAL- DIRECTOR CA- 2013

Power to remove directors has always been bestowed on shareholders, as we all know that at the end of the day, directors are answerable to shareholders. Nothing has changed in the procedural aspect under Companies Act, 2013 as well. Shareholders can remove any director before the expiry of his tenure, except any director appointed by Tribunal for prevention of oppression and mismanagement u/s 242 and a director appointed under principle of proportional representation u/s 163.

Right to Remove a Director is Legal Right of Share Holders:

Section 169 and Chapter 7 of Companies Act, 2013 Right of Shareholders to remove a director in the General Meeting through Ordinary Resolution is a Legal Right. This legal right cannot be damaged or taken away by MOA, AOA or any other documents or Agreement.

Section 169 and Chapter 7 details the procedure of removal of director by shareholders as follows: -

A company MAY, by ORDINARY RESOLUTION, remove a director, Not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard.

The provision relating to removal shall not apply where the company has availed itself of the option to appoint not less than 2/3RD (two – thirds) of the total number of directors according to the principle of proportional representation.

A special notice shall be required of any resolution, to remove a director, or to appoint somebody in place of a director so removed.

As per Section- 115 of Companies Act, 2013:-

v  Special notice To Company-There is a criteria, who can send the notice to the Company. Only shareholder/s holdingnot less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. The same should besigned by the concerned shareholder/s.

v  Date of meeting- Shareholders have the right to decide the date of meeting. However, the special notice shall not be sent earlier than 3 months (three months) from the date of meeting but at least 14 clear days before the date of the meeting, at which the resolution is to be moved.

On receipt of notice of a resolution to remove a director, the company shall immediately send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.

Intimation to Director- The Company shall forthwith send a copy of the notice to the concerned director.

Reasonable Opportunity of being heard- The director concerned may make representation in writing to the company and requests its notification to members of the company. The Director may request to send his representations along with the notice to the members and to be heard at the meeting. However, the rights may not be available, if on the application either of the Company or of any other person who claims to be aggrieved.

Intimation By Company to all shareholders:

1. The company shall, if the time permits it to do so;

(a)Company shall take immediate steps to send the notice to its members, at least 7 clear days before the meeting. The notice has to be sent in the same manner as in case of any other general meeting of the Company; and

(b) Send a copy of the representation to every member of the company to whom notice of the meeting is sent.

2. The company shall, if the time not permits it to do so;

Notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated. At the same time, the notice shall also be posted on the website, (if any). However, it shall be published at least 7 clear days before the meeting.

The copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved,

The Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director inspite of that he is not a party to it.

***Members may pass remove the director by passing ordinary resolution.

Appointment of director in place of removed director- A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given. A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed. If the vacancy is not filled, it may be filled as a casual vacancy. The director who was removed from office shall not be re-appointed as a director by the Board of Directors. 

File Form- DIR-12 within 30 days of passing of resolution for appointment of Director.

Analysis of L&T – Service Tax – Impact on Valuation of WCT in residential apartments

Construction Service / Works Contract- Residential Apartments Impact of Larsen & Toubro [ K.Raheja] Judgment.

                                                                                            – Madhukar N Hiregange

Commercial tax is a largest[maximum] contributor of revenue to every State. There were attempts in late 1990s and later by Sales Tax authorities to cover works contract under tax. However in several disputes, it was held that there was no sale and therefore not taxable.

States were keen to get the huge revenue from this sector [ presently about 10% of the GDP of India] into taxation. The Government by way of the 46th amendment to the Constitution of India inserted an article 366 (29A) to enable several such activities which were held as not liable as a sale. States took some time [ 2002 to 2005] to make laws to specify what was a works contract and started to collect the tax on the same from the contractors and dealers involved in works contract of indivisible nature.

The contract broadly can be classified under:-

  1. Where the sale is insignificant to service. Then it would be considered as a service only.

  2. Where the service is insignificant to sale. Then it would be considered as a sale only.

  3. Where the service as well as sale elements are significant. Then it would be considered as a works contract. The works contracts further could be bifurcated as under:

    a) In relation to Immovable property [Buildings, Plant & machinery permanently       embedded in earth, Transmission towers, roads, dams bridges etc.]

     b)  Movable property [ bus bodies, machinery repairs, electroplating, galvanisationetc]

Dominant Intention Test

In normal course to decide whether the contract is one of sale or service the dominant objective or intention of the contracting parties would be important. However once a contract is a works contract then the dominant intention test is no longer applicable due to the deeming fiction created by change in the law1.as per the Landmark decision by Supreme Court by a 3 member bench.

Divisible Contracts Vs Indivisible Contracts

Where there are separate contracts for the supply of the goods and another contract for the service or erection, construction, repair, mounting, dyeing, fabricating etc then the supply would be considered as a sale.The activity of labour/ skill / use of machinery etc to complete the job would be said to be service. These type of contracts are divisible contracts2. The conditions including the penalties built into the purchase order/ work order on different terms for the supply and service would add to the clarity and avoid disputes.

The Andhra Pradesh HC3 observed that there were no standard formulae to determine whether a transaction was works contract or sale transaction and that it would depend on the facts and circumstances. While dealing with the issue in hand, it held that the dealer had entered into a maintenance agreement with the customer to charge labour and overhaul charges at a particular rate and replacement of spares at another particular rate. The Court held that this is a contract of sale and sales tax would be applicable only on the value of spares charged by the customer;

There is a contract which is awarded for a lump sum. However there is a bill of quantity attached to the same along with the amount payable for each component of supply as well as each component of service. Billing is done exactly as per the break up provided. This maybe considered as a divisible contract.This would also be as per the latest decision of Kone Elevators, which is also as per the Larsen & Toubro of 2013. This view would not hold good however where such break-up is only for payment mile stones.

Sale of Immovable Property in the course of construction: The Larger Bench of the Supreme Court has confirmed the earlier order in K.Raheja of the Karnataka High Court that even in the contract for sale of immovable property in future, there is a works contract and that portion of the work which is incomplete as on the date of the contract would be liable to tax.*4 It was observed in the decision that the dominant intention test would not be applicable for works contract.

Sale of Completed Construction:This also means that once the building is complete as evidenced by the certification by an Architect or registered qualified engineer duly supported by electricity bills, there would be no sales tax applicable.

-  L&T Ltd Vs State of Karnataka – 2013 (65) VST 1 (SC); BSNL Vs UOI – 2006 (145) STC 91 (SC)

- Sarvodaya& Co Vs St of Maharastra – 1976 (38) STC 86 ( Bom)

- Eastern Typewriters Service Vs St of AP – 1978 (42) STC 18 (AP)

- L&T Ltd Vs State of Karnataka – 2013 (65) VST 1 (SC)

Analysis of the Larsen &Tubro in 2013 following the earlier K.Raheja& L&T of Karnataka High Court of 2005

The decision of could be of immense value in immovable property transactions irrespective of the option of composition or otherwise in most States.

We examine some of the issues raised and decision thereunder:

  1. Even in case of a single agreement to sell an apartment in future with certain specification, there is a works contract involved. It cannotbe said that the construction is done for the developer and NOT done on behalf of the buyer. [ Para 110] Therefore even in single contract agreements service tax would be payable on the balance of construction to be done.

  1. The development agreement between the owner of land and developer is a transaction of transfer of immovable property as well as works contract. [ para 111] The transfer of in progress property [ that which the landlord sells in the course of construction] would be liable to service tax in the hands of the developer.

  1. The goods portion in works contract is permissible to be taxed even if taxed after incorporation as long as it does not tax transfer of immovable property. [ Para110] The deduction for land is available from the value.

  1. The works contract is only from the stage the develop enters into a contract with the apartment buyer. The value addition made to the goods transferred after the date of agreement is entered into can ONLY be made chargeable to tax. [ para 115] This means that only on the portion incomplete VAT is chargeable. By extension service tax also would be only on that balance amount.

  1. Where at the time of construction and until construction is complete there was no contract with any buyer, the goods used in construction cannot be deemed to have been sold by the builder since there is no purchaser. [ para 117] This confirms the understanding that once complete no VAT would be applicable. Consequently even service tax would not be applicable post completion.

Impact of Above decision can be understood by way of an illustration: Apartment in Bangalore being sold initially at Rs. 5000 per sft. Agreement to sell {Immovable property portion} is Rs. 2500 and Construction agreement is Rs.2500. At the start of the projects Rs. 2500 would be liable to VAT ( depending on option) and Service Tax at 4.944 ( 12.36 x 40. Assumed to be total of 9 % = Rs. 225 per sft. At 50% completion the price would be around Rs.6000/- again normally broken into 3000 for each component. However as per the L&T judgment 50% of the construction is complete. Therefore agreement to sell would be Rs. 4500 and construction Rs.1500. At the rate of 9% it would be Rs.135 per sft. Towards the end it would be less than Rs. 50 per sft. Once complete neither VAT nor Service Tax would be applicable. This benefit could be passed onto the buyers.

The real estate industry has slowly started to take advantage of this decision by getting percentage completion certificates and depending on the quantum of completion adding the completed construction value as a component in the agreement to sell [ which is for immovable property] in addition to the value of undivided interest in land. This would benefit the buyers for sure depending on at what stage they entered into an agreement with the developer.

However some developers may continue to follow the earlier method to maintain uniformity, ensure that the credit reversals are not necessary in K-VAT and additional record keeping requirement.

Therefore the L&T judgment while taxing the single contracts has also been a boon where it has clearly clarified that to the extent of completed part, there cannot be a tax as that part is an immovable property.

This article is based on a chapter of – CST – Handbook [ With GST Impact] to be published by Puliani Law House, Bangalore.

Important Case Laws

  • ASSESSMENT / REASSESSMENT / APPEALS / SEARCH

    • The Gujarat High Court in Raaj Ratna Metal Industries Ltd vs. ACIT has held that if AO contests the audit objection but still reopens u/s 147 to comply with the audit objection, it means he has not applied his mind independently and the reopening is void

    • The Kolkata ITAT in Munshi Mini Rice Mill vs. ITO has held that failure to record detailed reasons in assessment order does is not required to justify s. 147 action. There is a statutory presumption that AO has applied his mind while passing assessment order

    • The Mumbai High Court in CIT vs. Reliance Infrastructure Ltd summoned the Senior officers of the department and passed strictures for ‘Irresponsible conduct’ of filing an appeal on a point which is admittedly covered against the department by a judgement of the Supreme Court

    • The Delhi ITAT in DCIT vs. Spaze Tower Pvt. Ltd has held that Expl 2 to S. 132B, though inserted w.e.f. 1.6.2013, is retrospective and seized cash cannot be adjusted against advance-tax liability

  • INTERNATIONAL TRANSACTIONS / TRANSFER PRICING

    • The Mumbai High Court in Vodafone India Services Pvt. Ltd vs. UOI has held that neither the capital receipts received by the Petitioner on issue of equity shares to its holding company, a non-resident entity, nor the alleged short-fall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act.  

    • The Hyderabad ITAT in DCIT vs. Owens Corning Industries (India) Pvt. Ltd has held that TPO cannot question commercial expediency of payment to AE. RBI approval to a transaction implies it is at arms’ length price. 

    • The Hyderabad ITAT in Vijay Electricals Limited vs. ACIT has held that fraud in determination of LIBOR/ EURIBOR is no reason to discard it as ALP for Transfer Pricing purposes.

  • SECTION 14A / RULE 8 D

    • The Cochin ITAT in Geojit Investment Services Ltd vs. ACIT held that in applying Rule 8D(2)(ii) for purposes of s. 14A interest expenses directly attributable to tax exempt income as also directly attributable to taxable income, are required to be excluded from computation of common interest expenses to be allocated.

    • The Bangalore ITAT in Alliance Infrastructure Projects Pvt. Ltd vs. DCIT has held that S. 14A & Rule 8D disallowance cannot be made if there is no exempt income. Cheminvest Ltd. vs. ITO 121 ITD 318 (Ahd) (SB) is not good law.  

    • The Delhi ITAT in Interglobe Enterprises Ltd vs. DCIT has held that no disallowance u/s 14A & Rule 8D can be made towards exempt income earned on strategic investments.

    • The Delhi High Court in CIT vs. Holcim India P. Ltd has held that S. 14A & Rule 8D disallowance cannot be made if there is no exempt income or if there is a possibility of the gains on transfer of the shares being taxable.

  • CAPITAL VS. REVENUE / CHARGE TO TAX

    • The Pune ITAT in The Solapur District Central Co-op. Bank Ltd vs. ACIT has held that interest on NPAs, even if credited to the Profit & loss account, is not chargeable to tax.  

    • The Pune ITAT in The Nanded District Central Co-op. Bank Ltd vs. DCIT has held that grant given to safeguard the interests of depositors, though used for meeting SLR requirements of RBI relatable to its banking activity, is still capital in nature

    • The Karnataka High Court in CIT vs. McDowell & Co Ltd has held thatpremature payment of sales-tax deferral loan by paying an amount equal to the net present value of the deferred tax by which the entire liability to pay tax/loan stood discharged is not a “benefit” taxable u/s 41 (1)

  • PENALTY

    • The Mumbai ITAT in Times Guaranty Ltd vs. ACIT has held that wrong claim for depreciation by showing a finance or loan transaction as a lease transaction attracts penalty u/s 271(1)(c)

    • The Gujarat High Court in Shanti Enterprise vs. ACIT has held thatassessee’s claim for refund of penalty with interest u/s 275 (1A) cannot be defeated by inaction of revenue

  • MISCELLANEOUS

    • The Mumbai High Court in CIT vs. N.G.C. Network (India) P. Ltd has held that advertisement expenditure incurred by agent to popularize the business of the channel run by the foreign principal is allowable as there is a direct business between the expenditure and the assessee’s business as agent. The fact that the foreign principals also benefited does not entail right to deny deduction under section 37(1).

    • The ITAT Kolkatta in Parmanand Tiwari vs. ITO has held that Rule 37BA (credit for TDS) inserted w.e.f. 01.04.2009 to mitigate hardship to taxpayers has to be treated as being retrospective in nature

    • The Bangalore ITAT in DCIT vs. India Advantage Fund-VII has explained the entire law on taxation of private specific/ discretionary trusts under revocable &
      irrevocable transfers and AOPs. 

    • The Mumbai ITAT in Araska Diamond Pvt. Ltd vs. ACIT has held that loss on foreign currency forward contracts by a manufacturer/ exporter is a “speculation loss” according to s. 43(5)(a) and not a “hedging loss”

    • The Cochin ITAT in Padinjarekara Agencies Pvt. Ltd vs. ACIT has held thatAO is entitled to tinker with P&L A/c u/s 115JB, if assessee’s claim is not permitted by accounting principles

    • The Delhi ITAT in ITO vs. Rakam Money Matters P. Ltd has explained thelaw regarding addition of share application money as unexplained credit u/s 68