UPDATES:

1. Charging of high premium on issue of shares can’t be ground for addition u/s 68[CIT vs Anshikha Consultants Pvt Ltd, Delhi High Court].
2. Today (15-08-15) is the last date for issue of TDS certificate for June quarter of 2015-16 by Government Deductors in Form 16A.
3. Advances paid for purchase of assets would amount to utilization of capital gains u/s 54G of the Income Tax Act- Supreme Court of India.
4. Use modified Version of Form MR-2 (Approval of appointment, remuneration etc. of MD / WTD/Manager from CG) w.e.f. 14.08.15.
5. Updated Costing taxonomy 2015, Business rules and MCA XBRL validation tool version 2.0 (beta) has been released.
6. Haryana Value Added Tax, 2003 vide Noti No Leg. 9/2015 dated 03.08.2015. Notified Reassessment and revision period extended in Haryana VAT.
7. The Board of Approval on (SEZs) on 19.05.2015, has de-notification of 22 SEZs as the progress made by the Developers of said SEZs are not satisfactory.

INCOME TAX UPDATE

CASE: Japan Airlines Co. Ltd vs. CIT (Supreme Court)

TITLE: S. 194-I: In deciding whether a payment is for "use of land", the substance of the transaction has to be seen. If the payment is for a variety of services and the use of land is minor, the payment cannot be treated as "rent"

The Supreme Court had to consider the conflict of judicial opinion between the Delhi High Court in CIT vs. Japan Airlines Co 325 ITR 298 (Del) and that of the Madras High Court in CIT vs. Singapore Airlines Ltd 358 ITR 237 (Mad) on the question whether landing/ parking charges paid by an airline company to the AAI were payments for a contract of work under Section 194-C and not in the nature of ‘rent’ as defined in Section 194-I.

The Delhi High Court decided the issue in favour of the department following its earlier decision in the case of United Airlines v. CIT 287 ITR 281. It took the view that the term ‘rent’ as defined in Section 194-I had a wider meaning than ‘rent’ in the common parlance as it included any agreement or arrangement for use of land.

The High Court further observed that the use of land began when the wheels of an aircraft touched the surface of the airfield and similarly, there was use of land when the aircraft was parked at the airport. However, the Madras High Court dissented from the view of the Delhi High Court. HELD by the Supreme Court reversing the Delhi High Court and affirming the Madras High Court.

CASE LAWS

CIT vs. Dalmia Dyechem Industries (Bombay High Court)

S. 271(1)(c): The rigors of penalty provisions cannot be diluted only because a small number of cases are picked up for scrutiny. No penalty can be levied unless if assessee's conduct is "dishonest, malafide and amounting concealment of facts". The AO must render the "conclusive finding" that there was "active concealment" or "deliberate furnishing of inaccurate particulars"

Conditions under Section 271(1)(c) must exist before the penalty can be imposed. Mr.Chhotaray tried to widen the scope of the appeal by submitting that the decision of the Apex Court should be interpreted in such a manner that there is no scope of misuse especially since minuscule number of cases are picked up for scrutiny. Because small number of cases are picked up for scrutiny does not mean that rigors of the provision are diluted. Whether a particular person has concealed income or has deliberately furnished inaccurate particulars, would depend on facts of each case 

Reliance Industries Ltd vs. CIT (Bombay High Court)

S. 221: Penalty for failure to pay TDS in time can be levied even if the assessee voluntarily pays the TDS. Financial hardship, diverse locations and lack of computerization are not good excuses. The fact that CIT(A) decided in favour of the assessee & deleted the penalty does not necessarily mean that two views are possible

Parliament treats a person who has deducted the tax and fails to pay it to revenue as a class different from a person who has not deducted the tax and also not deposited the tax with revenue. This is for the reason that in the first class of cases the assessee concerned after deducting the tax, keep the money so deducted which belongs to another person for its own use. In the second class of cases, the assessee concerned does not take any advantage as he pays the entire amount to the payee without deducting any tax and does not enrich itself at the cost of the government. Therefore, although penalty is also imposable in the second class of cases, yet in view of the proviso to Section 201(1) of the Act, it is open to such assessee to satisfy the Assessing Officer that as they have good and sufficient reasons no penalty is imposable. It is in the above view that in the first class of assessees the Parliament has provided for prosecution under Section 276B of the Act for failing the pay the tax deducted at source 

DIT vs. Credit Agricole Indosuez (Bombay High Court) (No. 1)

Strictures passed regarding the "casual and callous" and "frivolous" manner in which senior officers of the dept authorize filing of appeals. Strictures also passed against counsel for acting as a "mouthpiece" of the Dept in persisting with unmeritorious appeals. CBDT directed to take appropriate action

Undoubtedly, an Advocate has to fearlessly put forth his client’s point of view, however the same has to be tempered /guided by truth and justice of the dispute. In matters of tax, justice requires that there must be certainty of law which presupposes equal application of law. Thus where the issue in controversy stands settled by decisions of this Court or the Tribunal in any other case and the Revenue has accepted that decision, then in that event the Revenue ought not to agitate the issue further unless there is some cogent justification such as change in law or some later decision of an higher forum etc 

DIT vs. Credit Agricole Indosuez (Bombay High Court) (No. 2)

S. 244A: Interest on income-tax refund received by a non-resident is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Accordingly such interest cannot be assessed as business profits but has to be assessed as "interest" under Article 11/ 12

Interest on income tax refund is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Therefore, taxable under the Article 11(2) of Indo Netherlands tax treaty 

CIT vs. Bisleri Sales Ltd (Bombay High Court)

S. 28(va)/ 115JA: non-compete consideration received prior to insertion of s. 28(va) is not taxable. Amount credited to reserves without a corresponding debit to the P&L A/c cannot be added to the "book profits"

To invoke clause (b) of the Explanation below Section 115JB (identical to Section 115JA) of the Act, two conditions must be satisfied cumulatively viz. there must be a debit of the amount to the Profit and loss account and the amount so debited must be carried to Reserves. Admitted position in this case is that there is no debit to the Profit and loss account of the amount of Reserves. The impugned order has in view of the self evident position taken a view that in the absence of the amount being debited to Profit and Loss account and taken directly to the reserve account in the balance sheet, the book profits as declared under the Profit and Loss account cannot be tampered with 

Income Tax Updates

1. No denial of sec. 54F benefit due to non-completion of construction in all respects within 3 years

2. Time-limit of one year to file refund claim doesn't apply to amount wrongly paid as 'Service Tax'

3. ITR 6 RELAESE4. MEF­2015 instructions If you feel any problem in online submission of MEF, Please call on below noted contact details.

In Detailed

1. No denial of sec. 54F benefit due to non-completion of construction in all respects within 3 years

 [2015] 60 taxmann.com 74 (Karnataka)

HIGH COURT OF KARNATAKA

Commissioner of Income-tax, Bangalore v. Smt. B.S. Shanthakumari

2. Time-limit of one year to file refund claim doesn't apply to amount wrongly paid as 'Service Tax'

August 6, 2015[2015] 59 taxmann.com 401 (Kerala)

Excise & Customs : Section 11B of Central Excise Act, 1944 applies only to amount having colour of 'tax'; amount wrongly paid as 'service tax' without even charge of service tax, does not colour of 'tax' and therefore, time-limit of section 11B would not apply to refund of said amount

 [2015] 59 taxmann.com 401 (Kerala)

HIGH COURT OF KERALA

Geojit BNP Paribas Financial Services Ltd. v. Commissioner of Central Excise, Customs & Service Tax*

3. ITR 6 RELAESE
www/incometaxindia.gov.in

4. MEF­2015 instructions

                 

Points which shall be carefully read and be taken care for Multipurpose Empanelment Form (MEF) for the year 2015‐16

1      All the members in full time practice are advised to fill the MEF Form and shall submit full details in the MEF as this panel will also be available for the assignments other than the bank branch audit. The applicants falling under "cooling/rest" for Bank Branch Auditors Panel should also submit MEF as cooling/rest year does not count for the particular year of non­application.

²               Last date for submission of applications on the website www.meficai.org is 31^stAugust, 2015. Members are advised to fill MEF well in advance to avoid last minute rush.

3      Please use Internet Explorer 6.0/ Mozilla Firefox 7.0 or later versions to fill MEF 2015­16.

4      The information filled in by the applicant in MEF can be edited/modified any number of times before final online submission.

5      All correspondence, acknowledgement, discrepancy letters, etc. will preferably be through e­mail only. Please fill up e­mail id correctly and ensure that it is active.

6      It is must to provide correct contact details i.e. telephone number, e­mail­id also to keep track of these as and when allotment procedure starts.

7      (a) Unique Code Number (UCN) is very important as it facilitates compiling the applicants' bank audit experience. Therefore, an applicant must ensure that correct UCN appears in the MEF.

(b)              If the applicant has never been allotted UCN at any point of time, we would like to inform that UCN will be allotted to all eligible applicants at the time of preparation of the Bank Branch Auditor's Panel.

(c)If UCN was allotted earlier, please mention this in Memorandum of changes in case it is not appearing in the MEF and also in the hard copy of the declaration. The changes will be incorporated in MEF Database after due verification.

(d)              For MEF 2015­16, UCN will also be allotted to the non­eligible applicants for Bank Branch Auditors’ Panel so that their data can be sent to the requisite authorities for other bank audits and other assignments. However, the following applicant will not be allotted UCN :

I.   Member practicing in his individual name not holding full time CoP and/or associated as partner/ proprietor/Chartered Accountant employee in any other firm.

II. In case of firm, if none of partner/proprietor is

exclusively associated^# with the firm.

holding fulltime Certificate of Practice (CoP).

^# A member is not treated as exclusively associated with the firm if he is a partner in any other firm or is a sole proprietor of any other proprietary firm or is a paid employee elsewhere.

Therefore, you can apply for Multipurpose Empanelment Form without UCN also.

8      Applicant practicing in individual name should continue to use the same UCN in case he forms a sole proprietary concern.

9      Members may note that experience in capacity, as articled/audit assistant or paid employee/assistant should not be added in experience columns’ to be mentioned in questions of MEF.

10    In case the applicant was appointed as Central/Branch Statutory Auditor of a Public Sector Bank in the previous financial year, the following may be noted to avoid conflict of Interest :

a.   Don’t associate with the same Bank (of which the applicant is appointed as statutory auditor) or any of its subsidiaries/associates, as concurrent/internal/income and expenditure or revenue auditor/stock auditor/ accounts etc of the bank/branch of banks & monitoring of borrowing sick unit.

b.   Don’t take a loan (including outstanding on credit card) from/give a guarantee to a loan from the same Bank (of which the applicant is appointed as statutory auditor) or any of its subsidiaries/associates.

c.    Don’t accept the position of a Director on the Board of the same Bank (of which the applicant is appointed as statutory auditor) or any of its subsidiaries/associates.

11    If an applicant has done audit of two or more than two entities or Statutory Central and/or as well as branch audit of a Bank for the same year, then it should be counted as one year experience only, while filling­up various questions of MEF.

12    The Institute reserves right to call for additional information including financial documents, annual financial statements, income tax & service tax returns and such other documents, from the applicant as may be considered appropriate.

13    While every care is taken in preparing the panel, in the event of any inadvertent mistake or omission, the Institute will not be responsible in any manner.

http://localhost:9000/MEFICAI2015_Deve/innerpage.jsp                 1/3

03/08/2015                                                                 MEF­2015 instructions

14    The Institute does not undertake any responsibility with regard to the allotment of audit.

15    PROCEDURE FOR LOGGING INTO MEF:

MEF is designed differently in case of sole proprietary concern, partnership/LLP concern and members practicing in individual name and therefore, the applicant should select his option carefully.

i.   The Partnership firm converted into Limited liability partnership (LLP) should use their old Firm Registration No. (FRN) to login to MEF. For example your FRN is 100000C and LLP registration No. S200000 please use 100000C and its date of Establishment.

ii.   The new Limited liability partnership (LLP) should use its LLP registration No. and date of Establishment.

Visit www.meficai.org and select your option for empanelment as a sole proprietor/partnership concern/individual.

Remember the PASSWORD for future reference, as you would be able to log into your form using this password ONLY.

16    All the information being sourced from Institute database is static (not editable) and the same will be appearing with green background. Applicants, who do not agree with the details appearing in these fields, should fill in the Memorandum of Changes.

17    Status of the applicant as on 01.01.2015 will be considered for categorisation of the applicant for Bank Branch Auditors’ Panel, subject to the following:

(a). In case, any of the partner resigns during the period from 01.01.2015 till the date of final preparation of the panel for submission to RBI (tentatively in October, 2015), the same will be given effect to as per the data base of the Institute and provisional category as on 01.01.2015 as mentioned in acknowledgement will stand modified accordingly. This means the credit will be given for only those continuing partners (from out of the partners as on 01.01.2015) who have signed the declaration, for categorisation in Bank Branch Auditors’ Panel. Further, the credit will not be given for the partners who have joined subsequent to 01.01.2015.

(b). In case any of the Chartered Accountant employee as on 01­01­2015 resigns during the period from 01.01.2015 till the date of final preparation of the panel for submission to RBI (tentatively in October, 2015), and another Chartered Accountant employee joins during the same period, category as mentioned in acknowledgement will remain unchanged.

18    COMPLAINT FILING MECHANISM

a.   In case, an applicant faces any problem in accessing, operating or submission of MEF, complaint may be lodged by accessing complaint­box link available on www.meficai.org

b.   Applicants can lodge their complaint by using either MEF No./ MRN / FRN

c.    Complaint number will be displayed on the system after successful lodging of complaint. Please note the complaint number for future reference. Applicant would be able to view the status of their complaints by using MEF No. /Complaint No./MRN/FRN.

d.   All the complaints lodged by the applicant would be looked into by PDC Secretariat.

19.   In case, the complaint is not resolved or replied within a week, members can call at 011­30110444, 30110438, 30110440, 30110451, 30110480 and 30110508.

20.  SUBMISSION OF DOCUMENTS

A hard copy of the Declaration duly signed by all (the continuing) partners/ proprietor/ member practicing in individual name accompanied by a print of acknowledgement of submission of MEF must be sent to ICAI by courier/speed post/hand delivery at the following address in an envelope superscribed with "DECLARATION FOR MEF 2015­16" so as to reach on or before 15^thSeptember 2015.

The Secretary

Professional Development Committee

The Institute of Chartered Accountants of India

"ICAI Bhawan" Plot No­ A­ 29

Sector­ 62, NOIDA

Dist: Gautam Budh Nagar

Uttar Pradesh

PIN­ 201309

21.   Receipt of hard copy of the Declaration will not be individually acknowledged. The same will be displayed on the website mentioning MEF number within 15 days of receipt of the Declaration. Declarations will then be verified for completeness and correctness and discrepancy (ies), if any, will be intimated to the applicant by email.

Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to persons resident outside India

RBI:

The Reserve Bank of India has issued circular on "Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to persons resident outside India."

Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to persons resident outside India

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulation 8 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time.

2. In terms of the extant instructions, an Indian company can issue shares under Employees’ Stock Option (ESOP) Scheme, by whatever name called, to its employees or employees of its Joint venture or Wholly owned overseas subsidiary/subsidiaries who are resident outside India, directly or through a Trust, provided that the scheme has been drawn in terms of regulations issued under the SEBI Act, 1992 and face value of the shares to be allotted under the scheme to non-resident employees does not exceed 5 per cent of the paid up capital of the issuing company. The Trust or Indian company has to ensure compliance with the above conditions and comply with the reporting requirement.

3. On a review, it has been decided that an Indian Company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/directors or employees/directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, provided that :

1. The scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013, as the case may be.
2. The “employee’s stock option”/ “sweat equity shares” issued to non-resident employees/directors under the applicable rules/regulations are in compliance with the sectoral cap applicable to the said company.
3. Issue of “employee’s stock option”/ “sweat equity shares” in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.
4. Issue of “employee’s stock option”/ “sweat equity shares” under the applicable rules/regulations to an employee/director who is a citizen of Bangladesh/Pakistan shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

4. The issuing Company shall furnish to the Regional Office concerned of the Reserve Bank of India under whose jurisdiction the registered office of the company operates, within 30 days from the date of issue of employees’ stock option or sweat equity shares, a return as per the Form-ESOP (given as Annex to enclosed this circular).

5. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents /customers concerned.

6. Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourth Amendment) Regulations, 2015 notified through Notification No. FEMA.344/2015-RB dated June 11, 2015, vide G.S.R. No. 484 (E) dated June 11, 2015.

7. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

UPDATES:

1. If assessee admits undisclosed income, substantiate manner and paid taxes on undisclosed income no penalty u/s 271AAA of the Income Tax Act can be levied – [SPS Steel and Power Ltd. v/s. ACIT, ITAT KOLKATA].
2. Genuine expenditure paid in cash cannot be disallowed u/s 40A (3) of the Income Tax Act –[DCIT vs. KolliGopal Krishna, ITAT Hyderabad].
3. RBI has notified two new forms NBS 8 and NBS 9 to be filed annually within 30 days of closing of financial year. NBS 8 is for NBFC-ND with assets size between 100-500 crore. NBS 9 is for NBFC-ND with assets size below 100 crore.
4. DGFT launches online payment facility for application fees through Credit/ Debit Cards.
5. India and USA have signed an Inter Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) to promote transparency between the two nations on tax matters.
6. ICAI on 06.07.2015 announced the new scheme of education and training for CA course. Now, Commerce Graduates / Post-Graduates (with minimum 55% marks) or Other Graduates / Post-Graduates (with minimum 60% marks) and Intermediate level passed students of ICSI and ICWAI to enter directly to its Intermediate course.

FLA Return by 15th July,2015

ANNUAL RETURN ON FOREIGN LIABILITIES AND ASSETS

• Act: Annual return on Foreign Liabilities and Assets has been notified under FEMA 1999. Return to be filed under A.P. (DIR Series) Circular No.145 dated June 18, 2014 and submitted to the Department of Statistics and Information Management, RBI, Mumbai

• Applicability: It is required to be submitted directly by all the Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who hold foreign Assets or Liabilities in their balance sheets

• Due Date: FLA Return is mandatory under FEMA 1999 and companies are required to submit the same based on audited/ unaudited account by July 15 every year through official email id of any authorized person of company like CFO, Director, Company Secretary at fla@rbi.org.in

• Format: The FLA Return has to be submitted in excel based format, which has inbuilt checks and validations. The latest format of FLA Return is available on RBI’s web site at the following link:

https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx

For detailed FAQs on FLA Return you may please read more on the following link:

https://rbi.org.in/Scripts/FAQView.aspx?Id=95

• Non-compliance: Non-filing of FLA Return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.